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	United Kingdom Employment Appeal Tribunal
You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Murray & Ors v. Philippine Airlines Inc [2001] UKEAT 0425_00_1906 (19 June 2001) URL: http://www.bailii.org/uk/cases/UKEAT/2001/0425_00_1906.html Cite as: [2001] UKEAT 0425_00_1906, [2001] UKEAT 425__1906

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APPEARANCES

 

For the Appellants	MR DAMIAN MCCARTHY (of Counsel) Messrs Moss Beachley Mullem & Coleman Solicitors 116 Seymour Place London W1H 1NW
For the Respondent	MR JEREMY LEWIS (of Counsel) Messrs Herbert Smith Exchange House Primrose Street London EC2A 2Hs


 


MR COMMISSIONER HOWELL QC

1. This appeal which is before us today for Full Hearing pursuant to the directions given by a different division of the Appeal Tribunal on Preliminary Hearing on 7 July 2000 is by Mrs I P Murray and a number of other former employees of Philippine Airlines Incorporated who were based in the United Kingdom at the time of the material events. They brought proceedings before the Employment Tribunal, dealt with at London North at a hearing on 7-9 December 1999, which proceedings were dismissed for reasons set out in the Tribunal's Statement of Extended Reasons sent to the parties on 16 February 2000 at pages 99-113 inclusive of the appeal file before us. The only issue before the Tribunal that concerns us on this appeal is a claim for breach of contract against the airline on the ground that it had failed to pay the full contractual entitlement to redundancy pay on the Appellants being made redundant at dates in 1998. This took place as part of an exercise, explained in the Tribunal's findings of fact, in which the airline had to close down its London operation, though the exercise of reducing the United Kingdom operation had begun some time earlier and had been the subject of memoranda in 1996 to which the Tribunal referred.
2. The only material issues before us concern the way the Tribunal dealt with the claim that an entitlement to enhanced redundancy payments in excess of the employees' statutory entitlement was part of their contractual terms of employment with the airline. Mr McCarthy, who has appeared before us today for the employees, submitted by reference to a helpful skeleton argument and the large volume of documents before us on this appeal, that the Tribunal's decision, dismissing the claim for breach of contract on the ground that there was no such contractual entitlement, as alleged, to enhanced redundancy terms, was perverse in two ways. In particular, first that the Tribunal had erred in misconstruing a number of documents which Mr McCarthy submitted should have been construed as entitling the employees to enhanced redundancy terms. Alternatively, that the Tribunal's decision was perverse in not finding that there had been an express contractual entitlement arising from the effect of assurances given, on an earlier partial redundancy exercise in 1994, to the employees at that time by a Mr Suzara who was the head of European operations for the airline at the time, and provided two witness statements to supplement the evidence given by the employees themselves in support of their contention that they were entitled to these enhanced benefits either by the terms of their original contracts or by virtue of express assurances given by him.
3. The material facts appear from the Tribunal's Extended Reasons at pages 7 and following. It is convenient to take those from the Tribunal's own reasons so far as material:

"7 During 1994 negotiations took place in connection with a right-sizing plan for the London operation of the Respondent. A note made by Ms Gleeson, one of the Applicants, in relation to a meeting on 11 February 1994, indicated that the Respondent would pay one month's salary for every year of service and suggested that any employees to be made redundant in the future would also receive one month's salary per year of service. At that time the General Manager of the European operation of the Respondent was Mr C Suzara.

8 The Respondent's Personnel handbook" [which we interpose is accepted for the purposes of this appeal as comprising terms incorporated into the employees' terms and conditions of employment], " states in section 1 at paragraph 4: -

"On matters not included in the booklet, corporate policies so long as they are not in conflict with English law will apply."

There is nothing in the English Handbook that sets out what the corporate policy is. We did have a copy of a memorandum dated 16 December 1991 which was from the President and Chief Executive Officer at that time, Feliciano Belmonte Junior, to Senior Vice Presidents, Vice Presidents, Regional Vice Presidents, Assistant Vice Presidents, Directors and Managers stating:

"I am pleased to provide you at this time with the updated edition of our Personnel Policies and Procedures Manual (Philippines).

