Easter Term [2017] UKSC 39 On appeal from: [2015] EWCA Civ 455

JUDGMENT
Hartley and others (Appellants) v King Edward VI
College (Respondent)
before
Lady Hale, Deputy President
Lord Clarke
Lord Wilson
Lord Hughes
Lord Gill (Scotland)
JUDGMENT GIVEN ON
24 May 2017
Heard on 1 February 2017
Appellants Respondent
Oliver Segal QC Thomas Linden QC
Katharine Newton Ben Cooper
(Instructed by Thompsons
Solicitors
)
(Instructed by Blake
Morgan LLP
)
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LORD CLARKE: (with whom Lady Hale, Lord Wilson, Lord Hughes and
Lord Gill agree)
Introduction
1. I can take the underlying facts from the agreed statement of facts and issues.
The appellants are employed as teachers at the respondent’s sixth form college. They
have brought this action and pursued this appeal supported by their union, the
NASUWT. Their contracts of employment incorporate terms relating to working
time from a collective agreement entitled Conditions of Service Handbook for
Teaching Staff in Sixth Form Colleges. It is known as the Red Book. When sixth
form teachers whose contracts of employment incorporate the Red Book go on strike
their employer can withhold their pay. The issue in these proceedings and in this
appeal is how much the employer can deduct for each day of strike action.
2. On 30 November 2011 the appellants participated in a full day of lawful strike
action. On or about 31 January 2012, the respondent made deductions from their pay
at the rate of 1/260 of their annual pay. The figure of 260 was arrived at by taking
365 days, less weekends, that is by taking the total number of weekdays in the
calendar year. The appellants say that the appropriate deduction was 1/365 of their
annual pay, pursuant to section 2 of the Apportionment Act 1870 (“the Act”). The
contracts of employment in secondary education, that is at schools rather than sixth
form colleges, include an express term contained in the relevant agreement, which
is known as the Burgundy Book, that when teachers are on strike their employers
are entitled to deduct salary at the rate of 1/365 of their annual pay.
The Act
3. The Act is entitled “An Act for the better apportionment of rents and other
periodical payments”. Section 2 is entitled “Rents, &c to accrue from day to day and
be apportionable in respect of time” and provides as follows:
“All rents, annuities, dividends, and other periodical payments
in the nature of income (whether reserved or made payable
under an instrument in writing or otherwise) shall, like interest
on money lent, be considered as accruing from day to day, and
shall be apportionable in respect of time accordingly.”
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4. Section 5 is entitled “Interpretation of terms” and includes the following:
“In the construction of this Act –

The word ‘annuities’ includes salaries and pensions.”
Section 7 states in the heading that the Act is not to apply where stipulation is made
to the contrary and provides:
“The provisions of this Act shall not extend to any case in
which it is or shall be expressly stipulated that no
apportionment shall take place.”
The proceedings
5. On 24 April 2013, the appellants commenced proceedings in the Birmingham
County Court alleging that the respondent was in breach of contract and claiming
monies owed pursuant to section 2 of the Act to the extent that the deductions from
their pay exceeded 1/365 of their annual wage entitlement in respect of each strike
day. On 17 June 2013, between the issue of proceedings and the trial of this action
Jay J handed down judgment in the High Court in Amey v Peter Symonds College
[2013] EWHC 2788 (QB); [2014] IRLR 206, which determined the same issue in
favour of the defendant, which was another sixth form college, by reference to the
same generic contractual terms and on the basis of very similar, if not identical,
facts. Jay J held that while “accruing from day to day” in section 2 must be construed
as referring to calendar days, section 7 applied to disapply section 2 because the
claimant’s contract necessarily implied that his pay was tied to his directed time
work. [For the definition of “directed time” see paras 14 and 16 below.] The
claimant, who was not a member of NASUWT, did not appeal to the Court of
Appeal.
6. The respondent in the present case applied for summary judgment on the
basis that the County Court would be bound by the Amey judgment. The appellants
agreed that that was so but resisted summary judgment on the basis that they wanted
to seek determination of the point of principle by the Court of Appeal and could only
do so if a “final” determination were entered in favour of the respondent, from which
it could apply to the Court of Appeal for permission to appeal pursuant to CPR Part
52 and Practice Direction 52A. As a result, the parties agreed a consent order which
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was approved by DDJ Viney and referred to in para 2 of the consent order dated 27
February 2014. Pursuant to that order the respondent withdrew its application for
summary judgment and, the parties having agreed the material facts, the appellants
consented to final judgment being entered in favour of the respondent on the basis
that the Amey judgment was binding, but without prejudice to the appellants’ right
to argue on appeal that Amey was wrongly decided and/or that their case should be
decided differently on the basis of the agreed facts.
