SUMMARY
CONTRACT OF EMPLOYMENT
Whether established
Implied term/variation/construction of term
REDUNDANCY
An email between senior managers suggested that where key people
were to be made redundant, they would be entitled to the same redundancy terms
as had been offered in previous redundancies would apply. This was forwarded to
the Claimant when he expressed concern about his position. He took it as
reassurance, and argued he had accepted the offer which in these circumstances
was implicitly contained within it by remaining in post. When then made
redundant he sought payment of the 4 weeks pay for each year of service he
understood to have been offered to him by this passage of events, rather than
the 3 he was paid.
The EJ rejected this on four grounds. It was argued on appeal that
one of these was irrelevant, and the other three grounds were materially
inconsistent with the findings in fact. These arguments were rejected, it being
held that although the judgment was not free from matters of concern, the
reasoning was sufficiently clear for the appeal to be dismissed.
THE HONOURABLE MR
JUSTICE LANGSTAFF (PRESIDENT)
Introduction
1.
This appeal, against a decision reached by
Employment Judge Macleod at Glasgow on 9 January 2013 when
he dismissed the claim made by the Claimant, raises a question that on the face
of it is deceptively simple. The question was whether there was a contract
that entitled the Claimant to be paid four weeks’ pay for each year of service
in the event that he was made redundant or whether he should receive only
three. He was paid the latter; he claimed the former. Part of the problem in
determining at an appellate level whether a Judge’s findings are permissible or
whether they betray an error of law is that it is all too easy for Judges who
are familiar with assessing the rights and wrongs of the workplace to forget
that the test of whether a contract has been breached depends centrally not
upon the subjective views or the intentions, good or bad, of the parties but
upon the objective view that the court must take.
2.
That view was expressed simply and, in my view, correctly by
Mr Napier QC in the submissions that he is recorded as having made to
the Employment Judge. There he submitted that the test (paragraph 94) was
what the reasonable man would conclude in possession of knowledge of all the
circumstances, including the history of how the parties had behaved towards
each other. He would add, and accept – and I would emphasise – that the
objective observer will take into account not what reasonable people would have
concluded was the meaning of an agreement or indeed whether they had entered
into an agreement but whether, knowing what is known about the individuals
concerned, these individuals, in their particular employment context, had done
so. At the conclusion of the argument I do not understand that proposition to
be disputed, but the central feature of it is that it requires an objective
approach. This has frequently been emphasised by appellate courts, most
recently in the case of Park Cakes Ltd v Shumba and Ors
[2013] EWCA Civ 974, a Judgment of 31 July 2013. Underhill LJ
at paragraph 29 referred back to an earlier authority, that of Quinn v Calder Industrial Materials Ltd
[1996] IRLR 126, a decision of the Appeal Tribunal chaired by Lord Coulsfield,
to draw attention to the fact that it might – and if so, it would be
erroneously – be taken to suggest that the subjective intentions of the parties
were relevant directly in determining whether they had become contractually
bound. Thus specifically he pointed out (paragraph 29.1):
There may be room for misunderstanding of his statement at the
end of para 7, but the crucial question is whether the circumstances
support the inference that the employer intended to be contractually bound.
Although on a proper reading I think this is clear, it is nevertheless worth
spelling out that the reference to the employer’s intention must be to his
intention as objectively evinced; that is, the question is whether the
employer’s conduct (including anything said by him) was such, viewed
objectively, as to convey to the employees that he intended to be so bound. On
ordinary contractual principles, what matters must be not what an offeror
actually intends but what intention his words or conduct would communicate to
the reasonable offeree.”
3.
As I have indicated, the parties here accept that that is the offeree in
the position of and with the attributes of the particular offeree under
consideration.
4.
