United Kingdom Employment Appeal Tribunal

BAILII case number: [1993] UKEAT 344_93_2211

Appeal No. EAT/344/93

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 22 November 1993

Before

HIS HONOUR JUDGE B HARGROVE OBE QC

MR J H GALBRAITH CB

MRS E HART

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STAR NEWSPAPERS LTD          APPELLANTS

MISS S JORDAN          RESPONDENT

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Transcript of Proceedings

JUDGMENT

Revised


 


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APPEARANCES

For the Appellants MR C MAKEY

(OF COUNSEL)

Messrs Clarke Willmott & Clarke

6 Hammet Street

Taunton

Somerset

TA1 1RG

For the Respondent MR J CAVANAGH

(OF COUNSEL)

Messrs Alms & Young

1 Church Square

Taunton

Somerset

TA1 1RR


 


JUDGE HARGROVE OBE QC: After a hearing on 19 March 1993 the Industrial Tribunal held that the Respondent had been constructively dismissed and she was awarded £7,506 compensation.

The Respondent commenced employment with the Appellants on 17 September 1990 as a junior representative on a salary plus commission. On 1 April 1991 she was appointed assistant manager again on a salary plus commission. There was an attempt in September 1991, which was successfully opposed by the Respondent, to restrict the area of her commission earning in the sense that the physical area was to be diminished and she was appointed key accounts manager. In March 1992 she returned to the position of assistant manager with a larger geographical area because, what was said then to be, a substantial shortfall in commission potential in the job from key accounts manager. In September 1992 the employer requested the Respondent to agree to a reduction in the area from which she earned her commission but she refused. On 19 October 1992, on her return from a period of sick leave, she was confronted with a series of complaints and with the unilateral decision that the area would be altered. She was also suspended for a short period.

On 23 October she wrote to the Appellants claiming that her contract of employment had been repudiated on a number of grounds but the matter which is mainly relevant here is that she claimed the reduction in her area would result in a loss of income.

The Tribunal, in its Full Reasons which were commendably brief held as follows:

"This has been a complicated case in terms of the areas that have been raised by the applicant to found her claim for constructive dismissal. It would be of assistance in this judgement to highlight that the three areas that the applicant was really talking about which we have distilled from the evidence that we have heard are:

Firstly, relating to whether or not the respondent was contractually able to reduce the size of the area which the applicant was serving - that, in this case, was Taunton.

The second aspect of her claim was whether she had been constructively dismissed as a result of the reduction in income which she expected to receive as a result of that contraction of her area.

The third area of constructive dismissal which we have distilled from the evidence relates to the respondent's procedures.

We would like to make it clear in this judgement that the basis upon which we find for the applicant is as follows.

We do not feel that the applicant has established her case in relation to the question of area. We feel that the respondent company was not contractually bound to assign her to a particular area or not.

We do not find for the applicant in relation to the question of procedures, which is the third area; although we would like to observe that we felt the procedures adopted by the respondent company were very poor indeed and we hope that the respondent company has now tightened them up.

The area that we find for the applicant, and that is why she succeeds in relation to this claim, is to do with the reduction in her income. What happened was that the applicant was working and servicing the area of Taunton. She was paid a basic wage and commission; the commission was essentially 3% on sales. Initially, it was her own sales and then it seemed to change to sales of the whole paper. Anyway, she was contractually entitled to commission.

I leave out paragraph 8 of the findings.

"The applicant concluded, not unreasonably the tribunal feel, that a contraction in area would result in a loss of income and indeed, when one looks at the past six months that the applicant worked for the respondent, she was achieving quite high levels of commission - in part no doubt due to her work and a part due to other people's as well. The fact was that she was enjoying quite a high level of commission over that period, and the tribunal feel that when she was told on 19 October 1992 unilaterally that the company was changing the area [although it was entitled to do that] the respondent company took absolutely no account of the financial impact upon the applicant. The respondent company really should have, in changing or splitting the area, come to some sort of agreement with the applicant that she would not have any reduction in her finances. She was entitled to treat that substantial reduction in income as a fundamental breach of contract, and as a result, she was entitled to treat it as constructive dismissal, and that this dismissal was unfair."

