In May 2015, HM Revenue and Customs (HMRC) ended its system of check-off for PCS union members’ subscriptions. In Smith and ors v The Commissioners for HMRC, the High Court held that it was irrelevant that the union had waited for almost six years before it issued legal proceedings for breach of contract after making clear its objection to the variation of its members’ contracts.
Basic facts
The four claimants in this case worked for HMRC and were also members of the civil service union, PCS.
Up until the end of April 2015, their union subscriptions were collected by means of “check-off” arrangements, which meant that they were deducted directly from their pay via the payroll system and paid to the union by HMRC.
However, as part of a general government policy to get rid of check-off in the public sector, HMRC told the PCS in January 2015 that it intended to remove this facility later that year. The claimants argued that they had a contractual entitlement to check-off.
The union also argued that it was entitled to bring a third-party claim against HMRC under the Contracts (Rights of Third Parties) Act 1999 in respect of the subscriptions payable by check-off and that it was also entitled to be compensated for the damage caused by the breach of contract.
For its part, HMRC argued that its employees had accepted a variation of their contracts to exclude check-off or had waived the breach when the facility was removed.
Even if the acceptance was not definitive at first, it argued that as the claimants had waited for almost six years before issuing proceedings “any objective bystander” would assume that the matter had been dropped.
High Court decision
Following similar cases against other government departments - Communities and Local Government; Work and Pensions (weekly LELR 476); Department for Environment, Food and Rural Affairs (weekly LELR 786); and the Home Office – the High Court found against HMRC.
The judge first of all dismissed the argument that the claimants had not objected to the removal of check-off. He also held that the normal contractual limitation period of six years for bringing a claim of breach of contract applied. The fact that the claimants had waited was, therefore, irrelevant.
The requirement to show unequivocal conduct or an omission rested with the party trying to prove the variation or waiver (in this case, HMRC). As it had not been able to point to any conduct or omission on the part of the claimants, it had not shown that the right to check-off was removed.
Given that the claimants had not accepted the variation of their contracts, the right to check-off remained. As such, PCS had the right under the Contracts (Rights of Third Parties) Act 1999 to enforce the claim on its own behalf.