lee v gec plessey telecommunications

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Lee v GEC Plessey Telecommunications

High Court, Queen's Bench Division, (HCQB)

Mr Justice Connell

The High Court held:

The plaintiffs were entitled to a declaration that their contracts of employment

included a term derived from a collective agreement entitling them to enhanced

severance payments in the event of termination of their employment on the ground

of redundancy.

The Court could not accept the defendants' argument that the terms were not

contractually binding upon them because there was no consideration given by the

employees for the introduction of the enhanced terms into the individual contracts.

Where, in the context of pay negotiations, increased remuneration is paid and

employees continue to work as before, there is plainly consideration for the increase

by reason of the settlement of the pay claim and the continuation of the same

employee in the same employment. The situation is similar with an increase in a

severance payment since a redundancy payment is part of the remuneration package.

The employee continues to work for the employer, thereby abandoning any

argument that the increase should have been even greater and removing a potential

area of dispute between employer and employee. The employer has both secured a

benefit and avoided a detriment.

It could not be held that the employers were entitled unilaterally to alter the

plaintiffs' contracts of employment since they had reserved to themselves, in the

statement of terms and conditions issued in 1985, the power to alter individual

contracts of employment unilaterally via general instructions. Terms incorporatedinto a contract as a result of a collective agreement will remain part of the contract

unless and until removed, either by agreement or under specific right found within

the contract. In the present case, there was no agreement as to the removal of the

entitlement to enhanced redundancy terms and there was no clear right in the

contract, as set out in the 1985 statement of terms and conditions, to effect unilateral

adverse variations to the contract. In any event, the contract as it existed on 4 July

1990, when the general instruction purporting to withdraw the enhanced terms was

issued, did not include any right unilaterally to alter the plaintiffs' contracts via a

general instruction. The statement of terms and conditions which took effect in April

1990 omitted any reference to the incorporation of collective agreements or general

instructions and notices. There is a heavy burden upon a party who asserts that the

actual contract is different from the statement of terms and conditions and, in the

present case, there was no evidence to imply a continuation of the previous terms.

The plaintiffs could not be held to have compromised their claims by virtue of an

agreement by the unions in April 1991 to withdraw from litigation against the

defendant employers. The unions could not be regarded as acting as the plaintiffs'

[1993] IRLR 383 at 384

agents for the purpose of settling the litigation since they were not authorised to act,

and did not act, as agents for the plaintiffs in the course of negotiations leading to

the agreement.



Nor could it be held that the April 1991 settlement was a collective agreement

incorporated into the plaintiffs' contracts of employment so as to alter those

contracts by providing that the enhanced redundancy terms would no longer apply.

As with general instructions, the new contracts of employment did not include the

incorporation clause previously contained in the statement of terms and conditions.

Neither could it be held that the collective agreement constituted a package offer by

the employers to individual employees of a variation in their contract of

employment, which the plaintiffs accepted by their conduct in accepting the pay

rise. In order to determine whether terms of a collective agreement relating to

redundancy matters have been incorporated into individual contracts so as to

become contractually enforceable as between employer and employee, the court

must look for the necessary contractual intent on both sides of the bargain and also

look at the content and character of the relevant parts of the collective agreement. In

the present case, the necessary contractual intent did not exist and the two parts of

the collective agreement relating to redundancy were not both apt for incorporation

into individual contracts. The evidence showed that both sides to the negotiationsunderstood that they were involved in collective bargaining and that no-one believed

that the agreement was binding upon individuals or intended that that should be the

case. Moreover, as to content, the agreement was to restore the previous terms until

31 May 1991 and thereafter to negotiate on any enhanced severance payments.

While the former term was apt for incorporation, the latter was uncertain and not

suitable for incorporation in an individual contract.

124.5

Obiter dicta:

If the employers wished to incorporate in individual contracts a term relating to the

ending of the entitlement to the 1985 redundancy terms and to link this to the payincrease, they could have written to their employees to this effect, making it clear

that acceptance of the increase would also amount to acceptance of the cessation of

such rights.

Cases referred to:

Williams v Roffey Bros and Nicholls (Contractors) Ltd [1991] 1 QB 1 CA

Price v Rhondda Urban Council [1923] 2 Ch 372 HC

Robertson and Jackson v British Gas Corporation [1983] IRLR 302 CA

Cadoux v Central Regional Council [1986] IRLR 131 CS

Hammersmith & Queen Charlotte's Special Health Authority v Cato [1987]

IRLR 483 EAT

Alexander and others v Standard Telephones & Cables Ltd (No.2) [1991] IRLR

286 HC

Walford v Miles [1992] AC 128 HL

Appearances:

For the Plaintiffs:JEFFREY BURKE QC and ROY LEMON, instructed by Robin

Thompson & Partners

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For the Defendants:PATRICK ELIAS QC and RICHARD PAYNE, instructed by

Rotherham & Co

1

MR JUSTICE CONNELL: This is a claim by three employees against their

employer in which they seek a declaration that their contracts of employmentinclude within them a term entitling each of them to enhanced severance payments

from their employer in the event that they should be made redundant.

2

Each of the plaintiffs is a production worker employed by the defendants, GEC

Plessey Telecommunications Ltd, at their premises at Beeston, near Nottingham.

3

This is one of the places where the defendants conduct their business, namely, the

manufacture of telecommunications equipment.

4Each of the plaintiffs has been employed by the defendant company, or by its

predecessors, for a significant period of time. In the case of David Lee the length of

his employment is 26 years. In the case of Melvyn Wood the length of his

employment is 31 years. In the case of Byron Harvey the length of his employment

is 21 years.

5

When the proceedings were commenced in January 1991 there was a fourth

plaintiff, Patricia Ann Lawson. However, during the currency of these proceedings

Mrs Lawson has been made redundant by the defendant company, she has obtained

from her former employers a payment which is satisfactory to her, and she has played no further part in these proceedings. In the course of his opening Mr Burke

(leading counsel for the plaintiffs) told me that the claim on her behalf was

withdrawn.