The PPPM is intended primarily to provide you with one source of information about the various policies, rules and procedures governing Philippine based P.A.L. employees and to establish guidelines to help you in making decisions on matters that affect and concern the employees under you."

The policy did contain provisions of severance of employment which provided for payment of one month's salary for every year of service based on the employee's salary at the time of termination." [Again we interpose that it is common ground that a copy of this Philippines manual was circulated to the relevant Vice Presidents and other managerial staff responsible for the United Kingdom employees with whose cases we are concerned.]

"9 Miss Gleeson was one of those made redundant with effect from 31 March 1994 and was paid a redundancy payment of one month's salary for each year of employment at that time. Miss Gleeson was subsequently offered reinstatement with effect from 1 July 1994 and recommenced employment with the Respondent upon terms that she had already been compensated in severance pay for the period up until 31 March and would not be entitled to additional severance or retirement payments in respect of that period.

10 In 1996 a decision was made that the Respondent would no longer operate from Gatwick and that its United Kingdom operation would move to Heathrow. Relocation would involve travelling difficulties for many staff and the implications were discussed at a meeting with Gatwick staff in late August or early September 1996.

11 By a fax dated 11 July 1996 Ms Amy Lipana, the Country Manager for UK and Ireland, sent a fax to Mr Dias de Rivera which stated in relation to redundancy:-

"Redundancy. We are obliged to offer redundancy and it is my recommendation that we follow the same redundancy package offered to our L.O.N. employees during the right sizing exercise in 1994. This is based on one month for every year of service.."

Mr Dias de Rivera told the Tribunal that he checked with his head office to establish whether there was any agreement in place in the United Kingdom as to redundancy terms and was advised that there was no such agreement.

12 On 23 September 1996 Mr Dias de Rivera sent a memorandum to Mr Carne, the Vice President of Human Resources in Manila, setting out proposals for payments to staff who transferred from Gatwick to Heathrow. He proposed that enhanced redundancy payments should be made to staff who agreed to undertake trial periods of work at Heathrow and for those who worked at Heathrow for less than two months he proposed a redundancy payment of two thirds of the monthly pay for each year of service. However, it was decided by the head office in Manila that for this round of redundancies no enhanced terms would be offered in excess of the statutory redundancy entitlement.

13 On 25 September 1966 Ms Lipana wrote to the members of staff who were being made redundant upon the transfer to Heathrow stating:-

"In the event that an entitlement to redundancy pay arises, this will be calculated in accordance with the statutory minimum. There is no term of our current contract which provides for contractual redundancy pay."

14 During 1997 and 1998 the Respondent suffered considerable losses as a result of the Asian economic crisis. At the beginning of 1998 the Respondent had to consider what measures to take in order to safeguard its business. One measure which was seriously considered was the cessation of its flights to and from Europe. This would clearly have an impact on all employees of Philippine Airlines in Europe.

15 On 23 February 1998 a meeting was held in London attended by Mr Dias de Rivera. He explained the financial position of the Respondent and losses being sustained by the European operation and told the staff that if the London operation closed down or was handed over to a General Sales Agency then the Respondent would not give less than it is required to do by British law in making redundancies. That was reflected in the minutes prepared by Mrs I Murray of that meeting."

The Tribunal then went through the events and the negotiations which followed that announcement and the dissatisfaction that was expressed by employee representatives that the company on this occasion was preparing to pay only the statutory redundancy entitlement which it considered to be the limit of its legal obligation. Finally, the negotiations with a view to persuading the company to offer more generous redundancy payments on this occasion having been unsuccessful, the company served redundancy notices as recorded by the Tribunal in their Extended Reasons at paragraph 33:

"33 On 29 June 1998 Ms Lipana wrote to all employees confirming that their employment would terminate by reason of redundancy with effect from 30 June 1998. Thereafter the Respondent had operated no flights in or out of London."

4. The way the Tribunal dealt with the claims with which we are concerned for the purposes of this appeal appears from the following passages at paragraphs 34-36 in their Statement of Extended Reasons which I will set out at this point before coming back to the submissions Mr McCarthy made on them:

"The claim for breach of contract

34 It is maintained by the Applicants that the provisions in the Personnel manual used in the Philippines in relation to redundancy pay were corporate policies which should apply pursuant to paragraph 4 of the introduction to the English Handbook. The issue for the Tribunal is whether there was an express term or an implied term that entitled the Applicants to an enhanced redundancy payment of one month's salary for each year of employment.

