England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM AN EMPLOYMENT APPEAL TRIBUNAL

		Royal Courts of Justice Strand London WC2 Thursday, 14th December 2000

Thursday, 14th December 2000

1. LADY JUSTICE ARDEN: This is an application for permission to appeal out of time against the order of the Employment Appeal Tribunal, chaired by His Honour Judge Reid dated 5th October 2000, dismissing the applicant's appeal against the Employment Appeal Tribunal's decision chaired by Mr Cowling, sitting alone in Southampton, dated 22nd September 1998 to dismiss the applicant's claim in respect of an unlawful deduction of wages.
2. The applicant has not appeared in person today but has asked the court to accept submissions from her husband, Mr P N MacMullen, who has very helpfully described the background to this case to me. Mr MacMullen appeared on Mrs MacMullen's behalf in the Employment Appeal Tribunal.
3. The application was received by the Court of Appeal on 3rd November 2000. It should have been received within 14 days of the date on which the judgment of the EAT was sent to the parties, and so it is eight days out of time. Were that the only question in issue, it seems to me that I could have overlooked that matter. This is in fact a second appeal, thus CPR 52.13 applies. I need not read from CPR rule 52.13. I can go instead straight to the background to this matter.
4. Mrs MacMullen was employed as a night sister in the Netherton Nursing Home, which is owned by the respondent. By January 1997 her wages were £7.00 per hour. I should say that Mr MacMullen tells me that Mrs MacMullen has been engaged as a nurse for over 30 years and is therefore very experienced. Dr Cooke took over the nursing home in early 1997 and informed Mrs MacMullen that her wages were to be reduced to £6.30 per hour. On 20th February 1997 the applicant's solicitors wrote a letter of complaint to the respondent. The facts, according to the decision which I have seen, are said to be that there was no reply. The Employment Appeal Tribunal indeed records the fact that the appellant also protested orally about the reduction in her wages. Eventually the home was closed -- that was on the 31st August 1997 -- and the appellant was then made redundant. But during that period, January to 31st August 1997, Mrs MacMullen continued to be employed by the nursing home, but was paid only £6.30 per hour. Eventually, she made a claim in the Employment Tribunal on 21st November 1997 for the difference between the amount she was paid and £7.00 per hour.
5. The matter came before the Employment Tribunal on 27th September 1998. The Employment Tribunal said that where an employer announces a unilateral change in the contractual terms this will normally be a breach of contract. An employee can respond in one of four ways. If the breach is fundamental, he can resign and complain of constructive dismissal, or he can simply refuse to work under the new terms, or, alternatively, he can stay at work and bring an action for breach of contract or a claim under section 13 of the Employment Rights Act 1996. The employee may decide to acquiesce in the breach by simply carrying on working under the revised terms. If an employee waits too long after the employee's breach of contract, he may be taken to have affirmed the contract, losing the right to claim constructive dismissal. An employee may continue to perform the contract under protest for a period without necessarily being taken to have affirmed the contract. There comes a point, however, at which delay will indicate affirmation. Where an employer imposes new terms at short notice the employee is not obliged to make up his or her mind whether or not to accept the change at once. A reasonable trial period is permitted so that the employee can try working under the new terms before deciding what course to take.
6. So, to recapitulate, there are four courses of action open to the employee, one of which is continuing in employment but bringing a claim for the difference between the amount of the agreed wages and the reduced amount.
7. The Employment Tribunal went on to say there were two questions. First, was £7.000 an hour properly payable to the applicant, and second, was it properly payable within three months of 21st November 1997 when the complaint was presented to the Employment Tribunal? The Employment Tribunal held that the applicant had affirmed the contract, bringing about a variation in her terms. The Tribunal referred to the fact that she took no action when she was presented with varied terms in May 1997, even though she had had legal advice from February 1997. In addition, she had claimed redundancy money in August 1997 on the basis that her hourly rate was £6.30 per hour, not £7.00.
8. The matter then came before the Employment Appeal Tribunal on 5th October 2000. The Employment Appeal Tribunal was satisfied that there was evidence on which the Employment Tribunal could reach its conclusion. It pointed out that there was no further protest by Mrs MacMullen after her solicitors wrote a letter in February 1997 beyond an oral protest at the time when she received new particulars of employment on 30th May 1999. She continued to attend for work. She claimed redundancy, holiday pay and pay in lieu of notice on the basis of her hourly rate of £6.30. Therefore, the Employment Appeal Tribunal held that there was no point of law and no means whereby they could interfere with the decision of the Employment Tribunal. They referred to the lengthy period of time, the lack of a follow up to the solicitor's notice and the lack of an active or written response to new particulars of employment.
9. The Employment Appeal Tribunal stressed that no complaint was made about Mrs MacMullen's competence as a night sister, and in particular the Tribunal said:

"But this Tribunal would like to make it entirely clear that the fact that this appeal fails is not in any sense an indication that Mrs MacMullen has in any way, at any time, failed in her duties as a Night Sister. The allegations, which were originally made against her have not been supported by one shred of evidence and so far as the Employment Tribunal and this Tribunal are concerned, there is no justification for any such allegations having been made."

10. I would also point out that the Employment Appeal Tribunal considered an argument that Dr Cooke had accepted that the proper hourly rate was £7.00 per hour, because in answer to the question, "Are the details given by the applicant about wages/salary, take home or other bonuses correct?", in the form IT3 filed at the Employment Tribunal, Dr Cooke had placed a tick. But on the particulars overleaf he had said that the respondent's pay had been reduced in line with other employees to £6.30 per hour. On the basis of that document, construed as a whole, the Employment Appeal Tribunal took the view that it was clear there was no acceptance by the respondent that £7.00 per hour was an appropriate rate of pay.
11. On this appeal I have a written skeleton argument signed by Mr Gary Morton of counsel. That argument relies on Rigby v Ferodo [1988] ICR 29. I will read the head note:

"The employee was a lathe operator and had been first employed by the employer in 1964. He was a member of a union in 1982 was entitled to 12 weeks' notice of termination of his contract. In that year the employer encountered serious financial difficulties. In consequence, the employer proposed a 5 per cent reduction in wages to the union, and warned that, if this were not agreed, it would have to be imposed. In September, the union suggested two alternative proposals, the alternatives being dependent on whether or not the union members took industrial action. The employer warned that there was no alternative to reductions in wages and, on 18th September, set out in writing the reduced rates which it applied from that date. The union held meetings of its members at which the only votes taken were in relation to the possibility of taking industrial action; no vote was taken on whether or not to accept the wage reductions. The union itself did not agree to accept the reductions, although it indicated to the employer that no industrial action would be taken. The employee instituted proceedings for damages for breach of contract in 1984. Ognall J held that the employer had underpaid the employee and ordered an inquiry as to damages. The Court of Appeal dismissed the employer's appeal.

On appeal by the employer:

Held, that, in the absence of the employer seeking to terminate the contract of service it had with the employee, the employer had sought to compel the employee to accept a wage that was less than he was entitled to under the contract; that the employee in continuing to work and receiving a reduced payment under protest had not accepted a variation in the terms of the contract and, therefore, he was entitled to recover the difference between his contractual entitlement and the amount paid by the employer either in damages for breach of contract or in debt."

12. In this case their Lordships make it clear that there is no reason why an employee should not, should he choose to do so, refuse to accept a repudiation and continue to work on the terms of the old contract. Indeed, that is what the employee had done in that particular case. Lord Oliver, giving the opinion of the House, said at page 34 C:

"... there is no reason in principle why, if the employee clearly indicates that he does not accept the employer's breach as a termination of the contract, it should not remain on foot and enforceable so far as concern obligations which do not of necessity depend on the existence of the relationship of master and servant."

