(1979) 1 CLR 815
[*815] 1979 June 4
[TRIANTAFYLLIDES, P., STAVRINIDES, L. LOIZOU, JJ.]
LANITIS BROS. CO. LTD.,
Appellants,
v.
CLEOPAS IOANNIDES AND. OTHERS,
Respondents.
(Case Stated No. 164).
CLEOPAS IOANNIDES AND OTHERS,
Appellants,
v.
LANITIS BROS CO LTD.,
Respondents.
(Case Stated No. 165).
Master and servant—Redundancy—Collective agreement—Termination of employment—Negotiated and agreed upon by trade unions with authorization of employees—Doctrine of agency—Trial Court’s finding that such authorization covered the probability of the termination of employment of each of the employees fully warranted on the facts of this case—Termination of employment consistent with paragraph 2(a) of the Supplies and Services (Control of Employment) Order, 1974—Not open to trial Court to treat said termination as a case of redundancy, envisaged by section 5(b) of the Termination of Employment Law, 1967 (24/67), because such course excluded by paragraph 2(b) of the said Order—And mere fact that agreement for termination of employment was concluded on the ground of redundancy did not empower trial Court to treat such redundancy as one regulated by section 16(3) of Law 24/67 under which it ordered payment of the amount of £150 to each one of the employees—Object of relevant proviso to the said section 16(3)—Principle of “last in, first out”, embodied[*816]in relevant collective agreements, of no avail because though termination of employment was agreed to within the ambit of such agreements it took place as a result of specific ad hoc agreement reached with approval of employees.
Contract—Agency—Master and servant—Trade union—Negotiating settlement of dispute on behalf of, and with approval of employees—Whether settlement binding on employees.
Following the Turkish invasion of Cyprus in 1974 the sale of Lanitis Bros. Co. Ltd. (“the company”), which carries on the business of manufacturing and selling bottled refreshment drinks, were reduced by about fifty per centum and decided to terminate the employment of a number of its employees. There followed negotiations with the trade unions of which the employees involved in this case, as well as other persons in the employment of the company, were members and in the end an agreement was reached for the termination of the employment of thirty-two employees of the company. When this agreement was reached the trade unions, before signing it, called a general meeting of their members which approved such agreement. In the collective agreements which were in force at that time between the trade unions concerned and the company there were clauses stating that the principle of “last in, first out” would be applied in cases of dismissals for redundancy, provided that the abilities of those to be dismissed would not be substantially higher than those who would remain in the service; and it, was, also, stipulated in such clauses that in case of any dispute it would be examined by means of the machinery of the Joint Consultation Committees.
On September 27, 1974, the affected employees were informed in writing by the company that their employment was being terminated at once, with one month’s salary being paid to them in lieu of notice.
In proceedings instituted by some of the employees, under sections 3 and 9 of the Termination of Employment Law, 1967 (24/67) the Industrial Disputes Court held that though under paragraph 2(b) of the Supplies and Services (Control of Employment) Order of 1974 (“the Order”), which was in force at the material time, it was not possible to terminate the relationship[*817]of employer and employee under section 5(b) of Law 24/67 on the ground of redundancy, such a course was possible in view of the provisions of paragraph 2(a) of the Order, when there existed a collective agreement between the parties providing for termination of employment on the ground of redundancy. As a result, the trial Court held that the employment of the employees in question was terminated on the ground of redundancy in the sense of section 18(c)(vii) of Law 24/67, namely due to the reduction of the volume of work or business of the company and awarded to each one of them, under section 16(3)of Law 24/67, the sum of £150 payable by the company.
Upon appeals by way of case stated by both the company and the employees the company complained that it should not have been ordered to pay the above sum to each one of the employees and the employees contended that it was wrongly held that their employment was terminated lawfully.
Held, (1) (on the question whether the finding of the trial Court that the trade unions concerned had the specific authorization of the employees to negotiate and accept the termination of their employment was correct) that though it is correct that the general view is that collective agreements between trade unions and employers are not legally binding between the parties to them, their terms may be incorporated in individual employment contracts and so become binding on the parties thereto (see Chitty on Contracts, 24th ed., vol. 1, p. 60, para. 123); that it appears to be legitimate to rely on the doctrine of agency when union officials negotiate a settlement of a dispute on behalf of a few employees identified by name (see Chitty, supra, vol. 2, p. 548, para. 3537); that, therefore, in the light of the facts as they were found by the trial Court its conclusion that, in the present case, the three trade unions concerned had the specific authorization of the employees, and that by such authorization there was covered the probability of the termination of the employment of each of the employees, was fully warranted.
