England and Wales Court of Appeal (Civil Division) Decisions

Briscoe v Lubrizol Ltd. [2002] EWCA Civ 508 (23rd April, 2002)

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN’S BENCH DIVISION
(MR JUSTICE HUNT)

		Royal Courts of Justice Strand, London, WC2A 2LL
		23rd April 2002

Lord Justice Potter :

INTRODUCTION

1. There is before the court an appeal by the defendants and a cross-appeal by the claimant, their former employee, from a judgment of Mr Justice Hunt given on 20 October 2000. The claimant sued for damages on a number of grounds in respect of non-payment of benefit to him under a long-term disability scheme (“the scheme”) contained in Group Policy No ZG 9167 underwritten by Phoenix Assurance plc (“the insurers”). The claimant, who had been employed in heavy manual work by the defendants from December 1986, had a prolonged period off work in June 1990, during which he was paid benefit by the defendants while the insurers were considering whether he was in fact entitled to benefit under the policy. In November 1991, the defendants ceased paying benefit to the claimant following the insurers’ refusal to pay the claim and, after a further period during which communication between the claimant and the defendants broke down, the defendants purported to terminate the claimant’s employment by a letter of dismissal dated 3 June 1992. It was a summary dismissal, in that no period of notice was given. The letter which stated that the defendants were treating the claimant’s employment as having been terminated on 20 November 1991, by virtue of his failure to return to work and the absence of medical evidence to justify this. The judge held that, in the circumstances of the case, to which I shall turn in more detail shortly, the claimant continued to be entitled to payment of benefit up to 3 June 1992, but that the dismissal which took place on that date was justified and that the claimant’s right to payment of benefit thereupon ceased.
2. On this appeal the claimant contends that his contract of employment either was not terminated by the letter of 3 June 1992, in which case he is entitled to claim past and future benefits as a debt, alternatively that, if his contract of employment was terminated, that termination was wrongful and he is entitled to equivalent damages. By their Respondent’s Notice the defendants assert that the judge erred in law in that, having decided that the relevant terms of the contract of employment were those contained in the defendants’ handbook (which did not follow the precise wording of the terms of the insurers’ policy), the claimant was never in fact entitled to payment of benefits by the defendants because he was never incapable of work as defined in the handbook; that being so, the payments made in anticipation that the insurers would meet the claim were not contractually due and thus the judge erred in holding that the claimant was entitled to payment for the period between November 1991 (when the payments ceased) and 3 June 1992 when he was dismissed.

THE RELEVANT CONTRACTUAL DOCUMENTS

Particulars of Terms of Employment pursuant to Section 1 of the Employment Protection (Consolidation) Act 1978

3. The claimant’s written particulars of employment in relation to his job as a Shift Operator set out numbered terms of employment as to remuneration, hours of work, holiday entitlement etc. It referred in several places to the Company Information Handbook (“the handbook”). In particular, Paragraph 6 provided:

“The Company Information Handbook also contains information regarding Sickness and other Employee Benefits Plans. Any queries should be addressed to the Personnel Department.”

4. It is pertinent to note that the reference to the handbook as containing ‘information’ regarding benefits contrasts with references to ‘details’ of holiday entitlements ‘given’ in the handbook (Paragraph 5) and details of the Defendant’s Disciplinary Rules and Procedures to be ‘found’ in the handbook (Paragraph 9).

The handbook

5. The relevant information in the handbook appeared under the heading ‘THE LUBRIZOL CONTINUOUS DISABILITY SCHEME’, which included the following paragraphs:

“1. Objects of the Scheme

The Scheme is designed to provide benefits in respect of disability of members by sickness or accident …

3. Who is Eligible?

You will become eligible to join on the 1^st June on which you satisfy all of the following conditions:-

… [There is no dispute that the claimant became eligible and was included within the scheme] …

4. Costs of the Scheme

The Company will pay the whole of the cost of the benefits.

5. When the Benefit is Payable

Benefits will commence immediately after twenty-six weeks of continuous disablement and finish when you are no longer disabled or when you reach age sixty-five if male. The insurers will not cover you should your disability be (a) wilfully inflicted .. [and four other examples follow which are not relevant to this case]

Should a member be disabled for more than one period of twenty-six weeks, appropriate benefits will be paid in the same way as for the first period of disablement.

6. Amount of Benefit

This will be at the rate of 52% of your annual Pensionable Pay as defined in the Lubrizol Retirement and Death Benefits Plan. However, the insurance company may seek to impose limitations of benefits in certain cases and these will be notified to you individually if they apply …

7. Payment of Benefit

Full benefit will be payable after twenty-six weeks of total disability. This means that you must be unable to follow any occupation as a result of either sickness or an accident. If you are unable to follow your usual occupation but can do some other work, the benefit will be reduced in the same proportion as your loss of earnings bear to your previous Pensionable Pay. Your new occupation must be acceptable to the insurance company …

The Insurance Company reserves the right to ask for medical evidence of good health, and to impose special terms, except as set out in the next paragraph.

9. Income Tax on Benefit

The Insurers will pay the benefit to Lubrizol who will pay an equivalent amount to the member after deduction of Income Tax if any.

10. Continuation of Option

If you leave the Company you can continue the benefit by paying the premiums to the Insurance Company. Details will be given to you on request.” (emphasis added)

6. Earlier in the handbook, in the section relating to health, under the heading ‘DISABILITY SCHEME’ it was provided that:

“On the 1^st June following the completion of three years’ service employees under the age of sixty … enter the Lubrizol Continuous Disability Scheme, subject to acceptance by the insurers. Once acceptance has been given for a specified benefit, this cannot be reduced. Benefits over a certain level and subsequent increments above this level will, however, be subject to satisfactory evidence of health …”

The policy

7. Under Clause 1 (Definitions) of the First Schedule to the policy, the scheme was defined as ‘The Lubrizol Ltd Continuous Disability Scheme’ and by Clause 3 (Terms of Scheme) it was provided that:

“The terms of the Scheme shall be as agreed upon between the Grantees [Lubrizol] and the company [the insurers]. The Grantees shall notify the company of any intention to amend the Scheme and any such amendment that shall affect the Policy only to the extent agreed upon by the Company. Relevant details of the Scheme shall be given to members but nothing contained in such details or any amendment thereof shall affect the Company’s liability under the Policy.” (Paragraph 3 of Definitions).

8. Clause 5 (Eligibility for Membership) provided that:

“An employee shall be regarded as being in eligible employment and shall qualify for membership in accordance with the conditions set out in the Second Schedule.”

[It is not disputed that the claimant was so qualified]

9. Clause 8 (Benefits) provided that:

“(A) A benefit (hereinafter referred to as the ‘Benefit Insured’ determined in accordance with the Third Schedule) will be payable under the Policy in respect of any part of a member’s Disablement that occurs after the end of the waiting period [i.e. 6 months commencing on the date of commencement of the member’s disablement] and before the Terminating Date [age 65] …

(B) (i) If the Disablement in respect of which a benefit is being paid under section (A) above ceases because the member engages in a gainful occupation (with the employer or otherwise) the company shall pay a reduced benefit in accordance with the Third Schedule (Part II) in respect of any continuous period following the end of the Disablement and before the Terminating Date ...”

10. Clause 1 (Definitions) provided that:

“A Disablement” in respect of a member shall mean a continuous period of illness or disablement in respect of which evidence has been produced to the company which showed to the company’s satisfaction that throughout such period the member has been totally unable because of his illness or disablement to perform his normal occupation (as hereinafter defined) and does not engage in any other gainful occupation or employment.”

“Normal Occupation” in respect of a member shall mean the occupation in which he was employed by the employer immediately before the beginning of the Disablement.” (emphasis added)

11. Clause 12 of the policy provided that:

“A member shall cease to be included in the Policy.

….

(2) On ceasing to be in the Employer’s service …

No benefit shall be payable under the Policy in respect of a member after he has ceased to be included in the Policy”

12. As already indicated, the judge accepted the argument of the defendants that, so far as the contract of employment between the claimant and the defendants was concerned, the terms of the scheme, and hence the claimant’s entitlement to payment of benefit, was contained in the handbook and not in the policy. Nevertheless, he went to hold that, by virtue of the provision in the handbook set out at paragraph 6 above,

“Once [t]he [claim] was accepted for benefit by the insurers under the scheme which actually existed (i.e. the right to payment if he could not carry out his normal duties) the defendant was promising that the benefit could not be taken away.”

He also went on to say (and this must have been by reference to the policy terms) that the benefit would cease if the claimant were properly and lawfully dismissed. This raised the issue central to his judgment and this appeal, namely whether the plaintiff was indeed so dismissed by the defendants’ letter dated 3 June 1992.

THE POLICY OR THE HANDBOOK?

13. Before turning to the issue of dismissal, it is logically appropriate to deal with the issue raised by the Respondents Notice (see paragraph 2 above), namely whether the claimant’s entitlement to benefit depended upon his satisfying the policy definition of Disablement (‘totally unable .. to perform his normal occupation’), or that set out in the handbook (‘unable to follow any occupation’). Not only does it affect the claimant’s entitlement to the benefit for the period November 1991 to 3 June 1992 in respect of which he obtained judgment, but it is plainly a relevant circumstance when considering whether or not his conduct justified his dismissal in June 1992.
14. In my view the judge was wrong to hold that the information given in paragraph 7 of the handbook (which in fact amounted to a mis-statement of the test of entitlement to disability benefit under the defendants’ scheme as defined in the policy) was definitive of the entitlement of the claimant to benefit. It is of course frequently the case that details of an employee’s contract and the benefit to which he is entitled by virtue of his employment are largely to be found in a handbook of the kind supplied to the claimant in this case. For this purpose, and depending upon the circumstances, incorporation by express reference in the statutory particulars of employment will not usually be required by the court. Again, it is frequently the case that, in the employment context, the language of a handbook, while couched in terms of information and explanation, will be construed as giving rise to binding legal obligations as between employer and employee. It is also true that the court does not look favourably upon an employer who seeks to restrict his contractual obligations in reliance upon a document (whether by reference to a ‘works notice’ or an insurance policy) to which the employee is not party and to which his attention has not been specifically drawn, so as to limit a right or benefit which information given in the handbook has led the employee to expect: see the approach in the not dissimilar case of Villella-v-MFI Furniture Centres Limited [1999] IRLR 468, in which Judge Green QC, sitting as a judge of Queen’s Bench Division, held that a restriction in an insurance policy underwriting a contractual permanent health insurance scheme which stipulated that entitlement to benefit would cease on an employee leaving service did not form part of the claimant’s contract, with the result that he was entitled to continue to receive benefits notwithstanding the employer’s contention that his employment had terminated.
15. In Villella the judge upheld the primary case advanced for the claimant that the stipulation that entitlement to benefit ceased on an employee leaving service could not be regarded as having been incorporated by reference in the claimant’s contract because there was no evidence that he was shown or saw the policy, or had it drawn to his attention that he could or should read it. The judge applied by analogy the remarks of Lord Denning in Falton –v- Shoe Lane Parking [1971] 2 QB 163 when refusing to give contractual effect to an exemption clause which was

“.. so wide and so destructive of rights [that] the court should not hold any man bound by it unless it is drawn to his attention in the most explicit way … In order to give sufficient notice, it would need to be printed in red ink with a red hand pointing to it or something equally startling.”

