United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR J ALGAZY (Of Counsel) Instructed by: Messrs Bindman & Partners Solicitors 275 Grays Inn Road London WC1X 8QB
For the Respondent	MR T PULLEN (Of Counsel) Instructed by: Messrs Thompsons Solicitors Great Russell Street London WC1B 3LW


 


JUDGE D SEROTA QC

1. This is an appeal by the London Borough of Camden against the decision of the Employment Tribunal at London Central (Chairman Mr T P Ryan) that was promulgated on 26 October 2001. The proceedings were in the nature of a test case concerning a number of employees within the Council Tax Department of the London Borough of Camden. We understand that there were some 20 employees. The Applicants maintained that Camden had made unlawful deductions from their wages. The dispute related to the construction of their contracts of employment. The Applicants maintained that the contracts gave them certain pay protection following a reorganisation of the Council Tax Department. The Applicants' claims were accepted by the Employment Tribunal.
2. The Applicants were all Council Tax Officers. The Applicants had posts of a particular pay grade but enjoyed pay at a higher grade than the grade appropriate to the post. This situation had arisen as a result of past reorganisations. It was a term of such reorganisations that all employees who were redeployed should not find themselves on a lower pay grade than enjoyed prior to the redeployment. The Employment Tribunal cited by way of example clause 2.12. of Camden's Redeployment Procedure dated 14 April 1988 that was incorporated into the Applicants' contracts of employment:

"In all cases where the employee is redeployed to a lower graded post, previous grading, basic salary and rights to incremental progression shall be retained on a personal basis. A contractual payment made in addition to basic salary for which no time limit has been set shall be retained either for the same length of time following redeployment as it had been continuously paid prior to redeployment or until termination for any reason of the main contract of employment whichever is the lesser."

We were also referred to a number of documents in the Applicants' supplemental bundle. For example there is an internal memorandum of the Finance Department dated 6 March 1991 addressed to all staff in the revenues group contains the following:

"Re: Ring fencing and Slotting in for the Revenue's Restructure

Staff in the above sections are being slotted into their new posts of the Revenue's Restructure. This means that, notwithstanding below, you will be on your present grade either in substantive post or on a personal grade."

There is a letter dated 10 November 1992 from Camden to Mr Clements in which he is told upon a restructure his appointment to the position of Council Tax Assistance Scale 4:

"You will retain your previous grade and incremental progression of scale 6/SO1 on a personal basis …"

In a further letter of 1 March 1993 Camden write to Mr Clement to the effect:

"Your substantive post and personal grade are unaffected by this temporary appointment and your salary, terms and conditions of service will remain the same."

3. In 1996 Camden entered into prolonged negotiations that took some three years with Trades Unions representing its employees. Some (but not all Trades Unions) agreed the form of a new contract of employment. The local branch of UNISON was one of the Trade Union that did not agree to the new contract. The Applicants were members of that branch. We shall refer shortly to the relevant terms of that contract. Camden employees whose Trades Union had not accepted terms of the new contract were dismissed and immediately reappointed. Mr Collins and Mr Clements were among these employees. The letter of dismissal contains the following:

""STAFF WHO RESPONDED BUT WHO HAVE NOT AGREED TO VARY THEIR CONTRACT.

If you have not agreed to vary your contract but you have accepted the offer of re-engagement on the new terms and conditions you will have your contract of employment terminated on 9 May 1996. You will be immediately re-engaged on the terms and conditions of the new contract of employment. …

You will be engaged on the new contract with effect from 10 May 1996""

4. Mr Collins wrote to Camden in terms which we assume were prepared by UNISON:

"I do not accept the variation to my contract of employment. I intend to continue working for the Council and I note your unqualified intention to continue employing me after 9^th May 1996 with no break in my continuity of employment. In order to mitigate my losses, I accept the dismissal and re-engagement. Such acceptance is entirely without prejudice to any legal or other action which I may wish to take in relation to my dismissal and my desire to defend myself against cuts in my terms and conditions."

We assume that most, if not all persons, in the position of the Applicants sent similar communications.

