Appeal No. EAT/583/90

	EMPLOYMENT APPEAL TRIBUNAL
	58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

		At the Tribunal
		On 20th January 1993

	Before

	THE HONOURABLE MR JUSTICE KNOX

	MR A FERRY MBE

	MR R H PHIPPS

MR B CHIDGEY	APPELLANT

G PERCY TRENTHAM LTD	RESPONDENTS

	Transcript of Proceedings

	JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR M MACKAY
Lay Representative

For the Respondents	NO APPEARANCE BY OR
ON BEHALF OF THE RESPONDENTS

	MR JUSTICE KNOX:  This is an appeal by Mr Chidgey from a decision of the Industrial Tribunal sitting at Reading on the 21 August 1990 whereby the Tribunal decided that it had no jurisdiction to entertain Mr Chidgey's application under the Wages Act 1986.  
	The application that was made by Mr Chidgey related to what he claimed was an unlawful deduction under the Wages Act 1986 in respect of the non-payment of holiday money, or money in respect of holiday entitlement, to which he claimed that he was contractually entitled.

	There does not seem to be any significant dispute about the figures.  The issue that was actually decided by the Industrial Tribunal was that it had, as I have already mentioned, no jurisdiction.  When that decision was given, and it was sent to the parties on the 25th September 1990, the state of the law was not what it is today.  At that stage the Court of Appeal had not given its decision in Delaney v. Staples [1991] ICR 331.  That occurred on the 20th December of that year and it is clear from that decision of the Court of Appeal that the distinction that was relied upon by the Industrial Tribunal in deciding that it had no jurisdiction between non-payments and deductions, was one which was not valid and the authority relied upon by the Industrial Tribunal of Allsop v. Star Vehicle Contracts Ltd [1990] ICR 378, was expressly disapproved by the Court of Appeal in Delaney v. Staples. So that undermines the actual decision of the Industrial Tribunal that it had no jurisdiction. It plainly did have jurisdiction and the only thing we need to add on this score is that Delaney v. Staples did in fact go to the House of Lords but their Lordships expressly said nothing on this particular issue.  They decided the case on other points, which were appealed. There was no appeal from the Court of Appeal's decision on this point of the difference between non-payments and deductions in Delaney v. Staples so the point remains open, in theory, in the House of Lords but we of course are bound by what the Court of Appeal decided and have to apply the law as it is there set out.  Accordingly, the Industrial Tribunal had jurisdiction, but it can not be blamed for not deciding that it had not because the law has been clarified since it gave its decision.

	The question then arises whether we should decide the issue ourselves or remit it to the Industrial Tribunal for it to consider.  There are potentially two reasons why we might decide the case should go no further.  One is, that it does appear that Mr Chidgey's success, if he succeeds at the end of the day, will be a Pyrrhic victory because the well known and respected firm of solicitors that acts for the liquidator of Mr Chidgey's employers, which I will call "the Company" say that there is nothing in the liquidation even for preferential creditors.  They have said that most lately, in a letter dated 11th January 1993, and that suggests of course that even if Mr Chidgey succeeds he will not, in fact, get any money because there is no money to be got.

	The other unfortunate aspect of this case is that it does look as though there is no valid claim against the Secretary of State out of the redundancy fund because during the twelve months preceding the Company's liquidation Mr Chidgey did not become entitled to any holiday pay because his employment had terminated more than twelve months before the liquidation started.  However, those are matters which are not directly before us because they do not affect Mr Chidgey's legal entitlement to such monies as he is contractually entitled to receive.  They do, of course, affect the question of whether he is likely to be able to get anything out of his legal entitlement, but it is not a reason, as we understand it, for our not giving our decision on the point, although it may prove to be a rather empty decision.  The second point is that there is, obviously, a question whether we have the necessary material to decide the question of his holiday pay entitlement ourselves.  The general rule is that this Tribunal can only decide questions where there is no valid decision of an Industrial Tribunal if there is only one possible solution.  That certainly is the case in relation to questions, other than questions of construction, but it does apply, in our view, to questions of construction in that we would have to be satisfied that all the relevant and admissible evidence on the subject was before us before we could express a final view on a matter that has deliberately been left open as the Industrial Tribunal deliberately left this question of construction open here.  However, fortunately, the Industrial Tribunal made quite full findings of fact in setting out what the problem before it was and at the end of that process they said this at paragraph 8:
"Having regard to the contractual terms contained in the statement of terms and conditions given to him [Mr Chidgey] in 1989, and to the staff handbook referred to in such terms and conditions, it may be that we should say that the respondents were justified in saying that no payment was due.  But are we entitled, as a Tribunal to make a finding in this respect?"

