lee v gec plessey telecommunications
TRANSCRIPT
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Lee v GEC Plessey Telecommunications
High Court, Queen's Bench Division, (HCQB)
Mr Justice Connell
The High Court held:
The plaintiffs were entitled to a declaration that their contracts of employment
included a term derived from a collective agreement entitling them to enhanced
severance payments in the event of termination of their employment on the ground
of redundancy.
The Court could not accept the defendants' argument that the terms were not
contractually binding upon them because there was no consideration given by the
employees for the introduction of the enhanced terms into the individual contracts.
Where, in the context of pay negotiations, increased remuneration is paid and
employees continue to work as before, there is plainly consideration for the increase
by reason of the settlement of the pay claim and the continuation of the same
employee in the same employment. The situation is similar with an increase in a
severance payment since a redundancy payment is part of the remuneration package.
The employee continues to work for the employer, thereby abandoning any
argument that the increase should have been even greater and removing a potential
area of dispute between employer and employee. The employer has both secured a
benefit and avoided a detriment.
It could not be held that the employers were entitled unilaterally to alter the
plaintiffs' contracts of employment since they had reserved to themselves, in the
statement of terms and conditions issued in 1985, the power to alter individual
contracts of employment unilaterally via general instructions. Terms incorporatedinto a contract as a result of a collective agreement will remain part of the contract
unless and until removed, either by agreement or under specific right found within
the contract. In the present case, there was no agreement as to the removal of the
entitlement to enhanced redundancy terms and there was no clear right in the
contract, as set out in the 1985 statement of terms and conditions, to effect unilateral
adverse variations to the contract. In any event, the contract as it existed on 4 July
1990, when the general instruction purporting to withdraw the enhanced terms was
issued, did not include any right unilaterally to alter the plaintiffs' contracts via a
general instruction. The statement of terms and conditions which took effect in April
1990 omitted any reference to the incorporation of collective agreements or general
instructions and notices. There is a heavy burden upon a party who asserts that the
actual contract is different from the statement of terms and conditions and, in the
present case, there was no evidence to imply a continuation of the previous terms.
The plaintiffs could not be held to have compromised their claims by virtue of an
agreement by the unions in April 1991 to withdraw from litigation against the
defendant employers. The unions could not be regarded as acting as the plaintiffs'
[1993] IRLR 383 at 384
agents for the purpose of settling the litigation since they were not authorised to act,
and did not act, as agents for the plaintiffs in the course of negotiations leading to
the agreement.
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Nor could it be held that the April 1991 settlement was a collective agreement
incorporated into the plaintiffs' contracts of employment so as to alter those
contracts by providing that the enhanced redundancy terms would no longer apply.
As with general instructions, the new contracts of employment did not include the
incorporation clause previously contained in the statement of terms and conditions.
Neither could it be held that the collective agreement constituted a package offer by
the employers to individual employees of a variation in their contract of
employment, which the plaintiffs accepted by their conduct in accepting the pay
rise. In order to determine whether terms of a collective agreement relating to
redundancy matters have been incorporated into individual contracts so as to
become contractually enforceable as between employer and employee, the court
must look for the necessary contractual intent on both sides of the bargain and also
look at the content and character of the relevant parts of the collective agreement. In
the present case, the necessary contractual intent did not exist and the two parts of
the collective agreement relating to redundancy were not both apt for incorporation
into individual contracts. The evidence showed that both sides to the negotiationsunderstood that they were involved in collective bargaining and that no-one believed
that the agreement was binding upon individuals or intended that that should be the
case. Moreover, as to content, the agreement was to restore the previous terms until
31 May 1991 and thereafter to negotiate on any enhanced severance payments.
While the former term was apt for incorporation, the latter was uncertain and not
suitable for incorporation in an individual contract.
124.5
Obiter dicta:
If the employers wished to incorporate in individual contracts a term relating to the
ending of the entitlement to the 1985 redundancy terms and to link this to the payincrease, they could have written to their employees to this effect, making it clear
that acceptance of the increase would also amount to acceptance of the cessation of
such rights.
Cases referred to:
Williams v Roffey Bros and Nicholls (Contractors) Ltd [1991] 1 QB 1 CA
Price v Rhondda Urban Council [1923] 2 Ch 372 HC
Robertson and Jackson v British Gas Corporation [1983] IRLR 302 CA
Cadoux v Central Regional Council [1986] IRLR 131 CS
Hammersmith & Queen Charlotte's Special Health Authority v Cato [1987]
IRLR 483 EAT
Alexander and others v Standard Telephones & Cables Ltd (No.2) [1991] IRLR
286 HC
Walford v Miles [1992] AC 128 HL
Appearances:
For the Plaintiffs:JEFFREY BURKE QC and ROY LEMON, instructed by Robin
Thompson & Partners
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For the Defendants:PATRICK ELIAS QC and RICHARD PAYNE, instructed by
Rotherham & Co
1
MR JUSTICE CONNELL: This is a claim by three employees against their
employer in which they seek a declaration that their contracts of employmentinclude within them a term entitling each of them to enhanced severance payments
from their employer in the event that they should be made redundant.
2
Each of the plaintiffs is a production worker employed by the defendants, GEC
Plessey Telecommunications Ltd, at their premises at Beeston, near Nottingham.
3
This is one of the places where the defendants conduct their business, namely, the
manufacture of telecommunications equipment.
4Each of the plaintiffs has been employed by the defendant company, or by its
predecessors, for a significant period of time. In the case of David Lee the length of
his employment is 26 years. In the case of Melvyn Wood the length of his
employment is 31 years. In the case of Byron Harvey the length of his employment
is 21 years.
5
When the proceedings were commenced in January 1991 there was a fourth
plaintiff, Patricia Ann Lawson. However, during the currency of these proceedings
Mrs Lawson has been made redundant by the defendant company, she has obtained
from her former employers a payment which is satisfactory to her, and she has played no further part in these proceedings. In the course of his opening Mr Burke
(leading counsel for the plaintiffs) told me that the claim on her behalf was
withdrawn.