16. Judge Green QC also found for the claimant on the alternative ground that termination of the claimant’s employment would have been a breach of the implied contractual term that, in a case involving the right of an employee to long term disability benefit under a permanent health insurance scheme, the employer would not terminate the claimant’s employment save for cause other than ill health in circumstances which would deprive the claimant of his continuing entitlement to such benefit in course of payment, or due to him under the terms of the scheme: see the decision of Sedley J in Asden –v- Webbs Poultry and Meat Group (Holdings) Limited [1996] IRLR 521, as approved by the obiter dicta of Staughton LJ in Brompton –v- AOC International Limited and UNUM Limited [1997] IRLR 639 and clarified in Hill –v- General Accident Fire and Life Assurance Company plc (Court of Session) [1998] IRLR 641.
17. In the Villella case, it was of course in the interests of the claimant to establish that the terms of his employment were comprehensively contained in his employers’ handbook in order to avoid the term which purported to limit benefit to the period of the claimant’s employment. Furthermore, he was assisted to that end by the terms of the employers’ letter to him which stated that the ‘full details’ of his pension plan were set out in a separate memorandum forwarded to him, which memorandum in turn set out a definition of disability which faithfully reproduced the definition of incapacity contained in the policy. In my view that is an important factual distinction, as is the fact that, in this case, it is the employee who invokes the terms of the policy as incorporated by reference insofar as his entitlement to benefit is concerned. As already observed, the court looks unfavourably upon an employer who seeks to restrict his contractual obligations as described in a handbook in reliance upon a policy which he has not brought to the attention of his employee; but that does not mean, by way of corollary, that where the handbook expressly or by implication refers to such a policy and purports to summarise its effect upon the employee’s rights in a manner which is disadvantageous to the employee, the court will similarly regard the handbook as definitive of those rights. In the former case, it will be just that the employer should be estopped from asserting a position less advantageous than that which he has represented. In the latter case, he seeks to rely on his own error to deprive the employee of a benefit which he has in fact intended to bestow.
18. In the instant case, as it seems to me, it was the clear contractual intention of the parties to bestow upon the claimant as an employee the benefits provided for in the ‘Lubrizol Continuous Disability Scheme’. Thus, the handbook contained the plainest possible reference to the scheme entered into between Lubrizol and the insurers under that title. While it is true that the handbook did not expressly refer to the policy with the insurers, the reference to insurers and their right to seek to impose limitations in benefit (see paragraph 6 of the handbook quoted at paragraph 5 above) made the position quite clear. Furthermore, paragraph 9 sets out the agreement of the insurers to pay to Lubrizol the benefit payable under the scheme, Lubrizol agreeing to pay it (or its equivalent) on to the employee less tax. In this context, I would construe paragraph 5 and the first sentence of paragraph 7 of the handbook also as an obligation undertaken by Lubrizol to the claimant that the full benefit provided for under the scheme would be payable to the claimant after twenty six weeks of total disability as defined in the policy, and not as erroneously expressed in the second sentence of paragraph 7.
19. That being so, it becomes unnecessary to decide whether or not the judge was correct to hold as he did that the earlier paragraph in the handbook (set out at paragraph 6 above) was available to assist the claimant. However, I can shortly state my view that he was not. It seems clear to me that in order to identify the ‘specified’ benefit referred to, it is necessary to look at the policy which provides in Clause 1 (Definitions) that a ‘Benefit Insured’ shall have the meaning ascribed in the Third Schedule (Part I). Reference to that schedule shows that it is concerned to specify the annual rate of benefit insured as an amount of 52 per cent of the employee’s ‘Scheme Salary’ as defined, subject to certain specific limits set out. On that basis, I consider it is clear that paragraph 6 in the handbook means that, once the member has been accepted into the scheme by the insurers, the amount of the benefit entitlement calculated in accordance with the formula and subject to the limits set out in the schedule cannot be reduced. In other words, it relates to the level of benefit payable if entitlement is established, and not to the meaning of disablement or the mode of proof of entitlement.
20. There was before the judge no dispute between the parties (i) that if the policy definition of disablement was that applicable to the claimant’s case, then, by reason of the provisions of Clause 12 of the policy (set out at paragraph 11 above) the claimant’s claim to benefit was coextensive with his employment, and (ii) that benefit, if payable, would be treated as wages payable by the defendants to the plaintiff. Thus, as already made clear, the essential issues in this appeal turn upon the lawfulness of the defendants’ purported dismissal of the claimant by their letter dated 3 June 1992.

THE IMPLIED TERM

21. There has been no dispute before us that it was an implied term of the claimant’s contract of employment that the defendants would not terminate that employment save for a cause other than ill health so as to deprive the claimant of the continuing entitlement to the very disability benefit which it was the primary purpose of the defendants’ scheme to provide for him until age sixty-five (should such disability last until that date). Neither side has sought to argue that the authorities to which I have referred at paragraph 16 above were other than rightly decided. The only difference relates to the nature of the ‘cause’ which it is incumbent upon the employer to demonstrate as giving rise to his right to dismiss. In that respect, Mr Pearson for the claimant has submitted that, save for the circumstances of 'genuine dismissal by reason of redundancy'’ such as those found in Hill’s case, the ‘cause’ must plainly be one which amounts to a repudiatory act by the employee in the sense of ‘gross misconduct’, as contemplated by Sedley J in Aspden. In that respect, Mr Pearson relies upon the observations of Lord Jauncey of Tullichettle in Neary –v- Dean of Westminster [1999] IRLR 288 at 290 when answering the question ‘what degree of misconduct justifies summary dismissal’. Having referred to various well-known formulations in the authorities, Lord Jauncey observed:

“There are no doubt many other cases which could be cited on the matter, but the above four cases demonstrate clearly that conduct amounting to gross misconduct justifying dismissal must so undermine the trust and confidence which is inherent in the particular contract of employment that the master should no longer be required to retain the servant in his employment.”

22. Mr Edis QC for the defendants on the other hand has emphasised that, in circumstances of the kind which existed in this case, it is of less assistance to adopt ‘gross misconduct’ as the yardstick justifying summary dismissal than to have regard to the fact that the law relating to summary dismissal is in fact no more than a specialised aspect of the ordinary law of repudiation in which the ultimate question is whether or not the employee should be regarded as having evinced an intention no longer to be bound by his obligations as an employee. In my view the nuances of difference between the two approaches in the particular circumstances of this case are not such as to have any practical effect upon the outcome.

THE ‘DISMISSAL’

23. The background to the eventual dismissal of the claimant is as follows. Following the claimant’s going off work in June 1990, the defendants continued to pay him his full wage. In October 1990 they submitted a claim to the insurers via their brokers who proceeded to process the claim. The defendants agreed with the insurers that the six-month ‘waiting period’ to enable a decision to be made upon the claim would finish at the end of February 1991. The defendants paid the claimant in full to the end of that waiting period and then began to pay him at the rate of the benefits to which he was entitled under the scheme in the expectation that his claim would be accepted by the insurers. In May 1991, the insurers intimated they could not deal with the claimant’s claim because the doctor they had instructed to report on him had not yet been paid for private medical treatment which he had earlier supplied. This was rectified and the doctor concerned, Mr Gearey, submitted a report, following which, in June 1991, the insurers refused the claim on the grounds that the defendant was ‘not medically unfit or unable to follow his normal occupation’. However, the defendants continued at that time to support the claimant in his efforts to be accepted for benefit.
24. In October, the claimant was asked to see the company medical officer in order to keep the defendants up to date with his condition and progress. The claimant stated that he was still unfit to work and it was explained to him that the company medical officer would probably recommend him to see another specialist to obtain a second opinion in support of his claim. It was explained that, in the event his condition did not improve and his claim continued to be unacceptable to the insurance company the defendants would have to consider termination. The claimant said that he understood the position but insisted that he was in no fit state to do even light duties. The defendant then saw the company doctor. On 20 November 1991, the defendants wrote to the claimant recounting the history and saying that they had been paying the claimant disability benefit in the ‘reasonable expectation that they could be reimbursed’. They were now suspending payments until the question of his acceptance or not by the insurance company was finally resolved, the company medical officer having made arrangements for him to see a specialist, Mr Rostron, who examined the defendant on 5 December. Mr Rostron’s report of that date did not support the claimant’s claim that he was unfit for his normal occupation. However, on 6 December the claimant obtained a medical certificate excusing him from work for 3 months i.e. until 6 March 1992. Mr Pickering, the defendant’s human resources manager, who had been supporting the claimant in his claim, saw him to discuss matters on 7 February 1992. The defendant then stated that he had seen another consultant, Mr Sandeman, who supported his claim and a copy of that report was with his solicitors who would themselves supply it to the insurers.
25. In March 1992 the insurers indicated that they had seen the report of Mr Rostron which they said confirmed their view of the claimant’s claim. The defendants wrote to ask the insurers to re-consider the claim once they (the insurers) had received the independent report from Mr Sandeman. On 24 March the brokers informed the defendants that the insurers had not received that report. However, Mr Pickering contacted the claimant’s mother who said that a copy of the report had indeed been sent a month before. The claimant did not provide the defendants with a copy of that report. However, it does not appear that they asked for it. In fact they did not see it until the claimant started proceedings against them for personal injury in 1994.
26. On 10 April 1992, the insurers indicated that they had received the report of Mr Sandeman but their views had not changed. Mr Pickering therefore arranged to see the claimant on 18 May 1992 to discuss matters. Before he did so he recorded the defendant’s position in an internal memorandum dated 11 May 1992 as follows:

“Currently unfit for work with no real prospect of returning in the near future. Our insurers are still unwilling to accept IGB onto the Disability plan …

LZ has been generous in allowing time to sort out problem. Sought advice from an independent consultant orthopaedic surgeon and allowed time for IGB’s own consultant to report. Insurers still won’t admit claim.

LZ entitled to rely on these reports and the decision of insurers and have no alternative but to treat IGB’s employment as having terminated with effect from 20/11/91.”

27. The claimant failed to turn up to the meeting on 18 May and Mr Pickering tried to contact him by telephone on three occasions to re-arrange the meeting. He was unable to speak to him but on each occasion spoke to the claimant’s mother and left messages with her to ask the claimant to contact him. None of those calls was returned and the claimant did nothing to contact Mr Pickering. Having heard the evidence, the judge found that the calls were made and held that the claimant received the messages but took no action to respond.
28. On 3 June 1992 Mr Pickering wrote to the claimant in the following terms:

“We arranged on the 11^th May, 1992 an appointment for 10 a.m. on the 18^th May, 1992 to discuss your current long term absence. You failed to attend for this appointment and on three occasions when we tried to contact you, you failed to return our calls.

You have now been absent from work for almost two years and have indicated that there is no prospect of you returning in the foreseeable future. In November 1991, we wrote to you explaining that the Company was not prepared to continue to pay you the benefits you would have received on acceptance on to the Continuous Disability Scheme, as the insurers had indicated that you do not qualify under the Rules of the Scheme.

In an attempt to put the matter beyond doubt, the Company sought further advice from a consultant orthopaedic surgeon and is entitled to rely on his advice. In addition, you submitted a further report to the insurers who have confirmed their view that you do not qualify under the Rules of the Scheme.