It is thus incumbent upon a Tribunal, if an issue arises of whether a
contract has been entered into at all, or, if it has, what terms have been
agreed, to approach the issue not on the basis of that which the parties have
understood to have happened but upon the basis of that which objectively has
occurred. I would observe that this is not to say that the intentions of the
parties and their actions both before and after have no relevance. For instance,
an agreement, in order to be a valid contract in English law – and it is, by
agreement, English law that applies to this appeal – must be one in the making
of which there has been a process that may be defined as offer and acceptance, with
there being consideration and intent to create legal relations, and sufficient
certainty of its terms, quite apart from the need that it should not be
unlawful.
5.
The process of offer and – I emphasise that word in the current
context, for reasons that will become apparent – acceptance are objectively to
be assessed, but as Hoffmann LJ observed towards the end of his speech in Carmichael v National Power
[1999] ICR 1226 at 1235:
“The evidence of a party as to what terms he understood the agreement
being is some evidence tending to show that those terms in an objective sense
were agreed.”
6.
He noted in the same paragraph that evidence of subsequent conduct may
be admissible to support an argument that terms have been varied or enlarged to
found an estoppel. If, let us suppose, a party is unclear as to what has been
agreed, where he propounds an agreement to have been made, the fact of his lack
of clarity may be some evidence that tends to illuminate the objective question
of whether there has indeed been an agreement, for one would normally expect
any agreement reached to have been clear and precise in its terms, and
uncertainty about what was agreed may therefore indicate that the facts are
such that there was no agreement.
7.
With that introduction, but for one further comment, I turn to the
facts. That further comment is that in this case I have been fortunate to have
had from both parties, through Mr Stephen Miller, solicitor, for the
Claimant and Mr Napier QC for the Respondent, arguments that are of
the highest quality. It has been a somewhat rare treat for me.
The facts
8.
The Claimant was employed as company secretary of a UK company from 3 December 2001 until 30 June 2012. He was then dismissed
purportedly by reason of redundancy. The company was wholly owned by an
Australian corporation. The contract of employment contained, so the Judge
found, no provision for any enhanced payment in the event of redundancy, until
on 8 October 2010 an offer to vary the policy on redundancy was
published. Prior to that, and therefore at a time when there was no
contractual redundancy policy applying generally to staff, it became apparent
that the UK company would have to withdraw from its operations. The Claimant
was understandably concerned about his position. Together with another, whose
main concern was finance, they spoke to the finance director of the UK company, a Mr Harkin. It was within that context that later on the same day Mr Harkin
disclosed part of a confidential email that had been sent to the chief
executive officer of the UK company and to him, Mr Harkin, by the chief
executive officer of the Australian corporation. Mr Harkin forwarded
part, but part only, of that email to Mr Dick, the other person with whom
he had had the conversation, and the Claimant. It read (see paragraph 37):
“Ken/Mark
It may be appropriate to offer some form of retention to the key
people, but we did hear from the Recruitment Consultant that the job market in
the property sector is still dire. Our redundancy package offered to previous
people already made redundant will apply to any future redundancies, and this
in itself provides a financial incentive for some of the people to stay,
particularly those not based in London as job prospects in the regions are very
poor. You should discuss this with Rilla.
I hope I’ve covered everything, but let me know if I haven’t.
Regards,
Matthew.”
9.
Ken is the first name of the CEO of the UK company, Mark the first name
of Mr Harkin. Accordingly, this email, viewed objectively, was a
management communication that was not intended to be directed to the Claimant.
It was, however, forwarded to him by Mr Harkin, in circumstances in which
he had been looking for reassurance as to his position in the event of
redundancy. The question for the Tribunal was whether the email of 16 February 2010
consisted of a “definitive undertaking” by the Respondent to the Claimant that
he would receive four weeks’ pay per year of service. A second issue did not
in the event arise, namely whether it had been superseded by the introduction
of the avowedly general and contractual policy of October 2010 (see
paragraph 16).
10.
