United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant
For the Respondents


 


JUDGE LEVY QC: Mr Andrew Thompson ("Mr Thompson) was employed by Ritec Ltd ("the Company") for a considerable period of time. Under his contract of employment, the Company had an obligation to make payments into a pension fund ("the Pension Fund") for his benefit. A time came in June 1992 when Mr Thompson discovered that the Company had not been making appropriate payments. He complained then. He complained persistently thereafter. The Company promised that matters would be put right. They were not put right. Against that background, Mr Thompson wrote a letter dated 12 January 1994 to the Chairman of the Company in these terms:

"Ref: RITEC PENSION FUND/BOARD MEETING

Please would you raise this matter at the Board Meeting Thursday January 13th 1994.

Pension Fund members have concerns related to possible changes of the Board of Ritec Ltd.

As things currently stand, I consider that the Pension Fund continues to be administrated unacceptably. For this I consider all Trustees and therefore all Directors to be jointly and severally liable.

I request that before the resignation of any Directors, or indeed in any case, a statement be issued to Fund Members which comprises:

1. An explanation of what the current situation is.

2. Reconfirmation of the Company's intentions to 'make good' to the extent that Members' Funds will be reimbursed to the equivalent position that no delays or default ever occurred.

3. Following the collapse of previous plans to make restoration, what plans do the company now have?

What exactly happened to the £45,000 promised? How much was given by SLB, and for what alternative purpose, and on what date(s)? Was it by loan, if so to whom exactly was it loaned and what documentation exists? What remains?

5. How are Fund holders to be protected if Ritec Ltd becomes Ritec International?

The Directors should be aware that they undertook to make a 'clean breast' of the situation approximately 12 months ago, to use their best endeavours to make reparations and to prevent reoccurrances of past abuses and poor communications.

Since this time I note the following:

a) No reparation has been made.

c) I personally drew to the Chairman's attention that employees' contributions were once again being withheld by the company despite his written assurance that this would never happen again. I received no reply.

d) After the £45,000 or a portion of it, had been paid by Stephen Byers to the Company instead of to the Pension Fund, Stephen Byers informed me that notice had been given to his Building Society to hand over the money to a Trustees' Account. Some would consider this a deception.

There is more, but I seek only to evidence the point that the whole Board has been in dereliction of duty regarding the Pension Fund Members.

I hope that all Directors would consider it improper to resign before covering their position of legal responsibility by securing proper and acceptable commitments by the company to the Pension Fund Members.

Unless a suitable and acceptable resolution to this matter is tabled within a reasonable period of time, say 28 days, at least one member, the writer, will conclude:

i) That his position may be untenable and therefore his contract may be considered to be necessarily, forcibly and constructively terminated.

ii) That the Company does not intend to bring forward a proper settlement unless forced to do so by legal action against those who are jointly and severally liable.

Yours sincerely"

Clearly Mr Thompson wanted a resolution of the payment to his pension fund which was suitable and acceptable to him, but his letter does not state precisely what he sought.

By letter dated 18 January 1994 the Chairman replied in these terms:

"I am replying to your letter dated 12th January 1994 which was signed by K. Nightingale and this, in view of the letter's content, surprised me greatly.

The Board considered your paper and decided that in view of its contents with its threats of legal action that the formal reply to you must come from the Company Secretary on behalf of all Directors.

However I take great exception to your remarks so far as I am concerned. I believe that should this matter come to law it will be seen that I did everything a non executive director could do, including:-

a) Visiting Scottish Equitable to find out the true state of affairs which then took them one year to unravel.

b) Insisting that any shortfall of employee contributions should be made good immediately.

c) Settling up with those scheme members who had left Ritec.

d) Persuading the Board that we must take on the role of Trustees from Stephen Byers and Philip Holmes.

e) Making arrangements for a replacement scheme which would be acceptable to all members and affordable to Ritec. I am told that the new Executive Pension Scheme meets those objectives and will eventually give increased benefits.

