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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Secretary of State for the Home Department v Cox & Ors [2023] EWCA Civ 551 (19 May 2023) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2023/551.html Cite as: [2023] IRLR 679, [2024] 1 All ER 295, [2023] EWCA Civ 551, [2023] WLR(D) 230, [2023] ICR 914 |
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ON APPEAL FROM THE HIGH COURT
THE HONOURABLE MR JUSTICE CHOUDHURY
[2022] EWHC 680 (QB)
AND THE HONOURABLE MR JUSTICE CHOUDHURY
[2022] EWHC 1626 (QB)
AND THE HONOURABLE MR JUSTICE FREEDMAN
Strand, London, WC2A 2LL |
||
B e f o r e :
(VICE-PRESIDENT OF THE COURT OF APPEAL (CIVIL DIVISION))
LORD JUSTICE STUART-SMITH
and
LORD JUSTICE LEWIS
____________________
SECRETARY OF STATE FOR THE HOME DEPARTMENT |
Appellant |
|
- and - |
||
(1) JAMES COX (2) MALCOM DAVEY (3) OWEN HUGHES (4) DENISE SPEAKMAN (5) PUBLIC AND COMMERCIAL SERVICES UNION |
Respondents |
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And Between: |
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SECRETARY OF STATE FOR THE DEPARTMENT FOR ENVIRONMENT, FOOD AND RURAL AFFAIRS |
Appellant |
|
- and - |
||
(1) KEITH CRANE (2) ELSPETH GANON WAGG (3) CAROLINE MacKENZIE (4) PUBLIC AND COMMERCIAL SERVICES UNION |
Respondents |
|
And Between: |
||
The COMMISSIONERS FOR H.M. REVENUE AND CUSTOMS |
Appellants |
|
- and - |
||
(1) COLETTE SMITH (2) ANDY O'DONNELL (3) IAN LAWTHER (4) WENDY TURNER (5) PUBLIC AND COMMERCIAL SERVICES UNION |
Respondents |
____________________
Oliver Segal KC and Darshan Patel (instructed by Thompsons) for the Respondents in all three appeals.
Hearing dates: 22 and 23 March 2023
____________________
Crown Copyright ©
LORD JUSTICE LEWIS:
INTRODUCTION
(1) the individual claimants had not varied their contracts of employment to exclude the check-off arrangements and had not waived any prior breach by their conduct in continuing to work after the check-off arrangements were withdrawn; and
(2) the parties to the contracts of employment did not intend the contractual term offering the facility for check-off arrangements to be enforceable by PCS.
THE FACTUAL BACKGROUND
The check-off arrangements
"4040. This section sets out the arrangements relating to the voluntary authorisation of deductions from the pay or pension of civil servants.
…..
4051. A civil servant who wishes to authorise deductions from his pay for any of the purposes or organisations listed in Annex 1 and 2 should obtain from the organisation concerned the standard form of authority approved by the Treasury, complete it and forward it to the organisation. The organisation will forward the completed forms … to the officer paying salary, wages or pension … Deductions for union subscriptions will be made from the earliest date practicable after receipt of the authority. Notice of termination for authority should be given direct to the paying officer of the departments. However, this method of payment may be withdrawn in respect of union subscriptions in the circumstances described in para 4100 …"
"LIST OF ORGANISATIONS FOR WHICH DEDUCTIONS MAY BE MADE FREE OF CHARGE"
"Deductions may be made from salaries, wages or pensions free of charge for the payment of premiums and subscriptions to the following:
Civil Service SAYE Scheme
National Savings Bank Clubs
Civil Service Medical Aid Association
Civil Service Retirement Fellowship
Hospital Saving Association
Hospital Saturday Fund
Post Office and Civil Service Sanitorium Society
Local Hospital Funds, Hospital Contributory Scheme and Provident Funds
Civil Service Benevolent Fund
United Kingdom Civil Service Benefit Society
Departmental Benevolent Funds ….
Civil Service Insurance Society ….
Post Office Insurance Society
Civil Service Sports Council
Department Sports Association ….
Nationally or departmentally recognised unions representing civil servants."
""
"Voluntary Deductions from Pay
7.3.1 Where departments and agencies have arrangements for voluntary deductions from pay to be offered to staff, the following conditions apply.
Conditions
7.3.2. Departments and agencies must ensure that:
a. no liability is to be attached to the department, agency or pension-paying authority in the event of default by a member of staff or recipient organisation. Legal advice should be taken if necessary; and
b. in providing such facilities, they offer no assurance of the soundness or integrity of recipient organisations.