The Tribunal Judge before whom the same advocates appeared set out
findings of fact in which he made frequent reference to the intentions or
understandings of the parties. When he came to make what he termed
observations on the evidence, he concluded as between
paragraphs 114 and 117 that the Claimant had no reliable
understanding of what had been paid in previous redundancies. He observed
(paragraph 117) that it was crucial in the case to be able to identify
precisely what the Claimant understood was the binding undertaking made to him,
and he was left unconvinced, he said, that he had a particularly clear
knowledge of the previous cases that would enable him to be reassured that the
email of 16 February meant what he said it meant. Mr Miller points
out that this is difficult to reconcile with what is said at paragraph 38,
in which there appears to be a clear finding that the Claimant’s view of what
had happened and understanding of the meaning of it was that he would receive
four weeks’ pay based upon his “knowledge at the time” that the 2009
redundancies (in England) had been calculated on this basis.
11.
The question of whether it was crucial to know when the Claimant had the
understanding he claimed was returned to at the end of paragraph 120:
“When he knew that information is crucial in this case and his
evidence about this insufficiently clear to establish the matter with any
probability.”
12.
Having made those observations, the Judge turned to his decision. He
considered first the events surrounding the sending of the email on 16
February. He referred to a dispute in the evidence between Mr Harkin, who
claimed that he was intending the Claimant to know that matters of potential
redundancy entitlement were being discussed at the highest level, and that of
the Claimant, which was that he understood he had been given a clear
reassurance that he would be paid. What he said was this:
“131. Mr Harkin sent the email to the claimant and
Mr Dick for their reassurance, according to his evidence. He wanted them
to know that matters were being discussed at the highest level. I had some
difficulty with this evidence. If that is what he wanted to reassure the
Claimant, he could have said so.
132. In my judgment, the terms of the email, which was forwarded
to the claimant without qualification or embellishment, were intended to give
reassurance to him by confirming that he would be paid the same package on
redundancy as those who had previously been made redundant. That is the plain
meaning of that statement.
133. Mr Harkin’s evidence that he intended this for
reassurance but that the reassurance was that the matter was being discussed at
a high level of management, I found entirely unconvincing. It would provide a
senior manager such as the claimant with no reassurance whatever to be told
that his situation was the subject of discussion at a high level. That would
add nothing to his knowledge. I considered that if, as Mr Harkin said,
the email was sent to reassure the claimant, that would only mean that the
respondents would pay his redundancy package on the same basis as those who had
gone before.”
13.
He then began the next part of his Judgment at paragraph 135, immediately
following therefore those to which I have just referred. It and following read:
“135. However, notwithstanding any reservations the Tribunal may
have with the intentions of Mr Harkin as expressed in early 2010 and at
the hearing, there remain four difficulties, in my judgment, which confront the
claimant.
136. Firstly, the form of the email is not consistent with the
communication of a clear variation of contract. It is clearly labelled as an
extract from a larger communication. Mr Harkin made no suggestion either
at the meeting in February or in this email, that this amounted to an offer or
a contractual commitment, and it is clear from his evidence that he did not
intend it to amount to either. Mr Harkin was sharing an internal management communication.
It is not, in form or content, the variation of a contractual term. It said
nothing about the precise calculation to be applied to the claimant. In what
appears to have been informal discussions, Mr Harkin told the claimant at
an unspecified time that the previous redundancies in 2009 were paid at four
weeks per year of service, but the message itself does not make this
unambiguously clear.
137. There is no offer made in the email. There is no
indication that it amounts to a specific variation of the contract of
employment between the respondents and the claimant. It was known to be an
extract from an internal management document which was being disclosed to the
claimant and Mr Dick by Mr Harkin on a confidential basis. It was characteristic
of the working relationship between the claimant and Mr Harkin that
confidential management information was shared in this way. The email amounts
to no more than the sharing of a statement of intent by the senior management
of the respondents as at that date. In my judgment the respondents did not
intend to create a contractual variation by sending that email.
138. Secondly, it is quite unclear to the Tribunal precisely
what the claimant at the time took from this email. He was clearly reassured,
but in his own evidence he said that he did not know what previous employees
who had been made redundant had in fact been paid, and that he made an
assumption that it would include two additional weeks per half year. That
assumption was clearly wrong. As a result, since the claimant’s understanding
of the meaning of the email cannot be relied upon, there can be no clear basis
for a finding that the parties have effectually [sic] varied the terms and
conditions upon which they have contracted.
