United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MR K FLETCHER (Solicitor) Messrs Jacksons Solicitors 1-15 Queens Square Middlesborough Cleveland TS2 1AL
For the Respondent	MR PAUL CAPE (of Counsel) Messrs Tilly Bailey & Irvine Solicitors York Chambers York Road Hartlepool TS26 9DP


 


MR JUSTICE KIRKWOOD: This is an appeal from a decision of an Industrial Tribunal sitting at Middlesborough on 19th October 1995. The decision was registered on 11th December 1995.

By its decision, the Industrial Tribunal decided that Mr Tha Din had been dismissed by British Steel by reason of redundancy and declared that Mr Tha Din was entitled to a redundancy payment of £1,068.48.

I shall refer in this judgment to British Steel as "the appellant", and to Mr Tha Din as "the respondent".

The issue in the appeal is whether the Industrial Tribunal was right to find that the appellant dismissed the respondent. The importance of the appeal lies in its significance to the appellant's operations at the Hartlepool 42" Pipe Mill.

It is necessary to say a little about the background. The appellant has had a pipe mill at Hartlepool for very many years. Originally it made 20" pipes there. However, in 1968 the mill was upgraded to make 42" pipes. For some 14 years after that, the appellant's principal if not sole customer for its 42" pipes from Hartlepool was British Gas. British Gas used those pipes in its extensive programme of pipe renewals and installations.

The supply of pipes to British Gas from Hartlepool was to come to an end in mid 1982. That, also, was a period of major restructuring in the steel industry as a whole.

The appellant was able to identify a potential source of new work for the Hartlepool mill by entering the market for the supply of submarine pipes for gas and oil companies. That was a competitive market. It was necessary for the appellant to cut production costs to enable it to succeed in that market. To do that, the appellant needed to control employment costs.

The appellant entered into negotiations with all the trade unions concerned with its endeavour, including the Iron & Steel Trades Federation. An agreement was reached on 9th September 1983 which has been referred to in argument before us as "the collective agreement". By it, the appellant was to retain a core group of key employees as permanent employees. All other members of its workforce were to be made redundant and were to receive redundancy payments. Thereafter, when the appellant needed, from time to time, more employees than could be provided from the core group, it would engage temporary employees for specific contracts, the contract ending when the specific task had been performed. It was specifically agreed between the appellant and the unions that there would be no redundancy payments in relation to these specific contracts.

We were told, and there was no dispute about it before us, that this collective agreement was central to the survival of the Hartlepool 42" Pipe Mill and therefore to its continued employment of labour.

The collective agreement was implemented and was renewed periodically; and most recently, as far as is relevant to this appeal, on 9th September 1993.

The pipe mill was operated by setting the machinery to meet the requirements of the order of the particular customer. When that order was completed, the machinery was adjusted to meet the specification of the new order and so on.

The respondent first worked for the appellant in December 1985. Between then and August 1990 he worked for the appellant for varying lengths of time. Each time he was engaged upon a contract for a specific purpose ["specific purpose" contract] and ceased to work when the purpose had been performed. Sometimes he had work, sometimes he did not.

From 6th August 1990 until 2nd December 1994, however, there was work for the respondent continuously. He worked as a crane driver. Fortuitously, and fortunately for the respondent, when one contract came to an end the appellant was able to offer him another. The last in that series was signed by the respondent on 7th October 1994 to begin work on 10th October 1994. The work the respondent was engaged to do under it was completed on 2nd December 1994. He was not offered another contract. Nor, we would add, were another 87 of the 166 temporary employees who had worked on that last order.

So the respondent went to see his union, the Iron & Steel Trades Federation, about a redundancy payment. He was told he was not entitled to one. He went to see the Citizens Advice Bureau and they took up his case by letter to British Steel on 28th April 1995. On 3rd June 1995 the Industrial Tribunal received the respondent's complaint for redundancy payments.

On 3rd July 1995, the appellant sent a substantive reply to the letter from the Citizens Advice Bureau of 28th April 1995. It said:

"Mr Din was employed for a series of Short Term Contracts; each terminated by completion of that particular contract as and when each contract became discharged by performance.

We are rather surprised that Mr Din has approach the Citizens Advice Bureau about this matter as he has certainly made no representation to British Steel at all."

The key passage in the appellant's notice of appearance to the originating application was in these terms:

"The Applicant was not dismissed by the Respondents within the meaning of Section 83 EP(C)A 1978. The Applicant was engaged under a specific project contract of employment, which was discharged, in accordance with its terms, on completion of the project."

The contract signed by the respondent on 7th October 1994 was in all material respects identical to those he had signed in the past and to those signed by other temporary employees. It was, incidentally, in the same terms (except as to its temporary and specific nature) as those signed by the core group of employees.

