United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MS P K HINKLEY IN PERSON
For the Respondents	MR D TATTON-BROWN (of Counsel) Instructed By: Messrs Irwin Mitchell St Peter's House Hearthead Sheffield S1 2EL


 


MR JUSTICE HOLLAND:

Introduction

1. This is an appeal from a decision of an Employment Tribunal held at Bedford which decision together with Extended Reasons was sent to the parties on the 29^th January 2001. In terms the decision was:

"(i) The Applicant's claim under the Working Time Regulations 1998 is dismissed upon withdrawal.

(ii) The Tribunal has no jurisdiction to deal with the Applicant's claim for unfair dismissal as she does not have the requisite length of service. That claim fails and is dismissed.

(iii) The Tribunal has no jurisdiction to deal with the Applicant's claim for breach of contract.

(iv) The Applicant's compliant of sex discrimination is dismissed because it is out of time and, further, the Tribunal does not consider it just and equitable to extend the time for the presentation of that complaint.

(v) The Applicant's complain of victimisation fails and is dismissed.

(vi) The Respondent made unlawful deductions from the Applicant's wages contrary to the provisions of section 13 of the Employment Rights Act 1996. The Tribunal is currently unable to determine the extent of those deductions and is prepared to reconvene to deal with that if the parties are unable to reach an accommodation."

The Applicant as Appellant appeals against rulings (ii), (iii), (iv) and (v) contending that such reflect errors of law. Before us she has advanced these contentions clearly and with moderation, being considerably assisted by the commendably even-handed submissions of Mr. Tatton-Brown for the Respondents, Ashtons Manufacturing Ltd, Thomas A. Ashton Ltd and Peter Cook.

2. Before tackling the substance of the appeal it is necessary first to draw attention to the way in which matters proceeded before the Employment Tribunal. Notwithstanding that rulings (ii), (iii), and (iv) were in form preliminary, going to jurisdiction, and that (as will be seen) ruling (v) covered the same ground as (iv), there were hearings of evidence in 2000 on the 28^th June, the 19^th, 20^th and 21^st September and on the 9^th and 10^th November. To save time oral submissions were sensibly replaced by written submissions and it was on the 21^st December that the Tribunal deliberated in private. We can well understand that by the time that the Extended Reasons came to be compiled it was becoming difficult to avoid a broad brush approach such as risked foregoing precision with respect to fact finding and identification of issues. As will be apparent we have found it necessary – and with the active co-operation of the parties – to look into some of the evidence that was before the Tribunal in somewhat more detail than was manifest in the Reasons.

The Facts

3. The Appellant founded a specialist manufacturing company, Little Extras Ltd, it being incorporated in the 24^th October 1996. She held all the shares; she and Mr. Vincenzo Alfano were the sole directors. In the course of time the workforce amounted to 8 hourly paid employees – she contends that she too was an employee of the limited company, as to which see later. By way of an agreement in writing of the 6^th November 1998 she transferred her shareholding to the Second Respondents with a view to the whole enterprise being taken over and incorporated in to a group of companies, the Ashton Group – such prominently including the First and Second Respondents and having the Third Respondent as Chairman. By Clause 3(D) it was provided: "(the Appellant) and Mr. Alfano shall resign their positions as directors of the Company and shall in substitution of her existing employment contract enter into the Employment Contract set out in Schedule 3 attached."
4. The consideration for the share transfer was as expressed in Clause 2.1:

"The total consideration for the sale of all the Shares shall be the sum of £20,000 (twenty thousand pounds) payable as to £6000 on Completion and the sum of £7000 twelve months from Completion and £7000 twenty four months from Completion. Payment of all further Consideration due after today's date is conditional upon the Vendor not resigning from her employment (other than for reasons which would amount to constructive dismissal) and not being dismissed for the reasons set out in clause 25 of the Service Agreement (set out in Schedule 3) or for any other reasons which would constitute sufficient reason for terminating the Vendor's employment."

5. Similarly dated are the written Terms and Conditions of Employment for the Appellant. It records the terms of her employment with the First Respondent as Director of Marketing and Sale (Little Extra). So far as material it recites:

"3. Date of Commencement of Employment: 9^th November 1998.

