United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR BRUCE CARR (of Counsel) Messrs Rowley Ashworth Solicitors 247 The Broadway Wimbledon
For the Respondent	MR TOM LINDEN (of Counsel) Engineering Employers Federation Broadway House Tothill Street London SW1H 9NQ


 


HIS HONOUR JUDGE D M LEVY QC

1. This is an appeal by Mr Michael Jowitt ("the Appellant") from the decision of an Employment Tribunal sitting at Leeds on 30 January 2001. He had made an Originating Application dated 18 October 2000. The issue for the Tribunal was whether the Appellant was entitled to relief because his employer had made deductions from his pay pursuant to Section 13 of the Employment Rights Act 1996. His employer was Pioneer Technology (UK) Ltd ("the Respondent"). The Tribunal's decision was promulgated on 14 February 2001. The unanimous decision was to dismiss the application. The Appellant appealed from the decision by notice dated 27 March 2001. The matter came before a panel of this Tribunal headed by Wall J on 9 October 2001 when it was permitted to proceed to a Full Hearing. At the Employment Tribunal the Appellant was represented by a member of the AEEU and the Respondent by Mr P May of EEF. The Respondent lodged but subsequently withdrew a cross appeal from the Tribunal's decision. At the hearing of this appeal we have had the benefit of able skeleton arguments and oral submissions from Mr Bruce Carr on behalf of the Appellant and from Mr Thomas Linden on behalf of the Respondent.
2. Born on 21 January 1949, the Appellant commenced his employment with the Respondent in 1995. He was a Senior Technician. His duties were to repair TV's, HI-Fi's, Videos and satellite systems etc when whey were brought to the workshop by Field Technicians as being too difficult to repair in the field. He had many years of work experience before joining the Respondent. Unhappily, on 30 October 1996 he was involved in an industrial accident at his place of work. As a consequence he has not been able to return to his work since and indeed has not done other work. He claims that the provisions of his contract of employment were such as to require the Respondent now to pay him certain monies by way of wages. This was the contention which the Tribunal rejected.
3. General Terms and Conditions of Employment

The Appellant signed a document headed "Statement of the General Terms and Conditions of Employment" existing between him and the Respondent on 3 April 1995. It stated in Clause 2 that his employment would be effective from 3 April 1995. Clause 4 referred to his remuneration:

"Your annual salary is £13,779 paid calendar monthly directly into your bank account. This will be reviewed on successful completion of your probationary period, and thereafter annually with effect from April 1^st."

Clause 7 stated:

"PENSION

You are invited to join the Company's Occupational Pension Scheme, full details will be provided at your induction."

Clause 8 dealt with Private Medical Insurance which was to be provided at the company's expense on completion of his probationary period. Clause 9 is important. It reads:

"SICK PAY

During your probationary period the Company will pay Statutory Sick Pay only for any qualifying absences (qualifying days for SSP are Monday to Friday). Thereafter you will be entitled to six weeks full pay and six weeks half pay. All payments are conditional upon compliance with the Company's rules on notification and certification, which are outlined in the Company Handbook."

Clause 10 dealt with Disciplinary and Grievance Procedure which were also explained in the Company Handbook. Clause 11 contains provision as to how alterations to the terms and conditions of employment would be changed.

4. Permanent Employment of the Appellant

By letter dated 19 July 1995, the Respondent informed him that his appointment was on a permanent basis effective from 3 July 1995, his salary being increased to £15,046 per annum. The letter continued:

"You are now eligible for the permanent status Terms and Conditions of employment which are detailed in the Company Handbook. Enclosed is a pension scheme booklet, if you wish to join please complete and return the application form and expression of wish form at the back of the booklet. Private Medical Insurance cover will be provided for you automatically through Private Patients Plan unless you indicated otherwise to us in writing.

5. Material Claims of the Company Handbook

We have been provided with a photocopy of the Company Handbook. As appears below, it contains a reference to 1997 legislation. We have assumed that the material Clauses of that Handbook for the purposes of this appeal were applicable to the Appellant when he entered into his contract of employment. Those Clauses are:

"Introduction

The contents of this handbook, together with your appointment letter, form part of your contract of employment with the subsidiary of the Pioneer Electronic Corporation. It is therefore important that you read and understand the handbook.

Any variations from the general terms and conditions set out in this handbook will be included in your appointment letter or other relevant documents. You will also be notified of any subsequent changes in your terms of employment in writing. Changes which affect all employees or a group of employees may be communicated via the notice board and so it is important that you pay attention to official items posted on the boards.

3.1 General

Pioneer has four categories of staff. These are:

Temporary	Staff on short term contracts
Probationary	All newly recruited staff serve a probationary or settling in period of three months (ie 13 working weeks) or 6 months (ie 28 working weeks) dependent on grade.
Permanent	Subject to a satisfactory attitude and contribution you will automatically move to this category on completion of three/six months' service. The decision to appoint you on a Permanent basis will be taken by your supervisor or manager in consultation with the Personnel Manager.
Established	After 24 months satisfactory service you will automatically become an Established member of staff.