They go on to deal with the question of jurisdiction.  That we take to be a statement that there was at least an arguable case on behalf of the Company.  But it is also indicative, we think, of the fact that they had, in the preceding paragraphs, set out fully everything, on their view of the matter, that needed to be set out before this question could be decided.  We have therefore come to the conclusion that it would be proper for us to state the view that we have formed quite clearly as to the contractual entitlement of Mr Chidgey on leaving his employment.

	The basic facts with regard to the amount of holiday that he took and the amount of holiday that he was entitled to were, as we understand it, not significantly in dispute.  He was entitled to 26 days at the end of his employment in respect of the year that had then finished and because he had been very busy working for the Company he had not taken 19 of those days.  The issue that arose was not about those figures so much as about whether he was entitled to any holiday pay at all at the end of his service and that turns on the provisions of his contract of employment.  This went through two stages.  There was originally a contract that was evidenced, if not contained in, some terms of employment that were supplied to Mr Chidgey dated October 1976 and that provided, as far as accrued holiday pay on leaving employment, as follows (it is set out in the Industrial Tribunal's decision at paragraph 7(a)):
"Accrued holiday pay.  On leaving the company's employment you will receive payment for X twelfths of your holiday entitlement less any holidays taken up to the date of the termination of your employment where X represents the number of completed months service in the current year.  The holiday year will run from January 1st to December 31st and carrying over of holiday entitlement will not be permitted."

The Industrial Tribunal found that the period of the holiday year subsequently was changed so that it ran from the 1st April to the 31st March and they found as a fact that that was effective for the last year of Mr Chidgey's employment. That is an important feature because it means that his holiday year when he left the employment was from 1st April to 31st March.  By coincidence, his employment was terminated by very short notice, some four days, to take effect on the very last day of the holiday year, namely the 31st March 1990.  The employers recognised that that was short notice and a payment was made to him in lieu of notice when he left their employ.  That, therefore, in our view, means that there was no proper notice and the employers recognised that fact by making a payment in lieu.  

	That was the first stage of the contractual situation between Mr Chidgey and the Company.  The second stage was when a new provision came into force and what the Industrial Tribunal say about that was this, (it is in paragraph 7(d) of their decision:)
"Around 1987 the respondent company became a subsidiary of the Egerton Trust and during 1989 new contracts of employment were issued to the respondents' staff.  One was offered to Mr Chidgey on 28 July 1989 and he signed it on 14 September.  Above the wording for his signature is printed `I agree that the preceding provisions of this statement, including those contained in the documents referred to, as varied from time to time, form the basis of my contract of employment with the company and I acknowledge receipt of the staff handbook and of the statement of which this is a true copy.'  There are in those terms and conditions of employment a number of references to the staff handbook."

and then the Industrial Tribunal found that Mr Chidgey, although he had not had it when he signed that statement, did receive it subsequently, probably around February 1990.  Pausing there for a moment, that in our view, means that it was effectively incorporated into that contract of employment in those places where it was referred to.  That is set out in the following paragraph of the Industrial Tribunal's decision which says this 7(e)):
"With regard to holidays, the written statement provides that he is entitled to 26 working days' holiday in each year in addition to the usual Bank and Public Holidays but that holidays will include an agreed number of days that must be allocated to the Christmas/New Year and Easter/Spring Holiday periods and that further details relating to holidays and to entitlement upon commencement and termination of employment are contained in the staff handbook."

