[View without highlighting]
[Printable RTF version]
[Buy ICLR report:  ICR 880]
||Neutral Citation Number:  EWCA Civ 425
||Case No: B2/2010/1695
IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE MAYORS AND CITY OF LONDON COUNTY COURT
His Honour Judge Birtles
||Royal Courts of Justice
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE WARD
LORD JUSTICE LEVESON
LORD JUSTICE PITCHFORD
|| GEOFFREY GARRATT
||- and -
||MIRROR GROUP NEWSPAPERS LTD
Andrew Short QC and Naomi Ling (instructed by Leigh Day & Co, London) for the Appellant
Clive Freedman QC and Daniel Northall (instructed by DLA Piper UK LLP, Manchester) for the Respondent
Hearing dates : 24 March 2011
HTML VERSION OF JUDGMENT
Crown Copyright ©
Lord Justice Leveson :
- On 1 January 1989, Geoffrey Garratt commenced employment with Mirror Group Newspapers Ltd ("MGN") as a photographer working on the Sunday Mirror, having previously been engaged on a casual basis. With effect from 4 February 2006, he was dismissed by reason of redundancy and became entitled to an appropriate redundancy payment. He claimed what has been described as an enhanced redundancy payment of two weeks' pay for each year of service (in contradistinction to the statutory entitlement calculated in accordance with the Employment Rights Act 1996). He contended that he was entitled to such a payment as a consequence of a Collective Agreement dated 22 August 2002 reached between the British Association of Journalists ("BAJ"), being the union of which he was a member, and MGN and which was incorporated into his current individual contract of employment (dated 21 October 2005).
- MGN was prepared to offer Mr Garratt an enhanced redundancy payment but only on the basis that he signed a termination or compromise agreement (to which I shall refer only as a "compromise agreement") to the effect that he accepted the payment in full and final settlement of all claims against MGN and its employees "howsoever arising, in connection with [his] employment and/or its termination" except for claims arising out of the agreement itself, or in respect of accrued pension rights or personal injury claims (subject to a warranty that he was not aware of any personal injury claims). Because of issues outstanding between Mr Garratt and MGN, Mr Garratt was not prepared to sign that agreement with the result that MGN was only prepared to pay the statutory entitlement. This amounted to a sum of £30,192 (before tax) less than he would have received under the Collective Agreement. These proceedings are his attempt to recover that sum by way of damages for breach of contract.
- Having heard evidence over three days at the Mayors and City of London Court, in a reserved judgment, His Honour Judge Birtles held that the entitlement to an enhanced redundancy payment was subject to an implied condition that it was payable only on receipt of a signed compromise agreement and, thus, he dismissed the claim. With the leave of Sir Richard Buxton, Mr Garratt now appeals to this court. MGN contends that the appeal is misconceived but, additionally, has served a respondent's notice in relation to the legal analysis which forms part of the judgment.
- The judge heard evidence from Mr Garratt, Mr Arnold Slater (another photographer employed by MGN), and from the General Secretary of the BAJ (Mr Steve Turner). For MGN, the relevant Human Resources Director, Mr Nick Budd, and the Human Resources Manager, Ms Jill Harrison, (neither of whom continued to be employed by MGN) also gave evidence. For comprehensive and well explained reasons (which are not challenged), the judge accepted the evidence of the latter two witnesses and rejected (where inconsistent) that were called on behalf of Mr Garratt.
- The history can be shortly summarised. Over the years, as MGN has declared employees redundant, it has offered to pay more than the statutory entitlement on the basis that the total package is accepted in full and final settlement: this approach was not included within any contract of employment. Thus, following the commencement of his employment, Mr Garratt received fresh contracts of employment (which contained nothing about selection for redundancy or redundancy payments) on 18 August 1997 and 21 October 2005. Meanwhile, on 10 January 2002, BAJ was recognised by MGN and negotiated on behalf of its members (including Mr Garratt). Following that recognition, an agreement was negotiated in relation to collective bargaining which included the term:
"The union has the sole bargaining right to negotiate the pay, hours and holidays for the above bargaining group and for no other areas of the relationship between the company and its employees."
The employment contract of 21 October 2005 contained a reference to this recognition agreement.
