THE QUEEN v ON THE APPLICATION OF KWIK-FIT LIMITED [2002] EWCA Civ 512

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
(Mr Justice Elias)
[2002] EWCA Civ 512Case No C/02/0391Venue Royal Courts of Justice, Strand, London WC2
Between
THE QUEENON THE APPLICATION OF KWIK-FIT LIMITEDCENTRAL ARBITRATION COMMITTEE
Before
Lord Justice BuxtonLord Justice LathamSir Denis HenryMR. D. BEAN Q.C. and MR. T. LINDEN (instructed by the Treasury Solicitor) appeared on behalf of the Appellant/Defendant.MR. J. BOWERS Q.C. and MR. J. LEWIS (instructed by Messrs Halliwell Landau, Manchester) appeared on behalf of the Respondent/Claimant.MISS H. MOUNTFIELD (instructed by Messrs Pattinson & Brewer) appeared on behalf of the Transport and General Worker's Union.Date 18 March 2002

LORD JUSTICE BUXTON:

In

[1]this appeal the background facts; the contentions of the parties before the Central Arbitration Committee ("the CAC"); the determination of the CAC; and the relevant parts of the governing legislation, which is Schedule 1A to the Trade Union and Labour Relations (Consolidation) Act 1992; are all set out in lucid detail in the judge's judgment, in terms that all counsel engaged before us were good enough to say they had no dispute with. It would be a work of supererogation to try to repeat that exercise in this judgment. I therefore annexe to this judgment paragraphs 1 to 21 of the judgment of Elias J, from which any further information necessary to elucidate the present judgment can be obtained.[2]I would also venture to endorse in strong terms what was said by the judge in paragraph 23 of his judgment, that the CAC was intended by Parliament to be a decision making body in a specialist area, that is not suitable for the intervention of the courts. Judicial review, such as is sought in the present case, is therefore only available if the CAC has either acted irrationally or made an error of law. There was a faint attempt before Elias J to argue irrationality. The judge rejected that claim, and there is no respondent's notice to seek to reinstate it. The only issue before us is whether the CAC erred in law in its construction or understanding of the legislation that gives it its authority, and thus proceeded in a way that in law was not open to it.[3]I am quite clear that the determination of the CAC in this case was entirely in accord with the legal provisions that bind it. Since in so holding I will be venturing to differ from the views of the judge who has great experience in this area of work, I need to set out in some detail my reasons for so thinking, though at the end of the day the point appears to be a short one.[4]A striking feature of the scheme provided by Schedule A1 is that everything turns on and is put in motion by a "request" by the trade union to be entitled to conduct collective bargaining on behalf of a group of workers (paragraph 1). That request has to contain a proposal by the union of a particular "bargaining unit" (paragraphs 2 (3) and 8(b)). The CAC becomes involved if "employer rejects request", at which stage the union, not the employer, may apply to the CAC under paragraph 11(2)(a) for the CAC to decide, in the absence of agreement "whether the proposed bargaining unit is appropriate or some other bargaining unit is appropriate".[5]Under paragraph 19(2) and (3) the CAC must decide "the appropriate bargaining unit" taking into account the matters specified, which as here relevant can be summarised as the need for the unit to be compatible with effective management; the views of the employer and of the union; the location of workers; and "the desirability of avoiding small fragmented bargaining units within an undertaking."[6]Simply reading these provisions through, it seems self-evident that the CAC's task is to start with the only proposal that it has before it, that contained in the union's request, and to determine whether that proposal is "appropriate": it however being open to the CAC under paragraph 11(2)(a) to determine that some other bargaining unit is appropriate.[7]It was complained on the part of the employer in this case that such a construction gives the union's proposal a preferable position, and upsets the industrial relations balance that ought otherwise to exist between proposals put forward by unions and proposals put forward by the employer. But, in my judgement, any such imbalance springs directly from the effect of the statutory provisions, which lay down clearly how the CAC must approach the question before it. That view is reinforced by the fact that, in the context of any particular request, the CAC of necessity can only recognize one bargaining unit. The word "appropriate" was plainly used by the draftsman to direct the CAC's attention to whether, bearing in mind the practice set out in paragraph 19(3) and 19(4), the bargaining unit that it had under consideration was suitable for the purpose for which it was to be used: that is, the conduct of collective bargaining in respect of a group of workers. Such a process does not exclude the consideration of bargaining units other than that proposed by the union. They may enter the picture in two ways: as a means of testing whether the union's bargaining unit is indeed appropriate; and as an alternative bargaining unit to be inserted in the request should the union's bargaining unit be seen as inappropriate. But it should be remembered that the statutory test is set at the comparatively modest level of appropriateness, rather than of the optimum or best possible outcome. Since the CAC has only to find and can only find one bargaining unit; and has only to be satisfied that the unit that it does find is appropriate; I see no escape from the contention that, provided the CAC concludes that the union's unit is appropriate, its inquiry should stop there.