United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR J BENNETT (Representative) Messrs Rosenblums Solicitors 10/12 Church Road Gatley Cheadle Cheshire SK8 4NQ
For the Respondents	MISS WHYTE (of Counsel) Messrs Finers Solicitors 179 Great Portland Street London W1N 6LS


 


JUDGE PETER CLARK: This is an appeal by the Applicant before the Liverpool Industrial Tribunal, Mr Vuotto, which sat over four days, against that Tribunal's decision to dismiss his complaint of unfair dismissal on the grounds that he had failed to show that he was constructively dismissed when he resigned his employment with the Respondent on 19 June 1996. Extended reasons for that decision are dated 27 June 1997.

The Facts

The Appellant commenced employment with the Respondent as a salesman in October 1989. The Respondent is in the clothing business, both manufacturing and selling garments. He was described by the Industrial Tribunal as a very good salesman.

Towards the end of 1995 the Respondent's business was not doing particularly well and a Mr Egan was recruited as National Field Sales Manager for the whole country. He decided to reorganise the salesforce and he created two key posts, those of Accounts Managers, North and South. The Appellant was given the northern post.

On 9 January 1996 Mr Egan met with the Appellant concerning his new position. An annual target had been set of £1.59 million. These targets were set and the Appellant was given a list of accounts. The Tribunal found that the Appellant did not dispute either the target, nor did he make any representations about any of the accounts allocated to him. The Tribunal were satisfied that, contrary to the Appellant's case, he was not given the post in the hope that he would fail in it and they found that Mr Egan believed the Appellant was capable of the task assigned to him.

The Tribunal found that the Appellant, although undoubtedly capable as a salesman, was a poor administrator who disliked close control. He did not meet his first quarter's target. There followed a number of memoranda from both Mr Egan and Mr Chan, the Sales Director, concerning his performance and criticising it.

The matter culminated in a disciplinary hearing which was convened for 10 June 1996. The Appellant was given notice of that meeting by a fax dated 7 June, but at that time he was on holiday and 10 June was his first day back at work after a holiday. The Tribunal found that Mr Egan was genuinely and reasonably concerned about the Appellant's performance and that he called the Appellant to that disciplinary hearing in good faith.

At the disciplinary hearing, so the Tribunal found, Mr Egan read out a summary of each bundle of documents which he used at the hearing, but of which the Appellant did not have any advance warning. As a result the Appellant was flustered in his replies to the allegations being put to him by Mr Egan in an assertive manner. Had he been given a fuller opportunity he might have been able to provide a better explanation than he did. Those explanations that he provided on the day were not convincing and the Tribunal found that at no time has the Appellant ever accepted any of the criticisms made of him.

The meeting was effectively adjourned. Prior to the close of the meeting the Appellant was told that in the absence of a satisfactory explanation from him, he would receive a final warning. The Appellant said that Mr Egan did not like him and wanted him out of the business. Mr Egan, truthfully as the Tribunal found, rejected this assertion. At the meeting the Appellant said that he would not accept a warning. He was then advised to go to lawyers and to consider whether he wished to resign.

It was the Respondent's case, rejected by the Tribunal that the disciplinary hearing was adjourned until 17 June and that if the Appellant did not resign before that date he was to provide his full explanation to the charges made against him by that time. The Tribunal also rejected the Appellant's case that the Respondent was in breach of contract in taking disciplinary proceedings against him, or by the manner in which they were conducted, up to the conclusion of the meeting on 10 June.

Following that meeting the Appellant discarded the documents which the Respondent had given to him and never returned to work. On 11 June he wrote to Mr Chan saying:

"... I have taken legal advice and it transpires that I am entitled to one weeks pay for every year of continuous employment. I therefore calculate 8 weeks in lieu of notice. Subject to the above being satisfactory I will proceed as discussed."

That letter was taken by the Respondent to be a conditional resignation and the Tribunal found that that was a reasonable assessment of it.

On 13 June the Respondent replied stating that the Appellant was entitled to six, not eight weeks notice. On 14 June the Appellant began new employment at a lower salary but without notifying the Respondent of that fact.