Trade Union Subscriptions
7.3.3. Where departments and agencies offer arrangements for deducting subscriptions to trade unions, they must ensure that:
"a. they comply with the relevant statutory provisions (including those concerned with political levies, where appropriate);
"b. they recover the costs of the provision of the facility from the trade unions concerned; and
"c. subscriptions deducted during the quarter in which an officer ceases to be a subscriber will be paid to the relevant trade union.
"In the event of official industrial action by non-industrial civil servants, departments and agencies may withdraw the facility, in whole or in part, in respect of deductions payable to any union with members officially involved in the industrial action for the duration of that action. Withdrawal is subject to approval by the Cabinet Office."
7.3.4 For those trade unions whose subscriptions include a political levy, arrangements must be made to ensure that the department or agency concerned shall not at any time have information about the numbers or identities of members contributing to the levy."
The Individual Contracts of Employment in the Cox case.
"Voluntary deductions from pay
The SSC will, if you so authorise, make deductions from your salary for direct payment to the following organisations or other 'approved' organisation:
• Trade union membership fee
• Certain insurers and assurance societies and companies
• Local hospital funds and hospital contributory schemes
• Payroll donations to charity
• The Home Office Sports and Social Association ('HOSSA') lottery or similar
• Civil Service organisations, including the Civil Service Sports Council (from which HOSSA derives most of its funds)
• Additional Voluntary Pension Contributions ('AVCs')
If you are unsure whether an organisation is 'approved', check with the SSSC section.
If you wish to authorise deductions from pay, you should obtain a standard form of authority from the organisation concerned and complete and forward the form back to that organisation. Once the authorisation has been accepted SSC will forward the contributions due and:
• make payments on the due date …
• continue to make payments on this basis as instructed until you wish to cease making payments then you must notify the SSC direct in writing to the address above. You should also advise the organisation concerned."
"5.5 If you wish, Pay Service may make voluntary deductions from your salary in respect of subscriptions or contributions to:
• Civil Service trade unions
• certain insurance and assurance societies and companies
• local hospital funds and hospital contributory schemes• payroll donations to charity ('Work Aid')
• the HOSSA lottery or similar
• Civil Service organisations, including the Civil Service Sports Council (from which the Home Office Sports and Social Association derives most of its funds)
If you are not sure whether an organisation is 'approved', Pay Service will be able to advise you.
5.6 If you take official industrial action as a non-industrial civil servant, payment of your union subscriptions by the method described above may be withdrawn, in whole or in part, while you take part in the action. You will be advised by a Home Office Notice or other communication of any decision to do so."
5.7 If you wish to authorise deductions from pay you should obtain from the organisation concerned a standard form of authority approved by HM Treasury or the Home Office, complete it and forward it to the organisation. If, on the other hand, you wish to cease making the payments, you should notify Pay Service yourself in writing. You should also advise the organisation concerned."
Withdrawal of the Check-Off Arrangements by the Home Office
The Claim and the Judgment in Cox
The Individual Contracts of Employment in the Crane case
"80 There are facilities for the deduction from pay, at the request of staff, of periodic payments to organisations with which the Agency as arrangements for the collection and remittance of such payments.
…
Trade Unions
84. Under an arrangement known as 'check-off', members of staff can arrange for trade union subscriptions to be paid directly from their salaries, free of charge. In the past, authorisation for such payments was only required when staff first joined a trade union. Now, under the Trade Union Reform and Employee Rights (TURER) Act 1992 , all union members have to sign new authorisations every three years.
85. Staff are notified in advance of any increase in subscriptions, and can withdraw from the check-off arrangements on publication of such a notice, or at any time, although a reasonable period should be allowed between an instruction to stop and cessation of deductions.
86. Currently a number of staff contribute to the following:-
FDA Administrative Grades
IPMS Scientific Grades
PCS Executive, Clerical, Secretarial and Support grades."
"You may arrange for your trade union subscriptions to be debited directly from your pay. Contact your local trade union representative for details."
"3.4.1. You may authorise deductions from your salary for direct payment to organisations such as trade unions, the Civil Service Sports Council, the Civil Service Benevolent Fund, the Civil Service Retirement Fellowship or charitable organisations via "Give As You Earn". Notification should be made in writing or e-mail to Shared Services Enquiries."
