Nicholls v Greenwich

Unless clear language makes it unavoidable, legislation, including subordinate legislation, is not construed retrospectively so as to impair a vested private right. A retirement gratuity validly promised in a contract of employment remains enforceable where later regulations impose a lower cap but do not clearly apply it to pre-existing contractual entitlements. The fact that payment falls due after the regulations does not itself make the contract retrospective. A term providing for payment on termination is a condition on which an employee holds office under section 112(2) of the Local Government Act 1972. Allsop v North Tyneside MBC [1992] ICR 639 was confined to a non-contractual redundancy-payment scheme.

Mrs Rita Nicholls, a part-time school cleaner, claimed damages for breach of contract after London Borough of Greenwich paid her a retirement gratuity calculated under the statutory cap rather than the larger sum promised under her 1982 employment terms. Her employment transferred from ILEA to the Council, which conceded that the contractual term remained continuously effective.

The employment tribunal dismissed the claim. The Employment Appeal Tribunal dismissed her appeal on 14 June 2002, treating Allsop v North Tyneside MBC as binding. The Court of Appeal considered whether regulations made under the Superannuation Act 1972 prohibited payment of the earlier contractual gratuity and operated retrospectively to impair a vested contractual right.

Appeal allowed. Mummery LJ gave the leading judgment. May LJ and the President agreed. The employment tribunal’s decision was set aside, and the Council was ordered to pay £2,903.64 plus the appellant’s costs.

1. The common-law principle stated in Yew Bon Tew v Kenderaan Bas Mara [1983] 1 AC 553, and approved in Arnold v Central Electricity Generating Board [1988] AC 228, applied. Unless the statutory language makes it unavoidable, legislation is not construed retrospectively so as to impair an existing vested right or impose a new obligation, duty or disability in relation to past events.
2. The contractual promise of a retirement gratuity was a term or condition on which Mrs Nicholls was appointed to hold office under section 112(2) of the Local Government Act 1972. Its connection with termination did not prevent it forming part of the employment package.
3. The 1996 Regulations were capable of applying to contracts made after they came into force, but contained no clear language applying the new statutory cap retrospectively to a pre-existing contractual entitlement. The gratuity had been lawful when promised and did not exceed the maximum then in force. The court therefore left open whether the regulations otherwise caught contractual entitlements as distinct from discretionary grants.
4. Allsop was clearly distinguishable. Its ratio concerned non-contractual enhanced redundancy payments made under a scheme, where the local authority’s statutory powers were subject to the regulations and the payments exceeded the employment legislation. It did not decide the retrospective effect of the regulations on an established contractual right. General observations about the Secretary of State’s control had to be read in that context.

1. Court of Appeal (Civil Division) [2003] EWCA Civ 416: allowed the appeal, set aside the employment tribunal’s decision and ordered payment of £2,903.64.
2. Employment Appeal Tribunal: dismissed the appeal on 14 June 2002, holding that Allsop v North Tyneside MBC required the regulations to be treated as prohibiting payment above the statutory maximum.
3. Employment Tribunal: dismissed the breach of contract claim in extended reasons sent on 29 September 2000.