Easter Term
[2019] UKPC 16
Privy Council Appeal
No 0089 of 2017
JUDGMENT
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Byron
(Respondent) v Eastern Caribbean Amalgamated Bank (Appellant) (Antigua
and Barbuda)
From the Court of Appeal of the Eastern Caribbean
Supreme Court (Antigua and Barbuda)
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before
Lady Hale
Lord Wilson
Lady Arden
Lord Kitchin
Lord Sales
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JUDGMENT GIVEN ON
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13 May 2019
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Heard on 12 February 2019
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Appellant
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Respondent
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E Ann Henry QC (of
the Bar of Antigua and Barbuda)
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David Dorsett Ph.D.
(of the Bar of Antigua and Barbuda)
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(Instructed by Blake
Morgan llp (Oxford))
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(Instructed by Axiom
Stone Solicitors)
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LADY HALE:
1.
The issue in this case in whether the appellant, the Eastern Caribbean
Amalgamated Bank (“the ECAB”) is liable to make the severance payment to which
the respondent is entitled as a result of his dismissal by the Bank of Antigua
(“the BOA”). This depends upon the terms, express or implied, of the Purchase
and Assumption Agreement under which the ECAB agreed to purchase certain assets
and assume certain liabilities of the BOA.
The history
2.
The respondent began employment with the BOA as a branch manager in
1992. He rose to become its Managing Director and then its Deputy Chairman. On
20 February 2009, pursuant to its emergency powers under the Eastern Caribbean
Central Bank Agreement Act 1983 (Cap 142) (as amended), the Eastern Caribbean
Central Bank (“the ECCB”) intervened in and assumed control over the BOA. The context
was a run on the Bank occasioned by the arrest of its Chairman, R Allen
Stanford, in the United States on allegations of running a “Ponzi scheme” through
the Bank. That very same day, the general manager of the BOA, appointed by the
ECCB, summarily terminated the respondent’s employment. There is now no dispute
that his employment was terminated fairly on the ground of redundancy. He was
therefore statutorily entitled to a severance payment (under sections C40 and
C42 of the Antigua and Barbuda Labour Code 1992 (Cap 27)) on the date when his
employment was terminated. The issue is who is liable to make that payment.
3.
On 12 October 2010, the ECAB entered into a Purchase and Assumption
Agreement with the ECCB for the purchase of certain assets and the assumption
of certain liabilities of the BOA. It will be necessary to return to the
precise terms of that agreement later. The agreement came into force on 18
October 2010. On 16 December 2010, the respondent filed a reference in the
Industrial Court of Antigua and Barbuda against both the BOA and the ECAB
claiming that he had been unfairly dismissed. The BOA did not defend the claim
and judgment was entered against that Bank on 14 December 2011. The ECAB did
defend the claim. The respondent argued that the ECAB was a
“successor-employer” to the BOA within the meaning of section 44 of the Antigua
and Barbuda Labour Code. On 30 March 2012, the Industrial Court held that the
ECAB was not a successor-employer and dismissed the claim against it.
4.
The respondent appealed to the Eastern Caribbean Court of Appeal. Before
the Court of Appeal, the respondent conceded that the ECAB was not a successor-employer.
Instead he contended that a term should be implied into the Purchase and
Assumption Agreement which would include the liability to make a severance
payment to him among the debts and liabilities assumed by the ECAB under that
agreement. In a judgment delivered on 31 May 2017, the Court of Appeal agreed
that such a term should be implied, allowed the appeal, set aside the judgment
of the Industrial Court and held that the BOA and ECAB were jointly and
severally liable for the severance payment.
5.
The ECAB now appeals to Her Majesty in Council.
The agreement
6.
The agreement is entitled “Purchase and Assumption Agreement of Assets
and Liabilities of Bank of Antigua Ltd”. It was made between the ECCB,
described as “the Vendor”, and the ECAB, described as “the Purchaser”. It
refers frequently to “the Bank”, a term which is not defined but must refer to
the BOA.
7.
Clause 3(1) of the agreement reads as follows:
“The Purchaser agrees to assume,
pay, perform and discharge all the debts and liabilities of the Bank, on the
final balance sheet and in the supporting books and documents of the Bank
(including all subsisting contracts related to or held in connection with the
said liabilities) whether secured or not in respect of the said business
subsisting at the Transfer Date, except the liabilities expressly excluded in
sub-clause (2).”
