HIS
HONOUR JUDGE McMULLEN QC
1.
This is a wages claim – formally a claim under Part II of the Employment
Rights Act 1996 that unauthorised deductions were made from the pay of two
employees.
2.
It is the judgment of the court to which all members appointed by
statute for their diverse specialist experience have contributed. By the Employment
Tribunals Act 1996 a wages claim is heard by a judge alone unless it is
considered that there should be lay members. In this case it was considered
that a three person tribunal would best be able properly to consider the issues
because of their experience. Thus, an appeal is heard by a three person bench
at the EAT.
3.
We will refer to Qantas Cabin Crew (UK) Ltd as the Respondent. Mr
Andrew Lopez’s and Ms Alexandra Hooper’s circumstances are similar but not
identical. Ms Hooper signed the first and second contracts of employment to
which we will refer, whereas Mr Lopez was found to have agreed the first and
signed the second. Part of Ms Hooper’s claim was out of time, but was rescued
by the Tribunal’s finding. Mr Lopez’s claim was in time. Save for the above, we
will refer to them as the Claimants.
Introduction
4.
It is an appeal by the Respondent and a cross appeal by the Claimants,
conditional on the appeal succeeding, against the judgment of an Employment
Tribunal sitting at London South under the chairmanship of Employment Judge
Stacey over two days with a written judgment given on 3 October 2011 and
reasons sent to the parties on 28 October 2011. The Claimants are represented
by Mr Deshpal Panesar and the Respondent by Mr Marcus Pilgerstorfer. The
Claimants make claims for wages due. The Tribunal upheld part of their claims
but dismissed the second part as to which they cross appeal. The Respondent
appeals against the primary finding and takes a jurisdictional point that the
claims were not properly made under the Act: they were not for wages but for
expenses. During the course of the hearing, Mr Pilgerstorfer sought to amend
his Notice of Appeal in respect of Mr Lopez, and Mr Panesar sought to raise new
points in respect of the appeal and the cross appeal by way of a written
submission after the end of our hearing. We gave him permission if so advised
to develop a point he made for the first time at the hearing and so our
judgment has been delayed in order to allow the exchange of these two further
submissions.
5.
The appeal was sent for a full hearing by His Honour Judge Peter Clark
and the cross appeal by His Honour Jeffrey Burke QC (albeit the EAT orders
confused the two).
The issues
6.
The substantive issue is the construction of a written contract of employment
entered into in the absence of undue influence and duress.
a. Does
the judgment of the Supreme Court in Autoclenz v Belcher [2011] ICR 1157 require a departure for employment contracts from settled principles
of construction in L’Estrange v Graucob [1934] 2 KB 394 CA and of
interpretation in Investors Compensation Scheme Ltd v West Bromwich
Building Society [1998] 1 WLR 896 HL?
b. If the
Claimants’ construction of the relevant contract is correct, and they have been
underpaid, does the payment consist of wages or of expenses?
c. The
Respondent contends that the judgment of the Tribunal is perverse.
d. The
approach of the EAT to applications to amend arises directly in relation to the
Respondent’s midway application, and what we hold to be a post-hearing
application by the Claimants. Generally, such amendments are refused by the
EAT where not raised below, and requiring further evidence and findings.
The legislation
7.
Part II of the Employment Rights Act 1996 is headed “Protection
of Wages”. Section 13 provides as follows:
“13 Right not to suffer unauthorised deductions
(1) An employer shall not make a deduction from wages of a
worker employed by him unless–
(a) the deduction is required or
authorised to be made by virtue of a statutory provision or a relevant
provision of the worker´s contract, or
(b) the worker has previously
signified in writing his agreement or consent to the making of the deduction.
(2) In this section "relevant provision", in relation
to a worker´s contract, means a provision of the contract comprised–
(a) in one or more written terms of
the contract of which the employer has given the worker a copy on an occasion
prior to the employer making the deduction in question, or
(b) in one or more terms of the
contract (whether express or implied and, if express, whether oral or in
writing) the existence and effect, or combined effect, of which in relation to
the worker the employer has notified to the worker in writing on such an
occasion.
(3) Where the total amount of wages paid on any occasion by an
employer to a worker employed by him is less than the total amount of the wages
properly payable by him to the worker on that occasion (after deductions), the
amount of the deficiency shall be treated for the purposes of this Part as a
deduction made by the employer from the worker´s wages on that occasion.
27 Meaning of "wages" etc
(1) In this Part "wages", in relation to a worker,
means any sums payable to the worker in connection with
his employment , including–
(a) any fee, bonus, commission,
holiday pay or other emolument referable to his employment , whether
payable under his contract or otherwise…”
There are exceptions for deductions for
overpayments of wages and expenses, and for other purposes not relevant to the
present case (section 14). Expressly excluded from the above by s27(2)(b) is:
“Any payment in respect of expenses incurred by the worker in
carrying out his employment.”
8.
The procedure for making a complaint is set out in s23 and it imposes a
3-month time limit with the following exception:
“23(3) Where a complaint is brought under this
section in respect of–
(a) a series of deductions or payments
…
the references in subsection (2) to the deduction
or payment are to the last deduction or payment in the series or to the last of
the payments so received.”
9.
In both cases an issue arises as to whether the claims relate to wages
or expenses, and in Ms Hooper’s case whether time for making the claim was
extended by reason of the Tribunal’s finding that she suffered a series of
deductions.
The facts
10.
Qantas Airways Ltd is the national airline of Australia. Cabin crew are
supplied to it by Qantas Cabin Crew Australia Pty Ltd (“QCCA”). These crew are
based in Australia. The Respondent is an English company which also provides
crew to Qantas. They are based at London Heathrow and serve on routes from
Heathrow to the Far East but not to Australia. Both the Respondent and QCCA
are wholly owned subsidiaries of Qantas. The Respondent recruits cabin crew
locally, and from Qantas subsidiaries. For these subsidiaries including QCCA
there is an expatriation programme under which Qantas and QCCA staff may be
given time out to work for the Respondent in the UK; it lasts about two years.
11.