- On the face of it, there was nothing in the collective agreement which gave the BAJ any bargaining rights over the terms and conditions of any redundancy payment but, from the outset, both BAJ and MGN entered into discussions in relation to this issue and, for his part, there is no suggestion that Mr Garratt was not entirely content that they did so: he said that he relied on the union to advise him about his employment rights "95% if not 100%".
- There were notes of the discussions between Mr Turner and Mr Budd on this issue running from 16 January 2002 to 10 April 2002 and beyond which included the following:
i) On 6 February 2002, it was recorded in the minutes of a meeting that:
"current redundancy formula is difficult to understand. BAJ not averse to linking the issue of notice periods with redundancy. Seeking reasonable redundancy terms. Prior consultation with FOCs regarding redundancy would help to build the union/company relationship."
ii) On 25 February 2002, in a written response to the claim made by BAJ, MGN observed that "as for redundancy payments the present terms are a direct result of the long notice periods offered to staff employed prior to December 1992" but expressed a wish for "a simplified system".
iii) On 7 March 2002, an action point was noted to the effect "Review Redundancy Formula and [Mr Budd] to put a proposal forward" which he did because, on 10 April 2002, Mr Turner welcomed the proposal to simplify the formula, but expressed concern about a weakness in the system, suggesting an alternative.
- The resulting Collective Agreement was dated 22 August 2002 and constituted an agreement to "changes to the terms and conditions of employment". It contained the following provisions as to redundancy:
"In the event that it is necessary to make compulsory redundancies within the recognised bargaining group, the following payments will be made.
For every completed year of service, on the day the contract ceases a payment of two weeks' basic pay will be made. This will include all the entitlements to statutory payment.
The minimum payment will be one month's salary.
The total amount of money that can be paid will be capped at 18 months money; this will include any pay in lieu of notice monies, where this is paid.
In most cases, the first £30,000 (at the time of signing) will be tax-free, however it is recognised that this is subject to approval by the Company's Tax Department and the Inland Revenue. The Company will not compensate for any tax that is deemed payable on the first £30,000.
Those individuals who are in receipt of two years' notice periods will in the event of redundancy continue to receive the redundancy terms that were in force prior to this agreement."
- Although there is no reference in the minutes or any of the documents to the need to sign a compromise agreement accepting payment in full and final settlement, the evidence of Mr Budd and Ms Harrison on this topic, which was unshaken in cross-examination, was clear. Thus, Mr Budd accepted that he did not recall discussing the mechanics of redundancy or the compromise agreement but said:
"I am certain that there was no reason to as the company had always made clear that it required the signing of a compromise agreement. The BAJ was fully aware of this from past practice and general discussions and therefore this was not an issue. The practice of requiring a compromise agreement was so well established that there was no need to discuss this....
The BAJ at no time queried the use of compromise agreements either during the discussions regarding redundancy payment levels or following the 2002 agreement when the payments were applied. The purpose of using a compromise agreement is to bring matters out onto the table and ensure that they are resolved in exchange for an enhanced redundancy package and therefore the company would never have agreed to enhanced payments without a compromise agreement."
- When he was cross examined, it was suggested to Mr Budd that his evidence that the fact that there was a requirement to sign a compromise agreement was an assumption only. He said that it was "very well known among the journalist population and, in fact, the wider MGN population". He went on:
"They knew they had to sign a compromise agreement. That was generally talked about, you know between members of the journalist community"
To the proposition that this had been denied by Mr Garratt and his witnesses he added:
"Sorry, you are talking about journalists here. That is just not believable. They talk to each other all the time. That's what they do. It's their stock in trade."
- Mr Budd also made the point that it was common for BAJ members to use BAJ solicitors (at the expense of MGN) to provide advice on compromise agreements and that at no time did the solicitors, BAJ or any employee query the requirement for a compromise agreement. He went on:
"[T]here were existing arrangements in relation to the mechanics of redundancies and the signing of a compromise agreement as a matter of standard practice and universal application. This did not change the signing of the recognition agreement nor was it intended to. The agreement simply did not cover this aspect of an enhanced redundancy payment and was not intended to alter the condition.
There was no intention to create a free standing right for individuals to be entitled to a payment without a compromise agreement. The agreement simply related to the level of payment that would be made when a redundancy was made and a compromise agreement signed."