7. On 1 July 2014 HHJ McKenna gave the appellants permission to appeal
directly to the Court of Appeal pursuant to CPR Part 52.14, in circumstances in
which Aikens LJ had indicated that the Court of Appeal was minded to accept
jurisdiction to hear the proposed appeal on that basis because it raised an important
point of principle. The appeal was heard by Elias, Tomlinson and Sales LJJ on 19
March 2015. By a judgment handed down on 14 May 2015 given by Elias LJ, with
which Tomlinson and Sales LJJ agreed, the Court of Appeal dismissed the appeal
[2015] ICR 1143. The Court of Appeal refused permission to appeal to this Court
but permission was granted by Lady Hale, Lord Wilson and Lord Reed on 25
February 2016.
The issues
8. The central question in this appeal is how much the respondent as the
appellants’ employer can withhold from their pay for each day of strike action. In
order to answer that question, a number of further questions potentially arise in order
to decide whether the Act applies to the facts of this case. As stated in the statement
of facts and issues (albeit in a different order), they are (a) whether the appellants’
contracts of employment provide expressly or by necessary implication for their
salary to be paid to them pro rata in respect of divisible obligations to perform work
on each day of directed time so that the Act has no application to this case; (b) what
is meant by “accruing from day to day” in section 2 of the Act; and (c) what is the
correct construction of section 7 of the Act.
Discussion
9. Question (a) seems to me to reflect a new point which the respondent sought
to raise in this appeal which was not taken in the courts below. As formulated (so
far as I can see correctly) by the appellants, the argument that the Act does not apply
in this case has three steps as follows. (1) The Act was made to address mischiefs
which arise in the context of periodic payments which are entire indivisible
payments. (2) The contracts in this case provide impliedly for the appellants to be
paid periodically in respect only of the work they do in directed time. (3) Therefore
the periodic payments were impliedly divisible.
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10. The appellant objected to the new point being taken for the first time in this
Court. We heard argument on the point without ruling on the objection. Having
heard argument and considered the point I would hold that it fails. Although the
point was not argued in the Court of Appeal, that point or a very similar one was
considered in the judgment of Elias LJ between paras 23 and 32. In particular he
considered the decision of the Court of Appeal in Item Software (UK) Ltd v Fassihi
[2004] EWCA Civ 1244; [2005] ICR 450, where an employee who was also a
director of a company was paid a salary monthly in arrears. His contract was
terminated on 26 June for misconduct. One of the issues was whether he was entitled
to his salary for the period during which he worked in June before termination. The
Court of Appeal accepted that at common law the employee could not recover
anything because his salary did not accrue until the end of the month, but held that
the Act applied. It held, as Elias LJ put it in para 31 in this case, that since, by virtue
of the Act, salary accrued day by day the employee was entitled to his salary until
his dismissal, even where it was for misconduct. Holman J, with whose judgment
Arden LJ expressly agreed, said that since the Act is a remedial Act, and since the
common law rule works an injustice, the Act should not be restrictively interpreted.
Elias LJ concluded that “this would suggest that [the Act] will now be readily
applied to all employment contracts where the common law principles pertaining to
entire contracts and substantial performance would operate”. Elias LJ further
concluded in para 32 that it followed that the Act does, in principle, apply to the
contracts of these teachers. As he put it, their pay is deemed to accrue daily. He added
that that was also the view of Scott J in Sim v Rotherham Metropolitan Borough
Council [1986] ICR 897, although the point was not directly argued in that case (see
further para 22 below). Elias LJ also noted that none of the parties sought to contend
otherwise in the Court of Appeal.
11. Thus the first of the three steps in para 9 above was satisfied because the Act
was indeed intended to address mischiefs which arise in the context of periodic
payments which are entire indivisible payments. However, for the reasons given
below, steps (2) and (3), namely that the contracts in this case provide impliedly for
the appellants to be paid periodically in respect only of the work they do in directed
time and that it follows that the periodic payments were impliedly divisible, were
not satisfied. For these reasons I would reject the new point sought to be advanced
for the first time in this Court. I would accordingly answer question (a) in the
negative. I do not think that the contracts of employment provide expressly or by
necessary implication for their salaries to be paid to staff pro rata in respect of
divisible obligations to perform work on each day of directed time.
12. To my mind the correct approach to this case depends essentially upon the
application of section 2 of the Act to the contracts of employment, all of which are
upon more or less the same terms. I return below to the meaning and effect of section
7 of the Act, which in my opinion does not apply to the facts of this case.
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13. Clause 1.1 of the contract is entitled “DUTIES” and provides for the duties
to be carried out under the reasonable direction of the Principal. Clause 1.2 provides
that the employee may be called upon to perform any of the duties set out in
Appendix 4 of the Red Book which might reasonably be assigned to him.
14. Clause 2 provides:
“2 WORKING TIME
2.1 Subject to the provisions in the other paragraphs
of this section, you may be required to work for 195 days
in any year of which 190 will be days on which you may
be required to teach in addition to carrying out other
duties. Within these 195 days, up to 1,265 hours a year
will be allocated reasonably to you by the Principal.
Details of this directed time will be provided by the
Principal.
2.2 Within the 1,265 hours you may be required to
teach for up to six hours over two evenings per week.
Any teaching in the evening beyond this level would be
undertaken only on a voluntary basis.