Both the Claimants came from a base in Australia to a base in London. The practical effect of the Respondent’s approach to their wages is summarised by
the Tribunal as follows:
“71. Both Ms Hooper and Mr Lopez find they are struggling to
live in London and that they are approximately one third worse off than they
were in Australia. Mr Lopez is eating into savings and is borrowing money off
friends and family to pay his mortgage at home. Ms Hooper has had to move from
Chiswick to Croydon in an attempt to make ends meet.”
12.
Mr Lopez on 19 January 1998 and Ms Hooper on 9 March 2008 started
working for QCCA in Australia. They read the Q&A document (below) about
work in London. In February 2010 they completed application forms to work for
the Respondent. On 13 August 2010 they were informed that they had been
“successful” and written terms would be sent. On 27 August 2010 they were
notified of a meeting to discuss tax briefing and advised “I still would
strongly suggest you seek your own financial advice as well”. They both
prepared to travel to London. Shortly after 6 October 2010 Ms Hooper signed
and returned an offer letter made by the Respondent. The Tribunal found that
Mr Lopez did not sign the offer letter but agreed its terms (“the October
contract”).
13.
The tax briefing took place on 3 November 2010. It included a
PowerPoint presentation conducted by an officer of the accountants Ernst &
Young. The November contracts were then offered to the Claimants for
signature. They did not have to sign that day and could take them away. They
did so sign. There were changes between the October and November contracts.
The Claimants were told the only change was to the length of the assignment
(from a maximum of 26 months to two years). They noticed the change to the
length of the assignment but that is of no consequence here. The Claimants were
not told of the two changes which were the subject of the current dispute. They
each noticed the change to the second set of payments known as the relocation benefits.
They considered this to be a mistake but nevertheless were not prepared to
raise any argument about it. The change was clearly in their favour on their
interpretation. This is the subject of their cross appeal.
14.
The other payments are Living Away From Home Allowance, referred to as
LAFHA. This consists of a food allowance and a housing allowance. There were
changes to the wording relating to these allowances which the Respondent
contended made no difference.
15.
Payments were made in accordance with the agreement to the Claimants of
their first incentive payment, the relocation benefit, in November 2010.
Grievances were lodged by the Claimants in February and March 2011, followed
shortly by Mr Lopez’s claim, but not until 28 June 2011 by Ms Hooper. The
claims in this case are based on a contention that the Respondent failed to pay
LAFHA and relocation benefits in accordance with the terms of the relevant
contract, and an issue arises as to which contract that is.
The documents
16.
There are four documents relevant to this case, which we set out in
turn.
(1) The Q&A
17.
The Q&A was on the website and preceded the Claimants’ applications
for the job; they read them. Relevant to the wages issue in this case are the
following:
“Will there be a rent/utility subsidy?
No. A competitive salary package is available to pay for your
cost of living.
Will the crew in London be taxed under the British or Australian
tax law?
Crew will be taxed under British tax law and may be subject to
Australian tax laws. LWOP crew will be provided with a tax briefing prior to
departure from Australia, however we strongly advise that you seek individual
advice on your own taxation circumstances.
Will there be any assistance given with accommodation in LHR?
Your remuneration package is weighted to allow you assistance at
the time of relocation to London. Crew can access a special rate of £60
(single) including continental breakfast per night (rates valid until end of
2010) at Jury’s Inn, Hatton Cross until such time you obtain your own
accommodation.
…
How much is the incentive payment?
For those employed by Qanta Cabin Crew Australia [the Claimants’ employer], an incentive payment to encourage people to relocate and take
up the opportunity in the UK is offered:
Qantas Cabin Crew Australia employee £4,000 on arrival into UK
£1,000 at the end of year 2.
…
Is the incentive payment taxable?
It is part of your remuneration so will attract taxation.”
(2) The October contract
18.
The October contract, signed by Ms Hooper and agreed by Mr Lopez,
includes a number of conditions none of which is relevant since the Claimants
satisfied them and then the following:
“2 Term of Employment
2.1 Subject to paragraph 21.2, your employment will be for
approximately two years (the Term), commencing in November 2010 with a range of
22 to 26 months, concluding between October and November 2012. The Company will
consult with you about your precise Termination Date, to facilitate your return
to Australia in order to recommence your employment with Qantas.
…
6. Living Away From Home Allowance (LAFHA)
6.1 In recognition of you being required to live temporarily in
the UK in order to perform your employment duties, your total salary package
will include a Living Away From Home Allowance (‘LAFHA’). The purpose of
the LAFHA is to compensate you for additional expenses incurred as a result of
you being required to live away from your usual place of residence whilst
working in the UK.
6.2 Specifically, the LAFHA (accommodation) component is an
agreed amount which is reasonable to cover your accommodation costs whilst on
assignment in the UK. The LAFHA (exempt food) component is based on your family
size (see below).
6.3 The length of your assignment is pursuant to Clause 2.1. The
terms and agreement of any extension will be mutually agreed at that time and
will be confirmed in writing.
6.4 Your entitlement to the LAFHA is conditional upon you
completing, on an annual basis, the Living Away From Home Declaration. The
signed declaration must be returned to Qantas by 31 March each year.
…
6.7 The Living Away From Home - Housing Allowance amount is
based on the actual cost of your accommodation in the UK being GBP9OO per month.
6.8 The Living Away From Home - Food Allowance amount is an
allowance designed to cover the additional costs of food associated with you being
required to live away from your usual place of residence in order to perform
your work duties. The amount will be fixed as GBP5,044 per annum.
7. Remuneration
7.1 The Company has established a simple remuneration system.
Your total gross remuneration package will consist of:
|
Base
Salary (p.a.)
|
£13,820
|
|
Fixed
Allowance (p.a.)
|
£655.97
|
|
Sector
Pay (per sector)
|
1-8 hrs
|
£28.68
|
|
8.01-16 hrs
|
£57.37
|
|
16.01 hrs+
|
£91.79
|
|
Two lump
Sum Payments payable in accordance with paragraph 8 below
|
Year 1 Lump Sum Payment
|
£4000
|
|
Year 2 Lump Sum Payment
|
£1000
|
Separate additional pay, allowances and benefits will not be
paid, except as otherwise provided in this Letter of Offer, the Company's Work
Rules or the Collective Agreement. The Fixed Allowance will be paid in consideration
of the expenses associated with uniform maintenance and communications costs
associated with flying duties.