5. Continuity of Employment: The Employee's employment with 'Little Extras' will be treated as continuous.

21. Garden Leave: The Company reserves the right to request the Employee not to perform her duties hereunder and not to attend the Company's premises after the Company or the Employee has served notice to terminate the Employee's employment.

23(i) This contract of employment is to carry on for a minimum period of one year and otherwise terminable upon 3 months notice from either party.

(ii) The Company is entitled to fulfil its obligations as to the giving of notice, whether contractual or under statute by the payment of wages in lieu of notice as its option if it so desires."

6. By the 20^th July 1999 the Appellant was totally dissatisfied with this employment, principally because of the way in which (as she claims) she had been treated by the Third Respondent. In the overall result (again as she claims) she was driven to terminate her employment, that is, she was constructively dismissed. The ensuing chronology appears to be as follows:

a. 20^th July. She spoke to the Respondents Managing Director, Mr. David Forster, intimating an intention to resign so as to leave at the end of her first year of this employment.

b. 27^th July. Mr. Forster wrote to her: "We were disappointed to receive your telephone call on Friday 20^th advising that you would not be renewing your contract with Ashtons Manufacturing Limited and were giving 3 months notice of termination. Subject to being advised otherwise, this is assumed to be effective from 6^th August 1999."

c. 28^th July. The Appellant wrote at length to Mr. Forster setting out her grievances. She refers to "tendering my resignation" but is not otherwise specific about the notice she is giving.

d. 30^th July. Mr. Forster writes: " … I cannot accept that the company is in anyway responsible for your decision to resign. In the meantime the Company has agreed to your suggestion of 'garden leave' during your period of notice. This means that you will be available on call during your normal working hours."

e. 18^th August. In a letter the Appellant denies that it was she who suggested garden leave.

f. 19^th October. The Third Respondent writes: "With the end of your 'garden leave approaching I am writing to explain the final arrangements for your departure from Ashtons Manufacturing.

1. Your final date with the company is to be 5^th November 1999 …"

g. 25^th October. The Appellant's solicitors reply: "We understand that the final date that our client will be with the company is the 8^th November 1999 which is the date upon which her 12 month contract with the company will end as our client's date of commencement of employment was the 9^th November 1988."

h. 27^th October. The Third Respondent writes: "Your contract of employment permits the company to pay you in lieu of notice. It is therefore the company's intention to terminate your employment as at 31^st October 1999. I confirm that you will receive full pay as normal through the payroll for the month of October. Payment in lieu of the balance of your notice period to 8^th November 1999 will be paid in November … Your employment will terminate on 31^st October 1999 …"

Unfair Dismissal

7. So far as relevant the Employment Rights Act 1996 provides:

"Section 94(1). An employee has the right not to be unfairly dismissed by his employer.

Section 108(1). Section 94 does not apply to the dismissal of an employee unless he has been continuously employed for a period of not less than one year ending with the effective date of termination."

8. The Respondents contended to the Tribunal that the Appellant's employment was with the First Respondents only and that it had started on the 9^th November 1998 (as provided for in the agreement of the 6^th November 1988) and had ended in less than one year, that is on the 31^st October 1999, by operation of the letter of the 27^th October. Before us, the Appellant contended that she had alternative responses to this contention as follows:

a. Her employment with the First Respondents was a continuation of her preceding employment with Little Extras Ltd, which employment had started in October 1996.

b. Notwithstanding the documentation of the 6^th November 1998 she had actually started working for the First Respondents on the 1^st November 1998 and had been paid as from that date. Accordingly a termination as sought by the letter of the 27^th October 1999 did not deny her a year's service.

c. Her contract of employment provided for a year's service as a minimum. To that end she had orally intimated notice terminating at the year's end, which intimation was understood by Mr. Forster to signify termination as at 6^th November 1999, hence the assumption communicated in his letter of the 27^th July 1999. Whether or no that was the correct date it was common ground that she was not seeking to terminate before the end of the first year of employment.

d. The letter of the 27^th October did not terminate her employment as at the 31^st October. Either it was wholly ineffective; or it served to effect a termination as at the 8^th November, that is, at the end of the first year.

