Cavanagh & Ors v Secretary of State for Work and Pensions

This is a Part 8 claim brought against the Defendant by two of its employees, Mr Cavanagh and Ms Williams, and by their trade union, the Public and Commercial Services Union (‘the PCS’). The main issues are whether, the Claimants having opted to have their subscriptions to the PCS deducted from their salary and paid by the Defendant to the PCS, they have a contractual right to insist that the Defendant continues with that arrangement, and whether, if they have, the PCS, which is not a party to their contracts of employment, can enforce that right under the Contracts (Rights of Third Parties) Act 1999 (‘the 1999 Act’).

The parties agreed that I could decide the legal issues without live evidence, on the basis of the material exhibited to the witness statements. The Claimants were represented by Mr Segal QC and by Ms Tether, and the Defendant by Mr Swift QC and Mr Cornwell. I thank all counsel, and their teams, for the great help they gave me before, during, and after the hearing, by preparing useful bundles, illuminating skeleton arguments, and a helpful agreed note, and by arguing the case clearly.

As Mr Swift and Mr Cornwell explain, the Department is ‘the result of a number of machinery of government changes in the course of the last 30 years’. The Department for Health and Social Security was split into two departments in 1988. One of those departments, the Department for Social Security (‘the DSS’), assumed, in 2001, some of the responsibilities of what was then the Department for Education and Employment. It then became the Department for Work and Pensions. The DSS had been responsible for some ‘Next Steps’ or Executive Agencies, such as, I infer, the Benefits Agency. As a result of that history, in part, at least, many different terms and conditions of employment apply to its employees.

The Introduction to the Civil Service Pay and Conditions of Service Code (‘the Code’) in the documents I saw is apparently dated October 1976. It says that there are two main sources of its provisions: legislation and agreements reached in negotiation with the National Staff Side or with Staff Associations ‘in accordance with custom and practice stretching back over more than 59 [?] years’ (the copy in the bundle is not very legible).

I was told that the Code was superseded in 1996. An extract from the Code (issue 2, dated July 1987) was in the bundle. It has a section entitled ‘Voluntary Deductions from Pay’ which was said to set out the arrangements relating to voluntary authorisation of deductions from pay. Paragraph 4051 provided that a civil servant who ‘wished’ to authorise deductions from his pay for listed purposes or organisations should get a form approved by the Treasury from the organisation concerned, and complete and forward it to the organisation. The organisation would forward such forms in batches at suitable intervals to the officer paying salary. Deductions for union subscriptions would be made at the earliest practicable date, rather than quarterly. Notice of termination of the authority was to be given direct to the paying officer. This method of payment ‘may be withdrawn’ in the circumstances set out in paragraph 4100.

Paragraph 4100 was headed ‘Unions Representing Civil Servants’. It provided that subscriptions to nationally or departmentally recognised unions representing civil servants ‘may be paid’ by means of deductions from the pay of members. ‘However, in the event of official action by non-industrial civil servants, and for the duration of such action, this method of payment may be withdrawn by the Official Side in whole or in part in respect of any deductions payable to any unions with members officially involved in industrial action. Staff will be advised by an office notice of any decision to withdraw this method of payment (“check off”)’. Paragraph 4101 made provision about subscriptions which included a political levy.

Mr Cavanagh was appointed on 26 January 1987 as a casual member of staff. The text of his appointment letter was said to summarise his main conditions of service as they then applied. Any significant changes were to be notified by staff circular. Details of conditions of service would be found in the Staff Code, a copy of which was available to be consulted. I was not told what, if any, provision about check-off there was in that document. Nor, indeed, do I know whether ‘the Staff Code’ is a shorthand reference to the Code. Given the date of Mr Cavanagh’s appointment, it is, to put it at its lowest, possible that it is, or that it is a document which summarised, the Code. Since the Code appears to have applied across the Civil Service before it was superseded, I would go further and say that this is a probable conclusion.

Mr Cavanagh was offered a promotion on 6 January 2001. His terms and conditions of employment, other than the description of the post he was offered, and that he would be paid by bank transfer monthly in arrears on the last working day of each month, were ‘set out in the statement of particulars of employment enclosed’. That document gave ‘particulars of the terms and conditions applicable to’ his appointment. ‘Further information’ was given in ‘the Guidance and Practice Handbook’ which would be available at his workplace. Neither side could tell me what, if any, provision that made about check-off. His employment was subject to the Civil Service Management Code (‘the CSMC’). But I have not seen the CSMC which applied then. The only version which I have seen was published much later. I refer to it below.

Conduct and discipline were covered by ‘the Guidance and Practice Handbook and Staff Rules’. A ‘Staff Handbook’ (if different) described the applicable duties of confidentiality and provisions of the criminal law. The Disciplinary Procedures Guide told him what to do about a grievance. The applicable collective agreements were a national agreement ‘on pay and related issues’ dated November 1992, and for non-pay matters, the Civil Service National Whitley Council Revised Agreement on Facilities for Industrial Relations Duties and Trade Union activities in the Non-industrial Civil Service – 1982. Neither side was able to tell me whether either agreement, or the other documents incorporated by reference in these particulars dealt with check-off.

Under the heading ‘Trade Unions’ the particulars said that the Civil Service attached importance to ensuring effective consultation with staff and their representatives. It said that it was, ‘of course’, a personal decision whether or not to join a trade union, but that the ‘Civil Service encourages staff to join an appropriate trade union and to play an active part within it, making sure their views are represented’.

Ms Williams was appointed on 4 October 1991 as a revenue assistant. What I take to be her appointment document said that the full terms and conditions for civil servants were set out in the Code (see above). The appointment document went on to say that the Inland Revenue Handbook summarised the full terms and conditions for Inland Revenue staff. There was also a simplified version; she would be given a copy when she started work. A regular publication would announce any important changes.

