Scottish Court of Session Decisions

EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
	[2013] CSIH 102
Lord Eassie Lord Drummond Young Lord McGhie	XA61/10 OPINION OF LORD EASSIE in an appeal under section 37(1) of the Employment Tribunals Act 1996 by TOM McNEILL Appellant; against ABERDEEN CITY COUNCIL (No.2) Respondents: _______________

Act: Napier, QC, McCrossan, Solicitor Advocate; Lefevre Litigation

Alt: Sandison, QC; Brodies

28 November 2013

[1] I am grateful to Lord Drummond Young for the very full Opinion which he has prepared in this appeal from the Employment Appeal Tribunal. I agree with him, and for the reasons given by him, that the appeal succeeds and that the decision of the Employment Tribunal should be restored. I would simply confirm that in so far as Lord McGhie may favour a different approach to the interpretation of section 95(1)(c) of the Employment Rights Act 1996 - which concerns "constructive dismissal"- from that of Lord Drummond Young, I prefer the view of Lord Drummond Young to the effect that the provision requires the employee's right to terminate the contract without notice by reason of the employer's conduct to be determined in accordance with the proper law of the contract of employment in question.

EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
	[2013] CSIH 102
Lord Eassie Lord Drummond Young Lord McGhie	XA61/10 OPINION OF LORD DRUMMOND YOUNG in an appeal under section 37(1) of the Employment Tribunals Act 1996 by TOM McNEILL Appellant; against ABERDEEN CITY COUNCIL (No 2) Respondents: _______________

Act: Napier, QC, McCrossan, Solicitor Advocate; Lefevre Litigation

Alt: Sandison, QC; Brodies

28 November 2013

Introduction

[2] The appellant was employed by the respondents for a period of 21 years prior to 27 July 2006, working in the field of leisure management. Latterly he held the post of Sport and Recreation Manager (North); this involved responsibility for a number of locations in the city and for approximately 500 members of staff. On 27 July 2006 the appellant tendered a letter of resignation from his employment with the respondents. He then lodged a claim for unfair dismissal with the Employment Tribunal in Aberdeen, alleging that in terms of section 95(1)(c) of the Employment Act 1996 he was entitled to terminate his contract of employment without notice by reason of the respondents' conduct. The result, he claimed, was that his resignation amounted to a constructive dismissal by the respondents.

[3] The background to the appellant's resignation is set out at some length in the judgment of the Employment Tribunal. It is unnecessary for present purposes to give more than a fairly brief summary. Some time prior to the appellant's resignation there had been a history of disagreements within the respondents' Leisure Department relating to the management of leisure facilities: whether they should be managed according to traditional municipal practices or on a more commercial basis. The appellant favoured a more commercial approach; others, including the investigating officer who considered the complaints against him, had favoured a more traditional approach. The appellant was a third-tier manager, and reported at first-tier level to his Corporate Director, the Director of Neighbourhood Services (North). In January 2005 a senior manager within the Leisure Department was suspended as a result of allegations of financial misconduct. Subsequently, complaints were made about that manager's relationship with another employee in the respondents' Leisure Department, GP. The appellant had reported concerns about this relationship to the respondents' Chief Executive. He made allegations regarding two specific incidents involving the senior manager and GP that he claimed to have witnessed. In that connection he made a statement to the disciplinary investigation that had been set up to consider the senior manager's conduct. Thereafter, the appellant discussed the statement that he had made to the investigation with other employees in the Leisure Department, including his own line manager. The line manager became concerned about those discussions. GP heard about the discussions, and in August 2005 she made a complaint in writing about the appellant's conduct, in particular his discussing the allegations with other members of staff. The complaint was passed to the appellant's immediate line manager, who decided to suspend him pending a disciplinary investigation. The reasons for the suspension and disciplinary investigation were found by the Employment Tribunal to be unclear (paragraph 18 of their decision). The appellant was suspended on 16 August 2005, and his suspension was confirmed by letter dated 17 August. The letter stated that the suspension was "precautionary", without assumption of guilt, pending investigation of two specific allegations: first, that the appellant had breached the confidentiality of an investigation interview when he was interviewed as a witness in relation to the complaint against the senior manager; and secondly, that he had made remarks among colleagues that were defamatory and undermined the position of a female colleague, obviously GP.

[4] Thereafter the appellant's conduct was considered by an investigating officer, who was the Assistant to the respondents' Chief Executive. The investigation was prolonged, and the allegations made against the appellant increased as it progressed. I deal with this aspect of the case in considering the appellant's second ground of appeal (paragraphs [36] et seq). The investigation continued into 2006, and the appellant became concerned at the manner in which it was proceeding. On 27 July 2006 he wrote to the respondents to tender his resignation, giving the following reasons:

"1. I have no trust in the Council as my employer.

2. The unfair way I have been treated.

3. The damage to my health and well-being.

4. The irreversible damage done to my career, integrity and reputation.

5. The breach of Council procedures.

6. Lack of information about and the process regarding assimilation".

The appellant then submitted a claim to the Employment Tribunal for unfair dismissal, in which he alleged that he had been constructively dismissed by the respondents. He contended that the manner in which the investigation of his conduct had been conducted amounted to a breach of the respondents' duty of trust and confidence towards him, and that on that basis he was entitled to treat the respondents' conduct as constructive dismissal and to claim compensation accordingly.

[5] After a hearing conducted over 22 days between 11 July 2007 and 20 February 2008 the Employment Tribunal (Employment Judge I McFatridge, Ms J Chalmers and Mr D Cameron) found that the manner in which the respondents had investigated the complaints of misconduct against the claimant amounted to a breach of their duty of trust and confidence. They accordingly held that the claimant had been constructively dismissed and that the dismissal was unfair. He was therefore entitled to a basic award and a compensatory award. The latter award was reduced by 50% owing to the claimant's contribution by his conduct to his dismissal; that reduction was made under section 123(6) of the Employment Rights Act 1996. The Tribunal did not, however, go so far as to find that the appellant was guilty of gross misconduct.

[6] On 4 February 2010 the Employment Appeal Tribunal (Lady Smith, Miss J Gaskell and Mrs A Hibbard) allowed the respondent's appeal, revoked the decision of the Employment Tribunal and substituted a decision dismissing the appellant's claim. The Appeal Tribunal held that the appellant was guilty of gross misconduct. That was a material breach of his contract of employment. In accordance with the Scottish doctrine of mutuality of contractual obligations, the appellant was disabled by his breach of contract from calling upon the respondents to adhere to their contractual obligation of trust and confidence in relation to the investigation. Consequently the appellant could not treat the manner in which the respondents had investigated his conduct as a repudiation of the contract entitling him to resign without notice, and he had not been constructively dismissed. The Employment Appeal Tribunal further held that in any event the respondents' investigation did not amount to a breach of contract.

[7] The Employment Appeal Tribunal refused leave to appeal against their decision, but on 29 January 2013, this court granted leave to appeal. The appellant now accepts that he was guilty of gross misconduct. Nevertheless he appeals on two cumulative grounds. First, he contends that the doctrine of mutuality of contractual obligations is of no relevance in determining whether he was entitled to resign without notice and was thus constructively dismissed. Secondly, he contends that the Employment Appeal Tribunal were not justified in interfering with the Employment Tribunal's assessment of the respondents' investigation. He must succeed on both grounds in order for the Employment Tribunal's decision in his favour to be restored.

Ground 1: Section 95(1)(c) and the doctrine of mutuality of contractual obligations

[8] Constructive dismissal of an employee is dealt with in section 95(1)(c) of the Employment Rights Act 1996. This provides as follows:

"95. Circumstances in which an employee is dismissed

(1)           ... an employee is dismissed by his employer if...

(a) the contract under which he is employed is terminated by the employer (whether with or without notice),

...

(c) the employee terminates the contract under which he is employed (with or without notice) in circumstances in which he is entitled to terminate it without notice by reason of the employer's conduct."

Strictly speaking, what the employee is entitled to do is to terminate the obligation to give further performance of his substantive obligations under the contract, a matter discussed at paragraphs [23] - [25] below. The subsection follows fairly standard practice in referring to termination of "the contract", but it is important to bear in mind that this is shorthand for a more complex concept.

[9] The appellant contended that the manner in which the disciplinary investigation was conducted involved a breach of the implied term to maintain mutual trust and confidence. Such a term was explained in Malik v BCCI, [1998] AC 20, to be an incident implied by law into all employment contracts. It is thus sometimes described as the "Malik term", and is a reciprocal obligation that both employer and employee must not:

"without reasonable and proper cause, conduct itself in a manner calculated and likely to destroy or seriously damage the relationship of confidence and trust between employer and employee" (Malik v BCCI [1998] AC 20, p 45F).

The Employment Tribunal found that the respondents had been guilty of such destructive or damaging conduct in their investigation of the appellant. As the implied term of trust and confidence is of the essence of the employment contract, non-observance entitled the appellant to terminate performance of the contract without notice.

[10] The Employment Appeal Tribunal reversed the Employment Tribunal's decision on this matter. They held that at the time when he resigned the appellant was in continuing material breach of his duty not to destroy or damage the relationship of trust and confidence by reason of his own gross misconduct (Employment Appeal Tribunal judgment, 4 February 2010, [2010] IRLR 374, para 106; Note of Lady Smith refusing leave to appeal, 7 May 2010, page 2). The principal features of that misconduct involved the appellant's indulging in sexual harassment of a person under his management, uttering sexist remarks, tolerating similar behaviour by others under his management, being indiscreet about allegations against colleagues, and falsely denying his misconduct during the investigation. The Employment Appeal Tribunal held that, because the appellant was in breach of the implied obligation not to destroy or damage the relationship of trust and confidence, the principle of mutuality of contractual obligations operated in such a way as to relieve the respondents from their corresponding obligation. Thus the appellant could not found on the respondents' breach of their obligation to maintain trust and confidence as a basis for constructive dismissal.

[11] The appellant's first ground of appeal was initially presented solely on the basis that as a matter of statutory construction the doctrine of mutuality was not relevant to the application of section 95(1)(c) of the Employment Rights Act 1996. In the light of observations from the bench, however, counsel developed an alternative argument that, on a proper application of the general Scots law of contract, the doctrine of mutuality did not prevent the appellant from founding on the respondents' breach of their duty of trust and confidence. I propose to consider each of these arguments in turn.

The construction of section 95(1)(c) of the Employment Rights Act 1996

[12] The leading case on the construction of section 95(1)(c) is Western Excavating (E.C.C.) Ltd v Sharp, [1978] QB 761. While the parties were in agreement on the importance of that case, they differed as to its precise ratio. In that case the court was concerned with the equivalent provision for constructive dismissal in the Trade Union and Labour Relations Act 1974, namely paragraph 5(2)(c) of Schedule 1; this was in identical terms to section 95(1)(c) of the 1996 Act. Lord Denning MR began by explaining that the relevant provision had given rise to a vast body of case law containing a diversity of views both amongst first instance tribunals and judges of the Employment Appeal Tribunal (at 768F-G). He noted that the Employment Appeal Tribunal had given guidance for tribunals on both sides of the border in Scott v Aveling Barford Ltd [1978] ICR 214 (at 768H), and continued:

"But this guidance was expressed to be given as an interim measure pending an authoritative statement of the law by the Court of Appeal or the Court of Session.

It is with diffidence that we approach the task. The rival tests are as follows.

The contract test
On the one hand, it is said that the words of paragraph 5(2)(c) express a legal concept which is already well settled in the books on contract under the rubric 'discharge by breach.' If the employer is guilty of conduct which is a significant breach going to the root of the contract of employment, or which shows that the employer no longer intends to be bound by one or more of the essential terms of the contract, then the employee is entitled to treat himself as discharged from any further performance. If he does so, then he terminates the contract by reason of the employer's conduct. He is constructively dismissed. The employee is entitled in those circumstances to leave at the instant without giving any notice at all or, alternatively, he may give notice and say he is leaving at the end of the notice. But the conduct must in either case be sufficiently serious to entitle him to leave at once. Moreover, he must make up his mind soon after the conduct of which he complains: for, if he continues for any length of time without leaving, he will lose his right to treat himself as discharged. He will be regarded as having elected to affirm the contract.