The Appellants claimed before the Industrial Tribunal and before this Tribunal that in order to show constructive dismissal there must be a repudiatory breach of contract and not just unreasonable conduct and Western Excavating EEC Ltd v Sharp [1978] ICR 221 is authority for that.

If the conduct is lawful it cannot be repudiatory and here the well known case of Spafax Ltd v Harrison [1980] IRLR 442 is relied upon and in particular at page 445 where Lord Justice Stephenson states as follows:

"I can see nothing whatever in Spafax's conduct as complained of in those paragraphs to amount to a repudiation. They did not break their contract with Mr Harrison; they were not bound to continue allowing him to use a Spafax or a Tewell van if he wanted to or to allow him to earn at least a minimum of £1250 commission. It was perfectly lawful for them to order him to use the new Spawell van and, indirectly, to reduce his commission thereby temporarily, but it is difficult to imagine that that state of affairs would have gone on for long. However that may be, the policy was for them and not for one of their branch managers and whether they were ill-advised to pursue the policy and to force Mr Harrison to comply with it or not, I cannot see that they did anything unlawful or that they broke their contract with him, let alone anything which amounted to a fundamental breach, a breach which went to the root of his contract, a breach so fundamental that it evinced an intention, on their part, not to continue to be bound by the contract."

The Appellant points out that the Respondent here had acted too precipitately; that what she ought to have done was to wait and see whether in fact there would be any reduction in her commission and at that stage to make her decision whether or not the conduct of her employers amounted to a constructive dismissal. The approach seems to be that the requirement of no delay in constructive dismissal cases would not apply until such time as the matters had become clear because unlike other cases where there is an immediate loss, here the loss was only a potential loss.

In short the Appellant makes the point that the Tribunal in deciding that the contract entitled the employer to alter the area has added a reasonableness test by making an implied term which contradicts the express term. The Appellant also placed before us a list of gross earnings on the advertising side from March 1993 until August 1993 and these were put forward upon the basis that they demonstrated that the Respondent really has no basis for saying that her earnings would have been reduced. At one stage it seems to have been suggested that this fresh evidence, if admitted, would not necessitate the sending back of this case to the Industrial Tribunal but we confess that we do not entirely follow the logic of that argument.

We have been referred to the basis of Ladd v Marshall which is too well known to require further elucidation but it seems to us that we should not admit this evidence for a number of reasons. The first is that the list that is put before us is partial. By that I mean that there was in the hands of the Appellants at the time of the hearing before the Tribunal, six months' figures which they decided not to place before the Tribunal. They now seek to place the subsequent six months' figures before us apparently upon the basis that it avoids the first problem in the Ladd v Marshall decision because as the figures were not in existence at the time they are not affected by the rule which says that they could have been placed before the Tribunal as a reasonable diligence. Two things seem to arise from that. The first is that the Respondent says that upon that basis one is entitled to assume that the previous six months' figures were disadvantageous to the Appellant. We would not go that far, but it does seem to us that as the question of this breach must be judged at the time when the Respondent wrote her letter accepting the repudiation, that is the moment which is relevant. The later events are to some extent an irrelevance. Furthermore, those figures are not decisive. In our view they would not persuade a Tribunal, particularly in their present raw state; we have no indications of their authenticity in the sense of how they are calculated, who calculated them; or for that matter the circumstances in which the particular revenue was earned. In all the circumstances we refuse to admit that fresh evidence.

The Respondent's approach is that the case of Spafax has to be read subject to the view that where the contract as here is silent both as regards commission and area, the Tribunal is entitled to find an implied term, which it did - the consideration had to be given by the employer to the question of remuneration in altering areas. Furthermore, it is said that the decision can be upheld on the breach and of trust and confidence cases.

