England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
THE COURT OF APPEAL (CIVIL DIVISION)

		Royal Courts of Justice
		29 January 1974

1. Lord Denning, M.R.: North Sea gas has brought several problems. We are concerned today with redundancy payments. Several men worked on converting houses for North Sea gas. Their work has finished. They are then found redundant. How is the redundancy payment to be calculated?
2. Mercer was employed as an inspector in 1969. He was employed by a company called Gascol Conversions Ltd., which was engaged in the conversion. According to him, he was told that his hours were to be 54¼ hours a week. He accepted those hours; but he was told: "I would have to work overtime as required." His pay was calculated on a basic time of 40 hours a week. That was the basic wage. He worked the extra 14 hours at overtime rates. That is time-and-a-half, or double time, as the case may be. In July, 1972, he was discharged as redundant.
3. Redundancy payments are based on "normal working hours". This court recently considered how these are to be calculated. It was in the case of Tarmac Roadstone Holdings Ltd. vs. Peacock & Others^[1]. It shows this: if a man is obliged to work a fixed number of hours overtime and his employers are bound to provide him with that fixed amount of overtime, then those fixed hours of overtime are added to his basic hours. The total becomes his "normal working hours". It is obligatory on both sides. The employers have to provide it and the man to do it. It becomes part of his work and part of his "normal working hours".
4. But in no other case does overtime count as part of his "normal working hours". It may be voluntary overtime on both sides. It may be voluntary on the employers' side but compulsory on the man's side. That is to say, he is bound to do the overtime if required, but the employer is not bound to provide it. In neither of those cases does the overtime count as part of his "normal working hours". It only counts when it is obligatory on both sides. That is, when it is "guaranteed overtime".
5. Now in this case I will assume that when Mr. Mercer was first employed in 1969, there was a fixed time of 54¼ hours, which was binding on both sides. The employer was bound to provide it and the man to do it. The tribunal seem to have accepted that view. So have the Industrial Court.
6. But the agreement seems to have been varied later. In 1970, the men's union came to an agreement with the employers' association. The men belonged to the General and Municipal Workers Union. The employers belonged to the Gas Conversion Association. They came to an agreement in 1970, which was repeated in substance in 1971 and 1972. It was made nationally to cover all men employed in the industry: -
"NORMAL WORKING WEEK

"The working week shall consist of 40 hours hereafter referred to as the normal working week. The 40 hours shall be worked Monday to Friday, 5 days of 8 hours.

"OVERTIME

"Employees will be expected to work overtime where necessary for completion of the conversion work. Overtime rates shall be payable for time worked in excess of 40 hours in any pay-week where so authorised by the employer."

7. As I read the agreement, the only fixed hours were 40 hours a week. The employers were not bound to provide any more. The men were not bound to do more. They were only "expected" to work overtime when necessary, but were not bound to do it. Applying the Tarmac case,^[2] the "normal working hours" were 40 hours.
8. In addition to that national agreement, there was a local agreement for this district where Mr. Mercer worked. We have notes of an agreement between management and union on 26th August, 1971. It says : -

"The working hours whilst in Berwick will revert to 54 per week, and that the starting time on the Monday morning will be revised to 08.00 hours (previously 07.45 hours)."

9. This was relied upon by Mr. Mercer to show that there was a local agreement for 54 hours working week. But at the end of the notes there are these words:

"The parties intend that any agreements contained in these notes shall be binding in honour only, and that they should not give rise to any legal obligations."

10. I do not think the local agreement should be regarded as varying the national agreement. See Loman & Henderson vs. Merseyside Transport Services Ltd.^[3] In any case the national agreement contains an express provision that:

"when the agreement is at variance with other national and local working agreements, it is to take precedence."

11. But it is unnecessary to go into those matters, because there is a supervening event of much importance. In February, 1972, the Industrial Relations Act, 1971, came into operation. By Schedule 2, Part II, the employer was bound to give to the employee a written statement specifying among other things :

"any terms and conditions relating to hours of work (including any terms and conditions relating to normal working hours)."

12. In pursuance of that statutory obligation, the employers, Gascol Conversions Ltd., on 25th February, 1972, sent a new contract of employment to each of their men. One was sent to Mr. Mercer. He sent it back signed on 21st March, 1972. He was given a copy of it for himself to keep. He agreed to it by a document in these terms which he signed himself : -

"I confirm receipt of a new contract of employment dated 25th February, 1972, which sets out, as required under the Industrial Relations Act, 1971, the terms and conditions of my employment.

"Signed J. W. Mercer.

Date: 21-3-72."

13. That was clearly a binding contract. Being reduced into writing, it is the sole evidence that is permissible of the contract and its terms. Turning to the terms themselves, the opening words are clear. They follow the very words of the national agreement:

"The normal working week consists of 40 hours which shall be worked Monday to Friday, 5 days of 8 hours, at times specified by the department concerned.

"Overtime. Employees will be expected to work overtime where necessary for completion of the conversion work. You will be paid at the rate of 1^ times the basic hourly rate on weekdays, and at double time on Sundays."

