United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MR M SUCKLING (Representative)
For the Respondents	MR R HARRISON (of Counsel) Messrs Lovell White Durrant Solicitors 65 Holborn Viaduct London EC1A 2DY


 


JUDGE PETER CLARK: At all material times the appellants were employed, first by Powell Duffryn Terminals Ltd ["Powell Duffryn"] and then, following a relevant transfer of the undertaking or part of the undertaking of Powell Duffryn in which they were employed as terminal operators at their Purfleet Terminal on 14th November 1996, by the respondent, Van Ommeren Tank Terminal (Purfleet) Ltd ["Van Ommeren"].

By Originating Applications presented to the Stratford Employment Tribunal on 17th June 1997 the appellants described their complaint as "Transfer of Undertakings. Wages Act". The substance of the complaint was that Van Ommeren had made an unlawful deduction from their wages contrary to s. 13(3) Employment Rights Act 1996, in that that respondent had not paid a bonus to which they were entitled.

It should be appreciated that following a hearing held on 23rd October 1997 before a full Employment Tribunal sitting at Stratford that tribunal dismissed the complaints in a decision with summary reasons dated 5th November 1997 ["the original decision"]. The appellants applied for a review of that decision by a written request received by the tribunal on 18th November 1997. By a review decision with full reasons dated 9th December 1997 the original tribunal Chairman, Mr Purse, dismissed that application under Rule 11(5) of the Industrial Tribunal Rules of Procedure ["the review decision"]. The appellants then appealed against the original decision to this tribunal by a Notice dated 16th December 1997. However, that Notice did not comply with Rule 3(1)(c) of the EAT Rules, in that no copy of the Employment Tribunal's extended reasons for the original decision was served with it, and the Chairman refused to extend time for providing reasons requested late. Nevertheless, at a preliminary hearing before a division of this tribunal presided over by Morison J, held on 22nd April 1998 the matter was allowed to proceed to this full appeal hearing and on that occasion this tribunal exercised its discretion under Rule 39(2) to allow the appeal to proceed on summary reasons only.

We also observe that at the preliminary hearing neither party to the appeal required the Chairman's Notes of Evidence and accordingly no order for the Notes was made. That said, we shall in the course of this judgment refer to certain pieces of evidence, non-controversial evidence, which were before the Employment Tribunal when it reached its original decision.

The background to these complaints was that on 21st September 1995 Powell Duffryn informed the relevant employees of the introduction of a bonus scheme, covering among others the terminal operators at Purfleet. The background as the letter explained was that there had been considerable advice, discussion and consultation with representatives of the employees leading to the institution of the bonus scheme. There was no recognised trade union and no collective bargaining arrangements, but employees were represented by some of their own number.

The material provisions of that bonus scheme were as follows:

"POWELL DUFFRYN TERMINALS LIMITED

PROFIT RELATED BONUS SCHEME 1995/1996

PURFLEET TERMINAL

1. INTRODUCTION

1.1 The Scheme is designed

* to reward profits earned in excess of a minimum level

* to motivate staff by rewarding them for achievement of targets and entitle them to share in profits in excess of these targets.

1.2 The Scheme will become effective from the 1st April 1995 and is based on the achievement of targets which are reviewed annually. ...

1.3 The Scheme is for the financial year 1995/1996 and thereafter may be continued or modified, or discontinued entirely at the discretion of the Board of Powell Duffryn Terminals Limited.

2. PARTICIPANTS

2.1 Participation in the Scheme is at the discretion of the Board and does not form part of the Terms and Conditions of Employment of Powell Duffryn Terminals Limited. ..."

and later in Clause 3 the Scheme is summarised and a formula based on the profits made during that financial year leading to a specified bonus pot is set out.

On 19th June 1996 Mr Lloyd, the managing director of Powell Duffryn, wrote to the terminal operators, including these appellants, in the following terms:

"Bonus Payments 1995/96

Following the approval of our accounts by the Auditors, I am pleased to advise you of your bonus for last year.

The figure has been calculated based on the letter sent to you dated 21st September 1995.

The amount of bonus (for eligible full time staff) amounts to £806.48. This amount, less the usual deductions, will be included with your June salary payment.

I am pleased to place on record my thanks to you for the efforts that you have put into achieving this bonus for Purfleet Terminal."

On 3rd September 1996 Mr Lloyd wrote to the employees in connection with the proposed transfer to Van Ommeren. In that two page letter he makes no mention, one way or the other, of the question whether any bonus payment is to be made for the financial year 1996/97.

On 4th September 1996, in the course of negotiations for the sale of the Purfleet Terminal business by Powell Duffryn to Van Ommeren, Powell Duffryn stated in a disclosure letter of that date that certain bonuses had been paid to staff, including these appellants, in respect of the 1995/96 financial year (which ended on 31st March 1996), and added:

"No bonus scheme has been instituted for the 1996/97 financial year."

