Robertson v British Gas Corp

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					Robertson v. British Gas Corporation Jackson v. Same

Court of Appeal
CA (Civ Div)

Ackner and Kerr L.JJ. and Sir David Cairns

Mr. Robertson and Mr. Jackson had for a number of years been employed, and still
are employed, by the British Gas Corporation as meter readers/collectors. They
brought proceedings in the Staines County Court this year each claiming arrears of
wages, in Mr. Robertson's case £425 and in Mr. Jackson's case £395. The pleadings
started with a three-sentence claim, but they were amended so as to disclose that
what was being in fact sued for was in each case the amount of one month's incentive
bonus pursuant to an incentive bonus pursuant to an incentive bonus scheme.
     Prior to discovery taking place, the employees contended that their entitlement
 to these sums depended upon an implication that there was incorporated into each of
 their contracts a bonus scheme, first by conduct in that at all material times until the
 default complained of they worked and the employer calculated their salaries
 according to the terms of the bonus scheme last agreed and the parties thereby
 mutually consented at each stage to the appropriate variation of the contract. The
 other basis of implication was to give business efficacy to the contracts of
 employment. The defence was a denial that the bonus scheme was any part of the
 contract, that the scheme had been validly determined by six months' notice, and as
 from the beginning of January there was no obligation to pay the bonus -- hence the
 claim which was for the months of January.
     The bonus, of course, is a sizeable one, having regard to the figures which I have
 already mentioned and the fact that those figures relate only to one month. The
 reason for the bonus being a large one is because the salaries themselves were low,
 the bonus representing something like one-third of the total wages hitherto paid.
     When the matter came before the judge, discovery caused both parties to shift
 their ground to some extent, and as a result it was conceded by the employees that
 their individual contracts of employment did not have by implication the bonus
 scheme implied into them, but they claimed that it was an express term of their
 contracts that the bonus scheme be imported.
     It was common ground that the collective schemes which were made between
 the employer and the trade union had in fact no legal force, and thus they could only
 be binding in so far as they had been incorporated in the terms of the individual
     *354 The issue before the judge centred upon what was to be taken as the
 contract. On the one hand it was said, and said by the employees, that the contract
 was to be found in letters written by the employer in 1970 setting out the terms upon
 which each of the employees had been appointed. The employer said that the terms
 of the contract were in each case to be found in the latest statement made by the
 employer pursuant to its obligations under the Contracts of Employment Act 1972,
 as amended by Part II of Schedule 16 to the Employment Act 1975, which placed a
 statutory obligation upon employers within a very limited time to inform their
 employees of the terms of their contract.
    The judge decided that the contract in this case was to be found so far as Mr.
Jackson was concerned in a letter of October 19, 1970, and it was common ground
that a similar such letter had been written about the same time to Mr. Robertson; and
he concluded that that letter imposed an obligation upon the employer to pay the
bonus which was operative between the parties before the six months' notice of
cancellation had been given by the employer to the trade union in June 1981.
    The notice of appeal takes a stand quite clearly on the contention that the
contracts is to be found in the latest statement by the employer pursuant to the
statutory obligations to which I have referred. The last such statement in relation to
Mr. Jackson was on September 1, 1977, and it was common ground that a similar
such statement was provided to Mr. Robertson.
    Mr. Howard's submission quite simply is this, that one starts when considering
what was the contract with the statements provided pursuant to the statutory
obligation, and from there one looks for any other material if it exists, but only on
the basis that the material provided pursuant to the statutory obligation raises the
strongest evidence and can only be displaced if there is stronger evidence available
to the contrary.
    The status of the notice provided pursuant to the Contracts of Employment Act
1972, as subsequently re-enacted in the Employment Protection (Consolidation) Act
1978, has been most recently considered by the Employment Appeal Tribunal in
System Floors (U.K.) Ltd. v. Daniel [1982] I.C.R. 54 where the President Browne-
Wilkinson J., at p. 57, referred to the authority which existed in the Divisional
Court, Turriff Construction Ltd. v. Bryant (1967) 2 K.I.R. 659, where Lord Parker
C.J. said, at p. 662:
         "It is, of course, quite clear that the statement made pursuant to
         section 4 of the Act of 1963" -- that is, the Contracts of Employment
         Act -- "is not the contract; it is not even conclusive evidence of the
         terms of a contract."
    Browne-Wilkinson J. went on to say, at p. 58:
         "It seems to us, therefore, that in general the status of the statutory
         statement is this. It provides very strong prima facie evidence of what
         were the terms of the contract between the parties, but does not
         constitute a written contract between the parties. Nor are the
         statements of the terms finally conclusive: at most, they place a
         heavy burden on the employer to show that the actual terms of
         contract are different from those which he has set out in the statutory
    *355 Browne-Wilkinson J. distinguished, and in our view properly
distinguished, the case in this court of Gascol Conversions Ltd. v. Mercer [1974]
I.C.R. 420, which was a case in which a new contract was negotiated and the offer
was a written offer given in the statutory form and was accepted by a written
statement to that effect with the result that there was between the parties a written
contract to be found on the employers' side with a written offer and on the
employee's side with a written acceptance. The earlier case of Camden Exhibition &
Display Ltd. v. Lynott [1966] 1 Q.B. 555 was not referred to in the course of that
judgment, but this is understandable because in that case there was no other material
but the statutory statement.
    I am quite satisfied, with respect, that Browne-Wilkinson J. has properly stated
the law in those parts of his judgment to which I have referred.
    Mr. Howard says that when Browne-Wilkinson J. said that the statement places
a heavy burden on the employer to show the actual terms of the contract are
different, there is to be implied that an equally heavy burden is place upon the
employee. For my part I do not accept that, nor do I think Browne-Wilkinson J. was
making that observation, because in that case the appeal tribunal considered a
situation in which the employee signed an acknowledgment that he had received the
statement and then considered what was effect. He said, at p. 58: "In our view the
statement is no more than persuasive, though not conclusive, evidence of the date of
    So much for the statutory statement. Now as to the other material. In my
judgment it cannot be disputed, and I do not think in fact it really was disputed by
