Supreme Court allows appeal finding indefinite guarantees on seconded staff status and seniority binding despite fleet maintenance plans.

THE SUPREME COURT

042/04

Denham J

Geoghegan J

Fennelly J

McCracken J

Macken J

Between:

William King, Garrett Madigan, William Graham, Dermot D’Arcy, Christopher Healy, Brendan Baker, Matt Graham, Hugh

Rafferty, Neil Quinn, John O’Donnell, Patrick Curry, Richard P. O’Connor, Patrick Gleeson, John Doyle, Liam Colgan, James A.

McCann, Christopher O’Connor, Patrick Foley, Gerry Cummins, Thomas Burke, Alan Brodigan, Peter J. Conway, Michael

Dardis, Michael Derham,

AND BY ORDER

Aidan Boland, Eamon Buckley, John Keenan, James Maher, Eric Norton, Vincent O’Connor

AND BY ORDER

Richard Barber, George Barker, Stephen Brogan, Martin Burke, Thomas Burke, Jim Byrne, Tim Carroll, Laurence Clarke, Jim

Doyle, Brian Flood, Padraic Geraghty, Adrian Heron, James Lewis, Patrick Macken, Patrick Molloy, Noel Murphy, Nollaig

O’Mahony, Gerald O’Sullivan, John O’Sullivan, Nicholas Radford, William Sharkey, David Smith, Peter Smith, Matthew Walsh,

Brian Webberley

Plaintiffs/ Appellants

AND

Aer Lingus Plc

Defendant/ Respondent

Judgment of Mr Justice McCracken delivered the 20th day of December 2005

Background

1. Prior to 1989 the Appellants worked in the maintenance and engineering department of the Respondent in Dublin Airport. At that

time by far the greater part of their work was the maintenance and upkeep of the Respondent’s fleet of aircraft and ground vehicles.

About this time the Respondent had plans to expand the maintenance and engineering department to enable it to service, not only

the Respondent’s own aircraft, but to obtain contracts to service aircraft from other airlines. They determined that the most efficient

way to do this would be to form a separate company within the group, to be known as TEAM Aer Lingus (hereinafter called “Team”).

These plans would involve the transfer of the maintenance and engineering staff from the Respondent to Team, a move which was

initially opposed by many of such staff and the Trades Unions representing them. Ultimately, after protracted negotiations, and

certain undertakings and guarantees having been given to the staff by the Respondent, Team commenced business with most of the

maintenance and engineering staff transferring, at least physically, to Team. These proceedings are concerned with the

consequences of the negotiations which took place, particularly in the light of subsequent events whereby Team was ultimately sold

by the Respondent to a Danish company called FLS Aerospace. To understand the issues now before the Court it is necessary to

detail the events leading up to the creation of Team and also the events which occurred at and after the sale of Team.

Negotiations on Setting up Team

2. It is not necessary to particularise all the negotiations which took place, but they were lengthy and complex. The workers were

naturally anxious that the position and status which they had acquired as employees of the Respondent should not be prejudiced, and

at the time there undoubtedly was a perception that such employment was extremely secure. They were particularly anxious to

protect their position should anything happen to Team. The negotiations progressed through various stages and three ballots of the

workers involved were held. The Respondent’s proposals were rejected in the first two ballots, but following further representations by

the Respondent, the proposals were accepted in the third ballot.

3. It should be said that at all times the Respondent acknowledged that the existing staff would retain their identity and contracts of

employment with the Respondent and would be seconded to the new company but would continue to enjoy full status and conditions

as an employee of the Respondent. However, the workers were not satisfied with general statements of this nature and required more

detailed information and undertakings from the Respondent.

The Respondent’s Representations

4. There was a large body of correspondence leading up to the taking of the final ballot which approved the Respondent’s proposals.

The final proposals evolved gradually through this correspondence and for the purpose of this decision it is sufficient to quote from

three of these documents, albeit at some length.

5. On 30th April 1990 the Respondent’s general manager-personnel, Mr John O’Neill, wrote to all craft workers in the following terms:-

“This letter compliments all previous correspondence on the matter.

All Dublin based AME’s and SME’s on secondment to TEAM will remain as Aer Lingus employees and will retire as Aer Lingus

employees.

The tradesmen’s agreement will continue to apply and all conditions including Aer Lingus ID cards, pensions, privileges, rights

and seniority will continue in existence as heretofore.

Time accumulated in TEAM will count as Aer Lingus service and if subsequently promoted the above guarantees will continue

to apply.

