United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR SEAN JONES (of Counsel) Instructed By: Messrs Steele & Co Solicitors 2 The Norwich Business Park Whiting Road Norwich Norfolk NR4 6DJ
For the Respondent	MR PAUL CAPE (of Counsel) Instructed By: Patterson Glenton & Stracey Solicitors Law Court Chambers 22 Waterloo Square South Shields NE33 1AW


 


THE HONOURABLE MR JUSTICE RIMER:

Introduction

1. This is an appeal by Peninsula Business Services Limited ("Peninsula") against the decision of an employment tribunal sitting at Newcastle upon Tyne over several days in May and August 2002 and chaired by Mr J.J.L Hargrove. The tribunal's extended reasons were promulgated on 28 August 2002. The respondent to the appeal is Mr J. Sweeney, a former employee of Peninsula.
2. Peninsula sells employment advice packages and health and safety services. It employed Mr Sweeney as a sales executive from October 1998 until 2 July 2001, when he resigned and his employment terminated. By an originating application presented on 26 September 2001, Mr Sweeney claimed that he had been unfairly constructively dismissed, although the hearing of that part of his claim was adjourned by the tribunal. He also claimed payment of £20,839 from Peninsula by way of damages for breach of contract, alternatively as a debt due to him. That claim was in respect of unpaid commission. By a second originating application presented on 30 April 2002, Mr Sweeney claimed the same commission, this time on the alternative basis that it had been unlawfully deducted from his wages. Peninsula's position was and is that Mr Sweeney was not entitled to any of the money he claimed, whichever way he put his case, and that the tribunal did not even have jurisdiction to entertain the payment claim advanced under the first originating application.
3. The tribunal decided that Peninsula was liable to pay Mr Sweeney the commission he claimed, and it gave directions for the ascertainment, in default of agreement, of its amount. By this appeal, Peninsula challenges that decision. The appeal raises five separate issues. Before coming to them, we must set out some facts.

The facts

4. On about 18 October 1998, Mr Done, Peninsula's managing director, made an informal offer of employment to Mr Sweeney as a salesman in its North East region. Mr Done then wrote to Mr Sweeney on 19 October 1998, offering him employment with a start date of 26 October 1998. His letter detailed the hours of work, and said that Mr Sweeney's basic salary would be £8,500. It explained he would also be entitled to commission at the rate of 7.5% of the net value of all new business and 5% of the net value of renewal business, with further commission payable if a certain quarterly target were to be achieved. The letter did not state when the commission would be payable, but explained that full details of the commission scheme were set out in a separate document. It explained that "to assist you through the initial transitional period" Peninsula would guarantee Mr Sweeney a minimum of £20,000 in his first 12 months of employment, or £1,666 gross per month. The letter dealt with the question of expenses and holiday entitlements. Its last main paragraph was headed "Contractual Terms" and provided that:

"This offer is conditional upon you entering into the standard contractual terms as set out below.

Statement of Main Terms of Employment – Individual Terms

Employee Handbook – Collective Terms and General Rules/Procedures

Restrictive Covenants

Code of Professional Conduct

Commission Scheme Rules

If you wish to inspect these documents before accepting this offer then you may do so here at Stamford House, by arrangement."

5. On 20 October, Mr Sweeney wrote a letter in reply to Mr Done, accepting his offer. His letter can be taken to have impliedly evinced a willingness to enter into the "standard contractual terms" Mr Done had referred to, although he had not yet seen any of the documents. Mr Sweeney started at Peninsula on 26 October, when he attended a three-day induction meeting. The tribunal found that on 26 or 27 October Mr Windridge and Mr Hayward of Peninsula explained the commission arrangements to him "in general terms" but that they did not explain "the practical effect upon [him] if he left [Peninsula] at a time when any commission was outstanding, least of all what the practical financial affects [sic] upon him might be."
6. On 28 October, Mr Sweeney signed a "Statement of Main Terms of Employment" and an "Induction Checklist", in which he confirmed he had read the current employee handbook and accepted that it formed part of his contract of employment. On the same day, he also signed a four-page document headed "Sales, Commission & Bonus Scheme," being (or including) the Commission Scheme Rules to which Mr Done had referred in his letter of 19 October. The first section, on page 1, headed "A. GENERAL TERMS" ("section A"), included this paragraph:

"All commission in relation to new and renewal business or consultancy work is all paid at the end of the calendar month following that in which the business was conducted , but only if the company has received at least 25% of the fee from the client. If 25% of the fee has not been received at the time commission will only be paid on the due pay date at the end of the calendar month following the calendar month in which 25% of the fee has been received."

7. The next section, also on page 1, was headed "B. EMPLOYEES LEAVING THE COMPANY" ("section B") and provided as follows. Section B is of central importance, and although the paragraphs are not numbered in the document Mr Sweeney signed, we will number them for ease of subsequent reference:

"(1) If the contract of employment is terminated either by the company through dismissal or by the Sales Representative through resignation, then special rules apply in relation to commission and bonus payments that might otherwise have been payable.