6

So far as the site at Beeston is concerned, this was operated by the National

Telephone Company more than 100 years ago; and in the early 1960s Plessey took

over the running of the business of manufacturing telecommunications equipment

from that site.

7In the 1970s Plessey had 8,000 or so employees at the site, but the number of

employees there at the present time has reduced to under 3,000. This reduction is in

part due to the formation of a partnership between the two concerns: GEC and

Plessey in 1987 and to the subsequent takeover of Plessey by GEC after a hostile bid

in 1989.

8

Subsequent to the completion of that takeover, GEC were in the driving seat at

Beeston and they continued with a business improvement programme which had

been under discussion for some time before the takeover.

9



Given the very significant reduction in the workforce to which I have previously

referred, it is not surprising that the individual entitlement to redundancy payment is

a matter of significant consequence to the employees of the defendants at Beeston.

10

Put shortly, what the plaintiffs assert is that over a number of years, and in particularfrom 1970 onwards, whenever a redundancy situation has arisen, the defendants or

their predecessors have paid to all employees made redundant at Beeston a

significantly enhanced severance payment.

11

That is to say, that in every case the employers have paid to the employees a

severance payment which was substantially higher than the statutory minimum

entitlement of that employee under the Employment Protection (Consolidation) Act

1978.

12

The plaintiffs contend that this enhanced payment is the right of each of them as aresult of a specific term to

[1993] IRLR 383 at 385

that effect in their contracts of employment, and they further assert that the

defendants have indicated an intention not to be bound by any such contractual term,

but to make to any of the plaintiffs (and to any other of their employees) who should

be made redundant, a severance payment in a significantly lesser sum than that to

which the plaintiffs claim that they and their fellow employees are entitled under

their contracts of employment.

13In the case of Mr Lee the redundancy payment to which he claims that he would

have been entitled if he had been made redundant in the spring of 1992 is £26,643.

14

So far as the defendants are concerned, their case is that they would only have been

obliged to pay him £8,193 under the redundancy payment terms that they wished to

operate.

15

Accordingly, the difference in Mr Lee's case is £18,450 and in the case of the other

two plaintiffs is £17,898 for Mr Wood and £13,138 for Mr Harvey.

16

It is immediately apparent that the difference between the plaintiffs and the

defendants is very significant in financial terms. Counsel told me in the course of his

opening that there is in existence another action following on this action in which

second action there are 1,324 plaintiffs who seek a declaration in similar terms to the

declaration sought by the plaintiffs in this instant action.

17

It is common ground between the plaintiffs and the defendants in the second set of

proceedings that the result of that litigation will follow the result of this action.18



Bearing in mind the sums in dispute, and bearing in mind the numbers of persons

affected by the litigation, it is easy to understand why this action has provoked

significant concern in the minds of both the employers and the employees.

19

In short, the plaintiffs say that they have a contractual entitlement to enhancedseverance payments in accordance with a formula which was agreed with the

employers over the years since 1970 and finally in 1985, and they ask the Court to

declare that that is their entitlement.

20

The defendants dispute that the plaintiffs are so entitled, but they agree that if the

contracts do contain such a term, and if their other arguments by way of defence are

defeated, then it is appropriate for the Court to make the declarations sought.

21

Thus there is no issue between the parties as to the appropriate remedy if the

plaintiffs make out their case.

22

The plaintiffs' case can be summarised as follows. They assert that from 1970

onwards the contracts of employment relating to employees of the defendants or

their predecessors at Beeston included a term entitling them to enhanced severance

payments; which term was the subject of negotiation from time to time, until in

October 1985 the defendants agreed that thereafter they would pay to any employee

who became redundant 15 weeks' pay for anybody employed for less than four

years, four weeks' pay for each year of service for anybody employed between four

and 25 years, and for anybody employed in excess of 25 years, 104 weeks' pay.

23

The plaintiffs go on to say that such an entitlement was of significant importance to

all employees because it provided for them a degree of security against the

possibility of unemployment and prompted them to enter into a variety of personal

arrangements, such as mortgages or loans, in reliance upon this entitlement.

24

They assert that there was also value in this agreement for the employers for this

reason. The unions representing the employees were implacably opposed to

compulsory redundancies. By providing substantial redundancy payments the

employers were able to attract volunteers for redundancy whenever a redundancysituation arose and thus the employers were enabled to achieve the desired reduction

in their workforce without the risk of industrial disharmony and, in particular,

without the risk of strike action.

25

The plaintiffs add that these terms relating to severance payments were observed in

every case at Beeston where an employee became redundant until on 4 July 1990, by

means of a general instruction of that date, the defendants purported to withdraw the

previously existing severance terms as from 30 September 1990.

26



The plaintiffs assert that this was a unilateral action by the defendants, taken without

previous discussion with the employees and certainly without their agreement. They

say that such action was in breach of an important term of their contract of

employment and that they immediately objected.

27

They ask the Court to make a declaration that the terms of their respective

employments include the right to enhanced severance payments in the event of

termination of their respective employments on the ground of redundancy.

28

In the light of these objections by or on behalf of the plaintiffs a temporary

moratorium was in fact agreed between the employers and the employees to the

effect that the old terms for severance payments would still be operated whilst

discussion took place between the two sides, but these discussions came to nothing

and the 1985 redundancy terms were withdrawn at a meeting between the employers

and the relevant unions at Beeston on 10 December 1990.29

The writ in these proceedings followed on 7 January 1991.

30

After the meeting on 10 December 1990 the defendants announced 47 more

redundancies on 17 December 1990 and on the same date they published a notice

setting out the details of how severance payments would be calculated for the future.

31

The result of this calculation was that the employee would receive about half or less

of the amount which he would have received under the 1985 agreement.

32

Proceedings having been issued, another announcement was made on 22 January

1991, this time of 270 redundancies, of which 220 were within the Business Systems

Group.

33

The situation was plainly very unhappy from the point of view of both the employer

and the employees. So far as the company was concerned, they knew that the unions

were implacably opposed to compulsory redundancies and they also knew that any

such redundancies would be likely to lead to a strike.

