United Kingdom Employment Appeal Tribunal

BAILII case number: [1994] UKEAT 712_93_1111

Appeal No. EAT/712/93

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 11 November 1994

Judgment delivered on 24 November 1994

Before

THE HONOURABLE MR JUSTICE PILL

MRS M E SUNDERLAND JP

MR G H WRIGHT MBE

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WILFRED ADAMSON          APPELLANT

B & L CLEANING SERVICES LIMITED          RESPONDENTS

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Transcript of Proceedings

JUDGMENT

Revised


 


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APPEARANCES

For the Appellant MR H BRADSHAW

(Of Counsel)

Lloyd Jones Travers

Old Bank House

Deacon Road

Widnes

Cheshire

WA8 6EA

For the Respondents MISS C GREENWOOD

(Of Counsel)

David Taylor

First Floor

21 Rodney Street

Liverpool

L1 9EF


 


MR JUSTICE PILL: Mr Wilfred Adamson appeals against a decision of the Industrial Tribunal held at Liverpool held on 16th June 1993. The Tribunal held unanimously that Mr Adamson's dismissal from his employment as a Foreman with B & L Cleaning Services Limited (the Company) was fair.

The Company are industrial cleaners in a comparatively small way of business. The business is hard and competitive. Mr Adamson began his employment with the company in January 1988 and was in charge of three men. He was a good worker and a valued employee until the events which led to his dismissal. The Company had a contract for landscape -cleaning at the premises of Trafford Park Development Corporation and Mr Adamson was working on that. It was worth £60,000 a year to the Company. The contract was due for renewal at the end of 1992 and tenders were invited.

Mr Adamson told Mrs Linda McCunnell, Director and Secretary of the Company, that he had asked the Corporation if he might tender for the work then being done by the Company. Mrs McCunnell said she was not happy about that and he offered her the keys of the van he drove saying he supposed she would be wanting them. She told him to go home and that she and her husband would get in touch with him.

Mrs McCunnell delivered a letter to his home telling him that he was not to come into work on the following Monday, 7th December 1992, but was to attend a meeting with her and her husband to discuss what he had said. He was told he might bring a witness with him.

Proceedings at the meeting were tape-recorded, at the request of Mr Adamson. We need not set them out in detail. No complaint is made of procedural unfairness. Mr Adamson refused to sign an undertaking not to seek to obtain, whether by competitive tender or otherwise, any contract in the field of industrial cleaning as long as he was in the Company's employment. He was asked if he would consider resigning before tendering but refused to do so. It emerged that a representative of the Corporation who had heard of Mr Adamson's request to tender had insisted that he approach Mrs McCunnell. His name was on the tender list though a tender had not been received and his name was withdrawn by the Corporation. In the event, the Company's tender was not accepted but Mr Adamson would have been deployed elsewhere by them.

By letter dated 11th December 1992, Mr Adamson was dismissed. It was stated that he was setting himself up in direct competition with the Company "from your position as an employee with access to inside information about this Company's business". It was noted that he had refused to give an undertaking to refrain from that action. Considerations arising from access to "inside information" formed no part of the Tribunal's decision.

The Tribunal found that Mr Adamson had "gone far in preparing and negotiating the submission of a tender which, if successful, would have lost them work". They noted that Mr Adamson was "firm in his refusal to comply with their perfectly reasonable requirement not to proceed with his tender". At paragraph 5 the Tribunal stated:-

"The Applicant was dismissed because he took active steps to tender for the work of a customer of the Respondents and refused to discontinue when required by the Respondents to do so. That was misconduct".

In paragraph 8 they stated:-

"Here an employee in post was actually engaged in competing with his employers; he was actually engaged in preparing a tender for work they were doing and had entered his name on the tender list. He was in breach of his duty of loyalty to the Respondents. He firmly refused not to tender in competition with them while in their employment. The Respondents were reasonably entitled to terminate his employment".

On behalf of the Appellant, Mr Bradshaw, while accepting that a term of loyalty and faithful service was implied into the contract, submits that there was no breach by the employee in this case. An employee is entitled to take steps to look for alternative employment without failing in his duty to his employer. Placed as he was, the only way in which Mr Adamson could test the employment market was to tender for contracts. No distinction could be drawn between seeking employment with a competitor of his employer and competing with the employer himself. To permit an employer to dismiss in circumstances such as these would be to place an unreasonable restraint upon employees.