7.2 Your Base Salary, Fixed Allowance and Sector Pay will be paid
monthly, in arrears, into an account with a financial institution in the UK, nominated by you and acceptable to the Company.
7.3 In accordance with Clause 6 of this contract, the total
gross remuneration package will be delivered in a manner which includes the LAFHA.
This recognises the additional costs incurred as a result of you residing in
the UK to perform your work duties.
7.4 Allowances for meal reimbursement will be paid to you in the
local currency of the slip port and the current rates are set out by the Company,
as varied from time to time.
…
9. Relocation and Repatriation Benefits
9.1 In consideration of your relocation from Australia to the UK to perform your duties under this Letter of Offer:
(a) within 2 weeks of the
Commencement Date, you will be paid the Year 1 Lump Sum Payment of £4000 (gross);
…
(c) subject to paragraph 9.2:
…
(ii) the Year 2 Lump Sum Payment of
£1000 (gross) will be paid in your final instalment of salary following the Termination
Date.
…
31 Completeness
31.1 This agreement replaces all
previous written or oral agreements and understandings.”
19.
The agreement also incorporates by reference various documents including
the company’s works rules and the collective agreement between the Claimants’
union Unite and the Respondent.
(3) The tax briefing
20.
On 3 November 2010, the officer from Ernst & Young put up a number
of slides which the Tribunal and the Claimants found confusing and which they
could not take away and copy. We will reproduce the findings of the Employment
Tribunal citing these documents as follows:
“29. The box in the left headed "Employee contract"
provides as follows:
‘Base salary
(p.a.) £13,820
Fixed allowance
(p.a.) £656
Sector pay(est) £4,590
Meals in slip
port(est) £8,080
Transfer year
incentive payment £4,000
Total £31,146’
30. The box on the right with the heading "Tax Structuring
for LAFHA under Australian Tax" provides as follows:
‘Salary and allowances £10,102
LAFH food £5,044
LAFH accommodation £12,000
Transfer incentive payment £4,000
Total £31,
146’
…
32. Considerable time in tribunal was spent understanding the
reference to "meals in slip port(s)"on p61 of the Ernst and Young tax
presentation. It apparently amounts to some £8,080 per annum and no mention is
made of it in the letter of offer. The Tribunal was concerned about this and
wondered if the offer letter complied with s1 ERA 1996.
33. On closer analysis it turned out that the collective
agreement of March 2009 provides that: "Allowances that provide for
reimbursement of meal expenses in slip port will be paid at the rates determined
by the company for each port from time to time. These rates will be published
in the cabin crew administration manual." (Clause 4.4 page 6). We accepted
Mr Pilgerstorfer's explanation that these payments do not fall within the
definition of wages in s1(4)(a) ERA 1996 and are properly expenses and s1 ERA
1996 has therefore not been breached of in this regard. We learnt that HMRC
accept the meals in slip port (other than in relation to Hong Kong) allowance
is assessed as tax exempt as being "incurred wholly, exclusively and
necessarily in the performance of the duties of the employment' (s336(1) (b).
If it amounts to a genuine out of pocket expense one questions why it is
described in the Ernst and Young presentation on p61 as part of the
remuneration package.
34. At page 30 the power point slide states:
• ‘You will be provided a Living Away
From Home Allowance (LAFHA) within your compensation package.
• LAFHA is made up of a food
component and an accommodation component
• LAFHA is delivered tax free in Australia
• For the LAFHA to be paid in a tax
effective manner, it should be clearly stated in the assignment letter or
elsewhere that it is for additional costs incurred as a result of your
assignment to the UK.’
35. A sample calculation is provided which provides salary and
allowances of £27,146 under both UK tax and Australian tax regimes which, for
the purposes of Australian tax has LAFHA for both food and accommodation
deducted to make the calculation more tax efficient.
36. ….They understood from the presentation that they would
receive LAFHA payments in addition to basic salary, but did not work out
precise calculations or do the maths of adding the LAFHA figures of £12,000 and
£5,044 per annum to their base salary. They trusted their employer was not
misleading them when they were told that their pay would be comparable and that
allowance had been made for higher costs in the UK than Australia.
37. At the meeting they were given new contracts and told they
needed to be signed before they could leave for the United Kingdom. They were
told that the only change to the contract was to increase the length of the
assignment to two years from its previous wording of being up to two years with
a possible extension to 26 months (see slide at page 59). They were not told of
any other changes and were told the amendment had been made for tax purposes
only. Both Claimants felt pressurised to sign on the spot and they were
committed to travel and had made all the arrangements.”
21.
The Employment Tribunal did not cite all of the slides but in particular
the slide cited included a clear reference to the reason for the change from
the original contract being to “eliminate the consequences of LAFHA being
taxable to employee”. It is striking from the written evidence of the manager
Mr Rogers, that the reference to structuring the salary and benefits is to the
tax treatment of LAFHA by the Australian authorities, which would in effect
allow such figure to escape tax. He said there were notional LAFHA figures for
that purpose.
(4) The November contract
22.
The Tribunal found that the offer had been changed from October to
November in relation to LAFHA. It noted the change in one place to location payments
but held that did not reflect the correct agreement. It found that changes had
been made to clauses 6.1, 7.1, 7.3 and 9. The substance of clause 7.1 was
unchanged. The figures in clause 9 were £10000 and £4500 in place of £4000 and
£1000 respectively. For the appeal, therefore, the focus is on clauses 6.1 and
7.3, and for the cross appeal on clause 9. Actually, there had been a change in
Mr Lopez’s contract for he was now offered a position of a first and business
class attendant whereas previously he had been simply a flight attendant, but
nothing seems to turn on this.
23.