34

Indeed, by April 1991 the various unions were holding individual ballots concerning

strike action and the results were expected over the weekend of 13 – 14 April 1991.

35

The first ballot to be declared (on or about 10 April, in fact) was that of the transport

drivers, who voted to strike.

36

Further, the employer's representatives realised very well that their new terms would

be unlikely to attract sufficient volunteers to satisfy the 270 requirement.



37

So far as the employees were concerned, they were dissatisfied with the new basis

for the redundancy calculation and they were anxious to do their best to restore the

1985 terms, which they believed was their right.

38On 28 March 1991, Mr Brian Crossland, the full-time

[1993] IRLR 383 at 386

officer and district secretary of the TGWU, wrote a letter to Mr Malcolm Thompson,

who was then the personnel director of the Business Systems Group of GPT,

threatening to consider seeking an injunction against the defendants if they did not

comply with site-recognised redundancy procedure.

39

On Thursday 11 April 1991 Mr Thompson telephoned Mr Crossland. In the 'phone

call Mr Thompson asked Mr Crossland if he was serious in his letter of 28 March towhich the reply was, in effect: 'Yes'.

40

Then Mr Thompson suggested a private meeting later that day between him and Mr

Carden on behalf of the defendants and Mr Crossland, Mr David de Lacey (who was

the senior shop steward for the Production Group) and Mr David Lee (one of the

plaintiffs in these proceedings and branch chairman of the TGWU) on behalf of the

unions. Mr Thompson suggested that the meeting should be exploratory and secret.

The invitation was accepted and later that evening the five of them met in a private

room at the Post House Hotel, Long Eaton.

41

Much of what transpired at that meeting is common ground. Mr Thompson's

suggestion was that he would be prepared to restore the 1985 redundancy terms for

the 270 workers if he could reach agreement with the unions over the pay claim

which would arise on 1 July 1991.

42

In short, he wanted to link the two matters together and he indicated that if

agreement could be reached on these items, then that ought to provide stability at

Beeston over the ensuing 15 months, ie until the pay claim of 1 July 1992, thereby

enabling management to concentrate on building up the business and enhancing thecompany's reputation.

43

The union representatives were taken by surprise by the attempt to link these

separate matters in the same negotiation and were initially hostile to the idea.

However, they agreed to adjourn the meeting and consider the situation over the

weekend, by which time the results of the strike ballot would be known.

44

In the result, the production workers, like the transport drivers, voted in favour of astrike, but the other groups did not.

45



The same persons met again on Monday 15 April 1991 at the Post House Hotel at

about 4 pm. The meeting lasted until about midnight. There was much further

discussion on many subjects, including extensive haggling about the size of the pay

increase.

46

Eventually the parties believed that they had a deal, the terms of which were noted

by Mr Carden who subsequently committed them more formally to writing (see core

bundle p.208).

47

The union representatives agreed to report back to their various committees on the

next day, Tuesday 16 April, and in the afternoon of the 16th a meeting of the joint

union committee with their full-time officials took place.

48

This was a very heated meeting. Some union members were upset that their

representatives should have attended a secret meeting with employers without

specific authority. Others were disappointed at the recommendation of a pay

increase of 4.25% when the Retail Prices Index figure at that time was 6% or more.

49

Another very major issue concerned the redundancy situation. The three union

representatives reported to the JUC that the employers had said that over the next 15

months there would be no significant redundancies. The members wanted to hear

more about this for themselves because there was nothing in writing about it and so

management were asked to come along and explain.

50At about 5 pm Mr John Carden and Miss Canning came to the meeting. They were

asked a number of questions. In particular, Mr Marshall, a senior union

representative asked whether there would be any more redundancies, to which Mr

Carden replied that there were no further planned redundancies.

51

Mr Crossland then intervened to reiterate his understanding from the two previous

meetings to the effect that there would be no significant redundancies over the 15-

month period, which understanding was not contradicted either by Mr Carden or

Miss Canning.

52

Thereafter the meeting soon ended on the basis that the union representatives would

report back to their members with a recommendation of acceptance of the proposed

terms.

53

The following day (17 April 1991) Mr Carden sent an employee relations report to

all senior managers detailing what he understood that the joint union committee and

the individual union committees had agreed to recommend to their members (core

bundle, p.208) and the committees communicated their recommendations to their

members in similar terms (bundle 10, p.13).

54



There followed a number of mass meetings and ballots, as a result of which the

company's offer was accepted by each union affected by the proposal.

55

Over the next few weeks, before 31 May 1991, 270 volunteers for redundancy were

found and were paid in accordance with the 1985 terms as set out in the company'soffer.

56

On 13 June 1991 the company announced a further 41 redundancies in the Network

Systems Group at Beeston.

57

After 1 July 1991 the company paid its employees the extra 4.25%.

58

On 19 July 1991 they announced their new terms of severance payments to take

immediate effect, which terms were significantly less generous than the 1985 terms,in some cases by as much as 80%.

59

On 24 July 1991 they announced a further 400 redundancies in the Business

Systems Group at Beeston.

60

The union representatives were dismayed by this turn of events and on 1 August

1991 an external joint union committee conference was held which was attended by

management representatives, including Mr Carden and Miss Canning.

61

Miss Canning took notes during the course of this conference, which were

handwritten, and subsequently typed out (core bundle, pp.218 to 221).

62

That meeting was acrimonious and was adjourned without any agreement being

reached.

63

On 6 September 1991, Mr Crossland wrote to Mr Thompson placing on record his

dismay at the company's attitude in respect of the redundancies which had been

declared recently and indicating that he was instructing solicitors to continue the

original actions which had been adjourned by consent in April 1991 in the light of

the apparent agreement reached at that time.

64

He stated in his letter that it was clear that the company had broken the spirit of its

offer made in April.

65

Mr Thompson replied on 20 September 1991 to the effect that it was clear to those

involved in the negotiations in April that severance terms for those leaving after 31

May 1991 would be a matter for discussion and negotiation and further assertingthat no guarantee had been given at that time that further redundancies



[1993] IRLR 383 at 387

would not be declared.

