United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MR R LINSKELL (Solicitor) EEF Broadway House Tothill Street London SW1H 9NQ
For the Respondents	THE THIRD RESPONDENT IN PERSON


 


JUDGE SMITH QC: This is an appeal by the employers, the Express Lift Co. Ltd, against a decision of an Industrial Tribunal held at Bedford on 16th September 1997 of which extended reasons were sent to the parties on 7th November 1997, whereby the Industrial Tribunal held unanimously that the applicants claims for constructive dismissal failed and were dismissed, but in respect of their breach of contract claims, they were successful and were awarded £1,680 in the case of Mr Duckett, £1,960 in the case of Mr Morris, and £2,800 in the case of Mr Jobbins.

We should say before we say anything further on this appeal, that this is a difficult and, in some respects, unfortunate case, where we have been assisted by the arguments on each side.

As appears from the extended reasons, the Industrial Tribunal had to consider the three consolidated Originating Applications together. In paragraph 1 of their decision the Industrial Tribunal interpreted the three claims as comprising not only claims for unfair constructive dismissal, but also, alternatively, claims for breach of contract. Mr Duckett and Mr Morris had been employed by the company as PCB testers, whilst Mr Jobbins was employed as a manufacturing test engineer. They had all been employed for a considerable number of years as shown in their IT1's, and they were good employees; and, we would have thought, extremely valued employees right up until the time they parted company with the appellant in September/October 1996.

The Industrial Tribunal found that they each tendered their resignations on 6th September 1996 on the understanding that they were entitled upon so doing to receive payments under the appellants' voluntary redundancy payment scheme.

Putting the matter shortly, the Industrial Tribunal held:

(1) that there had been no fundamental breach of contract of the kind entitling the respondents to treat themselves as constructively dismissed within the principles laid down in the well-known case of Western Excavating Ltd v Sharp [1978] IRLR 27 to which the Industrial Tribunal referred themselves in paragraph 5 of their decision. Accordingly, the Industrial Tribunal found that since there had been no fundamental breach of contract prior to the notices of resignation, there was no constructive dismissal in any of the three cases. There is no appeal against that finding.

(2) The Industrial Tribunal held that in refusing to pay the enhanced voluntary statutory redundancy payments, as appropriately calculated by the Industrial Tribunal, the appellants were in breach of contract for the reasons set out by the Industrial Tribunal at paragraph 15 of their decision based upon their findings of fact as set out in paragraphs 9 to 14 of the extended reasons. It is that finding of the Industrial Tribunal that is the subject of this appeal.

Before we consider the arguments advanced to us, we record, as the Industrial Tribunal found and as of course was common ground that the circumstances leading up to the departure of the three employees concerned in this appeal were the decision of the appellants on 18th July 1996 to close their Northampton factory, resulting in the loss of about 480 jobs, together with the events over the next few months following the announcement of the closure. Such involved detailed consultation meetings which took place between management on the one hand, and members of the recognised trade unions on the other, which ultimately led to a collective agreement being signed on or about 18th September 1996. The Industrial Tribunal made the relevant findings relating to those meetings in the decision.

Mr Linskell representing the appellants was very critical of the manner in which the Industrial Tribunal decision was framed, submitting that it did not follow the necessary principles of contract law that were plainly relevant to a finding of breach of contract.

It is convenient for us to deal with that point in order that we can look at the substance of the Industrial Tribunal decision, because we remind ourselves that we should not upset an Industrial Tribunal decision on grounds of form alone, if the substance of the decision, properly and sensibly construed, shows no error of law.

We accept that, with respect to the Industrial Tribunal, their reasoning and their conclusions do lack, to some extent, a reference to contractual principles, e.g., offer and acceptance, and the usual basic principles of contract law. We do not say this by way of criticism of the Industrial Tribunal, since neither side before them was represented by a lawyer or anybody particularly versed in the law of contract. Without being unduly technical, we would characterise the Industrial Tribunal's decision as a finding that the appellants, by management, had made an offer to all their employees that any of them could resign on terms of the then current redundancy package, i.e., what is described in the documents as being the agreed GEC terms. This we would construe as a finding that there was an offer made to all employees, which was not binding unless and until it was accepted by a particular employee, giving notice of resignation. Such an offer, applying basic contractual principles, could be withdrawn by the employers at any time before it was so accepted by any employee. Once again, in accordance with general contractual principles, such withdrawal would have to be communicated to the employee concerned before he had accepted the offer. The Industrial Tribunal found, as we interpret paragraphs 11 to 14 of their decision, that no such withdrawal of what we would characterise as the original offer made and as found as a fact by the Industrial Tribunal in paragraph 9 of its decision, was ever sufficiently communicated to the three employees before they had given their resignation notices. Thus, the Industrial Tribunal held that the offer had been accepted by the three employees before it had been withdrawn, and accordingly, in failing to pay the voluntary redundancy payments in accordance with the GEC package, the Industrial Tribunal held that the appellants were in breach of contract. In our judgment, that is the correct and reasonable characterisation of the Industrial Tribunal's decision which we believe to be faithful to the findings of the Industrial Tribunal.