2.3 In addition to the requirements in 2.1 above, you
will work such additional hours as may be needed to
enable you to discharge your duties effectively
including, in particular, the marking of students’ work,
the writing of reports on students and the preparation of
lessons, teaching material and teaching programmes.
2.4 In this section, ‘year’ means a period of 12
months commencing on 1st September.
2.5 Details of your holiday periods will be made
available to you by the Principal. You will be paid full
salary during these holiday periods unless you are
receiving less than full salary arising from the
application of the sick pay scheme, maternity scheme
etc.”
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15. Clause 4 is entitled “SALARY” and provides (in Mr Monk’s case), so far as
relevant, that his salary for the relevant year was £38,421 per annum (including PSP)
and that it would be paid monthly by credit transfer on the last working day of the
month, except in December when payment would reach his bank account on or
before 24 December. The other contracts were in the same form, although the figures
varied.
16. The Red Book contains a provision almost identical to clause 2.1 above,
except that it is para 20 and is entitled “Standard Working Time”, which is thus
the same as “directed time”. Paragraph 21 provides for “Evening Teaching”.
Paragraph 22 is entitled “Undirected Time” and reads
“In addition to the requirements in paragraphs 20 and 21 above,
a teacher will work such reasonable additional hours as may be
needed to enable them to discharge their duties effectively
including, in particular, the marking of students’ work, the
writing of reports on students and the preparation of lessons,
teaching material and teaching programmes and such other
duties as may reasonably be required. The amount of time
required for this work and the times outside the 1,265 specified
hours at which duties shall be performed shall not be defined
by the college, but shall depend upon the work needed to
discharge the teacher’s duties.”
17. In addition, para 18 provides for payment for additional days of directed time,
which were remunerated in addition to salary, as for example by an additional
payment at a daily rate of 1/195 of the “rate for the job”. There is also para 26, which
provides that no teacher may be required to work on a Sunday, Bank or public
holiday.
18. Finally, Appendix 4 in the Red Book describes the teachers’ “Professional
Duties”. Under that heading it states:
“The following duties shall be deemed to be included in the
professional duties which a teacher employed by a Sixth Form
College may be required to perform.
Teaching
1(a) planning and preparing courses and lessons;
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(b) teaching, according to their educational needs, the
students assigned to you including the setting and marking of
work to be carried out by the student in college and elsewhere;
(c) assessing, recording and reporting on the development,
progress and attainment of students in each case having regard
to the curriculum for the college.
Other Activities
2(a) promoting the general progress and well-being of
individual students and of any class or group of students
assigned to you;
(b) providing guidance and advice to students on
educational and social matters and on their further education
and future careers, including information about sources of more
expert advice on specific questions; making relevant records
and reports;
(c) making records of and reports on the personal and social
needs of students;
(d) communicating and consulting with the parents of
students;
(e) communicating and co-operating with persons or bodies
outside the college;
(f) participating in meetings arranged for any of the
purposes described above.
Assessments and Reports
3 Providing or contributing to oral and written
assessments, reports and references relating to individual
students and groups of students.”
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19. Appendix 4 includes a number of further activities involved in the work of a
teacher, which it is not necessary to particularise in any detail. The topics are
educational methods, discipline, health and safety, staff meetings, cover, public
examinations, management and administration.
20. The appellants regularly performed their undirected duties outside of the
normal term-time hours, ie during weekends, evenings and/or days of annual leave,
because there was insufficient time to perform all of those duties during such of the
normal term-time hours as were not allocated to directed time. The statement of facts
and issues refers to material relevant to each of the appellants as follows. Mr Hartley
says that the volume of work was so great that he was required to work every
weekend of the year on both Saturdays and Sundays, typically spending two to three
hours carrying out undirected time duties during a weekend. The nature of the job
meant that he had no choice but regularly to perform work in undirected time outside
of the normal college day, in the evenings, at weekends and during the holidays. Mr
Panko had over 11 hours’ remission time (ie time during directed hours allocated to
reflect his additional responsibilities) but was unable to complete all of his work in
that time and regularly carried out work during evenings, weekends and holidays.
Mr Monk was similarly unable to complete all of his work during his remission and
non-contact time. If he did not do evening and weekend work he would not be able
to deliver lessons because he would not have the material, schedules and tasks
prepared. He estimates that he would do work on “somewhere between 25 and 52
weekends a year”. The amount depends on his priorities and his state of health.
21. The parties agree that the amount of undirected time duties broadly correlates
with the amount of directed time duties in that the more directed time, in particular
teaching time, the more undirected time is likely to be required.
