Fraser v Southwest London St George’s Mental Health Trust (2002 Act and pre-action requirements) [2011] UKEAT 0456_10_0311

EAT
Fraser v Southwest London St George’s Mental Health Trust (2002 Act and pre-action requirements)
[2011] UKEAT 0456_10_0311 · 2011-11-03
[1]The Claimant is a nurse. Until her dismissal with effect from 7 October 2008 she was employed by the Respondent Trust. By a claim form presented on 15 October 2008 she made claims of unfair dismissal and breach of contract (unpaid wages and notice pay). By a second claim form presented on 22 December 2008 she claimed unlawful deduction of wages and non-payment in respect of her holiday entitlement under the Working Time Regulations 1998 [1] : although she also ticked the boxes indicating that she was claiming for race, disability and age discrimination, no particulars were provided and she was told by the Tribunal that the complaints in question had been rejected. By a third claim form presented on 4 February 2009 she made particularised claims of disability and age discrimination.[2]Those claims came on for hearing before an Employment Tribunal sitting at London South, chaired by Employment Judge Balogun, in February last year. By a Judgment with Reasons sent to the parties on 2 June 2010 all her claims were dismissed save for one of unlawful deduction of wages, in respect of which she was awarded £7,480.61.[3]The Claimant appealed to this Tribunal on a number of different grounds. Following a preliminary hearing only two now survive, being numbers (3) and (6) in her Notice of Appeal. She has been represented before us by Mr Ayoade Elesinnla of counsel. The Trust has been represented by Mr Andrew Midgley, also of counsel. Before the Tribunal the Claimant was also represented by Mr Elesinnla but the Trust was represented by Ms Leslie Millin of Capsticks, who have been the Trust’s solicitors throughout.[4]We take the two surviving grounds in turn. GROUND (3): THE SECTION 32 POINT[5]At the time when the claims were presented the regime provided for under Part 2 of the Employment Act 2002 was still in force. In her ET1 in the third set of proceedings, i.e. those raising the claims of age and disability discrimination, the Claimant asserted in section 3 of the form that she had raised a grievance relating to the matters which were the subject of her complaint. That assertion was not controverted in the Trust’s response form, which was lodged on 23 March: the relevant questions in section 2 are left unanswered. The very next day Capsticks wrote to the Tribunal seeking a pre-hearing review, partly in order to deal with a time point but partly also in relation to “some other jurisdictional points regarding the grievance procedure”. However, that letter was not copied to the Claimant’s solicitors and neither the request for a PHR nor the jurisdictional points referred to appear to have been raised at a case management discussion which took place only three days later (There is a suggestion in the Tribunal’s Reasons quoted below that at a CMD in February 2009, which was concerned with the first two claims but at which the Claimant had indicated her intention to bring the third claim, the Trust had referred to the possibility of a jurisdiction point being taken; but we are not sure from the Note of the CMD that that is correct.)[6]The three consolidated claims (in practice, however, only two) came on for substantive hearing on 8 February 2010. Ms Millin advanced the argument that the Claimant had not raised a grievance in relation to her claims of disability and age discrimination and that accordingly, by virtue of section 32 (2) of the 2002 Act, the Tribunal had no jurisdiction to entertain those claims: it follows from what we have said above that that was effectively the first time that the point had been raised inter parties. It will be convenient at this stage to set out the terms of section 32 (2), which reads as follows:
“An employee shall not present a complaint to an employment tribunal under a jurisdiction to which this section applies if – (a) it concerns a matter in relation to which the requirement in paragraph 6 or 9 of Schedule 2 applies, and (b) the requirement has not been complied with.”
[7]The Tribunal decided that point as a preliminary issue. One of the questions which arose was whether the Trust was entitled to raise the question in the way, or at the stage of the proceedings, that it had. Section 32 (6) of the 2002 Act provides:
“An employment tribunal shall be prevented from considering a complaint presented in breach of subsections (2)-(4), but only if – (a) the breach is apparent to the tribunal from the information supplied to it by the employee in connection with the bringing of the proceedings, or (b) the tribunal is satisfied of the breach as a result of his employer raising the issue of compliance with those provisions in accordance with regulations under section 7 of the Employment Tribunals Act 1996 (c 17) (employment tribunal procedure regulations). The question was whether the Trust had “raised the issue of compliance … in accordance with [the regulations]”
. The meaning of that requirement has been the subject of some authority, to which we will have to refer below.[8]The Tribunal decided that the point was indeed properly raised. In a preliminary section of its Reasons it said this:
“9. We deal first of all with the issue of whether the Respondent is estopped from raising jurisdictional points by virtue of section 32(6)(b) of the Employment Act 2002. The Respondent has not pleaded section 32 jurisdictional points in any of its ET3 responses, in particular the 3 rd response, even though it recognised at an early stage, as is evidence from the CMD of 4 February 2009, that such jurisdictional issues were potentially at play. Also, no steps were taken by the Respondent to amend its response to include these preliminary issues prior to the full merits hearing. 10. We have considered the authorities: DMC Business Machines plc v Plummer UKEAT/0381/06/M and Glasgow City Council v Stefan Cross Claimants and Ors UKEATS/09/BI . From these we have concluded that whilst it is best practice for the Respondent to raise the issue of section 32 compliance in the ET3 response – from the outset or by way of amendment – this is not the only avenue open to it. It is open to the Respondent to raise the matter at any stage of the proceedings, though clearly, the earlier the better. The Respondent in this case raised the matter on the 4 February 2009 and again at the start of the full merits hearing. In the circumstances, we do not consider that the Respondent is estopped from raising the jurisdictional points. 11. If we are wrong on this, the tribunal in the alternative raises the section 32 point of its own motion. The case: Radakovits v Abbey National plc [2009] EWCA Civ 1346 confirms that a tribunal is required to take of its own motion an issue of jurisdiction if it is concerned as to whether it can properly deal with the case. In our view, the matter before us is such a case.”