The relevant clauses are now as follow:
“6. Living Away From Home Allowance (LAFHA)
6.1 In recognition of you being required to live temporarily in
the UK in order to perform your employment duties, your base salary as
detailed at paragraph 7.1 includes a Living Away From Home Allowance ("LAFHA”)
component. For the avoidance of doubt, LAFHA is not paid in addition to the
base salary. The purpose of the LAFHA is to compensate you for expenses
incurred as a result of you being required to live away from your usual place
of residence whilst working in the UK.
6.2 Specifically, the LAFHA (accommodation) component is an agreed
amount which is reasonable to cover your accommodation costs whilst on
assignment in the UK. The LAFHA (exempt food) component is based on your family
size (see below).
6.3 The length of your assignment is pursuant to Clause 2.1. The
terms and agreement of any extension will be mutually agreed at that time and
will be confirmed in writing.
6.4 Your entitlement to the LAFHA component is conditional upon you
completing, on an annual basis, the Living Away From Home Declaration. The signed
declaration must be returned to Qantas by 31 March each year.
…
6.7 The Living Away From Home - Housing Allowance component is
based on the actual cost of your accommodation in the UK being GBP900 pet month.
6.8 The Living Away from. Home - Food Allowance amount is an
allowance designed to cover the additional costs of food associated with you being
required to live away from your usual place of residence in order to perform your
work duties. The amount will be fixed as GBP5,044 per annum.
7. Remuneration
7.1 The Company has established a simple remuneration system.
Your total gross remuneration package will consist of:
|
Base
Salary (p.a.)
|
£13,820
|
|
Fixed
Allowance (p.a.)
|
£655.97
|
|
Sector
Pay (per sector)
|
1-8 hrs
|
£28.68
|
|
8.01-16 hrs
|
£57.37
|
|
16.01 hrs+
|
£91.79
|
|
Two lump
Sum Payments payable in accordance with paragraph 9 below
|
Year 1 Lump Sum Payment
|
£4000
|
|
Year 2 Lump Sum Payment
|
£1000
|
Separate additional pay, allowances and benefits will not be
paid, except as otherwise provided in this Letter of Offer, the Company's Work
Rules or the Collective Agreement. The Fixed Allowance will be paid in
consideration of the expenses associated with uniform maintenance and
communications costs associated with flying duties.
7.2 Your Base Salary, Fixed Allowance and Sector Pay will be
paid monthly, in arrears, into an account with a financial institution in the UK, nominated by you and acceptable to the Company.
7.3 In accordance with Clause 6.1 of this contract, the total
gross remuneration package includes the LAFHA component. This recognises the
additional costs incurred as a result of you residing in the UK to perform your work duties.
7.4 Allowances for meal reimbursement will be paid to you in the
local currency of the slip port and the current rates are set out by the
Company, as varied from time to time.
7.5 You should refer to the Administration manual in relation to
the process for claiming reimbursement in relation to any other expenses
incurred by you in performing your duties.
…
9. Relocation and Repatriation Benefits
9.1 In consideration of your relocation from Australia to the UK to perform your duties under this Letter of Offer:
(a) within 2 weeks of the Commencement
Date, you will be paid the Year 1 Lump Sum Payment of £10,000 (gross);
…
(c) subject to paragraph 9.2:
…
(ii) the Year 2 Lump Sum Payment of
£4,500 (gross) will be paid in your final instalment of salary following the
Termination Date.
…
31 Completeness
31.1 This agreement replaces all previous written or oral
agreements and understandings.”
Which contract?
24.
The Tribunal found that the agreement reached by the Claimants was the
October agreement. By para. 100 of its reasons the explanation the Tribunal
gave in its preceding paragraphs 21 and 23 represented “the terms agreed”.
Paragraphs 21 and 23 follow an examination of the October contract. Throughout,
the language used is of the old contract and the new contract. Neither is
described as a draft, each therefore is a contract in its proper legal sense.
Clause 31 of the new contract shows in our judgment what the parties intended
to do about the old contract which was that it should be superseded. It also
shows that no other terms, for example, from the Q&A and the Ernst &
Young presentations, formed part of the contract.
25.
The Tribunal’s finding that the old contract applied is the sole ground
on which the finding in favour of the Claimants on LAFHA, and against them on relocation
benefits, was made. This is because the Tribunal found that the references to
the higher relocation payment in year 1 was a mistake caused by cutting and
pasting part of another contract and this was known to the Claimants. The same
goes for the higher payment in year 2.
26.
We pause here to note the way in which the claims were framed. Mr Lopez
says:
“My contract specifies that I receive a relocation payment of
£10,000 in the first year. On 25 November 2010 I received £4,000 gross
therefore I am owed £6,000 gross.”
27.
He goes on to describe his entitlement under LAFHA by reference to the
same monetary amounts as appear in the new and the old contracts. He repeats
this claim in his witness statement and says:
“I entered into this contract on the basis that this is what I
would receive.”
His reference to “this contract” and the express citation from
clause 6.1 are references to the November contract.
28.
Ms Hooper in her claim asserts the following:
“I have a written Contract of Employment. In this contract it
states that I should receive a relocation payment of £10,000 in the first
year. I have not been paid this £10,000 and believe it is due to me.
My contract also states that I should receive a living away from
home allowance. This includes £5,044 for food allowance, £900 per month for
rent.
I also wish to clarify part of my contract.”
29.
In her witness statement she says that the first contract which she
signed was ambiguous as to LAFHA. She acknowledges that it “should be paid for
additional expenses and because I have to live away from home”. She then
refers to the payment of £10,000 which is clearly an error by her for this did
not appear in the October contract which she signed. She goes on to say:
“When we attended there were rumours that we would have to sign
a new contract which would make our old contract void. Our fears were
confirmed at the beginning of the presentation. They informed us that the
contract we had was incorrect and that they would be offering a new one.”
30.
