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Cite as: [1998] UKEAT 36_98_0101

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BAILII case number: [1998] UKEAT 36_98_0101
Appeal No. EAT/36/98

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
             At the Tribunal
             On 1 January 1998

Before

THE HONOURABLE MR JUSTICE CHARLES

MR S M SPRINGER MBE

MRS R A VICKERS



LEICESTERSHIRE MENTAL HEALTH SERVICES NHS TRUST APPELLANT

MRS E PEREIRA RESPONDENT


Transcript of Proceedings

JUDGMENT

Revised

© Copyright 1998


    APPEARANCES

     

    For the Appellants MR D STILITZ
    (of Counsel)
    Messrs Mills & Reeve
    Solicitors
    Francis House
    112 Hills Road
    Cambridge
    CB2 1PH
    For the Respondent MISS S MOOR
    (of Counsel)
    Messrs Thompsons
    Solicitors
    Price House
    37 Stoney Street
    The Lace Market
    Nottingham
    NG1 1NF


     

    MR JUSTICE CHARLES: This is an appeal by the Leicestershire Mental Health Services NHS Trust against a decision of the Industrial Tribunal sent to the parties on 25th November 1997, in which the tribunal upheld the respondent's claim for breach of contract. The respondent is a Mrs Pereira.

    The contract that the tribunal found to exist was that a 'package deal' was agreed between the NHS Trust and Mrs Pereira that on her early retirement she would be paid a lump sum of 25,000 and thus that the NHS Trust would pay to Mrs Pereira the difference between the lump sum due to her under the NHS scheme relating to her pension and 25,000.

    It has never been asserted by the NHS Trust that it had no vires to make of this top-up payment as part of a package deal reached with an employee on an early retirement. It was accepted and asserted that it has made such payments in the past, albeit, not to somebody of the junior level occupied by Mrs Pereira.

    It is apparent that the tribunal were not told the basis upon which the NHS Trust accepted that it had such power, and how in the past decisions to make such payments had been made and authorised, save that we were informed that an assertion was made that such decision could only be made by the Chief Executive.

    We find this lack of detail before the Tribunal surprising, when it is remembered that an issue before the Tribunal was whether the person who Mrs Pereira alleged, and the Tribunal found made the agreement on its behalf, a Mr Coggan, had actual authority to do so. However, the position is that no issue as to vires was raised at the Tribunal or before us, and we, like the Tribunal, proceed on the basis that the NHS Trust which is, as we understand it, a creature of statute, had power to make the payment in the performance of its functions and, in particular, its general day to day management functions relating to its staff, and thus that the NHS Trust looked at from the outside world is no different to many employers.

    In its Notice of Appearance dated 4th July 1997 the NHS Trust do not raise any issue as to Mr Coggan's authority. The defence so set out was that Mr Coggan did not reach the alleged agreement with Mrs Pereira. However, the issue of Mr Coggan's authority was raised and argued before the Tribunal.

    We have not seen any Notes of Evidence relating to the issues of actual or ostensible authority or, indeed, any Notes of Evidence. This, we were told, in part flowed from an indication given earlier in this case by the judge then dealing with it.

    The appeal relates to Mr Coggan's authority. The reasons of the Tribunal are silent as to actual authority, but contain a finding that Mr Coggan had ostensible authority. This is contained in paragraph 21 of their Extended Reasons, which is in the following terms:

    "21. Mr Coggan had ostensible authority to negotiate and agree that with her."

    Paragraph 21 is in the last paragraph of the Extended Reasons under the headings "Facts".

