England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION

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

Mr Justice Elias

1. The claimant in this case is suing for breach of his employment contract. The circumstances of the claim are somewhat unusual.
2. The claimant commenced employment with the Australian Broadcasting Corporation ('ABC'), the defendant in this action, in April 1987. He was employed as a sound recordist working from the ABC's London premises. He commenced employment in April 1987 and continued working with the defendant under a series of fixed term contracts until his contract was terminated on the 31 December 1998.
3. In the course of 1997 there were discussions between the claimant and the defendant as to whether the claimant should work part time. In September 1997 the defendant purported to change the claimant's employment with effect from 1 January 1998 so that he would work for the period 1 January1998 to 31 January 1998 on a part time basis. The claimant's salary was reduced to a part time salary with effect from 1 January 1998 to give effect to that decision, but the claimant contended that he had never accepted this variation in his contract of employment. Accordingly he refused to work part time and asserted that he was entitled to treat his employment as continuing on a full time basis.
4. Subsequently, because of the failure to reach an amicable conclusion of this matter, the claimant issued proceedings in an employment tribunal on the 22 May 1998 seeking to have a written statement of his employment particulars. In this way he wished to establish his right to continue contractually as a full time employee, and to receive the appropriate pay. That application was settled by agreement between the parties on 10 August 1998. The terms of settlement included the acceptance by the defendant that it should pay full arrears of salary for the period from 1 January until the date of settlement. It was also agreed the claimant would continue thereafter to work as a full time employee.
5. In the following month, on 15 September, the claimant was given notice of dismissal by the defendant. The defendant informed the claimant in that letter that it had been considering its future requirements and had decided not to renew his contract which was due to expire on 31 December 1998. (The fixed term contract would have terminated in any event on that date, and it is not altogether clear whether notice was strictly required, but in any event it was given. Furthermore, it was not suggested before me that the mere fact that his dismissal would have resulted from the effluxion of a fixed term contract defeated his contractual redundancy claim.) He was also told that since he had accrued an excessive amount of annual leave, he should absent himself on what was termed 'recreational leave' as from 28 September until the termination date on 31 December. There had been no consultation with the claimant prior to the receipt of this letter.
6. The claimant requested written reasons for his dismissal. By a letter dated 18 March 1999, the employer stated:

'The ABC did not offer you further employment because the position is no longer required in a full time capacity.'

The defendant says that there was a part time position but the claimant had always made it unambiguously clear he was not prepared to accept that. Accordingly, it contended that there was no purpose in consulting him before sending the letter of dismissal.

7. The claimant then initiated proceedings before the Employment Tribunal for unfair dismissal and redundancy and the failure to give written reasons. This was on 30 March 1999. In fact it appears as though the claim in connection with the failure to give written reasons was not pursued, no doubt because by the date of the application they had already been provided.
8. The claimant's primary claim before the Employment Tribunal was that his dismissal was by reason of redundancy. In the alternative, he contended that the reason was that he had asserted his statutory rights by taking proceedings in the tribunal. ABC denied that the circumstances constituted redundancy and also denied that the reason for the dismissal was the exercise of his statutory rights. However, the Employment Tribunal held, in a decision dated 4 October 1999, that the claimant had been unfairly dismissed and that the principal reason for the dismissal was that he had commenced proceedings in the Employment Tribunal asserting his statutory right. Accordingly, this amounted to an automatically unfair dismissal within the relevant legislation (see section 104 of Employment Rights Act 1996). The Tribunal also found that there was what they termed a 'redundancy situation' and that due to lack of funding the defendant wished to reduce the work force. However, they concluded that that was not the principal reason for the dismissal in this case.
9. The Tribunal also considered what were the relevant terms under which the claimant had been employed. They held that he was employed under the terms applicable to the administrative staff working for ABC in London, and it is accepted that as a consequence of that he would have been entitled to certain enhanced redundancy compensation had the dismissal been by reason of redundancy.
10. The Tribunal did not immediately deal with the question of remedies but adjourned that issue to see if the matter could be resolved between the parties. Unfortunately it could not, and there was a further hearing on remedies on 21 January 2000. In the course of that hearing the Tribunal determined his loss on the basis that had the claimant's contract not been terminated because of commencing the employment tribunal proceedings (i.e. the automatically unfair reason), his contract would have been terminated in any event on 31 December by reason of redundancy. He would then have been entitled to the enhanced terms. In the circumstances, the Tribunal calculated his loss resulting from the loss of the redundancy payment coupled with other elements as being in excess of £58.000. However, there was at that time a cap on the amount which could be awarded in the Employment Tribunal, that being £12.000 in relation to the compensation payment element of an unfair dismissal award, and accordingly the full loss could not be recovered in the Tribunal proceedings.
11. The claimant now seeks to bring proceedings in the High Court for an alleged breach by the employer of its contractual obligations. He accepts that it is only the fact that there was the cap on compensation that has created the need to take these proceedings, but submits that this does not in any way act as a bar to these proceedings being initiated. It was always made plain that he was reserving his rights to pursue the breach of contract action in relation to his contractual redundancy claim. In these circumstances it is clearly open to him to pursue this claim: see Sajid v Sussex Muslim Society [2002] IRLR 113. Furthermore, it is also conceded by the defendant that the findings of the employment tribunal in each of the determinations, which were not appealed, are binding on this court, whether they are in fact correct or not. That concession was in my judgment rightly made in view of the decision of the Court of Appeal in O'Laoire v Jackel International Ltd [1991] ICR 718. As a consequence, the essential facts in this case are not in dispute, save for one specific matter which I will now address.