3.2 Commencement

To assist us in calculating your pay and statutory deductions, you should provide a P45 Income Tax form (if previously in employment), your birth certificate and marriage certificate (if married) on joining Pioneer. If you do not have a P45 form, tax deductions will be made initially under an emergency code.

Under new legislation introduced in 1997, employees must provide proof that they are legally entitled to work in the UK."

"4.1 Salaries and Other Pay

Salaries are normally reviewed annual and any increases are paid from 1^st April. The amount of your pay increase will depend on many factors including performance, attitude, attendance, contribution to the Company's aims, and the general economic performance of the Company.

Your initial salary and date of first salary review are given in your appointment letter.

All staff are paid calendar monthly by bank credit transfer on the 23^rd day of each month.

An annual statement of earnings (Form P60) will be issued in respect of each tax year, and you should retain it for future reference in case it is required by the Inland Revenue.

Any queries or problems you may have regarding pay should be referred in the first instance to your supervisor/departmental manager.

4.2 Deductions from Pay

The Company is legally required to deduct Income Tax and National Insurance from your gross salary. Contractual agreement detailed in the enclosed handbook and negotiated through the CAB will automatically be deducted from salary. Other deductions for example, in respect of pension contributions, Union dues and Sports and Social Club subscriptions, will only be made with your written authorities."

[Clauses 4.3, 4.4, 4.5 dealing respectively with Shift Allowances, Overtime Pay and Call Out were not material to this appeal]

"4.6 Payment During Absence Through Sickness or Injury

The Company is responsible for paying Statutory Sick Pay (SSP) on behalf o the Department of Social Security for absences of four or more days up to a maximum aggregate of 28 weeks in any one year. However, the Company operates its own sick pay scheme for all Permanent and Established staff at rates in excess of those payable under SSP.

Payments to employees include the appropriate SSP. It is vital, therefore, that employees comply with the notification and Certification procedures contained in Section Three since failure to do so may lead to the Company withholding salary.

Any employee who is subject to formal disciplinary action for reasons connected with attendance will be disqualified from receiving Company Sick Pay for as long as the disciplinary action remains current.

The Company Sick Pay rates in any 12 month period (including SSP), are as follows:

Staff Category Full Pay Half Pay

Temporary SSP only

Probationary SSP only

Permanent 6 weeks 6 weeks

Established

(under 3 years' service) 13 weeks 13 weeks

Established

(over 3 years' service 26 weeks

Each case will be reviewed where sick pay has been exhausted due to prolonged absence through ill health, and payment may be continued at management's discretion. For sickness lasting longer than six months, the long term disability scheme arrangements will apply (see Section Five)."

6. Clause 5 is headed "Other Benefits". Some of the Clauses are not material to this appeal. We will set out those to which particular attention has been drawn during the hearing:

"5.1 Pensions

The normal retirement age for both men and women is 65. The Company operates two pension schemes, both of which are open to all staff. Full details of both schemes will be given on successful completion of your probationary period.

Additional Voluntary Contributions (AVC's)

The Company also operates and Additional Voluntary Contribution scheme for those employees who wish to increase their pension benefits (within Inland Revenue limits). Tax concessions are allowed on these additional contributions, and full details are available from the Personnel Department.

5.2 Life Assurance

A lump sum of three times the employee's annual salary at date of death is payable to beneficiaries nominated by pension scheme members upon death in service. A sum equal to the employee's annual salary is payable in respect of staff who do not join the pension scheme.

5.3 Long Term Disability

The Company runs a scheme that is designed to provide an income during lengthy periods of absence due to prolonged sickness or injury. Permanent and Established members of staff are entitled to two thirds of normal pay (inclusive of State benefits) after 26 weeks continuous absence through illness or disability, for as long as they are unable to work up to date of retirement, as certified by a medical practitioner and, if necessary, confirmed by the Company's doctor.

5.4 Members Restricted by Ill-Health or Injury

If during the course of your employment as a Permanent or Established member of staff you become medically restricted and are confirmed by the Company's doctor as being unable to pursue your normal job (or one in the same grade), you will retain your existing salary for a period at least equal to the unexpired portion of the Company Sick Pay period, provided you are willing to undertake any alternative work within the limits of your restriction. If no suitable vacancy at your original grade becomes available by the end of that period, you will be required to move formally to a different grade and be paid accordingly. Your salary will be restored to its original level as soon as you are appointed to a vacancy in your original grade.

5.5 Private Medical Insurance

All Permanent staff are entitled to receive private medical insurance at the Company's expense, and to receive a discount for dependants' cover. Membership of the scheme is entirely optional. You may join the scheme after you have become a Permanent member of staff and details of the scheme and its implications will be sent to eligible employees at the appropriate time. Because of the potential expense of private medical insurance (due to the rapidly increasing costs of private health care) the Company reserves the right to amend or discontinue the benefits after due notice.

