The Equality And Human Rights Commission v Earle (Contract of Employment : Damages for breach of contract) [2014] UKEAT 0011_14_0406
EAT
The Equality And Human Rights Commission v Earle (Contract of Employment : Damages for breach of contract)
[2014] UKEAT 0011_14_0406 · 2014-06-04
[66]“Reasonableness and unreasonableness are also concepts deployed in this context, but only in a sense analogous to Wednesbury unreasonableness, not in the sense in which that expression is used when speaking of the duty to take reasonable care .” 29. The approach, whether there is any real difference between that adopted in commercial or employment contracts, is very much to the same effect. It was not, in my view, open to the employer, under this contract, simply to deny what would otherwise probably have been an incremental progression capriciously, arbitrarily or wholly unreasonably. If Miss Tether is right that the only circumstances which contractually in context can be taken into account in a progression review are characteristics personal to the employee, then the basis on which this employer denied any progression, namely lack of the necessary funding, would be perverse or wholly unreasonable within that test. 30. However, I cannot read the clause as necessarily limited to purely personal characteristics. Although I suspect that the parties to this contract would not have had as clearly in mind in 2009 the economic circumstances to which the government was subsequently subject, nonetheless the context of any employment decision in respect of pay for one member of staff will take into account what other members of staff are also being paid. That is industrial reality. It might be thought wholly unreasonable, for instance, for a pay increase to be denied to one employee who was factually in exactly the same circumstance as other employees for whom a pay rise was granted by reliance on a discretion which permitted it. The pay of one employee may have to be kept in reasonable balance with the pay of others in the interests of good management. 31. I do not, therefore, see here the context as requiring, nor the words as including (which they plainly do not) a restriction to circumstances which are purely personal. I have no doubt that the principal matter for consideration is performance. That is the only criterion which is specified. But because it is not the only criterion, it may not be a conclusive criterion. The circumstances in this case, says Mr Lynch QC, are such and so exceptional that it was permissible within the test set out by the cases for there to be no incremental progression here in the Claimant’s case, just as there was not in the case of any other employee who was a new entrant to the EHRC as opposed to being a legacy member of staff. 32. It follows that the Judge was wrong to come to the primary conclusion he did, as he expressed at paragraph 20. I turn to the subsidiary arguments, which are pressed by Miss Tether in support of the conclusion which the Judge in any event reached. 33. She submits that in paragraph 30 and 31 the Judge found that the comment made by Ms MacDonald was not merely a casual comment. The EHRC, she maintained, could not rely upon the entire agreement clause because it was not always a complete answer. She relied for this point on the Royal National Lifeboat Institution v Bushaway [2005] IRLR 674. That was a case in which the Appeal Tribunal upheld the entitlement of an Employment Tribunal to hold that the Claimant had been an employee of the Appellants throughout the period that she had worked for them, notwithstanding that she had had what was described as a contract of employment for less than the necessary period of service to claim unfair dismissal. Prior to that she had worked ostensibly as an agency worker. The Tribunal, however, found that the reality of the agreement between the parties despite the written terms were such that she was an employee. The fact that those written terms included an entire agreement clause could not be relied upon by the employer.34. It seems to me that this is a different case. The first question is what has been agreed between the parties. The effect of Bushaway is that the entire agreement clause was not actually part of the real agreement between the parties. There is no dispute here that the entire agreement clause is part of the agreement. As such, I accept the submissions of Mr Lynch that, as exemplified by White v Bristol Rugby Ltd [2002] IRLR 204 and by the case of Innterpreneur Pub Co v East Crown Ltd [2000] 2 EGLR 31, a decision of Lightman J, upon which the Judge in White v Bristol Rugby Ltd relied (see paragraph 28), is to the effect that an entire agreement clause obviates the need for any search for some remark or statement upon which to found a claim to the existence of a collateral warranty. The operation of such clause is not to render evidence of the collateral warranty inadmissible but rather to denude it of any legal effect.35. The second way in which Miss Tether prays in aid the conversation with Ms MacDonald is to argue that