- Ms Harrison elaborated on redundancy exercises in 2002 (before the Collective Agreement) and 2003 (which relied, for its financial terms, on the agreement) and confirmed that the condition of signing a compromise agreement to secure enhanced redundancy applied and "everyone who received an enhanced payment entered into such an agreement". She went on to explain that during a collective consultation about redundancy (in which the BAJ was involved), it was understood by all that a compromise agreement was a condition for getting an enhanced settlement and none who were made redundant (including a senior officer in the BAJ) suggested that they did not need to sign it. She said that as far as she was aware, the BAJ and its members had full knowledge of this. In that regard, the evidence revealed that between January and April 2002, while the negotiations were going on, a redundancy exercise was being undertaken by MGN and some 18 members of staff were declared redundant; all accepted enhanced redundancy payments and all signed compromise agreements. It is difficult to accept that the union representative Mr Turner would not be aware of these developments and, if he was concerned, raise them with management.
- The judge agreed with this assessment of the position and, as I have explained, accepted the evidence of Mr Budd and Ms Harrison. At paragraph 44 of his judgment, he specifically rejected the evidence of Mr Garratt and Mr Turner that neither of them was aware that the requirement to sign a compromise agreement was a matter of company policy before an employee dismissed for redundancy could receive an enhanced redundancy payment.
- Against that background, the specific discussions with Mr Garratt fall to be considered. Having been told that his job was under threat of redundancy, and after his proposals for taking voluntary redundancy had been rejected, on 3 February 2006, Ms Harrison sent him an offer of salary together with payment in lieu of holidays and a termination payment of £80,343 calculated in accordance with the agreement on the basis that it would be paid within 21 days of his signing the termination agreement for which purpose he needed to consult an independent solicitor; she mentioned the solicitor who had previously advised staff, the union solicitor or his own solicitor (for which MGN would pay up to £250). Legal advice on the issue of the termination or compromise agreement which was to forego any claim whether before an employment tribunal or a court arising from the termination of the employment was critical to comply with existing employment law.
- Mr Garratt was concerned that there was an existing issue to be resolved which related to his employment prior to joining the staff in 1989; he also sought to appeal against the decision to select him for redundancy. By letter dated 9 February 2006, he made it clear that, for these reasons, he was not prepared to sign the agreement but he sought the full payment "contractually agreed in my contract of employment" in any event. MGN responded by asserting that the enhanced terms were only payable on receipt of a signed compromise agreement and identified that, in the absence of agreement, only notice and statutory redundancy pay of £48,718 would be paid. At that moment, it was still open to Mr Garratt to accept the more generous offer involving an enhanced redundancy payment.
- In the event, he did not accept the offer and he was paid a total of £49,965 (the slight discrepancy being unexplained but, perhaps, amounting to accrued holiday pay). On 3 April 2006, his internal appeal against selection for redundancy was dismissed although he later successfully took proceedings before an Employment Tribunal recovering substantial compensation. I add only to underline that the judge specifically rejected Mr Garratt's contentions that, before the redundancy process started, he did not know of any condition that he had to sign a compromise agreement in order to get the enhanced redundancy payment which he argued was provided by his contract.
- Although I have re-ordered them, the judge summarised the following material facts that he found:
i) Arrangements for the payment of enhanced redundancy payments pre-existed the Collective Agreement of 2002 and had endured since 1993 (at the latest) to date; no employee had been paid an enhanced redundancy payment without signing a compromise agreement. The enhanced redundancy payment is made in consideration of the employee entering the compromise agreement: there is no other incentive for MGN in making the payment; it is not treated as a payment referable to income and is not taxed.
ii) From 1993 (at the latest) to date, the requirement to sign a compromise agreement was expressly notified to all employees identified as redundant and the signing of such an agreement was an automatic consequence of being dismissed as redundant.
iii) No employee, other than Mr Garratt, has sought to insist on a contractual right to an enhanced redundancy payment in the absence of a signed compromise agreement. Mr Garratt did not sign a compromise agreement and was not paid an enhanced redundancy payment.
iv) Although unstated by the judge in his summary (but following two of his specific findings of fact to which I have referred), before the redundancy process started, Mr Garratt (and the BAJ official) knew that Mr Garratt would have to sign a compromise agreement in order to get the enhanced redundancy payment provided by his contract.