(2) That there is no merit in the contention of counsel for the employees that the agreement reached between the trade unions and the company was not validly concluded in that there was not given effect to the “last in, first out” clause which was found in the relevant collective agreements, because though the termination of employment in question concerned was agreed to within[*818]the ambit of the said collective agreements, it did not take place by operation of the collective agreements as such, but as a result of a specific ad hoc agreement which was reached, with the approval of the employees concerned (p. 826 post); and that, therefore, the said terminations of employment took place, in a mode consistent with paragraph 2(a) of the Order.
(3) That it was not open to the trial Court to treat the termination of the employment of the employees of the company as a case of redundancy envisaged by section 5(b) of Law 24/67, and regulated by the other relevant provisions of such Law, such as section 16(3) thereof; that such a course was expressly excluded by the provisions of paragraph 2(b) of the Order, which prohibits, in unambiguous terms, the termination of the employment relationship on the ground of “redundancy” as envisaged by means of section 5(b) of Law 24/67; and that the mere fact that the agreement of September 27, 1974, was concluded on the ground of redundancy did not warrant, also, the course which was adopted by the trial Court, namely to treat such redundancy, in spite of the aforesaid express provisions of paragraph 2(b) of the Order, as a redundancy envisaged and regulated by the aforementioned relevant provisions of Law 24/67, and, in particular, by section 16(3) of such Law, under which it was ordered that the company should pay to each one of its dismissed employees the sum of £150.
(4) That this was a case of mutually agreed termination of employment in which the compensatory benefits, to be enjoyed by those whose employment was terminated, were, also, negotiated and agreed, and where there was no room for awarding to the employees concerned any other benefits under Law 24/67, to the detriment of their employer, the, company in question; and that, in any event, even if this case were to be regarded, contrary to what has already been stated above, as one in which the relevant provisions of Law 24/67 were applicable, it was not, warranted to make, on a proper application of section 16(3) of Law 24/67, an order for the payment of any amount to the employees by the company (see Phokou v. Kyriakou (1968) A.TR., vol. I, Part 1, 28, 31 and Constantinou v. Loel Ltd., (1968) A.T.R., vol I, Part 2, 63, 67).
Appeal by way of Case Stated
No. 164 partly allowed; appeal
by way of Case Stated No., 165
dismissed.[*819]
Cases referred to:
Edwards v. Skyways, Ltd., [1964] 1 All E.R. 494;
Allen v. Thorn Electrical Industries, Ltd. Griffin v. Receiver for the Metropolitan Police District [1967] 2 All E.R. 1137;
Phokou v. Kyriakou (1968) A.T.R. vol. I, Part 1, p. 28 at p. 31;
Constantinou v. Loel., (1968) A.T.R. Vol. I, Part 2, p. 63 at p. 67.
Cases Stated.
Cases Stated by the Chairman of the Industrial Disputes Court, relative to his decision of the 19th June, 1976 in proceedings under sections 3 and 9 of the Termination of Employment Law, 1967 (Law 24/67), instituted by Cleopasloannides and others, whereby it was held that the termination of their employment by their employers was lawful on the ground of redundancy and that the employers should pay to each one of them the sum of £150.—under section 16(3) of Law 24/67.
K. Michaelides, for the appellants in Case Stated No. 164 and for the respondents in Case Stated No. 165.
E. Lemonaris, for the respondents in Case Stated No. 164. and for the appellants in Case Stated No. 165.
Cur.adv. vult.
TRIANTAFYLLIDES P. read the following judgment of the Court. The parties to these proceedings have appealed, respectively, by way of two Cases Stated, against the decision of the Industrial Disputes Court by means of which it has held, in Applications Nos. 54/75, 56/75-62/75 and 80/75 before it, that the termination of the employment of the respondents in Case Stated No. 164 (and appellants in Case Stated No. 165, to be referred to hereinafter as the “employees”) by the appellants in Case Stated No. 164 (and respondents in Case Stated No. 165, to be referred to hereinafter as the “company”) was lawful on the ground of redundancy, and that the company should pay to each one of the employees the sum of £150 under section 16(3) of the Termination of Employment Law, 1967 (Law 24/67).
The company complains, in effect, that it should not have been ordered to pay the above sum to each one of the employees, and the employees contend that it was wrongly held that their employment was terminated lawfully, and that, in any event, the sum which ought to have been paid to each one of them[*820]under the provisions of Law 24/67 ought to have been much higher.
The salient facts of this case, as found by the trial Court, are, briefly, as follows:-
The Company carrier on the business of manufacturing and selling bottled refreshment drinks
Due to the Turkish invasion of Cyprus in 1974 the sales of the company were reduced by about fifty per centum.