66

External conferences were held on 17 September and 24 September, but no accord

was reached and at a mass meeting on 27 September 1991 the voting rejected strikeaction but supported the continuation of this action and the other related actions.

67

On 15 January 1992 the defendants amended their defence to allege that, by virtue

of agreements made between them and various trade unions acting on behalf of each

of the plaintiffs in April 1991, the plaintiffs had each compromised their claims on

the terms set out in the document dated 17 April 1991 issued by the works

committee and the joint union committee.

68

This was the document (bundle 10, p.13) which recorded the company's offer arisingfrom the meetings of 11, 15 and 16 April, which offer was recommended by the

committees to their members for acceptance and was subsequently accepted by each

union.

69

The document included the terms which restored the 1985 redundancy terms for

those leaving before 31 May 1991 and stated that after that date those terms would

no longer apply. Any enhancement after that date would be the subject of

negotiation.

70

Further, it provided that:

'... the recognised trade unions, singly and collectively, agree to

withdraw from any pending or proposed legal actions against the

company in respect of the current rationalisation programme.'

71

The plaintiffs deny that their claims have been compromised for a number of

reasons which I will consider subsequently, but, in particular, they say that it was a

condition of the agreement then reached that there would be no more than a few

further redundancies for a period of 15 months from April 1991, ie until July 1992.

72

Alternatively, they say that there was a representation by the defendant to that effect

which induced the agreement; or they assert a collateral contract which, by

implication, included a term that the defendant would not seek to enforce the April

1991 agreement in the event that there were more than a few redundancies in the

ensuing 15 months.

73

They go on to say that the redundancies announced in June and July 1991, totalling

441, were plainly contrary to the agreement reached in April and that the defendants



have thereby repudiated that agreement, which repudiation the plaintiffs have

accepted.

74

Alternatively, these further redundancies, argue the plaintiffs, prevent the defendants

from relying upon the April agreement, which has been rescinded.75

In these circumstances it is important to resolve the issue concerning what was

agreed in April 1991 before deciding upon the legal effect of that agreement.

76

There is no doubt that both the unions and the employers believed that they hadreached agreement in April 1991. The problem is that they are at issue as to what

was agreed.

77

The unions assert that they were assured by Mr Thompson that there would be nosignificant redundancies in the next 15 months. He could not guarantee that there

would be none, but there would only be a few, if there were any at all.

78

Mr Thompson denies this. He says that he was not at that time aware of any plans

for any further significant redundancies, and that in that state of belief he told the

unions that there were no further redundancies planned.

79

Thus the issue is a narrow one: was a firm assurance given or was it no more than an

honest statement of belief?

80

All the witnesses called by the plaintiffs are emphatic that the assurance was given.Mr Thompson's version of events is supported by Mr Carden, who in turn is

supported by Miss Canning as to the events of 16 April 1991.

81

After a lapse of 18 months it is most unlikely that any witness can recollect

accurately precisely what was said at the relevant time, and, in my judgment, a more

reliable conclusion is likely to be reached by looking at the contemporary

documents and the surrounding circumstances that then prevailed.82

I am clear in my conclusion that no witness was in any way attempting to deceive

me or to do other than tell me the truth to the best of his or her ability.

83

Equally I am clear that both sides to the April 1991 discussions were anxious, if at

all possible, to reach agreement because of the pressures that they were under in the

circumstances previously described. In particular, the employers wished, if possible,

to secure 15 months of industrial stability and uppermost in the minds of the union

representatives was the desire to restore the 1985 redundancy terms, especially for



the 270 employees who were imminently to be made redundant in the Business

Systems Group.

84

Against that background I look at the documents. The most important of these in this

context is the document at bundle 10, p.13, which records the company offer, whichthe works committee and the joint union committee recommended for acceptance,

and the employee relations report from Mr Carden dated 17 April 1991 (core bundle

p.208).

85

They are identical in their essential terms. Neither document makes any reference to

an assurance by the employers that there would be no significant redundancies in the

next 15 months.

86

The claims to enhanced terms of any employees made redundant after 31 May 1991

are to be the subject of negotiations, but nowhere is the assurance relied upon by the

plaintiffs set out.

87

If the assurance was given as claimed, this is a remarkable omission, since

agreement to this effect would have been very important against the background of

the recent redundancy declarations and of the recession.

88

Secondly, the document at core bundle p.213a and 213b is a document drafted byMr de Lacey and designed to explain to union members what the union strategy had

been since December 1990. It was written, Mr de Lacey told me, after the April1991 agreement had concluded and it came into Mr Thompson's possession on 13

June 1991.

89

It makes no mention of any assurance, such as that asserted by the plaintiffs. The

document records the considerable achievement of the unions in pressuring the

company into significantly changing their position on the redundancies, and then

states:

'The Redundancy Payments have been restored until the end of May.

Should management declare future surpluses following that date wewill have to fight again at that time to restore the payments and to

avoid compulsory redundancies.'

90

If the union representatives had achieved the additional promise of no further

significant redundancies for 15 months, such an important achievement would most

certainly have been set out in this propaganda document, as Mr de Lacey described

it.

91

Nor does the union reaction after the redundancy decla-



[1993] IRLR 383 at 388

rations of June and July 1991 support the plaintiff's case on this point. There was no

allegation of any breach of agreement when 41 redundancies were announced on 13

June and when the 400 were announced on 24 July an external joint union

committee conference was speedily arranged for 1 August.

92

Miss Canning made a contemporary note of what was said and the first paragraph of

that note is significant (core bundle p.218). The union were alleging that the

company had breached the undertaking gained in April 1991 for two reasons,

namely: (a) that further redundancies were announced soon after, and the company

must have known this was going to happen before 31 May 1991 when the enhanced

payment terms ceased; and (b) the company simply announced the new payment

terms, and did not negotiate about them.

93

It is noticeable that, according to the note, the unions were not saying that thecompany were in breach simply by virtue of declaring significant redundancies

within the 15-month period.

94

At this distance of time Miss Canning's note is the best evidence of what was said at

the time and I accept its essential accuracy.

