HIS
HONOUR JUDGE DAVID RICHARDSON
1.
This appeal concerns part of a judgment
given by the Employment Tribunal sitting in Manchester (Employment Judge
Vinecombe presiding) dated 7 February 2011. The underlying proceedings were
brought by Mr Walter Shumba, Ms Nazleen Amin, Mr Thomas Patterson and Mrs
Angela Buckley (“the Claimants”). They were each dismissed for redundancy on
17 July 2009 by Park Cakes Limited (“the Respondent”). They said that they
were contractually entitled to an enhanced redundancy payment. The Employment
Tribunal rejected that claim. That is the issue with which this appeal is
concerned.
2.
The Employment Tribunal was also
concerned with claims of unfair dismissal by the Claimants. Those claims were
successful; they occupied a substantial amount of the time of the Tribunal
below and much of its reasoning. The Respondent has not appealed against the
Tribunal’s findings of unfair dismissal.
Background
3.
The Claimants all worked as section
managers at a factory in Oldham which produced cakes and other confectionary
products. They were first employed at dates between 1990 and 2001. During
that period – and for some years before - the business was run by a company
within the Northern Foods group.
4.
In respect of most employees at the Oldham factory there was a
recognised trade union, the Bakers Food and Allied Workers Union (“BFAWU”).
Although the Claimants were union members, as section managers they fell within
a class known as “non-negotiated employees”. The union did not have
negotiating rights in respect of them.
5.
In January 2007 the business was sold to the Vision Group and is now
owned by the Respondent. The employment of the Claimants transferred under the
Transfer of Undertakings (Protection of Employment) Regulations 2006
(“TUPE”). In 2009 the Respondent reduced the number of section managers. The
Claimants were made redundant. They asserted that they were entitled to
enhanced redundancy payments. The Respondent denied this entitlement.
6.
It was the Claimants’ case that the right to an enhanced redundancy
payment derived either from an express term or from a term to be implied into
their contracts of employment by custom and practice, established during the
time when Northern Foods owned the business. It was said that Northern Foods
had always paid twice the statutory package (i.e. 2 or 3 weeks’ pay per year of
service) with no cap on the amount of weekly pay, plus an additional £600. The
Tribunal rejected the Claimants’ case on both grounds. On appeal the Claimants
challenges the reasoning and conclusion of the Tribunal only in respect of the
alleged implied term.
7.
We were told that the question whether
the Respondent’s employees were entitled to enhanced redundancy payments based
on the Northern Foods package had a general importance for the Respondent and
for its employees beyond the Claimants in this case. We take it that a
substantial number of employees from the Northern Foods days continue to be
employed by the Respondent.
The law
8.
It is convenient, before turning to the
detail of the appeal, to have in mind the principal authorities which were
cited to the Tribunal and upon which the Tribunal relied. To a significant
extent the Tribunal’s findings are formulated by reference to these
authorities.
9.
The first was Duke v
Reliance Systems Ltd [1982] IRLR 347, EAT, where the employer was
seeking to imply a contractual normal retiring age of 60. Browne-Wilkinson J said
(page 349):
“[T]here was no evidence that the employers' policy of
retirement for women at the age of 60 had been communicated to such employees
in 1978 nor was there any evidence of any universal practice to that effect. A
policy adopted by management unilaterally cannot become a term of the
employees' contracts on the grounds that it is an established custom and
practice unless it is at least shown that the policy has been drawn to the
attention of the employees or has been followed without exception for a
substantial period.”
10.
In Quinn v Calder Industrial Materials [1996] IRLR 12 the
Appeal Tribunal was concerned with a claim by an employee that an enhanced
redundancy scheme, enshrined in a policy of the employer, was a term of his
contract.
11.
Lord Coulsfield, giving the judgment of the Appeal Tribunal, observed
that the law recognised more than one type of implied term. In a case such as Quinn,
where the employee sought to establish that a policy had become a term of the
contract by custom and practice (paragraph 6): –
“The question whether there is an implied term in the present
case is really a different way of putting the question of what terms the
parties have actually agreed. In order to answer that question, it is necessary
to consider the whole circumstances of the formation of the contract and the
parties' actings before, and, even, after, the contract, to gather what terms
they had actually agreed.”
12.
Lord Coulsfield referred to Duke, noted the words “at
least” in the judgment of Browne-Wilkinson J, and continued:
“In a case such as the present, the factors to which
Browne-Wilkinson J referred are likely to be among the most important circumstances
to be taken into account, but they have to be taken into account along with all
the other circumstances of the case. Thus, for example, in our view, the
question is not whether the period for which a policy has been followed is
'substantial' in some abstract sense, but whether, in relation to the other
circumstances, it is sufficient to support the inference that that policy has
achieved the status of a contractual term. Again, with regard to communication,
the question seems to us to be not so much whether the policy has been made or
become known directly to the employees or through intermediaries, but whether
the circumstances in which it was made or has become known support the
inference that the employers intended to become contractually bound by it.”
13.
