United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR A SCRIVENER QC Booth & Blackwell Solicitors 76 Shoe Lane London EC4 3JB
For the 1st Respondents For the 2nd Respondents	MR P ELIAS QC Messrs Radcliffes Solicitors 5 Great College Street London S.W.1. Messrs Stephenson Harwood Solicitors 1 St Paul's Churchyard London EC4M 8SH


 


MR JUSTICE KIRKWOOD: On 23rd April 1996 Dr Hashmukhray Bhatt made a complaint by Originating Application to the Industrial Tribunal at London (North) that he had been unfairly dismissed and wrongfully dismissed by his employers, the Chelsea and Westminster Health Care Trust and the Charing and Westminster Medical School. He gave the dates of his employment as 1st July 1984 to 31st January 1996.

On 26th July 1996 Dr Bhatt made a further complaint by Originating Application in similar terms, but on this occasion naming only the Charing Cross and Westminster Medical School as the employer. He gave the dates of his employment as 1st July 1984 to 30th April 1996.

In response to the first of those applications, each respondent gave Notice of Appearance indicating its intention to resist the application. Each gave detailed particulars of its grounds for resistance. The Charing Cross and Westminster Medical School contended, inter alia, that Dr Bhatt had been employed on a fixed term contract and had waived his right to claim unfair dismissal when the contract came to an end.

Accordingly, on 5th and 6th March 1997 the Industrial Tribunal heard the case as to the waiver clause as a preliminary point. It decided unanimously that it had no jurisdiction to hear Dr Bhatt's applications. In its extended reasons, sent to the parties on 17th March 1997, the Industrial Tribunal held:

"26 Since we find on the documentary evidence as a question of law and of fact that Dr Bhatt was employed under a fixed term contract of one year or more, and we find that he signed in writing his agreement to exclude any claim in respect of rights under Part X of the Act [Employment Rights Act 1996], we have no alternative but to find that we have no jurisdiction to hear his applications."

It is against that decision that Dr Bhatt appeals.

The facts

We take the facts as found by the Industrial Tribunal. Dr Bhatt is an expert in the diagnosis and management of vitamin B12 disorders in the new born, infants, children, and adults. He began employment with the Westminster Medical School Westminster Hospitals on 1st July 1984 as a Clinical Lecturer. In 1984 the Westminster Medical School became known as the Charing Cross Westminster Medical School.

The Chelsea and Westminster Health Care Trust provides medical care and advice to patients, primarily at the Chelsea and Westminster Hospital. Because Dr Bhatt's contract of employment with the Medical School required that he would have contact with patients under the care of the Trust, he was given an honorary contract as a research assistant with the Trust.

Throughout the history, Dr Bhatt's employment by the Medical School depended upon funding from one or other outside source. In practice, that was one or other charitable source. Dr Bhatt was employed under a series of contracts.

The terms of the first contract to which the Industrial Tribunal referred were outlined in a letter dated 4th April 1986:

"It was agreed that on the expiration of your formal contract of employment you would be employed on a month to month basis according to the availability of charitable funds to support your salary. As you know, further funds have become available and I am now writing to confirm you new appointment as a Research Fellow in the Department of Child Health tenable for an initial period of three years with effect from 1 June 1995."

The letter then dealt with terms as to salary, superannuation, leave and notice, and continued:

"Because of the fixed term nature of your appointment it is a condition of employment that you waive your rights to redundancy payment or to claim unfair dismissal should your employment not be renewed after 31 May 1988." [A waiver clause.]

Dr Bhatt confirmed his acceptance of the offer of employment according to those terms.

Between then and 1992 there was a series of extensions of Dr Bhatt's employment, or re-engagements of him, for periods varying in duration from two months to three years. The terms remained the same save as to salary which increased. There were concurrent renewals of the honorary contract with the Trust. In each instance, there was a waiver clause which Dr Bhatt accepted.

It is not necessary for us, for the purpose of this appeal, to recite in more detail the terms of the letters to Dr Bhatt and acceptances by him which effected those extensions or re-engagements. It is sufficient for this purpose to go to a letter sent to Dr Bhatt on 29th July 1992:

"Further to my letter of 8 June, I write to advise you that we have now received confirmation from the Children's Medical Charity of funding of your employment as Research Fellow in the Department of Child Health for another three years. Consequently I am able to offer you an extension of employment in this capacity until 31st July 1995."

A waiver clause was attached to that which Dr Bhatt signed.

