IKON OFFICE SOLUTIONS PLC v MR G P STEEN [2003] UKEAT 236_02_2005

EMPLOYMENT APPEAL TRIBUNAL

BAILII case number: [2003] UKEAT 236_02_2005

Case No Appeal No. EAT/236/02

Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

Between

IKON OFFICE SOLUTIONS PLCAPPELLANT

MR G P STEENRESPONDENT

Before

Mr Recorder Hand

Date 20 May 2003

[1]APPEARANCES For the Appellant MR DAVID BROOK (of Counsel) Instructed By: Messrs Mundays Solicitors Crown House Church Road Claygate Esher Surrey KT10 0LB For the Respondent MR DANIEL TATTON-BROWN (of Counsel) Instructed By: Messrs Beetenson & Gibbon Solicitors Lauriston House Town Hall Square Grimsby DN31 1JB MR RECORDER HAND QC: This is an appeal against the decision of an Employment Tribunal sitting at Leicester on 28 th June 2001, 27 th September 2001 and 30 th November 2001, a written decision by way of extended reasons having been sent to the parties and entered in the Register on 14 th January 2002. The decision was that the Appellant had made an unlawful deduction from the Respondent's wages in breach of Section 13 of the Employment Rights Act 1996.

[2]Until his resignation on 28 th June 2000, the Respondent to this appeal (the Applicant at the Employment Tribunal), Mr Steen, was employed as a Sales Representative. Subsequent to that resignation he complained to the Employment Tribunal that he had been unfairly dismissed and that an unlawful deduction from his wages had been made in contravention of Section 13 of the Act. The claim for unfair dismissal stands adjourned and this Appeal concerns only his claim of unlawful deduction.

[3]Mr Steen started working as a Sales Representative for a company called Erskine Limited in June 1990. When Erskine Limited was taken over by Ikon Office Solutions Limited in June 1996 Mr Steen was working out of the Bromsgrove office. His terms and conditions of employment (i.e. the Erskine Employment Contract, which dated from June 1992 and had not been replaced) made provision for the payment of commission by a clause which reads as follows:- " Incentive Payments Commission bonus or other incentive payments may be paid by the company subject to such conditions and at such times as the company shall notify you in writing from time to time. The entitlement to such payments may be revised or withdrawn at any time at the company's discretion ".

[4]In June 1997, at Mr Steen's request, he transferred from Bromsgrove to the Leicester office. On 31 st July 1997 the Appellant's then Area Director, Mr Russell Wadd, wrote to Mr Steen in the following terms:- " Dear Graham I write to clarify a few points regarding your transfer from Bromsgrove to Leicester for the avoidance of any doubt, we agreed the following: …. C) You will receive commission paid on the Ikon National Pay Plan…. I trust the above covers all areas discussed, however if I have omitted any detail, please let me know. I must however at this point record my disappointment that such an experienced player as yourself has not yet registered a sale at this branch. Though your forecasts for business have been optimistic, I trust as Leicester's most experienced and highly paid sales person this position will be rectified in August. As you are aware, the pay plan does not reward failure ".

[5]As the Employment Tribunal found at paragraph 4(k) of its decision the Respondent, Mr Steen, had only ever received a copy of what the Tribunal described as "The Old Plan". What Mr Wadd was referring to in the letter quoted above was what the Tribunal described as "The Ikon Pay Plan", the latest iteration of which then dated from March 1997. There was a significant difference between the two so far as methods of calculating commission were concerned. The Old Plan provided for costs to be deducted from gross commission in order to ascertain the net commission to be paid but the deductible costs did not include Mr Steen's monthly basic salary. The Ikon Pay Plan defined the deductions to be made from gross commission as including "salary, telephones and mobile phones, parking fines etc".