(2) Commission payments on new and renewal business are only paid if the Sales Representative is in employment at the end of the calendar month when the commission payment would normally become payable. This does not apply in circumstances where the termination by the company or the employee is by virtue of retirement or redundancy.

(3) It is therefore an express contractual provision that an employee has no claim whatsoever on any commission payments that would otherwise have been generated and paid, if they are not in employment on the date when they would normally have been paid, being at the end of the month following 25% of the fee being received.

(4) Employees in employment at the end of the calendar month when commission and bonus payments would normally be payable, but under a period of notice, whether by dismissal or by resignation will be entitled to the appropriate commission payments payable at the end of each calendar month in question that falls within such a notice period.

(5) Such non-payments of commission and bonuses are contractual terms and therefore are sums not 'properly payable' under the contract and therefore are not unlawful deductions from pay in relation to Section 13 of the Employment Rights Act 1996 or as amended."

8. Mr Sweeney signed the document on page 4, and immediately below his signature and above the date, were the words:

"Confirming agreement to the contractual provisions in terms of the payment of commission and bonus arrangements for certain non-payments in circumstances of notice periods and termination of employment, deductions from pay in relation to Telesales appointments and bad debts and return of documentation."

9. There is no express finding by the tribunal as to whether Mr Sweeney read that document before signing it, although the inference we draw from their finding that "he did not carefully read or fully understand the commission and bonus scheme rules as set out in that document" (our emphasis) is that he devoted at least some attention to the contents of the document before signing it.
10. Put simply, section A provided that the salesman's commission was payable at the end of the calendar month following the payment by the customer of 25% of the fee. But (subject to two exceptions which do not apply in this case) section B(1), (2) and (3) provided that such commission was only payable if the salesman was still in Peninsula's employment at the end of that calendar month. Mr Sweeney resigned on 2 July 2001, and so on the face of it he thereupon forfeited any right to commission he could be said to have earned in the past, but which had not yet become payable to him in accordance with section A. His claim before the tribunal was that, despite the terms of section B, he was nevertheless entitled to be paid such commission.
11. The claim was and is important to Mr Sweeney. This is because his basic salary was only £8,500, Peninsula's £20,000 guarantee only operated during the first 12 months of employment, and so he was heavily dependent on the commission he could earn in order to make a proper living from his employment. His claim to nearly £21,000 commission was not just in respect of commission he had earned by sales during the month or two before his resignation. In broad terms, it represented probably all (or at least most of) the commission he had earned over the previous nine months, and so represented a major proportion of what he would regard as his earnings from Peninsula during his last year with it.
12. The explanation for this is that, as the tribunal found, the vast proportion of Peninsula's customers opted to buy their packages from the salesmen on three-year contracts, under which they were entitled to pay by 36 equal instalments. This meant that it was only at the end of month nine that they would have paid 25% of the fee, and so only at the end of month ten that the salesman would be entitled to be paid his commission (see section A). It was only in a small minority of cases that salesmen achieved sales with an immediate deposit payment, resulting in commission being payable much earlier. These economic facts meant that a salesman's first year could be lean from the cash flow perspective, although it was softened by the Peninsula £20,000 guarantee. By year two, new salesmen could, if they were successful, expect to be enjoying the flow of commission income they would have earned in months three and following of year one. As we have said, the tribunal found that Peninsula did not explain the effect of the commission provisions to Mr Sweeney at the outset. However, he did understand their effect by January 1999, when he discussed their operation with colleagues. We turn now to the five issues we have to decide.

(a) Was section B incorporated into Mr Sweeney's employment contract?

13. Mr Sweeney's claim for the payment to him of commission which had not become payable to him before his resignation required him to overcome the problem that section B showed he had no such claim. To overcome it, he argued, and the tribunal accepted, that section B was not incorporated into his employment contract at all. The tribunal found that his employment contract included the commission provisions other than those excluding the right to commission after leaving.
14. The tribunal's route to this conclusion was as follows. It held first that:

"[Peninsula's] attempt to make the offer conditional upon [Mr Sweeney] entering into the standard terms was not effective to bind [Mr Sweeney] with knowledge of the precise terms of the Commission Scheme Rules. Even if it be considered only to have been a conditional offer, in fact it was accepted by [Mr Sweeney] without the opportunity to examine the Rules. The offer to [Mr Sweeney] to inspect the documents (but only at the Manchester Office, not by way of provision of actual copies, although [Peninsula] had the opportunity to do so) was not reasonable notice to him of those terms."