The terms of the contract principally relevant to this appeal were:

"A number of temporary vacancies exist in certain occupations for the manufacture of approximately 28.5kms of heavy gauge pipe for the order from British Gas, Dixie, Vetco, Powergen, Mitsubishi, BP Harding and approximately 5km for SNIPS.

Following your confirmation of interest in being considered for employment on this task, we are now in a position to confirm an offer of temporary employment as a grade 3 OHC Driver in our 42" Pipe Mill, to commence on 10/10/1994.

The Employment Contract that comes into being on your acceptance of this offer is entered into for the sole purpose of completing the above work and comes to an end when the work is completed or, where this occurs earlier, the work carried out by your department or section in connection with this work has been completed.

This Contract is for the purpose stated above and is discharged by performance.

Terms and Conditions of employment applicable to this offer of temporary employment are as detailed in the Memorandum of Agreement made on 9th September 1993 between British Steel Tubes and Pipes, Hartlepool Works and the Unions representing employees in the Hartlepool 42" Pipe Mill. This document is available for perusal at the Personnel Department in Hartlepool Works."

There were then particular references to the position of temporary employees in relation to other contractual matters such as pensions, discipline and safety.

This case fell to be considered in the context of section 83 of the Employment Protection (Consolidation) Act 1978, the provision then in force,

"83 Dismissal by employer

(1) In this Part ... "dismiss" and "dismissal" shall ... be construed in accordance with subsection (2).

(2) An employee shall be treated as dismissed by his employer if, but only if,-

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

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

(c) the employee terminates that contract ..."

The essence of the issue before the Industrial Tribunal and now before us is this. The case for the appellant was that this was not, on any view, a fixed term contract so that section 83(2)(b) does not apply. The relevant provision is section 83(2)(a). But the contract was not terminated by the employer. It was discharged by performance. There was accordingly no dismissal so that the redundancy provisions of the Act were not brought into play.

The respondent's case was that there was a dismissal by the appellant in not continuing the respondent's employment, which had been continuous for over four years; in not offering him another contract. Alternatively, notwithstanding the words of the contract, it could not be discharged by performance but only upon proper notice.

Having outlined the facts of the case and reminded itself of the provisions of section 83 of the 1978 Act, the Industrial Tribunal considered the four authorities that were cited to it (and which have been cited in argument before us). They were :

Wiltshire County Council v The National Association of Teachers in Further and Higher Education [1980] ICR 455

Ryan v Shipboard Maintenance Ltd [1980} ICR 88

Brown & Others v Knowsley Borough Council [1986] IRLR 322

Ironmonger v Movefield Ltd [1988] IRLR 461

The Wiltshire case was about a teacher at a college of further education. She entered into fresh contracts each year to teach specified subjects on specified occasions in each academic session, which ran from September to the end of June. At the end of the 1976/77 session she was not offered a new contract. She made a complaint of unfair dismissal to the Industrial Tribunal, which held that she was employed on a fixed term contract and had therefore been dismissed within the meaning of the then current legislation. The employer's appeals to the Employment Appeal Tribunal and to the Court of Appeal were both dismissed.

There are two passages in the judgments of the Court of Appeal that seem to us to make the position crystal clear, but of which the Industrial Tribunal did not fully remind itself. The Master of Rolls, Lord Denning, included in his judgment this passage at page 459:

"... I would also mention an interesting paragraph in the report of Lord Donovan's Royal Commission on Trade Unions and Employers' Associations 1965-1968 (Cmnd. 3623). Paragraph 558 says:

"Most employees have contracts of employment for an indefinite period. However the need for protection against unfair deprivation of employment may also arise when the contract of employment has been entered into for a fixed period or for a particular purpose and its renewal is refused by the employer."

Although the Royal Commission recommended "a particular purpose" the legislature did not accept that recommendation. It limited the protection to contracts for a "fixed period." It did not extend the protection to a contract "for a particular purpose."

If I may seek to draw the matter together, it seems to me that if there is a contract by which a man is to do a particular task or to carry out a particular purpose, then when that task or purpose comes to an end the contract is discharged by performance. Instances may be taken of a seaman who is employed for the duration of a voyage - and it is completely uncertain how long the voyage will last. His engagement comes to an end on its completion. Also of a man who is engaged to cut down trees, and, when all the trees have been cut down, his contract is discharged by performance. In neither of those instances is there a contract for a fixed term. It is a contract which is discharged by performance. There is no "dismissal". A contract for a particular purpose, which is fulfilled, is discharged by performance and does not amount to a dismissal."

