United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR J BACON (of Counsel) Messrs Frank Allen Pennington Solicitors 6/7 Regent Terrace South Parade Doncaster S Yorks DN1 2EE


 


MR JUSTICE LINDSAY: We have before us as a preliminary hearing the appeal of Network Communications Systems Ltd in the matter P. Hill against Network Communications Systems Ltd.

On 6 August 1997 and 2 September 1997 there was a hearing before the Industrial Tribunal at Newcastle, under the chairmanship of Miss Thomas, and that hearing led to a determination which was promulgated to the parties on 29 January 1998. It may be that those Extended Reasons of 29 January 1998 had been preceded by some Summary Reasons but, if that is the case, then no point is taken on any difference between the two.

The decision of the Tribunal was that the claim for unfair dismissal brought by Mr Hill (it was a case of constructive dismissal) failed. Continuing with the reserved decision:

"The claim under Section 13 of the Employment Rights Act 1996 is well founded and it is ordered that the respondent pay to the applicant the sum of £28,438."

That sum was later changed, upon a review, to the £40,440 odd.

It is only the second part, the quantification of liability, that is put in issue in this appeal; the nature of the payment that was or was not due to Mr Hill from Network, was commission. The terms upon which the commission was to be paid and the meaning of those terms was very much a matter that was investigated by the Industrial Tribunal. It heard evidence from Mr Hill and on behalf of Network Communication and it determined that the terms of Mr Hill's employment were those set out in a letter of 13 September 1994.

On page 5 of our papers, paragraph 1 of the Extended Reasons, the Industrial Tribunal said:

"The respondent set out the terms of the engagement of the applicant in a letter dated the 13 September 1994."

On page 6 of our papers, paragraph 3 of the Extended Reasons, on the last lines of the page, the Industrial Tribunal said:

"The letter of appointment of the 13 September set out the terms of engagement."

The employer had asserted, and was recognised by the Industrial Tribunal as having asserted, that the terms of the arrangement between it and Mr Hill were different. On page 7 of our papers, paragraph 3 of the decision, the Industrial Tribunal says this:

"The respondent asserted before us that the terms agreed between him and the applicant were different. He said basically that commission would only be paid to the applicant after the applicant had 'earned his keep', in other words that allowing for the cost of employing the applicant in the first place, commission would only be payable on the profit made over and above that on sales secured by the applicant. For this to be workable it would be necessary to wait for company accounts and figures at the end of each accounting period (which is yearly) in order to ascertain what that profit over and above the cost of employing the applicant had been. We can find no way of construing the letter of appointment to mean that. Further, the words 'payable on invoice settlement' [and those are words found in the letter] are clearly completely at odds with that. They indicate the time at which commission will be paid and throughout the year, particularly towards the beginning of the year, invoices settled reasonably promptly are going to be to hand of course long before the figures for the period are available to support the calculations the respondent said had to be made."

We might add that that last point was not a point plucked out of the air by the members of the Tribunal, as members of an industrial jury, but was amongst points that were considered and advanced in the evidence. Notwithstanding that the Industrial Tribunal recognised that the employer had asserted terms other and different to those of the letter of 13 September, the Industrial Tribunal reverts to the letter and in paragraph 5 they say this:

"In the light of the terms of the letter of the 13 September 1994, and on the basis of the evidence, [and we need to emphasise those words] we find that the terms in respect of commission on which the applicant was employed are those set out in paragraph 2 of the letter of engagement as interpreted by the applicant [and again it would be prudent to give emphasis to those last words]. Nor do we find that those terms were effectively varied or superseded by the terms offered to him in November of 1996. It follows that sums by way of commission have been earned by the applicant during his employment on sales which he has secured and failure to pay those commissions when due constitutes a deduction from his remuneration which he has not authorised."

So that, after hearing evidence and after paying attention to its basis, the Tribunal concludes that the terms are those of the letter and, moreover, only the terms of the letter and, so far as concerns interpretation, the terms of the letter are to be as interpreted before the Tribunal by the Applicant.

So it followed from that that a commission had to be calculated. Mr Jeffrey Bacon, who has appeared before us on behalf of the Respondent below, the employer, the Appellant here, and has put before us a powerful argument, namely that the Tribunal did not sufficiently take into account, and did not sufficiently give reasons for the rejection, of evidence on the company's part that there had been terms agreed after the letter of 13 September 1994 and before Mr Hill actually had began to work for the company. He says that the Tribunal arrived at its conclusion as to the terms upon which Mr Hill was engaged in relation to commission simply as a matter of construction of the letter and that they did not take into account and deal with the evidence of the kind that I have mentioned.