- The significance of 1993 is that, on 30 August of that year, s. 39 and Schedule 6 to the Trade Union Reform and Employment Rights Act 1993 came into force which permitted compromise agreements, subject in each case to the relevant employee having obtained legal advice and a certificate to that effect. Prior to that date, broadly similar arrangements had been in place but, on each occasion, the involvement of ACAS and the submission of a COT 3 was required on the basis that it was not possible to 'contract out' of statutory employment rights.
The Judge's Approach
- The first issue which the judge addressed (albeit articulated in slightly different ways) was whether, prior to the Collective Agreement, there was a term implied into Mr Garratt's contract of employment by custom and practice that, if he signed a compromise agreement, the statutory redundancy payment would be enhanced. Having considered the authorities relating to implication of terms, the judge took the view that sufficient communication or knowledge depended on the nature of the practice subject to scrutiny and in the present case (conditions of receipt of an enhanced redundancy payment) the group to whom communication was most significant was those identified as redundant. Subjective intent is irrelevant: if employees have acquiesced in signing a termination agreement as a pre-condition, that is sufficient in the absence of individual protest or collective opposition.
- The judge concluded that, in the 13 year period 1993-2006, there was no evidence that anyone resisted the pre-condition. Post recognition in 2002, although the BAJ represented members in two redundancy exercises, all signed a compromise agreement and there was no collective opposition to the practice: by their conduct, the redundant employees agreed to the requirement. Thus, upon entering the Collective Agreement, this requirement for a compromise agreement was a contractual condition which was neither amended nor even addressed: the agreement was only concerned with the calculation of how much was to be paid. It was not revoked.
- On behalf of Mr Garratt, Miss Naomi Ling argued that to be implied through custom and practice, the term had to be "reasonable, certain and notorious". The judge did not accept that this test applied in the circumstances of a single employer/employee agreement but rather in cases concerning custom of a trade. In any event, however, he concluded that the term was reasonable (being the quid pro quo for the enhanced redundancy payment, the benefit being lost if there would still be proceedings in an employment tribunal or court) and it was also, based on his earlier findings, both notorious and certain.
- The second issue determined by the judge concerned the proper interpretation of Mr Garratt's contracts of employment and the impact of the Collective Agreement upon the 2005 agreement. Miss Ling pointed to the term in Mr Garratt's 1997 contract to the effect it "supersedes all other agreements and practices" and argued that this constituted an entire agreement clause. The judge did not agree; he construed the words as applying only to previous agreements inconsistent with the contents of that agreement: if there had been a contractual right to an enhanced redundancy payment, it certainly would not have been removed by such oblique words.
- In any event, considering the contract of employment in the context of the commercial and factual background known to both of the parties (see Ravennavi SpA v New Century Shipbuilding Co Ltd  2 Lloyds Rep 24 per Moore Bick LJ at para. 12), even if the clause did provide for an entire agreement, the term as to the payment of enhanced redundancy if a compromise agreement was signed was not removed. The same was so for the 2005 contract. For these reasons, the claim failed.
- Although there is no specific appeal against any of the judge's findings of fact, Mr Andrew Short Q.C. (for Mr Garratt) did challenge what he considered to be an important finding that Mr Slater (who was not, in fact, declared redundant) knew that if he wished to receive an enhanced redundancy payment, he would have to sign a compromise agreement. We were taken to the evidence during the course of which Mr Slater agreed that he would have to sign "certain paperwork" if he was going to take the money which Mr Clive Freedman Q.C. (for MGN) took as his being aware of the compromise agreement. Examining the immediately preceding cross examination, however, it is clear that the compromise agreement was being discussed. In my judgment, it was open to the judge to reach the conclusion that he did in relation to Mr Slater.
- It was common ground between the parties and the judge that the burden was on MGN to establish the existence of an implied term that an enhanced redundancy payment was payable only on receipt of a compromise agreement. The primary thrust of Mr Short's argument, however, concerned the approach of the judge to the implication of such a term which he considered depended on the nature of the practice subject to scrutiny and that the group of employees to whom communication was most significant was those identified as redundant so that if, by their conduct, employees had acquiesced in signing a compromise agreement as a precondition of receiving an enhanced redundancy payment, that was sufficient.
- Mr Short argued that, for such a term to be implied by way of custom and practice, consistent with authority, it was necessary that the term be "reasonable, notorious and certain" which comes from the well known test articulated in Devonald v Rosser  2 KB 728 per Farwell LJ at 743. Mr Freedman submitted that this test was entirely appropriate where the custom and practice relied upon was in respect of an industry (such as the weaving trade in Lancashire: see Sagar v Ridehalgh  1 Ch 310) but that the approach was different when considering an established practice within a single organisation.
