Appeal No. EAT/1397/01 RN

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 13 December 2002

Before
MR RECORDER LUBA QC
MS S R CORBY
MR T HAYWOOD

ICG (UK) LTD t/a SEARLE MANUFACTURING CO	APPELLANT

MR J BONE	RESPONDENT

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR THOMAS LINDEN
(of Counsel)
Instructed by:
Engineering Employers' Federation
Broadway House
Tothill Street
London SW1H 9HQ	
For the Respondent	MR LESLIE SAMUELS
(of Counsel)
Instructed by:
Messrs Lamport Bassitt Solicitors
46 The Avenue
Southampton SO17 1AX	

MR RECORDER LUBA QC

1	This judgment is the judgment of us all.  It is in four parts:
I	Introduction
II	Facts
III	Submissions
IV	Construing the Documents

I	Introduction

2	This appeal concerns a question of entitlement to an enhanced contractual redundancy payment, in circumstances where entitlement to a statutory redundancy payment has already been made out. 

3	It arises in this way.  On 10 October 2001 the Southampton Employment Tribunal gave its decision on an application made to it by Mr John Bone.  The Respondents to that application were his former employers, ICG (UK) Limited, who trade as Searle Manufacturing Co.  We shall refer to them in our judgment as “the Company”.

4	The Tribunal rejected a claim by Mr Bone that he had been unfairly dismissed.  It found that the reason for his dismissal had been redundancy and that the dismissal itself was fair.  However, it also decided that the Company should pay £9,143 to Mr Bone by way of a redundancy payment.  That is a sum some 50% higher than the statutory entitlement of £6,095.  Mr Bone brings no appeal from the rejection of his claim for unfair dismissal.  However, there is before us an appeal by the Company against the Decision and Order relating to the redundancy payment.
5	On 21 May 2002 this Tribunal ordered that this appeal do go forward for full hearing and gave directions.  It is pursuant to that Order and those directions that the appeal is before us today.

6	As originally drafted, the Company’s Notice of Appeal contended, at paragraph 6 (a), that the Tribunal had erred in law in deciding that Mr Bone was even entitled to a statutory redundancy payment.  That ground of appeal is no longer pursued and we accordingly dismiss it.

7	A second ground of appeal – and the only ground now pursued – is that the Tribunal erred in law in holding that, on the facts as they found them, a contractual entitlement to an enhanced payment of a further 50% beyond the statutory redundancy payment was made out.

8	Mr Bone, the Respondent to the appeal, contends by way of Respondent’s Answer that not only were the Tribunal right for the reasons that they gave but also (to summarise the Respondent’s Answer) that as a matter of construction the terms of the contract were to be treated, in respect of the definition of “redundancy”, as displaced by the statutory definition of that term.

9	We have had, in hearing this appeal today, the considerable assistance of Mr Thomas Linden of Counsel, who appeared for the Company, the Appellant, and Mr Leslie Samuels, who appeared for Mr Bone, the Respondent to the appeal.  It is right to record that neither of them appeared before the Employment Tribunal below.

II	Facts

10	The background facts can be shortly stated.  They are set out more fully in the Extended Reasons given by the Employment Tribunal itself.

11	For 24 years Mr Bone had been employed by the Company as one of its small team of heavy goods vehicle (HGV) qualified delivery drivers.  In May 2000 he was informed that the Company had decided to contract out its delivery or transportation work and that the Company would thereafter retain only one part-time driver.  Possibilities for Mr Bone’s retention by the Company, in the part-time driving post or in a factory based job, did not materialise and his employment was terminated by dismissal with twelve week’s notice on 11 October 2000.

12	Before the Tribunal, the Company contended that the conditions for payment of a statutory redundancy payment were not made out.  The Tribunal rejected that contention after having heard the evidence of several witnesses and having explored the facts in some detail.  At paragraph 18 of its Reasons it referred to the statutory definition of a redundancy situation, contained in section 139 (b) of the Employment Rights Act 1996.  It found on application of that statute to the facts that the definition was satisfied and, accordingly, a statutory redundancy payment was payable.

13	However, Mr Bone’s claim, as set out in his Tribunal application, was not so much for a statutory redundancy payment as for “redundancy pay”, as provided for in the Company’s redundancy procedure.  That is made plain from paragraph 11.3 of his application, which appears in our bundle at page 15.  Importantly, that was therefore a claim in contract, not a claim in statute.