On 15 February 1999, Ms Williams was offered a promotion. She was asked to sign a document if she agreed to employment ‘on the basis of the terms contained or referred to in this letter and the attached summary’. She accepted the offer on 18 February 1999. The written ‘particulars of employment’ said that full details of her employment ‘are contained in the COS Manual’. Neither side was able to help me about what, if anything, that document said about check-off.

Ms Williams was to be told about changes to her particulars of employment by ‘a revised letter or staff notices, circulars etc’. She was bound by collective agreements ‘that are in place, as amended from time to time and any collective agreements that are made in future’. The section on salary referred to a ‘pay and allowances manual’. Other documents were referred to under the heading ‘grievance and appeal procedures’.

Under the heading ‘Representation’ the particulars said that the Benefits Agency attached importance to effective consultation with staff and their representatives. It said that it was a personal decision whether or not to join a trade union, but that the ‘Civil Service encourages staff to join an appropriate trade union and to play an active part within it, making sure their views are represented’.

Collective agreements covering ‘the pay system and related arrangements’ and the Civil Service National Whitley Council Revised Agreement in the non-industrial Civil Service -1982 were referred to. The particulars said that they ‘affect your terms and conditions of service’. Neither side knew what, if any, provision either of those made about check-off.

The version of the Civil Service Management Code (‘the CSMC’) in the bundle must have been published after the commencement of Part 1 of the Constitutional Reform and Governance Act 2010 (see paragraph 1 of the introduction). That Act, according to that paragraph, gave the Minister for the Civil Service power to make regulations and give instructions for the management of the Civil Service, including the power to prescribe the conditions of service for civil servants. Paragraph 2 says that the CSMC (on which the recognised trade unions had been consulted) set out regulations and instructions to departments and agencies about terms and conditions of service and relevant delegations. Where departments and agencies are given discretion to determine terms and conditions, the CSMC sets out the rules and principles which must be followed in the exercise of those discretions. It does not of itself set out terms and conditions of service. Paragraph 6 says that when exercising discretions, departments ‘should remember that existing rights cannot be altered arbitrarily’ (emphasis as in the original).

Paragraph 7.3.1 of that version of the CSMC says that when departments ‘have arrangements for voluntary deductions from pay to be offered to staff, the following conditions apply’. The conditions are set out in paragraph 7.3.2. Paragraph 7.2.3 provides that ‘Where departments…offer arrangements for deducting subscriptions to trade unions, they must ensure that [three conditions are satisfied]’. Paragraph 7.3.3 continues, ‘In the event of official industrial action by non-industrial civil servants, departments…may withdraw the facility, in whole or in part, in respect of deductions payable to any union with members officially involved in the industrial action for the duration of that action. Withdrawal is subject to approval by the Cabinet Office’. This provision echoes paragraph 4100 of the 1987 version of the Code (see above).

There were various editions of the Defendant’s standard written particulars of employment in the bundle. The two most recent of those were the 2013 and 2015 editions. They are headed ‘Statement of Terms’. The first heading is ‘Introduction’. The text then reads:

‘This statement gives the particulars of the main terms and conditions of employment applicable to your appointment…

This statement does not necessarily represent the whole of your terms and conditions. Your manager may also hold paper documents that show additional contractual terms and conditions which have been agreed with you.

Keep this document in a safe place. Full details of your conditions of service are contained on the Department’s intranet site.

You will be told about any changes to your particulars of employment through a revised letter or staff notices, circulars etc. You are bound by any collective agreements that are in place as amended from time to time, and any collective agreements that are made in the future (see paragraph below on collective agreements).’

Under the heading ‘Hours of Attendance’ the Defendant reserves an express right to vary days, hours and times of attendance by giving the employee at least three months’ notice, where that is necessary to meet business requirements. The employee is directed to the Defendant’s intranet site for further information on hours and work patterns. The particulars state, ‘Your salary will be reviewed annually’. The particulars record that ‘by signing this contract’ the employee irrevocably authorises the Defendant to deduct from his final salary any overpayment in respect of exceeding his annual leave entitlement. The Defendant’s Standards of Behaviour Statement and works rules are expressly incorporated by reference; those can be viewed on the intranet site. It and the rules made under it can be varied. Details of the applicable Disciplinary Procedure are also said to be on the intranet site. The employee is also required to read the Defendant’s policies about electronic media and computer use, both on the intranet site. Policies about confidentiality and the use of official information are also binding, and on the intranet site. The Civil Service Code is also expressly incorporated.

Under ‘Representation’, the document encourages, in terms similar to those in Ms Williams’s and Mr Cavanagh’s current written particulars, staff to join a trade union and to play an active part in it. The PCS is mentioned as a trade union recognised by the Defendant.

Under the heading ‘Collective Agreements – national pay agreements’, the particulars say, ‘You are bound by the collective agreements that are in place, as amended from time to time and any that are made in the future’. Various agreements on ‘pay and related arrangements’ are then referred to.

The disputed document is the Defendant’s ‘Salary Policy’ which is on the Defendant’s intranet. At its start is the heading: ‘Key things you need to know’. The different elements of the policy are set out next to 13 bullet points. I refer to four, with my emphases.

‘Part-year Appointments Policy: If you have a Part Year contract you can choose to have your salary paid either on an averaged basis or a paid for attendance basis.

Deductions from Salary Policy – Compulsory and Voluntary: You can choose to have voluntary deductions made for subscriptions and premiums to certain Treasury approved organisations, for example, Trade Union subscriptions, repayment of loans from benevolent funds, and charitable donations. Compulsory deductions will be made for income tax, national insurance, superannuation, Child Support Agency Deduction of Earnings Orders and for any execution of debts.