5.6 Personal Accident Insurance

The Company insures on a 24 hour basis under a specific insurance arrangement, in respect of all staff, against personal accident and resultant disability or death whether occurring during time on Company business or otherwise. Benefits of up to twice salary are paid by the Company at its discretion.

5.8 Business Travel Insurance

The Company provides cover against medical expenses for illness and for loss of cash or baggage whilst travelling on business outside the UK, and for loss of baggage whilst travelling on business within the UK. For details on cover please contact the Personnel Department."

Clause 5.6 refers to specific insurance arrangements. Clauses 5.5 and 5.8 draw an employee's attention to insurance availability. Clause 5.1 provides that details of the pension scheme would be made available on successful completion of an employee's probationary period. Mr Carr contrasts these references with the bare reference to "a scheme" in Clause 5.3.

7. The Clause 5.3 Scheme

It will be observed that the opening words of Clause 5.3 refer to a scheme ("the Clause 5.3 Scheme") run by the company to provide an income during lengthy periods of absence. The Respondent had, as we learned, sought to meet its obligations under Clause 5.3 by entering into a policy of insurance ("the Policy") between it and Swiss Life (UK) Limited PLC ("Swiss Life). One of the issues raised on appeal was whether the Respondent was entitled to limit the amounts payable to the Appellant to such sums as were payable pursuant to that Scheme. We were shown a table setting out the material provisions of the Policy which had a commencement date of 7 February 1994, but there was no suggestion that the Appellant had been aware of the Policy or indeed of any arrangement between the Respondent and Swiss Life at any time prior to his accident. Attention was drawn to the following provisions of the Scheme:

"Terminal Date:	65th birthday of a Life Assured or such other date as shall be agreed in writing between the Employer and Swiss Life.
Waiting Period:	26 weeks
Eligible Employees:	All Permanent Full-Time Employees after 3 months service who are aged not less than 18 nor more than 60.
Salary:	Basic annual salary excluding any bonuses, commission, overtime payments or other fluctuating emoluments at the date of joining date and at each 1st April thereafter.
Scheme Benefit:	75% of Salary less Single State Invalidity Benefit plus Employer's Pension Fund Contributions of 6% of Salary plus Employee's Pension Fund Contributions of 4.5% of Salary. The benefit will increase at 5% per annum compound in course of payment.
Disablement:	In respect of Office Based and Clerical Employee's – A state of infirmity of mind or body as a result of which a Member shall be totally incapacitated from following his own occupation and shall not be following any other occupation. In respect of all other Employee's – A state of infirmity of mind or body as a result of which a Member shall be totally incapacitated from following the occupation in which he was engaged by the Employer immediately before becoming incapacitated and is not following any other occupation or employment. In the event of a Member becoming so disabled for a continuous period of two years then before becoming entitled to any further benefit under the Policy, Swiss Life must be satisfied of his total inability to follow occupation."

8. At page 36 of our bundle there was a table which was also before the Employment Tribunal showing the summary of benefits payable under the Policy:

"TABLE

Employer:	Pioneer Electronics Technology (UK) Limited
Policy Number:	94/P01/0172
Commencement Date:	7 February 1994
Terminal Date:	65th birthday of a Life Assured or such other date as shall be agreed in writing between the Employer and Swiss Life.
Waiting Period:	26 weeks
Eligible Employees:	All Permanent Full-Time Employees after 3 months service who are aged not less than 18 nor more than 60.
Salary:	Basic annual salary excluding any bonuses, commission, overtime payments or other fluctuating emoluments at the date of joining and at each 1st April thereafter.
Scheme Benefits:	75% of Salary less Single State Invalidity Benefit plus Employer's Pension Fund Contributions of 6% of Salary plus Employee's Pension Fund Contributions of 4.5% of Salary. The benefit will increase at 5% per annum compound in course of payment.
Disablement:	In respect of Office Based and Clerical Employee's – A state of infirmity of mind or body as a result of which a Member shall be totally incapacitated from following his own occupation and shall not be following any other occupation. In respect of all other Employee's – A state of infirmity of mind or body as a result of which a Member shall be totally incapacitated from following the occupation in which he was engaged by the Employer immediately before becoming incapacitated and is not following any other occupation or employment. In the event of a Member becoming so disabled for a continuous period of two years then before becoming entitled to any further benefit under the Policy, Swiss Life must be satisfied of his total inability to follow any occupation.
Premium/Premium Rates:	The premium payable in each Policy Year in respect of each Member shall be determined as at the first day thereof at the rate of £8.24 for each £1,000 of Benefit per annum.
Premium Payment Dates:	The total of the premiums for each Policy Year shall be payable on the first day thereof."