On 8th October 1996 Mr Lloyd addressed members of staff, although not all the employees, at one of a series of meeting held to inform the workforce about the proposed sale of the Purfleet operation to Van Ommeren and the impact it would have on them. It is common ground that in answer to a question about the bonus scheme he said on that occasion that it would not operate for the year 1996/97.

We have set out the foregoing matters of evidence in the light of the Employment Tribunal's short summary reasons for dismissing the complaint. That is no criticism of the tribunal; summary reasons are just that; it is the responsibility of appellants to obtain extended reasons for decisions under appeal within the time allowed by the Rules.

The tribunal's short reasons for dismissing these complaints are set out at paragraphs 2 and 3 of the summary reasons in this way:

"2 The question for the Tribunal is whether the Applicants had a right under, or in connection with, their contract of employment to a bonus. The only bonus scheme to which the Tribunal was referred was that entitled the "Profit Related Bonus Scheme 1995/96". That in its title makes it clear that it is for one year. In the body of the Scheme it is stated that "the Scheme is for the financial year 1995/96". The reference to the Scheme's being continued or modified or discontinued entirely at the discretion of the Board did not, in our view, impose an obligation to tell the employees that it was not to operate after 31 March 1996. This Scheme ran out on that date.

3. Therefore, we have to conclude that there was no legal obligation on Powell Duffryn Terminals Limited to make any payment under this Scheme after 31 March 1996. The Respondent is in the same position as that company and, accordingly, is not liable to make any payment."

The principal point taken by Mr Suckling in this appeal, as he argued below, is that no notice was given to the appellants by Powell Duffryn that the bonus scheme was discontinued. Mr Lloyd said in evidence, that was an "oversight". He submits that in the absence of such a notice the scheme continued for the year 1996/97. The appellant were entitled to a bonus payment and failure to make any such payment amounted to an unlawful deduction from wages. He further relies upon the letter to the employees, including these appellants, from Mr Lloyd of 19th June 1996, giving details of the 1995/96 bonus payment which, he submits, impliedly suggests that the scheme would continue for 1996/97, and the failure on the part of Mr Lloyd to mention that no bonus would be paid for 1996/97 in his letter to employees dated 3rd September 1996.

He argues that the employees worked to new practices, and continued so to do after 31st March 1996 in the belief that a bonus would be paid, subject to the profitability formula, for the year 1996/97.

In support of his contention he relies upon a recent decision of the EAT, Morison J, in Noble Enterprises Ltd v Lieberum (EAT/67/98. 23rd June 1998. Unreported). In that case the employer operated an unwritten annual bonus scheme intended to provide incentives for fast and better performance of duties by their workers on an off-shore rig for the period 1992-1996. The applicant resigned in January 1997 and did not receive a bonus for the previous year. Unknown to him the employers had decided not to pay a bonus to employees who left the employment before the payment date of 21st January. An Employment Tribunal upheld his complaint of unlawful deduction from his wages in respect of the previous years bonus, and that decision was in turn upheld on appeal. The EAT held that although discretionary, once the rig owners, BP, had allocated a sum of money for the bonus pot for a particular year, the bonus became payable by this employer to its employees. It was then contractual. Further, the applicant qualified for the bonus since there was no evidence that the requirement that he be employed at the bonus date had ever been communicated to him.

Having considered the submissions of Mr Harrison, we are satisfied that the case of Noble is distinguishable from the instant case on its facts and in relation to the issues raised in the respective cases. Here, the scheme was discretionary and there was no evidence that it was continued, at the discretion of Powell Duffryn or the respondent, Van Ommeren, for the 1996-97. There was here a written bonus scheme which falls to be construed on its face. There is no suggestion that any of the relevant employees received a bonus payment for the financial year 1996-97.

We turn then to the construction of this Bonus Scheme. In our judgment the Employment Tribunal was correct in its construction. The Scheme, which had not operated in earlier years was expressed to be for the financial year 1995/96. We are satisfied that there was no evidence that it was expressed to continue during the following year. Had such an indication been given, we would have no hesitation in saying that it would be enforceable by way of a claim under s. 13(3) of the Employment Rights Act 1996. However, the evidence was to the contrary, particularly the oral statement made by Mr Lloyd at the meeting on 8th October 1996, consistent with the disclosure letter to the respondent of 4th September 1996. We cannot read into the words of the Scheme a requirement that the employer was to give notice of discontinuance of the Scheme shortly after 31st March 1996. There was no contractual obligation to make a payment for that year; nor was there a reasonable expectation on the part of the employees, in all the circumstances, that such a payment would be made. The Scheme, which by clause 2.1 did not form part of the contracts of employment of these appellants, simply came to an end on 31st March 1996 without being continued or otherwise renewed.

In these circumstances, there being no error of law on the part of the Employment Tribunal, we shall dismiss this appeal.