At this stage we had finally arrived at the figure of £45,000 as the Employers Contributions which had not been paid in. To my obvious delight Stephen Byers had recently received a small inheritance which he offered to pay to the Pension Fund. There was no legal reason for him to do this and it is much to his credit that he made this offer. The information that the Employers contributions were in arrears was conveyed to the fund members and no attempt made at concealment. Unfortunately at the August Board meeting the financial position of the Company made it necessary to pay the money into the Bank. You may not like this, and I did not like it either, but a Board has to look at the position of all its creditors, its shareholders, and its staff when making such a difficult decision. It happens to be illegal to give preferential treatment to internal creditors over external creditors. The Board Minutes also record that I undertook to meet the Scheme members and explain what had happened. I wish this had been possible instead of having to take my wife unconscious in an Ambulance to hospital with what turned out to be critical and possibly terminal illness. Therefore I had to invite John McNaught to carry out this task.

I do not know where you dream up your information. Ritec Ltd is a fully owned subsidiary of Ritec International which in turn is a holding company dealing with shareholders and international agreements. Ritec Ltd is therefore a legal entity which is responsible to its creditors whatever it is called.

Regarding your efforts to commence making a case for constructive dismissal I cannot see this succeeding at all. Constructive dismissal is to protect employees in those companies where every effort is being made to force them to leave by resigning. I have made enquiries of the Executive Directors of Ritec and their wish is to persuade you to stay.

Finally, as this is a private letter, may I point out that you are a creditor for £6000 and I am one for £45,000. We should both have one aim in common. Not to run away but to work hard for the survival of Ritec. A lot has to happen in the next three months to ensure this, and moaning about things and making threats does not help anyone."

It should be noted that letter contains in the final paragraph an admission that a sum of £6000 had not been paid into the Pension Fund on behalf of Mr Thompson.

By a letter dated 14 February 1994, G J Oakley, Solicitors, wrote to the Company Secretary of the Company in these terms:

Our Client: Mr A Thompson/Ritec Pension Fund

We have been instructed by Mr Andrew Thompson, an employee of Ritec Limited, regarding a matter with which you will be familiar through the correspondence our Client has had in the past with his employer. The subject matter of our Client's concerns is the most unsatisfactory situation regarding the Ritec (UK) Limited Retirement and Death Benefit Scheme of which he is a member.

We do not propose repeating the long and detailed history of this matter as it has been well rehearsed in correspondence to which we have had access, but we would refer you specifically to our Client's letter of 12th January to Ritec's Chairman, D G Spickernell Esq, which contained a number of requirements including a demand for a statement from the Board setting out the current position regarding the Fund.

A response to this letter has been received from the Chairman but as this professes to constitute a personal letter, a formal response from the Board is still awaited. In this context we observe, however, that the Chairman has confirmed that our Client's letter has indeed been referred to the Board, and the Company Secretary has been instructed to send a formal reply.

We have advised our Client that he is entitled to bring proceedings against his employer to obtain an order for reparation to be made to the Pension Fund for any sums owed to it through the employer's failure to make appropriate contributions. We have further advised our Client that what appears to be a deliberate act by the company would give rise to each and every Director being exposed to personal liability for their involvement whether passive or active. We should also add that our advice to our Client has to date been confined to the civil law, but that we are quite prepared to have our instructions expanded to encompass a more detailed investigation of specific actions of the company, the Trustees and individuals insofar as such are relevant to our Client's situation. We make no further comment or specific allegation on this aspect at this stage but merely observe that irregularities may have occurred of a serious nature.

Naturally, our Client is somewhat alarmed at the prospect of bringing formal proceedings against his employer, Directors and/or Trustees. Such reluctance, however, is in the process of being eroded by the apparent lack of will on the part of the Board to state its position.

Our Client put forward a suggestion for a 28 day response to his letter. Having received a communication from the Chairman stating that a formal reply will be forthcoming, we feel it appropriate to record that such a reply must now be received by ourselves, or our Client, by Wednesday 23rd February 1994.

If no such reply is received by this date, or if the reply does not include a sensible proposal satisfactory to our Client for remedying the matter, together with detailed replies to each and every point contained in our Client's letter of 12th January, our Client reserves the right, without further notice to yourselves, to commence such proceedings as he considers fit in order to protect his position as a beneficiary of the Pension Fund. In this respect, we have advised our Client that all of the papers and correspondence he holds can be produced as evidence, notwithstanding any private, personal or confidential markings thereon.

