Scottish Court of Session Decisions

[1] The pursuer in this action was formerly employed by the defenders. At an earlier stage in his employment history he was employed by a company within the Scottish & Newcastle Breweries Group whose undertaking was acquired by Mount Charlotte Investments PLC. His contract of employment with that company transferred to Mount Charlotte Investments PLC apparently pursuant to the Transfer of Undertakings (Protection of Employment) Regulations 1981. The current defenders have subsequently acquired responsibility for the employer's obligations under the pursuer's contract of employment, the route or method of that transfer of responsibility being immaterial for present purposes. The principal claim in the action is for payment of a contractually based redundancy payment and is advanced in the first conclusion of the summons. There is also a second conclusion for payment of a relatively minor sum respecting other matters relating to a dispute concerning the length of notice of termination of employment and its consequences for salary, lunch allowance and car use, but none of these arise for present consideration.

[2] In January 1999 the post occupied by the pursuer in his employment with the defenders was that of general manager of their car park at Greenside Car Park in Edinburgh. In that month ownership and operation of the car park was transferred to a third party, NCP. The particular post occupied by the pursuer therefore ceased to exist and the defenders offered to the pursuer an alternative post as "Essential Services Manager" in Glasgow. The duties and responsibilities of that post were indicated in a letter of 20 January 1999 from the defenders to the pursuer as being "...... management of the stores and car park at Glasgow Thistle. There will also be the requirement on occasions to carry out audits in hotels at the direction of the Operations Director for Scotland.....". No change to salary or benefits would result were that post to be accepted by the pursuer. There followed thereafter a relatively protracted exchange of correspondence between the pursuer and his solicitors on the one hand and the defenders on the other. The upshot was that the pursuer declined to take up the offer of employment as the Essential Services Manager in Glasgow even on the basis of a trial period of four weeks. The position ultimately adopted by the pursuer in that correspondence was that the post in Glasgow was not suitable alternative employment and it had not been unreasonably refused. In his pleadings, however, the primary position adopted by the pursuer is that there was no obligation upon him to take up any offer of any possible alternative employment with the defenders once his particular post had become redundant and that contention was the one principally advanced by counsel for the pursuer in the debate before me.

[3] Turning to the documents relied upon or referred to, it is accepted that subsequently to the transfer of his contract of employment to Mount Charlotte Investments PLC, the pursuer was provided with a document, dated 29 May 1991, addressed to him and intituled "Codicil to Contract of Employment" (No.6/1 of process). In its opening paragraphs that document reads as follows:-

Of the terms and conditions thereafter set out in the Codicil only head 5 is of relevance to the current proceedings. It is in these terms:-

The Codicil proceeds to say that -

and there follows thereafter a list of various handbooks or booklets of which the only one seen as relevant to the present claim is the "Scottish & Newcastle Breweries Redundancy Booklet April 1988".

[4] That booklet (No.7/26 of process) contains in paragraph 1.1 a statement of its aim, namely:-

Notwithstanding that description of its aim, both parties to this litigation have approached matters on the basis that what is written in the booklet is to be treated as forming part of the actual terms of the pursuer's contract of employment.

[5] Section 2 of the booklet is headed "Redundancy Payments". Paragraphs 2.1, 2.2 and 2.7 are in these terms:-

Section 3 and 4 are intituled "Pensions and Life Assurance" and "Company Benefits" respectively. The text in each section is relatively brief and is couched essentially in terms of the giving of advice. Thus paragraph 3.2 tells the employee, not entitled to an immediate pension, of two options open to him. Paragraph 4.3 informs the redundant or potentially redundant employee that his beer allowance will cease. On the other hand, para.4.1 informs such an employee that if he holds a company car he may have the opportunity at the company's discretion to purchase the car at advantageous terms.

[6] The provisions of the booklet to which counsel especially directed attention are those in Section 5 which is headed "Company Services". The paragraph particularly in focus was paragraph 5.2 but it may be appropriate to set out the preceding and succeeding paragraphs:-

[7] In inviting dismissal of the claim for a redundancy payment as irrelevant, Mr Hanretty, who appeared for the defenders, submitted that in light of paragraph 5.2 of the booklet if any alternative employment were available within the Company the employee whose post was redundant was obliged to take up that alternative employment on a trial basis. Only if the employee did so, and only if at the end of that trial there were mutual agreement that the alternative employment was unsuitable, could any contractual entitlement to the redundancy payment provided for in the contract of employment arise. Since it was accepted by the pursuer that he had declined to try the alternative post of Essential Services Manager in Glasgow, which the defenders considered to be suitable alternative employment, the pursuer was thus not entitled to the redundancy payment claimed and the action was to that extent irrelevant.

[8] By way of elaboration of this short submission counsel for the defenders stated that this was a "generous scheme", going beyond the statutory redundancy entitlement and it would not make commercial sense for an employer to provide such benefits merely on a particular post becoming redundant while other alternative employment was available within the company. It was inherent in what was said in paragraph 5.1 of the booklet that the company would strive to find the employee an alternative position. The fact that paragraph 5.2 gave the employee a right to a trial period necessarily implied that there was a requirement to take up any alternative employment offered by the employer. It would, said counsel, do violence to the language of paragraph 5.2 to proceed on the basis that on a post becoming redundant an unqualified entitlement to a redundancy payment arose.

