England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CENTRAL LONDON COUNTY COURT
(MR ASSISTANT RECORDER HURST)

		Royal Courts of Justice Strand London WC2 Thursday 15 March 2001

1. LORD JUSTICE PETER GIBSON: The privatisation of London bus services in the early 1990s provoked opposition and discontent among some London bus workers who were aggrieved by the fact and manner of privatisation.
2. London Buses Limited, a subsidiary of London Transport, had 11 subsidiary companies operating bus services in particular parts of the London area. One such subsidiary was London General Transport Services Limited ("LGTS"). The privatisation was to be effected by the sale of shares of such subsidiaries. In 1993, following the government decision on privatisation, the management of LGTS formed a company, Mokett Limited ("Mokett"), with a view to competing in the bidding for the shares of LGTS and to effect a management employee buy-out ("MEBO").
3. The defendant, the Transport & General Workers Union ("the union"), was a recognised trade union in that it was recognised by LGTS for the purposes of collective bargaining under section 178(3) of the Trade Union and Labour Relations (Consolidation) Act 1992. The principal objects of the Union are the regulation of the relations between workers and employers, between workers and workers and also the provision of benefits to members. The objects also include the obtaining, maintaining and improving of just and proper hours of work and rates of wages.
4. The claimants, Daniel Ibekwe, Anthony Blackledge, Linda Elliott, Neville Glasgow, Terence Harper, John Neckles and Patrick Walsh, were all members of the union. They were all bus workers employed by LGTS. Mokett had to compete with other bidders for the shares in LGTS in a bidding process which, by stages, eliminated some of the bidders.
5. The LGTS management consulted the union and reached agreement that the union would back the MEBO. The MEBO was dependent on the provision by venture capitalists of considerable sums by way of finance. But the provision of finance was itself conditional on a framework agreement being signed by LGTS and the Union determining the terms and conditions of employment of the staff of the LGTS after privatisation.
6. The framework agreement was signed on 12 August 1994 by the union. It was agreed that changes would be effected in the terms and conditions of employment. Thus, it would reduce an employee's holiday entitlement by one week and the previous 38-hour week was extended to a 43-hour week. There is no dispute that what was agreed would cause a deterioration in the terms and conditions of employment of bus workers like the claimants.
7. Mokett and another company, Grampian, were left as the competing bidders at the final stage of the bidding process. Mokett won and on 2 November 1994 it acquired the shares in LGTS. Thus, there was no transfer of an undertaking and only the ownership of LGTS changed as a result of the privatisation. The framework agreement was implemented on 5 November 1994.
8. On 10 February 1997 the claimants issued proceedings against the union. By their particulars of claim, which they appeared to have prepared without the help of a lawyer, they claimed that they were not kept informed by the union of the negotiations for the framework agreement; that even after the framework agreement had been signed, they were not informed of that fact, even though employees were purportedly being consulted on the proposals; and that at all the meetings at bus garages which the claimants attended there were votes in favour of a ballot if and when detailed proposals became known.
9. The claimants pleaded in paragraph 8 that the union was in breach of its contract with the claimants (that contract incorporating the union's rules and constitution) by agreeing to the framework agreement which worked to their detriment and the sole purpose of which was to assist the Mokett, the bidder for the LGTS shares. They also pleaded in paragraph 10 that the union induced LGTS to breach their contracts of employment by a unilateral repudiation or a unilateral imposition of changed terms of employment on them.
10. Under the heading "Claim for Damages" they pleaded:

"We the Plaintiffs, hereby claim that we have suffered damage and loss under the above paragraphs 8 & 10. We hereby plead with the Court to award damages as follows (if the Court does find in our favour):

a) Compensatory Damages.

b) Aggravated Damages."

11. By its defence, the union denied that the particulars of claim disclosed a reasonable cause of action, denied any breach of contract or any inducement to break a contract. Amendments were made to the particulars of claim but a district judge struck out the amended particulars of claim. On appeal by the claimants the original pleadings were allowed to stand. By an unless order of His Honour Judge Goldstein on 15 October 1999, the claimants were required to provide particulars of their loss. A schedule of loss showing the difference between the sums which each of the claimants, other than Mr Blackledge, would have earned under his old contract before the framework agreement was implemented and the sums which the claimants earned after that implementation was filed. The claimants' witness statements supported the claims that they had suffered such losses in remuneration.
12. Mr Blackledge failed to give any particulars of his loss and his claim was accordingly dismissed at the trial. I shall call the remaining claimants the appellants.
13. That trial came on before Mr Assistant Recorder Peter Hurst. The appellants were represented by Miss Banton, the union by Mr Rose, both of whom appear before us today. The claimants' case was opened and their witnesses gave oral evidence over several days. When the appellants' case was closed, Mr Rose made a brief submission that the appellants had failed to discharge the burden on them of proving their loss and he asked that the case be dismissed.
14. The recorder accepted the submissions of Mr Rose that it was for the appellants to show that they would have continued to enjoy their original terms of employment if the union had not acted in breach of contract as they alleged, and that, even if one assumes that the breach of contract was made out, there was no evidence of any loss. The recorder accepted Mr Rose's further submission that the only possible outcome differing from the MEBO succeeding would have been that Grampian would have succeeded in its bid and that there was no evidence of any alternative offer from Grampian. The recorder referred to the appellants' calculations of loss and said:

"There is no issue at all between the parties that the claimants are now worse off than they were. The question for the court is: are they worse off than they would have been had the Grampian bid been accepted? In respect of that, I have quite simply no evidence."

