USDAW and others v Tesco Stores Ltd

The Court of Appeal allowed Tesco's appeal. The court held that the word "permanent" in the Retained Pay clauses should be given its natural meaning in context and did not demonstrate a mutual intention that the entitlement could not be defeated by ordinary termination of the contract on notice. Pre-contractual statements and other communications did not establish a clear and unequivocal promise that termination for the purpose of removing Retained Pay would be banned. The tests for implying a contractual term (business efficacy and obviousness) were not satisfied: the claimed implied term was insufficiently precise, inconsistent with express termination rights and not necessary to give commercial coherence. Promissory estoppel failed for lack of a clear promise and of unconscionable detriment. Finally, the judge erred in granting a final injunction because the relief sought would be uncertain in scope and courts do not normally grant permanent injunctions restraining private employers from dismissing employees for an indefinite period.

Background and parties

The claimants were USDAW (the recognised union) and three individual employees who had accepted offers from Tesco to relocate to new distribution sites in return for an enhanced pay feature described as "Retained Pay". Tesco later sought to withdraw Retained Pay by offering an advance payment and proposing termination and re-engagement on new terms to those who did not agree.

Nature of the claim and relief sought

• The claimants sought declarations that Retained Pay was an express contractual entitlement and that an implied term prevented Tesco from exercising its termination rights for the purpose of removing Retained Pay.
• They also sought an injunction restraining Tesco from removing or diminishing Retained Pay or serving termination notices in order to remove that entitlement. A further alternative claim was advanced in reliance on estoppel/forbearance.

Procedural posture

The claim was tried before Mrs Justice Ellenbogen in the High Court (reported at [2022] EWHC 201 (QB)). The judge found for the claimants, implying a term restricting Tesco's right to terminate and granting a declaration and a final injunction. Tesco obtained permission to appeal and the Court of Appeal heard the appeal.

Issues framed by the Court of Appeal

1. Construction of the express Retained Pay clauses and the meaning of "permanent" in context.
2. Whether it was necessary to imply a term limiting Tesco's express right to terminate on notice (tests of business efficacy and obviousness as summarised in Yoo).
3. Whether promissory estoppel or forbearance could prevent Tesco from terminating for the purpose of removing Retained Pay.
4. Whether final injunctive relief was appropriate.

Reasoning and conclusions

• On construction the court concluded the natural meaning of the contractual documents was that Retained Pay was co-terminous with the contract unless limited by express provisions; pre-contractual documents did not show a mutual intention that termination rights were curtailed.
• On implied terms the court applied the established tests (business efficacy and obviousness as summarised in Yoo). It concluded the precise content of any implied term was unclear, the term would be inconsistent with express termination rights and the necessity threshold was not met.
• On estoppel the court held there was no clear and unequivocal promise that Tesco would not terminate for the purpose of removing Retained Pay nor the requisite unconscionable reliance or detriment to found estoppel.
• On remedies the court concluded that a final injunction preventing dismissal for an indefinite period by a private employer was inappropriate because the orders would be insufficiently certain and because damages are the normal remedy for wrongful dismissal.

Consequentially the appeal succeeded and the High Court orders were set aside.

Appeal allowed. The Court of Appeal held that the natural meaning of the Retained Pay provisions did not show a mutual intention to prevent termination on notice; the tests for implying a limiting term were not satisfied because the purported implied term was not necessary, was imprecise and conflicted with express termination rights; promissory estoppel did not arise for want of a clear promise and unconscionable reliance; and a final injunction preventing termination indefinitely was inappropriate because it would be uncertain and is not a usual remedy in the private sector.

Appeal from the High Court (Queen's Bench Division, Ellenbogen J) [2022] EWHC 201 (QB); permission to appeal granted by Simler LJ on 24 March 2022; Court of Appeal judgment [2022] EWCA Civ 978 (15 July 2022).