COX and Ors v SECRETARY OF STATE FOR THE HOME DEPARTMENT

The First to Fourth Claimants (together “the Individual Claimants”) are employed by the Defendant and are members of the Fifth Claimant, the Public and Commercial Services Union (“PCS”), a trade union recognised by the Defendant for the purposes of collective bargaining. The union subscriptions payable by the Individual Claimants to PCS were, until 1 December 2014, collected by means of ‘check-off’ arrangements whereby deductions were made directly from their salaries through the payroll system by the Defendant and paid to PCS. The principal issues in this case are: (a) whether the Individual Claimants have a contractual entitlement to check-off; and (b) if so, whether PCS has an entitlement to bring a third-party claim against the Defendant pursuant to the Contracts (Rights of Third Parties) Act 1999 (“the 1999 Act”) in respect of the subscriptions payable by check-off.

The claims are brought as Part 8 claims and come before me for a determination on liability only. The parties have filed and served witness statements (with attached exhibits) from: on behalf of the Claimants, each of the Individual Claimants, Mr Mark Serwotka (General Secretary of PCS) and Mr Mike Jones (Group Secretary for the Home Office Group of PCS); and, on behalf of the Defendant, Mr Simon Parr (Head of Employee Relations in the Home Office). The parties agreed that no live evidence needed to be heard as there was little in the way of factual dispute, although there were clearly differences between the parties as to the way in which certain documents are to be construed. My findings of facts are based on the witness statements and the attached exhibits.

Historically, the terms and conditions of service for Government employees were determined centrally and were largely uniform. The Treasury was responsible for pay bargaining with the relevant unions. The terms and conditions centrally established were set out in the Civil Service Pay and Conditions of Service Code (“CSPCSC”), the rules and guidance set out therein expressed to be “mandatory on employing departments”. The introduction to the CSPCSC (as set out in a version dating from 1976) provides:

Within the Civil Service, the employer/employee relationship exists between the individual civil servant and his employing department. For convenience of departments, this Code collects together the results of negotiations with employees’ representatives and the rules for their application, and all matters of pay and conditions of service which are handled by the Civil Service Department on behalf of all employing departments. It also contains a statement of accepted principles of conduct which have statutory backing or are based on expressed Government policy. Thus the Code forms the basis from which pay and conditions of service throughout the Civil Service derive but it needs amplification in respect of those matters which are settled by departments through their own negotiations with staff representatives or by management decision. It follows that individual civil servants should not approach the Civil Service Department directly on matters affecting their own pay and conditions of service.…”

The CSPCSC contained a section on ‘Voluntary Deductions from Pay’, which included the following:

Annex 1, referred to in paragraph 4051 above, contains a list comprising organisations in respect of which deductions would be made free of charge; this list includes

The process of transferring responsibility for pay bargaining from the Treasury to individual government departments commenced with the enactment of the Civil Service (Management Functions) Act 1992. From 1 April 1996, as a result of the Transfer of Functions (Treasury and Minister for the Civil Service) Order 1995, the Treasury ceased to have any role in pay bargaining, and responsibility for terms and conditions was delegated to the Ministers of the various departments (who could, of course, further delegate within their own departments).

The Civil Service Order in Council 1995 (paragraph 10) directed that the Minister for the Civil Service (i.e. the Prime Minister) may “make and give instructions” for terms and conditions of service. It is from this that the Civil Service Management Code (“CSMC”) is derived. In 1996, a delegation made under the Civil Service (Management of Functions) Act 1992 was given to departments to determine terms and conditions of service subject to the condition that the Department complies with the provisions of the

The position from 1996 onwards was, therefore, that the Defendant had the power to set her own terms and conditions for civil servants working in her department subject to those terms and conditions complying with the CSMC. The introduction to the CSMC (in the version before me) provides:

Paragraph 6 of the CSMC (in a passage highlighted in bold in the original) provides:

Paragraph 7.3 of CSMC deals with ‘Voluntary Deductions from Pay’, and states

Thus, the CSMC contained similar, albeit not identical, provisions to those in the CSPCSC in respect of check-off arrangements. However, in respect of the withdrawal of check-off in the event of industrial action, the CSMC further provides that such withdrawal is also subject to the approval of the Cabinet Office.

The First Claimant joined the Home Office in 2001 as an administrative assistant and is now a technical specialist in Asylum Casework. He is also currently the PCS’s Home Office Group President. The First Claimant does not hold a copy of his contract of employment, but exhibits a document entitled, “Summary of the Principal Terms and Conditions of Appointment” (“the Summary”). This document, which is not disputed as setting out the relevant terms and conditions, provides in its introductory section as follows:

The Second Claimant started working in the Civil Service in 1987 and was deployed to the Home Office. He is currently the organiser of the Home Office Group, the personal case lead and the group journal editor.