New staff will be recruited under the terms of the tradesmen’s agreement. The conditions will be no less favourable than

those applying to current employees.

In the unlikely event of TEAM getting into business difficulties, existing employees will continue to maintain the Aer Lingus fleet

as a minimum.

New staff will commence immediately.

Existing staff will not be required to second pending a joint study group resolving any outstanding problems in regard to Aer

Lingus staff working in TEAM.”

6. On 2nd July 1990 Mr John O’Neill, in a letter marked “PERSONAL” wrote to each of the relevant craft workers including each of the

Appellants in the following terms:-

“DEVELOPMENT OF MAINTENANCE IN ENGINEERING BUSINESS.

Dear

I refer to the establishment of TEAM-Aer Lingus and the question of your present Aer Lingus status, working conditions and

privileges.

The purpose of this letter is to advise you on a personal basis that while you will be work within TEAM you will however remain

a member of Aer Lingus staff and will retire as a member of Aer Lingus staff, retaining full Aer Lingus retiree conditions.

Your rights, privileges and seniority as a staff member of Aer Lingus will be continued on the same basis as apply to all other

Aer Lingus staff.

Your present seniority will also accumulate within TEAM. If promoted in the future, within TEAM, you will not be required to

resign from Aer Lingus and you will still retain the guarantees within this letter.

This letter is a personal guarantee to you from Aer Lingus.”

7. A final agreement was reached between the Irish Congress of Trade Unions, representing the various craft unions, and the

Respondent, which agreement was circulated to all personnel involved just before the final ballot was taken. It is a somewhat unusual

document in that it is divided into a part A and part B, and there was some debate before this Court as to the status of the

representations in part B, but there is no doubt that the contents of part A were intended by all parties to constitute a legally binding

agreement. Part A reads as follows:-

“The company have agreed to convert their guarantees concerning your position as an Aer Lingus employee into an

irrevocably legally binding form such as if Team did not exist.

Lawyers appointed by both parties have agreed the following heads of agreement for such a guarantee.

Aer Lingus has agreed to incorporate into an irrevocably binding agreement guarantees to individual employees already

communicated in various documents. The legal effect of these guarantees is to preserve the status of each individual

employee such as if Team did not exist. Lawyers acting for the ICTU and unions representing all employees affected have

approved Heads of Agreement as agreed with lawyers acting for Aer Lingus. Following are the Heads of Agreement which will

give legal sanction to the guarantees given:

1 Each such Aer Lingus employee who will work within the new maintenance company will remain a member of Aer Lingus

staff.

2 All working conditions, rights and privileges including ID cards, pension entitlements, seniority and other benefits will be

preserved for each Aer Lingus employee working within the new Company.

3 Each such individual’s seniority and service held within Aer Lingus will continue and accumulate in the new Company.

4 Promotion within the new Company will not affect the guaranteed Aer Lingus status of each such individual working within

the new Company.

5 The agreement will provide that the guarantees given will become part of the individual’s contract of employment and will be

enforceable by each such individual employee.

6 No change in the terms of the agreement can take place without the individual consent of each employee affected.

If the ballot is in favour of the proposed agreement, the above Heads of Agreement will be formally drafted in a contract to be

signed by Aer Lingus and by the Unions as agents of individual employees.”

8. Part B then contains a number of matters in which it is stated that the company have agreed in addition, one of which is:-

“The Company agrees that it will continue to retain fifty per cent interest in the new Company.”

History of Team

9. The final ballot was held following receipt of this document, in which the proposals were accepted by a majority. In due course the

maintenance and engineering staff were seconded to Team and in the short term in fact enjoyed better conditions than the

Respondent’s other employees in that they got an increment and a national wage increase in 1981, which was not given to the

Respondent’s employees. However, this was short lived and in 1993 the aircraft maintenance business ran into difficulties resulting in

a lock-out of Team workers for a number of weeks. The present proceedings were commenced in 1994 claiming that the lock-out

constituted a breach of contract, but as matters progressed, the claims were expanded to include the present disputes.

10. Between 1994 and 1996 the persons seconded to Team did not receive either national wage agreement pay increases nor any

incremental increase, both of which were received by the remaining employees of the Respondent, and the wages of Team employees

fell below those of the remaining employees of the Respondent.