Withdrawal of the Check-Off Arrangements by DEFRA
The Claim and the Judgment in Crane
The Individual Contracts of Employment in the Smith case
"109. You may have deductions from salary or wages for premiums or subscriptions to the following organisations.
[this lists a number of organisations, which includes a predecessor to PCS]
…
You should obtain forms of authority from the organisations concerned…Staff association subscriptions may begin in any month. Other deductions may begin from the start of a quarter only. You should forward your authorities to the organisations in time for them to be sent to FDW (Pay Section) 14 days before the deductions are due to commence….
"17.2 Introduction
ADP Chessington has arrangements with a number of charities, companies and organisations to make voluntary deductions from pay. You can arrange direct with them for certain subscriptions/premiums to be deducted from your salary. A list of these organisations is shown in Appendix E….The Department has no involvement in the administration and accepts no liability for these arrangements so you must ensure that deductions are correct and in accordance with your instructions.
17.3 How to arrange for deductions to be made from your salary
If you want to authorise new deductions from your salary you must complete a form that the organisation you have joined will give you. You should send the completed form back to the organisations who will forward it to ADP Chessington.
17.4 Cancelling your deductions from salary
If you want to stop any voluntary deductions from your salary you should write to the organisation and ask them to cancel the deduction.
17.5 Trade Union Subscriptions
The two Civil Service unions with recognition rights in this Department are the:
Public and Commercial Services Unions…"
3.4.1. You may authorise deductions from your salary for direct payment to organisations such as trade unions, the Civil Service Sports Council, the Civil Service Benevolent Fund, the Civil Service Retirement Fellowship or charitable organisations via "Give As You Earn". Notification should be made in writing or e-mail to Shared Services Enquiries".
Withdrawal of the Check-Off Facility by HMRC
"Our view remains that Check-off is a contractual right that has been employed without any problem for decades. More importantly perhaps it is something that is seen as a key benefit by our members & something that they would prefer not to give up.
The Civil Service Management Code continues to allow for Check-off & sets out a number of conditions for its operation by civil service employers. All of these conditions are currently being met including the requirement for the administration costs to be covered. You will be aware that the current arrangements are "paid for by PCS at the rate of 50p per member per month.
The Claim and the Judgment in Smith
THE GROUNDS OF APPEAL
(1) the individual claimants had not varied their contracts to exclude check-off and waived any prior breach through their conduct; and
(2) the parties to the individual contracts of employment did not intend that the term relating to offering the check-off facility would not be enforceable by PCS pursuant to section 1(2) of the 1999 Act.
THE FIRST ISSUE – VARIATION AND ACCEPTANCE
Submissions
Discussion
"85. However, to take the position that to continue to work following a contractual pay cut could never constitute acceptance would be contrary to the dicta of both Browne-Wilkinson J in Jones v Associated Tunnelling Co Ltd [1981] IRLR 477 and Elias J in Solectron Scotland Ltd v Roper [2004] IRLR 4, in an area where the specialist expertise of the Employment Appeal Tribunal must be accorded particular respect; and I do not believe that it would be right in principle. A contractual offer can of course be accepted by conduct, and that must include the offer of a variation. Under a contract of employment the parties are in a complex relationship in which they are both required to perform their mutual obligations on a continuous basis, and those obligations are frequently modified by their conduct towards each other. I can see no reason why an employee's conduct in continuing to perform the contract, in circumstances where the employer has made clear that he wishes to modify it, may not—in principle—be reasonably understood as indicating acceptance of the change. …..
86. However, to say that in some circumstances continuing to work following a contractual pay cut may be treated as acceptance does not mean that it will always do so. On the contrary, what inferences can be drawn must depend on the particular circumstances of the case. Neither Browne-Wilkinson J in the Jones case nor Elias J in the Solectron case went further than saying that continuing to work following a contractual pay cut might constitute acceptance: the language used was "may well be taken to have … agreed" and "it may be possible to infer". The authorities illustrate some specific points about the proper approach to the question of when continuing to work may constitute acceptance. I briefly identify them as follows.
"87. First and foremost, the inference must arise unequivocally. If the conduct of the employee in continuing to work is reasonably capable of a different explanation it cannot be treated as constituting acceptance of the new terms: that is why Elias J in the Solectron case used the phrase "only referable to". That is simply an application of ordinary principles of the law of contract (and also of waiver/estoppel). It is not right to infer that an employee has agreed to a significant diminution in his or her rights unless their conduct, viewed objectively, clearly evinces an intention to do so. To put it another way, the employees should have the benefit of any (reasonable) doubt."