14. That agreement seems to me to be conclusive. There is no possible ground for setting it aside. There was no mistake, misrepresentation or misunderstanding of any kind. It shows that the normal working week was 40 hours and the employers were not bound to provide any more. Even the employees were not bound to work more. They were only "expected" to work extra hours when necessary.
15. Faced with that agreement, Mr. Mitchell had to admit it was conclusive unless he could show that subsequently to it there had been a variation of it or a waiver of some of its terms. I asked him: What evidence is there of any subsequent variation or waiver? He said that the men had gone on working the 54 hours and were being paid. That is no evidence of variation or waiver. It is quite consistent with the written agreement. The 54 hours consist of 40 hours, the normal working week, and 14 hours overtime for which they were paid "overtime rates". In my opinion, therefore, the redundancy payments should be calculated on normal working hours of 40 hours a week.
16. Now I must turn to the Courts below. The industrial tribunal had not had the advantage of Tarmac Roadstone Holdings Ltd. vs. Peacock & Others.^[4] It had not been reported. They were led to their view by a case which has subsequently been said to be erroneous, Armstrong Whitworth Rolls Ltd. vs. Mustard.^[5] They did say in the course of their decision:

"We are satisfied that the management bound themselves to provide 54 hours and required the men to work those hours."

17. I think that finding cannot stand. It is contrary to the written agreement. It may have been correct in 1968, but it is not correct at the relevant date, that is July, 1972, when the man was made redundant.
18. In the Industrial Court, Sir Hugh Griffiths was more concerned about the written contract of March, 1972. He spoke of it as "a most formidable point". But in the end, that court held that:

"the tribunal was entitled to look, as it did, at the reality of the situation and to conclude that it was not intended by either party that the mutual obligation to provide and work 54 hours a week should be altered by the written contract of employment."

19. I am afraid that observation goes against the general law. It is well settled that where there is a written contract of employment, as there was here, and the parties have reduced it to writing, it is the writing which governs their relations. It is not permissible to say they intended something different.
20. I would only add this: it is a very great advantage to the men to have short working hours of 40 hours a week - on basic rates - with considerable overtime work - on overtime rates. It means a great increase in the take-home pay. Tt means also that they can take industrial action - by banning overtime - without thereby being in breach of their contracts of employment. Those conditions can carry however with them this disadvantage: when a man is made redundant, his redundancy payment is less because his normal working hours are only 40 hours. No doubt the union feel that the advantages outweigh the disadvantage. The men cannot have it both ways. Having committed themselves by written agreement to normal working hours of 40, they cannot go back on it.
21. I would allow the appeal and hold the redundancy payments to be fixed on the basis of the 40 hours week.
22. Orr, L.J.: I agree.
23. I have felt in this case some sympathy with the respondent and with the conclusions reached by the tribunal and the National Industrial Relations Court. But the argument for the appellant founded on the respondent's signed acknowledgement and acceptance of a new contract of employment dated February, 1972, seems to me unanswerable. It was not suggested that the respondent had no sufficient opportunity to consider the terms contained in that document, and Mr. Mitchell, rightly in my view, did not dispute that it became an effective contract as the result of the respondent's signed acceptance. He claimed that there was evidence from which it may be inferred that the relevant terms of that contract had later been either varied or waived, but notwithstanding his attractive argument, I am unable to see any evidence which would justify that conclusion; and, for the reasons given by the Master of the Rolls, I too would allow this appeal.
24. Lawton, L.J.: I too would allow this appeal. In my judgment the tribunal were entitled on the evidence to find that up till February, 1972, the contractual hours were 54¼. They were also entitled on the evidence to take the view that the making of national agreements in 1970 and 1971, had not altered the contractual terms at all. In my opinion the making of national agreements between unions and employers' federations does not automatically change the terms of employment of any members of the union. Whether they do or do not must depend upon the circumstances of each case. For example, in the nationalised industries the making of a national agreement would produce, I should have thought, an almost irrebuttable inference that the terms of employment had been changed, but it does not follow in other industries (particularly those in which there are large numbers of employers) that the making of a national agreement produces an inference having anything like the same effect. It will, of course, produce an inference, but that inference will have to be balanced against other considerations. The tribunal did that balancing act and came to the conclusion that the terms of employment had not been changed before February, 1972; but in 1972, there was another national agreement and this time the employers gave notice of the terms of that national agreement to the men working for them including Mr. Mercer; and Mr. Mercer signed what was clearly a contractual document - which had the result upon which my brethren have already commented and to which I need not refer. Like them, I can find no evidence of variation or waiver after Mr. Mercer had entered into that written contract with his employers.

Appeal allowed with costs.

Note 1   (1973) 8 I.TR. 300.    [Back]

Note 2   (1973) 8 I.T.R. 300.    [Back]

Note 3   (1968) 3 I.T.R. 108.    [Back]

Note 4   (1973) 8 I.T.R. 300.    [Back]

Note 5   (1971) 6 I.T.R. 79.    [Back]