22. Some assistance in this type of case can I think be found in the judgment of
Scott J in Sim at 928G-929C, which is relied upon by the appellants as follows:
“In considering the scope of a teacher’s professional
obligations as a teacher, it is convenient to start with those
matters that are common ground. It is accepted that the teachers
have an obligation to teach their classes in accordance with the
timetable from time to time in force. It is accepted that they
have obligations properly to prepare for their classes and to
mark the schoolwork done by their pupils either in class or as
homework. It is accepted that these latter obligations may
require work to be done outside normal school hours. To put
the point another way, a teacher could not excuse a failure to
be properly prepared for a class or a failure to mark schoolwork
within a reasonable time after it had been done by pointing out,
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correct though the observation might be, that he or she had not
had time within school hours to do the work. It is, perhaps, one
of the hallmarks of professional employment, as opposed to
employment in non-professional capacities, that professionals
are employed to provide a particular service and have a
contractual obligation to do so properly. A worker in a car
factory or shop may clock off at 5.30 pm or, perhaps, work late
on an overtime basis. An employed professional does not
usually have an overtime option. He is employed to provide a
particular service to proper professional standards. His contract
may require his attendance in an office or other place of work
for particular hours but his contractual obligations are not
necessarily limited to work done within those hours. So, too,
teachers’ duties are not necessarily confined to their obligation
to be on school premises during school hours and to take their
classes during those hours.
The professional obligations of a teacher cannot, in my opinion,
be confined to the imparting of academic knowledge to the
pupils.”
That passage gives a picture of the wide scope of responsibilities of teachers such
as the appellants, all of which must be reflected in their overall salaries.
23. So too does the speech of Lord Templeman in Miles v Wakefield Metropolitan
District Council [1987] AC 539 at 556F-H, which was relied upon by the appellants.
Lord Templeman did not refer to the Act, although section 2 had been relied upon
by the successful employers. He said this:
“It is unusual for the holder of an office to take industrial action
and the consequences will depend on the rights and obligations
conferred and imposed on the office-holder by the terms of his
appointment. But if an ambassador and the embassy porter
were both on strike then I would expect both to be liable to lose
or both to be entitled to claim their apportioned remuneration
attributable to the period of the strike. A judge and an usher on
strike should arguably be treated in the same manner. The
ambassador might be required to decode a declaration of war
on Sunday, and a judge might devote his Christmas holidays to
the elucidation of legal problems arising from industrial action,
so that it would be necessary to divide their annual salaries by
365 to define a daily rate applicable to the period of strike,
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whereas the weekly, daily or hourly wages of the porter and the
usher provide a different basis for apportionment, …”
24. Section 2 of the Act must be read so that it provides in effect that “all …
salaries … shall, like interest on monies lent, be considered as accruing from day to
day, and shall be apportionable in respect of time accordingly”. In Sim Scott J
considered section 2 at pp 935G-936A, where he rejected a submission that teachers’
salaries accrued minute by minute and added:
“Under the contracts, the salaries are based on a yearly scale
but are paid by monthly payments. Each month a contractual
right to a salary payment vests in the teacher. By reason of
section 2 of the Apportionment Act 1870, the salaries are
deemed to accrue day by day. If a teacher’s contract were, in
the middle of a month, to come to an end, by death, dismissal
or some other event, section 2 would entitle the teacher, or his
estate, to an apportioned part of the month’s salary payment.
So the salaries may be regarded as accruing day by day. But
they do not accrue minute by minute. And for as long as the
contract is continuing, the only payment that can be claimed by
a teacher is a monthly payment and the only obligation to make
a payment of salary that rests on the education authority is an
obligation to make a monthly payment.”
This approach to section 2 appears to me to be correct, although on the facts Scott J
held that the employer was entitled to reduce the amount paid by way of equitable
set off. The approach is not however that set out in the judgment of Elias LJ in the
Court of Appeal, to which I return below. The use of the word “considered” in
section 2 seems to me to show that the section is a deeming provision.
25. The appellants’ case was summarised in para 32 of their written case in this
way. In the case of unvarying, annualised periodic payments (whether made once a
month, or otherwise), such as the salaries of the appellants, section 2 of the Act has
the effect of deeming accrual at the rate of 1/365 each day; but only because they
are unvarying annualised periodic payments. The appellants do not and did not
suggest that a periodic payment made over a period different from (and in particular
a period of less than) a calendar year should accrue at the rate of 1/365, or should be
aggregated with other periodic payments so that the total of such payments over a
calendar year should be added up and divided so as to accrue at the rate of 1/365.
Thus the application of section 2 depends upon the terms of the particular contract.
In this case we are concerned only with an annual contract.
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26. It is I think helpful to consider the arguments advanced by the parties and the
reasoning of the Court of Appeal in order to understand both the position in the
Court of Appeal and the present position. It is striking that the argument in the Court
of Appeal proceeded on the express basis (which was not challenged by the Court
of Appeal at the hearing) that, if section 2 applied and section 7 did not, the effect
was that Mr Monk’s salary had to be apportioned at the rate of 1/365 per calendar
day. By contrast the respondent put forward 1/260. It was common ground in the
Court of Appeal that section 2, if applicable, would require pay to accrue by equal
amounts daily: see per Elias LJ at para 53.