88. Secondly, protest or objection at the collective level may be sufficient to negative any inference that by continuing to work individual employees are accepting a reduction in their contractual entitlement to pay, even if they themselves say nothing. This is clear from Rigby v Ferodo Ltd [1988] ICR 29: see para 74 above.
89. Thirdly, Elias J's use in para 30 of his judgment in Solectron of the phrase "after a period of time" raises a point of some difficulty. It is easy to see how it may not, depending on the circumstances of the particular case, be right to infer acceptance of a contractual pay cut as from the day that it is first implemented: the employee may be simply taking time to think. Elias J's formulation is intended to recognise that a time may come when that ceases to be a reasonable explanation. However, it may be difficult to identify precisely when that point has been reached on anything other than a fairly arbitrary basis. In Khatri Jacob LJ discomforted counsel for the employers by making that very point: see para 47 of his judgment. But, again, that passage needs to be read in the context of the fact that in that case the variation had not yet bitten, and I do not think that the difficulty in identifying the precise moment at which an employee should be treated as first accepting a contractual pay cut means that the question has to be answered once and for all at the point of implementation."
"110. It may be said that the employee should never be held to have accepted a variation simply by working without protest under the new terms without more. After all, a party can bring a claim for breach of contract within the limitation period without having to notify the other party that he objects to the breach, and why should this be different? I think that the answer lies in the fact that the employment relationship is typically a continuing relationship based on good faith, and exceptionally in that context it might be appropriate to infer that a failure to complain about a proposed variation of the contract for the future may be taken as agreement to that variation which prevents it constituting a breach. It might also be said that an employer can always put the position beyond doubt by lawfully terminating the contract on notice and introducing the varied contract which includes the new disadvantageous term or terms. No doubt the employer's reluctance to do that is in part motivated by a desire to avoid potential unfair dismissal claims. But there are also less selfish reasons. In the context of a continuing relationship based on good faith, dismissing and re-employing might appear to be an unnecessarily hostile stance, only to be adopted as a last resort. Attempts to secure agreement should not be discouraged and exceptionally the circumstances may justify the inference that the employee has agreed to the new terms even where he has been reluctant to do so formally."
111. [Counsel for the employer] put forward some powerful reasons why the employment judge ought to have found that there was acceptance of the pay variation here, in particular the lengthy period of almost two years without complaint when no pay increments were given. However, I agree with Underhill LJ that the judge was entitled to take the view he did. There was initially objection to the change and thereafter, once the decision not to take industrial action had been taken, neither the unions, the employees nor the employer clarified their position. It could not in these circumstances be said that the employees had unequivocally by their conduct shifted their position and accepted the change in terms.
THE SECOND ISSUE – THE 1999 ACT
Submissions
Discussion
The Proper Interpretation of the 1999 Act
"1.— Right of third party to enforce contractual term."
(1) Subject to the provisions of this Act, a person who is not a party to a contract (a "third party") may in his own right enforce a term of the contract if—
(a) the contract expressly provides that he may, or
(b) subject to subsection (2), the term purports to confer a benefit on him.
(2) Subsection (1)(b) does not apply if on a proper construction of the contract it appears that the parties did not intend the term to be enforceable by the third party.
(3) The third party must be expressly identified in the contract by name, as a member of a class or as answering a particular description but need not be in existence when the contract is entered into.
(4) This section does not confer a right on a third party to enforce a term of a contract otherwise than subject to and in accordance with any other relevant terms of the contract.
(5) For the purpose of exercising his right to enforce a term of the contract, there shall be available to the third party any remedy that would have been available to him in an action for breach of contract if he had been a party to the contract (and the rules relating to damages, injunctions, specific performance and other relief shall apply accordingly).
(6) Where a term of a contract excludes or limits liability in relation to any matter references in this Act to the third party enforcing the term shall be construed as references to his availing himself of the exclusion or limitation.
(7) In this Act, in relation to a term of a contract which is enforceable by a third party—
"the promisor" means the party to the contract against whom the term is enforceable by the third party, and
"the promisee" means the party to the contract by whom the term is enforceable against the promisor."
" a third party may enforce a contract in which the parties intend that he should receive the benefit of the proposed performance and also intend to create a legal obligation enforceable by him (the "dual-intention" test)"
see paragraphs 7.1 (iii) and 7.4 to 7.5 of the report.