    Before returning to examine the reasons of the Tribunal, we turn to the relevant law. There is and, as we understand it, always was a substantial amount of common ground as to the relevant law and principles to be applied. Before the Tribunal the NHS Trust was represented by Counsel, but not the Counsel who appeared before us today, and Mrs Pereira was represented by a member of UNISON, who also did not appear before us today. We understand that the relevant law (and, indeed, we would expect this to happen,) was put before the Tribunal briefly and certainly Counsel, instructed on behalf of the NHS Trust before us, was able to say that text book passages in relation to the general principles relating to contract law, which are referred to in paragraph 23 of the Extended Reasons, were put before the Tribunal. In any event, and as appears from the principles relating to apparent and ostensible authority referred to below, those tests involve an assessment of a business, or commercial, relationship and, in our judgment, in this context, the views of the lay members of the Tribunal have considerable weight, even though they may not be based on a detailed legal analysis or, indeed, if they are reached without submissions and findings as to legal principles being made to them. It is largely a matter of commercial common-sense.

    Actual authority.

    This is a matter of fact and law, and as Diplock LJ points out in Freeman and Lockyer v Buckhurst Park Properties (Magnal) Ltd [1964] 2 QB 480 at page 502 and 503, the person contracting with a principal through an agent (who he calls the contractor) is a stranger to the relevant agreement, whether express or implied, between the principal and agent and in the nature of things a contractor can hardly ever rely upon "actual" authority of the agent. It follows that where as here a principal asserts that someone does not have "actual" authority to bind the principal to the agreement alleged, it is incumbent on the principal to demonstrate why this is the case. Here, if done properly, this would involve, or would potentially involve, the NHS Trust putting before the Tribunal evidence as to the powers of the NHS Trust to enter into the alleged agreement, any documents relating to the exercise of that power, for example, generally or when it has been exercised before, the terms of Mr Coggan's contract of employment and all documents and oral discussions dealing with, and identifying, the limits of his actual authority. It is common ground before us that this was not done.

    "Apparent" or "ostensible" authority.

    Textbook summaries can be found in Chitty on Contracts, 27th Edition at paragraph 31-055 to 31-057, and in Bowstead on Agency, 16th Edition, Article 74 and the ensuing paragraphs 8-013 to 049. Article 74 in Bowstead reads as follows:

    "Where a person by words or conduct represents or permits it to be represented that another person has authority to act on his behalf, he is bound by the acts of that other person with respect to anyone dealing with him as an agent on the faith of any such representation to the same extent as if such person had the authority that he was represented to have even though he had no such actual authority."

    The opening words of paragraph 31055 of Chitty is in the following terms:

    "Where a person by words or conduct represents to a third party that another has authority to act on his behalf, he may be bound by the acts of that other as if he had in fact authorised them. This doctrine, called the doctrine of apparent or ostensible authority, applies to cases where a person allows another who is not his agent at all to appear as his agent, ..."

    It is thus clear, and common ground, that the representation must be one made by the NHS Trust and that the representation can be made by words or by conduct. Both textbooks refer to Freeman and Lockyer v Buckhurst Park Properties (Magnal) Ltd [1964] 2 QB 480 where Diplock LJ, in particular between pages 502 and 506 describes "apparent" or "ostensible" authority and how it arises. At the bottom of page 503 and going to the top of page 504, he says this:

    "The representation which created "apparent" authority may take a variety of forms of which the commonest is representation by conduct, that is, by permitting the agent to act in some way in the conduct of the principal's business with other persons. By so doing the principal represents to anyone who becomes aware that the agent is so acting that the agent has authority to enter on behalf of the principal into contracts with other persons of the kind which an agent so acting in the conduct of his principal's business has usually actual authority to enter into."

    Then at page 505, dealing with the position of a corporate body, he says this:

    "The commonest form of representation by a principal creating an "apparent" authority of an agent is by conduct, namely, by permitting the agent to act in the management or conduct of the principal's business. Thus, if in the case of a company the board of directors who have "actual" authority under the memorandum and articles of association to manage the company's business permit the agent to act in the management or conduct of the company's business, they thereby represent to all persons dealing with such agent that he has authority to enter on behalf of the corporation into contracts of a kind which an agent authorised to do acts of the kind which he is in fact permitted to do usually enters into in the ordinary course of such business. ..."