On 1st August 1995 a further letter was sent to Dr Bhatt:

"I am now able to offer you a further extension of your appointment for three months, i.e. until 31st October 1995, pending the result of your application to the Children's Medical Charity for further funding of your appointment."

A waiver clause was attached to that which Dr Bhatt signed.

The final letter to Dr Bhatt in this series was dated 16th October 1995:

"Further to my letter of 1st August 1995 in which I offered you an extension of your appointment as Research Fellow in the Department of Child Health until 31st October 1995, I am now writing to offer a further extension until 31st January 1996, this extension being funded by a grant from the Westminster Children's Research Trust. Your appointment will continue to be subject to you being granted an honorary appointment by the Chelsea and Westminster Health Care Trust for the duration of your employment by the Medical School."

In this appeal, nothing turns on that last sentence. A waiver clause was attached and Dr Bhatt signed the extension of his appointment as Research Fellow in the Department of Child Health under the terms and conditions as stated.

Dr Bhatt's employment ended on 31st January 1996.

The statutory provisions

At the time of Dr Bhatt's Originating Applications, the current legislation was to be found in the Employment Protection (Consolidation) Act 1978. The Industrial Tribunal heard argument on the preliminary point by reference to the provisions of the Employment Rights Act 1996 which came into force on 22nd August 1996. The case has, likewise, been argued before us by reference to the 1996 Act.

There is no material difference between the relevant provisions of the two statutes. Accordingly, we follow the argument before the Industrial Tribunal and before us and refer to the Employment Rights Act 1996.

PART X

UNFAIR DISMISSAL

S.95 Circumstances in which an employee is dismissed

(1) for the purposes of this Part an employee is dismissed by his employer if (and, subject to subsection (2) and section 96, only if)-

(a) the contract under which he is employed is terminated by the employer (whether with or without notice),

(b) he is employed under a contract for a fixed term and that term expires without being renewed under the same contract, or

(c) the employee terminates the contract under which he is employed (with or without notice) in circumstances in which he is entitled to terminate it without notice by reason of the employer's conduct."

S.197 Fixed-term contracts

(1) Part X does not apply to dismissal from employment under a contract for a fixed term of one year or more if-

(a) the dismissal consists only of the expiry of that term without its being renewed, and

(b) before the term expires the employee has agreed in writing to exclude any claim in respect of rights under that Part in relation to the contract.

(2) ...

(3) An employee employed under a contract of employment for a fixed term of two years or more is not entitled to a redundancy payment in respect of the expiry of that term without its being renewed (whether by the employer or by an associated employer of his) if, before the term expires, the employee has agreed in writing to exclude any right to a redundancy payment in that event.

(4) An agreement such as is mentioned in subsection (1) or (3) may be contained-

(a) in the contract itself, or

(b) in a separate agreement.

(5) Where-

(a) an agreement such as is mentioned in subsection (3) is made, during the currency of the fixed term, and

(b) the term is renewed,

the agreement shall not be construed as applying to the term as renewed; but this subsection is without prejudice to the making of a further agreement in relation to the renewed term."

"S.235 Other definitions

(1) ... "renewal" includes extension, and any reference to renewing a contract or a fixed term shall be construed accordingly."

It is clear that in Dr Bhatt's case the three year contract of July 1992, taking effect from 1st August 1992, was for a fixed term of one year or more and that Dr Bhatt had agreed in writing to exclude any claim in respect of rights under Part X in relation to the contract. Had his employment ended on 31st July 1995, s.197 would have operated so as to disapply Part X and Dr Bhatt would have been unable to sustain a complaint of unfair dismissal. The central issue in this appeal is as to the effect of the two subsequent extensions, each for three months.

The Appeal

The central core of the argument of Mr Anthony Scrivener QC for the appellant is that this appeal tribunal should follow and apply the principle that has been applied in a number of cases over the past 22 years, which, although not binding on us, are highly persuasive. The principle is that where there is series of contracts each being renewed the final contract is the relevant one to consider to ascertain the requisite fixed term. In the case before us, it is argued, the final contract is that flowing from the letter of 16th October 1995. It was three months only. S.197 does not apply.

The first in that line of authorities is British Broadcasting Corporation v Ioannou [1975] ICR 267.

Mr Ioannou was employed by the BBC on a five year contract. That was then continued for a further two years. During those two years, the Industrial Relations Act 1971 came into force. It contained provision for compensation for unfair dismissal. It allowed for exclusion of that provision by a waiver when there was a fixed term contract. In those days it had to be a contract for a fixed term of two years or more.