"(b) a third party shall also have the right to enforce a contractual provision where the provision purports to confer a benefit on the third party, who is expressly identified as a beneficiary by name, class or description ("the second limb"); but there shall be no right of enforceability if the parties under the second limb where on the proper construction of the contract it appears that the contracting parties did not intend the third party to have that right (the "proviso")."
see paragraph 7.6 of the report and the discussion at paragraphs 7.17 to 7.18 of the report. As the Law Commission said at paragraph 7.17 of the report:
"In general terms it establishes a rebuttable presumption in favour of there being a third party right where a contractual provision purports to confer a benefit on an expressly designated third party". But that presumption is rebutted where on a proper construction of the contact the parties did not intend to confer a right of enforceability."
The Proper Approach to the Interpretation of the Contract
"… the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract."
"….. In construing this provision, as any other contractual provision, the object of the court is to give effect to what the contracting parties intended. To ascertain the intention of the parties the court reads the terms of the contract as a whole, giving the words used their natural and ordinary meaning in the context of the agreement, the parties' relationship and all the relevant facts surrounding the transaction so far as known to the parties. To ascertain the parties' intentions the court does not of course inquire into the parties' subjective states of mind but makes an objective judgment based on the materials already identified course."
"15. When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to "what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean", to quote Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd [2009] AC 1101 , para 14. And it does so by focussing on the meaning of the relevant words, in this case clause 3(2) of each of the 25 leases, in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the lease, (iii) the overall purpose of the clause and the lease, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party's intentions. In this connection, see Prenn [1971] 1 WLR 1381, 1384-1386; Reardon Smith Line Ltd v Yngvar Hansen-Tangen (trading as HE Hansen-Tangen) [1976] 1 WLR 989 , 995-997, per Lord Wilberforce; Bank of Credit and Commerce International SA v Ali [2002] 1 AC 251 , para 8, per Lord Bingham of Cornhill; and the survey of more recent authorities in Rainy Sky [2011] 1 WLR 2900, paras 21-30, per Lord Clarke of Stone-cum-Ebony JSC."
The Application of the 1999 Act to the Facts of the Present Appeals
Ancillary Matters
THE THIRD GROUND OF APPEAL – NEW CONTRACTS
Discussion
"(2) This Act comes into force on the day on which it is passed but, subject to subsection (3), does not apply in relation to a contract entered into before the end of the period of six months beginning with that day."
CONCLUSION
LORD JUSTICE STUART-SMITH
"based on the contention that the absence of any intention to enforce at the collective level must lead one to infer that there was no such intention at the level of individual contracts. Although it is well-established that once a collectively agreed term is incorporated into individual contracts of employment, the intentions of the parties entering into the collective agreement from which it originated are of no relevance to the construction of that term (see Harvey on Industrial Relations and Employment Law , AII at [62] and Hooper v BRB [1988] IRLR 517, CA), Mr Sheldon contends that the express intention disavowing enforceability at collective level (supported by the statutory presumption against enforceability) is a matter to be taken into account in construing the individual contracts. Simply put, the argument (as I understand it) is that the parties to the individual contracts cannot contend that check-off was enforceable by PCS when PCS itself did not contend that it was enforceable." [emphasis added]
"Once incorporated into an individual contract of employment, a provision which owes its origin to a collective agreement, falls to be construed strictly in accordance with the rules of construction applicable to contracts. In consequence evidence may not be adduced as to what the parties to the collective agreement actually meant at the time of agreeing the collective term which has become imported into the individual contract of employment nor may any subsequent action on the part of the "contracting" parties (except of course an expressly agreed variation of the contract) be employed as evidence that the provision as construed in accordance with the normal rules of contract law, did not mean what it said."
"80.1. First, it presumes that the intentions at collective level are relevant to construing the intentions of the parties (which are different from those at collective level) to the individual contracts. That is not correct, as is made clear in Hooper.
80.2. Second, it presumes that any intention that PCS had at collective level must necessarily be consistent with the intentions (of different parties) to be construed at the individual contract level. However, there does not appear to be any reason why that should be so. A collective agreement may contain many provisions, few of which might confer any direct benefit on the union itself. Whilst the union may be content with the non-enforceable status of that agreement generally, it does not follow that individual employees, into whose contracts collectively agreed terms have been incorporated, must have intended PCS not to be able to enforce those terms which did confer a benefit on the union. It is advantageous to the employees that PCS can directly enforce those arrangements since the employees then have the security of knowing that their union subscriptions will continue to be paid uninterrupted."
LORD JUSTICE UNDERHILL
Section 1 (2)
Section 10 (2)