13. That was the argument as put to their Lordships. Lord Oliver goes on to say that there is no reason why a contract of employment should be on a different footing from any other contract as regards the principle that a repudiation which is not accepted is a thing written in water and of no value to anybody; and it was on that basis that the House held that the employee was entitled to the amount whereby his wages were wrongly reduced, even though he had continued to work for the employer.
14. It is to be noted that in Rigby v Ferodo the judge had found that there was no acquiescence by the employee. At page 32, Lord Oliver points out that the judge found as fact that although the union agreed that it would not take industrial action, as it had previously threatened, if the management proceeded with the unilaterally imposed reduction, "there was never any agreement that the reductions would be accepted by the work force or that the terms of the members' contract of employment would be varied." He also found that the subsequent conduct of Mr Rigby could not have been understood and was not understood as evincing any consent to the reduction imposed.
15. Likewise, at page 35 E, Lord Oliver says:

"It has been submitted that there was some sort of implied acceptance on the part of Mr. Rigby of the appellant's repudiation by working on. At the trial this was put on the basis of estoppel, waiver and acquiescence. All three were rejected by the trial judge and, in my judgment, he was, on the facts which he found, quite plainly right to reject them."

16. It is clear from those passages that on the particular facts of that case there was no acquiescence or affirmation. But, as I see it, the House of Lords did not rule out the possibility of acquiesence or affirmation depriving an employee of his right to damages.
17. As to the meaning of "acquiesence" and "affirmation", I would refer to Chitty on Contracts, 28th Edition, Volume 1 at paragraph 25008, page 1225. Chitty states:

"Affirmation must be distinguished from a waiver by one party of a term of the contract inserted for his benefit, or a `total' waiver by the innocent party of the breach itself by which he forgoes, not merely his right to treat himself as discharged by the breach, but also any claim for damages for the breach.

Effective affirmation. Where the innocent party being, entitled to treat himself as discharged by the other's breach, nevertheless elects to affirm the continued existence of the contract, he does not thereby necessarily relinquish his claim for damages for any loss sustained as a result of the breach."

18. So that is an important passage because it illustrates, as indeed the Employment Tribunal pointed out, that an employee can continue work, even at the reduced hourly rate, and still maintain a claim for the difference. The question here is whether or not that is what Mrs MacMullen did. The position, as I have explained, is that the Tribunals took the view that she had indeed affirmed the new hourly rate.
19. I turn to paragraph 25-002 of Chitty on Contracts, pages 1220-1221, for a discussion of what is required by way of affirmation. The paragraph begins:

"Where the innocent party, being entitled to choose whether to treat the contract as continuing or to accept the repudiation and treat himself is discharged, elects to treat the contract as continuing, he is usually said to have `affirmed' the contract. He will not be held to have elected to affirm the contract unless, first, he has knowledge of the facts giving rise to the breach, and, secondly, he has knowledge of his legal right to choose between the alternatives open to him. Affirmation may be express or implied. It will be implied if, with knowledge of the breach and his right to choose, he does some unequivocal act from which it may be inferred that he intends to go on with the contract regardless of the breach.... .

Mere inactivity after breach does not in itself amount to affirmation, nor (it seems) does the commencement of an action claiming damages for breach. The mere fact that the innocent party has called on the party in breach to change his mind, accept his obligations and perform the contract will not generally, of itself, amount to an affirmation: the law does not require an injured party to snatch at a repudiation and he does not automatically lose his right to treat the contract as discharged merely by calling on the other to reconsider his position and recognize his obligation. But if the innocent party unreservedly continues to press for performance or accepts performance by the other party after becoming aware of the breach and of his right to elect, he will be held to have affirmed the contract."