As a result there arose the question of terminating the employment of about sixty persons, who were in the service of the company at the time, and of reducing the salaries of the rest of those in its service by twenty per centum.
Negotiations were embarked upon, in this respect, with the trade unions of which the employees invoked in this case, as well as other persons in the employment of the company, were members, and in the end an agreement was reached that there would be terminated the employment of only thirty-two out of those who were in the employment of the company at the time; and though the course of the negotiations the trade unions concerned were keeping their members informed of their progress, at general meetings called for the purpose, and, when the aforementioned agreement for termination of the employment of thirty-two out of them was reached, the trade unions, before signing in on September 27, 1974, called a general meeting of their members which approved such agreement.
At that particular time it was not yet known who were the thirty-two persons whose employment would be terminated, but as soon as the agreement was signed their names were announced and some of those who were to lose their jobs protested that others ought to have been dismissed instead of them.
In the collective agreements which were in force at that time between the three trade unions concerned and the company there were clauses stating that the principle of “last in, first out” would be applied in cases of dismissals for redundancy, provided that the abilities of those to be dismissed would not be substantially higher than those who would remain in the service; and it was, also, stipulated in such clauses that in case of any dispute[*821]it would be examined by means of the machinery of the Joint Conclusion Committee.
Among the thirty-two persons to be dismissed were the employees who are parties to these proceedings.
On September 27, 1974, the company informed, in writing the affected employees that their employment was being terminated at once, with one month’s salary being paid to them in lieu of notice; and each one of the said employees signed a certificate of discharge in which it was stated that he had received a month’s salary, what was due to him from the Provident Fund and one half share of the Christmas bonus. As the end of each such certificate there appears the following statement:-
“Received the sum of……… from Lanitis Bros Limited, in full settlement of my accounts with that Company, and in full settlement of any claims that I have or may have on that Company.”
At the material time there was in force the Supplies and Services (Control, of Employment) Order, 1974, hereinafter to be referred as the “Order” (see No. 249 in the Third Supplement, Part I, to the Official Gazette of September 13, 1974), which reads as follows:-
“Ο ΠΕΡΙ ΠΡΟΜΗΘΕΙΩΝ ΚΑΙ ΥΠΗΡΕΣΙΩΝ (ΣΥΝΕΧΙΣΙΣ ΜΕΤΑΒΑΤΙΚΩΝ ΕΞΟΥΣΙΩΝ) ΝΟΜΟΣ ( ΚΕΦ. 175Α)
Διάταγμα υπό του Υπουργικού Συμβουλίου δυνάμει του Κανονισμού Αμύνης 79Α(4)
Το Υπουργικόν Συμβούλιον, ενασκούν τας δυνάμει του Κανονισμού Αμύνης 79Α(4) χορηγουμένας αυτώ εξουσίας, εκδίδει το παρόν Διάταγμα:
1. Το παρόν Διάταγμα θα αναφέρηται ως το περί Προμηθειών και Υπηρεσιών (Έλεγχος Απασχολήσεως) Διάταγμα του 1974.
2. Διά του παρόντος Διατάγματος απαγορεύεται ο τερματισμός της σχέσεως εργοδότου και εργοδοτουμένου όπου τοιαύτη σχέσις υφίστατο κατά την 12ην Σεπτεμβρίου 1974, πλην εις περιπτώσεις καθ' ας:
(α) ο τοιούτος τερματισμός εγένετο συμφώνως προς τας [*822] προνοίας υφισταμένης συλλογικής συμβάσεως μεταξύ της οικείας συντεχνίας και του οικείου εργοδότου κατόπιν αμοιβαίας συμφωνίας μεταξύ εργοδότου και εργοδοτουμένου·
(β) αύτη εγένετο βάσει οιασδήποτε των περιπτώσεων αίτινες καθορίζονται εις το άρθρον 5 των περί Τερματισμού Απασχολήσεως Νόμων του 1967 και 1968, πλην της παραγράφου (β) ή δυνάμει των διατάξεων οιουδήποτε ετέρου εν ισχύι Νόμου.
3. Η ισχύς του παρόντος Διατάγματος άρχεται από της 12ης Σεπτεμβρίου 1974 και λήγει την 30ήν Σεπτεμβρίου 1974.”
(“THE SUPPLIES AND SERVICES (TRANSITIONAL POWERS) (CONTINUATION) LAW (CAP. 175 A)
Order made by the Council of Ministers under Defence Regulation 79A(4).
