Dunlop Tyres Ltd v Blows & Ors

A court should not seek ambiguity in contractual language that is clear. Where employment terms are genuinely ambiguous, however, an established practice existing when the contracts were made may form powerful evidence of the parties’ intentions and of the factual matrix. Continued adherence to that practice may confirm that the parties intended no contractual change; it does not alter the contract’s meaning after formation. This approach is consistent with the rule against using subsequent conduct as an aid to construction. On the ambiguous terms in this case, the established practice resolved the entitlement in favour of the employees.

Salaried employees at Fort Dunlop had, for about 30 years, received normal statutory-holiday pay, an overtime payment and paid time off in lieu when they worked on statutory holidays. Dunlop reduced the payment for Easter 1998 to double rather than triple time. The employees alleged unlawful deductions from wages.

The Employment Tribunal accepted the employees’ contractual construction. The Employment Appeal Tribunal reversed that decision. The employees appealed to the Court of Appeal. The central issue was whether the common terms entitled an employee working on a normal rostered statutory holiday to the statutory-holiday payment under clause 9F as well as the overtime premium under clause 6C and time off in lieu under clause 9E.

Appeal allowed unanimously. Lord Woolf CJ gave the principal judgment, with which Tuckey and Arden LJJ agreed. The court restored the Employment Tribunal’s decision.

1. The relevant common terms were genuinely ambiguous. The employers’ construction treated the paid day in lieu as replacing the statutory-holiday payment, producing double time for work done on the holiday. The employees’ construction gave the statutory-holiday payment, an hourly rate plus a 100 per cent premium, and paid time off in lieu, producing triple time. Both readings were tenable.

2. Where an employment contract is truly ambiguous, a well-established practice may be powerful evidence of the parties’ intended meaning. The employees had entered their contracts against a longstanding practice that staff of their category at Fort Dunlop received triple time for such work. Different arrangements for other employee groups or sites did not prevent these employees from relying on that practice.

3. Considering the pre-contract practice did not conflict with the principle in James Miller and Partners Ltd and Whitworth Street Estates (Manchester) Ltd [1970] AC 583 that subsequent conduct is not an aid to construction. The practice existed before the relevant common terms and continued unchanged afterwards. That continuity confirmed that the parties had intended no change. The background-circumstances approach was consistent with Reardon Smith Line Ltd and Yngvar Hansen-Tangen and Sanko Steamship Co [1976] 1 WLR 989.

4. Accordingly, on a statutory holiday that was a normal rostered working day, the employees were entitled to the normal statutory-holiday payment, the overtime premium of hourly rate plus 100 per cent, and paid time off in lieu. Dunlop’s reduced payment was an unlawful deduction from wages.

• Court of Appeal (Civil Division) Allowed the employees’ appeal, set aside the Employment Appeal Tribunal’s decision and restored the Employment Tribunal’s decision.
• Employment Appeal Tribunal On 28 June 2000, reversed the Employment Tribunal’s decision.
• Employment Tribunal, Birmingham On 6 January 1999, held that Dunlop had made unlawful deductions from the employees’ wages.