8.
Among the liabilities excluded in clause 3(2) were (b) “pending
litigation” and (c) “any contingent liabilities except those specified in
sub-clause (3)”. The list in clause 3(3) does not include liability to make
severance payments which might be ordered in future by the Industrial Court.
9.
Clause 12 did not feature in the arguments before us or in the courts
below, but might be thought to have some relevance to the issues. 12(1)
provides:
“The Vendor shall as soon as
practicable after the Transfer Date, prepare or cause to be prepared a
statement(s) (hereinafter ‘Closing Statement’) indicating all assets and
liabilities of the Bank as shown on the Bank’s final balance sheet and all
books and records as of the Transfer Date and reflecting those assets and
liabilities which are sold to the Purchaser and those assets and liabilities
which are retained by the Bank.”
Clause 12(2) imposed an obligation on the Purchaser
(which was already running the banking business of the BOA) to cooperate fully
and provide the Vendor with full access to the relevant books and records, so
that it could prepare the closing statement. Clause 12(3) provides:
“When the Closing Statement has
been determined the amounts shown in the Closing Statement shall be final and
binding for the purpose of this Agreement.”
10.
The Court of Appeal implied the words italicised below into clause 3(1),
so that it read as follows (para 14):
“The Purchaser agrees to assume,
pay, perform and discharge all the debts and liabilities of the Bank, on the
final balance sheet and in the supporting books and documents of the Bank, or
that properly ought to be reflected in the aforementioned documents (including
all subsisting contracts related to or held in connection with the said
liabilities) whether secured or not in respect of the said business subsisting
at the Transfer Date, except the liabilities expressly excluded in sub-clause
(2).”
The arguments on the contract
11.
The ECAB argues that it is clear from the wording of clause 3 that not
all the liabilities of the BOA were to be transferred to the ECAB. There was also
unchallenged evidence that not all the assets of BOA were transferred: in 2011,
the BOA still had substantial physical assets including a property on High
Street in St Johns on Antigua. Indeed, the ECAB might have argued, but did not,
that it was also clear from clause 12 that not all assets and liabilities of
the BOA were to be transferred.
12.
That being so, it was argued, it was not necessary to imply a term into
the contract, as the Court of Appeal had done, in order to give it business
efficacy as between the parties to it. It was not intended that all the
liabilities which were or ought to have been shown in the books were to be
transferred.
13.
Furthermore, the respondent was not a party to the Purchase and
Assumption Agreement: he was asking the court to imply a term in order to
favour a claim which he was seeking to make against one of the parties to the
agreement. That claim was at best a contingent liability, which was excluded by
clause 3(2)(c).
14.
If and so far as the respondent was now seeking to argue that this
liability was covered by the express terms of the contract, this was a new
point which he should not be permitted to take at this late stage.
15.
The respondent argues that this liability was not excluded by clause
3(2). It was not a liability in pending litigation because the proceedings were
not started until after the agreement was made. Nor was it a contingent
liability. Liability to make a severance payment to an employee dismissed by
reason of redundancy arises on the date of termination, under section C40 of
the Labour Code:
“Every employee whose terms of
employment with an employer and his predecessors has in aggregate exceeded one
year is entitled to severance pay upon termination of said employment by
employer for reasons for redundancy.”
Hence that liability ought to have been reflected in the
balance sheet and supporting books and documents as of the date of redundancy
on 20 February 2009 until it was discharged.
16.