[Underlining added]

It was common ground that it was open to the Respondent to make a claim under the policy. It was also common ground that as far as the Respondent would make a claim because of the Appellant's disablement, the benefit entitlement fell into the second of the two paragraphs from which benefit could be paid, ie that of an employee neither office based or clerical. Before that could happen it was also common ground that before the insurer was obliged to pay any monies they were entitled to argue that he was not following "any other employment or occupation". Further, if he had been disabled for a continuous period of two years, before becoming entitled to any further benefit under the Policy, the insurer had to be satisfied of his total inability to follow ANY occupation. We heard submissions as to how these paragraphs compared and contrasted to Clause 5.3 which introduced "a Scheme" to the Appellant.

9. Medical Assessments and Reports

Following his injury at work on 30 October 1996, as might be expected, the Appellant saw a medical advisor of the Respondent. Our bundle includes reports made by that advisor, Dr C A Pinder. The first dated 11 February 1997 has an initial progress report. At the box headed 'Recommendations/Restrictions' Dr Pinder stated:

"Still undergoing investigation. At this stage I am not in a position to comment on his future work capabilities but should be able to advise more details when investigations complete."

By a further report dated 12 August 1997 where Dr Pinder was asked to "assess current health", he reported:

"Medical condition steadily improving but not yet fit to do any type of work. Will review in
[? 6 months] with a view to discussing possibility of light work."

A further report by Dr Pinder was dated 4 March 1998. Under the heading "Specific Problems For Which Manager Needs Medical Opinion" was written:

"Long term sickness."

and in the box headed "Recommendations/Restrictions" Dr Pinder wrote:

"Not fit for his own job and never will be for the foreseeable future.

Advise contact DRO [Disability Resettlement Office] & Pact team for alternative suitable work & training."

A further report dated 18 August 1999 was requested of Dr Pinder by the PDI Department of the employer (PDI clearly stands for Permanent Disability Insurance). The form showed the "Reason for Consultation/Request" was:

"PDI declined after 2 yrs."

In the box specifying the problems for which the manager needed the medical opinion, was written:

"Capability to return to work."

Dr Pinder's report stated:

Mike's condition appears to have deteriorated with new symptoms developing in the last 18 months. He is neither safe not fit for any work on site at this time."

10. Very shortly before Dr Pinder had made this report, the Appellant had been examined, at the request of the insurer, by Mr David L Shaw MSc FRCS(Ed) FRCS(Orth), a Consultant Orthopaedic Surgeon. His report stated it had been prepared under instructions from Mentor Professional Services Limited acting for Swiss Life Claims. Mr Shaw confirmed that he had available a previous summary report by Mr G M Towns, Consultant Neurosurgeon. Mr Shaw dated his report at the rear 6 May 1999; the front of it has a date of 5 May 1999. The body of the report, after stating the date of injury, contains these paragraphs:

"HISTORY

The following is a summary history. The details of the injury are not in dispute and have been well covered by Mr Towns's previous report. Some time around the beginning of November 1996, whilst moving a production line conveyor, Mr Jowitt felt an immediate and spontaneous onset of pain in his neck radiating into the right arm accompanied by pins and needles involving the whole hand. He struggled on at work for a few days but because of continuing symptoms was unable to work further. He was referred to a consultant neurologist who, after further investigations referred him to Mr Towns, Consultant Neurosurgeon. After further investigations, Mr Towns performed a two level micro discectomy and fusion in the cervical spine. Mr Jowitt was not returned to work.

CURRENT STATUS

Mr Jowitt reports neck pain, aching in nature, present 24 hours a day. This is accompanied by aching pain radiating into the right shoulder. This and the neck pain is worse in damp weather. He wears a collar in bed at night. He complains of feelings of pins and needles in the forearm and right hand. He is right-handed. He also complains of cramping sensations involving both hands, but again the right worse than the left. He reports difficulties with certain activities of daily living such as doing up buttons and other domestic activities requiring fine manipulative skills. He is able to drive but for no more than 30 minutes because of discomfort in the neck and arm.

EMPLOYMENT STATUS

Mr Jowitt was a production engineer at the time of injury. He has not worked, other than for a few days after injury, since the date of injury.

RECREATIONAL ACTIVITIES

Prior to injury he undertook squash, swimming and cycling. These have now stopped.

PAST MEDICAL HISTORY

Mr Jowitt reports no previous symptoms in the neck and no previous injuries to the neck.

ON EXAMINATION

Mr Jowitt mobilised generally with evident discomfort. Range of movements in the cervical spine was limited to perhaps 10% of the normal range of movement in all directions. This was accompanied by pain. There was subjective altered sensation in the C6, C7 and C8 dermatomes of the right hand. There was objective reduced grip strength in the right hand when compared to the left. There was no small muscle wasting in the right hand. Two point discrimination was equivalent to between the index fingers of the right and left hands to 6mm. There was no generalised or localised hyper-reflexia in the upper limbs.