The concise judgment of Ackner LJ (as he then was) begins at page 462:

" Like the industrial tribunal, I, after some hesitation have also accepted that Mrs Guy was employed on a fixed term contract starting at the beginning of the autumn term and ending on the last day of the summer term. Had Mr Irvine been right in this submission that the contract was to perform a particular task, namely, to teach certain courses the length of which were not known when the contract was made, she would not in my judgment have been employed for a fixed term. When the courses end, her contract would have come to an end because she would have completed the task and the contract would have been discharged by performance."

The Ryan case was about an employee who worked on a job to job basis as a ship repairer. He was paid for each job and drew unemployment benefit between jobs. The Industrial Tribunal found that the employee had been continuously employed within the meaning of section 81(1) of the Employment Protection (Consolidation) Act 1978 but rejected the employee's contention that such a job was under a contract for a fixed term and that the employer's failure to renew his contract after the last job amounted to a dismissal. The Industrial Tribunal held that the employee had not been dismissed within the meaning of the Act. The Employment Appeal Tribunal dismissed the employee's appeal.

A short passage from the judgment of Kilner-Brown J in the Employment Appeal Tribunal that is relevant to the case before us is at page 93:

" On the facts of this case we are unanimously of the opinion that at the end of each job there was discharge of the contract by performance. The contract for the job came to an end when the job finished and at the of the job there was no longer a relationship of employer and employee. ..."

The next case considered by the Industrial Tribunal was Brown. That case also concerned a teacher at a college of further education. She had been employed on a series of fixed term contracts and in August 1993 was offered a written contract for the coming academic year beginning 1st September 1993. The contract contained the stipulation "the contract will last only as long as sufficient funds are provided by the Manpower Services Commission or by other firms/sponsors to fund it". In fact no such funding was forthcoming and the contract terminated on 31st August 1994. On the employee's application for a redundancy payment the Industrial Tribunal held that she had not been dismissed in law; that she had been employed for a specific purpose and the specific purpose having ceased, the contract was discharged by performance. The Employment Appeal Tribunal dismissed the employee's appeal.

Ironmonger was a decision on a completely different point although it was, incidentally, another example of a case in which a contract of employment was discharged by performance.

In the first three paragraphs of its extended reasons, under the heading 'FINDINGS', the Industrial Tribunal identified the question it had to answer. It posed the question in this way in paragraph 20:

"20 The question is therefore, was the contract brought to an end by the employer or did it come to an end automatically because, for example, the funding had been withdrawn (Brown v Knowsley Borough Council) or the repair work to a particular ship had been completed (Ryan v Shipboard Maintenance Ltd) or the building of which the employee was the works manager had been completed and handed over to the owners (Ironmonger v Movefield Ltd)."

It then answered the question it had posed in paragraph 21 and 22.

"21 In our opinion the contract was clearly terminated by the employer and therefore falls within section 83(2)(a) and the applicant is entitled to a redundancy payment. The contract of employment with which we are dealing is not the same as the cases referred to in paragraph 20. The applicant was employed to operate a crane in a large factory employing numerous people doing different jobs. It was not a contract to do work of a particular kind on a particular piece of equipment. The applicant's contract was to operate his crane on a number of tasks to enable various orders to be completed. It was a contract to work on several orders which the respondent had obtained from several different companies. The funding for the work which the applicant was required to do was not obtained from a specific third party which when withdrawn meant that no other work of that nature could be carried out. The funding of the various orders was from several customers some of whom had placed orders before and no doubt some of which would place orders in the future.

22 The work which the applicant and his fellow employees were engaged in was work which many thousands of similar employees carry out for their employers in each working day. They carry out specific tasks for their employers to produce a particular product which is then sold by the employers. The employer wins the order by the nature and quality of his product and the expertise of the management and workforce. In this case the respondents are no different to the many employers throughout the country who are carrying out a similar operation to them. They have to win orders to survive. If they do not survive they suffer financial loss. If they are unable to continue to employ all their employees they then have a choice whether to make them redundant. If they do they then are under a duty imposed by stature to compensate their employees for the loss of their jobs. To say that the respondents are entitled to evade that responsibility by stating that the contract is to carry out specific tasks would in our opinion enable the provisions of the Employment Protection (Consolidation) Act 1978 to be totally evaded. To use a modern allergy [sic] it would drive a juggernaut through the legislation."

Whilst taking care not to try to analyse too precisely the way in which the Industrial Tribunal expressed its findings, we are unanimously of the conclusion that, in this difficult case, the Industrial Tribunal misdirected itself in the application of the law and fell into error.