One can see from the way in which the Tribunal deals with matters one by one that there is some force in that argument. It can be argued that in their paragraph 3, they, at first blush, could be said to be rejecting the Respondent's, the employer's, version of what the terms were simply as a matter of construction of the letter and that, of course, would not be a proper thing to do because first one has to determine what the terms are before determining, as a matter of construction, what they mean. It would plainly have been preferable and more logical if the reference of the Industrial Tribunal "and on the basis of the evidence" that we found in paragraph 5 had preceded the analysis in the latter part of paragraph 3. But it cannot be overlooked that in paragraph 1, as we have already cited, they had said that the Respondent set out the terms of the engagement in the letter and that in paragraph 3, they had said that the letter of 13 September set out the terms of the engagement. Notwithstanding that it would have been preferable that paragraph 5 and its reference to the evidence had preceded paragraph 3, we cannot conclude that the Tribunal determined the terms of the agreement simply as a matter of construction, given their clear wording "and on the basis of the evidence" and moreover "as interpreted by the applicant".

Mr Bacon has drawn our attention to the familiar case of Meek v City of Birmingham District Council [1987] IRLR 250 and also, as a further example of the same type of thought, Levy v Marrable & Co Ltd [1984] ICR 583, a decision of the EAT, then under the chairmanship of Waite J. Without citing fully from Levy v Marrable it is appropriate to go to page 587 of the judgment, which deals with an argument not dissimilar to the one advanced to us by Mr Bacon:

"What is our duty in those circumstances? We think the principle involved is the following: where there has been a conflict of evidence at the hearing before an industrial tribunal on a significant issue of fact, then the industrial tribunal's finding (i.e. their acceptance or rejection of such evidence) must be made plain one way or the other. Express words are not necessary."

Moving on a little later:

"Failure by the industrial tribunal to provide that indication expressly or by reasonably clear implication from the overall language of their decision, amounts to an error of law."

And later still, but still on page 587:

"... the industrial tribunal failed to make it sufficiently clear, on a plain reading of their decision as a whole, whether they accepted (and if so to what extent) or whether they rejected the evidence on the one side or the other."

In that particular case the Industrial Tribunal was held to have fallen into error. But here, it seems to us, that although, no doubt, it would have been preferable for the Industrial Tribunal to set out each different version of the oral arrangements, if any, that took place between the letter of 13 September 1994 and Mr Hill beginning the work for the Respondent company and even if it would have been preferable, no doubt, for the differences to be examined and the preferences for one side or the other to be dealt with in detail, so far as concerns the finding, (to use Levy v Marrable term, "their acceptance or rejection of such evidence must be made plain one way or the other") it seems to us incontrovertible that having said "and on the basis of the evidence" the Industrial Tribunal here necessarily, by implication, if not by the fullest form of express statement, must have preferred the evidence of Mr Hill. Mr Hill's evidence was that the terms as to commission were those of the letter and nothing but the letter and moreover, he gave evidence on the construction of the letter, its interpretation, and his views were upheld. So that first point, it seems to us, fails.

It is not an unfamiliar situation in which less than comprehensive material is put before an Industrial Tribunal. They have to do the best they can, very frequently, with whatever is put in front of them. It is certainly not open to a party who has failed to adduce what might have been more detailed material evidence then to complain that the Industrial Tribunal acted without it.

Here, the Industrial Tribunal was given some information as to the quantification of commission. Looking at the top of our page 8, it is part of paragraph 6 of the reasoning:

"The respondent estimated, [and notice it is the respondent, the employer, that is here having its evidence stated] when asked to do so, that the applicant's contribution to turnover in terms of sales secured was some 5% in that year. He stated that it was some 50% in the following year (year ending 1996) and that some 66.6% in year ending 1997. In the year ending 1997 account has to be taken of the fact that the applicant was not there for a full year."

Going on into paragraph 7, the Industrial Tribunal said:

"The applicant produced a list of sales invoiced by him which he asserted were attributable to him during 1996 and during his time in 1997. He had kept none for 1995 because he expected his start to be slow. The respondent produced final accounts for the years ending 1995 and 1996 but could only give an estimate of turnover for 1997. These pieces of evidence together, both the verbal evidence and the list of accounts, were the best evidence that we had of sales achieved and the applicant's contribution in those years. On the basis of that evidence the commission award is made up as follows."

And on that basis the Industrial Tribunal first came to the figure that we read out, of £28,438 odd. However, Mr Hill sought a review of that and it might be noted that that review would have been an opportunity to Network to challenge the basis on which the computation had been done. But it was Mr Hill that sought the review. That review was granted and the arithmetic was changed so that ultimately the award in Mr Hill's favour was increased to £40,440 odd.

The principal ground that the company appeals upon is that the Industrial Tribunal, in concluding as to the terms upon which commission had to be paid, failed to have regard to the evidence of the discussion which they said took place after the letter of 13 September but before Mr Hill began to work and also, discussions in September or thereabouts in 1996, which related to the obligation, if any, to pay commission from the very start of Mr Hill's employment.