The Council of Ministers, in the exercise of the powers vested in it under Defence Regulation 79A(4), makes this Order:
1. This Order is to be cited as the Supplies and Services (Control of Employment) Order of 1974.
2. By means of the present Order the termination of the relationship of employer and employee, when such relationship existed on September 12, 1974, is prohibited, except in cases where:
(a) such termination is made in accordance with the provisions of an existing collective agreement between the trade union and employer concerned as a result of mutual agreement between employer and employee;
(b) it was made on the basis of any of the instances referred to in section 5 of the Termination of Employment Laws of 1967 and 1968, except paragraph (b), or by virtue of the provisions of any other Law in force.[*823]
3. This Order shall come into force on September 12, 1974, and shall expire on September 30, 1974.”).
The trial Court held that though under paragraph 2(b) of the Order it was not possible to terminate the relationship of employer and employee under section 5(b) of Law 24/67 on the ground of redundancy, nevertheless such a course was possible, in view of the provisions of paragraph 2(a) of the Order, when there existed a collective agreement between the parties providing for termination of employment on the ground of redundancy.
As a result, the trial Court held that the employment of the employees in question was terminated on the ground of redundancy in the sense of section 18(c)(vii) of Law 24/67, namely due to the reduction of the volume of work or business of the company and proceeded to award—as already stated—under section 16(3) of Law 24/67, to each one of the employees, the sum of £150, payable by the company.
In reaching its conclusion that the services of the employees in question were lawfully terminated on the ground of redundancy, the trial Court has found that the trade unions concerned had been authorized by each and everyone of their members, who was employed by the company, to negotiate in relation to, and accept, the termination of employment of thirty-two persons in the employment of the company, and that this specific authorization included the acceptance by each one of those affected of the possibility of the termination of his own employment.
We cannot accept the contention of counsel for the employees that the above finding is erroneous. It is correct that the general view is that collective agreements between trade unions and employers are not legally binding between the parties to them, but their terms may be incorporated in individual employment contracts and so become binding on the parties thereto (see Chitty on Contracts, 24th ed., vol. 1, p. 60, para. 123).
It appears to be legitimate to rely on the doctrine of agency when union officials negotiate a settlement of a dispute on behalf of a few employees identified by name (see Chitty, supra, vol. 2, p. 548, para. 3537). In Edwards v. Skyways, Ltd., [1964] 1 All E.R. 494, the headnote of the report reads as follows:-[*824]
“The plaintiff was employed by the defendant company as an aircraft pilot, and as such he was a member of the defendant company’s contributory pension fund and entitled under its rules on leaving the defendant company’s service in advance of retirement age to a choice between two options, either to withdraw the sum of his own contributions to, the fund or to take the right to a paid-up pension payable at retirement age. In January, 1962, the defendant company wrote the plaintiff, among others, informing him that it was necessary to declare a redundancy of approximately ‘fifteen per cent, of the defendant company’s pilot strength and giving him three months notice terminating his employment. At a meeting on Feb. 8, 1962, between authorised representatives of the defendant company and BALPA, the plaintiff’s trade association, it was agreed (as recorded in the notes of the meeting) that pilots declared redundant and leaving (the defendant company) would be given an ex gratia payment equivalent to the defendant company’s contributions to the pension fund. The representative of the defendant company actually said at the meeting that the defendant company would make ex gratia payments approximating to the defendant company’s contributions. Having been informed of the recorded agreement, and having found other employment and left the defendant company’s employment at the end of March, 1962, the plaintiff elected on May 1,1962, to withdraw his contributions to the pension fund and to receive the ex gratia payment that the defendant company proposed to make. The defendant company paid to the plaintiff the amount of his contributions, but did not make the ex gratia payment, and rescinded the decision to make ex gratia payments, having regard to the defendant company’s financial difficulties and creditors. The plaintiff brought this action to recover a sum equal to the total contributions made by the defendant company in respect of him to the pension fund. The defendant company contended that the recorded agreement was not intended to create legal relations and was too vague, and thus was not legally binding. It was admitted at the hearing that there was consideration moving from the plaintiff and that at the time of the meeting of Feb. 8, 1962, the[*825]defendant company intended to carry out the recorded agreement.
Held: where, as here, there was agreement and the subject of agreement related to business affairs, the onus of establishing that the agreement was not intended to create legal relations, which was on the party setting up that defence, was a heavy onus; and the defendant company had failed to discharge it for the following reasons—
(1) the words ‘ex gratia’ were used simply to indicate that the party agreeing did not admit any pre-existing liability on the defendant company’s part, and the mere use of the phrase ‘ex gratia’ as part of a promise to pay (even if prompted by the purpose of avoiding the incidence of income tax) did not show that the promise, when accepted, should have no binding effect in law, and
(ii) the use of the words ‘approximating to’ on behalf of the defendant company did not render the terms of the agreement too vague to be enforceable, for at most the phrase would connote on the evidence a rounding off of a few pounds downwards to a round figure”.