27. It was submitted on behalf of the respondent that, if the Act applied, the terms
of the contract could not be reconciled with the principle of equal daily accrual and
amounted to an express stipulation within the meaning of section 7 that the principle
in section 2 should not apply. The respondent adopted the reasoning of Jay J in Amey
and its submissions were recorded by Elias LJ in para 57 as follows:
“The undirected duties are subsidiary and directed towards the
directed duties. As a matter of common sense it is obvious that
pay is, as Jay J expressed it at para 42, ‘tied to the measurable
part of a teacher’s work’. This is further supported by the fact
that part time workers are paid as a proportion of the full-time
teaching hours that they work; that a teacher who agrees to
teach an additional day is paid 1/195 of the annual salary; and
that sick pay is calculated on the basis of working days.”
28. So in the Court of Appeal the appellants argued for 1/365 per calendar day in
reliance upon section 2 and, if section 2 did not apply, upon section 7, whereas the
respondent argued for 1/260 in reliance upon section 7. In this Court the case for the
appellants was the same, whereas the respondent relied upon section 2 on the basis
of the conclusion of the Court of Appeal that section 2 does not imply the principle
of equal daily accrual but at a rate which is appropriate in the context of that contract
to the particular day in question: per Elias LJ at para 59. It appears that he would
have chosen 1/195 by analogy with the pay of part time workers, but adopted the
respondent’s figure of 1/260 on the basis that it related to the total number of annual
working days. Both these approaches assume that the working days are limited to
days on which directed duties were carried out.
29. I have reached the conclusion that the appellants’ case is to be preferred to
that of the respondent. As I see it, the difficulty with 1/260 is that, given that the
work done by the teachers described above was not limited to work during week
days, it makes no sense to choose a calculation of 1/260 of the annual salary, which
assumes only week day working. I would therefore reject the 1/260 figure. What
then should the figure be? Although, as stated above, a case might perhaps be made
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for some other figure, the only alternative figure put forward during the argument
was 1/365.
30. It might be said that the difficulty with the figure of 365 is that it cannot be
justified arithmetically. However, this is where, as it seems to me, the statutory
formula in the Act comes in. On the basis of the statutory formula, namely that salary
“shall … be considered as accruing from day to day, and shall be apportionable in
respect of time accordingly”, the most sensible approach in order to apportion the
annual salary on a day to day basis is by treating each day as 1/365 of the annual
salary. As I see it, this achieves an overall approach which is broadly fair. The reason
why it is broadly fair is that the monthly payments are made every month, including
periods when the teacher is on holiday, and the work carried out is spread throughout
the year as explained both by Scott J and by the appellants’ evidence in this case. In
particular, it is not limited to periods when the teacher is carrying out directed work,
but includes preparatory work and the like which involves working in the evenings
and weekends.
31. I recognise that it can be said that this can give rise to surprising results but
that is almost always true of deeming provisions. They are chosen in order to have
a simple rule which can be applied in every case. Moreover, this approach seems to
me largely to adopt the approach in the cases in which the court construed the
expression “day by day” to mean daily or each calendar day: see eg Taylor v East
Midlands Offender Employment [2000] IRLR 760, EAT, per Maurice Kay J at para
5 and Thames Water Utilities v Reynolds [1996] IRLR 186, para 22, EAT. In the
latter case HH Judge Clark said this by reference to the expression “from day to day”
in section 2:
“Accordingly the real question is what is meant by the
expression ‘from day to day’ in section 2 of the Act. In our view
it can only be calendar days and not working days.”
32. In that case the EAT expressly agreed with the view of Evans-Lombe J in In
re BCCI SA [1994] IRLR 282. See also, to similar effect Smith v Kent County
Council [2004] EWHC 412 (QB), where Mackay J concluded that 1/365 was
appropriate, distinguishing Sim v Rotherham and Miles v Wakefield Metropolitan
District Council [1987] AC 539 on the facts. In Amey Jay J said at para 17 that that
line of authority had fallen into disfavour, although he recognised that it had not
been overruled by the Court of Appeal. He expressed that view on the basis that in
Leisure Leagues UK Ltd v Maconnachie [2002] IRLR 600 the EAT had held that
the concept of day to day accrual in the 1870 Act must be, as he put it, envisaged by
reference to the number of working days in the year and not the number of calendar
days because the EAT based itself on the Working Time Regulations 1998 (SI
1998/1833). He also noted, at para 19, that that decision had been followed by the
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EAT in Yarrow v Edwards Chartered Accountants [2007] All ER (D) 118 (Aug).
However, Jay J said at para 20 that those cases were only persuasive in the High
Court and that he was not convinced that the Act can be overridden simply because
it achieves a poor fit with modern employment law. I agree, although those
Regulations set a maximum average number of hours to be worked weekly (subject
to contrary agreement), entitlement to rest periods and paid annual leave, none of
which is incompatible with the terms and conditions of the employment in question
here. It is noteworthy that Jay J then set out the provisions of sections 2 and 7 of the
Act and held in para 23 that “the reference to accruing from ‘day to day’ in section
2 must be to each calendar day”. As I read the decision of Jay J, it was based upon
section 7 of the Act and, as explained below, I reach a different conclusion from him
in respect of section 7.
33. We were also referred to the decision of Blake J in Cooper v Isle of Wight
College [2008] IRLR 124; [2007] EWHC 2831 (QB). However, that decision seems
to me to be of little assistance in deciding how section 2 works in a case like this.