In Albion Automotive Limited v Walker [2002] EWCA Civ 94
the question was again whether a policy offering enhanced redundancy terms was
contractual. Peter Gibson LJ accepted a submission from counsel to the effect
that the following factors were likely to be relevant in that case (see paras
15 and 18):
“(a) whether the policy was drawn to the attention of employees;
(b) whether it was followed without exception for a substantial
period;
(c) the number of occasions on which it was followed;
(d) whether payments were made automatically;
(e) whether the nature of communication of the policy supported
the inference that the employers intended to be contractually bound;
(f) whether the policy was adopted by agreement;
(g) whether employees had a reasonable expectation that the
enhanced payment would be made;
(h) whether terms were incorporated in a written agreement;
(i) whether the terms were consistently applied.”
14.
Standing back for a moment from these authorities, it is important (we
think) to keep in mind that the fundamental question is the one which Lord
Coulsfield identified in Quinn – namely, whether the
circumstances in which the enhanced redundancy package had been made known or
had become known supported the inference that the employers intended to become
contractually bound by it. It is well established that this question is to be
determined not by an examination of the employer’s private intentions, but by
an objective examination of the circumstances. In Albion the
Court of Appeal did not seek to lay down an exhaustive list of considerations
relevant to that question, still less to attribute weight to individual
considerations.
15.
These were the cases before the Employment Tribunal. Ms Ingrid Simler, QC
on behalf of the Respondent submitted that the true test was whether the custom
or practice was “so universal that no workman could be supposed to have entered
into the employment without looking to it as part of the contract”. For this
proposition she relied on Henry v London General Transport Services
Limited [2002] IRLR 472 at paragraph 28. In that case the question was
whether changes were incorporated into the contracts of individual employees by
virtue of collective bargaining. The parties agreed that the question was
whether this was a custom of the trade, where the test is whether the custom is
“reasonable, certain and notorious”. Pill LJ recorded that agreement in his
judgment at paragraph 28.
16.
We do not accept Ms Simler’s submission.
The formulation which was agreed by the parties in Henry may be
appropriate to the question whether individual employees are bound by, and
entitled to take advantage of, terms reached as part of collective bargaining:
we need express no view on that question. There may be a useful analogy with
“custom of the trade” because collective bargaining is widely operated in many
industries with consequences which are generally understood by employees. It
has no application, however, to the question whether a particular employer is
bound by enhanced redundancy terms which that employer has operated for many
years. There is no useful analogy with cases on custom of the trade. The
question is to be determined in the way in which Quinn and Albion indicate.
The material before the
Tribunal: witness evidence
17.
Given the nature of this appeal it is
necessary to outline the material which the Tribunal received concerning the
Respondent’s practice of paying enhanced redundancy payments during the
Northern Foods era.
18.
The longest serving witness was Mr Roy Streeter, called on behalf of the
Claimants, who had worked for the business since 1978 and became successively a
shop steward and then, from 1996, the BFAWU full time officer with
responsibility for the business. His statement contained the following
evidence. He recalled that what he described as the Northern Foods redundancy
scheme was already in place when he started. He said that he had been involved
in a whole series of redundancy exercises – at least seven – and on each
occasion the company had paid the enhanced package. He said that everyone –
shop floor, supervisory or management, received the enhanced payment. There
was never any question that employees who were being made redundant would
receive a lesser amount. They did not need to negotiate for it; it was offered
automatically.
19.
On the Respondent’s behalf Ms Isabella McGauley gave evidence. She was
head of human resources, employed by the Respondent since 2006 – while the
business was still owned by the Northern Foods Group, but less than a year before
the transfer. The Respondent did not call any management witness to give
direct evidence concerning the enhanced redundancy terms prior to 2006.
20.
Ms McGauley’s statement was to the following effect. She confirmed that
prior to the transfer Northern Foods had in place an enhanced redundancy
payment policy which she said was “non contractual”. She said that the policy
ran across all the businesses within the Northern Foods Group; that it set out
the maximum payable; that there was “a certain amount of flexibility by
management in each business” – even flexibility not to pay if financial
circumstances did not permit. The policy was never systematically provided to
employees; and never communicated to them. She did not accept that it had ever
been applied on an automatic basis. In 2006 she recalled that representatives
were told that enhanced payments were subject to confirmation by the business.
She firmly believed that both management and union regarded the policy as
non-contractual.
21.
Ms McGauley accepted that in 2006
employees were given the enhanced redundancy terms. She said it was because
there was a threatened strike if payments were not made. Mr Streeter denied
that strike action was threatened. This seems to have been the only direct
dispute between them on the evidence.
The materials before the Tribunal: documents
22.
Before we turn to the Tribunal’s reasons,
it is relevant to summarise some documentary material which the Tribunal had
before it.
23.
Firstly, the Claimants had written terms and conditions of employment.
These made no reference to an enhanced redundancy payment. They said, under
the heading “Other terms and conditions of employment” that the Employee
Handbook contained “additional information regarding terms and conditions of employment”.
The Employee Handbook made no reference to an enhanced redundancy payment.
24.
Secondly, there were two documents dating back to the Northern Food days
which either were, or evidenced, agreements between the employers and BFAWU
concerning employees other than supervisors or section managers such as the
Claimants. These were relevant because the Claimants’ case was that the
enhanced redundancy payment applied across the board to all permanent employees
who were compulsorily dismissed for redundancy.