In addition the Appellant underlines the significance of a year's service – the period was relevant not only to jurisdiction but also to entitlement to the second tranche of payment for the shares.

9. The Employment Tribunal is respect of this issue found as follows:

a. With respect to the contention of 'continuous service', " … the issues of whether or not an applicant has sufficient continuous service and whether an applicant was or was not an employee at any particular time is not a matter for the parties to agree upon, it is a matter for the Tribunal to adjudicate upon. Of course the intention of the parties are matters, amongst others, that we need to consider and have regard to but at the end of the day it will be a matter for the Tribunal to determine on the facts of this particular case," see paragraph 19 of the Reasons.

b. Having considered Lee v. Lee's Air Farming (1961) AC 12, Secretary of State for Trade and Industry v. Bottrill (1999) IRLR 326 and the facts, "We have no doubt whatsoever that … the Applicant was never an employer of Little Extras Ltd but the sole owner of that business over which she had total control ... we are wholly convinced that Miss Hinkley's continuous period of employment began on the 9^th November and not before," see paragraph 24.

c. "There is no doubt that she began her period of employment with the first Respondent … on 9^th November 1998," see paragraph 17.

d. "There is no doubt in our minds but that she ceased to be employed by the First Respondent on 31^st October 1999 when she was dismissed and paid in lieu of the remaining period of her notice", see paragraph 17.

e. " … which ever way one looks at it, the Applicant has not been an employee beyond 31^st October 1999. With that being the case she has in our view, insufficient service to claim unfair dismissal," see paragraph 25.

10. Before us the Appellant challenged these findings as reflecting errors of law; Mr. Tatton-Brown sought to sustain them. Without discourtesy to either set of submissions we think that we can helpfully proceed immediately to our judgment under this first head. It is as follows:

a. We are entirely satisfied that the finding that the Appellant had been employed for a period of one year ending with the effective date of termination cannot be sustained on the findings made by the Tribunal for the reasons that follow.

b. As to the contention of continuous employment since October 1996, we readily agree that the matter was ultimately one for the Tribunal, that the cases cited were material and that it is for the Tribunal to make its decision on the facts and in the light of law, acting as an industrial jury. That said, the finding of this Tribunal is presently open to challenge on two bases. First, whilst agreement between the parties may be but a factor, it is nonetheless a matter of real potential moment when, as here, it is formally recorded in a Contract of Employment on the basis of which (as extricably linked with the share transfer contract) the Appellant agreed to sell her business and enter employment with the First Respondents – and on the basis of which the Second Respondents agreed to buy the business and the First Respondents decided to employ her. In our judgment a Tribunal reasonably evaluating this issue could not fail to investigate and make findings as to the circumstances in which Clause 5 was agreed upon, as to the significance of Clause 5 to the parties (was it a pre-requisite for her entry into employment with the First Respondents?) and as to when and in what circumstances the First Respondents decided in effect renege upon it. We agree: none such is conclusive, but how can discussion of it be by-passed? Then second, we note sustained discussion of the Appellant's erstwhile degree of control over Little Extras Ltd but an effective absence of exposition as to that which is important: when, how and in what terms did she establish (if at all) a contract of employment with that company. It is the reality of the contract that is crucial. Again therefore, we are not satisfied that the Tribunal as the jury correctly identified the factors that should bear upon their adjudication.

c. As to the stark finding that the employment with the First Respondents commenced on the 9^th November 1998 we readily acknowledge that so much is provided for in Clause 3 of the Contract of Employment, and that the written submissions of the Appellant's counsel to the Tribunal included no alternative submission. That said, the Appellant tells us that in evidence an earlier date was contended for and there is no finding as to that contention. If this point stood alone it would be ineffective but in the event of a re-hearing (as to which see below) this is a further point to be considered.