15. The references there are to the exchange of letters on 19 and 20 October 1998. The tribunal's finding was that that exchange constituted the making of Mr Sweeney's contract of employment, which then started on 26 October. They held that, by that exchange, Peninsula incorporated into the contract the commission scheme rules which had been referred to by Mr Done, but which it had not first provided to Mr Sweeney and which he had not seen. They held next that, in the light of the facts to which we have referred (the time lag in the payment of commission earned on most sales), the terms of section B(1), (2) and (3) were unduly onerous, and that Peninsula could only rely on them if it could show that it had first fairly brought them to Mr Sweeney's notice, which the tribunal found it had not. In reaching this conclusion, the tribunal relied on the well-known dictum of Denning LJ in Spurling (J) Ltd. v Bradshaw [1956] 1 WLR 461, at 466, that:

"Some clauses which I have seen would need to be printed in red ink on the face of the document with a red hand pointing to it before the notice could be held to be sufficient."

and on the decisions in Thornton v. Shoe Lane Parking [1971] 2 QB 163 and Interfoto Picture Library Ltd v. Stiletto Visual Programmes Ltd [1989] 1 QB 433. The tribunal held that the mere reference to the commission scheme rules in the letter of 19 October was insufficient to put Mr Sweeney on notice of the exact nature of its terms. The tribunal finally said that:

"Nor did the Tribunal accept that [Mr Sweeney's] signature upon the Commission Scheme Rules subsequent to the commencement of his employment was sufficient to fix him with notice or to amount to a variation or novation of the contract including such terms as was [sic] relied upon by [Peninsula]. The Tribunal concluded that the term by which [Peninsula] seeks to withhold in excess of £20,000 commission which had been earned by [Mr Sweeney] in the sense that he had done all that was required of him, was unduly onerous. It was one which clearly falls within the definition [sic] contained within the judgment of Lord Denning [in fact he was then Denning L.J.] in Spurling v. Bradshaw."

16. With respect to the tribunal, we regard their analysis of the position as incorrect. First, we consider they were wrong to characterise Mr Done's letter of 19 October as merely an "attempt" to make the offer conditional upon Mr Sweeney entering into the standard terms; and we consider they were equally wrong to interpret that exchange of letters as constituting an unconditional contract of employment incorporating those standard terms.
17. In our view, Mr Done's letter made it plain that he was not making an offer which, if accepted, would bind Mr Sweeney to those standard terms whether he had first read them or not. If that had been Mr Done's intention, he would simply have included a paragraph providing that, in addition to the other employment terms he had outlined in his letter, the offered terms of employment also included those standard terms. But that is not what he said. What he said was that his offer was "conditional upon you entering into the standard contractual terms as set out" in five documents. That way of expressing the condition conveys to us that Mr Done expected Mr Sweeney, if he accepted the offer, also to have to do something additional which positively manifested that he was agreeing to these standard terms; and we know from what happened eight days later that Peninsula in fact expected Mr Sweeney to sign various documents manifesting his agreement to them.
18. In our view, therefore, the sense of Mr Done's letter of 19 October was that he was saying to Mr Sweeney: "We are willing to employ you on the terms of this letter, but only on condition that you also sign up to our standard terms." By his letter of reply of 20 October, Mr Sweeney was saying that he agreed to that. We conclude, therefore, that no unconditional employment contract was concluded by that exchange of letters. That would, and did, only happen when Mr Sweeney did the necessary further signing on 28 October.
19. We accept of course that Mr Sweeney started work on 26 October, which was the start date of his employment mentioned in the exchange of letters and that the various documents he signed on 28 October record that his employment had started on 26 October. For reasons given, we question whether in fact any contract of employment had come into force on 26 October, although we have no difficulty in accepting that, once the documentation of 28 October had been signed, both sides recognised in them that the employment was to be treated as having started on 26 October. We see no difficulty about this. Mr Sweeney wrote his letter of 20 October in what we infer was a state of willingness to sign up to the standard terms when they were put in front of him, as indeed he did sign up. In short, once Mr Sweeney had written his letter of 20 October, both sides expected that he would start work on 26 October, as he did, and that the signing of the further contractual documents governing his employment was the foregone conclusion it turned out to be.
20. We conclude, therefore, that the tribunal were wrong to treat the employment contract as having been finally constituted by the exchange of letters on 19 and 20 October. In any event, we regard the tribunal's decision to that effect as one which appears to have ignored the practical realities of what was happening. Mr Sweeney started work on 26 October, and on 28 October he signed various documents which it is obvious were intended by both sides to govern the terms of his employment with Peninsula. The main one was the "Statement of Main Terms of Employment," but they also included the "Sales, Commission & Bonus Schemes" document. We regard the tribunal's conclusion that those documents did not form part of the terms on which he was employed by Peninsula as wrong. We consider it clear that they did.
21. In those circumstances, we regard the reliance which the tribunal placed on the Spurling, Thornton and Interfoto cases as misplaced. The principle which the tribunal drew from those cases is one ("the Interfoto principle") which applies, broadly speaking, to cases in which one party, A, has purported to bind the other party, B, to conditions other than conditions contained in a contractual document which B has signed, the type of problem which arose in the so-called ticket cases (see, for example, Parker v. The South Eastern Railway Company (1877) 2 CPD 416). In cases of that type, the authorities the tribunal referred to do establish that, in order for A to be able to rely on and enforce any unusual or onerous term in the conditions, he must be able to show that he first fairly and reasonably brought it to B's attention.
22. In our judgment, however, the Interfoto principle does not, at any rate normally, apply to cases in which the term or condition in question is contained in a written agreement which B has signed. As Mellish L.J. said in the Parker case, supra, at p. 421:

"In an ordinary case, where an action is brought on a written agreement which is signed by the defendant, the agreement is proved by his signature, and, in the absence of fraud, it is wholly immaterial that he has not read the agreement and does not know its contents."