OPINION AND PROGRESS

From the information available it is clear that Mr Jowitt had existing cervical spondylosis which became symptomatic on the above date. This eventually resulted in surgical treatment. He now has significant and continuing disabling symptoms. These are detailed above. I agree with Mr Towns's assessment which is supported by the neurophysiological tests that the level of neurological recovery which has now been achieved is the maximum which can be expected. Therefore, I would not expect there to be any further improvement in symptoms.

With regards to the level of disability, Mr Jowitt is certainly not disabled from any kind of employment activity. He would be unable however to undertake any employment which involved driving for more than short distances and any form of heavy lifting. He would also be unable to undertake employment which involved prolonged fine manipulative skills. This would include prolonged use of a computer keyboard, but would not exclude employment which involved short duration keyboard activities. In general therefore he should be able to undertake employment which did not involve any of the above activities."

We note from the final paragraph of the report set out above that Mr Shaw concluded that the Appellant was "certainly not disabled from any kind of employment activity". This suggest that quite properly he had in mind the provisions of the Policy.

11. On 8 June 2000 the personnel manager of the Respondent wrote to a representative of Swiss Life in the following terms:

"We have held a further meeting with Mike Jowitt and his union representative in the light of the report you submitted on the 11^th May 2000.

Firstly the report is now twelve months old and seems to be therefore a poor basis on which to form a judgement as to Mike's current fitness for work. It has been suggested by Mike that his medical condition has deteriorated in recent months. Secondly it is the opinion of our Occupational Medical Advisor and of Mike's own specialist that he remains unfit to perform any occupation at present.

In view of the foregoing I must request that you once again review your decision on the payment of benefit to this claimant or at the very least arrange for a further independent medical assessment by a specialist in the field."

The next document which we have been shown prior to the issue of proceedings is a memorandum from Ruth Wood, the Occupational Health Nurse Advisor of the Respondent, to Mr Towns who was mentioned by Mr Shaw. It is dated 5 September 2000. It appears to be an email. It contains these paragraphs:

"I have been instructed to contact you regarding a further appointment and examination of the above gentleman, who remains an employee of Pioneer Technology (UK) Ltd.

You did, in fact, furnish us with a detailed medical report on Mr. Jowitt at the end of March this year, at the request of Dr. C. Pinder, our Occupational Health Physician. Her letter to you contained an explanation that Mr. Jowitt had received a disability pension from Swiss Life, but they had declined to renew the insurance at his review, feeling that he was in fact capable of some kind of work.

Both Dr Pinder and yourself repudiate this, however. Dr. Pinder has gone so far as to comment that he is not fit or safe for work on site and is never likely to be, and you are of the opinion that he should not return to his previous occupation, and point out that, while you feel sure he is capable of some sort of employment, you would be amazed if anyone would employ him.

Our Personnel Manager is appalled that Swiss Life have terminated Mr. Jowitt's disability pension, particularly as he appears to qualify for the benefit. Mr. Priestley is determined therefore to do all he can to persuade Swiss Life to reconsider their verdict."

This memorandum was written shortly before the Appellant made his claim to the Tribunal. Very shortly after he had made his claim, Ruth Wood wrote a letter dated 1 November 1000 to another Consultant Orthopaedic Surgeon (Spinal), Mr Martin-Nelson which included these paragraphs:

"I have been asked to write to you to request whether it would be possible for you to carry out an independent medical examination and provide a report on the above gentleman, an employee of ours, who has now been absent from work for four years approximately with severe neck problems.

Mr Jowett has advanced cervical spondilosis and did have a C6/7 and C7/T1 anterior cervical microdiscectomy with fusion performed on 02.04.07 by Mr. Towns. This improved his pain, but unfortunately not the function in his right arm.

Mr Jowett was eligible for the Permanent Disability Insurance which the Company provides for its employees, but recently has had this benefit terminated. The Company wishes to appeal on his behalf, as we have been advised by our Company physician that he is not fit for any available work on site."

12. The Remedy Claimed By The Appellant In His IT1

The claim made by the Appellant was that the employer had made deductions from his pay pursuant to Section 13 ("Section 13") of the Employment Rights Act 1996. For the purposes of this appeal the material parts of that section are:

"13 Right not to suffer unauthorised deductions

(1) An employer shall not make a deduction from wages of a worker employed by him unless –

(a) the deduction is required or authorised to be made by virtue of a statutory provision or a relevant provision of the worker's contract, or

(b) the worker has previously signified in writing his agreement or consent to the making of the deduction.

(2) In this section "relevant provision", in relation to a worker's contract, means a provision of the contract comprised –

(a) in one or more written terms of the contract of which the employer has given the worker a copy on an occasion prior to the employer making the deduction in question, or

(b) in one or more terms of the contract (whether express or implied and, if express, whether oral or in writing) the existence and effect, or combined effect, of which in relation to the worker the employer has notified to the worker in writing on such an occasion.