- In Duke v Reliance Systems Ltd  ICR 449, EAT the employer was seeking to imply a contractual normal retiring age of 60. At page 452 Browne-Wilkinson J put the matter (at 452) in these terms:
"[T]here was no evidence that the employers' policy of retirement for women at the age of 60 had been communicated to such employees in 1978 nor was there any evidence of any universal practice to that effect. A policy adopted by management unilaterally cannot become a term of the employees' contracts on the grounds that it is an established custom and practice unless it is at least shown that the policy has been drawn to the attention of the employees or has been followed without exception for a substantial period."
- The alternative formulation (drawn to the attention of employees or followed without exception for a substantial period) is important as is the proposition that this "at least" must be shown: one or other of these approaches must be established but it is not necessarily sufficient. In that regard, it is instructive to consider Quinn v Calder  IRLR 126, EAT in which it was the employees who were seeking to establish a contractual right to an enhanced redundancy payment ("the Cookson terms"). In rejecting the right to such a payment, Lord Coulsfield referred to Duke and said (at para. 7):
"In a case such as the present, the factors to which Browne-Wilkinson J referred are likely to be among the most important circumstances to be taken into account, but they have to be taken into account along with all the other circumstances of the case. Thus, for example, in our view, the question is not whether the period for which a policy has been followed is 'substantial' in some abstract sense, but whether, in relation to the other circumstances, it is sufficient to support the inference that that policy has achieved the status of a contractual term. Again, with regard to communication, the question seems to us to be not so much whether the policy has been made or become known directly to the employees or through intermediaries, but whether the circumstances in which it was made or has become known support the inference that the employers intended to become contractually bound by it."
- In that case, where the employees were seeking to rely on the term, the necessary inference related to the employers; in this case, the question is whether there is sufficient to establish that the employees intended to be bound. Lord Coulson dealt with the fact that this situation had only arisen on four occasions in seven years and, of real importance, that from the employer's perspective payment of the enhanced terms was not automatic but required a decision on each occasion. He went on (at para 8):
"The fact that the employees' knowledge came from fellow-employees would not preclude the possibility of treating the enhanced terms as established, by custom and practice, as part of the contract; but it is necessary to take that knowledge along with the other circumstances, including the fact that there does not appear to have been any evidence that any employee actually entered into the employment on the faith of an expectation that those terms would be applied."
- Albion Automotive Limited v Walker  EWCA Civ 946 also concerned a dispute as to whether a contractual right to an enhanced redundancy payment was established by employees. The EAT did not consider that such a term was "reasonable, notorious and certain" and, on appeal to this court, there was here no reference to that test. In its place, based on the submission of counsel, Peter Gibson LJ adopted what might be described as a multi-factorial approach as to the relevant factors to be taken into account when considering whether a unilateral management policy had acquired contractual status. Those factors included (at para 15):
"(a) whether the policy was drawn to the attention of employees;
(b) whether it was followed without exception for a substantial period;
(c) the number of occasions on which it was followed;
(d) whether payments were made automatically;
(e) whether the nature of communication of the policy supported the inference that the employers intended to be contractually bound;
(f) whether the policy was adopted by agreement;
(g) whether employees had a reasonable expectation that the enhanced payment would be made;
(h) whether terms were incorporated in a written agreement;
(i) whether the terms were consistently applied."
- Mr Short also relied on the decision of the EAT in Solectron Scotland Ltd v Roper & Others  IRLR 4 which similarly concerned enhanced redundancy terms although in the context whether such terms had ceased to be a contractual entitlement following transfers of undertakings. The employers relied on a "relatively short" practice of fixing terms for volunteers for redundancy said to vary contractual terms. Although Elias J (as he then was) tested the proposition against the 'reasonable, notorious and certain' test, it does not appear that there was argument as to whether, contrary to Mr Freedman's submissions, that approach was appropriate in cases involving an individual organisation rather than a trade.