We pause there before turning to the question of the case upon which the main reliance is placed, that of Courtaulds Northern Spinning v Sibson and TGWU [1988] ICR 451 (CA) by suggesting this problem. Assume for a moment that the employers decided that they would reduce the area within Taunton to a distance of some 400-500 yards around the centre of the town. If that was suggested at the time the contract was made it seems very doubtful whether anyone would contradict the scenario that the reasonable man putting that case to both parties would expect to receive the immediate reaction - Well of course if that happened then we should have to look very carefully at the financial results on commission and on the earnings of the Respondent. Courtaulds Northern Spinning v Sibson and TGWU carries a helpful passage at page 459 from the judgment of Slade L.J. It reads:

"In my judgment, the crucial point which falls to be determined on this appeal is whether the industrial tribunal correctly directed themselves in law in stating what they regarded as the implied terms of the employee's contract of employment. There is, I think, no doubt that this question of implied terms was one of law. As Lord Denning M.R. put it in O'Brien v Associated Fire Alarms Ltd [1968] 1 W.L.R. 1916:

"I have always understood that the question whether a term is to be implied in a contract is a question of law for the court and not a question of fact. The primary facts, of course, and the surrounding circumstances have to be found by the tribunal of fact. But, that having done, the implication of a term is an implication of law."

See also Wilson v Maynard Shipbuilding Consultants A.B. [1978] ICR 376.

In Jones v Associated Tunnelling Co Ltd [1981] IRLR 477, the appeal tribunal, in a judgment delivered by Browne-Wilkinson J., gave what I respectfully regard as valuable guidance on the question of implying "mobility" terms in contracts of employment. He said, at p. 480:

"The starting point must be that a contract of employment cannot simply be silent on the place of work: if there is no express term, there must be either some rule of law that in all contracts of employment the employer is (or alternatively is not) entitled to transfer the employee from his original place of work or some term regulating the matter must be implied into each contract. We know of no rule of law laying down the position in relation to all contracts of employment, nor do we think it either desirable or possible to lay down a single rule. It is impossible to conceive of any fixed rule which will be equally appropriate to the case of, say, an employee of a touring repertory theatre and the librarian of the British Museum. Therefore, the position must be regulated by the express or implied agreement of the parties in each case. In order to give the contract business efficacy, it is necessary to imply some term into each contract of employment.

The term to be implied must depend on the circumstances of each case. The authorities show that it may be relevant to consider the nature of the employer's business, whether or not the employee has in fact been moved during the employment, what the employee was told when he was employed, and whether there is any provision made to cover the employee's expenses when working away from daily reach of his home. These are only examples; all the circumstances of each case have to be considered:...

A little later in the judgment Browne-Wilkinson J. proceeded to deal with a submission that, before any term can be implied, it is necessary to show precisely what term the parties, if asked, would have said was obvious. This submission was based on the decision of the House of Lords in Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board [1973] 1 WLR 601. Browne-Wilkinson J., however, rejected this submission saying, at p.481:

"In our judgment, that decision is distinguishable from the present case. In that case, there was no need to imply any term: the express terms of the contract were unambiguous and covered the event which had happened, albeit in a way which was surprising in its result. Therefore any term which was to be implied would be varying the unambiguous express terms of the contract. In the case of contracts of employment containing no mobility clause, the position is quite different. As we have sought to show, it is essential to imply some term into the contract in order to give the contract business efficacy: there must be some term laying down the place of work. In such a case, it seems to us that there is no alternative but for the tribunal or court to imply a term which the parties, if reasonable, would probably have agreed if they had directed their minds to the problem. Such a term will not vary the express contractual terms. This view is supported by the very many cases in which the courts have decided what terms as to mobility ought to be included in a contract of employment: see for example the cases cited above. If Mr Hughes's submission were correct, all those cases would have been wrongly decided since it is never possible to state with certainty exactly what the parties would have agreed as to mobility if they had directed their minds to the question.