6
So far as the site at Beeston is concerned, this was operated by the National
Telephone Company more than 100 years ago; and in the early 1960s Plessey took
over the running of the business of manufacturing telecommunications equipment
from that site.
7In the 1970s Plessey had 8,000 or so employees at the site, but the number of
employees there at the present time has reduced to under 3,000. This reduction is in
part due to the formation of a partnership between the two concerns: GEC and
Plessey in 1987 and to the subsequent takeover of Plessey by GEC after a hostile bid
in 1989.
8
Subsequent to the completion of that takeover, GEC were in the driving seat at
Beeston and they continued with a business improvement programme which had
been under discussion for some time before the takeover.
9
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Given the very significant reduction in the workforce to which I have previously
referred, it is not surprising that the individual entitlement to redundancy payment is
a matter of significant consequence to the employees of the defendants at Beeston.
10
Put shortly, what the plaintiffs assert is that over a number of years, and in particularfrom 1970 onwards, whenever a redundancy situation has arisen, the defendants or
their predecessors have paid to all employees made redundant at Beeston a
significantly enhanced severance payment.
11
That is to say, that in every case the employers have paid to the employees a
severance payment which was substantially higher than the statutory minimum
entitlement of that employee under the Employment Protection (Consolidation) Act
1978.
12
The plaintiffs contend that this enhanced payment is the right of each of them as aresult of a specific term to
[1993] IRLR 383 at 385
that effect in their contracts of employment, and they further assert that the
defendants have indicated an intention not to be bound by any such contractual term,
but to make to any of the plaintiffs (and to any other of their employees) who should
be made redundant, a severance payment in a significantly lesser sum than that to
which the plaintiffs claim that they and their fellow employees are entitled under
their contracts of employment.
13In the case of Mr Lee the redundancy payment to which he claims that he would
have been entitled if he had been made redundant in the spring of 1992 is £26,643.
14
So far as the defendants are concerned, their case is that they would only have been
obliged to pay him £8,193 under the redundancy payment terms that they wished to
operate.
15
Accordingly, the difference in Mr Lee's case is £18,450 and in the case of the other
two plaintiffs is £17,898 for Mr Wood and £13,138 for Mr Harvey.
16
It is immediately apparent that the difference between the plaintiffs and the
defendants is very significant in financial terms. Counsel told me in the course of his
opening that there is in existence another action following on this action in which
second action there are 1,324 plaintiffs who seek a declaration in similar terms to the
declaration sought by the plaintiffs in this instant action.
17
It is common ground between the plaintiffs and the defendants in the second set of
proceedings that the result of that litigation will follow the result of this action.18
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Bearing in mind the sums in dispute, and bearing in mind the numbers of persons
affected by the litigation, it is easy to understand why this action has provoked
significant concern in the minds of both the employers and the employees.
19
In short, the plaintiffs say that they have a contractual entitlement to enhancedseverance payments in accordance with a formula which was agreed with the
employers over the years since 1970 and finally in 1985, and they ask the Court to
declare that that is their entitlement.
20
The defendants dispute that the plaintiffs are so entitled, but they agree that if the
contracts do contain such a term, and if their other arguments by way of defence are
defeated, then it is appropriate for the Court to make the declarations sought.
21
Thus there is no issue between the parties as to the appropriate remedy if the
plaintiffs make out their case.
22
The plaintiffs' case can be summarised as follows. They assert that from 1970
onwards the contracts of employment relating to employees of the defendants or
their predecessors at Beeston included a term entitling them to enhanced severance
payments; which term was the subject of negotiation from time to time, until in
October 1985 the defendants agreed that thereafter they would pay to any employee
who became redundant 15 weeks' pay for anybody employed for less than four
years, four weeks' pay for each year of service for anybody employed between four
and 25 years, and for anybody employed in excess of 25 years, 104 weeks' pay.
23
The plaintiffs go on to say that such an entitlement was of significant importance to
all employees because it provided for them a degree of security against the
possibility of unemployment and prompted them to enter into a variety of personal
arrangements, such as mortgages or loans, in reliance upon this entitlement.
24
They assert that there was also value in this agreement for the employers for this
reason. The unions representing the employees were implacably opposed to
compulsory redundancies. By providing substantial redundancy payments the
employers were able to attract volunteers for redundancy whenever a redundancysituation arose and thus the employers were enabled to achieve the desired reduction
in their workforce without the risk of industrial disharmony and, in particular,
without the risk of strike action.
25
The plaintiffs add that these terms relating to severance payments were observed in
every case at Beeston where an employee became redundant until on 4 July 1990, by
means of a general instruction of that date, the defendants purported to withdraw the
previously existing severance terms as from 30 September 1990.
26
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The plaintiffs assert that this was a unilateral action by the defendants, taken without
previous discussion with the employees and certainly without their agreement. They
say that such action was in breach of an important term of their contract of
employment and that they immediately objected.
27
They ask the Court to make a declaration that the terms of their respective
employments include the right to enhanced severance payments in the event of
termination of their respective employments on the ground of redundancy.
28
In the light of these objections by or on behalf of the plaintiffs a temporary
moratorium was in fact agreed between the employers and the employees to the
effect that the old terms for severance payments would still be operated whilst
discussion took place between the two sides, but these discussions came to nothing
and the 1985 redundancy terms were withdrawn at a meeting between the employers
and the relevant unions at Beeston on 10 December 1990.29
The writ in these proceedings followed on 7 January 1991.
30
After the meeting on 10 December 1990 the defendants announced 47 more
redundancies on 17 December 1990 and on the same date they published a notice
setting out the details of how severance payments would be calculated for the future.
31
The result of this calculation was that the employee would receive about half or less
of the amount which he would have received under the 1985 agreement.
32
Proceedings having been issued, another announcement was made on 22 January
1991, this time of 270 redundancies, of which 220 were within the Business Systems
Group.
33
The situation was plainly very unhappy from the point of view of both the employer
and the employees. So far as the company was concerned, they knew that the unions
were implacably opposed to compulsory redundancies and they also knew that any
such redundancies would be likely to lead to a strike.