Mr Bradshaw relies upon the decision of this Tribunal in Laughton v Bapp Industrial Supplies Limited 1986 ICR 634. Employees of a company which supplied nuts and bolts wrote to ten of their employers' suppliers informing them that they intended to start up in business trading in nuts and bolts and asking for details of their products. The Industrial Tribunal's decision that the employers were justified in a decision summarily to dismiss was reversed on appeal to this Tribunal.

Peter Gibson J stated, at page 638D to F:-

"The crucial question on this appeal is whether it is a breach of the term of loyalty for an employee whilst still in the employment of his employer to indicate an intention to set up in competition with the employer in the future. The employers and the industrial tribunal have assumed that it is. In our view, the tribunal fell into error in accepting that the indication of such intention was in itself sufficient.

In Harris and Russell Ltd v Slingsby (1973) ICR 454, Sir Hugh Griffiths, giving the judgment of the National Industrial Relations Court said, at page 457:

"This court .... would regard it as a wholly insufficient reason to dismiss a man, that he was merely seeking employment with a competitor, unless it could be shown that there were reasonably solid grounds for supposing that he was doing so in order to abuse his confidential position and information with his present employers. In the nature of things, when a man changes employment, it is more than likely he will be seeking fresh employment with someone in the same line of business and, therefore, a competitor of his present employers."

That was said in the context of a case where the employee had given notice which was accepted and when he had been given time off to look for alternative employment. But as a general proposition not confined to those special circumstances its correctness was not disputed by Mr Robinson and we would adopt it. Mr Robinson submitted that it did not apply where the employee sought to set up in competition on his own account. But we do not see why in principle that should make a difference. An employee with experience in a particular industry who is intending to leave, whether to join a competitor as an employee or to set up in competition on his own account, commits no breach of contract in doing so unless either there is a specific term in his contract to that effect which does not fall foul of the doctrine against restraint of trade or he is intending to use the confidential information of his employer otherwise than for the benefit of his employer. In general an employer is not entitled to protect himself against competition on the part of a former employee".

Mr Bradshaw accepts that there is a factual difference in the present case in that the approach was to a customer of the employer rather than a supplier but submits that what Mr Adamson was doing comes within what is contemplated in that passage. He was testing the market with a view to competing with his employer in the future.

Miss Greenwood, for the Respondents, draws attention to the statement of Peter Gibson J at page 637F that "an employee whilst in his employment must not compete with his employer and must not work for another employer if the other employment would be inconsistent with his first employment". In this type of business, tendering and insisting upon liberty to tender against the employer's tender, is to compete with the employer. The present case is, she submits, more akin to Marshall v Industrial Systems and Control Limited (1992 IRLR 294), where the Employment Appeal Tribunal (Lord Mayfield Presiding) held that an Industrial Tribunal had not erred in holding that employers acted reasonably in dismissing a Managing Director after discovering that, with another manager, he was planning to set up in competition and take away the business of their best client and that he had tried to induce another key employee to join them in that venture.

The issue, as Counsel agreed, is whether in this context an insistence upon freedom to tender in competition with the employer when contracts currently held by the employer come up for renewal is a breach of the employee's implied duty to serve the employer with fidelity. In Robb v Green (1895 2QB 315), A L Smith LJ stated at page 320 that "I think that it is a necessary implication which must be engrafted on such a contract that the servant undertakes to serve his master with good faith and fidelity". That passage was cited with approval in judgments in the Court of Appeal in Hivac Limited v Park Royal Scientific Instruments Limited (1946 Ch 169) followed in Thomas Marshall Limited v Guinle (1978 ICR 905) (Sir Robert Megarry V-C).

We accept that tendering for the future business of an employer's customers in competition with the employer is factually different from an employee soliciting his employer's customers to transfer their custom after he has left the employment, action which has been held to be a breach of duty. However, in our judgment, it is as much a breach of the obligation to give faithful service. It is different from indicating an intention to set up in competition with the employer in the future. It is competing with the employer while still employed. An employer is entitled to expect an employee not to compete with him for contracts with the employer's existing customers.

The Industrial Tribunal were entitled to reach the conclusion they did. We would have reached the same conclusion. The appeal is dismissed.