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, 24th May 2001

Thursday, 24th May 2001

J U D G M E N T
1. LORD JUSTICE PETER GIBSON: The employer, Walter Rodney Housing Association, appeals with the permission of this court (May LJ) from the order of the EAT on 14th July 2000. Thereby the EAT allowed the appeal of the employee, Yaw Asamoah-Boakye, from that part of the decision of an Employment Tribunal in Reading whereby the employee's claim that he had been unfairly dismissed was dismissed.
2. The employer is a small housing association providing low-cost housing to the ethnic minority section of the community in Reading. The employee commenced his employment in January 1993, when he was employed as a finance officer. During the course of his employment he qualified as an accountant and latterly was employed under a contract which described him as such. In the autumn of 1998 a review of his functions was undertaken by the employer. It was concluded that there was no longer any need to continue to employ a finance manager in the way the employee had been employed. It was proposed that his post should be shared between the employer and another housing association. The decision was taken that the employee was redundant. On 16th October 1998 he was given notice of redundancy, expiring on 14th December. He was told he would receive a redundancy payment of £3,500.
3. Following discussion between the employer and the other housing association, the latter, in early November 1998, agreed to subsidise the employee's post for another 12 or 18 months. The director of the employer, Patricia Andrade, who was the employee's immediate line manager, told the employee of the employer's decision to withdraw the notice of redundancy. He was away from work through sickness from mid-December until 19th January 1999 when he returned to work, continuing to accept his salary. But the relationship between the employee and Miss Andrade, as the Tribunal was to find, broke down and he adopted an uncooperative attitude towards her.
4. Mediation was arranged. On 12th March 1999 he told the mediator that he had reached the end of the road with the employer and was very unhappy. In the course of discussions he was asked what he would require in order to leave and resolve the matter. He made it clear that he wanted either the redundancy payment or a substantial salary increase. That was not acceptable to the employer.
5. On 11th March 1999 the employee had lodged an originating application with the Tribunal claiming a redundancy payment. He wanted the Tribunal to make the employer pay that payment so that he could then leave.
6. On 12th May a meeting took place between the employee, White Edevbie (the Chair of the employer) and Andrea Williams-Mackenzie (the Human Resources Director). The employer offered to pay him £3,600, not as a redundancy payment but on the basis that he would be leaving his employment and would withdraw his originating application due to be heard the next month. The employer wanted the terms of an agreement to be incorporated into a compromise agreement to satisfy section 203 of the Employment Rights Act 1996 ("the Act"). Section 203(1) makes void any provision precluding an employee from bringing proceedings under the Act, but by section 203(2) that was not to apply to any agreement to refrain from continuing proceedings if certain conditions specified in subsection (3) were satisfied. They include conditions that the agreement is in writing and that the employee has received advice from an independent adviser. The employer expressly told the employee that the agreement should be run past his adviser.
7. On 13th May a letter expressed to be subject to contract and in a form which would comply with section 203 was sent by the employer's solicitors, Sharpe Pritchard, to the employee. It stated that the employee had lost confidence in the employer and that it would not be to the advantage of either party for the working relationship to continue. Accordingly the employer was proposing terms upon which the contract could be brought to an end by mutual agreement. The terms included termination of the employment on 25th May and the payment of salary up to that date; the payment of £3,600 on that date; a provision that the employer would try to agree with the employee a form of word explaining his departure; an agreement that the employee would not proceed with the tribunal proceedings; and a compromise of existing and future claims by the employee against the employer arising out of the employment or its termination. It was to be a term of the agreement that the employee had received independent legal advice from a solicitor who had to be identified. It was to be stated that the parties believed that the agreement satisfied the conditions for regulating compromise agreements under the Act. If the offer was accepted, the employee had to sign it and take it to his solicitor for signature, and then it was to be returned to the employer. The employer was to agree to pay the reasonable fees of the solicitor up to a specified sum.
8. By a letter dated 14th May the employee replied to Sharpe Pritchard, saying that he would agree to the terms and conditions subject to amendments. One was that the employment would end on 31st May and he should receive payment for accrued holidays of 16 days. The other was that he wanted "a good reference from my employers to safeguard my future job prospects with potential employees". The employee asked for a revised agreement incorporating the amendments.