20. Obviously, the contract with which this case is concerned is a contract of employment. In that situation the court bears in mind that an employee is not necessarily in a strong position if faced with a deduction of wages, and may in point of practice be obliged to go on working. He may not be well advised or have opportunities to obtain advice. I have to bear those points in mind.
21. With those points in mind, this passage shows, first that the person who is said to have affirmed must have knowledge of the facts giving rise to the breach. Clearly Mrs MacMullen had that knowledge, because she knew of the wage reduction. Secondly, knowledge of her legal right to choose the alternatives open to her. On that, of course, I have to bear in mind that it is found by the Employment Tribunal that she had consulted a solicitor and had a solicitor acting from February 1997. There is a further protection to Mrs MacMullen that the law requires affirmation to be unequivocal. It is not just a question of mere inactivity, or silence, or continuing to work, there must be some unreserved act, some unequivocal act, which amounts to affirmation.
22. The position here is that there were a number of matters which the Employment Tribunal relied on and, as I have said, the Employment Appeal Tribunal refused to interfere.
23. The arguments raised by the applicant are that it is implicit in the decisions of the Employment Tribunal and Employment Appeal Tribunal that the applicant must have agreed to the reduction in her wages. Clearly she did not do so; but the answer to that point, it seems to me, is that acquiesence must be assessed on an objective basis, namely, what did her attitude and actions connote to a reasonable person, not what she agreed to or did not agree to. Secondly, it is said there needs to be a date on which the employee can be said to have agreed to a particular variation in the contract. Again it seems to me that this is not an essential part of affirmation. It is sufficient that she affirmed the contract, and that, again, this has to be assessed on an objective basis, not on the question of agreement. Third, it said, still dealing with the point raised in the appellant's skeleton argument, that the employer should have given notice of dismissal and then re-engaged Mrs MacMullen. That was the only proper way of going about it. But it seems to me that this is not a correct point in law because it was open for Mrs MacMullen to continue working and to decide to affirm the wage reduction. It was essential that the employer should have given her notice of dismissal.
24. There are further points which Mr MacMullen has made today. He says that there was in fact a reply to the February letter written by Mrs MacMullen's solicitors and there was continued correspondence. He explains that what happened was that in September she was unable to continue to employ a solicitor and she joined a union which wrote to the court on her behalf. But the union was unable to deal with a number of matters, particularly matters which had occurred before she joined the union. That was the reason why the claim for holiday pay and redundancy pay and pay in lieu of notice was made on the basis of £6.30, not on the basis of the rate which was applicable in January 1997. But Mr MacMullen has also told me that, even once the holiday pay and redundancy pay and pay in lieu of notice were agreed, Mr Cooke continued actually to be liable for the sums agreed because he was given time to pay 50% of those monies, which he had apparently still not paid. Again, Mr MacMullen tells me that the particulars of employment were not actually given to Mrs MacMullen in May 1994. They were in fact the old particulars of employment dated March 1994, and they were pinned up on the notice board. He makes the point that Mrs MacMullen feels strongly about the proceedings, that the respondents had been able to make inaccurate and untruthful statements to the court and that she feels that her side of the events have not been properly dealt with and that she was not able to take legal help.
25. As regards these additional factual points, it really is too late to put them to the court now. They were known about at the time of the original hearing before the Employment Tribunal and, it follows, before the appeal was heard by the Employment Appeal Tribunal. Mrs MacMullen was present at the Employment Tribunal and could have put these points on her own behalf; if not, she could have asked for them to be taken into account when the matter came before the Employment Appeal Tribunal.
26. Mr McMullen referred to the lack of legal representation below. So far as that point is concerned, of course there is a pro bono scheme operated by the Bar and it is unfortunate that either Mrs MacMullen did not hear of it at the time or that she and her husband took the view that it was not actually meeting their particular needs. However that may be, the position is that it is now too late to go back over the facts which could and should have been dealt with before the Employment Tribunal.
27. I have dealt with the points of law that were in the original skeleton argument. So far as the new factual points are concerned, as I say, to recapitulate, it is now too late to raise those.
28. For all those reasons, it seems to me that there is no real prospect of success on an appeal, and that therefore I should decline to give permission to appeal to this court.
Order: Appeal dismissed. (Order does not form part of approved Judgment)