England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM EMPLOYMENT APPEAL TRIBUNAL
His Honour Judge Prophet
EAT/0941/03

		Royal Courts of Justice Strand, London, WC2A 2LL
		11th November 2004

Lord Justice Dyson:

Introduction

1. Mr Omilaju was employed by the London Borough of Waltham Forest ("the Council") in its Housing Department between September 1992 and August 2001. He commenced employment as a Span 6 Arrears Officer. By the time his employment ended he was a SO2 grade Housing Officer. Between 28 February 1998 and 18 August 2000, he issued 5 sets of proceedings against the Council in the Stratford Employment Tribunal ("the ET"). He alleged unlawful direct discrimination, and race discrimination through victimisation and interference with trade union activity. These proceedings were consolidated and all his claims were dismissed by the ET on 24 Sept 2001. The Council refused to pay his full salary during July and August 2001 when he was absent from work without leave attending the ET hearing. The Council has at all material times had in place a rule that employees who take employment proceedings against it are required to apply for special unpaid or annual leave to attend a tribunal hearing. Mr Omilaju could have applied for such leave in the present case, but he did not do so.
2. By a letter dated 7 September 2001, he resigned from his employment. He wrote:

"Following my senior managers' recent less favourable act and victimisation against myself by refusing to pay my full July and August salary by reason of my employment tribunal hearing against the Council for racial discrimination, harassment and victimisation, I see this act not only as a breach of the expressed terms of my contract of employment but also an act that has destroyed my trust and confidence in my employer and its senior management."

3. He went on to say that he saw this as "the last straw in a series of less favourable treatments that I have been subjected to over a period of years". He then proceeded to identify some of his complaints in the letter.
4. On 25 October 2001, he issued further ET proceedings against the Council. He made 7 complaints. Following an 8 day hearing in March 2003, the ET (Ms Gilbert as Chairman and Mr Edwards and Mrs Cushing as lay members) dismissed 6 of the complaints, including a claim that he had been constructively unfairly dismissed. But they upheld the complaint that he had been the subject of victimisation in relation to a reference given by the Council to Kush Housing Association ("Kush").
5. Mr Omilaju appealed against this decision. Only 2 of his 9 grounds of appeal were allowed to proceed to a full hearing of the Employment Appeal Tribunal ("the EAT"). These were:

(a) "Considering the ET own various findings at paragraph 90 (and also paragraphs 83 to 87, 36 to 39 and 40) whether the ET misapplied the law as well as applying the wrong test under the doctrine of "last straw" when they held that there were sufficient breaches of the implied term of trust and confidence in which the Appellant was entitled to resign but that his claim failed because "the last straw that broke the camel's back was perfectly reasonable and justifiable conduct of his employer acting fully in accordance with the terms of the Appellant's contract and the terms incorporated in it."" (Ground (viii)); and

(b) "Whether, on the ET own findings of fact, there were sufficient findings entitling the Appellant in law to resign apart from the last straw principle." (Ground (ix)).

6. The EAT (HH Judge Prophet, Mr Shrigley and Mr Welch) allowed Mr Omilaju's appeal against the ET's decision that he had not been constructively dismissed, and directed that the case be remitted to the same ET to answer the question "whether the previous acts of the employer, including the matter of the [Kush] reference, together with the final act in refusing to pay his salary for days spent at the ET, cumulatively constituted a fundamental breach of Mr Omilaju's contract of employment". At para 19 of its decision, the EAT said:

"19. This appeal has caused us to consider the following question – "Whether there can be a constructive dismissal in a situation where, whatever may have previously occurred, the final act which precipitated resignation is found by the Employment Tribunal to be reasonable conduct by the employer". We therefore grant Mr Weiniger's request for leave to appeal to the Court of Appeal."

7. This was said to be a "novel" point. Having decided ground (viii) in favour of Mr Omilaju, the EAT did not need to (and did not) reach a conclusion on ground (ix). The Council appeals against the EAT's decision on ground (viii). Mr Omolaju contends that this decision was correct, but in the alternative seeks to uphold the decision that he was constructively dismissed on the basis of ground (ix). I shall refer to grounds (viii) and (ix) respectively as the first and second issues.