[8]The employer strongly argued before us that that was a misconstruction, in particular of paragraph 11(2) of the Schedule read with paragraph 19(2) and 19(3). I have already set out paragraph 11(2). The employer argued that the question "whether the proposed bargaining unit is appropriate or some other bargaining unit is appropriate" placed on the CAC, not the duty and obligation to which I have just referred, of considering first the union's proposed bargaining unit; but a duty to treat on equal terms, and effectively as competitors, the unit proposed by the union and any alternative bargaining unit that may be proposed by the employer; and that a choice had to be made, or that that approach had to be adopted, was reinforced by the language used in paragraph 19(2) and 19(3), that the CAC must, in 19(2), decide "the" bargaining unit within a period of time, and (3) must take into account the matters there set out in deciding "the" appropriate bargaining unit.[9]I fear that I am unpersuaded by those arguments. Although Mr. Bowers QC resisted this conclusion, it seems to me to be an inevitable implication of that construction of paragraph 11(2) that the CAC would then have to choose between the union's unit and the employer's unit, should it conclude that both of them are appropriate. In other words, having discharged its statutory duty of deciding appropriateness, it then goes on to perform another task of deciding which of the two or possibly more proposed units is more or most appropriate amongst them all. That, as it seems to me, involves reading into the statute a requirement that not only is not there, but also is inconsistent with what is there: because if the obligation under 11(2)(a) was to conduct a comparative exercise, it would be wrong to use simply the language of appropriateness, rather than language that much more clearly drew the Tribunal's attention to the need to choose between various alternatives.[10]It is also not irrelevant to that consideration that there is no formal provision under the statute for the employer to propose an alternative. Of course, he may do so, and in this case I am prepared to accept that that is what he did: though a fair reading of the entire objections raised by the employer seems to me more to concentrate on his objections to the London bargaining unit in the context of the management structure of the company as a whole, rather than to urge that there were positive merits supporting a bargaining unit extending to the company at large. However that may be, the employer can take part in this process without proposing any bargaining unit at all. If it were intended that in every case where the employer proposed an alternative unit his unit would be necessarily considered pari passu with the union's unit, then I cannot help thinking that some much clearer guidance would have been given in the Schedule to that end, with provisions for the employer to take the necessary step preliminary to that consideration.[11]However, in that context, of the employer's interest, it is important to note that the analysis of this Schedule, in terms of the CAC starting with consideration of the union's unit, is subject to the important qualification that, in determining the appropriateness of the union's proposed bargaining unit, the CAC must not confine itself to the union's arguments, but has to take into account the statutory considerations, including importantly effective management and the views of the employer. As he did in the present case, the employer may well raise objections to the appropriateness of the union's proposed bargaining unit by urging that only another and different unit could be appropriate. The CAC cannot simply ignore such objections. It has to determine whether the objections, and the availability of alternatives that may form an important part of the argument in support of those objections, render inappropriate for bargaining purposes the unit proposed by the union. What, in my view, however, the CAC does not have to do is to conduct a search for the most appropriate unit from amongst those that are proposed to it.[12]The judge accepted that last point, thereby disagreeing with an important part of the submissions of the employer before him. However, he also disagreed with the contention of the CAC, that the statutory scheme required the union's proposal to receive first consideration. He did so because he appears to have understood the contention to be that the CAC could and must consider the union's proposal, as it were in the air, without reference to possible modifications to it, and without reference to the views of the employers. The latter could only be taken into account if the CAC found that the union's proposal failed the test of appropriateness.