United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MR TOM LINDEN (of Counsel) Messrs Martineau Johnson Solicitors St Philip's House St Philip's Place Birmingham B3 2PP
For the Respondent	MR J J NIXON (Solicitor) Messrs Edge & Ellison Solicitors Rutland House 148 Edmund Street Birmingham B3 2JR


 


JUDGE PETER CLARK: This is an employer's appeal against a decision of the Birmingham Industrial Tribunal upholding the respondent employee's claim that the employer was in breach of his contract of employment by wrongfully dismissing him without notice or pay in lieu thereof. Full reasons for that decision are dated 18th October 1996.

The Facts

The respondent commenced employment with the appellant College of Further Education in September 1974. On 1st April 1993 the College passed from Local Education Authority control to an independent corporation. The respondent's employment was transferred at that time.

On 25th May 1994 the parties entered into a written contract of employment which provided for three months notice of termination on either side. Under the contractual sickness policy the respondent was entitled to six months full sick pay followed by six months half-pay.

In October 1994 the respondent commenced a period of sick absence caused by work-related stress. Save for a brief return to work after 6 or 8 weeks of absence the respondent remained off work and never returned.

In early 1995 the parties discussed what might happen in the light of his continuing illness.

On 27th March 1995 the Principal wrote to the respondent setting out three options which had been earlier discussed. Take ill health retirement funded by the Teachers Pension Agency ["TPA"]; return to part-time work on reduced pay; return to full-time work, health permitting.

Under the Teachers Superannuation scheme, administered by the TPA, there was scope for enhanced pension benefits for teachers taking ill-health retirement after the age of 50. The respondent was 50 on 24th March 1993.

Having considered his position, and following further correspondence, the respondent wrote to the appellant on 21st May 1995 stating:

"Further to our recent discussions regarding my future at North Warwickshire College I have decided to apply to the Teachers Pensions Agency for early retirement on health grounds, hopefully with a retirement date of 31.8.95.

If successful I would hope to be able to supplement this pension with some part-time teaching and a role in delivering the 'Youthstart' project as discussed.

If my application is not successful I would clearly need to have further discussion about my future role.

If there is anything further to discuss please contact me."

His application to the TPA is signed and dated by the respondent 31st May 1995. He opted for a retirement date of 31st August 1995. The appellant supported his application.

That application took some time to process whilst the TPA obtained the necessary medical evidence to establish whether the respondent was entitled to benefit under the scheme.

On 8th November the appellant's Personnel Manager, Mr Mantle, wrote to the respondent pointing out that his entitlement to sick pay expired at the end of October. Nevertheless, in the exercise of his discretion, the Principal granted an additional month's sick pay at the half-rate, taking him to 30th November.

On 21st November the TPA notified the respondent that his application was accepted and indicated that the parties should agree a suitable termination date if that had not already been done. On receipt of that notification the respondent telephoned Mr Mantle on 23rd November. The tribunal regarded that conversation as critical and their findings as to what was said, in so far as findings were made, appear at paragraph 17 and following of the reasons in this way:

"17On receipt of that notification the Applicant telephoned Mr Mantle who was the personnel office for the Respondents. This was a critical conversation. Mr Mantle told us, and we accept, that he explained to Applicant that the College had not been notified nor received a copy of the letter to the Applicant. Indeed it appears that wrongly the TBA sent the Respondent's copy to Warwickshire Council who were the previous employers. The Applicant made it quite plain to Mr Mantle that having seen the proposal of the TPA he wished to proceed and take early retirement. Mr Mantle discussed with the Applicant when that would take effect.

19 Mr Mantle told us that, so far as he can recall, when he spoke to the Applicant on the telephone he said in effect;

"... it would be convenient, having regard to the fact that your sick pay entitlements have run out, if the date of retirement was treated as 30 November 1995".

20 Mr Cook does not disagree substantially with those words. What is in issue between the parties is whether or not Mr Cook said, "yes I agree to that, I wish to go on the 30 November", or whether he said any words which led the Respondent to understand that the Applicant wished to go at that stage or any other stage."

Pausing there, the issue as to whether or not Mr Cooke said "yes I agree to that, I wish to go on the 30 November", was never resolved as a matter of fact by the Industrial Tribunal.