34
Indeed, by April 1991 the various unions were holding individual ballots concerning
strike action and the results were expected over the weekend of 13 – 14 April 1991.
35
The first ballot to be declared (on or about 10 April, in fact) was that of the transport
drivers, who voted to strike.
36
Further, the employer's representatives realised very well that their new terms would
be unlikely to attract sufficient volunteers to satisfy the 270 requirement.
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37
So far as the employees were concerned, they were dissatisfied with the new basis
for the redundancy calculation and they were anxious to do their best to restore the
1985 terms, which they believed was their right.
38On 28 March 1991, Mr Brian Crossland, the full-time
[1993] IRLR 383 at 386
officer and district secretary of the TGWU, wrote a letter to Mr Malcolm Thompson,
who was then the personnel director of the Business Systems Group of GPT,
threatening to consider seeking an injunction against the defendants if they did not
comply with site-recognised redundancy procedure.
39
On Thursday 11 April 1991 Mr Thompson telephoned Mr Crossland. In the 'phone
call Mr Thompson asked Mr Crossland if he was serious in his letter of 28 March towhich the reply was, in effect: 'Yes'.
40
Then Mr Thompson suggested a private meeting later that day between him and Mr
Carden on behalf of the defendants and Mr Crossland, Mr David de Lacey (who was
the senior shop steward for the Production Group) and Mr David Lee (one of the
plaintiffs in these proceedings and branch chairman of the TGWU) on behalf of the
unions. Mr Thompson suggested that the meeting should be exploratory and secret.
The invitation was accepted and later that evening the five of them met in a private
room at the Post House Hotel, Long Eaton.
41
Much of what transpired at that meeting is common ground. Mr Thompson's
suggestion was that he would be prepared to restore the 1985 redundancy terms for
the 270 workers if he could reach agreement with the unions over the pay claim
which would arise on 1 July 1991.
42
In short, he wanted to link the two matters together and he indicated that if
agreement could be reached on these items, then that ought to provide stability at
Beeston over the ensuing 15 months, ie until the pay claim of 1 July 1992, thereby
enabling management to concentrate on building up the business and enhancing thecompany's reputation.
43
The union representatives were taken by surprise by the attempt to link these
separate matters in the same negotiation and were initially hostile to the idea.
However, they agreed to adjourn the meeting and consider the situation over the
weekend, by which time the results of the strike ballot would be known.
44
In the result, the production workers, like the transport drivers, voted in favour of astrike, but the other groups did not.
45
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The same persons met again on Monday 15 April 1991 at the Post House Hotel at
about 4 pm. The meeting lasted until about midnight. There was much further
discussion on many subjects, including extensive haggling about the size of the pay
increase.
46
Eventually the parties believed that they had a deal, the terms of which were noted
by Mr Carden who subsequently committed them more formally to writing (see core
bundle p.208).
47
The union representatives agreed to report back to their various committees on the
next day, Tuesday 16 April, and in the afternoon of the 16th a meeting of the joint
union committee with their full-time officials took place.
48
This was a very heated meeting. Some union members were upset that their
representatives should have attended a secret meeting with employers without
specific authority. Others were disappointed at the recommendation of a pay
increase of 4.25% when the Retail Prices Index figure at that time was 6% or more.
49
Another very major issue concerned the redundancy situation. The three union
representatives reported to the JUC that the employers had said that over the next 15
months there would be no significant redundancies. The members wanted to hear
more about this for themselves because there was nothing in writing about it and so
management were asked to come along and explain.
50At about 5 pm Mr John Carden and Miss Canning came to the meeting. They were
asked a number of questions. In particular, Mr Marshall, a senior union
representative asked whether there would be any more redundancies, to which Mr
Carden replied that there were no further planned redundancies.
51
Mr Crossland then intervened to reiterate his understanding from the two previous
meetings to the effect that there would be no significant redundancies over the 15-
month period, which understanding was not contradicted either by Mr Carden or
Miss Canning.
52
Thereafter the meeting soon ended on the basis that the union representatives would
report back to their members with a recommendation of acceptance of the proposed
terms.
53
The following day (17 April 1991) Mr Carden sent an employee relations report to
all senior managers detailing what he understood that the joint union committee and
the individual union committees had agreed to recommend to their members (core
bundle, p.208) and the committees communicated their recommendations to their
members in similar terms (bundle 10, p.13).
54
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There followed a number of mass meetings and ballots, as a result of which the
company's offer was accepted by each union affected by the proposal.
55
Over the next few weeks, before 31 May 1991, 270 volunteers for redundancy were
found and were paid in accordance with the 1985 terms as set out in the company'soffer.
56
On 13 June 1991 the company announced a further 41 redundancies in the Network
Systems Group at Beeston.
57
After 1 July 1991 the company paid its employees the extra 4.25%.
58
On 19 July 1991 they announced their new terms of severance payments to take
immediate effect, which terms were significantly less generous than the 1985 terms,in some cases by as much as 80%.
59
On 24 July 1991 they announced a further 400 redundancies in the Business
Systems Group at Beeston.
60
The union representatives were dismayed by this turn of events and on 1 August
1991 an external joint union committee conference was held which was attended by
management representatives, including Mr Carden and Miss Canning.
61
Miss Canning took notes during the course of this conference, which were
handwritten, and subsequently typed out (core bundle, pp.218 to 221).
62
That meeting was acrimonious and was adjourned without any agreement being
reached.
63
On 6 September 1991, Mr Crossland wrote to Mr Thompson placing on record his
dismay at the company's attitude in respect of the redundancies which had been
declared recently and indicating that he was instructing solicitors to continue the
original actions which had been adjourned by consent in April 1991 in the light of
the apparent agreement reached at that time.
64
He stated in his letter that it was clear that the company had broken the spirit of its
offer made in April.
65
Mr Thompson replied on 20 September 1991 to the effect that it was clear to those
involved in the negotiations in April that severance terms for those leaving after 31
May 1991 would be a matter for discussion and negotiation and further assertingthat no guarantee had been given at that time that further redundancies
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[1993] IRLR 383 at 387
would not be declared.