The respondent argues that the express terms of a contract must be
interpreted before one can consider any question of implication: see Lord
Neuberger in Marks and Spencer plc v BNP Paribas Securities Services Trust
Co (Jersey) Ltd [2015] UKSC 72; [2016] AC 742, para 28. Hence he argues,
first, that upon a plain reading of clause 3(1) the ECAB had agreed to “assume,
pay, perform and discharge” the debts and liabilities of the BOA apart from
those expressly excluded by clause 3(2), which this was not. Clause 3(1) should
be interpreted in the light of the facts and circumstances known or assumed by
the parties at the time the document was executed: see Lord Neuberger in Arnold
v Britton [2015] UKSC 36; [2015] AC 1619, para 15. The parties would have
assumed that the final balance sheet and supporting books and documents
correctly reflected the true state of the BOA’s debts and liabilities and
intended that they be included. The fact that the balance sheet and books may
have contained errors makes no difference. If, for example, the balance sheet
had mistakenly said that Party A was owed the sum of $1,000 when in fact he was
owed $100,000, the purchaser would have acquired the full liability, just as,
if the balance sheet had said that Party B was owed the sum of $500,000 when in
fact he was only owed $500, the purchaser would only have acquired the
liability to pay what was in fact due. But, he points out (as appears to be
common ground) the books and documents of the Bank would have included its
employment records. Further, he exhibits correspondence from his attorneys to
the BOA making a claim for, inter alia, a severance payment, and an email from
his attorneys to the attorneys for the BOA, copied to the respondent, dated 7
July 2010, reporting that agreement had been reached as to the sum lawfully due
to their client.
17.
Alternatively, if this liability is not covered by the express terms of
the contract, the respondent argues that the Court of Appeal was right to imply
the words “or that properly ought to be reflected in the aforementioned documents”
into clause 3(1). Without it the contract would “lack commercial or practical
coherence”: see Lord Neuberger in Marks and Spencer plc, above, para 21,
adopted in Paymaster (Jamaica) Ltd v Grace Kennedy Remittance Services Ltd [2017] UKPC 40; [2018] Bus LR 492, para 19. Such a term is necessary to make the
contract work: see Ali v Petroleum Company of Trinidad and Tobago [2017] UKPC 2; [2017] ICR 531, paras 7 and 9.
The Industrial Court Act
18.
The Court of Appeal also relied upon sections 9(1) and 10(3) of the
Industrial Court Act 1992 (Cap 214) to support its conclusion. Section 9(1)
reads as follows:
“In the hearing and determination
of any matter before it, the court may act without regard to technicalities and
legal form and shall not be bound to follow the rules of evidence stipulated in
the Evidence Act, but the court may inform itself on any matter in such manner
as it thinks just and may take into account opinion evidence and such facts as
it considers relevant and material, but in any such case the parties to the
proceedings shall be given the opportunity, if they so desire, of adducing
evidence in regard thereto.”
19.
Section 10(3) reads as follows:
“Notwithstanding anything in this
Act or in any other rule of law to the contrary, the court in the exercise of
its powers shall:
(a) make such order or
award in relation to a dispute before it as it considers fair and just, having
regard to the interests of the persons immediately concerned and the community
as a whole;
(b) act in accordance with
equity, good conscience and the substantial merits of the case before it,
having regard to the principles and practices of good industrial relations and,
in particular, the Antigua and Barbuda Labour Code.”
20.
This meant, said the Court of Appeal, that the Industrial Court, in
exercising its powers, “must give effect to the ethos and philosophical
approach mandated by section 10(3)” (para 20). It “was required to make a just
and fair award or order and act in accordance with equity, good conscience and
the substantial merits of the case” (para 20). An award in accordance with the
guidance given by the Court of Appeal, “having regard to justice, fairness,
good conscience and the substantial merits of the case” would have resulted in
the ECAB being jointly and severally liable with BOA for the severance payment
(para 21).
21.
It appears, therefore, that despite having implied a term which would
result in the whole liability being assigned to the ECAB, the Court of Appeal
relied upon section 10(3) to order that the BOA should remain jointly and
severally liable with ECAB.
Discussion
22.
In Marks and Spencer plc (above, para 16), Lord Neuberger
explained that construing the words which the parties have used in their
contract and implying terms into the contract both involve determining the
scope and meaning of the contract. They are, however, different processes
governed by different rules (para 26). The factors taken into account in each
process may be the same - the words used, the surrounding circumstances known
to both at the time, commercial common sense and the reasonable reader or
parties. But that does not mean that the processes are the same (para 27). As I
would put it, construing the words of the contract involves deciding what the
parties meant by what they did say. Implying terms into the contract involves
deciding whether they would have said something that they did not in fact say
had the matter occurred to them. And until one has decided what the parties
meant by what they did say, it will be difficult to set about deciding what
they would have said.
23.