9. Sharpe Pritchard on 18th May wrote back enclosing an amended agreement. The two requests were accommodated to this extent, that the payment was to include payment for six days' holiday and three days' accrued time off in lieu, and there was added a term that the employer would supply the employee with a copy of the reference from which the employer would not depart. But nothing was said about what would be in the reference. Nevertheless, the employee wrote on 19th May to Sharpe Pritchard saying that he had spoken to Mr Edevbie and agreed seven days as the accrued time off in lieu; he asked that an amended agreement be sent to him; he also said that he had arranged for his solicitor to sign the agreement at 10.00 a.m. the next day if it was received; he said that Miss Williams-Mackenzie had told him that it was the employer's wish that he proceed on leave the next day, and Miss Andrade had confirmed that; and he said that he agreed in principle to proceed on leave the next day provided that the agreement was then signed. But on 19th May the employee cleared his desk, handed over his keys, cheque books and computer passwords, said goodbye and left the office.
10. A draft amended agreement dated 19th May was sent to the employee, but it was not signed on 20th May or at all by the employee or his solicitors, Rowberry Morris. On 21st May they faxed Sharpe Pritchard, saying that, having looked at the agreement, they were unable to advise the employee to sign it without taking up two points. The first point was one which in the event was not proceeded with, and I need say nothing further about it. The second was that they wanted to be supplied with words explaining the employee's departure and with a copy of the reference.
11. On 24th March Sharpe Pritchard replied that the proposed reference and explanatory words would be provided. Rowberry Morris in a further letter the same day to Sharpe Pritchard said that the employee required the reference and explanatory words before he signed the agreement. On 26th May Sharpe Pritchard supplied the explanatory words suggested and faxed a draft reference drafted by Miss Andrade. This set out the employee's employment with the employer and included "His attendance at work has always been good with the minimum time off sick. He has always been punctual with his time keeping." Sharpe Pritchard said that they looked forward to the return of the agreement following receipt of which the £3,600 would be paid.
12. On 27th May Rowberry Morris agreed the proposed explanatory words, but suggested certain amendments to the reference and said that the employee noted that there was nothing in the reference which commented upon his performance of his duties. They asked that this be incorporated in the reference. The same day Sharpe Pritchard replied. They accepted the suggested amendments to the reference, but said that the employer was not prepared to include any comment as to the employee's performance.
13. Also on 27th May the employee himself wrote to Sharpe Pritchard reminding them that under the terms of the proposed agreement his employment with the employer was to cease on 31st May and all payments due to him made by that date; but he said that if agreement was not reached and the payment was not made by 28th May he would return to work on 1st June or take whatever action he deemed appropriate.
14. On 28th May Sharpe Pritchard wrote to the employee repeating that the employer was not prepared to make any further changes to the reference. They asked for a copy of the signed agreement. They said that as soon as that was provided a cheque would be posted to him. They told him that terms having been agreed to end his employment, it would not be appropriate for him to attempt to return to work on 1st June and said that the employer had no intention of reneging on the deal arrived at.
15. Sharpe Pritchard also wrote to Rowberry Morris saying that the employer could not go further with the proposed reference without running the risk of misleading a potential employer. They said that the employee had already received payment in respect of accrued holiday and agreed time off in lieu. They claimed that the employee had acted in a way totally inconsistent with the employment relationship and should not attend for work on 1st June as he would not be allowed entry to the premises. By a second letter of 28th May to the employee, Sharpe Pritchard repeated that message.
16. The agreement was never signed. The employee never received the payment of £3,600 contemplated by the agreement. On 3rd June the employee sought to amend his originating application to claim unfair dismissal, saying that that occurred on 31st May 1999. That application was treated by the Tribunal as a fresh application.
17. At the hearing before the Tribunal the employee represented himself. The employer was represented by counsel, Mr Oliver Campbell, who appears before us today. The Tribunal after a two-day hearing found that an agreement for the termination of employment had been reached in principle on 12th May, and that by 28th May the relationship between the parties effectively came to an end for all practical purposes. It said that it bore in mind the statutory definition of "dismissal" contained in section 95 of the Act. It rejected the employer's submission that the employee had resigned and said that there was no dismissal in the conventional sense. But it accepted that the action of the employer in telling the employee that he would no longer return to the workplace was something which could amount to a dismissal. It considered the question posed by Sir John Donaldson, Master of the Rolls, in Martin v Glynwed Distribution Ltd [1983] ICR 511 at page 519:

"Who really terminated the contract of employment."

18. The Tribunal expressed its conclusion in paragraph 8 of the decision in this way:

"In the context of the work place, we do not think that it is entirely appropriate that there should be a minute analysis and dissection of all the various factors involved in this case. On that basis, it seems to us that the actions of the parties in reaching an agreement, in principle, that the applicant would leave and would be paid a sum of money in return for so doing and discontinuing his action, coupled with the applicant's actions in leaving on 19 May, accepting the suggestion to him that he should take the remainder of that month as leave, surrendering his keys, passwords, cheque books and saying goodbye and cleaning his desk really amount, in our view, to a mutual termination of the applicant's contract of employment. It is true that there was a small area of dispute, small but not unimportant as far as the applicant is concerned, as to the precise wording of the reference. The respondents have indicated that they were prepared to provide a reference and they were prepared to supply a copy of it to the applicant and stand by that reference if called upon to do so by a future employer. That is a factor we take into account. We take into account the fact that the respondents told the applicant that he could not return to the work place, but that seems to us to be an incident which occurred at a stage when the employment relationship, for all practical purposes, had already come to an end. In these circumstances, the view the Tribunal takes, as we have indicated, is that this was not a dismissal by the respondents. It was not a resignation by the applicant. It was a mutual termination following an agreement which the parties had reached. It follows, there having been no dismissal, no question can arise of unfair dismissal and that aspect of the claim fails."

19. The Tribunal went on to consider whether the employer was in breach of contract, but held that because the employee had not withdrawn his tribunal case, the employer was not in breach of the agreement to pay the employee £3,600.
20. On the employee's appeal, the EAT identified the critical question as being whether the parties had reached a binding agreement to terminate the employment. Judge Peter Clark, giving the judgment of the EAT, said that on the facts as found and agreed the Tribunal was bound to answer the question in the negative for three reasons:

(1)The Tribunal had found that the employee did not resign.

(2)The correspondence showed that the employer required the employee to sign a valid form of compromise agreement, which its own solicitors drafted, after he had taken independent advice and wanted to be assured that the employee would withdraw his tribunal application and not make any further complaint arising out of the termination of his employment. The written agreement was a condition precedent to agreement being reached.

(3)The parties did not in fact reach agreement. The only agreement was "in principle" and there was an area of dispute not unimportant to the employee concerning the wording of the reference.

21. Accordingly the EAT allowed the appeal on that point. It further held that the employee was dismissed by the employer, but remitted the case to a further tribunal for an inquiry into whether or not the dismissal was fair.
22. Before us Mr Campbell submits:

(1) the Tribunal's decision that the employee had not been a dismissed was a decision of fact which it was entitled to reach and which ought not to have been disturbed by the EAT;

(2) the EAT was wrong to hold that there was no binding agreement because on 19th May 1999 the parties were in agreement on all material issues;

(3) if those submissions were wrong, the EAT should have remitted the entire case including the question of dismissal to a fresh tribunal.

23. I shall consider these in turn.

(1) Dismissal

24. Mr Campbell submitted that the question posed by Sir John Donaldson in Martin which was considered by the Tribunal, was framed to encouraged tribunals to adopt a pragmatic approach to dismissal. He argued that the Tribunal could adopt a pragmatic and a less strict approach to the requirements of contract law than would be appropriate in determining a commercial dispute. He referred to Terinex Ltd v D'Angelo [1981] ICR 12 at pages 15 E and 17 B, although he acknowledged that the judgment of the EAT in that case did not provide direct or express support for his submission. He said that the Tribunal's decision that there had been a termination of employment by mutual agreement was purely a question of fact on which the Tribunal heard much evidence, and he submitted that its decision could not be said to have been perverse.
25. It is of course right that the Tribunal, as an industrial jury, should adopt a realistic approach to the questions before it. The statutory question which section 95(1)(a) of the Act posed was whether the contract was terminated by the employer. If it had been terminated by mutual agreement then there could be no dismissal. Whether there was a dismissal is generally dependent on the primary facts found by the Tribunal and would normally not involve questions of law. But the Tribunal could not properly find a termination by mutual agreement unless in law there was a concluded agreement for such termination. If the parties negotiate for a termination on a number of terms, it would be an error of law for the Tribunal to find a concluded agreement when not all the terms had been agreed. Nor could there be a concluded agreement if the only agreement was one reached in principle. Most pertinently, if the negotiations were on the basis that the parties had to enter into a written agreement on which the employee had to receive advice from a solicitor and no such agreement was ever signed, there could not be an agreement, even if some of the terms were agreed, and it would be an error of law to hold otherwise.
26. The classic statement of the law in this area is that of Parker J in Von Hatzfeldt-Wildenburg v Alexander [1912] 1 Ch 284 at 288 and 289:

"It appears to be well settled by the authorities that if the documents or letters relied on as constituting a contract contemplate the execution of a further contract between the parties, it is a question of construction whether the execution of the further contract is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognise a contract to enter into a contract. In the latter case there is a binding contract and the reference to the more formal document may be ignored. The fact that reference to the more formal document is in words which according to their natural construction import a condition is generally if not invariably conclusive against the reference being treated as the expression of a mere desire."