Advances from Salary Policy: You can request an advance of salary for a range of purchases or situations.

Recoveries From Pay Policy: Overpayments will be recovered from your pay.’

The deductions from pay policy is further explained on internal pages 28-29. The text says that the Defendant is obliged to make certain compulsory deductions from salary. Those are listed. Under the heading ‘Voluntary Deductions’ it says, ‘Employees can pay subscriptions and premiums, through deductions from your salary, to certain Treasury approved organisations e.g. PCS Trade Union and Charities. These are called Consolidated Voluntary Deductions (CVD)’.

The ‘Deductions from Salary Procedure’ is on internal pages 38-39. Four sections are signposted. Third is ‘Consolidated Voluntary Deduction (CVD)’. This section provides:

‘3.1 Any voluntary deductions an employee authorises must be made at a regular, fixed interval. Employees will need to use RM to authorise any deductions. Please refer to Employee Services for more details.

The employee should make sure that all new authorisations reach their payroll provider no later than the first day of the month before the quarter in which they are to operate, ie no later than…..

An employee who wishes to authorise voluntary deductions from their pay to one of these organisations should obtain the standard form of authority from the local agent of the relevant organisation.

In the case of Payroll Giving…

Employees can pay for childcare vouchers through voluntary deductions from salary’.

There is a section headed ‘Deductions from Salary Advice’ between internal pages 54 and 57 of the policy. 15 questions are listed. Question 4 is ‘What other payments can payroll automatically deduct from salary?’. Question 5 is ‘What payments can payroll deduct from salary on request?’ The answer is that the Defendant has a ‘confirmed list of approved organisations for Voluntary Deductions’ (a link is given). The answer to question 6 says that ‘Employees can give money on a regular basis to Charity…’. The answer to question 7 explains that ‘Special legal obligations apply when Trade Unions increase subscriptions that are paid through deductions from an employee’s salary. DWP will give employees at least 1 month’s advance notice of an increase in the Union subscription and therefore in the amount to be deducted’. Mr Segal relied on question 8 (‘Are Trade Union subscriptions deducted during industrial action’) and the reply, ‘In the event of official industrial action, the Trade Union subscription deducted from salary may be withdrawn in whole or in part. Employees will be advised of any decision to withdraw this method of payment’. Question 9 is ‘How does an employee stop their ...CVD payments’.

There was discussion in Government about discontinuing arrangements for check-off in late 2013. There is a letter dated 20 December 2013 in the bundle from the Private Secretary to the Minister for the Cabinet Office (‘MCO’) addressed to ‘Dear Private Secretary’. It said that Civil Service departments had authority to decide their own arrangements for ‘the facility known as check-off’. The MCO considered that it was ‘not desirable for Civil Service employers to provide an unnecessary service on behalf of the Trade Unions and their members…. Departments are requested to review any such arrangements they have in place.’ Guidance was attached to the letter. The addressee was ‘strongly advised’ to speak, among others, to Departmental lawyers and to nominate a lead legal adviser, whose details should be supplied to Cabinet Office legal advisers. The letter continued, ‘If after … the review, your Secretary of State is minded to remove this service’, any Liberal Democrat Ministers in the department should be told and if there were none, the DPMO special advisers should be told.

The guidance said that many departments ‘provide[d] a service’ to certain trade unions (ie check-off). Its use by different trade unions varied considerably. Departmental data showed that some trade unions were ‘significant beneficiaries from the service with most of their subscriptions gathered in this way’. Others preferred to collect subscriptions directly. The ‘Advice’ was that there were ‘compelling reasons for departments to consider removing’ those arrangements. Four were listed. One was the cost to departments of providing such a service. Departments were asked to review arrangements. Any decision to keep or modify arrangements was the department’s, but ‘it is the view of the Cabinet Office that any review should include serious consideration to withdrawing from providing this service’ for the reasons given above. There was no statutory obligation to provide the service, or to continue to offer it, but ‘there may be employer-specific legal issues connected to its removal. The review…by departments should give consideration to options for how any such legal issues can best be addressed’.

In the light of a recent case, departments should ‘examine closely in particular whether there might be a contractual right for employees to be offered the check-off facility’. That case is Hickey v Secretary of State for Communities and Local Government [2013] EWHC 3163 (QB); [2014] IRLR 22, to which I refer below. Departments were reminded that the relevant statutory provision (section 68(3) of the Trade Union and Labour Relations (Consolidation) Act 1992 – ‘TULRCA’) did not create any obligation on an employer to maintain any check-off arrangements when an employee authorised deductions from his wages for a trade union subscription. If, as a result of the review, a Secretary of State or Minister was minded to withdraw from, review or amend any check-off arrangements, ‘it is essential that officials consult with their own departmental lawyers before any final decision is taken’. Departments were asked, among other things, to submit a report to the Cabinet Office on the progress of their reviews by the end of January.

In January 2014, the Defendant told the PCS that it was reviewing check-off arrangements. On 25 June 2014, the Defendant allowed the PCS to have access to its members during working hours in order to enable a national switch to direct debit arrangements. The PCS was also allowed to contact its members using the Defendant’s email system. The Defendant began to discuss the issue with the trade unions in the summer of 2014, and between 16 October 2014 and 26 November 2014, formally consulted them. PCS indicated in those discussions that it intended to move all its members onto direct debit arrangements. After that consultation the Defendant decided to end the check-off arrangements. On 11 December 2014, it wrote to PCS to say that it would be withdrawing check-off from 31 March 2015. It later postponed the date to 30 April 2015. The first month in which there was no check-off was May 2015.