[13]The CAC said before us that that had not been its argument. It had accepted before Elias J that in assessing the union's proposal, which is the starting point of the inquiry, the CAC can and must take into account the employer's views. It may not be very illuminating to seek to resolve how the argument in fact did proceed before Elias J, because the important consideration in the present case is that the CAC undoubtedly did take the employer's views in respect of a company-wide unit into account when examining the union's proposals. Its conclusion, set out in detail in paragraphs 13 to 16 of its determination, was, however, that those arguments did not undermine the appropriateness of the London area proposed by the union for bargaining purposes. I have indicated that I am satisfied that that was a conclusion fully open to the CAC, it having given consideration in the context of the union's proposal to the employer's competing proposal. In reaching that conclusion, the CAC did not, as Elias J feared it might have done, fail to have regard to matters that it was statutorily required to take into account.[14]I should mention a number of further considerations by which I am fortified in that conclusion. First, as Elias J records in paragraph 30 of his judgment, the argument before him focused on three sentences in the determination, relating to the obligation to take into account the need for the unit to be compatible with effective management:
"The union reminded us that 'compatible' means 'consistent' or 'able to co-exist with'. That is, we are not required to decide on the most effective form of management, merely that what we decide is compatible with effectiveness. Or, to put it another way, we need to examine whether the union's proposed bargaining unit is found wanting and does conflict with effective management."
[15]The judge held, at paragraph 62 of his judgment, that that construction was correct. The duty was not to determine the unit that was compatible with the most effective management: there might be a number of possible bargaining units that would be consistent with effective management, but not necessarily as effective. I would respectfully agree. But if the CAC plays this comparatively modest role in deciding compatibility with effective management, it is difficult to see why, in the case of appropriateness, it does not have the same order of obligation: which is to assess the proposal before it in its own right, whilst recognizing that there may be other possible proposals that would equally meet the statutory requirements. Were the case otherwise, and the CAC were under an obligation to seek the optimum bargaining unit, or at least (as the judge held) to consider and adopt improvements on the union's proposed unit, then it is difficult to see why it would not be obliged, as part of that process, to bring the relationship between the union's proposed unit and efficient management under more critical review than is envisaged by the judge in paragraph 62.[16]Second, the judge rejected Kwik-Fit's argument that the duty of the CAC was to find the most appropriate bargaining unit, as I have indicated. It is helpful to cite what he said in paragraphs 49 to 50 of his judgment:
"However, while I accept Mr Bowers' submissions on this aspect of the case, I do not agree with his related submission that the CAC must choose the most appropriate bargaining unit on the evidence before it. On the face of it, this is a perfectly cogent submission. Indeed, it seems perverse to conclude that the CAC is entitled to determine, as the appropriate bargaining unit, a less rather than more appropriate unit. But in my judgment what is most appropriate depends upon the particular context in which a determination has to be made. The CAC is not engaged in an abstract exercise of deciding how in an ideal world it would map out a company's bargaining arrangements. It is faced with a specific claim for recognition which the employer has already rejected. The employer's opposition may be to any bargaining; sometimes it will be to the particular bargaining unit selected by the union. But the employer's opposition must seriously engage the union's proposal if it is to carry any significance. If the employer is going to suggest an alternative bargaining unit it must be one that would at the very least be capable of regulating the terms of a significant proportion of the workers in the union's proposed bargaining unit. To take an extreme example, it is obviously no answer to a claim for recognition in Bolton that there is a more appropriate bargaining unit in Liverpool. That simply does not meet the union's claim that it should represent a group of workers who want their pay, hours and holidays determined by collective bargaining, and it does not meet the concerns of these workers. 50. If the CAC were to have to determine the most appropriate bargaining unit, independently of the context in which the issue arises, it would in many, perhaps most, cases be reaching a decision of no value which could, moreover, frustrate the statutory process. The company will often be able to suggest what everyone would agree would be, if it could be implemented, a more desirable bargaining unit to that proposed by the union, while of course being unwilling actually to recognise any union in respect of its proposed unit. For example, unions will often pursue recognition following a concerted membership campaign in a particular geographical area or company division. It can hardly have been Parliament's intention that it should fail in its recognition ambitions simply because the employer was able to conceive of a better starting point for collective bargaining, such as recognition nationally or on a regional basis, or through plants rather than divisions. Of course, the position would be otherwise if the union's proposals were not compatible with effective management."
