MM Packaging (UK) Ltd v Philip Potter & Ors

The meaning of a settlement agreement is determined objectively and holistically, by reference to the words used and the facts known to the parties. Where an agreement compromises a claim for a protective award under the Trade Union and Labour Relations (Consolidation) Act 1992 and provides for “90 days of gross pay”, the phrase ordinarily refers to the statutory entitlement being compromised. The payment is therefore calculated on the calendar basis applicable to the protective award, including non-working days. Other claims and generous additional payments do not justify departing from that contextual construction.

Following the closure of its Bootle factory, MM Packaging (UK) Ltd entered into a settlement agreement with Unite and former employees. Clause 1.2(ii) provided for “90 days of gross pay”. The employees and union contended that this meant 90 working days calculated by a daily rate. The company contended that it meant 90 calendar days, as under the statutory protective-award regime.

Four employees brought proceedings seeking payment on the working-day basis. HH Judge Graham Wood QC, sitting as a Deputy High Court Judge, accepted that construction and rejected the company’s construction. The central issue on appeal was the proper construction of clause 1.2(ii), including the significance of the statutory claim and the agreement’s wider settlement context.

Appeal allowed and claim dismissed. The Court of Appeal, in the judgment of Lord Justice Underhill, with which Lady Justice Thirlwall and Lord Justice Lindblom agreed, held as follows.

1. Construction was a matter of law. The construction of a written agreement was a matter of law for which there was a single right answer, although the court might need to determine facts relevant to the context. The agreement had to be construed holistically by asking what it meant in the context of the facts known to both parties.
2. Statutory context controlled the meaning. The union had made a claim under section 189 of the Trade Union and Labour Relations (Consolidation) Act 1992, from which the employees could benefit by an award of up to 90 days’ pay. That claim was expressly identified as one of the claims compromised by the agreement. An objective reader would therefore understand “90 days of gross pay” as referring to the entitlement claimed under the statutory scheme.
3. Calendar calculation followed. Under sections 189 and 190 of the 1992 Act, remuneration for a protected period was calculated by reference to a week’s pay, with remuneration for a period shorter than a week reduced proportionately. The agreed payment therefore included non-working days and was to be calculated on the calendar basis. The absence of an express reference to the Act, a protective award or a protected period did not alter that conclusion.
4. The fact that other actual or potential claims were settled, and that the agreement contained generous additional payments, did not justify departing from the natural contextual meaning. Since the construction issue resolved the dispute in the company’s favour, it was unnecessary to determine rectification.

• Court of Appeal (Civil Division) — [2017] EWCA Civ 1471: allowed the company’s appeal, held that “90 days of gross pay” meant payment calculated on the calendar basis, and dismissed the employees’ claim.
• High Court — HH Judge Graham Wood QC, sitting as a Deputy High Court Judge: construed the clause as requiring a working-day calculation and rejected the company’s construction. No citation is stated in the judgment.