Section 68 of TULRCA is headed ‘Right not to suffer deduction of unauthorised subscriptions’. Section 68(1) provides that where there are check-off arrangements between an employer and a trade union, the employer must ensure that no subscription deduction is made from the wages payable on any day to a worker unless there is a current written authority from the worker authorising the deduction. Section 68(2) explains how that authority may be withdrawn by a worker. Section 68(3) provides that the worker’s authority for such deductions from his wages ‘shall not give rise to any obligation on the part of the employer to the worker to maintain or to continue to maintain subscription deduction arrangements’. Section 68A gives a worker the right to present a complaint to an Employment Tribunal that his employer has made a deduction which contravenes section 68.

In Alexander v Standard Telephones and Cables Limited (No 2) [1991] IRLR 286 Hobhouse J (as he then was) considered how a term could be incorporated in a contract of employment. At paragraph 30 he referred to the decision of Scott J (as he then was) in National Coal Board v National Union of Mineworkers [1986] IRLR 439. He said,

‘Therefore, even in a case which involved wide express words of incorporation the Court considered it necessary to look at the content and character of the relevant parts of the collective agreement in order to decide whether or not they were incorporated into the individual contracts of employment.’

He continued, in paragraph 32:

‘The principles to be applied can therefore be summarised. The relevant contract is that between the individual employee and the 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 in 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 to consider in conjunction with the words of incorporation, whether any particular part of that document is apt to be a term of the contract; if it is inapt, the correct construction of the contract may be that it is not a term of the contract. Where it is not a case of express incorporation, but a matter of inferring contractual intent, the character of the document and the relevant part of it and whether it is apt to form part of the individual contract is central to the decision whether or not the inference should be drawn’.

This passage was approved by the Court of Appeal in Wandsworth London Borough Council v D’ Silva [1998] IRLR 193 as providing a valuable guide (supplemented by a point which was relevant on the facts of D’Silva). It has also been applied in later decisions of the Court of Appeal: for example, in Kaur v MG Rover Group Limited [2005] IRLR 40, and in Keeley v Fosroc International Limited [2006] EWCA Civ 1277; [2006] IRLR 961 (see further, below).

That extract from the judgment in Alexander shows that it is necessary to ascertain the contractual intention of the employer and employee. If that intention can be found in a written document, that must be construed in accordance with usual principles. If there is no document, or it is incomplete or inconclusive, the parties’ contractual intention must be inferred from any other available material, including collective agreements. Where a document has been incorporated in general terms, it is still necessary to consider whether the particular term is apt for incorporation. If it is not, the correct construction of the contract may be that it was not intended to be a term of the contract. Where a document has not been expressly incorporated, so that whether there is any contractual intent is a question of inference, the character of the document, and of the relevant passage, and whether it is apt to form part of the individual contract of employment are central to the decision whether an inference should be drawn.

In Keeley v Fosroc, at paragraph 36, Auld LJ (with whom the other members of the Court agreed) said that a good way of testing whether a provision in a ‘policy’ is intended to have contractual effect is to ask whether, if the provision was in an express contract, it could seriously have been argued that it was not apt to be a contractual term. In that case, the employee’s contract of employment incorporated, by express reference, the employer’s staff handbook. The claimant argued that the provisions of that handbook dealing with redundancy payments were contractually binding. The Judge had held that those terms were not apt to be contractual. The handbook referred to compensation for redundancy but did not expressly set out the method of calculation (paragraph 10). The evidence was that calculation method was not set out in the handbook in order to prevent departmental managers from making mistakes in calculation; so the calculation was reserved for the defendant’s HR department. The method of calculation alleged in the particulars of claim was admitted in the defendant’s defence (paragraph 13).

The fact that the handbook was presented as a collection of ‘policies’ did not prevent them from having contractual effect (paragraph 33). Auld LJ said that a ‘highly relevant’ factor was the importance to the overall bargain of the contested term (paragraph 34). In paragraph 35 of the judgment, he referred to the equal, if not greater, importance of the wording of a provision in an incorporated document containing contractual terms. ‘If put in clear terms of entitlement, it may have a life of its own, not to be snubbed out [sic] by context immediate or distant in the document of which it forms a part’. The contextual factors were also relevant: other provisions in the handbook were expressed as entitlements, and other provisions in the redundancy section were, too (paragraph 38).

D’Silva is a case which was clearly on the other side of the line. The issue was whether a provision in the employer’s code setting out the level at which sickness absence would be reviewed was contractual, or set out good practice which managers were intended to follow. The Industrial Tribunal and the Employment Appeal Tribunal had held that the provision created a contractual right. The Court of Appeal allowed the employer’s appeal.

In Hussain v Surrey and Sussex Healthcare NHS Trust [2011] EWHC 1670 (QB); [2012] Med LR 163 the question was whether a disciplinary procedure was incorporated in a doctor’s contract of employment. It did not expressly say that it was and it was not incorporated by express reference. Andrew Smith J held its provisions were incorporated in so far as they were apt to be contractual, and were worded to show that they were mandatory. He said, at paragraph 168, that no single test established whether an employer and employee agree that the provisions of a document should be binding, and if so, which of its provisions. He identified six factors which are material here: the importance of the provision to the contractual working relationship; its relationship with the admittedly contractual provisions; the level of detail prescribed by the provision; the certainty with which the provision expressed its requirements; its context (a provision included among admittedly contractual provisions is more likely to be contractual); and whether the provision is workable.

As I have indicated, Hickey was referred to in the guidance which prompted the Defendant’s decision to withdraw check-off from the Claimants. The issue in that case was the proper construction of a term in the staff handbook providing for check-off. It said, ‘If you are a member of [a trade union], one method by which your union subscription can be paid is for you to ask the department to deduct [it] from your pay and to transfer it to the appropriate trade union…’. The provision also said, in terms similar to those of paragraph 4100 of the Code (see above), that the department could withdraw from the arrangement if there was industrial action.

