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BAILII case number: [1992] UKEAT 369_91_1002

Appeal No. EAT/369/91

EMPOLYMENT APPEAL TRIBUNAL

4 ST. JAMES'S SQUARE, LONDON, SW1 4JU

At the Tribunal

On 10th February 1992

Before

THE HONOURABLE MR JUSTICE PILL

MR T S BATHO

MRS P TURNER OBE

HUMBER WORKFORCE CONTRACTORS LTD APPELLANTS

MR G LANGLEY & OTHERS RESPONDENTS

Transcript of Proceedings

JUDGMENT

Revised

APPEARANCES

For the Appellants MR A HILLIER

(Of Counsel)

Messrs Hill Taylor Dickinson

Solicitors

Irongate House

Duke's Place

London

EC3A 7LP

For the Respondents MR J BOWERS

(Of Counsel)

Messrs Pattinson & Brewer

Solicitors

30 Great James Street

London

WC1N 3HA

MR JUSTICE PILL: This is an appeal by Humber Workforce Contractors Ltd against a Decision of the Industrial Tribunal at Hull 30th May 1991 that they had made unlawful deductions from wages from monies properly due to each applicant. The respondents are named in the Notice of Appeal and there are twenty of them. At this stage we deal with an application by the appellants to amend their Notice of Appeal.

The unanimous Decision of the Tribunal was that unlawful deductions from wages had been made by the employers from monies properly due to each applicant. Points were raised at the hearing upon the construction of the Contracts of Employment which were set out in letters. It is said that there are differences between 12 of the cases where the men were admittedly employed in the capacity as Tugmaster Drivers and where their employment began before September of 1989, six other cases where employment began after that date and three other cases, though one man is in both categories, where the men were not employed as Tugmaster Drivers. Two applications to amend are in substance made; the first, and it appears at paragraph 4A of the proposed amended Notice is that the Tribunal misunderstood its function. It is sought to be argued that whereas the Tribunal thought, as appears from the expression "each applicant" which we have already mentioned, that their Decision following a particular hearing would apply to all cases it was a misunderstanding and that the first case was to be tried as a sample but without binding the other cases.

The second application is that set out in paragraph 4B and C of the proposed amended Notice and sets out that the Tribunal is alleged to have erred in law in construing the documents under which the men were employed.

In support of his first application Mr Hillier of Counsel submits that it is clear from paragraph 1 of the reasoned Decision that the Tribunal misunderstood what they were doing. He relies upon the sentence:

"There are some 20 applicants here and by consent, a sample applicant, (not the first-named person Mr Langley but Mr W E Rothenburg whose case number is 1903/91 has been heard today."

The paragraph also sets out that Mr Peter Russell a Trade Union official appeared for the applicants and Mrs Maureen Berry, company secretary appeared on behalf of the employers. Mr Hillier submits that it is clear from that paragraph that the agreement was not that the Decision in that case should cover all the applicants but it was, as is stated in the paragraph, a sample application.

We see the force in that submission. However, if the point now sought to be taken, were to be taken, we are firmly of the opinion that it ought to have been taken sooner than it was. The sequence of events following the issuing of the reasoned Decision on the 30th May of 1991 was that on the 13th June 1991 the employers by then represented by solicitors, wrote to the Assistant Secretary of Tribunals applying to the Tribunal for a review of its Decision upon the ground that the interests of justice require such a review. The points made in that letter relate solely to the different categories of employee which we have already mentioned, the six who were employed after September 1989 and the three who are alleged to have been employed other than as Tugmaster Drivers. In correspondence which is in our Bundle the Tribunal decline to review its Decision.

A Notice of Appeal was then served on the 8th July 1991 within the 42 day period provided by the Rules. The applicants, then also represented by solicitors, took points on the Notice of Appeal and pointed out, and understandably in our view, that the Notice appeared to provide only a basis for argument in the case of eight applicants, that is those in the categories already mentioned.

By letter dated 6th August 1991 the employer's solicitors said:

"The appeal extends to all the applicants before the Industrial Tribunal and we hope this will be plain to you on re-reading the Notice of Appeal."

We do not find that a very helpful reply. On a careful reading of the Notice of Appeal it can be said to apply to all 20, but the manner in which it is set out certainly does not make that obvious.