Furthermore, our Client will, in the absence of a proposal to remedy the situation, be forced to resign from the company as in the face of such confirmation from the Board that they cannot or will not rectify matters his position as an employee will be wholly untenable as he cannot be expected to retain any trust or confidence with his employer. We should add at this juncture that whilst our Client has come close to such a situation in the past, he was able to continue as an employee when learning of the Managing Director's confirmation that he would make a personal contribution to the Pension Fund to restore it to is appropriate value. Unfortunately, this gesture has failed to materialise to date.

Finally, we would add that as this is a formal letter to the Board covering events over a lengthy period of time, we require the Company Secretary to send copies to each and every Director who has held office within the last twelve months.

As a matter of courtesy, we would advise that the writer will be out of his office for the remainder of this week, returning on Monday 21st February 1994."

Mr Oakley is a brother-in-law of Mr Thompson. Mr Goldstone, who appears for the Company as heard in the Industrial Tribunal, submitted that this letter somehow altered the conclusion which Mr Thomspon said he would have to make in the final paragraph of his letter of 12 January, and the Company was thereafter required to deal with requests made by the solicitors, rather than the letter of 12 January. As to the first point, the first sentence of the paragraph commencing "Furthermore" towards the end of Mr Oakley's letter, states clearly what Mr Thompson had in mind. As to the second, the letters of the company dated 22nd and 23rd February to which we shortly turn, clearly demonstrate that the Company knew that it was Mr Thompson's letter which required answering.

By letter dated 22nd February a Director of the Company, Mr Stephen Byers ["Mr Byers"] replied to Mr Oakley in a letter marked 'Without Prejudice' in these terms:

"Re: Mr. A. Thompson/Ritec Pension Fund

In response to your letter of 14 February 1994, I regret very much the further gap in communications which caused Andrew Thompson to request your intervention in this matter.

I have drafted a response to Andrew's letter of 12 January 1994 for review and approval at a meeting of our Board of Directors on Thursday, 24 February 1994.

By copy of this letter, I am promising to Andrew that the response will be given to him promptly after the meeting. Should he have any specific questions which cannot wait until then, he should let me know."

Whilst Mr Byers invited "specific questions" from Mr Thompson, he sought from neither Mr Thompson nor his solicitors what he or they considered would be "a suitable and acceptable" resolution to Mr Thompson's serious complaint.

By letter dated 23rd February sent by facsimile and post, Mr Oakley wrote further to the Company in these terms:

"Our Client: Mr A Thompson/Ritec Pension Fund

Thank you for your letter of 22nd February 1994.

We note that on 24th February our Client will receive a written response to his letter of 12th January.

We do not understand the "without prejudice" nature of your letter as this is not a communication to which such a caveat would be relevant." (Our underlining.)

A reply, also marked 'Without Prejudice', to Mr Thompson's ultimatum was contained in a letter dated 24th February in these terms:

"I very much regret the delay in response to your letter to Spike Spickernell dated 12th January 1994.

In response to the points raised:

1) The current situation is that the Company's contributions under your part of the Ritec Pension Fund are still owed. It is understood that the total amount in arrears is between £6,000 and £6,500.

We fully expected this amount to be paid before the end of the 1993, but due to high Company overheads and delays in payment under several large overseas agreements, this was not possible.

2) I reconfirm that the Company intends to "make good" to the extent that Members' Funds will be reimbursed to the equivalent position that no delays in payment occurred.

3) The amount owed to you will be paid into the private pension scheme you have selected as soon as possible. The intent is to do this by the end of 1994, but within the next twelve months at the latest.

As a start towards this objective, it is intended to initiate a Standing Order to be effective 1 May 1994 in the amount of £550.00 per month with best endeavours to increase this amount as and when we are fortunate to receive large, lump-sum payments.

4) The £45,000 was paid into the Company in order that we could remain in business. Again, this was due to delays in payments under several large, overseas contracts as well as high overheads.

5) There is no intention of Ritec Limited becoming Ritec International.

As you know, our overheads have been reduced recently and several overseas projects which had been delayed are now moving ahead. Therefore, I am confident that we can achieve the above objectives with your cooperation and assistance.

Please let me know any further questions, as I am determined to avoid the communications difficulties of the past and to do everything possible to look forward.

Also, since the above statements of intent are made in good faith, I would very much appreciate your confirmation that they are acceptable and that we can work together in achieving them."