[6]When Mr Steen received his September 1997 Sales Commission Statement he discovered what he thought was a £2,000 shortfall in the commission, which he had calculated he ought to receive. This, it transpired, was equivalent to his basic monthly salary. He protested to Mr Wadd about this. Mr Steen maintained his protests and the question as to how his commission was to be calculated had not been resolved by the time that he wrote to the Appellant's Head of Personnel, Ms Myers, on 31 st March 1999. The matter dragged on and had not been resolved by 16 th February 2000 when Ms Myers wrote to Mr Steen explaining how commission was calculated under the Ikon Pay Plan. There was a meeting between Mr Steen and management on 29 th February 2000 and, although the amount of commission on various transactions appears to have been agreed at that meeting, the Employment Tribunal found that the method of calculation was neither discussed nor agreed (see paragraph 4(i) of the decision). As the Employment Tribunal found, the matter had still not been resolved by the time of Mr Steen's resignation, which took effect on 30 th June 2000.

[7]Therefore the issue for the Employment Tribunal was whether, at the material time covered by the complaint of unlawful deductions, Mr Steen's entitlement to commission was based on The Old Plan or The Ikon Pay Plan; in other words what, at the material time, was the contractual term as to commission? Mr Steen's case was that he had never received a copy of The Ikon Pay Plan, remained employed under contractual terms as to commission as defined by The Old Plan and was therefore contractually entitled to net commission calculated without deduction of salary.

[8]The Appellant's case was that the contract allowed for the unilateral variation of terms relating to the payment of commission and that it was not necessary for Mr Steen to have received any notice at all; alternatively it was not necessary for him actually to have received The Ikon Pay Plan because the reference to it in the letter of 31 st July 1997 gave him adequate notice of the fact that his terms had been changed and his contract only required that he be notified of a change not that he be given the actual detail of the change. The Appellant also made a number of other submissions to the Employment Tribunal as to the incredibility of Mr Steen never having received a copy of The Ikon Pay Plan. As we have already said, these were rejected by the finding at paragraph 4(k) of the decision and this left the Employment Tribunal with the task of construing the relevant parts of the contract of employment.

[9]At paragraphs 8 and 9 of its decision the Employment Tribunal concluded that Mr Steen's contract had not been varied and that he was entitled to be paid commission as calculated by reference to The Old Plan. In reaching this conclusion the Employment Tribunal first had regard to the case of Chequepoint UK Limited v Radwan , although they were only able to see it reported in IDS brief page 673. Having summarised what they understood to have been decided by the case they added, somewhat cryptically:- " As a rule of construction ambiguity in contractual terms is resolved against the person who is seeking to rely upon the term in question ". We characterise that remark as cryptic because, having had the advantage of being able to read the full transcript of the decision in Chequepoint , it does not seem to us immediately apparent that the "rule"quoted above has any connection with that authority.

[10]Paragraph 9 of the Employment Tribunal's decision is much easier to understand and, in order to appreciate the full force of Mr Brook's criticisms, we set it out in full (apart from the last three sentences, which are not pertinent for present purposes):- " We have considered the construction of the Clause headed "Incentive Payments" in the applicant's contract of employment with Erskine. The employer agreed that it would notify employees in writing of the conditions subject to which the commission would be paid. The pay plan of which the applicant had had written notification was the Old Plan. Under that plan "costs" to be deducted from gross commission had not included salary. Having been so notified the applicant was contractually entitled to rely on the terms of the Old Plan until such time as the respondent notified him in writing of the change in the conditions. We find on the balance of probability that it did not do so. The applicant was more than aware of the terms of the Ikon Pay Plan not least because of the effect on his wage packet but that does not mean that he had been notified in writing of the conditions of that plan. The respondent's attempt to impose the Ikon Pay Plan upon him was an attempt to unilaterally vary his contract of employment to which he did not consent. He remained in employment but under protest. He did not therefore affirm the contract; nor was there any compromise and accord so far as the basis upon which the calculation of commission was to be made, only in relation to certain deals where the entitlement of the applicant's commission was disputed. Had the respondent wanted to vary the conditions to which the payment of commission was subject (which it could have done at any time) all it had to do was notify the employee in writing and ensure that it was able adequately to prove that it had done so. "