Also, in Allen v. Thorn Electrical Industries, Ltd. Griffin v. Receiver for the Metropolitan Police District, [1967] 2 All E.R. 1137, it was held that an agreement between the employers and a trade union by means of which the employers agreed to increase the salary of hundred and twenty employees of theirs amounted to a binding contract.
In the light of the foregoing, as well as of the facts as they were found by the trial Court, we are of the opinion that its conclusion that, in the present case, the three trade unions concerned had the specific authorization of the employees, and that by such authorization there was covered the probability of the termination of the employment of each of the employees, was fully warranted.
Moreover, we find no merit in the contention of counsel for the employees that the agreement reached between the trade[*826]unions and the company was not validly concluded in that there was not given effect to the “last in, first out” clause.
As has been mentioned, earlier on in this judgment, such a clause was to be found in the relevant collective agreements. Though, however, the termination of the employment of the employees, who are parties to these proceedings, was agreed to within the ambit of the said collective agreements, it did not take place by operation of the collective agreements as such, but as a result of a specific ad hoc agreement which was reached, with the approval of the employees concerned, on September 27,1974; and it is significant, in this respect, to bear in mind that the trade unions obviously treated the said specific agreement as dispensing with the need to comply with the aforementioned “last in, first out” clause, because when the thirty-two employees of the company were dismissed, without such clause having been fully complied with, there does not appear to have arisen any dispute between the company and the trade unions in this connection; and, indeed, no such dispute was referred to the Joint Consultation Committee.
In our opinion, therefore, the termination of the employment of the employees of the company took place in a mode consistent with paragraph 2(a) of the aforementioned Order.
But, we do not agree, that it was open to the trial Court to treat the termination of the employment of the employees of the company as a case of redundancy envisaged by section 5(b) of Law 24/67, and regulated by the other relevant provisions of such Law, such as section 16(3) thereof.
We take the view that such a course was expressly excluded by the provisions of paragraph 2(b) of the Order, which prohibits, in unambiguous terms, the termination of the employment relationship on the ground of “redundancy” as envisaged by means of section 5(b) of Law 24/67. The mere fact that the agreement of September 27, 1974, was concluded on the ground of redundancy did not warrant, also, the course which was adopted by the trial Court, namely to treat such redundancy, in[*827]spite of the aforesaid express provisions of paragraph 2(b) of the Order, as a redundancy envisaged and regulated by the aforementioned relevant provisions of Law 24/67, and, in particular, by section 16(3) of such Law, under which it was ordered that the company should pay to each one of its dismissed employees the sum of £150.
In our opinion, this was a case of mutually agreed termination of employment in which the compensatory benefits, to be enjoyed by those whose employment was terminated, were, also, negotiated and agreed, and where there was no room for awarding to the employees concerned any other benefits under Law 24/67, to the detriment of their employer, the company in question. In any event, even if we were to regard this case, contrary to what has already been stated above, as one in which the relevant provisions of Law 24/67 were applicable, it was not, in our view, warranted to make, on a proper application of section 16(3) of Law 24/67, an order for the payment of any amount to the employees by the company, because as correctly held by the Industrial Disputes Tribunal in Phokou v. Kyriakou, (1968) A.T.R., vol. I, Part 1, 28, 31 and constantinou v. Loel Ltd., (1968) A.T.R., vol. I, Part 2, 63, 67, the object of the relevant proviso to section 16(3)
“is not to penalize the employer who had to dismiss employees because he is in serious financial difficulties. It is rather intended to ensure that any financial benefit to an employer who deliberately creates redundancy (e.g. by mechanization) is passed on in part to the redundant employee.”
In the result, the appeal by way of Case Stated No.165 fails, but the appeal by way of Case Stated No. 164 succeeds to the extent that the awards of £150 to each one of the employees concerned are set aside, for the reasons given hereinbefore, and this case is remitted, with our opinion as contained in this judgment, to the Industrial Disputes Court so that it will proceed to modify its sub judice decision accordingly.
Bearing in mind all relevant considerations we have decided[*828] to make no order as to costs as regards the present proceedings before us.
Appeal by way of case StatedNo. 165 dismissed;appeal byway of Case Stated No. 164allowed to theextent of settingaside awards of £150 to eachone of the
employees concerned.No order as to costs.
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