(3) Where the total amount of wages paid on any occasion by an employer to a worker employed by him is less than the total amount of the wages properly payable by him to the worker on that occasion (after deductions), the amount of the deficiency shall be treated for the purposes of this Part as a deduction made by the employer from the worker's wages on that occasion."

13. Other Remedies Open To Employees Suffering From Long Term Disability

Counsel reminded us the that employees suffering as did the Appellant have remedies other than those he claimed under Section 13. We were referred to the decision in Villella v MFI Furniture Centres Ltd [1999] IRLR 468. There Judge Green QC, sitting as a Judge of the Queen's Bench Division of the High Court had to consider a claim for damages of a plaintiff incapacitated by illness while employed by the defendant. The question for him was whether the plaintiff was entitled to receive benefit under the defendant's permanent health insurance scheme if the incapacity continued until his death or until he reached the age of 65; the plaintiff was then 54. Entitlement of the plaintiff was considered on the basis of the construction of his terms and conditions of employment, which is the first task faced by the Employment Tribunal and by us on the hearing of this appeal. Clearly the Appellant's claim here is different, but many of the issues which arose in Villella are material here. Judge Green QC, in paragraph numbered 29 of the judgment, referred to Thornton v Shoe Lane Parking [1971] 2 QB 163. [Wherever that authority is mentioned in the report, the plaintiff is inadvertently shown as 'Falton']. The first two paragraphs of the headnote correctly reflect the judgment of Judge Green QC:

"A restriction to an insurance policy underwriting a contractual permanent health insurance scheme which stipulated that entitlement to benefit would cease on an employee leaving service did not form part of the plaintiff's contract, so that he was entitled to continue to receive benefits notwithstanding the employers' contention that his employment had terminated."

The stipulation that entitlement to benefit ceased on an employee leaving service could not be regarded as having been incorporated by reference in the plaintiff's contract where there was no evidence that he was shown or saw the policy or had it drawn to his attention that he could or should read it. Applying the principle expressed by Lord Denning in Falton [Thornton] v Shoe Lane Parking, a condition so destructive of the plaintiff's rights would have to have been drawn to his attention in the most explicit way in order for him to be bound by it. The argument that the plaintiff's rights under the contract could not be greater than the employer's rights under the insurance policy could not be accepted. The employer's arrangements with their insurers were irrelevant."

14. Construction of the Appellant's Terms of Employment

The Extended Reasons do not show any reference to authorities on which the Tribunal relied in reaching its conclusions on the questions of construction which arose before it as they do here. We, by contrast, were helpfully referred to the most recent restatement of the law on this subject by Lord Hoffman in his speech in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 at pp 912/3:

"… I think I should preface my explanation of my reasons with some general remarks about the principles by which contractual documents are nowadays construed . I do not think that the fundamental change which has overtaken this branch of the law, particularly as a result of the speeches of Lord Wilberforce in Prean v Simmonds [1971] 1 W.L.R. 1381, 1384-1386 and Reardon Smith Line Ltd v Yngvar Hanbsen-Tengen [1976] 1 W.L.R 989, is always sufficiently appreciated. The result has been, subject to one important exception, to assimilate the way in which such documents are interpreted by judges to the common sense principles by which any serious utterance would be interpreted in ordinary life. Almost all the old intellectual baggage of "legal" interpretation has been discarded. The principles may be summarised as follows,

(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

(2) The background was famously referred to by Lord Wilberforce as the "matrix of fact", but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.

(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from they way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.

(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax: see Mannai Investments Co. Ltd v Eagle Star Life Assurance Co. Ltd [1997] AC 749.

(5) The "rule" that words should be given their "natural and ordinary meaning" reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention to which they plainly could not have had. Lord Diplock made this point more vigorously when he said in Antaios Companis Naviera S. A. v Salen Rederierna A.B. [1985] A.C. 191,201:

"if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense.""

15. The Rival Contentions

Both Mr Carr and Mr Linden accepted that the entitlement of the Applicant to long term disability payment fell to be determined by construing the "Statement of the General Terms and Conditions of Employment" referred to in paragraph 3 and the material Clauses of the Company Handbook set out in paragraph 5. The Appellant's case concentrated on Clause 5.3 of the Handbook set out in paragraph 6 of this judgment. The Appellant's case that was on the facts, and on the true construction of the documents the Appellant was entitled to long term disability under Clause 5 of the terms of the Handbook, with particular reference to Clause 5.3. He was aged fifty one at the time he lodged his application. The Appellant had been absent from work for a lengthy period of absence due to prolonged sickness or injury. In such circumstances he was entitled, pursuant to the provisions of Clause 5.3, to expect the Respondent, under its Scheme, to pay him as promised in Clause 5.3, namely two thirds of normal inclusive of state benefits, because he was absent through disability and for as long as he was able to work up to the date of retirement, as certified by a medical practitioner, and if necessary confirmed by the company's doctor. The Policy about which he had no knowledge could not be the Scheme which the company unbeknown to him had taken out. Unable to work, meant the work which he had been doing at the date of the accident. He had produced appropriate medical evidence.