She knew that the new contract was different. She looked through it and
signed it. In doing so she found “it was ambiguous as to whether we would
receive the LAFHA on top of our wage”. She acknowledged that the £10,000
relocation figure was a big incentive “in signing the new contract”. There is
no finding on this, but it may well be an explanation as to Ms Hooper’s action;
for since she is wrong in thinking that the old contract referred to £10,000 (it
is £4000) the offer of it in the new contract would be an incentive to sign.
Indeed, this is the thrust of Mr Panesar’s argument on the cross appeal where
he contends that the terms in relation to relocation were clear, no mistake was
apparent to the Claimants and this clause was relied upon by them both when
signing their contracts.
31.
The dispute between the parties is as to which contract applies. Mr
Panesar in his written argument contends that:
“The November terms do not in respect of LAFHA constitute a
valid agreement or variation.”
He submits that the November contract is different and contains
revised terms as to LAFHA but that these terms were never agreed by the Claimants
and therefore are not binding. He makes no separate argument as to the true
construction of the November contract itself, but only by reference to the circumstances
in which it came to be signed.
32.
In the context of this discussion about the relevant contract, it is
necessary for us to determine an application made by the Respondent to amend
the Notice of Appeal. There is no need to do this for Ms Hooper in respect of
whom the legal position is clear. Having signed the October contract, she was
an employee of the Respondent as both counsel accept following Sarkar v
South Tees Acute Hospitals NHS Trust [1997] IRLR 328 EAT and s230(1) of
the Employment Rights Act 1996. However, in respect of Mr Lopez, what
is asserted is that he never did agree the terms in the October contract and
was not an employee until November. This would open the door to the submission
that he did not need to be shown amendments to an existing contract, for he was
entering into the contract for the first time in November.
33.
This is to challenge a finding of fact by the Employment Tribunal. For
it to be raised for the first time on appeal would require remission to the Tribunal
for it to make findings as to the primary facts behind its conclusion that Mr
Lopez did agree the terms, or to use Mr Pilgerstorfer’s language, how he
“externalised any subjective acceptance there may have been to the terms” of
the offer. It would require an adjournment of today’s proceedings for that to
be done and for Mr Panesar to make representations to the Tribunal.
34.
As we indicated above, this will generally not be allowed by the EAT for
the reasons which I gave in Secretary of State v Rance [2007] IRLR 665 and in the similar formulation in Leicestershire County Council
v Unison [2005] IRLR 920 EAT, itself approved by the House of Lords in Celtec
Ltd v Astley [2006] IRLR 635 HL. No good reason has been put to us why
this point could not have been made earlier in the Employment Tribunal or in
the Notice of Appeal. We would not allow it to be raised now.
35.
Lest we are wrong in the exercise of our discretion and case management,
we would hold that it has no merit in substance. This is essentially a
perversity point for which the threshold before a successful appellant is high:
Yeboah v Crofton [2002] IRLR 634 CA. Mr Lopez attended the tax
briefing because he had agreed the terms of the October offer and had taken
steps to pack up his belongings. The absence of his signature was not material
and he was in the same position as Ms Hooper by 3 November 2010 when he came to
sign the new contract.
36.
We consider Mr Panesar is correct on both the procedure and the
substance of the amendment application. It follows that both Claimants were
employees of the Respondent under the October contract. Having seen the Q&A
on the website, agreed the October contract, heard the presentation and seen
the slides at the tax briefing they entered into the November contract. Since
Mr Panesar relies on the matters taking place in the tax briefing, it must
follow that it is the November contract which is to be construed. Yet he argues
that because of what was said in the Q&A, the October contract and the tax
briefing, the terms on LAFHA in the November contract do not apply but the
terms on relocation do. In short, his case is that LAFHA is added to base
salary; and the relocation figures are £10,000 and £4500, not £4,000 and £1000.
37.
From the citations from the claim and the evidence of the Claimants
above, it is clear that they were relying upon the November contracts. Even in
his further submissions, Mr Panesar leaves unchallenged the basis of the
Claimants’ claims founded upon the November contract for he simply submits that
the November contract could not be enforced as respects LAFHA absent an
agreement to the variation from the October LAFHA terms. The conditional cross
appeal which he mounts is of course based upon the figures produced by the
November contract only. It is implicit in Mr Panesar’s submission that the
language of the October contract serves to provide LAFHA payments on top of
basic salary and this right is taken away by the November contract. Mr
Pilgerstorfer maintained throughout that there was no difference in the LAFHA
clauses in the October and November contracts. The intention of the parties was
to include a notional LAFHA payment within the overall money going to the
Claimants. The surrounding circumstances, the context, the factual matrix
however it is put, for this stratagem was to present a tax efficient formula to
the Australian authorities. That was what Ernst & Young had advised and
that was what the tax briefing was all about. Of course there would be many
things on the minds of the Claimants when considering work on the other side of
the world, but the overwhelming weight of evidence about the explanation of the
benefits to them focuses on an efficient payment system for the purposes of the
tax authorities in Australia should they be liable for that, and in the UK
where they would be liable to be taxed.
38.
The premise of Mr Panesar’s submission therefore is that there was
unagreed variation of the contract of employment which took the form of the
November contract. On the findings as we have held them of the Employment
Tribunal, both Claimants had entered into contracts of employment by the
October contracts. What they were being offered were revised contracts in
November. The Tribunal found that they did not expect their employer to
mislead them. Taking this baton and running with it, Mr Panesar contends that
the LAFHA terms in the November contract should have no effect. In his
supplementary submissions he contends that the doctrine in L’Estrange v
Graucob Ltd [1934] 2 KB 394 does not apply to these signed contracts
since the Respondent made “untrue statements”. He contends that there was
misrepresentation by the Respondent, and further that the doctrine on non
est factum applies here. In other words, the signature on the foot of each
of the contracts was not the act of the signatory because neither of them knew
the material terms.
39.
As to this, Mr Pilgerstorfer contends that new points have been raised
by Mr Panesar and for the same reasons as we have found above that the Notice
of Appeal may not be amended, we should not allow a back door amendment by way
of the further post-hearing submissions. In succinct submissions Mr
Pilgerstorfer contends that even if the Claimants can establish a
misrepresentation of fact, the remedy is rescission. Misrepresentation was not
pleaded and it was not relied upon. There has never been any contention that
the contract should be rescinded. The plea of non est factum is bound
to fail since the Claimants understood the legal character of the documents and
the changes as to LAFHA were not so fundamental as to allow the doctrine to
take effect.