The unreasonableness test

On the other hand, it is said that the words of paragraph 5(2)(c) do not express any settled legal concept. They introduce a new concept into contracts of employment. It is that the employer must act reasonably in his treatment of his employees. If he conducts himself or his affairs so unreasonably that the employee cannot fairly be expected to put up with it any longer, the employee is justified in leaving. He can go, with or without giving notice, and claim compensation for unfair dismissal" (768H-769E).

Lord Denning MR then explained that the unreasonableness test had been said to involve a similar exercise as was required when determining whether the employer had unfairly dismissed the employee (769E-770A). That required the tribunal to determine whether "in the circumstances (having regard to equity and the substantial merits of the case) he acted reasonably". That test was to be found in paragraph 6(8) of Schedule 1 of the 1974 Act, and is now set out in slightly different form in s 98(4) of the 1996 Act. The Master of the Rolls, having set out the rival tests, then decided in favour of the contract test:

"The result

In my opinion, the contract test is the right test. My reasons are as follows. (i) The statute itself draws a distinction between 'dismissal' in paragraph 5(2)(c) [the test for constructive dismissal] and 'unfairness' in paragraph 6(8) [the test for unfair dismissal]. If Parliament intended that same test to apply, it would have said so. (ii) 'Dismissal' in paragraph 5 (2) goes back to 'dismissal' in the Redundancy Payments Act 1965. Its interpretation should not be influenced by paragraph 6(8) which was introduced first in 1971 in the Industrial Relations Act 1971. (iii) Paragraph 5(2)(c) uses words which have a legal connotation, especially the words 'entitled' and 'without notice.' If a non-legal connotation were intended, it would have added 'justified in leaving at once' or some such non-legal phrase. (iv) Paragraph 5(2)(a) and (c) deal with different situations. Paragraph 5(2)(a) deals with cases where the employer himself terminates the contract by dismissing the man with or without notice. That is, when the employer says to the man: 'You must go.' Paragraph 5 (2)(c) deals with the cases where the employee himself terminates the contract by saying: 'I can't stand it any longer. I want my cards.' (v) The new test of 'unreasonable conduct' of the employer is too indefinite by far. It has led to acute difference of opinion between the members of tribunals. Often there are majority opinions. It has led to findings of 'constructive dismissal' on the most whimsical grounds. The Employment Appeal Tribunal tells us so. It is better to have the contract test of the common law. It is more certain: as it can well be understood by intelligent laymen under the direction of a legal chairman. (vi) I would adopt the reasoning of the considered judgment of the Employment Appeal Tribunal in Wetherall (Bond St. Wl) Ltd. v Lynn [1978] ICR 205, 211:

'Parliament might well have said, in relation to whether the employer's conduct had been reasonable having regard to equity and the substantial merits of the case, but it neither laid down that special statutory criterion or any other. So, in our judgment, the answer can only be, entitled according to law, and it is to the law of contract that you have to look.'

(vii) The test of unreasonableness gives no effect to the words 'without notice.' They impose a legal test which no test of 'unreasonableness' can do." (770D-771B)

I note in passing that the relevance of reason (iv) is difficult to understand. It may be that the Master of the Rolls was labouring under a misapprehension that a constructive dismissal involving termination of the contract by an employee was a distinct kind of dismissal from an unfair dismissal involving termination by an employer. But a constructive dismissal can also be an unfair dismissal; indeed it is only in that case that a claim arises under the employment legislation.

[13] Lawton LJ observed that for the other types of dismissal, that involve termination by the employer, consideration of the rights under the contract was necessary (771H-772B). He then said:

"It would be odd if [contractual rights] did not have to be considered under sub-sub-paragraph (c) which sets out the circumstances in which an employee can terminate his contract of employment. When he does so, he purports to release himself from his contractual obligations; but he can only do so in the circumstances specified which must be 'such that he is entitled to (do so) without notice by reason of the employer's conduct.' The word 'entitled' in this context connoted the existence of a right. The only right which the employee can have to terminate his contract of employment is that which the law gives him. His right is of a specified kind. It is a right to terminate 'without notice by reason of the employer's conduct.' In my judgment, this is the language of contract; language which has a significant meaning in law in that it confers a right on an employee to be released from his contract and extinguishes the right of the employer to hold the employee to it. Any other construction would produce an odd result. ...[I]f sub-sub-paragraph (c) did not bring the contract to an end altogether the nonsensical position would arise that the employee could terminate it but the employer could sue him for damages for doing so without notice. In my judgment, contracts can only be brought to an end in ways known to the law." (772B-772E)

He also expressed agreement with the judgment of Lord Denning (773E). Eveleigh LJ agreed with both judgments (773E).

The parties' arguments

[14] The result of the decision in Western Excavating is accordingly that, in determining whether an employee is entitled to terminate a contract of employment in terms of what is now section 95(1)(c) of the 1996 Act, it is necessary to have regard to rights that arise under the ordinary law of contract. That in turn leads on to the first question debated in the present case: what are those contractual rights? For the appellant, it was submitted that the Court of Appeal favoured a test derived from the English law of contract: an employee was "entitled to terminate ... without notice" where the employer was guilty of a significant breach going to the root of the contract or which showed that the employer no longer intended to be bound by the essential terms of the contract: Western Excavating, supra, Lord Denning MR at 769A-B. Although the test derived from the English law of contract, counsel submitted that its legal effect arose from the wording of the statute. Consequently it was not appropriate to look further at the rights that might arise under the proper law of the parties' contract, and in particular it was not appropriate to have regard to the Scottish principle of mutuality of contract. It followed that the test did not vary according to the proper law of the contract, whether that be English or Scottish law; nor did the test evolve if the English common law of contract subsequently evolved. Parliament had re-enacted the statutory provision considered in Western Excavating without amendment, in section 55(2)(c) of the Employment Protection (Consolidation) Act 1978 and subsequently section 95(2)(c) of the 1996 Act, and this represented an endorsement of the interpretation adopted in that case. Counsel further submitted that this approach was supported by policy considerations: it was desirable that the statutory law governing employment should be consistent throughout the United Kingdom. He further drew attention to an undesirable result that would follow from application of the Scots law of mutuality of obligations as interpreted by the Employment Appeal Tribunal: an employer who discovered misconduct in that employee's past employment history could treat the past misconduct as a material breach of contract and use it to excuse the behaviour by the employer that would otherwise amount to a breach of the duty of mutual trust and confidence. In other words, the discovery of past misconduct might permit the employer to act in a manner that would otherwise amount to a repudiatory breach of contract.

[15] For the respondents, by contrast, it was submitted that the applicable legal system was that of the proper law of the contract, Scots law or English law as the case might be. That was justified by the wording of section 95(1)(c), which could have referred to the English common law but did not do so. Furthermore, it was quite artificial to refer the parties' rights to a version of English law fixed in time, which would have no regard to subsequent developments. Consequently the question of "entitlement to terminate... without notice" referred to a contractual entitlement determined according to the proper law of the contract. That was the clear import of the decision in Western Excavating; in that case the court rejected a test based on the concept of reasonableness, which test would obviously have secured uniformity between Scots and English law.

Analysis

[16] In my opinion the parties' rights under section 95(1)(c) of the 1996 Act must be determined according to the proper law of the contract of employment. It follows that in a case where that contract is governed by Scots law the Scottish principle of the mutuality of contractual obligations applies. I reach that conclusion for four reasons. In the first place, I can find nothing in the opinions of the Court of Appeal in Western Excavating to indicate that section 95(1)(c) incorporates a specific rule derived from the existing state of the English common law. Instead, the decision indicates that the general law of contract applies; that appears in particular from the description of "the contract test" in the opinion of Lord Denning MR at [1978] QB 768-769, which refers to the common law rather than a statutory test derived from the common law. Furthermore, the emphasis throughout the opinions is on the practical advantages of determining questions of constructive dismissal in accordance with the common law that governs the contract. Those advantages would be substantially reduced in a Scottish case if the relevant tribunal were unable to take the Scottish common law into account but instead required to have regard to English law as it existed in the 1970s.

[17] In the second place, if Western Excavating held that as a matter of statutory construction section 95(1)(c) requires that regard should be had to a rule derived from the English law of contract, that would have to be a reference to English law as it existed in 1974, when the legislation considered in that case was enacted. The statute inevitably speaks from its own date, and if it contains an implied reference to the English common law that is to apply in all cases as a matter of statutory construction, that must be a reference to the then-existing common law. That seems completely artificial, as it would mean that any further developments in the English common law of contract could not be taken into account in considering the application of section 95(1)(c). This has practical consequences; during the 1970s it appears that there was some doubt in English law as to whether the termination of the future obligation to perform of the party not in breach of contract was elective or automatic; that question was not fully resolved in favour of the elective position until the decision of the United Kingdom Supreme Court in Geys v Société Générale, [2013] 1 AC 523. Counsel for the appellant referred to the fact that the relevant statutory provision had subsequently been re-enacted in 1978, in section 25(2)(c) of the Employment Protection (Consolidation) Act of that year, and in 1996 in the form of section 95(1)(c). This does not solve the problem, however; the fundamental difficulty is that courts and tribunals would have to consider the state of English law as it existed at a particular time in the past, a wholly artificial exercise.

[18] In the third place, there is no obvious reason why, in the absence of any express provision in the statute, section 95(1)(c) should be construed as referring to a rule of English law rather than Scots law. In a Scottish case, there would be obvious disadvantages in such a course, as a Scottish court or tribunal cannot be expected to be familiar with the details of English law. Counsel for the appellant emphasized that his construction of section 95(1)(c) would produce consistency of approach north and south of the border, but that does not seem a sufficient justification for a major inroad upon the Scots law of contract in a case that is otherwise governed by Scots law.

[19] In the fourth place, the central thrust of the appellant's argument was that the Scottish doctrine of mutuality is excluded in the application of section 95(1)(c). That ignores, however, the fundamental importance of the doctrine of mutuality in the Scots law of contract. The classic statements of the law are well known. In Turnbull v McLean & Co, 1874, 1 R 730, LJC Moncreiff stated (at 738):

"I understand the law of Scotland, in regard to mutual contracts, to be quite clear ‑:1st, that the stipulations on either side are the counterparts and the consideration given for each other; 2d, that a failure to perform any material or substantial part of the contract on the part of one will prevent him from suing the other for performance; and, 3d, that when one party has refused or failed to perform his part of the contract in any material respect, the other is entitled to insist for implement, claiming damages for the breach, or to rescind the contract altogether - except in so far as it has been performed".

The importance of the principle of mutuality is emphasized in the two short concurring opinions of Lord Benholme and Lord Neaves (both at page 739), and in the earlier case of Johnston v Robertson, 1861, 23 D 646, at 656 per LJC Inglis. In my opinion it is unlikely in the extreme that Parliament would have intended to exclude the application of such an important feature of the Scots law of contract as an incidental consequence of enacting section 95(1)(c).

[20] Counsel for the appellant submitted that the doctrine of mutuality was a "peculiarity" of Scots law that should be dispensed with in the construction of section 95(1)(c). I have no hesitation in rejecting that submission. First, as explained in the last paragraph, mutuality is a fundamental aspect of the Scots law of contract. Indeed, it can be regarded as an essential feature of Scottish bilateral and multilateral contracts in broadly the same way as consideration is an essential feature of English contracts (although the two clearly fulfil different functions). Secondly, as Turnbull v McLean indicates, the remedies that are available in Scots law to enforce performance and to secure future performance are critically dependent on the concept of mutuality. I return to this matter below at paragraph [23]; for present purposes it is sufficient to state that this feature of mutuality is of such practical importance in the operation of the law of contract that it cannot be dismissed as a mere "peculiarity" of the law.

