TRANSCO Plc (formerly BG Plc) v Paul O'Brien
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE PILL,LORD JUSTICE LONGMORE,SIR MARTIN NOURSE |
| Judgment Date | 07 March 2002 |
| Neutral Citation | [2002] EWCA Civ 379 |
| Docket Number | A1/2001/1269 |
| Court | Court of Appeal (Civil Division) |
| Date | 07 March 2002 |
[2002] EWCA Civ 379
IN THE SUPREME COURT OF JUDICATURE
CIVIL DIVISION
ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
The Royal Courts of Justice
The Strand
London
Lord Justice Pill
Lord Justice Longmore
Sir Martin Nourse
A1/2001/1269
MR R LEIPER (instructed by Legal Services, Transco Plc, 31 Hamer Road, Solihull, West Midlands) appeared on behalf of the Applicant
MR P MEAD (instructed by MR J Phillip, 40 Kilburn Road, London W9) appeared on behalf of the Respondent
Thursday 7 March 2002
This is an appeal against the judgment of the Employment Appeal Tribunal delivered on 14 May 2001, Mr Recorder Langstaff QC presiding, whereby they dismissed an appeal by Transco PLC (formerly BG PLC) (the appellants) from a majority decision of an Employment Tribunal sitting at Southampton which had held on 9 August 1999 that the appellants were in breach of their contract of employment with Mr Paul O'Brien (the respondent) by failing to consider him for, and subsequently offer him, the enhanced contractual redundancy payment referred to in their document, "Financial Packages 1996–2002". It was further ordered that the matter be relisted before an Employment Tribunal for consideration of remedy. There had been an earlier decision of an Employment Tribunal on the question whether the respondent was an employee of the appellants, the appellants arguing that he was self-employed. It had been decided unanimously on 19 February 1999 that the respondent was an employee and that finding has not since been challenged.
The respondent began work for the appellants on 1 August 1995 as a Finance and Administration Manager. He was responsible for their contract with one particular customer, and that involved financial and operational management of that customer's facilities. The respondent's function was unique in the appellants' structure. He was employed initially through an employment agency, then as an hourly paid worker, and finally under an annual salary. It was held in the Employment Tribunal that he was under a contract of service from February 1996 until August 1998.
In mid-1996 those employees of the appellants who were involved in the activities of BGP (British Gas Properties) were asked to sign a five-year contract, the intention being that everyone would be made redundant within that five-year period. That was because the BGP portfolio of properties was to be sold over the five-year period and it was wished to retain existing staff to deal with that operation. In order to encourage existing employees to remain, they were offered fresh terms. That was done in a document entitled "Financial Packages 1996–2002". The terms offered to encourage employees to remain and work on the disposal of properties included a significant annual bonus based on sales results, a loyalty bonus and an enhanced redundancy package. To qualify for the incentive scheme, the criteria were (1) to have completed three months' service at the end of the performance period, (2) to be a BGP permanent employee and (3) to have accepted BGP's terms and conditions by signing a revised contract of employment by the end of July 1996.
It is common ground that the respondent met the first of those criteria. Whether he is now entitled to the enhanced redundancy payment depends on the terms and effect of his existing contract of employment with them when, in the summer of 1996, they declined to offer him the improved terms. The issue before the Employment Tribunal was as to whether he was a permanent employee. He did not accept the terms, and thereby comply with the third criterion, because they were not offered to him.
The appellants had 75 workers who were recognised as permanent employees. They were all considered entitled to the enhanced redundancy package, with the possible exception of one employee who in the event had not chosen to accept the package. The only explanation given for singling out the respondent was the fact that the employers had not believed him to be a permanent employee.
By a majority the Employment Tribunal held:
"The majority say [the failure to accept the terms] was because [the appellants] had failed to offer him the revised Contract of Employment, but in view of his status as a permanent employee they should have done so. Their failure to do so was in breach of their implied duty of trust and confidence and in particular their duty to treat employees in a fair and even handed manner. The majority say that [the appellants] should not be permitted to rely upon their own breach of contract."
In his dissenting opinion, the chairman found that the respondent was a temporary and not a permanent employee, and so did not qualify for the offer of improved terms of employment. The chairman went on to express the view that the reason the respondent was not considered for the enhanced redundancy package was because of the appellants' mistaken belief as to his status.
The Employment Appeal Tribunal upheld the decision of the Employment Tribunal. They did so on two grounds. First:
"The question the Employment Tribunal had to answer was whether it was a breach of contract to deny Mr O'Brien the opportunity of entering a revised contract of employment with enhanced redundancy terms. There was no reason for excluding him, other than the fact that it was not realised that he was a permanent employee.
The simple approach in fact is to note that if it had been appreciated that he was a permanent employee, he would have been offered the enhanced terms. If it was a breach not so to regard him, he must be placed in the position he would have been had the contract been fulfilled. He would have had the offer."
The EAT went on to consider the terminology used by the Employment Tribunal in relation to implied terms of trust and confidence in contracts of employment. They held that:
"… to offer a particular benefit to the entirety of a class of employees bar one is capable of being an act calculated seriously to damage or destroy the trust and confidence between the employer and that one employee."
It was held that to single out an employee without reasonable and proper cause was an act that no reasonable employer could take. The use of the expression "fair and even handed manner", used by the Employment Tribunal, was one which the EAT recognised did not emerge from the authorities. But the EAT held that the expression was used "as the antithesis of that which is arbitrary and capricious" and its use did not involve an error of law.
The appellants accept that a term can be implied into a contract of employment that the employer will not "without reasonable and proper cause, conduct itself in a manner likely to destroy or seriously damage the relationship of confidence and trust between employer and employee": Lord Nicholls of Birkenhead in Malik v Bank of Credit and Commerce International SA [1998] AC 20 at page 34.
In Malik at page 45F Lord Steyn again set out the term, as he understood it:
"It is expressed to impose an obligation that the employer shall...
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