it amounted to an interpretation of the contract which was shortly to be supplied. If so, it would not be caught by Clause 22. It would not be inconsistent with the contract. It would not be a side agreement. It would be an explanation agreed between the parties as to the true meaning of the words or, alternatively viewed, part of the context within which those words fell to be construed.36. In paragraph 31, it may well be that the Judge was attempting to express this. I have set out that somewhat Delphic paragraph above. Viewed textually, the agreement between the Claimant and Ms MacDonald could not overrule a discretion contractually given. That would be precluded by the operation of the entire agreement clause. It could define the discretion. That faces the difficulty here that the contract was not specifically present before the parties at the time of the conversation. If the parties had the precise provision in mind, then it might have had some effect. Miss Tether submits that in general terms the parties were anticipating entering into a contract. I accept that it was part of the general evidence as to what might be expected of the contract by the parties at the time that the contract was entered into. I have little doubt that, had economic circumstances been otherwise, the contract would probably have fulfilled those expectations. But that is not the same thing as requiring the construction of Clause 5.3 to mean that which is contended for. I have taken this into account in my earlier conclusion as to the true meaning of 5.3. If it is necessary to do so, I simply add that viewing this point separately does not drive me to a different conclusion.37. The next point taken in defence of the decision by Miss Tether was that the Respondents were in breach of contract by failing to hold a progression review individually with the Claimant. What happened was that the Respondent decided that it would be pointless to do so for her and others in her position because the EHRC simply had no funding to pay for progression. The government remit was not such as to permit it.38. It is not, in my view, devoid of purpose to hold a progression review despite the difficulty of funding, experienced elsewhere during the credit crunch, as it has been shown that frequently discussions are made about grading which may have potential effect once economic circumstances improve. Although Miss Tether argues that each year is to be viewed separately from each other year in terms of progression, this is not actually what Clause 5 provides. There is no very obvious reason to me why, in the context of the ongoing relationship between employer and employee, a progression review may not indicate how an employee is placed for future progression once economic circumstances ease. There was therefore a point, as it seems to me, in holding such a review. In any event, the contract, on my reading of it, entitled the Claimant to have such a review.39. The Judge did not reach any finding on this. I floated with the parties in argument what the consequence would be if I were to decide in favour of Mr Lynch’s arguments on Clause 5.3 but to hold that there was nonetheless contractually a right to a progression review. Here Miss Tether argued that the Claimant had performed well. If she had had a review at which performance was a major criterion, as it would contractually have to be, she would have had a real chance of incremental progression. To deny her an incremental progression would be to exercise the discretion in breach of the principles expressed in Clark v Nomura , echoing those expressed by Timothy Walker J in Clark v BET [1997] IRLR 348, paragraphs 7 and 9-11; Mallone v BPB Industries Ltd [2002] ICR 1045 (see in particular paragraphs 12, 40 and 41); Horkulak v Cantor Fitzgerald International [2005] ICR 402 , in particular at paragraphs 70-72; and Keen v Commerzbank AG [2007] ICR 623 , which confirmed the general approach between paragraphs 52 and 56. I accept that that is the approach. The issue is, taking the view that I do of the contract, whether I should remit the matter for a decision to be made by the Tribunal as to any finding of breach and remedy. Miss Tether has argued that, notwithstanding the recent decision of the Court of Appeal in Jafri v Lincoln College [2014] WLR (D) 178 , I should determine the consequences here myself, exercising the powers of the Employment Tribunal. Mr Lynch, for his part, takes the same course. He asks me to take account of the primacy of performance, of the lack of material showing that truly economics permitted what might otherwise have been expected to be a steady upward salary progression. He takes me to witness evidence which was, and was accepted to be, before the Tribunal, in particular from Claire Field, the Respondent’s Deputy Director of People Strategy, and David Ede, the Respondent’s Director of Resource Management. 