MR F HUTTON v JOSEPH WILLIAM THOMPSON [2002] UKEAT 0079_01_1104

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2002] UKEAT 0079_01_1104Case No Appeal No. EAT/0079/01Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
MR F HUTTONAPPELLANTJOSEPH WILLIAM THOMPSONRESPONDENT
Before
Mr Recorder LangstaffDate 11 April 2002
[1]APPEARANCES For the Appellant MS N CUNNINGHAM (of Counsel) Instructed by: Free Representation Unit Peer House 4th Floor 8 - 14 Verulam Street London WC1X 8LZ For the Respondent MR M.D. WINTHROP (Solicitor) Instructed by: Short Richardson and Forth 4 Mosley Street Newcastle upon Tyne NE1 1SR RECORDER LANGSTAFF QC: This appeal has to be decided against a factual background which is unlikely ever to be repeated. It is for that reason quite unusual. It arises out of a decision by the Employment Tribunal at Newcastle upon Tyne, whose extended reasons were promulgated on 28 November 2000. The Facts[2]The claim was in respect of an unlawful deduction from wages. Mr Hutton, a former teacher, claimed that he had not been paid the full amount of sick pay to which he was entitled. That entitlement depended upon the terms of the contract. It was those terms which came into dispute. Mr Hutton said that a contract of employment which appears in our papers at page 39 was drawn up by him in typescript from drafts produced by the Respondent who was the proprietor of the school at which he taught. His case was that that draft contained blanks. The document with its blanks had been handed back to the Respondent. The Respondent had then completed the document by hand written additions to the typescript drafts.[3]At paragraph 4 of its decision the Employment Tribunal accepted that this was the position. However, what is curious about the case is that the Respondent denied having had anything to do with the formation of what was described as a contract of employment in this way. The significance of that will become apparent as we recite the facts further. The contract of employment consists of one page, it identifies seven particular terms and conditions of employment and has an additional paragraph to which we will need to refer. At paragraph 5 it provides; "Your entitlement to salary during periods of absence from work, owing to sickness or injury is in accordance with (and the words are then added in manuscript) National Agreement." It was to be asserted at the Tribunal by Mr Hutton that the National Agreement was a reference to what is known as the burgundy book. This provided for terms as to sick pay, which were in excess of the sick pay he in fact received. However, at the foot of the single page headed 'Contract of Employment' are the words; "The company Conditions of Employment form part of this Contract of Employment and as such should be read in conjunction therewith."[4]Those company conditions of employment provide for six months full salary, less national insurance, sickness benefit when payable and do not make any provision for a continuation in respect of pay thereafter. It is the period thereafter which gives rise to the claim.[5]Accordingly, the position before the Tribunal was that Mr Hutton would succeed if he could establish that the contractual terms which applied to him were more generous than those of the company conditions of employment, which I have just described. If he could not do so his claim would fail. The Tribunal approached the resolution of this issue in two paragraphs which are central to this appeal. In paragraph 8 they say this:
"In this case before ascertaining whether or not there has been such an unlawful deduction of wages it is necessary to decide what represented the contractual terms between the parties. The applicant relied upon a document which, upon our finding of fact had been signed by the respondent and in which there was a reference to sick pay in accordance with National Agreement. However, the contract also specifically provided in express terms that the sick pay to which this applicant was entitled was represented by 6 months salary less N.I sickness benefit. The applicant has been paid sick pay on the basis of that provision."
[6]We interpose to note that each of those statements is correct. In our view it demonstrates the proper approach to be taken by an Employment Tribunal, namely that it should first decide what represented the contractual terms. It should be noted however that the last sentence, as we understand it, refers to payment not in respect of any early period of sickness (which might suggest an acknowledgment of the company terms and conditions). Rather it relates to the fact that in the context of the dispute between the parties the Applicant had been paid the sums to which he would be entitled if the company conditions had been the sole conditions applicable. The Tribunal continued at paragraph 9 in these terms:
"The Tribunal was of the view that the express term would, in any event, prevail over any reference to the incorporation of national terms, should any exist. However, were the Tribunal to be wrong about that then no evidence was produced by the applicant, with whom the burden of proving his case lies on the balance of probability, as to the terms of any National Agreement. It is dubious whether there can be said to be any such agreement which applies to independent schools and certainly it was the respondent's case that he had not entered into any such negotiations nor was there any other body that had done so on his behalf. Even were there to be such a document, there was no reliable evidence other than the applicant's contention that it made provision for sick pay on the basis suggested. Nor was it clear what any such agreement might or might not say as to the basis of incorporation or as to express terms taking precedence or otherwise."