[17]I would respectfully agree. But the difficulty is that, once it is accepted that the CAC's task goes beyond assessing the appropriateness of the union's proposed unit, there is no logical reason to stop at any point short of that contended for by Kwik-Fit. The judge's observations are, rather, directed at why such a step might produce results that were inappropriate in the context of the general process envisaged by Appendix A1. But that in my view goes a long way towards demonstrating that the CAC's task is to determine whether the structure proposed by the union is appropriate for pay bargaining purposes, and no more than that.[18]Third, Kwik-Fit, by a respondent's notice, seeks to reinstate this part of its argument, that the CAC should have determined the most suitable bargaining unit. As a modified version of that claim, it argues that in assessing the union's proposed unit, the CAC should at least have taken into account the relative merits of the employer's proposed unit as a unit. The difficulty of the first contention is not only that pointed out by the judge, but also that the process might well leave the CAC with having found that two, or possibly more, overlapping units were appropriate. It is wholly unclear on Kwik-Fit's argument what the CAC is then supposed to determine. It was to avoid that dilemma that Annexe A1 was drawn in the way that it was. It is at that point that the employer can only avoid that dilemma by saying that the CAC must then choose between two units that it has found to be appropriate.[19]So far as the second contention is concerned, while the CAC did not in terms pass on the employer's bargaining unit, it was well aware of why that unit had been proposed; of the merits claimed for it; and of the reasons why those merits were said to make the union's unit inappropriate. Unless the CAC did indeed have a primary obligation to choose between all possible contenders in the field, a contention that the judge thought, as I think, to be quite inconsistent with the use of the language of appropriateness, the CAC had fully fulfilled its statutory task.[20]Fourth, the judge held that since, in his view, the CAC had wrongly formulated its task, he could not be certain that it would have come to the same conclusion on the evidence before it, had it applied the proper test to it. The matter therefore had to be remitted. But the real, indeed the only, vice identified by Elias J was that to which he refers in paragraph 44 of his judgment: if the construction proposed by the CAC is correct, the employer's views as to the appropriate unit would have no relevance unless and until the union's proposal was found to be wanting. But the passages set out by Elias J make it entirely clear that the employer's views were seen as relevant by the CAC and taken into account by it. The employer's position was very simple. The union's unit, limited to London, was not appropriate, because the only appropriate unit in Kwik-Fit's view was a single unit covering the whole country, mirroring the management and management structure of the company. For reasons set out in detail, the CAC did not accept that criticism. Even if the judgment of Elias J were to be upheld, and the issue be remitted to the CAC for the reasons set out therein, I do not see how the CAC could properly come to any other conclusion than that which it has already reached.[21]Sixth, and allied to the last point, the contest before the CAC was straightforward. It did not partake of the type of case hypothesised by Elias J, where modifications or improvements might be suggested to the union's proposal, or where constructive dialogue was offered by the employer as to proposals different from those of the union. The employer's position in this case was that only his proposal, of a national unit, could meet the statutory criteria. The CAC did not agree. In so determining, they not only upheld the union's proposal but rejected, in a reasoned decision, the employer's criticism of it. Since it is not now contended that the CAC acted irrationally, and plainly could not be so contended, that must necessarily be the end of the case.[22]For those reasons I would allow the appeal and reverse the decision of the judge below.