The Third Claimant began working in the Home Office in 2006. His current role is as an immigration officer based at Lunar House in Croydon.

The Fourth Claimant commenced working for the Civil Service in the late 1970s and is currently within the change and engagement team in Her Majesty’s Passport Office (HMPO) in a role that she has held since before 2014.

As with the First Claimant, none of the Second to Fourth Claimants holds a contract of employment; and they too rely upon a statement issued to them of the summary of the principal terms and conditions of appointment in similar terms to the Summary provided to the First Claimant. Clause 15 of the Summary is headed “Representation” and provides:

The standard terms and conditions for employees of the HMPO at the time check-off was removed had a very similar introductory paragraph.

It is noteworthy that the Summary expressly refers to significant changes being notified by way of Home Office Notices or office circulars and to the details of their conditions of service being in the Codes, Home Office Manuals and in the Staff Handbook.

I was provided with an extract from the HMPO Handbook. This contains, as one might expect, multiple provisions relating to pay. The section relating to check-off is in the following terms (emphasis added):

The Home Office Handbook (in a version dating from 1995) provides (emphasis added):

The Home Office Notice 107/1987 introduced changes to paragraphs 4100 and 4051 of the CSPCSC relating to the withdrawal of check-off in the event of official industrial action. It also introduced related changes to the Staff Handbook as follows (emphasis added): -

The Home Office Notice 110/2003 contained advice to Staff on the pay consequences of taking industrial action. It deals in some detail with the effect of such action on all aspects of pay and contains a similar provision to those above in respect of check-off arrangements:

The Defendant’s policy HR41100 Pay: Consolidated Voluntary Deductions from Pay

The Defendant’s Policy, ‘HR41101 Pay: CVD – Approved Organisations’ sets out a list of organisations in respect of which subscriptions can be deducted. This includes, amongst charities, savings associations and other unions, express reference to the “PCS Union”.

That was the context in which each of the Claimant’s union subscriptions were paid by way of check-off until 2014.

In December 2013, the Minister for the Cabinet Office wrote to the Permanent Secretaries for Civil Service departments setting out his view that, “… it [was] not desirable for Civil Service employers to provide an unnecessary service on behalf of the Trade Unions and their members, which can impose additional costs as well as constraints on the way employers administer their payrolls”. That letter went on to request that Departments review their check-off arrangements. On 16 January 2014, the PCS asked the Home Office for an update on the review and was informed, by way of a response from the Home Office dated 23 January 2014, that the review was still at an early stage and that it would contact PCS to arrange a consultation and meeting if it was minded to remove check-off. It was not until 21 July 2014 that the Home Office confirmed that it was minded to remove check-off. I mention this part of the chronology as it is suggested in the Defence (at [4]) that the “The Defendant and PCS had been in discussions about the withdrawal of check-off since 23 January 2014”. It is somewhat unrealistic to describe the absence of any correspondence about the matter between 23 January and 21 July 2014 as indicative of being “in discussion” throughout that period.

There was a single consultation meeting on 7 August 2014 at which the PCS stated that its members paying check-off should be treated as having ‘reserved rights’ to continue doing so. In an email from PCS to the Home Office dated 18 August 2014, the PCS emphasised that its members were clear that they had a contractual right to check-off.

On 1 September 2014, Ms Gooch, Head of Employee Relations, Reward, HR Policy, Health Safety & Wellbeing at the Home Office, informed Mr Jones of PCS that checkoff would be removed as of 1 December 2014.

Check-off arrangements in the Defendant’s department ceased as from 1 December 2014, and on 5 December 2014 PCS lodged a collective grievance against the cessation. The grievance does not appear to have been progressed by the Defendant because of her insistence, in line with her collective grievance process, that the grievance be brought by or on behalf of named individuals.

Meanwhile, in an attempt to maintain the flow of subscriptions affected by the proposed withdrawal of check-off, the PCS had commenced a campaign to encourage members to move to direct debit payment of subscriptions. This was described by Mr Jones as an

This is not the first occasion on which PCS and/or its members have sought to challenge the withdrawal of check-off. Two previous decisions of this Court have dealt with similar issues, albeit involving different Government Departments. The first is Hickey & another v Secretary of State for Communities & Local Government [2013] EWHC 3163 (QB). In that case, the relevant staff handbook contained a provision as to check-off in the following terms:

For the purposes of clarity, these and certain other provisions in the handbook had been highlighted by agreement between the Department and the union as conferring enforceable contractual rights incorporated into individual staff contracts of employment. In 2013, the Department informally notified the relevant trade unions that it intended to terminate check-off arrangements. The Claimants sought interim relief by way of speedy trial. Popplewell J (as he then was) held that the employees did have a contractual right to require the Department to continue to pay their union dues by way of check-off. In doing so, Popplewell J considered that the check-off provisions were apt to have contractual effect, particularly given the express agreement that they should have such effect. At paragraph 11 and 12 Popplewell J held as follows:

These withdrawal provisions were those that permitted check-off to be withdrawn in the event of industrial action. At [20] and [21], there was further analysis of the language used and whether it was that of contractual obligation:

Popplewell J rejected an argument that there was anything inherently improbable or contrary to policy for a government department to undertake, as a contractual obligation, to deduct union subscriptions by way of check-off: see [23]; and further held that there was a “real benefit” to employees in the administrative convenience of not having to make their own arrangements for payment each month, or having to set up a direct debit or standing order and then change it or replace it from time to time as may be necessary. The check-off arrangements ensured that “[e]ach member benefits from the efficient and secure collection of dues from other members and check-off benefits each member in that way”: see [24].

The second case is Cavanagh and others v Secretary of State for Work and Pensions [2016] EWHC 1136 (QB). The relevant provisions in that case were contained in the SSWP’s Salary Policy, amongst other documents. The key provisions were described by Laing J (as she then was) as follows (with Laing J’s emphasis):

Check-off was ended by the SSWP as from May 2015. The issue for Laing J was whether the check-off provisions imposed a contractual obligation. Having considered the provisions of the CSPCSC and CSMC described above, she said this:

As to the CSMC in particular, it was stated as follows at [64] to [66]:

Laing J went on to construe the check-off provisions and concluded that it could safely be inferred from the available material that they were intended to bind the defendant and that the defendant was obliged to continue to provide the check-off arrangements to the claimants: see [71] of Cavanagh. It is also relevant to note that Laing J rejected an argument that the check-off arrangements were determinable on reasonable notice (see [72]) and held that the PCS was entitled to enforce the check-off arrangements as a third party against the Department pursuant to the 1999 Act (see [73]).

It is clear that these decisions are highly relevant in this context given that the historic position is similar to that which pertained and was considered by Laing J in Cavanagh and the language used in the check-off provisions in both Hickey and Cavanagh bears some comparison to that used in the present case. I shall say more about the relevance of these decisions in the discussion below of the issues to be determined.

The parties have helpfully agreed a list of issues to be determined. These are as follows:

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 checkoff, specifically:

Whether it was an implied term that check off could be removed by the Defendant giving reasonable notice.

Whether the Defendant breached the Individual Claimants’ contracts by (a) removing check off on 1 December 2014 and/or (b) without reasonable notice.

Whether the Individual Claimants affirmed the contracts and waived any breach through ongoing performance under the contracts.

If the Fourth Claimant had a contractual entitlement to check off with HMPO (which is denied) was that entitlement removed when she assimilated onto the Defendant’s standard terms and conditions on 1 August 2015.

Did the term confer a benefit on the PCS as per s 1(1)(b) of the 1999 Act. This is admitted by the Defendant.

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?

Which, if any, of the Individual Claimants entered into contracts on or after 11 May

I shall deal with each of these issues in turn.

Mr Segal QC (who appears for the Claimants with Mr Patel of Counsel) submits that the provisions as to check-off, whilst not set out in the Summary, are clearly referred to in documents identified in the Summary as containing the relevant terms and conditions of service. In other words, the check-off provisions are contained in policy documents and are incorporated into the contract. Furthermore, the relevant provisions are apt for incorporation given that the language used in them, which broadly mirrors that considered by the Court in Hickey and Cavanagh, is that of legal obligation. The entitlement to check-off was one that had existed for many years, having been included in the CSPCSC and maintained with the advent of CSMC. As stated by Laing J, those Codes, which are the “common root” for present provisions are an “important pointer” to the correct interpretation of them. The specific and limited circumstances (namely industrial action) in which check-off may be withdrawn confirms that it may not otherwise be withdrawn: see Hickey at [21]. This is consistent with the general stipulation at paragraph 6 of CSMC that “existing rights cannot be altered arbitrarily”. The fact that voluntary deductions can be made in respect of other organisations and charities does not undermine the contractual nature of the obligation.