The decision of the ET

8. It is necessary to examine the decision of the ET in a little detail. The issue of the reference to Kush in the context of alleged indirect discrimination is dealt with at paras 34-39 of the ET's Extended Reasons. Mr Omilaju applied for the post of Housing Services Manager with Kush. On 14 Oct 98 Kush requested a reference from Mr Driscoll at the Council. The letter of reference, which was not sent out until 6 Nov, contained a paragraph about a disciplinary investigation of the conduct of Mr Omilaju. The earlier ET had concluded that this paragraph was "a piece of unexplained negative or adverse treatment by Mr Driscoll", and that the reference contained an "assertion for which there seems to be little foundation, namely that the disciplinary matter was live in Nov 98". The second ET came to the same conclusion and adopted the findings of their predecessor. They returned to the issue of the reference in the context of alleged race discrimination by way of victimisation at paras 81-87, and concluded that Mr Omilaju's complaint was made out.
9. At para 40, the ET dealt with Mr Omilaju's complaints about bullying and shouting by Ms Chown, who had been his line manager until mid-98. This too had been considered by the earlier tribunal, who had found that the allegations that Ms Chown had treated Mr Omilaju less favourably than his fellow employees were not proved. The later tribunal noted that Mr Omilaju had not resigned in response to Ms Chown's treatment of him, but added:

"This Tribunal considers that the finding that there was in use a managerial technique which involved shouting at employees and threatening them with disciplinary action supports a finding of an unacceptable management practice by this Tribunal."

10. The complaint of unfair dismissal was dealt with at paras 90-92. It is necessary to set out para 90 in full:

"90. The Applicant has to show that he resigned in circumstances in which he was entitled to resign without notice by reason of his employer's contract (sic). The Applicant has to show that there was serious breach of contract, or a breach which was the last in a series of breaches; that he resigned in response to the breach, and that he resigned within a reasonable time without affirming the contract. The Applicant in this case resigned because he was not paid wages for the days in July and August 2001 he was attending the Employment Tribunal. He was not paid because he was not available for work and his absence was not covered by his contract. There was no breach of contract at all never mind on[e] which would entitle the Applicant to resign without notice. The Applicant did not resign because of the Kush Reference or because of Mrs Chown's conduct towards him both of which may have been breaches of the implied term of trust and confidence. He resigned because he was not paid. The Applicant also says it was the last in a series of actions such as to amount to a breach of trust and confidence. To this end the Applicant relies on the history including his treatment by Mrs Chown and the reference from Mr Driscoll. He may not have resigned in response to these to these but taken together with non payment of wages in the Employment Tribunal he was entitled to resign and claim he was dismissed. The difficulty for the Applicant is that looked at objectively the straw that broke this camels back was perfectly reasonable and justifiable conduct of his employer acting fully in accordance with the terms of the Applicant's contract and the terms incorporated in it. The Applicant was not dismissed. There was no dismissal and his complaint of unfair dismissal fails and is dismissed."

The reference to "contract" in the first line must be in error for "conduct".

The decision of the EAT

11. Unsurprisingly, the EAT concentrated on para 90 of the ET's reasons. They said at para 7 that there may have been some ambiguity in the sentence "He may not have resigned in response to these but taken together with non-payment of wages in the Employment Tribunal he was entitled to resign and claim he was dismissed." At para 10, they referred to the important decision of this court in Lewis v Motorworld Garages Ltd [1986] ICR 157, where Glidewell LJ said at p 169 F-G that the last action of the employer which leads to the employee leaving need not itself be a breach of contract. The EAT made the point that the ET had not been referred to this decision, adding: "If they had been, it would have been difficult for them to have said what they did at the beginning of paragraph 90".
12. They continued:

"11. In its comprehensive judgment in the instant case, the Employment Tribunal, at paragraph 90, indicate that because the final act, which caused Mr Omilaju to resign, was not a breach of contract, but, indeed, fully in accordance with the terms of his contract there could be no constructive dismissal. They also added that the action of the employers was a reasonable one. In general terms, Mr Weiniger submits that the Tribunal approached the matters correctly, and reached conclusions which it was entitled to reach on the evidence it received. That, in general terms, is a powerful argument and this Tribunal does not seek normally to disturb an Employment Tribunal decision approached in that way. The difficulty arises, however, in the terms of paragraph 90, which we have set out above, and which does indicate some degree of ambiguity and possible confusion on the part of the Employment Tribunal.

12. However we have also had an interesting argument from Mr Weiniger, in respect of what can or cannot constitute a "last straw" situation. Mr Weiniger says that in order to constitute a "last straw" the conduct of the employer has to be unreasonable in some way, and, indeed, this Tribunal expressly found that the employer's actions in respect of the non payment of wages was reasonable.

13. The difficulty about that argument, it seems to us, is that in all "last straw" situations, matters turn to some extent on the perception of the employee at the time when he feels that he has been treated unreasonably or unfairly by his employer. It is that which causes him to decide to resign, bringing into the picture, as is usually the case and, indeed, is the case here, previous actions by the employer about which he had complained. It seems to us that it would be wrong to say that any possibility of a finding of constructive dismissal in such a situation is negatived if the final action of the employer is subsequently found by the Employment Tribunal to have been reasonable.

14. The case law indicates that the function of the Employment Tribunal when faced with a series of actions by the employer is to look at all the matters and assess whether cumulatively there has been a fundamental breach of contract by the employer. We are unable to find in the judgment of this Employment Tribunal the answer to that question."

13. The EAT, therefore, found for Mr Omilaju on the first issue and allowed the appeal. At para 16, they explained that "it would not be appropriate for us to substitute a decision on the matter of whether he was or was not constructively dismissed, as Mr Edward suggests, nor, indeed, do we think it would be proportionate for this matter to have to be remitted to a different Employment Tribunal". As I have said, they did not determine the second issue.

The first issue

The law

14. The following basic propositions of law can be derived from the authorities:

1. The test for constructive dismissal is whether the employer's actions or conduct amounted to a repudiatory breach of the contract of employment: Western Excavating (ECC) Ltd v Sharp [1978] 1 QB 761.

2. It is an implied term of any contract of employment that the employer shall not without reasonable and proper cause conduct itself in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee: see, for example, Malik v Bank of Credit and Commerce International SA [1998] AC 20, 34H-35D (Lord Nicholls) and 45C-46E (Lord Steyn). I shall refer to this as "the implied term of trust and confidence".

3. Any breach of the implied term of trust and confidence will amount to a repudiation of the contract see, for example, per Browne-Wilkinson J in Woods v WM Car Services (Peterborough) Ltd [1981] ICR 666, 672A. The very essence of the breach of the implied term is that it is calculated or likely to destroy or seriously damage the relationship (emphasis added).

4. The test of whether there has been a breach of the implied term of trust and confidence is objective. As Lord Nicholls said in Malik at page 35C, the conduct relied on as constituting the breach must "impinge on the relationship in the sense that, looked at objectively, it is likely to destroy or seriously damage the degree of trust and confidence the employee is reasonably entitled to have in his employer" (emphasis added).

5. A relatively minor act may be sufficient to entitle the employee to resign and leave his employment if it is the last straw in a series of incidents. It is well put at para [480] in Harvey on Industrial Relations and Employment Law:

"[480] Many of the constructive dismissal cases which arise from the undermining of trust and confidence will involve the employee leaving in response to a course of conduct carried on over a period of time. The particular incident which causes the employee to leave may in itself be insufficient to justify his taking that action, but when viewed against a background of such incidents it may be considered sufficient by the courts to warrant their treating the resignation as a constructive dismissal. It may be the 'last straw' which causes the employee to terminate a deteriorating relationship."