    We agree with and adopt paragraph 8-20 of Bowstead on Agency, that the representation made by or on behalf of the principal need not be deliberate. In our judgment, Diplock LJ's use of the word "intended" at page 503 of his judgment in the Freeman and Lockyer case is too narrow and is not reflected by the remainder of his judgment. Alternatively, if the intention of the alleged principal has to be intended, in our judgment, that matter falls to be judged objectively. It seems to us that if a subjective intention was necessary, in many if not most cases there would be and it would be, necessary to show, "actual" authority. Further, in any event, the extent of the usual authority of a person who holds the position of a person who is alleged to have bound the principal does not fall to be assessed by the subjective views of the principal. It follows that the evidence of a purported principal as to the usual authority of people in its organisation, or generally, is not decisive. Also, any subjective intention of the purported principal that was necessary would be that the principal would be bound if it was held by a court or tibunal, to use the words of Diplock LJ, that the agent has authority to enter on behalf of the corporation into contracts of a kind which an agent authorised to do acts of the kind which he is in fact permitted to do usually enters into in the ordinary course of such business.

    The Tribunal's Extended Reasons and reasoning.

    As we have said, the conclusion as to ostensible or apparent authority is in paragraph 21 at the end of the passage entitled "Facts", and no express finding is made as to "actual" authority.

    The preceding paragraphs set out an outline of the history and thus the story which has given rise to the complaint and a summary of the Tribunal's basic factual conclusions and reasons. Of particular relevance and importance to the issue of authority are the following passages:

    (a) Mr Coggan is the Patient Services Manager of the NHS Trust. (Paragraph 2).

    (b) Mrs Pereira was entitled to retire at any time but could continue working to age 65 and she would have been significantly better off if she had stayed. (Paragraph 6.)

    (c) The NHS Trust through its line managers such as Mr Coggan and Human Resources monitored its staff eligibility for early retirement for the purposes of manpower planning, both at the operational level, e.g., recruitment, and Authority wide, e.g., for age profiling and balancing the workforce. From time to time particular initiatives are taken in this respect. (Paragraph 8.)

    (d) Mr Coggan managed five ward managers and the day hospital manager. One of those wards was Charnwood, whose ward manager was Mr John Osborn, they were therefore at different levels, the line managers of the Applicant. Mr Coppel, who represented the NHS Trust before the Tribunal, called Mr Coggan a junior manager; Mrs Bullock, who represented Mrs Pereira before the Tribunal, called him a senior manager, we regard him as a middle manager. (Paragraph 9).

    (e) Sometime in the Summer of 1996, after Mr Coggan had put the idea into his head, Mr Osborn approached the Applicant telling her that Mr Coggan "was doing a package" which she understood to be regarding money and asking if she would be interested. She said she would if the offer was reasonable. He told Mr Coggan that she was interested and arranged for her to see Mr Coggan on 12 August 1996. She told him of her personal circumstances and financial needs. He promised to make enquiries about how much money she might receive. (Paragraph 10.)

    (f) Thereafter Mr Coggan had discussions with Mrs Pereira and approached the NHS Pension Scheme on her behalf. (Paragraphs 11 and 12.)

    (g) The Applicant went to see Mr Coggan again on 29th October 1996. They both had the estimate of retirement benefits. We find that Mr Coggan told the Applicant that she would receive 25,000 inclusive of her superannuation lump sum if she retired. She accepted that offer. He also offered her the opportunity of bank, i.e., casual work after she retired. (Paragraph 12.)

    (h) The Applicant later queried the length of reckonable service used to calculate her pension benefits. She saw Mr Coggan about that on 26 November 1996 and he told her that the amount she was receiving was only a couple of hundred pounds less than the agreed amount. He asked if she would accept the offer. She agreed. (Paragraph 13.)