It seems clear to us that the Industrial Tribunal paid too much attention to the factual circumstances of the decided cases upon which it relied and insufficient to the fundamental proposition of law. Each of those cases depended upon its own facts for the construction of the contract of employment. But in each of them there is the common proposition that where the contract as construed is a "specific purpose" contract, it is discharged by performance.

Secondly, the Industrial Tribunal did not concern itself with making a finding as to what the terms of the respondent's contract were. The nearest the Industrial Tribunal came to that was in paragraph 21 of the extended reasons in these words:

"The applicant's contract was to operate his crane on a number of tasks to enable various orders to be complete. It was a contract to work on several orders which the respondent had obtained from several different companies."

With great respect to the Industrial Tribunal, we found the respondent's temporary contract to be clear and unequivocal in its terms. I have already set out the relevant terms. It was a "specific purpose" contract; and it was quite plain, and indeed, it set out that the contract was discharged by performance.

This was not a case in which the Industrial Tribunal had to construe the contractual agreement from the surrounding facts. The agreement was clearly set out in writing and both parties to it were bound by it.

In making its findings, the Industrial Tribunal did not address the clear terms of the written contract. It seems to us that, in paragraph 21 of its extended reasons, the Industrial Tribunal fell into a trap by looking at broad generalities. The tribunal then went on to infer, though not to say expressly, that the appellant's arrangements for employment of temporary employees was a superficial disguise to enable the appellant to avoid its responsibilities under the Employment Protection (Consolidation) Act 1978.

It is our unanimous conclusion that that whole approach was erroneous. Whilst we do not depart from the proposition put before us that the Industrial Tribunal was entitled to look at the realities of the employment arrangement, it should, in our judgment, have done so in the context of the collective agreement and the employment arrangements at the Hartlepool 42" Pipe Mill. Furthermore, the Industrial Tribunal seems to have overlooked that Parliament has left "specific purpose" contracts outside this part of the employment legislation. What the Industrial Tribunal seems to us to have done was to put the clear written contract on to one side and construed for itself the term of the contract as to the ending of it in the light of its own understanding of the purpose of the legislation. That was not a proper or permissible approach. The result it produced was plainly wrong.

On this aspect of the appeal, we would set aside the finding and declaration of the Industrial Tribunal and substitute for it a finding that the respondent was not dismissed because his contract was discharged by performance.

We turn to consider an argument which was not before the Industrial Tribunal but which has been raised before us by Mr Cape, Counsel for the respondent. It relates to section 49 of the Employment Protection (Consolidation) Act 1978.

"49 Rights of employer and employee to a minimum period of notice

(1) The notice required to be given by an employer to terminate the contract of employment of a person who has been continuously employed for [one month] or more-

(a) ...

(b) shall be not less than one week's notice for each year of continuous employment if his period of continuous employment is two years or more but less than twelve years; and

(c) ...

(2) The notice required to be given by an employee who has been continuously employed for [one month] or more to terminate his contract of employment shall be not less than one week."

Subsection (4A) was added to section 49 by an amendment contained in the Employment Act 1982.

"(4A) Subsections (1) and (2) do not apply to a contract made in contemplation of the performance of a specific task which is not expected to last for more than three months unless the employee has been continuously employed for a period of more than three months."

Mr Cape argues that with the exclusion from the provisions of sections (1) and (2) of certain very short-term contracts made in contemplation of the performance of a specific task, it is to be inferred not only that all other such contracts fall within subsections (1) and (2); but, more fundamentally, that any "specific purpose" contract not so excluded is incapable of being discharged by performance and can only be terminated by notice.

We have already referred to that part of the judgment of Lord Denning MR in Wiltshire that refers to the intent behind the employment legislation. Furthermore, while section 83 of the Act does extend to "fixed term" contracts it does not extend to "specific purpose" contracts. It seems to us that Mr Cape's submission, if correct, represents a major change in employment law and we would be slow to hold that "specific purpose" contracts are brought within section 83 by means of the amendment by subsection (4A) of section 49.

We are satisfied that Mr Cape's submission, though persuasively argued, is wrong. Section 49(1) refers to the notice required to be given by an employer to terminate the contract of employment. It does not apply to the provision of a contract that it is to be discharged by performance. The discharge of the contact by performance brings to an end the contractual relationship without any action by either party to it. Notice of termination is not necessary. There may, however, be other circumstances in which a "specific purpose" contract comes to an end. At some stage before it has been performed, either the employer or the employee may wish to terminate it for one reason or another. If it be that the employer has to dismiss the employee (other than summarily), then notice will be appropriate and the length of notice may be determined by section 49.

Accordingly this appeal is allowed with the consequence to which we have referred in our decision on the main part of the appeal.