139. Thirdly, the claimant’s position before the Tribunal has
altered, as Mr Napier pointed out. His claim in the ET1 was largely,
though not entirely, based on the assertion that the Australian redundancy
policy applied and that was the reason for his being entitled to 42 weeks
rather than 30. It appears to have been accepted that the claimant has not
succeeding [sic] in demonstrating that the Australian redundancy policy in fact
applied to him, and in my judgment that is correct. This is of importance in
considering the precise nature of the claim before the Tribunal, which is for
42 weeks. The email of 16 February provides no detail as to the
quantification of the previous claims but the claimant read it, now admittedly
incorrectly, to mean that the Australian policy would apply. On any view, that
was a misunderstanding. His original claim has not, therefore, been proved.
140. Fourthly, at no stage prior to the date of termination of
his employment did the claimant raise with the respondents his intention to
rely upon the terms of the email. This is inconsistent with what the claimant
asserts to have been his understanding of the meaning of the email. I did not
accept the claimant’s evidence that he did not raise the matter prior to
termination because he thought it would be likely to have a detrimental effect
on his position. There was no basis in fact for that assertion. In any event,
by the time of the consultation meetings, the claimant’s employment was clearly
coming to an end. From the outset it was made clear to him that he was to
receive an enhanced redundancy payment. If he truly believed that the email
gave him a contractual right to a redundancy payment based on four weeks’ pay
per year of service, it is inconceivable that he would not have mentioned that
at one of the meetings leading to his dismissal, but he did not. The only
conclusion which can be drawn is that he was not certain as to the meaning of
the email.”
14.
The Judge went on to note that without the variation that the Claimant
asserted had been rendered by the email there was no contractual right to any
enhanced redundancy payment, and he concluded (paragraph 142) that the
email did not amount to an offer to vary, or a variation of, the terms and
conditions upon which the Claimant was employed and that therefore the claim
failed. He did not deal, therefore, with other matters that, should this
appeal succeed, remain outstanding.
The appeal
15.
The appeal correctly, in my view, identifies the single question as
being the legal effect, if any, of the communication of
16 February 2010. The appellant argued that on the basis that the
sender of the email had ostensible authority to bind the Respondent, a matter
that is not now in dispute, if it ever was, the Judge had effectively concluded
by the terms of paragraph 132 facts from which it ineluctably followed
that there was such an agreement. Having concluded that the email confirmed to
him that he would be paid the same as those previously made redundant, and the
whole purpose of sending it was to offer an undertaking to that effect by the
Respondent which the Claimant needed to do little more than remain in post to
accept, there was an inconsistency between the statement in paragraph 132
and what was said at paragraphs 136 and 137. The Judge
therefore had demonstrated factual inconsistency in matters material to his judgment
such that it could not stand.
16.
Next, he argued that there was no basis for what was said at
paragraph 138, which was inconsistent in any event with what was said at
paragraph 38. To suggest that the Claimant had been unsure what he took
from the email may have repeated what was said in
paragraphs 116, 117 and 120, but it was inconsistent with
what appeared to be a clear finding of fact that he had a clear understanding as
to what the agreement actually was (paragraph 38). Besides, the
understanding of the parties has in this context only a tangential relevance to
whether there has been a contract. That must objectively be assessed.
17.
Third, at paragraph 139 the judge regarded as unproven the original
claim which the Claimant made to the effect that the reference within its terms
was to the Australian redundancy policy, and took this as a reason for
rejecting the Claimant’s case that the email constituted a contractual
commitment. That, Mr Miller submitted, was irrelevant. The fact that a
litigant has not proved one claim is on the fact of it irrelevant to whether
they have or have not proved another, unless the claims are interdependent. I
would observe here that in any event if the issue was, as it appears to be,
whether the contract was entered into at all, in the words constituted by the
email, an argument about what those words meant in the circumstances is beside
the point.