40. I have considered their respective submissions and I think that, in the circumstances of this particular case, it is just that I should determine the issues. To do otherwise would be to expose the parties to further delay, expense and inconvenience and to utilise the resources of the Tribunal further, denying them thereby to other litigants. In part, I reach this view, I must confess, because I am impressed by the force of the Respondent’s financial case. As Mr Ede put it at paragraph 11 of his witness statement, “...consideration of whether to exercise any choice or discretion in regard to making such payments [that is incremental payments] would, inevitably, have to have resulted in a negative answer.” He went on to explain the funding reasons that lay behind it. 41. I have considered Miss Tether’s submission, relying in part upon correspondence between the EHRC and government in relation to their funding to meet their contractual obligations. My conclusions are that the EHRC was critically dependent upon the government remit. In colloquial terms, it had to go cap in hand to ensure that it could meeting binding contractual commitments already entered into. That does not suggest that there was any room for those payments which it was not contractually obliged to make but could choose whether to become obliged to make or not. 42. Though the parties would, absent the crisis in government funding, have hoped - reasonably - that there would be progression through the pay scales, I cannot see that in this case EHRC would have wished to make any additional payment to Miss Earle or other similar employees in her position if it could avoid it. I have already concluded that it was entitled to take account of matters which were not purely personal to the employee under the contract. It follows that in the somewhat exceptional circumstances of recent years, the holding of a review would not, in this case, have led to the making of any incremental payment to Miss Earle. I have to put her in the same position in which she would have been had the contract been fully and properly performed. There is an element here of assessment of the chances of what might have been. However, I cannot see that there is any realistic chance against this background that she would have received even a percentage of the incremental payments she sought. 43. It follows that, despite a deeply impressive argument from Miss Tether on behalf of the Claimant, the appeal must be allowed, it be declared that the contract was not broken and therefore the decision set aside. 44. Miss Tether has asked me to mention the background as part of the context within which the EHRC contract was formed. Each of the prior organisations, namely the Commission for Racial Equality, the Disability Rights Commission and the Equal Opportunities Commission operated different terms and conditions. They were harmonised once the ECHR took over. For those who had been members of staff of the legacy bodies, it was agreed that they would have automatic progression until they reached grade level 3, halfway between the bottom salary range and the rate for the job. Accordingly, at the same time as the Claimant was held back by the financial considerations which I have described, they proceeded. It was relevant, submitted Miss Tether, to the construction of the contract to note that, in respect of the CRE, salary increases were to be determined by performance as assessed in annual appraisals. There was a review annually. There was no automatic guarantee there that there would be an increment or an increment to any particular level. But it was expressly subject to being appraised as satisfactory or better. This was therefore a qualifying criterion but heavily and only linked to performance on the face of it. The DRC contract provided that increases in pay would depend on performance in this job, and there were detailed provisions set out at page 67 of the staff handbook, creating pay zones with pay steps at 20%, 40%, 60%, and 80% of the zone and including guarantees where performance was assessed at being good, though it was emphasised that the progression mechanism was not incremental and did not mean that colleagues would automatically move on to the next pay step year on year. In the EOC pay progression was related to performance and in the staff handbook, under “performance management”, it was said that the individual employee’s annual pay award was determined by the box marking awarded under the performance assessment scheme. 45. These are all slightly different, but informative of the general background within those organisations. They were succeeded by the contract which I have set out. If they were part of the context (and I put it that way because the Judge, taking the view he did as to the plain meaning of the contract, did not think it necessary to set out any particular conclusions), then they do not in my view require any different interpretation of clause 5.3 from that which I have set out above. Nor does it seem to me that they require any different a conclusion on the question of what the consequence would have been if the EHRC had honoured its contract formally by having an individual performance review in the Claimant’s case.