[11]Mr Brook, who appeared for the Appellant, attacked the Employment Tribunal's decision in a number of ways. Firstly, he complained that the Employment Tribunal had simply failed to deal with the primary argument addressed to it, namely that Mr Wadd's letter of 31 st July 1997 had constituted the notice of variation stipulated for in the contract of employment. Nowhere in paragraphs 8 and 9 of the Employment Tribunal's is there any reference to this point, as formulated by Mr Brook in written submissions to the Employment Tribunal and as summarised by it in paragraph 6 c) of the decision (we refer to the second occurrence of a paragraph 6 c) in the decision), which reads:- " In any event, the Applicant had notice of the Ikon pay Plan because of the express reference to that Plan in Mr Wadd's letter to him dated 31 July 1997 or by regular mailing ".

[12]Paragraph 8, submitted Mr Brook, does not address the point. The first sentence of paragraph 8 reproduces parts of the IDS report of the case of Chequepoint UK Limited v Radwan and the second sentence does not derive from the case because the Chequepoint case was not concerned with ambiguity. This, he submitted, is confirmed by consideration of the full report as set out in the Smith Bernal transcript of the Judgment, which he had obtained for us from the LAWTEL Internet Service.

[13]Secondly, and as an adjunct to his first submission, Mr Brook further submitted in relation to paragraph 8 of the Employment Tribunal's decision that not only did the second sentence have no connection with the authority referred to in the first but also that the paragraph represented inadequate reasoning and thus an error of law arose as characterised by the Court of Appeal in Meek v City of Birmingham District Council

[1987] IRLR 250

. He also applied this criticism to paragraph 9 of the decision.

[14]Thirdly, the Employment Tribunal had misconstrued the Incentive Payments clause of the contract of employment and thus had failed to understand that Mr Wadd's letter constituted proper notice of variation under that clause. Mr Brook argued that the vital sentence in the Employment Tribunal's decision was the last sentence of the extract from paragraph 9 quoted above. The Employment Tribunal had gone wrong by failing to conclude that the letter was adequate notice. His submission was that on a true construction of the clause relating to incentive payments in the original terms and conditions, all that was required was that the employee's attention was drawn to the existence of a new scheme for calculating commission payments. On the true meaning of the words of the clause, it was not necessary for the employee to receive the scheme itself or any detail of it. Notification need only be as to the existence of new conditions not as to their substance. The other submission as to construction made to the Employment Tribunal, namely that the first and second sentences of the clause were disjunctive to the extent that the requirement for notification arising from the first sentence was overridden by the discretion as to variation provided for by the second sentence, was not pursued on this appeal.

[15]Fourthly, he argued that no reasonable Employment Tribunal properly directing itself could have reached the factual conclusion that Mr Steen had never received The Ikon Pay Plan either in July 1997 or at some later time.

[16]Mr Tatton-Brown, whilst accepting that the Employment Tribunal does not deal expressly in paragraphs 8 and 9 of its decision with the submission summarised at paragraph 6 c) of its decision, namely that Mr Wadd's letter of 31 st July 1997 had constituted the notice of variation stipulated for in the contract of employment, argued that the Employment Tribunal must be taken to have rejected that argument. He submitted that this is clear when one reads paragraph 9 of the decision as a whole.

[17]So far as paragraph 8 of the Employment Tribunal's decision was concerned, Mr Tatton-Brown submitted that in the paragraph, the Employment Tribunal was answering the Appellant's submission (summarised at paragraph 6 b) (again we refer to the second occurrence of that paragraph in the Employment Tribunal's decision) that no notice of a variation was required. Once this was understood, then there was no difficulty in understanding paragraph 8; the reference to ambiguity is dealing with the alternative constructions of the Incentive Payments clause, which Mr Brook had put before the Employment Tribunal. In any event the reference to ambiguity was otiose in the sense that it could be excised without making any difference to the Employment Tribunal's reasoning or conclusions.

[18]So far as the construction of the Incentive Payments clause was concerned, Mr Tatton-Brown submitted that detail of the conditions had to be supplied. This meaning was consistent with the obligations placed on employers by the provisions of Part I of the Employment Rights Act 1996 (particularly sections 1, and 4), which require the details as to remuneration to be given to the employee rather than to be by reference to other documents, which might be accessible to him.