Blake J referred to the part of Lord Templeman’s speech in Miles v Wakefield
Metropolitan District Council quoted in para 23 above, including the passage at the
end of the quote where he gave the examples of the ambassador and the judge who
might be required to devote their Sundays or holidays to work, so that it would be
necessary to divide their annual salaries by 365 to define a daily rate applicable to
the period of strike, whereas the weekly, daily or hourly wages of the porter and the
usher provided a different basis for apportionment. Cooper was concerned with pay
for a defined 37 hour week.
34. In all these circumstances the cases seem to me to show that the correct
approach under section 2 to a case like this, where the contract is an annual contract,
is to hold that the salary must be apportioned on a calendar day basis over 365 days,
which yields a daily figure of 1/365.
35. In reaching these conclusions I am conscious that I have in this respect
reached a different conclusion from the Court of Appeal.
36. Before considering the effect of section 7, it is convenient to consider the
approach of the Court of Appeal to sections 2 and 7 together because Elias LJ does
so in paras 33 to 38 as follows:
“33. It is a critical element in the claimants’ case that the
effect of section 2 is that pay does not merely accrue daily but
does so at an even rate. This is the justification for treating the
pay referable to the strike day at 1/365.
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34. No doubt for most periodic payments that will typically
be the case. There will be no reason to assume that the payment
should accrue other than by regular and equal increments. But
I do not think that section 2 dictates this result. In my view there
are strong arguments which suggest that this is neither the
purpose nor the effect of the Act. It is concerned with providing
a remedy for the unfairness which results from the fact that the
common law would recognise no rights in a party who had
provided service to the employer but not for the whole of the
relevant pay period. The Act ensured an entitlement to such
portion of the payment as was referable to the period of service.
To achieve that objective it is not necessary to provide that
payment accrues at an equal daily rate. Moreover, to construe
section 2 as having that effect would create a new source of
unfairness, where the rigid application of a daily rate of 1/365
would create an injustice in the context of the particular
arrangement between the relevant parties, which it is difficult
to suppose Parliament intended. The present case illustrates the
sort of problem which could arise, if the College’s argument
about the unfairness and inappropriateness of deductions being
made at a rigid daily rate of 1/365 are accepted (see below).
35. There are two further features of the Act which support
this analysis. The first is that in section 5 there is a definition
of ‘dividend’ by reference to various forms of payments,
including payments ‘out of the revenue of trading or other
public companies, divisible between all or any of the members
of such respective companies shall be usually made or declared
at any fixed times or otherwise’; and the provision then goes on
to provide expressly: ‘all such divisible revenue shall, for the
purposes of this Act, be deemed to have accrued by equal daily
increment during and within the period for, or in respect of
which the payment of the same revenue shall be declared or
expressed to be made …’. If section 2 automatically envisaged
that payments caught by the Act would be deemed to accrue by
equal daily increments, these words would not have been
required.
36. The second lies in the way in which the exclusion
principle in section 7 is drafted. That section envisages that the
parties might displace the Act by providing in sufficiently clear
terms that no apportionment shall take place. But if there is no
such exclusion and section 2 establishes a principle of equal
daily accrual, that principle will apply. Section 7 does not
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provide that the parties might agree to exclude that principle,
or might otherwise draft the contract in a manner which is at
odds with that principle. Yet Parliament would surely have
allowed this had it understood that the principle was imported
by section 2. The parties have assumed that it is possible to read
section 7 as allowing for that exclusion, but as I indicate below
I am very doubtful whether it can.
37. If that is right, the failure to allow departure from the
principle of equal daily accrual can be explained either on the
basis that the principle is not part of the Act and therefore does
not need excluding; or it is part of the Act which Parliament
intends to be mandatory in all circumstances where the Act
applies. However, if there is a principle of equal daily accrual,
and especially if the parties cannot contract out of it, that would
lead to curious and potentially unjust consequences. Take a
case outside the area of employment law. Assume that a party
takes a lease and agrees to pay the landlord at the end of 12
months at a rent which increases after six months. Suppose that
the landlord sells the freehold after six months. He would be
entitled under the Act to the rent for that period. Under the
terms of the lease, that would be a smaller sum than could be
claimed by his successor because the rent has increased. But if
section 2 imposes a principle of regular and equal daily accrual,
the successor would have to account for half the full rent paid
over the 12 months to the original landlord, even though the
rent for the first half of the year was smaller.
38. If, contrary to my view, the principle of equal daily
accrual is implicit in section 2, Parliament must surely have
intended to allow contracting out from that principle. However,
I confess that I can find no satisfactory way of construing
section 7 so as to achieve that result.”
37. As I understand Elias LJ’s reference to equal daily apportionment, he is
describing a process which leads to 1/365. For the reasons I have given I would hold
that in a case like this the express provision in section 2 that the salaries “shall be
considered as accruing from day to day and shall be apportionable in respect of time
accordingly” does indeed mean equal daily apportionment. However, I agree with
him that Parliament must surely have intended to allow contracting out from the
principle. In my opinion it did so in section 7.
