Colette Smith v The Commissioners for H.M Revenue & Customs (HMRC)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Freedman |
| Judgment Date | 13 December 2022 |
| Neutral Citation | [2022] EWHC 3188 (KB) |
| Court | King's Bench Division |
| Docket Number | Case No: QB-2021-001069 |
[2022] EWHC 3188 (KB)
Mr Justice Freedman
Case No: QB-2021-001069
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Oliver Segal KC and Darshan Patel (instructed by Thompsons Solicitors) for the Claimants
Clive Sheldon KC and Jack Feeny (instructed by The Government Legal Department) for the Defendant
Hearing dates: 6 & 7 July 2022
Approved Judgment
This judgment was handed down remotely at 10.30am on 13 December 2022 by circulation to the parties or their representatives by e-mail and by release to the National Archives
Introduction
The First, Second, Third and Fourth Claimants (together “the Individual Claimants”) are employed by the Defendant (“HMRC”). HMRC was established by an Act of Parliament in 2005. It was a merger between the predecessor departments of Inland Revenue and HM Customs and Excise. At the time of the merger, there were approximately 24,000 civil servants transferring from Inland Revenue and 85,000 from HM Customs and Excise.
Prior to this, the First and Second Claimants were employed by the Inland Revenue, and the Third and Fourth Claimants were employed by the HM Customs & Excise. The Individual Claimants are members of the Fifth Claimant, the Public and Commercial Services Union (“PCS”), a trade union recognised by HMRC for the purposes of collective bargaining.
The union subscriptions payable by the Individual Claimants to the PCS were until 1 May 2015 collected by means of check-off arrangements, that is to say that they were deducted from pay via the payroll system and paid to the PCS by HMRC. By a letter dated 15 January 2015, HMRC notified the PCS of its intention to remove this facility with effect from the end of April 2015.
The Individual Claimants seek a declaration that the termination of their entitlement to have their PCS subscriptions collected by means of check-off amounted to a continuing breach of their contracts of employment, and that they remain contractually entitled to have their trade union subscriptions collected by check-off after 1 May 2015. There is an issue as to whether there is a contractual right to insist HMRC continues to implement with the check-off facility. There is also an issue as to whether since the withdrawal of check-off by HMRC, the Individual Claimants have accepted a variation of the contracts of employment so as to remove any contractual right of check-off or that they are precluded from enforcing any such right by waiver, estoppel, acquiescence or otherwise.
There is also an issue as to whether the PCS, which is not a party to the contracts of employment, is entitled to enforce that right under the Contracts (Rights of Third Parties) Act 1999 (“the 1999 Act”). The PCS seeks a declaration that the material term of the Individual Claimants' contracts of employment confers a benefit on it within the meaning of section 1(1)(b) of the 1999 Act, that HMRC cannot show that the parties to the contracts of employment did not intend that term to be enforceable by the PCS within the meaning of s. 1(2) of the 1999 Act. As a consequence, the PCS seeks a declaration that it is entitled to be compensated by HMRC for damage caused by HMRC's breach of the contracts of employment of the Individual Claimants, and the like breach of that term of the contracts of the PCS members employed by HMRC as at 1 May 2015, whose circumstances were materially identical to those of the Individual Claimants as at that date and to whose contracts the 1999 Act applied. The PCS also brings a claim for compensation arising from the above breach of contract, pursuant to the 1999 Act.
This matter comes before the Court as a Part 8 claim in common with other such cases to which reference is made below. The parties agreed that the Court could determine the legal issues without live evidence on the basis of the witness statements and the materials exhibited to the witness statements. I wish to express my thanks to Counsel in this case for the high quality of their written and oral arguments. Their expertise and experience have been of great assistance to the Court.
List of agreed issues
The list of agreed issues as regards the Individual Claimants is as follows:
Issue 1: Whether it was a term of (some or all of) the Individual Claimants' contracts that they were entitled to the continued collection of their PCS subscriptions by means of check—off, specifically:
a) where the contractual provision relied on is found.
b) whether the document containing the provision was incorporated into the Individual Claimants' contracts of employment.