The relevant paragraph was highlighted as contractually binding when the Secretary of State and the union had negotiated the handbook, as the parties had decided that they wanted to be clear which parts of the handbook conferred contractual rights on employees. As Popplewell J observed (judgment, paragraph 10) the parties had expressly agreed that the provision was intended to have contractual effect. Against that background, the ‘natural meaning of the words “subscriptions can be paid” is that they confer a contractual entitlement to pay the subscriptions in the way described….If the department were entitled to discontinue the arrangement and to refuse to operate checking-off, the position would be that, contrary to that language, the employee cannot pay in that way’.

That construction was supported by the second part of the paragraph about industrial action. The natural inference from that paragraph, which permitted withdrawal from the arrangement in specifically defined circumstances, was that those were the only circumstances in which withdrawal was permitted. The Judge noted that the defendant accepted that the term was contractual, but that the two construction arguments on which the defendant relied deprived the term of any real effect. The first argument was that the provision entitled the employee to ask for check-off, but gave no entitlement to have it provided, even when there was a subsisting arrangement with a trade union. The second was that the premise of the term was a continuing check-off arrangement and that it did not guarantee that such an arrangement would be maintained; an employee could only have subscriptions deducted if there was such an arrangement in force. The Defendant submitted that that argument was supported by the apparently permissive language of the term. The Judge rejected both arguments. This was a case where (as often) it did not help to say that the parties could have made their intentions clearer (ibid, paragraph 18). What was intended by the term depended on its own particular language. That did not make the entitlement conditional on whatever the defendant had agreed with the unions. ‘It provides unequivocally that union subscriptions can be paid in a certain way. That is the language of unqualified entitlement.’ (ibid, paragraph 20). The language of the second part of the paragraph (about industrial action) was ‘inconsistent with an unfettered right to modify or withdraw from such an arrangement in any circumstances’ (ibid, paragraph 21).

He did not get much help from the language of the rest of the handbook; the parties pointed to its mixture of apparently contractual, and apparently discretionary, provisions (judgment, paragraph 20).

In D’Silva, obiter, at paragraph 31, the Court of Appeal observed that the general position was that contracts of employment could only be varied by agreement. In the employment field, as in others, a party to the contract could reserve a right to change a particular aspect of the contract unilaterally by notice. Clear language was required to confer such an unusual power on one party. The Court was unlikely to favour an interpretation which did more than to enable one party to vary its own obligations. To apply such a power to the right of appeal conferred on an employee could produce an unreasonable result ‘and the courts in construing a contract of employment will seek to avoid such a result’.

The issue in Security and Facilities Division v Hayes [2001] IRLR 81 was whether the employer, a Government Executive Agency, could unilaterally reduce allowances paid to employees if they were away from home overnight. The contract was in five separate documents. The employees’ claim succeeded in the county court. The Court of Appeal said that the appeal turned on the true construction of contractual documents. The employer accepted that the contract could be varied consensually through the Whitley Council process. The Court rejected the Defendant’s primary submission about the construction of the right to claim an allowance. It dealt shortly with the alternative submission, that it was an implied term of the contract that, on certain conditions, the employer could simply vary the rate of an allowance by increasing or decreasing it.

Peter Gibson LJ (with whom Mance LJ – as he then was - agreed) said, at paragraph 44:

‘It is a very strong thing to imply a term into a contract of employment when that term allows the unilateral variation of the contract. That is all the more so when there are established means for reaching consensual variations to the contract through the Whitley Council procedures. No authority was cited to us in support of [the employer’s] submission; and it seems to me inherently improbable that the right to make a unilateral variation in the terms of the subsistence allowances was intended by the parties. I do not see how it satisfies the test of necessity for the implication of such a term’.

In Marks and Spencer plc v BNP Paribas Securities Services Trust [2015] UKSC 72; [2015] 2 WLR 1843 the Supreme Court has recently repeated and endorsed the traditional tests for the implication of a term in a detailed commercial contract; that is, that such a term be necessary to give business efficacy to the contract, or so obvious that it goes without saying.

The 1999 Act was preceded by a Law Commission Report, ‘Privity of Contract: Contracts for the Benefit of Third Parties’ (Law Com. no 242) (1996).

Section 1(1)(b) of the 1999 Act provides that, subject to the provisions of the 1999 Act, a person who is not a party to a contract (‘a third party’) may in his own right enforce a term of the contract if, subject to subsection (2), it ‘purports to confer a benefit on him’. Section 1(2) provides that section 1(1)(b) does not apply if ‘on a proper construction of the contract, it appears that the parties did not intend the term to be enforceable by the third party’. Section 6(3)(a) provides that section 1 confers no right on a third party to enforce any term in a contract of employment against an employee.

In Nisshin Shipping Co Limited v Cleaves & Co Limited [2003] EWHC 2602 (Comm) [2004] 1 All ER (Comm) 481 the issue was whether the commission clause in a charterparty ‘purported to confer a right’ on a broker who was a third party to the charterparty. There were nine charterparties and each contained an arbitration clause. Colman J described the broad purpose of the 1999 Act at paragraph 1 of his judgment. It was to enable a third party to a contract under which one party had promised to confer a benefit on him to enforce that promise directly against the promisor.