27. That was said in the context of an agreement in correspondence, but the same principle applies to agreements said to be reached both in correspondence and orally. Unfortunately the Tribunal does not appear to have considered this line of authority and so did not consider whether the execution of a written compromise agreement was a term of any agreement reached between the parties. The employee, who was representing himself, is not a lawyer and it was not Mr Campbell's case before the Tribunal that there was a termination by mutual agreement. He argued for a resignation by the employee.
28. In these circumstances, these points of law being relevant to the question before the Tribunal, I am not able to accept Mr Campbell's first point.

(2) Binding agreement

29. Mr Campbell submits that on the facts the parties had reached agreement by 19th May on all material, alternatively all important, points and that the employee was thereby bound. Mr Campbell points to the fact that an agreement in principle had been reached by 12th May for the termination of employment and that on 19th May the employee had cleared his desk, handed over the keys, cheque books and computer passwords, said goodbye and left. He said that thereby the employee was implementing the agreement.
30. In my judgment this is an impossible submission. As I have already indicated, it is not the law that an agreement is concluded merely because there is an agreement on some important or material terms without agreement having been reached on all the terms. It is plain from the commencement of the negotiations at the meeting on 12th May 1999 that it was the employer who was insisting on an agreement in writing to incorporate the terms on which the employment would terminate and that this would necessitate the employee receiving independent legal advice from a solicitor. The employer did not want further proceedings to be commenced before the Tribunal, nor did he want the existing proceedings to continue. The need to comply with section 203 was plainly present to the mind of the employer. I quote from the employer's minutes of that meeting what Miss Andrade said to the employee.

"I will offer you £3,600 pay, asap as and when you enter into an agreement to waiver your case at ET and end your employment with the association. You have to run it past your advisor."

31. Later in the minutes it is recorded that a copy of a compromise agreement would be sent to the employee, and that he was to contact the employer to say whether he accepted the terms in the compromise agreement and would leave the employer. The draft agreement which was sent to the employee was headed "subject to contract", thereby recognising that a contract was required. I have already referred to the terms of the draft which was sent. It is plain that the employer wanted the agreement to cover everything to do with the termination of employment, including what was to be said to outsiders about the employer leaving the employer's employment. It is no less plain that it was considered crucial that the employer's solicitor should have given advice before the agreement was signed.
32. All the subsequent correspondence until the negotiations broke down is consistent with the view that the execution of a written contract was essential. When the employee asked for a provision to be inserted in the agreement that he should receive a good reference, the reaction of the employer was not to reject that as being unacceptable or unimportant but to incorporate a provision into the draft agreement, and so it became a matter for negotiation.
33. I am unable to find crucial significance in what the employee did on 19th May, given that he had not yet received advice from his solicitor, still less sign the agreement. What the employee did when he cleared his desk, and so on, and in leaving was to proceed on leave, as he indicated by his letter on that day had been the request of the employer. That does not signify that the employee was recognising that he was terminating his employment that day, even though there can be no doubt but that he expected that all would go well and that he would be signing the agreement the following day. In my judgment it is plain that there was never any agreement on one matter of importance to the employee, that is to say the question of a reference. It is not for this court to consider whether the employee was acting reasonably or unreasonably in insisting on such a reference. Until there was a binding agreement, he was free to stipulate whatever terms he wanted to be included in the agreement as a condition of his acceptance. But no agreement was reached, no agreement was ever executed and in my judgment therefore the Tribunal was plainly wrong to hold that there was a termination of the employment by mutual agreement, and the EAT was plainly right to hold that there was no binding agreement.

(3) Remission

34. Mr Campbell submits that the EAT should have remitted the whole case, including the question whether there was a dismissal by the employer or a resignation by the employee to a fresh tribunal. The employer did not appeal against the Tribunal's finding that the employee did not resign, yet Mr Campbell submits that there was considerable evidence before the Tribunal that the employee had resigned; and he points to the finding at the meeting on 12th May that the employee had told the employer that he had reached the end of the road with the employer and was very unhappy and that on the 19th May he had cleared his desk and left.
35. In my judgment, these facts do not provide any basis for going behind the finding by the Tribunal that the employee did not resign. In my judgment the Tribunal was plainly right in that conclusion. If there was no resignation and no mutual agreement that the employment was at an end, given that the employee was told by the employer that his employment was at an end and that he should not attend for work, it is an inescapable conclusion that he was dismissed by the employer. I see no reason to interfere with the EAT's decision that the case be remitted to a fresh tribunal only to enquire into whether the dismissal was fair.
36. For these reasons I would dismiss this appeal.
37. LORD JUSTICE BUXTON: I agree. There is nothing wish to add.
38. LORD JUSTICE JONATHAN PARKER: I also agree.
Order: Appeal dismissed with costs assessed as agreed at £165.80