United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MISS WALSH (Solicitor) Messrs L Bingham & Co Solicitors 4 Carmelite Street London EC4Y 0BN
For the Respondents	MISS EMMA SMITH (of Counsel) Messrs Denton Hall Solicitors Regency Court 206-208 Upper 5th Street Milton Keynes MK9 2HR


 


JUDGE COLIN SMITH QC: This is an appeal by the employee, Mrs Jennifer Jones, from a decision of an Industrial Tribunal held at Reading on 10th November 1994, when the Industrial Tribunal held that the appellant had not been dismissed by the respondents, F Sirl & Son (Furnishers) Ltd, when she left their employment on 24th November 1993. The extended reasons for the decision were sent to the parties on 24th January 1995.

As is apparent from the decision, the Industrial Tribunal held that, although there had been serious breaches of the appellant's contract of employment which entitled the appellant to treat herself as constructively dismissed, they were not satisfied, on the balance of probabilities, that the appellant had resigned in consequence of the breaches of contract, and so they held that she had not discharged the burden of proving that she had been constructively dismissed. It is against that finding, relating to causation, that the appeal is made before us today. Apart from their case that the decision of the Industrial Tribunal should be upheld, by a cross-appeal the respondents submit that the Industrial Tribunal erred in finding that the respondents were in breach of contract at least in some respects, and submit that the Industrial Tribunal should have concluded that there were no such breaches in those respects. By her reply to the cross-appeal, the appellant submits that in deciding that the respondents were in breach of contract in the respects that they did, the Industrial Tribunal had correctly applied the relevant principles of law and correctly concluded on the facts that the respondents had fundamentally breached the appellant's contract.

Before considering those submissions in detail, it is necessary for us to refer to the facts found by the Industrial Tribunal and for the reasons for their decision, sufficiently for an understanding of the issues on this appeal and cross-appeal.

The Industrial Tribunal set out its detailed findings of fact in paragraph 4 of its summary reasons as incorporated by reference into its extended reasons. What we set out is no more than a summary of those reasons and we of course refer to those reasons for the full details thereof. As is apparent from those findings, putting the matter in summary form, the appellant was a very long standing employee of the respondents, having worked for the company from May 1964 until she resigned on 24th November 1993, i.e., almost 30 years later. She had started as a typist and eventually became manageress of the respondents' furnishing company in Ascot. The respondents are a small family company of whom the directors are Mr and Mrs Sirl. Until July 1993 Mrs Sirl took little part in the business on the findings of the Industrial Tribunal. As was very widespread, the respondents were badly affected by the recession, with the result that in July 1992 the appellant's hours of work and pay were reduced. The Industrial Tribunal found that in July 1993, most unfortunately, Mr Sirl had to undergo serious heart surgery, and it was then that Mrs Sirl became actively involved in the business. The Industrial Tribunal found that in July or August 1993, the appellant's petrol allowance was cut. In August 1993, the non-contributory pension scheme, to which the appellant belonged and of which she was a trustee, was terminated. At the beginning of October 1993, the Industrial Tribunal found that a Mr Moor was appointed manager of the company by the respondents without the appellant being consulted. The Industrial Tribunal found that on 25th October 1993, Mrs Sirl had notified the appellant that she, Mrs Sirl, would be taking over responsibility for the respondents' accounts, which constituted a significant part of the appellant's duties. The Industrial Tribunal found that it was not explained to the appellant that Mrs Sirl intended that the appellant should devote more time to selling, nor that the take-over of the accounting function was not to take place for some months. The Industrial Tribunal also found at paragraph 4(j):

"On 17th November 1993, the applicant was approached by another furnishing company who offered her a job. After considering this briefly she accepted it and gave a week's notice to the respondents. The applicant had not, up to that stage, taken any active steps to seek alternative employment."

By paragraphs 4 to 8 of the extended reasons, the Industrial Tribunal set out many of the legal principles which are relevant to a claim for constructive dismissal. In paragraph 9 of the decision the Industrial Tribunal proceeded to make its assessment of the evidence and apply those legal principles to its findings of fact. It concluded that the actions of the respondents in:

(1) Reducing the petrol allowance;

(2) terminating the non-contributory pension scheme;

(3) promoting Mr Moor to manager; and

(4) notifying the appellant that Mrs Sirl was taking over the accounts function, amounted to a series of breaches of contract by the respondents, which had a cumulative effect entitling the appellant reasonably to regard the notification by Mrs Sirl on 25th October 1993 that she would be taking over the accounts as the last straw, so that she could have resigned there and then in consequence, and treated herself as constructively dismissed.

The Industrial Tribunal went on to take note of the delay of three weeks between 25th October 1993 and 17th November 1993, and found it to be a factor which it bore in mind.

In paragraphs 10 and 11 of the decision the Industrial Tribunal set out parts of the appellant's evidence in chief and in cross-examination as recorded in the Chairman's notes. The Industrial Tribunal then concluded in paragraphs 12 and 13 of the decision that although they were satisfied that there had been breaches of the appellant's contract, they found, taking into account the delay, that the appellant had not proved that she had resigned in consequence of the breaches of contract, although they acknowledged that she was unhappy in her job. The Industrial Tribunal put the matter in this way in paragraph 12:

"12 Having indicated that we were satisfied that the respondents' actions had breached the applicant's contract of employment, we asked ourselves whether the applicant had proved, on the balance probabilities, that her resignation was a consequence of such breach or whether, acknowledging as we do that she was unhappy in her job, it was prompted by the offer of alternative employment with another firm. In reaching this decision we take into account the delay from 25 October to 17 November and find that we are not satisfied that the applicant has proved to us, as she must, that her resignation was a consequence of breach of contract committed by her employers."

