Nexus operated the Tyne and Wear Metro. Its offer to consolidate a pre-existing entitlement (the “productivity bonus”) into the basic pay of its relevant employees who were members of the defendant unions was accepted in 2012. In proceedings brought by some of those employees for unlawful deduction of wages (the “Anderson proceedings”) it was established that on its true construction the resulting “letter agreement” required the payment of enhanced shift allowance. The employment tribunal found that the sums in question were due under the employees’ contracts but deferred quantification of pre-complaint and post-complaint deductions to the remedy stage. Since the initiation of the Anderson proceedings other employees had presented complaints in the employment tribunal on substantially the same basis. In the present proceedings Nexus contended that the construction of the agreement did not correspond to the common intention of the parties and the agreement should accordingly be rectified for common mistake; alternatively, that the agreement did not correspond to its own intention, and that that was something which the unions knew or ought to have known so that the agreement should be rectified for unilateral mistake. Nexus’s only purpose in bringing the proceedings was to enable it, if it succeeded, to deploy the fact that the letter agreement had been rectified as a defence in the pending unlawful deductions claims and any future such claims. Thus, although formally the issues were directed to Nexus’s claim in the present proceedings, the real focus of the argument was on whether in the proceedings brought by the employees they could rely on res judicata and abuse of process to prevent Nexus from advancing the defence that the letter agreement had (if it had) been rectified. The judge rejected the defendants’ case that Nexus was estopped from pursuing its claim and dismissed the defendants’ strike-out/summary judgment application. The defendants appealed.
On the appeal—
Held, Appeal allowed. The action was formally defective because, although the letter agreement was capable of rectification to the extent that its terms were incorporated in the individual contracts of employment, those contracts were not the target at which Nexus had aimed and it had in consequence proceeded against the wrong defendants. The court would dismiss the claim and allow Nexus, if so advised, to bring fresh rectification proceedings against the employees ( paras 26, 31, 33, 110–111, 112, 118–119).
Notwithstanding the dismissal, the court found that a consideration of the other fully argued issues—res judicata and abuse of process—should be of assistance if they arose in future proceedings. The principle that rectifiability could be relied on as a defence even where the court had no power to rectify was identified in the context of the jurisdiction of different divisions of the High Court, but (per Underhill LJ) there was no reason why it should not apply generally, including where the jurisdictions in question were those of the High Court and the employment tribunal. An employment tribunal was well able to decide a case of rectifiability for mistake as any of the other contractual issues which fell within its jurisdiction; indeed as a specialist tribunal it was likely to start with a better understanding of the context than a judge in the County Court or High Court. As a matter of law a case that the letter agreement was rectifiable for mistake could have been raised in the Anderson proceedings by way of defence. If such facts were shown as would cause the High Court to make an order for rectification of the letter agreement the employment tribunal could have treated it as rectified and dismissed the complaint on that basis. Further ( per Underhill LJ) the mistake case should have been so advanced in the Anderson proceedings. Accordingly, any attempt by Nexus at the remedy stage to defeat an order for payment of the pre-complaint deductions on the basis of the mistake case would be precluded by cause of action estoppel or issue estoppel, or it would fall to be dismissed as an abuse of process. It would be abusive for Nexus now to rely on rectification (if proved) as a defence to the Anderson claimants’ claims for the pre-complaint deductions. Thus, by whichever route, Nexus could not rely on rectification as a defence to those claims. The question whether, and if so to what extent, it was entitled to do so as regards the post-complaint deductions should be decided (if necessary) by the court hearing the rectification claim ( paras 52–59, 68, 71, 75, 78–80, 88, 89, 90–91, 97, 99, 104, 112, 118–126).
Lord Hendy KC and Madeline Stanley (instructed by Thompsons Solicitors LLP) for the defendants.
David Reade KC and Joseph Bryan (instructed by Addleshaw Goddard LLP) for the claimant.