66
External conferences were held on 17 September and 24 September, but no accord
was reached and at a mass meeting on 27 September 1991 the voting rejected strikeaction but supported the continuation of this action and the other related actions.
67
On 15 January 1992 the defendants amended their defence to allege that, by virtue
of agreements made between them and various trade unions acting on behalf of each
of the plaintiffs in April 1991, the plaintiffs had each compromised their claims on
the terms set out in the document dated 17 April 1991 issued by the works
committee and the joint union committee.
68
This was the document (bundle 10, p.13) which recorded the company's offer arisingfrom the meetings of 11, 15 and 16 April, which offer was recommended by the
committees to their members for acceptance and was subsequently accepted by each
union.
69
The document included the terms which restored the 1985 redundancy terms for
those leaving before 31 May 1991 and stated that after that date those terms would
no longer apply. Any enhancement after that date would be the subject of
negotiation.
70
Further, it provided that:
'... the recognised trade unions, singly and collectively, agree to
withdraw from any pending or proposed legal actions against the
company in respect of the current rationalisation programme.'
71
The plaintiffs deny that their claims have been compromised for a number of
reasons which I will consider subsequently, but, in particular, they say that it was a
condition of the agreement then reached that there would be no more than a few
further redundancies for a period of 15 months from April 1991, ie until July 1992.
72
Alternatively, they say that there was a representation by the defendant to that effect
which induced the agreement; or they assert a collateral contract which, by
implication, included a term that the defendant would not seek to enforce the April
1991 agreement in the event that there were more than a few redundancies in the
ensuing 15 months.
73
They go on to say that the redundancies announced in June and July 1991, totalling
441, were plainly contrary to the agreement reached in April and that the defendants
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have thereby repudiated that agreement, which repudiation the plaintiffs have
accepted.
74
Alternatively, these further redundancies, argue the plaintiffs, prevent the defendants
from relying upon the April agreement, which has been rescinded.75
In these circumstances it is important to resolve the issue concerning what was
agreed in April 1991 before deciding upon the legal effect of that agreement.
76
There is no doubt that both the unions and the employers believed that they hadreached agreement in April 1991. The problem is that they are at issue as to what
was agreed.
77
The unions assert that they were assured by Mr Thompson that there would be nosignificant redundancies in the next 15 months. He could not guarantee that there
would be none, but there would only be a few, if there were any at all.
78
Mr Thompson denies this. He says that he was not at that time aware of any plans
for any further significant redundancies, and that in that state of belief he told the
unions that there were no further redundancies planned.
79
Thus the issue is a narrow one: was a firm assurance given or was it no more than an
honest statement of belief?
80
All the witnesses called by the plaintiffs are emphatic that the assurance was given.Mr Thompson's version of events is supported by Mr Carden, who in turn is
supported by Miss Canning as to the events of 16 April 1991.
81
After a lapse of 18 months it is most unlikely that any witness can recollect
accurately precisely what was said at the relevant time, and, in my judgment, a more
reliable conclusion is likely to be reached by looking at the contemporary
documents and the surrounding circumstances that then prevailed.82
I am clear in my conclusion that no witness was in any way attempting to deceive
me or to do other than tell me the truth to the best of his or her ability.
83
Equally I am clear that both sides to the April 1991 discussions were anxious, if at
all possible, to reach agreement because of the pressures that they were under in the
circumstances previously described. In particular, the employers wished, if possible,
to secure 15 months of industrial stability and uppermost in the minds of the union
representatives was the desire to restore the 1985 redundancy terms, especially for
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the 270 employees who were imminently to be made redundant in the Business
Systems Group.
84
Against that background I look at the documents. The most important of these in this
context is the document at bundle 10, p.13, which records the company offer, whichthe works committee and the joint union committee recommended for acceptance,
and the employee relations report from Mr Carden dated 17 April 1991 (core bundle
p.208).
85
They are identical in their essential terms. Neither document makes any reference to
an assurance by the employers that there would be no significant redundancies in the
next 15 months.
86
The claims to enhanced terms of any employees made redundant after 31 May 1991
are to be the subject of negotiations, but nowhere is the assurance relied upon by the
plaintiffs set out.
87
If the assurance was given as claimed, this is a remarkable omission, since
agreement to this effect would have been very important against the background of
the recent redundancy declarations and of the recession.
88
Secondly, the document at core bundle p.213a and 213b is a document drafted byMr de Lacey and designed to explain to union members what the union strategy had
been since December 1990. It was written, Mr de Lacey told me, after the April1991 agreement had concluded and it came into Mr Thompson's possession on 13
June 1991.
89
It makes no mention of any assurance, such as that asserted by the plaintiffs. The
document records the considerable achievement of the unions in pressuring the
company into significantly changing their position on the redundancies, and then
states:
'The Redundancy Payments have been restored until the end of May.
Should management declare future surpluses following that date wewill have to fight again at that time to restore the payments and to
avoid compulsory redundancies.'
90
If the union representatives had achieved the additional promise of no further
significant redundancies for 15 months, such an important achievement would most
certainly have been set out in this propaganda document, as Mr de Lacey described
it.
91
Nor does the union reaction after the redundancy decla-
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[1993] IRLR 383 at 388
rations of June and July 1991 support the plaintiff's case on this point. There was no
allegation of any breach of agreement when 41 redundancies were announced on 13
June and when the 400 were announced on 24 July an external joint union
committee conference was speedily arranged for 1 August.
92
Miss Canning made a contemporary note of what was said and the first paragraph of
that note is significant (core bundle p.218). The union were alleging that the
company had breached the undertaking gained in April 1991 for two reasons,
namely: (a) that further redundancies were announced soon after, and the company
must have known this was going to happen before 31 May 1991 when the enhanced
payment terms ceased; and (b) the company simply announced the new payment
terms, and did not negotiate about them.
93
It is noticeable that, according to the note, the unions were not saying that thecompany were in breach simply by virtue of declaring significant redundancies
within the 15-month period.