[9] Counsel for the defenders went on to submit that the point in time at which any question relating to the suitability of the alternative employment was to be judged was at the end of the trial period. It would be necessary at that point in time that the employer accept that the employment was unsuitable before any entitlement could arise. However, it was conceded by counsel that at that stage the employer would have to act reasonably in deciding whether to withhold agreement that the alternative post was unsuitable. But, according to counsel, if any alternative position, irrespective of its suitability, were offered by the employer an obligation lay with the employee to take it up for the trial period as a first condition precedent to his acquisition of any entitlement to the redundancy payment.

[10] In her response counsel for the pursuer, Miss Paterson, opened by inviting the allowance of a proof before answer.

[11] Having adverted to the provisions of paragraphs 2.1 and 2.2 of the booklet, counsel then referred to various aspects of the statutory scheme now contained in the Employment Rights Act 1996. She did so by looking to the description and discussion of those provisions contained in Harvey on Industrial Relations and Employment Law, paragraphs 1053, 1054, 1515, 1589, 1611, 1615, 1624, 1639, 1685 and 1731 rather than the statutory provisions themselves. Put in very brief terms, under the statutory scheme an employee would lose any right to a redundancy payment if he were offered an identical or suitable alternative employment and he unreasonably refused that offer. Unless the alternative were identical, an employee was entitled to a four week trial period of the alternative. Were he then to reject the offer of the alternative employment, his right to redundancy would yet depend on the dual criteria of whether the alternative employment were suitable and his rejection were unreasonable. In that respect counsel referred to Carron Company v Robertson 1967 S.C.273.

[12] Counsel for the pursuer then proceeded to examine the approach adopted by counsel for the defenders. The criticisms advanced included the observation that were counsel for the defenders correct in his construction an employee whose post had become redundant would be obliged to undergo a four week trial period in a job which might, from the outset, be manifestly unsuitable. There would be no point in inviting employees to apply for any vacancy (paragraph 5.1) if, as the defenders contended, the employee could be forced to undergo four weeks in any job of the employer's choosing.

[13] The submission advanced by counsel for the pursuer was that on a proper construction of the provisions of paragraph 5.2 of the booklet, the provisions' only effect was to give the employee an option of trying out some other job should that be offered to him. Counsel stressed however that in her submission there was no requirement that the employee undertake the alternative employment tendered by the employer. There was no compulsitor upon the employee to take up any offer of alternative employment and that same absence of compulsitor applied irrespective of the suitability or unsuitability of the alternative employment or indeed irrespective whether the alternative post might be one identical with the redundant post.

[14] Although it appeared that the logical outcome of the construction contended for by counsel for the pursuer was that there was no defence on the merits to the claim for payment of a contractual redundancy payment, counsel for the pursuer did not seek to restrict the scope of the inquiry to matters of quantum. The pursuer has not tendered a preliminary plea to the relevance of the defences and counsel for the pursuer did not seek to add such a plea despite the fact that the logic of her argument would appear to prompt it.

[15] In approaching the competing contentions of counsel I have to observe at the outset that although both parties in their pleadings and at the debate treated the terms of the booklet as being terms of the contract of employment itself and subjected them to textual scrutiny on that basis it is, I think, difficult to approach matters on the view that the Codicil and the booklet constitute an entire agreement.

[16] Some, if not most, of the booklet consists of material plainly incapable of being given contractual force or as being intended to have contractual force. By way of random example one might mention paragraph 5.3. Indeed immediately preceding Section 5 there is a section headed "Benefits" which states that "State and Company redundancy benefits are subject to change from time to time. In the event of redundancy you should check any benefits which might apply to you, either through your Personnel Manager or, for State benefits, with the appropriate State agency". Further, one must bear in mind the statement of the aim of the booklet set out in paragraph 1.1.

[17] I would further observe that within neither the Codicil nor the booklet does one find any attempt at an express definition of what is meant by "redundancy". There is, in my view, a plain distinction between a particular post or job becoming redundant or unnecessary for the purposes of the employer's business and the employee himself becoming superfluous to the employer's needs. This distinction is of course reflected in the statutory scheme whereby - again put very shortly - an employee is not entitled to a redundancy payment (i) if he is offered and unreasonably refuses renewal of his contract on identical terms or (ii) is offered different but suitable employment which he unreasonably refuses. In the latter case (different, but possibly suitable, employment) the employee has the right to a four week trial period and will not lose his right to redundancy payment by having accepted an offer of re-engagement on those different terms should the alternative be unsuitable and not unreasonably rejected on that account.

[18] At some points in the course of her submissions counsel for the pursuer appeared to accept that the terms of the booklet had to be read with the statutory scheme in mind. In my view, the terms of paragraph 2.1 and 2.2 of the booklet rather underscore that necessity and, as a general observation, it would appear to be not unreasonable that the parties should take the contractual understanding of redundancy to be the same as that in the statutory scheme albeit that the quantum resulting in the event of redundancy might be different. I do not find anything in the documentation before me suggesting that the parties agreed to a concept of "redundancy" differing from the substance of the statutory concept as opposed to agreeing on differing consequences flowing from that concept.