    It was submitted before us on behalf of the NHS Trust, particularly, we think, on the basis of paragraph 13 of the Extended Reasons, that Mr Coggan was acting as a go-between. We do not accept that that is a fair reading of the Extended Reasons. It is clear that Mr Coggan had to approach the relevant people responsible for managing the NHS Superannuation Scheme to obtain information as to what was payable under that. It would also not be unreasonable for him, as is stated in paragraph 10 to discover what other money might be available to fund the proposed package deal. Paragraph 12, in our judgment, makes it clear that having obtained necessary information, Mr Coggan did enter into the package deal. In our judgment and on a fair reading of the above cited findings, they show that the Tribunal found that the following was the case:

    (1) Mr Coggan's authority and duties included monitoring staff for eligibility for early retirement and in pursuance thereof from time to time he took part in initiatives to this effect.

    (2) It was Mr Coggan who approached Mrs Pereira's immediate manager about the possibility of people for whom he was responsible taking early retirement, pursuant to some form of agreement or package to include matters outside entitlement under the NHS Superannuation Scheme.

    (3) When Mrs Pereira indicated to her immediate manager that she would be interested in "doing a package" on an early retirement, and would be likely to accept such a package if the offer was reasonable, the person who the NHS Trust sent to discuss early retirement with her was a middle manager, Mr Coggan.

    (4) Mr Coggan went to talk to, and to negotiate with, Mrs Pereira in pursuance of his authority and duties referred to in (1) above.

    Given that, in our judgment, a fair and common sense reading of the Extended Reasons, indicates that having heard argument on apparent, or ostensible, authority, the Tribunal concluded, again using the words of Diplock LJ, that Mr Coggan had authority to enter on behalf of the NHS Trust into contracts of a kind which he, as someone authorised to monitor staff eligibility for early retirement and to take part in initiatives in that respect, usually enters into in the ordinary course of such business. The same adaptation can be used of the words used by Diplock LJ at page 503 to 504 of his judgment.

    This is very largely a conclusion on an issue of fact and judgment as to what persons in the position of Mr Coggan and who act as Mr Coggan did in this case, usually have actual authority to do. We repeat that in our judgment the views and conclusions of the lay members of the Tribunal on such an issue after hearing all the evidence has particular weight.

    The grounds of the appeal.

    The first ground advanced was that the Tribunal gives no reasons for its critical finding. In this respect, reliance is placed on Meek v City of Birmingham Borough Council [1987] IRLR 250 and in particular paragraph 8. It is true that paragraph 21 is not linked by express reasoning to the earlier recitation of the facts. However, as appears above, in our judgment, a fair and common-sense reading of the reasons as a whole provides that link and identifies the facts found, and relied on, to reach that conclusion. Put another way, in our judgment, the reasons satisfy the passage in the judgment of Bingham LJ at paragraph 8 of Meek and tell the NHS Trust why it lost. We would go further and state that, in our judgment, this argument advanced on behalf of the NHS Trust falls foul of the quotation of the decision in UCATT v Brain [1981] IRLR 255 from the judgment therein of Donaldson LJ contained in Meek where he says:

    "... I think it would be a thousand pities if these reasons began to be subjected to a detailed analysis and appeals were to be brought based upon any such analysis. This, to my mind, is to misuse the purpose for which the reasons are given."

    The second ground of appeal is, based on an assertion, that there was no finding of "actual" authority. We agree that no such finding was made and do not accept the written arguments put in on behalf of Mrs Pereira that such a finding can be inferred. At this point we pause to comment that we did not call upon the representative of Mrs Pereira and therefore she was not given the opportunity to persuade us against this view orally.

    In our judgment, it is clear that what the Industrial Tribunal did was to ignore this issue of "actual" authority and to pass to the consideration of whether Mr Coggan had apparent or ostensible authority. This is hardly surprising, having regard to the comments of Diplock LJ in Freeman and Lockyer to the effect that someone in the position of Mrs Pereira has no knowledge of the internal workings of the NHS Trust at the relevant level, and the material that was placed before the Industrial Tribunal would have only given them a very limited view of these matters.

