De La Haye v Air Mauritius Ltd

In these proceedings Mr De La Haye (“the plaintiff”) claims severance pay under the Employment Rights Act 2008 (as amended) following the ending of his employment as a pilot by Air Mauritius Ltd (“the defendant”).

The plaintiff was employed under a series of separate four-year contracts. The first ran from 8 December 1997 to 7 December 2001. The second commenced the day after the expiry of the first and ran from 8 December 2001 to 7 December 2005. Likewise, the third commenced immediately on the expiry of the second and was due to run from 8 December 2005 to 7 December 2009. However, this third contract was, in Summer 2006, displaced by mutual consent by a fourth contract dated 16 June 2006; this fourth and last contract of employment was to run from 13 July 2006 to 12 July 2010. Nothing turns on the reasons for this substitution of the fourth contract for the third, which seem to have been connected with a change of model of aeroplane which he was employed to fly.

One of the reasons why the plaintiff was employed under successive fixed term contracts appears to have been that as an expatriate his work permit ran only for four years at a time. The defendant’s evidence was that another reason was that demand for air services fluctuated a good deal with global and local conditions.

Each of these fixed term contracts contained similar terms. One of them was for termination by either side on notice to the other. The critical clause for present purposes is clause 10(A) of the last (fourth) contract. So far as material it read:

On 27 February 2009, when the fourth contract had about 17 months to run, the defendant served written notice of termination on the plaintiff. The relevant parts of its letter to him read:

The plaintiff’s claim was principally for severance pay under section 46 of the Employment Rights Act 2008 (“the Act”). If he was entitled to such severance pay, it fell to be calculated by reference to his remuneration according to the formula contained in that section. In addition to his salary he enjoyed several potentially valuable allowances, benefits and privileges. There was some dispute between the parties as to which of these would count towards his remuneration for the purpose of the formula, and what if any credit needed to be given for gratuities paid under the successive contracts, but the Board is concerned only with the question whether he qualified for severance pay at all.

Entitlement to severance pay is dealt with in section 46 of the Act. The terms here set out by the Board are those which prevailed at the time that the plaintiff’s contract came to an end (ie on 31 August 2009). So far as material section 46 then provided as follows:

The references in subsection 46(5)(a) to section 36(3) and (4) are to circumstances in which a worker may treat the employer’s actions as amounting to termination. The references in section 46(5)(b) to section 38(1) to (4) are to prohibitions on termination for various reasons such as race or other protected characteristics, or protected activity, and to the circumstances in which termination for misconduct or poor performance is permitted.

It will be noted that the concept of continuous employment is relevant both under section 46(1), which requires a minimum of 12 months such service before severance allowance arises at all, and also under section 46(5), where the length of such service determines the amount of the allowance. “Continuous employment” is given a specific definition for the purposes of the Act in section 2, which provided then, as it still does:

It follows that in the present case, on the law as it stood in August 2009, there were three conditions, all of which had to be satisfied, for entitlement to severance allowance:

In the Industrial Court the magistrate heard evidence on each side as to the economic reasons which the defendant contended justified it in giving notice to the plaintiff, and which had been foreshadowed in the letter of notice. There was a good deal of evidence concerning the impact on the defendant airline of the global financial crash in 2008-09, not only via reduced demand for its services but also because of the effect on hedging fuel contracts which it had made, which had run into considerable losses. The evidence was that overall the losses were of the order of €84.3m or almost 4 billion rupees by 31 March 2009. There was evidence that a series of cost-saving measures had been adopted before there was any question of terminating the contracts of any pilot. They had included asking employees to take unpaid leave of up to two years, or to switch to part-time work, and the granting of unpaid leave to pilots. Recruitment had been put on hold. The evidence also showed that the cost to the defendant of an expatriate pilot, such as the plaintiff, was a good deal greater than that of a local pilot, because several valuable allowances and privileges were enjoyed by the former which the latter did not have. For his part, the plaintiff disputed the truth of the assertion that the defendant was under economic pressure, and pointed to the fact that later in 2009 some recruitment had been resumed. He also contended that the defendant had failed to show that the selection of himself for termination was justified. The magistrate had all this evidence on both sides. She determined that there was clearly sufficient economic justification for the termination of the plaintiff’s contract. Given the extra cost which expatriate pilots involved, there could be no basis for saying that the selection of the plaintiff, at a time of the financial stringency which had been established, was unjustified. She expressed herself in these terms:

The magistrate did not in those circumstances need to address the length of continuous service. She did hold that successive fixed term contracts did not, by reason of succession, become an indeterminate employment. Nor did she need to address the nature of the termination of the plaintiff’s contract, though she did observe that it had been as provided for in the notice clause of the contract (10(A)(ii)).

On appeal to the Supreme Court, the court decided the case on a different, and preliminary, point. It agreed that the contract was for a fixed term rather than for an indeterminate duration. It held that the plaintiff did not pass the threshold for severance allowance, because the contract had been determined by the giving of notice, as provided for in the terms freely agreed by both parties. The court referred to section 36(1) of the Act. That provided:

For the plaintiff, Mr Bibi contended principally that the four contracts fell to be considered together as continuous employment within the definition given by section 2 of the Act. For the defendant, Mr Ithier SC contended that such an interpretation of the Act would be absurd.

