ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
His Honour Judge Richardson, Mr M. Clancy and Mr T. Motture
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE HOOPER
LORD JUSTICE RIMER
| C.F. CAPITAL PLC
|- and -
Mr Fred Banning (of Clarke Mairs LLP) for the Respondent
Hearing date: 18 July 2011
Crown Copyright ©
Lord Justice Rimer :
'I refer to our meeting of 2 December 2008.
As discussed during our meeting the Company has been subject to a market conditions reflected by the current difficulties within the economic climate and as a result we have experienced a downturn in business transacted.
Despite the economic downturn we have been able to mutually agree to a change in your employment status and our working relationship will continue by your move into self-employment.
The termination of your existing employment contract will be effective from 31 December 2008.
Your Agency Agreement will commence 1 January 2009, which is enclosed for your consideration and signature. It reflects our confirmation that a retainer in the sum of £1,000 will be paid to you on a monthly basis, which is reviewed annually on the anniversary of the Agreement. This retainer is to be deducted from commissions earned on the percentage splits agreed from time to time.
Please find enclosed two copies of this letter and the Agency Agreement. I shall be grateful if you would sign both of each, keeping one and returning the other ones to me.'
'Even on the basis of Mr Keeley's perception of the upshot of the meeting on 1 December, his letter of 22 December goes far further than was appropriate. His evidence was only that [Ms Willoughby] had been keen "to discuss the self employment proposal further" (paragraph 14 of his statement) and that her later decision not to become self-employed "was somewhat at odds with the interest she had shown during" their meeting on 1 December (paragraph 27). At that meeting Mr Keeley had only provided possibilities regarding the amount of the retainer and had not discussed, let alone agreed, the date on which the transition would take place and neither had he discussed with [Ms Willoughby] any of the detailed terms of the Agency Agreement that was offered to her (pages 90 to 102) which are detailed and some of which could be said to be onerous. An appropriate letter at this stage would have advised [Ms Willoughby] of the proposed terms for self-employment (as she had herself requested) and sought to obtain her agreement to those terms including by way of further discussions if she wished. Mr Keeley said in evidence that the intention behind the letter was to give [Ms Willoughby] "an opportunity to reflect on matters and change her mind if she wished". That is not what the letter states.'
The ET's decision
'… in isolation, any reasonable recipient would have read the letter… Indeed it is how CFC intended it at the time albeit on the false premise that [Ms Willoughby] had agreed to the termination of her employment and her move to self employed basis.'
'A reasonable person with that understanding would have recognised, upon receiving the letter of 22 December, that something was seriously wrong: there had been a mistake and the reference to the termination of her contract of employment had to be an error.'
'26. Thus, while on the face of it, the letter of 22 December would have amounted to a dismissal that dismissal, which was founded on a mistake, was withdrawn, timeously, by [CFC].
27. Instead, [Ms Willoughby] brought her employment to an end when she refused to return to work and this was more formally confirmed to [CFC] when it became aware that she had applied for Job Seeker's Allowance.
28. Thus, [Ms Willoughby] was not dismissed and, therefore, her complaint that she was unfairly dismissed is not well-founded and is dismissed.'
The EAT's decision
'39. Without doubt the main practical problem which the law has sought to address in these cases has been the problem of words spoken in anger in the heat of the moment. In ordinary human experience we generally take people to mean what they say; but we often make allowances for words spoken in anger, recognising that they may soon be retracted and may reflect no more than a momentary, flawed intention on the part of the speaker. The law caters for this eventuality; but the law will not serve the wider interests of justice unless employers and employees are usually taken to mean what they say.
40. We think the Court of Appeal's decision in Buckland [a reference to Buckland v. Bournemouth University Higher Education Corporation  EWCA Civ 121;  4 All ER 186] also points to a limitation in the "special circumstances" rule. The Court of Appeal decided that an employee who commits a repudiatory breach of contract has no right to an opportunity to cure the breach. There is a logical distinction between an employer who commits a repudiatory breach of contract and an employer who uses express words of dismissal – the former is by definition acting in breach of contract, the latter not necessarily so. But the distinction is not necessarily clear cut. An employer's words of dismissal may be the culmination of a course of conduct amounting to a repudiatory breach, or they may themselves amount to such a breach. In such circumstances there can be no room for the "special circumstances" doctrine. An employer who is in fundamental breach cannot improve his position by using express words of dismissal.'