14	The Tribunal were satisfied that the terms of that document (that is, the Company’s redundancy procedure document) were met and that accordingly the enhanced payment was due.  The question is whether, as a matter of true construction of the contract, they were right.

III	Submissions

15	It is right to first record the common ground.  The parties are agreed that Mr Bone’s contract of employment is as shown on pages 25 to 26 of our bundle.  Further, that contract of employment, made to take effect in August 1976, expressly incorporates a reference to the relevant collective agreements.  That appears from the opening paragraphs of the contract after the heading “Your Job Title is…”

16	One of those collective agreements, as at August 1976, was the agreement, already briefly referred to above, and properly described as, “Searle Manufacturing Company Limited Redundancy Procedure (Hourly Rated Employees)”.  That document is reproduced for us at pages 29 and following of our bundle.  That is the common ground.

17	Mr Linden for the Company contends, in summary, that the agreement on which Mr Bone relies contained its own definition of the circumstances in which enhanced payments might be payable.  He contends that that definition was not met on the facts and accordingly no enhanced payment was due.  Alternatively, he contends, the Employment Tribunal made no sufficient findings as to whether the definition was met and, in those circumstances, the matter should at least be remitted.  We pay tribute to the succinct way in which he presented his oral submissions and the helpful content of his Skeleton Argument.

18	Likewise we pay such tribute to Mr Samuels, who appears today for Mr Bone.  His contentions, again in summary, are that the agreement relied upon is intended to apply to statutory redundancy situations.  In identifying whether there is a “redundancy situation” for the purposes of the agreement he contends that the statutory definition prevails over any other, or alternative, formulation that the document may contain.

19	We hope, in those summaries, we have not done an injustice to the detailed and carefully reasoned submissions put to us today.

IV	Construing the Documents

20	To resolve these contentions we go first to the terms of the relevant document.  We record again its full title, which appears on the frontispiece under the heading “Searle Manufacturing Company Limited”, identifying next the group of which that Company forms part.  The document’s title is “Redundancy Procedure (Hourly Rated Employees)”.

21	It is common ground before us that, because he was an hourly-rated employee, this agreement was capable of applying to Mr Bone; and if it did so apply to him it gave rise to an enforceable entitlement to a contractual payment in his case.

22	The document bears the date 30 May 1976.  It was subsequently varied on 1 November 1981 but only in respect of the percentage enhancement of any payment over the statutory entitlement.

23	The document opens, at paragraph 1, with a statement or declaration of intent.  That reads:

1.1	“Searle Manufacturing Company Limited will implement the following procedure when a redundancy situation is considered likely to occur.”

There then follows, importantly, paragraph 2 headed “Definition of a Redundancy Situation”, which contains the following words:

2.1	“A redundancy situation will exist when the general work load is such that the requirement for hourly rated employees has diminished or ceased.”

24	The document may well have been the result of negotiations with the representatives of relevant trade unions.  We note that the agreement is signed by the representatives of a number of trade unions concerned with this particular employer, as well as the employer’s representatives themselves.

25	When read as a whole the agreement covered a number of matters related to redundancy or potential redundancy.  First, there are provisions for avoidance of redundancy.  Then there are provisions for consultation when a redundancy situation is envisaged or declared.  Then there are provisions for selection, advance warning and such related matters.  

26	Redundancy payments themselves are dealt with at paragraph 7.  After the heading “Redundancy Payments” that paragraph reads:

7.1	“Redundancy payments will be prescribed in the Redundancy Payments Act 1965 except that: - 
7.1.1	the service qualification for the minimum payment prescribed under the Act (i.e. half a week’s pay for service between ages 18 and 21 inclusive; one week’s pay for ages 22 and 40 inclusive, and 1 week’s pay for service between 41 and 64 inclusive) will be reduced from 2 years’ continuous service to 6 months’ continuous service with the Company.
7.1.2	The payments calculated under 7.1.1 will then be increased by 50% [as amended].
7.1.3	The Management will consider any extreme hardship arising from redundancy and will make specific recommendations to the Managing Director for ex gratia payments where appropriate.”

The agreement concludes with provisions dealing with arrangements for alternative employment.