In all the circumstances and, having due regard to the needs of the business, your position has been filled. As you have indicated that you are unfit to return to work in the near future, there is no prospect of the Company offering you fresh employment.

It is with regret, therefore, that we have to inform you that the company is treating your employment as having terminated on the 20^th November, 1991 by virtue of your failure to return to work in the absence of independent medical evidence to justify such failure.”

29. It was the evidence of Mr Pickering, accepted by the judge, that the reason the decision was taken to write in those terms was as follows. The claimant had failed to attend the meeting arranged for 18 May and had not returned calls which Mr Pickering believed he had received. He had earlier said that there was no prospect of his returning to work in the foreseeable future. The insurers had indicated that they did not accept his claim on the basis of a report which the defendants had obtained in an effort to assist him and a report from his own independent expert. He had failed to return to work and this failure was not supported by any independent medical evidence which the defendants had seen. His position had now been filled and the defendants could not offer him alternative employment.
30. The defendants received no reply from the defendant to their letter of 3 June 1992, whether by way of protest or acknowledgement until, over three years later, they received a letter from his solicitors on 2 September 1995 which referred to “Our client’s retirement on the grounds of ill health” and intimated a claim that he was entitled to 52% of his gross salary under the defendants’ insurance scheme. So far as the interim period was concerned the judge stated:

“There was no demand for wages in lieu of notice. He was neither being paid nor receiving benefit and no claim was made for either. Instead he pursued a personal injury claim and had no contact at all with the defendant until November of 1995 some 3 and a half years later when his solicitors initiated a claim. Moreover when, on later occasions, he visited hospital he plainly regarded his employment as over and he told his solicitor he had retired on grounds of ill health. Indeed he told me in evidence that he had regarded his employment as at an end. All of this combines to satisfy me that he had received the letter, treated it as a dismissal and accepted it.”

31. By the time of trial, there was agreement between the parties that at the time of his ‘dismissal’ the appellant had in fact been capable of light work, though not of returning to his normal duties (which involved a degree of heavy work). In this respect the judge held:

“When I look at the question of whether he was in wrongful repudiatory breach I have no difficulty in concluding in the light of what he did and did not do that the claimant had by then evinced an intention no longer to be bound by his contract of employment. I bear in mind too the now agreed medical evidence that he was in fact capable of light work.”

32. It has to be said at once that the judge’s conclusions on this vital part of the case were so succinctly stated that it is not immediately clear which of the things that the claimant ‘did and did not do’ were the acts or omissions on his part which he judge found to be repudiatory.
33. In broad terms the case for the defendants was that the repudiatory breach of the defendant lay in his failure to work for the defendant for almost two years and attend to discuss his absence at a time when his claim to benefit under the scheme had been considered and rejected by the insurers on the basis of the medical reports proffered to them. The evidence of Mr Pickering (see paragraph 28 above) was little more than a repetition of what had been set out in the letter of dismissal dated 3 June 1992. The judge made no findings of fact which added to the matters set out in that letter, save that he was satisfied that the arrangement to meet on the 18 May had been made and that the claimant neither attended nor explained his non-attendance and that, despite receiving the three subsequent telephone messages, the claimant took no action to respond. The judge’s further findings related to whether the claimant had received the letter of dismissal. He held that the claimant did indeed receive it, giving as reasons for rejecting his denial, instances of lies he had told in relation to his medical history as proof of his inaccuracy as an historian. Thereafter, the judge rounded off his judgment on the facts with the two passages which I have quoted at paragraphs 30 and 31 above.
34. Thus, the three matters relied on by the defendants as repudiatory conduct on the part of the claimant were (i) his absence from work for almost two years coupled with an indication that there was no prospect of return in the foreseeable future; (ii) his failure to keep his appointment to meet the personnel manager which had been fixed for 18 May 1992; (iii) his failure to respond to three telephone messages of which he had knowledge seeking to re-fix an appointment for discussion as to his future. As to (i), it is first worthy of note that it was the only reason advanced to the claimant for his dismissal: see the final paragraph of the letter of 3 June 1992 (paragraph 28 above). However, because it was agreed by the date of trial that the claimant had not been capable of doing his normal job but was only fit for light duties, the judge was not asked to find, nor did he find, that the claimant was at fault in not having returned to work. It thus seems clear the judge must have founded his judgment upon his finding in respect of (i) and (ii) against the background of events as I have described them.
35. It seems to me that the judge rightly ignored as a reason justifying termination on the part of the claimant three matters which, on the evidence of their letter of 3 June, the defendants seem to have regarded as supplementary reasons justifying dismissal. Those were (iv) the existence of an unfavourable medical report from the defendants’ own consultant; (v) the insurers’ confirmation of their view that the claimant did not qualify for benefit despite sight of his further report; (vi) the fact that the defendants had now filled the claimant’s position in the light of his unfitness to return. So far as (v) and (vi) were concerned, whatever might have been the position as it appeared at the time, the agreement of the parties that the claimant was indeed unfit to return to his employment and was only fit for light duties plainly removed the possibility of a plea that the claimant was deliberately or unjustifiably failing to return to work. The same was true of (vi) which was the inevitable result of the claimant’s inability to return to work, but was not something which rendered his own conduct repudiatory.
36. Thus the question becomes whether or not the judge rightly held that, having failed without explanation or excuse to attend on 18 May, and having failed over the period of two weeks thereafter to reply to the defendants’ messages to get in touch to discuss matters, the claimant had been guilty of repudiatory conduct justifying his summary dismissal.

THE RIVAL SUBMISSIONS

37. At the hearing before us, Mr Edis QC (who did not appear below) submitted that the judge was indeed correct to find as he did. In this connection, he submitted that, even if it be acknowledged that the claimant was at the time disabled from returning to his normal work (as it must be in the light of the parties agreement that he was only fit for light duties), he was nonetheless obliged to carry out the lawful instructions of his employer and to attend the place of his employment if able and reasonably required to do so. By acting as he did in not attending a meeting with Mr Pickering he was, in the words of the judge, in ‘wrongful repudiatory breach’ and ‘evinced an intention no longer to be bound by his contract of employment’.
38. Mr Pearson, who appeared for the claimant both here and below acepted that the judge was entitled to find that the claimant was in breach of contract by his failure to attend on 16 May or to respond to the defendant’s request for a further meeting, but submitted that, in the context of employment law and the necessity to show ‘gross misconduct’ as justifying summary dismissal, the breaches relied on fell far short of the level of seriousness which would have entitled the defendants to treat the contract of employment as discharged. Mr Pearson acknowledged that absence from work without consent by a fit employee may amount to repudiatory conduct: see for instance London Transport Executive –v- Clarke [1981] ICR 355, a case in which an employee took six weeks off work to go on holiday to Jamaica despite the refusal of his previous request for permission to do so and in circumstances where he was well aware that he was required at work. However, as Mr Pearson also submitted, that is far from the facts of this case, in which the claimant’s failure to report to work related not to a refusal to do the work which he was employed but unfit to do, but to a meeting for the purpose of discussing his future, as to which there was no immediate urgency, given that the employers had replaced him with another employee and were no longer paying him the benefit for which his disability in fact qualified him. Mr Pearson conceded that it is possible to imagine circumstances where an employee in the position of the claimant who refused to communicate with his employer might be in repudiatory breach; however, he submitted that, in order to demonstrate the necessary element of defiance and deliberation to amount to gross misconduct, the employee should have been informed that his contract of employment still subsisted for the purposes of any benefit to which he was entitled and to have been warned that failure to communicate might result in his dismissal or, at least, might have serious consequences.

DISCUSSION

39. Because I differ in my conclusion from My Lords Ward LJ and Bodey J, I begin by referring to the four issues which Ward LJ has set out at paragraph 81 of his judgment. In that paragraph he makes clear (as I have done) that the judge addressed only two of those issues, first the nature and level of disability entitling the claimant to benefit (the Policy or the Handbook) and, second, the issue of the lawfulness of the claimant’s summary dismissal. Despite the state of the pleadings to which Ward LJ has also referred, the judge did not address the issue of whether the defendant was obliged to pay benefits despite the insurers’ rejection of the claim and/or whether the defendants were obliged to pursue the claimant’s claim for benefits to the point of arbitration (as pleaded), which issues Ward LJ considers under the separate headings ‘Was the claimant entitled to benefits under the scheme’ (paragraphs 102-104 and 119-122 of his judgment) and “Is the employer obliged to pay the benefits whether or not it is to be reimbursed by the insurers?” (paragraphs 124-134) to both of which questions he gives a negative answer.
40. For my part I do no think it appropriate to embark upon the consideration of those questions, first because of the course which the proceedings followed before the judge, as made clear to us by Mr Pearson who (unlike Mr Edis) argued the matter at trial and, second, because neither point appears in the defendant’s cross-appeal by way of respondent’s notice. While the second point was briefly touched on before us in the course of oral argument in response to a question from Ward LJ, it was never made the subject of amendment to the respondent’s notice and has been the subject of objection as a ground of appeal by Mr Pearson.
41. Following receipt of further written submissions after the end of oral argument, it is clear that the position is as follows. Mr Pearson asserts, and Mr Edis acknowledges, that, at trial, the broad question of whether the claimant was entitled to be paid the policy benefit in circumstances when the claim had been rejected by the insurers was not addressed and thus the judge made no findings of fact about it. The matter proceeded upon the basis that liability turned (a) on the issue dealt with by the judge, namely whether the policy or the handbook defined the degree of disablement which entitled the claimant to benefit and (b) on the question of repudiation. In relation to (a) the opening paragraph of the defendant’s skeleton argument at trial stated:

“To qualify for benefit the Claimant had to become and remain “disabled” for a period of six months. In that event the defendant would pay benefit throughout the period of disablement until the claimant reached sixty-five years ...” (emphasis added)

42. It is clear that the judge acted upon that basis because, had he not done so, he would not and could not have held that the claimant was entitled to a judgment for £7117 in respect of benefits due up to the date of his dismissal. At the end of his judgment, having dealt with the issue of repudiation, he said:

“Once there was a termination of the contract, the claimant ceases to be member of the scheme and ceases to be entitled to the benefits. The consequence is that the claimant’s claim only succeeds up until 3 June 1992.”