[19]Finally, Mr Tatton-Brown submitted that the Employment Tribunal had been entitled to find that Mr Steen had never received The Ikon Pay Plan. This was a finding of fact made after a thorough investigation of the evidence and it could not be properly characterised as perverse.

[20]In our judgment, central to this appeal (as it was central to the Employment Tribunal) is the construction of the Incentive Payments clause. What has to be notified is both "such conditions" and "such times". It seems to us that there cannot be notification of "such conditions" without the detail of the conditions being communicated. If all that was required was notification as to the mere existence of the conditions, then the language of the clause would be somewhat different.

[21]Moreover, so far as timing is concerned, it seems difficult to envisage how the notification could be completed without detail of the times being given. This provides us with some measure of comfort that our view of the meaning of the language as it relates to conditions is correct. Considering the two sentences of the Clause as a whole it seems to us that the intention of the parties was that the employer would tell the employee not only that there was commission but how it would be paid, when it would be paid, whether and how it had been changed (either as to the basis or timing of payment) and, if it was the case, that it had been discontinued. In reaching our conclusion as to construction we have not had recourse to Mr Tatton-Brown's argument as to the impact of sections 1 and 4 of the Employment Rights Act 1996. Unless the statutory background is so pervasive that the makers of the contract must be taken to have used words so as to be consistent with the relevant statutory provisions, which we do not think is the case here, we think that the correct approach is to concentrate only on the language of the clause to be construed.

[22]The crucial sentences of paragraph 9 of the decision are the fifth, sixth, seventh and tenth:- " Having been so notified the applicant was contractually entitled to rely on the terms of the Old Plan until such time as the respondent notified him in writing of the change in the conditions. We find on the balance of probability that it did not do so. The applicant was more than aware of the terms of the Ikon Pay Plan not least because of the effect on his wage packet but that does not mean that he had been notified in writing of the conditions of that plan. … Had the respondent wanted to vary the conditions to which the payment of commission was subject (which it could have done at any time) all it had to do was notify the employee in writing and ensure that it was able adequately to prove that it had done so. "

[23]In our view, those sentences mean that the Employment Tribunal concluded the contract, whilst providing for unilateral variation, also stipulated a notice mechanism, which had to be complied with before the variation could be effective. The Employment Tribunal asked themselves whether Mr Wadd's letter constituted such notice and concluded that the terms of the letter, as set out above, did not constitute adequate and proper notice to effect a variation in accordance with the contract. Accordingly Mr Steen remained employed under the original terms of the old plan and his contract was not varied to include the provisions of the Ikon Pay Plan. Although the Employment Tribunal does not say explicitly that this has been its construction of the Incentive Payments clause and does not say explicitly that it rejects the argument that the letter of 31 st July 1997 constituted adequate notice of the unilateral variation, it seems to us to be clear from the terms of the decision what the reasoning has been and, accordingly, to be clear to the Appellant why it has lost. Thus we cannot accept Mr Brook's submissions that the Employment Tribunal have not dealt with his submissions and have not adequately expressed its reasons at paragraph 9 of the decision.

[24]Mr Brook derived support for his argument on construction from the Chequepoint case. We agree that the Chequepoint case has some resemblance to the present case. There was a term in the employee's contract in that case, which read as follows:

" The employee's basic salary will be £……. per year. In addition the company may, at its absolute discretion, pay to all or any of its employees an annual bonus….the terms and conditions of any such bonus scheme to be notified to employees from time to time "