Mr Sheldon QC (who appears for the Defendant with Mr Feeny of Counsel) submits that the decisions in Hickey and Cavanagh are not binding on the Court and can be no more than “pointers” given the different facts involved. In particular, the relevant provision in Hickey was expressly highlighted to be contractual, which is clearly not the case here. The policy documents here were not intended to have contractual effect; at best, they might, if not reflected in the terms and conditions, give rise to a public law challenge for failure to implement. The language used in the relevant provisions has to be seen in light of the statutory requirement that any deductions from wages must be expressly authorised; the language is that of authorisation and process, and not the language of contractual entitlement. The provisions cannot be apt for incorporation because if they were then so too must be those relating to deductions for the lottery and HOSSA. It is absurd to suggest that there should be any contractual right in respect of such deductions. The passages dealing with withdrawal do no more than provide sensible notice to employees that they may, if they engage in official industrial action, fall behind on their subscriptions; they are not to be interpreted as meaning that those are the only circumstances in which withdrawal might apply. To that extent, Mr Sheldon submits that Popplewell J’s and Laing J’s construction should not be followed. Had the intention been to create any contractual obligation, the provisions could readily have been drafted to make that clear or could, as in Hickey, be identified by the parties as having that effect.

In my judgment, Mr Segal’s submissions are to be preferred.

The principles applicable when considering whether provisions contained in policy documents are apt to be incorporated in the contract of employment are well-established. They were explained by Hobhouse J in Alexander v StandardTelephones & Cables Ltd [1991] IRLR 286as follows:

In Keeley v Fosroc International [2006] EWCA Civ 1277, the Court of Appeal (Auld LJ) held as follows:

In Hussain v Surrey and Sussex Healthcare NHS Trust [2011] EWHC 1670 (QB), Andrew Smith J, in considering whether the terms of a disciplinary procedure were contractual, held as follows:

In common with many civil service employees who commenced employment in the decades that the Individual Claimants did, a single, comprehensive document purporting to be the contract of employment and containing all provisions in one location is not generally to be found. Instead, the terms and conditions of service are indicated in the Summary (provided to comply with the requirements of ss.1-7 of the Employment Rights Act 1996 that employees be provided with a statement of the terms and conditions of their employment) and the other policy documents to which reference is made. The Summary in the present case, which is in similar terms for all of the Individual Claimants, unequivocally states that the “Details of civil servants’ conditions of service” are in the Codes and in the staff handbooks. The Home Office Handbook (version extant as at 19 August 2014) provides (at 1.2.1) that as a Crown employee working within the Home Office, the terms and conditions of employment are those set out in the letter of appointment, the Home Office Handbook and the Civil Service Code (amongst other sources). The fact that these documents may not themselves be contractual does not preclude them from being incorporated if that intention is shown as between the employer and the employee: Alexander at [31]. One can therefore legitimately look to those documents to ascertain what was intended. I reject Mr Sheldon’s argument that because

As to whether or not the check-off provisions are apt to form part of the individual contract, one must consider the specific language used. If the language used is not that of contractual obligation then it may not be correct to infer that the parties intended the provisions to have that effect. I begin with the root documents, the CSPCSC and the CSMC. Of course, the fact that the introduction to the CSPCSC refers to the “Rules and guidance” issued thereunder as being “mandatory”, does not mean that all of its provisions must therefore be contractual: whether or not any particular part of the CSPCSC is contractual will depend on whether that part itself contains the language of legal obligation.

The passages in paragraphs 4051 and 4100 of the CSPCSC and paragraphs 2, 6 and 7.3 of the CSMC were analysed by Laing J in Cavanagh: see [5], [6], [16] and [17]. As held by Laing J in that case, the “common root” for the current contractual arrangements in that case appears to be the CSPCSC, which was “clearly intended to have contractual or quasi-contractual effect and it was intended that the Crown should abide by it”: [62] of Cavanagh. Given that important historical status of the CSPCSC, “[i]t 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 respectfully agree with that analysis as to the effect of the Codes.

Similarly, the analysis of Popplewell J is relevant as the same provision for the withdrawal of check-off in the event of industrial action exists in all the documents dealing with check-off, both historic (at least since the amendment introduced by HON 107/1987) and current. As stated there, the provision for withdrawal in such tightly defined circumstances is inconsistent with there being an unfettered discretion to modify or withdraw check-off in any other circumstances (which discretion would exist if the provision were non-contractual).

In the face of this highly relevant authority, Mr Sheldon seeks to persuade me that the analysis in those cases is not strictly binding on this Court as the circumstances are different. However, it seems to me that, at least in so far as the historic position of the Codes is concerned, the circumstances are not different at all; in fact the pre-1996 position is identical across all departments. Popplewell J’s analysis of the withdrawal provision would continue to apply given that the industrial action justification continues to be the sole reason for withdrawal even in the Defendant’s staff handbook: see paragraph 5.6 of the 1997 handbook. Even if not strictly binding on this Court, the decisions in those cases, in respect of the “common root” documents, should be followed by this Court unless convinced they were wrong: see Halsbury’s Laws, Vol 11 para 32.

