United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	THE APPELLANT (IN PERSON)
For the Respondent	MR G PRICHARD (OF COUNSEL) (Instructed by) Retail Motor Industry Federation Legal Department 201 Great Portland Street London W1N 6AB


 


JUDGE PETER CLARK: The Appellant, Mrs Pellowe, commenced employment with a company, Lex Vauxhall ("Lex") in November 1994. She was a Purchase Ledger Clerk. On 1^st October 1997 the part of Lex's undertaking in which the Appellant was employed was transferred to the Respondent, Pendragon in circumstances where the TUPE Regulations applied. The Appellant transferred into the employment of the Respondent on the same terms, so far as material as she enjoyed with Lex. On 14^th November 1997 the Respondent dismissed the Appellant by reason of redundancy. She received her statutory redundancy entitlement based on 4 years service and her age, 57 years.

1. By an Originating Application presented to the Manchester Employment Tribunal on 21^st November 1997, the Appellant brought a claim of Breach of Contract against the Respondent. It was her case that under her Contract of Employment with Lex, she was entitled to an enhanced redundancy payment, that is, a payment in excess of the statutory entitlement which she received. The Respondent accepted that she had transferred into their employment on the same terms as were provided for in her Contract with Lex, but denied that she was entitled to a contractual enhanced redundancy payment.
2. The claim came before a Chairman, Mr D Reed, sitting alone at Manchester on 24^th March 1998. He dismissed the claim by a Reserved Decision with extended reasons promulgated on 22^nd April 1998. Against that decision the Appellant appealed to this Employment Appeal Tribunal. The Appeal came before a division presided over by Judge Byrt QC for an ex parte preliminary hearing on 28^th October 1998. The Appellant did not attend that hearing and the Tribunal dealt with the matter on the papers, including the Appellant's grounds of appeal which she drafted herself.
3. In a Judgment given by Judge Byrt on that day, this Tribunal found for themselves a potential point of law. They apparently took the view that the Chairman had dealt with the matter by asking himself whether there was an express term of the contract that the Employer should pay the Appellant an enhanced redundancy payment. He decided there was no express term but did not consider the possibility that an implied term might have arisen as a result of the usage and practice of the parties. On that single point of law the appeal was allowed to proceed to this Full Appeal Hearing. Having now had the advantage of submissions made both by Mrs Pellowe and Mr Prichard of Counsel, both of whom who appeared below, we are satisfied that there is a short answer to the point. The Chairman did consider whether such a term could be so implied. He found that it could not. (See para 16 and 17 of his reasons).
4. Although not expressly cited in those reasons, we are told that the Chairman was referred to the Employment Appeal Tribunal decision in Quinn –v- Calder [1996] IRLR 126, to which we shall return. However, we do not think it right to dismiss this appeal on that narrow ground. We have therefore gone on to consider, with the help of the parties, whether that was a permissible finding by the Chairman.
5. The material facts found by the Chairman were these. Within the accounts department where the Appellant worked was an employee called Mrs Naven, whose duties included calculating redundancy payments due to employees dismissed by Lex by reason of redundancy. For that purpose she had a ready reckoner table produced by her employers. That chart was before the Chairman having been attached to the Originating Application. The horizontal line gives various ages at the date of redundancy, the vertical line shows rounded up years of service. The point at which the two lines meet gives the number of weeks pay which the redundant employee will receive. That multiplier is more favourable than the basic statutory redundancy entitlement when applied to a person of the Appellant's age and rounded up years of service.
6. Mrs Naven told the Chairman, and he accepted, that over the 10 years during which she had performed this duty there had been more than 100 redundancies. In every case, payment was made in accordance with the chart. There is material before us which suggests that that practice had been in force for at least 20 and possibly 25 years prior to the Appellant's dismissal in November 1997. As to the contractual position the following documents were produced in evidence.

A. The Appellant's statement of Terms and Conditions of employment issued by Lex and signed for by the Appellant on 21^st September 1995. Her signature appears below the legend: "I accept the Terms and Conditions outlined above." In these circumstances, it seems to us that that document may properly be accorded the status of a written contract of employment. (See Gascol –v- Mercer [1974] ICR 420.) We shall refer to it as "the Contract". The contract contains this clause: "Other Terms & Conditions: Other terms and conditions relating to your employment are contained in the section of the enclosed Lex Employee Handbook." There is no specific reference to redundancy entitlement in the contract.

B. The Handbook, which we conclude was incorporated into the contract, refers to the Lex redundancy policy aiming to ensure that "compensation will be paid" where it is not possible to find suitable alternative employment for redundant employees.

C. There was a management manual which sets out the enhanced redundancy payment scales to be found on Mrs Naven's chart. However, the Chairman found that the manual was not intended for mass circulation. It was an instruction manual for members of management.

7. The Chairman found on that evidence that although every redundant employee received the scale enhanced redundancy payment on dismissal during the Lex era, there was no express contractual term giving rise to entitlement to such payment.
8. As to the question of whether a term fell to be implied by custom and practice the Chairman said this at paras 16-17 of his reasons:

"16. The question for me to answer was whether the practice of making those payments cast upon Lex (and then Pendragon) the obligation to make them. I concluded it did not.