At paragraph 23 of his judgment, Colman J said that section 1(2) did not provide that section 1(1)(b) is disapplied, unless, on the proper construction of the contract, it appears that the parties intended that the term should be enforced by the third party. In other words, if the contract is neutral on this question, section 1(2) does not disapply section 1(1)(b). Whether a contract does express a mutual intention that the third party should not be able to enforce the benefit conferred on him, or is neutral on that point, is a question of construction having regard to all the relevant circumstances. He quoted from an article by Professor Andrew Burrows, who was a member of the Law Commission, which suggested that there was a rebuttable presumption of intention. This was based on the ‘idea that if you asked yourself, “When is it that parties are likely to have intended to confer rights on a third party to enforce a term, albeit they have not expressly conferred that right”, the answer will be: “When that term purports to confer a right on a …third party”. That then sets up the presumption. But the presumption can be rebutted if, as a matter of ordinary contractual interpretation, there is something else indicating that the parties did not intend such a right to be given’.

At paragraph 24, Colman J noted that the charterparties were neutral in that sense, subject to an argument which he then considered and rejected. He held that the brokers were entitled to enforce the commission clauses in the charterparties, and that, in short, the effect of section 8 of the 1999 Act was that they were entitled, and indeed, obliged, to enforce those clauses by the means provided in the charterparty for settling disputes between the parties to it; that is, by arbitration.

Prudential Assurance v Ayres [2007] EWHC 775 (Ch); [2007] 3 All ER 946 was a decision about the construction of a supplemental deed, made between a landlord and the assignee of a lease, ‘the commanding purpose’ of which, on the Judge’s construction, was to limit the assignee’s liability for rent (and that of any previous tenant) to the value of the assignee’s assets. The question was whether the deed purported to confer a benefit on a former tenant who had guaranteed liability of the assignee under the lease. Lindsay J said that the key issue was whether the deed, ‘seeming to restrict recoverability against any previous tenant is a term that “purports to confer a benefit on” the previous tenants’. Lindsay J referred to the definition of ‘purport’ in the Oxford English Dictionary. He concluded that ‘…section 1(1)(b) is satisfied if on a true construction of the term in question its sense has the effect of conferring a benefit on the third party in question. There is…no requirement that the benefit on the third party shall be the predominant purpose or intent behind the term or that [section 1(1)(b) does not apply] if a benefit is conferred on someone other than the third party’. He referred to the decision of the Court of Appeal in Laemthong International Lines Company Limited v Abdullah Mohammed Fahem & Company [2005] EWCA Civ 519; [2005] 2 All ER (Comm) 167.

The Judge’s conclusion was reversed by the Court of Appeal ([2008] 1 All ER 1266). The Court of Appeal held the provision in question did not purport to confer a benefit on the previous tenant, but to restrict the rights of the landlord and of the previous tenant against the assignee. But the Court did not disapprove the Judge’s approach to the construction of the 1999 Act.

Dolphin Maritime & Aviation Services Limited v Sveriges Angfartygs Assurans Forening [2009] EWHC 716 (Comm); [2009] 2 Ll L R 123 concerned a letter of undertaking (‘LOU’) which a P&I Club (‘the Club’) addressed to the owners and/or underwriters of a cargo of scrap steel. That cargo had been loaded on a ship, New Flame, which had then grounded on a reef. The underwriters had instructed Dolphin to seek compensation in respect of the cargo for the cargo owners and for the underwriters. The LOU provided that in consideration of the cargo interests not arresting the ship, the Club undertook to pay to Dolphin, or to any solicitors the cargo interests might appoint, such sums as might be due from the ship owners in respect of the cargo.

The Judge referred to Ayres. He noted that the conclusion of the Court of Appeal meant that there was no question for them about the application of the 1999 Act. He held that a contract does not purport to confer a benefit on a third party just because the third party’s position would be improved if the contract is performed. The language used by the parties must show that one of the purposes of the contract (as opposed to one of its incidental effects) was to benefit the third party (judgment, paragraph 74). The provision in the LOU that payment should be made to Dolphin or to the solicitors was ‘an agreement as to the means by which the Club’s obligation to the underwriters was to be discharged. It was not an indication that the agent payee was an intended beneficiary of the promise. The intended beneficiaries were the underwriters on whose behalf payment was to be received’ (judgment paragraph 75).

At paragraph 76, the Judge contrasted with a provision for payment to an agent on his principal’s behalf an agreement by A and B that A will pay C (when C is not A’s agent or trustee). The fact that payment was to be made under the LOU either to Dolphin or to the solicitors was a further indication that the purpose of the LOU was not to benefit Dolphin or the solicitors.

In Hickey (see above), the Judge recorded, at paragraph 18, the argument of the defendant Government department that check-off was primarily for the benefit of the trade union. He considered that argument at paragraph 24. The Judge was not impressed by that argument. He said that there was a real benefit for employees in not having to make the arrangement themselves. He recognised that the union also benefited from savings in time and in cost. He pointed out that any cost benefit to the union was a benefit to the employees; and each member benefited from an efficient and secure way of collecting the subscriptions of other members. I appreciate that Popplewell J was not concerned with the 1999 Act, but the defendant’s argument, and the Judge’s response to it, are, nonetheless, interesting.

There are three main questions.

Is the Defendant obliged to continue to provide the check-off arrangements to Mr Cavanagh and to Ms Williams?

It is notorious that, historically at least, a civil servant’s relationship with the Crown had no contractual basis. But the Defendant has not resisted the Claimants’ claims on the grounds that there is no contract at all between them and the Defendant. Such a stance would be inconsistent with the documents in this case and with at least one of the Defendant’s arguments (that based on section 6(3) of the 1999 Act). I therefore assume that there is a contract of employment between the Defendant and Ms Williams and Mr Cavanagh.

