United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR DANIEL TATTON-BROWN (of Counsel) Instructed By: Mr N Mills Messrs Fynn & Partners Solicitors 70 Richmond Hill Bournemouth Dorset BH2 6JA
For the Respondents	MR GUY PRITCHARD (of Counsel) Instructed By: Mr T Ensor-Clinch Legal Adviser Retail Motor Industry Federation Ltd 201 Great Portland Street London W1N 6AB


 


MR JUSTICE LINDSAY (PRESIDENT): We have before us, by way of a full hearing, the appeal of Mr M. Silvey in the matter Silvey against Pendragon Plc. Today we have had argument from Mr Daniel Tatton-Brown, on behalf of Mr Silvey, and Mr Guy Pritchard for Pendragon, Mr Pritchard having had the advantage of having appeared below.

1. At an earlier Employment Tribunal hearing than the one with which we are concerned with, Mr Silvey's case had failed in a number of respects but it was then later realised that some of his claims had not, in fact, been ruled upon and, in consequence of that, a review was sought and was granted. That led to a further hearing on 12 April 1999 to deal, inter alia, with a pension claim based on an assertion that Pendragon, the employer, was in breach of contract and that the recoverable loss consequential upon that breach should have reflected that if Pendragon had not broken its contract as to notice Mr Silvey would have been employed a further 12 weeks, would thereby have passed his 54^th birthday and would therefore have received a larger pension than in fact proved the case. That claim failed before the Employment Tribunal. Mr Silvey appeals against that. We need only briefly set out the background.
2. By November 1997 Mr Silvey had some 38 years of service with Pendragon Plc and its predecessors, chiefly with its predecessors, who were motor dealers in Dorset. We have not seen his separate contract of employment but we have no reason to think that it prohibited the employer from paying money in lieu of notice at the point of dismissal. Nor have we any reason to think that it prescribed for Mr Silvey longer than the 12 weeks' notice which was, in effect, written into his contract by section 86 of the Employment Rights Act 1996: see section 86 (1) (c). Subsection (3) of section 86 says:

"(3) Any provision for shorter notice in any contract of employment with a person who has been continuously employed for one month or more has effect subject to subsections (1) and (2); but this section does not prevent either party from waiving his right to notice on any occasion or from accepting a payment in lieu of notice."

So on the assumption that Mr Silvey's oral or written contract of employment did not forbid payment in lieu of notice, nothing in his contract would have forbidden it, nothing in the Act forbids it either and so it was open to the employer to offer payment in lieu of notice. That came to pass, because on 6 November 1997 Mr Silvey was given a letter written by the employer which included the following:

"Dear Maurice

Further to our recent discussions, we write to confirm the following."

And Lord Davies has pointed out, in the course of argument, that what follows is something by way of confirmation of earlier discussions, but, continuing:

"It is with great regret that we must terminate your employment with immediate effect on the grounds of redundancy. In pursuance of the 1978 Employment Protection (Consolidation) Act you are entitled to 12 weeks' notice, for which payment will be made in lieu of your working. This equates to £3668.71."

The letter continues with other matters, which we need not read, but it is the case that some £5,565 of redundancy money was also paid.

3. As at that date, 6 November 1997, Mr Silvey was 54 years of age. On 18 November 1997, that is only 12 days later he would have been 55. If he had been employed during the remaining 12 weeks of the contracted notice period he would have passed 55 at the point at which his employment would have ended. He would, had that happened, have achieved pension rights which it is agreed would have been worth, as a lump sum immediately paid, £5,893.55 more than those he became entitled to and he therefore sought that further sum from Pendragon as lost pension rights in consequence, he said, of their breach of contract. The Tribunal however, ruled otherwise.
4. The case is slightly distorted because Pendragon had, by a relatively small amount, miscalculated the payment in lieu of notice; the arithmetic was wrong. They underpaid by £27 and also it was later realised that Mr Silvey had a claim based on bonus for £950. But it cannot be denied, and Mr Tatton-Brown does not seek to deny, that Mr Silvey did indeed accept the offer of payment in lieu of notice and received the payment to which he thereby became entitled. What then is the consequence of accepting an offer in respect of payment in lieu of notice? This, as it seems to us, is regulated by a case J.T. Dixon v Stenor Ltd [1973] IRLR 28 per Sir John Donaldson, as he then was. At paragraph 3 of that case, one finds this:

"Both the Industrial Relations Act 1971, in relation to dismissal, and the Redundancy Payments Act 1965 count the time of employment as being from the moment when a man starts in employment until the moment when his employment ceases. If a man is dismissed without notice but with money in lieu, what he receives is, as a matter of law, damages for breach of contract. During the period to which the money in lieu of notice relates he is not employed by his employer."

