A 2012 letter recording a collective agreement on Metro staff pay was interpreted as increasing a shift allowance as well as basic pay. The Supreme Court held that the letter can in principle be rectified for mistake even though the collective agreement is not itself a legally enforceable contract, but Nexus had sued the unions rather than the employees whose contractual rights would change. Nexus cannot use rectification to reopen the existing Anderson wage claims.
The pay agreement
Nexus employs staff on the Tyne and Wear Metro and recognises the National Union of Rail, Maritime and Transport Workers and Unite the Union for collective bargaining. In 2012, pay for employees in grades 1 to 3 included basic pay, a shift allowance calculated as a percentage of basic pay, and a productivity bonus. Despite its name, the bonus was not discretionary: it was 25.5% of basic pay.
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Nexus offered to “consolidate the productivity bonus (25.5%) into basic salary”, and the unions accepted. The agreement was recorded in a letter from Nexus dated 10 October 2012. That letter was placed with the Red Book, the principal collective agreement on conditions of service, and formed part of it. The unions said that raising basic pay by 25.5% also raised the shift allowance. Nexus denied that this was intended or required, and continued to pay the allowance without that increase.
Enforceable for employees, but not between Nexus and the unions
Section 179(1) of the Trade Union and Labour Relations (Consolidation) Act 1992 conclusively presumes that a collective agreement is not intended to be a legally enforceable contract unless it is in writing and says that the parties intend it to be enforceable. The Red Book, including the letter, contains no such statement. It was common ground that it is not a contract between Nexus and the unions.
Each relevant employee’s written particulars nevertheless incorporate the Red Book. Once incorporated, its terms are enforceable between employer and employee. The parties are different, so the statutory presumption does not apply to the employment contract. It was not disputed that the bonus terms are legally enforceable in that way.
From the wage claims to the rectification action
In the Anderson proceedings, employees successfully claimed that Nexus had made unauthorised deductions by failing to increase their shift allowance. The tribunal’s decision on liability became final. Only the remedies remained to be determined.
Nexus then sued the unions for rectification of the letter recording the agreement. It alleged either a shared mistake or a mistake of its own known to the unions. The truth of those allegations was disputed.
The High Court allowed the claim to proceed. The Court of Appeal dismissed it. The Supreme Court agreed with that outcome but took a different view about which document could in principle be rectified.
Which document can be rectified
Rectification corrects a document which fails to record what was agreed. It does not change a transaction simply because its consequences proved unwelcome. Although the letter was not contractually binding between the union and the employer, its wording had legal consequences once incorporated into the employees’ contracts.
The Supreme Court held that the employment contracts themselves cannot be rectified. The employees were not parties to the letter or the negotiations, so there is no basis for attributing to them a shared intention or knowledge of Nexus’s mistake. A union bargains “on behalf of” employees only in a loose sense. It is not their agent, particularly where some are not members, are employed later, or do not want the union to negotiate for them. The union contracts as principal.
The incorporation clause adopts the text of the Red Book, not the wording the negotiators meant to use but failed to use. There is only one letter. If that letter were rectified, the incorporated terms and the employees’ rights would change. There is no separate contractual document to rectify. The Court of Appeal was therefore wrong to say that Nexus had aimed at the wrong document.
It was also wrong to treat unenforceability as a complete barrier. Equity will not act in vain, and correcting a document that affects no legal rights would normally be futile. Here the letter creates no rights between Nexus and the unions, but its incorporated wording does create rights between Nexus and the employees. Rectifying it would alter those rights. The document need not, considered alone, create legal rights.
The proper defendants
Nexus had nevertheless sued the wrong parties. The unions had no enforceable rights or obligations under the letter. It was the employees whose contractual rights would change if the letter were rectified, and the employees had not been made defendants.
The unions’ involvement in the negotiations might make them important witnesses, but it did not make them the proper defendants. The practical difficulty of suing employees did not justify deciding their contractual entitlement in their absence.
The Anderson claims and the tribunal
An employment tribunal cannot grant an order for rectification. In determining a wages complaint, however, it can treat a document as rectified if the requirements for that equitable relief are proved. Nexus could have raised the alleged mistake as a defence before the Anderson tribunal decided liability.
It was too late to introduce that defence at the remedies hearing. The liability decision was final. A new action designed to deprive the Anderson claimants of its benefit would be an abuse of process.
Verdict: The Supreme Court unanimously dismissed Nexus’s appeal. Fresh proceedings concerning rectification would have to be brought against the affected employees. Nexus could not use such a claim to reopen the wages and deductions already at issue in Anderson. The Court did not decide what defences might be available to later claims.
