United Kingdom Employment Appeal Tribunal

BAILII case number: [1995] UKEAT 1161_94_2710

Appeal No. EAT/1161/94

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 27 October 1995

HIS HONOUR JUDGE P CLARK

MR A C BLYGHTON

MR R N STRAKER

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MR R O'GRADY           APPELLANT

F P FINANCIAL MANAGEMENT GROUP SERVICES LTD

(FORMERLY KNOWN AS NM FINANCIAL MANAGEMENT GROUP SERVICES LIMITED)          RESPONDENTS

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Transcript of Proceedings

JUDGMENT

Revised


 


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APPEARANCES

For the Appellant MR O SEGAL

(of Counsel)

Messrs Coffin Mew & Clover

Solicitors

5 Kings Park Road

Southampton

Hants

SO15 2SQ

For the Respondents MR M F BARRATT

Solicitor

Legal Department

Friends' Provident

Life Office

Pixham End

Dorking

Surrey

RH4 1QA


 


JUDGE CLARK: This is an appeal by the employee, Mr O'Grady, against the majority decision of the Southampton Industrial Tribunal sitting on 22 September 1994 that he was not dismissed and accordingly, the Industrial Tribunal had no jurisdiction to entertain his complaint of unfair dismissal. It was a constructive dismissal case under Section 55(2)(c) of the Employment Protection (Consolidation) Act 1978.

The facts are set out in the Industrial Tribunal's extended reasons. In summary, the employers are engaged in the financial services industry and the Appellant had been employed since July 1975. Immediately prior to the ending of his employment he was a Branch Manager, Direct Sales, at their Port Solent branch.

In May 1993 the employer informed Branch Managers, including the Appellant, that as from 1 October 1993 there would be changes in the terms and conditions of their contracts of employment and, over the next few months, the employee endeavoured to negotiate with his employer to see whether those proposed changes could be avoided or altered, so far as he was concerned.

By 18 August the Applicant was informed that there was no scope for compromise, or for him to be treated any differently from other Branch Managers. After that meeting the Applicant remained unhappy with the proposed changes and he looked into the possibilities of alternative employment.

By 3 September he had been offered a post with C Aitkin Asset Management Company Ltd. On 22 September he filled in an application for registration with FIMBRA in connection with that prospective employer and on 28 September, by letter, he resigned.

The Tribunal also find, on the Appellant's evidence, that if he had not got a post with Aitkin he would have looked for another post.

"5 ... Had Mr Aitkin not offered me a post I would have had to stay where I was. I would not have resigned from the respondent because I would have had nowhere else to go."

Having then reviewed the submissions made to them, the Industrial Tribunal at paragraph 11 conclude:

"11 ... that the test for determining constructive dismissal is the same whether the breach is an actual breach or, in the present case, an anticipatory breach. [They then assumed that the breach was a fundamental breach] ... "

Pausing there, it seems to us that a fact finding Tribunal ought to make findings of fact and not assumptions, but it does not in the event matter in this case. But on that assumption they say that:

"... the innocent party is put to his election as to whether he is to proceed working under the contract, or treat himself as discharged from further performance by reason of the breach. ..."

And then at paragraph 12 the majority set out their reasoning which led to their conclusion that the Applicant was not dismissed. They say this:

"12 ... We have concluded that whilst the anticipatory breach of the respondent, [the employer] in proposing to change the applicant's [employee's] terms and conditions of employment, prompted the applicant to look for alternative employment, we find ourselves unable to conclude that the reason for the applicant's resignation was as a result of the respondent's breach. We find that the resignation was prompted by the fact that the applicant had found, what for him was, better employment. This view is fortified in our minds by the fact that the applicant frankly acknowledged to us that, but for the offer of employment from Mr Aitkin, he would have continued in the employ of the respondent, and would not have resigned. Whilst we accept that the anticipatory breach triggered the search for alternative employment, and that but for such breach the applicant may well have remained in the respondent's employ, that in our mind is not sufficient to indicate that that was the reason for the resignation. We find it clearer to consider the case on the evidence, without reference to the job offer of Mr Aitkin. The best available evidence is that of the applicant to the effect that he would have waived the breach and continued in the respondent's employ."

And at paragraph 14 they set out the minority member's opinion which led him to conclude that "constructive dismissal had been established" and that was based on the submissions made by Mr Segal on behalf of the Appellant.

In a sustained argument before us, Mr Segal submitted that first we must look at the words of the statute. Section 55(2)(c) provides that:

"an employee shall be treated as dismissed if the employee terminates that contract, (that is the contract of employment) with or without notice, in circumstances such that he is entitled to terminate it without notice by reason of the employer's conduct."

And he helpfully summarised his argument by way of three propositions:

(1) Has there been a fundamental breach? In this case the Tribunal assume that there was and he says that the employee is then entitled to choose whether to accept or waive that breach.