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38. The question then arises what is meant in section 7 by an express stipulation.
On the face of it, it means that there must be an express provision in the contract
which has the effect of disapplying the statutory formula so that “no apportionment
shall take place”. As Elias LJ says in para 40, read literally, section 7 seems to
suggest that the apportionment principle will apply unless the contract in clear terms
addresses it and says that it should not. In my opinion the parties correctly so
understood the Act.
39. In paras 40 and 41 Elias LJ refers to two cases on the meaning of section 7
and its predecessor. In In re Lysaght [1898] 1 Ch 115 Lord Lindley MR held that
but for a clause in a will that certain shares “shall carry the dividend accruing thereon
at my death” the Act would have allowed residual legatees to take the benefit of
dividends on the shares up to the date of death. As Lord Lindley put it, the clause
amounted to “a stipulation, within the meaning of section 7 …, that no
apportionment shall take place”. In reaching that conclusion (as Elias LJ put it in
para 41) Lord Lindley referred to the interpretation put on a predecessor clause in
similar terms considered in Tyrell v Clark (1854) 2 Drew 86; 61 ER 651. In that case
the Vice Chancellor (Sir R T Kindersley) considered the meaning of an “express
stipulation” and how those words should be construed. Elias LJ said this:
“In my judgment these authorities show that, where the
language of the contract is plainly inconsistent with an
apportionment of income, no apportionment is permissible. But
there is a presumption that the Act will apply, and if the
contract is ambiguous or lacks clarity on that question, it cannot
displace the operation of the Act.”
40. Elias LJ concluded in para 42 that, assuming that section 2 requires pay to
accrue at an equal rate daily, and that section 7 permits contracting out of that
principle, it seemed to him that the concept of an “express stipulation” would have
to be similarly construed. There would have to be a clear intention derived from the
contract that the principle should not apply. I would accept that only if it can fairly
be said that in a particular case, there is, in the words of section 7, an express
stipulation in the contract that no apportionment should take place.
41. As I see it, the amount of the daily rate provided for in section 2 which is to
be “apportionable in respect of time accordingly” will depend upon the terms of the
particular contract. I agree with Elias LJ (in para 44) that, absent a provision (I would
say an express provision) to the contrary the principle of equal daily accrual will be
the obvious principle to adopt. For the reasons given above, I am of the opinion that
1/365 is the appropriate rate here. In any case the precise figure will depend upon
the true construction of the particular contract. I do not accept the view expressed
on behalf of the Court of Appeal that the arguments have been advanced on a false
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basis. In this case there is no express (or indeed implied) stipulation excluding the
statutory apportionment so that section 7 has no application. A critical feature of the
instant case which leads to a figure of 1/365 is that the contracts are annual contracts.
If the contracts were not annual contracts the position would be very different and
would depend upon the terms of the particular contract.
42. Elias LJ put the position in paras 59, 60 and 61 as follows:
“59. It will be clear from my discussion of the effect of the
1870 Act that I believe that the arguments have been advanced
on a false premise. It is a fundamental feature of the claimants’
case that section 2 implies the principle of equal daily accrual
unless excluded by a clear inconsistent clause. If that is the
wrong analysis of section 2, and there is no such principle
which needs to be excluded, the question of what pay would
have been earned on the strike day has to be gleaned purely
from the construction of the contract, modified by the
assumption that pay accrues daily at a rate which is appropriate
in the context of that contract to the particular day in question.
60. Applying that modified principle of construction, I do
not think that the claimants can be right. The natural
interpretation of the contract (as modified by that assumption)
would not in my view be that pay accrues at an equal rate day
by day, and I do not accept that the fact that work may be
carried out on any day of the year would justify that conclusion.
There is plainly a close link between the directed hours and
pay, and in my judgment Jay J was right [in Amey] to say the
undirected work is essentially ancillary to the directed work.
There is little point, and no value to the employer, in a teacher
preparing for lessons which are not given. The judge also held
that pay is tied to the measurable part of the teacher’s work.
Although Mr Segal did not accept that analysis, it seems to me
justified by the way in which part time teachers are paid. They
receive that proportion of the full time directed hours which
they perform. It is also supported by the fact that if a teacher
voluntarily agrees to work an extra day, the amount paid is
1/195 of the annual salary. No doubt that extra day will
generate undirected working time, but this is taken into account
by treating it as a contributory part of the value provided by the
teaching day.
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61. Taken to its logical conclusion that would tend to justify
the principle that the pay referable to a strike day is 1/195 of
the annual salary. But the College does not seek to follow the
logic that far, perhaps with good reason. Some of the
undirected work, such as writing references, preparing
materials and so forth will not necessarily be directly and
inextricably linked to the directed time, in the sense that a
failure to work for a day will lead to a proportionate reduction
in the work done in the undirected hours. So relating the work
to the total number of annual working days, including days
which are paid holidays, provides a sensible and acceptable
principle which possibly errs in the employee’s favour.”