THE FINDINGS OF FACT.

12. The essential findings were that there was a redundancy situation and the applicant would have been dismissed by reason of redundancy with effect from the 31 December 1998 had he not been dismissed for taking his claim to the tribunal.
13. The one point put in issue is whether the ABC was already intending at the date of giving notice to dismiss the claimant by reason of redundancy. Ms.McKie, for the defendant, submits that there is no finding that it was.
14. In order to resolve this matter, it is necessary to consider certain passages of the two Employment Tribunal decisions. In the first decision, which considered the question of liability, the Tribunal reached the following conclusion at paragraph 24:

'We find on the facts that there was a need for fewer employees by the Respondents to do the work as a Sound Recordist. It is clear that from evidence from the Respondents that due to lack of funding they wished to reduce the work force and accordingly they asked the Respondent to work part time. It is clear from the evidence that the post has not yet been filled.'

15. As I have said, however, they concluded that the reason for the dismissal was not the redundancy situation but the fact that the claimant had asserted his statutory right. They did, however, in paragraph 34 of the decision, give certain indications to the parties as to their conclusions so as to assist the parties in seeking to resolve matters without a further hearing. They said this:

'The Tribunal having given an indication to the parties that (a) there was a redundancy situation and the Applicant was redundant ....'

16. In the later remedies hearing, at paragraph 1, the Tribunal said this:

'The Tribunal concluded on 4 October 1999 that the Applicant was unfairly dismissed. The principal reason was for asserting a statutory right and also that there was a redundancy situation and that the Applicant was in effect redundant ... '

Then at paragraph 12 of the decision the Tribunal concluded as follows:

'We find that, if he had not been dismissed by reason of his asserting a statutory right in September 1998, his employment would have been terminated on 1 January 1999 because of redundancy.'

17. It seems plain to me that the Tribunal took the view that it was clear even at the point of dismissal that the employee would be dismissed by reason of redundancy. Indeed, it is possible to read the decision as suggesting that this was one of the grounds for the dismissal, albeit not the principal ground.Paragraph 1 of the second decision lends support to that argument. In any event, the reason given by the employer for the dismissal was that the position occupied by the claimant was no longer needed in a full time capacity. The employer disputed that this constituted redundancy as a matter of law, but the Tribunal found in the circumstances that it did, contrary to ABC's submissions. Moreover, in the proceedings before me the defendant has relied upon a witness statement from Colin Palmer, the Director of Human Resources for ABC, in which he reiterated that the decision to dismiss theclaimant was based on the change from full time to part time work. Of course, the Employment Tribunal had found that this was not in fact the principal reason, but in my judgment this evidence supports the view that had the claimant not been dismissed for asserting his statutory rights, as the Tribunal found, then ABC was plainly at that time intending to dismiss him because he would not change from full time to part time work. This is what ABC thought that it had done. But this, as the Tribunal found, would have constituted a dismissal by reason of redundancy.