For the plaintiff, Mr Bibi submitted that whilst the contract provided for termination by either side by the giving of notice, that did not mean that when such notice was given there was no termination by the giver. The Board understood Mr Ithier to accept that the notice which the defendant gave amounted to a termination of the contract by it, but he contended that because the parties had freely agreed to such a method of termination, it could not give rise to entitlement to severance allowance. That was, he submitted, either because such termination was altogether outside section 46, or because, as a consensual method of ending the contract, it was automatically justified.

Mr Bibi’s careful written case had begun by withdrawing the ground of appeal which raised the issue of the economic circumstances justification. It became clear that he may not have intended altogether to abandon his case that there was no such justification. The Board was very conscious that his withdrawal would have led the defendant to believe that the point was not pursued, but it nevertheless permitted him to outline the submissions which he wished to make. They repeated the arguments advanced before the magistrate.

Mr Bibi also sought the leave of the Board to raise three entirely new grounds of appeal. These had not figured at any stage in either of the courts below. The Board needs to repeat what it said on this topic quite recently in Grewals (Mauritius) Ltd v Koo Seen Lin [2016] UKPC 11; [2016] IRLR 638, when a similar attempt was made.

It should be added that there may be occasions when no injustice would be done by entertaining a new argument, at least if it is a pure point of law. Mr Bibi identified the old case of Connecticut Fire Insurance Co v Kavanagh [1892] AC 473 as accepting that proposition, albeit in a case in which the fresh argument was not permitted because it was far from clear that the evidence would not have had to be different if the new argument had been raised at trial. That is, however, only one circumstance relevant to whether there would be injustice in investigating entirely new arguments. Another is undoubtedly the great desirability of the Board having the considered opinion on the topic of the courts in the country from which the question comes to it, especially a court of specialist jurisdiction such as the Industrial Court.

In the event, the Board permitted Mr Bibi to outline his three new arguments, in order to decide whether they should properly proceed to adjudicate upon them or not. They were:

In the event, the Board refused to entertain any of these fresh arguments. The first, and perhaps the second, might, if raised at the right time at trial, have entailed further evidence, for example as to what lay behind the note of 17 April (although the plaintiff accepted that it appeared to have been written because he had received the notice on 3 March), and when exactly the minister was informed. Moreover the Board would have been deprived of the considered opinion of the local courts. Those considerations apart, the Board was not only far from persuaded that these fresh arguments fell within the category of ones which had such merit as to require them to be admitted despite their lateness and the absence of any excuse for their not having been advanced when they should have been, but, to the contrary, was entirely satisfied that there is no arguable point in any of them. In the briefest terms:

The Board is satisfied that the notice sent by the defendant to the plaintiff was a termination by it of his contract. The fact that it was a termination permitted by the freely agreed terms of the contract does not alter the fact that it brought the contract to an end, nor that it was undertaken by one party only. The Supreme Court fell into error in holding that what happened was not a unilateral act of the defendant. It was indeed a unilateral act, and the fact that it was anticipated and permitted by the contract does not make it any the less so. Subject to meeting the other requirements of section 46, therefore, this termination was perfectly capable of triggering entitlement to severance allowance.

The Board cannot accept Mr Ithier’s argument that because the giving of notice was envisaged by the freely agreed contract, that by itself either excluded the provisions of section 46 or meant that the termination was automatically justified for the purposes of that section. If that were so, most of the provisions of section 46 for the payment of severance allowance in the event of a termination on prohibited grounds would be wholly ineffective in the case of fixed term or indeterminate contracts containing provisions for termination on notice. An employer could, for example, give notice of termination on the grounds of an employee’s race, colour or pregnancy, even though termination on such grounds is prohibited by section 38(1), and avoid the obligation to pay severance allowance. Similarly, the protection for workers against dismissal for misconduct unless the safeguards required by section 38(2) are satisfied would simply be circumvented.

Much of Mr Bibi’s argument was devoted to the question of continuous employment. The Board agrees with him that the employment of the plaintiff under the four successive fixed term contracts described above did indeed fall within the concept of continuous employment as defined in section 2. There is nothing in the least absurd about so reading section 2. Section 2 is expressly designed to treat as continuous employment successive fixed term contracts. That they are none of them indeterminate is true but nothing to the point. There could perhaps be examples of successive indeterminate contracts separated by breaks of not more than 28 days, which might also fall within the definition, but much the most common case will be successive fixed term contracts. The plain reason for the provision is to accord to a worker who has in reality been in employment for a substantial time, albeit under successive contracts closely following one another, the same severance allowance as a co-worker employed for the same length of time under a single, usually but not necessarily indeterminate, contract. There is nothing absurd about such a statutory rule.

That said, there could be no question in any event in the present case but that the plaintiff met the base qualification for severance allowance set by section 46(1), namely 12 months’ continuous employment. Even his last contract had run for more than two and a half years by the time he was given notice. The question of the length of his continuous employment would have been relevant to the calculation of his severance allowance if the termination had not been justified.

Justified, however, it clearly was on the basis of the findings of the magistrate in the Industrial Court. The Board does not embark on a re-appraisal of the evidence on a question of evaluation such as this, especially when made by a specialist tribunal with local experience of the considerations which are relevant to justification for termination; it would only reverse the finding of a first instance judge who had heard the evidence on each side if satisfied that it betrayed some error of principle or lacked any proper basis. Nothing which Mr Bibi could have said, despite heroic efforts, could have begun to show such error.

It follows that the plaintiff’s appeal must be dismissed. His contract was indeed terminated by the defendant but the termination was justified.