Secretary of State for the Home Department v James Cox & Ors.

The Court of Appeal considered three consolidated appeals by government employers after the High Court held that departmental "check-off" arrangements for deduction of union subscriptions were contractual terms of individual contracts of employment and that the union (PCS) could enforce those terms under the Contracts (Rights of Third Parties) Act 1999. The court applied the principles on acceptance by conduct (see Abrahall) and confirmed that an employee’s continued work will only amount to unequivocal acceptance of a variation if no other plausible explanation for their conduct exists.

The majority held that the judges below were entitled to find that the employees had not unequivocally accepted the withdrawal of check-off and had not waived past breaches. However, on construction of the individual employment contracts and having regard to the factual matrix, the majority concluded that the contracting parties did not intend the obligation to offer check-off to be enforceable by the union under section 1(2) of the 1999 Act. Consequently the union could not enforce the check-off term as a third-party right.

Background and procedural posture:

• These are three consolidated appeals from High Court decisions ([2022] EWHC 680 (QB); [2022] EWHC 1626 (QB); [2022] EWHC 3188 (KB)). The individual claimants were civil servants whose employers (Home Office, DEFRA, HMRC) removed payroll "check-off" for PCS subscriptions between 2014 and 2015. PCS brought claims on behalf of members for breach of contract and sought to rely on section 1 of the Contracts (Rights of Third Parties) Act 1999 to enforce the term. The claimants sought declarations and damages.

Nature of relief sought: Declarations that removal of check-off breached individual contracts of employment; damages for breach; declaration that the contractual term purported to confer enforceable benefits on PCS under the 1999 Act.

Issues framed:

• Whether the individual employees had accepted, by continuing to work, a variation of their contracts (and/or waived earlier breaches).
• Whether the parties to the employment contracts intended the check-off term to be enforceable by PCS under section 1(2) of the 1999 Act.
• In Cox only: whether certain later changes amounted to new contracts entered into after 11 May 2000 so that the 1999 Act applied (section 10(2)).

Court’s reasoning and subsidiary findings:

• On acceptance/waiver: the court applied Abrahall and authorities on acceptance by conduct. The factual matrix (collective protest by PCS, correspondence, the union’s litigation elsewhere, and the employers’ conduct) meant the tribunals below were entitled to conclude there was no unequivocal acceptance and no waiver; steps such as setting up direct debits were treated as reasonable mitigation rather than acceptance.
• On third-party enforcement under the 1999 Act: the majority undertook an objective construction of the employment contracts in their factual context. They held that the check-off term was primarily an obligation to offer a facility to employees and arose from collective bargaining which was not intended as an enforceable right for the union. On a proper construction, it appeared the parties did not intend the term to be enforceable by PCS and thus the statutory presumption of third-party enforceability was rebutted. The union therefore could not enforce the term under section 1(2).
• On the "new contract" point (Cox): the majority considered factual material insufficient to conclude some individuals had entered into new contracts after 11 May 2000 and would have remitted that issue for factual findings if necessary; the point became academic given the decision on the 1999 Act.

Outcome: appeals were allowed in part (Court of Appeal majority): the findings below that employees had not accepted/waived the change were upheld but the union’s right to enforce the check-off term under the 1999 Act was rejected.

The appeals were allowed in part. The Court of Appeal upheld the High Court’s findings that the individual employees had not unequivocally accepted the variation or waived past breaches, but on the proper construction of the individual contracts and their factual matrix the majority concluded that the parties did not intend the check-off term to be enforceable by the union under section 1(2) of the Contracts (Rights of Third Parties) Act 1999; accordingly PCS could not enforce the term. A factual remittal concerning whether certain employees entered new contracts after 11 May 2000 was unnecessary in light of that conclusion but was directed by one judge as appropriate if the point had remained live.

Appeals to the Court of Appeal from three High Court (Queen's Bench / King's Bench) judgments: Choudhury J ([2022] EWHC 680 (QB) and [2022] EWHC 1626 (QB)) and Freedman J ([2022] EWHC 3188 (KB)). This Court heard the consolidated appeals and delivered judgment on 19 May 2023 ([2023] EWCA Civ 551).