25.
There was an agreement operative from 29 December 1985 which related to
most workers – adult workers, part-time workers, apprentices, juveniles and new
starters. Being a collective agreement it was stated to be “binding in
honour only and not intended to be legally enforceable”, but it would no doubt
form the basis of provisions in the contracts of employees. That agreement was
wide-ranging and covered many issues relating to wages, other allowances, and
other working conditions. It specifically stated that redundancy payments
would be in accordance with the statutory scheme.
26.
There was also an agreement between the
company and BAFWU regarding the employment of temporary workers; the agreement
itself does not seem to have been available, but it was contained in an old
handbook for managers. Mr Streeter placed some reliance on this agreement when
he was cross examined. Clause 10 of that agreement is of some potential
importance. Under the heading “Security of Employment” it provided as follows:
“SECURITY OF EMPLOYMENT
If a job loss situation were to arise the Company would reserve
the right to firstly, remove all temporary employees out of the business and
secondly, to select for redundancy by L.I.F.O. from those permanent employees
with less than 3 years’ service before the need to look for redundancies from
other sectors of the workforce.
In the first nine months of employment the employee would have
temporary status.
Between 9 and 24 months service the employee would have
permanent status and the entitlement to one weeks notice of termination of
employment and 2 weeks pay in lieu of notice.
Between 24 and 36 months service the employee would have
permanent status and would be entitled to a redundancy package of equal to
twice the statutory package with no upper earnings limit plus an additional
£600 ex gratia payment.”
27.
Thirdly, there were documents internal to
the Respondent, prepared for the HR department, not given to employees
generally.
28.
One such document was entitled
“Redundancy non-negotiated employees”. This is a document of particular
importance, because it is common ground that the Claimants were non-negotiated
employees to whom it would apply. The document described itself as a
“redundancy policy”. It dealt with alternative employment and the giving of
notice. It contained a section headed “Redundancy payments”. Under the rubric
of “Entitlements” it set out the enhanced payment for which the Claimants now
contend. It set out a definition of pay. It said that “minimum entitlement” was
one month’s pay. It gave guidance as to benefits – for example, private
medical insurance could be extended for the duration of the notice period.
Later, under the heading “General”, it stated (para 8):
“The above specifies the policy limits to apply to redundancy
packages. In no circumstances should these limits be exceeded without the
prior authority of the Personnel Executive.”
29.
Another document was entitled “Redundancy
– Local Company Schemes”. This too described itself as a policy; but, unlike
the other policy, it expressly stated that it was providing “guidelines”. This
too contained a rubric “Entitlements” setting out the enhanced payment for
which the Claimants now contend. It said, however, that redundancy payments
should not exceed the guidelines except where local agreements currently
existed.
30.
Fourthly, there was a Question and Answer
document prepared at the time of the TUPE transfer. This contained the
following:
“Will current customary rules apply to any future redundancy?
If not will we resort to state entitlement?
A There are no known plans for redundancy. As part of the data
provided to Vision within the sale process they have been made fully aware of
the Northern Foods redundancy terms. They have not indicated any plan for
change.”
31.
Finally, there were numerous documents
which showed that enhanced redundancy payments – at the level of twice
statutory package with no cap - had been made on numerous occasions in the past
during the period when Northern Foods owned the Respondent. These documents
were disclosed by the Respondent.
32.
In 1993 there were two pro-forma redundancy estimates prepared for
employees. The pro formas make provision for redundancy payments to be
calculated on the basis of statutory redundancy entitlement together with
company enhancement. As completed in handwriting, they indeed offered twice
the statutory entitlement with no cap on a week’s pay.
33.
In 2002 there were further redundancy estimates. One refers to and sets
out both a “redundancy calculation” and a “Northern Foods Calculation”. It is
based upon twice statutory entitlement without any cap on earnings. Another
was prepared for a development manager taking voluntary redundancy. It refers
and sets out terms of a “Northern Foods Enhanced Redundancy”. It is slightly
more generous than twice statutory entitlement without any cap on earnings.
34.
In 2004 the Respondent’s then personnel director prepared a redundancy
quotation for a specialist employee – a “critical path co-ordinator”. This
referred to “Enhanced Northern Foods Redundancy Entitlement”. The calculation
is based on twice statutory scheme without any cap on earnings. Four members
of supervisory management were also given quotations for redundancy in 2004
which referred to “Company’s Enhanced Redundancy Payment”. The redundancy
quotations are based upon twice statutory scheme without any cap on earnings.
35.
In 2005 three employees were made compulsorily redundant. The
redundancy calculations do not appear to have survived, but the leaver’s forms
make it plain that enhanced redundancy payments were made to them. The
enhanced payments are multiples of the employees’ weekly pay without any
statutory cap. Without redundancy calculations it is impossible to be certain
that the payments are twice the number of weeks allowed by the statutory
scheme, but the payments are entirely consistent with this being the case.
36.
In 2006 three employees were made redundant: in two cases the redundancy
appears to have been compulsory; in one case voluntary. The letters written to
them make plain that enhanced redundancy payments were made to them, based
again on twice statutory entitlement without a cap on earnings.