[21] Thirdly, far from mutuality's being a "peculiar" feature of Scots law, it is a common feature of civil law systems. Although the Roman law of contract initially operated through a series of nominate contracts with differing formal requirements, it ultimately developed a defence known as the exceptio non adimpleti contractus (the defence of the unperformed contract): McBryde The Law of Contract in Scotland, at paragraph 20-44. This defence has been adopted in modern civilian systems. One example is South African law, where it was explained by Corbett J in ESE Financial Services (Pty) Ltd v Cramer, 1973 (2) SA 805 (C), at 809:

"Where a plaintiff sues to enforce performance of an obligation which is conditional upon performance by himself of a reciprocal obligation owed to the defendant, then the performance by him of this latter obligation (or, in cases where they are not consecutive, the tender of such performance) is a necessary prerequisite of his right to sue and should be pleaded by him. Conversely in such a case the defendant may raise a defence, known as the exceptio non adimpleti contractus, the fact that the plaintiff has failed to perform, or in the appropriate case, tender performance of, his own reciprocal obligation".

Likewise, the concept of mutuality features in the important concept of cause in French law. This is dealt with in article 1131 of the Code Civil, which is in the following terms:

"L'obligation sans cause, ou sur une fausse cause, ou sur une cause illicite, ne peut avoir aucun effet".

In a leading modern commentary, the Mega Code Civil, edited by Professor Xavier Henry and others, 7^th ed, 2007, it is stated that in synallagmatic contracts (bilateral and multilateral contracts), the obligation of each contracting party finds its cause in the obligation of the other contracting party. Further, it is the interdependence of reciprocal obligations resulting from a synallagmatic contract that gives a party to such a contract the right not to perform his obligation when the other has not performed his own obligation, assuming that the obligations derive from the same contract. That statement of the law is similar to the position in Scots law, where the obligations of one party are regarded as the counterparts of the obligations of the other, and if one party fails to perform his obligations the other is relieved from his own obligation to perform. The details of the law are obviously different, but the general principle is the same. Thus it cannot be said that there is anything "peculiar" about the Scots principle of mutuality; that principle is an important feature of other major legal systems.

The application of the doctrine of mutuality

[22] For the foregoing reasons I reject the argument that the doctrine of mutuality has no relevance to the application of the statutory test found in section 95(1)(c) of the Employment Rights Act 1996. There remains, however, the alternative argument advanced for the appellant, that the doctrine of mutuality had no application to the facts of the present case. In my opinion this argument is well founded. Consequently I consider that in so far as the Employment Appeal Tribunal relied on the principle of mutuality to hold that the respondents were relieved from their duty of trust and confidence, it erred in law.

The effect in law of rescission and retention

[23] The principle of mutuality of contractual obligations is of fundamental importance to the remedies that are available to enforce a bilateral or multilateral contract. Two remedies are dependent on the principle: rescission and retention. Although it is retention rather than rescission that is directly relevant to the facts of the present case, I will begin by commenting briefly on rescission, since it shares with retention a number of important features which cast light on the true nature of the right of retention. It is trite law that, when one party to a contract is in material breach, the other is generally entitled to rescind the contract: see McBryde, The Law of Contract in Scotland, at paragraphs 20 - 89; Turnbull v McLean, supra; Wade v Waldon, 1909 SC 571, at 576 per LP Dunedin; Blyth v Scottish Liberal Club, 1982 SC 140. It is sometimes said that the effect of rescission is to "terminate" the contract, or to bring it to an end. While this is often convenient shorthand, it should be noted that the contract is not in fact "terminated" in its entirety. What happens in the event of rescission is that the parties are relieved of any obligation to make further performance of their primary or substantive obligations under the contract, that is to say, the obligations that constitute the fundamental acts that each party is obliged to perform. Nevertheless, the parties' accrued rights are not affected; rescission only affects the terms of a contract that are still executory: Gloag, Contract, 2^nd ed, 621; and the terms of the contract are still relevant in determining the parties' accrued rights. They will in particular be relevant to the calculation of damages, if such a claim is made, and to the quantification of any restitutionary remedy that is available. Similarly, an arbitration clause will continue to bind the parties.

[24] The legal results of rescission, or repudiation as it is known in English law, are set out in Heyman v Darwins Ltd, [1942] AC 356, a case that concerned the status of an arbitration clause. Lord Macmillan stated the law as follows (at 374):

"[W]hat is commonly called repudiation or total breach of contract, whether acquiesced in by the other party or not, does not abrogate the contract, though it may relieve the injured party of the duty of further fulfilling the obligations which he has by the contract undertaken to the repudiating party. The contract is not put out of existence, though all further performance of the obligations undertaken by each party in favour of the other may cease. It survives for the purpose of measuring the claims arising out of the breach, and the arbitration clause survives for determining the mode of their settlement".

In the same case Lord Porter stated (at 399):

"To say that the contract is rescinded or has come to an end or has ceased to exist may in individual cases convey the truth with sufficient accuracy, but the fuller expression that the injured party is thereby absolved from future performance of his obligations under the contract is a more exact description of the position....[T]he injured party may accept the renunciation as a breach going to the root of the whole of the consideration. By that acceptance he is discharged from further performance and may bring an action for damages, but the contract itself is not rescinded".

The latter passage was approved by Lord Wilberforce in Photo Production Ltd v Securicor Transport Ltd, [1980] AC 827, at 844. Lord Wilberforce further endorsed a distinction between primary obligations under a contract, which on "rescission" generally come to an end, and secondary obligations which may then arise, including the right to damages. While those statements relate to the position in English law, which in this area is different in its conceptual structure from Scots law, the basic principle that the contract remains in existence following rescission is equally applicable in Scotland. This is clear from the opinion of LJC Ross in Lloyds Bank PLC v Bamberger 1993 SC 570, at 573:

" (1) Where, as here, a contract has been rescinded by the innocent party as a result of material breach of contract by the party in default amounting to repudiation, both parties are absolved from future performance of their primary obligations under the contract ...

(2) However, it is incorrect to say that in these circumstances the contract has come to an end. The innocent party may still bring an action for damages against the party in default for breach of contract...".

Photo Production was cited as authority for both of these propositions. In the same case, LJC Ross also made it clear that provisions such as arbitration clauses and clauses affecting damages survive rescission. Whether a particular clause survives rescission depends upon the parties' intention ascertained from the terms of their contract read, obviously, in context. Similar statements of the law are found in McBryde, The Law of Contract in Scotland (3^rd ed), at paragraphs 20-49 to 20-52 and 20-111 to 20-120. No doubt the word "rescission" continues to be used in Scots law for the option that is available to an innocent party in the event of material breach, but the basic point remains: the contract itself remains in existence so far as that is relevant to the parties' continuing rights and obligations. Even where the expression "terminated" is used, the contract as a whole does not vanish, but remains in existence so far as it is relevant to the parties' rights and obligations.

[25] Counsel for the respondents submitted that the effect of a material breach of contract was that the whole of the provisions of the contract ceased to be binding. He relied on remarks by Lord Rodger in Inveresk PLC v Tullis Russell Papermakers Ltd, supra, at paragraph [62]. In that passage, after quoting from Lord Fullerton in Graham v Gordon, 1843, 5 D 1207, at 1211, Lord Rodger stated in relation to retention of rent:

"In such a case there is no question of the tenant withholding or retaining rent that is due to the landlord: on the contrary, the tenant withholds the rent on the ground that he has no obligation to pay it because the landlord has not performed the obligation for which the rent is the consideration".

Counsel suggested that this meant that performance under the contract was not due; while withholding of performance was perhaps the most common application of this principle, it was not the whole of the principle. Thus the result of a material breach of contract was that the whole of the innocent party's obligations to perform cease to be binding, and any failure to perform could not be a breach of contract. I do not think that this accurately represents the meaning of the passage quoted. It is in any event in my view clearly incorrect, for the reasons already discussed; in effect, counsel's submission is a version of the "vanishing contract" fallacy discussed in the two preceding paragraphs. The critical point is that the contract does not cease as a whole to be binding; it is only performance of the substantive obligations that is suspended. This is an important feature of the right, in that it limits its effect to what is necessary to secure future contractual performance.

Retention

[26] The second remedy that is available following a material breach of contract is usually known as retention. The expression "retention" is used to denote a range of legal remedies: see Inveresk PLC v Tullis Russell Papermakers Ltd, 2010 SC (UKSC) 106, at paragraph [29], and McBryde, The Law of Contract in Scotland, (3^rd ed), at paragraphs 20-61 and 20-62. In the present context, the word describes the right of one party to a mutual contract to withhold performance in response to a breach of contract by the other. In Turnbull v McLean, supra, LJC Moncreiff indicates that a material failure in performance will prevent the guilty party from suing the other for performance. Put more generally, if one party is in material breach of contract, the other party may withhold performance of its own substantive obligations under the contract, that being the entitlement that is generally known as the right of retention: Gloag, Contract, 2^nd ed, at 592, 623 and 626 et seq; Gloag and Irvine, Rights in Security, at 303-305; McBryde, The Law of Contract in Scotland (3^rd ed), at paragraph 20-62 et seq; and Inveresk v Tullis Russell, supra, per Lord Hope at paragraphs [30]-[33]. In the latter case Lord Hope cites with approval (at paragraph [32]) the definition given by Gloag and Irvine at page 303:

"Retention may be defined as a right to resist a demand for payment or performance till some counter obligation be paid or performed.... Thus the right of a party to withhold performance of his obligation under a mutual contract, if the counter obligation is not performed, is often spoken of as a right of retention, and may result in a right to retain money or goods".

[27] That formulation, and the discussion by Lord Hope in Inveresk, makes it clear that the right of retention permits a withholding or temporary non-performance of the substantive obligations under the contract. By the expression "substantive" obligations, I mean the fundamental obligations that define what the contract is intended to achieve; in a contract of sale of goods these would be the supply of goods and the payment of the price, and in a contract of employment they are the performance of services by the employee and the provision of work and the payment of salary or wages by the employer. The right of retention is of considerable practical importance in Scots law, as it serves to provide security for future performance of the contract. Other legal systems adopt different approaches to this issue. In the systems based on English law, such security is provided (in equity rather than at law) by the interposition of a range of equitable interests. Thus a purchaser of land will normally be held entitled to an equitable interest in the subjects of sale pending completion of the transaction. Such an equitable interest is essentially quasi-proprietary in nature (although that is not how it is regarded technically in English equity). Scots law does not recognize any comparable right, as was made clear in Burnett's Tr v Grainger, 2004 SC (HL) 19; hence the practical significance of the right of retention.

[28] Three features of the right of retention are material for present purposes. First, it is a right to withhold performance of substantive obligations under the contract pending performance by the other party of its obligations. The right does not go further than that. In particular, it does not have the result that the whole of the parties' rights and obligations under the contract are put into some form of suspension. As LJC Moncreiff indicates, a failure to perform any material part of the contract on the part of one party will prevent that party from suing the other for performance. It does not follow that the innocent party is absolved from his other obligations under the contract. None of the standard formulations of the principle of retention gives any support for such a view. Furthermore, there is an obvious parallel with the situation on rescission, where it is clearly established that the parties are relieved of their obligation to make further performance of the substantive obligations but the contract itself does not vanish but remains binding for the purpose of working out the parties' rights and obligations. Consequently, if one party commits a sufficiently serious breach of contract, the other is entitled to refuse to perform his substantive obligations under the contract, but that is as far as the right goes. An example of what is permitted by way of retention is found in Laurie v British Steel Corporation, 1988 SLT 17, where employees refused to carry out their duties and the employer was held entitled to suspend their employment and withhold their pay. In that case Lord Cowie referred (at page 19) to "the fundamental rule that if one party does not fulfil his part of the mutual contract he cannot turn round and demand performance by the other party of his part of the contract". Otherwise the terms of the contract remain in force. Thus, even in a case where the employee is in material breach of contract, the employer would not be justified in committing a breach of his implied obligation to maintain a relationship of trust and confidence between employer and employee. This point has been expressed by saying that retention justifies non-performance but not misperformance: Hoult v Turpie, 2004 SLT 308, at paragraph [12]. The important point is that the remedy is limited in its scope.

[29] Secondly, it is important to recognize that the function of retention is to provide security for future contractual performance. This is why the scope of the remedy is limited to withholding performance of substantive obligations under the contract; by doing that the innocent party ensures that, while the other party is in material breach, he does not incur the work and expense required to fulfil his own obligations, and at the same time reserves the threat of withholding performance entirely and rescinding the contract if the breach is sufficiently material. The primary function of retention is thus to provide interim security, and in my opinion its application should always be governed by this consideration. In this connection, it can be said that the principle of retention cannot generally be invoked in respect of a breach of contract that has occurred in the past and is unlikely to be repeated.