94
At this distance of time Miss Canning's note is the best evidence of what was said at
the time and I accept its essential accuracy.
95
In these circumstances my conclusion is that the question of future redundancies
certainly formed an important part of the April 1991 discussions. The unions sought
from the management the maximum comfort on this point that they could hope toachieve, appreciating the reality that a definite commitment to a no-redundancy
situation was something that they could not expect in the prevailing economic
circumstances.
96
They were very worried about the 270 redundancies which were imminent and were
most anxious to achieve the 1985 terms and payments for those employees and they
settled for the best that Mr Thompson could give them – an honest statement of his
understanding and belief at the time. They trusted him and relied on his judgment in
the matter.
97
When the union representatives reported to the joint union committee that the
employers had said that over the next 15 months there would be no significant
redundancies and when Mr Crossland on 16 April reiterated his understanding to
this effect in the presence of Mr Carden and Miss Canning they were not
intentionally misrepresenting what had been said to them, rather they were repeating
their understanding of what the situation would be in the coming months in reliance
upon Mr Thompson's good faith and judgment and realising that they could achieve
no more than that.
98
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Thus Mr Crossland's letter of 6 September 1991 in which he asserted that the
company had broken the spirit of its offer, accurately recorded the correct situation,
namely, that the further redundancies after 31 May 1991 were contrary to what the
unions had been led to expect.
99
They were not, however, contrary to any term in the agreement because no
undertaking, as alleged, had been given.
100
In the same letter Mr Crossland went on to complain that the company had broken
its promise to negotiate concerning enhanced severance payments for the future,
which complaint was further justified by the attitude of the company thereafter when
they declined to make any significant improvement in the terms announced on 19
July 1991.
101
Before leaving this aspect of the matter I must deal with Mr Burke's submission thatMr Thompson, when saying that in April 1991 he was not aware of any plans for
any further significant redundancies, could not reasonably have held that opinion.
102
Mr Burke relies upon a memorandum prepared by Mr Trollope and amended by Mr
John Rivers, the defendant's personnel director, in January 1991 (core bundle pp.204
and 205) which spoke of a further manufacturing rationalisation which would
involve the loss of an additional 1,800 – 2,000 jobs throughout the defendant's
organisation from January 1992 onwards.
103He also relies upon the deteriorating situation in the defendant's business between
January 1991 and March 1991, of which Mr Thompson was aware in April 1991,
and upon the suggestion of a further review of manpower in the Business Systems
Group of the defendants which was the main employee group at Beeston (see bundle
15, pp.64 and 71).
104
However, Mr Rivers told me that the Trollope memorandum was a discussion
document which never reached the stage of becoming a proposal. It was not a plan
and he had not discussed it with Mr Thompson because it was not part of Mr
Rivers's thinking at the time.
105
He confirmed that in March/April 1991 there were no plans for any more
redundancies in the Business Systems Group. It was on 3 June 1991, when the main
board met, that the seriousness of the economic situation was brought home to them,
as a result of which further redundancies were subsequently declared.
106
In April 1991 Mr Thompson knew that the defendant's business was in difficulties,
but he did not then believe that Beeston would suffer any more redundancies
because they were very efficient at that site and because that possibility had not beendiscussed with him.
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107
When he said that he was unaware of any plans for any further significant
redundancies I have no doubt that he was being truthful; and, given his state of
knowledge at that time, his opinion to that effect was held on reasonable grounds.
108Against the background of my conclusions on the facts I pass now to consider the
other issues which require my decision.
109
Originally on the pleadings the defendants denied that an entitlement to an enhanced
redundancy payment formed any part of the individual contracts of employment of
its employees.
110
However, in May 1992 the defendants conceded that the terms of the general
instruction which was issued on 21 October 1985 and which specified the amountsthat the defendants would thereafter pay to an employee leaving due to redundancy,
was, subject to one reservation, a term of each such contract.
111
Nonetheless, they still disputed the plaintiffs' right to the declaration sought on four
separate grounds, which I will deal with seriatim.
112
(1) Consideration
The defendants say that there was no consideration given by the plaintiffs or any
other of the employees of GPT for the introduction of the enhanced terms into theindividual contracts. Thus, say the defendants, such terms were not contractually
binding upon them.
113
To this the plaintiffs give a number of answers. Firstly, they say that individual
contracts of employment specifically included 'the provisions of relevant collective
agreements currently in force and made between and on behalf of the company (or
the Engineering Employers' Federation) and the trade unions concerned'; and
'general instructions and notices'.
114
The best evidence of this is to be found in the statement of terms and conditions of
employment dated 16 September 1985.
[1993] IRLR 383 at 389
115
Thus, say the plaintiffs, as terms and conditions relating to enhanced redundancy
payments were improved from time to time, it was not necessary for the employees
to give separate consideration for each such improvement since there was obvious
consideration for the contract of employment as a whole; and all that was being
changed was one detail of a collective agreement which was specifically
incorporated into each contract.
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116
Secondly, the plaintiffs assert that where an improvement in the employees' terms
and conditions is announced by the employer, the employee gives consideration by
continuing to work on the basis of the improved terms and without seeking a larger
or more significant improvement. Otherwise, say the plaintiffs, the result would be
ludicrous because any employer who announced a pay increase in the context of a
pay claim which is then paid by the employer and accepted by the employee could
thereafter withdraw the pay increase at will and without being liable to a damages
claim for the difference on the basis that there was no consideration for the
increased payment.
117
The consideration is, they say: (a) the employee continuing to work; and (b) not
continuing with his pay claim, so that the employer avoids industrial action and
benefits from the continued services of a known employee.
118110.1, 124.5, 160
In my judgment the arguments advanced by the plaintiffs are correct. Where, in thecontext of pay negotiations increased remuneration is paid and employees continue
to work as before, there is plainly consideration for the increase by reason of the
settlement of the pay claim and the continuation of the same employee in the same
employment.