5. We now turn to consider the relevant terms of the new contract of employment that relates to redeployment. These are to be found in Section 6 which is headed "Procedures".

"4.11 Any offer of suitable work shall, wherever possible, be to a post of the same grade as the employee's previous substantive post. Where there is a suitable vacancy and no redeployee of the appropriate grade has been identified who is capable of carrying out the duties of the job, a redeployee of a higher grade may be offered the post."

4.12 deals with the details of grade protection. We need not set this out in any further detail; suffice it to say that grade protection is made available to redeployees on certain terms, based on length of service.

4.13 It would not be the Council's normal practice to seek to redeploy an employee into a post that carries less hours than they are currently working. However, if this did occur the employee would be protected at their [sic] previous pay level, rather than making a deduction for hours worked. In these circumstances pay protection would be on the same period/level of protection as shown in 4.12.

4.14 Alternatively, in exceptional circumstances, a redeployee of a lower grade may be offered a post at a higher grade, but only where all the requirements of the person [sic] specification of the vacant post are fully met."

6. A number of questions were raised by employees as to whether protection was applicable under clause 4.12 of the new contract or under clause 2.12.1 of the Re-deployment Procedure to which we have already referred. Camden sent a letter to relevant staff on 18 September 1996. The relevant part of the letter is cited by the Employment Tribunal:

""I am writing to clarify the contractual position of employees who have salary protection following redeployment under the 'old' Camden employment contract.

You will continue to receive your current salary protection in accordance with the terms and conditions of your old contract of employment whilst you remain in your current post. If you are redeployed into another post in the future, any pay protection will be in accordance with the provisions of the redeployment procedure of the new Camden contract of employment."

….

The salary protection provisions under the new contact were notified to you in February 1996 ….

Please note that all other terms and conditions under the new contract continue to apply. If you have any queries on this matter please do not hesitate to contact your Departmental Personnel Officer.""

7. We were also referred to a comparison between 'old' and 'new' contracts published by Camden in February 1996. Under "redeployment procedure" the 'old' contract is explained in these terms:

"The Council has an organisational change procedure and a redeployment change procedure for dealing with issues arising from reorganisations. Following redeployment to a lower graded post, grading, basic salary and rights to incremental progression are retained on an indefinite basis. Additional contractual payments are protected for the period that they have been paid."

The explanation relating to the new contract is as follows:

"Salary Protection provision amended. Following redeployment to a lower graded post, the employee will get grade protection i.e. protection of incremental progression and pay awards of basic salary and LWA based on length of Camden service."

There is then an explanation of the new 'Marking Time' provision.

8. We note that the Employment Tribunal held that after 10 May 1996 the Applicants had a contractual right to their current salary protection in accordance with the terms and conditions of the old contract of employment so long as they remained in their current post. That right existed independently of the letter of 18 September 1996, which confirmed that right. If that letter did anything it amounted to a variation of the contract of employment, to take away from the employees the right to have that old form of protection indefinitely. The Employment Tribunal also held that Camden had agreed to give the Applicants salary protection in accordance with the terms and conditions of the old contract while they remained in their current posts. By going to work on 10 May 1996 and thereafter the Applicants accepted the provisions as to salary of the new contract of employment protection that we have set out. We mentioned these findings at this stage in our judgment because there has been no appeal against them.
9. In 2000 Camden Finance Department underwent a reorganisation following the implementation of the 'Best Value Scheme' and all posts were re-evaluated. The Applicants' posts had been at Grade SC4 before the re-organisation but they were then regraded to SC5. Camden maintained that the Applicants were 'redeployees' and as they were on a new grade they no longer had any right to the higher 'Personal Grade' pay. We have been told that Camden as an extra contractual concession, and not by way of contractual obligation, allowed the applicants to retain the existing pay protection for a limited period. However from September 2000 the Applicants were paid in accordance with the pay scale appropriate to their revised grade. The Applicants maintained they were entitled to be paid the rate of their previous personal grade which was SC6/SO1.
10. It is significant to note the pay scale including London Weighting Allowance as at 1 April 2000 for grade SC5 was between £17,766 and £19,236, for grade SC6 £19,776 - £20,928 and for SO1 from £21,657 - £22,299. The Applicants in this case were therefore faced with a drop in their income we were told of some £3,000 which having regard to the level of payment, amounted to a significant reduction.
11. It was common ground between the parties that if Camden was not lawfully entitled to pay the Applicants and other employees in like position who had been on protected salaries, at a reduced rate, then the failure to pay at the appropriate rate would amount to an unlawful deduction from wages contrary to section 13(3) of the Employment Rights Act 1996.
12. The issue turns on the construction of the second sentence of clause 4.11 which we have already referred to.
13. We now turn to explain how the question was resolved by the Employment Tribunal. The Employment Tribunal records submissions made by Council for the Applicants, Mr Pullen as to the rules of construction:

"He reminded us of five things:

The primary task is to ascertain the intention of the parties;

secondly, that the Tribunal should give effect to the plain meaning of the words wherever possible;

thirdly, that we should give the contract, which is a commercial contract, a business-like meaning;

fourthly, that we can if we are driven to the conclusion of the terms are so unreasonable that the parties cannot have intended them to mean what they say, interpret them to put a more reasonable construction on them; and

fifthly, he reminded us of what is called the 'contra proferentem' rule, whereby, where all else fails by way of construction, it is possible to construe a document against the party who imposes it."

The Employment Tribunal rejected a submission by Mr Algazy, Counsel for Camden, who submitted that the contra proferentem rule could not apply. The Employment Tribunal held that there was an ambiguity in clause 4.12. The contra proferentem rule would apply as the employment contract in this case was Camden's document. Camden has sought to impose it on all their employees some of whom had accepted it and some were compelled to do so by being dismissed and re-engaged. With the exception of the Employment Tribunal's decision relating to the application of the contra proferentem rule, the submissions of Mr Pullen as to the rules of construction are not controversial.

14. The Employment Tribunal considered that there was an ambiguity in clause 4.11:

"19(v) Taking section 6.4 as a whole, it is clear that the phrase "redeployment procedure" or the word "redeployment" were used not as terms of art but in a much looser sense by the parties to this contract. It covered the whole gamut of staffing reorganisation or departmental reorganisation. Time and again, phrases such as "slotting in", "ring fencing" and the like are used in various ways. To say simply because there was no redeployment in the classic sense the provisions did not apply was artificial and false.

(vi) We tested the matter in this way. If we supposed for a moment that those who worked in the Council Tax Department as assistants, on Scale 4, had had their jobs regraded after a proper evaluation process at Scale 3, a lower scale, would the parties have intended that the provisions of 4.11 and 4.12 should apply to them? To that there seemed only one answer. Of course they would. It would have been manifestly unreasonable had they not done so. So, if in those circumstances it would have applied to employees who were downgraded from 4 to 3, then so must it have applied to Mr Collins and Mr Clements. We were satisfied that clauses 4.11 and 4.12 applied to these Applicants.

(vii) The argument then became simpler. Were the Applicants redeployees of a lower grade being offered a post at a higher grade, or were they redeployees of a higher grade being offered a post under 4.11 and 4.12? That depended on the construction of the phrases "redeployee of a higher grade". There was a clear distinction of the phrase "redeployee at a higher grade". There was a clear distinction in the language used between posts and employees. "Any offer of suitable work shall wherever possible be to a post of the same grade as the employee's previous substantive post". That sentence was clearly talking about posts. "Where there is a suitable vacancy and no redeployee of the appropriate grade has been identified who is capable of carrying out the duties of the job, a redeployee of a higher grade may be offered the post." There the grades are specified. The mere fact that "posts" had been referred to in the previous sentence did not necessarily mean that they were included here. They could have that meaning, they could have the alternative meaning namely, that it was the personal grade that was carried over in the case of these Applicants under their contract from pre-1996 days. There was in our judgment genuine ambiguity at this point."