[9]Having thus permitted the point to be taken, the Tribunal went on to consider whether the Claimant had indeed raised grievances in relation to her claims of age or disability discrimination and held that she had not: see paragraphs 14-16 of the Reasons. It accordingly held that it had no jurisdiction to entertain the claims.[10]On this appeal the Claimant does not challenge the Tribunal’s decision that she had lodged no relevant grievance. But she repeats the contention that it was too late for the Trust to take the point. She originally also asserted that Mr Elesinnla had been prevented by the Tribunal “from developing his arguments to support his contention that … she had complied with section 32”: see ground (1) of the Notice of Appeal. But that ground was dismissed at the preliminary hearing in this Tribunal.[11]It is clear from the phrase “but only if” that the effect of section 32 (6) is to place a procedural condition on the taking of points under sub-sections (2)-(4). The question is what the nature of that condition is. This has, as we have already said, been the subject of some authority in this Tribunal. The cases are (in chronological order) Holc-Gale v Makers UK Ltd [2006] ICR 462; DMC Business Machines Plc v Plummer (UKEAT/0381/06); Suffolk Mental Health Partnership NHS Trust v Hurst [2009] ICR 281 ; and Glasgow City Council v Stefan Cross Claimants (UKEATS/0007/09). It is strongly arguable that in Hurst Elias P intended to hold that an employer could only raise an issue under section 32 by pleading it in his response, either as originally lodged or by way of amendment (see paragraphs 82-83), and that support for that proposition can be found in my judgment in DMC . However, Judge Clark expressed a more relaxed view in Holc-Gale , and in the Glasgow City Council case Lady Smith, having reviewed all their earlier authorities, held that there was no such rule. She held, in short, that the effect of sub-section 6 (b) was that a “compliance issue” can be raised in any way permitted by the Rules, including by oral application, provided only that it is raised “before the Tribunal starts considering the merits of the complaint” (see paragraph 41). That, it will be seen, was the approach which the Tribunal followed: see paragraph 10 of the Reasons quoted at paragraph 8 above. We would be slow, on ordinary principles, to depart from Lady Smith’s considered view, and there is in the event no reason why we should consider doing so, since Mr Elesinnla has made it clear in his oral submissions that he does not seek to espouse the strict approach arguably advanced in Hurst . His point was simply that the Tribunal was wrong to say that the point could be raised “at any stage of the proceedings” and the way in which it had been raised in the present case, at the start of the substantive hearing, without prior notice and at the eleventh hour, was simply unfair.[12]We do not accept that submission. On the basis of Lady Smith’s judgment in the Glasgow City Council case, an absolute bar to the claim being raised arises only at the point when a tribunal commences its consideration of the substantive issues in the case. That had not occurred in the present case: the Trust had indeed left it to the last possible moment, but it remained on the right side of the line. Beyond that, the issue is one of fairness. As to that, however, the only fairness point taken in the Notice of Appeal relates to Mr Elesinnla being prevented from developing his submissions, but that is no longer live: see paragraph 10 above. It is too late for any other such point to be introduced now. If it were to be suggested that the absence of notice meant that Mr Elesinnla was unable fairly to meet the point being raised – which we are bound to say seems on the face of it an implausible suggestion – it would be necessary to obtain a full account of precisely how matters were handled before the Tribunal, almost certainly involving the comments of the Judge and members.[13]We accordingly dismiss ground (3). The basis on which we do so makes it unnecessary to consider whether the Tribunal’s alternative reasoning at paragraph 11 of the Reasons was correct. We would, however, observe that the very specific drafting of sub-section (6) means that authorities such as Radakovits , to which the Tribunal referred (and whose full citation is [2010] IRLR 307 ), which are concerned with more conventional jurisdictional bars, may not be directly applicable. GROUND (6): THE HOLIDAY PAY POINT[14]The facts relevant to this ground can be summarised as follows. The Claimant injured her knee in an accident at work in November 2005. She went off sick; and in fact, to anticipate, she never returned to work before her dismissal almost three years later. Her entitlement to sick pay expired in August 2006. However, not all of her absence was uncomplicatedly as a result of incapacity. In November 2007 she was certified fit to return to work, but not to undertake the full duties of her previous job as a nurse. The Trust resumed paying her from that date, on the basis that she was ready and willing to work; but, for various reasons into which we need not go, it did not prove possible to find work for her to do. The Trust eventually ceased paying her again in March 2008. (The only part of her claim on which she succeeded related to her pay for the period between then and the date at which she was eventually given notice.)[15]We should start by summarising the relevant provisions of the Working Time Regulations and the Working Time Directive , which the Regulations are designed to implement. So far as concerns annual leave, the relevant provision of the Directive is article 7, which reads:
“Annual leave 1. Member States shall take the measures necessary to ensure that every worker is entitled to paid annual leave of at least four weeks in accordance with the conditions for entitlement to, and granting of, such leave laid down by national legislation and/or practice. 2. The minimum period of paid annual leave may not be replaced by an allowance in lieu, except where the employment relationship is terminated.”
