England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE EATRF 98/0313/3

Royal Courts of Justice

Strand

London WC2

Wednesday, 17 March 1999

B e f o r e:

LORD JUSTICE BELDAM

LORD JUSTICE WARD

LORD JUSTICE MANTELL

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CARVER (NEE MASCARENHAS )

APPELLANT

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SAUDI ARABIAN AIRLINES

RESPONDENT

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(Transcript of the handed down judgment of

Smith Bernal Reporting Limited, 180 Fleet Street,

London EC4A 2HD

Tel: 0171 421 4040

Official Shorthand Writers to the Court)

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MR D BEAN QC with MR T LINDEN (Instructed by Messrs Pattinson & Brewer, London WC1N 3HA) appeared on behalf of the Appellant

MR T BRENNAN (Instructed by Messrs Clifford Chance, London EC1A 4JJ) appeared on behalf of the Respondent

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J U D G M E N T

(As approved by the Court )

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©Crown Copyright

Wednesday, 17 March 1999

J U D G M E N T

LORD JUSTICE MANTELL:

This appeal is concerned with the extent of the Employment Tribunal’s jurisdiction to entertain claims under Part X Employment Rights Act 1996 and Part II of Sex Discrimination Act 1975. The point has been described as important and one on which guidance would be welcome.

Thankfully the facts are straightforward and I can take them quite shortly. For nearly ten years until her resignation on 10th April 1996 the appellant worked for Saudia Arabian Airlines as a flight attendant. The contract of employment (dated 16/4/86) was expressed to be subject to the laws of the Kingdom of Saudia Arabia. Further “the Commission for Labour and Settlement Disputes of the Kingdom Saudia Arabia shall settle any dispute arising from the implementation of the terms and conditions of this contract when such disputes are not settled amicably by the two parties.” The contract made no provision as to where the appellant would be based save that “the Employee may be based at any location to which Saudi operates in or out of the Kingdom and may be transferred from one location to another.” By another term “this contract will be treated cancelled without notice or compensation to the Employee should any of the conditions stipulated for employment or service continuation cease, such as medical or physical fitness, or pregnancy.” The appellant did her training in Jeddah and then transferred to Bombay which was, so it appears, her place of origin and her domicile. After about four years she moved to London which remained her base until she resigned in 1996. During the time that she was in London all her tours of duty began and ended at Heathrow. She did a certain amount of work at the airport amounting normally to 1½ hours before flights and on leaving Heathrow the first hour of any flight would have been within British airspace. Usually any long haul flight would have been between London and Jeddah or London and Riyadh although there would be intermediate flights between Jeddah and/or Riyajd and other destinations in the Middle East. After returning to Heathrow there would be a period of debriefing and in the nature of things the appellant spent days in London on standby. Her contract required her to fly seventy two hours per month in order to qualify for full salary. There remains a question as to whether or not the majority of her working time was spent within or without Great Britain.

She claims to have resigned because she wanted to have a baby and pregnancy was incompatible with her continuing in employment. So she alleges that she has been unfairly constructively dismissed in breach of section 94(1) of the Employment Rights Act 1996 and to have been discriminated against by her employer on the ground of her sex contrary to section 6(2)(b) of the Sex Discrimination Act 1975.

On 5th December 1996 the Employment Tribunal (then styled the Industrial Tribunal) ruled that it had no jurisdiction to hear either complaint. It found the facts to which I have adverted and also stated the following: “her contract required her to fly for seventy two flying hours per month to qualify for her full salary. A number of ways of calculating the percentage of her working time taking place within Great Britain and outside it were suggested to the Tribunal. It has taken the view that if her normal working week was forty hours then 72/160 would indicated that more of her time was spent in the UK than outside it.” The tribunal reminded itself by section 196(2) and (3) that in a case such as this the right not to be unfairly dismissed did not apply to employment where “under the employee’s contract of employment he ordinarily works outside Great Britain” and in relation to the claim under section 6 of the Sex Discrimination Act 1975 that by section 10 the right not to be discriminated against does not arise if “the employee does his work wholly or mainly outside Great Britain.”