'… this is not a case of an immature employee, or of a decision taken in the heat of the moment, or of an employee being jostled into a decision by the employers…'.
Dame Elizabeth Lane, agreeing, said, at paragraph , that Mrs Sothern's words meant 'I resign' and, in the context, they expressed an intention to resign and were so understood and accepted. They were not idle words, or words spoken under emotional stress which the employers knew or ought to have known were not meant to be taken seriously.
'14 … It has obviously been contemplated in this Appeal Tribunal and has been contemplated for years that in the heat of the moment words which clear enough standing alone would indicate a dismissal can lose that effect if one looks at the surrounding circumstances. Of course, it must be a question of degree. Of course, you may get a situation in which the change of mind is so late that it is impossible to recover from the dismissory words expressed in the first place.
15. We have no doubt whatsoever and, hoping that this matter may well be tested in the Court of Appeal, perhaps impertinently, confidently assert that it is a matter of plain common sense, vital to industrial relations, that either an employer or an employee should be given the opportunity of recanting from words spoken in the heat of the moment. We agree entirely with the first conclusion of the Industrial Tribunal that, having done what they did, withdrawing the original spoken words, saying that a man was suspended and telling him that, in the circumstances there was no dismissal…'.
'11. On the other hand we do not consider that in the circumstances of this case the matter rests there. It is true that if unequivocal words of resignation are used by an employee in the normal case the employer is entitled immediately to accept the resignation and act accordingly. This has been authoritatively decided by the Court of Appeal in Sothern v. Franks Charlesly & Co  IRLR 278 to which we were referred. It is clear however from observations made in that case that there may be exceptions. These include cases of an immature employee, or of a decision taken in the heat of the moment, or of an employee being jostled into a decision by employers (Fox LJ at paragraph 21); they also apply to cases where idle words are used under emotional stress which employers knew or ought to have known were not meant to be taken seriously (Dame Elizabeth Lane, paragraph 25). There is therefore a duty on employers, in our view, in an appropriate case to take into account the special circumstances of the case.
12. It may be that the majority of the Tribunal were correct in holding that when the appellant demanded the books on Thursday, 15.4.82, notwithstanding that it was in the heat of the moment, he meant it at the time. The real question however is whether or not in the special circumstances the respondents were entitled to assume that this was a conscious rational decision. It is true that the majority refer to the exceptional circumstances of the case but we do not consider that having regard to the observations in Sothern v. Franks Charlesly & Co  IRLR 278 it is sufficient to dismiss the unusual aspect of this case in this way. We consider that the proper approach is to have regard, not merely to what was said on 15.4.82, but to what happened the following day and indeed to the fact that the appellant did report for work on the following Monday apparently under the impression that he was still employed. At the very least there was, in our view, an obligation upon the respondents when the appellant reported on Friday, 16 April to seek some form of confirmation that his act of resignation was in fact a genuine one and fully understood. Instead of that they adopted what we consider to be the indefensible practice of requiring him against his will to sign a blank document which presumably on some subsequent occasion was filled in by them with the word "resigned" written opposite the entry "reason for leaving". Further we agree with the observation of the dissenting member that in the special circumstances of this case a reasonable employer would at least have consulted with one of the appellant's sisters before assuming that the appellant meant the words which he had used. For these reasons we propose to allow the appeal.'
'In my opinion, generally speaking, where unambiguous words of resignation are used by an employee to the employer direct or by an intermediary, and are so understood by the employer, the proper conclusion of fact is that the employee has in truth resigned. In my view tribunals should not be astute to find otherwise. However, in some cases there may be something in the context of the exchange between the employer and the employee or, in the circumstances of the employee him or herself, to entitled the Tribunal of fact to conclude that notwithstanding the appearances there was no real resignation despite what it might appear to be at first sight.'
May LJ then referred to Fox LJ's judgment in Sothern's case and, in relation to paragraph  (which I have cited above), said that Fox LJ was there contemplating the possibility to which he, May LJ, had referred, namely 'that if one is concerned with an immature employee or decisions taken in the heat of the moment, then what might otherwise appear to be a clear resignation, should not be so construed'. May LJ also referred to the like qualification that Dame Elizabeth Lane had made in Sothern's case.