119
110.1, 124.5, 160
The situation is similar with an increase in the severance payments made to thosewho lose their employment due to redundancy, for a redundancy payment is part of
the remuneration package. The employee continues to work for the employer,
thereby abandoning any argument that the increase should have been even greater
and removing a potential area of dispute between employer and employee. The
employer has both secured a benefit and avoided a detriment (see Williams v Roffey
Bros and Nicholls (Contractors) Ltd [1991] 1 QB 1).
120
The case of Price v Rhondda Urban Council [1923] 2 Ch 372 is plainly
distinguishable from the instant case, since in Price there was no negotiation
between the employer and the employee as to whether married women should beemployed or not, so that there was no extra value to the employer in women teachers
continuing in their employment.
121
Here there were constant negotiations between the employer and the trade unionsconcerning redundancy terms and there was value to the employer in the settlement
of those negotiations from time to time.
122
In any event, the observations of Eve J in Price supra concerning considerations
were obiter since the ratio decidendi of the case was that there was, in truth, no newoffer of employment capable of acceptance by the plaintiff.
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123
Further, in the instant case, if in each individual contract of employment there were
incorporated the provisions of relevant collective agreements agreed from time to
time, as well as general instructions and notices, the contention that each
improvement in the employees' terms requires fresh consideration fails to give
proper recognition to the value to be attributed by the employer to the continuation
of the same workforce in his employ and/or to the possibility of making adjustments
from time to time to the detail of the contracts of employment without having to
issue new contracts whenever adjustments are put into effect.
124
(2) Unilateral alteration
The defendants claim that they had reserved to themselves the power to alter
individual contracts of employment unilaterally, via general instructions. They rely
upon the statement of terms and conditions of employment dated 16 September
1985 which expressly incorporated general instructions and notices into suchcontracts.
125
In this way the defendants claim that they were entitled unilaterally to alter these
contracts, either to the benefit or to the detriment of the employee, and they say that
they did just this via the general instructions of 4 July 1990, which, on its face,
withdrew the terms for redundancy payments then in force (ie the October 1985
terms) as from 30 September 1990.
126
At a meeting between the joint union committee and senior management on 21
November 1990 the employers agreed to observe the old redundancy terms until a
special joint union works conference had been convened, but on 10 December 1990
at an external conference a failure to agree and exhausted procedure was registered
and the company withdrew the 1985 redundancy terms.
127
The plaintiffs' answer to this contention is threefold. First they say that the right to
withdraw unilaterally a term in individual contracts of employment and to replace it
with something less advantageous to the employee cannot exist unless it is plainly
expressed in the contract.
128Secondly they say that on the evidence in this case the entitlement to enhanced
redundancy terms came into the contracts of employment as a result of collective
agreements reached between management and unions which were then incorporated
into the individual contracts and not as a result of general instructions and notices.
Contractual terms thus incorporated cannot be unilaterally withdrawn by a different
route.
129
Thirdly, they say that if the right to make a unilateral adverse alteration to the terms
of the individual contract did exist in contracts accurately recorded by the statement
of terms and conditions dated 16 September 1985 (which incorporated generalinstructions and notices), then such a right did not exist after 9 April 1990; on which
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date a new contract of employment commenced and evidence of which is set out in a
new statement of terms and conditions of employment which was attached to a letter
of 15 January 1990 sent by GPT to its employees at Beeston.
130
This new statement of terms and conditions omitted any reference to theincorporation of general instructions and notices into individual contracts; and
therefore from 9 April 1990 the power to make changes to such contracts via general
instructions and notices ceased to exist.
131
In order to deal with the rival contentions on this issue I look first of all at the
manner in which the enhanced redundancy terms had become terms in the contracts
of employment. This had been via collective negotiation leading to collective
agreement.
132
The consequence of such agreement was then communicated to the individualemployees by general instruction. The instruction, in effect, announced what had
previously been agreed but was not itself the source of the contractual term. Thus
the general instruction of 21 October 1985 informed the employees of the terms
collectively agreed between the unions and the employers, and thereafter these
terms, it is conceded by the defendants, became incorporated into the individual
contracts.
133
110.1
These terms will remain part of the contracts unless and until they are removed,either by agreement or under specific right found within the contract.
134
110.1
Here there was certainly no agreement to their removal; quite the contrary.
Unilateral withdrawal from the collective agreement is certainly permissible, but
such withdrawal is not effective to change the individual contracts, which will still
include the agreed item (see, Robertson and
[1993] IRLR 383 at 390
Jackson v British Gas Corporation [1983] IRLR 302 per Ackner LJ at p.304, 14 –
16and Kerr LJ at p.305, 24.
135
110.1
Further, when looking at the terms of the individual contracts, as set out in the
statement of terms and conditions of employment of 16 September 1985, I do not
find there clearly set out the right to effect unilateral adverse variations to the
contract for which the defendants contend.
136
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Certainly they never asserted any such right at the external conference on 10
December 1990, but contented themselves instead by relying upon their current
business circumstances.
137
The case of Cadoux v Central Regional Council [1986] IRLR 131, referred to by thedefendants is plainly distinguishable because there the rules which the employers
wished to change unilaterally had been made by them unilaterally and not as a result
of any agreement with the trade union.
138
110.1
As to the situation after 9 April 1990, it is plain that new individual contracts of
employment took effect on 10 April 1990. The plaintiffs accurately point out that
the statement of terms and conditions of employment omits any reference to the
incorporation of either the provisions of relevant collective agreements currently in
force or general instructions and notices.
139
These omissions are striking when one remembers, first, that they were included in
the statement of 16 September 1985 and, second, that the new terms and conditions
did make reference to collective agreements (see item 3 salary) and to a company
general instruction (see item 5 – holiday entitlement).
140
Further, Mr Thompson told me that the 1990 statement was put together deliberately
by people skilled in doing so and after legal input. He agreed that the statement was
a fairly comprehensive document touching all the important aspects of the contractof employment.