The decidedly succinct terms of article 7 undergo some expansion in the Regulations, as follows: (1) Regulation 13 confers the basic right to annual leave: paragraph (1) reads (so far as material) “a worker is entitled to four weeks' annual leave in each leave year”. (2) Regulation 16 confers the right to be paid for such leave: paragraph (1) provides that the worker “is entitled to be paid in respect of any period of annual leave to which he is entitled under regulation 13”. Those are the core provisions. But it is necessary to refer to some other provisions, specifically: (3) Regulation 13 (9) reads:
“Leave to which a worker is entitled under this regulation may be taken in instalments, but— (a) it may only be taken in the leave year in respect of which it is due, and (b) it may not be replaced by a payment in lieu except where the worker's employment is terminated.”
That is important. The right is to leave and not, save on termination (as to which see (2) below), to pay in lieu of leave: this of course reproduces the explicit terms of article 7.2 of the Directive. Nor can entitlement to leave be carried over from one year to the next: the rule is “use it or lose it”. (4) Regulation 14 deals with the situation where a worker’s employment is terminated part-way through his leave year (as will in practice almost always be the case). In such a case the amount of leave to which he was entitled as at the termination date is calculated on a pro rata basis, and he is entitled to pay in lieu to the extent that he has not taken that amount of leave. We should for completeness set out the terms of paragraphs (1) and (2), which read: “(1) This regulation applies where – (a) a worker's employment is terminated during the course of his leave year, and (b) on the date on which the termination takes effect…., the proportion he has taken of the leave to which he is entitled in the leave year under Regulation 13 differs from the proportion of the leave year which has expired. (2) Where the proportion of leave taken by the worker is less than the proportion of the leave year which has expired, his employer shall make him a payment in lieu of leave in accordance with paragraph (3)." We need not set out paragraph (3). (5) Regulation 15 deals with the machinery for taking leave, and in particular for fixing the leave dates. Paragraphs (1) and (2) read (so far as material) as follows: (1) A worker may take leave to which he is entitled under regulation 13 … on such days as he may elect by giving notice to his employer in accordance with paragraph (3), subject to any requirement imposed on him by his employer under paragraph (2). (2) A worker's employer may require the worker— (a) to take leave to which the worker is entitled under regulation 13 …; or (b) not to take such leave, on particular days, by giving notice to the worker in accordance with paragraph (3). (The details of the notice requirements in paragraph (3) are immaterial for present purposes.) (6) Regulation 30 contains the enforcement provisions. Paragraph (1) confers a right to complain to an employment tribunal where an employer (a) “has refused to permit [the worker] to exercise any right under … regulation …13” or (b) “has failed to pay him the whole or any part of any amount due to him under regulation 14 (2) or 16 (1)”.[16]The Court of Appeal in Commissioners of Inland Revenue v Ainsworth [2005] ICR 1149 held that a worker who was absent sick throughout a leave year did not accrue any entitlement under regulation 13 (or, therefore, regulation 16) because he was already absent from work and did not need “leave”. But that case was subsequently referred by the House of Lords to the European Court of Justice, sub. nom . Stringer v HM Revenue & Customs Commissioners (where it was heard together with a reference in a German case, Schultz-Hoff v Deutsche Rentenverscherung Bund , which raised a similar point). The decision of the Court (see [2009] ICR 932 ) was that although a rule in domestic legislation that the right to annual leave had to be exercised in the leave year in which it accrued was, generally, consistent with the Directive (see para. 43 of the Judgment, at p. 981 D-E), such a rule was not permissible in cases where the worker had not “had the opportunity” to exercise that right as a result of sickness ( loc. cit. ). In such a case he should, exceptionally, be entitled to carry over his entitlement to a subsequent year. As it is put in paras. 48-49 of the judgment (p. 982 A-D):
“48. … [ I]f … the right to paid annual leave guaranteed to the worker by Article 7(1) of [the Directive] may not be undermined by provisions of national law which exclude the creation or existence of that right, a different result cannot be allowed in relation to provisions of national law which provide for the loss of that right, in the case of a worker on sick leave for the whole leave year. 49. … Article 7(1) of [the Directive] must be interpreted as meaning that it precludes national legislation or practices which provide that the right to paid annual leave is extinguished at the end of the leave year and/or of a carry-over period laid down by national law even where the worker has been on sick leave for the whole leave year and where his incapacity for work persisted until the end of his employment relationship, which was the reason why he could not exercise his right to paid annual leave.”