The decision arrived at was as follows:

“We have been referred to a number of cases including Todd -v- British Midland Airways Ltd 1978 IRC 995, a Court of Appeal decision, Iran National Airlines Corporation -v- Bond a decision of the Employment Appeal Tribunal in March 1980 and Janata (sic) Bank -v- Ahmed (Qutubuddin) [1981] ICR 791, also a decision of the Court of Appeal. We have considered the decision given in the Todd case that where the contract of employment is not conclusive as to where the employee ordinarily works then the Tribunal should apply what is known as the “base test”. We have also compared the facts in the case of Iran National Airlines Corporation -v- Bond with those which have been presented to us. The distinctions that we would draw between Mr Bond’s contract of employment and that of Mrs Mascarenhas is that in Mr Bond’s case he had been recruited in London, trained in London, required to be resident in London, paid in London in sterling, paid national insurance contributions and paid United Kingdom income tax, and he was also a British National, and he had worked under those conditions for the whole of his employment.

Our finding, is having weighed all the facts which have been presented to us, that Mrs Mascarenhas did not ordinarily work within the United Kingdom and that she is not qualified to bring a complaint within the Tribunal’s jurisdiction under either the Sex Discrimination Act 1975 or the Employment Act 1996.”

That decision was appealed to the Employment Appeal Tribunal which in a careful judgment delivered on 18/2/98 by Morison J, its President, upheld the Tribunal’s decision but in so doing observed that the law was not altogether clear and suggested that this court should have an opportunity to give further guidance to Tribunals who have to decide whether claims under the Employment Rights Act and Sex Discrimination Act are within its jurisdiction.

The Tribunal applied the same test for jurisdiction to the claim under the Sex Discrimination Act as it did to the claim under the Employment Rights Act, that is whether or not the appellant ordinarily worked within the United Kingdom (meaning Great Britain). The Employment Appeal Tribunal recognised that the Employment Tribunal had not distinguished between the two statutes but was not prepared to condemn the decision on that score appearing to take the view that in spite of the different wording the two tests were the same. At p.20 of the transcript the President said, “We would consider it to be a strange and undesirable result that a person could be held ordinarily to work wholly or mainly in England and at the same time doing his/her work wholly or mainly outside Great Britain, or vice versa. If therefore, as appears likely, the Chairman simply equated the two tests, we could understand why and would not wish to say that he was wrong on that account.”

Whilst remarking that the President has there misreported the wording of Section 196(2) I would, nevertheless, agree with the sentiment if the different wording of the two statutes can sensibly to be given the same meaning. However the wording of the relevant sections deserves a little closer attention than it has so far received. Section 196(2) reads:

"The provisions to which this subsection applies do not apply to employment where under the employee’s contract of employment he ordinarily works outside Great Britain."

Among the provisions to which the subsection applies is Part X of the Act which in turn includes an employee’s right not to be unfairly dismissed by his employer, (section 94(1)). Section 196(2) must be read in the context of section 196 as a whole. Section 196(1) provides: “Sections 1 - 7 and sections 86 - 91 (I interpose, nothing to do with unfair dismissal) do not apply in relation to employment during any period when the employee is engaged in work wholly or mainly outside Great Britain unless - (a) the employee ordinarily works in Great Britain and the work outside Great Britain is for the same employer”. So it is quite clear that with regard to the Employment Rights Act 1996 Parliament allowed for a distinction to be made between the place where under the contract of employment the employee ordinarily works and the place where the employee is wholly or mainly engaged in work. A similar distinction had been made under section 141 of Employment Protection (Consolidation) Act 1978 though not under the Trade Union and Labour Relations Act 1974 where although para. 9 schedule 1 uses both expressions they are not so juxtaposed as to necessarily suggest a different meaning.

So far as is material Section 6(2) of the Sex Discrimination Act 1975 provides:

"It is unlawful for a person in the case of a woman employed by him at an establishment in Great Britain to discriminate against her - (b)...by dismissing her or subjecting her to any other detriment."

Section 10 gives us the meaning of employment at an establishment in Great Britain. Both subsections (1) & (2) are relevant:

"(1) For the purposes of this Part and section 1 of the Equal Pay Act 1970 (“the relevant purposes”), employment is to be regarded as being at an establishment in Great Britain unless the employee does his work wholly or mainly outside Great Britain.