141
110.1
There is a heavy burden upon a party who asserts that the actual contract is different
from the statement of terms and conditions, and whilst Mr Elias is right to point out
that the terms here under consideration are not terms which are required to be
included in the statement under s.1 of the Employment Protection (Consolidation)
Act 1978 , nonetheless the omission in the circumstances described is, in my
judgment, significant.
142
No doubt the new contracts were part of the defendants' business improvement
programme, but, nonetheless, the statement of terms and conditions was an
important document which had been the subject of detailed consideration.
143
It is argued by the defendants that an intention to change the pre-existing contractual
terms should only be inferred if such an intention is spelt out by a clear statement of
that which is being changed or removed.
144
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I conclude here that the opposite is the case. If a continuation of the previous terms
is to be implied, despite the omissions to which I have referred, there should be
some evidence to justify or support the implication.
145
Here there is none. Mr Rivers was never asked about the point. No-one from thedefendants' legal department or from the Engineering Employers' Federation was
called.
146
Comparing the two statements, in many respects they follow a similar pattern and
individual matters are raised therein in substantially the same order.
147
It is certainly not necessary to imply the continuation of such terms to give meaning
to the statement or to the contract of which it is strong evidence. Looking at the
document on its face there is no reason for any such implication and the conclusion
that I draw is that the new contracts of employment applicable on and after 10 April
1990 did not have general instructions and notices incorporated within them.
148
That being the case, by 4 July 1990 the defendants cannot rely upon any right
unilaterally to effect an adverse variation to the plaintiffs' contracts via a general
instruction, since the contract, as it existed, did not include any such right. For all
these reasons I reject the second ground relied upon by the defendants.
149
(3) The April 1991 agreement
The defendants assert that as a result of the agreement reached in April 1991, whilst
the litigation was pending, the plaintiffs are not entitled to the declaration that they
seek.
150
This, say the defendants, is because the plaintiffs seek a declaration as to their
present legal rights, not their past rights; and, they say, by virtue of the April 1991
agreement, any right to enhanced redundancy payment was extinguished with effect
from 31 May 1991.
151
They go on to say that the April 1991 agreement settled this litigation because the
unions who were parties to it were the plaintiffs' agents for the purpose of effecting
such settlement.
152
In the light of the findings previously expressed, it is clear that there was an
agreement reached between the employers and the unions in April 1991, the
essential terms of which agreement are set out at core bundle pp.208 and N13.
153
Thus the agreement included terms to the effect:
(1) that the 1985 redundancy terms would not apply after 31 May 1991;
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(2) that the recognised trade unions singly and collectively agree to withdraw from
any pending or proposed legal action against the company in respect of the current
rationalisation programme.
154
This agreement was plainly a collective agreement and, therefore, presumed not to be legally enforceable (see s.18 of the Trade Union and Labour Relations Act 1974 ,
now s.179 of the Trade Union and Labour Relations (Consolidation) Act 1992 )
unless the requirements of subsection 1 are satisfied, which they are not here, since
there is no provision in the agreement which states that the parties intended that it
would be a legally enforceable contract.
155
Indeed, the evidence from both sides relating to the agreement was to similar effect.
Mr Thompson described the agreement as a collective agreement couched in
collective language. Mr de Lacey described it as the normal situation, namely, that
agreements reached in this manner are not legally binding. Mr Crossland describes itas no more than collective bargaining.
156
The union witnesses accepted that the term of the agreement relating to the
withdrawal from any pending or proposed legal actions against the company was
intended to include this action, and the first question to be answered is whether the
unions were acting as the plaintiffs' agents for the purpose of settling the litigation.
157
In appropriate circumstances it is possible for a union to act as agent for its
members, and here the union did organise and fund the litigation.
158
On 6 September 1991 Mr Crossland wrote to Mr Thompson on behalf of all trade
unions and employee groups, saying:
'I am therefore instructing solicitors to continue the original actions
for those union members on-site who have been declared redundant.'
159
However, s.30 of the 1974 Act (now s. 178 of the 1992 Act )
[1993] IRLR 383 at 391
provides that collective agreements are made by or on behalf of the trade union.
160
There are significant practical difficulties in the way of the agency argument, eg are
non-union members (of whom there were significant numbers at Beeston) bound by
agreements reached by union representatives? Are employees who disapprove of
some or all of the concluded agreement bound?
161
Most importantly, the evidence in the case does not support the proposition that the
unions were agents for these plaintiffs.
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162
Mr de Lacey stated that the union representatives had no authority to alter their
members' individual contracts. Mr Thompson clearly stated that the April 1991
negotiations were collective negotiations producing a collective bargain. His
understanding of the situation was that the unions would withdraw support for the
litigation and would try to persuade their members not to continue with it. He knew
that instructions had to be obtained from the individuals concerned.
163
The reality of the situation was confirmed by the defendant's solicitors when they
wrote to the plaintiffs' solicitors on 28 August 1991 enquiring of the progress with
regard to obtaining the consent of the various plaintiffs to a compromise of these
proceedings.
164
No such consent was ever obtained and I have no doubt that if any of the plaintiffs
had been asked after April 1991 whether his action had been settled as a result of theagreement reached in that month his answer would have been 'certainly not'.
165
1416
In short, I reject the submission that this litigation was compromised by the April
1991 agreement, since the unions were not authorised to act, and did not act as
agents for the plaintiffs in the course of the negotiations leading to that agreement.
166
(4) Alternatively,
and this is their fourth ground of defence, the defendants say that the April 1991
agreement was a collective agreement which was incorporated into the plaintiffs'
contracts of employment so as to alter those contracts.
167
The essential variations thus effected were that the enhanced redundancy terms
would not apply to those leaving Beeston by reason of redundancy after 31 May
1991 and that the plaintiffs would get a pay rise of 4.25% as from 1 July 1991. This
pay rise was paid to and accepted by the plaintiffs, in accordance with the
agreement, who have thus accepted such variations as terms of their individual
contracts.168
Accordingly, say the defendants, firstly, these terms are incorporated into the
plaintiffs' contracts of employment and they are thus precluded from obtaining the
declaration that they seek, and/or, secondly, by accepting the pay rise which was
paid to them after 1 July 1991 the plaintiffs have, by their conduct, agreed to vary
their contracts which thereafter included the term that the 1985 redundancy terms
would not apply after 31 May 1991.