95

In these circumstances my conclusion is that the question of future redundancies

certainly formed an important part of the April 1991 discussions. The unions sought

from the management the maximum comfort on this point that they could hope toachieve, appreciating the reality that a definite commitment to a no-redundancy

situation was something that they could not expect in the prevailing economic

circumstances.

96

They were very worried about the 270 redundancies which were imminent and were

most anxious to achieve the 1985 terms and payments for those employees and they

settled for the best that Mr Thompson could give them – an honest statement of his

understanding and belief at the time. They trusted him and relied on his judgment in

the matter.

97

When the union representatives reported to the joint union committee that the

employers had said that over the next 15 months there would be no significant

redundancies and when Mr Crossland on 16 April reiterated his understanding to

this effect in the presence of Mr Carden and Miss Canning they were not

intentionally misrepresenting what had been said to them, rather they were repeating

their understanding of what the situation would be in the coming months in reliance

upon Mr Thompson's good faith and judgment and realising that they could achieve

no more than that.

98



Thus Mr Crossland's letter of 6 September 1991 in which he asserted that the

company had broken the spirit of its offer, accurately recorded the correct situation,

namely, that the further redundancies after 31 May 1991 were contrary to what the

unions had been led to expect.

99

They were not, however, contrary to any term in the agreement because no

undertaking, as alleged, had been given.

100

In the same letter Mr Crossland went on to complain that the company had broken

its promise to negotiate concerning enhanced severance payments for the future,

which complaint was further justified by the attitude of the company thereafter when

they declined to make any significant improvement in the terms announced on 19

July 1991.

101

Before leaving this aspect of the matter I must deal with Mr Burke's submission thatMr Thompson, when saying that in April 1991 he was not aware of any plans for

any further significant redundancies, could not reasonably have held that opinion.

102

Mr Burke relies upon a memorandum prepared by Mr Trollope and amended by Mr

John Rivers, the defendant's personnel director, in January 1991 (core bundle pp.204

and 205) which spoke of a further manufacturing rationalisation which would

involve the loss of an additional 1,800 – 2,000 jobs throughout the defendant's

organisation from January 1992 onwards.

103He also relies upon the deteriorating situation in the defendant's business between

January 1991 and March 1991, of which Mr Thompson was aware in April 1991,

and upon the suggestion of a further review of manpower in the Business Systems

Group of the defendants which was the main employee group at Beeston (see bundle

15, pp.64 and 71).

104

However, Mr Rivers told me that the Trollope memorandum was a discussion

document which never reached the stage of becoming a proposal. It was not a plan

and he had not discussed it with Mr Thompson because it was not part of Mr

Rivers's thinking at the time.

105

He confirmed that in March/April 1991 there were no plans for any more

redundancies in the Business Systems Group. It was on 3 June 1991, when the main

board met, that the seriousness of the economic situation was brought home to them,

as a result of which further redundancies were subsequently declared.

106

In April 1991 Mr Thompson knew that the defendant's business was in difficulties,

but he did not then believe that Beeston would suffer any more redundancies

because they were very efficient at that site and because that possibility had not beendiscussed with him.



107

When he said that he was unaware of any plans for any further significant

redundancies I have no doubt that he was being truthful; and, given his state of

knowledge at that time, his opinion to that effect was held on reasonable grounds.

108Against the background of my conclusions on the facts I pass now to consider the

other issues which require my decision.

109

Originally on the pleadings the defendants denied that an entitlement to an enhanced

redundancy payment formed any part of the individual contracts of employment of

its employees.

110

However, in May 1992 the defendants conceded that the terms of the general

instruction which was issued on 21 October 1985 and which specified the amountsthat the defendants would thereafter pay to an employee leaving due to redundancy,

was, subject to one reservation, a term of each such contract.

111

Nonetheless, they still disputed the plaintiffs' right to the declaration sought on four

separate grounds, which I will deal with seriatim.

112

(1) Consideration

The defendants say that there was no consideration given by the plaintiffs or any

other of the employees of GPT for the introduction of the enhanced terms into theindividual contracts. Thus, say the defendants, such terms were not contractually

binding upon them.

113

To this the plaintiffs give a number of answers. Firstly, they say that individual

contracts of employment specifically included 'the provisions of relevant collective

agreements currently in force and made between and on behalf of the company (or

the Engineering Employers' Federation) and the trade unions concerned'; and

'general instructions and notices'.

114

The best evidence of this is to be found in the statement of terms and conditions of

employment dated 16 September 1985.

[1993] IRLR 383 at 389

115

Thus, say the plaintiffs, as terms and conditions relating to enhanced redundancy

payments were improved from time to time, it was not necessary for the employees

to give separate consideration for each such improvement since there was obvious

consideration for the contract of employment as a whole; and all that was being

changed was one detail of a collective agreement which was specifically

incorporated into each contract.



116

Secondly, the plaintiffs assert that where an improvement in the employees' terms

and conditions is announced by the employer, the employee gives consideration by

continuing to work on the basis of the improved terms and without seeking a larger

or more significant improvement. Otherwise, say the plaintiffs, the result would be

ludicrous because any employer who announced a pay increase in the context of a

pay claim which is then paid by the employer and accepted by the employee could

thereafter withdraw the pay increase at will and without being liable to a damages

claim for the difference on the basis that there was no consideration for the

increased payment.

117

The consideration is, they say: (a) the employee continuing to work; and (b) not

continuing with his pay claim, so that the employer avoids industrial action and

benefits from the continued services of a known employee.

118110.1, 124.5, 160

In my judgment the arguments advanced by the plaintiffs are correct. Where, in thecontext of pay negotiations increased remuneration is paid and employees continue

to work as before, there is plainly consideration for the increase by reason of the

settlement of the pay claim and the continuation of the same employee in the same

employment.

119

110.1, 124.5, 160

The situation is similar with an increase in the severance payments made to thosewho lose their employment due to redundancy, for a redundancy payment is part of

the remuneration package. The employee continues to work for the employer,

thereby abandoning any argument that the increase should have been even greater

and removing a potential area of dispute between employer and employee. The

employer has both secured a benefit and avoided a detriment (see Williams v Roffey

Bros and Nicholls (Contractors) Ltd [1991] 1 QB 1).