It is in those circumstances that we turn to consider the submissions made to us on the appeal and cross-appeal and express our conclusions upon them.

It is convenient to deal with the issues on the cross-appeal first. It was submitted to us, very much as a second string to the argument of the respondents and by way of cross-appeal, that the Industrial Tribunal were wrong, in some respects, in the conclusions they reached in paragraph 9 of their extended reasons with regard to the question of breach. Thus it was submitted to us that the appellant had accepted the breach relating to the withdrawal of the non-contributory pension scheme, and thereby waived her rights in respect of it; that the appointment of Mr Moor did not impinge in any way upon the appellant's position so that it could not be a breach; and that at most the prospective removal of her accounting function was no more than an anticipatory breach. Accordingly it was submitted that the last breach related to the reduction in the petrol allowance in July or August 1993, and that that was neither sufficiently important in itself to justify the appellant leaving, nor was it the last in a series of breaches justifying her leaving. With respect we must reject that argument. In our judgment here, the Industrial Tribunal were amply justified in finding that all these matters were serious breaches. The withdrawal of the pensions entitlement was clearly a serious breach and there was no sufficient evidence of waiver. The appointment of Mr Moor was plainly open to the construction that it amounted to a demotion of the appellant from her position as manageress, since it was open to the Industrial Tribunal to conclude that there was only room for one substantive post of manager in such a small company. Further, the admittedly prospective removal of the accounting function which had formed a significant part of the appellant's duties since 1988 was, in our judgment, plainly a very serious anticipatory breach. We consider that we should uphold the findings of the Industrial Tribunal relating to breach. Viewed contractually, in our judgment, clearly there were a succession of serious breaches here, no doubt forced by the recession and the very difficult personal circumstances of Mr Sirl and the financial circumstances of the business.

We turn therefore to the main issue on the appeal, namely whether the finding of the Industrial Tribunal that the appellant had not established that she had left in consequence of the breach was erroneous, in that they had applied the wrong test in law. In our judgment it is clear from case law to which we were referred, namely Norwest Holst Group Administration Ltd v Harrison [1984] IRLR 419, Walker v Josiah Wedgwood & Sons Ltd [1978] ICR 144 and an unreported decision of His Honour Judge Peter Clark in the Employment Appeal Tribunal, namely O'Grady v Financial Management Group Services Ltd EAT/1161/94, of which we were helpfully provided with a transcript, that in order to decide whether an employee has left in consequence of fundamental breach, the Industrial Tribunal must look to see whether the employer's repudiatory breach was the effective cause of the resignation. It is important, in our judgment, to appreciate that in such a situation of potentially constructive dismissal, particularly in today's labour market, there may well be concurrent causes operating on the mind of an employee whose employer has committed fundamental breaches of his contract of employment entitling him to put an end to it. Thus an employee may leave both because of the fundamental and repudiatory breaches, and also because of the fact that he has found another job. In such a situation, which will not be uncommon, the Industrial Tribunal must find out what the effective cause of the resignation was, depending on the individual circumstances of any given case.

In the case of O'Grady, to which we have been helpfully referred, the Industrial Tribunal made what we regard as a crucial finding of fact, namely that had Mr O'Grady not left the employment of the employers in that case, he would have remained and affirmed his contract with the new terms and conditions proposed by the employers. Thus because of this factor taken together with the fact that the Industrial Tribunal found that Mr O'Grady had left to find another job, the appeal tribunal held that the Industrial Tribunal in that case had asked themselves the correct question, namely, what was the effective cause of the resignation, and correctly answered it in the negative.

Looking at paragraphs 8 and 12 of the decision in this case, in our judgment, the Industrial Tribunal did not, with respect, ask themselves the correct question particularly in paragraph 12 of the decision. Instead of asking themselves whether the breach was the effective cause of the resignation, they appeared to take the view that simply because the appellant's departure had been "prompted by the offer of alternative employment" it therefore followed that she had not left in consequence of the fundamental breaches of contract. In our judgment, it is plain that had the Industrial Tribunal asked themselves the correct question, i.e., what was the effective cause of the appellant's resignation, they would have been bound to conclude, on the evidence before them given by the appellant, that the main operative cause of the appellant's resignation was the very serious and fundamental breach of her contract by the respondents. In our judgment, this is graphically illustrated by extracts from the notes of evidence at page 26 of the bundle and at page 28. Thus at page 26 the appellant said in evidence:

"I felt I was no longer part of the team. Wasn't party to discussions and I wasn't wanted. ...

I told her I felt I was being pushed out. Had tried to assist with Mr S's illness, but had been rebuffed and felt like the office junior.

Felt there was nothing of my job left to do and not much point in my hanging on. Did not offer me any additional hours at that stage."

And later on in the notes at page 28:

"I left because I was being pushed out - obvious I wasn't wanted that's why I left."

In our judgment, in the case of an employee like the appellant who had been in the self-same employment for a period of almost 30 years, the overwhelming presumption is that when a whole series of serious breaches of contract occur over a few months between July and October 1993, and the employee then leaves only three weeks later to go to another job, the effective cause of her leaving is the fundamental breach of contract. Whilst the resignation must be the effective cause of the resignation, it does not have to be the sole cause, and there can be a combination of causes provided the effective cause for the resignation is the breach. In our judgment, had the Industrial Tribunal applied the correct test laid down in the cases to which we have referred, they would have been bound to conclude, on the findings of facts which they reached and on the evidence before them, that the effective cause of the appellant resigning was the breaches of contract. Accordingly, we allow the appeal and substitute a finding of constructive dismissal. The case will have to be remitted to the Industrial Tribunal for them to decide whether the dismissal was fair or unfair in all the circumstances.