United Kingdom Employment Appeal Tribunal

BAILII case number: [1996] UKEAT 626_94_1806

Appeal No. EAT/626/94

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 18 June 1996

THE HONOURABLE MR JUSTICE BUCKLEY

MR R JACKSON

MRS E SUNDERLAND

---

MR J TOPP          APPELLANT

BIRCHWOOD BOAT CO LTD          RESPONDENTS

---

Transcript of Proceedings

JUDGMENT

Revised


 


---

APPEARANCES

For the Appellant MR S L TOPP

(Lay Representative)

For the Respondents MR M TREHARNE

(Solicitor)


 


MR JUSTICE BUCKLEY: This is an appeal from the decision of the Industrial Tribunal at Nottingham on Friday 6 May 1994. Full reasons were given for the decision and sent to the parties on 11 May 1994 and we have a copy of them. The decision was against the Applicant, Mr Topp. The Industrial Tribunal holding that he had resigned as opposed to being constructively dismissed.

Referring to the reasons, it appears that Mr Topp began work with the Respondents, Birchwood Boat Co Ltd, back in May 1985. It was on 17 September 1993 that the employment ended ostensibly through his resignation. Mr Topp, as we have indicated, claimed that he was constructively dismissed.

The Tribunal found, and we see no reason to query this finding, that there was no term in the contract of employment permitting the employer or reserving the right to the employer, to lay off workers through shortage of work or contracts. However, the time came, presumably through lack of work and orders, when they did just that. That was in September and the real issue at the Industrial Tribunal appears to have been whether, notwithstanding there was no express term in the contract reserving the right to lay off, there was a term nevertheless.

We have been told by Mr Topp's brother, Mr Stuart Topp, who also appeared at the Tribunal, that the only point that was argued before the Industrial Tribunal was custom. The employers asserting that there was a custom of the trade or industry which reserved the right to lay off employees. Having read the reasons we readily accept from Mr Topp that that was effectively the only point that the Industrial Tribunal considered. The Tribunal found that there was a custom that it was reasonable, certain and notorious, and that was established by the evidence. That appears in particular at paragraph 7.

It is clear to us that the Tribunal went wrong as a matter of law. A legal custom which is clearly what the Tribunal were considering is something which is so well established as to be notorious in the particular trade or industry, or perhaps in an area such that when two parties are entering into a contract, in this case a contract of employment, even if they do not provide for that matter in the contract, because it is so notorious, it nevertheless becomes a term of the contract.

We were referred to the well-known case of Sagar v H Ridehalgh & Son Ltd [1931] 1 Ch 310. The well-known quotation from that case or phrase was "as every weaver in Lancashire knows...". If something like that is established at the time the contract is made, it becomes a part of the contract. In this case, it is perfectly plain both from the Chairman's Notes of Evidence and from the Tribunal's decision, that there was simply no enquiry into what every ship builder or boat repairer in this area, or in the industry or trade generally would know or would be taken to know. The question of custom was approached simply by looking at what these two parties did in working out the particular contract into which they entered. That is a fundamentally flawed approach as a matter of law. What the parties do in working out a contract may give rise to an estoppel. It may give rise to a variation of a contract. It may be that it is evidence of what the parties had in fact agreed at the time of entering into it. It cannot by itself establish a strict legal custom.

With great respect to the Tribunal, we feel that they did go wrong and that as a matter of law there was no evidence in this case from which they could have concluded that there was a legal custom. All there was in this case was the fact that apart from on this occasion, there had been two or possibly three earlier occasions and we note that that was over a period of some eight years, during which there had been short time working. That is, that the Respondent had put its workforce on either a three or four day week for a period of time.

The only enquiry that was permissible as a matter of law here in order to ascertain whether this contract had in some way, or did in some way include a right to lay off, on the facts that were given in evidence, was for the Tribunal to ask itself whether, having regard to the way both parties had behaved on those previous occasions of short working, and perhaps how the parties reacted on this instant occasion, whether looking at all that objectively and fairly, the proper interpretation was that the parties were accepting lay off as a part of this contract, notwithstanding that there is nothing in writing to that effect? That is a quite different enquiry as to whether there was a strict legal custom which the Tribunal did in the event pursue.