The question whether the check-off provision imposes a contractual obligation on the Defendant depends, ultimately, on what the salary policy means, in its context. To understand what it means involves discovering what inferences can be drawn, from the available contractual and non-contractual materials, about whether the parties jointly intended the salary policy to have contractual effect. In the context of this case, I am not impressed by the Defendant’s argument that it is significant that the staff intranet is not referred to in Mr Cavanagh’s and Ms Williams’s contractual documents as a potential source of contractual terms. First, the parties could not have foreseen when those documents were signed that there would ever be such a thing as a staff intranet. Second, it is clear from Alexander and from Hussain that a document may have contractual effect even if it is not part of the materials to which the parties have expressly attached the label ‘contractual’. Third, the staff intranet is referred to in the current standard written particulars of employment as such a source, and those documents do not refer to staff handbooks and the like as such a source.

There are two main pointers to the correct interpretation of the relevant provisions. They are the historic contextual material about the check-off provision, and the decision in Hickey, which is a helpful guide to what the words of the salary policy might mean.

The Defendant’s current contractual arrangements with its employees appear fragmented. But that should not disguise their common root. That, on the material I have seen, appears to be the Code. As its introduction explained, the two main sources of its provisions were legislation and collective agreements. The Code was clearly intended to be contractual (or, perhaps more accurately, to have a quasi-contractual effect, in the light of the anomalous historic employment status of civil servants). It was intended, at all events, that the Crown should abide by it. It contained a provision in very similar terms to the salary policy. My starting point, therefore, since that provision did not come from any legislation, is that it must have originated in a Civil Service-wide collective agreement, and that it must have been intended that Government employers would abide by it.

The provision about check-off in the Code is echoed in the CSMC and in the current salary policy. In particular, the express right to withdraw check-off if there is official industrial action is in all three sets of provisions. Although I have not seen any of the various handbooks, manuals and collective agreements expressly referred to in Mr Cavanagh’s and Ms Williams’s appointment letters, I do not consider it likely that in the period between 1996 and the advent of the staff intranet, there was any collective agreement by which the historic position about check-off, set out in the Code, was abrogated. I consider that it is far more likely that the staff intranet, which is expressly referred to in the more recent standard written particulars of employment, has become the repository of the detailed terms and conditions which were in the Code, and which then migrated from there to the various, now superseded, manuals and handbooks, and thence to the staff intranet. This would explain the similarity in language between the provisions about check-off in the Code, those which were considered in Hickey, and those which are now found on the staff intranet.

I appreciate that the CSMC does not of itself set out terms and conditions of service. Its significance, however, is that in a context where legislation permits terms to be imposed on civil servants, it sets out, in areas where departments and agencies are given discretion to determine terms and conditions, ‘the rules and principles which must be followed in the exercise of those discretions’. Paragraph 7.3.3 of the CSMC supports the view that what Departments are being authorised to do in relation to check-off, where they offer it, is to continue the historic position. I say that because of the continuing presence of the express permission to withdraw check-off when there is industrial action. I agree with Popplewell J’s analysis of the significance of that express permission. I also note that departments must get the approval of the Cabinet Office if check-off is withdrawn, and the general warning in paragraph 6 of the CSMC that departments ‘should remember that existing rights cannot be altered arbitrarily’.

Whether or not my theory about the transition from the Code to the staff intranet is correct, I consider that, applying the approach of Hobhouse J in Alexander and of Andrew Smith J in Hussain, there is nothing incongruous in finding that the staff intranet is a potential source of contractual terms. It is the obvious place for an employee to look for detailed terms and conditions if his written particulars expressly refer to it. But, in addition, given that none of the documents referred to in the contractual documents signed by Ms Williams or Mr Cavanagh is any longer available to be consulted, it is also the obvious place for them to look. They cannot be expected to engage in extensive if not impossible archival research in order to find out what their detailed terms and conditions are.

If, by whichever route, the staff intranet is a potential source of contractual terms, the next question is what the relevant parts of the salary policy mean. In ascertaining their meaning, I consider that the historical position is important. That is, that the parties to the original collective agreement which is reflected in paragraphs 4051 and 4100 of the Code intended the Crown to abide by those provisions. It would be surprising, if similar language is used in two sets of provisions, the first of which was intended by the parties to be binding, to conclude that the second is not. I also consider that Popplewell J’s analysis in Hickey supports this view. I appreciate that the parties in Hickey had expressly agreed that the relevant provisions were contractual, and the Defendant had conceded as much. However it is perfectly clear from the two construction arguments which were advanced by the Department in that case that that concession was more apparent than real. Those two constructions aimed to deprive the provision of any binding effect. That was the context in which Popplewell J’s observations about the language of the provisions, and his conclusion that the provisions did impose real obligations on the Department, were made and reached. That is why they help me to construe the salary policy.

The introductory bullet points to the salary policy (see above) use the phrases ‘you can choose to’ (twice), ‘you can request’ and ‘will be recovered’. ‘You can request’ clearly means ‘You can ask, but you may not get’. ‘Will be recovered’ is clearly mandatory. ‘You can choose’ is used of two options, one of which (the Part-year Appointments Policy) is unarguably contractual. The natural meaning of that phrase, in both places, is that the employee is free to choose, but once he has made the choice, the Defendant will comply with that choice. I can see no sensible reason for giving the same phrase different meanings in adjacent paragraphs (separated, as they are, by only three lines of text). That sense is supported by the phrase ‘can pay’ in paragraph 3 on internal page 29 of the salary policy. I see no reason to differ in my interpretation of that language from Popplewell J in Hickey. The fact that the language is terse does not make it any the less clear. Like Popplewell J, I consider that question 8, and its answer, also support the view that this provision is intended to bind the Defendant. If that were not so, question 8 would be redundant.