15. The Employment Tribunal then went on to resolve the ambiguity in favour of the Applicants by the application of the contra proferentem rule. Accordingly, the Employment Tribunal held that the Applicants were covered by clauses 4.11 and 4.12 and were to be given protection of their Grade SO1 pay scale in accordance with clause 4.11.
16. We now turn to consider the rival submissions. However, before so doing we note that there is no cross appeal by the Applicants; there is no challenge to the findings as to the relevant matrix of fact some of which we have summarised, as determined by the Employment Tribunal.
17. Mr Algazy submitted, as he had to the Employment Tribunal, that there was no ambiguity in paragraph 4.11. He submitted that the word "grade" clearly refers to the substantive post in the first sentence of the clause and that there was no reason for the word "grade" to be given a different meaning in the second sentence. He submitted that there was nothing in the matrix of fact to support a case based on ambiguity.
18. Mr Algazy then made a number of submissions in relation to the application of the contra proferentem rule. He drew our attention to the judgment of Sir John Pennycuick in St Edmundsbury and Ipswich Diocesan Board of Finance v Clark (No 2) [1975] 1WLR 468 where the Court of Appeal accepted that the application of the contra proferentem rule was one of late or last resort, when a sure conclusion could not otherwise be reached. The rule was not to be taken into account in reaching such a conclusion; see page 477. Mr Algazy went on to submit that the rule had no application where the agreement in question was the result of the joint efforts of both parties. In the present case, he submitted, the clause was not inserted for the benefit of Camden but for the benefit of downgraded employees. Mr Algazy submitted that the Employment Tribunal did not rely upon any other relevant canon of construction and that as the contract in question was the result of negotiation between Camden and the Unions even if, contrary to his first submission there was an ambiguity it was impermissible to have resort to the rule of contra proferentem.
19. Mr Pullen's submissions in support of the decision mirrored those he made to the Employment Tribunal. He submitted that the word "grade" in the second sentence of paragraph 4.11 referred to the "pay" grade rather than the post status grade. He submitted that there were effectively two types of grade, the "post pay grade" and the "personal pay grade" of an employee who had been redeployed. The draftsman of the contract could have used the word "substantive" before the word "grade" to make clear that it did not extend protection to persons such as the Applicants. He submitted that the construction of the contract propounded by Camden was unreasonable as it would result in a number of employees suffering pay reductions.
20. Mr Pullen submitted that the construction of the words "redeployee of a higher grade" by the Employment Tribunal was essentially a question of fact rather than law. He drew our attention to paragraph 12-046 of 28^th Edition of Chitty on contracts and the decision of the Court of Appeal in "The Troll Park" Belgravia Navigation v Cannor Shipping [1988] 2Ll LR 423 which supports the proposition that the meaning of an ordinary word is a question of fact for the Tribunal. We asked Mr Pullen whether it could be said that the phrase "redeployee for the higher grade" could be regarded as an ordinary word. He submitted that the exercise to be undertaken by the Tribunal in construing the phrase would be the same as construing a single word as it would still have to determine the meaning of the words making up the phrase. Mr Pullen went on to submit that the word "grade" was ambiguous. If the ambiguity was not patent, then it was a latent ambiguity when one construed the contract in its context and against the background of the matrix of facts as found by the Employment Tribunal. He drew our attention to the decision of Robinson v The Great Railway Company [1885] 35 CBNS 123 to support his submission that the question of whether there was an ambiguity in a contractual provision was one of fact for the Employment Tribunal. We have to say in passing that we are not satisfied that this case is authority for that proposition.
21. In relation to the application of the contra proferentem rule Mr Pullen submitted that there was an ambiguity in clause 4.11, and that in determining whether there was an ambiguity, the unreasonableness of a particular construction was relevant and that it was apparent from paragraph 19(viii) of the Extended Reasons that the Employment Tribunal had considered and applied other methods of construction before determining that it needed to apply the contra proferentem rule. He submitted that it was wholly appropriate for the Employment Tribunal to apply the rule because (i) the contract of employment was imposed upon the Applicants (ii) the provision was intended to benefit Camden rather than the Applicants (iii) Camden was determined to impose a new contract so as to save monies and did so not at the behest of the employees. If an employer is determined to impose contractual conditions upon its employees, it can always do so as there is an inequality of bargaining position. In any event it could not be said that the Applicants' Trade Union had agreed the term in question.
