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You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Fontana (Gb) Ltd v. Fabio [2002] UKEAT 140_01_0407 (4 July 2002) URL: https://www.bailii.org/uk/cases/UKEAT/2002/140_01_0407.html Cite as: [2002] UKEAT 140_1_407, [2002] UKEAT 140_01_0407 |
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At the Tribunal | |
On 7 May 2002 | |
Before
THE HONOURABLE MR JUSTICE WALL
MR P A L PARKER CBE
MR G H WRIGHT MBE
APPELLANT | |
RESPONDENT |
Transcript of Proceedings
JUDGMENT
Revised
For the Appellant |
MS ANYA PROOPS (of Counsel) Instructed by: Messrs Wragge & Co Solicitors 55 Colmore Row Birmingham B3 2AS |
For the Respondent | MS H GOWER (of Counsel) Instructed by: Messrs Cartwright & Lewis Solicitors 100 Hagley Road Edgbaston Birmingham B16 8TL |
MR JUSTICE WALL
The facts
"11.1 No provision of retirement or death in service benefits will be made by the Company for the General Manager. There is therefore no contracting-out certificate in force under the Pension Schemes Act 1993 in respect of the Employment."
Secondly, clause 18 of the agreement headed: "Former Service Agreements" reads as follows:
"18.1 This Agreement shall be in substitution for any previous letters of appointment, agreements or arrangements, whether written, oral or implied, relating to the employment of the General Manager."
"We find, as a matter of fact, that at the meeting on 25 September 1997 a commitment was given by Fontana that pension contributions would be paid on behalf of [Mr Fabio] and it was not a question of "maybe" but of "how much"."
"9.1 In this respect we prefer the evidence of the applicant to that of Dr Donati who told us that there had been no agreement in principle to pay pension contributions on behalf of the applicant;
9.2 If pension contributions were not to be paid the applicant would have been in receipt of a smaller remuneration package than when he had been employed by Lafarge;
9.3 In 1998 the applicant wrote to Dr Donati to the effect that "When I was employed it was confirmed to me that the Company would contribute to the contribution for the pension ………I would like to know the level of the amount I can count on". Fontana did not reply to this to the effect that it had not agreed to pay pension contributions for the applicant;
9.4 In discussions relating to the 1999 budget for Fontana (GB) Ltd it was accepted that the question of the pension contributions to be paid for the applicant was discussed and that this was something which needed to be resolved;
9.5 The first draft of that budget contains, in a schedule of the employees, an asterisk against the name of the applicant and a note to the effect that his salary was exclusive of contributions which were to be calculated. In the final version of the budget this was amended to read "exclusive of pension contributions". On behalf of the respondent it was argued that this meant that no pension contributions were to be paid. To the contrary, we find that there is no logical explanation for the note being included if it were not to record the fact that it had been agreed that pension contributions would be paid but the amount had not yet been agreed or determined. If, as the respondent contends, no contributions were to be paid, there would have been no need for this to have been mentioned at all.
9.6 The applicant was asked why, if the respondent had agreed to pay pension contributions on his behalf he did not strike out or amend clause 11.1 in his Service Agreement. We accept the applicant's evidence that at that stage in his relationship with Fontana he felt it was neither appropriate nor necessary for him to do so; he was simply relying on their word."
"12 On behalf of Mr Fabio it was argued that in the event of a failure to agree, the amount payable by the employer under the Italian social security system, namely 22.36% should be payable. However, Mr Fabio in his evidence said that he did not expect the full amount to be paid and he would have accepted contributions of between 15 and 20% of his salary. In this case we have no doubt that had the Appellant been operating successfully, the Appellant would have agreed that it should pay pension contributions on behalf of the applicant of not less than 15% of his gross salary as being "reasonable" and we have calculated the amount due to the applicant in this respect accordingly. For the period Mr Fabio was employed (21.5 months plus 3 months notice period) his gross salary was £102.083.00 x 15% = £15,312.45"
The argument on perversity
The "entire agreement" clause
"Any variations of this Agreement which are agreed in correspondence shall be incorporated in this Agreement where that correspondence makes express reference to this Clause and the parties acknowledge that this Agreement (with the incorporation of any such variations) constitutes the entire Agreement between the parties."
"Entire agreement clause
7. The purpose of an entire agreement clause is to preclude a party to a written agreement from threshing through the undergrowth and finding in the course of negotiations some (chance) remark or statement (often long forgotten or difficult to recall or explain) on which to found a claim such as the present to the existence of a collateral warranty. The entire agreement clause obviates the occasion for any such search and the peril to the contracting parties posed by the need which may arise in its absence to conduct such a search. For such a clause constitutes a binding agreement between the parties that the full contractual terms are to be found in the document containing the clause and not elsewhere, and that accordingly any promises or assurances made in the course of the negotiations (which in the absence of such a clause might have effect as a collateral warranty) shall have no contractual force, save insofar as they are reflected and given effect in that document. The operation of the clause is not to render evidence of the collateral warranty inadmissible in evidence as is suggested in Chitty on Contract, 28th ed vol 1, par 12 - 102: it is to denude what would otherwise constitute a collateral warranty of legal effect."
