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Employment Law Case Update: Ali v Petroleum Company of Trinidad and Tobago
- AuthorEmployment Team
Sometimes education leads to destitution… In Ali v Petroleum Company of Trinidad and Tobago (Petronin) Mr Ali had worked for Petrotrin for 11 years when he was awarded a scholarship to study abroad for a degree. Petrotrin also paid Mr Ali a monthly living allowance in the form of a repayable loan. The loan was to assist with living costs - however an express term was that loan repayment would be waived if Mr Ali worked for the company for five years once finishing his studies.
Mr Ali completed his degree and did return to work for Petrotin but he did not complete the five years of service required due to his successful application for voluntary redundancy 18 months after his return to work. When calculating the redundancy pay, Petrotrin deducted the value of the maintenance loan from the balance. Unfortunately this left Mr Ali with no redundancy pay. The redundancy payment Mr Ali would have received would have been approximately £28,000.
Mr Ali issued proceedings in the Trinidadian courts arguing that he was not contractually obliged to repay the loan. On appeal to the Privy Council he argued the loan should be waived as Petrotrin had terminated his employment within the five years. This argument was unsuccessful as the Privy Council held that Mr Ali had freely chosen to apply for voluntary redundancy - he was not obliged to do so and so it was right for him to be required to repay the loan. The case also turned on whether there was an implied term in the loan agreement that Petrotrin could not dismiss Mr Ali within that five year period. The majority decided there was not. They also decided there was an implied term that if Petrotrin did prevent Mr Ali completing five years’ service then the repayment would be waived.
Privy Council decisions are not legally binding in the UK but can be persuasive. This case demonstrates that potentially employees in a voluntary redundancy situation will be required to repay loans or alike to the employer; compulsorily redundant employees could potentially be excused. To avoid the risk of dispute any loan agreements should expressly state the terms in the event of termination of employment.
This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice. All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.