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Court of Appeal Judgment: Rectification of collective agreements


The Court of Appeal has handed down judgment in (1) Rail Maritime and Transport Union (“RMT”) and (2) Unite the Union (“Unite”) v Tyne and Wear Passenger Transport Executive t/a Nexus (“Nexus”).

Nexus operates Newcastle Metro. This litigation relates to the terms and conditions of Nexus’s employees within Grades 1 to 3. Nexus recognised RMT and Unite (together “the Unions”) for the purposes of collective bargaining. Nexus brought a claim against the Unions in the Chancery Division of the High Court seeking to rectify a collective agreement (between Nexus and the Unions) as to the pay of Nexus’s employees within Grades 1 to 3.

The Court of Appeal held (as a matter of law) that collective agreements (as non-binding agreements) are not susceptible to rectification. In these circumstances Nexus’s claim to rectify the collective agreement was struck out as formally defective.

The Facts

The collective agreement between Nexus and the Unions (as to terms and conditions) is incorporated into the contracts of individual employees. This is entirely standard practice. Employees in Grades 1 to 3 receive basic pay and shift allowances which is a percentage uplift on basic pay paid for working particular shifts. In the 2012 round of pay negotiations, Nexus offered to consolidate a payment referred to as a “productivity bonus” in basic pay. The Unions agreed and this agreement was recorded in a collective agreement incorporated into the individual contracts of employment.

Following the 2012 pay negotiations a dispute arose about the calculation of shift allowances. The Unions considered that shift allowances should be calculated as a percentage uplift on basic pay including the productivity bonus which had now been incorporated into basic pay. Nexus continued to calculate shift allowances by references to basic pay not including the incorporated productivity bonus.

On 19 June 2015 Mr Steven Anderson and 79 other members of the RMT (“the Anderson Claimants”) brought claims in the Newcastle Employment Tribunal under section of the Employment Rights Act 1996 for unauthorised deductions from wages in respect of Nexus’s failure to pay shift allowances calculated by reference to basic pay incorporating the productivity bonus. There was also a claim for unauthorised deductions under section 13 in respect of the corresponding impact on the Anderson Claimants’ holiday pay.

Nexus defended these claims (before the Employment Tribunal) on the basis that the contract properly construed should be read to mean that the now incorporated productivity bonus should be excluded before calculation of shift allowances. Newcastle Employment Tribunal disagreed. The Anderson Claimants were successful in the Employment Tribunal. The Employment Appeal Tribunal rejected Nexus’s appeal. Nexus appealed again to the Court of Appeal. The Court of Appeal (in a decision heard with another appeal and reported under the name Agarwal v Cardiff University [2019] ICR 433) dismissed Nexus’s appeal and upheld the Employment Tribunal’s construction of the collective agreement (incorporated into the Anderson Claimants’ contracts of employment).

The claim for rectification

On 20 May 2020 Nexus issued a claim for rectification. Rectification is an equitable remedy, which (in very general terms) may be granted if a court is satisfied that the written record of an agreement does not reflect the intentions of the parties to that agreement. Neither Nexus nor the Unions (in the High Court or on appeal) were able to point to any previous instance of an attempt to rectify a collective agreement.

Nexus accepted (as it was bound to do following the Court of Appeal’s judgment reported as Agarwal) that properly construed the collective agreement meant that shift allowances should be calculated on the basis of basic pay incorporating the productivity bonus. But Nexus said that the collective agreement should be rectified for common mistake (on the basis that it did not reflect the common intention of the parties who had not intended that the incorporated productivity bonus should be taken into account when calculating shift allowances). Alternatively Nexus argues that the collective agreement did not correspond to Nexus’s intention, that this was something which the Unions knew or ought to have known and that the collective agreement ought to be rectified on the basis of unilateral mistake. The Court of Appeal referred to Nexus’s case on common and/or unilateral mistake as “the mistake case.”

Nexus had never previously raised or even foreshadowed the mistake case in the course of the Anderson Litigation.

The High Court

The High Court (Stuart Isaacs QC sitting as a deputy High Court Judge) heard a trial on a preliminary issue as to whether Nexus was estopped (by reason of cause of action estoppel and/or issue estoppel) from advancing the mistake case in the high court litigation on the basis that it could (and should) have been raised in the Anderson Litigation. At the same time, the High court heard the Unions’ application for strike out and/or summary judgment (inter alia) on the basis that it was not possible (in law) to rectify a collective agreement and on the basis that Nexus’s claim was abusive in particular by reason of Nexus’s failure to raise rectification in the course of the Anderson Litigation.

In a judgment handed down on 28 May 2021 the High Court found for Nexus on all issues and in particular found that the rectification claim was not estopped, that the rectification claim was not abusive and that it was (in principle and as a matter of law) possible to rectify a collective agreement.

The Unions appealed to the Court of Appeal.

Collective agreements and rectification

Nexus had brought a claim to rectify the collective agreement. The defendants to the rectification claim were the Unions (the other party to the collective agreement).

It was common ground that the collective agreement has no legal effect. Section 179 of the Trade Union and Labour Relations (Consolidation) Act 1992 provides that a collective agreement shall be conclusively presumed not to be a legally binding contract unless it is in writing and contains a provision stating that the parties intend the collective agreement to be a legally binding contract. The relevant collective agreement in this case (in common with the majority of collective agreements) contained no such provision.

The Court of Appeal unanimously held that the fact that the collective agreement was legally unenforceable was an “insuperable barrier” to rectification (per Underhill LJ at [26]). That meant that the claim (as presently formulated) must fail.

The contracts of employment (incorporating the collective agreements) were legally enforceable (and not in principle rectifiable) instruments. A claim to rectify the individual contracts of employment must have necessarily been brought against the workforce (the other parties to the potentially rectifiable instruments).

The Court declined to give Nexus the opportunity to apply to amend their claim to seek to rectify the contracts of employment (incorporating the collective agreement) and to add the workforce as the defendants to such a claim. The Court considered that Nexus had made a deliberate and considered decision to bring a claim against the Unions (and not the workforce) (Males LJ at [121]). Nexus’s claim in the High Court was dismissed.

Estoppel and Abuse

In addition the Court considered whether and the extent to which (bearing in mind the principles of both estoppel and abuse, and Nexus’s failure to raise the mistake defence in the Anderson Litigation) Nexus could rely on the rectification defence in respect of claims for deductions brought by both the Anderson Claimants and by other members of the workforce.

The following points are matters of general interest and application:

  1. The majority of the Court (Underhill LJ and Males LJ) when considering whether the test for estoppel was held that Nexus could (as a matter of law) have raised rectification as a defence in the Employment Tribunal to the Anderson Claimant’s claims under section 13 the Employment Rights Act 1996 (see Underhill LJ at [52] to [59] and Males LJ at [131] to [135]); and
  2. The Court heard full argument on whether (if the rectification claim could proceed against the Unions as defendants) there was privity of interest between the Unions and the Anderson Claimants such that the Unions could rely on the defence of estoppel. Had this point arisen for determination, this was a situation where privity of interest would have been established (per Underhill LJ at [100] to [103]). The Anderson Claimants has sought to enforce rights which had been negotiated on their behalf by the Unions in the course of the 2012 pay negotiations.

The judgment can be read here.

Lord Hendy KC and Madeline Stanley appeared for the Appellant Unions and were instructed by Thompsons Solicitors LLP.

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