15. The last straw principle has been explained in a number of cases, perhaps most clearly in Lewis v Motorworld Garages Ltd [1986] ICR 157. Neill LJ said (p 167C) that the repudiatory conduct may consist of a series of acts or incidents, some of them perhaps quite trivial, which cumulatively amount to a repudiatory breach of the implied term of trust and confidence. Glidewell LJ said at p 169F:

"(3) The breach of this implied obligation of trust and confidence may consist of a series of actions on the part of the employer which cumulatively amount to a breach of the term, though each individual incident may not do so. In particular in such a case the last action of the employer which leads to the employee leaving need not itself be a breach of contract; the question is, does the cumulative series of acts taken together amount to a breach of the implied term? (See Woods v W. M. Car Services (Peterborough) Ltd. [1981] ICR 666.) This is the "last straw" situation."

16. Although the final straw may be relatively insignificant, it must not be utterly trivial: the principle that the law is not concerned with very small things (more elegantly expressed in the maxim "de minimis non curat lex") is of general application.
17. It is the alleged failure by the ET in the present case to apply the judgment of Glidewell LJ which led the EAT to allow the appeal. It is submitted by Mr Weiniger on behalf of the Council that although, as Glidewell LJ makes clear, the final straw does not need to be a breach of contract, it must at least be conduct which is "blameworthy or unreasonable". Anything less than a breach of contract or conduct which is blameworthy or unreasonable is not capable of being a final straw in the sense discussed by Glidewell LJ.
18. On behalf of Mr Omilaju, Mr Edward submits that (i) the final straw does not need to be a breach of contract (see Lewis), (ii) blameworthy or unreasonable conduct in a final straw case must by definition be, or at least contribute to, a breach of the implied term of trust and confidence, but (iii) since the breach of this implied term is, by definition, also a breach of contract, it cannot be a requirement that a final straw should amount to blameworthy or unreasonable conduct, since Lewis says that it does not need to be a breach of contract.
19. The question specifically raised by this appeal is: what is the necessary quality of a final straw if it is to be successfully relied on by the employee as a repudiation of the contract? When Glidewell LJ said that it need not itself be a breach of contract, he must have had in mind, amongst others, the kind of case mentioned in Woods at p 671F-G where Browne-Wilkinson J referred to the employer who, stopping short of a breach of contract, "squeezes out" an employee by making the employee's life so uncomfortable that he resigns. A final straw, not itself a breach of contract, may result in a breach of the implied term of trust and confidence. The quality that the final straw must have is that it should be an act in a series whose cumulative effect is to amount to a breach of the implied term. I do not use the phrase "an act in a series" in a precise or technical sense. The act does not have to be of the same character as the earlier acts. Its essential quality is that, when taken in conjunction with the earlier acts on which the employee relies, it amounts to a breach of the implied term of trust and confidence. It must contribute something to that breach, although what it adds may be relatively insignificant.
20. I see no need to characterise the final straw as "unreasonable" or "blameworthy" conduct. It may be true that an act which is the last in a series of acts which, taken together, amounts to a breach of the implied term of trust and confidence will usually be unreasonable and, perhaps, even blameworthy. But, viewed in isolation, the final straw may not always be unreasonable, still less blameworthy. Nor do I see any reason why it should be. The only question is whether the final straw is the last in a series of acts or incidents which cumulatively amount to a repudiation of the contract by the employer. The last straw must contribute, however slightly, to the breach of the implied term of trust and confidence. Some unreasonable behaviour may be so unrelated to the obligation of trust and confidence that it lacks the essential quality to which I have referred.
21. If the final straw is not capable of contributing to a series of earlier acts which cumulatively amount to a breach of the implied term of trust and confidence, there is no need to examine the earlier history to see whether the alleged final straw does in fact have that effect. Suppose that an employer has committed a series of acts which amount to a breach of the implied term of trust and confidence, but the employee does not resign his employment. Instead, he soldiers on and affirms the contract. He cannot subsequently rely on these acts to justify a constructive dismissal unless he can point to a later act which enables him to do so. If the later act on which he seeks to rely is entirely innocuous, it is not necessary to examine the earlier conduct in order to determine that the later act does not permit the employee to invoke the final straw principle.
22. Moreover, an entirely innocuous act on the part of the employer cannot be a final straw, even if the employee genuinely, but mistakenly, interprets the act as hurtful and destructive of his trust and confidence in his employer. The test of whether the employee's trust and confidence has been undermined is objective (see the fourth proposition in para 14 above).