Mr Sheldon submits that I should not interpret paragraphs 4051 and 4100 (read with Annex 1 to the Code) as they have been in Cavanagh because to do so would lead to the absurdity that the department may be contractually obliged to make deductions in respect

It was also suggested that the language itself is not that of obligation but that of authorisation and process. In my judgment, the language is that of obligation. The first two or three sentences of paragraph 4051 of the CSPCSC, if taken in isolation, could (as Mr Segal accepted) tenably be said to deal with authorisation alone. However, the next three sentences, which state that “Deductions will be made…”, that “Notice of termination” is required before payments cease and that the payment may be withdrawn in a particular defined scenario (i.e. that of industrial action), all strongly militate towards this provision being intended to be contractual.

Similarly, the language used in paragraph 7.3.3 of the CSMC is that of obligation. The fact that paragraph 7.3.3. commences with the words, “Where departments and agencies offer arrangements for deducting subscriptions…” does not mean that such arrangements are entirely discretionary. If there is an offer of such arrangements (as there was here) and it is taken up (as it also was here) then there is an obligation to continue making them until withdrawn in accordance with the right to do so in the event of official industrial action. The industrial action exclusion is even more circumscribed in the CSMC in that withdrawal is subject to Cabinet Office Approval. Mr Sheldon argued that the only reason for that stipulation is that the Cabinet Office, as the guardian of the employer’s side during industrial action, would have an interest in overseeing any arrangements that could have a bearing on such action, and that one cannot infer from the need for such approval that this is the only situation in which check-off may be withdrawn. However, it seems to me that, if anything, the need for Cabinet Office Approval, which is cast in mandatory terms, underlines both the importance of check-off to the parties and the existence of the obligation not to terminate the facility otherwise. If the Cabinet Office

It was also argued that Popplewell J’s interpretation of the withdrawal provisions is wrong in that these do no more than provide notice to employees of circumstances that may give rise to a shortfall in their subscriptions. I do not accept that submission. The withdrawal provisions make no reference at all to the possibility of a shortfall. In any event, a withdrawal of check-off for any other reason would also lead to a shortfall, and no reason was given as to why it would not be appropriate or sensible, if the Defendant is correct, to give notice to the affected employees in those circumstances as well.

For these reasons, I do not consider the decisions in Hickey and Cavanagh to be wrong. As such, there is no reason to depart from the conclusions reached therein as to the construction of the check-off provisions in the Codes and their role in interpreting present documents.

The trajectory of the documents since 1996 is, if anything, heading towards an even clearer statement of contractual obligation than that contained in the Codes. Thus, we see, for example in the HMPO Handbook, that the “SSC will, if you so authorise, make deductions from your salary…” and that “Once the authorisation has been accepted SSC will forward the contributions due … and continue to make payments on this basis as instructed until you wish to cease making payments”. Mr Sheldon accepted that the terms of the HMPO Handbook were a “stronger pointer” to a contractual obligation but contended that this is still intrinsically a provision about authorisation and process and not apt to create a contractual obligation. I cannot accept that submission. Not only is the language unequivocally that of obligation, it is also relevant that the provisions immediately preceding and following the section on Voluntary Deductions from pay use similar language – “the SSC will arrange for the outstanding balance to be paid to you” – and/or are clearly concerned with legal obligations in the context of deductions from salary pursuant to an attachment of earnings order. It would be odd if similar wording were to be treated as imposing an obligation in one section but not in one immediately adjacent to it.

I accept that the HMPO Handbook applies only to the Passport Office. However, no reason has been put forward as to why a radically different approach should be taken to check-off in respect of employees in other sections within the Defendant’s department, particularly where the same union and the same Minister having overall authority over terms and conditions for the department are involved.

A final point raised by Mr Sheldon was that check-off was not understood by any party to be contractual prior to its withdrawal, and that, at best, it was considered to be a matter of “custom and practice”. However, it will be apparent from the background set out above, that not only did PCS “reserve its rights” at the consultation meeting, but it also expressly stated in an email dated 18 August 2014 that its members considered checkoff to be contractual. Furthermore, the belief expressed by some members that check-off was a matter of custom and practice is not necessarily inconsistent with the belief that it gave rise to a legal entitlement. The factual premise of the submission appears therefore to be incorrect. Even it were correct, it would be of limited significance given the limited role to be played by subjective intentions in determining contractual intent. Of course, the parties could have taken the step taken in Hickey and expressly identified those provisions agreed to have contractual effect. However, the fact that that was not done does not mean that the check-off provisions were not intended to be contractual. As stated by Popplewell J in Hickey:

In conclusion, in respect of Issue 1, it is my view that the check-off provisions are apt for incorporation into the Individual Claimants’ contracts of employment. Check-off is an important facility of real benefit to the employees and the Union; the wording is of a contractual nature and does not conflict with any other provision in the documentary material; there is sufficient detail and certainty to render the provisions workable without more (and it has not been suggested otherwise); and the provisions are contained in documents that contain (often in close proximity) other legal obligations.