43. Furthermore, the appeal came before us upon the same basis i.e. that it turned upon the two issues dealt with by the judge in his judgment. In my view the terms of the notice of appeal and cross-appeal make that quite clear. So did the skeleton arguments as I read them. It is certainly how I read that part of the skeleton argument on the cross appeal quoted at paragraph 26 of Ward LJ’s judgment. The words “in the circumstances” in paragraph 13 of the skeleton refer back to 1.2 and are dependent on the assertion that the claimant was fit for light work and therefore never qualified for payments under the Handbook definition relied on and asserted by the respondents as governing entitlement (see paras 1 and 1.1 of the skeleton). As I understood Mr Edis’ submission throughout, he conceded that, if he lost on that argument, then the claimant would, as the judge held, at least be entitled to a judgment against the defendants for the benefits payable to him up to the date of his dismissal. If this might otherwise have been in doubt, it is clear from the limited grounds on which the respondent appealed against the judgment which the claimant did obtain for £7,117 due up to 3 June 1992. It was never argued in that connection that there was no entitlement to benefit (i.e. benefit payable by the defendants) on the grounds that such entitlement had not been shown to the satisfaction of the insurers.
44. Further, as I understood the position from counsel, there had been agreement as to the extent of the claimant’s disability (i.e. fitness for light duties only) for the purposes of the proceedings, specifically in order to avoid the need to consider the medical evidence and the question of whether or not the insurers were acting reasonably in rejecting the evidence of disability. In the oral submissions before us we were never referred to the content of the various medical reports. The question whether or not the defendants were obliged to pay regardless of whether they were reimbursed by the insurers was briefly raised by a question from Ward LJ in the course of the appeal and it inspired brief reference by Mr Pearson to Bainbridge –v- Circuit Oil (UK) Limited [1997] IRLR 305 and Earl –v- Cantor Fitzgerald International (Unreported) to demonstrate that the right to payment of disability benefit may in an appropriate case be regarded as part of an employee’s remuneration package. Mr Edis did not, in oral argument, make any counter-submissions in that respect. He has only sought to do so in subsequent written submissions, in the face of objection from Mr Pearson that the point should not be open to him for the reasons which I have above set out. I would uphold that objection.
45. With that introduction, I turn to consider the issue of repudiation. In this context, I start from the position (as the parties accept must be the case) that, despite the difficulties he was having in convincing the insurers of his entitlement to benefit in the light of his medical evidence, the subsequent agreement of the parties as to his level of disability indicates that the claimant was in fact in a condition which entitled him to payment under the disability scheme, because his fitness only for light duties did not render him fit to return to his former heavy manual occupation. However, the matter was the subject of ongoing dispute with the insurers on the basis of the medical evidence available at the time and (though both sides appear not to have known it) the defendants were, in those circumstances, not entitled to terminate the claimant’s contract of employment simply because of his continued absence through illness.
46. As is unambiguously clear from their internal documentation (see paragraphs 26 above), the defendants considered the claimant’s position solely on the basis of whether they would, or could reasonably be expected to, continue his employment in the light of his long absence from work. That being so, it is plain that the meeting which was fixed for May, and which thereafter did not take place, whilst in one sense being called for the purposes of discussing the claimant’s position, was in reality (but undeclared) to inform him that his employment was to be terminated for that reason.
47. It also seems clear that the claimant himself understood at the time that his entitlement to benefit depended upon his ability directly to convince the insurers of his condition and that, having failed to do so by submission of the report of Mr Sandeman, and following his letter of dismissal, he thought his employment was at an end. It is clear that he made no protest at the time and apparently told the solicitors whom he had instructed in relation to his personal injury claim that he had retired on grounds of ill health.
48. That said, however, the claimant had no further communication of any kind with the defendants following his letter of summary dismissal, and he did not indicate in any way that he waived such rights as might arise therefrom. Nor, has it been argued before us that he became in any way estopped, or otherwise precluded, from submitting in these proceedings that his summary dismissal was wrongful because nothing which he had done prior to receipt of the letter of 3 July amounted to repudiation of his contract of employment.
49. Upon careful consideration, I feel constrained to find in favour of such submission. For this purpose I ignore (though I am not persuaded that the judge ignored) the subjective state of mind or knowledge of the claimant at the time he was dismissed, and limit myself to objective consideration of the behaviour of the claimant with which the defendants were confronted. I also proceed upon the basis that the defendant was capable only of performing light duties at the time of his dismissal. In this respect, again, I differ from the judge’s view that this was supportive of a finding that the claimant’s conduct was repudiatory (see the quotation from his judgment at paragraph 31 above). I say that because, (a) the test for disability was the claimant’s fitness to return to his former occupation (b) the defendants were correctly of the view that he was ‘currently unfit for work with no real prospect of returning in the near future’ (see paragraph 26 above) and (c) the defendants had never anticipated or suggested that he was required to return on a ‘light duties’ only basis.
50. It seems to me that, if an employee is on extended sick leave in circumstances where, for the purposes of a long-term disability scheme, the employer is under an obligation to keep his contract of employment in being, then the employer is entitled to expect that the employee will co-operate with him for the purposes of progressing his claim under the scheme and will also keep the employer informed as to the prospects of his return. That is plainly necessary, so that the employer may protect his own interests and adjust the requirements of his business (including where necessary pursuing the insurers for payment under the scheme). Thus, I have no doubt that in this case it was reasonable for the defendants to require the attendance of the claimant for discussion along those lines. That said, however, circumstances differ from case to case and, just as it will often be necessary in a case of misconduct by an employee for the employer to issue a warning notice as to the effect of repetition, or to make clear to the employee the consequences of any continued misconduct, so as to elevate a non-repudiatory breach into a future ground for dismissal, so should it be necessary for an employer to make clear to his employee the consequences if he does not attend for the purposes of discussing what steps should be taken in respect of his disability and/or his continued employment. However, that was not done in this case.
51. In this case, there was no urgent need for a meeting. The defendants, since November 1991, had replaced the claimant in the workplace with another employee and had ceased to pay the claimant his benefit. So far as the defendants were concerned they were engaged in a ‘tidying up’ operation in relation to the position of the claimant, having already decided what they were going to do. They were treating the insurers’ opinion as to the claimant’s condition as decisive and had not, as it appears, even asked the claimant for a copy of his latest medical report from Mr Sandeman, being content to accept what they understood to be the decision of the insurers without further argument. Had the defendants been aware of their legal obligation to keep the claimant’s employment position open for the purposes of his claim, no doubt they would have written to him setting out the position, so that he could fully consider his best course of action. Unfortunately, like him, they were not aware of the legal position and did not do so. The result was, therefore, that an employee who was indeed unfit for work and (by subsequent concession) was medically qualified for the benefit payable under the scheme, was summarily dismissed without having received any indication that failure to attend or communicate with his employer would be treated as grounds for such summary dismissal. In these circumstances I do not consider that the claimant’s failure to attend or communicate could rightly be regarded as ‘gross misconduct’ justifying summary dismissal on any ordinary definition of that term for the purposes of employment law or that, objectively judged, it demonstrated an intention on the part of the claimant to repudiate his contract of employment.

CONCLUSION

52. I would therefore allow the appeal on the basis that the claimant was wrongfully dismissed by the defendants’ letter of 3 June 1992 and I would dismiss the cross-appeal.

Mr Justice Bodey:

53. I respectfully agree with Ward LJ and Potter LJ that, on the point with which we are concerned, the policy of insurance between the Defendant company and Phoenix Assurance PLC ("the insurers") predominates over the employment handbook. Therefore, to qualify for benefit, the Claimant had only to meet the lower requirement of being totally unable to perform his "normal" occupation, not the higher requirement of being totally unable to perform "any" occupation.
54. It was agreed by the parties following the Joint Experts' Statement of 12th September 2000, that the Claimant had indeed been unfit for his "normal" occupation since June 1990.
55. Although that fact (unfitness for his "normal" occupation) was not known to the parties back in 1991/1992, the hearing below proceeded on the basis that the effect of the agreement just mentioned was to leave only two issues for determination: (i) as to whether it was indeed the policy or the handbook which determined the degree of disablement necessary before an employee could benefit under the scheme and (ii) if the Claimant came within that definition (according to how the court ruled) then whether he was in sufficiently serious breach of contract to justify being dismissed without notice.
56. As to issue (i), the conclusion that the definition of disablement in the policy predominates over that in the handbook, coupled with the parties' above agreement, means that the Claimant was entitled to the benefits of the scheme whilst still employed by the Defendant.
57. As to issue (ii), in my view the Defendant company took all reasonable steps to deal with the claim under the policy. The correspondence shows it doing so appropriately, filling in all necessary claim-forms, organising medical appointments, handling the brokers' questions, writing to ensure that the insurers kept open their file as a live claim and so on.
58. Indeed the Judge largely covered this issue, answering the question as to whether the Defendant was negligent in processing the claim against the insurers"... I do not find the Defendant negligent" - and then explaining why not.
59. The Claimant however did not reciprocate the Defendant's efforts, since the Judge held:

(a) that he made no contact with the Defendant from February 1992 onwards;

(b) that Mr Pickering made arrangements with him for a meeting on 18th May, 1992, but that he "... neither attended, nor explained his non attendance"; and:

(c) that the Claimant did in fact receive the three telephone messages made by Mr Pickering requesting him to make contact, but "... took no action to respond".

60. This lack of any response occurred in spite of a warning to the Claimant recorded in Mr Pickering's notes of a meeting between himself and the Claimant held on 16th October 1991 to the effect: ".... I explained that in the event his condition does not improve and he continues to be unacceptable to the insurance company, we may have to consider termination". So the claimant was aware of the risks inherent in his situation.
61. It is nevertheless asserted that there were duties on the Defendant (a) to advise the Claimant in May 1992 that he still had a contract of employment with the Defendant and (b) to warn him that, if he did not make contact with the Defendant, then he might be dismissed.
62. However, there is no suggestion that, as at May 1992, the Claimant had ever been dismissed, nor so informed; and in my judgment there is no mandate for implying into such a contract an obligation on the Defendant to warn the Claimant of what must have been perfectly obvious, namely the serious risk of dismissal for failing to comply with the Defendant's reasonable instructions. This was a contractual claim, not one for 'unfair dismissal'.
63. It is also significant that, at all material times, the Claimant had his own Solicitors, a fact of which the Defendant was aware. So the Claimant had not only shown himself capable of protecting his own interests, but also had access to legal advice relating to his employment, including as to his rights under the disability scheme. The Defendant was entitled to take these considerations into account when deciding how to deal with the impasse which the Claimant was creating.
64. On the particular facts of this case, it does not appear to me to be pivotal as to whether in a scheme like this the implied term identified by Sedley L J in Aspden v Webbs Poultry [1996] IRLR 521 is (a) not to dismiss the employee (nor to treat his conduct as repudiatory) except in the event of his "gross misconduct", or merely (b) not to dismiss him without cause (aside from his disability). For, in my judgment, the Complainant's repeated lack of response to and co-operation with the Defendant's reasonable requests and instructions was well capable of being characterised as gross misconduct and of being properly treated by the Defendant as a repudiation by him of his employment contract. So the Defendant's response as effected by its letter of 3rd June 1992 was, in my view, within the band of reasonable responses.
65. Accordingly, I consider that the Judge was entitled to say, as he did, that the Claimant had "... evinced an intention no longer to be bound by his contract of employment"; as was the reality. I am thus not persuaded that the decision was wrong in law, nor outside the band of conclusions which the Judge was entitled to reach.
66. As to the Defendant's cross-appeal against the Judgement in favour of the Claimant for £7,117.13: the case was not argued below on the basis that the Defendant would only be liable to the Claimant if the Defendant recovered from the insurers; and so (given that the Claimant is agreed to have been unfit to pursue his "normal" occupation) it follows that he must be entitled as against the Defendant to be paid a sum equivalent the benefit up until the time of his dismissal on 3rd June 1992.
67. I therefore agree with Ward L.J. that both the appeal and cross-appeal should be dismissed.

Lord Justice Ward:

Introduction – or perhaps just a cri de coeur.

68. Trying to pick up the real issues in this case is like trying to pick up a ball of mercury. In other words it is nigh impossible. I fear there has been a failure to identify and then to address all the issues which arise, several of which seem to me to be important to a proper resolution of the case. They have simply rolled away unresolved. How fairly and justly to gather these slippery drops together causes me concern.

The issues as pleaded.