22. In reply Mr Algazy submitted that if the Employment Tribunal had come to a correct conclusion but for the wrong reasons we were obliged to send the matter back for reconsideration by the Employment Tribunal. He submitted, accordingly, that we could not entertain arguments relating to the unreasonableness of Camden's construction, the relevance of the Applicants' position prior to 1996, and the explanatory document of February 1996, to which we have referred. He also submitted that we were bound by the finding of the Employment Tribunal that the phrase could bear the meaning for which Camden had contended, as the Applicant had not appealed. This would not be a point of law but a question of fact. He submitted that the case should be determined on what was a dry point of law and any sympathy we might feel for the Applicants was irrelevant.
23. We have in mind speech of Lord Hoffman in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1AER 98 which we need not set out. We had in mind the factual background as found by the Employment Tribunal. It seems to us a most striking point that if the construction put by Camden is correct, it could at a stroke reduce the salaries of all employees on protected pay grades merely by promoting them, whereas were Camden to demote them or leave them in an equivalent post they would retain their personal pay grades. We accept that although the construction of a document is a question of law the meaning of an individual word or phrase may be regarded as a question of fact; we have in mind passages in "The Interpretation of Contracts" second edition by Kim Lewison QC at paragraph 3.01 and in Chitty on contracts at paragraph 12.046.
24. We are by no means certain that we would have dealt with this matter as did the Employment Tribunal. We are very much inclined to doubt whether the Applicants could have been said to be redeployed at all, as the Employment Tribunal held at paragraph 19(iv). We would also probably have come to the conclusion on the simple question of construction of the contract against the matrix of fact, that the parties never intended that a promotion or move to a higher grade should trigger a loss of existing pay grade protection and a substantial reduction in salary. The lay members of the Tribunal who have extensive industrial experience are of the opinion that in the context of Local Government Industrial Relations', the suggestion that the parties intended to remove salary protection in cases of promotion, was so unlikely as to be unimaginable, unless set out explicitly and in the clearest possible terms. Nonetheless as there is no cross appeal it is inappropriate for us to determine the appeal by reference to revisiting the question of re-deployment or by the construction we have mentioned above.
25. We now turn to consider the question of ambiguity; as Mr Algazy himself accepted this is a question of fact. In our opinion the phrase "redeployee of higher grade" at the very least is capable of bearing two meanings. It might mean a "redeployee of higher personal grade" or a "redeployee of higher post grade" without doing any violence to the language or to the presumed intention of the parties. There are clearly good reasons, having regard to the relevant matrix of fact to suggest that the phrase has the meaning contended for by the Applicants ie "higher personal grade". In those circumstances it seems to us that the Employment Tribunal was justified in applying the contra proferentem rule for the following reasons:

(i) we recognise that in most cases the application of the rule should be a construction of last resort when all else has failed;

(ii) so far as these Applicants were concerned this was a contract that had been forced upon them by Camden;

(iii) the commercial reality so far as these Applicants were concerned, was that Camden as employer had the whip hand and that there was no equality of bargaining power;

(iv) the fact that Trade Unions were involved in negotiations does not detract from the fact that this contract was an employer's document and was given to employees on a take it or leave it basis;

(v) the Employment Tribunal found that this was an employer's document and was for the employer's benefit;

(vi) as a last resort the Employment Tribunal was entitled to resolve the ambiguity by the application to the rule.

26. Accordingly, we are satisfied that the Employment Tribunal reached the correct conclusion and we can see no basis for interfering with its decision so the appeal must fail.
27. We would conclude by expressing our gratitude to both Mr Algazy and Mr Pullen for their attractive and skilful submissions and for their most helpful Skeleton Arguments.