18.
The fourth difficulty, as the Judge put it, was that the Claimant had
not asserted his rights under the email in earlier discussions with the
employer. Here, again, Mr Miller argued that there was an inconsistency,
in this case with what was said in paragraph 50 in the findings in fact.
There, the Judge had noted that the Claimant had questioned Mr Harkin during
the course of consultation meetings prior to his redundancy, arguing that the
employer had deviated from the Australian stated policy of paying four weeks
per year. Mr Napier having responded that the Judge’s conclusion at
paragraph 140 is factually correct, that there was no reference to the email as
giving rise to any rights, this was in reply accepted by Mr Miller; but he
still seeks to argue that there remains an unhappy tension between the two paragraphs.
19.
Accordingly, he submits, there had here been a promise that in context
was made to a man concerned about his position. It was not simply to the
effect that the matter would be discussed subsequently at board level, but was intended
as a reassurance. Viewed objectively, therefore, this had to be an offer, or
promise capable of acceptance, with an intention that it should be honoured in
the event, therefore fulfilling the requirements of offer, acceptance and
intent to create legal relations.
20.
Mr Napier’s response was essentially to argue that the question was
whether the company intended to create a contractual right to enhanced
redundancy payment in order to, and as part of a deliberate plan to, encourage
key people to remain as employees and by its actions confer a contractual right
on the Claimant. He submits that there is no inconsistency, properly
understood, between what is said in paragraph 137 and what is said at
132. At paragraph 132 the Judge was dealing with arguments which on the one
hand could be taken to intend only that the subject of redundancy would be
discussed at very senior level; on the other hand, the Claimant was saying that
he intended a binding commitment. The Judge in paragraph 132 was not
resolving the second of those, but he was rejecting the evidence that he had
been given by Mr Harkin that the letter had not been intended as a
reassurance of the position on redundancy. He pointed out that that was made
clear by paragraph 135, which showed that the paragraphs immediately
preceding that related to the question of Mr Harkin’s intention and did
not resolve the issue of whether on the facts before the Tribunal, properly
assessed, a contractually binding commitment had been entered into. He
submitted that the lack of clarity to which is referred in paragraph 138
was relevant. It seems to me that he is right in that submission to this
extent. If a party is unclear about what precisely has been “agreed”, that
uncertainty and lack of precision may be some material that will assist a
Tribunal in concluding that, objectively viewed, there had in fact been no
agreement at all.
21.
Secondly, he argued that there were two aspects: the offer with which
paragraph 137 dealt and the response to the offer with which 138 dealt.
Unless there was a meeting of minds, objectively viewed, there could be no
binding contract. That, he submitted, was the purpose of the Tribunal’s
observations at 138.
22.
At paragraph 139, he submitted, the Employment Judge had not erred
in making the point that the claim as originally formulated had not been
proved, in circumstances where the Claimant’s understanding had been affected
throughout by it. He submitted that in any event paragraphs 137, 138 and 140
raised difficulties that, taken separately, had the effect that the claim could
not succeed. The point at paragraph 140 was, he submitted, relevant
extraneous evidence that the Judge was entitled to take into account both for
the purposes of identifying the terms of the contract and in deciding whether
there had been any variation of those terms.
Discussion and conclusion
23.
It is critical for me to remember that this is a Judgment of an
Employment Judge which one cannot expect to be drafted to the highest standards
of legal draughtsmanship. It has often and correctly been said that such a
Judgment may well contain infelicities, awkwardness of expression and apparent
inconsistencies that derive from the pressures under which Tribunals operate.
It is trite that a Judgment must be taken overall and viewed as a whole. Here,
as it seems to me, the Judge was ultimately clear as to that which he was
deciding. The matter that has given me the greatest pause has been the absence
of a clear statement by the Judge, although he had set out Mr Napier’s
submissions on the law, which acknowledged that he was engaged in resolving
objectively whether there had been an agreement between the parties that was to
be of binding contractual force. Understandably, perhaps, the Judgment is shot
through with findings about the intentions or understandings of the parties.