17. There was no evidence that this policy had been expressly brought to the attention of the Employees and in my view, no grounds upon which to infer that the policy invariably followed by Lex had achieved the status of a contractual term. Certainly, the actions of Lex were not necessarily inconsistent with the absence of a contractual obligation to make those payments. I could not infer that they had ever intended to become contractually bound to make the payments."

9. In these circumstances, he dismissed the Appellant's claim for damages for breach of contract.
10. Mr Prichard has drawn our attention to two other Employment Tribunal decisions in which the very same point arose and where the Appellant's claims were also dismissed. They are McGuire & Ors –v- M Ward (Helston) Ltd, a decision of an Employment Tribunal sitting at Bodmin on 6^th November 1995 under the chairmanship of Mr Brian Walton and Silvey & Ors –v- Pendragon, a decision of an Employment Tribunal sitting at Southampton on 22^nd-23^rd June 1998, chaired by Mr N Jenkinson. In the latter case, Mr Prichard appeared for Pendragon and as well as the Employment Tribunal's decision with extended reasons, we have had the advantage of seeing skeleton arguments submitted by both Counsel in that case, Ms Victoria Bather having appeared for the Applicants.
11. Further and very properly, Mr Prichard has also referred us to a decision of an Employment Tribunal sitting at London (North) under the chairmanship of Mr P R K Mennon, in Case No: 16864/96, Smith –v- PNG Waltham Cross, promulgated with extended reasons on 16^th January 1997, where the Applicant's claim for breach of contract succeeded. The facts there were not identical to the other cases and the Chairman in his reasons made clear that the Employment Tribunal was deciding that case on its own facts, having been specifically referred to the Bodmin case of McGuire. Whilst we have read that material with interest we are not, of course, bound in any way by those decisions.
12. In Quinn –v- Calder the Applicants were dismissed by reason of redundancy. They claimed that their employer was in breach of contract in failing to pay enhanced redundancy compensation. In 1987, the group of companies to which the Respondent belonged issued a policy document to Group Companies containing guidelines on additional redundancy payments. Although the terms were not communicated to their employees or their trade unions, the terms of that policy became generally known among the workforce. On four occasions when redundancies were made between 1987 and 1994 enhanced payments were made. However, the payments were not automatic; a decision had to be made by higher management on each occasion.
13. Although no reference to enhanced redundancy payments was made in their contracts of employment, the Applicants claimed that their entitlement to such payments on dismissal by reason of redundancy were to be implied into their contracts through custom and practice. An Employment Tribunal rejected their claims, relying on the EAT decision Duke –v- Reliance Systems [1982] IRLR 347 (Mr Justice Brown-Wilkinson presiding) on the basis that the Applicants had failed to establish either that the policy had been drawn to their attention by management or that it had followed the policy without exception for a substantial period. Duke was a case about normal retiring age.
14. On the employees' appeal Lord Coulsfield, giving judgment on behalf of the Scottish Employment Appeal Tribunal, reviewed the old common law cases on implying terms by custom and practice. (See for example, Sagar –v- Ridehalpy [1931] 1 Ch 310.
15. In dismissing the appeals the Employment Appeal Tribunal held that in determining whether a policy adopted by management unilaterally has become a term of the individual employee's Contract of Employment on the grounds that it has become established custom and practice, various relevant factors must be taken into account; such as whether it has been drawn to the attention of the employees by management or has been followed without exception for a substantial period. However, the question, as a pure matter of contract law, is whether it can properly be inferred from all the circumstances that it was the intention of the parties that the enhanced redundancy payment should form a term of the contract. On the facts, in that case, the Employment Appeal Tribunal held that the Employment Tribunal was entitled to conclude that such intention was not made out.
16. In this appeal, Mrs Pellowe submits that the automatic payment of enhanced redundancy compensation by Lex, without an individual decision being taken, for over 20 years in every case of redundancy, coupled with the reference to "compensation will be paid" in the handbook, leads inevitably to the conclusion that the implied contractual term by custom and practice is made out. She submits, not unreasonably, that it is unfair that she did not receive the enhanced payment made invariably in the past during the Lex era. We sympathise with that approach but we are unable to accept that it reflects the law. It seems to us that Lex's policy remained just that, a policy. There is no evidence that the Appellant accepted employment with Lex on the basis that if she were to be made redundant in the future she would receive an enhanced payment. Lex was careful not to commit themselves to a contractual obligation to make such payments, by reserving the scale of the enhanced payments for the management manual which was not formally distributed to the workforce.
17. The Chairman was entitled to reach the conclusions expressed in paras 16-17 of his reasons. In our judgment, those conclusions accord with the facts and the authorities. In reaching our conclusion we have considered the judgment of Mr Justice Timothy Walker in Clark –v- BET plc [1997] IRLR 348. That was an assessment of damages for admitted breach of contract. His Lordship found that there was an express contractual obligation to review the claimant Chief Executive's salary each year. The only discretion accorded to the Company was as to the amount of the increase. Similarly, the Claimant had a contractual right to participate in a bonus scheme to a maximum of 60% of salary. The discretion was as to the quantum of the bonus.
18. Those facts seem to us far removed from the circumstances of this case. In these circumstances, we must dismiss this appeal.