37.
It follows that up to the acquisition of the Respondent by the Vision
Group all the documentary evidence suggests that employees were made redundant
on enhanced terms. With the single exception of the development manager, the
formula was twice statutory entitlement with no cap on earnings: in the case of
the development manager the payment was slightly more generous.
38.
The position changed after acquisition by
the Vision Group. Employees who opted for voluntary redundancy received terms
less than the enhanced redundancy terms. But in rounds of compulsory
redundancies employees had been offered the enhanced redundancy terms.
39.
The documentary evidence produced by the Respondent is less clear concerning
the £600 payment. It will be recalled that in clause 10 of the agreement
relating to temporary workers this was described as an “ex gratia payment”.
In 1993 the form used made specific provision for a redundancy severance
payment in addition to the enhanced redundancy payment. One form is completed
with the figure of £600 in handwriting: the other contains no figure. In 2002
the letters and estimates do not refer to payment of £600: notice periods,
however, are particularly generous, and the development manager was paid more
than twice the number of weeks allowed for in the statutory scheme. In 2004
there is no reference to a payment of £600 in the surviving documents relating
to the critical path co-ordinator; but each of the other four employees
received an additional payment of £600 - described as “ex-gratia severance
payment of £600” and a “one off payment” - said to be dependent on working normally
up to the agreed date of termination. In 2005 there is no reference to a
payment of £600. In 2006, however, by which time Ms McGauley was employed by
the Respondent, the sum of £600 was paid to each of three employees, described
as a “severance payment”.
The Tribunal’s reasons
40.
As we have said, the Tribunal’s reasoning
largely dealt with the unfair dismissal claims. Its reasons concerning the
alleged enhanced redundancy term are to be found in paragraphs 65 to 78 (which
set out findings of fact, on which we have already drawn in this judgment) and
in paragraphs 97 to 110.
41.
The Tribunal held, correctly, that the
burden of proving that there was an implied term of the contract and a breach
of it rested upon the Claimants. The Tribunal cited Quinn and Albion . It continued as follows: –
“105. The Tribunal was satisfied that there was no formal policy
giving rise to the payment of the enhanced redundancy pay to which the
claimants say they were entitled. The Tribunal was also satisfied that the ‘guideline’
documents were not drawn to the attention of employees nor was any document or
policy indicating that the employees were entitled to an enhanced redundancy
payment.
106. Enhanced redundancy pay had been paid to employees in the
past, although it was not clear on how many occasions it was paid, but the
Tribunal was unable to infer that it was paid without exception. If there was
a policy entitling employees to an enhanced redundancy payment there would be
no requirement for guidelines. The existence of documents giving managers a
discretion to make enhanced redundancy payments within certain limits infers
that firstly, the enhanced redundancy payment sought by the claimants was not
the ‘normal’ payment and secondly that an enhanced payment would not be made on
every occasion.
107. The Tribunal was not satisfied that payments of the
enhanced redundancy pay claimed by the claimants was paid automatically. Miss
McGauley was involved in the collective consultations prior to the transfer of
the business to the respondent. It is clear from the documents that the
Tribunal were referred to that there were discussions on redundancy terms. If
there had been a contractual entitlement to enhanced terms such discussions
would be otiose.
108. Undoubtedly the claimants had an expectation that they
would receive an enhanced redundancy payment because they were aware that other
employees had received enhanced payments. However the Tribunal agreed with Mr
Choong’s submission that this expectation was not based on any agreement or
policy drawn to their attention or indication from the respondent that it
intended to be contractually bound to pay an enhanced redundancy payment.
109. Accordingly the Tribunal concluded that a policy relating
to the payment of enhanced redundancy payments had not been drawn to the
attention of the claimants nor was it satisfied that enhanced redundancy
payments had been paid to redundant employees in the past without exception.
110. The claimants have not proved on the balance of probabilities
that there was an implied term entitling them to an enhanced redundancy payment
and their claim fails and is dismissed.
The appeal - preliminary
42.
There is an appeal to the Employment
Appeal Tribunal only on a question of law, and Mr Charles Prior started with
the difficulty that the Employment Tribunal cited principles of law derived
from the leading cases. He put his appeal in two ways. He argued that the
Tribunal reached some conclusions which were impermissible – perverse, he would
say, in the true legal sense. He also argued that, while the Tribunal directed
itself correctly in law, it did not apply the law correctly.
43.
The limits of a perversity appeal are
well known. A perversity appeal is essentially a complaint about the Tribunal’s
findings of fact (or sometimes its evaluation of those facts). Because
Parliament has expressly provided that there is to be an appeal to the Appeal
Tribunal only on a question of law, there is only the most limited scope for
such an appeal. Thus in the leading case, Yeboah v Crofton
(2002) IRLR 634 at para 93 Mummery LJ said: -
“Such an appeal ought only to succeed where an overwhelming case
is made out that the Employment Tribunal reached a decision which no reasonable
tribunal, on a proper appreciation of the evidence and the law, would have
reached. Even in cases where the Appeal Tribunal has "grave doubts"
about the decision of the Employment Tribunal, it must proceed with "great
care", British Telecommunications PLC –v- Sheridan [1990] IRLR 27
at para 34.”