(2) How did the employee exercise the choice? Did he accept the repudiatory breach? He accepts such acceptance must be unequivocal but he says in this case that there was such acceptance.

(3) Did the employee waive or affirm the contract by delay and acceptance? He says and we agree that there is no such finding by the Industrial Tribunal and that does not arise in this case.

So the argument focuses on the second question on his series of propositions and in answering it, in the affirmative, he relies on the well known passage from the judgment of Lord Denning, M.R. in Western Excavating (ECC) Ltd v Sharp [1978] ICR 221 at page 225H to 226C. There his Lordship says:

"The contract test

On the one hand, it is said that the words of paragraph 5 (2) (c) [that is the predecessor of Section 55(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 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."

Mr Segal submits that that is the entire test for constructive dismissal. In particular, he says, the question of whether or not the fundamental breach by the employer was the effective cause of the employee leaving the employment, is irrelevant.

In our view, that submission is wrong in law. Mr Barratt for the Respondent, referred us to Harvey on Industrial Relations and Employment Law. At volume 1, paragraph D 403 the editors set out a four-fold test for determining whether or not an employee is able to claim constructive dismissal:

"1. There must be a breach of contract by the employer. This may be either an actual breach or an anticipatory breach.

2. That breach must be sufficiently important to justify the employee resigning, or else it must be the last in a serious of incidents which justify his leaving. Possibly a genuine, albeit erroneous, interpretation of the contract by the employer will not be capable of constituting a repudiation in law.

3. He must leave in response to the breach and not for some other, unconnected reason.

4. He must not delay too long in terminating the contract in response to the employer's breach, otherwise he may be deemed to have waived the breach and agreed to vary the contract."

That summary of the law, it seems to us, takes into account authorities including Western Excavating (ECC) LTD v Sharp [1977] 221 but the question is whether the third proposition is good in law.

We think the proposition is correctly stated and we take that from three decisions of this Appeal Tribunal. The first is Logabax Ltd v Titherley [1977] ICR 369. That case was decided before the case of Sharp but the passage which we think is relevant is at page 375 C, Kilner-Brown J. giving the judgment of the Tribunal said:

"... Although it may be argued that an employee does not have to go so far as to demonstrate a fundamental breach as the common law requires, nevertheless the words of the sub-paragraph [that is the predecessor of Section 55(2)(c)] seem to us to imply that the employee must indicate that he is exercising his entitlement to claim a constructive dismissal."

Because Logabax was decided at a time when there was uncertainty in the authorities as to whether the contract test, or the reasonableness test, was the correct one for determining whether or not constructive dismissal had taken place, those observations must be regarded with some caution. However, after the decision in Sharp this Tribunal decided the case of Walker v Josiah Wedgwood & Sons Ltd [1978] IRLR 105. In the course of the judgment of this Tribunal in that case, given by Arnold J, at paragraph 19 his Lordship said this:

"19 We think for our part that it is at least requisite that the employee should leave because of the breach of the employer's relevant duty to him, and that this should demonstrably be the case. It is not sufficient, we think, if he merely leaves -at any rate in any circumstances at all similar to the present. And secondly, we think it is not sufficient if he leaves in circumstances which indicate some ground for his leaving other than the breach of the employer's obligations to him."

That passage was cited as a correct statement of the law by the Employment Appeal Tribunal in Norwest Holst Group Administration Ltd v Harrison[1984] IRLR 419. At paragraph 20, giving the judgment of the Tribunal Balcomb J. said:

"Even if the members in the majority had been of the view that the letters of 17 and 21 June did amount to an unequivocal acceptance by Mr Harrison of the employer's repudiatory breach, they consider that there is substance in the final ground of appeal, viz that the only matter of which Mr Harrison was entitled to complain (the threat to remove him from his directorship) was not the effective cause of his resignation."

He then recites the passage I have just read from Walker & Josiah Wedgwood & Sons Ltd [1978] IRLR 105. It seems to us that it is now well settled law when considering constructive dismissal, that it is necessary for the Tribunal to see whether it is the fundamental breach which caused the resignation. That Appeal Tribunal decision in Harrison

was upheld by the Court of Appeal [1985] ICR 668 and we do not understand Lord Justice Cumming-Bruce to have questioned the principle set out in Walker's case in his judgment, particularly at page 680 F to G, as was submitted to us by Mr Segal.

Reverting to paragraph 12 of the decision, we conclude that the Industrial Tribunal majority correctly asked itself the question, was the employer's repudiatory breach the effective cause of the Appellant's resignation? They answered that question in the negative on the basis of their findings:

(a) that he left to take another job and

(b) that had he not left the respondent he would have remained and affirmed the contract with the new terms and conditions proposed by the respondent.

In these circumstances, the Tribunal were entitled to find that it was not a repudiatory breach which caused his resignation. The Appellant did not accept the repudiation and therefore, there was no constructive dismissal.

We therefore see no grounds for interfering with this Industrial Tribunal decision and the appeal is dismissed.