It was only on the 30th January 1992, within a very short time before this hearing, that the employers sought to take the point that the Tribunal had misunderstood its function on the relevant day. The point to be taken is that the case which was being heard was only that of Mr Rothenburg and that the Decision was in no way to be binding upon the other categories. Mr Hillier realistically accepts that 11 of the cases could not properly be distinguished from the Decision in the case which was heard. If that was the view of the employers it should have been obvious immediately upon receipt of the Tribunal's Decision. We have referred to the opening words of that Decision. It is also clear from later paragraphs of the Decision, paragraphs 5 and 6, that the Tribunal was under the impression that it had been requested by the parties to deal with all cases on the same basis. That emerges plainly from paragraph 6 of the reasoned Decision. A point made on behalf of the applicants is that Mrs Berry who appeared before the Tribunal has not, either in correspondence or by affidavit or otherwise, ever maintained that the agreement was other than that which the Tribunal clearly believed it to be, and it is only when a fresh legal mind came to be applied to the problem that this point is sought to be made.

It is important not only that Notices of Appeal are served within time, and there is clear authority upon that, but also that the basic grounds on which it is sought to appeal are plainly set out at an early stage. Notwithstanding how obvious the position must have been to the employers when they read the Decision letter, they allowed a period of seven months to elapse before making an application to amend on what is a quite fundamental point namely the Tribunal's misunderstanding of its own function. In the circumstances we refuse leave to amend on that ground. It would not be right that that issue should be re-opened. A finding on that point in favour of the employers would mean that the cases would have to be considered afresh by an industrial tribunal.

We take a different view on the other point at paragraph A2 of the Original Notice. Though under a heading and under a narrative which appeared to apply only to "other employees" it was stated:

"For the employees who were already employed in September 1989 there was no change in the pay arrangements for holiday when the change in the wages structure was implemented in September 1989."

One would have expected that to be set out under a separate heading as indeed has been done and plainly done in the amended Notice of Appeal. However, the point had been taken at the hearing and we do not consider that any injustice is done by allowing a late amendment as requested in that respect. We do not however, allow the alternative amendment put at paragraph 4C of the proposed amended notice. Mr Hillier properly accepts that the alternative submission had not been put to the Industrial Tribunal and we do not consider it right that the employer should be allowed to argue it at this stage. The result is that the application to amend is refused with respect to paragraph 4A; it is allowed with respect to paragraph 4B (i) and (ii) and to paragraph 4C up until the word "alternatively" appears.

We now propose to hear arguments on the merits.

* * * * * * *

This is an Appeal against a Decision of the Industrial Tribunal sitting in Hull entered on the 30th May 1991. The Tribunal held that Humber Workforce Contractors Ltd had made unlawful deductions for monies properly due to each of 20 applicants. The monies withheld were claimed by the employers to be an overpayment of holiday money which had been paid due to an error of fact. The employers' appeal against that finding by an amended Notice of Appeal dated the 30th January 1992. The appellants claim that the Tribunal erred in law in their construction of the documents which set out the terms of the contracts between the applicants and the appellants.

It is further submitted that the Tribunal failed adequately to have regard to the terms of letters of appointment issued to six of the employees who were taken on after September 1989.

It is further submitted that the Tribunal erred in failing to understand that three of the respondents were not employed as Tugmaster Drivers and should not have been treated in the same way as the others.

One employee comes into the second and third categories, that is, he was not employed as a Tugmaster Driver and was employed after September of 1989.

We heard this morning an application to amend the Notice in accordance with the document of the 30th January 1992. We have granted that in part and I have referred to the points now sought to be made. We refused leave to amend to add a further ground, for reasons given earlier in the day and which can perhaps be summarised in this way. It was sought to argue that the Tribunal had misunderstood its function in hearing the case of a single applicant. We refused leave to argue that the single case did not include consideration of other cases because we came to the conclusion that the point, if it was to be taken, should have been taken very much sooner. We are not concerned with the arithmetic involved. The holiday pay was paid at an hourly rate of £5.25 per week. The appellants submit that on a correct construction of the contracts, or at any rate some of the contracts, it should have been paid at a rate of £3.50 per week.

In their Decision the Tribunal referred to letters from the employers to Tugmaster Drivers dated the 14th August 1989 and the 22nd September 1989. The first of those letters is a sample of letters sent to Tugmaster Drivers employed before September 1989. That provided at paragraph 1:

"Rate of Pay - The basic rate of pay will be £3.50 per hour. You will be paid on a monthly basis by direct credit into your bank account."