11. In 1996 and 1997 Team began to prosper again and the Respondent decided to seek a purchaser for Team. In 1998 FLS

Aerospace agreed to purchase Team and negotiations then commenced with the workforce as to the conditions under which they

would be willing to remain with Team under the new management. As a result of these negotiations very attractive terms were

offered by the Respondent, subject to the individual employees who remained on with Team agreeing to waive all rights they might

have against the Respondent on foot of the earlier guarantees and representations. In the event, some ninety-seven per cent of

employees remained on, and three per cent, including the Appellants herein, opted to return to the Respondent. At this stage the

Respondent only had a very small maintenance and engineering division, largely looking after its commuter aircraft. About eighty

persons transferred back, but there were only some forty technical jobs available. The remaining forty employees, including many of

the Appellants, were redeployed in other jobs in the Respondent, some of which would normally pay a considerably lower salary than

that paid to maintenance and engineering workers.

These Proceedings

12. The statement of claim was amended on several occasions and ultimately sought a number of declarations in relation to the rights

of the Appellants and damages. The matter was heard in various stages by the High Court (Kearns J.), and I will refer to the

judgments in more detail, but ultimately by order dated the 4th day of June 2003 the Court declared that:-

“1 The plaintiffs were at all material times and continue to be in the employment of Aer Lingus.

2 The plaintiffs are entitled as employees of Aer Lingus upon the end of their secondment to TEAM Aer Lingus to be treated as

though TEAM had never existed and were to be paid the same levels of remuneration as mechanical engineers employed by

Aer Lingus who had not been seconded, to have their seniority fully recognised and to be placed on the appropriate

incremental scale as though they had never left Aer Lingus, such entitlement to be limited to a period of four years following

the end of their secondment with TEAM Aer Lingus.”

13. The Court also awarded damages based on these declarations.

14. Although the Appellants substantially succeeded in these proceedings, they have appealed in relation to the limitation of their

entitlement to a period of four years from the end of their secondment to Team.

15. The Respondent did file a notice to vary, but it is no longer pursuing it, and therefore is accepting the findings of the learned trial

Judge. For this reason, most of the issues dealt with by the learned trial Judge are no longer in dispute, but it is useful to summarise

very briefly the findings of his several judgments.

Judgments of the Learned Trial Judge

16. The first judgment, delivered on 15th April 2002, dealt with the issue of whether the Appellants were entitled to parity of pay

during the period of their secondment to Team. The learned trial Judge held there was no such entitlement, and this is not an issue

before this Court. However, the learned trial Judge ended his judgment on that issue by saying:-

“It seems appropriate, having regard to the defined agenda which the Court undertook, to defer to a later date any

submissions the parties may wish to make, particularly with regard to the work circumstances in which the present plaintiffs

find themselves following their return from secondment. In other words, are they entitled to maintenance work which accords

with their qualifications and experience, or, if such work is not available, are they entitled to compensation or damages in lieu

thereof? In this regard I am thinking in particular of the assurance given to transferring craft workers by Mr O’Neill’s letter of

13th April 1990 in which he said:-

“In the unlikely event of Team getting into business difficulty, existing employees will continue to maintain the Aer Lingus

fleet as a minimum.””

17. There was then a further hearing dealing with this issue, in the course of which Counsel for the Respondent accepted that the

Appellants were employees of the Respondent. Having heard further submissions the learned trial Judge delivered his second judgment

on 8th October 2002. In the course of that judgment he held that the agreement made in 1990 did not preclude the Respondent from

selling off Team at some future point in time, and indeed that it would have been commercial madness for the Respondent to bind its

future behaviour indefinitely in such a fashion. What it did mean, in his view, was that the Respondent would not sell off Team

without the substantial agreement of the workforce and their union representatives, but he held that agreement had been secured

given that ninety-seven per cent of the Team workers agreed to transfer to FLS Aerospace.

18. The learned trial Judge then went on to consider the rights of those who had opted to return to the Respondent. His findings in

this regard are set out at page 10 of his judgment as follows:-

“I conclude therefore on this issue that on returning to Aer Lingus in 1998, the claimants were at that point entitled to do so

as if Team had never existed, that they were then entitled to be paid the same levels of remuneration as mechanical

engineers employed by Aer Lingus who had not been seconded. They were further entitled, in my view, to have their seniority

fully recognised and to be placed on the appropriate incremental scale as though they had never left Aer Lingus. However, I

am not holding that the commitment that such workers would “continue to maintain the Aer Lingus fleet” was an open-ended,

indefinite or life time commitment which placed Team workers in an altogether superior position to those working in Aer

Lingus, but rather that on their return and from that point onwards they should be no better off and no worse off than Aer

Lingus staff engaged in maintenance and engineering work at that time, the only difference being that they were entitled to

such additional benefits or security as was conveyed by the term and representations contained in Mr O’Neill’s letter.