35 In reaching our decision on this issue we took the following matters into account:-

(a) The covering letter dated 16 December 1991 to Senior Vice Presidents and others enclosing the updated edition of the Personnel Policies and Procedures Manual (Philippines) clearly stated that the Manual was to cover Philippine based employees.

(b) The Personnel Manual applicable to English based employees does not contain a provision for enhanced redundancy pay and does not incorporate the provisions of the Philippines Manual. It merely states:-

"On matters not included in the booklet, corporate policies so long as they are not in conflict with English law will apply."

(c) There is no evidence that there was a corporate policy for enhanced redundancy pay. Both Mr Blum in his evidence and Mr Dias de Rivera confirmed that the Philippines Manual did not have application to employees based outside the Philippines.

(d) In relation to the 1994" [the original Statement of Extended Reasons before us refers to 1991 but that, it is quite apparent, was a misprint] "round of redundancies the reference to the enhanced redundancy payment covering future redundancies did not make clear whether it related to future redundancies in that round of redundancies or connected with that round of redundancies or something else. On the evidence that we have before us the balance of probabilities is that the enhanced redundancy pay applied only to the 1994 round of redundancies.

(e) In the 1996 round of redundancies it was clearly stated by the letter to staff of
25 September 1996:-

"In the event that an entitlement to redundancy pay arises, this will be calculated in accordance with the statutory minimum. There is no term of your current contract which provides for contractual redundancy pay."

It is clear from this provision that even if there had been any prior rights that was no longer the case in 1996 and any prior policy must have changed prior to 1996 if such a policy existed.

(f) There is no express term in the Applicant's contracts of employment entitling them to a payment of enhanced redundancy pay.

(g) The Tribunal also considered whether there was any implied term in the Applicants contract of employment. We took into account the decision in Pellowe v Pendragon plc unreported, 17 June 1999 EAT which Mr Lewis, for the Respondent, referred to us. It was held in that case that the question as a pure matter of contract law was whether it could properly be inferred from all the circumstances that it was the intention of the parties that an enhanced redundancy payment should form a term of the contract. We can draw no such inference. There is no evidence that any corporate policy applied outside the Philippines and although an enhanced redundancy payment was paid in the UK in 1994 no such payment was made in 1996. The Tribunal is unable to imply any term into the Applicant's contracts of employment entitling them to an enhanced redundancy payment.

36 It is the unanimous decision of the Tribunal that the Applicants' claims for breach of contract fail."

5. Against that decision the employees before us have appealed on grounds set out in their original Notice of Appeal but which for practical purposes we can take from Mr McCarthy's skeleton argument and the oral submissions he addressed to us. The first major ground of appeal is the contention that the Tribunal erred and were perverse in not finding on the evidence before them that an entitlement to enhanced terms had been incorporated in the contracts of employment of these particular employees, who are all UK based employees and not Philippines based employees, by the reference to "company policies" on the preliminary page of the United Kingdom Manual referred to by the Tribunal as the "English Handbook" in paragraph 8 of their Extended Reasons. Mr McCarthy has referred us to the terms of that document itself which is described as the Philippine Airlines Personnel Handbook. On the first page, on page 149 of the appeal file under the heading Section One, Introduction, explaining generally the function of the booklet of setting out the rules with which an employee must comply and information helpful to him or her as an employee, it does indeed contain the statement referred to by the Tribunal that:

"On matters not included in the booklet, corporate policies so long as they are not in conflict with English law will apply."