We therefore reach the conclusion that we are entitled to hold, and do hold, that the right term to imply into Mr Jones's contract from the outset was that he could be required to work at any place within reasonable daily commuting distance from his home."

Thus, in cases such as the present where it is essential to imply some term into the contract of employment as to place of work, the court does not have to be satisfied that the parties, if asked, would in fact have agreed the term before entering into the contract. The court merely has to be satisfied that the implied term is one which the parties would probably have agreed if they were being reasonable..."

That approach is reflected again in Prestwick Circuits Ltd v McAndrew [1990] IRLR 191. The passage in question is at page 194 where the following is found:

"He maintained, under reference to Courtaulds Northern Spinning Ltd v Sibson & TGWU [1988] IRLR 305 that no term could be implied unless `the parties if reasonable would probably have agreed if they had directed their minds to the problem', but that case related to an implied term of the place of work. As both parties agreed that the employer was entitled to direct the employee to Irvine to work, we obtained no assistance on the question of, that being so, whether reasonable notice of transfer was necessarily to be implied. In para 43 of the Courtaulds case Slade LJ referred to the strict rights of the employer under the express or implied conditions of the contract of employment, and Mr Wright submitted that there could not be implied as a matter of necessity in this contract a right of the employee to receive reasonable notice of transfer from Ayr to Irvine.

We do not require to consider the further points made by Mr Wright for the employer because Mr Macfadyen for the employee persuaded us that, as it was agreed that the right of the employer to transfer the employee from Ayr to Irvine was necessarily to be implied, it was also necessary to imply some qualification of that term to preclude a contractual right of the employer to transfer the employee from Ayr to some other place at a moment's notice. Mr Macfadyen submitted that the employer's right to transfer the employee was subject to two limitations, viz (1) geographical and (2) reasonable notice, and that the two were inseparable. We regard the logic of this proposition as irrefutable."

It therefore follows on those cases that the Tribunal in reaching the conclusions it did, there was an implied term that the Respondent Company on splitting the area would come to some agreement with the Applicant that she would not have a reduction in her finances and that she was entitled to treat a substantial reduction in the income as a fundamental breach and further, that the employers paid no attention whatsoever to her financial situation. Looking at those matters the Tribunal was entitled to say that there had been a breach of that implied term and we can see no reason why it should not also be regarded as a fundamental breach going to the root of the contract.

We have also considered whether this is a case which comes under the heading which has been urged before us that there has been a breach of trust and confidence between the parties. We put that in that rather neutral way because in our view it is not necessary for our decision to reach any view on that aspect of the case, deciding as we do upon the basis that as put forward by the Tribunal their decision as encapsulated in paragraph 9 of their reasons is sufficient.

It is said on behalf of the Appellant there are reasons for rejecting the approach of the Tribunal because there is insufficient evidence to deal with the question of the likelihood of there being financial loss to the Respondent. These matters are set forth in grounds (v) to (vii) inclusive. It has been trite law certainly since before Piggot Bros & Co Ltd v Jackson [1992] ICR 85 that before an attack can be made upon the question of lack of any evidence upon which a Tribunal can reasonably reach a conclusion, there must be before this Tribunal the Chairman's Notes of Evidence. Those notes have not been obtained and the perversity points therefore fail.

We have borne in mind the view, often quoted, in Woods v W M Car Services (Peterborough) Ltd [1982] IRLR 413. This Tribunal should only interfere with a decision of the Industrial Tribunal if it is shown that that Tribunal has misdirected itself in law or that the decision is such that no reasonable Industrial Tribunal could have reached it. Bearing that in mind we have formed the strong view that there is no basis here upon which we ought to interfere with the decision reached by the Industrial Tribunal and this appeal therefore fails.