[17]When the case came back before the House of Lords ( [2009] ICR 985 ), it was accepted by the employers that that ruling should be given effect to, and the employees’ appeals were allowed without the issue being further discussed. We should note, however, that the House was asked to decide a distinct issue as to whether claims derived from the Regulations could be brought as claims for unlawful deductions under Part II of the Employment Rights Act 1996 , as well as under regulation 30, and thus potentially attract the operation of section 23 (3) (a) of the Act, which extends the time limit where there has been a “series of deductions” of which the most recent was in time. Although the question did not in fact arise on the facts of the case, the House agreed to determine the point and held that such claims could indeed be brought under Part II.[18]We should also mention the decision of the ECJ in Pereda v Madrid Movilidad [2009] IRLR 959 . In that case an employee had been injured shortly before he was due to take annual leave. The Court held that he was entitled to substitute a different period of annual leave. Having identified the purpose of annual leave, it said at paragraph 22 (p. 961):
“It follows from the foregoing and, in particular, from that stated purpose of the entitlement to paid annual leave that a worker who is on sick leave during a period of previously scheduled annual leave has the right, on his request and in order that he may actually use his annual leave, to take that leave during a period which does not coincide with the period of sick leave.”
It went on to say that the substitute period of leave would have to be fixed in accordance with “the rules and procedures of national law which are applicable to the scheduling of workers' leave” and (at para. 23) that if that proved impossible the leave might be given in the subsequent leave year. The Court concluded:
“25. Consequently, although [the Directive] does not preclude national legislation or practices which allow a worker on sick leave to take paid annual leave during that sick leave (Schultz-Hoff and Others, paragraph 31), it follows from paragraph 22 of the present judgment that, where that worker does not wish to take annual leave during a period of sick leave, annual leave must be granted to him for a different period. 26. In the light of all the foregoing, the answer to the question referred is that article 7(1) of [the Directive] must be interpreted as precluding national provisions or collective agreements which provide that a worker who is on sick leave during a period of annual leave scheduled in the annual leave planning schedule of the undertaking which employs him does not have the right, after his recovery, to take his annual leave at a time other than that originally scheduled, if necessary outside the corresponding reference period.”
[19]Turning to the facts of the present case, the Trust’s leave year runs from April to March, so that the Claimant’s absence spanned four such years – 2005/6, 2006/7, 2007/8 and 2008/9. No point arose in relation to 2005/6, no doubt because the Claimant was paid throughout that year (either by way of ordinary pay or sick pay). Nor did any point arise in relation to 2008/9 because the Trust, albeit belatedly, paid her the appropriate pro-rated amount of accrued holiday pay as at the date of the termination of her employment in accordance with regulation 14 (2). However, for large parts of the intervening two years (specifically from August 2006 to March 2007 and from April to November 2007) the Claimant was receiving no pay, and her claim before the Tribunal was for four weeks’ holiday pay in relation to each of those years.[20]In the light of Stringer , it was not in issue before the Tribunal that the Claimant had accrued the right to claim annual leave in each of the two years in question. But the Trust’s contention was that if she wanted to exercise that right she was obliged to do so by giving notice under regulation 15 (1) – which it was common ground that she had never done. She was accordingly in no different position from any other employee who had not exercised her right to paid annual leave in a given year: as we have made clear at paragraph 15 (3) above, such leave can not be either commuted or carried forward.[21]The Tribunal accepted that submission. It said, at paragraphs 117-120 of the Reasons:
“ Holiday Pay 117. The Claimant was absent due to sickness throughout the holiday year April 06 to March 07 and during part of the leave year April 07 to March 08. WTR leave is an entitlement which a worker can choose to forgo. The entitlement is triggered by the worker giving notice to the employer, in accordance with Regulation 15, of his or her wish to take annual leave on a specific date or dates. The Claimant confirmed in evidence that she did not request leave during these leave years. 118. There is nothing in the Stringer judgment to suggest that Regulation 15 should not apply to workers who are off sick. The Claimant has not suggested nor has there been any evidence that she was unable to take leave during this period. In fact the only reason she put forward for not requesting leave was that she did not know that she could. 119. As the Claimant did not take her leave during the relevant leave years, Regulation 13(9) continues to apply and she is not entitled to carry over the leave or receive a payment in lieu of it. 120. The Claim for holiday pay therefore fails and is dismissed.”