Issue 2: Whether it was an implied term that check-off could be removed by the Defendant giving reasonable notice.
Issue 3: Whether HMRC breached the Individual Claimants' contracts by (a) removing check-off-on 1 May 2015 and/or (b) without reasonable notice.
Issue 4: Whether the Individual Claimants accepted a variation of their contract of employment to exclude check-off by their conduct: whether viewed as affirmation, waiver, estoppel, acquiescence or express/implied acceptance.
The PCS's claim under the Contracts (Rights of Third Parties) Act 1999 (“1999 Act”)
Issue 5: Did the term confer a benefit on the PCS as per s 1(1)(b) of the 1999 Act? This is admitted by HMRC.
Issue 6: On a proper construction of the contracts did it appear that the parties did not intend that the term would be enforceable by the PCS as per s 1(2) of the 1999 Act?
Issue 7: If the defence (at issue 4) is made out, does this defeat the PCS's claim under the 1999 Act pursuant to s 3(2), read with s 2.
Observations by HMRC regarding the issues
The issues for determination in this case are, in general, the same as those determined in the recent decisions in Cox & Others v Secretary of State for the Home Department [2022] EWHC 680 (QB) and Crane & Others v Secretary of State for the Department of Environment, Food and Rural Affairs [2022] EWHC 1626 (QB).
The Court of Appeal has granted the SSHD permission to appeal the Cox judgment insofar as it relates to the issue of waiver/variation and the 1999 Act. Permission to appeal has not been granted in relation to the issue of contractual entitlement. In the light of this, HMRC did not argue those points of general application pleaded in the Defence which were determined against the SSHD in Cox. However, HMRC submitted that there were some factual differences with the effect that there is no contractual entitlement to check-off for the Individual Claimants. Likewise, HMRC submitted that there were some factual differences from both Cox and Crane which meant that the waiver/variation defence should be decided on its own merits.
In respect of the 1999 Act, whilst HMRC relies on the same submissions as the defendants in Cox and Crane, it also has a discrete point which arises from the fact that the PCS paid a service charge to HMRC, legally enforceable as a debt, for provision of the check-off service.
Liability: Claims by Individual Claimants
Issue 1: Whether it was a term of (some or all of) the Individual Claimants' contracts that they were entitled to the continued collection of their PCS subscriptions by means of check—off, specifically:
a) where the contractual provision relied on is found.
b) whether the document containing the provision was incorporated into the Individual Claimants' contracts of employment.
The Claimants contend that it has for many decades been a term of all contracts of employment of those employed by HMRC (or predecessor departments) that those employees have the right to have their PCS subscriptions collected by check-off. That term was originally agreed by HMRC's predecessor departments and other government departments collectively with the recognised trade unions; it was incorporated by express reference into individual contracts; and it has never been removed by either collective or individual agreement. Further, the Individual Claimants contend that the following parts of documents are express sources of their contractual right to have the PCS subscriptions collected by check-off in the years prior to the removal of the alleged right:
(i) the extract from the Inland Revenue Handbook (as regards the First and Second Claimants);
(ii) the extract from G3–1 Pay and allowances document (as regards the Third and Fourth Claimants);
(iii) the extract from the TG3 Pay Policy; and
(iv) policy documents HR41100 and HR41101 published on the intranet.
Legal principles
A policy adopted by an employer can be the source of contractual rights and obligations, whether or not the relevant policy is expressly incorporated in the employees' terms and conditions of employment. In Alexander and others v Standard Telephones and Cables Ltd (No 2) [1991] IRLR 286, Hobhouse J explained the applicable principles in the following way:
31 … The relevant contract is that between the individual employee and his employer; it is the contractual intention of those two parties which must be ascertained. In so far as that intention is to be found in a written document, that document must be construed on ordinary contractual principles. In so far as there is no such document or that document is not complete or conclusive, their contractual intention has to be ascertained by inference from the other available material including collective agreements. The fact that another document is not itself contractual does not prevent it from being incorporated into the contract if that intention is shown as between the employer and the individual employee. Where a document is expressly incorporated by general words it is still necessary...
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