16. The Respondent's case was put on three bases, first, that paragraph 5.3 gave rise to no entitlement at all, it merely stated that there was a scheme in existence and described its nature. This argument was rejected by the Tribunal. The appeal against such rejection has been abandoned, in our judgment correctly. The second argument was that the entitlement was to the protection of "a" scheme, that scheme on the construction of the contract was the policy under which the Appellant had no entitlement on the facts. That was the argument accepted by the Tribunal. The third argument was put before the Tribunal on which it did not comment. If, said the Respondent, the insurance policy did not cover the Appellant's entitlement these were prescribed by paragraph 3 alone. There was evidence that the Appellant was able to do some work, he therefore was not, on the words of paragraph 3, "unable to work" and therefore his application should fail. This argument was not dealt with in the Extended Reasons by the Tribunal.
17. 'A Scheme'

The first question which arises for our decision is that on which the Appellant failed in the Employment Tribunal: whether the words "a scheme" as used in Clause 5.3 of the Handbook in the context of the documents provided to the Applicant soon after the commencement of his employment, are such (in the context of the contract of a whole construed following the five principles enunciated by Lord Hoffman) are sufficient to incorporate the Policy under the Appellant's terms and conditions. In paragraph 10 of the Extended Reasons on this question the Tribunal said this:

"… The obligation is run a scheme to design to provide income during lengthy period of absence due to prolonged sickness or injury. The Respondents provide such a scheme in the separate contract that they entered into with an insurance company, Swiss Life."

In paragraph 13 of the Extended Reasons, after examining the facts, the Tribunal concluded:

"The Respondents have done that which they contractually agreed to do. They have provided the scheme."

18. Like the Tribunal below, this Tribunal is composed of two Lay Members with wide industrial knowledge which they have brought to bear on this and the other questions raised on this appeal. Unlike the Tribunal below, we have all consciously considered this and the other questions of construction which arose in accordance with the principles enunciated by Lord Hoffman as set out above. There is no suggestion, when he signed the "Statement of the General Terms and Conditions of Employment" or received the company's Handbook, that the Appellant had been told of the existence of a policy or anything about it. We have considered the provisions of Clause 5.3 in the context of both those documents and the particular Clauses to which our attention was drawn. In our judgment the words "runs a scheme" entitles an employee, if he has long term disability as provided in the Clause, to receive from the Respondent the income as set out in Clause 5.3 To promote the word "a" in the phrase "a scheme" to reach a conclusion that the only obligation of the Respondent was to provide a scheme, whether or not it was consistent with what was to be provided complied with the second sentence in Clause 5.3 flew in the face of the principles, particularly the fifth, enunciated by Lord Hoffman.
19. In reaching this conclusion we have not considered the terms of the Policy, but having reached this conclusion, we did consider the terms of the Policy to see whether or not it met the provisions of Clause 5.3. Clearly, it did not.
20. The Respondent in other parts of the Handbook – see for example Clause 5.6 – referred to a specific insurance policy limiting benefit. If it had wished to limit its liability to make payments for long term disability to a specific insurance arrangement that was for the company to have done in Clause 5.3. In paragraph 10 of the Extended Reasons the Tribunal has quoted the first sentence of paragraph 5.3 of the Handbook and ignored the second sentence completely. It has relied on Clause 5.4 to reach its decision, a Clause which is in some ways inconsistent with Clause 5.3. If the provisions of Clause 5.4 are considered in the context of the question, in our judgment it does not assist reaching construction that "a scheme" should be construed as the policy which the Respondent had chosen to meet its obligations in the Handbook. In our judgment the holding that the policy equated with the necessary scheme was wrong in law. The Policy is a contract between the Respondent and Swiss Life, if it provides to an employee that which is proffered in the second sentence of Clause 5.3, if it does not, this does not entitle the Appellant to the benefits set out in the sentence if it otherwise meets its requirements. By entering a separate contract with Swiss Life the Respondent may have attempted to provide a Scheme which met its liabilities within Clause 5.3, but the Policy does not give an employee the protection set out in the Scheme. The decision in Villella, albeit on a different factual basis, is consistent with the construction which we have reached. This reinforces our view that it is that the construction we have reached is a construction to be preferred to that of the Employment Tribunal.
21. Unable to Work