They are frequently of little assistance, as I pointed out at the outset of
this Judgment, but they do have some tangential relevance. If the Judge had
said in terms that the reason why the second and fourth points were
difficulties for the Claimant was that the lack of certainty made it less
likely objectively that an agreement had been entered into, upon the basis that
if parties agree generalities, they cannot normally be expected to be agreeing
to specific, binding terms but, rather, are giving voice to common intentions
rather than reciprocal obligations, he would have set out the relevance of the extraneous
evidence. I do not understand that view of the law to be dissented from by
Mr Miller. If, therefore, that is what the Tribunal Judge was doing here,
then he was entitled to take into account the second and fourth points, subject
to the argument about inconsistency in respect of paragraph 138.
24.
In colloquial terms, the fourth point is perhaps an obvious one, in the
context of employer/employee. If there has been an agreement by offer and
acceptance, an important matter, reached a year and a bit earlier by parties
who were concerned about their position, then, if a binding commitment, it is
likely that it would have been referred to subsequently as such. If not openly
understood as a binding commitment, that would be some evidence from which a
court could conclude that the circumstances at the time were not such as to
give rise to one. But the matter that centrally concerns me is the finding at
paragraph 132 and the potential inconsistency with 137. The expression
between managers that a redundancy package “will apply to any future
redundancies” is capable of giving reassurance, if it is circulated to those
whom it might affect. Here in effect it was.
25.
In the event, I have been persuaded by Mr Napier’s submissions that
the Judge was not in paragraph 132 stating that the email was objectively
meant to be relied upon as contractually binding the Respondent, even though,
given Mr Harkin’s position, it might have done so. The Reasons set out at
paragraphs 136 and 137 are clear and do not need repetition. I
should add, however, for completeness that although the offer, if it were an
offer, was not addressed to the Claimant save only by Mr Harkin’s actions,
if so construed, and was of its nature an email between high‑level
employees, it did not necessarily identify him as a key person, nor did he
“discuss the matter with Rilla”, the parties do not found their arguments on
either of these points.
26.
The finding at paragraph 137 is to the effect that there was no
offer. It is somewhat artificial to analyse employment contractual
relationships in the terms of offer and acceptance, which might be thought more
appropriate to the exchange of correspondence in respect of commercial
contracts. But there has to be, nonetheless, an agreement between the
parties. The Tribunal was, as I have observed, entitled to think that an
additional reason for holding there was not one here was that the “agreement”
lacked clarity so far as the Claimant was concerned and in respect of his
subsequent behaviour, shedding some light upon whether he had objectively to be
viewed as having agreed what was either a variation to or an addition to, or a
contract collateral to, his existing employment contract.
27.
It seems to me that the third matter to which the Judge drew attention
was irrelevant. It had, in my view, no real place in the reasoning if the
Judge relied upon it in coming to the conclusion he did. But though I have
come to that view, this does not detract from the fact that the terms of
paragraphs 137, 138 and 140 are sufficiently explained by
Mr Napier’s submissions such that I can regard them as part and parcel of
a cohesive Judgment that, despite its very obvious infelicities, comes to a
permissible conclusion for reasons that are clearly expressed in respect of
whether there was an offer, whether there was an agreement and whether
objectively there was an intent to create legal relations.
28.
The inconsistencies that Mr Miller quite rightly draws attention to
between paragraph 38 and what follows in paragraphs 114‑120 and 138
would, if the matter stood upon its own, have been sufficient for me to think
that if that had been the only decisive point in the appeal, I would have
remitted the matter for further consideration, but it is not. Although, as I
have indicated, I have been concerned about aspects of the approach and
determination, taking the approach that I should to the determination of the
Employment Judge, I have concluded that this appeal, beautifully presented
though it has been, must, and does, fail.