That seems to us to be a clear reference to that Staff Handbook so that its provisions on those subjects are effectively incorporated. To bring this rather lengthy story to an end, the relevant paragraph in the Staff Handbook was found by the Industrial Tribunal in paragraph 7(f) to read as follows:
"`During holidays you will be entitled to your normal remuneration. [and then there is an omission represented by some dots]  On the commencement and termination of your employment your holiday entitlement will be in direct proportion to the number of complete months continuous employment during the relevant calendar year.  On termination of employment for any reason you may receive payment in respect of outstanding holiday entitlements' (with an exception resulting from termination as a result of gross misconduct)."

and then there are provisions preventing holiday being taken during a notice period but giving the Company an option to require holiday entitlement to be taken during a notice period.  That is something which, in our view, the Company was plainly not in any situation to take advantage of because it did not give proper notice.

	One is therefore left with the question whether that passage incorporated from the Staff Handbook is effective to alter, what seems to us to be, the clear effect of the first edition of the terms of employment, namely, that Mr Chidgey was entitled, on the 31st March, to twelfths, which was 12 twelfths of a year's holiday entitlement, because he had done 12 months during that year.  The only two arguments that seem to us to be available to support the view that there was no such entitlement, or that there was less than 12 twelfths, are these;  first of all, it might be said, and indeed was said before the Tribunal, that the use of the word "may" in the phrase "on termination of employment for any reason you may receive payment in respect of outstanding holiday entitlements" denotes that there was a discretion given to the Company in relation to such payments and that there was no right.  That seems to us, on balance, to be a bad argument.  We say that for two reasons.  First of all the sentence in which the use of the word "may" occurs is, as we see it, in flat contradiction to the immediately preceding sentence which it will be recalled says, so far as relevant:
"On the commencement and termination of your employment your holiday entitlement will be in direct proportion to the number of complete months continuous employment during the relevant calendar year."

That suggests entitlement as a right and seems to us to be quite inconsistent with any discretion vested in the Company to withhold what otherwise would be a matter of right.  In those circumstances, if there are two contradictory provision in a provision which is intended to replace what was previously clear in conferring a right, rather than a discretionary entitlement to be considered for benefit, the original provision where there is a right will remain unaffected.  

	Secondly, there is the consideration that there is an exception resulting from termination as a result of gross misconduct and, as Mr Mackay observed during the argument, that is inconsistent with there not being a right to receive payment for holiday entitlement.  One can put it in either of two ways.  One can say that if there was no entitlement there was no need for the exception because the Company could have dealt with the matter by exercising its discretion against a person who was guilty of gross misconduct.  The other way of putting the same proposition is that the "may" may well be intended to reflect the possibility that there would be an exception operative if you were guilty of gross misconduct and that what the "may" referred to was the possibility of the employee being dismissed for gross misconduct.  Whichever way one looks at it the exception provides a clear indication that "may" was not intended to confer the sort of general discretion which is needed to remove, what otherwise, was obviously a matter of right.  For those reasons, it seems to us, that the use of the word "may" in that sentence is inadequate to deprive Mr Chidgey of what otherwise was his contractual right.

	The other argument that we can see might possibly be adduced in favour of the proposition that there was no right to 12 twelfths is the insertion of the word "calendar" in the expression "during the relevant calendar year" in the preceding sentence to the one that we have been examining.  Calendar year normally means from 1st January to the 31st December.  But that is not, we think, a possible construction in the light of the specific finding of the Industrial Tribunal that the holiday year in question was the year from 1st April to the 31st March and we therefore see nothing sufficient in the use of the word "calendar" there to displace what otherwise is the true construction of the Staff Handbook.

	For those reasons we have come to the clear conclusion, on the basis of the facts found by the Industrial Tribunal, that had it had jurisdiction, as we think it plainly did have in the light of the Court of Appeal decision in Delaney v. Staples, it should have come to the view that Mr Chidgey did indeed have the holiday entitlement that he claimed and we therefore refer this matter back to the Industrial Tribunal with a declaration to that effect for it to give effect to our view of the question of construction.  Whether it provides any benefit for Mr Chidgey at the end of the day, we fear, must be doubtful but that is not a matter with which we are directly concerned.