Generic filters

"The barristers are reliable specialists in their field who provide high quality legal advice and representation. They also understand their clients"

Chambers & Partners

Smith and others v The Commissioners for HM Revenue & Customs [2022] EWHC 3188 (KB)


Prior to 1 May 2015, employees of HMRC were allowed to pay their union subscriptions by way of an arrangement known as check-off (which involved the employer deducting the subscription from their monthly salary and paying it directly to the union). Following the unilateral removal of the check-off mechanism by HMRC in May 2015, a group of HMRC employees brought claims for breach of contract, and the PCS (their union) claimed damages for the loss of union members it sustained following this breach of contract pursuant to the Contracts (Rights of Third Parties) Act 1999.

The main arguments marshalled by HMRC in defending the claims were that:

    1. Employees had no contractual right to check-off.
    2. If there was such a right, it could be removed by HMRC on giving reasonable notice.
    3. In any event, the Claimants waived their right to check-off or impliedly accepted the removal of check-off by (for example) not objecting to it after the change came into effect, and not bringing a claim until around 5 ½ years after-the-event.
    4. The parties did not intend PCS to be able to enforce the right to check-off, in particular because the right to check-off derived from collective agreements (which are generally unenforceable).


Mr Justice Freedman sitting in the High Court (Queen’s Bench Division) ruled in favour of the Claimants in Smith and others v The Commissioners for HM Revenue & Customs [2022] EWHC on all issues, following earlier rulings to similar effect by Laing J (as she then was) in Cavanagh v Secretary of State for Work and Pensions [2016] EWHC 1136 (QB) and by Choudhury J in Cox v Secretary of State for the Home Department [2022] EWHC 680 (QB) and in Crane v Secretary of State for the Department of Environment, Food and Rural Affairs [2022] EWHC 1626 (QB).

The rulings on points 3 and 4 above are potentially of wider interest.

With regard to waiver/implied acceptance, HMRC argued that a delay of 5 ½ years from the date of the removal of check-off, with no protest in that time (save from some protest prior to the actual removal of check-off took place) meant there was unequivocal acceptance. It was argued that any objective bystander would assume that the matter had been dropped by PCS at that point.

Freedman J rejected this argument, noting that PCS had objected to the removal of check off prior to the removal, had specifically threatened legal action and asserted that the removal of check-off would amount to a breach of contract. Freedman J considered there was never an unequivocal withdrawal of these objections and no event which led to a clear and unequivocal acceptance. Freedman J stated that once it is not possible to infer consent on the part of individual employees at the time of/in the period of weeks immediately following a variation imposed by their employer, the normal contractual limitation period of 6 years applies no less to such claims than to any contractual claim.

Thus, in practice, if employees (individually or collectively) object to a contractual change prior to or at the time of the change, the mere passage of time for years thereafter will not, without more, turn an unequivocal rejection of the change into an unequivocal acceptance. Clearly, however, much will depend on the facts of an individual case and the nature of the contractual change being imposed – notably Freedman J did not consider the removal of check-off to fall within the category of contractual changes where implied acceptance is more readily inferred such as changes to wages or alteration of job duties (see para 31 of Solectron Scotland Ltd v Roper [2004] IRLR 4, EAT).

On the argument on the Contracts (Rights of Third Parties) Act 1999, HMRC argued (as noted above) that there was no intention for PCS to be able to enforce the right to check-off under section 1(2) of the 1999 Act, given that the right to check-off derived from a collective agreement. Freedman J rejected this argument (in line with previous rulings on the point in Cavanagh, Cox, and Crane), highlighting that it is not the collective agreement which is being enforced but the contract of employment. The combined intentions that matter for the purpose of construing the contract of employment are those of the employer and employee. On the facts of this case, nothing in the contract could be construed as expressing an intention that PCS should not be entitled to enforce the benefit conferred on it by the check-off positions.

The Defendants in Cox and Crane have already successfully obtained permission to appeal against the High Court’s rulings in those cases regarding points 3 and 4 above (where very similar arguments on similar facts were raised). The appeal on those cases is scheduled for March 2023 in the Court of Appeal. HMRC has sought leave to appeal against this decision and will likely ask to combine this appeal with those currently listed in March 2023.

You can read the full judgment here.

Oliver Segal KC and Darshan Patel acted for the Claimants, instructed by Thompsons Solicitors.

Key contacts

Oliver Segal KC

Head of Chambers
Oliver Segal KC Telephone Clerk020 7269 0360
Shortlist Updated

Out of hours

William Meade (Senior Clerk)

07970 649 755