120

The case of Price v Rhondda Urban Council [1923] 2 Ch 372 is plainly

distinguishable from the instant case, since in Price there was no negotiation

between the employer and the employee as to whether married women should beemployed or not, so that there was no extra value to the employer in women teachers

continuing in their employment.

121

Here there were constant negotiations between the employer and the trade unionsconcerning redundancy terms and there was value to the employer in the settlement

of those negotiations from time to time.

122

In any event, the observations of Eve J in Price supra concerning considerations

were obiter since the ratio decidendi of the case was that there was, in truth, no newoffer of employment capable of acceptance by the plaintiff.











123

Further, in the instant case, if in each individual contract of employment there were

incorporated the provisions of relevant collective agreements agreed from time to

time, as well as general instructions and notices, the contention that each

improvement in the employees' terms requires fresh consideration fails to give

proper recognition to the value to be attributed by the employer to the continuation

of the same workforce in his employ and/or to the possibility of making adjustments

from time to time to the detail of the contracts of employment without having to

issue new contracts whenever adjustments are put into effect.

124

(2) Unilateral alteration

The defendants claim that they had reserved to themselves the power to alter

individual contracts of employment unilaterally, via general instructions. They rely

upon the statement of terms and conditions of employment dated 16 September

1985 which expressly incorporated general instructions and notices into suchcontracts.

125

In this way the defendants claim that they were entitled unilaterally to alter these

contracts, either to the benefit or to the detriment of the employee, and they say that

they did just this via the general instructions of 4 July 1990, which, on its face,

withdrew the terms for redundancy payments then in force (ie the October 1985

terms) as from 30 September 1990.

126

At a meeting between the joint union committee and senior management on 21

November 1990 the employers agreed to observe the old redundancy terms until a

special joint union works conference had been convened, but on 10 December 1990

at an external conference a failure to agree and exhausted procedure was registered

and the company withdrew the 1985 redundancy terms.

127

The plaintiffs' answer to this contention is threefold. First they say that the right to

withdraw unilaterally a term in individual contracts of employment and to replace it

with something less advantageous to the employee cannot exist unless it is plainly

expressed in the contract.

128Secondly they say that on the evidence in this case the entitlement to enhanced

redundancy terms came into the contracts of employment as a result of collective

agreements reached between management and unions which were then incorporated

into the individual contracts and not as a result of general instructions and notices.

Contractual terms thus incorporated cannot be unilaterally withdrawn by a different

route.

129

Thirdly, they say that if the right to make a unilateral adverse alteration to the terms

of the individual contract did exist in contracts accurately recorded by the statement

of terms and conditions dated 16 September 1985 (which incorporated generalinstructions and notices), then such a right did not exist after 9 April 1990; on which



date a new contract of employment commenced and evidence of which is set out in a

new statement of terms and conditions of employment which was attached to a letter

of 15 January 1990 sent by GPT to its employees at Beeston.

130

This new statement of terms and conditions omitted any reference to theincorporation of general instructions and notices into individual contracts; and

therefore from 9 April 1990 the power to make changes to such contracts via general

instructions and notices ceased to exist.

131

In order to deal with the rival contentions on this issue I look first of all at the

manner in which the enhanced redundancy terms had become terms in the contracts

of employment. This had been via collective negotiation leading to collective

agreement.

132

The consequence of such agreement was then communicated to the individualemployees by general instruction. The instruction, in effect, announced what had

previously been agreed but was not itself the source of the contractual term. Thus

the general instruction of 21 October 1985 informed the employees of the terms

collectively agreed between the unions and the employers, and thereafter these

terms, it is conceded by the defendants, became incorporated into the individual

contracts.

133

110.1

These terms will remain part of the contracts unless and until they are removed,either by agreement or under specific right found within the contract.

134

110.1

Here there was certainly no agreement to their removal; quite the contrary.

Unilateral withdrawal from the collective agreement is certainly permissible, but

such withdrawal is not effective to change the individual contracts, which will still

include the agreed item (see, Robertson and

[1993] IRLR 383 at 390

Jackson v British Gas Corporation [1983] IRLR 302 per Ackner LJ at p.304, 14 –

16and Kerr LJ at p.305, 24.

135

110.1

Further, when looking at the terms of the individual contracts, as set out in the

statement of terms and conditions of employment of 16 September 1985, I do not

find there clearly set out the right to effect unilateral adverse variations to the

contract for which the defendants contend.

136







Certainly they never asserted any such right at the external conference on 10

December 1990, but contented themselves instead by relying upon their current

business circumstances.

137

The case of Cadoux v Central Regional Council [1986] IRLR 131, referred to by thedefendants is plainly distinguishable because there the rules which the employers

wished to change unilaterally had been made by them unilaterally and not as a result

of any agreement with the trade union.

138

110.1

As to the situation after 9 April 1990, it is plain that new individual contracts of

employment took effect on 10 April 1990. The plaintiffs accurately point out that

the statement of terms and conditions of employment omits any reference to the

incorporation of either the provisions of relevant collective agreements currently in

force or general instructions and notices.

139

These omissions are striking when one remembers, first, that they were included in

the statement of 16 September 1985 and, second, that the new terms and conditions

did make reference to collective agreements (see item 3 salary) and to a company

general instruction (see item 5 – holiday entitlement).

140

Further, Mr Thompson told me that the 1990 statement was put together deliberately

by people skilled in doing so and after legal input. He agreed that the statement was

a fairly comprehensive document touching all the important aspects of the contractof employment.

141

110.1

There is a heavy burden upon a party who asserts that the actual contract is different

from the statement of terms and conditions, and whilst Mr Elias is right to point out

that the terms here under consideration are not terms which are required to be

included in the statement under s.1 of the Employment Protection (Consolidation)

Act 1978 , nonetheless the omission in the circumstances described is, in my

judgment, significant.