It is common ground that this letter was handed to Mr Thompson by Mr Byers. They had a conversation, of which Mr Thompson made a manuscript attendance note soon after. It is common ground that in that conversation Mr Byers told Mr Thompson that the Company would not commence to make any payment to the Pension Fund of arrears due to him prior to May.

A bundle of documents available at the hearing included a copy of that manuscript note:

"It is apparent from the note that Thompson was told that the Company proposed to make certain payments for another employee whose conduct was under question before it made any payments to him. Parts of his note reads: 'Given letter, asked to come and talk to [Mr Byers] if it did not measure up to expectations. I replied I had sought the Company's formal offer which I would answer and formally reply to and I did not intend or expect to bargain over it. ...

Expressed surprise that I was to queue up after some guy who was being blamed for the problems. [Mr Byers] said it was not just [X] but also the essential financial difficulties and what company would offer. I said I was still not getting the point across that I am not an ordinary trade debtor who assumed an implied risk on supplying on credit terms, or an investor who took a gamble willingly, but a worker who had money for his labour withheld without consent, denied by silence, carried the lathe and ignored, proposals not honoured while due debt was actually increasing - it was an outrage.

[Mr Byers] said my accusations were unfounded and did not help matters and should not keep getting repeated. I replied that I will take a few days to decide what to do and formally reply."

In a manuscript letter dated 1 March 1994 Mr Thompson did reply to the Company's offer in these terms:

"Thank you for your letter of Feb 24th which I have now had the opportunity of considering.

Your proposal on behalf of the company does not take us any further forward because it is not a reasonable proposal to resolve my Pension Fund Situation. Of particular dismay is the timescale anticipated for payment of employer's pension fund contributions required to be met during my period of employment.

Put frankly, I cannot really be expected patiently to await potential long-term resolution of the problem when past proposals have failed to materialise. Furthermore, whilst I appreciate your purported efforts to deal with my own personal situation I am not comfortable that either the company or the Trustees should favour me before other members of the fund. Such actions could subsequently be undone in certain circumstances. I have in mind here our 'confidential' conversation at the time your Feb 24th letter was given to me.

Consequently I have determined that you do not intend to resolve matters by an immediate payment putting me in the position that I would have enjoyed had all proper payments been made on a timely basis. I have therefore no option but to resign from the company immediately, as a result of the continuing and serious breach of contract by my employer.

You will understand that such a decision is one of significant consequence to me financially as I do not have any alternative employment available to me although I will naturally be eager to make the most of my opportunities in the job market. In this respect I would wish that you will see fit to provide me with an appropriate reference reflecting my performance as an employee at Ritec. Indeed I hope you will agree that, notwithstanding the distractions inevitably generated by my pursuit of reimbursement of pension fund contributions, my performance towards the business has been significant. I have never allowed this dispute to detract from my desire to operate wholly in the best interests of the company.

I am more than happy to be available for consultation by any employee whose task it becomes to complete those matters where I have adopted a key role.

We will need to agree a pro-rata payment of my March salary together with pay in lieu of holiday entitlement as per my conditions of employment, and to settle outstanding expenses.

You will appreciate that even though I am now leaving the company it is vital for my future personal financial planning that I receive full up to date details of the employer contributions made and owing to my pension fund together with the number of units allocated. Please may I therefore have sent to me a proper statement of my pension fund entitlement."

The Company replied by letter dated 2nd March in these terms:

"I have no choice but to accept your resignation of 1 March 1994, and regret very much that you feel you have a basis for doing so without honouring your contractual notice period of 90 days.

I do not accept the reasons for your resignation and do not understand the timing, especially since you are well aware that we wanted you to stay.

The timing of this action may place in jeopardy several key projects for which you are responsible.

In view of these circumstances, we must hold you responsible for any damage which may occur to the Company as a result of your action and its timing."

Thereafter Mr Thompson issued an Originating Application in the Industrial Tribunal dated 15th March 1994 claiming unfair dismissal. The Company's response was dated 22nd April 1994 and was in these terms:

"The Applicant resigned without notice in breach of his contractual obligations. Pursuant to the Applicant's contract of employment he was under a duty to give three month's notice of termination of employment.

It is admitted by the Respondent that the management of the company's contributory pension scheme was not perfect but every effort was made to ensure that the pension scheme was maintained and the Applicant was kept informed in this respect from time to time.