This case

23. Para 90 of the decision of the ET lies at the heart of this appeal. The EAT say at paragraph 7 that there is some ambiguity in the sentence in para 90 of the ET's decision "He may not have resigned in response to these but taken together with non-payment of wages in the Employment Tribunal he was entitled to resign and claim he was dismissed". The EAT consider that it is not clear whether this sentence records part of Mr Omilaju's submissions, or whether it forms part of the ET's conclusions. In my view, the sentence plainly is recording part of Mr Omilaju's submissions. The ET's conclusions start with the sentence which begins "The difficulty for the Applicant….". In any event, it would seem that the perceived ambiguity was not the reason why the EAT allowed the appeal. They said:

" It seems to us that there is some ambiguity there, but because of the action we have decided to take in this case, which we shall come to in a moment, it will be helpful if the Employment Tribunal, in due course, can clarify the position on that matter."

24. I move, therefore, from the issue of ambiguity. The EAT rightly observed that the first part of para 90 is inconsistent with the principle that a final straw does not need of itself to be a breach of contract. The ET is saying that (i) Mr Omilaju had to show that there was a serious breach of contract, or a breach which was the last in a series of breaches, and (ii) the Council's refusal to pay was "not a breach of contract at all never mind one which would entitle the Applicant to resign without notice". If para 90 had stopped there, the EAT would have been right to conclude that the ET had misdirected itself and to allow the appeal for that reason.
25. But the second part of para 90 starts with the words: "The Applicant also says it was the last in a series of actions such as amount to a breach of trust and confidence." This submission is rejected by the ET because "looked at objectively, the straw that broke this camel's back was perfectly reasonable and justifiable conduct of his employer acting fully in accordance with the terms of the Applicant's contract…." The question is whether this application of the final straw principle was in accordance with the law as I have explained it earlier in this judgment.
26. If the ET had rejected the submission by merely repeating that the refusal to pay Mr Omilaju's salary was not in breach of contract, that would clearly have been a misdirection for the reasons that I have given. But the ET also said that the refusal to pay, looked at objectively, was perfectly reasonable and justifiable conduct. It is true that I have rejected Mr Weiniger's submission that it is a prerequisite of a final straw that the act should be unreasonable, if not of itself a breach of contract: the essential requirement is that it should contribute to a breach of the implied term of trust and confidence. But it will be an unusual case where conduct which is "perfectly reasonable and justifiable" satisfies the final straw test.
27. In the passage under scrutiny, the ET is addressing the submission that the failure to pay was the last in a series of actions amounting to a breach of the implied term of trust and confidence. In that context, it seems to me that the ET is saying that the failure to pay was not the last in such a series. Viewed objectively, it did not have the quality of contributing to the undermining of Mr Omilaju's trust and confidence in his employer. The reason why it did not have that quality was that, in all the circumstances, the failure to pay was perfectly reasonable and justifiable conduct.
28. I have not found it altogether easy to ascertain the basis on which the EAT did allow the appeal in this case. At para 10, they make the fair point that the first part of para 90 falls into the error of saying that the final straw must be a breach of contract. At para 11, they say that Mr Weiniger's submission that the ET approached the matters correctly, and reached conclusions which they were entitled to reach is in general terms "a powerful argument". But, they say, the difficulty is that para 90 indicates "some degree of ambiguity and possible confusion". I have already dealt with the ambiguity point. Nor is it clear what confusion is being referred to: it may be the breach of contract point. It is not clear whether this ambiguity/confusion is the basis on which the appeal was allowed. At para 12, the EAT deal with Mr Weiniger's submission that the final straw must have the quality of unreasonableness. At para 13, they identify the difficulty with that submission as being that in all last straw situations, matters turn to some extent on the "perception of the employee at the time when he feels that he has been treated unfairly". If this means that the test of whether there has been a breach of the implied term of trust and confidence is subjective, then it is not correct. The final sentence of paragraph 13 rejects Mr Weiniger's submission for reasons with which I would agree. The mere fact that the alleged final straw is reasonable conduct does not necessarily mean that it is not capable of being a final straw. The correct test is the one I have sought to explain earlier in this judgment. But, as I have said, it will be an unusual case where the final straw test is satisfied and the conduct relied on as the final straw has been judged objectively to be reasonable and justifiable conduct.
29. Having rejected Mr Weiniger's submission at para 13, the EAT conclude at paragraph 14 that the ET failed to "look at all the matters and assess whether cumulatively there has been a fundamental breach of contract by the employer."
30. In the present case, the ET were fully aware of the circumstances in which Mr Omilaju had not been paid. They must have decided that, taking an objective view of all the circumstances, the failure to pay was not a final straw, and that they could reach this decision without considering in detail the nature and effect of the earlier acts. In my judgment, they were entitled to do so. I would find for the Council on the first issue.