(2) Subsection (1) does not apply to - (a) employment on board a ship registered at a port of registry in Great Britain or (b) employment on aircraft or hovercraft registered in the United Kingdom and operated by a person who has his principal place of business or is ordinarily resident in Great Britain; but for the relevant purposes such employment is to be regarded as being at an establishment in Great Britain unless the employee does his work wholly outside Great Britain."

So if the words “does his work wholly or mainly outside Great Britain” in section 10 of the 1975 Act are to be given the same meaning as “engaged in work wholly or mainly outside Great Britain” as used in section 196 of the 1996 Act it would follow that the place where a person wholly or mainly works is not necessarily the same place as where he ordinarily works under his contract of employment. Lest it be objected that the niceness of any such distinction may not have been apparent to Parliament in 1975 it has to be remembered that section 9(1) of the Contracts of Employment Act 1963 and section 12(1) of the Contracts of Employment Act 1972 each exclude portions of the Act in relation to “employment during any period when the employee is engaged in work wholly or mainly outside Great Britain unless the employee ordinarily works in Great Britain and the work outside Great Britain is for the same employer,” a point to which Megaw LJ was fully alive as will be seen when I come to consider Wilson -v- Maynard Shipbuilding Consultants A.B. [1978] ICR 376.

So it is my opinion that the use of different language was deliberate and that a distinction may have to be drawn between where a person ordinarily works and the place where he wholly or mainly does his work. Of course the two may and usually will be the same but that need not be the case and the distinction is one to be kept in mind when considering, as I do next, the main point in this appeal namely what meaning has to be given to subsection (2) of section 196 of the Employment Rights Act 1996.

The right of an employee not to be unfairly dismissed was formerly contained in para.4 of schedule 1 of the Trade Union and Labour Relations Act, 1974. Paragraph 4 provided:

"(1) In every employment to which this paragraph applies every employee shall have the right not to be unfairly dismissed by his employer and the remedy of an employee so dismissed for breach of that right shall be by way of complaint to an Industrial Tribunal under Part III of this Schedule and not otherwise.

(2) This paragraph applies to every employment except insofar as its application is excluded by or under any provision of this schedule."

Paragraph 9(2) provided that:

"Paragraph 4 above does not apply to any employment where under his contract of employment the employee ordinarily works outside Great Britain."

There is no material difference, therefore, between para.9(2) and section 196 (2) save that as already noted the former does not point up any distinction between the place where an employee ordinarily works and where he wholly or mainly works. The meaning of paragraph 9(2) has been considered by this court on three previous occasions.

The first such was Wilson -v- Maynard Shipbuilding Consultants AB . The facts are not important. In giving the judgment of the court at p.384 Megaw LJ posed the problem:

"In deciding whether or not under his contract of employment the employee ordinarily works outside Great Britain, does one look to the terms of contract or to what has actually happened during the employment? What are the criteria by which the Tribunal is to decide a disputed question as to where the employee “ordinarily works under his contract of employment”?"

The first approach has been usefully characterised by Morison J in this case as the “contract test” and the second as the “function test”. In Wilson’s case this court came down on side of the “contract test”. Having highlighted certain of the difficulties involved in the alternative construction, at p.385 Megaw LJ said:

"The answer is that one must look at the terms of the contract express or implied ... This meaning conforms with the grammatical structure of para. 9(2). The present tense is used: “ordinarily works.” If it had been intended to relate the decision to what had happened up to time of the dismissal, the present tense would be inappropriate. The construction also conforms, we believe, with good sense. It means that the question whether or not this important statutory right exists is settled at, and can be ascertained by reference to, the time of the making of the contract. It is not liable to be varied by the unilateral act of the employer - the decision of the employer to give a dismissal notice at a time chosen by him - in the course of the performance of a contract. Of course, the terms of the contract may be varied, and, if they are varied in some relevant respect, it is the varied terms which have to be considered. But the question of variation, if it is raised in a case under para. 9(2), has to be decided by the ordinary principles of the law of contract. A variation, for example, cannot be unilateral, and it must be intended to affect the legal relations between the parties."