The principles are, once again, very well-established, the test being whether a term as to notice is “necessary to give the contract business efficacy” or is “so obvious that it went without saying”: Marks and Spencer plc v BNP Paribas [2016] AC 742. The Defendant submits that if check-off is contractual then the need for notice is so obvious as to go without saying. The argument was not developed in any detail in oral submissions. I consider the argument to have no real merit. Business efficacy does not demand that there be a notice provision. Check-off can operate perfectly well without it and for so long as the authorisation is maintained. The Defendant identified no reason, whether administrative, financial or otherwise, that would render it necessary for her to be able to terminate check-off on notice. Insofar as deductions are made in respect of other organisations, business efficacy does not demand notice in respect of such deductions either. The prior approval given by the department in respect of deductions to be paid to such organisations confers sufficient control on the Defendant over the process. As stated by Laing J in Cavanagh, “Such a term [as to reasonable notice] is very far, in the employment context, from being a term which is so obvious as to go without saying: see [72].

It follows from my conclusion under Issue 1 that the removal of check-off did amount to a breach of their contracts.

A number of points are made in support of the argument that if there was a breach, it was waived by the Individual Claimants:

Whilst the Defendant’s written argument was put on the basis of waiver/acquiescence, Mr Sheldon’s oral submissions, and the authorities relied upon by both sides under this issue, approach the issue principally by reference to the question of whether an employee has by his or her conduct indicated acceptance of a variation to the contract of employment. The relevant principles were most recently summarised by Underhill LJ in Abrahall v Nottingham City Council [2018] EWCA Civ 796, where one issue was whether a contractual pay cut had been accepted by the affected employees continuing to work:

On the facts in Abrahall, Underhill LJ concluded as follows:

The application of the principles, summarised in [65] above, to the facts of the present case lead, in my judgment, to the conclusion that the Individual Claimants had not accepted the withdrawal of the check-off. This is so for a number of reasons.

First, the continuation of work here does not unequivocally give rise to the inference that the Individual Claimants had accepted the change in check-off. The evidence of the Claimants is clear that in matters of pay, including check-off, the expectation was that the PCS would take the lead in dealing with management. As such, the employees had

Second, there was protest at the collective level. That was sufficient, in the circumstances of this case, to negate any inference based on a continuation of work, even if the employees raised no individual protest: see Abrahall at [88]. Mr Sheldon contended that these protests were inadequate and highlights the fact that PCS did not pursue grievances properly by identifying named individuals. However, there is equally nothing to suggest that PCS had ever withdrawn its objection. PCS could undoubtedly have made its position clearer by stating that any continuation of work was under protest or that the PCS reserved its position until the outcome of test cases. Similarly, the Defendant could have informed the employees that continuing to work after the removal of check-off would be viewed as acceptance. It could therefore be said that there was equivocality on both sides. Mr Parr in his evidence for the Defendant acknowledges that PCS initiated the proceedings in Cavanagh shortly after the proposal was made to remove check-off within the Defendant’s department. Mr Parr seeks to infer from the absence of any indication that a Cavanagh-type claim would be pursued against the Defendant that the Defendant’s employees and PCS had accepted the change within the Defendant’s department. However, in view of the fact that an objection had been raised by the PCS and had not been withdrawn, and that PCS was pursuing litigation based on check-off against other departments which shared common historical documents relating to checkoff, it is not clear on what basis Mr Parr could treat the position as unequivocally in favour of implied acceptance. There is certainly nothing to suggest that the department sought to clarify the position with the PCS. Once again, there was equivocality on both sides.

Third, the setting up of direct debit arrangements to ensure continued payment of subscriptions cannot be seen as an unequivocal act implying acceptance. The employees were faced with a situation where their union subscriptions would cease to be paid (leaving them without the benefits of union membership) unless they made alternative arrangements. The union faced a substantial loss of income unless it secured an alternative means of collecting those subscriptions. It seems clear to me that, their union having registered its objection to the removal of check off at collective level, the direct debit arrangements entered into were nothing more than reasonable mitigating steps that the employees could be expected to take when faced with a breach; the alternative would have been to risk losing the benefit of union protection and potentially incur further loss. The setting up of direct debits is another act that cannot be said, in these circumstances, to be only referable to an acceptance of the removal of check-off: it is equally consistent with the taking of reasonable mitigating steps.