[30] Thirdly, the remedy of retention is equitable in nature. This appears clearly from Stobbs & Sons v Hislop, 1948 SC 216, a case dealing with retention of rent, where LP Cooper stated (at 223):

"The latest view is that retention of rents does not rest on any principle peculiar to the law of leases, but is simply one of the many instances of the general equitable rule of Scots law that reciprocal obligations arising under a mutual contract are the counterparts of each other, and that, under suitable circumstances, a party to such a contract will be permitted to withhold performance of his obligations unless and until the other party has performed his, or, to put it from the opposite angle, that failure to perform a material part of the contract on the part of one party will prevent him from suing the other for performance.... The equitable nature of the rule and the discretionary control asserted by the Court in allowing or refusing retention in mutual contracts according to the circumstances are illustrated by the cases cited by Gloag, at page 627".

Lord Russell also referred to the equitable nature of retention (at 229). In Gloag on Contract (2^nd ed) at 627 reference is made to a number of cases where the equitable nature of retention is recognized; these include Graham v Gordon, 1843, 5 D 1207; Ferguson v Ardrossan Dry Dock Co, 1910 SC 178; and Earl of Galloway v McConnell, 1911 SC 846. The equitable nature of retention is in my opinion important. The cases illustrate the wide variety of circumstances in which retention may be invoked. In view of the potential range of such a remedy, it seems to me to be imperative that the court should be able to ensure that it does not become an instrument of abuse. That that can readily be achieved by equitable control; in any particular case the court may exercise a discretion as to whether retention should be permitted to operate, and if so on what terms. I would not wish to circumscribe the circumstances that may be relevant to the exercise of that discretion. Nevertheless, I am of opinion that, in considering whether it is equitable to permit the exercise of the right of retention, it is important to bear in mind the fundamental function of the right, namely the provision of security for future contractual performance. If the right is invoked for some other purpose, it may well be appropriate to hold that its exercise is inequitable and should therefore not be permitted.

The implied term of mutual trust and confidence

[31] In a series of cases starting in the 1970s courts and tribunals have recognized an implied term, operating as a default rule in contracts of employment, to the effect that an employer should not "without reasonable and proper cause conduct itself in a manner calculated and likely to destroy or seriously damage the relationship of confidence and trust between employer and employee": that formulation was approved in Malik v BCCI, [1998] AC 20, at 45 per Lord Steyn; see also Hepple, Rights at Work, pages 51-53. The term imposes reciprocal duties on employer and employee: ibid. In Malik it was pointed out that the term adds little to the employee's implied obligation is to serve his employer loyally and not to act contrary to his employer's interests. The major importance of the term lies in its impact on the obligations of the employer. In that respect, it is applicable to situations in which a balance has to be struck between an employer's interest in managing his business as he sees fit and the employee's interest in not being unfairly and improperly exploited. The term is clearly important, and a breach of it may well be sufficiently serious to justify the exercise of the right of retention or, if sufficiently serious, rescission. Nevertheless, the term is not one of the substantive obligations of the contract of employment. These are, at least in a normal case, the duty to provide work and pay salary or wages on one hand and the duty to perform the work as instructed on the other hand. The duty not to act in such a way as to destroy or seriously damage the relationship of trust and confidence affects the way that the parties act in performing their substantive duties, but it is conceptually distinct. For that reason, if there is a sufficiently material breach of contract by the employee, the employer will be justified in suspending employment and not paying salary or wages, but will not be justified in going further and performing acts that are calculated to destroy or seriously damage the relationship of mutual trust and confidence.

Application of the right of retention in the present case

[32] In the present case it is now accepted on behalf of the appellant that he was guilty of gross misconduct, in that at a time considerably before the initiation of the investigation he had used sexist remarks to female employees and had permitted a "laddish" culture to prevail in his department. If that had been known at the time, the respondents might have elected to treat such misconduct as a sufficiently material breach of contract to warrant dismissal. Alternatively, they might have withheld performance of their obligations to provide work and pay salary by, in effect, suspending the appellant until he tendered proper performance of his contractual duties, eschewing such remarks and toleration of such culture. That alternative would have been an application of the remedy of retention, based on the mutuality principle. Neither of these events occurred, however. The respondents' obligation to maintain mutual trust and confidence remained in place. It continued in place throughout the investigation carried out by the respondents. The Employment Tribunal held that the manner in which that investigation was conducted breached the respondents' obligation of trust and confidence. In those circumstances the notion that the principle of mutuality of contract debars the appellant from founding on a claim of constructive dismissal on the basis of the respondents' breach of their obligation of trust and confidence in the conduct of the investigation is erroneous.

[33] The Employment Appeal Tribunal held (at paragraphs 87 et seq of their original judgment) that:

"If a party to [a mutual onerous contract] is in material breach of one of his obligations he cannot insist that the other party perform a reciprocal term. He cannot demand fulfilment of the obligations in which he is creditor unless he has performed or is prepared to perform the obligations which he has himself undertaken and in which he is debtor...".

After making reference to a number of cases, including English cases (although the principle of retention is not, so far as I am aware, part of English law) the Employment Appeal Tribunal concluded (at paragraph 99) that, because the appellant was at the time when he resigned in breach of his implied duty of trust and confidence, he was in repudiatory breach and was not entitled to terminate the contract on the basis that the respondents had themselves breached that implied term. This involves a misunderstanding of the parties' rights. As noted above, if the respondents had rescinded the contract on the basis of the appellant's breach (assuming that the breach was sufficiently serious), that would have precluded future performance of the substantive obligations and the appellant would not have been in a position to rescind the contract. That is not what happened, however. The respondents continued with a very detailed investigation of the appellant's conduct in a manner that was held by the Employment Tribunal to amount to a material breach of their duty of trust and confidence towards the appellant. The appellant rescinded the contract on the basis of that breach. The fact that the appellant was himself in breach of contract did not prevent him from relying on the respondents' breach as a ground of rescission because, obviously, rescission does not involve the enforcement of the substantive provisions of the contract. It is enforcement of the substantive provisions that is prevented by the remedy of retention. That is as far as the remedy goes; other rights and remedies are not precluded. The fundamental error in the Appeal Tribunal's reasoning, as expressed in their judgment, was to hold that the appellant's breach of contract disabled him from founding in any way on the respondents' breach of contract. That is not what the remedy of retention achieves; the respondents' duty of trust and confidence remained, notwithstanding the appellant's breach of contract, and the appellant was entitled to found on the respondent's breach of their duty as amounting to constructive dismissal. That does not involve "enforcing" the terms of the contract; for the purposes of retention, "enforcement" is compelling the performance of the substantive terms of the contract

[34] In addition, I am of opinion that the equitable nature of the right of retention is of importance in this case. Even if the remedy of retention had been potentially applicable it should have been refused on equitable grounds. As noted above, the primary function of the right of retention is to provide security for future contractual performance. Acting in breach of the obligation of mutual trust and confidence does nothing to secure future performance; on the contrary, it rather tends to undermine future performance by striking at the underlying relationship between employer and employee. Moreover, if a breach of contract by an employee permitted the employer to behave in a manner that wholly disregarded the employee's interests, that could readily permit manifest unfairness; the result would be that any breach of contract by the employee of sufficient materiality to permit retention would allow the employer to behave in a wholly outrageous manner, without any redress for the employee. The right of retention should not be used to achieve such a result. For these reasons I am of opinion that in the circumstances of the present case any attempt to use the remedy of retention to prevent the appellant from founding on the respondents' breach of their duty to maintain a relationship of trust and confidence would be inequitable, and that on that ground the remedy should be refused.

[35] For the respondents it was submitted that equitable considerations also operated in favour of the employer. The employee's breach of contract was a serious abuse of the trust and confidence placed in him by his employer. That meant that he did not approach the employer's breach with clean hands, and he should not therefore enjoy the benefit of the court's equitable discretion; reference was made to the maxim he who seeks equity should do equity. I accept that the existence and nature of the employee's breach of contract might be relevant considerations in considering whether the court should exercise its equitable jurisdiction to deny a remedy. In the present case, however, I consider it important that the employee's breaches of contract had occurred several years before the respondents' breach; by the time of the disciplinary proceedings they do not appear to have had any significant continuing effects. Furthermore, the breaches of the respondents' duty of trust and confidence were substantial (see below at paragraphs [42] et seq), and were continuing at the time when the appellant resigned from his employment. In these circumstances I consider that, when the scale of the breaches of contract on either side are balanced, it would be plainly unfair to hold that the appellant was not entitled to rely on the respondents' breach of their duty of trust and confidence. Furthermore, when the respondents discovered conduct on the part of the appellant that might amount to a repudiatory breach of contract, they were entitled to invoke the clear and well-established procedures that are available in such a situation. They ought to have carried out a proper investigation, promptly and fairly. If in the course of investigating the complaints against the appellant they committed a breach of their duty of trust and confidence, that too amounted to a repudiatory breach of contract; moreover, it was a breach that was more calculated to destroy the relationship of trust than were the earlier breaches by the appellant. In that situation it was open to the appellant to terminate the contract in reliance on the respondents' breach, in accordance with ordinary principles of the law of contract. Moreover, the fact that the appellant was in breach of contract resulted in a significant reduction in the award made in his favour by the Employment Tribunal.

[36] For the foregoing two reasons, I am of opinion that the appellant has established his first ground of appeal, and that the prior repudiatory breach of contract on his part did not disable him from terminating the contract by reason of the respondents' conduct towards him.

Ground 2: The respondents' investigation into the appellant's conduct

[37] The appellant's second ground of appeal relates to the conduct of the respondents in investigating allegations about his past conduct. The Employment Tribunal held that the respondents' investigations amounted to a breach of their duty of trust and confidence towards the appellant, and that the appellant's resignation was in response to that breach of contract. The Employment Appeal Tribunal did not deal with this issue in their original judgment, but considered it in a supplementary judgment dated 18 January 2012. They concluded that they were not satisfied that the respondents were in breach of their duty of trust and confidence. The result of that was to remove the basis for the Employment Tribunal's finding of constructive dismissal, since the test for constructive dismissal under section 95(1)(c) of the Employment Rights Act requires the existence of a material breach of contract on the part of the employer.

The Employment Tribunal's reasoning

[38] The Employment Tribunal considered the question of the respondents' breach of the obligation of trust and confidence at considerable length (paragraphs 345-400; this followed a detailed review of the evidence that had been led). They began by noticing that in order to terminate his contract of employment in terms of section 95(1)(c) the appellant had to show a breach of contract by the respondents going to the root of the contract of employment and that he had resigned in response to that breach without undue delay: Western Excavating, supra. They noted that the appellant had claimed that the respondents were in breach of the implied term of trust and confidence. This raised three questions: First, what was the conduct complained of? Secondly, did the respondents have reasonable and proper cause for the conduct? Thirdly, if the respondents did not have reasonable and proper cause, was their conduct calculated to destroy or seriously damage their relationship with the appellant (paragraph 346)?

[39] As to the first of these questions, the conduct complained of, the Employment Tribunal listed nine matters that had been raised by the appellant (paragraph 347). These matters were in summary:

1. The subject matter of the investigation by the investigating officer had been extended away from the original two matters that had led to the appellant's suspension; those two matters were that the appellant had breached the confidentiality of an interview in connection with a disciplinary investigation into a senior manager within the Leisure Department and that he had made defamatory remarks to colleagues about a female colleague (paragraph [3] above).

2. The manner in which the investigation was carried out by the investigating officer; in particular, it was said that the investigating officer had demonstrated clear animosity and hostility towards the appellant.

3. The respondents had allowed vague and unspecific allegations going back over a period of more than 10 years to be included in the list of allegations.

4. The investigating officer had failed to ask probing questions of witnesses who were making extremely damaging allegations; in addition, he allowed untested allegations to go forward.

5. The investigating officer continually allowed new allegations to be added to those being investigated.

6. The confidentiality of the investigation had been breached, in particular through disclosures in the course of an internal audit investigation.

7. The appellant had been referred to Occupational Health for a report, but the respondents had failed to advise Occupational Health of the reason for the reference.