Prior to the Applicant's resignation the Respondent through Mr Stephen Byers, Director, confirmed that the Respondent intended to "make good" any arrears in respect of the pension scheme and made clear its intent to do this by the end of 1994 but within a period of 12 months at the latest in any event.

It is denied that the circumstances surrounding the pension scheme amount to or could amount to sufficient reason for the Applicant to consider that he has been constructively dismissed and that in the circumstances such dismissal was unfair."

The hearing of Mr Thompson's application took place before an Industrial Tribunal on 13th, 14th and 15th March 1996. Mr Thompson appeared in person. As we have said Mr Goldstone represented the Company. We are told that at the hearing of the application the Chairman noted that most of the facts were uncontentious. They are obviously to be found in the bundle of correspondence which we have set out. It is therefore surprising to learn that evidence in chief took most of the first day of the hearing and cross-examination of Mr Thompson took most of the second day. No evidence was adduced on behalf of the Company. Mr Goldstone told us - and this was accepted - that in the course of cross-examination, Mr Thompson admitted that if the Company had offered to make good the arrears of his contributions within fourteen days, he would have considered that a satisfactory response to his letter of 12th January, an answer to which Mr Goldstone attached considerable significance. It is an answer to which we will return.

The decision of the Tribunal was sent to the parties on 9th May 1996. The unanimous decision of the Tribunal was that the Company did not constructively dismiss Mr Thompson and accordingly his complaint of unfair dismissal failed. It is against that decision that Mr Thompson appeals. The Tribunal then in paragraph 5 of the Extended Reasons made a number of findings of fact, contained in sixty-five sub-paragraphs.

Presenting Mr Thompson's appeal to us, Mr Sheldon submits the Tribunal's decision cannot stand for three different reasons:-

First, Mr Sheldon submits that the Tribunal set out the right three questions in sub-paragraph 3 of paragraph 4 of its Extended Reasons. The sub-paragraph reads:

"In the light of the concessions made by RITEC (see below) RITEC did not call any evidence, rightly in the Tribunal's view, because the issues at the end of the day in the light of RITEC's concession that they had been in breach of a term of the Applicant's contract, narrowed down to the following:

(a) Did the Respondent commit a fundamental breach of the Applicant's contract of employment?

(b) Did the Applicant affirm the contract by his delay in terminating his contract during the period February 1992 to 1 March 1994?

(c) At the time of resigning, did he act reasonably - i.e. did he or did he not "jump the gun"?"

However, he submits, the Tribunal failed properly to apply Western Excavating (EEC) Ltd v Sharpe [1978] 1 All ER 713, which, in paragraph 6 of the Extended Reasons, it correctly identified as the leading authority on constructive dismissal. Mr Sheldon submitted a reading of the decision demonstrating that the second and third questions were elided with the first in a way which was improper.

Secondly, and in the alternative, Mr Sheldon submitted that given the factual background of the case, the decision of the Industrial Tribunal could truly be classed as perverse. He reminded us that in Imperial Group Pension Ltd v Imperial Tobacco Ltd [1991] ICR 524 at page 533 Sir Nicholas Browne-Wilkinson VC said:

"... Pension benefits are part of the consideration which an employee receives in return for the rendering of his services".

Mr Sheldon submitted that when an employer had failed to pay the pension contributions due to an employee into a pension fund over a prolonged period, and refused to take steps to make good their omission, it followed as night followed day that the employer was not only in breach of contract but a fundamental term of the contract of employment was breached, which entitled the employee to leave without more ado. He submitted that a complaint by an employee to an Industrial Tribunal that in such circumstances he had been constructively dismissed and unfairly dismissed in these circumstances should be upheld. Thus the decision in this case of the Industrial Tribunal was clearly wrong and perverse.

Thirdly, and in the alternative, Mr Sheldon submitted that where there had been persistent breaches of contract by an employer which had been waived, those breaches could later be relied on when there was a further breach of contract. In that context he referred us to a passage in the judgment of Ackner LJ in Lewis v Motorworld Garages Ltd [1986] ICR 157 at page 165:

"... Moreover, in my judgment, if the industrial tribunal had found, and again there is an absence of any clear finding, that the two breaches or either of them were also breaches of the implied term - the trust and confidence term - then although they had not been relied upon as repudiatory breaches they could still be added to any other breaches of the implied term in order to support an allegation that there had been a course of conduct which amounted to a wrongful repudiation by the employer."