Paragraph 2 provided inter alia:

"Hours of Work: The guaranteed working week will be 35 hours to be worked as required."

It provided at paragraph 4:

"Holiday periods will be paid at the rate of 35 hours per week at the basic rate of pay of £3.50/hour for each week or part thereof, although this is subject to review."

The letter of 22nd September 1989, which applies in the case of the 12 employees admitted to be Tugmaster Drivers and who were admittedly employed before the letter was written, provides as follows:

"Following recent confusion regarding the calculation of wages, it has been necessary to change the basic structure in order to simplify details for all concerned.

The new basic wage calculation is shown below, and will be back dated to 1st September 1989

8 hrs x 4 days x 3.50 =112.00

8 hrs x 1 day x 7.00 = 56.00

-------

168.00

Plus 25% Shift Allow. 42.00

-------

210.00

_______

The above amount is for a 40 hour week, anything over and above will be paid at over-time rates, i.e. £5.25 per hour for week day, and £7.00 per hour for weekends. This equates to a gross monthly pay of £9.10.00 without overtime rates. You will also note that the 25% shift differential has been built into the wage structure, so you will now receive it automatically. Over time rates will continue to be paid monthly in arrears.

HOLIDAYS

To calculate holidays, your entitlement is 1.66 days for each month worked up to 31st December 1989. Holidays cannot be carried over into the new year and no cash will be paid in lieu. Any one wishing to book a holiday will need to collect a form from this office, and the dates will have to be confirmed with the Cargo Superintendant.

If you have any queries regarding the above matters please let me know."

We then have a document dated 19th December 1989 which is said to have been sent to the men employed after the September letter. We do not propose to read it in full; it bears a striking similarity to the letter of the 14th August 1989.

"1.Rate of Pay - The basic rate of pay will be £3.50 per hour. ......

2.Hours of Work: The guaranteed working week will be 35 hours to be worked as required.

As mentioned, initially you will be required to work 8 hours per day, 5 days per week on a shift rota, including nights. The 8 hour shift may be at any point during a 24 hour period. .......

4.Holiday periods will be paid at the rate of 35 hours per week at the basic rate of pay of £3.50/hour for each week or part thereof, although this is subject to review."

There was provision for the signature by an employee of his acceptance of the terms and conditions but there is no evidence that the document was signed. The opening words of the letter read:

"Further to your recent interview we are pleased to offer you employment on the following terms."

We deal with the Tribunal's findings having set out portions from the documents which the Tribunal considered relevant. The Tribunal did not refer, in terms, to the December letter which we have quoted. The Tribunal held that the September letter to all Tugmaster Drivers was the "new contract". They continued:

"We also are satisfied and find that by necessary implication, the previous paragraphs in the previous letter of appointment, in relation to holidays were also altered. We have no doubt in our mind that it was in the contemplation of all parties, that these things were being changed to bring everything into line, meant that the guaranteed hours to be worked after 1st September were 40; the guaranteed pay was £210, and the holiday pay arrangements would reflect those new facts, namely £210 per holiday week. We find that that is what happened; that is what the documents mean and indeed, on the admitted evidence of Mrs Berry, that is indeed what happened in practice, because whether employed in September 1989, or subsequently also enjoyed the same terms and conditions. That is what happened and it reflected the`paper' changes set out above."

On behalf of the appellants, Mr Hillier submits that, on its true construction the document dated the 22nd September 1989 was limited to varying the minimum number of hours to be worked during the week and the total amount to be paid for that 40 hour week. The basic rate of pay remained at £3.50 per hour and the calculation of holiday pay remained unaffected by the changes in the September letter. He submits that the Tribunal were correct in focusing upon the construction of documents. If they did take into account post contractual conduct, they were in error. He says that there is nothing inconsistent between the August document and the September document, the two, as he put it, sit happily together. The provisions as to holiday pay in the August letter, that it was to be based on a rate of £3.50 per hour were not expressly varied in the September letter and they should not be held to have been varied by implication. He makes the further point that it would be odd if the basic rate of pay could be said to be £5.25 per week, a sum achieved by dividing the £210 in the September 22nd letter by the 40 hours contemplated in that letter, because it would be as high as the rate specified in the September letter for overtime. His submission, in summary, is that the basic rate for the purpose of holiday calculations remained one of £3.50 per week.