Further, we find it curious that the tribunal mention an issue as to whether the respondent understood that the applicant wished to go at that stage or any other stage, in the light of their clear finding at paragraph 17 that the applicant made it quite plain to Mr Mantle that having seen the proposal of the TPA he wished to proceed and take early retirement.

Nevertheless, as we shall explain later in this judgment, it does not appear to us to be critical that no such finding of fact was made by the tribunal.

On 30th November the respondent wrote to Mr Mantle asking about his entitlement to pay in lieu of notice.

Mr Mantle replied on 5th December, stating that the College regarded his application to retire as a termination by mutual agreement and not a dismissal.

That was the issue for the Industrial Tribunal to decide.

The Industrial Tribunal decision

In considering whether or not the contract had been terminated by mutual consent, rather than by dismissal, the tribunal's reasoning appears to have proceeded as follows:

(1) For there to be a consensual agreement to terminate there must be a binding contract to that effect. The rules of offer and acceptance and consideration apply. There must be a clear understanding between the parties and no mistake as to what has been agreed. Silence cannot amount to acceptance of an offer. (Paragraph 35 of the reasons).

(2) Here, the words used by Mr Mantle and the respondent during their conversation on 23rd November 1995 do not show a clear consensual agreement that the contract was to be treated as terminated on 30th November 1995. That finding, so the tribunal found, is supported by the correspondence. (Paragraph 37 of the reasons).

(3) Having ruled out first consensual termination and then frustration of contract, but it being common ground that the contract was terminated, by a process of elimination the tribunal reached the view in the absence of termination by either party on three months notice, as provided for in Clause 12 of the contract, the only conclusion which it could draw was that the contract had been terminated unlawfully by the employer. (Paragraph 42 of the reasons).

(4) The analysis proceeded in this way; the Principal's letter of 27th March 1995 was an invitation to treat; the respondent's letter of 21st May was an offer by him to take early retirement; that offer was accepted by the appellant on 23rd November 1995; to terminate the contract lawfully at that point the employer should have given three months notice in writing. They did not do so and accordingly the appellant was in breach of contract.

The Industrial Tribunal went on to assess the quantum of damages recoverable in respect of the breach as found. In relation to the assessment of damages there are further grounds of appeal advanced by Mr Linden, but we have not found it necessary to consider those arguments.

The Appeal

The principal point taken by Mr Linden on behalf of the appellant is that the tribunal erred in law in its approach to the question of breach. He relies on the Court of Appeal decision in Birch v University of Liverpool [1985] ICR 470. We are told by both parties that that case was not cited to the Industrial Tribunal and that in our view is apparent from the way in which the tribunal approached their task.

In response, Mr Nixon accepts that the tribunal did not wholly direct themselves in accordance with the approach taken by the Court of Appeal in Birch, but points out that in that case the Court of Appeal approved the decision of the Employment Appeal Tribunal in Burton Allton & Johnson Ltd v Peck [1975] ICR 193. The facts of that case are conveniently summarised by Ackner LJ in Birch at page 480D, where he says:

"The material facts of the case can be shortly stated. The employee had been off work on account of his illness for quite some time. His employers considered that it would be in his own interests to accept redundancy, but they were concerned as to whether this could be done while he was still away sick. When he returned to work he was seen by the area supervisor; he was told there was no work for him, but that a meeting was to be arranged between the area supervisor and him in order that they should both go the employment exchange. The majority of the industrial tribunal found that the employee had been dismissed on the day of his return to work. Griffiths J. presided over the tribunal and he said, at p.197:

"It seems to me, in the face of the evidence, that [the area supervisor] told the employee that there was nothing for him, that he knew he was to be made redundant, and that he was sent home without work or pay, that it is impossible to say that there was no evidence on which the lay members could come to the conclusion that he was in fact dismissed on the occasion of the meeting between him and [the area supervisor].""

His Lordship then goes on to cite a passage from the judgment given by Nolan J on behalf of the appeal tribunal in Birch page 481B he said this:

"That case [Peck]was relied upon before the appeal tribunal, and this is what Nolan J. said:

"As we understand that decision, it was based upon the finding by the majority of the industrial tribunal that Mr Peck's contract of employment had been terminated by his dismissal. The passages in the judgment of the judge which we have quoted are designed to make it clear that the fact that an employee has no objection to being dismissed, or even volunteers to be dismissed, does not prevent his dismissal, when it occurs, from being a dismissal within the meaning of the Act. We do not read the judgment as encroaching in any way upon the distinction which exists in law between a contract which is terminated unilaterally (albeit without objection, and perhaps even with encouragement from the other party) and a contract which is terminated by mutual agreement. The phrase 'consensual dismissal' which the industrial tribunal used seems to us, with respect, to blur this critical distinction. In every case it will be necessary to determine what it is that has had the effect, as a matter of law, of terminating the particular contract, and on the undisputed facts of the present case it seems to us clear for the reasons already given that the termination was effected by mutual agreement and not by dismissal."

