Thames Water Utilities v Reynolds [1995] UKEAT 1090_94_2211

EAT
Thames Water Utilities v Reynolds
[1995] UKEAT 1090_94_2211 · 1995-11-22
This is an appeal by the employer against a unanimous decision of the London (North) Industrial Tribunal (Chairman: Mr G. Flint) following a hearing held on 7 September 1994, that the employer had unlawfully deducted the sum of £130.80 from the Respondent employee's wages contrary to The Wages Act 1986 . The Tribunal's extended reasons ("the reasons") for that decision are dated 5 October 1994.The claim arose in this way. The Respondent was employed by the Appellant as a driver/loader from 20 October 1980 until his dismissal by reason of redundancy on 31 March 1994. At the date of dismissal it was common ground that the Respondent was entitled to the equivalent of 8 days holiday pay in respect of days during the preceding holiday year when he was asked to work in lieu of taking his paid holiday entitlement. A payment was made following termination of employment in respect of this arrears of holiday pay on the basis of 1/365ths of his basic annual salary (£11,683 per annum) multiplied by 8. The Respondent contended that he was entitled to payment on the basis of 1/260ths of his annual salary representing a proportion of his annual working days. The issue was therefore, what is the correct basis of calculation? The Tribunal answered that question in favour of the Respondent's contention. Against that finding the Appellant now appeals.The Tribunal's findings may be summarised in this way:(1) By a letter dated 30 July 1993 from the employer, signed by the employee, the employee agreed to a material variation in the terms and conditions of his contract. The change was from a 38 hour 5 day week paid for as a week to a 38 hour 5 day week paid for in weekly instalments of an annual salary. He did not agree to move from weekly pay to monthly pay. (Reasons paragraph 2).(2) The provisions of that letter were supplemented by detailed terms and conditions of service ("The Green Book"). Section 10 is entitled "Holidays and Leave".Section 10.8 provides:
"(a) On leaving, employees shall be entitled to holiday, or payment in lieu, pro-rata to their completed months of service from the commencement of the holiday year, less any holiday already taken since that date."