"10 The relevant legal principles regarding the recognition of pre-contractual promises or assurances as collateral warranties may be stated as follows:
(1) a pre-contractual statement will only be treated as having contractual effect if the evidence shows that parties intended this to be the case. Intention is a question of fact to be decided by looking at the totality of the evidence;
(2) the test is the ordinary objective test for the formation of a contract: what is relevant is not the subjective thought of one party but what a reasonable outside observer would infer from all the circumstances;
(3) in deciding the question of intention, one important consideration will be whether the statement is followed by further negotiations and a written contract not containing any term corresponding to the statement. In such a case, it will be harder to infer that the statement was intended to have contractual effect because the prima facie assumption will be that the written contract includes all the terms the parties wanted to be binding between them;
(4) a further important factor will be the lapse of time between the statement and the making of the formal contract. The longer the interval, the greater the presumption must be that the parties did not intend the statement to have contractual effect in relation to a subsequent deal;
(5) a representation of fact is much more likely intended to have contractual effect than a statement of future fact or a future forecast."
Ms Proops relied in particular on paragraph 10(4) of this passage in Lightman J's judgment.
" '15. Acknowledgement
Each party to this agreement now acknowledge that this agreement and its schedules together with the documents referred to in this agreement contain the whole agreement between the parties and that they have not relied upon oral or written representations made to them by other persons, its employees or agents.
17. Previous agreement
All previous agreements between the club and the player are hereby cancelled without prejudice to any rights or obligations which shall have accrued or become due between the parties prior to the date of termination of any previous agreements' "
"Mr Kerr says that these clauses, in particular clause 15, are designed to preclude any factual investigation into the pre-contract history. They are fatal to the contention that the contract here was part oral and part written. I agree that the purpose of an entire agreement clause, such as clause 15, is to defeat any argument that the contract is qualified or supplemented by any oral collateral warranty or oral term existing outside the four corners of the written document. However, I am not persuaded that a clause such as clause 17 has any bearing on oral terms alleged to have been agreed simultaneously with the written contract. In the end, Mr Kerr did not press his reliance on clause 17. He did not need to, in view of the plan terms of clause 15."
(a) contained an entire agreement clause, and
(b) stipulated that the claimant would be entitled to twenty four months of termination.
However, with that written agreement, the defendant also sent a covering letter in which it explicitly stipulated that the original, more limited provision as to notice would still apply. The claimant then followed the procedures for entering into the agreement set out in the letter, and the Court of Appeal held that the original twelve months notice provision remained in force because the covering letter was "intended to be and in the event was a contractual document of offer in terms providing for the overriding of the termination provisions of the printed form of agreement": - see the judgment of Peter Gibson LJ at page 7.
"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"
Ms Gower derived this proposition from the speech of Lord Hoffman in the decision of the House of Lords in Investors Compensation Scheme Ltd -v- West Bromwich Building Society [1998] 1 WLR 896, 912. in which he summarised the principles by which contractual documents are nowadays construed. For present purposes it is, we think, sufficient to record that the proposition identified earlier in this paragraph is the first of the principles identified by Lord Hoffmann.
Uncertainty
"Even where the points outstanding are of relatively minor importance, there will be no contract if it appears from the words used or other circumstances that the parties did not intend to be bound until agreement on these points had been reached. A fortiori parties are not bound by a term requiring outstanding points to be agreed, if that term forms part of an agreement which is itself not binding because it was made without any intention of entering into contractual relations."
"The price or prices to be paid, and the date or dates on which payment is to be made by the purchasers to the Commission for such old tentage shall be agreed from time to time between the Commission and the purchasers as the quantities of the said old tentage become available for disposal, and are offered to the purchasers by the Commission."
"In my opinion there never was a concluded contract between the parties. It has long been a well recognised principle of contract law that an agreement between two parties to enter into an agreement in which some critical part of the contract matter is left undetermined is no contract at all. It is of course perfectly possible for two people to contract that they will sign a document which contains all the relevant terms, but it is not open to them to agree that they will in the future agree upon a matter which is vital to the arrangement between them and has not yet been determined. It has been argued that as the fixing of the price has broken down, a reasonable price must be assumed. That depends in part upon the terms of the Sale of Goods Act, which no doubt reproduces, and is known to have reproduced, the old law upon the matter. That provides in s.8 "the price in a contact of sale may be fixed by the contract, or may be left to be fixed in manner thereby agreed, or may be determined by the course of dealing between the parties. Where the price is not determined in accordance with the foregoing provisions the buyer must pay a reasonable price"; while, if the agreement to sell goods on the terms that the price is to be fixed by the valuation of a third party, and such third party cannot or does not make such valuation, s 9 says that the agreement is avoided. I find myself quite unable to understand the distinction between an agreement to permit the price to be fixed by a third party and an agreement to permit the price to be fixed in the future by the two parties to the contract themselves. In principle it appears to me that they are one and the same thing".