40.
In our judgment it is Mr Pilgerstorfer who now is correct on both the
procedure and the substance. Again, the matter would require remission to the
Tribunal if misrepresentation were to be pleaded and relied upon. It would in
effect mean starting the case again. The correct legal approach seems to us to
be as follows:
(1) A party is
bound by the written terms of a contract they have signed whether or not they
have read them: see L’Estrange.
(2) A party
induced to enter a contract by misrepresentation is bound by it unless it is
rescinded.
(3) The right
to rescission is qualified by section 2(2) of the Misrepresentation Act.
It is by no means certain that had the Claimants pleaded this matter the remedy
of rescission would have been awarded. Since Autoclenz it is the less
likely to be awarded in an employment contract.
(4) Rescission
here is simply not possible since the parties cannot be put back by the court
into their original positions. There are, as Mr Pilgerstorfer argues
correctly, very substantial bars to rescission as a matter of fact in this case
based on affirmation by the Claimants in that they have worked under the
contracts and have performed all of the terms binding upon them. The
Respondents have received value for the money they have paid to the Claimants
and there is a very substantial lapse of time.
41.
It follows that since the route to rescission is not open to the
Claimants for any of the above reasons the terms remain binding upon them.
42.
As for the application of the doctrine of non est factum, the
material authority is Saunders v Anglia Building Society [1971] AC 1004 HL. As Lord Reid (page 1015G-1017D) held, the plea when it is raised
must be kept within narrow limits so as not to shake the confidence of those
who rely on signatures. There is a heavy burden on the person seeking to
invoke the remedy which is only available in very exceptional circumstances to
a person of full capacity. The essence of the doctrine is that the person
signed the document believing it had one character or effect completely
different from what he or she signed. The plea is not available where the
mistake was really a mistake as to the legal effect of the document.
43.
The short answer to Mr Panesar’s extra-time submission is that it involves
effectively an amendment to the Notice of Appeal to raise points which were not
the subject of adjudication or plea below. For the reasons we gave above we
will not allow this. However, again lest we be wrong, the arguments against it
would appear as a matter of substance to be insuperable.
Application of Autoclenz
44.
We then turn to the principal finding of the Employment Tribunal as to
the applicability of the law on the interpretation of contracts. A good deal
was made of the judgment in Autoclenz. The Tribunal was correct
to look for the reality of the agreement between the parties, and to search for
that in the context and circumstances of the case starting with the written
material. The major point of departure from Autoclenz occurs in
our case because there was no allegation that the agreement was a sham.
Indeed, neither the October nor the November agreement is asserted by the
Claimants as an unenforceable agreement on the particular terms which favour
them. Once the context in which the LAFHA terms were agreed is recognised – tax
efficiency – the terms of the October and November contracts make complete
sense. The Respondent did not force the Claimants to enter into the agreements
and indeed it was said to them in writing that once they had fully understood
the position at the 3 November meeting, they could withdraw if they wished.
The Tribunal may have been distracted by its constant reference to the
subjective views of the Claimants but in our judgment the Claimants had in mind
the tax consequences of the arrangements they were making.
45.
In his judgment in Autoclenz, with which all members of
the Supreme Court agreed, Lord Clarke developed a more generous approach to the
treatment of employment contracts from those of commercial contracts. He did
this by reference to earlier judgments of different divisions of the Court of
Appeal. He referred to “a valuable article by Alan Bogg” (see paragraph 28) on
the requirements for a finding of sham in contracts of employment. In his
turn, Mr Bogg himself analyses the judgment in Autoclenz in “Sham
self-employment in the Supreme Court” 41 ILJ 328, an authoritative article
extending to rather more words than the judgment itself. We agree with his
analysis which was this:
“…Lord Clarke is keen to emphasise the normative differences
between personal employment contracts as compared with ordinary or commercial
contracts. This is reflected in the loosening of the signature rule and the
parol evidence rule, the potential liberalisation of restrictions on the use of
extrinsic evidence to interpret personal employment contracts, and the
deployment of a purposive approach to construction and characterisation. This
high judicial recognition of the need for contractual protection of vulnerable
parties in the employment sphere means that the common law of personal
employment contract is now something other than ‘commercialist or mercantilist,
essentially committed to the values and techniques of private law in a narrow
sense’.”
46.
In our judgment, whilst seeking to apply Autoclenz the
Employment Tribunal came to the wrong conclusion. It was not suggested that
the document was a sham. Given our findings as to misrepresentation and non
est factum those arguments would not lie either.
47.
A simpler route to the solution of this case lies in the construction of
the October contract. If the Respondent is correct in its submission that
there is no difference between October and November, there is no basis for not
applying it. While the wording may not be as clear as the Respondent may have
wished it, it is clear enough to the Claimants for them to have relied upon the
October agreement. Construing it on its own, and in the context of the tax
efficiency it sought to promote, it cannot be said as the Claimants assert that
the agreement was to make payments of LAFHA on top of salary. What the clauses
mean, taken as a whole, is that for the purposes of tax structuring, the whole
of the payment forthcoming to the Claimants will be presented and a notional
figure within it will be earmarked to LAFHA in its two forms, food and
accommodation, and those figures will not attract tax. That is the meaning of
the index clauses in this appeal, since the Claimants complain that the
November contract contains an express formulation in favour of the Respondent
that they would not get LAFHA on top of basic pay, the two versions mean the
same thing.
48.