Mr Linskell, in a very powerful address to us, made a number of very detailed submissions that are all set out in great detail in his skeleton argument, to which reference should be made for the detail if necessary. It came down to this. Firstly, that there was no proper legal basis for the Industrial Tribunal finding of a breach of contact. Secondly, that it was a perverse finding on the facts for the Industrial Tribunal to have found that there was a breach of contract. That is on the assumption that they did apply correct contractual principles, which he submits they did not.

So those are the first two grounds of appeal. He submits that the matter is sufficiently clear for us to be able to substitute our own decision that there was no breach of contract and allow the appeal on that basis.

Thirdly, and finally, it is said that the appellants did not know the case they had to meet, and they were entitled to know. They reasonably did not know that the case they had to meet was a breach of contract case , since, in Mr Linskell's submission, it was not at all clear from the Originating Applications that there was ever any claim for breach of contract, and his submission is that there should have been an amendment on notice, so that the appellants could be put on notice as to the case they had to meet. He submits that if that submission were to be upheld, the appeal should be allowed on the basis that the hearing should be remitted to a fresh Industrial Tribunal.

So those were an outline, and no more than an outline, of Mr Linskell's submissions. His detailed submission are all set out in the skeleton argument. We will refer, as necessary, to those submissions as we proceed.

By way of response, we have received a very helpful, very clear, and concise skeleton argument from the three respondents, of whom Mr Jobbins has been the spokesman today. We have those arguments fully in mind of course and have taken them fully into account.

We have carefully considered the submissions made to us. We have been correctly reminded that before there can be a liability for breach of contract the contract must be clearly established in the first place. We fully accept that ordinary contractual principles must be followed by the Industrial Tribunal in considering a claim for breach of contract. Just as any civil court would, similarly, have to consider such principles when considering claims for breach of contract.

It is, we consider, extremely difficult to spell out sufficiently clear terms to amount to the necessary offer and acceptance necessary to constitute a binding contractual obligation against the context of a series of consultation meetings between the two sides of industry, management and the union representatives, over a proposed redundancy. In our judgment, in this particular case, in the light of the contemporary documents which were before the Industrial Tribunal and which have been helpfully placed before us, the documentary evidence before the Industrial Tribunal fell considerably short of establishing an unconditional offer to make voluntary redundancy payments by the appellants to anyone who left their employment. Whilst we accept that at pages 47, 49 and 51 of the appellant's additional bundle, Mr Taylor, the Group Personnel Manager of the appellants, appeared to offer all employees who left the current GEC redundancy package, in our judgment, the position altered substantially with effect from the meeting of 5th August 1996 and thereafter. At the meeting of 5th August 1996, Mr Moore, Director of Components, stipulated, in our judgment clearly, that the employers:

"... reserved the right not to allow employees to terminate their employment, for reasons of redundancy, where to do so would result in the company not being able to fulfil its obligations to its customers, its employees and comply with current legislation."

In our judgment, looking at this statement as a matter of contract law, its effect was that any original offer which had been made was withdrawn and it was made clear that it was entirely at the discretion of management whether any given employee would or would not be entitled to leave on voluntary redundancy terms, i.e., with the benefit of the GEC package.

In our judgment the further statement in the same document that:

"... subject to local management agreement, the company would release employees on the existing packages given a mutual release date is achieved."

did not have the effect of reinstating the original position since everything remained subject to a "mutual release date" being agreed, i.e., both sides had to agree that the employee could be released, so once again it was a matter for the employer's discretion.

The Industrial Tribunal appear, in our judgment, to have accepted that the appellants had altered their position substantially in the way we have described above, but they nevertheless concluded in paragraph 8 that the change was not sufficiently communicated to the three respondents and needed, in effect, to be individually communicated to them. However, in our judgment, it is beyond argument that the approved method and channel of communication, both of the original offer and of its qualification so that it became conditional upon the agreement of the employers, was by communication from management to the union representatives in the course of the consultation meetings which were being held. In our judgment, the union representatives were clearly authorised to receive such communications on behalf of the employees, including the three respondents. This was the mutually agreed channel of communication.