8. The appellant considered that general issues arose around his suspension, in particular as to whether the suspension was fair and reasonable in all the circumstances and whether the lifting and then re-imposition of the suspension was reasonable.

9. The appellant and the employee GP had not been treated equally, in that the respondents had pursued the appellant in an excessive way but had failed to carry out a proper investigation as to whether the allegation that the appellant had made about GP was true or not.

It should be noted that these issues were raised by the appellant in relation to the question of whether there had been a breach by the respondents of their duty of trust and confidence. It was not contended by the appellant that he relied on all of these as a basis for his resignation.

[40] The Employment Tribunal grouped these concerns into three issues: whether the investigating officer should have investigated matters beyond the original two allegations made in the letter from GP complaining about the appellant's conduct; the level of detail of the investigation; and whether the investigating officer acted oppressively in the way in which the investigation was carried out. The Tribunal had no difficulty in finding that the respondents were obliged to take some sort of action in response to the allegations made by GP (paragraph 351). They remarked, however, that there was a lack of evidence as to who had made the decision to proceed with the investigation and how and why that decision had been made.

[41] The Employment Tribunal then moved on to the second question, whether there was reasonable and proper cause for each of the matters complained of. They considered each of those matters in turn.

The initial decision to suspend and the intimation of new complaints

[42] The respondents initially decided in August 2005 to investigate two related complaints: that the appellant had breached the confidentiality of an interview that he had given in relation to an investigation into the conduct of a senior manager within the respondents' Leisure Department, and that he had made defamatory remarks to colleagues about GP, a female employee within the Leisure Department. During the interview the appellant stated that he had witnessed the senior manager who was the subject of the disciplinary investigation engaged in a sexual act with GP. The complaint was that he had improperly mentioned that allegation to colleagues on two other occasions, outwith the disciplinary investigation. It was further suggested that his remarks had been defamatory of GP.

[43] On 16 August 2005 Mr Muir, the appellant's line manager, decided to investigate these complaints and to suspend the appellant meantime. The Employment Tribunal found that there was no explanation for the decision to suspend (paragraph 356). The letter confirming the decision stated only that suspension was imposed because of the apparent nature and seriousness of the complaints, and was not imposed lightly. Yet Mr Muir had known for some weeks that the appellant had been discussing the allegation concerning the senior manager and GP and had not acted.

[44] After the suspension, however, the respondents added a range of new complaints to the investigation. The Employment Tribunal was severely critical of the respondents' failure to inform the appellant within a reasonable time of new complaints that would necessitate a lengthening of the investigation (paragraph 365); of the respondents' informing the appellant's wife that he was being investigated over procurement practices (which was a disclosure of confidential information) at a point when he was yet to be told of that complaint (paragraphs 366 and 385); and of the respondents' allowing complaints to be "drip-fed" in instalments rather than being finalized at an earlier point (paragraph 369).

The manner in which the investigation was carried out and the animosity of Mr Towns to the appellant

[45] The Employment Tribunal found that Mr Towns, the official who was carrying out the disciplinary investigation into the appellant, had a strong dislike for the appellant which probably would have been in evidence during the meetings between them. There had, for instance, been an altercation between Mr Towns and the appellant's representative for which the former had apologized. The Tribunal concluded that they were in no doubt that an independent observer would have concluded by the end of the case that Mr Towns was partial (paragraph 386; see also paragraphs 387-389).

Unspecific complaints

[46] The Employment Tribunal made several criticisms of the nature of the new complaints included in the investigation. The new matters extended over the previous ten years. The descriptions given to the appellant were unspecific and gave him no realistic opportunity of dealing with them. Vague allegations were included if Mr Towns thought them serious enough. Historical complaints about managerial issues were included. Complaints of bullying were included, where the alleged victim had made no complaint. The Employment Tribunal found Mr Towns' decisions to have been unreasonable in each of these aspects (paragraph 371). Many of the complaints were "tittle tattle and gossip" (paragraph 372). The Employment Tribunal gave two examples of what it thought were unspecific complaints made without direct supporting evidence (paragraph 373). First, it was alleged that the appellant had threatened to intimidate employees physically, but not a single witness was found who could allege a single occasion when that had occurred. Secondly, it was alleged that the appellant had said or implied to female members of staff that the granting of sexual favours would result in advancement. The Tribunal described that as "an extremely serious allegation", in my opinion correctly, but it was made without the direct evidence of a single employee naming a specific time or place or statement to that effect.

Probing questions

[47] The Employment Tribunal was also concerned as to the "depth of questioning and critical assessment" of witnesses. It considered that a reasonable employer ought to have been deeply suspicious of GP's motives in coming forward as she did; she clearly had a strong motive for trying to get the appellant into trouble, in view of the evidence that the appellant had given at the disciplinary enquiry into the senior manager, who was her partner. Mr Towns had accepted that the majority of the complaints about the appellant emanated from her, nevertheless he made it clear in his evidence that he accepted her as being completely credible except for one incident when the appellant was said to have thrown a telephone. The Tribunal considered that Mr Towns allowed the terms of his meeting with GP to dictate the course of his future investigation (paragraph 377). They commented that Mr Towns had inexplicably met GP first, rather than the appellant as the respondent's guidance directed (paragraphs 359-363). The Tribunal also expressed a series of concerns about how other witnesses were dealt with (paragraphs 379-384).

Unequal treatment

[48] The Employment Tribunal found that the disciplinary investigations into the appellant on one hand and into the senior manager who was already under investigation and into GP in respect of her relationship with the manager on the other hand had been carried out in an unequal manner. The investigation of an allegation of improper conduct that the appellant had made against GP was described by the Employment Tribunal as "a complete sham". The employee investigating GP (a Ms Tierney) for a variety of matters had not put the allegation regarding sexual relations in the workplace to GP on the ground that that would have upset her. No such similar consideration was shown by Mr Towns towards the appellant (paragraphs 390- 391). The Employment Tribunal later noted that Ms Tierney did not press the matter "because there was no evidence. She does this without speaking to any of the witnesses" (paragraph 397). In the investigation of the appellant Mr Towns did not question GP regarding the appellant's allegation against her, even though he acknowledged that the truth of the allegation had some bearing on one of the original complaints against the appellant (paragraph 395).

Lifting and re-imposing suspension

[49] The appellant ultimately became unfit for work, and at that point Mr Towns lifted the appellant's suspension, only to re-impose it when his health improved to a point when he could return to work. The Employment Tribunal said that "the respondent's procedures do not suggest that a suspension can be lifted and re-imposed in this way" and that the decisions had been taken in an effort to exhaust the appellant's entitlement to sick pay (paragraph 387).

Reference to the Occupational Health Service

[50] At one point the appellant had been referred to the respondents' Occupational Health Service. The Employment Tribunal expressed concern about the handling of this referral. The appellant had been certified unfit for work because of depression and anxiety arising from his suspension and investigation. He was told to attend at the Service, only for the staff there to ask why he had been referred (paragraph 56), as they had not been informed of the reason in advance by the respondents. The Tribunal found this was "unfortunate" and "clearly a breach of the respondent's own procedure" (paragraph 385).

Whether seriously damaging or destructive to employment relationship

[51] The Employment Tribunal then moved on to the third of the crucial questions (see paragraph [37] above) and considered whether the conduct of the respondents, committed without reasonable and proper cause, was calculated seriously to damage or destroy the employment relationship. The Tribunal considered the various issues cumulatively and concluded that the respondents' treatment of the appellant from the point at which he was suspended to the point at which he resigned was such as to be calculated totally to destroy any relationship of trust and confidence (paragraph 399). There was accordingly a material breach of contract on the part of the respondents.

Whether resignation in response

[52] Finally the Employment Tribunal determined whether the appellant had resigned in response to the respondents' breach of contract without undue delay. It found it established on the facts that the claimant had resigned in response to the breach of contract. In the course of so finding, the Tribunal observed that it was arguable that the appellant had reason to resign as early as November 2005; he did not do so because he wanted to keep a job that he had held for many years and which he enjoyed. The final straw had occurred in July 2006 when he was invited to yet another meeting and was once again told that the list of allegations against him was not complete. By that stage he had lost all confidence in the respondents' procedures, and had formed the firm view that he was not going to get a fair process from the respondents. The appellant was aware that the respondents' behaviour had already made him ill. The Employment Tribunal concluded that the appellant's resignation at that point was caused by the respondents' behaviour, and that he did not delay unduly in resigning, as it was quite understandable for him to carry on in the face of continued breaches by the respondents in the hope that at some stage the respondents' investigation would get back on track. The appellant was entitled to resign when he finally decided that that was simply not going to happen (paragraph 400).

The Employment Appeal Tribunal's judgments

[53] The Employment Appeal Tribunal dealt with the respondents' investigation into the appellant's conduct in two stages. In their original judgment they reached a decision based on the doctrine of mutuality of contractual obligations, and held that this was sufficient for the appeal to be decided in the respondents' favour. The respondents had, however, argued additional grounds of appeal before them. In their original judgment the Employment Appeal Tribunal did not deal properly with those grounds, but indicated that there was undoubtedly merit in three of them. When the appellant applied to the Court of Session for leave to appeal, an interlocutor was pronounced requiring the Employment Appeal Tribunal to determine those other grounds. That interlocutor was interpreted as requiring the Employment Appeal Tribunal to state whether or not it was satisfied that the respondents were in fundamental breach of contract through a breach of their duty of trust and confidence. On that basis the Appeal Tribunal issued a supplementary judgment finding that the respondents were not in breach of contract, but did not formally dispose of the other grounds of appeal. When the case came back to the Court of Session, the respondents raised the other grounds of appeal, and the Appeal Tribunal was once again approached; on this occasion, however, the Appeal Tribunal indicated that their papers had been lost, and that they were accordingly unable to produce a supplementary judgment. On that basis the Court declined to remit the appeal again. We consider that in view of the loss of the papers there is nothing further that can be done at this stage in relation to the other grounds of appeal beyond the general comments made below at paragraphs [75] and [76]. The present opinion accordingly proceeds on the basis that the only critical question is whether the Appeal Tribunal was correct in holding that the respondents were not in breach of their duty of trust and confidence.

[54] On that basis, I will consider the Employment Appeal Tribunal's criticisms of the Employment Tribunal's approach on a thematic basis, taking its original and supplementary judgments together.

Matters relied on by the Employment Tribunal

[55] The Employment Appeal Tribunal criticized the Employment Tribunal for taking account of matters on the list summarized at paragraph [38] above that could not have been among the appellant's reason for resigning. Examples were the complaints of unequal treatment between the appellant and GP and failure of Mr Towns to ask probing questions of witnesses. Neither of these had been founded on by the appellant when he resigned, and indeed he could not have been aware either of Mr Towns' failure to ask probing questions of witnesses or the manner in which GP was investigated. This meant, the Appeal Tribunal held, that the Employment Tribunal had started its considerations on the wrong basis; they should have asked what the appellant was complaining of when he resigned rather than the criticisms that they were minded to level at the respondents for their handling of the investigation (original judgment, paragraph 110; supplementary judgment, paragraphs 5, 6, 8).

Unequal treatment

[56] The Employment Appeal Tribunal criticized the Employment Tribunal for finding that the investigation of GP was a sham. It held that the Employment Tribunal had wrongly found that the reason that the respondent's investigation was not pursued was because GP would be upset despite having found as a fact elsewhere (Employment Tribunal's judgment, paragraph 307) that it was stopped for want of corroboration. The Employment Appeal Tribunal further held that in any event the criticism of the investigation of GP was irrelevant; if the appellant and GP had been treated differently, the solution would be to investigate both rather than investigate neither (Employment Appeal Tribunal's original judgment, paragraph 109). The Appeal Tribunal later added that the complaints against the appellant were not comparable to those against GP and that the complaints about him were corroborated, unlike those regarding GP (supplementary judgment, paragraph 11).