- The judge considered that acquiescence by employees in signing a precondition of receiving an enhanced redundancy payment was sufficient for an agreement in the absence of an individual protest or collective opposite and concluded that prior to the Collective Agreement, there was a contractual condition that a precondition to an enhanced redundancy payment was a willingness to enter into a compromise agreement; this condition was not amended by the Collective Agreement which did not address the issue. In any event, the judge said that he was equally satisfied that the term satisfied the 'reasonable, notorious and certain' test.
- Mr Short submits that what was critically missing from the judge's analysis was any finding that the employees as a group (as opposed to those who were being offered redundancy packages) agreed to change the terms of their employment to reflect the need to sign a compromise agreement. He submits that positive acts by employees A, B and C would not ordinarily demonstrate an intention on behalf of employees D – Z to be contractually bound in the future – particularly where A, B and C are leaving or have left employment and only D – Z are to remain in employment. Furthermore, a failure by D – Z to object to that policy should not be taken as endorsement or agreement because the policy has no immediate impact upon them. In that regard, he points to the complete failure on the part of MGN to publicise the term which, he contends, is the minimum required to even start to justify its implication by custom and practice.
- Mr Freedman responds by arguing that the judge was not simply relying on what was accepted by those who had been made redundant. Rather, he found that the employees were all aware that there was a requirement to enter into a compromise agreement as a condition precedent to obtaining an enhanced redundancy payment (that is to say above the payment required by law) and that this was beyond the context of their own redundancies. Thus, he found that Mr Garratt and Mr Turner knew (which means that the BAJ knew); he found (and was entitled to find) that Mr Slater knew. As to any wider group of employees, he accepted the evidence of Mr. Budd and Miss Harrison, the implication from which was that it was, indeed, well known by all.
- For my part, without seeking to rationalise the language of the authorities, I prefer to focus on the broader question of what was agreed between the employers and the employees (as a group), either or expressly or by clear implication because, in reality, the factors mentioned by Peter Gibson LJ to which I have referred all go to that issue. Thus, the length of time, frequency and extent to which a practice was followed in every case as a matter of routine are encompassed by (b), (c), (d) and (i); the understanding and knowledge both of employer and employees by (a), (e) and (g) and what was in writing by (f) and (h). Notoriety and certainty are certainly established by similar indicia; whether terms are reasonable may go somewhat further but may equally need no more than a consideration of the other factors on the basis that if, as between the parties, the court considers a term to be unreasonable, it is highly unlikely (at least in the light of modern employment practices) that it will be possible to infer agreement.
- I start from the position prior to the Collective Agreement. It is quite clear that the judge accepted that from the time that MGN was prepared to pay more by way of redundancy than the law required (whether the redundancy was voluntary or compulsory), as part of its willingness to do so, any outgoing employee who accepted the offer had always been required to forgo any other claim that might be brought. Whether it was good employment relations or otherwise, the aim (as articulated in the evidence) was to draw a line under the employment and to save the cost of challenges before a tribunal or court. Prior to 1993, in order to obtain that result, ACAS and a COT 3 was required; from 1993, provided that the employee had obtained legal advice and a certificate to demonstrate compliance with the legislation, it was possible to effect a compromise agreement; it has not been suggested that the terms of such agreements have been modified.
- Further, for my part, I do not accept Mr Short's proposition that the position is akin to an employer who purports unilaterally to vary a contractual term when the issue is not whether the employer intends to be bound by the new term but whether the employees have agreed to the variation by their response. After 1993, but prior to the Collective Agreement, the only possibility of obtaining a payment in excess of statutory redundancy terms was by entering into a compromise agreement. This was what was referred to as the quid pro quo but it was up to the employee whether he wished to take this course or to exercise such other rights as he or she had under the contract whether by litigation or otherwise. To that extent the employee retained total freedom of choice. What the employee could not do (and in my judgment the judge made it clear was well known) was to obtain the enhanced redundancy pay without entering into the compromise agreement.