'Far from the respondent's resignation having taken place when she was in a fit of temper or was suffering from acute anxiety, it appears that her resignation bore all the hallmarks of a deliberate and conscious act. No doubt she resented some things which Mr Martin had said, but she did not merely say that she was leaving but she took time to sit down and write a letter of resignation. That letter is well expressed and clear in its terms. It appears to me that even if it is assumed that her statement that she was leaving was made in the heat of the moment, the respondent had a full opportunity to reconsider the matter and, if so advised, to withdraw the resignation. Instead of that the respondent sat down and wrote out the letter of resignation, thus confirming what she had already stated orally.
On the findings I am satisfied that there is no justification for thinking that the appellants knew or ought to have known that the resignation was not a conscious or rational decision. It was not a case of an employee flouncing out in a fit of temper, nor was it a case of an employee offering her resignation at a time when her employers knew or ought to have known that she was not herself but was suffering from an anxiety state.'
'In essence, as I understood counsel for the respondent to concede, this is a "heat of the moment" case and I question whether the unambiguous language used by a mature employee of some years' standing at the time of the confrontation alone would have precluded the application of the general rule in Sothern so as to bring it within the exception. Be that as it may, the terms of the letter which she subsequently wrote are I my view conclusive and for these reasons I would allow the appeal. I would only add that where possible exceptions to a general rule are suggested in obiter dicta such as that used in the case of Sothern, there may be a tendency for tribunals to apply the exception to the rule rather than the rule itself and I wish to emphasise that only in highly exceptional circumstances will this be justified.'
'These exceptions are not as I understand the position meant to be definitive, because each case must turn on its own facts and circumstances, but they are meant to indicate the sort of situations where at first sight words are used or acts are done which clearly and unambiguously indicate that the employee is terminating his own employment or is being dismissed, but where special circumstances are present which ought to indicate to the employer or employee that that was not intended or at any rate put him on his guard and cause him to realise that the words or acts should not be taken at their face value. Examples of these situations were quoted to us by counsel. In particular reference was made to [Martin's case and Barclay's case].'
'31. Let us first look at the problem from the approach of sound management. As we have said, the industrial members take the view that the way in which this industrial Tribunal have expressed themselves puts too high a burden on employers. If words of resignation are unambiguous then prima facie an employer is entitled to treat them as such, but in the field of employment, personalities constitute an important consideration. Words may be spoken or actions expressed in temper or in the heat of the moment or under extreme pressure ("being jostled into a decision") and indeed the intellectual make-up of an employee may be relevant (see Barclay  IRLR 313). These we refer to as "special circumstances". Where "special circumstances" arise it may be unreasonable for an employer to assume a resignation and to accept it forthwith. A reasonable period of time should be allowed to lapse and if circumstances arise during that period which put the employer on notice that further enquiry is desirable to see whether the resignation was really intended and can properly be assumed, then such enquiry is ignored at the employer's risk. He runs the risk that ultimately evidence may be forthcoming which indicates that that in the "special circumstances" the intention to resign was not the correct interpretation when the facts are judged objectively.
32. How then is that approach to be reconciled in law? This is not a purely commercial context. In the sphere of industrial relations these special circumstances may arise due to those conflicts of personalities or individual characteristics. A resignation by an employee is a repudiation of the contract of employment, a fundamental breach. It should be accepted by the employer within a reasonable time (see Western Excavating (ECC) Ltd v. Sharp  IRLR 27 CA, per Lord Denning at p. 29, 15; see also London Transport Executive v. Clarke  IRLR 166). In many cases the acceptance will be by inference. Thus where words or actions are prima facie unambiguous, an employer is entitled to accept the repudiation at its face value at once, unless these special circumstances exist, in which case he should allow a reasonable time to elapse during which facts may arise which cast doubt upon that prima facie interpretation of the unambiguous words or action. If he does not investigate these facts, a Tribunal may hold him disentitled to assume that the words or actions did amount to a resignation, although – to paraphrase the words of May LJ – Tribunals should not be astute so to find.
33. One then asks, what is the reasonable period of time? It may be very short – Martin  IRLR 49. It may be over a weekend – Barclay  IRLR 313. The test is objective and one of reasonableness. It is only likely to be relatively short, a day or two, and it will almost certainly be the conduct of the employee which becomes relevant, but not necessarily so.'
Discussion and conclusion
Lord Justice Hooper :
Lord Justice Laws :