27	At the time of its drafting the background legislation governing redundancy was the Redundancy Payments Act 1965.  As we have indicated, that Act is specifically referred to in the document at paragraph 7.1.1.  The 1965 Act, in our view, formed an important part of the material and relevant context at the time this agreement was drawn up.

28	In 1965 the definition of redundancy, to be found in section 1 of the Redundancy Payments Act, was, in part, in these terms:

1	(2)	“For the purposes of this Act an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is attributable wholly or mainly to…
(b)	the fact that the requirements of that business for employees to carry out work of a particular kind or for employees to carry out work of a particular kind in a place where he was so employed, have ceased or diminished or are expected to cease or diminish.”

In its modern recasting the definition is found in section 139 (b) of the Employment Rights Act 1996, which is broadly, but not precisely to the same effect.

29	We return to the document.  If the words of paragraph 2.1 of the collective agreement are to be read literally, or absent any further contextual consideration, this appeal must be allowed.  The Tribunal made no finding on the employer’s submission that the words of clause 2.1 were not satisfied.  In particular, they made no finding as to whether or not “the general work load is such that the requirement for hourly rated employees has diminished or ceased”.  As indicated, therefore, on the literal wording of paragraph 2.1, if its proper meaning is its literal meaning, this appeal must be allowed.

30	But we do not consider, when construing a collective agreement possibly freely negotiated more than 20 years ago, it is right to confine our attention to the literal words of one paragraph, when that literal wording can lead to ambiguity or absurd results, in the context of the agreement as a whole.

31	On the literal words, the collective agreement deprives an employee who is redundant as a matter of law of the benefits of the redundancy procedures it sets out.  That construction leads to the absurdity that the benefit of the redundancy procedure is not available for those who need it most; that is, actually redundant hourly paid workers.  It is to persons such as Mr Bone, an hourly paid redundant worker, that the agreement was intended to apply.

32	We have, and the Tribunal below had, no direct evidence about the relevant context or factual matrix in 1976.  That is neither unusual nor surprising given the passage of time.  It is, however, precisely why both Employment Tribunals and this Tribunal have in their majority members of experience and expertise drawn from both sides of industry.  They are familiar with the general context in which collective agreements are drawn up and negotiated.  The Tribunals draw heavily on that experience and expertise.

33	In 1976, when this agreement was drawn, it was intended to set out redundancy procedures for one class of the Company’s employees.  It enhanced the basic minimum statutory provisions provided by the Redundancy Payments Act 1965 and it built on them.  For that class of employee – the hourly rated employee – the agreement would need a trigger or definition provision in order to activate.

34	One such was readily available in the statute itself.  We have already read the provisions of section 1 (2) or the Act, so far as material.  But those words of that statute were not precisely apt.  The agreement was to cover only the redundancy situations that might relate to hourly rated workers.  So the draftspersons distilled or re-framed the statutory definition.  Firstly, they put it into lay person’s language.  Secondly, they drew its terms afresh with reference to hourly rated employees only.

35	We find that on a true construction of the agreement, it was to operate or to be triggered when an hourly rated employee was in a redundancy situation.  The words of the agreement were, as we read them, intended to marry or link the statutory arrangements to the Company’s procedures.

36	The alternative contention, that the draftspersons must have had in mind the framing of an alternative scheme of entitlement for the Company’s hourly rated employees, is not one we can accept.

37	We are accordingly satisfied that our construction of paragraph 2.1 makes sense.  It accords with good industrial practice and it produces harmony between internal company procedures and the statutory scheme, so that they can operate hand in hand.  

38	The alternative, literal construction produces, we are satisfied, unworkable, unintended and perhaps absurd results, of which the instant case is a good example.  Other indicia of the correctness of this approach are helpfully set out at paragraph 3 of Mr Samuel’s Skeleton Argument.  

39	In the event, for those reasons, we must dismiss this appeal.  We appreciate that in doing so we have upheld a Tribunal decision which, on the particular point we have considered on appeal, is not comprehensively reasoned.  It is, however, perhaps unfair to criticise the Employment Tribunal in that respect.  It had before it hotly contested issues as to unfair dismissal, and as to whether there was a redundancy situation at all, and it is perhaps understandable that its reasons on this aspect were not as full or easy to discern as might otherwise have been the case.

40	As we, for our part, can detect no error of law in the Employment Tribunal’s conclusion, this appeal is dismissed.