Secretary of State for the Department for Environment, Food and Rural Affairs v Public and Commercial Services Union

Factual and Procedural Background

This appeal consolidates three cases that all turn on a “check-off” clause contained in individual contracts of employment within the civil service. The clause obliges the employer, if authorised by the employee and at no cost, to deduct union subscription monies from salary and pay them directly to the employee’s recognised trade union. The trade union, however, is not itself a party to any contract of employment.

At first instance, the union succeeded. The Court of Appeal, by a majority, reversed that decision, holding that the trade union could not enforce the clause under the Contracts (Rights of Third Parties) Act 1999 (“the 1999 Act”). One Lord Justice dissented. The Supreme Court granted permission to appeal, and the instant opinion is a concurring judgment by Judge Burrows agreeing that the appeal should be allowed.

Legal Issues Presented

1. Whether the check-off clause “purports to confer a benefit” on the trade union and expressly identifies the union for the purposes of sections 1(1)(b) and 1(3) of the 1999 Act, thereby engaging a rebuttable presumption that the union may enforce the clause.
2. Whether, under section 1(2) of the 1999 Act, the collective-bargaining context rebuts that presumption by demonstrating that the employer and employee did not intend the clause to be enforceable by the trade union.

Arguments of the Parties

Trade Union’s Arguments (summarised)

• The collective bargaining background is irrelevant once the clause has been incorporated into individual employment contracts.
• Only the objective intentions of the employer and employee matter for the purposes of section 1(2); the union’s intentions are irrelevant because it is not a contracting party.
• In any event, even if background material is admissible, nothing rebuts the statutory presumption that the union may enforce the clause.

Employer’s Arguments (summarised)

• Because the clause originated in an unenforceable collective agreement (see s. 179 Trade Union and Labour Relations (Consolidation) Act 1992), the contracting parties could not objectively have intended to confer enforceable rights on the union; otherwise the union would obtain indirectly what it cannot obtain directly.
• The collective-bargaining context therefore rebuts the presumption in section 1(1)(b), read with section 1(3), so that section 1(2) bars the union’s claim.

Table of Precedents Cited

Court's Reasoning and Analysis

Judge Burrows emphasises that sections 1(1)(b) and 1(3) together create a rebuttable presumption: once a contract term both (i) purports to confer a benefit on a third party and (ii) expressly identifies that third party, the third party is presumed entitled to enforce the term. Those two statutory conditions are conceded to be met in the present case.

The decisive question is therefore whether the presumption is rebutted under section 1(2). Applying orthodox principles of contractual construction, the court must consider admissible background—the “factual matrix”—but must not embark on a free-standing search for intention using inadmissible material.

The collective-bargaining context is admissible background because the check-off clause originated in a collective agreement and was later incorporated into individual contracts. However, that context does not demonstrate an intention to withhold enforceability from the union:

• No express term excludes third-party enforceability.
• No implied term (meeting the “officious bystander” criterion) can be identified that would do so.
• Permitting the union to sue is the most efficient and effective enforcement mechanism; employees themselves usually suffer no loss and individual actions would be impracticable.
• There is no logical reason why a clause negotiated collectively should, for that reason alone, exclude third-party rights when an identical clause negotiated individually would not.

Accordingly, the employer has not discharged the burden of rebutting the statutory presumption. Recognition that a collective agreement is unenforceable between employer and union (s. 179 TULRCA 1992) is not inconsistent with the parties later agreeing, in the employment contract, that the union shall have enforceable rights under the 1999 Act.

Holding and Implications

Appeal ALLOWED.

The trade union has a statutory right under the Contracts (Rights of Third Parties) Act 1999 to enforce the check-off clause against the employer. The immediate consequence is that the union may sue to compel compliance with the deduction-and-remittance obligations. The judgment clarifies, for the first time at Supreme Court level, how the rebuttable presumption in sections 1(1)(b), 1(3) and 1(2) operates, particularly where the contractual term originated in a collective agreement. No new general principle is created, but the decision underscores the limited circumstances in which collective-bargaining background will suffice to rebut the statutory presumption conferred on expressly identified beneficiaries.