Ali v Petroleum Co of Trinidad and Tobago
Privy Council (Trinidad and Tobago)
Citations:  UKPC 2;  ICR 531;  IRLR 432.
The claimant was the defendant’s employee. The defendant gave the claimant a scholarship to study abroad. This would pay the claimant’s course fees, and provide a loan to cover his living expenses. The parties agreed that if the claimant came back and worked for the defendant for five years, he would not have to repay the loan.
The claimant completed the course and returned to work for the employer. However, 18 months later, the defendant invited the claimant to take voluntary redundancy. When the claimant accepted, the defendant deducted the loan payment from his redundancy award.
The claimant brought an action for breach of contract. He argued that there was an implied term in the contract stating that loan would not be repayable if the claimant’s employment was terminated by or at the defendant’s behest (other than for dishonesty) before five years was up.
- Did the implied term contended for by the claimant exist?
- Was the defendant in breach of the implied term?
The Privy Council held in favour of the defendant. The proper term to be implied into the contract was that the defendant would do nothing to prevent the claimant from completing five years of service, unless the claimant was in repudiatory breach of contract.
On the facts, the defendant would not have made the claimant redundant if he had not accepted voluntary redundancy. Accordingly, they did nothing to prevent the claimant from completing the five year period and were not in breach of contract.
This Case is Authority For…
When applying the ‘necessity’ test for implying terms in fact, it is not enough to show that the contract would be improved by the suggested term. While it is necessary to show that the suggested term is fair, this is not enough on its own to warrant implying the term. Any term implied must be tailored to the necessity of the case.
A term cannot be implied into a contract if it is inconsistent with any of the express terms of the contract.
Lord Kerr dissented. He thought it was obvious that the parties would have agreed that the claimant would not have to repay the loan if he opted for a redundancy in circumstances where he had no guarantee of keeping his job.