[22]Ground (6) in the Notice of Appeal reads:
“The ET erred in law in failing to decide the Claimant’s unlawful deductions claim for her holiday pay despite setting it out as an issue.”
As pleaded, that makes no sense: paragraphs 117-120 of the Reasons directly address the holiday pay issue. But the position was clarified in Further and Better Particulars (apparently pleaded by Mr Elesinnla) which I directed on the sift: see in particular paragraphs 11 and 12 of that document. The real points being taken are twofold - (1) that as a matter of law there was no requirement that the Claimant should have “taken” her leave, by giving notice under regulation 15, in order to qualify for the payments sought; and/or (2) that, if there was such a requirement, the Trust was in breach of duty in not informing her of it (the so-called “ Scally point”). We take those points in turn. (1) NOTICE UNDER REGULATION 15[23]The question is whether it was a condition of the Claimant’s entitlement to holiday pay under the Regulations that she should have formally taken her annual leave by giving notice under regulation 15 (1). This is in fact a point which is the subject of some authority and has attracted discussion from the commentators. The position on the authorities can be summarised as follows: (1) In List Design Group Ltd v Catley [2002] ICR 686 (reported with List Design v Douglas ) the applicant had taken eleven days’ leave in the holiday year 1998/9. His entitlement under the Regulations (as they then stood) was to fifteen days’ leave. He was not paid for the leave taken because the employer, wrongly, contended that any relevant entitlement was rolled up in his ordinary pay. The industrial tribunal awarded him fifteen days’ pay. The employer contended on appeal that the award should only have been in respect of the eleven days actually taken. This Tribunal upheld the tribunal’s decision. At paragraphs 41-45 of his judgment (pp. 695-6) Bell J said this:
“42. [Counsel for the employer] contends that the only claim available to Mr Catley under the 1996 Act would be for "deductions". That is holiday pay which should have been paid in respect to holidays actually taken and not compensation for holidays which could have been taken and then claimed for but which were in fact not taken. Regulation 16, he points out, says that the right to be paid is at "a rate of a weeks pay in respect of each week of leave". That, [counsel] contends, must mean actual leave; there is no right to be paid for weeks of "non-leave", that is holidays not taken, other than under specific circumstances provided for by the Regulations which do not apply in Mr Catley's case. 43. We cannot accept that argument on the face of the express wording of Regulation 16(1). By Regulation 16(1) Mr Catley was entitled to be paid "in respect of any period of annual leave to which he was entitled under Regulation 30 at the rate of a week's pay in respect of each week of leave". But the words, "each week of leave" which [counsel] interprets as "actual leave", is, in our view, used in relation to the rate of pay. It cannot, in our view, detract from the opening words that the worker is "entitled to be paid in respect of any period of annual leave to which he is entitled under Regulation 13". Note particularly the word "entitled". 44. [Counsel] developed his argument by contending that Regulation 16(1) had to be taken with Regulation 13(9)(b). If an employer cannot replace leave by a payment in lieu, the employee cannot claim it as an unlawful deduction on wages under the Act because the employer is forbidden to pay it. 45. We do not accept that argument. In our view Regulation 13(9)(b) is clearly aimed at the vice of an employer of persuading employees not to take the leave to which they are entitled but to take more money instead. That would clearly be against the public policy of doing the best to ensure that employees take proper, refreshing periods of holiday in any given year. In our view the wording of Regulation 16(1) is clear and the provision in 13(9)(b), with the aim to which we have just referred, does not detract from it.” (2) Very shortly before the decision in List Design this Tribunal had heard argument in three linked cases under the Regulations, reported as Kigass Aero Components Ltd v Brown [2002] ICR 697 . None of the cases directly raised the issue of leave not taken, but the judgment of Lindsay P – handed down a month after List Design but in ignorance of it – contained a thorough review of the scheme of the Regulations (with the benefit of submissions from experienced employment law counsel). In that context he said this, at paragraph 10 (p. 701G): “Whilst, no doubt, many employers and employees manage their holiday plans with less formality than the Regulations require, where, as in the cases before us, it is the strict regulations that are relied on, the Regulations need duly to be complied with.