The substitution trap

[57] The Employment Appeal Tribunal held that the Employment Tribunal had wrongly fallen into the "substitution trap" by forming its own view of how the investigation ought to have been conducted, rather than considering the "range of conclusions and approaches that were open to a reasonable employer". To vouch that characterization the Appeal Tribunal cited a number of paragraphs in the Employment Tribunal's judgment; all of these except paragraph 362 occurred before the Tribunal discussed whether the respondent was in breach of the implied term (original judgment, paragraph 111). Their criticism was modified in their supplementary judgment, where they said that "despite employment of the 'no reasonable employer mantra'", and having cautioned against being unduly prescriptive at paragraph 362, the Employment Tribunal had fallen into that very trap (supplementary judgment, paragraph 12).

Unspecific complaints

[58] The Employment Appeal Tribunal found that the Employment Tribunal were perverse to have concluded that the respondent wrongly included unspecific complaints going back over ten years. That criticism was influenced by its conclusion that there was no direct evidence that the appellant had solicited sexual favours (Employment Tribunal, paragraph 373), yet there were two employees who gave statements to Mr Towns to that effect (supplementary judgment, paragraph 7).

Contractual terms

[59] The Employment Appeal Tribunal thought that the Employment Tribunal had proceeded on the basis that the requirement to advise the Occupational Health Service of the reason for the appellant's referral was contractual, when it was not (supplementary judgment, paragraph 9). A similar criticism was made about their treatment of a power to lift and re-impose suspension (paragraph 10).

Suspension

[60] Additional criticisms by the Employment Appeal Tribunal of the Employment Tribunal's assessment of the appellant's suspension were that the appellant had not questioned the propriety of his original suspension or its re-imposition, the Employment Tribunal had been inconsistent as to whether reasons were given for that suspension, and that the finding regarding Mr Towns' efforts to exhaust the appellant's sick pay amounted to drawing an inference of bad faith for which there was no basis (supplementary judgment, paragraph 10).

Analysis

[61] The critical finding by the Employment Appeal Tribunal was that they were not satisfied that the respondents were in breach of their obligation of mutual trust and confidence towards the appellant (supplementary judgment, paragraph 13). On that basis, they held that there was no material breach of contract on the part of the respondents, with the result that the appellant was unable to invoke section 95(1)(c) of the Employment Rights Act 1996. In my opinion the Appeal Tribunal were not justified in coming to this conclusion. In doing so, they unfortunately contravened the fundamental principle that their jurisdiction is confined to matters of law: Employment Tribunals Act 1996, section 21(1). Consequently the Employment Appeal Tribunal should not interfere with a decision of an Employment Tribunal on a question of fact. The classic statement of the law is found in Melon v Hector Powe Ltd, 1980 SC 188; affirmed at 1980 SC (HL) 1, where LP Emslie stated (at 1980 SC 198):

"The law is clear that where it cannot be shown that the tribunal of original jurisdiction has either misdirected itself in law, entertained the wrong issue, or proceeded upon a misapprehension or misconstruction of the evidence, or taken into account matters which were irrelevant to its decision, or has reached a decision so extravagant that no reasonable tribunal properly directing itself on the law could have arrived at, then its decision is not open to successful attack".

This principle is repeated in a large number of cases including, in Scotland, McBride v Strathclyde Police, [2013] CSIH 4, at paragraph [35] per Lady Dorrian; Hewage v Grampian Health Board, 2011 SC 397, at paragraph [43] per LJC Gill; and Salamis (Marine & Industrial) Ltd v Forbes, 2006 SC 62, at paragraphs [14]-[16] per LP Hamilton. In this connection, too, it is important to bear in mind the further principle that "one ought not to take too technical or view of the way an employment tribunal expresses itself, that a generous interpretation ought to be given to its reasoning and that it ought not to be subjected to an unduly critical analysis": Hewage v Grampian Health Board, 2013 SC (UKSC) 54, paragraph [26] per Lord Hope.

[62] When the foregoing principles are applied, I am of opinion that the Employment Appeal Tribunal's criticisms of the Employment Tribunal's reasoning on each of the individual issues were, with one unimportant exception, unjustified. In every instance those criticisms involved the reconsideration and rejection of the Tribunal's view on questions of fact. That could only be justified on the basis that the Tribunal had considered the wrong issue, or misapprehended or misconstrued the evidence, or had taken into account irrelevant matters, or had arrived at a decision that was perverse, so that no reasonable Tribunal could have reached it. When the individual criticisms are considered, however, I am of opinion that the Tribunal's analysis of the evidence and its conclusions on that evidence cannot be criticized on any of those grounds. In every case, it appears to me that the Tribunal considered the correct issues, on the basis of properly available evidence, and reached a decision that was clearly within the permissible range. The Appeal Tribunal's criticisms, by contrast, appear to go very obviously beyond the limits of its jurisdiction. They all involved reconsideration of the Tribunal's findings of primary fact and the critical influences to be drawn from those findings of primary fact.

[63] My comments on the specific matters referred to by the Employment Appeal Tribunal in their two judgments are as follows.

Matters relied on by the Employment Tribunal

[64] In the present case the Employment Appeal Tribunal made a number of specific criticisms of the Employment Tribunal's reasoning. A central criticism, found at paragraph 110 of the original judgment and taken up at paragraphs 5, 6 and 8 of the supplementary judgment, is that a number of the matters relied on by the Employment Tribunal had not been founded on by the appellant when he tendered his resignation. The matters founded on were those stated in the appellant's letter of 27 July 2006, quoted in paragraph [4] above. This criticism applied in particular to complaints of unequal treatment between the appellant and GP and the lack of probing questions from Mr Towns in relation to allegations against the appellant. The Employment Appeal Tribunal held that relying on such matters disclosed a fundamentally incorrect approach; the correct approach was to consider the conduct actually relied on by the appellant as having caused his resignation. In my opinion this is not a valid criticism. It is undoubtedly correct that an employee claiming constructive dismissal must establish that the conduct complained of was the reason for his resignation, and that means that he must establish that he relied on that conduct in tendering his resignation. It is not correct, however, to suppose that the only matters relied on were those stated in the appellant's letter of 27 July 2006. That letter is framed in very general terms; it refers to a lack of trust; to the unfair way in which the appellant had been treated; to the damage to the appellant's health and well-being; and to the damage done to his career, integrity and reputation. The concept of unfair treatment, in particular, is quite capable of referring to many of the factors relied on by the Employment Tribunal; and the same applies to the concepts of lack of trust and damage to health, well-being and career.

[65] Furthermore, the letter of resignation followed approximately a year of correspondence following the appellant's suspension on 17 August 2005. During that period the appellant set down in detail a range of concerns about the investigatory process and the way in which he was being treated. That correspondence was before the Employment Tribunal and is referred to in some detail in their decision. The Employment Tribunal listed nine matters in their opinion (at paragraph 347; see paragraph [39] above). These reflected the range of concerns raised by the appellant during the process of investigation. It is not correct, as the Employment Appeal Tribunal suggested, that these were an artificial construction by the Employment Tribunal; they emanated from the appellant.

Unequal treatment

[66] The Employment Appeal Tribunal's next criticism was of the Employment Tribunal's finding that the investigation of GP's conduct was a sham: original judgment, paragraph 109. At a more general level, the Appeal Tribunal clearly thought that the Employment Tribunal were not justified in making adverse comparisons between the manner in which the complaints against the appellant were investigated at the manner in which the complaints against GP were investigated. In my opinion this criticism has no basis. The Employment Tribunal's remarks about the investigation of GP, and the comparison with the investigation of the appellant, were much more nuanced than the Employment Appeal Tribunal appeared to think. The evidence was considered by the Employment Tribunal at some length, in paragraphs 295-308. The conclusions are found at paragraph 307, and are reiterated at paragraph 391. Ms Tierney, who was charged with the investigation of GP, failed to keep a record of one interview; she was not given any statement from another important witness, a Ms F, who gave evidence to the Employment Tribunal. Ms Tierney decided not to interview another significant witness, nor to interview the appellant. She then appears to have decided that she would not investigate the complaints against GP further. Her reason for doing this was apparently that she considered that there was no corroboration (paragraph 307), and this is taken at face value by the Employment Appeal Tribunal. The Employment Tribunal, who heard the relevant evidence, commented that they were unaware of why Ms Tierney discounted the evidence of Ms F without having heard it. They further pointed out that Ms Tierney had not advised GP that she had been asked to carry out the investigation, nor did she seek GP's evidence. These elements clearly indicate that the Tribunal did not think Ms Tierney justified in not proceeding with the investigation on the ground of a lack of corroboration; it is possible that a note of faint irony can be detected in their discussion of the matter. The Employment Appeal Tribunal, however, appear to have taken the assertion that there was no corroboration at face value, without looking at the other evidence, and in particular the failure to take basic steps to obtain corroboration. At paragraph 391 the Employment Tribunal indicated that Ms Tierney "did not even interview GP", and that she appeared to have reached such a decision because GP "was having a hard time and... it would be upsetting for her to have another allegation added". The Tribunal in that paragraph observed that this differed markedly from the treatment of the appellant; Mr Towns had been faced with medical opinion that the way in which he was conducting the investigation was causing stress and anxiety to the appellant, but had made no attempt to change his position or to desist from adding additional allegations. The Appeal Tribunal referred to paragraph 391 (at paragraph 109 of their original opinion) to suggest that it was inconsistent with the reference to lack of corroboration at paragraph 307, but this seems unjustified. The discussion at paragraph 307 indicated that no proper effort had been made to obtain corroboration; the discussion at paragraph 391, by contrast, was concerned to demonstrate that Ms Tierney's consideration for GP stood in stark contrast to the consideration shown by the respondents for the appellant. It should further be noted that the stress that GP was experiencing because of the investigation into her conduct is referred to expressly at paragraphs 306 and 308 of the Tribunal's judgment; paragraph 307 must be read in this context.

[67] The Employment Appeal Tribunal further stated that the investigation of GP cannot have been of any relevance when considering Mr Towns' investigation of the allegations about the appellant. They stated that logically it was the investigation of GP that ought to have proceeded rather than the investigation of the appellant that ought to have been discontinued. This appears to be misconceived. The complaint of unequal treatment was not founded on to suggest that the appellant should not have been investigated; it was rather founded on as demonstrating unfair treatment of the appellant. Moreover, its ultimate relevance was as merely one element in a complex web of complaints by the appellant about his treatment; ultimately, as one factor that indicated that the respondents were in breach of their duty of trust and confidence.

[68] In their supplementary judgment the Employment Appeal Tribunal added (at paragraph 11) that there was a lack of comparability between the complaints against the appellant and those against GP, and that while the complaints against the appellant were corroborated those against GP were not. It is correct that the allegations made against the appellant were quite different from those made against GP, a fact that must have been obvious to the Employment Tribunal. Nevertheless the point raised by the appellant was simple in nature; it is stated by the Employment Tribunal at paragraph 342:

"Essentially Mr McNeill's position was that he makes a complaint about misconduct on the part of two individuals. Nothing happens to the two individuals and the truth or otherwise of the complaint made by the claimant about them is never investigated. On the other hand a detailed investigation is lodged against Mr McNeill going back ten years investigating every possible complaint made by past and present subordinates in what he felt to be excruciating detail".

It was thus the manner in which the complaints were investigated that was relevant, rather than the substance of the complaints. Moreover the contrast between the two sets of investigations drawn by the appellant and accepted by the Employment Tribunal was very stark and was hardly dependent on details of the complaints made in each case. As to the issue of corroboration, the Tribunal found that the complaints against GP were very badly investigated. That is plainly material to the question of whether corroboration has been discovered. On that basis, I find it impossible to understand how the lack of corroboration could be relied on as a reason for not taking the complaint against GP any further. Finally on this matter, I would observe that the Appeal Tribunal stated that the different nature of the allegations "provided a rational explanation for deciding not to take matters [against GP] any further". Whether or not that is correct, it is not apparent that the respondents' reason for not taking matters further was the difference in the nature of the allegations; there is no finding in fact by the Tribunal to that effect. In assessing the decision of the Tribunal, it is the reasons that the respondents actually had for discontinuing the investigation of GP that are relevant, not the fact that another reason might have justified discontinuance.

