Nokes v Doncaster Amalgamated Collieries Ltd (1940)
[1940] AC 1014 — Simple, classroom-style explainer for students.
Quick Summary
The House of Lords said: no automatic transfer of a worker’s contract under Section 154 (Companies Act 1929). A contract of personal service needs the employee’s consent. Section 154 moves assets and liabilities, but it does not force a new employer on a person. So, no statutory novation. The summons against Mr. Nokes failed.
Issues
- Is personal service a transferable property right under Section 154?
- What happens to employees when a company dissolves and its business is transferred?
- Does Section 154 allow statutory novation of employment contracts without consent?
- Is there a statutory exception in Section 154 that overrides common law on non-transferability of personal service?
Rules
- Use the ordinary meaning of the statute (golden/literal rule) unless Parliament clearly says otherwise.
- Statutes may change prior law, but courts need clear words for such change—especially against deep common-law principles.
- At common law, a personal service contract is not transferable without the worker’s consent.
Facts (Timeline)
Before 1937: Mr. Nokes worked for Hickleton Main Co. Ltd. under a contract of service.
4 Jun 1937: Chancery Division made an order under Companies Act 1929, s.154(1) transferring property, rights, liabilities and duties to the respondent.
After transfer: Nokes continued working and was paid by the new company, thinking his old contract still stood.
7 Oct 1937: He absented himself. He would be liable under Employers and Workmen Act 1875 s.4 only if a contract with the respondent existed.
Lower courts: Summons succeeded; appeals to the Divisional Court and Court of Appeal were dismissed.
House of Lords: Final appeal allowed.
Arguments
Appellant (Nokes)
- Section 154 does not transfer personal service contracts.
- No consent → no new employer; otherwise it is an unlawful statutory novation.
- Common law protects a worker’s choice of employer.
Respondent (Company)
- The transfer order carried over all rights and duties, including contracts.
- Practical reality: the business continued; the employee kept working and was paid.
- So, a contract with the new company should be inferred.
Judgment
The appeal was allowed. The Lords held that Section 154 transfers only rights and liabilities that are inherently transferable. A contract of personal service is not one of them. There was no contract between Nokes and the respondent by force of statute, so the summons must be dismissed.
Ratio
- Section 154 does not override the common-law bar on transferring personal service without consent.
- No statutory novation created by Section 154; clear words would be needed.
- The statute is read with its ordinary meaning; rights pass only if they are capable of assignment.
Why It Matters
The decision protects the worker’s freedom to choose an employer. It guides company transfers: assets can move by order, but people are not property. It also shows careful, text-based statutory interpretation.
Key Takeaways
- No automatic transfer of employment contracts under s.154.
- Consent is essential for personal service contracts.
- Courts require clear words to upset core common-law rules.
- Businesses should use notice + termination + fresh offers on transfer.
Mnemonic + 3-Step Hook
Mnemonic: “No Obligation, Keep Employer’s Say” → N-O-K-E-S.
- No obligation: The law does not force a new employer on the worker.
- Keep consent: Personal service needs the employee’s yes.
- Section 154 limited: Transfers only what is assignable, not personal service.
IRAC Outline
Issue
Can Section 154 transfer an employee’s contract and bind them to a new employer without consent?
Rule
Literal meaning prevails; personal service is non-transferable absent clear statutory words.
Application
Section 154 lists transferable items; it does not expressly include personal service. No consent, no new contract.
Conclusion
No contract with the respondent arose by statute; the summons fails; appeal allowed.
Glossary
- Personal Service
- A job that depends on the individual’s skills and trust; not freely transferable.
- Statutory Novation
- A switch of contracting party by statute alone. Rejected here for employment contracts.
- Section 154 (1929)
- Provision enabling court-ordered transfers of a company’s property, rights, and liabilities.
FAQs
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Publisher: The Law Easy — Reviewed by The Law Easy
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