(a) ”

And at paragraph 12 (p. 702F) he said:
“If payment were to be made in respect of leave not in fact taken that would conflict with regulation 13 (9) (b) and, equally, nothing in relation 16 overrides the formal requirements for notice in regulation 15. Thus in order to achieve consistency and clarity where the employment continues the words “in respect of each week of leave” in relation 16 (1) need to have added a phrase so that the provision should read ‘in respect of each week of leave duly taken ’”
. There is (at least on the face of it) a clear conflict between those passages and the decision in List Design : an employee is entitled to payment under regulation 16 (1) only in relation to leave actually taken, which means taken by giving due notice in accordance with regulation 15. (3) In Canada Life Ltd v Gray [2004] ICR 673 the applicants were self-employed commission agents selling life insurance: they were, however, “workers” and so fell within the terms of the Regulations. They had “not taken holiday as required by the Regulations” (see paragraph 2 of the judgment, at p. 675 B-C) between 1998 and 2002 [2] and had received no “holiday pay”. When their engagements were terminated they claimed four years’ arrears of holiday pay under regulation 16 (1). The employers argued that they could not recover in relation to periods of holiday which they had not taken. This Tribunal (HH Judge Peter Clark presiding) rejected that argument and followed List Design . As regards Kigass , Judge Clark pointed out that Lindsay P’s observations were obiter ; but he said that in any event there was no real conflict between that case and List Design – see paragraphs 7-24 (pp. 676-9). The essential point which he made was that Lindsay P in Kigass was doing no more than to set out – correctly, as far as it went – the position during employment , whereas in List Design the Tribunal had been concerned with the position on termination: in such a case an employee was entitled to claim not only a payment in respect of the current year under regulation 14 (2) but also, subject to the issue of limitation [3] , pay in respect of any untaken annual leave in previous years. (4) In MPB Structures Ltd v Munro [2004] ICR 430 , a decision of the Inner House, the Lord President said, at paragraph 14 (p. 435D):
“… [We] are of the opinion that it is essential, not only that payment should be made for annual leave, but also that it should be made in association with the taking of that leave.”
It has to be said, however, that that was obiter , and in the context of a different issue: none of the previous three authorities were cited. Of those cases it appears that the Tribunal was referred only to List Design , though Mr. Elesinnla told us that he believed that he had referred the Tribunal also to the IDS Handbook on Working Time , which contains a very thorough and careful discussion of the current point at pp. 161-7. All these cases, of course, precede the decisions of the ECJ in Stringer/Schultz-Hoff and Pereda ; but they contain nothing directly material, and the Court emphasises that the detailed procedures governing annual leave and paid holiday are a matter for domestic legislation provided that the fundamental purposes of article 7 are respected.[24]Mr Elesinnla contended that the present case fell squarely within the ratio of List Design , as endorsed by Canada Life . The fact that the Claimant had not formally “taken” her annual leave by serving the requisite notice did not matter: all that mattered was that she was entitled to it. This, like Canada Life , was a case where the employment had terminated and she was entitled to claim in respect of previous years: no limitation issue had been raised.[25]In Canada Life , as we have seen, this Tribunal purported to reconcile the apparent conflict between List Design and Kigass . On ordinary principles we should follow that decision unless we are satisfied that it was clearly wrong. After careful consideration, and with great respect to the Tribunals in that case and in List Design , we have come to the firm conclusion that both were indeed wrongly decided on the issue in question. Our reasoning is as follows.[26]We start by considering the purpose of regulation 16 (1) – that is, the obligation to pay employees in respect of annual leave. This is straightforward. It is the policy of the Regulations that employees should take the full annual leave to which they are entitled, in the interests of their health and welfare. If they were entitled to take annual leave but not to be paid for it there would be an incentive to forgo it. That is a good reason for paying employees for periods of leave taken, but it has no application where leave has not been taken: that is why, under both the Directive and the Regulations, commutation of leave into holiday pay is expressly proscribed.[27]It therefore seems to us that Lindsay P was plainly right in Kigass to treat regulation 16(1) as requiring payment in respect of each week of leave actually taken (see paragraph 23(2) above); and that conclusion is supported by the observation quoted above from Munro . Although Bell J in List Design emphasised that what paragraph (1) says is “in respect of any period of leave to which he is entitled ”, to read that as meaning “is entitled whether he takes it or not ” seems to us inconsistent with the purpose of the Directive and the Regulations as set out above: it cannot be right for employees to receive holiday pay for leave which they have never taken. In fact, so far as we can see, the effect of the decision in List Design – namely that Mr Catley should be paid fifteen days’ holiday pay when he only took eleven days’ leave – was that he was paid twice for the “missing” four days: since he was apparently hourly-paid in respect of all hours worked (see paragraph 3 of the judgment) he will have been paid for those days, and to receive holiday pay in respect of them as well is double recovery. That is not consonant with the legislative purpose: indeed it creates an incentive not to take holiday.[28]Normally, of course, the distinction between the Kigass and List Design approaches does not emerge in practice. Employees on an annual salary are simply paid seamlessly each month throughout the year, whether they have taken leave in that month or not; and most weekly-paid workers will also typically be paid for any weeks of annual leave without demur. In both cases they are unquestionably paid in respect of their leave periods, and it would never occur to them to seek holiday pay on top. It is only in untypical cases that the question may become live. One example is where there is a doubt as to whether the employer has indeed paid for the leave period in question, as in the case of “rolled-up pay” considered by the ECJ in Robinson-Steele v RD Retail Services Ltd [2006] ICR 932 : it is because the employer in List Design was running such a case, though it was rejected on the facts, that the issue arose there. The other obvious example is where, as in the present case, the employee is not receiving his ordinary pay because of sickness absence: we consider at paragraph 31 below whether any special considerations apply in such a case.