United Kingdom Employment Appeal Tribunal

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Cite as: [1994] UKEAT 875_92_2006

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BAILII case number: [1994] UKEAT 875_92_2006

Appeal No. EAT/875/92

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 20 June 1994

Before

HIS HONOUR JUDGE J HULL QC

MR J H GALBRAITH CB

MR R TODD

SPACE TECHNOLOGY SYSTEMS LTD APPELLANTS

MR E WOOD RESPONDENT

Transcript of Proceedings

JUDGMENT

Revised

APPEARANCES

For the Appellants MR M D ROSS

(SOLICITOR)

Paris Smith & Randall

9 College Place

Southampton SO15 2YR

For the Respondent THE RESPONDENT IN

PERSON

JUDGE HULL QC: Space Technology Systems Limited, who appeal to us today, are an electronics Company based in Alton. They had contracts in several different parts of the country, in particular they had a contract with the Royal Aircraft Establishment at Farnborough for providing computer services there. Mr Wood was a Quality Assurance Manager employed by the Appellants. He is a gentleman who is now aged 51. He had served the Company for 19 years at the material time, having been employed since the age of 30. We do not know the details of his employment, but he was plainly a trusted and highly responsible manager with the Company.

There came a time when the contract at Farnborough, which as I say was for providing computer services, came to an end. It was hoped by STS that it would be renewed; that is to say that in the bidding which arose they would again be successful.

Unhappily that was not so. On the 5 December 1991 it was learned that STS had not got the contract for the next period, I think it was three years. A rival Company, Serco, had successfully bid for the contract. Of course that raised question marks over the future of those who were engaged at Farnborough. Mr Wood has made to us the point that although he was based at Farnborough for the time being, that is to say he had a desk and an office there, he was the Quality Assurance Manager for the whole Company and had his own office at the head office at Alton. Therefore he was in a very different position from most of the others.

What happened was that 16 out of the 21 people who were employed at Farnborough were dismissed. Many of them were very young and had not been long with the Company. Mr Wood was in a different category and so was another of his colleagues, a Mr Necas, who had been an Oceanographer and was now a Systems Analyst who was employed in the same task, that is to say on the same contract at Farnborough, and I think three other employees.

During the fortnight or so following the 5 December 1991, when it became known that the contract was not to be renewed with STS, there was a certain amount of discussion between Mr Wood and Mr Evans, the Managing Director. The details are set out in the decision of the Industrial Tribunal which subsequently heard the case.

The employment of Mr Wood with STS ended at the end of December and he went to work with Serco, by whom apparently he is still employed, again we are sure in a very responsible capacity and at Farnborough. We cannot do better than refer to what the Tribunal actually said about the matter. They set out the history, which I have referred to, and they say in paragraph 3 of their decision that:

"Mr Evans did discuss matters with Mr Wood at that time and whilst there is some dispute as to exactly what he was told and what options he was given it is clear to us that there were possibilities of work within the company and that in any event he was required for the handover period."

Then they refer to two letters which were written, those are with our papers. Mr Wood wrote to Mr Evans on the 12 December and said:

"Perhaps you can appreciate my concern after 20 years of loyal service just what are my prospects now with STS. Will you please provide a positive statement on my future career in your Company or whether I should seek alternative employment? Due to the implied short time scales I would very much appreciate your reply by 18 December 1991 so that, based on your reply, appropriate decisions can be made."

So far as we know, he was not entitled to any long period of notice on his contract, it was not a case of a man with a contract for a year, or two years, or anything else. It was suggested he was only entitled to his ordinary twelve weeks notice by statute. The reply, which was the next day, said:

"I have no additional information to what I said to you last Friday and advise you to consider other employment for longer term security.

The prospects with STS are reduced significantly by the loss of the Farnborough contract and considering the economic climate, the Company will have to reduce staff after March 1992 unless we receive significant orders. Thank you and good luck."

That was saying in terms, it seems to us, that Mr Wood would be well advised to look for other employment because of the uncertainty of the future. The Tribunal say again in paragraph 3:

"Mr Wood took this to mean that he had no long term prospects with the company and it was being suggested to him that he should in fact seek work elsewhere. He replied by letter dated 17 December 1991 indicating that he would be looking for alternative employment; he felt he did not have any choice and he raised the question of a redundancy payment in view of his length of service with the company. On 18 December Mr Evans wrote to him making it quite clear that he was not being dismissed and that there was short term employment, although there was no possibility of assurance in the longer term. There was then a meeting on 23 December 1991 between Mr Evans and Mr Wood, Mr Webber was present." [He was the contract manager at Farnborough].