23. That statement reflects the usual rule which applies to written agreements. It would make for wholly unacceptable commercial uncertainty if it were open to B, who has signed a written agreement, to say that he was not bound by one of the terms expressly contained in it because A had not first drawn his attention expressly to it. By signing, B is treated as having agreed to that term (and all the others), however onerous it may be and whether he has read it or not. We consider that the usual rule applies also to this case, because the relevant terms – section B(1), (2) and (3) – were contained in a document which Mr Sweeney signed and which formed part of the terms of his contract of employment. We add that we would also regard the terms of section B as being set out perfectly fairly and clearly in that document. They are contained in a section whose heading was in capitals – "EMPLOYEES LEAVING THE COMPANY" – and the words on page 4 of the document, immediately below his signature, reminded Mr Sweeney that the document he was signing dealt, inter alia, with "… certain non-payments in circumstances of notice periods and termination of employment …". The terms were in simple language, which did not need explanation by a lawyer, and were there for him to read before signing if he wanted to. In our view, it follows that the whole of the commission rules document, including section B, was incorporated into Mr Sweeney's contract of employment, even if at the time of signing he had not first carefully read them or fully comprehended their effect.
24. We were referred in argument to the decision of the Court of Appeal in Ocean Chemical Transport Inc and Another v. Exnor Craggs Ltd [2000] 1 Lloyd's L.R. 446. That case concerned a contract constituted by an exchange of faxes which incorporated by reference certain standard terms and conditions. The issue was whether the claimant was fixed with a time bar provision contained in condition 10. The judge at first instance had held that the Interfoto principle was of no application, since the terms and conditions had been expressly referred to in the contractual documents themselves. The Court of Appeal dismissed the appeal. Both counsel before us referred to parts of Evans L.J.'s observations in paragraphs 48 and 49:

"48. … Mr Charkham submits that the Interfoto test, as he called it, has to be applied, even in a case where the other party has signed an acknowledgement of the terms and conditions and their incorporation. It seems to me that Mr Charkham could be right in what might be regarded as an extreme case, where a signature was obtained under pressure of time or other circumstances, and [our emphasis] where it was possible to satisfy the Interfoto test; that is to say, that the clause was one which was particularly onerous or unusual for incorporation in the contract in question. I would prefer to put the matter more broadly and to say that the question is whether the defendants have discharged the duty which lies upon them of bringing the existence of the clause upon which they rely (and, if Mr Charkham is right, of the effect of that particular clause) to the notice of the other party in the circumstances of the particular case.

49. As I have indicated, in some extreme circumstances, even a signature might not be enough. On the other had, in the present case there was an express acknowledgment. … In my view, the respondents did, in this particular case, where there was an express acknowledgement of the existence of the terms, certainly discharge their duty of bringing it sufficiently to the notice of the buyers for the clause to form part of the contract. …".

25. We do not regard those observations as supporting Mr Sweeney's case. The Ocean Chemical case was one in which the relevant conditions were not actually contained in the documents signed by the parties, but were simply referred to in them. Even in such a case, the Court of Appeal's view was that the Interfoto principle would not apply unless there were also some "extreme circumstances" surrounding the signing. For two reasons, we regard the present case as far removed from the type of case Evans L.J. had in mind. First, section B was not simply incorporated by reference into the document Mr Sweeney signed on 28 October: it was contained in the document itself. Secondly, accepting, as we do, the tribunal's finding that section B(1), (2) and (3) comprised an unusually onerous term, there is no suggestion that Mr Sweeney signed in any sort of extreme circumstances of the type to which Evans L.J. was referring.
26. Mr Cape, who appeared for Mr Sweeney, made much of the point that when Mr Sweeney signed the commission rules document, he did not know of the ten-month time lag in the expected receipt of commission, a feature which, in the event of resignation, would potentially make section B particularly onerous. We of course accept the tribunal's finding that he did not know this, and no doubt that feature made even more onerous what might anyway be regarded as an onerous clause. But we do not regard this as a feature which operated to exclude the case from the ordinary principle that a man who signs a contract is to be taken as agreeing to, and as being bound by, its terms. There is no suggestion that Peninsula misled Mr Sweeney in any way as to the effect of the commission rules. It would seem rather that Mr Sweeney signed up without troubling first to find out in more detail how the company operated.
27. The result is that we consider that the tribunal was in error in concluding that section B was not incorporated into Mr Sweeney's contract of employment. We hold that it was.

(b) Were the terms of section B(1), (2) and (3) void as falling foul of the Unfair Contract Terms Act 1977?

