In the case of Ali v Petroleum Company of Trinidad and Tobago, the Privy Council ruled that there was no implied term that a voluntary redundancy situation relieves an employee’s obligation to repay a loan.
Mr Ali was given a loan by his employer for living expenses during a period of study. The terms of the loan stated that it would be waived if he worked for the company for five years after completing his studies. He worked for 18 months before accepting an offer for voluntary redundancy and the loan was deducted from his redundancy payment.
The Privy Council held that there was an implied term that the employer would do nothing of its own initiative to prevent Mr Ali from providing 5 years’ service (excepting repudiatory breaches and unavoidable circumstances) but in this instance he had volunteered for redundancy.
This case is not binding on UK courts, however, it may have persuasive authority and highlights the importance of loan agreements being drafted carefully to protect against any unintended consequences.