44.
He explained (paras 94 and 95):
“Over the years there have been frequent attempts, consistently
resisted by the Employment Appeal Tribunal, to present appeals on fact as
questions of law. The technique sometimes employed is to trawl through the
Extended Reasons of an Employment Tribunal, selecting adverse findings of fact
on specific issues on which there was a conflict of oral evidence, and
alleging, without adequate particulars, supporting material or even proper
grounds, that these particular findings of fact are perverse and that therefore
the overall decision is perverse. An application is often made to obtain the
notes of evidence made by the chairman in the hope of demonstrating that the
notes are silent or incomplete on factual points, that the findings of fact
were not therefore supported by the evidence and that a question of law
accordingly arises for the determination of the Employment Appeal Tribunal.
Inevitably there will from time to time be cases
in which an Employment Tribunal has unfortunately erred by misunderstanding the
evidence, leading it to make a crucial finding of fact unsupported by evidence
or contrary to uncontradicted evidence. In such cases the appeal will usually
succeed. But no appeal on a question of law should be allowed to be turned into
a rehearing of parts of the evidence by the Employment Appeal Tribunal. I am,
of course, well aware that this is easier said than done, especially when, as
here, neither side was legally represented on the first level of appeal. As the
Employment Appeal Tribunal was well aware, unrepresented litigants have
understandable problems in separating questions of law from proof of facts and
in distinguishing the making of legal submissions from submissions of fact,
even giving evidence in the course of submissions.”
45.
We need to say a word about the procedure
which has been followed by the parties in connection with this aspect of the
appeal. It became clear after service of the Notice of Appeal and the Answer
that there were disputes between the parties as to whether certain findings of
the Tribunal were in accordance with the evidence below. The Claimants’
solicitors were ordered to provide a schedule of that which appeared to be in
dispute; there were some 26 entries on it; the Respondent’ solicitors
responded; and the Employment Judge, when consulted, accepted the responses put
in by the Respondent’s solicitors on 17 items, regarding the rest as
essentially submissions. The appeal came on for hearing; there was still no
unanimity, the Claimant remaining in disagreement. The appeal was adjourned
for the Employment Judge’s notes to be provided, and he has provided them.
46.
Even by the time of the hearing the
Employment Judge’s notes remained the subject of disagreement. All the parties
did, by way of preparation for the hearing, was to put in the bundle lengthy
notes of all the evidence at the Tribunal hearing – which was concerned, as we
have said, to a large extent with issues of unfair dismissal. This is not a
satisfactory procedure. The items in dispute having been identified and dealt
with serially by the Employment Judge, the notes of each side relevant to those
issues should have been separately identified and set out, issue by issue, so
that each dispute could be followed. Having heard the appeal we do not think
any of the disputes over evidence are central to its resolution: indeed they
were relied on only to a limited extent by either advocate. But the volume of
indigestible documentation was a costly and unnecessary inconvenience. It was
compounded by the inclusion, within the appeal bundle, of a very substantial
quantity of material which had been relevant to the issue of unfair dismissal
before the Tribunal but which was irrelevant to the issue under appeal. It is
always helpful to the Appeal Tribunal if papers are prepared and agreed so as
to exclude that which is plainly irrelevant and unnecessary.
Payment without exception
47.
The principal attack by Mr Prior was upon
the Tribunal’s conclusion, in paragraph 106 of its reasons, that:
“Enhanced redundancy pay had been paid to employees in the past,
although it was not clear on how many occasions it was paid, but the Tribunal
was unable to infer that it was paid without exception.
48.
Mr Prior submits that the only finding
open to the Tribunal on the evidence was that every redundancy during the
Northern Foods era had led to payment in accordance with the Northern Foods
redundancy terms without exception. He says (1) Mr Streeter’s evidence was
unequivocally to this effect and he was not cross-examined upon it; (2) Mr
Streeter’s evidence derived considerable support from documents produced on
disclosure; (3) the Respondent adduced no evidence at all of any exception in
the Northern Foods era; (4) Ms McGauley agreed in cross examination that prior
to the transfer the non-negotiated employees (such as the Claimants) always
received the Northern Foods redundancy terms.
49.
Ms Simler QC for the Respondent says that the Tribunal was entitled to
doubt whether enhanced redundancy pay was paid without exception. She relies
on the 1985 agreement, which provides for most workers to receive statutory
redundancy pay, and makes no mention at all of enhanced redundancy pay. She
accepts that there was no explicit assessment of Mr Streeter’s evidence: she
says it is only possible to infer that Mr Streeter was not regarded as a
reliable witness. She prays in aid cases on perversity, such as Neale v
Hereford and Worcester County Council [1986] IRLR 168, Piggott
Bros v Jackson [1991] IRLR 39 and Stewart v Cleveland Guest
(Engineering) [1994] IRLR 440 and Yeboah v Crofton from
which we have already cited.
50.
On this question the Appeal Tribunal is not unanimous. We shall set
out, in paragraphs 51 - 59 the conclusions of His Honour Judge Richardson and
Baroness Drake. We shall then set out in paragraphs 60 to 66 the conclusions
of Mr Mallender.