169
As to the incorporation argument, the defendants point to and rely on the clause in
the statement of terms and conditions of employment dated 16 September 1985
which expressly incorporated the provisions of relevant collective agreements
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currently in force and made between and on behalf of the company (or the
Engineering Employers' Federation) and the trade union concerned.
170
110.1, 1416
I have previously stated my conclusion that the new contracts of employmentapplicable on and after 10 April 1990 did not have general instructions and notices
incorporated within them; and my conclusion is the same concerning relevant
collective agreements.
171
110.1, 1416
The April 1991 agreement was a relevant collective agreement and, accordingly, as
such, it was not incorporated into individual contracts because after 10 April 1990
they no longer included the incorporation clause relied upon. Accordingly, this
argument fails.
172
The second point made by the defendants under this head relies upon the conduct of
the plaintiffs in accepting the pay increase of 4.25% applicable from 1 July 1991 and
paid to them on and after 23 July 1991. In short, the defendants say that the April
1991 agreement constituted an offer by the defendants to individual employees of a
variation in their contract of employment; which variation, say the defendants, was
in two parts which were essentially linked and to be treated as a package.
173
These two parts were: (1) the abandonment of the entitlement to the 1985 enhanced
redundancy terms by all the employees after 31 May 1991; and (2) the pay rise of4.25% from 1 July 1991.
174
Since the plaintiffs accepted the pay rise, the defendants say they cannot avoid the
consequence of their conduct, namely, the loss of the right to enhanced redundancy
terms. They cannot accept the good part of the offer of variation and reject the bad
part, but must be taken to have accepted both parts of the offer.
175
Further, say the defendants, both parts of the offer were suitable, or apt, for
incorporation into the individual contracts because they both related to pay, it beingcommon ground that redundancy pay is pay (see Hammersmith & Queen Charlotte's
Special Health Authority v Cato [1987] IRLR 483 at paragraph 10).
176
124.5, 1416
In appropriate circumstances terms of a collective agreement relating to redundancy
matters can be incorporated into individual contracts and thus become contractually
enforceable as between employer and employee (see Alexander and others v
Standard Telephones & Cables Ltd (No.2) [1991] IRLR 286 at paragraph 29 per
Hobhouse J).
177
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124.5, 1416
In order to decide whether this has occurred in a particular case the court must look
for the necessary contractual intent on both sides of the bargain and also look at the
content and character of the relevant parts of the collective agreement.
178As to intent, the evidence shows that both sides to the April 1991 discussions
understood that they were involved in collective bargaining. I have previously
referred to the evidence which establishes this (eg Mr Thompson described the Post
House talks as collective negotiations leading to a collective agreement and Mr de
Lacey said that these talks involved normal bargaining as between the unions and
management and any agreements reached were not legally binding).
179
So far as the individuals are concerned, Mr Lee spoke of his involvement in seeking
individual consent to the agreement which the joint union committee recommended,
to which some union members agreed and some did not.
180
124.5, 1416
In my judgment it is clear that no-one involved in the April 1991 talks which led to
the agreement, to which I have previously referred, believed that that agreement was
binding upon individuals; and no-one intended that that should be the case.
181
Further, as to its content, the agreement dealt with redundancy terms and/orseverance pay in two places, namely, the restoration of the 1985 terms up to 31 May
1991 and the agreement thereafter to negotiate on any enhanced severance payments.
182
124.5, 1416
Whilst the former term is, as I conclude, apt for incorporation, the latter is not. Such
a term is unenforceable (see Walford v Miles [1992] AC 128 at 136G – 138H), it is
uncertain, and whilst it is appropriate for collective nego-
[1993] IRLR 383 at 392
tiations, it is not suitable for incorporation in an individual contract.
183
On the other hand, the agreement to negotiate carries with it certain importantimplications from the point of view of the employee, who is led thereby to expect a
dialogue directed towards fresh agreement. No individual would have been prepared
to abandon his contractual rights to the 1985 terms without at least the prospect of
negotiating about them thereafter, yet if the defendant's argument be correct, the
term bringing such rights to an end after 31 May 1991 became part of the individual
contracts with no corresponding benefit to the individual employee, save for the pay
increase.
184
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The act of acceptance of the increase is not clearly referable to the abandonment of
the 1985 terms; rather it illustrates the willingness of the individual to accept that
increase in salary for 12 months but no more.
185
In summary, therefore, the necessary contractual intent did not exist in this case; andthe two parts of the collective agreement relating to redundancy were not both apt
for incorporation into individual contracts.
186
Accordingly, in my judgment, neither was in fact incorporated into these contracts
in this case. If it be thought that this conclusion is unjust to the employers on the
basis that their employees are thereby enabled to accept the good and reject the bad,
the answer is that the remedy lay in their own hands.
187
When in January 1990 they wished to introduce new contracts of employment as
from 10 April 1990, they wrote a letter making their intention plain and telling
individuals that consequences would follow from their attendance at work thereafter
(see core bundle p.136).
188
124.5
If they wished to incorporate in individual contracts the term relating to the ending
of the entitlement to the 1985 redundancy terms and to link this to the pay increase,
they could have written to their employees to this effect, making it clear that
acceptance of the increase would also amount to acceptance of the cessation of such
rights. They did not do this and for the reasons previously set out I conclude that thisterm never became any part of the individual contracts.
189
In the light of these conclusions, and particularly those concerning the April 1991
agreement, it is not necessary for me to go on to consider the points relating to
collateral contract, warranty, misrepresentation, repudiation and rescission, which
were fully argued before me. This does not mean that I was not assisted by these
arguments and I would like to place on record my thanks to counsel for the clear and
constructive way in which the arguments on each side were placed before me.
190
Accordingly, there will be a declaration for the plaintiffs as sought, the precise terms
of which declaration can be submitted by agreement or adjudicated upon by me in
the event of disagreement.