Mr McCarthy made it plain and it is common ground that the booklet itself contains no express provisions about entitlement to payments on redundancy, either in accordance with or in conflict with what is stated to be applicable to Philippine employees under the corporate Personnel Policies and Procedures Manual to which he also referred us, which is at page 140 and following of the appeal file. It is not necessary to repeat the provisions cited by the Tribunal in their Statement of Extended Reasons but it is worthy of note that in the part of the manual headed 'Severance of Employment' a number of rules are set out, obviously of primary application to Philippines based employees. In particular, on the entitlement on termination of service, reference is made to various schemes such as one referred to as a 'Separation Assistance Grant', and the 'Employees Group Protection Plan' and in particular 'the PAL Employees Retirement Plan' which we understood from Mr McCarthy were references to either Philippines-based or world wide employee benefits plans, which were not necessarily applicable to the UK based employees with whom we are concerned. We mention that because in Rule 2(d) providing for the benefits for Philippines based employees on termination of service "due to reduction of force or layoff", the entitlement for those employees which is the basis of the claim for a contractual entitlement for the UK based employees under this head of the argument is expressed as follows:

"Employees so terminated shall, by way of termination pay, be entitled to whichever amount is greatest among the following:

- One month's salary for every year of service based on the employee's salary at the time of termination

- Amount due under the Retirement Plan

- Amount due under existing legislation."

That, Mr McCarthy said, was perfectly capable of applying in accordance with its terms to United Kingdom based employees even though they might not be members of the Retirement Plan referred to at all, and even though the United Kingdom employees' pension arrangements would be highly unlikely to provide for the payment of a cash amount out of the pension scheme which could be compared arithmetically with the calculation of one month's salary for every year of service that these employees were claiming.

6. However, it appears to us that before the general wording in the English employees' manual referring to, "corporate policies", as applying insofar as not inconsistent with English law could be said to have incorporated an entitlement to one month's salary for every year of service in the same way as part of the calculation for the Philippine employees set out in the Philippine employees manual, there would have to be something additional, beyond the documents to which Mr McCarthy was able to point us, to effect the incorporation of that entitlement as a contractual term. Mr McCarthy's submission was based on the contention, as set out in paragraph 3 of his skeleton argument, that the four facts found by the Tribunal and referred to in paragraph 2 of his skeleton were sufficient by themselves to lead to the conclusion, and lead only to the conclusion, that, in his words, there was:

"A corporate policy for enhanced redundancy payments contained within the PPPM and this was incorporated into each employee's [meaning UK employees] contract of employment."

The four facts identified were, the general reference in the British personnel manual to corporate policies to which we have already referred. Second, the fact that there was nothing in the British employees' manual which set out what the corporate policy was in relation to severance payments, as was indeed the case. Third, the wording in the memorandum of
16 December 1991 referred to by the Tribunal and referring in terms only to Philippine based PAL employees as being the employees to whom these terms were directly applicable and to the provisions of the document being only guidelines otherwise to help the managers around the world make decisions on matters concerning their employees. Fourthly, the fact that that policy for Philippine based employees did contain the provisions for part of the calculation to be done by reference to one month's salary for every year of service.