- Neither do I accept that the judge was seeking to impute knowledge purely on the basis of the failure of the prospectively redundant employees (as opposed to those who were not being considered) to object. The inference of widespread knowledge by all is to be drawn from that fact but only in the context of other facts:
i) Every employee who has been offered a redundancy package since 1993 has had the benefit of legal advice and the requirement to sign a compromise agreement has never been refused, or the subject of query let alone challenge. No employee, lawyer or union representative has ever taken issue with the requirement either at the time or prospectively: the wide ranging nature of the agreement (which Mr Short argues evidences lack of reasonableness) only serves to make this point of greater significance.
ii) The judge specifically accepted the evidence of witnesses to the effect that the practice of requiring a compromise agreement before payment of an enhanced redundancy payment was "very well established" with the workforce. It was "generally talked about" as this was the journalists' "stock in trade": he was entitled to reach that conclusion on the evidence. Although Mr Short argues that the confidentiality clause of the compromise agreement militates against the conclusion that employees of MGN talked about the requirement, in the context of this industry, it does not even start to undermine it.
iii) As evidence of its widespread knowledge, before this redundancy process started, Mr Garratt, Mr Slater and the BAJ official, Mr Turner knew that a compromise agreement would have to be signed in order to get the enhanced redundancy payment. Mr Turner's knowledge is of particular significance because of his long standing union connection and the fact that he entered into and conducted the negotiations for the Collective Agreement without once raising this as worthy of discussion.
- Mr Short correctly submits that it is appropriate that an employer's attempt to convert a policy into a contractual term is subject to particular scrutiny specifically because an employer can control the introduction of policies and make clear its intention to be (or not to be) contractually bound by those policies whereas individual employees cannot. In this regard, again, context is all important. The employers were not seeking to impose a condition of employment on anyone. After the introduction of the statutory scheme for redundancy payments, each employee acquired a contingent right to a sum of money if declared redundant. The contract of employment required nothing more. What MGN were doing was to say to their employees that they could have an enhanced payment on terms that the payment was accepted in full and final settlement of all claims. For the employees, this could only inure to their benefit: if anyone wished to pursue some other issue with MGN he or she was at perfect liberty to do so (as Mr Garratt eventually did): in those circumstances, however, there would be no enhanced payment.
- For my part, I readily recognise the force of Mr Short's argument that MGN could have put this issue beyond argument by publicising to the workforce that an enhanced redundancy payment would only be made if the outgoing employee signed a compromise agreement. Mr Freedman did not demur from the proposition but argued that lack of such publicity was not decisive: the recognition by MGN employees of the position could be evidenced in other ways and, in this case, it was. I agree.
- Although I have approached the issue from a slightly different direction, I am equally content (as was the judge) to analyse the position from the standpoint of the reasonable, notorious and certain test in which regard I am specifically referring to a term that a redundancy payment above the statutory minimum would only be paid if the employee signed a compromise agreement, relinquishing all other rights save for claims arising out of a breach of the termination agreement, accrued pension rights and latent (i.e. unknown) claims for personal injury. Mr Short submits that it was not reasonable that someone who, for example, had suffered discrimination resulting in personal injury (potentially depriving them of the ability to work) for which they wanted to seek a remedy would be prevented from receiving a significant additional sum to which they were contractually entitled.
- Quite apart from the question whether, in the case of a discrimination claim, an enhanced redundancy payment would be recoverable if its loss flowed from discrimination, the issue of reasonableness must be approached in the round. This was best expressed (albeit in a slightly different context) by Underhill J in ABN Amro v Hogben  UKEAT 0266_09_0111. Concluding that the practice of requiring a compromise agreement in return for an enhanced redundancy payment involved a legitimate interest in achieving finality, he said (at para 45):
"Further, it seems to me ... that even if a case of discriminatory impact could be made out the requirement could plainly be justified. Employers have a legitimate interest in achieving finality as regards all issues arising out of the dismissal of an employee. Offering a further payment to achieve a binding compromise of all such issues is plainly a proportionate means of achieving that aim. Its proportionality is unassailable because the choice always remains with the employee: if he thinks it is a bad deal he need not take the offer. He will of course, by definition, have access to legal advice. The fallacy in the Claimant's case is that it overlooks the fact that he otherwise has no right to this payment: although it may be described as an enhanced redundancy payment, it is in fact a payment offered to redundant employees in return for a full and final settlement of all claims. It is of course for that reason that the contention that the payment could be made while [accepting] the right to advance outstanding claims makes no sense."
- In this context, notoriety is no more than widespread knowledge and understanding; certainty relates to the nature of the arrangement (namely the requirement of the compromise agreement if the enhanced payment is to be made). In the light of the analysis above, both of these conditions are satisfied.