28. The second point arising on the appeal is the tribunal's conclusion that, if they were wrong in holding that the terms of section B(1), (2) and (3) were not incorporated into Mr Sweeney's contract, those terms were anyway void as falling foul of section 3(2)(b) of the Unfair Contract Terms Act 1977 and failing to satisfy the section 11 requirements of reasonableness. Section 3 reads:

"3. Liability arising in contract

(1) This section applies as between contracting parties where one of them deals as consumer or on the other's written standard terms of business.

(2) As against that party, the other cannot by reference to any contract term –

(a) when himself in breach of contract, exclude or restrict any liability of his in respect of the breach; or

(b) claim to be entitled –

(i) to render a contractual performance substantially different from that which was reasonably expected of him, or

(ii) in respect of the whole or any part of his contractual obligation, to render no performance at all,

except in so far as (in any of the cases mentioned above in this subsection) the contract term satisfies the requirement of reasonableness."

29. The tribunal recorded that Mr Sweeney's argument that section B(1), (2) and (3) were contract terms to which section 3(2)(b) applied was that:

"… a clause which asserts a right to withhold commission, which the employee has done all that is required of him to earn prior to the termination of the employment and which amounts to a very substantial proportion of his annual earnings, amounts to a claim to render a contractual performance substantially different from that reasonably expected or to render no performance at all in respect of the whole of any part of his contractual obligation."

30. The contrary argument advanced by Peninsula was the same as that advanced to us by Mr Jones on this appeal. Mr Jones conceded that Mr Sweeney contracted with Peninsula "as consumer", but submitted that there is no question of section B containing a contract term to which section 3(2)(b) of the 1977 Act applies. He submitted that all that section B(1), (2) and (3) did was to define the circumstances in which an entitlement to commission which could be said to have been earned would not in fact be payable. If a contractual term provides that, in a particular event, a payment which might otherwise be made will not be made, it cannot be said that the happening of that event, and the consequential application of the term, have rendered the paying party's contractual performance substantially different from that which was reasonably expected of him. All that the paying party has done is to operate the contract in accordance with the terms to which the receiving party agreed at the outset. In this case, section B(1), (2) and (3) simply defined the limits of Mr Sweeney's rights, and there is no basis on which he could ever have reasonably expected any rights greater than those that section B gave him. This is not a case in which Peninsula has endeavoured to cut down or restrict his rights in any way.
31. Mr Jones placed reliance on Brigden v. American Express Bank Ltd [2000] IRLR 94. Mr Brigden's employment contract had provided that he "may be dismissed by notice and/or payment in lieu of notice during the first two years of employment without implementation of the disciplinary procedure." He was summarily dismissed within 12 weeks, and his claim for breach of contract was met with reliance on the quoted provision. His response was that it was void under section 3(2)(b) of the 1977 Act. Morland J rejected that argument, saying:

"22. … although [the clause is] expressed in negative terms, [it] is a clause setting out the claimant's entitlement and the limits of his rights. In my judgment, it is not a contract term excluding or restricting liability of the defendants in respect of breach of contract or entitling the defendants to render a contracted performance substantially different from that which was reasonably expected of them or to render no performance in respect of any part of their contractual obligation."