On behalf of the Respondents Mr Bowers draws attention to the expression "subject to review" in the August letter. It is used in relation to holiday pay and against that background he submits that the change which is effected by the September 22nd letter comes as no surprise. His submission is that the effect of the September letter is to change the basic wage for the purpose of the calculating holiday pay. He relies on the fact that it is normal for holiday pay to be calculated in the same way as ordinary pay though that begs the question what the ordinary pay is in this particular case. He submits that it is a necessary implication of the September letter that for purposes of holiday pay calculation the basic rate had changed. He submits that the letter must be considered in the light of the statutory regime which by virtue of Section 1(3)(d) of the Employment Protection (Consolidation) Act 1978 provides that:

"(i)entitlement to holidays, including public holidays, and holiday pay (the particulars given being sufficient to enable the employee's entitlement, including any entitlement to accrued holiday pay on the termination of employment, to be precisely calculated),"

must be set out in a document provided for employees. If the combination of documents leads to any uncertainty, they should be construed against the employer.

We put points to both Counsel in relation to the September letter. We do not find force in Mr Hillier's point about overtime because the basic wage calculation, as it is described in the letter, would itself provide that the week-day overtime rate was on the 5th day of the working cycle actually lower than the rate paid for the basic eight hours on that day. There is an anomaly, on his approach, whichever view one takes of the letter.

We have unanimously come to the conclusion in relation to the pre-September 1989 employees that for the purpose of holiday pay the basic wage contractually agreed was that of £5.25 a hour.

We see force in the points made by Mr Bower to which we have referred. We note the opening wording of the letter:

"Following recent confusion regarding the calculation of wages, it has been necessary to change the basic structure"

In the next paragraph the calculation which is set out appears under the heading

"basic wage calculation"

As to the point that one does not normally have a shift allowance included for the purpose of calculating holiday pay, the letter itself "that the 25% shift differential has been built into the wage structure". In our judgment, reading the documents together as a matter of construction, the correct conclusion was that reached by the Industrial Tribunal, namely that for the disputed purpose the basic wage was the higher figure.

There has been considerable argument as to the relevance of the conduct of the employer in paying for a considerable period of time, and to a considerable number of men, the higher rate. In our view that would not in itself enable the respondents successfully to resist this appeal. Where money is paid on a mistake of fact there are circumstances in which it can be recovered, subject to arguments about estoppel which in our view do not arise in the present case. If there was a rule of law that in construing a contract you should have regard to money subsequently paid under it; money paid under a mistake of fact could not normally be recovered. However we have regard to the way the Tribunal put it. We do not read them as putting the subsequent conduct merely on that basis. We consider them to be taking the view that the subsequent conduct is evidence of what was, agreed between the parties, that the subsequent conduct is evidence of what was agreed between the parties, as seen by the employers. One has to look at two documents, and money was paid. It was paid because of the employers' intentions and understanding of what the terms of the contract were. The Tribunal did note that Mrs Berry, the Company Secretary, who appeared for the employers before the Tribunal, said that "that is indeed what happened in practice". They were entitled to take the view that Mrs Berry was accepting that it was the view that the employers themselves, at that time, took of the contract.

We turn to the post-September employees, and indeed, the original Notice of Appeal before its amendment in accordance with the 30th January document, gave prominence to this point, and the point that we have so far been considering occupied a very subsidiary position. The point is made, as it clearly was made by Mrs Berry at the Tribunal, that there were overpayments of holiday pay in relation to the post-September 1989 employees. It is right to say that as summarised at paragraph 6, Mrs Berry's submission covers all employees but we have already mentioned the admission as interpreted by the Tribunal which appeared at paragraph 5(f). In relation to the post-September employees the Tribunal said this:

"We are quite satisfied that there was a change brought about in September 1989 and to claim as the respondents now do this is a claiming back of monies over-paid of wages is not in fact the truth."

That is a further statement of their position in relation to all twenty applicants. They added this:

"Mr Andrew and the other 6 who joined in December, have been treated in just the same manner as everybody else."

Mr Hillier's submission is that the Tribunal was not entitled to ignore the contents of the December letter. He points out that in the December letter there is a plain reference to

"Holiday periods will be paid at the rate of 35 hours per week at the basic rate of pay of £3.50/hour"

He draws attention to the fact that the Tribunal did not, in terms, deal with that letter. He submits that the only proper construction of the holiday arrangements for the post-September 1989 employees was on the basis of that paragraph. He makes the same submission in relation to the subsequent practice of the employers not being relevant to the interpretation of the Contract as he did in relation to the pre-September employees. The December letter needs to be elaborated by reference to the September letter but is not inconsistent with it.