On 16 June he wrote to the Respondent indicating that he was not willing to resign his position. On 18 June Mr Chan replied in these terms:

"In reply to your fax dated 11th June which was sent to us on 16th June 1996, we would like to make our position absolutely clear that the company has never demanded that you resign. At the disciplinary hearing we discussed the options available to you.

You are invited to give a full explanation of the matters raised at the hearing by 17th June 1996.

The company will consider to give you a final warning, and suggest you come back to the company with acceptable rectification proposals.

You may resign and leave with a good reference.

We have given you full opportunity to state your case in the disciplinary hearing conducted by both your immediate manager and myself on 10th June 1996 and (thereafter). In view of your poor work performance and no acceptable explanation having been given, we have made our decision on giving you a final warning. This letter serves as a final written warning letter. I urge you to discuss your rectification proposals with your immediate manager by this Friday, 21st June 1996. In the absence of receipt of your proposals we shall be forced to lay down what we would reasonably expect you to achieve by 15th July 1996. If there is insufficient improvement by 15th July 1996, we may review the situation and this may lead to your employment being terminated. If you wish to appeal against this decision, you may do so in accordance with the company's disciplinary procedure, a copy of which is enclosed herewith.

We understand you have not carried out your normal duties after the hearing. As you have not been suspended, there is no excuse on not performing your normal duties."

Upon receipt of that letter the following day, 19 June, the Appellant replied in these terms:

"Further to your recent communication, I am writing to you to offer and confirm my resignation from Easey Garments UK Ltd. The above is subject to your initial offer of 6 weeks salary in lieu and the use of the car for one month, plus my entitlement of outstanding holiday pay. As there is a certain amount of outstanding detail to finalise such as samples/record cards etc., could we set a date, possibly in three weeks time for me to bring all the above to Easey House. This will give you one week to organise my final settlement."

He then deals with pension matters.

The Issues

The Industrial Tribunal identified four different ways in which the Appellant put his case that there had been a fundamental breach of the implied term of mutual trust and confidence to be found in his contract of employment:

(1) He was promoted in December 1995 with the express intention that he should fail in the new post.

(2) The disciplinary hearing was set up with the intention of dismissing him; alternatively, in the hope that he would be driven to resign.

(3) The disciplinary hearing was conducted with the express intention of goading the Appellant into resigning.

(4) At the conclusion of the meeting on 10 June 1996, the respondent told him that if he declined to resign then he would be dismissed. He contended that he was given the following three options:

"You can resign and we will give you a good reference, alternatively we can dismiss you and we will give you a bad reference, thirdly we will give you a final written warning. You can have a month to prove that you can do the job and then you will provide a report to the Board of Directors on 15 July."

The Industrial Tribunal Findings

The Tribunal found that the disciplinary hearing was held in good faith. Secondly, they found that there was no breach of contract, either in the Respondent holding the disciplinary hearing of 10 June, nor in the way in which it was conducted up until the conclusion of the meeting on that day.

In the circumstances they rejected the four different ways in which the Appellant had put his case of constructive dismissal. However, they went on to find that the Respondent had been in fundamental breach of contract by the imposition of the final written warning by their letter of 18 June, in circumstances where they had unilaterally concluded the disciplinary process without giving the Appellant a sufficient opportunity to put his case or to put forward mitigating circumstances as to the disciplinary penalty to be imposed.

However, and this is the critical finding by the Tribunal, at paragraphs 2.20 and 2.21 they said this:

"On 19 June 1996 the Applicant replied confirming that he would resign. He spoke of certain matters in connection with the termination of his employment. He gave no reason for his change of heart. His written statement does not refer to the reason for his resignation. In cross examination he told us that he had resigned because he felt the respondent had bulldozed him into a corner.

In all the circumstances of the case we have concluded that the applicant has failed to prove that the respondent's breach of contract was the reason he resigned. He is a proud man. We are inclined to the view that the true reason was that he would not accept any criticism of his conduct or performance."

In those circumstances the Tribunal concluded that the Appellant had failed to make out a constructive dismissal and on that basis the claim failed.

The Appeal

Mr Bennett takes two points in this appeal. First, he contends that the Tribunal's finding that the Respondent was not in breach of contract in taking disciplinary proceedings against the Appellant and particularly in the manner in which they were conducted up to the close of 10 June meeting was perverse.

