Government must pay for the legal costs of an appeal over a Police pay issue.

The Court of Appeal yesterday awarded costs in favour of the Bermuda Police Association (BPA).

The legal hearing in question is the case presented to the Court of Appeal last June, in which Government successfully argued against a Permanent Police Tribunal ruling, that officers' 'combined allowance' should be part of their salary.

In November the Court of Appeal ruled in favour of Government, quashing this part of the Tribunal's arbitration award, made in June 2008. Government argued that by making the allowance a salary supplement, this would end up costing millions in extra pension payouts.

It said the Tribunal was also prohibited from making an award concerning pensions, and so its decision was unlawful.

The Police however argued the allowance $6,878 a year for a constable, had always been subject to payroll tax. They said as it was part of their total pay, it should be recognised as salary and therefore form part of their pension.

The Court of Appeal judges, Edward Zacca, Sir Austin Ward and Sir Robin Auld, upheld Government's challenge by two to one, with Mr. Justice Zacca in disagreement.

Earlier this month however, the BPA asked for leave to appeal the issue to the Privy Council, arguing it was of sufficient public importance.

Mr. Justice Zacca, Sir Murray Stuart-Smith and Sir Anthony Evans, sitting on the Court of Appeal, decided in their favour.

The question of whether the combined allowance should become part of an officer's salary and therefore pensionable, will now be decided by the Privy Council in London.

Yesterday the Court of Appeal ruled the legal costs incurred by the BPA during Government's appeal last year should be paid by Government.

Mr. Justice Zacca said: "We have considered the submissions that have been made and a majority of the Court was of the opinion that the cost of the appeal should be awarded to the BPA."

Alan Dunch, the BPA's lawyer, said last night: "We are very pleased to get a review of the costs in our favour. We were granted leave to appeal to the Privy Council and are in the process of moving that forward."

Mr. Dunch said the case was likely to be heard by the end of this year or early 2011.

He declined to comment on the BPA's legal costs last year.