The dispute in the present case concerns a contract of 32 clauses. Whether
in the October or the November version, only two provisions are in dispute:
LAFHA and relocation. There is no systemic attack on the nature of the
relationship. The Claimants were employed by QCCA and could take or leave the
offer of secondment to the Respondent for two years as they expressly agreed in
each of the contracts. They could take independent advice and were free to
choose whether to take the offer of work in London. LAFHA and relocation terms
were no doubt important but they are only a part of the contractual
arrangements. The Claimants were provided with independent advice in the tax
briefing and their trade union had negotiated terms and conditions relating to
their employment at QCCA and the Respondent. The new contracts embodied those
collective agreements. While not expert in employment law, or in tax, they
were uniformed members of the Respondent’s air crew with very substantial
responsibilities for passenger safety. They had their eyes open when they
signed these agreements.
49.
Let us compare them with the Autoclenz workers. Both
counsel accept that Autoclenz provides important authority for
the determination of the status of workers. That is not the issue here. The
Respondent contends that it has only limited reach where there is not an
allegation that the workers were subject to a sham contract. Throughout the
judgments at all levels in Autoclenz there is reference to the
status of “sub-contractors” suffusing the whole of the written materials. This
was held to be unreal in that it did not embody the true agreement between the
parties. In our judgment there is a significant difference as the Respondent
submits between individuals terms which on the Claimants’ case, and the
Tribunal’s findings, were not made known to them, and the contractual nature of
the whole relationship between the parties.
50.
Lord Clarke’s judgment in Autoclenz accepts the
correctness of the orthodox position relating to the applicability of a signed
contract since he adopted in full the judgment of Aikens LJ in the Court of
Appeal below (see para. 20 of Autoclenz). What he did was to
adopt “a different approach” to employment contracts by reference to the
judgment in the Court of Appeal below, Consistent Group Ltd v Kalwak
[2007] IRLR 360 and Firthglow Ltd t/a Protectacoat v Szilagyi
[2009] ICR 835. His conclusion was as follows:
“32. Aikens LJ stressed at paras 90-92 the importance of
identifying what were the actual legal obligations of the parties. He
expressly agreed with Smith LJ's analysis of the legal position in the Szilagyi
case and in paras 47-53 in this case. In addition, he correctly warned against
focusing on the "true intentions" or "true expectations" of
the parties because of the risk of concentrating too much on what were the
private intentions of the parties. He added:
‘What the parties privately intended or expected (either
before or after the contract was agreed) may be evidence of what,
objectively discerned, was actually agreed between the parties: see Lord
Hoffmann's speech in the Chartbrook case [2009] AC 1101, paras 64-65.
But ultimately what matters is only what was agreed, either as set out in the
written terms or, if it is alleged those terms are not accurate, what is proved
to be their actual agreement at the time the contract was concluded. I accept,
of course, that the agreement may not be express; it may be implied. But the
court or tribunal's task is still to ascertain what was agreed.’
I agree.
33. At para 103 Sedley LJ said that he was entirely content to
adopt the reasoning of Aikens LJ:
‘recognising as it does that while employment is a matter
of contract, the factual matrix in which the contract is cast is not ordinarily
the same as that of an arm's length commercial contract.’
I agree.
34. The critical difference between this type of case and the
ordinary commercial dispute is identified by Aikens LJ in para 92 as follows:
‘I respectfully agree with the view, emphasised by both
Smith and Sedley LJJ, that the circumstances in which contracts relating to
work or services are concluded are often very different from those in which
commercial contracts between parties of equal bargaining power are agreed. I
accept that, frequently, organisations which are offering work or requiring
services to be provided by individuals are in a position to dictate the written
terms which the other patty has to accept. In practice, in this area of the
law, it may be more common for a court or tribunal to have to investigate
allegations that the written contract does not represent the actual terms
agreed and the court or tribunal must be realistic and worldly wise when it
does so.’
35. So the relative bargaining power of the parties must be
taken into account in deciding whether the terms of any written agreement in
truth represent what was agreed and the true agreement will often have to be
gleaned from all the circumstances of the case, of which the written agreement
is only a part. This may be described as a purposive approach to the problem.
If so, I am content with that description.”
51.
He went on to uphold the finding that the wording of the contract was
simply window-dressing and “there was ample evidence on which the judge could
find as he did that this was in truth an employment relationship”.
52.
The true terms of the contract cannot depend on the subjective
interpretation of the Claimants, - not only the Claimants’ impression but that
of the group - yet the Employment Tribunal was much engaged with this
argument. In essence the Claimants’ case is that they trusted their employer not
to mislead them. It is implicit in their case that the October contract was
neither misleading nor incorrect and delivered to them payments of LAFHA in
addition to their salary. By parity of reasoning, the November contract denied
them the add-on of the LAFHA payments. All other terms were properly agreed.
The difference in clause 2 as to the length of the term was between 22-26
months (the October contract) and two years with a possible extension by mutual
agreement (November). Otherwise it is to be assumed that the November terms reproduced
the October terms.
53.
Since we have found that the contention of the Claimants that they did
not expect their employer to mislead them did not inure to a full-scale
allegation of misrepresentation pleaded and tried, and since the circumstances
set out in Autoclenz could not realistically be applied to this
sophisticated group of air crew, there is no reason why their signature on the
November contracts should not bind them. We appreciate that since Autoclenz,
the suggestion of rectification will be less likely in an employment context
but in our judgment it is not applicable anyway in this case given the absence
of a finding that there was a common or unilateral mistake.
54.
As a matter of construction we respectfully disagree with the Employment
Tribunal’s approach to the October contract. Clause 6.1 asserts that the total
salary package includes LAFHA and clause 6.2 treats LAFHA as a component of the
pay. Clause 7.1 asserts that no separate additional allowances will be paid
and clause 7.3 asserts that the total gross remuneration package “includes the
LAFHA”. Those words when placed in the context of the recruitment exercise are
not stultified. The Claimants are to receive their salary, part of which is
earmarked as LAFHA which will provide a tax efficient benefit to them. Tax
efficiency is achieved because it is presented as a payment for the additional
costs of accommodation and food while working in London. It follows logically
from the Claimants’ case that the November contract does make that position
clear. As a matter of construction we agree for there, again, there is express
reference to the salary as including LAFHA: clause 6.1 and 7.3; and no separate
allowances are payable: clause 7.1.
55.