As to the first of Mr Sheldon's submissions, Mr Goldstone submitted that there were findings of fact by the Industrial Tribunal which supported their judgment and with which this Tribunal could not interfere. He read us a number of extracts from the 27th edition of Chitty on Contract to support a submission if in equity there had been waiver, it was not open to a party who had waived his rights to resurrect them. As Mr Thompson's letter of 12th January 1994 contained no firm statement of what was acceptable to him, it should only be treated as "a proposal", (a term which Mr Goldstone repeatedly used to describe what Mr Thompson wrote in that letter). He submitted that once the Company had responded to the letter, it was not open to Mr Thompson to treat the letter as unsatisfactory; he should have negotiated with the Company, alternatively sent in a fresh letter stating precisely what he required to be done and to have waited for the company's response before taking precipitous action.

On perversity, he reminded us of the many injunctions given to this Court by the Court of Appeal as to how slow they should be to interfere with findings of fact of an Industrial Tribunal. He reminded us of a passage from the judgment of Lord Denning MR in Woods v W M Car Services (Peterborough) Ltd [1982] IRLR 413 at page 415:

"The circumstances are so infinitely various that there can be, and is, no rule of law saying what circumstances justify and what do not. It is a question of fact for the tribunal of fact - in this case the Industrial Tribunal. Once they come to their decision, the Employment Appeal Tribunal should not interfere with it. Thus when the manager told a man: 'You can't do the bloody job anyway', that would ordinarily not be sufficient to justify the man in leaving at once. It would be on a par with the trenchant criticism which goes on every day. But if the manager used those words dishonestly and maliciously - with no belief in their truth - in order to get rid of him then it might be sufficient: because it would evince an intention no longer to be bound by the contract. At any rate an Industrial Tribunal so held in Courtaulds v Andrew [1979] IRLR84 and the Appeal Tribunal did not interfere with it."

Mr Goldstone submitted it would be wrong to hold that the decision of the Industrial Tribunal was perverse. Particularly when no Notes of Evidence had been produced, we were unable to judge whether there were facts which justified findings made by the Industrial Tribunal.

On Mr Sheldon's third submission, Mr Goldstone also submitted that we should not interfere with facts as found by the Industrial Tribunal.

We are satisfied that the first of Mr Sheldon's submissions is right. In Wadham Stringer Commercials (London) Ltd v Brown [1983] IRLR 57 at page 48; giving the judgment of an Employment Appeal Tribunal, Browne-Wilkinson J said:

"The Western Excavating case put to sleep a dispute as to the two possible views of the proper construction of that subsection. The first view, held by the Court of Appeal to be heretical, was that the section required one to look and see whether, in all the circumstances of the case, it was right and proper, irrespective of the terms of the contract, that the employee should have walked out in response to the conduct of the employer complaining. The other view, upheld by the Court of Appeal, was that the requirements of subsection (c)could not be satisfied unless the conduct of the employer amounted to a fundamental breach of contract constituting a repudiation. Having introduced what we might call that contractual approach, it seems to us to follow that, in considering whether or not there is a constructive dismissal, one has to approach the matter on a contractual basis throughout. If there is a fundamental breach of contract then, as a matter of contract law, the employee is entitled to accept that repudiation. Neither the circumstances inducing the fundamental breach by the employer, nor the circumstances which lead the employee to accept such repudiation, are relevant as a matter of contract law."

In considering whether there had been a fundamental breach of contract, as a matter of contract law, the Industrial Tribunal did consider the circumstances which led the employee to accept the repudiation of the contract other than as a matter of contract law. Their suggestion that he had "jumped the gun" strongly suggests that, as Mr Sheldon submitted, they elided the further questions they had to answer when they were considering the first. In paragraph 10 of the Extended Reasons, further findings of fact were made. Under "(a) Fundamental breach" there is this passage:

"The Respondent's breach of the Applicant's contract of employment i.e. their failure during the period 1989 to 1 March 1994 in respect of the employer's contributions into the PF was a matter which caused the Applicant a good deal of concern during that period, but it never got to the stage where it had an adverse effect on his working relationship with RITEC nor did it make him feel that he could no longer put up with it and that he would have to leave unless it was resolved immediately or within a reasonable time. The Applicant acknowledged that apart from the PF mess he had had a good working relationship with Mr and Mrs Byers and RITEC and that RITEC had treated him well and looked after him and spared him financial worries throughout his period of illness. He had also progressed to the stage where Mr Byers had offered him a seat on the Board of Directors of RITEC. He had been repeatedly promoted and given important areas of responsibility. The Applicant enjoyed his work. The Applicant also accepted that the Respondent Company was fighting for its survival during the relevant period and that he saw no point in making the Company insolvent simply in order to make the PF solvent (A65/66 and A78/79). The PF issue did not impinge on his work or day to day working relationships. The breach by RITEC, important though it was, was not so important a breach as would have been the case if e.g. RITEC had paid him less than his full contractual salary entitlement during that period. The adverse impact of the breach would not have been felt, if the matter had remained unresolved, until the date of the Applicant's retirement or the termination of his employment. The Applicant was aware that RITEC had every intention of making its PF contributions up to date at a future date. The Applicant had been aware and he had accepted that throughout that period RITEC had been in dire financial straits and that the breach was forced upon RITEC because all available funds had to be utilised by RITEC for financial survival even if it meant that temporarily RITEC would have been in breach of its contractual contribution obligations to the PF. The alternative, i.e. making the PF payments up to date but neglecting to meet the other important financial obligations, would have resulted in RITEC ceasing to trade which would not have helped any of its employees including the Applicant who would all have lost their jobs if RITEC had become insolvent. There was no breakdown in the relationship of trust and confidence. It is the Tribunal's unanimous decision on the facts of this case that although RITEC's failure to meet its contribution obligations to the PF was a breach of the terms of the Applicant's contract of employment, it was not a fundamental or significant breach."

In paragraph 10(b), under Delay/'Jumping the Gun' there is this passage:

"The Applicant had had concerns about the PF from early 1990 onwards. From February 1992 until 1 March 1994, a two year period, the Applicant had been aware that the Respondent was in continuous breach of its contributions obligations to his PF. He had on several occasions informed Mr Holmes, Mr Byers and the Chairman that in his view RITEC had not acted properly. On occasions he used pretty strong language. He had on occasions set time deadlines for RITEC to rectify the situation. However, on each occasion he accepted RITEC's explanations and decided to stay. He blew hot and cold throughout the period. The breach was a continuous breach throughout the period 1989 to 1 March 1994. Despite his threats, he did not complain to the Pensions Ombudsman nor to any other outside agency. He never felt that it was a resigning issue until February/March 1994. On each previous occasion he accepted RITEC's assurance - and RITEC never gave any firm assurances in writing - and he elected to stay and affirm his contract. He knew in July 1993 that Mr Byers' personal loan of £45,000 to RITEC would be used to meet the Respondent Company's debts other than its obligations to the PF. Yet, he did not consider that to be an immediate resigning issue. For some reason, best known to himself, he decided to force the issue in January 1994 and he and his solicitor wrote respectively to the Chairman on 12 January 1994 (A164/165, R87/88) and to RITEC's Board of Directors on 14 February (A173/174, R92/92A). However, neither the Applicant nor his solicitor put any specific proposals in their letters. The Applicant understandably did not want to bargain. However, when specific proposals in writing for the resolution of the issue (A183/184, R96/97), the Applicant resigned without indicating to RITEC what he would have considered to be "sensible" proposals for the resolution of the issue. In evidence, the Applicant stated that an undertaking, inter alia, to make all PF contributions up to date within a specified period, e.g. two weeks, would have been acceptable to him and if such a proposal had been forthcoming from RITEC he would not have resigned. However, he never put any such proposal to RITEC at that time and he resigned as soon as he received the letter of 24 February 1994 (A183/184, R96/97) without giving RITEC any opportunity to find out what he had in mind. The Applicant 'jumped the gun'. The letter of 24 February 1994 from RITEC (A183/184, R96/97) was not the 'last straw'. That was not a 'take it or leave it' proposal. It was an invitation to the Applicant to consider RITEC's proposals and to discuss with RITEC any alternative suggestions which he might have had."