15. The recorder said that it was open to Mr Rose not to call any evidence but if he did that he would almost certainly have lost the case on liability. The recorder expressed considerable reluctance that he had come to the view that the claim had to fail even though the appellants had put forward evidence which would have been sufficient for him to reach a decision on liability.
16. Permission to appeal was refused by the recorder but granted by May LJ at a without notice hearing of the application for permission made by the appellants. May LJ's reasons for giving leave were:

"It seems to me to be arguable, at least, that the Recorder got the burden of proof the wrong way round. T o put it simply, it could be submitted that the claimants established a sufficient case for real loss in the particulars which they relied on - ie a loss based on the difference between their rates of pay before and after the management buy-out - and that it was for the defendants to show, if it be the case, that this loss would probably not have been suffered. If this were correct, the claim should not have been dismissed at the time that it was for the reasons which the Recorder gave."

17. Miss Banton adopts the point taken by May LJ. She submits that it was premature for the recorder to dismiss the claim at that stage without any finding of liability. She says that the appellants, in putting forward as their loss the difference between their rates of pay before and after the implementation of the framework agreement, established a prima facie case of loss. She has a second argument that, because the recorder had indicated that, almost certainly, liability would have been established, the appellants were entitled, at least, to nominal damages. She criticises the recorder for awarding costs in favour of the union against the appellants.
18. Mr Rose supports the reasoning and conclusion of the recorder. He says that it was the appellants' case, that there was a choice between the MEBO and the bid from Grampian and that the appellants contended in evidence that the proper outcome ought to have been a successful Grampian bid. He said that the appellants adduced no evidence that the same terms which the appellants had previously enjoyed would be obtained if Grampian had succeeded in its bid.
19. I am not able to accept Mr Rose's submission. I do not accept that it was the appellants' case that the Grampian ought to have succeeded. Their case was simply that the union should not have been involved in backing Mokett's bid by entering into the framework agreement, that they should have been given more information of both bids and that when that had been provided there should have been a ballot on which bid to accept.
20. The starting point in law is that the appellants had contracts of employment with LGTS which could not be varied without the appellants' consent. Whether it was Mokett or Grampian which purchased the shares in LGTS, the position remained the same before and after the privatisation. By reason of the union's breach of contract, which I will assume the recorder would have been prepared to find through the union entering into the framework agreement and the consequent imposition by LGTS of different rates of pay, the appellants appear to ahve suffered loss. Prima facie that loss is to be measured by the difference in pay before and after the implementation of the framework agreement. If the union had performed its contract with its members there would have been no framework agreement and no change in the terms of the appellants' contracts of employment.
21. It may be that the union will be able to show that that was not the true loss, but that is a matter for the union to prove. I do not accept that it was for the appellants to prove that the Grampian bid would have succeeded or led to more favourable terms being offered to the workforce of LGTS. That, I repeat, was no part of the claim of the appellants who wanted more information and a ballot; they never got that. If they and the other bus workers had approved the Grampian bid and it succeeded, and if the Grampian bid contained terms varying the contracts of employment, it may be that approval by the appellants of the Grampian bid and their acceptance of the varied terms would have affected the quantum of the loss. If the consent of the appellants was not obtained, they would have been entitled to be paid by Grampian in accordance with the terms of their pre-privatisation contracts.
22. Mr Rose submitted that the recorder had made a finding that the terms of employment would change in any event on privatisation. If the recorder had made such a finding, he would have erred in law because, for the reasons already given, the consent of the employee is needed for a variation of the terms for employment of an employee. But the recorder made so such finding. He did find, no doubt correctly, that if the MEBO did not succeed, the Grampian bid would have succeeded. But that was a mere consequence of the fact that there were only two bidders at the final stage. It says nothing about what would have happened in relation to the contracts of employment. Mr Rose points to the words of the recorder:

"....privatisation is quite clearly going to cause disruption to the way things have been done previously."

23. But the recorder heard no evidence about Grampian's financial position or what it was intending to do if it succeeded. That quite general remark can hardly be a finding of fact as distinct from speculation. The recorder similarly speculates in a later passage that:

"any bidder would have to look at its overheads in general and that would include the wages cost."

24. That may well be right, but it does not follow that Grampian was bound to have insisted on changing the appellants' terms of employment.
25. Therefore, in agreement with the view put forward by May LJ, I respectfully disagree with the recorder's conclusion. I think he did misapply the burden of proof. The appellants did establish a prima facie loss in the form appearing in the schedule of loss. It was for the union to show why that was not the true loss of the appellants. Accordingly, in my view, the recorder erred in law in the exercise of his discretion when deciding to dismiss the appellants' claim at that stage. I think it is unfortunate that the recorder was seduced into the shortcut of stopping the case in the way he did. Had he made findings as to liability, it might have assisted him in arriving at a correct conclusion on the consequent loss.
26. I am much more doubtful about Miss Banton's second argument. The appellants' claim is one for damages. It might be thought well within the proper ambit of the court's discretion under the Civil Procedure Rules, having regard to the overriding objective, to stop a case when it becomes clear that the claimants, if succeeding on liability, could only recover nominal damages. The court must avoid incurring unnecessary costs and taking up a disproportionate amount of the court time. But I need express no final conclusion on this because of my conclusion on the first point.
27. For these reasons, I would allow this appeal, set aside the order of the recorder and return the case to the county court.
28. LORD JUSTICE LATHAM: I agree.
Order: Appeal allowed with costs. Order of the recorder to be set aside and case to be returned to the county court.