Fourth, the fact that there was a substantial gap between the objection and the letter before action does not alter the analysis. Once PCS had made its objection clear (as I find it did

Finally, the fact that the Defendant changed its system for making voluntary deductions in the meantime did not amount to a change in position on the part of the Defendant in reliance upon any act on the part of the employees and/or PCS. The change appears to have affected only the mechanism for making deductions and the number of organisations in respect of which such deductions could be made. It is stated to be a change made for technical reasons and not because of any implied acceptance of the removal of check-off.

For all of these reasons, it is my judgment that the Individual Claimants had not, by their conduct, accepted the withdrawal of check-off.

Section 1(2) of the 1999 Act, so far as relevant, provides:

The Defendant accepts that the check-off provisions confer a benefit on PCS (Issue 6). Accordingly, PCS would have the right to enforce those provisions in its own right unless, on a proper construction of the contract, it appears that the parties did not intend for them to be enforceable by PCS.

Mr Segal submits the check-off provisions are neutral as to enforcement by PCS, and that, as such, s.1(b) of the 1999 Act is not disapplied. Reliance is placed on the decision of Colman J in Nisshin Shipping Co Ltd v Cleaves and Co Ltd [2003] EWHC 2602 (Comm). It is further submitted that, as Laing J found in the Cavanagh case, there is simply no contractual material here which shows an intention that the check-off provisions were not to be enforceable by PCS.

Mr Sheldon submits that in construing the intention of the parties for these purposes it is relevant to consider the external sources from which the term is derived; in this case, that would include the collective agreement between PCS and the Defendant. Both the Defendant and PCS were expressly agreed that check-off would not be enforceable as part of the agreement at collective level; indeed, there is a statutory presumption against such collective agreements being enforceable: see s.179, Trade Union and Labour Relations (Consolidation) Act 1992. Mr Sheldon sought to rely on an extract from Labour Law, Ewing Collins and McColgan (2^nd ed), where, having referred to Laing J’s conclusion in Cavanagh that the union could enforce check-off as a third party, the authors commented as follows:

In those circumstances, submits Mr Sheldon, it is not open to the Individual Claimants to contend that check off was intended to be anything other than unenforceable by PCS, thereby disapplying s.1(2)(b) of the 1999 Act. This is reinforced by the statutory regime for the deduction of trade union subscriptions which provides that a worker’s authorisation of such deductions shall not give rise to any obligation on the part of the employer to maintain or continue with such arrangements. Furthermore, the condition (set out in para 7.3.3(b) of CSMC) that the costs of providing check-off would be recovered from the trade unions conferred on PCS an ability to enforce check-off directly. That ability militates against the presumption of third-party enforcement under the contracts between the employees and the Defendant: Royal Bank of Scotland plc v McCarthy [2015] EWHC 3626 (QB) at [142]. Finally, it was submitted that it would be absurd to infer that there was any intention that other organisations which benefit from deductions would have been able to enforce the right to recover them directly, and the same should apply in respect of check-off.

For the Defendant to succeed on this point, I would need to be satisfied that on the proper construction of the contract, the parties (that is to say the Individual Claimants and the Defendant) intended that the check-off provisions should not be enforceable by PCS. Mr Sheldon’s principal argument is based on the contention that the absence of any intention to enforce at the collective level must lead one to infer that there was no such intention at the level of individual contracts. Although it is well-established that once a collectively agreed term is incorporated into individual contracts of employment, the intentions of the parties entering into the collective agreement from which it originated are of no relevance to the construction of that term (see Harvey on Industrial Relations and Employment Law, AII at [62] and Hooper v BRB [1988] IRLR 517, CA), Mr Sheldon contends that the express intention disavowing enforceability at collective level (supported by the statutory presumption against enforceability) is a matter to be taken into account in construing the individual contracts. Simply put, the argument (as I understand it) is that the parties to the individual contracts cannot contend that check-off was enforceable by PCS when PCS itself did not contend that it was enforceable.

There are several difficulties with that argument:

For these reasons, I find that the answer to this issue is that the check-off provisions are enforceable by PCS pursuant to s1(2) of the 1999 Act.

Section 10 of the 1999 Act deals with its commencement. So far as relevant, it provides:

The 1999 Act came into force on 11 November 1999. Accordingly, by s.10(2) of the 1999 Act, it does not apply to contracts “entered into” before 11 May 2000. The Second and Fourth Claimants commenced employment before that date. Mr Segal argues that there were substantial variations to their contracts after that date which amounted to the ‘entering into’ of a contract within the meaning of s.10(2) of the 1999 Act so that its provisions do apply. In particular, I was referred to a letter dated 23 March 2004 sent to the Second Claimant which confirmed his transfer to another unit accompanied by changes to salary. It was expressly stated that all other terms remain unchanged. In 2014, the Second Claimant was moved to annualised hours working. The Fourth Claimant benefited from a temporary promotion in February 2005 accompanied by a temporary cover allowance. There were further changes to hours, status and pay in subsequent years, particularly in 2010 when her request to change to full time working was authorised. Each of these changes was accompanied by an express statement that all other terms remained unchanged. Mr Segal submits that these were fundamental changes to the contract of employment, amounting, in legal terms, to the entering into of a new contract, as opposed to minor variations which would not.