142

No doubt the new contracts were part of the defendants' business improvement

programme, but, nonetheless, the statement of terms and conditions was an

important document which had been the subject of detailed consideration.

143

It is argued by the defendants that an intention to change the pre-existing contractual

terms should only be inferred if such an intention is spelt out by a clear statement of

that which is being changed or removed.

144







I conclude here that the opposite is the case. If a continuation of the previous terms

is to be implied, despite the omissions to which I have referred, there should be

some evidence to justify or support the implication.

145

Here there is none. Mr Rivers was never asked about the point. No-one from thedefendants' legal department or from the Engineering Employers' Federation was

called.

146

Comparing the two statements, in many respects they follow a similar pattern and

individual matters are raised therein in substantially the same order.

147

It is certainly not necessary to imply the continuation of such terms to give meaning

to the statement or to the contract of which it is strong evidence. Looking at the

document on its face there is no reason for any such implication and the conclusion

that I draw is that the new contracts of employment applicable on and after 10 April

1990 did not have general instructions and notices incorporated within them.

148

That being the case, by 4 July 1990 the defendants cannot rely upon any right

unilaterally to effect an adverse variation to the plaintiffs' contracts via a general

instruction, since the contract, as it existed, did not include any such right. For all

these reasons I reject the second ground relied upon by the defendants.

149

(3) The April 1991 agreement

The defendants assert that as a result of the agreement reached in April 1991, whilst

the litigation was pending, the plaintiffs are not entitled to the declaration that they

seek.

150

This, say the defendants, is because the plaintiffs seek a declaration as to their

present legal rights, not their past rights; and, they say, by virtue of the April 1991

agreement, any right to enhanced redundancy payment was extinguished with effect

from 31 May 1991.

151

They go on to say that the April 1991 agreement settled this litigation because the

unions who were parties to it were the plaintiffs' agents for the purpose of effecting

such settlement.

152

In the light of the findings previously expressed, it is clear that there was an

agreement reached between the employers and the unions in April 1991, the

essential terms of which agreement are set out at core bundle pp.208 and N13.

153

Thus the agreement included terms to the effect:

(1) that the 1985 redundancy terms would not apply after 31 May 1991;



(2) that the recognised trade unions singly and collectively agree to withdraw from

any pending or proposed legal action against the company in respect of the current

rationalisation programme.

154

This agreement was plainly a collective agreement and, therefore, presumed not to be legally enforceable (see s.18 of the Trade Union and Labour Relations Act 1974 ,

now s.179 of the Trade Union and Labour Relations (Consolidation) Act 1992 )

unless the requirements of subsection 1 are satisfied, which they are not here, since

there is no provision in the agreement which states that the parties intended that it

would be a legally enforceable contract.

155

Indeed, the evidence from both sides relating to the agreement was to similar effect.

Mr Thompson described the agreement as a collective agreement couched in

collective language. Mr de Lacey described it as the normal situation, namely, that

agreements reached in this manner are not legally binding. Mr Crossland describes itas no more than collective bargaining.

156

The union witnesses accepted that the term of the agreement relating to the

withdrawal from any pending or proposed legal actions against the company was

intended to include this action, and the first question to be answered is whether the

unions were acting as the plaintiffs' agents for the purpose of settling the litigation.

157

In appropriate circumstances it is possible for a union to act as agent for its

members, and here the union did organise and fund the litigation.

158

On 6 September 1991 Mr Crossland wrote to Mr Thompson on behalf of all trade

unions and employee groups, saying:

'I am therefore instructing solicitors to continue the original actions

for those union members on-site who have been declared redundant.'

159

However, s.30 of the 1974 Act (now s. 178 of the 1992 Act )

[1993] IRLR 383 at 391

provides that collective agreements are made by or on behalf of the trade union.

160

There are significant practical difficulties in the way of the agency argument, eg are

non-union members (of whom there were significant numbers at Beeston) bound by

agreements reached by union representatives? Are employees who disapprove of

some or all of the concluded agreement bound?

161

Most importantly, the evidence in the case does not support the proposition that the

unions were agents for these plaintiffs.

http://www.lexisnexis.com/uk/legal/search/runRemoteLink.do?service=citation&langcountry=GB&risb=21_T507719093&A=0.5931504466041191&linkInfo=GB%23UK_ACTS%23num%251992_52a%25section%25179%25sect%25179%25&bct=A






162

Mr de Lacey stated that the union representatives had no authority to alter their

members' individual contracts. Mr Thompson clearly stated that the April 1991

negotiations were collective negotiations producing a collective bargain. His

understanding of the situation was that the unions would withdraw support for the

litigation and would try to persuade their members not to continue with it. He knew

that instructions had to be obtained from the individuals concerned.

163

The reality of the situation was confirmed by the defendant's solicitors when they

wrote to the plaintiffs' solicitors on 28 August 1991 enquiring of the progress with

regard to obtaining the consent of the various plaintiffs to a compromise of these

proceedings.

164

No such consent was ever obtained and I have no doubt that if any of the plaintiffs

had been asked after April 1991 whether his action had been settled as a result of theagreement reached in that month his answer would have been 'certainly not'.

165

1416

In short, I reject the submission that this litigation was compromised by the April

1991 agreement, since the unions were not authorised to act, and did not act as

agents for the plaintiffs in the course of the negotiations leading to that agreement.

166

(4) Alternatively,

and this is their fourth ground of defence, the defendants say that the April 1991

agreement was a collective agreement which was incorporated into the plaintiffs'

contracts of employment so as to alter those contracts.

167

The essential variations thus effected were that the enhanced redundancy terms

would not apply to those leaving Beeston by reason of redundancy after 31 May

1991 and that the plaintiffs would get a pay rise of 4.25% as from 1 July 1991. This

pay rise was paid to and accepted by the plaintiffs, in accordance with the

agreement, who have thus accepted such variations as terms of their individual

contracts.168

Accordingly, say the defendants, firstly, these terms are incorporated into the

plaintiffs' contracts of employment and they are thus precluded from obtaining the

declaration that they seek, and/or, secondly, by accepting the pay rise which was

paid to them after 1 July 1991 the plaintiffs have, by their conduct, agreed to vary

their contracts which thereafter included the term that the 1985 redundancy terms

would not apply after 31 May 1991.