I endorse wholeheartedly those observations, which seem to me to meet entirely the point made that is a Burton, Allton & Johnson situation."

The facts in Birch's case were:

"The employer forced by economic circumstances to make a substantial reduction in its staff, issued a series of circular letters inviting its employees to take advantage of an early retirement scheme. Under the scheme, which was expressly stated not to be redundancy scheme, any application for early retirement was subject to final approval by the employer. The two employees applied for early retirement under the scheme, and the employer ultimately replied with letters formally requesting their retirement on a particular date. The employees subsequently claimed redundancy payments ..."

and an industrial tribunal found that they had been dismissed. On appeal, the appeal tribunal found that the contracts had been terminated by mutual consent and that there was no dismissal. On appeal by the employee to the Court of Appeal, the Court of Appeal dismissed the appeal holding:

"that the question whether on the agreed facts the industrial tribunal was entitled to hold that there had been a dismissal ... was a question of law and not merely one of fact and degree ..."

and went on to hold, upholding the decision of the Employment Appeal Tribunal, that there was here a dismissal. In particular, the Court of Appeal found that the fact that:

"an application for early retirement under the scheme was subject to final approval by the employer ..."

did not mean that such final approval, when given, constituted a dismissal by the employer.

In this case, Mr Nixon submits, the Industrial Tribunal were entitled to find as a matter of fact, that there was here no consensual termination; that the contract was terminated on 30th November, and that in the circumstances it was open to the tribunal to find that the contract was unilaterally terminated by the employer, albeit with the consent of the respondent.

Conclusion

The question as to whether an employee is dismissed is precisely the same in a common law claim for damages for wrongful dismissal as it is in a claim of unfair dismissal by reason of the 'contract' test applied to the concept to unfair dismissal. See Western Excavating (ECC) Ltd v Sharp [1978] ICR 221.

The following legal principles emerge from the cases; and in particular the case of Birch.

(1) a dismissal involves the unilateral termination of the contract by the employer.

(2) the question at the end of the day is 'who really terminated the contract of employment'. Was it the employer or was it the employee, or was it terminated by mutual consent of the parties. See Martin v Glynwed Distribution Ltd [1983] ICR 511, 519 (per Sir John Donaldson MR).

(3) the fact that the employee consents to the unilateral termination of the contract does not prevent a dismissal taking place. See Burton, Allton & Johnson Ltd v Peck [1975] ICR 193.

(4) the fact that an application for early retirement by the employee was subject to final approval by the employer does not mean that such final approval constituted a dismissal. See Birch.

Applying those principles we have no hesitation in concluding that this tribunal erred in law in its approach to the question of dismissal.

This is a plain case on the facts.

The respondent was given three choices on 27th March 1995. After careful consideration, and with no suggestion of pressure applied by the appellant on the Industrial Tribunal's findings of fact, he opted to apply for ill-health retirement, subject to obtaining the benefits of the TPA scheme. He wished to leave on 31st August 1995. The appellant supported his application. That date passed because the TPA had not completed the necessary medical enquiries. Once the application was approved on 21st November and the respondent decided to take early retirement, he spoke with Mr Mantle on 23rd November. The latter pointed out that the discretionary extension to the respondent's sick pay terminated on 30th November. That was the date on which the employment terminated.

Simply looking at the facts it is abundantly clear that there was no unilateral termination of the contract by the appellant. The respondent wished to leave the employment and the appellant agreed to that course. This case, in our judgment, falls fairly and squarely within the concept of consensual termination as explained by the Court of Appeal in Birch.

In these circumstances we shall allow the appeal and set aside the tribunal's declaration that the respondent was wrongfully dismissed and that part of the award relating to damages for that breach, leaving a balance of £466.81 accrued holiday pay, in respect of which there is no appeal.