When Mr Ioannou's two years came to an end, he was offered and accepted a further renewal, this time for one year. It was not on exactly the same terms as before. Most importantly, a waiver clause was added. Mr Ioannou's employment by the BBC ended at the end of that final year. Throughout the period of his employment there was provision in his contract or contracts to termination on three months' notice on either side.

The BBC's case was that the one year contract was merely an extension of the earlier one so that there was, by aggregation, a fixed term contract of two years or more. Mr Ioannou's case was that the relevant contract was the final one, and it was only for one year. Mr Ioannou's case prevailed before the Industrial Tribunal and on appeal to the National Industrial Relations Court.

The Court of Appeal (Lord Denning M.R., Stephenson and Geoffrey Lane L.JJ.) decided unanimously that there had been no fixed term contract at all. A contract for a stated period which was determinable by either party giving to the other a stated period of notice in writing was not a contract of a fixed term.

Three years later, in Dixon and another v British Broadcasting Corporation [1979] ICR 281, the Court of Appeal (Lord Denning M.R., Shaw and Brandon L.JJ.) reversed the decision in Ioannou on that point.

In Ioannou the Court of Appeal also addressed the issue of law that had been argued between the parties below. Lord Denning MR at 272F:

"I do not think it is necessary in these cases to inquire whether there is a "renewal" of a previous contract of employment or a "re-engagement" under a new contract of employment. That is too fine a distinction for ordinary mortals to comprehend. Suffice it to say that you must always take the final contract which expires, and on the expiration of which he claims redundancy payment or compensation for unfair dismissal. ... It matters not whether the final contract is a renewal or re-engagement. It is the final contract alone which matters in this regard."

That has become known in these cases as "the Denning test".

Both Stephenson LJ and Geoffrey Lane LJ adopted a different approach. Each considered it necessary to distinguish between an extension under an existing contract and re-engagement under a new contract. On the facts of Mr Ioannou's case, each held that the final, one year contract, containing as it did new provisions of importance such as the waiver clause, was a new contract and not merely an extension of the old. So the relevant fixed term contract was for one year only.

We heard argument as to whether we were bound to follow the approach of the majority of the Court on this point in Ioannou. Mr Scrivener QC for the appellant argued that the ratio in the case lies in the decision on the notice point which was subsequently reversed. All else is obiter. Mr Patrick Elias QC, for the respondent, argued that Ioannou was decided on two separate and distinct points, as was recognised by both Lord Denning MR and Brandon LJ in Dixon. He did not, however, ask us to decide this appeal on the basis that we are bound by the decision of the majority of the Court in Ioannou, and we have not done so.

Open University v Triesman [1978] ICR 543 (EAT - Phillips J) was another aggregation case. The employers sought to add a period of extension of seven months which contained a waiver clause to an earlier period of 18 months which did not. Phillips J followed the Denning test. The learned judge also considered what would be the result where it wrong to apply that test:

"... it would be necessary to consider whether the extension of the original term of 18 months by an additional term of seven months was in all the circumstances of the case a new contract, or merely a variation of the original old contract."

Having then referred to the difficulty of carrying out that consideration in the case before the Employment Appeal Tribunal, Phillips J concluded:

"However, if we had to determine that question, being wrong on the first matter, then in the circumstances of this case we should reach a conclusion that there was here a new contract and not a mere renewal of the old contract."

BP Oil Ltd v Richards is an unreported decision of the Employment Appeal Tribunal in April 1983 (EAT/768/82 - Browne-Wilkinson J (P)). In the passage relied upon by Mr Scrivener, the President said:

"The crucial question is: does one look at the whole term of the original contract plus extensions as one contract or does one concentrate attention solely on the last contractual arrangement made between the parties? We can see no ground for distinguishing Open University v Triesman on that point. As a matter of comity and in the interests of orderly industrial relations, it is undesirable for us to depart from that decision and therefore we follow it."

The result in that case was to exclude the employee's unfair dismissal claim because there was, as the Court found, a valid waiver in a contract for a fixed term of one year.

Mulrine v University of Ulster [1993] IRLR 545 was a decision of the Court of Appeal of Northern Ireland (Sir Brian Hutton LCJ and MacDermott LJ) which declined to apply the Denning test to the facts of the case before it. Sir Brian Hutton LCJ:

"Therefore I consider that the proper approach is to ask the question (which can be answered without difficulty in this case): was the appellant's contract extended or renewed, (those words being given the same meaning by Stephenson LJ and Lane LJ (as he then was) in the Ioannou case,) or was there a re-engagement under a new contract?"