169

As to the incorporation argument, the defendants point to and rely on the clause in

the statement of terms and conditions of employment dated 16 September 1985

which expressly incorporated the provisions of relevant collective agreements



currently in force and made between and on behalf of the company (or the

Engineering Employers' Federation) and the trade union concerned.

170

110.1, 1416

I have previously stated my conclusion that the new contracts of employmentapplicable on and after 10 April 1990 did not have general instructions and notices

incorporated within them; and my conclusion is the same concerning relevant

collective agreements.

171

110.1, 1416

The April 1991 agreement was a relevant collective agreement and, accordingly, as

such, it was not incorporated into individual contracts because after 10 April 1990

they no longer included the incorporation clause relied upon. Accordingly, this

argument fails.

172

The second point made by the defendants under this head relies upon the conduct of

the plaintiffs in accepting the pay increase of 4.25% applicable from 1 July 1991 and

paid to them on and after 23 July 1991. In short, the defendants say that the April

1991 agreement constituted an offer by the defendants to individual employees of a

variation in their contract of employment; which variation, say the defendants, was

in two parts which were essentially linked and to be treated as a package.

173

These two parts were: (1) the abandonment of the entitlement to the 1985 enhanced

redundancy terms by all the employees after 31 May 1991; and (2) the pay rise of4.25% from 1 July 1991.

174

Since the plaintiffs accepted the pay rise, the defendants say they cannot avoid the

consequence of their conduct, namely, the loss of the right to enhanced redundancy

terms. They cannot accept the good part of the offer of variation and reject the bad

part, but must be taken to have accepted both parts of the offer.

175

Further, say the defendants, both parts of the offer were suitable, or apt, for

incorporation into the individual contracts because they both related to pay, it beingcommon ground that redundancy pay is pay (see Hammersmith & Queen Charlotte's

Special Health Authority v Cato [1987] IRLR 483 at paragraph 10).

176

124.5, 1416

In appropriate circumstances terms of a collective agreement relating to redundancy

matters can be incorporated into individual contracts and thus become contractually

enforceable as between employer and employee (see Alexander and others v

Standard Telephones & Cables Ltd (No.2) [1991] IRLR 286 at paragraph 29 per

Hobhouse J).

177











124.5, 1416

In order to decide whether this has occurred in a particular case the court must look

for the necessary contractual intent on both sides of the bargain and also look at the

content and character of the relevant parts of the collective agreement.

178As to intent, the evidence shows that both sides to the April 1991 discussions

understood that they were involved in collective bargaining. I have previously

referred to the evidence which establishes this (eg Mr Thompson described the Post

House talks as collective negotiations leading to a collective agreement and Mr de

Lacey said that these talks involved normal bargaining as between the unions and

management and any agreements reached were not legally binding).

179

So far as the individuals are concerned, Mr Lee spoke of his involvement in seeking

individual consent to the agreement which the joint union committee recommended,

to which some union members agreed and some did not.

180

124.5, 1416

In my judgment it is clear that no-one involved in the April 1991 talks which led to

the agreement, to which I have previously referred, believed that that agreement was

binding upon individuals; and no-one intended that that should be the case.

181

Further, as to its content, the agreement dealt with redundancy terms and/orseverance pay in two places, namely, the restoration of the 1985 terms up to 31 May

1991 and the agreement thereafter to negotiate on any enhanced severance payments.

182

124.5, 1416

Whilst the former term is, as I conclude, apt for incorporation, the latter is not. Such

a term is unenforceable (see Walford v Miles [1992] AC 128 at 136G – 138H), it is

uncertain, and whilst it is appropriate for collective nego-

[1993] IRLR 383 at 392

tiations, it is not suitable for incorporation in an individual contract.

183

On the other hand, the agreement to negotiate carries with it certain importantimplications from the point of view of the employee, who is led thereby to expect a

dialogue directed towards fresh agreement. No individual would have been prepared

to abandon his contractual rights to the 1985 terms without at least the prospect of

negotiating about them thereafter, yet if the defendant's argument be correct, the

term bringing such rights to an end after 31 May 1991 became part of the individual

contracts with no corresponding benefit to the individual employee, save for the pay

increase.

184



The act of acceptance of the increase is not clearly referable to the abandonment of

the 1985 terms; rather it illustrates the willingness of the individual to accept that

increase in salary for 12 months but no more.

185

In summary, therefore, the necessary contractual intent did not exist in this case; andthe two parts of the collective agreement relating to redundancy were not both apt

for incorporation into individual contracts.

186

Accordingly, in my judgment, neither was in fact incorporated into these contracts

in this case. If it be thought that this conclusion is unjust to the employers on the

basis that their employees are thereby enabled to accept the good and reject the bad,

the answer is that the remedy lay in their own hands.

187

When in January 1990 they wished to introduce new contracts of employment as

from 10 April 1990, they wrote a letter making their intention plain and telling

individuals that consequences would follow from their attendance at work thereafter

(see core bundle p.136).

188

124.5

If they wished to incorporate in individual contracts the term relating to the ending

of the entitlement to the 1985 redundancy terms and to link this to the pay increase,

they could have written to their employees to this effect, making it clear that

acceptance of the increase would also amount to acceptance of the cessation of such

rights. They did not do this and for the reasons previously set out I conclude that thisterm never became any part of the individual contracts.

189

In the light of these conclusions, and particularly those concerning the April 1991

agreement, it is not necessary for me to go on to consider the points relating to

collateral contract, warranty, misrepresentation, repudiation and rescission, which

were fully argued before me. This does not mean that I was not assisted by these

arguments and I would like to place on record my thanks to counsel for the clear and

constructive way in which the arguments on each side were placed before me.

190

Accordingly, there will be a declaration for the plaintiffs as sought, the precise terms

of which declaration can be submitted by agreement or adjudicated upon by me in

the event of disagreement.

lee v gec plessey telecommunications

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