- I turn now to the negotiation of the Collective Agreement which Mr Turner accepted was concerned solely with the calculation of benefits to be paid under the enhanced redundancy scheme. It was concerned with "changes to the terms and conditions of employment" and also spoke of maintaining, in certain circumstances, "redundancy terms that were in force prior to this agreement". Construing it, however, is an exercise to be conducted with care. On the one hand, in Ali v Christian Salvesen  1 All ER 721 Waite LJ warned (at 726d) that such agreements should be concise and clear, so as to be readily understood by all who are concerned to operate it with the result that should any topic be left uncovered by an agreement of that kind, the natural inference would be that it was omitted advisedly. On the other hand, in Burke v Royal Liverpool University Hospital NHS Trust  ICR 730, Morison J provided a different perspective when he observed that collective agreements should not be examined through the eyes of a lawyer: custom and practice plays a considerable part in the way that these arrangements are made.
- The judge accepted (and was entitled to accept) the evidence of Mr Budd and Ms Harrison that the need for a compromise agreement was "taken almost as read" or "taken as read". In my judgment, with the words of caution to which I have just referred in mind, it is simply not tenable to suggest that this agreement was intended to change the practice of requiring a compromise agreement or that it had this (unintended) effect. As Ward LJ put in argument, going back to the test suggested by MacKinnon LJ in Shirlaw v Southern Foundries (1926) Ltd  2 KB 206 at 227, if an officious bystander had suggested an express provision to that effect, Mr Budd and Ms Harrison would certainly have suppressed him with a testy "of course"; Mr Turner might not have been testy, but he would have readily agreed.
- Furthermore, this approach is entirely consistent with the formulation in Attorney General of Belize and others v Belize Telecom and others  1 WLR 1988 articulated by Lord Hoffmann when he said (at para 21):
"It follows that in every case in which it is said that some provision ought to be implied in an instrument, the question for the court is whether such a provision would spell out in express words what the instrument, read against the relevant background, would reasonably be understood to mean. It will be noticed from Lord Pearson's speech that this question can be reformulated in various ways which a court may find helpful in providing an answer – the implied term must "go without saying", it must be "necessary to give business efficacy to the contract" and so on – but these are not in the Board's opinion to be treated as different or additional tests. There is only one question: is that what the instrument, read as a whole against the relevant background, would reasonably be understood to mean?"
- The significance of the Collective Agreement in relation to Mr Garratt is that his contract of employment was amended in 2005 and thereafter incorporated the recognition agreement with the BAJ (and, thus, the terms agreed in relation to payment of redundancy). If the argument advanced by Mr Short is correct, by a side wind and entirely fortuitously, Mr Garratt not only acquired a right to an enhanced redundancy payment (which, on Mr Short's argument he did not previously have) but, in addition, acquired a better right than any employee had previously had, namely the right to such a payment unencumbered by the obligation to enter into a compromise agreement. On the other hand, as Mr Freedman points out, those whose contracts had not been amended to include an express incorporation clause, had no right to an enhanced redundancy payment at all. For my part, I do not accept that this represents the reality of the contractual relationship of MGN and its employees in general or that of MGN and Mr Garratt in particular.
- I must deal with one further issue of construction. Mr Short submits that the Collective Agreement was more extensive than suggested and dealt both with payment of redundancy and timing, its terms that "for every completed year of service, on the day the contract ceases a payment of two weeks basic pay will be made". Mr Freedman submits that the comma in that sentence is simply misplaced and that this provision is also about calculation, namely that two weeks payment will be made for every complete year between the date of employment and the date of cessation. I agree: clarity required resolution of the issue whether part of a year might count for a proportionate increase in payment and it is this issue to which this provision was directed.
- It is obviously important that employers ensure that the basis upon which they conduct contractual relations with their employees are agreed in an open, transparent and accessible manner so that issues such as that which has engaged both Judge Birtles and this court can be avoided. In the event, however, I have come to the clear conclusion that the judge was right to decide that, by the terms of his contract, Mr Garratt was not entitled to an enhanced redundancy payment unless he signed a compromise agreement. It was for him to decide whether the likely prospects of success in whatever other proceedings he might have contemplated taking against MGN were sufficiently high to render the additional redundancy payment an unattractive substitute. By refusing to sign the compromise agreement, he decided that they were. In my judgment, his contract did not entitle him to both. I would dismiss this appeal.
Lord Justice Pitchford:
- I agree.
Lord Justice Ward:
- I also agree.
Copyright Policy |
Donate to BAILII