69. The nub of the claim was pleaded in paragraph 9 of the re-amended statement of claim as follows, but with emphasis added by me:-

“It was a term of the claimant’s contract of employment, implied in order to give it business efficacy thereto, that the defendant would after the claimant became entitled to receive benefit under the terms of the scheme maintain the claimant’s employment and membership of the scheme.”

That was admitted in the amended defence, correctly so, it seems to me, because it is well in line with the sort of implied term found by Sedley J. in Aspden v Webb’s Poultry and Meat Group (Holdings) Ltd. [1996] IRLR 521 that:-

“... the provisions for dismissal in a contract of employment ... would not be operated so as to remove the employee’s accruing or accrued entitlement to income replacement insurance at the sole instance of the defendant (that is to say, otherwise than by reason of the employee’s own fundamental breach).”

70. Paragraph 9 then pleads that the defendant breached that implied term and the claimant consequently suffered the loss and damage later set out. What is interesting is the way particulars are given of the breach as follows:-

“(9.1) Failure to produce sufficient evidence of the claimant’s disability to the insurer or (if necessary thereafter) to arbitrators and/or umpire under clause 18 of this scheme and otherwise to take all necessary steps to ensure the payment of benefit to the defendant in its transmission to the claimant and

(9.2) Withdrawing the claimant from membership and/or ... dismissal of the claimant without previously having taken the steps set out in 9.1.”

It may be pedantic to point out that the particulars of breach are in fact particulars of breaches of other terms which had not then been pleaded. On a charitable view, this can be taken to have been cured by Further Information given by the claimant in which it was asserted that the contract between the defendant and the insurer placed on the defendant the obligation to produce to the insurer evidence sufficient to satisfy them that the claimant qualified for benefit and it was, thus, the claimant’s case that as between himself and the defendant there was a corresponding contractual duty “such that they owed him a duty to produce this evidence to the insurers”. It was alleged that in the circumstances it fell to the defendant to obtain the necessary evidence and present it to the insurer. Moreover, when the claim was rejected it was alleged that the defendant “could and should have challenged this decision if necessary by arbitration or reference to an umpire in accordance with the scheme”.

71. In the re-amended defence, the defendant denied that it was in breach of the implied term pleaded in paragraph 9 since the claimant was in repudiatory breach and was not entitled to benefit under this scheme. It was also denied that the defendant was obliged under the scheme or the claimant’s contract of employment or otherwise to produce evidence to the insurers sufficient to satisfy the insurer that the claimant qualified for benefit, the defendant’s duty being only to provide such evidence requested by the insurer. It was denied that the defendant was obliged to refer the insurer’s refusal to accept the claimant’s claim to arbitration. Then, and this has assumed prominent importance, it was denied that the terms set out in the defendant’s Handbook were incorrect – the Handbook rather than the insurance policy between the defendant and the insurer (to which the claimant was not a party) being alleged to set out the claimant’s rights under the scheme.
72. Paragraph 13 of the re-amended defence is also important. It alleges:-

“It is the defendant’s case that at all times it was entitled to rely upon the findings of the insurer as to whether the claimant was entitled to benefit under the scheme.”

73. I note that in the skeleton argument advanced by the defendant at the trial, the defendant submitted as to the implied term that:-

“Prior to termination of employment the claimant had not become entitled to benefit under the scheme in the absence of proof of disablement as defined.”

74. The defendant pleaded in paragraph 8 that:-

“In the light of the claimant’s failure to satisfy the insurer that he was entitled to benefit under the scheme it wrote to the claimant a letter dated 3^rd June 1992 ... In that letter the defendant indicated that given the claimant’s failure to respond to a request for him to attend meetings to discuss his position and in the absence of any evidence that the claimant intended to return to work, or that his continued absence was due to ill-health such as to justify the claim to the insurer that he was entitled to benefit under the scheme, the defendant would treat the contract as terminated on 20^th November 1991.”

75. The claimant’s claim in the alternative was pleaded in paragraph 10 as follows:-

“Alternatively the said non-payment of benefit by the defendant and his withdrawal from membership of the plan constitute a wrongful repudiation of the claimant’s contract of employment which the claimant has not accepted. In the circumstances the claimant remains in the defendant’s employment in the sense of continuing to qualify for benefits under the plan.”

76. Paragraph 11 advanced a further alternative case that if the contract of employment had been terminated (e.g. by dismissal), then under the terms of a further implied term, it was incumbent on the defendant to inform him of his right to effect an individual permanent health insurance policy and the defendant failed to inform him of that option.
77. Thus the claimant claimed the benefits he alleges he should have received to the age of 65 years as damages or, if paragraph 10 prevailed, as a debt.
78. The defence denied paragraph 10 of the amended statement of claim and pleaded with reference to paragraph 11 that the claimant had received a copy of the company Information Handbook which referred to the claimant’s rights under the scheme. Potter L.J. has set out paragraph 10 which tells the employer that if he leaves the company he can continue to benefit by paying the premiums to the insurance company, details to be given on request. The claim under paragraph 10 was, therefore, bound to fail. The defence pleaded that in any event as at 3^rd June 1992 the claim for benefit had been considered and rejected by the insurers. Loss and damage were denied.
79. The claimant also claimed that it was a term of the employment that the defendant would pay his pension contributions throughout the period of his employment. The defendant admitted it had stopped making the payments under the pension scheme when the contract of employment was terminated, and the inference is that the defendants were acknowledging, as I believe to be the fact, that it ceased making pension contributions in November 1991, rather than in June 1992.
80. As originally drafted there was a claim in negligence against the insurers, subsequently deleted from the re-amended Statement of Claim, alleging that the insurers owed the claimant a duty of care and that their decision to reject the plaintiff’s claim was negligent. We did not know until counsel responded to our written invitation to submit further argument after the conclusion of the hearing that in fact the claimant pursued that claim unsuccessfully to the Court of Appeal, his appeal being dismissed on 15^th October 1999. It also emerged that the defendant brought a Part 20 claim against the insurers in the proceedings as they were then constituted and that on 31st January 2000, the Part 20 claim was stayed under Section 9 of the Arbitration Act 1996 so that the defendant’s claim to be indemnified by the insurers could be referred to arbitration. It then emerged that the arbitration did not proceed because the claimant’s claim, though issued in time, was not served until after the limitation period had expired. It was then too late for arbitration.
81. It seems to me that at the trial the important issues were not only first, whether or not the contract of employment was governed by the terms of the Handbook or the policy so as to determine what constituted the relevant disability, and secondly, whether or not the claimant was lawfully dismissed in November 1991 alternatively June 1992; but also thirdly, whether or not the defendant was obliged to pay the benefits in circumstances where the insurers had rejected the claim and fourthly, whether or not the defendant was obliged to pursue the claim for benefits if necessary to the point of arbitration in the absence of any request by the claimant that they should do so. I do not know if issues three and four were ever addressed to the judge: there is nothing in his judgment to suggest that they were. That may be why this case has been made more difficult.

The judgment of Hunt J.

82. He saw the first issue as being “what was his contract of employment?” He accepted that on the evidence it was likely “that the Handbook was intended to reflect the policy and that the so-called mis-matches were a mistake”. He held:-

“It is apparent that much of the Handbook is concerned with what are now termed “mission statements” and expressions of good practice and general company information but where it set out the essence of a disability scheme and a promise of benefit it was and must have been contractual.”

That seems to suggest he was finding that the company Handbook definition of disability prevailed and that, as he summarised it, “benefit is only payable when he is incapable of all work”. If that were correct, then the claimant never qualified for benefit under the terms set out in the Handbook.

83. The judge, however, went on to consider the passage in the Handbook “of some importance” which read:-

“On 1^st June following completion of 3 years’ service employees under the age of 60 ... enter the Lubrizol Continuous Disability Scheme, subject to acceptance by the Insurers. Once acceptance has been given for a specified benefit, this cannot be reduced. ...”

He accepted the claimant’s case that this meant that:-

“... once he was accepted for benefit by the insurers under the scheme which actually existed (i.e. the right to payment if he could not carry out his normal occupation) the defendant was promising that the benefit could not be taken away. ... The effect of this is to bring us full circle back to the terms of the policy itself. Under that policy the benefits are, for our purposes, coterminous with employment, the benefit ceases if the claimant is properly and lawfully dismissed.”

84. At this stage of the judgment it is not clear how he had answered the first question; but, having found that the claimant was lawfully dismissed, his conclusion was that the consequence was that the claim only succeeded up to 3^rd June 1992. If the Handbook terms prevailed over the policy terms, then on the agreed medical facts, the claimant was not entitled to any benefit at all and so the judge must have decided that the policy definition of disability prevailed.
85. The “other major issue in the case” for the judge was “whether the claimant was in fact dismissed and if so was such dismissal lawful”? To decide that he said that the “first question I have to ask myself is whether this (the letter of 3^rd June 1992) was a letter of dismissal”. He referred to the fact that it stated that the company was treating the employment as having terminated on 20^th November 1991 and he held:-

“In my view any employee would view this letter as a letter of dismissal in the sense that he would know that the employer no longer regarded himself as his employer.”

He does not there identify whether the date of dismissal was the date nominated by the company.

86. His “next question” was “whether the claimant received that letter”. He was satisfied that he had. He also noted that:-

“... thereafter there was no contact from him to the defendant. There was no demand for wages in lieu of notice. He was neither being paid nor receiving benefit and no claim was made for either. Instead he pursued a personal injury claim and had no contact at all with the defendant until November 1995 some three and a half years later when his solicitors initiated a claim. Moreover when on later occasions he visited hospital he plainly regarded his employment as over and he told his solicitors he had retired on grounds of ill health. Indeed he told me in evidence that he had regarded his employment as at an end.”

So the judge concluded:-

“All of this combines to satisfy me that he had received the letter, treated it as a dismissal and accepted it. When I look at the question of whether he was in wrongful repudiatory breach I have no difficulty in concluding in the light of what he did and did not do that the claimant had by then evinced an intention no longer to be bound by his contract of employment. I bear in mind too the now agreed medical evidence that he was in fact capable of light work.”

87. He then held:-

“I do not believe in view of the above that the question still arises as to whether the defendant company was negligent in the processing of the claimant’s claim against the insurers but if it does I do not find it negligent. ... In short the matter was never finally resolved through the claimant’s lack of contact.”

88. Finally he considered “whether the defendant was in breach of an implied term to continue the claimant’s employment pending the final resolution of his claim for disability benefits”. He considered that Hill v The General Accident Fire & Life Assurance Co. [1998] IRLR 641 had held that:-

“... while there is an implied duty of mutual trust and confidence in every contract of employment it does not follow that an employer may not exercise the power of dismissal where there is cause if the practical effect of this would be to bring an employee’s entitlement to an end. I adopt that view. I have considered the case of Aspden v Webb’s Poultry and Meat Group (Holdings) Ltd. [1996] IRLR 521 and I do not consider that gross misconduct is the only cause warranting dismissal in the circumstances I find in this case.”

89. Consequently he concluded:-

“Once there was a termination of the contract the claimant ceases to be a member of the scheme and ceases to be entitled to the benefits. The consequence is that the claimant’s claim only succeeds up until 3^rd June 1992.”

90. The order was that there should be judgment for the claimant in the sum of some £7,117.13 (inclusive of interest) and also that:-

“2. The assessment of the claimant’s claim in respect of his loss of pension be referred to the district judge for determination (if not previously agreed) ...”