In our judgment the November contract represents the true agreement
between the parties. If we are wrong and the Employment Tribunal was correct
in upholding the October contract, the terms themselves, and the context in
which they were agreed, do not as Ms Hooper asserts in her witness statement
say “we would receive the LAFHA on top of our wage”. The word “includes” makes
that untenable. We accept Mr Pilgerstorfer’s submission and this ground of
appeal must be allowed.
Jurisdiction
56.
The conclusion that there is no unlawful deduction makes the second
ground unnecessary but we will deal with it as we have heard full argument. It
follows from our finding that this term was about tax efficiency and the
treatment of expenses for living away from home that Part II of the Employment
Rights Act 1996 does not apply. This is exempted by section 27. The
salary includes an element of payment for the cost of living in London for a period of time. It follows from the fact that it is tax efficient and tax
would not be levied upon it in Australia that this is in respect of expenses
and not wages. We accept in full the submissions of Mr Pilgerstorfer to this
effect. The Employment Tribunal in our judgment wrongly distinguished Southwark
London Borough v O’Brien [1996] IRLR 420. It is important to apply the
guidance of Mummery P in that case who emphasised that the payment was to be
“in respect of” expenses and said the following:
“22. …We would agree with Miss Moor to this extent; that if a
payment, which is clearly not in the nature of expenses, is labelled
‘expenses’, it is open to the tribunal to conclude that ‘expenses’ is a
misdescription of the payment made. But when asking, ‘Is the payment in
respect of expenses incurred by the employee?’, it is not necessary for the payer
to show that what he has paid is precisely a reimbursement of the sum expended
by the worker. ‘In respect of’ means ‘referring to’ or ‘relating to’ or
concerning in a general way, whereas the expression used by the chairman in his
decision, ‘payment of expenses’, would appear (wrongly, in our view) to equate
the statutory provision with reimbursement of a precise amount.
27. Our conclusion in this case is
that a payment of a mileage allowance does not cease to be ‘in respect of’
expenses because it is found to be generous. The errors of law by the chairman
are to equate payments ‘in respect of’ expenses with ‘payments of expenses’ and
to treat generous expenses wholly as remuneration. Both conclusions are, in
our view, wrong as a matter of law.”
57.
In this case, the payments were properly to be regarded as payments in
respect of expenses since it was a requirement that the Claimants relocate,
there were higher costs of living in London than in Australia, there is a
direct link between those costs and the carrying out of their duties from the
London base and the notional figures produced by the Respondent are based upon
those additional costs.
58.
On this ground too the Employment Tribunal erred for it did not have
jurisdiction under Part II to make the award
Perversity
59.
No additional grounds were advanced by Mr Pilgerstorfer in support of
his perversity ground. In our judgment this matter can be dealt with as one of
construction of the documents in the appropriate factual circumstances.
Nothing is added by the conventional ground of perversity. This fails to reach
the high hurdle imposed by Yeboah v Crofton: see above.
The cross appeal: relocation payments
60.
Given our finding in support of the Appellant, it is now necessary for
us to deal with the cross appeal. We can do so quite quickly. The Tribunal
found that the entry of the higher figures for relocation in the November
contract was a mistake which the Claimants knew about. The figures appear once
correctly and once incorrectly in the November contract. In the light of the
Q&A, the October contract, the tax briefing and the circumstances known to
the Claimants that there was a mistake, as a matter of construction the higher
figures are incorrect.
61.
Since the Tribunal held that the correct document was the October contract,
the Claimants cannot possibly mount an argument based upon the higher figures
which occurred only in the November contract. Nor does the context assist
them: they were never told anything other than that they would receive
relocation payments of £4,000 and £1,000. It was only when they saw the
November contract that a different figure appeared, once. This mix and match
approach of the Claimants is misconceived.
62.
As to the November contract, there plainly was a mistake, as the Claimants
knew. As a matter of construction, primary importance is to be given to the
first place where the figures occur. Since the Claimants rely on the context of
the Q&A, the October contract and the November tax briefing, the figures
which they assert of £10,000 and £4,500 were not the agreed terms. It follows
that the payment to both Claimants of the initial tranche for year 1 was
correct and there has been no under payment. The claim under Part II of the
Employment Rights Act in respect of this payment was correctly dismissed by the
Employment Tribunal.
63.
Separately, the Respondent contends that such payments were not “wages”
for the purposes of Part II. We disagree. The tax treatment of LAFHA is at
the forefront of all of the representations made to and by the Claimants. We
have disagreed with the Employment Tribunal and held that those payments were in
respect of expenses. The relocation payments are treated quite differently and
from the outset it is acknowledged that they are taxable in full. They
undoubtedly form part of the wages. It might have been possible to structure
the package to make this aspect tax efficient but that was never done. These
payments are, as they were accurately initially described in the Q&A,
incentive payments to induce the Claimants to come to London. They are not
payments of or in respect of expenses but of wages, a modest form of golden
hello.
64.
The Respondent also argues in respect of Ms Hooper that her claim for
this was out of time. It is accepted that Ms Hooper received her payment on 25
November 2010 and so should have presented her claim by 24 February 2011. She
did so on 28 June 2011. She complained of only one deduction. No claim was
made in respect a failure by the Respondent to make the second payment which is
not due until November 2012. The 2011 complaint therefore cannot have been in
relation to a series of deductions but of only one. One might assume what the
Respondent’s approach would be to the second payment – in line with the
construction we have given of both the October and November contracts – but as a
matter of fact there has been no deduction from what was properly due on the
expiry of year 2. As a matter of language this cannot constitute a series of
deductions for there was only one. The Claimant was out of time. She did not
assert that it was not reasonably practicable to make the claim within three
months and so on this ground too the claim would fail, the Tribunal having no
jurisdiction to deal with it.
Disposal
65.
The Respondent’s appeal on LAFHA is allowed. Since this is a matter of
construction there is no need to refer the matter to the Employment Tribunal
and we will dismiss the Claimants’ claims. As to the cross-appeal on
relocation payments, this became live in the light of the foregoing, and is
dismissed. The Employment Tribunal’s decision on this ground is upheld.