5. Sir John Donaldson continued with an exposition of the reasoning that lay behind the conclusion that during the period to which money in lieu of notice relates, the man is not employed by his employer. It follows, as far as we can see, that as Mr Silvey accepted the payment in lieu of notice his employment ceased as at 6 November 1997. He cannot simultaneously receive money in lieu of notice and claim the benefit of the continuing employment which would have occurred had he not accepted money in lieu of notice.
6. The Employment Tribunal's reasoning is, everyone agrees, not entirely clear but they were of the view that the employment ended on 6 November 1997 and, in our judgment, they were right in that view. Had Mr Silvey wished to claim that employment had continued down to the expiry of the 12 weeks of the notice, as he was entitled to, he would have had either to refuse the offer of payment in lieu or make it abundantly clear that his acceptance of it was without prejudice to his employment continuing for the remaining 12 weeks. It is an odd factor that occurs in this case that, if only he had done that, the likelihood is that Pendragon might well have said "By all means continue to be employed" because they had no particular reason to oppose that, but that was not done. This Dixon v Stenor point seems to us to be an answer to the appeal. Mr Tatton-Brown has sought to avoid the point but we find no way of escaping it. The employer was undoubtedly in breach, and that is not denied by Mr Pritchard, but the case is therefore that on his accepting the offer of payment in lieu of notice the right of the employee to assert that he continued to be employed ceased at the beginning of the period to which the payment in lieu of notice related, namely on 6 November 1997. That date was, of course, on the facts of this case, before Mr Silvey's 55^th birthday. He thus lost the right to claim that he would have been employed until after that date, not by reason of the employer's breach but by reason of his accepting to receive payment in lieu of notice in respect of that breach. The fact that he accepted £4,618 or so for a loss which, if only he had realised it, could have been quantified at a good deal greater, is unfortunate from his point of view but it does not, of itself, ground any recovery from the employer. He voluntarily accepted a basis upon which his employment ended on 6 November and hence cannot claim that he has lost the ability to claim as if his employment had continued for the further 12 weeks.
7. A quite alternative approach to the Respondents' case has been raised also by Mr Pritchard and might be headed "Remoteness". This, apparently, was argued below but did not find its way into the Decision of the Tribunal at any stage. We have been taken to Treitel on Contract and there are passages at pages 322, 323 and 324 to which our attention has been drawn and which we need to recite. Thus, under the heading of "Remoteness" and under the grander heading "Remedies for breach of contract" at page 322 we find:

"The principle that damages will not be awarded for losses which are 'too remote' is illustrated by the leading case of Hadley v Baxendale."

And then, summarising the rules in Hadley v Baxendale Treitel says:

"First, the loss must arise 'naturally, ie according to the usual course of things, from such breach of contract itself."

A little later:

"Secondly, the defendant may be liable, if the loss was such 'as may reasonably be supposed to have been in the minds of both parties at the time they made the contract as the probable result of the breach'."

A little later:

"In the law of contract a much higher degree of foreseeability is required. There must, as it was put in The Heron II, be a 'serious possibility' of a 'real danger' that the loss will occur; and references to 'foreseeability' as a test of remoteness in contract must be understood in this sense."

8. Had we needed to decide the case on the remoteness argument the Respondent would have failed. The Appellant, by Mr Tatton-Brown, argues correctly in our view, that the test in remoteness and, indeed in foreseeability, does not depend on actual knowledge, still less actual knowledge at the immediate point of contract, but imputed knowledge; that we take to be correct. Moreover, we take also to be correct his subsidiary point that remoteness is not concerned with whether the precise detailed form of loss that was suffered could have been, or was, foreseen, but whether, more broadly, loss of the kind suffered, broadly speaking, could objectively have been foreseen. Applying that test, we see that such a loss could have been foreseen. The passage of time should surprise no one, nor can it be said, in a modern commercial context, that an employer did not know that, with the passage of time, and with the consequential likelihood of further contributions by the employer and further contributions from the employee, the pension benefits would increase over time. The fact that, in this particular case, they increased by a jump on a particular birthday might not have necessarily been foreseen but that a breach of contract by an employer such as would terminate an employee's employment earlier than otherwise would the case might lead to his losing pension benefits seems to us manifestly capable of being foreseen. It was, in other words, reasonably to be supposed to have been in the minds of both parties at the time they made the contract as the probable result of the breach.
9. Mr Pritchard argues on the remoteness case that here what we are concerned with is not a direct loss applicable between the two contracting parties but that the loss was related to the activity of a third person, namely the Pension Trustees. We accept Mr Tatton-Brown's point that that is irrelevant. It is a loss nonetheless and not unforeseeable simply because a third party was involved.
10. So, had we needed to decide the remoteness question, it would have been decided in the Appellant's favour, but, coming back therefore to the Dixon v Stenor point, we have not seen an answer to it, in other words, that as Mr Silvey voluntarily accepted a basis on which his employment ended on 6 November 1997 he is unable to claim that it was the employer's fault that he was not treated as if his employment had continued beyond his 55^th birthday.
11. This is a sad result for us to arrive at; it gives none of us any comfort. Both the employer and the employee did not themselves actually foresee the result. It only came to light afterwards and, no doubt, surprised both. The Trustees of the relevant Pension Fund are very likely to have a discretion; such discretions are widely conferred upon Trustees and we do feel that Mr Silvey has suffered not an injustice, looking simply at the rule of law, but rather an unlucky turn of events which could have been avoided if only the parties had realised in more detail the legal consequences of their actions. Mr Silvey could have asked that he should work out his time, or at any rate not receive the money in lieu of notice but rather be treated as employed for the further 12 weeks and it is hard to see what loss Pendragon could thereby have suffered. Pendragon, had they been approached in such a behalf would, as it seems to us, have had no reason not to allow Mr Silvey to stay on or at least to be regarded as continuing to be employed. Only 12 days further would have sufficed to avoid the detriment which it has transpired Mr Silvey has suffered.
12. We would commend to both sides a joint approach by them to the Pension Trustees to see if, in the exercise of whatever discretion the Trustees might have, the unfortunate result of this case could be alleviated or annihilated by some discretionary payment by the Trustees but that, of course, is entirely for them but it is a thing that we would commend both sides to join to do.
13. Reverting simply to the question of the appeal, for the reasons we have given we dismiss the appeal.