Section 10.11. Holiday Pay

"(a) Pay for holidays shall be calculated having regard to the number of working hours in the day or days upon which holidays are taken. (b) Holiday pay shall be the average earnings, including bonus payments, over a minimum period of the previous 12 weeks calculated at the current hourly/weekly rate ... [including certain specified allowances]."
(3) The provisions of The Apportionment Act 1870 clearly applies. (Reasons paragraph 5).(4) Applying the Act, the annual salary should be apportioned according to the number of days worked, not the number of calendar days in the year. Hence the correct fraction is 1/260ths, not 1/365ths. (Reasons paragraph 6).In support of the appeal Mr Bowers agrees that the Act applies. He relies on:
"2 Rents, etc to be apportionable in respect of time.
... All rents, annuities, dividends, and other periodical payments in the nature of income (whether reserved or made payable under an instrument in writing or otherwise) shall, like interest on money lent, be considered as accruing from day to day, and shall be apportionable in respect of time accordingly.7 Nor where stipulation made to the contraryThe provisions of this Act shall not extend to any case in which it is or shall be expressly stipulated that no apportionment shall take place."He submits that the Respondent's contract contains no express stipulation that no apportionment shall take place for the purposes of Section 7 of the Act. This may be contrasted with the Appellant's staff (as opposed to manual) employees' terms and conditions of employment ("the Blue Book") which contains provision for calculating a day's pay (1/365ths of the annual salary) and specific apportionment where annual salary is paid weekly.In construing the expression "from day to day" in Section 2 of the Act he relies, first, upon the decision of Evans-Lombe J. in Re BCCI SA [1994] IRLR 282. One issue which arose in that case was whether an employee, Mr Malik, was entitled to prove for compensation for the last 3 days of his employment on the basis that his annual salary, payable monthly, should be divided by 270 (the number of working days in the year) or by 365, the number of calendar days, for the purpose of applying Section 2 of the Act. He preferred the latter approach, distinguishing the cases of Sim v Rotherham Metropolitan Borough Council [1986] IRLR 391 and Miles v Wakefield District Council [1987] ICR 368 , both being cases in which the employee challenged deductions from wages by their employers in respect of strike days. The issue in those cases was what was the value of the loss of services to the employer on those days. In each case the court (Scott J and the House of Lords respectively) held that the correct measure of loss was arrived at by dividing the annual wage by the number of working days. Evans-Lombe J drew a distinction between the damages claim in those cases and the Apportionment Act exercise to be carried out in the case of Mr Malik. He concluded that the correct approach was to take the monthly salary and divide it by the number of days in the month.Secondly, he has referred us to a decision of the Southampton Industrial Tribunal (Chairman: Mr M A Rich sitting alone) in Oliver & Others v these Appellants (case number 25292/94. 28 July 1994. Unreported). In the specimen case taken, that of Mr Moody, he was employed on the same annual salary as Mr Reynolds in the instant case, but had agreed to be paid four weekly. An issue arose as to the computation of a day's pay for the purpose of calculating the correct pay entitlement for a 7 day period during his employment. The Chairman held that the Apportionment Act applied; he followed the approach of Evans-Lombe J in Re BCCI and calculated each day's pay at the rate of 1/365ths of Mr Moody's annual salary.Pausing there, we note that both the above cases were cited to this Industrial Tribunal, which purported to distinguish them in paragraph 5 of the reasons on the basis that those cases did not address the same problem, that is unpaid holidays, as in the instant case. Mr Bowers submits that no distinction can properly be made. The definition of a day's pay for the purpose of the Act must be the same in each fact-situation.Finally he provided a further example of the statutory construction of a day in other legislation. In Hoye v Forsdyke [1981] 1 WLR 1442 Vinelott J was required to consider the meaning of the expression "30 qualifying days" in paragraph 2(2) of Schedule 7 to The Finance Act 1977 . He held that the word "day" could only be construed as meaning a calendar day of 24 hours, and not a working day.In summary Mr Bowers contends that the Act applies; that a day can only mean a calendar day; that no distinction can be drawn between a day's pay during and after employment and that the Tribunal's construction of the Act was therefore wrong in law.In response, Mr Kibling supported the Tribunal's conclusion primarily on the basis of construction of the contract. He did not accept that the Apportionment Act applied. Accordingly he submitted that the Tribunal had reached the right conclusion by the wrong route.He argued that until the variation effected by the signed letter dated 30 July 1993 a day's pay was calculated on the basis of 1/260ths of the annual pay.He points to the fact that the letter specifically provided that the provisions relating to annual holidays remained as previously detailed. Mr Reynolds never accepted the change from weekly to monthly pay. A distinction could and should be drawn between pay during employment and damages for the lost opportunity of taking paid holiday during employment. Holidays relate to working days; weekend days being non-working days in any event. The cases of Re BCCI and Oliver were properly to be regarded as Apportionment Act cases, and thus did not assist here. The employee's entitlement to holiday pay on the termination of his employment fell to be determined by reference to the contract, and that was governed by the Green Book at Section 10.11 (a) which referred to the number of working hours in the day.He relied upon the approach in Sim and Miles as being analogous to this case.He also referred us to Morley v Heritage [1993] IRLR 401 and Ellis v Rowbotham [1900] QB 740. We found the issues in those cases so far removed from the instant dispute as to be unhelpful here.We prefer the submissions advanced by Mr Bowers.In our judgment the Tribunal was correct in finding that the computation of a day's holiday pay for the purpose of calculating the employee's contractual entitlement on termination under Section 10.8 (a) of the Green Book was to be made by reference to the Apportionment Act , there being no express stipulation in the contract of the kind envisaged by Section 7 of the Act. Accordingly the real question is what is meant by the expression "from day to day" in Section 2 of the Act. In our view it can only be calendar days and not working days. We agree with the approach of Evans-Lombe J. in BCCI , which we are satisfied should have been applied to the facts of this case. In our view the Tribunal was wrong to distinguish that case. Equally we believe that the case of Oliver was correctly decided and cannot properly be distinguished from the instant case.It follows that this appeal must be allowed and the finding of unlawful deduction is set aside.