In our judgment, accordingly, we find that the Industrial Tribunal erred here in finding that the appellants did not communicate the revocation of any original offer they may have made. In our judgment, on the documents, it is clear that any such offer was revoked and that the revocation was properly communicated at the meeting on 5th August 1996, as reiterated at the meeting of 28th August 1996 (see page 57 of the appellants' additional bundle); and in the draft heads of agreements (see clause 1.b. at page 62 of the appellants' additional bundle).

We further find, with respect to the Industrial Tribunal, none of the findings of fact made at subparagraphs 15(2), (3) or (4) of their decision entitle the Industrial Tribunal to find any breach of contract on the part of the appellants. With regard to paragraph 15(2), we were rightly reminded of the judgment of Diplock LJ, as he then was, in the case of Lavarack v Woods of Colchester Ltd [19660 2 AER 683, page 690:

"The general rule as stated by SCRUTTON L.J., in Abrahams v. Herbert Reiach Ltd (18), that in an action for breach of contract a defendant is not liable for not doing that which he is not bound to do, has been generally accepted as correct and in my experience at the Bar and on the Bench has been repeatedly applied in subsequent cases. The law is concerned with legal obligations only and the law of contract only with legal obligations created by mutual agreement between contractors - not with expectations, however reasonable, of one contractor that the other will do something that he has assumed no legal obligation to do."

In our judgment, the finding of the Industrial Tribunal at paragraph 15(2) is inconsistent with that important principle.

With regard to paragraph 15(3), in our judgment, it is clear from the contemporary documents that no such agreement was ever secured since the termination form required the signature not only of the immediate manager, but also of the relevant functional director, which was not obtained. That it was not obtained was no doubt for the reasons given by Mr Taylor in his letters to the three respondents dated 6th September 1996.

With regard to paragraph 15(4), while we accept that it was extremely unfortunate that, on the Industrial Tribunal's findings of fact, Mr Jobbins was misled as to his position, such did not result in any breach of contract since, in our judgment, there was no contractual obligation on the part of the appellants to pay Mr Jobbins the voluntary redundancy payment, for reasons we have given above.

In our judgment, it would only be in exceptionally clear cut cases that a contractual obligation could ever be spelt out of consultation meetings held for the purposes of negotiating redundancy terms. We do not need to decide whether such a contract can ever be so found, since, in our judgment, nothing approaching a contractual promise of the kind found by the Industrial Tribunal is revealed by the relevant documents in this case. We accept that there is great force in the argument that it would undermine the purpose of such negotiations if those participating had to measure everything they said against the risk of having made an offer which if accepted could result in contractual obligation.

Accordingly, with respect to the Industrial Tribunal, we find that in this case the Industrial Tribunal erred in law in finding the appellants in breach of contract since, in our judgment, it is quite clear from the contemporary documents that there was no such contractual obligation. We allow the appeal and substitute a finding that the claims for breach of contract fail. We need not consider the appellants' alternative argument that they did not know the case they had to meet until they received the Industrial Tribunal's decision.

However, we all wish to add that we consider that the Industrial Tribunal were justifiably critical of the way in which these three employees had in fact been dealt with on termination of their employment. There is no doubt, in our view, that it was not made clear to these individual employees that if they resigned they would not get the redundancy package. There was clearly a very great deal of uncertainty, confusion and differing information being passed down to these employers, who acted in good faith, in our judgment, in all the steps they took to obtain alternative employment in the firm and genuine belief that they would be paid the voluntary redundancy package. In particular, the respondents had never been alerted to the possibility that they were key workers whom the appellants would wish to retain. They only became aware of that, as distinct from the contents of Mr Taylor's letters, during the course of the proceedings. In our judgment, despite the judgment of the Industrial Tribunal on constructive dismissal, which is not the subject of appeal, the respondent may well have had grounds for complaining that, at least at the time when it was suggested to them they could withdraw their notices of resignation and continue their contracts of employment with the appellants, there had been a breach of the implied duty of trust and confidence on the part of the appellants in not paying the redundancy payment.

We would hope and expect that these appellants, being large and responsible employers, having now achieved the principle they sought to achieve relating to their non-liability for breach of contract in the circumstances of this case, would see their way to making a realistic payment to these respondents, based upon their reasonable expectations and reflecting the overall equity of the case, especially in the light of the situation the respondents found themselves in due to the closure of the Northampton factory. We regard these employees as being particularly deserving of such discretionary payments in all the circumstances. But, for the reasons we have given, we allow the appeal and substitute a finding that there was no breach of contract.