[7]The Tribunal then concluded at paragraph 11 that it was not satisfied that the Applicant had discharged the burden of establishing that he had a contractual entitlement to the wages which he claimed had been unlawfully deducted.[8]This Tribunal may only interfere with the decision of an Employment Tribunal if there is an error of law. The error of law here is said to arise in two respects. One is that the Tribunal were in error in concluding that the express term, by which they meant the term in typescript, which was derived from the company conditions and was incorporated into the contract by virtue of the words at the foot of the single sheet to which we have referred, prevailed over any reference to the incorporation of National Terms by virtue of paragraph 4.[9]Miss Cunningham urges that there is a general rule that where there are hand written interpolations to otherwise typescript or printed documents, they should as a matter of general principle prevail over other typescript writing where there is inconsistency. This argument however assumes an inconsistency, whereas the approach of the Employment Tribunal is along the lines that none exists because none could be shown on the evidence. In effect we think it rather puts the cart before the horse although we shall return to its force in due course.[10]The second attack upon the Tribunal's decision is however in respect of the approach which it adopted. The difficulty for the Tribunal, which makes this case unique, is that it found that the parties had determined that the arrangements in respect of sick pay would be in accordance with something they had chosen to describe as "National Agreement". Indeed it had found that the words "National Agreement" were inserted in the document by Mr Thompson. Accordingly, it could only have concluded that he had some particular national agreement in mind. But because his case was that he had played no part in putting the insertions into the document that was before the Tribunal, he could not, consistent with his evidence on that, advance any explanation as to what the National Agreement was, nor what its terms might be. They had therefore to be derived, if they were to be derived at all, from some other evidence.[11]The Employment Tribunal did not have before them a document which was identified by the employee as being the relevant National Agreement; however, it did have his evidence as to that which the National Agreement contained in the relevant respect. It must be borne in mind that the National Agreement as such was not incorporated into the contract of employment we have seen. All that was incorporated from whatever national agreement it may have been were the relevant terms in respect of holidays and holiday pay (clause 4) and the relevant terms in respect of entitlement to salary during periods of absence from work owing to sickness or injury (clause 5). Those are quite specific terms.[12]The Tribunal appear from what is said in paragraph 9 to have been prepared to credit the Applicant's evidence as to the contents of the National Agreement. It did not dismiss the evidence as being so unreliable that it could not base a decision upon it. As Miss Cunningham has contended before us, it implicitly gave some, albeit limited, credence to it.[13]It was the only evidence before the Tribunal as to the content of the National Agreement. Accordingly, on the evidence before it the Tribunal could only conclude (once it accepted that the Applicant's evidence was evidence, though limited) that the National Agreement did indeed contain the terms which he described. If the Tribunal had asked the question, "what were the terms as to sick pay to be incorporated from the National Agreement?" there might have been two answers. One was, "we have no evidence." It could only decide that if it was not prepared to rely upon the evidence of Mr Hutton for reasons which no doubt it would have made clear. The other was to say that the evidence which it had, though limited, was to the effect that there were terms providing for further sick pay, we understand to the extent of six months half pay, in excess of the company conditions. The question that the Tribunal would then have been in a position to answer was whether or not clause 5, being on this evidence to the effect that there were 6 months full pay and 6 months half pay, should prevail over the term otherwise applicable which provided only for 6 months pay.[14]Looked at in that light, one would need to have clear and cogent reasons why a Tribunal should come to a conclusion that those terms explicitly incorporated from the National Agreement should not prevail over the company conditions. There might be such reasons. They might emerge from the context within which the contract was negotiated. They might emerge from other material which could be put before the Tribunal by the parties. But otherwise, we would expect there to be clear and cogent evidence to displace the view that where a contract provides for a blank to be filled in, specifically for that individual contract, by one party to it, then if any such terms once filled in are inconsistent with other parts of the same contract they should prevail over those latter parts. There would seem to be no very good reason for the contract to refer to the National Agreement when it might with equal facility have referred to the company conditions unless there was some difference between the two, which it was intended that the individual contract should reflect by way of distinction from the principal contract. But be that as it may, as will emerge from later in this judgment that is an issue which we cannot properly resolve on the material available before us. However, we can examine the approach that the Tribunal took. In our view it was flawed in these respects. First it did not properly identify the content of the express term, albeit on limited evidence, in order to determine whether that or the company condition of service should prevail.[15]Second, it is insufficient to say, as the Tribunal said, that there was:
"No reliable evidence other than the Applicant's contention that it made provision for sick pay on the basis suggested."