51.
The Majority. In our judgment the evidence of Mr Streeter was of
critical importance on this issue. He was successively a shop steward and the
full-time union representative throughout the period in question. The factory
was fully unionised. He indeed said in the clearest terms that the enhanced
payment was paid across the board throughout his time without exception. Given
his position, if an exception was made to the payment of enhanced redundancy
terms it is extremely unlikely – we would say virtually inconceivable - that he
would not know about it. It would have been a matter of great controversy. It
is true that he primarily represented shop floor staff rather than management;
but it was not and is not suggested that there was any significant difference
in practice as regards the two groups; and, as we have seen, the supervisory
staff such as the Claimants were his members.
52.
Mr Streeter’s evidence – that the payment was made without exception –
derives support not only from the documents concerning payment during the
period 1993 to 2006 but also from clause 10 of the agreement regarding the
employment of temporary workers, from which we have already quoted. To our mind
this provision only makes sense if it was recognised on both the management and
union side that permanent workers were entitled to an enhanced redundancy
package. It strongly supports his evidence that enhanced payments were made
without exception during the Northern Foods era, at least from the time of this
agreement. It is difficult to envisage any circumstances in which the
Respondent’s management would accept the language of entitlement in this
agreement if it did not, as a matter of practice, at the time of this agreement
always make enhanced payments on redundancy to permanent workers. The Tribunal
referred to clause 10 in its findings of fact, but did not return to it in its
conclusions.
53.
There is no finding in the Tribunal’s reasons as to whether it
considered Mr Streeter an honest and reliable witness. If he was an honest and
reliable witness, then the evidence as to what happened on the ground prior to
2007 was all one way: Ms McGauley agreed that the enhanced payment was paid in
a round of redundancies during 2006; Mr Streeter said that it was paid on all
previous occasions (and the Claimants gave evidence that they had not heard of
any exceptions during their employment). We do not consider that the Tribunal
was, for the most part, faced with a conflict of evidence on this issue between
Ms McGauley and Mr Streeter. Ms McGauley was not employed until the very end
of the relevant period, and the Respondent called no evidence on this question
from any member of management or employee who was employed prior to 2006.
54.
The Tribunal made no explicit assessment of Mr Streeter’s evidence.
There are, we think, two possibilities: one is that they were unsure of his
credibility and reliability, but gave no reasons. The other is that they
overlooked the importance of his evidence and made a finding which really
cannot stand with his evidence. If the former were the case, the challenge
would be to the adequacy of the Tribunal’s reasoning. If the latter, the
challenge is properly a perversity challenge.
55.
We have found ourselves asking why the Tribunal has not dealt with Mr
Streeter’s evidence in its conclusions. It said that it was “unable to infer”
that payment was made without exception. But this was not wholly or mainly a
question of inference, since it was Mr Streeter’s evidence that payment was
made without exception, and there was no evidence to the contrary. We have
reached the conclusion that the Tribunal overlooked the central importance of
Mr Streeter’s evidence on this question; this is why it said it was “unable to
infer” that the question whether payment was made without exception, rather
than making an assessment of his evidence. In our judgment the question
whether payments had been made during the Northern Foods era was not wholly or
even mainly a question of inference; the evidence all pointed to payment being
made without exception; and it was not rational for the Tribunal to reject the
Claimants’ case by saying that it was “unable to infer” that payment was made
without exception without addressing and assessing Mr Streeter’s evidence. We
conclude that the Tribunal did not have a rational basis for rejecting this
part of the case for the Claimants. In our judgment the Tribunal should have
proceeded on the basis that for many years during the Northern Foods era
enhanced redundancy payments were made without exception.
56.
Does this amount to an error of law? We consider that it does. The
issue was one of great significance in the context of the case. The Tribunal
has not set out any rational basis for rejecting the evidence that payment was
made without exception, and we cannot see any. The burden of proof was of
course upon the Claimants: but the Claimants brought evidence capable of
discharging that burden; and it required to be rationally assessed. We keep in
mind also that the question of entitlement to enhanced redundancy payment was
not the main issue in the case, and that the Tribunal was faced with a great
deal of oral and documentary evidence concerning the three claims of unfair
dismissal; this makes the Tribunal’s error understandable and puts it in
context, but in our judgment it remains an error.
57.
Mr Mallender, as we shall see, places significance on the fact that the
additional sum of £600 was not or may not have been paid on every occasion. We
accept that the Tribunal might legitimately have drawn a distinction between
the enhanced redundancy terms themselves (which were of great value to
employees) and the additional sum of £600 (variously described as an ex-gratia
or “one off” sum). The Tribunal, however, did not draw this distinction. It
said rather that it was not satisfied that enhanced redundancy pay was paid
without exception. As we have seen, all the documents show that enhanced
redundancy pay was always paid: there is no exception, and we cannot see any
rational basis for doubting that enhanced redundancy pay was always paid.
58.