Mr Segal relies upon the authority of Mulchrome v Swiss Life (UK) plc [2005] EWHC 1808 (Comm) in which the essential issue was whether the Claimant could establish that a cause of action for benefits payable in respect of disablement had accrued under a contract of insurance entered into between her employer and the insurer after 11 May 2000; only if a contract had been so entered would she have the right as a third party to make any claim for benefits against the insurer in her own right. The Deputy Judge drew a distinction between minor variations, which would not amount to entering into a new contract and “fundamental” changes, which generally would. At [44] the Deputy Judge stated:

At [50], the Deputy Judge concluded as follows:

Mr Sheldon submits that there must be a new or fresh contract entered into after 11 May 2000 in order for the 1999 Act to apply and that a variation to an existing contract does not suffice. That is the only means by which there would be certainty in relation to the introduction of this important right for third parties. He submits that the Deputy Judge was wrong to conclude that a fundamental variation to an existing contract is enough to amount to entering into a contract. In the alternative, if the Mulchrome distinction between fundamental and minor variations is correct, it is submitted that the kind of changes relied upon by the Second and Fourth Claimants, such as changes in pay, or location, or even temporary promotions, are not enough.

The reference in s.10(2) of the 1999 Act to the need for a contract to be “entered into” after 11 May 2000, does signify a new contract: an existing contract that was merely the subject of a minor variation would not amount to the “entering into” of a contract. The question, however, is whether a more fundamental variation can also amount to the entering into of a new contract, even though there is no interruption to the pre-existing contractual relationship. It is perhaps surprising that Counsel’s researches only produced one authority on the topic. However, Mulchrone deals with a similar issue to that which arises in the present case, and is a decision of a Court of coordinate jurisdiction. For reasons set out above at [52], this Court should follow it unless convinced it is wrong. In my judgment, the decision in Mulchrone is not wrong; on the contrary, it accords with general principles relevant to the distinction between the mere variation of a contract and its replacement with a new contract. A variation that seeks to change one of the fundamental terms of the relationship will in legal terms amount to the entering into of a new contract; see Farnsworth v Lacy at [71]. I respectfully agree with the analysis of the Deputy Judge at [44] and [50] of Mulchrome.

Applying that distinction, between variations which are fundamental (and which could amount to the entering of a new contract) and those which are not, to the present case, it is my clear view that the changes relied upon by Mr Segal are fundamental in nature. Mr Sheldon accepted in the course of oral submissions that a promotion to a new role would amount to a new contract, but maintained that a temporary promotion would not suffice. In my judgment, a promotion that is effective for any significant length of time would ordinarily amount to a fundamental variation of the contract and therefore the entering into of a new contract. A promotion involves a change in the level of responsibility associated with the role and usually an increase in salary. Those are two important aspects of the contractual basis for employment, any significant change to which could be described as “fundamental”. Whilst a mere transfer to another unit might not necessarily amount to a fundamental change, much will depend on the particular circumstances. A change in the nature of the duties involved, accompanied by a change in pay, could amount to a fundamental variation and the entering into of a new contract. On any view, a change to an entirely new basis for calculating working hours (such as annualised hours working) or a shift from part-time to full-time working (with the attendant changes in pay) would be likely to involve a fundamental change to the terms of the contract.

For these reasons, I consider that the Second and Fourth Claimants did enter into new contracts upon the occurrence of the changes post-11 May 2000 that are identified above. Accordingly, the terms of the 1999 Act do apply to their contracts.

Both parties asked that the Court avoids confining its decision on this issue to the Second and Fourth Claimants alone. It is, however, very difficult, without knowing the particular circumstances of individual contracts, to give any general guidance as to when it can be said that a new contract has been entered into for the purposes of s.10(2) of the 1999 Act. That said, it seems to me highly unlikely that an employee whose employment commenced before 11 May 2000 and whose employment subsequently changed in any of the ways that the second and fourth Claimants’ employment did, would not be able to say that they too had entered into a new contract upon such changes taking effect.

For the reasons set out above, the agreed issues are determined in favour of the Claimants. It just remains for me to thank all Counsel for their helpful and skilfully developed written and oral submissions.