Then they go on in paragraph 4 of their decision:

"On 23 December [the Aircraft Establishment] wrote to STS indicating that Serco had issued job offers to certain of STS employees and that other employees on site should not report for work on 2 January 1992. In order to ascertain who had accepted job offers and who had not and thus should be excluded from the site on 2 January, a circular letter was sent out" [which we have not seen but the Tribunal referred to]. "Mr Wood received such a letter. On 23 December he had the meeting with Mr Evans seeking to establish the position as to his future once again. There is some dispute as to exactly what took place and what was said with regard to job prospects. It is clear to us that at the conclusion of that meeting Mr Wood did not regard himself as having been dismissed and Mr Evans certainly did not regard himself as having dismissed Mr Wood.

We find that Mr Wood left the meeting understanding that if he chose to accept the Serco offer his obligation to give notice to STS would be waived. He felt that his employment had come to an end because of what had been said although nothing had been stated to him in terms to bring the employment to an end. Mr Wood in fact agreed in evidence that he had not been dismissed and Mr Evans for his part indicated that he told Mr Wood that if he decided to go then his notice would be waived and that he would not be treated any differently from anyone else in the same situation. As a consequence of this Mr Wood contacted Serco and accepted their offer. This was confirmed with other information to STS in the fax letter sent on the following day 24 December. Mr Wood was paid for the month of December, his employment with STS finishing on 31 December 1991."

On the face of it, therefore, what happened was that Mr Wood resigned from STS and went to Serco. But the Tribunal considered matters in rather more depth than that. They considered the circumstances of Mr Necas, his colleague, and Mr Necas had indeed resigned. They then came to their conclusions:

"We have had to consider in the first place whether or not there was a dismissal within the terms of paragraph 55 of the Employment Protection (Consolidation) Act 1978".

Section 55 provides, among other things, that an employee is deemed to be dismissed if his employer has behaved in such a way that he is entitled to accept it as terminating the contract of employment, a breach going to the root of the contract as has been said, and does indeed accept the conduct of the employer as terminating his contract of employment.

They go on:

"We have concluded that in both cases there was not an actual dismissal. So far as Mr Necas was concerned there was a clear resignation which he made of his own free will against the background of a concern for job security. In the case of Mr Wood, he effectively resigned following a meeting on 23 December 1992."

There they are saying "well he too resigned". They go on:

"8.Both applicants asked the Tribunal to decide whether or not there was constructive dismissal. We find that there were no specific terms of the employment in respect of which of it can be said the employer was in breach. We have looked at the issue of the implied term "trust and confidence"."

They go to find that in the case of Mr Necas he was advised of the situation and there was no breach of that implied term.

That implied term of course is not simply a term for "trust and confidence". It implies duties on the part of both employers and employees, but I will come to that in a minute. They go on to say:

"9.So far as Mr Wood is concerned the position is somewhat different not least of all because his employment extends over a considerably longer period of time than that applying to Mr Necas. His employment with the company was of some 19 years duration."

They refer again to the facts of what happened on the 6 December when he was in conversation with Mr Evans.

They go on:

"No promises were given to him as to the future of his employment and so he was extremely concerned about job security and sought clarification of the position by letter. We think it is entirely reasonable that he should conclude from the letters written by his employer, after he has sought specific assurances, that his future with the company would likely be of a very short duration. We were told by Mr Evans that there were quality assurance options available for Mr Wood at least until October," [that of course would be October the following year 1992] "this is inconsistent with what the letter states" [which of course was suggesting that he should seek employment and there would be reductions in March] "and if it is true, then in our view it is reasonable that this option should have been spelled out. We consider, bearing-in-mind Mr Wood's length of service and the fact that he was pursuing his particular concerns about job security, that he should have received a greater consideration from the Respondent as to exactly how he was to be employed in the future. We accept that as Quality Assurance Manager there were options available for him and also that it may well not have been possible for the company at that time to say exactly what his future would be but it is our view that the company did not give him the consideration that it should have done at the time in the form of specific discussions as to his future. He sought clarification in correspondence and really received quite short, swift replies. It was made quite clear to him that there was no future in the longer term with the company and that indeed it would be sensible for him with regard to his longer term security to seek other employment.

Furthermore on 23 December it was made clear to him that if he wanted to go then he could and there was no evidence shown to us that Mr Evans made any very clear statement to Mr Wood at this time to say that there was a future for him, particularly in relation to quality assurance through to October or beyond.

10.Against this background we have concluded that the company was in breach of contract and that it was in breach of the implied term of "trust and confidence" arising from the manner in which Mr Wood was dealt with between the 6 and 23 December 1991."

