Nazir Ali v Petroleum Company of Trinidad and Tobago

A court may imply a contractual term only where it is necessary to make the contract work, because it is obvious or required for business efficacy. It may not rewrite the bargain merely to improve fairness or reasonableness. An inconsistent express term precludes implication.

Where a promised benefit depends on one party allowing the other to perform, the minimum necessary term may prevent that party from defeating performance by its own initiative. A voluntary redundancy remains a dismissal for redundancy purposes, but dismissal does not invariably amount to employer prevention. The critical question is whether the employee truly had a choice and whether the employer was willing to retain them. If both retention and departure remained open, the employer has not prevented continued service.

Nazir Ali v Petroleum Company of Trinidad and Tobago concerned an employer-funded degree programme. The employee’s fees were paid outright, while his living allowance was advanced as a loan. Repayment would be waived if he returned and worked for the company for five years.

The employee returned but accepted voluntary redundancy before completing five years. The company deducted the loan from his redundancy payment. The trial judge rejected his claim for payment without that deduction, and the Court of Appeal dismissed his appeal in brief terms.

The appeal to the Board raised two questions: whether the loan agreement contained an implied term restricting the company’s ability to prevent completion of the five-year service condition, and whether the voluntary redundancy triggered that term.

1. Disposition. Lord Hughes, with whom Lord Neuberger, Lord Clarke and Lord Carnwath agreed, dismissed the appeal. The loan agreement contained an implied term protecting the employee’s opportunity to complete the qualifying service, but that term was not triggered by the voluntary redundancy on the facts found.
2. Implication of terms. Applying Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72; [2016] AC 742, a term may be implied only where necessary to make the contract work. Necessity may arise because the term is obvious or because business efficacy requires it. Reasonableness, fairness or improvement of the agreement is insufficient, and an implied term cannot contradict an express term.
3. Content of the implied term. Because the repayment waiver depended on the employer permitting five years’ service, the agreement necessarily required the employer not to prevent that service on its own initiative. If it did so, repayment would be waived. Dismissal justified by the employee’s repudiatory breach, or termination under compulsion, was excepted. This was the minimum necessary protection and created a waiver obligation rather than liability in damages.
4. Redundancy and prevention. The majority accepted the principle illustrated by Burton, Allton & Johnson Ltd v Peck [1975] ICR 193: an employee’s willingness to accept redundancy does not stop the employer’s ensuing termination from being a dismissal by reason of redundancy under the Redundancy Payments Act 1965. That statutory characterisation did not establish that every voluntary redundancy amounted to employer prevention for the distinct contractual term.
5. Application. Prevention depended on practical reality. An employee who accepts an effectively inevitable selection may still have been prevented from continuing service. Here, however, the trial judge found that the employee had a free choice, knew that previous non-volunteers had been retained, and would have remained employed had he declined the package. The employer was willing both to retain him and to let him leave. It therefore did not prevent completion of the five years.
6. Dissent. Lord Kerr would have allowed the appeal. He considered that the parties would obviously have agreed that repayment was waived where the employee was identified as part of a group targeted for redundancy, received no guarantee of continued employment, and consequently opted for redundancy. The later discovery that he would have been retained was, in Lord Kerr’s view, an impermissible retrospective consideration.
7. Order. The appeal was dismissed. Costs were to follow the event unless written submissions seeking a different order were lodged within 28 days.

1. Privy Council: By a 4–1 majority, dismissed the employee’s appeal in Nazir Ali v Petroleum Company of Trinidad and Tobago [2017] UKPC 2. The Board upheld the result below, although its analysis differed by recognising an implied contractual term which was not triggered.
2. Court of Appeal of Trinidad and Tobago: Dismissed the employee’s appeal in brief terms. No citation is stated in the judgment.
3. Trial court: Rejected the employee’s claim. It found that he had freely chosen voluntary redundancy and knew that he could decline the scheme.