We do not feel that we can possibly conclude that had the Tribunal adopted the correct approach in law that they would inevitably have reached the same result. It is as we have said, an entirely different enquiry, and simply to illustrate one of the difficulties with it where one party to a contract acts in a certain way, in this case short working in the past, and an employee or employees accept that, it certainly does not necessarily follow that thereafter there is a term of the contract that the employer is entitled to impose short working, let alone a complete lay off for an indefinite period. If it happens on several occasions or if there is any discussion or anything is said between the parties, it may be possible to draw the conclusion that the parties are accepting a new term in the contract to that effect. It does not necessarily follow. For example, the employees may on the odd occasion accept something as a fait accompli, they may recognise the employers difficulties at that particular stage and be tacitly agreeing to it on that occasion but without committing themselves to accept it on future and unspecified occasions.

Another difficulty with drawing the inference of a new or varied term of the contract simply from such occurrences is, that one would need to identify the new term or the varied term with at least some sensible clarity. Here, what has been pointed out is that in the past it was relatively short periods of short working, on this occasion what was sought to impose was a complete lay off for an unspecified time.

We say no more on the topic. We simply point out that it may be a nice point in any particular case to decide having looked at what has happened, whether the proper interpretation is that the parties are tacitly agreeing a new clause in the contract or not. We would certainly not presume to express a view as to how that enquiry would be answered in this case because, as we have indicated, that enquiry was never undertaken.

Mr Treharne for the Respondents relies upon another submission as a fall-back. I do not use that word in any way indicating that he had no conviction or confidence in his submission, quite the reverse. The point is simply this, that where one party repudiates a contract, the employer in this case, allegedly repudiates the contract, if the employee is going to assert constructive dismissal after he resigns, one necessary ingredient is that he has to establish that he resigned because of the repudiation in the sense that the resignation is an acceptance of that repudiation, thus terminating the contract.

What happened here, again we are drawing solely on the Tribunal's decision, is that the employee found himself in some financial hardship because of this lay off and he sought alternative employment and found it. He went back to the employer, spoke to a Wages Clerk, and we are told a Director, to see if there was any information as to how long the lay off would be, getting no answer, he resolved to accept the alternative employment and thus resigned. We have not seen the letter of resignation, but we are told it would not help, it was really no more and no less than an assertion that he resigned.

Again, the question of whether that is fairly interpreted, and we have only glossed over the facts on that aspect of the case, but whether when they are looked at in full and fairly, whether they should be interpreted as an acceptance of the repudiation of the contract, if there was one, namely to impose a lay off at all, or whether they should be interpreted as the employee in any event preferring alternative employment to a contract which had the uncertainties of lay off in it, is again a matter which will depend upon the evidence and the Tribunal's assessment of it. There are arguments both ways which have been addressed to us by Mr Treharne and Mr Topp.

What is clear to us from the decision of the Tribunal is that the Tribunal did not resolve that point. Mr Topp tells us again that the only enquiry and the only argument at the Tribunal was on the strict legal custom point. It is perhaps not surprising that although in paragraph 9 of the decision we find reference and some findings on the matters we have just mentioned, there is no conclusion. The only conclusion in paragraph 10 is that because there was no fundamental breach of contract, inevitably the Applicant had resigned. There is no further conclusion that in any event, even if there had been a breach by the employer, that breach was not accepted by the employee as opposed to his resigning because he found alternative employment in all the circumstances a better option.

That is not a conclusion that this Tribunal drew and again for the reasons we have indicated, we would not think it right for us to draw that conclusion. It is again a nice point on a careful and objective analysis of what actually happened in this case. In the result, we are satisfied with respect to this Tribunal, that it was wrong in law in its approach to the question of custom. That there was no enquiry on what was perhaps the proper approach, namely whether the parties had in some other way subsequently incorporated a right to lay off in this contract and secondly the final point, whether there was an acceptance of repudiation as opposed to a straight resignation for another reason.

Those two points not having been explored by the Tribunal, we feel that it would be wrong for us to give our view on that because we have not heard all the evidence and indeed there may be other evidence relevant to those two topics. The only solution is to send this matter back to a Tribunal to be re-heard, and in the circumstances and intending no disrespect to the original Tribunal but we feel it would be appropriate for it to go do a differently constituted Tribunal.