The appeal and cross-appeal.

91. The essence of the claimant’s appeal is that the judge was wrong to treat the claimant’s breaches of his employment as being so serious as to entitle the defendant to treat the contract of employment as discharged, i.e. there was no repudiatory breach by the claimant. Alternatively the claimant had done nothing to justify summary dismissal. The appellant’s case is that the letter of 3^rd June was a repudiation of the contract by the defendant but since it was not accepted by the claimant, the contract continued and the claimant continues to be entitled to payment of the benefits as a debt. Alternatively the judge ought to have found that the dismissal was a breach of the defendant’s duty to continue the claimant’s employment so long as he was entitled to disability benefit and that he is therefore entitled to damages after that wrongful dismissal.
92. In its cross-appeal, the defendant invites the court to set aside the whole of the order made, including that part of it which deals with the pension. The grounds for the cross-appeal and for upholding the judge’s order concentrate primarily upon supporting that part of the judgment which suggested that the Handbook terms prevailed so that the claim failed because the claimant could not show he was incapable of carrying out any work at all. The grounds do, however, include as ground 1(c) the following:-

“The payments made by the respondent to the claimant from June 1990 to November 1991 were made in anticipation that the insurers would meet the claim and not because there was a contractual obligation on the respondent to make such payments until the appellant’s contract of employment came to an end.”

93. Although that probably has to be read in the context that there was no contractual obligation because the claimant was not disabled within the meaning of that term, the words read in isolation are capable of putting in issue matters which were not addressed by the judge but which I identified as arising on the pleadings namely whether or not the defendant was obliged to pay benefits in circumstances where the insurers were refusing to meet the claim and whether or not the defendants were under any duty to take steps to obtain the benefits from the insurers. Although the written skeleton argument does little to clarify matters it does assert:-

“1.3 In the circumstances the respondent had no liability to make payments to the appellant and only did so between June 1990 and November 1991 in anticipation that eventually the appellant would meet the insurers’ criterion for entitlement under the policy. In the event the insurers declined the claim on the basis that the appellant did not meet their policy conditions.

1.4 The failure/refusal of the respondent to make payment to the appellant between November 1991 and June 1992 was not a breach of contract and could not sound either in damages or debt. This could only have occurred if the contract of employment incorporated the terms of the policy but it did not. As a matter of law it is difficult to rationalise a situation where a contract of employment dealing with an employee’s entitlement to a benefit can incorporate terms that are materially different as to the qualification for entitlement.”

94. As the arguments were developed before us, Mr Pearson submitted, to give only a very concise summary of his argument, that for conduct on an employee’s part to be treated as repudiatory, it must be grave and deliberate and the claimant’s conduct was neither. In this case, because of the agreement made for the purposes of the trial that the claimant was unable to carry out his normal work, he was entitled to receive payment of the sickness benefit from his employer. The judge was wrong to hold that an employer could terminate the contract if there was cause to do so, despite the implied term not to frustrate the employee’s entitlement to benefit.
95. Mr Edis Q.C., who appeared before us but did not play any part in the case before then, submitted that the employer was not in breach of the implied term because he was not entitled to benefits at the time of dismissal, his claim having been rejected by the insurers, and, he adds, rightly rejected on the information available at that time. He submitted that entitlement under the scheme had to be decided by the insurers subject to the employer’s right to refer any dispute to arbitration, the employee having the grievance procedures to force the employer to seek compliance from the insurers. He submitted there was no contractual obligation to pay benefits which had first to come from the insurers. He submitted that the claimant did evince an intention not to be bound by the contract of employment and that the judge was right to find that the claimant had been dismissed. He conceded that dismissal dated from 3^rd June 1992, not 20^th November 1991.
96. Because Mr Pearson was taken by surprise by some of the arguments now being advanced by the employer, we gave him time to put in written submissions. He contends that the claimant was entitled to the benefits because he qualified under the terms of the scheme. The fact that the employer clearly thought that if the insurers had rejected the claim, that was the end of the matter and even that the employee might have thought the same, may have been rational but both were wrong. He submits it is impossible to justify a theory of repudiation by inadvertence. In the absence of warning that failure to respond to the invitations to meet and discuss the problems would justify dismissal, the conduct of the employee was not sufficiently serious. The fact that the employer had not been able to obtain reimbursement through arbitration was not the fault of the employee.

The issues properly to be resolved in this appeal.

97. It seemed to me that the following four questions needed to be answered:-

i) Is the question of the employee’s disability to be determined by the definition in the Handbook or in the policy?

ii) Even if the policy definition prevailed, was the claimant actually entitled to benefits under the Continuous Disability Scheme?

iii) Was the defendant in breach of the implied term pleaded in paragraph 9 of the statement of claim so that there was a restriction on its right to dismiss the claimant?

iv) Was the claimant lawfully dismissed on 3^rd June 1992?

Handbook or policy?

98. The statement of particulars of the terms of employment given pursuant to s. 1 of the Employment Protection (Consolidation) Act, 1978, signed by the claimant on 4^th December 1986 record his employment as a shift operator commencing on 1^st December 1986. The material terms were:-

“1. Your remuneration is paid at 4 weekly intervals ... Details of your current salary are as shown on your monthly pay slip and salary increase slip. ...

4. No other remunerative work or employment may be undertaken by you except with our written consent. ...

6. The Company Information Handbook also contains information regarding Sickness and other Employee Benefit Plans. Any queries should be addressed to the Personnel Department.

7. The length of notice or pay in lieu which you are entitled to receive is ...

8. In the event that you wish to seek redress of any grievance relating to your employment you should make verbal application to your supervisor. The Company Information Handbook explains the procedure if you are unable to settle the grievance with your supervisor.”

99. Under “Disability Scheme” the Handbook states that on 1^st June following the completion of 3 years service employees enter the Lubrizol Continuous Disability Scheme, subject to acceptance by the insurers. The Handbook informs the employee that:-

“Both the Disability Scheme and the Retirement and Death Benefit Plan are non-contributory, the entire cost being borne by the company.”

100. Another part of the Handbook gives information about “The Lubrizol Continuous Disability Scheme”. As the relevant provisions have been set out in paragraph 5 of Potter L.J.’s judgment, I need not repeat them. I also gratefully adopt his recitation of the relevant provisions of the insurance policy.
101. I agree with Potter L.J. that the governing document is the policy. The Handbook made it plain that employees only enter the scheme “subject to acceptance by insurers”. It is, according to the Handbook, “the Scheme” which is “designed to provide benefits to members”. The Scheme is clearly an insurance scheme, the members are those accepted by the insurers, and the benefits provided are those provided by the Scheme, i.e. by the terms of the policy. The Handbook is redolent with references to “the insurance company” and “the insurers” and their part in making – and refusing – a payment of the benefit: see paragraphs 6, 7, 9 and 10. I am, therefore, in no doubt that the employee is only entitled to benefits if he is disabled within the meaning of the word as defined in the policy.

Was the claimant entitled to benefits under the scheme?

102. This, in my judgment, is a crucial question which should have been determined to enable proper answers to be given to the remaining issues. This is the area where confusion has reigned. To say that the claimant is entitled to the benefits because it is now established as a fact in this litigation that he was throughout a continuous period of illness or disablement unable because of his illness or disablement to perform his normal duties i.e. the occupation in which he was employed by the employer immediately before the beginning of the disablement, and had not engaged in any other gainful occupation or employment, is to address only part of the problem. To be fully addressed one has to look at the contractual arrangements and the respective duties of employer, employee and insurer. That was not sufficiently done at the hearing. We accordingly invited further submissions from counsel on this and associated questions. Counsel responded in writing and did not seek a further oral hearing. I will, therefore, for the moment, answer the question in the light of those submissions.
103. Mr Pearson protests that it is not open to the defendant on this appeal to argue that the claimant was not entitled to benefits under the scheme. He submits that the defendant’s case at the trial, as stated in the skeleton argument of counsel who appeared below was:-

“To qualify for benefit the Claimant had to become and remain “disabled” for a period of six months. In that event the defendant would pay benefit throughout the period of disablement until the period of disablement until the Claimant reached sixty-five years ...”

104. Thus he submits that Hunt J. did not have to resolve the question whether or not the claimant was actually entitled to benefit because there was no dispute about it once the parties had agreed the medical evidence that the claimant was not able to perform his normal occupation and once the policy definition of disablement was held to prevail over the Handbook definition. Mr Edis has not submitted any argument to the contrary. Although the question was raised, at my prompting, during the hearing, Mr Edis does not seem to demur from Mr Pearson’s complaint that it was never part of the appellant’s case even if, on a benign construction of the cross-appeal and the respondent’s skeleton argument, not settled by Mr Edis, the point may have been signposted as I have earlier explained. In the light of those submissions, I conclude that my first approach to this appeal must be to accept that the judge treated the claimant as being entitled to benefits under the scheme and, although I shall return to the question later, I approach the appeal on that basis. So I turn to the next question.

Was the defendant in breach of the implied term pleaded in paragraph 9 of the statement of claim?

105. On the pleadings it was agreed that after the claimant had become entitled to receive benefit under the terms of the scheme, the defendant would maintain his employment and membership. The defendant was contending that since the claimant was in repudiatory breach, he was not entitled to benefit under the scheme. It is, therefore, necessary to examine the scope of this implied term.
106. It derives from Sedley J.’s judgment in Aspden. He found there was a mutual intention that the provisions for dismissal would not be operated “otherwise than by reason of the employee’s own fundamental breach”. In paragraph 21 he expressed the mutual intention in these terms:-

“The mutual intent did not impinge at all upon the ability of the company at any time to accept the employee’s repudiatory conduct – for example malingering – as putting an end to the contract and with it the entitlement to insurance benefit.”

107. However, I agree with Lord Hamilton in Hill v General Accident Fire and Life Assurance Corporation plc [1998] IRLR 641 at paragraph 34 that:-

“Insofar as Sedley J.’s conclusion is to be understood as laying down a general proposition that gross misconduct is the only circumstance in which the employer could lawfully dismiss an employee in receipt of sick pay and with the prospect of permanent sickness provision, I must respectfully disagree.”

To limit dismissal to gross misconduct is to circumscribe the right to dismissal too narrowly. I do not believe Sedley J. had that in mind. I do not believe he would disagree with Lord Hamilton’s broader proposition in paragraph 20 of his judgment that:-

“I accept that the defender’s power to dismiss is subject to limitation. Where provision is, as here, made in the contract for payment of salary or other benefit during sickness, the employer cannot, solely with a view to relieving himself of the obligation to make such payment, by dismissal bring that sick employee’s contract to an end. To do so would be, without reasonable and proper cause, to subvert the employee’s entitlement to payment while sick.”

In my judgment, the principle to emerge from those cases is that the employer ought not to terminate the employment as a means to remove the employee’s entitlement to benefit but the employer can dismiss for good cause whether that be on the ground of gross misconduct or, more generally, for some repudiatory breach by the employee. That, therefore, leads to the next question.

Was Mr Briscoe lawfully dismissed on 3^rd June 1992?

