Although courts can (and do) imply terms into a contract in certain circumstances, the Employment Appeal Tribunal (EAT) refused to do so in Lloyd v BCQ Ltd. This was because there was an express term in Mr Lloyd’s contract which was inconsistent with the term he wanted the court to imply.

Basic facts

Having started work for BCQ in 1978, the company took out a private health insurance (PHI) policy on behalf of Mr Lloyd in 1988. There was, however, no reference to it in a new contract dated November 1992, which contained a clause stating that it reflected “the entire understanding between the parties and supersedes all previous Agreements and arrangements…”.

After suffering a back injury in an accident in May 2007, Mr Lloyd returned to work briefly in July but went off again in August that year. In March 2010, he attended a board meeting at which he said he was unlikely to be able to return to work. He was signed off sick by his doctor for six months in April 2010 and then again in October.

On 18 November the company arranged to meet Mr Lloyd to establish whether he could return to work and warned him that he might be dismissed if he could not. A week later, as he was unable to say when he might return, the company gave him six months’ notice of termination. At the same time, it confirmed his PHI benefits would continue to be paid until his 60th birthday on 21 December 2011. Mr Lloyd was paid the balance due to him as a lump sum at the end of his notice period on 31 May 2011.

Relying on the decision in Aspden v Webbs Poultry and Meat (Holdings) Limited, Mr Lloyd brought a claim for breach of contract, among other things. He argued there was an implied term in his contract that BCQ would not dismiss him when he was off sick and in receipt of PHI benefits, if, as a result, he would be disqualified from receiving the benefits.

Tribunal decision

Noting that his 1992 contract of employment was an “all terms contract” which made no reference whatsoever to PHI cover or to any right to it, the tribunal held that Mr Lloyd had no contractual entitlement to any PHI benefits.

It added that even if the PHI policy had been included in the terms of the employment contract, there was no breach and no loss as he had received all the payments to which he was entitled up to his 60th birthday.

EAT decision

The EAT dismissed his appeal and distinguished Aspen on the basis that even if that case could be taken as a rare example where terms could be implied to qualify an express right it had been necessary in that case in order to reconcile express terms of the contract which were mutually inconsistent.

By contrast, there was an express term in Mr Lloyd’s contract which permitted the termination of his contract by notice which would trigger the payment of his PHI benefit.

There was therefore no scope in this case for implying the term relied on by Mr Lloyd, especially as there was no evidence to support his argument that he had a contractual right to benefits under the PHI policy. In any event, it agreed with the tribunal that as Mr Lloyd had received the equivalent of the PHI benefit, he had suffered no loss and there was therefore no breach.

Finally, said the EAT, even if it was to imply a term along the lines suggested by Mr Lloyd, it could only be implied in cases where the dismissal was “without reasonable and proper cause”. In this case, he had been dismissed for a good reason - his long absence from work and the fact that he had no idea when he might be fit enough to return.

Comment

It is worth remembering, as in the case of United Bank v Akhtar, that a tribunal will draw a distinction between implying a term which contradicts an express contractual term, which is not allowed and implying a term which controls the exercise of a discretion that is expressly set out in a contract, which is allowed.