Megaw LJ went on to say that the question had to be determined by reference to the relevant terms of the contract of employment, express or implied and that what happened under the contract was inadmissible for construing those terms save where a relevant and essential term could only be ascertained by looking at what the parties did. The question was “where, looking at the contract as a whole, the employee’s place of work was to be” (p.385). At p.386 Megaw LJ recognised the difficulties which might arise as in this case where the contract leaves to the employer’s discretion the decision as to whether work will be carried out wholly in Great Britain or wholly outside Great Britain or for some period or periods in one place and for another period or periods in another place or places. Later on the same page he says:

"In trying to ascertain the intention of the legislature, the court is entitled, and we think bound, to have regard to the use of the phrase “ordinarily works” as used by the legislature in section 12 of the Contracts of Employment Act 1972. It cannot have been intended to have a different meaning in para. 9(2) of the Act of 1974 from the meaning which it plainly has in that section of Act of 1972. In section 12 of the Act of 1972 it plainly contemplates that the employee may “ordinarily work in Great Britain” even though for a period of his employment he is engaged in work wholly or mainly outside Great Britain. It necessarily follows that to decide where an employee “ordinarily works” one must look to the contract and to the whole contemplated period of the contract, and not simply to some lesser period within that whole period."

And then at p.387 in an effort to give guidance to Tribunals he states the following:

"In such a case as the present it appears to us that the correct approach is to look at the terms of the contract, express and implied (with reference, it may be, to what has happened under the contract, for the limited purpose which we have expressed above) in order to ascertain where looking at the whole period contemplated by the contract, the employees base is to be. It is in the absence of special factors leading to a contrary conclusion, the country where his base is to be which is likely to be the place where he is to be treated as ordinarily working under his contract of employment. Where his base, under the contract, is to be will depend on the examination of all relevant contractual terms. These will be likely to include any such term as expressly defined his headquarters, or which indicate where his travels involved in his employment begin and end; where his private residence - his home - is, or expected to be; where and in perhaps what currency he is to be paid; whether he is to subject to pay national insurance contributions in Great Britain. These are merely examples of factors which among many others that may be found to exist in individual cases may be relevant for deciding where the employers base is for the purpose of his work looking to the whole normal, anticipated, duration of the employment."

The “contract test” has it has been called was affirmed in Janata Bank -v- Ahmed [1991] ICR 791 CA. The bank was based in Bangladesh but had a London Office. Immediately prior to dismissal Mr Ahmed had worked at the London branch. He was ordered back to Dakar. On refusing to return he was dismissed. The Industrial Tribunal rejected his claim of unfair dismissal on the basis that he ordinarily worked outside Great Britain. He appealed to the Employment Appeal Tribunal and was successful. The bank appealed to this court. In allowing the appeal all three members expressly approved the test laid down in Wilson’s case. At p.803 Waller LJ said:

"If it be correct that the right not to be unfairly dismissed is either a right which exists throughout the employment or does not exist at all (and I think it is correct) then the court has to look at the whole of the contract which Mr Ahmed made and was performing. There could only be a change in the right not to be unfairly dismissed if there has been a change in the terms of the contract."

At p.805 Donaldson LJ said:

"Clearly there has to be a common approach and that approach was indicated in the statute itself and in Wilson -v- Maynard Shipbuilding Consultants A.B. [1978] QB 665. The starting point is the contract of employment. The statute says so. Most people in fact work where their contract requires them to work. It follows that it is legitimate to regard the place where the complainant has in fact been working has a strong indication of where, during that period, he was required to work under his contract of employment. If there is a divergence, the likelihood is that the contract has been varied expressly or tacitly. But this does not of itself necessarily provide the answer to the question of where he ordinarily works, because, by definition the contract has been prematurely terminated and if this had not occurred things might have been different. Take the case of a man whose contract of employment is for two years, the first month to be worked in London and the remainder in Paris. If he is dismissed during the first month, he will never have worked anywhere other than in London, but clearly it is Paris and not London which is place where he ordinarily works under his contact of employment.

A variant of this situation arises when a man is employed to do work which from time to time is to undertaken at different branches or centres as his employer may direct. In other words, he is subject to a series of consecutive “postings”. During the currency of each posting he ordinarily works at the place to which he has been posted but this is not the test under the statute. The test is where he ordinarily works under the contract of employment as a whole.

