MR GERRY HODES v MARKS & SPENCER PLC [2001] UKEAT 0716_00_0111

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2001] UKEAT 0716_00_0111Case No Appeal No. EAT/0716/00Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
MR GERRY HODESAPPELLANTMARKS & SPENCER PLCRESPONDENT
Before
His Honour Judge J R ReidDate 1 November 2001
[1]APPEARANCES For the Appellant MR M TRAFFORD (of Counsel) Boodle Hatfield 61 Brook Street London W17 2BL For the Respondent MR A CHOUDHURY (of Counsel) Legal Department Marks & Spencer PLC 47-67 Baker Street London W1A 1DN HIS HONOUR JUDGE J R REID QC This is an appeal from a decision of an Employment Tribunal held at London South on 13 April 2000. The decision was given on 25 April 2000. By that decision the Tribunal held, first, that the Applicant, Mr Hodes, was unfairly dismissed by the Respondents, Marks and Spencer PLC; secondly, that the Respondents should be given credit for a payment made to the Applicant under an early retirement scheme; and thirdly, that the Applicant had leave to apply for a further hearing as to remedy.[2]The appeal is by Mr Hodes, the Applicant, against the second of those decisions. Very briefly, the facts are that Mr Hodes had joined Marks and Spencer in 1968 at the age of 22. He had been with them for over 30 years when on 23 February 1999 he was told that he had been selected for early retirement. He was then sent on gardening leave and finally retired on 31 May. He was 1 of 31 out of 125 top staff so treated. The severance package included payment which was made to him amounting to £151,474 gross under an early retirement scheme which had been introduced in 1996 and was known as the ERP.[3]The scheme itself was intended to "… close the gap between pension and potential earnings for the period between retirement and age 60 by the payment of a lump sum". I quote from paragraph 19 of the Tribunal's findings, though it appears from argument that it might have been possible to take the payment otherwise than by a lump sum. That sum was paid under the 1996 scheme. The 1996 scheme was expressed to be discretionary. I quote from Clause 2 of the scheme at page 48 of the bundle:
"2.1 The purpose of the scheme is to provide a superannuation gratuity to participants in respect of past service with the company on the basis established under the terms of this document. The existence of the scheme confers no contractual or other rights or entitlements on any employee or ex-employee of the company or any dependants, heirs or beneficiaries of an employee or an ex-employee of the company or any other person. 2.2 Participation in the scheme is only open to members of senior management who are members of the company's pension scheme who shall have been continuously employed by the company for a minimum of 10 years and who are requested by the company to retire before their normal retirement age of 60 or such other age as may apply to them under paragraph 3.6 hereof. 2.3 The company shall be responsible for selecting eligible employees for consideration to participate in the scheme and for recommending such participation the Remuneration Committee may establish such procedures as it may think fit to lead to identification of selected employees and recommendation of them for participation in the scheme. 2.4 Participation in the scheme is at the absolute discretion of the company. The discretion being exercised solely by the Remuneration Committee. The Remuneration Committee shall be entitled to call for such information as it considers appropriate relating to any selected employee. The decision of the Remuneration Committee as to participation as to the amount of ERP shall be final and binding. The Remuneration Committee shall not be required to provide reasons for its decision. 2.5 In exercising its discretion the Remuneration Committee shall in each case consider whether it is in the best interests of the company and appropriate for the selected employee, taking account of his past service, for him to receive an ERP."
Then paragraph 4 of the scheme provides that:
"4.1 The scheme may be terminated at any time by resolution of the board. 4.2 The Remuneration Committee may at any time modify, amend or add to the terms of the scheme or adopt a new table, such as the board giving not less than 2 months notice in writing thereof. 4.3 Neither termination of the scheme under paragraph 4.1 nor modification of, or amendment of the scheme, or adoption of a new table, under paragraph 4.2 shall adversely prejudice ERP granted prior to the date of such termination, modification or amendment or new table becoming effective."
[4]On the face of it therefore the scheme was entirely discretionary. It was non-contributory in the sense that it was not contributed to by the employees at all and there was no fund from which the payments were to be made. It was argued in front of us that in fact it was not discretionary but was contractual. We were invited to look at a number of documents, the first of which is at page 41 of our bundle, a letter from a Ms Clara Freeman to executive directors, divisional directors and executives in April 1997. That document contains 2 paragraphs I should quote:
"When the company requests that a member of senior management retires before the age of 60 it may offer an early retirement pension (ERP) separate from the company pension which will be payable from the date of retirement to age 60. The Remuneration Committee will be responsible for deciding whether an ERP will be paid and will consider each case on its own merits. Responsibility for reviewing or modifying the scheme or the factors used to calculate the ERP rests with the committee."