We find a number of odd features about the December letter and Mr Hillier has faced up to that, at least by his acceptance that there has to be read into the December letter the higher rates of pay granted in September. The December letter is a formal document which purports to set out employment terms but has to be supplemented by the higher wage figure which appears to contradict the figure of £3.50 an hour. Mr Hillier submits that there is no contradiction. The December letter provides a basic rate of pay of £3.50 per hour. All that the September letter did was to create a formula by which weekly wages were to be calculated. That formula, he submits, and of course we have rejected this submission in relation to the pre-September employees, does not affect what is the basic wage.

In our unanimous judgment the Tribunal were entitled to reach the conclusion they did in relation to the post-September employees. Their references to the conduct of the employers after the December letter, we see in this circumstance also as being their view of what the parties themselves at that time intended the Contract to be.

It is surprising that there is no reference to the December letter in the Tribunal's findings. Nevertheless, for a number of reasons we consider that they were entitled to ignore that letter in deciding what the terms of the Contract were. The letter is not signed by Mr Andrew and there was no evidence before the Tribunal that he or the others had accepted by signature the terms as binding them. It is difficult what is more, to take seriously a document which purports to be a comprehensive setting out of employment terms but which on examination requires supplementing on a basic point by reference to an earlier document. The terms of the December letter were not followed in practice; the employers treating the new employees on the same basis as the earlier ones in relation to holiday pay. Further, that accords with what one would expect to find an employer doing who was taking on new employees. He would be unlikely to pay them a lower rate of holiday pay than existing employees. That point is not decisive but it adds weight to our view that the December document is not one to which weight must be given. It is in very similar terms to the August document and it may well be that it was sent out in ignorance or misunderstanding by whoever sent it as to what terms were being operated between the employers and employees. Any mistake that was made by the employers, in our view, is more likely to have been in sending out that letter, than in paying the six new employees on the same basis as the earlier ones.

The lack of clarity in the earlier arrangement, about which we have expressed our findings, if anything diminishes our confidence that these employers did formally set out, or even sought to set out, in the December letter what they expected to be binding terms as between them and the post-September employees. In our view they acted on the August/September arrangements, as we have interpreted them, believing them to constitute the Contract which they had made with the employees of both categories. Having ourselves formed those views we believe that the Tribunal were entitled to come to the conclusion they did. Their conclusion is briefly expressed, it is perhaps surprising that reasoning is not fuller, but it appears to us that albeit in shorthand form they have reached the same conclusion. Unless there is something wrong in their conclusion or in their reasoning, it would not be for us to upset it. They reached the conclusion that as they briefly put it:

"that is what the documents mean and indeed on the admitted evidence of Mrs Berry, that is indeed what happened in practice because everybody also enjoyed the same terms and conditions. That was what happened....."

A further point is taken, though Mr Hillier will not I am sure mind if I say that it was not taken with much enthusiasm, in relation to three employees who were not admitted to be Tugmaster Drivers. One of those is in another category too and we need not mention him further. Another of them is mentioned in paragraph 4(d) of the Tribunal's Decision in these terms:

"Mr Ambridge, although strictly not a tugmaster driver nonetheless has been conceded as being directly a recipient of this letter [that is the September letter] and affected by the changes therein."

There appears no reason whatever to distinguish Mr Ambridge from Mr Preston, the outstanding non-Tugmaster Driver. If the matter were to be remitted it is difficult to see any reason, and none has been suggested to us, why a concession which affected Mr Ambridge did not also affect Mr Preston. The failure to mention Mr Preston may have been an omission on the Tribunal's part or on the part of Mrs Berry, although we should not wish to criticise her on that or indeed any other ground, but it does not appear to us that it could be right to single out Mr Preston as someone for whom there should be a remission. It seems to us that the reference to Mr Ambridge must apply equally to him.

Further, we consider there was a burden upon the employers to raise this point if they wished to and there is no material before us, either in the Decision or in the submissions of Counsel, that any case was made against Mr Preston on this ground.

It follows, for the reasons we have given on the various points raised, that this Appeal must be dismissed.