Secretary of State for the Department for Environment, Food and Rural Affairs v Public and Commercial Services Union

Heard on 1 and 2 July 2024

Lord SalesANDLady Rose ( with whomLord ReedandLady Simleragree):

The respondent employers are three Government departments. Some of their employees, including the individual claimants in these proceedings, are members of the Public and Commercial Services Union (“the Union”). The Union is recognised for collective bargaining purposes by those employers. The individual claimants chose in the past to have their union subscription deducted from their salary at source through the pay roll system. The sum deducted would then be paid over to the Union by the employer. This is referred to as a check-off arrangement.

In 2014 or 2015, the employers stopped the check-off arrangements leaving the employees to make their own arrangements for paying their union subscription. It is now accepted by the Government that the unilateral withdrawal of the check-off arrangements was a breach by the respondent departments of their employees' contracts of employment. The withdrawal of the check-off arrangements led to a substantial reduction in the subscription income of the Union.

A number of employees brought actions against the employers for breach of their contracts of employment in these and earlier proceedings. Those claims were successful but they could only address the position of each individual employee who brought a claim. Further, it was not clear what loss the employees had suffered, given that the result of the breach was that they received more in their monthly salary than they had before. The person who had really suffered the loss was the Union, but the Union was not a party to the contract of employment and so did not, under common law, have a right to sue for that breach.

The Union considered that this difficulty was precisely the kind of difficulty that had been addressed – and resolved in their favour – by the enactment of the Contracts (Rights of Third Parties) Act 1999 (“the 1999 Act”). The Union therefore also brought its own claims against the employers alongside those of the individual employees, asserting that the contracts of employment in dispute fulfilled the criteria set out in the 1999 Act. They claimed to be entitled to rely on the third party right provided by section 1 to enforce the term of the contracts of employment containing the check-off arrangements.

The individual claimants and the Union succeeded in the High Court in the three separate actions which have directly led to this appeal. The actions were:

a. Cox and others v Secretary of State for the Home Department in which judgment was given on 23 March 2022 by Choudhury J: [2022] EWHC 680 (QB); [2023] ICR 283; [2022] IRLR 502 (“the Cox judgment”);

b. Crane and others v Secretary of State for the Department for Environment, Food and Rural Affairs in which judgment was given on 24 June 2022 by Choudhury J: [2022] EWHC 1626 (QB); [2023] ICR 373; [2022] 1 RLR 778 (“the Crane judgment”); and

c. Smith and others v The Commissioners for HM Revenue and Customs (HMRC) in which judgment was given on 13 December 2022 by Freedman J [2022] EWHC 3188 (KB); [2023] ICR 611; [2023] IRLR 197 (“the Smith judgment”).

Appeals brought by the respondent departments from all three judgments were heard together by the Court of Appeal (Underhill LJ, Vice President of the Court of Appeal Civil Division, Stuart-Smith and Lewis LJJ). In their judgment handed down on 19 May 2023 ( [2023] EWCA Civ 551; [2023] ICR 914; [2023] IRLR 679), the Court of Appeal unanimously dismissed the appeals as regards the individual claimants and confirmed the respondents' liability to them. But by a majority they allowed the appeals as regards the Union's claims under the 1999 Act and dismissed those claims.

Only one of the many arguments raised in this series of cases is still relied on by the respondent employers before this court. That issue, which arises from the application of section 1(2) of the 1999 Act, is whether on a proper construction of the contracts of employment, it appears that the employer and the employee who are the parties to each contract did not intend the check-off arrangements to be enforceable by the Union.

The majority of the Court of Appeal held that the parties did not so intend. The main reason for that conclusion was that the check-off arrangements derived originally from a collective agreement between the predecessor to the current employer and the predecessor to the Union concluded many years ago. It is well known that agreements arrived at by collective bargaining are not intended by the parties to be legally enforceable by either party against the other. That was originally a matter of custom and practice in industrial relations but it is now provided for by section 179 of the Trade Union and Labour Relations (Consolidation) Act 1992 (“TULRCA”). To construe the contracts of employment as conferring third party rights on the Union to enforce the check-off arrangements would, the majority held, circumvent that prohibition and allow the Union to achieve by an indirect route what it could not achieve by the direct route of suing on its own agreement with the employer.

This appeal therefore raises the issue of the correct interpretation of the 1999 Act and the proper construction of the contracts of employment of the individual claimants in these proceedings.

Claims against the Secretary of State for the Home Department (“the Cox case”) are brought by four individual claimants as well as by the Union itself. They are James Cox, Malcolm Davey, Owen Hughes and Denise Speakman. They started working for the Home Office at various dates between 1987 and 2014 and in various roles, for example as an immigration officer or in His Majesty's Passport Office. Claims against the Secretary of State for the Department for Environment, Food and Rural Affairs (“DEFRA”) were brought by three individual claimants, Keith Crane, Elspeth Ganon Wagg and Caroline Mackenzie (“the Crane case”). They started working for DEFRA's predecessor departments in 1986, 2007 and 1990 respectively. The claims against HM Revenue and Customs (“HMRC”) were brought by four individual claimants, Colette Smith, Andy O'Donnell, Ian Lawther and Wendy Turner (“the Smith case”). Two of them had previously been employed by the Inland Revenue and two by HM Customs & Excise before the merger of those two departments in 2005.

All the individual claimants were and are members of the Union and chose to pay their union subscriptions using the check-off arrangements until those arrangements were withdrawn by their employers.

Historically, the terms and conditions of service for Government employees were determined centrally by HM Treasury which was responsible for pay bargaining with the relevant unions. Terms and conditions were largely the same across departments and were set out in the Civil Service Pay and Conditions of Service Code (“the CSPCSC”) which employing departments had to adopt.

The background to the adoption of check-off arrangements was described by Choudhury J in his judgments in the Cox case and the Crane case. Choudhury J said that the origins of the check-off arrangements lie in collective agreements reached between the Government and the relevant trade unions in the 1960s. He was not shown any documentation from that time but referred to a research paper from 1966 which confirmed that in July 1965 HM Treasury offered to provide check-off to the staff associations recognised by the Government at that time (including the Union's predecessor). This was, it appears, the source of check-off for civil servants working for central Government: see para 6 of the Crane judgment.

Voluntary deductions from pay were dealt with in para 4051 of the CSPCSC. That provided that a civil servant who wished to authorise deductions from his pay for any of the organisations listed in an Annex to the CSPCSC should complete a form and send it to the organisation which would then forward it to the officer paying their salary. The particular Annex which listed organisations for which there was no charge for arranging the deduction included nationally and departmentally recognised unions representing civil servants. There was a particular provision which applied to them and not to other organisations in that Annex.Para 4100 provided that in the event of industrial action and for the duration of such action, the employer could withdraw the method of payment in whole or in part in respect of any union with members officially involved in the industrial action.

During the 1990s responsibility for pay bargaining was transferred from HM Treasury to individual Government departments and responsibility for terms and conditions was delegated to the Ministers of the various departments. This gave rise to the Civil Service Management Code (“the CSMC”). The CSMC did not itself set out those terms and conditions but it also dealt with voluntary deductions from pay.Para 7.3 of the CSMC made similar provision for check-off arrangements as the CSPCSC, including...