Wetherill & Ors v Birmingham City Council

This Court of Appeal allowed an appeal by Birmingham City Council against a county court order that had upheld claims by employees for unpaid car user allowance and had declared the employer to be in continuing breach of contract. The Court held that paragraph 63 of the national Scheme (the "Purple Book") must be read as giving the local authority power to determine the band or grading to be paid, and to vary that determination from time to time, subject to an implied obligation to act reasonably and to give proper notice or transitional arrangements where existing employees have relied on the previous practice. The Council's unilateral implementation in April 1993 of a decision to disregard the upper bands (3 and 4) without adequate transitional protection was a breach of contract in April 1993, but the circular of 1 March 1993 was effective to announce the Council's decision and any breach was compensable rather than being a continuing unqualified breach extending indefinitely. The judge erred in holding that the employer remained in continuing breach for the whole period and in finding abuse of process in relation to the Council's changed stance in earlier litigation.

Background and nature of claim. Employees designated as essential car users sued Birmingham City Council for unpaid car user allowance and sought declarations about the Council's ongoing contractual obligations under paragraph 63 of the National Joint Council Scheme of Conditions of Service (the "Purple Book"). The county court judge held that the Council's withdrawal, with effect from 1 April 1993, of Band 3 mileage allowance and subsequent failure to pay Band 3 rates amounted to continuing breaches of contract.

Procedural posture. The Council appealed to the Court of Appeal (appeal from Birmingham County Court, His Honour Judge McKenna). The appeal raised construction and remedial issues and touched earlier related litigation (notably Butler and Brown actions) and the Wigan decision.

Issues framed by the Court.

• How paragraph 63 of the Scheme should be construed as to whether the band is fixed by the engine capacity of the car actually used or by a local-authority determination.
• Whether a local authority may vary the banding during employment and what limits apply.
• The contractual effect of the Council's implementation (circular of 1 March 1993) withdrawing Bands 3 and 4 and whether that amounted to a continuing breach entitling employees to damages for the later period claimed.
• Whether it was an abuse of process for the Council to advance the defence it did in these proceedings given its conduct in earlier litigation.

Court's reasoning and outcome on issues. The Court of Appeal held that paragraph 63, read as a whole, envisages that the local authority (not the individual employee) determines the appropriate banding and may reassess that determination from time to time, but must exercise the power reasonably. The Council's pre-1993 practice of paying allowances according to the engine size of the employee's car produced vehicle-specific contractual expectations for existing employees. The Council was entitled to change to a duties-specific approach, but implementation without adequate transitional arrangements was a breach of contract in April 1993 because some employees had relied on the prior vehicle-specific practice and incurred financial commitments. The circular of 1 March 1993 was nevertheless effective to announce the decision; it did not invalidate the change but made the Council liable for damages for inadequate transition. The judge was wrong to treat the failure to pay Band 3 after 1 April 1993 as a continuing breach that necessarily produced the wide remedies and declaration he made. The Court also rejected the county court's finding that the Council's defence amounted to an abuse of process. The appeal was allowed and the earlier order set aside.

Appeal allowed. The Court of Appeal held that paragraph 63 of the national Scheme permits the local authority to determine and subsequently vary the banding by which car user allowance is paid, but the power must be exercised reasonably and with proper transitional arrangements where employees have acquired vehicle-specific expectations. Birmingham City Council breached contract in implementing the withdrawal of Bands 3 and 4 from 1 April 1993 without adequate transitional protection, but the withdrawal and circular of 1 March 1993 had legal effect; the county court was wrong to treat the breach as a continuing unqualified breach for the whole subsequent period and was wrong to find abuse of process. The order of 23 August 2006 is set aside.

Appeal from Birmingham County Court (His Honour Judge McKenna) where an order dated 23 August 2006 upheld employees' claims for unpaid Band 3 car user allowance and made a declaration of continuing breach. This Court of Appeal allowed the Council's appeal in [2007] EWCA Civ 599 and set aside the county court order. Earlier related proceedings at lower level included Brown and others v Birmingham City Council (settled 1999) and Butler and others v Birmingham City Council (claim BM 302225) which produced interlocutory rulings.