[19] Viewed against that background I consider to be erroneous the contention for the pursuer to the effect that the mere fact of a post's becoming redundant is sufficient to give rise to a right under the contract to a redundancy payment notwithstanding the existence of another identical post or an alternative suitable post. In my opinion there is much force in Mr Hanretty's observation that it is inherently unlikely that any employer would provide a redundancy payment scheme which would oblige the employer to make a redundancy payment even though suitable alternative employment - or even other identical employment - were available within the employer's undertaking. In my view clear and express language would be expected were such a result intended and as already indicated I do not consider that any such language is to be found in the codicil or in the booklet. I find myself accordingly unable to accept the submission of counsel for the pursuer that what is to be taken from paragraph 5.2 of the booklet is simply that an employee whose post is redundant has the right, at his sole option, to require the employer to give him a trial period in another post irrespective whether that other post be identical, suitable alternative, or even prima facie unsuitable employment. In my view, but subject to a qualification to which I shall shortly turn, the much better reading of paragraph 5.2 is along the lines advanced by counsel for the defenders, namely that in describing a right on the employee's part to a four week trial period the text proceeds on the assumption that entitlement to a redundancy payment does not arise if there be alternative employment.

[20] The need for me to make reference to such a qualification arises from the, in some ways conversely extreme construction contended for by counsel for the defenders, namely - the alternative employment does not require to be suitable; the employee is required nonetheless to undergo a four week trial period; and only if the employer then agree the alternative job to be unsuitable would the right to a redundancy payment arise. While counsel for the defenders eventually accepted that matters could not be thus left to the employer's unfettered veto and that it might be implied that the employer would have to act reasonably in giving or withholding his consent to the alternative employment's being unsuitable at the effluxion of the four week period, counsel disputed the possibility of any criterion or suitability or reasonableness entering into matters at the outset of the offer of the alternative position.

[21] As counsel for the pursuer pointed out this approach would produce the result that a managing director whose position became redundant might be required to perform whatever menial duties might be available at the lowest level in the company's organisation for the period of four weeks only thereafter to receive recognition of the unsuitability of the post, or the possible right to challenge the refusal of that recognition as being unreasonable on the part of the employer.

[22] In my view that is a result which neither employer nor employee is likely to have intended. It is a result which does not arise if one takes the simple step of treating the assumption underlying the text of paragraph 5.2 of the booklet as being that entitlement to a redundancy payment does not arise if there is suitable alternative employment which it is reasonable for the employee to take up. That assumption is of course also consistent with the statutory notion of redundancy and fits with the provisions in the opening paragraphs of section 2 of the booklet, wherein nothing is said clearly indicating that the concept of redundancy differs as between the contractual or consensual terms and the statutory concept. The difference between the two regimes lies in the amount of the benefits payable in the event of redundancy.

[23] Accordingly the qualification which I make to the submission of counsel for the defenders to the effect that paragraph 5.2 proceeds on the assumption that entitlement to a redundancy payment does not arise if there is alternative employment is that the alternative employment offer be suitable and one which it is reasonable for the employee to take up.

[24] Having reached that conclusion respecting the competing constructions contended for by counsel, which is a result intermediate between the positions adopted by them, there then arises the question of the appropriate approach which I should adopt to the future disposal of this action (insofar as relating to the claim for a redundancy payment).

[25] So far as the terms of the pleadings are concerned, the relatively polarised positions ultimately adopted in argument are not wholly or plainly reflected. Thus in the defences (Answer 11, third sentence), the defenders aver that the pursuer was offered suitable alternative employment and they then advance factors indicating that suitability. For his part, the pursuer in his pleadings incorporates the terms of his solicitor's letter of 1 April 1999 which proceeds on the view that the alternative employment was not suitable. I quote from the letter thus:-

Having made that incorporation the pleader, in an apparently rather contradictory manner, goes on to challenge the view that entitlement to a redundancy payment is "qualified by reference to any refusal of alternative employment". The pleadings for the pursuer further advanced the case that esto there was such a qualification, the alternative employment as Essential Services Manager was not suitable alternative employment for the reason, put shortly, that it did not carry responsibilities sufficiently approaching those of the post of Manager of the Greenside Car Park.

[26] The question of the suitability of the offer of alternative employment as Essential Services Manager in Glasgow and the reasonableness of the pursuer's rejection of that offer is thus already a matter canvassed in the pleadings. For the reasons which I have endeavoured to describe I consider that the de quo of the dispute truly turns on the suitability of the alternative employment offered and the reasonableness of the pursuer's refusal of that offer. Accordingly the future course for the resolution of this dispute, which has been made subject of a commercial action, appears to me to dictate an inquiry into those issues already canvassed in the pleadings and also the other issues which were not the subject of the debate. In these circumstances I shall put the case out By Order to discuss future arrangements for that inquiry.