"... In evidence, [Mr Thompson] Applicant stated that an undertaking, inter alia, to make good all [Pension Fund] contributions up to date within a specified period, e.g. two weeks, would have been acceptable to him and if such a proposal had been forthcoming from [the Company] he would not have resigned. However, he never put any such proposal [to the Company] at that time and he resigned as soon as he received the letter of 24 February 1994 without giving [the Company] any opportunity to find out what he had in mind. [Mr Thompson] 'jumped the gun'. The letter of 24 February 1994 was not the 'last straw'. That was not a 'take it or leave it' proposal. It was an invitation to [Mr Thompson] to consider the [Company's] proposals and to discuss with [the Company] any alternative suggestions which he might have had."

In our view, insofar as these are findings of fact, some appear to be incorrect, for example Mr Thompson did not reply as soon as he received the letter of 24th February; he resigned following his letter of 1st March. More to the point, the passages shows the Industrial Tribunal considered that the consistent failure to make payments to the Pension Fund not to be a fundamental breach of contract, being less important than payment of salary. Having regard to the dicta in Imperial Group Pensions (supra) this prima facie was an incorrect approach. Additionally they seem to have considered the facts under which they found in paragraph 10(1) to be material factors which Mr Thompson should have considered in the context of his claim that there was a fundamental breach of contract by the Company. This approach is contrary to the dicta in Westland v Wadham Stringer (supra).

In any event we observe that in the final paragraph of his letter of 12th January, Mr Thompson commenced, "unless a suitable and acceptable resolution to this matter is tabled within a reasonable period of time, say twenty-eight days."... Mr Thompson was not making a proposal, as Mr Goldstone submitted; he was issuing an ultimatum. We observe that the Company made no effort in the period allowed to it by Mr Thompson to find out what period of time would have been satisfactory to Mr Thompson. The Tribunal also considered Mr Thompson's failure to continue to correspond material factors in deciding whether there had been a fundamental breach of contract. This is not a material factor on the question of fundamental breach. It is material for other purposes. As was said in Wadham Stringer commencing at the foot of page 48:

"The reasonableness of the employers, and employee's conduct may fall to be considered for the purposes of Section 57 (Employment Protection (Consolidation) Act 1978), if such question arises or for the purposes of assessing compensation. But in considering whether or not there has been a constructive dismissal, the test is a contractual test and a contractual test only."

Mr Goldstone drew our attention to the passage in Pederson v Camden LBC [1981] ICR 674 at page 678 where Lawton LJ said:

"The next question is, if there was a breach of contract, was it of such a fundamental kind as to entitle the employee to regard himself as released from all obligations under it? That could come about in one of two ways -- either that there had already been a breach which made it clear that the employers were not going to be bound by the contract, or that their conduct was such as to indicate that from a particular moment they were not for the future going to be bound by it. If there was evidence that there was a breach of contract which could have been of a fundamental kind, neither the Employment Appeal Tribunal nor this court is entitled to substitute its own view as to whether it amounted to a fundamental breach."

This Court does not interfere so long as the primary court directs itself properly. In Pederson the Industral Tribunal did not look into extraneous matters as did the Industrial Tribunal in our judgment in its Extended Reasons.

Because the Tribunal has mis-directed itself on the issue of whether there has been a fundamental breach of contract, this matter has to be reconsidered by the fact-finding Tribunal.

Having regard to the decision we have reached on the first of Mr Sheldon's submissions, it is not necessary for us to reach a decision on the second. We think it more appropriate to allow the appeal on the basis that there has been no proper determination as to whether there has been a constructive dismissal and to remit the matter to the Industrial Tribunal for a further hearing on that point. The Industrial Tribunal must first find whether, as a matter of contract, the failure to make good the pension contributions prior to his resignation was a fundamental breach of contract which entitled Mr Thompson to treat the contract of employment as at an end. It may well be germane to their decision to remember that as a result of what Mr Thompson was told on 24th February, he knew that the Company did not propose to begin to make good the shortfall in their contribution to the pension fund until at least the beginning of May, and that both lay Members of this Tribunal consider that it has become established custom and practice in the field of industrial relations to regard and treat pension provision as of equal importance to wages and salaries. The Tribunal may in such circumstances find that the final submission made to us by Mr Sheldon on this point was right. When the failure to make good the Pension Fund deficit is viewed in this context, it may be that such a submission will be of assistance to the Tribunal. However, as we are allowing the appeal on the primary submission of Mr Sheldon, it is unnecessary for us to consider this further.