Taylor v Secretary of State for Scotland

A contract must be construed as a whole. Each provision is read in the context supplied by the other provisions to ascertain the meaning of the parties’ legal relationship.

A contractual equal opportunities policy prohibiting age discrimination does not extinguish existing age-related retirement provisions unless it does so expressly or by necessary implication. Where the contract preserves an employer’s discretion to review retention after the minimum retirement age, that discretion remains effective if the policy and retirement provisions can sensibly operate together.

Applying the same retirement arrangements to everyone retained beyond the minimum retirement age does not breach such a policy merely because those employees are treated differently from staff who have not reached that age.

The appellant was a prison officer whose employment continued beyond the minimum retirement age of 55. His contract provided that retention beyond that age was discretionary, subject to regular review, and terminable on three months’ notice. A later contractual equal opportunities policy stated that no one in the Scottish Prison Service should be discriminated against on grounds including age.

Following a staffing review, the service adopted arrangements targeting employees aged 55 or over for retirement. The appellant was retired at 58. The industrial tribunal rejected his unfair dismissal claim and his contention that retirement before 60 was itself a breach of contract, but found that he had suffered contractual age discrimination. The Employment Appeal Tribunal quashed that finding, and the Second Division of the Court of Session refused the appellant’s appeal.

The issue before the House was whether retiring him at 58 breached the equal opportunities term when the contract was construed as a whole.

1. The appeal was dismissed unanimously. Lord Hope of Craighead delivered the leading speech. Lord Browne-Wilkinson, Lord Lloyd of Berwick, Lord Nolan and Lord Millett agreed with his reasoning.

2. Per Lord Hope, the prohibition against age discrimination was contractual rather than statutory. The issue therefore depended upon the proper construction of the contract. A contract must be read as a whole, with each provision understood in the context supplied by the others. Where the agreement is written, the object is to ascertain the meaning of the words used within that complete contractual setting.

3. The equal opportunities policy did not remove the contractual provisions concerning the minimum retirement age. The same minimum age applied to all employees, irrespective of their age when they entered employment. Nor did the policy expressly or by necessary implication remove the conditions governing retention after that age. The policy said nothing about retirement, and it could operate meaningfully without deleting those conditions. The policy therefore had to be construed consistently with their continued contractual effect.

4. The employer consequently retained its right to review continued employment after the minimum retirement age and to effect retirement at any time on three months’ notice. Those conditions differed from the terms applicable to employees below 55, but that difference was inherent in provisions which applied only after the minimum retirement age. The conditions were not themselves discriminatory because the appellant was subject to the same arrangements as every other employee upon reaching that age.

5. The staffing arrangements did select employees aged 55 or over to minimise or avoid compulsory redundancies among younger staff. Nevertheless, all employees who had been retained beyond the minimum retirement age were treated alike. Those wishing to remain were retained until 30 September 1995 and then retired. The employer exercised the continuing discretion uniformly within that contractual category and did not discriminate between its members by age or on any other ground.

6. Treating retained employees differently from employees below the minimum retirement age was therefore within the scope of the employer’s unrestricted contractual discretion. The appellant’s retirement did not breach the equal opportunities policy.

1. House of Lords: Dismissed the appellant’s appeal unanimously and upheld the conclusion that his retirement did not breach the contractual equal opportunities policy.

2. Court of Session, Second Division: Refused the appellant’s appeal on 18 December 1998. It held that the employer’s wide discretion concerning retirement after the minimum retirement age was not intended to be fettered by considerations of age.

3. Employment Appeal Tribunal: Allowed the employer’s appeal on 26 August 1997 and quashed the finding of contractual age discrimination.

4. Industrial tribunal: Rejected the claims of unfair dismissal and breach arising merely from retirement before age 60, but found that the appellant had suffered discrimination on grounds of age contrary to his contract.