Mr J. McColl v HCT Group — 2021

Mr J. McColl was employed by HCT Group from 13 November 2000 until 27 November 2020. His contract included a redundancy clause stating that the redundancy settlement would be two weeks' gross pay for each full year of service and that redundancy payment would be subject to "funding availability". When he was made redundant, he received statutory redundancy and notice pay, but not the enhanced contractual redundancy payment. He brought a breach of contract claim for the unpaid contractual enhancement, which he calculated at £52,321.57.

The tribunal treated the central issue as the construction of clause 24.4. It rejected the Respondent's case that the phrase meant there had to be a "sufficient surplus of funds", and it also rejected the Claimant's submission that payment was required unless it would "tip the Respondent into insolvency". Applying ordinary contractual construction principles, including the contra proferentem rule, the tribunal held that "funding availability" meant immediately available funds sufficient to make the enhanced redundancy payment, that the funds were not barred by statutory or regulatory duties from being used for that purpose, and that making the payment would not create a real and material threat to the Respondent's going concern status.

On the facts, the tribunal accepted that HCT Group was under serious financial pressure in 2020, but found that it continued to operate as a going concern, had significant cash balances, had agreed repayment plans with HMRC and a leasing company, and was still paying suppliers. It also took account of the fact that enhanced redundancy payments had been made to employees in the February 2020 redundancy exercise. The tribunal found that the Respondent had not established a lack of funding availability and, on the balance of probabilities, the Claimant had shown that the Respondent did have the necessary funding availability to pay his enhanced redundancy in November 2020.

The tribunal therefore found the Respondent in breach of contract for failing to pay the contractual enhanced redundancy payment. It recorded the shortfall as £52,321.57, but ordered only £25,000 because that was the maximum sum it could award in the tribunal's contract jurisdiction.