43. Finally I should refer to para 64 in these terms:
“64. Mr Segal puts forward a forceful argument that it is far
from clear precisely how the contract envisages that the pay
will accrue. I accept that is so, but for reasons I have given I
think that the principle of equal daily accrual will be excluded
if it is clear that the contract is inconsistent with that principle,
even if it is not obvious precisely how the pay is deemed to
accrue. For reasons I have given, in my view the contract
plainly does not envisage that pay will accrue by equal amounts
per day.”
44. I respectfully disagree with the approach in those paragraphs, essentially for
these reasons. The directed work is plainly important but it is only part of the
teacher’s responsibilities. While there is a relationship between the directed work
and undirected work, much of the undirected work is very important in its own right
and is carried out outside the hours of directed work: see in particular paras 18, 19
and, especially 20, above. Moreover the role of a teacher as described by Scott J is
a multi-faceted one.
45. The appellants’ case may be summarised as follows. Mr Monk’s case is
typical of that of all the appellants. He was employed on an annual salary of £38,421
payable to him monthly at the end of each month. He was paid that salary to perform
the duties referred to in his contract, as set out above, notably in clause 1 and in
Appendix 4 set out in the Red Book. There is no suggestion in any of the documents
referred to above that some of his duties were paid and some unpaid. Section 2 of
the Act provides that his salary must be considered as accruing “from day to day”
and “be apportionable in respect of time accordingly”. There is nothing in the
contract which stipulates for any apportionment other than a day to day
apportionment, which (as appears above) the cases show means calendar day. In the
Page 20
context of an annual contract in which payment is monthly and, given the wide
variety of work carried out, whether directed or undirected work, where there is no
distinction between days upon which work is carried out and days upon which work
is not carried out, the natural effect of the Act is that, as submitted on behalf of the
appellants, the apportioned part of his salary on the day he was on strike was the
same as any other day, namely 1/365 of his annual salary. In short, it was deemed
or “considered” by section 2 to be part of his annual salary.
46. As to para 59 of Elias LJ’s judgment, quoted above, I would accept the
submission made on behalf of the appellants that section 2 of the Act implies the
principle of equal daily accrual unless excluded by a clear inconsistent clause. I
would accept the appellants’ arguments set out in para 45 above that they were paid
a salary to perform the duties referred to in their contracts and there is no suggestion
that some of those were paid and some unpaid. On that basis, as para 59 puts it, I
agree that the question of what pay would have been earned on the strike day has to
be gleaned purely from the construction of the contract, modified by the assumption
that pay accrues daily at a rate which is appropriate in the context of that contract to
the particular day in question. However, I do not agree with the Court of Appeal
that, as stated in paras 60 and 61 of the judgment of Elias LJ, the natural construction
of the contract on that assumption would not be that pay accrues at an equal rate day
by day. It appears to me that it is wrong to say that, as Jay J put it in Amey, there is
a close relationship between the directed hours and pay. Indeed, as Elias LJ says in
para 61, some of the undirected work, such as writing references, preparing materials
and so forth will not necessarily be directly and inextricably linked to the directed
time, in the sense that a failure to work for a day will lead to a proportionate
reduction in the work done in the undirected hours. This is clear, for example, from
the many different “Professional Duties” identified in Appendix 4 of the Red Book
and quoted in para 18 above under the heading of “Other Activities” and not
“Teaching”. In short they are not limited to the week days but cover many other days
including evenings and weekdays. Hence the conclusion that, in the context of an
annual salary, the provision in section 2 that the salary “shall … be considered as
accruing from [calendar] day to [calendar] day and shall be apportionable in respect
of time accordingly” points to an apportionment of 1/365.
CONCLUSION
47. For these reasons I would hold that section 2 of the Act applied in this case
and was not excluded by section 7. As to the questions posed in para 8 above, I
would hold that (a) section 2 of the Act applied to this case, (b) that “accruing from
day to day” means accruing calendar day by calendar day and (c) that section 7 of
the Act has the meaning discussed in paras 38 to 41 above and does not apply on the
facts of this case.
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48. The contract involved many different obligations and was not restricted to
direct work five days a week. Under section 2, the salary “shall be considered as
accruing from day to day, and shall be apportionable in respect of time accordingly”
and the cases show that an apportionment must be carried out on a calendar day by
calendar day basis. To my mind those cases are correctly decided and are to be
preferred to those which doubt that approach. Once a calculation based on five days
a week has been rejected, it follows that the solution cannot be a deduction of 1/260
of the annual salary for one day’s strike. Once the 1/260 approach is rejected, it
seems to me that the natural solution is to take 1/365. Indeed, it is hard to see what
other approach could fairly be adopted. It does seem to me that to take 1/365 is to
respect (and reflect) the statutory approach in the cases of calculating the value of
one calendar day in cases where the contracts provide for an annual salary paid
monthly. The rate would no doubt be different if the contracts were not annual
contracts.
49. For these reasons I would allow the appeal and invite the parties to agree an
order. Failing agreement, written submissions on the form of order and on costs must
be filed within 21 days of the handing down of the judgment.