Housing Services Agency v Cragg (EAT/490/96) had not been reported at the time when we heard this appeal. We were referred to the transcript as handed down. It has since been reported at [1997] IRLR 380. Cragg was a redundancy payment case. HH Judge Peter Clark at paragraph 69:

"In the absence of binding authority, it would be almost impossible, as a matter of weight, to know which highly persuasive line of authority to follow. We have therefore adopted an independent approach to the issues raised, regarding ourselves solely bound by the statute. We confess that cause us no discomfort, since in our judgment each of the earlier cases overlooks two important features:

(1) that there is a difference between the provisions relating to unfair dismissal and redundancy payment waiver agreements, and

(2) the statutory definition of 'renewal'."

In respect of unfair dismissal cases, the Employment Tribunal Appeal held that:

"If there is no dismissal [consisting of the expiry of the fixed term without its being renewed (on the same terms) (s.95(1)(b); s.197(1)(a)] the parties must start again. Whether by renewal or re-engagement, if the employment continues for a further fixed term, that must be for a term of one year or more, and there must be a waiver agreement complying with s.197(4) entered into before the expiry of the new term (s.197(1)(a))."

"Pausing here, we accept the final contract test propounded by Lord Denning and followed in BP is so far as it relates to unfair dismissal waiver. Questions of renewal and re-engagement are not too difficult; they are simply irrelevant when considering unfair dismissal waiver."

HHJ Peter Clark distinguished redundancy waiver cases by reference to the different statutory provision in respect of them, and concluded that in those cases a waiver may be of effect if renewal is for a period of less than two years (the period applicable in redundancy cases) provided that the parties have (a) entered into a waiver agreement during the original fixed term and (b) entered into a further waiver agreement during the extended term.

Whilst this appeal was being heard, the Court and Counsel became aware that a further judgment of the Employment Appeal Tribunal was being prepared by Lindsay J upon the effect of s.197 in unfair dismissal cases. It was agreed that, once handed down, Counsel would make submissions upon that judgment in writing. That, in the result, has caused considerable delay in handing down this judgment.

The judgment of the Court in British Broadcasting Corporation v Kelly-Phillips (EAT/1397/96) was handed down on 25th June 1997. Lindsay J held that the opening words of s.142 Employment Protection (Consolidation) Act 1978 (now s.197 Employment Rights Act 1996), which are:

"(1) Section 54 does not apply to dismissal from employment under a contract for a fixed term of [1 year] or more, ..."

made no mention of renewal or extension.

"One cannot, merely by giving a large meaning to the word "renewal", reach the conclusion that a later contract which is a "renewal" of an earlier one is the same contract as the earlier one or is to be treated as having been made when the earlier one was or for a term which had begun when the earlier one's term had begun. ... Whatever the meaning of the word "renewal", it has no place in the construction of those opening words which are therefore to be construed by reference only to the ordinary and natural meaning of words. That throws one back to what it was that had happened ..."

In absence of binding authority, and in the face of decisions, which, though persuasive, contain conflicts, Mr Elias QC for the respondent invited us to return to the words of the statute.

S.95 of the 1996 Act addresses the circumstances in which an employee is dismissed by his employer. Subsection (1)(a) is termination by the employer and subsection (1)(c) is termination by the employee ("constructive dismissal"). Subsection (1)(b):

"he is employed under a contract for a fixed term and that term expires without being renewed under the same contract"[Our emphasis.]

Subsection (1)(b) accordingly addresses three possible circumstances:

(1) expiry of the term without being renewed: dismissal.

(2) expiry of the term and renewal under a new contract: dismissal and re-engagement.

(3) expiry of the term and renewal (extension - s.235(1)) of it under the same contract: no dismissal.

Accordingly, the term maybe renewed (extended) without a new contract of employment being made, but with the old contract continuing. That is the distinction drawn by the majority of the Court of Appeal in Ioannou. In order to determine whether or not there is a dismissal it is necessary to distinguish whether there is a renewal (extension) of the term under the old contract or whether there was a renewal under a new contract. However difficult that may be in the particular case, it cannot be avoided. But where the only change is an extension of the fixed term, that will almost inevitably be an extension under the same contract. Otherwise, the concept of "renewal under the same contract" would never be satisfied.