“Continue” in my view is not to be taken in such a volatile market as meaning “indefinitely” or “forever”. It is virtually

impossible to further clarify what period of time this word should be taken to include. It must at a minimum mean that such

work, its equivalent, or compensation in lieu thereof, would be available for some reasonable time after Team workers sought

and found relocation in Aer Lingus rather than FLS.”

19. The learned trial Judge then said his ruling would help to clarify the position from 1998 to the date of the judgment but that any

further or ongoing consequences were by consent a matter for another day. It is his finding that work on the Respondent’s fleet or its

equivalent or compensation in lieu thereof would only be available for a reasonable time after relocation with the Respondent that has

led to this appeal. In the judgment he left over for another day what was the meaning of “some reasonable time”.

20. On 29th and 30th April 2003 there was a further hearing in relation to what could be considered a reasonable time. Counsel for

the Appellants made it quite clear at the commencement of the hearing that the Appellants were contending that the question of a

reasonable time did not arise at all, and indeed that the issue of a reasonable time had not been pleaded by the Respondent. After

hearing arguments on the point, the learned trial Judge said in the course of the hearing of 29th April 2003:-

“On this argument this morning I prefer the submissions advanced by Mr Hanratty. I am going to hold that the reasonable

period was from the date of return of the workers concerned from Team to Aer Lingus, i.e. in 1998 up to the time the

judgment in this matter was delivered in October 2002, i.e. a period of four years, or whatever the relevant period is so

calculated.”

21. The Court then went on to deal with the amount of compensation to be awarded.

The Issue on this Appeal

22. It is now accepted by the Respondent that the Appellants were at all times employees of the Respondent, and that by opting to

return to the Respondent after the sale of Team, they were entitled to be treated as if they had never been seconded at all, but had

at all times remained in the employment of the Respondent, and that none of their rights or entitlements would be affected by the

secondment. Thus the sole issue remains as to whether the Appellants rights in this regard are in some way limited in time.

Conclusion

23. Counsel on behalf of the Appellants accept that on any construction of the agreement or guarantees, the Appellants can be in no

better position than they would have been if they had not been seconded, and in no better position than any of the Respondent’s

maintenance and engineering employees who were not seconded but remained working for the Respondent. In particular, they accept

that they are on just as much a risk as they ever were in relation to the vicissitudes of the airline industry. They accept that should

there be a need for redundancies or redeployment they would be on the same risk as if they had always remained working in the

Respondent. What they fear is that the limitations imposed by the concept of a reasonable time would in fact mean that at the end of

the four year period they would no longer have the benefit of the agreement and guarantees, and could in effect be demoted.

24. The learned trial Judge based his decision on a consideration of how long the Respondent was bound to continue to maintain their

own fleet of aircraft. He was obviously correct in ruling that commercially such a commitment could not have been expected to last

forever. However, that is only one comparatively minor part of the undertakings and guarantees given to the Appellants, and indeed it

is not included in Part A of the final heads of agreement reached between the Irish Congress of Trade Unions and the Respondent.

The guarantees given in that document, which are expressed to be “an irrevocably legally binding form such as if Team did not exist”

related to the status and seniority of those being seconded to Team. That document was the culmination of lengthy negotiations,

and the final ballot approving the setting up of Team was clearly based on the contents of that document.

25. It is interesting to note that the only reference to maintaining the Aer Lingus fleet is contained in Mr. O’Neill’s letter of 30th April

1990 which does not appear to form part of the legally binding guarantees, but rather is something which the Respondent had

represented as some form of additional comfort to the workers being seconded.

26. I cannot see how it could have been the intention of the parties that matters such as seniority, status, working conditions, rights

and privileges including pension entitlements could possibly be limited in time. The whole purpose of giving guarantees was to reassure

all persons being seconded that they would remain in exactly the same position as if the maintenance of the fleet had never been

transferred to Team. This commitment could only make any sense if it was unlimited in time. I would emphasise that it does not

amount to giving any special privileges to the Appellants, but rather puts them in the same position in which they would have been

had Team never existed. To limit these guarantees would, in my view, place the Appellants in a worse position than their colleagues

who had not transferred to Team, which was what the lengthy negotiations sought to avoid. I would add that the Appellants are, as

already explained, subject to any of the ordinary incidents of an employment contract, in particular, termination on notice, in

accordance with the terms of the contract, dismissal on reasonable grounds and redundancy.

Accordingly I would allow this appeal.