LORD JUSTICE LATHAM: I agree.

SIR DENIS HENRY: I agree.

Order

Appeal allowed. ANNEX The Background The legislative context The determination of the CAC "Summary of the Union case 7. The Union argued that the two London Divisions were distinct in employment terms from the rest of the Company. There was a London weighting allowance and had, until recently, operated a particular pattern of hours of work. The Union contended that the London Divisions had an identifiable management structure and that final decisions on matters of discipline and dismissal were taken by Divisional Directors alone without formal reference to the Company Head Office. They noted that there was one personnel manager, or Training and Development Manager, in London covering both Divisions. 8. The Union drew the panel's attention to a variety of examples of companies in the transport sector which actively encouraged the decentralisation of collective bargaining, often to a local site level. A number of these were integrated organisations with national operations. It must be presumed, they argued, that these organisations found bargaining decentralisation compatible with the effective management of a centralised organisation. They suggested that their application could not be construed as encouraging the fragmentation of bargaining units since it covered the whole of the London area. Summary of the company's case 9. In rejecting the Union's arguments, the Company laid especial emphasis on the integrated and centralised nature of its operations. The success of the Company was founded on standardised high quality service provided in each of the Centres. This was reflected in the management of the employment relationship. All fitters and, with appropriate variations to allow for seniority, Centre Managers had the same basic terms and conditions of employment as revealed in the common employment Handbook, the same training, same career ladder, same hours of work and holiday entitlement and identical rosters system. The rules of the profit sharing scheme were nationally designed and applied equally in all Centres based on local profitability. While decision taking in discipline and dismissal matters was taken by a manager or Director at the appropriate level (with more senior staff being handled at Head Quarters level) the same national procedures were used and carefully enforced in all sites. 10. The only flexibility in terms and conditions of employment related to pay since it was both necessary and sensible to adjust pay rates in accordance with local or regional variations. The Company drew attention to the fact that there was no reference to a London Weighting in any of the company literature. They accepted that virtually all qualified and trained fitters in the two London Divisions received an allowance or salary enhancement but noted that similar allowances were paid in Aberdeen and some other locations where they were experiencing recruitment difficulties. While Divisional Directors made recommendations for such allowances, the decision was taken centrally in the Scottish Head Quarters. The Company contended that there was nothing special or unique about the way the London Divisions were managed, with each having a divisional director. 11. The Company expressed concern at the possible consequences of a decision to allow for a London bargaining unit. There was a danger that it might sap morale if different terms and conditions were to apply. More serious was the real possibility of multi-unionism emerging in the future with competing bargaining units in different divisions. Emphasis was placed on the danger of leap-frogging in bargaining." "As an integrated, national company the only bargaining unit that would be compatible with effective management would be one covering the whole of their operations in England, Scotland and Wales for Tyre and Exhaust Centre staff up to and including Centre Managers." "13. The Act requires the Panel in s. 19.3(a) to give precedence to the need for the bargaining unit to be compatible with effective management. Other considerations to be taken into account, in as far as they do not conflict this compatibility with effective management, are listed in s.19.4. We have listened carefully to the oral submissions of both parties, have studied their written submissions and have questioned them closely on aspects of their cases. We note that there are no existing local and national bargaining arrangements that apply to Kwik-Fit GB and neither party has argued that any particular distinctive characteristics of the workers or their location apply in this case. We are not of the view that a bargaining unit covering the whole of London and a significant proportion (20%) of the Company's employees can be considered either a small or fragmented unit especially as there are no other bargaining units in the Company (with the exception of Northern Ireland which is, in any event a separate company). 