United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR R THACKER (of Counsel) Appearing under the Employment Law Appeal Advice Scheme


 


MR RECORDER LANGSTAFF QC

1. This is a Preliminary Hearing in an appeal from the Employment Tribunal sitting at Birmingham, whose Reasons were promulgated on 12 February 2001. That decision was in relation to a preliminary issue. They held the damages were limited to the period of the entitlement to notice contained in the employee's contract.
2. The facts taken from the Employment Tribunal's decision are these. The employee was a case worker. His contract of employment was funded by a third party. Funding was expected to end after some 2 years 2½ months. It was called, by him, in the Employment Tribunal, a fixed term contract. He was engaged under this contract on 23 April 2000. He resigned on 26 June 2000. The precise circumstances which gave rise to his decision to resign were not examined before the Employment Tribunal, but he claimed that his employer had acted toward him in such a way that he was justified in his resignation. In other words he claimed that he had been constructively dismissed.
3. The Employment Tribunal in their decision, having resolved what seems to us, a relatively simple issue, namely that there was such a thing as wrongful constructive dismissal, were faced with contentions that, so far as the Appellant is concerned, he was subject to a fixed term contract albeit terminable on notice. His submissions were to the effect that notice merely determined the relationship not the obligation to pay under the contract. The employer said that it was not a fixed term contract because it was terminable by notice. In any event the Tribunal determined that the measure of damages were subject to a ceiling which was the extent of the notice period. The notice period under the contract being one week within the first year of its operation, and the employee having already been paid one week's wages, this in effect shut him out from proceeding further.
4. Before this Tribunal the employee makes a number of points. Mr Thacker, who appears on his behalf under the ELAAS Scheme and for whose submissions we are very grateful, advanced a point which seemed to him to be a distillation of the arguable grounds that there were for seeking to overturn the decision of this Tribunal. He was followed, with the permission of this Tribunal, by Mr Mellors himself.
5. What was submitted to us by Mr Thacker was, summarising his submissions, and I hope without distortion, that there is a difference in the compensation to which the victim of wrongful dismissal is entitled depending on the nature of the breach of contract which is alleged. If the breach is one which occurs in what Mr Thacker described as a termination situation, for instance where an employer dismisses an employee with no, or very short, notice, then he accepted that damages would be limited to the period of the notice provided for by the contract; the employer would plainly have intended to dismiss and had in effect gone about it in a way which broke the contract. There would be no reason to suppose that the continuation of the relationship in contractual terms would not have involved the employer giving the notice he was entitled lawfully to give under the contract. That was, he submitted to us, to be distinguished from the breach of a very different term, such as the implied term of trust and confidence, as identified by the House of Lords in the case of Malik v BCCI. Where such a term was broken, he submitted, the damages which arose should be calculated on the basis of damages for that breach and should not be restricted to the notice period. He gave us an analogy of a case in which an employee, entitled to a £5,000 bonus, was in breach of contract denied it, and resigned. If he was entitled only to a one week notice period at a salary of £100 per week it was Mr Thacker's submission that he could not be restricted to £100 damages.
6. We have come to the conclusion that thus far there is in truth no arguable basis upon which this appeal should proceed. This is because we take as our starting point what is accepted to be the principle, the ordinary contractual principle, upon which damages for breach of contract are to be assessed. A person complaining of a breach of contract is entitled to be placed into the position in which he would have been if the contract had been fully and properly performed. Thus where someone is entitled to a week's notice but is dismissed without notice he is entitled to be placed into the position in which he would have been, that is, as an employee with a contract subject to one week's notice. If the employee was entitled to a bonus and was denied it and thereby resigned, he would be entitled to be placed into the position that he would have been if the contract had been fully and properly performed, that is, entitled both to a bonus of £5,000 and the sum of money of the notice period.
7. Mr Thacker continued to argue that, because of the nature of the breach not being a breach in a termination situation, a Court or Tribunal could properly have regard to what in fact would probably have happened if there had been no breach, that is, that the contract may well have continued for the duration of the anticipated 2 years 2½ months. We cannot accept that that submission gives rise to an arguable point of law. It is subject to the established authority of Laverack v Woods of Colchester in which the Court of Appeal held that the principle that an employee is entitled to be placed into the position in which he would have been had be not been wrongfully dismissed, is that the contract which would then be taken hypothetically to have governed the relationship between employer and employee would be one in which the employer could lawfully dismiss upon notice. The fact that the employer was in breach was no basis for requiring the employer to do any more under the contract than he was lawfully required to do as a minimum. Accordingly, Laverack v Woods is authority for the general principle that in any case of wrongful dismissal damages are usually limited to the extent of the notice period because that is the period within which an employer may lawfully choose to terminate the contract. Put another way, the extent of the rights that the employee has under his contract is the extent of time within which the employer is obliged to continue to perform his obligations to pay, and such other obligations that rest upon him under the contract.
8. Mr Mellor, in person, argued a slightly different point. He argued that, under this contract of employment, if he were to be put notionally back into the position of an employee, the contract could not properly be determined by giving notice until the end of the 2 year 2½ month period except in the circumstance that funding ceased. If this submission were properly arguable we would think that this case should go forward for hearing by a Full Tribunal. It depends however upon whether the contract of employment can arguably be read to provide for that result. To construe a contract of employment a Court has to have regard in the first place to its terms. If those terms are clear on the face of the contract then that is the interpretation which must be given to the contract.
9. Although there were 2 contracts of employment, which, it appears, were given to Mr Mellors, they do not differ in the essential respects save as to a matter of 2 weeks. The contract that we have been shown provides at the outset that:

"The post is dependent on funding from the National Lottery Charities Board and if funding ceases your employment would also be terminated."

The same point is repeated toward the end of the contract where it is said:

"This post is funded by NLCB and funding is expected to cease after two years three months hence:-….."

and it proceeds with a waiver in respect of various employment rights. Quite separately from those two references within the body of the contract there is a paragraph which is headed 'NOTICE TO TERMINATE'. It reads:

"After one month's service and until you have completed fifty two weeks service, notice entitlement will be one week' written notice on either side. Thereafter, it will be one month's written notice on either side."

There is no wording which indicates any restriction upon the ability of either the employer or the employee to give notice. In particular, there is nothing which indicates that the notice will only exercised in the event that funding ceases. Accordingly, we think the only sensible construction that a Court can properly give to this contract is that the notice provision is independent of the provisions in respect of funding. We think that, properly construed, this contract provides for termination upon notice.

10. Accordingly, we do not think that it is arguable that, in the event of a breach whose consequence in terms of loss to the employee was that he resigned and was no longer in employment, damages could be any more than the loss for the period within which the employer could lawfully terminate the contract, that is, the notice period. We appreciate that it would have been open to the employee to have argued that there was, quite independently of the additional week's wages that he would have entitled to under the notice period, some damage caused to him by reason of the alleged breach on behalf of the employer. That compensation he would be entitled to claim exactly as the disappointed employee in Mr Thacker's hypothetical case of the £5,000 bonus would be entitled to claim that bonus as well pay for the as notice period. However, as we read the Employment Tribunal's decision it does not appear that there was any suggestion that there was any specific loss other than the loss of the benefits of continued employment which were caused by the breach of the implied terms allegedly broken.
11. In those circumstances we cannot see that there is any arguable point of law in this appeal and it must be dismissed.