That is the conclusion and it appears to be based first of all on the fact that Mr Wood had been employed for 19 years and was therefore entitled to be treated with proper consideration for a senior employee. Secondly, that the possibility of work going on until the following October had not been dealt with and there had been no detailed discussions and that Mr Evans had said "there is little prospect of job security for the future, things do not look good and you would be well advised to seek more secure employment elsewhere if that is what you want".

Western Excavating v Sharp [1978] ICR 221, C.A. has been cited to us by Mr Ross, for the Appellant employers. It was held that the contract test was the correct one. At page 226 Lord Denning 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."

It is not every breach of contract which leads to that result. Certainly it is not every lack of consideration or failure to answer all questions correctly or anything of that sort, which justifies that conclusion.

In the case of Courtaulds Northern Textiles Ltd v Andrew [1979] IRLR 84, to which Mr Ross again referred, there is a passage at page 85. The facts of that case were very different but this passage is very important to us.

At paragraph 10:

"One of the ways in which it is put forward in the cross-notice by the solicitors for Mr Andrew is to say that it was an implied term of the contract that the employers would not, without reasonable and proper cause, conduct themselves in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between the parties."

We would accept that way of putting it, adding the undoubted corollary that there is a similar obligation upon the employee. One of the most obvious instances is that if either employee or employer does not behave with honesty, that is something which is done without excuse, and which is calculated to destroy the relationship of confidence between the parties.

Of course, it does not mean that every failure by one or the other entitles the other to treat the contract as being at an end. It must be a breach of contract which goes to the root of the contract. Here on the face of it what had happened was that as soon as Mr Evans, the Managing Director, became aware of the reduction in work, he answered the questions which he was asked truthfully. It is true that he did not go into the possibility, it was apparently no more than a prospect, that there might be work which would go on to the following October, but there was no suggestion against the good faith of the indications he gave to Mr Wood.

Whatever the position about that, it was not suggested that he was not acting in good faith when he said the prospects are not good, clearly there are going to be redundancies, clearly we are going to have to start in March getting rid of people and indeed, saying to Mr Wood, "if you do choose to go to Serco then the Company for its part will not hold you to your notice period, you may go straight across and they apparently want you". Of course it could be said that in that way Mr Evans was showing a certain amount of astuteness because it might well mean that his Company, if that happened, would not be liable for any redundancy payment.

Having considered it as carefully as we can, we are of the opinion that there is not sufficient shown here to indicate that there was any breach of contract by the employers at all. Lack of consideration, which is referred to by the Industrial Tribunal, is not enough. It is of course always possible to think of ways in which an employer, or indeed an employee, can treat the other with better manners or more consideration. There was no allegation that the advice which was given by Mr Evans was not given in perfectly good faith or that he was guilty of doing something which was directly contrary to Mr Wood's important interest under the contract.

However, today Mr Wood has appeared in person, and he has told us about certain matters which the Tribunal appears not to have dealt with at all. He says (and this was put in evidence) that on the 23 December 1991, when there was a discussion between the parties, they were instructed by Mr Evans, him and his colleagues, to return all documents, to return their Company cars and the keys to their Company cars and he did that on Christmas Eve, the 24th, the next day. There he met a member of the staff who handed him a cheque and said "this is your final payment". Up to that point he had considered himself still employed by STS. He says that there is a letter which we have not seen; on the 26 December Mr Evans came to his house and put a letter through his box. He said that by the 2 January he considered himself employed by Serco, having been dismissed as he had understood it.

As we have said, we do not take the view that this Industrial Tribunal's decision can be justified in law on the basis which is set out in the decision. We have not seen the Notes of Evidence, they were not asked for on this appeal. Simply on the basis of the matters which have been spelled out by the Industrial Tribunal we do not feel that they were entitled to say that there was a breach of an implied term, the implied term that the employer would not do anything seriously to damage the relationship of trust and confidence between the parties. There was no evidence set out in their decision which could justify that conclusion. It therefore follows that the conclusion cannot stand.

We are not in a position to set ourselves up as judges of fact. In our view, unhappily, this case should go back for a fresh hearing and there are matters which Mr Woods has told us occurred at the hearing which should be considered by the Tribunal, together with all the other matters, to see whether indeed this contract of employment was terminated in such circumstances that there was a breach going to the root of it by the employer, which justified Mr Wood in treating it as at an end.

It may very well be (in view of something we were told) that one of the matters that the Tribunal will think it right to look at is - what are the terms under which Mr Wood is in fact employed at the moment by Serco - and whether in fact that employer treats his employment as continuous?

So far as this case is concerned all we say is that the decision cannot be supported upon the grounds on which it rests. We say nothing about the evidence, which we have not heard, but we say that it should go back to a different Tribunal. We think this Tribunal reached a decision which is flawed, possibly having overlooked evidence to which it should have paid attention. We think the case should go back to a different Tribunal for a re-trial.