The substitution trap

[69] The Employment Appeal Tribunal indicated (at paragraph 111 of their original judgment and paragraph 12 of their supplementary judgment) that the Employment Tribunal had fallen into the "substitution trap" by imposing its own view of how the investigation should have been carried out rather than considering what a reasonable employer might have done in the circumstances. In my opinion there is no justification for this criticism. The Employment Tribunal were careful to note the correct legal position. For example, at paragraph 362 of their judgment they state:

"There is of course a range of reasonable responses open to an employer being asked to carry out the type of investigation Mr Towns was asked to carry out. It is not for the tribunal to be unduly prescriptive as to how the investigation is carried out".

The Tribunal then held in the same paragraph that, despite that principle, any investigation within the range of reasonable responses would have involved asking the appellant whether or not he had said the things complained of and his reasons for doing so. If he denied the allegations, it would then have been appropriate to interview the individuals to whom he has said to have made the statements in question. I find it impossible to criticize the Tribunal's approach at this point; it seems to me obvious that any reasonable investigation of an employee's conduct should involve asking the employee under investigation for his reaction, and should also involve interviews with those who make allegations against him.

[70] The Employment Tribunal further referred to the need to respect the range of reasonable responses at paragraph 369 of their judgment. This paragraph related to the length of the disciplinary proceedings; it was stated that it would appear inexplicable to an employee such as the appellant that a fairly straightforward investigation appeared to be taking several months, and that this was bound to cause stress and anxiety. The Tribunal stated:

"The tribunal formed the view that no reasonable employer would have dealt with the matter in this way. The tribunal was mindful of the risk of substituting their own judgment for that of Mr Towns, however, the tribunal believes that we have scrupulously avoided this temptation. The tribunal does believe that it was outwith the range of reasonable responses for Mr Towns to have dealt with the matter of extending the scope of his investigation into the allegations made by GP without telling the claimant and continuing to suspend the claimant...".

I can see no basis for criticizing this statement, or for doubting that the principle in question was genuinely followed by the Tribunal.

[71] Further reference to what a reasonable employer would have done is found at paragraphs 375 and 376, dealing with the time that had elapsed since the events referred to in some of the allegations, at paragraph 377, dealing with the attitude that should have been taken towards GP's evidence against the appellant, at paragraph 380, dealing with allegations of sexual misconduct made by an employee KD, at paragraph 382, dealing with the encouragement of individuals to give evidence to the investigation of the appellant's conduct, at paragraph 383, dealing with the width of Mr Towns' investigation of the appellant, at paragraph 385, dealing with the way in which allegations were drip-fed to the appellant over a lengthy period, at paragraph 389, where the Tribunal stated that a reasonable employer would, if personal relationships between the investigator and the person being investigated reached the state of the relationship between Mr Towns and the appellant, someone else would have been delegated to take over the investigation. At paragraph 393 the Tribunal decided that the manner in which the respondents dealt with the investigation of the manager was said to have had a relationship with GP "could not be said to be outwith the band of reasonable responses", although they state that they themselves would not have come to the same conclusion. This must be contrasted with paragraph 394, where the Tribunal state that, with regard to GP, the way in which the respondents behaved "was entirely outwith the range of reasonable responses". This is a particularly clear indication of the discriminating attitude taken by the Employment Tribunal. In these circumstances, I find it impossible to support the Employment Appeal Tribunal's view that the Employment Tribunal had fallen into the "substitution trap". Nor do I consider that the Employment Appeal Tribunal were justified in stating that the Employment Tribunal had merely employed the "no reasonable employer" test as a "mantra"; the repeated references to that test, and especially the contrast between paragraphs 393 and 394, clearly indicate that the test was properly applied.

Unspecific complaints

[72] The Employment Appeal Tribunal held (at paragraph 7 of their supplementary judgment) that the Employment Tribunal had been perverse in deciding that the list of complaints against the respondents' conduct should include their allowing vague and unspecific allegations dating back over more than 10 years to be included in the list of allegations against the appellant. Reference was made in particular to allegations made against the appellant by female staff to the effect that the appellant had solicited sexual favours from them. The Employment Appeal Tribunal indicated that two employees had given statements to Mr Towns to that effect. On that basis, they criticized the Tribunal's reasoning at paragraph 373 of their judgment, where they discounted the allegation that the appellant had solicited sexual favours. What the Employment Tribunal actually stated in that paragraph, however, was that the allegation was made "without the direct evidence of a single employee naming a specific time or place or statement" made by the appellant to the effect complained of. The criticism of the respondents thus related to the level of specification of the information that they used to make allegations, which appears to me to be a matter of some importance. This point appears to have been ignored by the Appeal Tribunal. Consequently I cannot find their criticism justified.

[73] Moreover, further clear examples of lack of specification in the complaints against the appellant are found in the Employment Tribunal's narration of the factual background. At paragraph 69 of their judgment they referred to a set of six allegations made in February 2006 which "contained no specification whatsoever and accused the claimant generally of manipulative practices". An example was given: "Making disparaging remarks about individual colleagues to other colleagues". The Tribunal commented that this entirely lacked specification and left the appellant in the situation where he was faced with a charge were he could give no answer other than a flat denial or acceptance. That seems manifestly correct; yet the Employment Appeal Tribunal ignored this part of the Employment Tribunal's judgment. At paragraphs 72-75 the Tribunal considered an allegation that the appellant had been under the influence of alcohol "on many occasions in the workplace and elsewhere". 15 matters were listed which were described as "specific allegations". The Employment Tribunal noted that they were struck by the lack of specification of a number of these incidents. They referred to two particular examples. First, it was said that "on an occasion in the mid-1990s" the appellant sent a colleague to the Beach Ballroom to purchase wine for consumption at a drinking session in his office, and the colleague was refused the order on the basis that the appellant had not paid a previous bill. Secondly, it was said that the appellant was drunk on "some or all of the occasions" of which he allegedly made sexually harassing telephone calls to a named employee. At paragraph 77 the Tribunal referred to an allegation that "exercise of [the appellant's] management duties has been lacking in the areas of processes and procedures, recruitment and deployment of staff, attendance records, maintenance of records, and training and development of staff". 14 further allegations were listed. The Tribunal remarked that in none of the specific instances was any time given, with one partial exception. They commented (paragraph 78) that "all of these allegations were insufficiently specific to allow any employee to answer them in any realistic way other than by confirmation or denial". Furthermore, none of the allegations had been made by those responsible for managing the appellant at the relevant time; he had received good appraisals from his managers; and he had been promoted subsequent to most of the alleged mismanagement.

[74] In my opinion these passages in the Employment Tribunal's judgment provide very clear examples of lack of specification in the complaints against the appellant. They fully justify the Tribunal's view that the appellant had not been provided with anything near adequate specification of the complaints against him. The Employment Appeal Tribunal appear to have disregarded these parts of the Tribunal's judgment. If they had been taken into account, it would be impossible to state, as the Appeal Tribunal did at paragraph 7 of their supplementary judgment, that it was "perverse" of the Tribunal to include "vague and unspecific allegations" as part of the complaint against the respondents.

[75] In seeking to justify the Employment Appeal Tribunal's conclusion at paragraph 7 of their supplementary judgment, counsel for the respondents founded on a passage at paragraphs 207-208 of the Employment Tribunal's judgment. This is dealt with allegations made by an employee within the respondents' leisure department, KD, to the effect that the appellant had subjected her to a substantial level of sexual harassment. The Tribunal at paragraph 204 of their judgment described these allegations as the most serious of those made against the appellant. KD had provided an affidavit, as summarized in some detail at paragraph 207 of the judgment. At paragraph 208 the Tribunal referred to further evidence from another employee, FP, and spoke of sexual harassment by the appellant. These allegations were considered by the Tribunal at some length, at paragraphs 207-217 of their judgment. In relation to KD, their conclusion was that they did not accept her affidavit as being truthful: paragraph 204. They stated that KD's allegation had been strenuously denied by the appellant, and that where her allegations could be checked against the evidence of other neutral witnesses those witnesses gave "completely contradictory evidence": ibid. That conclusion appears to be justified by the Tribunal's discussion of the relevant evidence that they had heard; in particular, at paragraphs 209 and 211-217 there is a detailed discussion of the evidence of two other employees, Mr Sanghera and Mr Smart, who both contradicted KD's account. The Tribunal noted (at paragraph 210) that Mr Towns had not found KD's most serious allegation of sexual harassment to be proved, but that he found a general allegation of sexual harassment to be true. The Tribunal, however, after hearing evidence had formed "an entirely different view in their findings in fact". Against this background, I consider counsel's reliance on KD's affidavit to be entirely misplaced. I note that the Tribunal accepted that a certain amount of sexual banter was accepted among the senior management team in the respondents' Leisure Department, and that the appellant had taken part in this: see, for example, paragraph 199. Nevertheless, this had apparently been accepted within the Department, and the Tribunal concluded that it was not of great moment in the case against the appellant.

Contractual terms

[76] The Employment Appeal Tribunal criticized the Employment Tribunal for treating certain terms as contractual when they were not (supplementary judgment, paragraphs 9 and 10). The specific passages in the Tribunal's judgment that criticized are found at paragraph 385 and 387. In both of these, however, the Tribunal refers not to a breach of contract but to a breach of the respondents' procedures. That appears to be clearly correct; indeed the Appeal Tribunal indicated that the procedures were contained in the respondents' guidance for managers. In these circumstances it seems to me that the procedures were plainly relevant to the question of whether there was a breach of the duty of trust and confidence. In Gogay v Hertfordshire County Council, [2000] IRLR 703, was held that the suspension of the employee can amount to a breach of the implied term of trust and confidence. I therefore find the Appeal Tribunal's criticism unjustified.

Suspension

[77] The Employment Appeal Tribunal further criticized the Employment Tribunal for its treatment of the appellant's suspension (supplementary judgment, paragraph 10; see paragraph [59] above). The matters relied on by the Appeal Tribunal are clearly contradicted by the judgment of the Employment Tribunal. It is said first that the appellant had not questioned the propriety of his suspension and its reimposition, this is contradicted by paragraph 46 of the Tribunal's decision, where a letter written by the appellant to Mr Towns on 25 November 2005 is discussed. In this letter a number of complaints made about the investigation, and in particular he stated that he felt that he was subject to a witch hunt and that his suspension arose as a direct result of the statement that he gave the course of the earlier disciplinary hearing against a senior official. Perhaps more significant, however, is the fact that from the time of his suspension onwards the appellant vigorously contested the allegations against him. The Employment Appeal Tribunal suggest that the Employment Tribunal's statement at paragraph 356 that they had no real explanation as to the reason for suspension conflicted with a finding at paragraph 19 that the letter of 17 August 2005 " intimating" his suspension gave two distinct reasons: breaching the confidentiality of an investigation and making defamatory remarks to colleagues. The Appeal Tribunal's criticism is misplaced, however; the letter of 17 August 2005 (which confirmed rather than intimated his suspension) mentioned breach of confidentiality and defamatory remarks as the reasons for the investigation, and not the reasons for the suspension. It is self-evident that an investigation may proceed without suspension. Furthermore, it appears that no evidence was in fact before the Tribunal as to the actual reason for the suspension; Mr Muir, the responsible officer, did not give evidence for the respondents: see the Employment Tribunal's judgment at paragraph 18.

[78] In paragraph 10 of their supplementary judgment the Employment Appeal Tribunal further criticized the Employment Tribunal for, at paragraph 387, assuming that the parties' contract prohibited the re-imposition of suspension. That is not what paragraph 387 says; in that paragraph the Employment Tribunal stated that the lifting and re-imposition of the suspension was not justified by the respondents' procedures. The Tribunal, agreeing with the appellant, thought that the lifting and re-imposition were motivated by the desire to ensure that while the appellant was off sick he was exhausting his entitlement to 6 months sick pay at full salary. The Appeal Tribunal stated that there was no basis in the findings in fact for such an inference of bad faith. Ultimately this is not a matter of great importance. It appears to be correct that there is no factual basis for such a finding about exhausting sick pay other than the evidence of the appellant, and on that basis the finding can be criticized as speculative. This does not, however, affect the merits of the Tribunal's decision.