We have mentioned that three times the Industrial Tribunal concluded that it was the letter that was the only basis. That is a finding which the Appellant rightly describes as a critical issue, but, given the words to which we have drawn attention and on the basis of the evidence, it cannot be taken to have been a conclusion that was one only on construction. The fact that there had been contrary evidence was recognised and, as it seems to us, the Meek v City of Birmingham test, indeed, the Levy v Marrable test is satisfied and so, as we mentioned on that point, we discern no error of law.

A point that has emerged in argument today was that the company had averred that Mr Hill in September or October 1996 had agreed that no commission was due as at that date. That had been averred in a full IT3 headed "Grounds on which the Respondent intends to resist the Application". It had been said, at paragraph 7 (c) "The Applicant accepted that there was no commission due", but that of course, was merely an averment and we have been taken to the written statement of Mr Paul Bennett, on behalf of the Respondent company, and to notes of evidence and we are unable to see that there was evidence given in support of an allegation that Mr Hill had accepted that there was no commission due.

The Tribunal in its paragraph 7, in a passage we have quoted, had said "Nor do we find that those terms were effectively varied or suspended by the terms offered to him in November 1996". It would be curious if, expressly dealing with whether the arrangements were superceded by November 1996, the Tribunal had not dealt with an alleged supercession in October or September 1996 and, of course, the Tribunal did go on to find that there was commission due in respect of the period for which an agreement that no commission was due, had it been made, would have applied.

Given that the averment seems to have had no material evidential support, certainly no clear one, given the findings of the Industrial Tribunal about no supercession by November 1996 and of its finding that there was commission due, then if there had been evidence in support of the averment then plainly it must have been rejected by the Tribunal and again, the Levy v Marrable test would have been satisfied. We do not see anything in that point on the Appellant's behalf.

The remaining point taken in his well ordered argument by Mr Bacon is that the Tribunal should not have gone on to deal with quantum, given the inadequacy of the material that they had on the subject.

It is plain from the notes of argument put in front of us - and we should say that the notes which we have looked at are well prepared notes of proceedings, quite as full and in many respects, more full than one not uncommonly encounters as taken by the Chairman - there is no note of any request for an adjournment. True it is that the employer's representative on that day did say, in his or her speech, that there was insufficient evidence before the Tribunal to arrive at any final figure as to what the commission should be. That, of course, was on the basis of the case if the Applicant's evidence happened to be preferred over that of the employer, which turned out to be the correct basis. But there is no indication that an adjournment was sought and it is to be remembered that it was the Respondent employer's own evidence that here provided such basis as there was for a computation. There is no hint that there had ever been any agreement or direction earlier that only quantum should be dealt with on the day and there was plainly some evidence from which an assessment could be made.

We fail to see why the Respondent company did not, there and then, seek an adjournment if it felt there was no just basis upon which compensation could be quantified and, of course, had it sought an adjournment and had it been refused, then there could have been an appeal against that refusal and the matter could have been more thoroughly gone into. As it was, the Tribunal saw fit, on the material that it had, to proceed to a judgment on the quantum.

In the absence of an application for an adjournment, it may be that the Industrial Tribunal was not only entitled but even obliged to go forward to a judgment on quantum. The very fact that the Tribunal did come to a judgment on quantum does not, in our view, provide any basis for a successful or arguable appeal on the Appellant's behalf.

So far as concerns error in computation or inadequacy of figures, the Respondent company, the Appellant before us, says that there had been an agreement in respect of bad debts and some other matters that should have been taken into account in the computation of commission. But the Industrial Tribunal mentions no such terms as having been found to exist and it is to be remembered that the eventual version of the contract, which they find to exist, is not merely the letter of engagement and only the letter of engagement, but the letter of engagement "as interpreted by the Applicant".

There is no finding of terms in relation to bad debts or the other matters which the employer criticises. What the company is here doing is assuming a contractual term in its favour and then complaining that that contractual term has been overlooked. But the Industrial Tribunal held that it was the letter alone, as interpreted by the Applicant, that was the correct basis and we do not feel able to discern a point of law in the computation which offends that basis, namely that it was the letter alone as interpreted by the Applicant that was the proper basis.

The Industrial Tribunal's computation was inescapably rough and ready, but there is no error of law inherent in a rough and ready computation, at all events when that is the only thing that can be done in the light of such material as is put in front of it.

Notwithstanding Mr Bacon's powerful argument, we think this is a case that should not go to a full hearing. Indeed, up to a point, the fullness of Mr Bacon's argument is almost a factor against it going further, because we cannot see that there is any material which might be relevant at the full hearing, were there to be one, which would be likely to improve the Appellant's case, given here that we have already very full notes, seeming to be accurate and certainly not, in any way, challenged by the employer, of what was done and said at the hearing.

Accordingly, notwithstanding his excellent argument, we decline to let this matter go further.