. In 1992 the employee had been written to in terms that notified him as to the detail of a new bonus structure. Not only the fact that there was to be a new bonus structure was brought to his attention but also some detail as to how it was to be calculated. As we understand it Mr Brook relied on paragraph 15 of the Judgment of May LJ, which is in the following terms:- " In my judgment, the respondent's submission correctly construes clause 18 of the contract and correctly applies the facts established by the evidence to it. The appellants had a discretion as to the payment of bonus and had agreed that from time to time they would notify the terms of any bonus scheme. The letter constituted notification within clause 18. Once such a scheme was notified, be it individual or referable to a group, the respondent was entitled to the bonus until, in their discretion, the employer notified a change in the scheme or its withdrawal. It is unnecessary in this appeal to determine what would have constituted appropriate notice since no notice of any kind was established by the evidence. That construction, in my view, accords with the terms of the clause, but it also accords with common sense. If you tell an employee that he is going to get bonus payments on certain terms, you are or ought to be obliged to pay bonus in accordance with those terms until the terms are altered and notice of the alteration is given ". (italics added)

[25]Mr Brook relies on the last sentence of that quotation as illustrating that Mr Wadd's letter of 31 st July 1997 was open to have been construed as adequate notice in the instant case. We think that this reads a great deal more into the closing sentence of the paragraph than May LJ ever intended. As the sentence we have emphasised by italics makes clear, on the facts in Chequepoint no notice of any kind was ever given and May LJ was careful not to express any view as to what notice might have sufficed. In those circumstances we think that nothing can be gleaned from that case, which might be of assistance in the instant appeal.

[26]We accept that paragraph 8 of the Employment Tribunal's decision may be somewhat too compressed. It seems to us likely that no more was intended by the first sentence than to derive from the brief IDS report of the Chequepoint the proposition that an existing contract remains in force until varied lawfully. The second sentence expresses what might be referred to as a "canon of construction". As we have already said, it does not derive from the Chequepoint case and we remain somewhat perplexed by it.

[27]We can see some force in Mr Tatton-Brown's argument that the Employment Tribunal might have been addressing the argument that the second sentence of the Incentive Payments clause was disconnected from the first and provided an overarching discretion to remove the commission payments without any notice whatsoever. Even so, the meaning of the clause was first and foremost a matter of construction of the language of the clause and we have difficulty in understanding wherein any ambiguity arose or why it was necessary to have recourse to that canon of construction? In the event, that point on the construction of the Incentive Payments clause has not been pursued on this appeal; the criticism, which has been made of paragraph 8 to us has been that of inadequacy of reasoning. Whilst we agree that the paragraph is cryptic, ultimately we have concluded that Mr Tatton-Brown is right when he says that it is otiose to the decision. In our judgment all the reasoning necessary for the Employment Tribunal's decision is set out at paragraph 9. As we have already said, it seems to us that the reasoning there is set out with reasonable adequacy and looking at the decision as a whole we have concluded that no error of law of the kind identified by the Court of Appeal in the case of Meek has arisen in the instant appeal.

[28]Finally we turn to the argument that no reasonable Employment Tribunal, properly directing itself on the evidence, could have concluded that Mr Steen had never received the Ikon Pay Plan in mid -1997 or later. The Employment Tribunal set out the evidence relating to this aspect of the case at paragraph 4 k) of the decision. There they record Mr Steen's denial that he had ever received a copy of the Plan and Mr Wadd's evidence that all he had done was to send the letter of 31 st July 1997 and that he had never sent written details of the Plan. They record also the evidence of an ex-employee based at the Leicester office to the effect that he had received some pay plans but not all of the documents relied on by the Appellant; his evidence, the Employment Tribunal thought, was vague and lacked cogency. Another witness thought that such plans were in a master file but he could not say that Mr Steen had been notified about such plans. Evidence was given about the internal postage system but this did not deal with the distribution of pay plans.

[29]In our judgment it is implicit in paragraph 9 of the Employment Tribunal's decision that the Tribunal was rejecting the submission (recorded at the second occurrence of paragraph 6 e) in the decision) that :- " It was not credible that the applicant did not receive any subsequent pay plan in the 3½ years he worked for the respondent. " We think that there was an ample evidential basis for them doing so and that the decision was not perverse.

[30]For all the above reasons, and despite the able arguments of Mr Brook, we have come to the conclusion that there was no error of law in the Employment Tribunal's decision and accordingly this appeal will be dismissed.