United Kingdom Employment Appeal Tribunal

BAILII case number: [1996] UKEAT 1328_95_2106

Appeal No. EAT/1328/95

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 21 June 1996

THE HONOURABLE MR JUSTICE MUMMERY (P)

MISS J W COLLERSON

MR P DAWSON OBE

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MRS J JEFFERIES          APPELLANT

POWERHOUSE RETAIL LTD          RESPONDENTS

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Transcript of Proceedings

JUDGMENT

PRELIMINARY HEARING

Revised


 


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APPEARANCES

For the Appellant MISS L WILLIAMS

Welfare Adviser

Southampton & District Unemployed Centre

11 Porchester Road

Woolston

Southampton

SO19 2JB


 


MR JUSTICE MUMMERY (PRESIDENT): This is the preliminary hearing of an appeal by Mrs J Jefferies against the unanimous decision of the Industrial Tribunal held at Southampton on 9 and 10 October 1995.

The full reasons for the decision were sent to the parties on 31 October. On 7 December 1995 a Notice of Appeal was served in which Mrs Jefferies set out the grounds on which she sought to appeal.

Those grounds have been elaborated in oral argument today by Miss Williams, who represents her and by a helpful skeleton argument which Miss Williams submitted prior to the hearing. She sought to persuade this Tribunal that the appeal does raise reasonably arguable questions of law. If the appeal does not raise questions of that kind, then the Tribunal has no jurisdiction to entertain the appeal and there is no point in the matter going to a full hearing.

The question which arose concerned a claim, by Mrs Jefferies and others, to what is described in the decision as "additional redundancy payments". The unanimous decision of the Tribunal was that Mrs Jefferies and the others concerned were not entitled to an additional redundancy payment. That claim was therefore dismissed.

We are not concerned with other claims dealt with in the decision concerning other Applicants who had alleged that they had been unfairly dismissed. The relevant facts found by the Tribunal were these. The claim was that the relevant Applicants had been paid less than their full redundancy payment entitlement under their contracts of employment.

We are only concerned with the case of Mrs Jefferies. Her position was that she had been employed by Southern Electric Plc at Appliance Warehouse, West Quay Road, Southampton. There was a transfer of that undertaking in April 1992 to the Respondents, Powerhouse Retail Ltd. Mrs Jefferies was made redundant. She was paid a statutory redundancy payment and an ex-gratia payment following her redundancy on 9 December 1994. The redundancy had occurred on the closure of Powerhouse Retail's distribution depot at West Quay Road.

The Tribunal found as a fact, in paragraph 8 of extended reasons, that, at the time of their dismissal, the Applicants all received ex-gratia severance payments in excess of the statutory redundancy entitlement. The Tribunal set out in paragraph 9 and 10 the rival contentions. The contention on behalf of Mrs Jefferies and others in the same position was that they were entitled to an increased severance payment on the basis that other Southern Electric employees had received enhanced severance packages in the past. As a result of that, there was incorporated into their contracts, by custom and practice, an obligation. That had passed under the Transfer Regulations when the transfer took place in April 1992 from Southern to Powerhouse.

There does not seem to be any doubt that, if there was a contractual term for an enhanced severance payment, then that would have been carried over by virtue of the provisions of regulation 5 of The TUPE Regulations 1981. The point of issue taken by Powerhouse Retail is summarised in paragraph 10 of the extended reasons. That was that there was never any contractual right on the part of the employees to any particular level of severance payment. Their case was that the contractual rights of the employees derived from negotiated collective agreements with recognised trade unions. Those agreements made no reference to severance entitlements in excess of the statutory minimum. What they did was to put together particular passages from time to time to suit particular redundancy exercises and to encourage early or voluntary retirement. Those packages, they submitted, were not a matter of contractual entitlement. They were not regarded as such by the trade unions.

Those were the rival contentions. The Tribunal made their crucial findings of fact on the critical issue "entitlement or not entitlement". They said on two occasions at least, prior to the transfer, Southern had put together packages of severance benefits in 1986 and 1991. The terms differed from one another. They were expressly stated to be discretionary. The terms were supplied to the unions for information only. They were stated to be non-negotiable and were not distributed to the employees generally.

On that part of the case Miss Williams has helpfully provided us with document headed "Notes of Guidance on Selective Early Voluntary Retirement Arrangements". There are two such documents, in similar form. One is dated 1 November 1991. The other one is dated November 1993, post-dating the transfer to the Respondent. It is important to note from those guidance documents statements which do not materially differ from the 1991 document and the 1993 document:

"The arrangements for severance will be applied selectively at the discretion of the company and are not negotiable."

They set out under the heading "For Staff aged 50 and above" the statement:

"The scheme provides for an ex gratia lump sum severance payment in addition to the ESPS benefits"

Details are given of the ESPS benefits and of the calculation of the ex gratia severance payment.

"payment includes any entitlement to a statutory redundancy payment and payment in lieu of any unexpired period of notice [and states further] that the payment is based on age and basic schedule salary at the date of leaving as follows."

They set out the columns for the calculation, one column saying "Age at date of leaving" and the other "Number of calendar months basic schedule salary". It is added at the end that "Under present tax laws this ex gratia severance payment is tax free up to £30,000".