THE ARGUMENTS

18. The argument falls within a small compass; Mr. Galbraith-Marten, in an able argument for the claimant, submits that there is an implied term in the contract to the effect that in the event of a redundancy situation arising, the contract would not be operated so as to remove the claimant's entitlement to contractual redundancy benefits, save with good cause. He contends that it could not conceivably be good cause to dismiss someone for an unlawful reason, as in this case. The defendant disputes that such an implied term exists; Ms. McKie submits that in reality the claimant is simply seeking artificially to manufacture an implied term in an attempt to circumvent his real grievance, which is that there was the cap on the unfair dismissal compensation which deprived him of full redress. As I have already said, however, if the contractual term does exist, there can be no objection to the claimant pursuing this action. It is frequently the case that employees will seek not to have their common law claims determined in the industrial tribunal, notwithstanding its jurisdiction to hear certain breach of contract claims, precisely because of the limitation on damages in that jurisdiction. (The limit is now £25,000 for breach of contract claims so the need to pursue separate actions is not as pressing as it was when the cap was smaller.)
19. The claimant relies heavily upon certain decisions which have held that there is an implied contractual term limiting the right of an employer to dismiss employees where the result would be to deprive the employee of rights which he has either accrued or is in the course of accruing under long term sickness schemes. The claimant contends that the principles developed in those cases are potentially capable of applying equally to cases where redundancy rights have accrued. He submits that such an accrual has occurred at least where, as in this case, the employer is intending to terminate the contract of the particular employee by reason of redundancy.
20. Plainly there are limits to this principle, as Mr. Galbraith-Marten recognises.It does not mean that an employer is unable to dismiss an employee whenevera sickness or redundancy scheme is in place because of the possibility that at some date in the future employees may become subject to these schemes.That would turn the traditional principles of contract upside down. The principle, if it is to apply, must be narrowly circumscribed. Mr. Galbraith-Marten contends that it will apply where the employee is contractually entitled to a right in certain circumstances pursuant to a specific scheme, and is either exercising the right, or its exercise or possible exercise is imminent, and thedismissal frustrates his ability to take advantage of the right.

THE LONG-TERM SICKNESS CASES.

21. There are a number of cases where the courts have held that the employer's power to terminate on notice is restricted in circumstances where it will deprive the employee of certain rights which are conferred upon him under a long term sickness scheme. In Aspden v Webbs Poultry Meat Group (Holdings) Ltd [1996] IRLR 251 the defendant company adopted a generous permanent health insurance scheme for directors and senior managers including Mr. Aspden. Under the scheme, any eligible employee who was wholly incapacitated by sickness or injury from continuing to work would receive an amount equivalent to three quarters of his salary, beginning 26 weeks after the start of incapacity and ending with the employees death, retirement date, or the date on which he ceased to be an ineligible employee, which included dismissal on any ground. There was considerable friction at the employer's work place, and Mr. Aspden was absent from time to time with heart problems. At the time of his dismissal, he had been absent for three months or so on sick leave arising from these problems. The employers thought he was malingering and dismissed him on notice. Nonetheless, he claimed damages for wrongful dismissal on the grounds that it was an implied term of the contract that, save for summary dismissal, the employers would not terminate the contract while he was incapacitated for work. Mr Justice Sedley upheld this submission. He said this:

'It was, I find, the mutual intention of the defendant ... and the Plaintiff that the provisions for dismissal in the contract of employment which they entered in March 1986 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 employees own fundamental breach'.

Indeed, in the particular circumstances of that case, the judge held that the implied term even overrode an express term of the contract which in terms provided that the employee may be dismissed if he could not discharge his duties for six months in any twelve consecutive calendar months. It is pertinent to note that in that case the employee had not established that he was in fact permanently unable to work; but the term was held to apply essentially on the ground that it was necessary to do so otherwise it would have precluded him from having the opportunity to establish that fact.