The consecutive posting situation has, of course, to be distinguished from the case where an employee is appointed to a new position, involving a significant variation in his contract of employment, as a result of which he is required to work in one particular country unless and until that contract is further varied. In such a case that will be the place and the only place at which he ordinarily works under his contract of employment."

Ackner LJ agreed that the Bank’s appeal should be allowed for the reasons given by Waller LJ.

So far so good. Whether or not one agrees with the approach or the reasoning it is impossible to detect any inconsistency between any of the six judgments all of which speak in favour of the “contract” test. Sandwiched between Wilson -v- Maynard Shipbuilding Consultants and Janata Bank -v- Ahmed, however, came another decision of this court in Todd -v- British Midland Airways Ltd [1978] ICR 959 CA. Mr Todd had been a pilot employed by British Midland Airways on their international flights. He was dismissed for alleged bad behaviour whilst staying overnight in Tunis. Before the Industrial Tribunal he claimed that his dismissal had been unfair. It was accepted that most of his working hours were spent outside Great Britain. The Industrial Tribunal held that he had been “ordinarily working” outside Great Britain and declined jurisdiction. That decision was upheld by the Employment Appeal Tribunal. Mr Todd appealed successfully to the Court of Appeal. The constitution was formidable, Lord Denning MR Eveleigh LJ and Sir David Cairns. Lord Denning MR referred to Wilson with approval but then continued at p.964,

"But in other cases there is more difficulty. I refer particularly to the type of case we have here of the airline pilot. He is based in Great Britain, but ordinarily works for the greater part of his time on international flights overseas. Mr Todd ordinarily worked for 53% of his time outside Great Britain. In those circumstances, Megaw LJ and his colleagues departed from the literal words of para. 9(2) and adopted a liberal approach. They looked at the “general legislative purpose” such as I described in Nothman -v- Barnett London Borough Council [1978] ICR 336, 344. The legislative purpose must have been that men who were based in Great Britain should be entitled to the protection of the Act, even though they ordinarily worked outside Great Britain. This court adopted what may be called “the base” test. Megaw LJ said,

“It is, in the absence of special factors leading to a contrary conclusion the country where his base is to be which is likely to be the place where he is to be treated as ordinarily working under his contract of employment.”

The “base” test, if I may say so, is a good sensible way of overcoming the literal meaning of the words “ordinarily working” in the statute. It affords good guidelines for the Tribunals which have to deal with so many of these cases. A man’s base is the place where he should be regarded as ordinarily working, even though he may spend days, weeks or months working overseas. I would only make this suggestion. I do not think the terms of the contract help very much in these cases. As a rule, there is no term in the contract about exactly where he is to work. You have to go by the conduct of the parties and the way they have been operating the contract. You have to find at the material time where the man is based."

It is this passage and in particular the last sentence which has formed the foundation for what has been called the “function” test being that for which Mr David Bean QC has argued so persuasively in this court. Eveleigh LJ agreed but added a further twist by equating the words “ordinarily works” to “almost exclusively works”. Sir David Cairns was more orthodox. He too, adopted the reasoning in Wilson -v- Maynard Shipbuilding Consultants which, in any event he held to be binding on the court. He referred to the relevant passages in the judgment including that cited by me to the effect that it is the “whole period contemplated by the contract” which determines where the employee’s base is to be. He then said at p.967:

"It appears to me that is a test which was intended to be applicable to all cases which in substance were the same in relation to the material facts as the case which was then under review."

Mr Bean argues that “the material time” referred to by Lord Denning in Todd must mean the time at which the claim for unfair dismissal arose and that in the circumstances of this case the appellant was clearly based in London at the material time. He does not say, but might have done, that on any view the appellant was not working “almost exclusively” outside Great Britain. Further he contends that the appellant was based in Great Britain under the term of the contract which required her to work at any place to which her employers decided to send her.