7. We have not for our part been satisfied that as a matter of construction it is right to say that a fair reading of those documents together does lead to the conclusion that an entitlement to what is only a part of the calculation set out for Philippine based employees had become incorporated as a free-standing entitlement in the contracts of employment of the United Kingdom based employees with whom we are concerned. We are certainly not satisfied that as a matter of law the Tribunal's conclusion in this case, that such a contractual entitlement had not been established on a proper construction of the documents in evidence before then, was wrong or perverse.
8. Mr McCarthy then sought to put his argument that the Tribunal erred and were perverse in not having found that enhanced terms on redundancy were incorporated into the UK employees' contracts of employment on an additional or alternative ground. This was that an acceptance that this had indeed been the case, and that company policy world wide had given rise to a pre-existing contractual entitlement in force at all material times both before and after 1994, should have been found by the Tribunal and should have been taken as confirmation of the existence of that pre-existing contractual right. This he sought to established by reference to the evidence that was put before the Tribunal as to what happened in the 1994 round of redundancies or, what was referred to as a, 'right-sizing exercise', in which the head of European operations, Mr Suzara, had been involved. Mr McCarthy referred us to the witness statements by Mr Suzara himself which were before the Tribunal at pages 210-214 of the appeal file before us. In the first of these Mr Suzara appeared to be disclaiming any assurance by himself as having been given other than in relation to the 1994 round of redundancies with which he was concerned and denied giving any commitment for the future. The second, Mr McCarthy said, should however have been construed by the Tribunal in a rather broader way as an acknowledgement by Mr Suzara that company policy had indeed all along been to incorporate an entitlement to enhanced redundancy payments in the contracts of employment of United Kingdom employees. Again, having looked at Mr Suzara'a statements which were before the Tribunal, we have not been persuaded that a fair reading of the two statements taken in conjunction with one another should have led this Tribunal to the opposite conclusion to that which they came on the issue of whether there had been such a corporate policy before 1994 and at all material times thereafter or not.
9. Mr McCarthy also referred us to the contents of individual witness statements or letters by the employees involved, given in 1997 and following, some obviously prepared for the purposes of the proceedings before the Tribunal. Again it is we think fair to say that none of those statements provided clear evidence, any more than Mr Suzara's statement did, to lead to the conclusion that the assurances that Mr Suzara undoubtedly did give at that time were given on the basis of any contention by the employees, or any acknowledgement by the company, by reason of the reference to "company policy" that there had been a pre-existing contractual entitlement to enhance redundancy payments for United Kingdom employees all along. The whole tenor of what appears to have been said by Mr Suzara was in our judgment correctly reflected by the Tribunal in their reference to the material facts at paragraph 7, where these 1994 assurances are referred to in the context of negotiations taking place in connection with the right-sizing plan with which Mr Suzara was then concerned; and in paragraph 35 of their Extended Reasons. We think the Tribunal's conclusion there that there was no evidence that there was a "corporate policy" for enhanced redundancy pay was justified, and is not called into question in any arguable way by the references to the 1994 assurances in any of the witness statements or other documents to which we have been referred. In our judgment therefore the Tribunal were right in concluding that the references to the corporate policy had not, either by necessary construction of the documents, or by reference to acknowledgements given on behalf of the company, become incorporated in the contractual rights of the United Kingdom employees so as to give them an entitlement to the enhanced redundancy payments that they were seeking before the Tribunal.
10. Mr McCarthy then made a further and separate submission based on the effect of the assurances given in 1994, that the Tribunal had been perverse in the finding they recorded in paragraph 35(d) and in rejecting the contention that (although there might not have been any pre-existing contractual entitlement before 1994) such an entitlement arose by reason of the express assurances given by Mr Suzara that on, at any rate, some future redundancies, similar enhanced payments would be awarded by the company to match those that were given to the particular employees with whom he was concerned in 1994. In our judgment, again, a comparison of Mr Suzara's two statements does not lead, with anything like sufficient clarity, to the conclusion that what was said in 1994 must necessarily have been interpreted as an assurance binding the company on future occasions for redundancy beyond the scope of the particular round of "right-sizing" with which Mr Suzara was himself concerned in 1994. It may well have been that as part of that exercise some further redundancies might have become necessary in the aftermath of what Mr Suzara negotiated in 1994; but what is said in his statements does not in our judgment lead to the conclusion that what was then said should be taken as having had any wider application, or as having bound the company as to what should or should not be paid on subsequent redundancies for different reasons, such as took place in 1996 and 1998.
11. It may be that what was said in 1994 was not clear. It was obviously said in the particular context of the redundancies being envisaged at that time, but it was for the Tribunal in this case considering the evidence put before it as to what was said and what was understood at that time, to determine whether the assurances then given were given by reference to an existing redundancy round, or were given so as to have a much broader effect on all future employees made redundant by this company even in later years and for reasons later arising. That is a question of fact. We have reached the conclusion that the Tribunal, in deciding that question of fact in favour of the company and against the employees' contentions in paragraph 35(d) of their Extended Statement of Reasons, made a decision that was open to the Tribunal on the evidence before them. That paragraph appears to us to demonstrate that the Tribunal were correctly directing their minds to the material issue, which was whether the assurances then given about enhanced redundancy pay applied only to the 1994 round of redundancies or to the later round of redundancies on the basis of which claims to the Tribunal were being made; and we have not been satisfied that there is any ground for saying either that the Tribunal's conclusion there expressed was unjustified, or that the reasons for it were explained with insufficient clarity.
12. Those were the two major grounds on which Mr McCarthy sought to persuade us that the Tribunal had fallen into error of law in rejecting these claims for breach of contract. We have not been satisfied that either of them establishes that the Tribunal fell into error of law, and we accordingly, unanimously, dismiss this appeal.