108. To draw a distinction between gross misconduct and repudiatory conduct evincing an intention no longer to be bound by the contract is in my judgment to make a distinction without a real difference. It may be more common in employment cases to deal with gross misconduct, but that is essentially a form of repudiatory conduct. The two propositions appear to have been so treated by Lord Jauncey of Tullichettle in Neary and Neary v Dean of Westminster [1999] IRLR 288 when he said at paragraph 20:-

“The question of whether there has been a repudiatory breach of that duty justifying instant dismissal must now be addressed. Whether misconduct justifies summary dismissal of a servant is a question of fact.”

109. The question turns upon what degree of misconduct justifies summary dismissal or amounts to repudiation. Laws v London Chronicle (Indicator Newspapers) Ltd. [1959] 1 W.L.R. 698, 700/1Lord Evershed M.R. analysed the authorities and stated that the proper conclusion to be drawn from them was this:-

“... since a contract of service is but an example of contracts in general, so that the general law of contract would be applicable, it follows that the question must be – if summary dismissal is claimed to be just viable – whether the conduct complained of is such as to show the servant to have disregarded the essential conditions of the contract of service. It is, no doubt, therefore generally true that wilful disobedience of an order will justify summary dismissal, since wilful disobedience of a lawful and reasonable order shows a disregard – a complete disregard – of a condition essential to the contract of service, namely, the condition that the servant must obey the proper orders of the masters, and that unless he does so the relationship is, so to speak, struck at fundamentally.

...

I think it is not right to say that one act of disobedience, to justify dismissal, must be of a grave and serious nature. I do, however, think ... that one act of disobedience or misconduct can justify dismissal only if it is of a nature which goes to show (in effect) that the servant is repudiating the contract, or one or its essential conditions; and for that reason, therefore, I think that you find in the passages I have read that disobedience must at least have the quality that it is “wilful”: it does (in other words) connote a deliberate flouting of the essential contractual conditions.”

Lord Jauncey also analysed the authorities and concluded at paragraph 22:-

“There are no doubt other cases which could be cited on the matter, but the above four cases demonstrate clearly that conduct amounting to gross misconduct justifying dismissal must so undermine the trust and confidence which is inherent in the particular contract of employment that the master should no longer be required to retain the servant in his employment.”

I take that to be the test.

110. A subsidiary question arose in the course of the argument: must the conduct be considered subjectively from the point of view of the employee or objectively? That question is answered by Mapleflock Co. Ltd. v Universal Furniture Products (Wembley) Ltd. [1934] 1 K.B. 148, 155 where Lord Hewart C.J. giving the judgment of the court comprising the L.C.J., Lord Wright and Slesser L.J. said:-

“The language of the Act [the Sale of Goods Act 1893] is substantially based on the language used by Lord Selborne L.C. in Mersey Steel and Iron Co. v Naylor, Benzon & Co. 9 App. Cas. 434, 438, where he said: “I am content to take the rule as stated by Lord Coleridge in Freeth v Burr (1874) L.R. 9 C.P.208, which is in substance, as I understand it, that you must look at the actual circumstances of the case in order to see whether one party to the contract is relieved from its future performance by the conduct of the other; you must examine what that conduct is, so as to see whether it amounts to a renunciation, to an absolute refusal to perform the contract, such as would amount to a rescission if he had the power to rescind, and whether the other party may accept it as a reason for not performing his part.” In Freeth v Burr Lord Coleridge C.J. stated the true question to be: “Whether the acts and conduct of the party evince an intention no longer to be bound by the contract”. ... the true test will generally be, not the subjective mental state of the defaulting party, but the objective test of the relation in fact of the default to the whole purpose of the contract.”

Devlin J. put it succinctly in Universal Cargo Carriers Corp. v Citati [1957] 2 Q.B. 401, 436:-

“The test of whether an intention is sufficiently evinced by conduct is whether the party renunciating was acting in such a way as to lead a reasonable person to conclude that he does not intend to fulfil his part of the contract.”

111. What then would a reasonable person conclude from the claimant’s conduct? On 10^th May 1991 the company wrote to him informing him that until the matter was resolved with the insurers “payroll has been instructed to suspend payment”. In fact the payments appear to have continued until November 1991. On 16^th October 1991 the parties had met and it is common ground that Mr Briscoe said there had been no improvement in his condition and that he was in no fit state to do even light duties. The company explained that in the event that his condition did not improve and he continued to be unacceptable to the insurance company, they might have to consider termination. He was told in writing on 20^th November 1991 that payments were being suspended until such time as his acceptance or not by the insurance company was finally resolved. He was referred to the company’s expert. His report did not satisfy the insurers. He went to see the Human Resource Manager regarding his claim and the suspension of his benefits on 7^th February. Mr Briscoe said he had his own solicitors acting for him and some time in about March or April they sent an independent medical report to support his claim directly to the insurers. His solicitors must have been aware of the reasons why they were instructed to communicate with the insurers. We do not know what response the solicitors received from the insurers. We do know that the further medical report made no difference to the insurers’ opinion about the validity of the claim. Thereafter, as the judge found, “he was neither being paid nor receiving benefit and no claim was made for either”. He failed to pursue his claim despite having access to legal advice. After Mr Briscoe’s medical report was rejected in April, a meeting was arranged to discuss his current long term absence. He failed to attend for that appointment and on three occasions when the company tried to contact him, he failed to return their call. He had, therefore, been absent from work for two years. The last medical certificate submitted to excuse his absence was dated December 6^th 1991 and excused him from work until March 1992. His Handbook set out that:-

“The following are examples of misconduct which may be considered sufficiently serious by management to warrant suspension with pay or instant dismissal with or without payment in lieu of notice, depending on the particular circumstances of the individual case.

....

Unexplained absence.

...

Wilful disregard of instructions ...”

112. Against that background the company wrote on 3^rd June treating his employment as having terminated “by virtue of your failure to return to work in the absence of independent medical evidence to justify such failure"”
113. Upon analysis, therefore, Mr Briscoe was in breach of his duty to obey a lawful instruction to attend upon his employer to discuss his long term absence. He was in breach of an instruction to return their calls to re-arrange that appointment. His continuing absence from work was unexplained by any current medical report. The company had seen neither hide nor hair of him since February. In my judgment a reasonable person would conclude that the claimant no longer intended to fulfil his part of the contract of employment. His refusals to attend were wilful on the findings made by the judge. He had undermined the trust and confidence inherent in his contract of employment and in my judgment the company were no longer required to retain him in their employment.
114. That conclusion is fortified if one bears the agreed medical evidence in mind. On the basis of that evidence he was at least fit for light work contrary to his assertions that he was incapacitated from any work. His duty was to report for such work as he was able to do. He abstained from doing so. The true position shown by the agreed medical evidence is relevant both to the company’s conclusion that his failure to return to work was unjustified. The company would be entitled to rely upon Boston Deep Sea Fishing and Ice Co. v Ansell (1888) 39 Ch D 339, 352, 264. Absence from work can justify dismissal: see London Transport Executive v Clarke [1981] I.C.R. 355. Here Mr Briscoe’s absence on the grounds of ill health had been called in question as he knew. His employer was entitled to instruct him to attend to explain his position and he failed to do so. The only conclusion a reasonable employer could draw was that he had washed his hands of the whole business. In this case the traffic was moving all one way, that is to say movement by the employer. They were doing their level best to assist their employee. There was no counter-flow of movement from the employee. He was doing nothing in response. He was, albeit years later, asserting his entitlement to benefits. Those benefits were liable to be reduced if he found alternative work. He was not entitled to sit back and do nothing. That is exactly what he was doing. Duties of trust and confidence are mutual. He was in breach of his. In my judgment the judge was fully entitled to come to the conclusion that he had evinced an intention no longer to be bound by his contract of employment, especially bearing in mind the “now agreed medical evidence”.
115. Mr Pearson submits that the employer ought not to have acted without warning to the employee of the dire consequences that would follow his non-attendance. I reject that submission. On 16^th October 1991 he was told by the employers that:-

“In the event his condition does not improve and he continues to be unacceptable to the insurance company we may have to consider termination. I.B. said he understood this but said that he was in no fit state to do even light duties and could not understand why the insurance company remained unconvinced.”

116. In my judgment that was sufficient warning. In any event I also accept the submission of Mr Edis that a failure to warn, if there was one, went more to the fairness of the dismissal than to the lawfulness of it.

I would, therefore, dismiss the appeal.

The appeal considered in the light of the unresolved issues.

117. I am fortified in my conclusion by considering the case on the basis that the real issues I identified early on in this judgment did need to be resolved. I express my views on them because:-

i) They were raised on the pleadings and the judge could have resolved them, even if he was not required by the parties to do so.

ii) The facts are sufficiently found or otherwise beyond dispute as to make it possible for this court to express a view.

iii) We have given the parties the opportunity to address the issues and they have done so in writing.

118. Accordingly, and for the sake of completeness, I express my views about them.

Returning to the question: was the claimant entitled to benefits under the scheme?

119. Let me repeat the definition in the policy with emphasis added:-

“”A disablement” in respect of a member shall mean a continuous period of illness or disablement in respect of which evidence has been produced to the company to show to the company’s satisfaction that throughout such period the member has been totally unable because of his illness or disablement to perform his normal occupation ...” (Emphasis added).

The italicised words cannot be ignored.

120. Here the evidence produced to the insurers did not satisfy them that he was not able to perform his normal occupation. We do not have sight of all the evidence presented to the insurers. We only have Mr Rostron’s short report which concluded that:-

“There are also a number of inappropriate illness responses which suggest exaggeration and overstatement of the case and I suspect his alleged disability is out of all proportion to the pathology present. Notwithstanding this, I do not doubt that this gentleman suffered some minor episodes of recurrent low back pain as after any spinal surgery the patient always has a minor residual disability. However, I can find no evidence that he has a further major problem.”

121. If that stood alone it justified the insurer’s stance. There is nothing before us to indicate the opinion of their expert, Mr Geary, nor do we have evidence of the report submitted by the claimant’s own expert, Mr Sandeman.
122. Since the insurers were not satisfied, they were not obliged to pay the benefit. That is not to say that the insurers had an absolute veto. Clause 18 of the policy provided that:-

“If any difference or dispute of any kind whatsoever shall arise between the grantees and the company in respect of this policy or in respect of any claim ... the same shall be referred to the decision of two arbitrators ... The obtaining of an award in such an arbitration shall be a condition precedent to any right of action against or any liability of the company.”

If the arbitrators confirmed the view of the insurers, then the benefits would not be payable. If the arbitrators decided that the employee’s health did disable him from continuing his normal occupation, then the insurers would have been bound to pay under the policy. It is a fact in this case that the insurer’s decision was not challenged until, as we now know, it was too late to do so. The position remains that, absent an award by an arbitrator in the company’s favour, payments of the benefit were not due because the insurers were not satisfied that the employee was truly disabled and a critical part of the definition of disability was not established. As clause 18 makes clear, the obtaining of an award in such an arbitration is a condition precedent to any right of action against all liability of the company. The cause of action against the insurers, if any declaration against them was to have been sought, expired six years after the injury, that being the date when payments first became due. Claims against the insurers would appear, therefore, to be statute-barred as the defendant rightly conceded when the question of arbitration was raised after the stay on the Part 20 Proceedings. The fact has to be accepted that, as the insurer’s lack of satisfaction was not properly challenged, payments of benefit under this policy were neither in fact nor in law payable by the insurers in the events which happened. It is not for this court to speculate about the outcome of a hypothetical arbitration.