I do not take issue with Mr Bean’s reading of Lord Denning’s judgment in Todd. I also agree that the same reasoning might have been sufficient to confer jurisdiction upon the Tribunal in the present case. But Lord Denning’s enlargement of the Wilson principles was unnecessary for the decision in Todd which, as was held by Sir David Cairns, could be decided by a strict application of the test laid down by Megaw LJ. Like Sir David Cairns I consider that Wilson’s case and the Janata Bank case are binding upon us as they were upon the Tribunal which was, therefore, obliged to consider the position as it appeared at the date of the contract. So viewed and “looking at the whole period contemplated by the contract” it is clear that the appellant’s base could be nowhere other than Jeddah. In my view the “contract” test does not produce a shocking or unfair result. It is almost the converse of what was held to be the position in Todd. So I would reject the “function” test. I would also reject Mr Bean’s alternative submission that the “contract” test is met in the present case because the contract contemplated transfers of the kind to which the appellant was subjected. The particular point was addressed in Wilson. At p.675 Megaw LJ asked:

"But what is to happen if, as in the present case, an implied term of the contract leaves it to the employer’s discretion as to whether the work shall be carried out wholly in Great Britain or wholly outside Great Britain or for some period or periods in one place and for another period or other periods in other places?"

And then later at p.676 provided this answer:

"It necessarily follows that to decide where an employee “ordinarily works”, one must look to the contract and to the whole contemplated period of the contract and not simply to some lesser period within that whole period."

So, for my part, I can detect no flaw in the Tribunal’s reasoning or in the rejection of the appellant’s appeal by the Employment Appeal Tribunal. I would dismiss the appellant’s appeal in relation to the unfair dismissal claim.

Here the position was quite different. The Tribunal had to consider where at the time of the alleged discrimination the appellant was “wholly or mainly” working. ( See Haughton -v- Olau Line (UK) Ltd [ 1986] ICR 357 CA). However, the Tribunal decided jurisdiction on where the appellant was ordinarily working. That was impermissible. Insofar as the Tribunal purported to make a finding of fact as to where the appellant was wholly or mainly working it seems to me that it did so without any evidential basis. The Tribunal appears to have taken the monthly, minimum, flying time, namely seventy two hours, required of the appellant and set it against a notional working week of forty hours. By such a comparison it would seem that the appellant worked most of her time within Great Britain. But neither the seventy two hours minimum flying time nor the notional forty hour week had any relevance to the question which had to be determined. Consequently I would hold the finding to be without any foundation and as such to amount to an error of law. I would be minded, therefore, to remit the question of jurisdiction under the Sex Discrimination Act to the Tribunal, differently constituted, with a direction to determine the question of jurisdiction on the basis of where the appellant wholly or mainly did her work at the relevant time. I would also suggest that “mainly” be given its literal meaning of “for the most part” or as Eveleigh LJ would have it in Todd (p.967) “on a balance of weight”. To that extent only I would allow this appeal.

LORD JUSTICE WARD: I agree but I only add that it could have been very different. “Where under his contract of employment the employee ordinarily works” could be read as meaning where he is required under his contract ordinarily to work: cf.. Maulik -v- Air India [1974] I.C.R. 529, 531 per Sir John Donaldson, and Janata Bank -v- Ahmed [1981] I.C.R. 793, 805, per Donaldson L.J.. In both judgments “ordinarily works” was compared with “ordinarily resident” but the analogy was not thought to be as compelling as it might have been had it then been the “settled law” - as it became after Reg. -v- Barnett L.B.C., ex p. Shah [1983] 2 AC 309 - that the words “ordinarily resident” refer to a person’s abode in a particular place or country which he had adopted voluntarily and for settled purposes, as part of the regular order of his life for the time being, whether of short or long duration. That at least would have provided a test which was capable of commonsense, and not technical, application and so capable of being more easily understood by those affected by the law and more easily applied by those who have to enforce it. It might even have produced much the same answer as asking where the employee “wholly or mainly” does his work. But that is not to be. For the reasons convincingly demonstrated by Mantell L.J., we are bound by Wilson -v- Maynard Shipbuilding Consultants A.B. [1978] I.C.R. 376 with the result that the appeal must be allowed only to the limited extent identified by my Lord.

LORD JUSTICE BELDAM: I also agree.

ORDER: Appeal allowed in part; respondent to pay the costs of the appellant in relation to Sex Discrimination; the appellant to pay the costs of the respondent in relation to the Employment Rights Act; leave to appeal to the House of Lords refused. ( This does not form part of the approved judgment )