EAT Unlawful Deduction From Wages – Unauthorised deduction of wages – section 13 Employment Rights Act 1996
The Claimant claimed he had been entitled to full pay for 12 months’ sick leave. That contention was founded upon his case that the Respondent had entered into a binding service agreement with him (as its Managing Director) in January 2007. The terms of that service agreement included a provision for full pay for sick leave for up to a year. The Respondent resisted the claim, arguing it had never agreed to be bound by the terms of the 2007 service agreement. The ET found that the 2007 service agreement had never been signed and had thus remained unexecuted. Nevertheless, it found the Respondent had agreed to be bound by the unexecuted agreement and that its then Finance Director (Mr Burrows) had authority so as to bind the company in this regard. The Respondent appealed.
Held: allowing the appeal
In this case, the Claimant – the Managing Director, 96% shareholder of the parent company, (the sole shareholder of the Respondent) – had drawn up the 2007 service agreement and had put it to the Respondent’s Finance Director, Mr Burrows (also a 2% shareholder in the parent company), for acceptance. The ET had found (consistent with Mr Burrows’ ultimate evidence on the point) that the Agreement had never been signed as accepted on behalf of the Respondent. Allowing that acceptance could be by conduct, it still needed to amount to a final and unqualified expression of assent to the terms of an offer (tested objectively). That said, absent fraud or misrepresentation, the law would not save a party from a bad bargain or from its own incompetence in failing to fully engage with the terms of the offer put to it. Terms and conditions which are immediately visible to the other contracting party will form part of the relevant contract even if that other party has not actually read the document (L’Estrange v F Graucob Ltd [1934] 2 KB 394), and where an individual has actual authority to bind a company, it will be bound by any agreement thus reached even if it contained provisions harmful to the company’s interests (Criterion Properties plc v Stratford UK Properties LLC and Ors [2004] 1 WLR 1846 HL).
On the question of intention, Mr Burrows’ evidence before the ET had been equivocal and this crucial issue remained unresolved (even on the more limited question as to whether the Respondent was to be taken to have agreed the sick pay provision) by reference to the matters cited in the ET’s reasoning; the various factors relied on by the ET were equally consistent with Mr Burrows having agreed to increase the Claimant’s entitlements as derived from the parent company, with no final agreement having been reached as to the proposed service agreement with the Respondent (Mr Burrows accepting in evidence that he would have been concerned about certain of the remuneration (particularly salary review and bonus) provisions). The ET had needed to engage with questions as to Mr Burrows’ authority (whether this was derived from the board of the parent company rather than that of the Respondent) as well as whether the performance it had relied on had in fact been that of the parent company. It had also needed to make a clear determination as to intention in the light of Mr Burrows’ evidence before it. The failure to make clear findings on these points rendered the decision unsafe and the case would be remitted to a different ET to consider afresh.
Eady QC HHJ
[2016] UKEAT 0019 – 16 – 1404
Bailii
Employment Rights Act 1996 13
England and Wales
Employment
Updated: 17 January 2022; Ref: scu.565117