"This case arises upon a question of sale, but in my view the principles which we are applying are not confined to sale, but are the general principles of the law of contract. To be a good contract there must be a concluded bargain, and a concluded contract is one which settles everything that is necessary to be settled and leaves nothing to be settled by agreement between the parties. Of course it may leave something which still has to be determined, but then that determination must be a determination which does not depend upon the agreement between the parties. In the system of law in which I was brought up, that was expressed by one of those brocards of which perhaps we have been too fond, but which often express very neatly what is wanted: "certum est quod certum reddi potest". Therefore, you may very well agree that a certain part of the contract of sale, such as price, may be settled by some one else. As a matter of general law of contract all the essentials have to be settled. What are the essentials may vary according to the particular contract under consideration. We are here dealing with sale, and undoubtedly price is one of the essentials of sale, and if it is left still to be agreed between the parties, then there is no contract."
"The principle to be deduced from the cases is that if there is an essential which has yet to be agreed and there is no express or implied provision for its solution, the result in point of law is that there is no binding contract. In seeing whether there is an implied provision for its solution, however, there is a difference between an arrangement which is wholly executory on both sides, and one which has been executed on one side or the other. In the ordinary way, if there is an arrangement to supply goods at a price "to be agreed", or to perform services on terms "to be agreed", then although, while the matter is still executory, there may be no binding contract, nevertheless if it is executed on one side, that is, if the one does his part without having come to agreement as to the price or the terms, then the law will say that there is necessarily implied from the conduct of the parties, a contract that, in default of an agreement, a reasonable sum is to be paid."
"69 In my judgment the following principles relevant to the present case can be deduced from these authorities, but this is intended to be in no way an exhaustive list:
Each case must be decided on its own facts and on the construction of its own agreement. Subject to that:
Where no contract exists, the use of an expression such as "to be agreed" in relation to an essential term is likely to prevent any contract coming into existence, on the ground of uncertainty. This may be summed up by the principle that "you cannot agree to agree".
Similarly, where no contract exists, the absence of agreement on essential terms of the agreement may prevent any contract coming into existence, again on the ground of uncertainty.
However, particularly in commercial dealings between parties who are familiar with the trade in question, and particularly where the parties have acted in the belief that they had a binding contract, the Courts are willing to imply terms, where that is possible, to enable the contract to be carried out.
Where a contract has come into existence, even the expression "to be agreed" in relation to future executory obligations is not necessarily fatal to its continued existence.
Particularly in the case of contracts for future performance over a period, where the parties may desire or need to leave matters to be adjusted in the working out of their contract, the Courts will assist the parties to do so, so as to preserve rather than destroy bargains, on the basis that what can be made certain is itself certain. Certum est quod certum reddi potest.
This is particularly the case where one party has either already had the advantage of some performance which reflects the parties' agreement on a long term relationship, or has had to make an investment premised on that agreement.
For these purposes, an express stipulation for a reasonable or fair measure or price will be a sufficient criterion for the courts to act on. But even in the absence of express language, the Courts are prepared to imply an obligation in terms of what is reasonable".
"Thus in contracts for future performance over a period, the parties may neither be able nor desire to specify many matters of detail, but leave them to be adjusted in the working out of contracts. Save for the legal implication I have mentioned, such contracts might well be incomplete or uncertain; with that implication in reserve they are neither incomplete nor uncertain."
(1) there was no pensions "market" which would enable the Tribunal to identify the "going rate" for pension provision;
(2) there was no trade, custom or trading practice which would assist the Tribunal in identifying the appropriate level of pension provision.
"……..to be for a further term of 21 years at a rent to be fixed having regard to the market value of the premises at the time of exercising this option taking into account to the advantage of the tenant any increased value of such premises attributable to structural improvements made by the tenant ………"
Megarry J held that where an option was expressed to be exercisable at a price to be determined according to some stated formula, without any effective machinery being in terms provided for working out that formula, the Court had jurisdiction to determine it. The Court was reluctant to hold void for uncertainty any provision that was intended to have legal effect, and where it was accepted that the option was intended to have business efficacy.
"Where there was a practice which, even in formal contracts, left matters such as print run to the discretion of the publisher, the failure to agree on such matters in an informal bargain that otherwise possessed the attributes of a binding contract did not entail that the contract did not exist for agreement would either later be made upon those matters or the publisher would decide."
Conclusion
(1) There is absolutely no definition by the parties of what the level of pension contributions should be.
(2) Even if it were possible to infer into the agreement of 25 September 1997 an implied term that the level of pension contribution would be "reasonable" this does not, in our judgment, avoid the uncertainty. There are numerous pension schemes with many different levels of pension contribution and criteria for payment (some based on performance and length of service) all of which can described as reasonable.
(3) At no point either on 25 September 1997 or afterwards did Mr Fabio attempt to define what he perceived to be a reasonable level of pension contributions. All he did, in 1998, was to ask the Appellant what they thought was a reasonable level, and in discussing the 1999 budget for the Appellant, Mr Fabio went no further than to point out that the level of his pension contributions was unascertained.
(4) There is nothing in the contemporaneous documentation which provides a structure or yardstick by which any outside body could make an assessment of what was "reasonable".
Permission to appeal