Because that indicates both that the Applicant's contention might be regarded as reliable evidence, and secondly indicates that that is all the evidence tending one way or the other which the Tribunal had. If that evidence were not to be adopted, there would need to be some explanation why not, and there is none.[16]Next, in the third sentence of paragraph 9, the Tribunal regard it as apparently relevant that it might be doubtful whether there is a National Agreement which applies to independent schools such as that which Mr Thompson ran. They took into account, it appears, the Respondent's case that he had not entered into any such negotiations nor had anyone done so on his behalf. This, it seems to us is an irrelevant consideration. The fact was that in accordance with the earlier findings, Mr Thompson had used the words 'National Agreement' and the presumption must have been that he intended by those words to convey some appropriate meaning. If the National Agreement were not one which applied to independent schools, it might well be one which applied to others.[17]A National Agreement, meaning an agreement between unions and employers, need not be one which specifically relates to the employer or the job concerned. It may be incorporated by reference notwithstanding. For instance, in the case of transfers of undertakings, it is not uncommon for wages in the employment of the transferee to be determined by arrangements entered into by a transferor in respect of which none of the employees nor the transferee employer is party. It is perfectly possible to contract by relation to third party terms and conditions.[18]Next, we cannot regard as relevant the last sentence of paragraph 9. That provides that it was apparently relevant that it was not clear what a national agreement might or might not say as to the basis of incorporation, or as to express terms taking precedence or otherwise. This is to envisage a national agreement, having an effect upon the terms specifically agreed between an individual employee and individual employer, so, as it were, to make invalid some provision which they had otherwise agreed as a matter of contract. If, for instance, the national agreement had said, "this agreement cannot be incorporated in any contract," but the contract between the employee and employer had said the opposite, then when construing the contract between the employer and employee any Tribunal would be bound to start with the proposition that the national agreement was indeed incorporated. The inconsistency would become apparent but would be of no effect as between employer and employee. It is the contract between employer and employee to which the Tribunal has to pay regard.[19]Moreover, the last sentence of paragraph 9 that it appears to amount to speculation by the Tribunal as to what the national agreement might or might not have said. It is true that it might have qualified the right to sick pay in a way which would prevent the employee here being entitled to it. However, the Employment Tribunal were not in a position to speculate that that was the case. The evidence it had, as we have indicated, was such that it felt able to give some credence to the argument that it contained the terms as to sick pay claimed by the Appellant. The absence of evidence as to other terms does not, as we see it, entitle the Tribunal to speculate that it should ignore that evidence. However it would have entitled the Tribunal to conclude, had it wished to do so, that there was so little evidence that an adjournment was appropriate or, for instance, that it was so surprising that the Appellant had not produced the document itself, that, given the possibility of such other terms, his evidence was completely unreliable or some such approach. Yet neither of those approaches nor any other that might be thought of was identified.[20]Accordingly, we have come to the conclusion that the Tribunal here erred in its approach to the question it had to resolve. Mr Winthrop in clear and cogent submissions, for which we would like to pay him credit, argued that as a matter of construction the Tribunal could not say that the manuscript words prevailed, that what was necessary was an enquiry into the surrounding facts, and that as part of that enquiry it was pertinent whether or not the document upon which reliance was placed by the Appellant was before the Tribunal. He argued that the Employment Tribunal had decided that it had insufficient evidence produced by the Appellant to make the findings he sought and that it was permissible for the Tribunal to take that approach. He argued that the Tribunal was entitled as a matter of mixed fact and law to take the view that the express term, would in any event have prevailed over the reference to the incorporation of national terms.[21]We cannot accept those submissions because of the view to which we have come that the Tribunal here adopted the wrong approach to resolving the question which it had rightly identified as the appropriate one to answer. It follows that this appeal must be allowed. Miss Cunningham has urged us to exercise the powers of this Tribunal to determine the issue for ourselves. She says that it is inevitable given the measure of agreement, which she invites us to note, that the national agreement must be the burgundy book and that it contains the terms, contended for by the Appellant. She argues that if those terms had been identified as the relevant provisions of clause 5 of the contract, the Tribunal would be bound as a matter of law to determine the issue of construction in favour of the Appellant. The findings of fact it made in respect of the context would be taken into account in doing this.[22]However, we have been persuaded by Mr Winthrop that we are not in a position to resolve that question. It seems to us that we cannot for ourselves resolve the issues of fact and the issues of law on the basis of findings of fact which remain properly to be established.[23]We consider that the Tribunal should approach the questions in this way. First, it has already been found as a fact that the contract exists in the terms as at page 39 of our bundle. What is required is that the terms of the "national agreement" should be identified by the best available evidence so that substance can be given to the wording of clause 5. In the light of what clause 5 says, the Tribunal will then be in a position to consider whether there is an inconsistency between that clause and the company's conditions of service. If it considers there is an inconsistency then it will have to determine whether that inconsistency is resolved by applying the terms of the national agreement as explained to it under clause 5 or whether it should apply the company conditions of employment which are to be incorporated by reason of the last sentence in the contract of employment and to be read in conjunction with it. As we have indicated, it would need clear and cogent reasoning to explain why the provisions of clause 5 should in the event of inconsistency not prevail over the company conditions of employment, but we should emphasise that much may depend upon the context within which the agreement was reached as evaluated by the Tribunal. We are far from being able to resolve that question here. It is eminently one for the Tribunal to determine.[24]As to whether remission should be to the same Tribunal we consider that that, if it is administratively convenient, has a considerable advantage. There is no criticism here of the Tribunal who were in a very difficult position because of the lack of evidence, both because the Applicant had not provided them with terms and conditions (perhaps because he thought they would be so obvious as to need no proof) and because the Respondent consistent with his case was not prepared to identify any national agreement at all, let alone confirm the terms of any to which the Applicant referred.[25]The error that we have detected is one in approach only and we see no reason to lack confidence in this Tribunal resolving the remaining issues in accordance with this judgment. If however it is administratively inconvenient to reconvene that Tribunal, there would be, as we see it, no possible reason why it should not go to another Tribunal. Accordingly, this appeal will be allowed with a direction that the matter be remitted for hearing before the same Tribunal if that remains administratively convenient.