22. A similar approach has been adopted in two Scottish cases. In Adin v Sedco Forex International Resources Ltd [1997] IRLR280 an employee who was injured was entitled to certain benefits under both long term and short term disability plans. The latter lasted for twelve months before the former came into force. Once he was covered by the long term plan, which provided for benefits for an employee subject to permanent disability, he could retain the benefit even if he were dismissed. Lord Coulsfield in the Outer House of the Court of Session held that the benefits provided a coherent scheme and that it would defeat the purpose of providing protection for long term sickness if the company could exercise its general power to terminate on notice whilst the short term scheme was in force, and thereby deprive the employee of the benefits.
23. In Hill v General Accident and Fire [1998] IRLR641 an employee who was subject to a sick pay scheme was dismissed by reason of redundancy just four months before he would have become entitled to a long term sicknessprovision. Lord Hamilton, in the Outer House of the Court of Session, accepted that it would not be open to the employer to dismiss the employee for a specious or arbitrary reason or no reason at all, or for the specific purpose of defeating his sick pay entitlement. To permit such dismissals would be to subvert the scheme. However, he held that there was no implied term that the employee would not be dismissed by reason of redundancy. Accordingly, whilst his approach was very similar to that of Mr. Justice Sedley in the Apsden case, he held that insofar as the learned judge was seeking to lay down as a general proposition that gross misconduct was the only circumstance when the employee could lawfully dismiss, that was too limited a statement. The dismissal for redundancy was a dismissal for good cause and was not caught by the implied limitation on the power to dismiss.
24. More recently the High Court followed these cases in Vilella v MFI Furniture Centre Ltd. [1999] IRLR 475. The validity of the principle has not been definitively determined by any appellate court, but in Brompton v AOC International Ltd. and UNUM Ltd. [1997] IRLR 639 Staughton LJ expressed the view, obiter, that there was a 'good deal to be said' for the view that the employee could not be dismissed save for cause after becoming entitled to receive benefits under a long term sick scheme.
25. These cases are in my view not directly in point. They are concerned with a situation where the employee has to remain in employment in order to obtainor retain contractual benefits. Here the employee needs to have his contract terminated before the right to any contractual redundancy compensation arises. Moreover, it seems to me that it is not appropriate to say that the right to redundancy accrues in the same way as sickness benefit may be said to do. It is true that the amount of compensation depends on the period of employment at the time of dismissal, but whereas if someone is sick it is possible to say that the right to the benefit may be accruing with the period of sickness until the requisite qualifying period has elapsed, the right to redundancy compensation has either been established or it has not.Moreover, whether someone is redundant is ultimately for the employer to decide; by comparison, he of course has no control over whether someone is sick.
26. However, although the situations are not identical, there is in my view an analogy between this case and the sickness cases. In redundancy situations, as with sickness, the employer may have promised to cater for the particular circumstances by conferring a benefit on the employee according to an established scheme. In my view there are circumstances where it would be contrary to the functioning of the redundancy scheme, and to its purpose, to permit the employer to exercise his contractual powers so as to deny the employee the very benefits which the scheme envisages will be paid. At the very least, it seems to me, that where the employer has resolved to dismiss the employee by reason of redundancy, he should not without justification be entitled to defeat the employee's claim to compensation by dismissing him for some other independent reason, or indeed no reason at all. I would formulate the terms as follows: 'Once an employer has determined that an employee will be dismissed by reason of redundancy, such that his dismissal for any other reason will defeat the employee's right to contractual benefits which accrue when the dismissal is by reason of redundancy, the employer may not lawfully dismiss the employee for any reason other than redundancy, unless the dismissal is for good cause.' In my opinion this term can readily be implied whether on the officious bystander or the business efficacy tests of implied contractual incorporation. (In practice, however, it is difficult to see in a redundancy situation what any good cause can be other than lawful summary dismissal.)
27. This term does not of course oblige the employer to dismiss for redundancy at all. He can change his mind and retain the employee in post. It simply requires that if he does dismiss, any such dismissal must, absent good cause, be for redundancy.
28. It follows that in this case the employer was in breach of contract in dismissing the employee for the reason it did. The contract was not lawfully terminated simply by giving the requisite notice because the power to dismiss on notice for this reason was not a contractual option. The damages therefore, are to be assessed on the basis that the employee could and would only have been dismissed lawfully by reason of redundancy. That would have attracted the contractual redundancy terms. The relevant sum has been agreed between the parties and I am fortunately saved the trouble of making the calculation.
29. The term which I have found should be implied in this case is narrower than that formulated by Mr. Galbraith-Marten. On his proposed implied term,even if there had been no decision by the company to dismiss the particular claimant by reason of redundancy by the time his contract was in fact terminated, it would still have been unlawful for the claimant to have been dismissed once the redundancy situation had arisen, save for cause. Mr.Galbraith-Marten draws a direct analogy with the sickness cases to which I have referred. In those cases, as we have seen, the claimant may be protected from dismissal even when he is in the course of accruing his right a long term sickness benefit. I would reserve my position on whether that wider term is to be implied in law.. As I have said, it is in my view difficult to say that an individual accrues a redundancy payment in the way in which he does sickness entitlement, and the mere recognition that redundancies will be necessary maybe too soon for any implied limitation on the power to dismiss to arise.Moreover, even if the employer could not lawfully dismiss (save for cause) whilst the selection of employees to be made was under active consideration, it may not necessarily follow that the damages would be the redundancy compensation. The employer will often be able to say that he might in good faith not have dismissed the employee by reason of redundancy at all because, for example, there are other volunteers, or it would have been cheaper to dismiss others. Accordingly, the employer may be able to rely upon the principle that the contract breaker should be treated as though he would have exercised his rights under the contract in a way most favourable to himself: see Lavarack v Woods of Colchester Ltd [1967] 1 QB 278. However, I reach no concluded view on this issue, which must await consideration on anotherday.

CONCLUSION.

30. It follows that I find for the claimant. I confess that I am pleased to be able todo so. The defendant's position lacked merit. It would in my view havebeen a gross injustice if ABC were to be better off as a result of dismissing theemployee for an unlawful reason than it would have been had it dismissed him lawfully by reason of the redundancy that had arisen. The need to preserve the integrity of the legal process recognised in the old adage that 'hard cases make bad law', may sometimes compel a court to accept a particular injustice because it cannot properly be remedied in line with legal principle. Fortunately, I am satisfied that I can here do justice without any improper distortion of the legal rules.