Then at page 99 is a further letter from Ms Freeman to Mr Baldock, chairman of the Remuneration Committee. There was this passage on page 2:
"I would add the following points:- 1 The terms of the ERP (Early Retirement Policy) apply equally to executive directors, divisional directors and executives of the company. They were agreed by the Remuneration Committee at the board meeting on 31 July 1996. The central element of the Early Retirement Policy is an additional pension. Consequently some of the original elements of the leaving package eg the car, are not now included. It is worth noting the increases to divisional directors salaries over the past three years at Appendix 3"
Next at page 111, writing to Mr Hodes on 12 April 1999 - so this is in the period between his being told that he was to be let go and his final departure on 31 May at the end of his gardening leave - Helena Felton, the divisional director wrote a letter containing this passage:
"The Early Retirement Plan (ERP) that you will receive from the company 1 June 1999 is a discretionary payment which will be made provided all other contractual obligations on your behalf have been met."
At page 115 there was note from a Mr Oatley to Mr Hodes containing this passage:
"1 The company cannot guarantee that the ERP will continue to be paid but it does constitute a contractual commitment which would be required to be taken on by any new owner. Of course if the company were to be wound up you would be in the same position as any other creditor and would have rights in the proceeds of the winding up." and at page 116, from the group personnel manager, Ms Dutton to Mr Hodes in May 1999 a letter containing this passage: "
Some of you have sought clarification on the status of the Early Retirement Pension (ERP). This is a formal contractual commitment by the company to pay the ERP to each individual. There is not therefore any connection with Marks and Spencer pension fund which is operated outside the company through a trust. Marks and Spencer cannot stop or vary payments without being in breach of contract, nor would it wish to do so as each of these Early Retirement Pensions has been awarded purely in respect of past service of that participant in the scheme." Those documents were, it was said to us, indications that in fact the scheme was not a discretionary scheme but that it was a part of Mr Hodes' contract of employment.[5]The position as we see it is that there is no finding of fact by the Tribunal that the scheme was in any sense a sham. In our judgment the words of the scheme are clear and it was what it said, discretionary. The fact that the payments under it were described as pension is neither here nor there. A pension may be either contractual or non-contractual. There are still people who receive payments in their retirement which are properly described as pensions but which were provided for them purely gratuitously by their former employers. The references to contractual obligation particularly at pages 115 and 116 are not references to the scheme itself but to the position once an ERP has been awarded. Once it has been awarded there is thereafter a contractual commitment by Marks and Spencer which would be enforceable by the recipient in the event of non payment, and would be enforceable in the event of a liquidation as a claim by a creditor. The Tribunal, it seems to us, came to that self same conclusion, namely, that the scheme was discretionary and we think that in that they were entirely right.[6]We were referred to a number of cases. Firstly, we were referred to cases relating to the taking into account of pensions in cases of personal injury. Parry v Cleaver is of course the leading case on the subject. We were referred also to Hopkins v Norcross which quotes fairly large chunks from Parry v Cleaver . It is the law that in a personal injury case a person who suffers loss does not have to bring into account any pension that they receive. The same considerations will apply in the case which is a contractual rather than a tort case – see in particular Lord Justice Staughton in Hopkins v Norcross page 16 letters C-F.[7]Clark v Nomura was also cited. The claimant relied on it suggesting not only that this indicated that payments of this sort would be contractual but also that a proper application of the law would have led to the taking into account of the Applicant's past service and the inevitable award of a substantial sum equal to his ERP. It was suggested that in those circumstances that sum should be considered as being a contractual entitlement which should be left out of account, it being submitted that this was not in truth a discretionary bonus, but in effect contractual because it would have been irrational or perverse not to have awarded him that sum. As we have already indicated, that does not seem to us to be the case because it seem to us that the words of the scheme itself are paramount and that it was, as it said, in truth entirely discretionary.[8]Those cases are not in our judgment of assistance to us because, as was noted by the Employment Appeal Tribunal in Rubenstein v Roskin and reinforced in the very recent case of Johnson v Ulysses , what one is looking at in a case of this sort is a statutory compensation scheme not a claim for damages in common law. By Section 123, as it now is, the requirement, as the Tribunal rightly observed in paragraph 22 of their decision, is to determine the amount of the compensatory award as being:
"…. such amount as the Tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal insofar as that loss is attributable to action taken by the employer."
The question therefore was a question of whether it was just and equitable to take this payment into account.[9]Ought it then to be taken into account? The Tribunal held that it ought to be taken into account. They described it as being made to sweeten the pill of dismissal and they held that it would not be just and equitable to ignore it. That was a decision for the Tribunal rather than for us. There was no error of law in doing as they did and we could not properly, even if we wished to do so, interfere with that exercise of their discretion. However, we would go further than that and say that in our judgment the Tribunal were entirely correct in saying that his payment should be taken into account. It was a non-contractual payment. It was a payment which would not have arisen but for the dismissal of Mr Hodes. The loss that he has suffered is undoubtedly diminished by this sum that he would not otherwise have received. The extent of that loss may be affected by the taxation treatment of the sum that he has received under the ERP but that is a question of the quantum to be taken into account. So far as taking the ERP itself into account it seem clear to us that the Tribunal were entirely right in saying that this was something which as a matter of justice and equity ought to be taken into account in determining what it was just and equitable to be awarded by way of compensation.[10]It follows that in our view therefore the decision of the Tribunal was correct. The appeal should therefore be dismissed.