I am not much helped by the parties’ attempts to persuade me that the other provisions of the salary policy either were, or were not, contractually binding, or by the Defendant’s argument that if and in so far as they might be binding, their source was not the salary policy but some other instrument. It seems to me that some of the provisions are intended to be binding and some are not. What matters in this case is not so much whether the neighbours of the check-off provision are binding, or why such provisions as are binding are binding, but that the intranet is a place where all employees will expect to find details of their terms and conditions. The question then is, in relation to any provision found there, ‘can it be inferred that the parties intended this to be binding?’. It is particularly important, given the history, and the fact that the precise origins of some provisions are no longer traceable, that employees (whatever their date of appointment) should be able to find all the potentially binding provisions in one place. I infer that that is one reason why these provisions have been collected together on the intranet.

The factors identified by Andrew Smith J in Hussain also support the view that the check-off provisions are intended to be binding. They affect an aspect of the pay/work bargain, which is central to the contract of employment. They are certain in scope, and sufficiently detailed. The associated check-off procedure is detailed and clear. The provisions are workable. They are found alongside at least some other provisions which are plainly intended to be contractual, and in a place where the parties would expect to find contractual provisions.

The Defendant argued that the presence of the provisions in the salary policy was explained by the statutory regime in TULRCA. The provisions were there, it was argued, to ensure compliance with the statutory provisions. It was simply a ‘scheme of authorisation’. I reject that submission. The short answer to it is that the statutory provisions do not apply unless there are check-off arrangements between an employer and a trade union. TULRCA provides that the employee’s authorisation of deductions gives rise to no obligation on the employer to maintain check-off arrangements. A premise, therefore, of this part of the salary policy is that there are check-off arrangements between the Defendant and PCS. If there were no such arrangements, section 68 of TULRCA could not apply.

For those reasons, I conclude that I can safely infer from the available materials that the check-off provisions in the salary policy are intended to bind the Defendant, and that the Defendant is obliged to continue to provide the check-off arrangements to Mr Cavanagh and to Ms Williams.

Are the check-off arrangements terminable on reasonable notice?

I have no difficulty in deciding that the arrangements are not terminable on reasonable notice. Such a conclusion would be contrary to the tenor of the relevant authorities. I was not persuaded that either of the tests for the implication of a term was satisfied. The fact that the Defendant finds the arrangement costly or inconvenient does not begin to show that the implication of such a term is necessary in order to give the contract business efficacy. Such a term is very far, in the employment context, from being a term which is so obvious as to go without saying.

Can the PCS enforce the check-off arrangements pursuant to the 1999 Act?

The Defendant argued that the relevant parts of the salary policy do not ‘purport to confer a benefit’ on the PCS. I do not understand that argument. Mr Swift accepted that a contractual term can have more than one purpose; and it must follow that a term can purport to confer a benefit at the same time, both on the promisee, and on the third party. This is not a case, like Dolphin, of an incidental factual benefit which is not a purpose of the contractual term in question. The very purpose of the provision is to enable PCS members to get the Defendant to pay money from their salaries directly to the PCS. Once thus paid to the PCS, that money would belong to the PCS. It is obvious that that is a benefit to the PCS, and that it is a benefit which the salary policy purports to confer on the PCS. That conclusion is not defeated by the fact that the check-off arrangement also benefits the employees or indeed (a point pressed by Mr Swift) that it benefits the Defendant by promoting effective collective bargaining. In Dolphin, by contrast, the LOU did not purport to confer a benefit on Dolphin. Dolphin was no more than one of two potential conduits through which the cargo interests’ money would be transmitted to the cargo interests. The parties to the LOU did not intend that Dolphin should benefit in any way from that transmission.

The Defendant also argued that section 1(2) operated to disapply section 1(1)(b) of the 1999 Act. This argument, as I understood it, was based on the inherent improbability of an agreement by the Defendant that PCS should be able to enforce the check-off arrangements, and on a general appeal to the surrounding circumstances. This argument is contrary to the clear words of the statutory provisions and to the interpretation given to them by Colman J in the Nisshin case. As Mr Segal put it, this submission was really a submission that the Defendant does not like the effect of the 1999 Act. Section 1(2) requires me to be satisfied, if I am to accept the Defendant’s argument, that, on the proper construction of the contract, the parties (not just the Defendant) intended that the check-off provisions should not be enforceable by the PCS. There is simply no contractual material which shows such an intention, whether expressly, or by necessary implication.

Finally, the Defendant argued that the exception in section 6(3) of the 1999 Act applied, as to permit the PCS to enforce these provisions would amount to the enforcement, against an employee, of a term in a contract of employment. I reject that submission. The premise of the application of the check-off provision is that the employee has exercised his choice to ask for these arrangements to be applied to him. He can withdraw his consent to them at any time. I do not consider that to permit the PCS to enforce the check-off provisions against the Defendant would be to enforce that provision ‘against’ the employee. The short point is that no term in his or her contract of employment obliges either Claimant to pay money to the PCS. The Claimants may ask the Defendant to deduct subscriptions from their salary and pay those to the PCS, but they may at any time ask the Defendant to stop. I thank the parties for drawing my attention to the potentially relevant Hansard material. I do not consider that I can take it into account, as section 6(3) is not ambiguous.

I conclude that the effect of the 1999 Act is that the PCS may enforce the check-off arrangements against the Defendant.

I do not consider that I am in a position to decide on the basis of the available factual and legal materials any questions about damages and do not do so. The PCS had no evidence about loss. During the hearing I raised a question about the potential impact of sections 3 and 5 of the 1999 Act. The Defendant has not pleaded that it relies on either provision, but it seems to me that these might warrant further consideration. Nonetheless, although I have not heard detailed submissions about this, and subject to any further points the parties may wish to make in writing about the underlying principles, or its drafting, my provisional view is that I should make a declaration which expresses my conclusions. This is a private law claim. The fact that the Defendant is a Government Department does not change that view.