We should make it clear that we have not decided this part of the case
on the basis that Mr Streeter was not cross-examined on the issue. Mr
Streeter’s evidence was not agreed; at least one or two questions were asked in
cross-examination as to the extent of his knowledge of the redundancy scheme;
there could hardly have been a direct and positive challenge to his evidence
since the Respondent was not in a position to put forward any positive case to
the effect that it did not always pay enhanced terms during the Northern Foods
era. We rest our conclusion on the way in which the Tribunal dealt with the
issue in its reasoning, not on the narrower basis that there was a failure to
cross-examine.
59.
As we have seen, the importance of the
question whether enhanced payments were made without exception is that it is
one of the gateways identified in Duke for the establishment of a
contractual term by custom and practice; and it was considered in Quinn
and Albion to be a factor of considerable importance. Since
we have found that the Tribunal fell into error in this respect, we will have
to assess the significance of this error to the Tribunal’s finding. Before we
do so, however, there are other arguments to address.
60.
The minority (Mr Mallender). The issue before the EAT was whether the Tribunal
came to a perverse decision in holding that Ms McGauley’s evidence regarding
the level of redundancy terms paid in the years prior to the TUPE transfer
was to be preferred to that of Mr Streeter. The Tribunal was not explicit in
providing reasons for this but this Appeal was not on these grounds.
61.
The difference of evidence was
something that the Tribunal had to resolve because the whole case concerning
whether or not there was an implied term depended on it. To find that there
was perversity - given Yeboah v Crofton - is a high hurdle to straddle
and in the judgement of Mr Mallender this case failed to reach that level.
62.
In his view the evidence submitted
by both sides was not of a high standard and the Tribunal cannot be blamed for
that. Evidence was submitted by the Appellant that enhanced terms had always
applied to redundancies (see the witness statement from Mr Streeter) prior to
the TUPE transfer. This conflicted with Ms McGauley’s contention that enhanced
terms were not automatically paid and required prior management approval in
each case.
63.
In the Further and Better
particulars supplied by the Claimants it was clear that the enhanced terms
sought included double statutory redundancy terms and a “further payment of
£600”. In Mr Mallender’s view the evidence about this £600 payment was
important.
64.
The background was as folIows. In
2004 employees who were made redundant were paid an additional sum of £600 and
PILN conditional upon “working normally up to agreed date of termination”. In
2005 the £600 payment was not made and there was no conditional “normal
working” clause attached to payment in lieu of notice. By 2006 the £600
payment was back in but was not dependant on normal working. Thus there was a
variation in redundancy terms at least between 2004 and 2006. This evidence
was available to the Tribunal although again it is not explicitly dealt with in
the reasons.
65.
Finally Mr Hulme’s witness
statement referred to enhanced terms “normally” being paid with the £600
payment. In his evidence Mr Streeter conceded that there were issues with the
£600 payment. To Mr Mallender and one assumes to the Tribunal this did not
seem like evidence of an automatic contractual payment which could become an
implied term.
66.
Standing back from the evidence as
a whole the Tribunal who heard and evaluated the witnesses and reviewed all the
evidence over some 8 days were best placed to make a balance of probabilities
judgement. The Tribunal made a clear finding at clause 107 that “It was not
satisfied that payments of the enhanced redundancy pay claimed by the
claimants’ was paid automatically” and in clause 109 “nor was it satisfied that
enhanced redundancy payments had been paid to redundant employees without
exception”. In Mr Mallender’s view there was no error of law in the Tribunal
coming to these conclusions.
The redundancy policies
67.
On both sides submissions were made to us
concerning the redundancy policies and the Tribunal’s conclusions concerning
them. It will be recalled that the policy entitled “Redundancy non-negotiated
employees” was directly applicable to the circumstances of the Claimants.
68.
Mr Prior attacks the finding in paragraph 105 of the Tribunal’s reasons
that there was no “formal policy giving rise to the payment of the enhanced
redundancy pay to which the claimants say they were entitled”. He submits
that the document was plainly a formal policy and that it contained no
discretion as to the making of enhanced redundancy payments. It set out what
were described as “entitlements” to redundancy payments in precisely the terms
which the Claimants sought – double the number of weeks allowed by the
statutory scheme, with no limit on weekly pay.
69.
Ms Simler says that the Tribunal, in paragraph 7.4, was not ignoring the
document in question; rather the Tribunal was finding that it was a guideline
as opposed to a formal policy requiring management to pay a specific sum. She
submitted that this was a key factor in favour of the Tribunal’s conclusions.
If the policy reserved a discretion to management it was inconsistent with the
existence of an implied term.
70.
We have already described the document entitled “Redundancy
non-negotiated employees”; we must say that on the ordinary use of language it
meets the description of “formal policy”; it is not a permissible use of
language to describe it as anything less than a “formal policy”; and we are critical
of the Tribunal’s use of language at this point.
71.
We do not, however, accept that the Tribunal had overlooked the
document; we think in context that the Tribunal’s meaning, although erroneously
expressed, is clear. They found that the document gave guidelines for the
payment of enhanced redundancy pay: see paragraph 103, and the next sentence of
paragraph 105.
72.