[29]If the reasoning is correct so far, we cannot, with all respect, accept the reconciliation between Kigass and List Design propounded by Judge Clark in Canada Life : see paragraph 23 (3) above. The fact is that the applicants did not exercise their right to take holiday during the years in question, and the ordinary rule is, as we have said, “use it or lose it”, without any right to commutation; why should the fact that the employment had, years later, terminated (as all employments eventually will) create an entitlement to holiday pay which had never arisen at the time ? The special regime applying under regulation 14 in the case of a termination is intended to cover the situation where the employee has taken less than his proportionate holiday entitlement at the moment during the year when the employment terminates: in those particular circumstances it has reasonably been thought to be unfair that the employee should potentially lose out, as it would be perceived, by the chance of which part of the year he had chosen to take his holiday in. But neither the wording of regulation 14 nor the policy behind it requires the revival of claims for holiday entitlement not taken in previous years. [4][30]If, therefore, Kigass states the correct approach, the Tribunal’s basic reasoning is - subject to the sickness point considered in the following paragraph - right, even if arguably rather too broadly expressed (which may, however, reflect the fact that the representatives did not refer it to the full authorities). [5] The Claimant’s entitlement to holiday pay under regulation 16 (1) depended on her having given proper notice under regulation 15 of her intention to take annual leave, and she did not do so. It might appear somewhat artificial for an employee who is not at work anyway to have to give notice of an intention that part of her absence should count as holiday; but that merely reflects the artificiality of a period of long-term sickness counting as holiday at all. In any event the giving of notice is more than a formality. Without it the employer who is not otherwise paying the employee, or is paying him only sick pay, will not know whether, or – just as importantly – when, he is obliged to make any payment under regulation 16.[31]We have considered carefully whether the conclusion to which we have come in the previous paragraphs is consistent with the ECJ authorities to which we have referred. In our view it is. It is clear from the passage from the judgment in Pereda set out at paragraph 18 above that an employee who is off work as a result of sickness has a choice. He or she may choose to take annual leave during the period when they would anyway be absent sick – that might at first seem a surprising choice, but if his or her sick pay is exhausted it might in fact be attractive – or they can ask for it to be deferred until a later period. But it is for the employee to ask: see the phrases “on his request” in paragraph 22 of the judgment and “where the worker does not wish” in paragraph 25. If the Claimant had in the present case made a request to take the annual leave accruing in either 2006/2007 or 2007/2008 following her recovery, the Trust might have been obliged to accede to that request; and if she had not had the chance to take that holiday before her termination supervened it might be necessary to read regulation 14 as entitling her to a payment in lieu. But that is not what happened. (2) THE SCALLY POINT[32]The original Notice of Appeal was very thinly pleaded. As noted above, however, I directed on the sift that Further Particulars be given. Paragraph 12 of those Particulars pleads as follows:
“12. Alternatively, the Claimant complained that the failure to inform her of her contractual right to take annual while she was on sick leave amounted to a breach of the implied term of trust and confidence and in this connexion she relied on the decision of the House of Lords in Scally and others-v-Southern Health and Social Services Board and others [1991] IRLR 522, which is authority for the proposition that there is an implied obligation on employers to inform employees of contractual benefit which they can avail themselves of, and breach of that obligation amounts to a breach of the implied duty of trust and confidence. The implied duty will only arise where all of the following circumstances obtain: (i) the terms of the contract of employment have not been negotiated with the individual employee and have resulted from negotiation with a representative body or are otherwise incorporated by reference; (ii) a particular term of the contract confers on the employee a valuable right contingent on action being taken by the employee to avail him or herself of it; and (iii) the employee cannot reasonably be expected to be aware of the term unless it is drawn to his or her attention. It is submitted that all three limbs of the conditions in Scally apply in this case. The first two are obvious, and the third is satisfied by the fact that the Claimant requested information as to how she could take her holiday, which went unanswered. This aspect of the Claimant’s complaint was not dealt with at all.”
In connection with the allegation in the final passage that the Claimant “requested information about how she could take her holiday”, we were referred to a letter from her to the Trust dated 12 November 2007 in which she records having asked Mr Christie of HR about “the situation regarding my annual leave and pay” but being told that he could not advise her “as he had to look into it”.[33]The effect of the decision of the House of Lords in Scally , as referred to in the Particulars of the Notice of Appeal, can be sufficiently summarised by reference to the headnote in the Industrial Cases Reports ([1991] ICR 771), the material part of which reads as follows:
“ … [W]here a contract of employment negotiated between employers and a representative body contained a particular term conferring on the employee a valuable right contingent upon his acting as required to obtain the benefit, of which he could not be expected to be aware unless the term was brought to his attention, there was an implied obligation on the employer to take reasonable steps to publicise that term.”