123. The next questions which arise are:-

a) Was the employer obliged to pay the employee irrespective of whether the insurers were reimbursing those payments?

b) Was the employer obliged at is own initiative to present fresh evidence to the insurers or to take steps to advance the claim for benefits or to refer the dispute to arbitration?

Is the employer obliged to pay the benefits whether or not it is to be reimbursed by the insurers?

124. The answer to that question depends upon the terms of the contract of employment. Looking for the moment only at the terms of employment as they are stated in the statutory particulars, it would seem from paragraph 1 that the remuneration for the work to be done was the amount shown on the monthly pay slip or salary increase slip. Benefits are not included within that remuneration but referred to quite separately in clause 6 of the statement which refers to the Handbook. In the Handbook information is given about “Employment and Remuneration”. The hours of work are set out. Then,

“Remuneration

Your pay will be transferred at 4 weekly intervals into the bank of your choice on the third Monday of each period so that all permanent employees are paid 2 weeks in advance. The company reviews pay rates of all employees at regular intervals.”

Nothing is said there about additional benefits.

125. “Health” is separately dealt with. There is provision for payment of sickness benefits. That provides:-

“The duration of sickness benefits depends upon the individual’s length of continuous service. No Company benefits will be paid to employees with less than 6 months service but Statutory Sick Pay will be paid by the Company. The following table shows the schedule of benefits:-

Continuous Service Requirement prior to first day of sickness	Aggregate Amount of Benefit inc. SSP and/or Nat. Insurance	Aggregate Amount of Benefit inc. SSP and/or Nat. Insurance
	100%	50%
6 months but less than 1 year	13 weeks
1 year but less than 2 years	13 weeks	13 weeks
2 years but less than 3 years	13 weeks	26 weeks
3 years and up to 1 June following completion of 3 years service	26 weeks	26 weeks
THEREAFTER	26 weeks	Disability Scheme”

126. That is what happened here. The employee was paid his full wages for the first six months but thereafter was dependent on the Disability Scheme. The Handbook then makes reference to the Disability Scheme to which the employees become eligible to join on 1^st June following completion of their 3 year service. It seems to me, therefore, that there can be no doubt but that the employer is obliged to pay sickness benefit for the first 6 months but then his liability ends and the Disability Scheme kicks into place.
127. The way this scheme is set out in the Handbook has already been recited. The objects of the scheme are important. It is “to provide benefits in respect of disability of members by sickness or accident”. That suggests that what the employer is doing is provide the scheme which provides the benefits. The cost of the scheme is met by the employer and that constitutes the employer’s obligation: the employer must keep up the payment of the premiums. I must repeat paragraph 9:-

“9. Income tax on benefit.

The insurers will pay the benefit to Lubrizol, who will pay an equivalent amount to the member, after deduction of income tax, if any.”

That confirms that the insurers pay the company and the company then passes on the benefit less tax. The question is whether that constitutes an obligation to pay remuneration in that sum, whether the benefit is received from the insurers or not

128. I turn to terms of the policy. The insurance contract is expressed in these terms:-

“Now this policy witnesseth that in consideration of the payment to the company [the insurers] of premiums ... the company will pay to the grantee [Lubrizol] the appropriate monthly benefit in respect of any member who is disabled to the extent described in the first schedule.”

129. I must refer to paragraph 3 of the first schedule:-

“3. The terms of the scheme shall be as agreed upon between the grantees and the company. ... Relevant details of the scheme shall be given to members but nothing contained in such details or any amendment thereof shall affect the company’s liability under the policy.”

Paragraph 10 deals with payment of benefits as follows:-

“10. Any benefit payable under the policy in respect of a member shall be paid to the grantees to be applied in accordance with the scheme; the company shall not be bound to see to the application of any money so paid.”

130. Mr Pearson submitted that the defendant was wrong to think that “if the insurers rejected the claim that was the end of the matter”. He referred to Bainbridge v Circuit Foil (U.K.) Ltd. [1997] IRLR 305 and Earl v Cantor Fitzgerald International (Unreported). In my judgement those cases are quite different and are clearly to be distinguished. In Bainbridge the employer ceased to pay the insurance premiums and the question was whether the employer was contractually bound to provide the benefits of the scheme to the employee as part of his remuneration. There the contract of employment contained provision for sickness as follows:-

“4. Sickness or injury and pension.

You are covered by the company’s sick-pay schemes ...”

As Aldous L.J. noted:-

“It is common ground that, pursuant to that term, the rules of the long term scheme form part of the appellant’s terms of employment.”

That begs the question whether the employer’s obligation is limited to maintaining the scheme or whether it extends to making payments equivalent to the benefits payable by the insurers under the scheme whether or not the insurer pays them. In the scheme itself disability benefit was defined to mean:-

“... the amount of benefit payable by the employer in accordance with the supplementary rules.” (I add the emphasis).

Payment of disability benefits was provided for in these terms, again with emphasis added by me:-

“Benefits are paid as a continuation of salary and the employer’s normal salary payment arrangements will apply.”

Aldous L.J. held in paragraph 13:-

“A person who agrees to work for another for consideration consisting of wages and other benefits will, in my view, continue to work upon those terms until notice or variation is given by one of the parties in the absence of clear contractual terms to the contrary. It follows that the respondents were contractually bound to provide the benefits of the scheme to the appellant as part of his remuneration ...”

Thus it seems to me plain that the consideration was not only the wages but the other benefits, whatever they were in the particular case. There there was no question but that the benefits were part of the employee’s remuneration because it expressly so provided.

131. Earl v Cantor Fitzgerald International is an unreported judgment of Moore-Bick J. There there was a permanent health insurance scheme for employees but the insurers rejected the claim on a variety of grounds including late notification and insufficient evidence that Mr Earl had been actively at work when the scheme took effect. The important provision in Rule 11(c) for payment of the benefit was this:-

“Payments of benefit made to a member under the scheme who is in service are a continuance of salary or earnings and although benefits are insured by the employer they are not insurance benefits to the member.” (Emphasis added.)

132. That being so I do not find it surprising that Moore-Bick J. should have concluded:-

“It [the scheme] is nothing more or less than an undertaking on the part of the employer to make certain payments to the employee in certain defined circumstances and subject to certain defined conditions. That is plain from the general tenor of the rules as a whole and is placed beyond any doubt by Rule 11(c) of the General Rules which makes it clear that payments are in the nature of salary.”

133. In my judgment the case before us is quite unlike those before the court in those earlier authorities. There is no provision making the payment of benefits a continuation of salary so as to impose a primary obligation on the employer to pay them. The employer does not promise to do so. What the employer does promise is to make provision at its expense for employees to become members of the company scheme. Under the scheme the benefits are paid to the company and when received by the company it is obliged to pay them over to the employee. At that stage and only in those circumstances are the benefits treated as akin to remuneration requiring the deduction of tax. I would be satisfied that the company was under no contractual obligation to pay benefits which had not been received from the insurers.
134. That view accords with the way the company in fact dealt with the matter throughout. On 4^th January 1991 the claimant was informed that he would be transferred to the Disability Scheme “subject to acceptance by the insurers”. He was also told that the company “would pass on the disability payments from our insurers which will continue so long as the insurers are satisfied you are unfit for work.” He was told on 10^th May that the payments had been made “pending your acceptance onto the scheme by the insurers”. The company were clearly assuming, correctly in my judgment, that they were a mere conduit and that they were under no obligation to pay if the insurance company did not pay them.

Was the employer obliged to pursue a claim for benefits to the point, if necessary, of referring the dispute to arbitration?

135. Quite clearly the company holds any benefits received to the use of the employee. There is a duty of trust and confidence between employer and employee. There is no doubt an implied duty on the employer to take all reasonable steps to obtain the benefits but, in my judgment, only if action has been requested by the employee. In my judgment the company would not be obliged to take the initiative. It must front an attack against the insurer but the declaration of war must be made by the employee. On the facts of this case no more could have been expected from a good employer. They paid up without a quibble in anticipation of (but subject to) the claim being met. They arranged for the employee to be seen at the company’s expense by the company’s doctor and the company encouraged the employee to put in his own medical report. When the claim was finally rejected in April 1992 the company made arrangement for a meeting with Mr Briscoe but he failed to attend. The company made three further efforts to re-arrange the meeting. Mr Briscoe did not respond. He had solicitors acting for him, perhaps principally for the purpose of quite separate personal injury litigation, but the solicitors provided Mr Sandeman’s report, must have known (or reasonably would be expected to have known) why it was required by the insurers and were in a position to advise. Nothing was heard from the claimant after February 1992 until, out of the blue, this claim was made in September 1995. The employers did all they reasonably could on the employee’s behalf and were under no obligation to do more.
136. Although it is far from clear from the judgment, it seems to me that that was also the judge’s view when finding that the defendant company was not “negligent in the processing of the claimant’s claim against the insurers”. He also found that “the matter was never finally resolved through the claimant’s lack of contact”. If that is a correct analysis of the effect of his judgment, and I think it is, I note that there was no appeal against it.

Was the defendant in breach of the implied term pleaded in paragraph 9 of the statement of claim?

137. To remind myself, that term, which was admitted, was that:-

“... the defendant would after the claimant became entitled to receive benefit under the terms of the scheme maintain the claimant’s employment and membership of the scheme.” (Again I add the emphasis.)

138. If the defendant never became entitled to receive benefit, the implied term putting some restraint on the power of dismissal was not broken. Even if the implied term is as Sedley J. found it to be it in Aspden, then provisions for dismissal would not be operated so as to remove either an accrued entitlement to benefit or an accruing entitlement. No claim was accruing for the simple reason that the claimant did nothing to pursue his claim for benefit. The company had done everything it could to co-operate with him: he had done nothing in return. There was, therefore, no breach of the implied term.

Was Mr Briscoe lawfully dismissed on 3^rd June 1992?

139. If the implied term does not bite, then Mr Pearson recognises that the claimant has no claim. Even if the company was not entitled to dismiss him summarily as it did, he could recover no more than damages for the period of notice and because he was not being paid nor entitled to pay, there would have been no damage. The claim is only worthwhile if there was a continuing entitlement to benefit. That is why deciding whether or not he was actually entitled to those benefits lies at the heart of this case. That is why the issue ought to have been at the forefront of the dismissal question.

Conclusions.

140. In my judgment the judge was correct to find that Mr Briscoe was lawfully dismissed on 3^rd June 1992 when the company accepted that he had evinced an intention no longer to be bound by the terms of his employment. The appeal must, therefore, be dismissed.
141. I would for my part have gone further and found that he was not entitled to the benefits at all in the circumstances of this case. I would, therefore, not have found that he was entitled to the sum of £7,117.13 which the judge awarded him. As I began this judgment, the question is how fairly and justly to deal with this appeal and cross-appeal. Since there has been no attempt to attack that part of the judge’s order save upon a basis which we are all agreed was wrong, namely the attempt to argue that the Handbook definition of disability prevailed, I would not consider it fair or just to allow the cross-appeal on a wholly different basis, especially as Mr Pearson points out that it was I who set the hare running. I would, therefore, also dismiss the cross-appeal.
Order: appeal dismissed with costs and cross-appeal dismissed with costs; detailed costs assessments to be dealt with in Liverpool by same costs judge; public funding costs assessment for the appellant.