We are reminded by Miss Whyte of the hurdle faced by an Appellant in arguing perversity: see Piggott Bros & Co Ltd v Jackson [1991] IRLR 309, Stewart v Cleveland Guest (Engineering) Ltd [1994] IRLR 440. We do not have the Chairman's notes of evidence in this case. In particular, questions of whether or not there is a fundamental breach of contract are essentially questions of fact for the Industrial Tribunal: see the Court of Appeal decisions in Pedersen v Camden London Borough Council [1981] ICR 674 and Woods v W.M. Car Services (Peterborough) Ltd [1982] ICR 693.

In our judgment the Appellant fails to mount that hurdle in this case. What the Industrial Tribunal was finding, we think, was that the procedural irregularities at the disciplinary hearing did not crystallise into a fundamental breach of contract until the Respondent imposed a sanction of a final written warning without giving the Appellant a proper opportunity to put his case. There is no cross-appeal against that finding, and we shall proceed on the basis that it was a permissible finding to Mr Bennett's second ground of appeal.

That ground may be formulated in this way, stripping aside arguments directed to questions of fact. Here the Industrial Tribunal found that the Respondent was guilty of a fundamental breach of contract; the following day the Appellant resigned and there was therefore no delay. The crucial finding of the Tribunal, on which the Appellant's case failed, related to the lack of causal connection between the breach and the resignation.

Mr Bennett accepts the dictum of Sir John Arnold in Walker v Josiah Wedgwood & Sons Ltd [1978] ICR 744 in which he said:

"... it is at least requisite that the employee should leave because of the breach of the employer's relevant duty to him, and that this should demonstrably be the case. It is not sufficent, we think, if he merely leaves ... . And secondly, we think it is not sufficient if he leaves in circumstances which indicate some ground for his leaving other than the breach of the employer's obligation to him."

However, that must be read subject to the qualification that it is for the Industrial Tribunal to discern the effective cause of the resignation and whilst the repudiatory breach as found must be the effective cause, it need not be the sole cause: see Jones v F. Sirl & Son (Furnishers) Ltd [1997] IRLR 493.

Here, he submits, the Industrial Tribunal has misdirected itself in law by looking for the reason for the Appellant's resignation, as if it were determining the reason for dismissal. It did not consider the possibility that there was more than one cause of the resignation, and that the relevant breach was the effective cause.

We remind ourselves that we must not subject Industrial Tribunal decisions to fine toothcombing. We take into account Miss Whyte's powerful submission that the Industrial Tribunal was entitled, on the facts as found, to draw a distinction between the Appellant's refusal to accept any criticism and the breach found by the Tribunal, and that in any event the breach found was not one of the ways in which the Appellant put his case below. However, we are not satisfied that the Industrial Tribunal did ask themselves the correct question, as identified above, and for this reason we have concluded that the decision cannot stand.

The appeal is allowed and the Industrial Tribunal's decision will be set aside.

That leaves the question of what should be done in this case.

Mr Bennett submits that the matter should be remitted to a fresh Industrial Tribunal for a re-hearing. Miss Whyte optimistically submits that it should go to the same Industrial Tribunal.

We think that for the obvious reason that the appearance of fairness requires that the matter should be a heard by a new and different Tribunal, that we should take the course suggested by Mr Bennett and accordingly we shall remit the case to a fresh Industrial Tribunal for a complete re-hearing.

A complete re-hearing means precisely that. The new Industrial Tribunal will not be bound by any of the findings made by the first Tribunal. It will be necessary for the new Tribunal to decide:

(1) What is the relevant term or terms of the contract?

(2) Do the facts as found by the Tribunal constitute a breach of contract by the Respondent, identifying the precise breach or breaches?

(3) Was the breach a repudiatory or fundamental breach of contract?

(4) If so, was the breach so found the effective, although not necessarily the sole, cause of the Appellant's resignation?

(5) If so, did he delay in accepting the breach so as to affirm the contract?

applying the guidance contained in the Court of Appeal decision in Western Excavating (EEC) Ltd v Sharp [1978] ICR 221 as further explained in the later cases.