In our judgment this conclusion is not perverse. Although this
document, unlike the other redundancy policy, does not use the word “guidelines”
the last paragraph of the document states that it “specifies the policy
limits”; and there are significant parts of the document which are not
prescriptive. It can be read as a document setting out policy and identifying
the limits within which management may act. We do not accept Mr Prior’s
submission that the Tribunal was perverse in this respect.
73.
Nor, however, do we accept Ms Simler’s submission that the terms of the
policy are decisive of the question whether there was an implied term. This was,
as we have seen, an internal policy. It was not circulated to employees or to
the union. The Tribunal did not make findings as to its provenance: we know
only that it existed by the time Ms McGauley was involved. There was, as we
have seen, evidence that for many years enhanced payments were made without
exception. The terms of the internal policy deserve careful consideration, but
they must be assessed in the context of the evidence as a whole.
74.
Mr Prior then criticises the Tribunal’s
conclusion concerning discussion in collective consultations prior to the
transfer of the business. The Tribunal said that: –
“If there had been a contractual entitlement to enhanced terms
those discussions would have been otiose.”
75.
The discussions to which the Tribunal
refers are exemplified by the question and answer which we have already quoted
– in particular the question as to whether “current customary rules” will
continue. It is of course trite law that on a TUPE transfer (which was
envisaged in this case) the employee transfers with the benefit of existing
contractual terms. It is technically true to say that discussions about it
would not have been necessary.
76.
The Tribunal did not suggest that this
point concerning discussions in collective consultation was in any way decisive
to its reasoning. To our mind it would not be a decisive point. If there had
been an express term of the contract discussions would indeed have been
entirely otiose. But where there was no written entitlement to “current customary
rules” we do not find it surprising that the issue was raised in collective
consultations. While we do not criticise the Tribunal for making this point,
we do not think it is in any way decisive of the issues the Tribunal had to
determine.
77.
Mr Prior next criticises the Tribunal’s
finding in paragraph 108 that:
“The expectation was not based on any agreement or policy drawn
to their attention or indication from the Respondent that it intended to be
contractually bound to pay an enhanced redundancy payment.”
78.
Mr Prior argues that the question and
answer to which we have referred show that the policy was well known; and he
points to the fact that the Northern Food terms had been offered on every
previous occasion – even to one of the Claimants, Mr Shumba, when he was
previously at risk of voluntary redundancy.
79.
In our judgment there is nothing perverse
about this conclusion by the Tribunal. The fact that a policy becomes known to
employees, or has been applied to relevant employees in the past, does not mean
that the policy has been “drawn to the attention” of employees in the sense in
which that expression was used in Duke and Albion.
The Tribunal was entitled to find that the policy had not been drawn to the
attention of employees: its findings of fact in paragraphs 69 and 78 were
sufficient for this purpose.
Outcome
80.
We return to our conclusion, by a
majority, that the Tribunal erred in law in rejecting the Claimants’ case that
enhanced redundancy payments were made without exception for many years during
the Northern Foods era.
81.
Mr Prior submitted that, once granted he has brought home his case that
the policy had been applied without exception by management for a substantial
period, it follows that the Tribunal ought to have found an implied term: he derives
this proposition from Duke, which, he argued, should be read
disjunctively (so that it was sufficient to prove that the policy had been
applied without exception by management). He argued that there was only in
reality one permissible conclusion for the Tribunal.
82.
We reject this argument. It is not the law that every policy which
management consistently applies thereby becomes a term of the contract of an
employee who may potentially benefit from it. It is well understood by
employers and employees alike that employers are entitled to have policies
about a range of matters which are not intended to be, and do not become,
contractual.
83.
As we have already noted, Ms Simler argued that even if enhanced
redundancy payments were made without exception, the claims were bound to fail
because the element of discretion in the documented policy was inconsistent
with the existence of an implied term. For the reasons we have given, we
rejected this argument.
84.
By a majority, we have reached the conclusion that the Tribunal’s error
was a significant one. It was a substantial factor leading to the Tribunal’s
rejection of the Claimants’ case.
85.
The Appeal Tribunal is restricted to consideration of questions of law.
It does not decide disputed questions of fact for itself. It can substitute
its own decision only if it is plain, once the law is applied, what the correct
decision should be. It follows that the claims to enhanced redundancy payments
must be remitted for re-hearing.
86.
We have considered – applying well known criteria set out in Sinclair
Roche & Temperley v Heard [2004] IRLR 763 – whether
remission should be to the same, or a differently constituted, Tribunal. We
have reached the conclusion that remission should be to a differently
constituted Tribunal. As we said at the outset of this judgment, the issue has
an importance beyond these three claims. We think it would be unsatisfactory
to remit the matter to the same Tribunal to decide it upon evidence given a
considerable time ago, especially when (as here) it has not expressed findings
on the honesty and reliability of a key witness. We think the better course is
to remit the matter for hearing by a freshly constituted Tribunal which will
hear evidence again. This may, of course, include further evidence on either
side. Assuming that Mr Streeter gives evidence, and assuming that his evidence
is challenged, it will be important to assess his credibility and reliability.
The significance of clause 10 of the agreement concerning temporary workers will
be an important matter to take into account; as will the written policies
produced by the Respondent. The Tribunal should approach the matter entirely
afresh and reach its own conclusions.