S.197(1) deals with the disapplication of Part X which is the part of the Act dealing with unfair dismissal. Whether the conditions of s.197(1) are satisfied only falls for consideration, therefore, when there has been a dismissal. The form of dismissal referred to in s.197(1)(a) must be the same as that referred to in s.95(1)(b).

Under s.197(1)(a), in any case where there is an extension, it is necessary to ask whether it is an extension under the same contract or not. If the renewal (extension) is of the fixed term under the same contract, there is no dismissal and the same contract remains in place. The dismissal does not occur until the term expires without being renewed under the same contract. Whether or not the waiver, which forms part of the contract, runs with and for the duration of the contract as extended depends upon its terms. It may do so: or a new waiver clause may be needed.

If the renewal is not under the same contract, there is a new contract. There is a dismissal at that stage. The waiver (if it is in place) can only apply to rights arising on that dismissal. If there is a new contract, it must contain a new waiver and the waiver applies only to that contract. The new contract must be considered entirely separately from the old.

Although the reference to a "fixed term of one year or more" may require that the original term is for one year or more, it cannot simply be a reference to the term as originally fixed. Were it otherwise the result may be bizarre. Take the case of a contract for two years with the term extended by three months under the same contract. The extension will not constitute a dismissal (s.95(1)(b); s.197(1)(a)). But if the term as extended is not treated as the relevant fixed term there will not be a statutory dismissal at all when the further three months expire.

Mr Elias helpfully draws these conclusions:

(1) In every case on the expiry of the original term of a fixed term contract, it is necessary to ask whether the term has been renewed;

(2) if it is renewed under the same contract, there is no dismissal;

(3) if it is not renewed or it is renewed under a different contract, there is a dismissal and if the claim for unfairness is to be excluded, one has to look to see if the waiver provisions are satisfied.

(4) Where there are continuing renewals under the same contract, that contract continues in place.

(5) It is only when there is a dismissal that the question of waiver has to be addressed.

(6) At that stage it is necessary to ask whether the contract which is determined was for a fixed term of one year or more, and whether before the expiry of the fixed term, the relevant waiver has been agreed.

(7) The relevant fixed period term for that purpose is not the fixed term as originally specified in the contract, but the fixed term as renewed (whether on one or more occasions).

Mr Elias would, we think, argue that the opening words of s.197(1) "for a fixed term of one year or more" allow for that term to be arrived at by aggregation of shorter terms. We incline to the view that the original term must be a fixed one of one year or more, but it is not necessary for us to decide that point since in Dr Bhatt's case the contract that we have taken as a starting point was for three years from 1st August 1992.

Mr Elias's submission to us upon the Denning test in Ioannou is that Lord Denning MR was right to say "take the final contract which expires"; but that what Lord Denning MR meant was "take the final extension" and that is wrong. Renewal was not defined in the Industrial Relations Act 1971 under which Mr Ioannou's unfair dismissal case was brought (cf. S.235(1) Employment Rights Act 1996). It was, however, defined to include extension by s.56(1) Redundancy Payments Act 1965 to which the Court made no reference. Mr Elias invited us to adopt the approach of the majority of the Court in Ioannou.

We accept the submission that a contract for a fixed term may be extended as to its term leaving that same contract in place. We accept, too, that when a contract of employment for a fixed term of a year or more is extended as to its term by a lesser period that extension alone is not to be taken as the correct point of focus for the purpose of s.197(1). The contract remains in place and the extension does not take it outside s.197(1). Nor do we find in that section foundation for the decision (obiter) of the HHJ Peter Clark in Cragg that upon an extension "the parties must start again". Nor do we find that the provision of s.197(5) that, in redundancy cases, a waiver agreement made during the currency of the original fixed term should not be construed as applying to the term as renewed (but that that is without prejudice to the making of a further waiver agreement in relation to the renewed term) does more than impose an additional burden in redundancy cases.

It causes us concern that we reach a conclusion that departs from the simplicity of the Denning test; and that, despite considerations of comity, we do not follow that line of cases. Our conclusion is, however, in line with the approach adopted by Stephenson LJ and Geoffrey Lane LJ in Ioannou; and with the approach of Sir Brian Hutton LCJ in Mulrine.

It follows that the appellant has failed to persuade us that the Industrial Tribunal erred in law in reaching the conclusion to which we have referred. Accordingly, this appeal is dismissed.