Mr. Howard, that the letter of October 19, 1970, to Mr. Jackson -- a letter was
written in similar terms to Mr. Robertson -- is the contract. It says in terms:
        "I am pleased to inform you that, in agreement with the North
        Thames Area Joint Council for Gas Staffs, a review of the
        prepayment collection and meter reading organisation within the
        board has been undertaken and, as a result, you have been appointed
        with effect from July 1, 1970, as follows ..."
    Then it sets out the new classification, the new grade and the new salary. Then
there is a reference to the means of payment, and then it goes on to say:
        "You will be required to undertake straight collection or meter
        reading and to maintain standard performance or work a 7 1/2 hour
        day and maintain standard numbers.
        "You will also be required to carry out scattered collection or meter
        reading and, while engaged on scattered work, you will be required to
        work normal office hours, i.e. from 8.45 a.m. to 5.15 p.m. and
        maintain standard numbers; also, you may be required to drive a
        board's vehicle. Authorised timed appointments outside these hours
        will be paid for at overtime rates, or time off in lieu may be taken, in
        accordance with the national agreement."
    Then comes the sentence upon which Mr. Sedley for the employees relied and
upon which the judge based his decision: "Incentive bonus scheme *356 conditions
will apply to meter reading and collection work." That is to be compared with what
is contained in the statutory statement, the material words of which are these:
        "The provisions of the agreement of the National Joint Council for
        Gas Staffs and Senior Officers relating to remuneration and
        increments will apply to you. Any payment which may, from time to
        time, become due in respect of ... incentive bonuses ... will be
        calculated in accordance with the rules of the scheme in force at the
    Mr. Howard's submission is that that statement makes it quite clear if there is not
in force at the time a bonus scheme then no bonus is payable.
    I refer to the words in the contract itself first because it seems to me that prima
facie the best evidence of what are the terms of a contract, where there is written
evidence of it, is to be found in the writing. I read the words which I have quoted
from the letter of October 19, 1970, as clearly laying down as a contractual
obligation that there be an incentive bonus for the job. One then has to inquire where
are the terms and conditions of that incentive bonus to be found. It is common
ground that one goes to the collective agreement made between the employer and
the trade union. As at the commencement of this employment which began a good
deal earlier than the date of this letter there was a collective scheme in existence
from which one could see quite clearly what was the bonus to be paid in the
circumstances which were relevant to this employment; and therefore, when this
employment began, be it in 1963 or taking the date of the new classification,
October 1970, there was a collective scheme which provided the bonus which was
to be paid, if the employee qualified, under this contract. There was thus, in my
judgment, imported expressly into the contract an obligation to pay that bonus.
    From time to time the collective scheme modified the bonus which was payable,
and when that occurred, in my judgment, that variation became a part of the
employer's obligation to pay and the employee's obligation to accept in satisfaction.
Thus the collective scheme provided the tariff which at the material time was the
appropriate bonus. The contract did not, in my judgment, contemplate the absence of
any bonus at all. The collective agreement could, as occurred in this case, be
determined; but that did not determine the tariff which had been imported into the
agreement, first when the agreement was originally made, and then altered as time
went by by the consensual agreement between the trade union and the employer, it
being implied in the contract that that variation should bind the parties to this
contract of employment. It follows, in my judgment, that under the letter of October
19, 1970, that tariff could not be affected by the unilateral determination of the
collective agreement; and accordingly, if that letter was to be the operative
document in relation to the terms of the employment of the employees, the judge
was wholly correct in giving judgment in their favour.
    I turn to the document dated September 1, 1977, the statutory statement of terms.
I do not take the view that the phrase "in accordance with the rules of the scheme in
force at the time" is necessarily inconsistent with the vital words of the letter of
October 19, 1970; I think it can be read in the way in which I have read and
interpreted the letter of October *357 19, 1970. But if I am wrong in that view, then
in my judgment the letter of October 19, 1970, takes precedence over that which is
no more than, albeit strong, evidence of the contract. The contract itself has
overridden any inconsistency that there may be between the two documents. I accept
Mr. Sedley's submission that the statutory statement of terms cannot be used as an
aid to the interpretation of the letter of October 19, 1970. If clarification is required
of the vital phrase which I have read in the letter of October 19, 1970, then it has to
be done with due regard to the principles of the interpretation of written documents.
I know of no principle that makes an employer's statement, years after the contract
was made, of his understanding of what the contract means, albeit provided pursuant
to a statutory obligation, admissible evidence for the interpretation of the contract
itself. There was at some stage a suggestion that variations might have occurred as a
result of the two employees taking no action following the receipt of the documents,
but significantly, not only was that submission not advanced in the court below, it
does not feature in the notice of appeal. My understanding was that Mr. Howard,
when pressed by this court with regard to how that variation could be brought about,
accepted that it was a difficult submission to advance, and I do not propose to deal
with it further.
    There is in the notice of appeal a suggestion that the employees are estopped
from denying that the contract is to be found in the statutory statement of terms.
There was no pleading to this effect -- that is a technical matter -- but, more
important, there are no facts found, in my judgment, which could support what must
be a very difficult case of estoppel to make out. If the statutory statement did not
accurately set out the terms of the contract, then the employer would be in breach of
his statutory obligation, and I find it difficult to accept that a failure to comply with
a statutory obligation could redound to the benefit of an employer and create an
estoppel against the employee from saying the employer got it wrong and that the
contract was as clearly set out in the written statement provided to him on the
confirmation of his employment.
    In my judgment the judge was right, as I have indicated, in concluding that the
contract was to be found in the letter of October 19, 1970, and in concluding further
that the employer could not alter the tariff in relation to the bonus which was
payable by unilaterally determining the collective agreement which it had made not
with the employees but with their union.
    Accordingly, I would dismiss this appeal.