32. Mr Jones also relied on the decision of this appeal tribunal in Brennan v. Mills and Allen Limited, 13 July 2000, unreported, a judgment delivered by HH Judge Peter Clark. The employment contract in that case included a provision relating to commission, clause 4 of which provided (rather as in section B) that "Payment … is subject to your being in the employment of the company at the time of payment and not under notice, whether given or received." Judge Clark's view (a minority one, since the majority took a different view on other issues, which meant they did not need to consider the point under the 1977 Act) was that, applying the same reasoning as had Morland J in the Brigden case, "the termination clause set out the applicants' entitlement and the limit of their rights. They were entitled to anniversary renewals commission up to the termination of their employment (or, more strictly, the date of notice of termination) and no further. It does not fall within s.3(2)(b) UCTA."
33. Mr Jones submitted that those two judicial observations support his argument that, so also in this case, section B(1), (2) and (3) merely defined Mr Sweeney's entitlement and the limit of his rights. Given these provisions, Peninsula could not reasonably have been expected to deliver anything more than they did in fact deliver, and so section B(1), (2) and (3) could not be regarded as contract terms of the type covered by section 3(2)(b) of the 1977 Act.
34. The tribunal were referred to both decisions but they disregarded the Brigden case as being distinguishable on its facts. They acknowledged that the Brennan case was closer on its facts, but observed (i) that Judge Clark "does not expressly explain how the EAT arrived at its conclusion that the clause merely set out the claimant's entitlement and the limit of his rights" and (ii) that "with the greatest of respect, it appears that the part of the decision is in fact obiter see page 12 of the judgment. The Tribunal chose to distinguish the present case on its facts, having regard to the penal and confiscatory nature of this clause."
35. That last sentence represents the totality of the tribunal's reasoning that section B included a contract term to which section 3(2)(b) applies. We do not regard it as reasoning justifying the conclusion. For the tribunal simply to dismiss Brigden as distinguishable on its facts was unconstructive. Reported cases are almost invariably distinguishable on their facts from the case in which they cited; but their importance lies in the principles by reference to which they are decided, and their value on subsequent citation is in seeing whether those principles assist in the disposition of the instant case. Paragraph 22 of Morland J's judgment identified a principle which was directly in point in the present case, and it was one to which we consider the tribunal should have had regard in assessing the suggested application of section 3(2)(b) to section B. As for the tribunal's remarks about Brennan, we do not understand their need to express "the greatest of respect" about Judge Clark's observations being obiter. It is correct that they were the views of a minority, on a point which the majority did not (and did not need to) consider, and so were not part of the reason for the decision in the case. Nobody could have been more aware of that than Judge Clark, and the tribunal did not need to be so deferential in pointing it out. But the importance of the Brennan case was that Judge Clark's views were the considered views of the judicial member of the EAT panel, and in so far as they identified and applied the principle applied by Morland J in Brigden to a case which was, for relevant purposes, indistinguishable from the present one, they plainly also deserved the tribunal's consideration. We also do not understand the tribunal's view that Judge Clark did not expressly explain his conclusion on the point. In our view, the point he was making was so clear as not to require fuller explanation.
36. Having so dispatched the prior authority, the tribunal concluded that section 3(2)(b) applied to section B "having regard to the penal and confiscatory nature of this clause." In short, the tribunal's view appears to have been that because section B was so unfair to employees who leave, it was one to which section 3(2)(b) applied. The tribunal offered no explanation as to why the conclusion is said to follow from their chosen premise. On this appeal, and in support of that conclusion, Mr Cape submitted that the essence of the bargain made in this case was that, if Mr Sweeney did the work, he was entitled to the commission, whereas section B(1), (2) and (3) operated to defeat that right in certain circumstances. Therefore, he said, it was a clause which could be said to render a performance by Peninsula substantially different from that which was expected. He said that the tribunal was entitled to have regard to way contract was reasonably expected to be operated.
37. We disagree both with the tribunal's conclusion on this point and with Mr Cape's submission in support of it. The bargain Mr Sweeney made with Peninsula was not that for which Mr Cape contended. The bargain he made was simply an employment contract whose terms incorporated section B. From the moment he signed the commission rules document, he could have had no expectation, reasonable or otherwise, of being paid post-resignation commission, since section B made it clear he would not be entitled to such commission. In that respect, it was akin to the type of clause that Morland J and Judge Clark respectively considered in Brigden and Brennan, namely one that set out his entitlement and the limits of his rights. In our view it was not a contract term falling within section 3(2)(b) of the 1977 Act, and we hold that the tribunal were in error in deciding that it was. That being so, no question of the reasonableness or otherwise of section B under section 11 of the 1977 Act arose.

(c) Was section B(2) void as being in unlawful restraint of trade?

38. The third issue which arises is this. In case section B was in fact incorporated into his contract, a further argument advanced by Mr Sweeney, which the tribunal upheld, was that section B was void as being in unlawful restraint of trade. The tribunal's reasons for this were as follows:

"The Tribunal also concluded that it was in unlawful restraint of trade in that in part it was designed to provide an economic disincentive or discouragement to the established salesmen from leaving their employment and working elsewhere. Such a clause could not be objectively justified. In this connection the Tribunal considered and applied the observations of the Court of Appeal in Marshall v. N.M. Financial Management Ltd [1997] IRLR 49."

39. We do not know which observations in the Marshall case the tribunal had in mind. But our view is that not only does nothing in that case support their conclusion, we regard it as supporting the reverse conclusion. It concerned the validity of clause 10 of an agency contract. The effect of clause 10 was essentially that, following termination of the agent's agency, no previously earned commission (with certain exceptions) was to be payable to the former agent, but this was subject to the provisos that renewal commissions were to be paid to him:

"(g) If at the date of termination of this agreement … the agent has for a period of not less than five years been continuously an agent of the company and either (i) within the period of one year after the date of such termination the agent does not become an independent intermediary or become employed by or represent or become an appointed representative of any company or organisation which may directly or indirectly be in competition with the company; or (ii) at the date of termination the agent (if an individual) has attained the age of 65 years …"

40. The judge had held, and there was no appeal against this, that proviso (g)(i) was void as being in unreasonable restraint of trade and that, as (g)(ii) was a proviso to (g)(i), it had to be excised as well. But he held that the remainder of clause 10 survived, and the Court of Appeal upheld him. The reason why proviso (g) was held to be void is that it was regarded as one whose performance "not only constitutes [the ex-agent's] acceptance of the offer but provides the consideration necessary to enforce it." (See per Millett L.J., at paragraph 23).
41. The point about the case, however, is that it is clear that the only feature of clause 10 which the court regarded as constituting a restraint of trade was the condition in clause 10(g)(i). This is because that is what that condition amounted to, namely a condition restricting the former agent's liberty to carry on his trade in such manner and with whom he might choose. There is no such condition in the present case. Mr Sweeney was at liberty, on leaving Peninsula, to work for whomever he liked.
42. The tribunal's point, however, is that because section B had the effect of imposing what they regarded as a penalty on resigning employees, it must have operated as a disincentive on them to resign and, therefore, to go and work for competitors whom they might, but for section B, have wished to work for. We regard the tribunal's conclusion that those circumstances turned section B into a contract in restraint of trade as wrong. We do not consider it seriously arguable that the commission penalty that Mr Sweeney suffered on resignation arose under a contractual term involving an unlawful restraint of trade. His employment contract did not impose any restraint on him as to whom he might work for, or what he might do, after leaving Peninsula. It is also worth citing from Millett LJ's remarks in the Marshall case in paragraph 24, where he said:

"Even if clause 10(g) is considered on its own, the consideration for the renewal commission consists in the performance by Mr Marshall of the two conditions on which it is made payable, one of which (the restraint) is invalid, and the other (at least five years' service) is not." (Our emphasis).

43. In that case, therefore, the Court of Appeal had no doubt that a condition requiring the agent to serve for five years before he could claim to be entitled to post-leaving commission was valid. The tribunal's reasoning in the present case would, however, suggest that such a condition was invalid, since it would have operated as a disincentive to a termination of the agency agreement during the first five years.
44. We consider that the tribunal's decision on this aspect of the case was wrong as well. We hold that nothing in section B was void as being in unlawful restraint of trade.

(d) Did the tribunal have jurisdiction to entertain Mr Sweeney's first originating application?

45. The next point is this. Mr Sweeney's claim for damages or debt in his application issued on 26 September 2001 was, as we understand it, in respect of all commission he had earned down to the date of his resignation, but which had not been paid to him. The claim was necessarily premised on the basis that, for one reason or another, he was not bound by section B. We have held that he was, and so the claim was anyway bound to fail and this further point, which goes to the employment tribunal's jurisdiction, does not strictly arise for consideration. However, as we heard argument on it, we will deal with it. We add that since, as we understand it, the claim included, at least in part, commission which would not have been payable to Mr Sweeney by 26 September 2001 even if he had remained in Peninsula's employment (see section A), the claim was a particularly ambitious one: it sought not just to say that section B did not apply to Mr Sweeney, but also that the payment provisions in section A did not apply to him either. We need not, however, devote further attention to the latter point. The tribunal dealt with the jurisdiction point on the basis that, accepting Mr Sweeney was right on the section B arguments, none of the commission he claimed had actually become due for payment to him until after he resigned. Of course, by the time of the hearing, which was in May 2002, all the commission had (subject to the section B point) become payable to Mr Sweeney under section A.
46. The jurisdiction point arises under the Employment Tribunals Extension of Jurisdiction (England and Wales) Order 1994. Regulation 3, headed "Extension of Jurisdiction," reads, so far as material:

"3. Proceedings may be brought before an employment tribunal in respect of a claim of an employee for the recovery of damages or any other sum (other than a claim for damages, or for a sum due, in respect of personal injuries) if –

…

(c) the claim arises or is outstanding on the termination of the employee's employment."

47. Peninsula's argument is simple. As at the date of, and immediately after, the termination of Mr Sweeney's employment, the claimed commission was not due to him and so he had no right either to claim payment or to complain that, in omitting to pay him the commission, Peninsula had committed any breach of contract. The earliest point in time at which Mr Sweeney could have been entitled to advance either claim was at varying later dates, when different amounts of commission actually became payable to him.
48. In those circumstances, Peninsula submitted that the claim in respect of commission neither "arose" nor was "outstanding" on the termination of the employment. Nothing happened at the moment of, or immediately after, such termination to cause such a claim to "arise;" and although as at the date of termination Mr Sweeney had a prospective claim for payment of commission, that claim cannot be said to have been "outstanding" at that time, a concept which can sensibly only refer to an unsatisfied claim which has already fallen due for payment.
49. Peninsula relied on the decision of this appeal tribunal in Miller Bros & F.P.Butler Ltd v. Johnston [2002] ICR 744. The judgment was a carefully reasoned one delivered by Mr Recorder Langstaff Q.C. The issue was whether a claim by an employee under a compromise agreement entered into shortly after the termination of his employment was enforceable under the 1994 Order. This appeal tribunal held that it was not, as the claim neither arose "in a temporal sense" on the date of termination, nor was it then outstanding. It only arose some days after the termination.
50. In this case, it appears to us plain that, as at the date of resignation, the claimed commission was no more "outstanding" on the termination date than was the claim in Miller. In our view, a claim will only be "outstanding" at such date if it is in the nature of a claim which, as at that date, was immediately enforceable but remained unsatisfied. This is obvious both from the language of regulation 3, and also from the fact that regulation 7 prescribes a time limit for the bringing of such claims of three months beginning with the effective date of termination. That necessarily presupposes that, as at that date, there existed a claim which was capable of being brought.
51. It is also obvious that no claim for commission can be said to have "arisen" on the date of Mr Sweeney's resignation. He was no more entitled to sue for it on that day than he was the day before. Assuming he was right that section B did not apply to him, he was only entitled to sue for it once it had fallen due for payment under section A – and that only happened after the effective date of termination. It is true that, at that date, he could be said to have a prospective right to the payment of commission. But since he could not sue for payment until the right had matured into an actual right, we do not regard that as giving the tribunal jurisdiction.
52. The tribunal took a different view. They were referred to the Miller case, but decided that it afforded no assistance. They preferred to adopt what they called a "purposive view" of the language of regulation 3, one which they held enabled a claim to be brought in the employment tribunal in respect also of merely contingent claims existing as at the effective date of termination. They did not overlook regulation 7, but said that the contingent claim could be brought within the three month period, which would be sufficient to confer jurisdiction on the tribunal; and that the substantive hearing could, if necessary, be deferred "until the crystallising or contingent event" occurs.
53. With respect, we regard that reasoning as defective. If a payment is only contingently due, it is not possible to claim payment until the contingency has happened. Before then, all that can be claimed is a declaration of entitlement to the payment if and when the contingency does happen, but a claim of that sort is not within regulation 3.
54. We propose to say no more on a point which we consider needs no further elaboration. We conclude that the tribunal was in error on this part of its reasoning as well, and that they had no jurisdiction to entertain the payment claim included in Mr Sweeney's first originating application.