    In our judgment, this ground of appeal or argument that a lack of a finding of "actual" authority indicates a finding by the Tribunal that someone in Mr Coggan's position would not have usual authority to bind the NHS Trust is wrong. This is because:

    (a) express "actual" authority is not the same thing as "usual" authority, or put another way, the issue whether someone who is acting in a particular manner in his principal's business usually has "actual" authority to enter into the relevant transaction on behalf of the principal is not the same thing as the issue whether that person has express "actual" authority.

    (b) Distinctions and argument that was put before us, based on the correct proposition that "actual" authority can be implied, and therefore, the lack of a finding as to implied "actual" authority when the issue of "actual" authority had been put before the Tribunal leads to a conclusion that it was accepted by the Tribunal that someone doing Mr Coggan's job would not usually have authority to bind the principal to the contract found by the Tribunal, is, in our judgment, far too sophisticated in the circumstances of this case. In particular this is so when it is remembered in our view it is clear that the Tribunal ignored the issue of "actual" authority.

    (c) An absence of any finding of the former, that is express or implied "actual" authority, therefore does not indicate a conclusion on the latter, that is "usual" authority.

    Misdirection of law.

    As appears above, our reading and interpretation of the Tribunal's Extended Reasons shows that it did not misdirect itself as to the law. It was argued that the manner in which the Tribunal dealt with the decision of Puntes v The Governing Body of Isambard Brunel Junior School EAT/1001/95 - 8th October 1996, indicates that they misdirected themselves as to the law. All that was before the Tribunal was a truncated report of that decision. The full report shows at page 8 that the issues as to authority were a fall-back position. The report also shows that the Tribunal in that case went into them on the basis that the appellant who had been represented, it appears very well, by her father, had no specific legal training.

    Paragraph 25 of the Extended Reasons reads as follows:

    "25. We were referred to by both advocates to the case of Puntes v The Governing Body of Isambard Brunel Junior School EAT 8.10.96 (1001/95). That case is unreported. We only had two articles on it supplied by Mr Coppel and Mrs Bullock, IDS Brief 582 February 1997 and an ACAS source. That was a case for a declaration under section 11 Employment Relations Act 1996 that a temporary promotion was in fact permanent on the basis of a promise by the deputy head teacher that it would be made permanent in the future. We distinguish that case so far as we can without a Report as there appear to have been no intention to create legal relations, there was no acceptance by the teacher, there was no consideration and the deputy head had not authority to enter into a contract which would bind the school governors, nor had the teacher acted to her detriment as a result of what she had been told, anything said was void or uncertainty, and the teacher would have been aware of the deputy head's lack of authority to contract on the governor's behalf."

    We think it is probably fair to say that in that paragraph the Industrial Tribunal are throwing the kitchen sink at that decision in distinguishing it. We would also accept that it is fair to imply from that that the Tribunal had concluded that Mrs Pereira was not aware of any lack of authority on behalf of Mr Coggan, indeed, if she had been so aware, she could not have relied on any representation by words or conduct that he had authority. Such lack of knowledge of the person described by Diplock LJ as the contractor (i.e. here Mrs Pereira) is an integral part of a case based on ostensible authority. In our judgment, the way in which the Tribunal distinguished the Puntes case does not indicate that they misdirected themselves as to the test to be applied in determining whether or not Mr Coggan had ostensible or apparent authority. As we have explained, our reading of their Extended Reasons shows that they complied with the guidance provided by Diplock LJ, although as we understand it, that guidance was not before them.

    The next point raised is no evidence. Here, the NHS Trust referred us to and relied on Piggott Bros. & Co. Ltd. v Jackson [1991] IRLR 309, and in particular paragraph 17. It is apparent from our reading of the Tribunal's Extended Reasons, that we reject this ground of attack. Indeed, it was accepted, very properly in oral submissions on behalf of the NHS Trust, that if we were against them on their earlier points, this ground would not survive as a free-standing ground.