The next question of construction which arises is what is meant by the phrase "unable to work" to be found in Clause 5.3. Having determined that the employee was only entitled to long term disablement benefit if he satisfied the provisions of the Policy, in the light of the medical evidence, some of which we have set out above, the Tribunal, not unnaturally, found that he was not entitled to benefit from the Policy. In the light of our determination that it is the words of Clause 5.3 alone which govern, it is necessary to determine what is meant by "unable to work". Mr Carr submitted that the phrase meant the work which he was employed to do at the time of the injury. Mr Linden submitted that this was a gloss on paragraph 5.3. This required that the Appellant be "unable to work". Applying the ordinary meaning of those words, the Tribunal had found as a fact that he was not unable to work. That was the finding we should respect. He submitted that Mr Carr's construction sought to qualify the words, to insert words such as 'he was then employed to do' which was impermissible as a matter of law, alternatively could not be implied. He invited us to consider the terms used in Clause 5.4 where the certificate of the company's doctor referred to "unable to use your normal job (or one in the same grade)" to suggest that benefit could only be obtained under Clause 5.3 if that was the position of the Appellant, as to which there was no proof before the Tribunal and consequently before us.

22. The Tribunal's decision which was very much on what was meant by 'any work', was in the context of the Policy, rather than in considering the words on the construction of Clause 5.3, which we have favoured. We remind ourselves on the sentence within Principle (4) of Lord Hoffman in I.C.S Ltd v West Bromwich B.S. [1998] 1 W.L.R:

"… the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean."

In the judgment of all of us (and here the experience of Lay Members is especially valuable) the construction proffered by Mr Carr is right. We think it inconceivable, looking at this Clause in the context of both the statement referred to in paragraph 3 of the judgment and the Handbook, that the parties would have understood other than if an employee had long term disability resulting from an industrial injury, his benefit entitlement provided by Clause 5.3 arose not if was unable to do any work, but if he was unable to do the job he was employed to do when he suffered his injury, subject to the appropriate medical certificates. In our judgment the provisions of Clause 5.4 do not alter such a construction. That Clause deals specifically with payments to be made while an individual is unable to work for a limited period. As Mr Linden submitted, Clause 5.4 recognises there may be an intermediate position between two extremes of complete inability to work and ability to do any job; that restriction is in terms of the medium term. Clause 5.3 deals with long term disability in the manner which it did. If, therefore, there was medical evidence before the Tribunal that on the date of his Originating Application to satisfy the Tribunal that he was unfit to do the work he was employed to do and provided his claim was within the provisions of Section 13, the Appellant was entitled to succeed. We turn to consider these questions

23. The Evidence

Mr Linden submitted that on 18 October 2000 (the date of submission of the Appellant's Originating Application) there was no "evidence as certified by a medical practitioner and, if necessary, confirmed by the company's doctor" that the Appellant was unable to work. In paragraphs 9 to 11 of this judgment we have set out the medical evidence and correspondence on it which was before the Tribunal. In the context of the question we consider Mr Shaw's report is of no assistance. He was not the Respondent's doctor and he was considering the question whether the Appellant was able to follow 'any kind of employment activity'. Very material to the question, by contrast, is the statement of Mr Priestley, the company's Personnel Manager, in his letter of 8 June 2000:

"… it is the opinion of our Occupational Medical Advisor and of Mike's own specialist that he remains unfit to perform any occupation at present."

If the company's own medical advisor had, so soon before the lodging of the application, expressed the opinion that the Appellant was unfit to perform any occupation, in our judgment there was evidence from the company's medical advisor that the Appellant was then unfit to do the work he was employed to do. We have also set out what we think is an email sent by Ruth Wood, the Occupational Health Nurse Advisor dated 5 September 2000 shortly before the Originating Application was lodged. This was a document which, on medical evidence, a Tribunal could properly rely.

24. Because of the findings regarding the Respondent's obligation, the Tribunal did not consider whether the medical evidence before it was sufficient to meet the provisions of Clause 5.3 on the construction we have reached on "unable to work". On the evidence before it, if it had considered the question, we are satisfied that the Tribunal would have concluded that the Appellant was unable to work as provided in Clause 5.3
25. Section 13

We have set out the provisions of Section 13 in paragraph 12 of this judgment. Because of its earlier findings, the Employment Tribunal did not consider these provisions. If it had, we consider that it would have considered the sum payable by way of disability benefit to the Appellant could properly be considered wages due to him with the consequence that they would have concluded the Appellant was entitled to succeed in his claim.

26. In reaching our conclusions we have considered all the oral and written conclusions of counsel, to whom we are indebted for their assistance.
27. In the event, we will allow this appeal and substitute for the decision of the Tribunal and substitute a decision that there have been deductions from the Appellant's pay pursuant to Section 13. Unless the amount due to the Appellant can be agreed between the parties within eight weeks of the promulgation of this judgment, the matter should be restored for a hearing as to quantum to the Employment Tribunal.
28. When we rose shortly before 5.00pm at the close of submissions, both counsel sought permission to appeal should their submissions before us result in a decision adverse to their respective submissions. In view of the joint approach and the recognition of each counsel that arguable points could arise on a further appeal, we consider it appropriate to give permission to appeal to the Respondent should it wish to take this course.