This is a classic case where it was first necessary to decide what the
parties meant by what they did say. There is a great deal to be said for the
view that the words used did include this liability. Clause 3(1) has three
elements: (i) “all the debts and liabilities of the Bank … subsisting at the
Transfer Date”; (ii) “on the final balance sheet and in the supporting books
and documents of the Bank …”; and (iii) subject to the express exclusions in
sub-clause (2). Element (i) is comprehensive, subject
to what follows; it means that everything subsisting at the Transfer Date is
transferred apart from those liabilities which are expressly excluded. Element (iii)
refers to the express exclusions which are defined in sub-clause (2) with (3),
none of which apply on the facts of this case.
24.
It is element (ii) which is thought to cause the difficulty. But it can
clearly be read to cover, not only those debts and liabilities which appear on
the final balance sheet, but also those debts and liabilities which are apparent
from the books and documents of the Bank at the Transfer Date.
25.
There is good reason to think that this particular liability will have
been apparent from the books and records of the Bank. The evidence is that the
terms of the respondent’s original employment were contained in a written
letter of employment from the Bank’s chairman. His promotion to Managing
Director was in accordance with a letter from the Bank’s Human Resources
Manager. His appointment as Deputy Chairman was also documented. His dismissal
was oral but the circumstances (which were dramatic) may well be documented.
There is the email indicating that an agreed sum had been negotiated with the
Bank. But as the respondent is not party to the contract, nor suing directly
upon it, he has not had disclosure of the relevant documents which might enable
this to be established.
26.
If this liability was not covered by the words used, it is in my view
difficult to see how it could be proper to imply a term which would include it.
The agreement clearly contemplated that some liabilities would be retained by
the BOA, which also retained some assets. It would not be necessary, as between
the parties to the agreement, to imply a term including more debts and
liabilities than were covered by the express terms of their agreement. Their
contract would make complete sense without it.
27.
If this analysis is correct, two problems arise. First, it is a new
argument, which has been raised by the respondent for the first time before the
Board. These proceedings have been going on since 16 December 2010. For the
first five years, the respondent was contending that the ECAB was a “successor-employer”
within the meaning of section 44 of the Labour Code. This was clearly
incorrect. He therefore shifted ground before the Court of Appeal and contended
for the implied term which the Court of Appeal accepted. It is only before this
Board that, while endeavouring to support the implied term, he has also sought
to argue that the express term, on its true construction, covers this liability.
28.
Normally, the Board would be most reluctant to allow a party to take a
fresh point such as this at this late stage in the proceedings. However, the
Board is conscious that these are not ordinary civil proceedings. They are
proceedings before the Industrial Court, governed by the Industrial Court Act.
Section 9(1) provides that the court “may act without regard to technicalities
and legal form”. This is clearly a procedural provision which encourages the court
to be flexible in its approach to the hearing and resolution of the disputes
before it. Section 10(3)(b) requires the court to act in accordance with
“equity, good conscience and the substantial merits of the case”. The Board is
exercising the same jurisdiction as the Industrial Court and, to my mind,
should adopt the same flexible and non-technical approach which that court is
obliged to adopt. I would therefore allow the respondent to put forward the
case which he now does.
29.
However, that does not mean that he is entitled to succeed before the Board.
We are, as has already been indicated, inclined to accept his interpretation of
the contract. But as yet there has been no evidence directed towards that
issue. We do not know exactly what was and was not documented in the supporting
books and documents of the Bank, nor has there been evidence or argument to
deal with the impact, if any, of clause 12 of the Agreement. We understand that
implying a term, as the Court of Appeal did, was a convenient way around these
problems. But in the light of the law as we have found it to be, we see no
alternative to remitting the case to the Court of Appeal, for it to decide how
best to proceed.
30.
However, we do not understand how section 10(3) could give rise to joint
and several liability. If this was a legal assignment of the debt, liability
would be transferred to ECAB, leaving no liability in the BOA. Section 10(3)
enables the Industrial Court to be flexible in the remedies it imposes but we
have seen no authority to suggest that it allows the court to devise a wholly
new cause of action or ground of substantive liability. Altering the effect of
a valid legal assignment would be to do just that.
31.
Accordingly, the Board will humbly advise Her Majesty that the case must
be remitted to the Court of Appeal for further consideration in the light of
the guidance given in this judgment. It would, of course, be open to the
parties to agree a sensible and realistic settlement in the meantime, bearing
in mind how long these proceedings have been going on. The parties should file
their submissions on costs within 21 days.
