Garratt v Mirror Group Newspapers Ltd

The Court of Appeal dismissed the appellant's challenge to a first-instance finding that an enhanced redundancy payment was payable only upon the employee signing a compromise (termination) agreement. The court applied principles governing implication of terms by custom and practice and by construction, considering whether a practice had become part of individual contracts because it was reasonable, notorious and certain, or otherwise established by the factual matrix. The judge's factual findings — that MGN had for many years insisted on a compromise agreement as the quid pro quo for any enhanced payment, that employees (and the union negotiating the 2002 Collective Agreement) were aware of that practice, and that the 2002 Collective Agreement did not alter that condition — were upheld. The court concluded that the enhanced payment was conditional on signing a compromise agreement and the appellant was not entitled to both an enhanced payment and to pursue outstanding claims.

Facts and parties. The appellant, a long-serving photographer employed by Mirror Group Newspapers Ltd (MGN), was dismissed by reason of redundancy in February 2006. He claimed an enhanced redundancy payment of two weeks' pay per year of service under a Collective Agreement of 22 August 2002 which had been incorporated into his 2005 individual contract. MGN offered the enhanced payment only on receipt of a signed compromise agreement. The appellant refused to sign and accepted only the statutory entitlement, then sued for the shortfall.

Procedural posture. The claim was tried over three days before His Honour Judge Birtles at the Mayors and City of London County Court, who dismissed the claim. With permission, the appellant appealed to the Court of Appeal which heard argument and dismissed the appeal.

Issues for decision.

• whether a term should be implied into the appellant's contract by custom and practice that an enhanced redundancy payment would be payable only on signing a compromise agreement;
• whether the Collective Agreement of 22 August 2002 (incorporated into the 2005 contract) displaced or altered that requirement;
• whether the implied term satisfied tests of reasonableness, notoriety and certainty or should be implied as necessary in the factual matrix.

Court's reasoning. The court accepted the trial judge's factual findings that since about 1993 MGN had consistently required a compromise agreement as the condition for enhanced redundancy payments, that outgoing employees had routinely obtained legal advice and signed such agreements, and that the union and other employees were aware of the practice. The court preferred an analytic approach that focuses on what was agreed between employer and employees against the relevant background, taking account of duration, frequency, publicity, whether payments were automatic, and whether the practice had been communicated or acquiesced in. Applying that multi-factorial analysis and, alternatively, the "reasonable, notorious and certain" formulation, the court found the requirement to sign a compromise agreement was sufficiently established and was not displaced by the 2002 Collective Agreement, which concerned the calculation of payments rather than the mechanics (the quid pro quo) for receiving an enhanced payment. The appellant had elected not to sign the compromise agreement and therefore had no contractual right to the enhanced payment while preserving other claims.

Relief sought. The appellant sought damages equal to the difference between the enhanced payment under the Collective Agreement and the statutory redundancy paid; the court refused that relief.

Commentary. The court emphasised the importance of employers making contractual bases of payments clear and transparent, but concluded on the facts that the trial judge was entitled to infer the implied condition.

The Court of Appeal dismissed the appeal. It upheld the trial judge's factual findings that MGN's longstanding practice was to make enhanced redundancy payments only in exchange for a signed compromise agreement, and that this practice was known and acquiesced in by employees and the union. The 2002 Collective Agreement did not remove that pre-condition. Therefore the appellant, having refused to sign the compromise agreement, was not contractually entitled to the enhanced redundancy payment.

Appeal to the Court of Appeal ([2011] EWCA Civ 425) from a trial before His Honour Judge Birtles at the Mayors and City of London County Court (case no. 9MY00170). Permission to appeal was granted by Sir Richard Buxton.