The second issue

31. Mr Edward submits that the ET finding that Mr Omilaju resigned in response to the failure to pay his salary is perverse. He submits that the ET should have found that Mr Omilaju resigned in part for this reason, but also in part by reason of the Council's earlier conduct, including its behaviour in relation to the Kush reference. In support of his argument, Mr Edward relies, in particular, on the terms of the letter of resignation of 7 September 2001.
32. The opening paragraph of the letter is in the clearest terms: the failure to pay is said to be "an act that has destroyed my trust and confidence in my employer and its senior management". The first sentence of the immediately following paragraph states: "I see this also (sc the failure to pay) as the last straw in a series of less favourable treatments". In other words, Mr Omilaju is making it clear that this is a last straw case, and that the failure to pay is the last straw. It is true that the letter goes on to set out some of his complaints of the Council's earlier conduct. In my judgment, however, on a fair reading of the letter, the reason given for the resignation is the failure to pay. At the very least, the ET were entitled so to hold.
33. This interpretation is entirely consistent with the evidence adduced by Mr Omilaju and the way the case was presented on his behalf. Thus, at para 34 of his witness statement, Mr Omilaju said that the Council's conduct in deducting his salary in respect of the period when he was attending the ET hearing was the "last straw". "It destroyed my trust and confidence in the Respondent". He made the same point at para 47 of the statement. At para 2 of its Extended Reasons, the ET set out the issues which had been identified at a directions hearing on 16 May 2002, and had been subsequently further clarified. These included at (viii) under the heading "Unfair Dismissal" the following issue: "whether the breach of contract referred to in (vii) above (viz the deduction of salary) was a fundamental breach of the Applicant's contract of employment and if not the last in a series of breaches by the Respondent such as to entitle the Applicant to resign without notice by reason of the Respondent's conduct".
34. In these circumstances, the ET were fully entitled to view this as a final straw case. I do not consider that it would have been open to the EAT to take a different view. It is certainly not open to this court to do so.
35. For these reasons, I would not interfere with the ET's decision on the reason for Mr Omilaju's resignation.

Conclusion

36. For the reasons that I have sought to give, I would allow this appeal.

Lord Justice Wall:

37. I agree.

Lord Justice May:

38. I agree that this appeal should be allowed for the reasons given by Dyson LJ.
Order: Appeal allowed with the decision of the EAT of 31 March 2004 set aside. Decision of the ET restored. Costs of appeal to be paid by respondent subject to detailed assessment if not agreed. Permission to appeal was refused. (Order does not form part of approved judgment)