[34]Mr Midgley’s primary response before us was that this point had not been argued in the Tribunal and could not be raised now. He referred to paragraph 19 of the Reasons, which purports to summarise the issues, and to the admittedly short summary of Mr Elesinnla’s oral submissions (we were told that there were no written submissions) at paragraph 57: neither refers, directly or indirectly, to point raised in the Particulars of the Notice of Appeal. He acknowledged that at paragraph 16 of the Further and Better Particulars attached to the third Claim Form the Claimant had pleaded that the Trust:
“failed to inform [her] of her contractual right (a) to take her annual leave while she was on sick leave … (c) [to] take her annual leave upon her return to work on 2 November …”
But he said that that point had since been “tacitly abandoned”.[35]Mr Elesinnla did not accept that. He told us that, so far as he could recall, the point pleaded in the Particulars of the claim was explicitly run in the Tribunal, although he accepted that – contrary to what is said in the Particulars of the Notice of Appeal – he had not referred the Tribunal to the decision in Scally .[36]This is not a very satisfactory state of affairs. If the dispute had been identified at the preliminary hearing of this appeal the Judge could have been asked whether the point had been taken or not. If we had to decide the question on the probabilities we would incline to the view that Mr Elesinnla’s recollection was mistaken. It seems rather unlikely that if the point was explicitly taken in the Tribunal it would simply have been overlooked, and although it could in principle have been argued – albeit unsatisfactorily – without reference to Scally it would be rather surprising if Mr Elesinnla did so without drawing the Tribunal’s attention to a case which was on any view highly material. But in the end we do not think it would fair to decide the appeal on that basis. The burden must be on the Trust to show that a point which had clearly been pleaded had been abandoned. If the “ Scally point” is indeed arguable, we ought to remit the case to the Tribunal so that it (a) can confirm whether the point was taken or not and (b), if it was not (or if, exceptionally, it allowed the point to be revived even if abandoned), can decide it.[37]The remaining question is thus whether the point is indeed arguable. Mr Midgley submitted that it was not. He pointed out that one of the conditions prescribed in Scally for the duty in question to arise was that a contract had been negotiated collectively under which employees had acquired rights which were contingent on them taking a particular step: the headnote here accurately reflects the speech of Lord Bridge at p. 781H (see point (2)). He submitted that the present case was different. If the Claimant enjoyed a right to take holiday during the years in question (or possibly, following Pereda , in a subsequent year), notwithstanding her sickness absence, that entitlement arose as a matter of general law and not of contract and did not fall within the ratio of Scally . We agree: there can, absent particular circumstances, be no duty on an employer to advise his employees of their rights as a matter of general law.[38]We have considered whether, even though the case might not fall specifically within the terms of Scally , it might not have been a breach of contract for the Trust not to answer the request for advice or information which the Claimant says in her letter of 12 November that she had made. The facts about this complaint are not established, but if it were necessary the issue could be remitted to the Tribunal. However, we do not think that we should make such an order. In the first place, the Particulars of the Notice of Appeal focus squarely on Scally (we note in this connection that the letter of 12 November was not included in the original bundle for this Tribunal). Secondly, we do not believe that this alternative argument could have assisted the Claimant on the particular facts here. The Trust resumed paying her in November 2007 although she did not return to work: if she had designated any part of the rest of the year as holiday she would not have received any more pay than she in fact did. CONCLUSION[39]The appeal is accordingly dismissed.[40]We regret the delay in promulgating this decision, which is a consequence of the pressure of work in this Tribunal. [1] The Regulations in fact use the term “leave” rather than “holiday”; but in some contexts that is awkward, and we will use the terms “leave” and “holiday” interchangeably. [2] The factual position about what holiday was taken is not in fact clear, perhaps unsurprisingly given that the applicants were self-employed. It seems unlikely that they had taken no holiday at all. We strongly suspect that the point was that, whatever holiday they may or may not have taken, they had not given any notice under regulation 15. But what matters so far as the point of principle is concerned is that the case was decided on the basis that leave had not been taken. [3] A claim in relation to a previous year would in most cases be prima facie out of time - though that would depend on the fortuity of when the leave year happened to end. But the time bar might, depending on the particular case, not apply if it had not been reasonably practicable to bring the claim in time or by reference to the “series of deductions” provision referred to at paragraph 17 above (that being the other major issue decided in Canada Life ). [4] Of course there might, depending on the circumstances, be a limitation defence. But that would not necessarily be so. [5] Mr Elesinnla was disposed to challenge the statement in paragraph 118 that there was no suggestion, or evidence, that the Claimant was unable to take leave during the relevant period. As noted at paragraph 14 above, the facts about the Claimant’s absence are not uncomplicated. But, subject to the “ Scally point” considered below, the question of the Claimant’s “ability” to take leave – whatever exactly the Tribunal meant by that – is immaterial. Even if she was in some sense unable to take leave in the leave years in question, her remedy was to ask to take it in a subsequent year, as contemplated in Pereda ; but she did not do so.