Returning to the decision, the Tribunal said in paragraph 12:

"12. The terms and conditions of employment of the respondent's employees are contained in a joint agreement which was negotiated between the respondent and its recognised trade union in April 1992. The question of severance terms was raised during these negotiations and was dealt with by way of a non-binding assurance expiring in mid 1994."

The Tribunal stated their conclusion on this part of the case:

"13. It is the unanimous decision of the Tribunal that the 1986 and 1991 packages were devised to suit specific situations and cannot be relied upon by the applicants as part of their terms and conditions of employment. Whilst the applicants may well feel aggrieved that the terms offered when they were made redundant may have been less generous, it does not affect our finding. Since the enhanced terms did not form part of the applicant's contracts with Southern, those terms cannot have transferred under the Transfer of Undertakings (Protection of Employment) Regulations 1981 when the transfer took place in April 1992. As a result the claims for enhanced redundancy payments are dismissed."

Anything that happened after April 1992, either in the way of issue of documents with guidance on ex gratia payments or by way of conduct of the Respondents, is not relevant to this claim. This claim is based on the transfer. All that is relevant to the issue of obligation to make the payment occurred prior to April 1992.

What is wrong in law with that decision? The Tribunal addressed themselves to the issue between the parties, as identified in the Originating Application and the Notice of Appearance. They made certain findings of fact, on the basis of which they said there was no entitlement. Where is the legal misdirection which would give grounds for appeal?

The grounds of appeal attached to the Notice of Appeal reiterate the issue between the parties and the background of the transfer and summarise Mrs Jefferies' case in these words:

"Enhanced severance terms were granted to employees of Southern Electric of over 50 years of age and have become incorporated into the contract of employment by custom and practice."

Reference is made to details of redundancy packages offered to employees. Three are mentioned: 1986, 1991 and 1993. For the reasons mentioned, the Tribunal were correct in considering in their decision only the 1986 and 1991 packages. The 1993 package occurred after the transfer in April 1992. It could not be relevant to whether a legal obligation existed and was subject to the transfer in 1992.

The grounds then refer to the terms on offer and to evidence given by Mr Fettiplace, Industrial Relations Manager at Southern Electric to the Industrial Tribunal, that certain terms were currently offered to the Southern Electric employees.

The Tribunal, it was submitted, had come to a perverse conclusion in finding that the 1991 package was devised to suit a specific situation. That was contradictory of undisputed evidence. It was also contended that the same package of enhanced redundancy terms was offered to employees over a period of four years and would have acquired the status of a term of a contract. The employees were aware of the details of the package. It had been regularly adopted. It was submitted that the Tribunal, as a result of making perverse findings of fact, had reached a legally erroneous conclusion that there was no implied term for an enhanced redundancy arrangement for employees of more than 50 years of age.

Miss Williams elaborated the details of the reasoning for those grounds in her oral submissions today. The essence of them is summarised in her skeleton argument in saying:

"There was perversity here and the perversity was in finding facts in relation to the matters on which she based her argument of an implied term."

She repeated the points about the earlier packages in 1986 and 1991. She submitted that it was common ground that, whilst the documents, referred to as guidance notes, stated that the payments were discretionary, all redundant employees in fact, received the enhanced payments. She went as far as to say, in the course of discussion of the case with us, that the effect of the custom and practice followed was to negative the discretionary nature of the payments as described in the guidance notes.

Miss Williams said that, as already indicated in the Notice of Appeal, details of the payments were known to all the employees. There was a slight variation between the two packages adduced in evidence. That was relied on as confirming the discretionary nature of the packages. The Tribunal had accepted that contention, but it was erroneous to do so. It comes back to this main point. Was there an error of law on the part of the Tribunal in finding that there was no entitlement to the enhanced payment? Their refusal to find that entitlement was based on their refusal to find an implied term. Their refusal to find an implied term was based on the evidence before them.

In our view, on the evidence before the Tribunal, they were entitled to come to the view that there was no implied term which gave a right to an enhanced payment. The material before them took the form of the guidance notes. They do not assist Mrs Jefferies because there is an express statement in them that the severance payments which she is claiming as enhanced payments were ex gratia at the discretion of the company and not negotiable.

As to the other evidence, it seems, even on Miss Williams's submissions, to relate to two earlier packages of 1986 and 1991. The Tribunal would be entitled to come to the conclusion that, on the basis of those two matters alone, there was insufficient material to create a legal obligation from custom and practice.

The position is, in law, that a discretionary payment means what it says. There is no obligation to exercise the discretion in favour of the person who would benefit from the exercise. The most that can be said by way of a legal obligation in relation to a discretion is that there is an obligation to consider its exercise; but not to exercise it in a particular way. The only manner in which the discretionary nature of the payment can be eliminated is by sufficient evidence that it had become a matter of obligation. The Tribunal were entitled to find that it had not become a matter of obligation on the evidence.

In those circumstances, we have reached the conclusion that the appeal does not raise an arguable question of law. It is an attempt to have the evidence looked at again to see if a different conclusion would be reached by a different Tribunal.

The appeal is dismissed on the basis that there is no possibility of a different conclusion being reached. The Tribunal were entitled to come to the conclusion they did on the evidence that they had. The appeal is therefore dismissed.