(e) Did the non-payment of commission to Mr Sweeney amount to an unlawful deduction of wages due to him?

55. The final point is as to Mr Sweeney's alternative argument, raised by his second originating application, that the failure to make commission payments to him constituted unlawful deductions from his wages. Section 13 of the Employment Rights Act 1996, headed "Right not to suffer unauthorised deductions," reads, so far as material:

"(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 of 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 that 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."

56. The conclusions to which we have come on the other issues raised by this appeal make it unnecessary to consider this point either. Mr Cape accepted that if section B(1), (2) and (3) were incorporated into Mr Sweeney's contract, no point was available to him to the effect that Peninsula had ever effected any unlawful wage deductions.
57. The tribunal in fact held that it had. An obstacle in their route to that conclusion was that Mr Sweeney had signed the commission rules document, which in terms included not just section B(1), (2) and (3), but also section B(5), which expressly spelt out that post-resignation commission was not "properly payable" under the employment contract (see section 13(3) of the 1996 Act) and that the non-payment of it would not amount to unlawful wage deductions for the purposes of section 13. Peninsula could not have made the position much clearer, but for commendably good measure they again reminded Mr Sweeney, immediately below his signature, that the contract provided for certain non-payments after the termination of his employment.
58. One might, therefore, think that the signing by Mr Sweeney of the commission rules was, on the face of it, a perfectly good piece of signed writing from him for the purposes of section 13(1)(b). Not so, said the tribunal. Their reasoning was as follows:

"It seemed to the Tribunal that in drafting section 13(1)(b) Parliament must have intended that the worker had to signify his agreement or consent to the making of the deduction and that therefore the writing must clearly explain its effect. In the view of the Tribunal it was not apt to describe [Mr Sweeney's] signature on a document which is some 3 pages of closely typed A4 and which contains the 3 line clause referred to above [a reference to section B(5)], as amounting to any agreement or consent to the withholding of commissions in the circumstances arising in this case. Furthermore, the Tribunal accepted [Mr Sweeney's] argument that for there to be agreement or consent the worker must have knowledge of the nature of that which he is agreeing or consenting to or, to put it another way, the consent must be informed consent. At the time he signed the document he was clearly not aware of its effect and the fact that he became aware of it afterwards did not, in the Tribunal's view, validate or constitute a new agreement or consent. The agreement or consent must be in writing and with knowledge, prior to the deduction. If knowledge is only acquired after the writing, new writing is required."

59. We respectfully disagree with that too. There was nothing tricky about the commission rules which Mr Sweeney signed. They spelt the post-employment position out clearly and unambiguously to anyone who could be bothered to read them. It appears that Mr Sweeney did not trouble to read them as carefully as he should, but he nevertheless signed them; and by his signature he "signified in writing" his agreement to the making of the deductions for the purposes of section 13(1)(b). The tribunal's suggestion that such a signed writing will only work for the purposes of section 13(1)(b) if the employer can also prove that, when the employee signed, he had actual knowledge of the full effect of precisely what he was signing would appear to us to add an unwarranted, and commercially unacceptable, gloss to the statutory words. The adding of such a gloss would be a recipe for uncertainty and dispute, whereas the point of section 13(1)(b) is to enable a signed consent from the employee to speak for itself and to remove the scope for such uncertainty and dispute. Of course, if the signing of the consent were effected in circumstances of the type which might entitle the signatory to avoid or set aside a contract, then different considerations would arise. There were no such circumstances in this case.

Result

60. We allow Peninsula's appeal and set aside the tribunal's decision that Mr Sweeney was entitled to be paid the commission he claimed in his originating applications.