    In the written argument, on behalf of the NHS Trust, it was said that there was no evidence to contradict what is described as the NHS Trust's assertion that Mr Coggan had no actual or usual authority. We have already explained that any such assertion, or evidence, by the NHS Trust as to usual authority would not be decisive. We comment that we also find it difficult to see how this argument could be properly run in the absence of Notes of Evidence, but nonetheless, and in any event, have concluded that the findings of fact made by the Tribunal, as we read their Extended Reasons, show that it had ample evidence to conclude that Mr Coggan had ostensible, or apparent, authority on the tests referred to in the textbooks and the authorities mentioned above. Further, in the written submissions it was said that no evidence was adduced by Mrs Pereira of a representation. We see no reason why there should be any such evidence - where as here, it is conduct of the NHS Trust that is relied on. It is quite clear on the findings reached by the Tribunal that Mrs Pereira thought that she and Mr Coggan, and thus the NHS Trust, had entered into a binding agreement, that of itself is, in our judgment, sufficient. It is not necessary for Mrs Pereira, the contractor described by Diplock LJ, to go through the mental process of thinking that by words or conduct the NHS Trust are representing to me that Mr Coggan has authority to enter into this agreement. It was accepted and found, that she thought that she had done a deal and had entered into a contract. That is enough.

    Perversity.

    Our earlier conclusions show that we reject this challenge. Properly it was accepted by Counsel on behalf of the NHS Trust that this ground could not stand as a free-standing ground if we were against him on earlier arguments.

    Uncertainty.

    In our judgment, the arguments put forward here are self-defeating. The finding has already been referred to and is contained in paragraph 12 of the Extended Reasons:

    "... We find that Mr Coggan told the applicant that she would receive 25,000 inclusive of her superannuation lump sum if she retired; she accepted that offer. ..."

    There is no uncertainty about that. It is quite clear what was agreed. The paragraphs that are relied on to show uncertainty follow that. Again these have already been referred to then at this stage:

    "13. The applicant later queried the length of reckonable service used to calculate her pension benefits. She saw Mr Coggan about that on 26 November 1996 and he told her that the amount she was receiving was only a couple of hundred points less than the agreed amount. He asked if she would still accept the offer. She agreed."

    There is some uncertainty. It follows that that possible variation of the agreement would fall foul of the law as to uncertainty. Additionally, it would seem to us, that it would have been open to the Tribunal to find that there was no intention at that stage to create legal relations. We then pass to the next paragraph relied on in support of the argument on uncertainty, which is paragraph 17, which reads as follows:

    "17. The applicant retired with effect from 3 April 1997. She found that she only received 11,950 and not 25,000 as she expected. She rang Mr Coggan to express her unhappiness at that. He offered to meet her but she declined. He confirmed the previously agreed amount of between 24,000 and 25,000 and could not understand why it had not been paid into her account but would try and sort it out. That conversation was overheard on an extension telephone by the applicant's daughter."

    In our judgment, it is quite clear that the sentence in that paragraph beginning with the words "He confirmed" is reciting evidence given as to what Mr Coggan said in that telephone conversation. We have the greatest difficulty in understanding the submission made that the natural reading of the sentence is that it is referring to a finding by the Tribunal that what had previously been agreed was between 24,000 and 25,000. Suffice it to say, we simply cannot read that sentence in that way.

    It follows, in our judgment, that the uncertainty point fails. What the Tribunal found was the agreement set out in paragraph 12, which we have cited. There is no uncertainty about that. The Tribunal clearly had evidence before them upon which they could base that finding. That point would also survive even if the points we have made as to uncertainty concerning the possible variation of that agreement were not made. There was evidence before the Tribunal to find that the agreement reached between Mr Coggan and Mrs Pereira was that set out in paragraph 12. It is not for us to second guess that finding of fact.

    For all those reasons we dismiss this appeal.


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