Perversity

[79] Finally, I note that at paragraph 109 of their original judgment, the Employment Appeal Tribunal were prepared to hold that the impression given by the Employment Tribunal's judgment led to the conclusion that the judgment was perverse. This was the respondents' second ground of appeal from the Tribunal's decision. For the reasons discussed in the preceding paragraphs, I am of opinion that the detailed criticisms of the Tribunal's judgment made by the Appeal Tribunal have, with one unimportant exception, no basis. For that reason I have no hesitation in rejecting the conclusion that the Employment Tribunal's decision was perverse. It appears to me to be a careful and well‑reasoned opinion, in which the evidence was approached according to the correct legal principles.

Further grounds of appeal to the Employment Appeal Tribunal

[80] As mentioned at paragraph [53], the respondent's appeal to the Employment Appeal Tribunal relied on five grounds (Appeal Tribunal's original judgment, paragraphs 4-8). I have already considered the first of these, that the appellant was in prior repudiatory breach of contract and that his resignation could not constitute constructive dismissal. The second ground was that the Tribunal's decision was, overall, a perverse one. In his submissions, counsel for the respondents made a considerable number of detailed criticisms of the Tribunal's decision, essentially to support the Appeal Tribunal's reasoning. For the reasons already discussed, I would reject these criticisms. It is criticisms of that nature, however, that form the basis for any conclusion of perversity, and in the present case I am unable to come to any such conclusion. The respondents' third ground of appeal was that any dismissal was fair, in that the respondents had not acted in breach of the implied term of trust and confidence. It was contended that the Tribunal had erred in its application of the test for breach of the implied term, had reached a perverse decision and had engaged in impermissible substitution of its own view is in reaching its decision. All of these matters have been dealt with as aspects of the first ground of appeal, and are discussed above.

[81] The fourth ground of appeal was that, if there had been a dismissal, any failures on the respondents' part had been procedural, and if they had not occurred the appellant would probably have been dismissed in any event; this argument was presented under reference to section 98A(2) of the Employment Rights Act 1996. It is now impossible to go into this matter in detail in view of the loss of the Appeal Tribunal's papers. The Appeal Tribunal referred to this matter in a summary manner at paragraphs 112 and 113 of their original judgment. Counsel did not cover these paragraphs in the course of their argument, and I do not propose to say anything about them. Finally, the fifth ground of appeal related to the position of the appellant's solicitor. The Appeal Tribunal expressly declined to comment on this ground (original judgment, paragraph 114). It is unnecessary now to say anything about it.

[82] Overall, while the Appeal Tribunal's inability to deal with the additional grounds of appeal is most unfortunate, it must be borne in mind that a substantial part of the content of those additional grounds was in fact canvassed before us. To the extent that those grounds were not covered, the inevitable result is that the judgment of the Employment Tribunal must stand. I should observe that I was unimpressed by the criticisms of that judgment that were made by both the Appeal Tribunal and by counsel in the hearing of the present appeal. For that reason it may be that the inability to argue the additional grounds is not a matter of great moment.

Conclusion

[83] For the foregoing reasons, I am of opinion that the Employment Tribunal did not err in law in reaching its decision that the appellant had been constructively and unfairly dismissed, and the Employment Appeal Tribunal erred in law in allowing the appeal against that decision. This appeal must accordingly be allowed. Consequently the decision of the Employment Tribunal as to unfair dismissal and the remedies for such dismissal should be reinstated.

EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
	[2013] CSIH 102
Lord Eassie Lord Drummond Young Lord McGhie	XA61/10 OPINION OF LORD McGHIE in an appeal under section 37(1) of the Employment Tribunals Act 1996 by TOM McNEILL Appellant; against ABERDEEN CITY COUNCIL (No 2) Respondents: _______________

Act: Napier, QC, McCrossan, Solicitor Advocate; Lefevre Litigation

Alt: Sandison, QC; Brodies

28 November 2013

Introduction

[84] I have had the opportunity of considering the opinion delivered by Lord Drummond Young and I gratefully adopt his summary of the facts and analysis of the Scots law of contract. I am also happy to adopt his material dealing with "Ground 2" and the subsequent issues as set out in paragraphs [37] to [83] of the Opinion. I am content that the appeal should succeed.

[85] This case turns on the contention that the employers were in breach of contract and I do not seek to add to his Lordship's analysis of the particular facts and circumstances and the conclusion to the effect that there was a breach which the principle of mutuality did not excuse. However, I am satisfied that sec 95 of the Employment Rights Act 1996 covers the situation where the employer's conduct in relation to his contractual obligations justifies the employee in treating his own obligations of future performance as at an end whether or not the employer is in breach of contract. If that is so, it must follow that questions of mutuality as justifying an apparent breach will seldom be relevant to the question of whether the employee was entitled to treat the conduct as justification for termination.

[86] Most discussion of sec 95(1)(c) has taken place in the context of dispute over the materiality of an alleged breach of contract by the employer. But while there must be repudiation by the employer in the sense of refusal to continue to perform all his duties, I am not persuaded that there is any need to show that this is a breach of contract. If an employer's conduct shows that he is no longer intending to perform his own substantive obligations the employee must be entitled to stop performance of his own substantive obligations. I see no difficulty in describing that as a situation where he is entitled to terminate the contract without notice for the purposes of sub-sec (1)(c).

[87] In Western Excavating (E.C.C.) v Sharp [1978] ICR 221, Lord Denning at p 226 A-B, set out the contractual test. He was doing so for the purpose of comparing it with the "unreasonableness test" and it can be assumed that he was attempting an accurate and comprehensive description. He said:

"If the employer is guilty of conduct which is a significant breach going to the root of the contract of employment or which shows that the employer no longer intends to be bound by one or more of the essential terms of the contract, then the employee is entitled to treat himself as discharged from any further performance. If he does so, then he terminates the contract by reason of the employer's conduct. He is constructively dismissed."

The use of the word "guilty" may been taken to be suggestive of some breach of duty but the substance of the dictum was to identify two strands of conduct, one involving breach and the other simply a clear intention no longer to be bound. In Welch v The Taxi Owners Association (Grangemouth) Ltd UKEATS/0001/12/BI, Lady Smith expressed the matter without any reference to guilt:

"In accordance with general principles of the law of contract, the employee is entitled to resign if, looking at matters objectively, the employer has conducted himself ... in a manner which shows that he no longer regards himself as bound by the contract."

[88] The terms of sec 95 are set out by Lord Drummond Young at paragraph [8]. The plain aim of the section is to provide a definition of dismissal for the purposes of the Act. Plainly the termination must be attributable in some way to the actings of the employer. An employee who leaves entirely of his own volition is not dismissed. But, for the purposes of sec 95 it is unnecessary to determine whether the dismissal was, or was not, justified. The provisions of sec 95(1) heads (a) and (c) have the same fundamental purpose of providing for the situation where the employer has brought about the end of the employment. Head (a) can be seen to cover the situation where he has done so explicitly and head (c) might be taken to have been intended to cover situations where the employer's intention not to continue was a matter of implication from his conduct. Even if head (a) can be read as allowing a wide approach to implied termination by an employer it would not follow either that this was the intention of Parliament or that a narrow approach to (c) was to be taken as a consequence.

[89] The implications of "termination" of a contract are discussed by Lord Drummond Young at paragraphs [23] and [24]. The term has a limited meaning. It does not carry any implication that the terminating party has a right to walk away from all his obligations under the contract. The contract does not vanish. When an employee "terminates" the contract, the effective meaning in the context of these provisions must simply be that he has concluded that he need not continue to perform his substantive duties. Employees cannot be left in limbo. They must be entitled to terminate the contract in the sense of stopping performance of their own substantive obligations where it is clear that, for whatever reason, the employer has no intention of performing his. The employee would be entitled to reach that conclusion if the employer's conduct showed that the employer no longer regarded himself as having to perform his substantive obligations under the contract. The scheme of the Act would be defeated if such circumstances did not fall under either (a) or (c).

[90] The scheme is to make dismissal the trigger and then make detailed provision for consideration of fairness and consideration of appropriate remedies. In both contexts there is scope for effect to be given to the justification for the employer's conduct. It would be surprising if Parliament had intended to make the operation of subsection (c) dependent upon analysis of whether the employer might have been justified in deciding not to perform his duties. Plainly no such analysis is required in considering whether matters fall under head (a). Even when the employer has good reason to dismiss, the employee is given a potential remedy.

[91] This view of the intention of the provisions is supported by practical considerations. If an employer has decided to terminate the contract he would normally be expected to tell the employee expressly. But some actings are as eloquent as words. If an employee finds his office locked and his personal things in a box by the door, he may readily understand that he is no longer expected to perform his contractual duties; in other words that the employer has terminated the contract. That situation might well be regarded as falling within the scope of head (a). But the implications of some actings are less free from doubt. To provide a comprehensive cover of "dismissal" Parliament required to make provision for the situation where the employer has acted in a way which shows that he is no longer prepared to perform his part of the contract even in circumstances when he has made no attempt, explicit or implicit, to dismiss. It is likely that ambiguous situations will usually arise in circumstances like the present where the employer's conduct can be regarded as a possible breach of contract and a full analysis of the circumstances may be required to determine whether the conduct of the employer is of a character which justifies the employee in terminating his performance. In some cases it might be relatively easy to characterise the employer's actings as impliedly terminating the contract and, indeed, if a very wide view of implied intention was to be taken for the purposes of head (a) there might appear to be little scope left for head (c). But there may be circumstances where the employer has acted without any intention of bringing the employment to an end but where his conduct shows that he is no longer intending to be bound by all the terms of the contract. An example might be where an employer has unilaterally changed an employee to a lower grade. He might genuinely believe that downgrading was a proper response to some failure or act of misconduct by the employee. It might be possible to view that as an implied termination under head (a) but such circumstances are more naturally viewed as a constructive dismissal under (c). There is no reason why the employee in that situation should not be entitled to regard himself as dismissed. Indeed the position might be particularly clear where the employee knows that the employer has good reasons for his action.

[92] It is unnecessary to say more about the infinite variety of circumstances in which an effective termination by virtue of the employer's conduct may arise. It is clear that it may be difficult, in practical terms, to draw a clear distinction between implied termination by the employer and conduct which simply makes it clear that, for whatever reason, the employer is no longer intending to be bound by all his contractual obligations. In the present context I see no persuasive reason why Parliament might have wanted to make it necessary to draw such a distinction. There is no linguistic need to read (c) narrowly to exclude circumstances which are not a breach of contract by the employer simply because it might be possible to cover them by a strained construction of head (a). There is nothing to justify this on a purposive basis.

[93] In short, while it is clear that the assessment of the employer's conduct requires a contractual test to determine whether it shows an intention by the employer not to perform his substantive obligations under the contract, there is little scope for further enquiry as to whether the employer's attitude is justified. Such matters are irrelevant to the purpose of sec 95. In any event, any prior dicta suggesting the need for an approach wholly consistent with common law must be taken to be qualified by the dicta of the Supreme Court in Gisda Cyf v Barrett [2010] ICR ICR 1475. "An interpretation that promotes [the rights of employees] as opposed to one which is consonant with traditional contract law principles, is to be preferred": per Lord Kerr of Tonaghmore at para 37. There is no obvious reason why this broad comment in relation to sec 97 should not be equally applicable to sec 95.

[94] If the employee's entitlement is to be assessed by reference to the employer's conduct without regard to the justification for that conduct, it follows that the principle of mutuality would rarely have any bearing. The remedies afforded by the principle of mutuality are rescission or retention: as Lord Drummond Young explains at paragraphs [23] to [30]. The right to rely on mutuality as a justification for retention of performance by an employer might well be relevant in analysing the conduct of the employer. If such conduct can be seen as intended to compel performance by the employee rather than as indicative of an intention to terminate, the employee might not be entitled to rely on it as justifying termination by him. But in the present case it is clear that any conduct relied on by the employers in name of mutuality was well in the past. There was no basis upon which it could have been concluded that the employer was withholding performance of his own obligations in security of future performance by the employee. The only realistic conclusion would have been that the employers were treating the prior misconduct as justifying rescission; in other words that they were no longer prepared to be bound by the contract. In that situation the employee could treat his own obligations of performance as at an end and I am satisfied that this could properly be described as terminating the contract within the meaning of sec 95(1)(c).

[95] I agree that this appeal must be allowed and that the whole decision of the Employment Tribunal should be reinstated.