14. We have taken great care in reviewing the points made to us about the need for the unit to be compatible with effective management. We have noted that the union recognises that the company has strong national policies and culture and operates as a national unit. It has suggested that its aim is to negotiate a modern partnership agreement which fits the needs of the business, to remain an efficient `best-in class' business, while meeting the needs of its members. We accept that the company operates centrally and seeks to apply uniform policies and procedures across all sites not just in employment but in wider aspects of operational management. We also accept that there is nothing particularly distinctive about the London divisions which mark them out from the rest of the company although, as both parties agreed, London does have a distinctive labour market. There are, however, aspects of operations such as the handling of disciple ( sic ) and dismissals, the relative autonomy of Divisional Directors, and the local delivery of training co-ordinated currently by one manager in London which allow us to conclude that it is possible for other aspects of employment practice, such as collective bargaining, to be applied at the London Divisional level. We note that there are many examples of central control being exercised in companies which have opted for a decentralised bargaining structure. That is, the central features of policy and practice and the approval of budgets remain in the control of the centre, a matter the trade unions sometimes find frustrating. We do not believe that collective bargaining covering all of the London Centres would undermine or challenge the continued mode of management preferred by Kwik-Fit GB. In this regard we have paid attention to the two previous CAC decisions drawn to our attention by the company. It seems to us that in both cases particular emphasis was placed on the needs of these two companies to ensure that there was full flexibility of labour between sites and there were particular business reasons why this was necessary. With the relatively rare exception of the movement of staff across the M25 boundary, we have heard no evidence that there is significant movement of fitters to Centres in different Regions, let alone Divisions. The particular features of these cases do not therefore apply to this one. 15. We are required to ensure that the unit is compatible with effective management. The union reminded us that `compatible' means `consistent' or `able to co-exist with'. That is, we are not required to decide on the most effective form of management, merely that what we decide is compatible with effectiveness. Or, to put it another way, we need to examine whether the union's proposed bargaining unit is found wanting and does conflict with effective management. Using this test we concluded that it was possible for a bargaining unit to apply across the London divisions. We noted that it is only recently that two divisions have been created and the previous organisation structure provided a unified management in London. We also note that, within the bounds of national policies, there exists a management team quite capable, in our view, of conducting collective bargaining and able to forge workable relationships with the union. That is, the bargaining unit proposed by the union is compatible with effective management. 16. We cannot predict what the consequence of a London bargaining unit would be on the rest of the company, just as we cannot predict how the company will respond to legislative changes concerning employee participation. We do note, however, that the company has the managerial capacity and the size to exert a strong influence over future events if it so wishes." The key legislative provisions "11 (1) This paragraph applies if - (a) before the end of the first period the employer fails to respond to the request, or(b) before the end of the first period the employer informs the union (or unions) that the employer does not accept the request (without indicating a willingness to negotiate). (2) The union (or unions) may apply to the CAC to decide these questions - (a) whether the proposed bargaining unit is appropriate or some other bargaining unit is appropriate; (b) whether the union has (or unions have) the support of a majority of the workers constituting the appropriate bargaining unit." "19 (1) This paragraph applies if - (a) the CAC accepts an application under paragraph 11 (2) or 12 (2), and (b) the parties have not agreed an appropriate bargaining unit at the end of the appropriate period. (2) The CAC must decide the appropriate bargaining unit within - (a) the period of 10 working days starting with the day after that on which the appropriate period ends, or (b) such longer period (so starting) as the CAC may specify to the parties by notice containing reasons for the extension. (3) In deciding the appropriate bargaining unit the CAC must take these matters into account - (a) the need for the unit to be compatible with effective management; (b) the matters listed in sub-paragraph (4), so far as they do not conflict with that need. (4) The matters are - (a) the views of the employer and of the union (or unions); (b) existing national and local bargaining arrangements;(c) the desirability of avoiding small fragmented bargaining units within an undertaking;(d) the character is of workers falling within the proposed bargaining unit and of any other employees of the employer whom the CAC considers relevant;(e) the location of workers."

Cited in 4 later judgments