    I agree that this appeal must be dismissed. For my part I do not think that it is
necessary to consider whether there is any difference in effect between the wording
of the assumedly identical letters of appointment (of October 19, 1970, in the case of
Mr. Jackson) and of the statements of the terms of their employment sent to both
employees on September 1, 1977, pursuant to the Contracts of Employment Act
    As regards the authorities to which Ackner L.J. has referred concerning the
statements of terms of employment made under that Act, I agree with what he has
    *358 Turning to the two sets of contractual documents in this case, and without
distinguishing between them, it seems to me to be clear that both of them were
designed to operate in the context of some agreed collective scheme concerning
bonus payments, with conditions (in the case of the first document) and rules in
force (in the case of the second document), whose terms are to be treated as
incorporated into the individual contracts evidenced by these documents. Both of
them proceed on the basis that there will be an incentive bonus and that its amount
and the terms governing it are to be found in an agreed collective scheme in force
from time to time. Such a agreement was in force at the time when both these
documents came into existence, and from time to time the terms of the scheme were
thereafter varied by some further collective agreement between the trade union side
and the employer's side. I agree with Mr. Sedley's submission that, when the terms
of the collective agreements were varied by consent between the two sides, then the
new terms clearly became incorporated into the individual contracts of employment.
But what does not follow, in my view, is that the contracts of the individual
workmen can be varied by some unilateral variation or abrogation or withdrawal
from the collective agreement by either side.
    It is true that collective agreements such as those in the present case create no
legally enforceable obligation between the trade union and the employers. Either
side can withdraw. But their terms are in this case incorporated into the individual
contracts of employment, and it is only if and when those terms are varied
collectively by agreement that the individual contracts of employment will also be
varied. If the collective scheme is not varied by agreement, but by some unilateral
abrogation or withdrawal or variation to which the other side does not agree, then it
seems to me that the individual contracts of employment remain unaffected. This is
another way of saying that the terms of the individual contracts are in part to be
found in the agreed collective agreements as they exist from time to time, and, if
these cease to exist as collective agreements, then the terms, unless expressly varied
between the individual and the employer, will remain as they were by reference to
the last agreed collective agreement incorporated into the individual contracts.
    In the present case this construction is reinforced by the fact that, although it
looks from the documents as though the incentive bonus scheme is merely one small
part of the total terms of the individual contracts of employment, it provides in fact
an integrated and general framework for a very large number of the mutual rights
and obligations of the parties. Indeed, it becomes virtually impossible to determine
what the full terms of these individual contracts of employment are if you once take
away the agreed collective scheme for an incentive bonus as an integral part of these
    For all these reasons I have no doubt that the judge came to the right conclusion,
and I would equally dismiss this appeal.


    I too would dismiss the appeal for the reasons given in the judgments already
delivered, and I have nothing to add.

Appeal dismissed. Leave to appeal refused.

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