d. Turning from commencement to termination we cannot sustain the approach of the Tribunal, that is to regard the letter of the 27^th October as obviously effective to deprive the Appellant of access to the Tribunal – and for that matter, to a possible entitlement to the second tranche of the share consideration. Everything about this letter cries out for investigation and evaluation. Why it was sent? Was it perceived that if it were not sent there would have a year's employment? Was the intention to prevent her having access to a Tribunal or to the second tranche? Or both? Given the terms of the contract as to termination on notice, could it have any effect at all? If it did have effect, was it to terminate on the 31^st October (viz on 4 days notice), or on the 8^th November (viz the period during which there was to be payment in lieu of notice)? Absent evidence, we cannot make our findings; suffice it to note that we would be loth to give it any weight at all unless its provenance and construction could be carefully and fairly sustained.

Breach of Contract

11. Under this head the Appellant raised a complaint against the Second Respondent seeking payment of £14,000, the total of the two outstanding tranches needed to complete the consideration or her shares all as provided for by Clause 2.1 as already cites. Two issues were raised as effective preliminary issues: could a complaint be maintained against the Second Respondents within the ambit permitted by the Employment Tribunals Act 1996? And did the claim arise at or was it outstanding on the termination of the Appellant's employment so as to satisfy the jurisdictional provisions of Article 3 Employment Tribunals Extension of Jurisdiction Order 1994? In the event the Tribunal found for the Appellant on the first issue (and there is no cross-appeal); as to the second issue it ruled against the Appellant on the basis of an effective termination on the 31^st October 1999, that is before either of the ensuing tranches became due so as to be 'outstanding'. Per paragraph 39:

"The Applicant would argue that she was deprived of her opportunity to meet her obligations under her contract and under the Agreement being as she was dismissed before the first anniversary of the commencement of employment. However, we did not believe that that act, i.e. of dismissal, was in breach of her contract of employment because the First Respondent was perfectly entitled under its terms to take the option it did, i.e. of dismissing her and paying her in lieu of the balance of her notice."

12. This uncritical reliance upon the letter of the 27^th October renders this ruling unsustainable for the reasons already given. Further and in any event if the letter were effective to dismiss her on the 31^st October and thus deprive her of any prospects for payment of the second tranche did not a claim for damages then 'arise' so as to given jurisdiction – see the terms of Article 3(c)? Here again the appeal must be allowed.

Sex Discrimination

13. The Appellant's case was that by way of a series of incidents she was the victim of sex discrimination, essentially at the behest of the Third Respondent acting as Chairman of the First Respondents. Two preliminary issues arose. First, was the complaint as initiated by the ET1 of the 23^rd December 1999 out of time, that is, arising more than three months after the last act complained of? Second, if so would it be just and equitable to extend the statutory time limit? The Tribunal resolved both issues against the Appellant. At her instigation we have anxiously considered whether here again the rulings of the Tribunal can be impugned. With some hesitation, we think not. As to the ruling on the first issue, it readily appears to be within the scope of a reasonable Tribunal seized of the law and the facts. As to the second ruling, we have been more concerned. The issue was not easy and could have been the subject of alternative evaluation. That said, the ruling that was made cannot, as we conclude, be impugned as reflecting an error of law or perversity. The appeal under this head fails. We may add that the Appellant may not be significantly disadvantaged: a reduction in the number of issues could be forensically advantageous.

Victimisation

14. By way of her ET1 the Appellant complained of victimisation within the meaning of Section 4 Sex Discrimination Act 1975. This was considered by the Tribunal on its merits and rejected. It is manifest that that consideration was legally flawed in that it wholly failed to reflect the requirements of Section 4. However adverting to the submissions in the topic made to the Tribunal in writing, it is apparent that none such sought to reflect Section 4 and fairness to the Tribunal demands acknowledgement that it ruled on the case as it was put to it. Yet further, looking at the Appellant's case under this head as advanced in the ET1 and in these submissions, we can discern no case that could withstand analysis by reference to Section 4. In the result, we readily reject so much of the appeal as relates to this head of complaint.

Summary

15. With respect to the complaints of unfair dismissal and breach of contract we allow the appeal and we direct that such complaints be reheard by a differently constituted Tribunal. We are acutely aware of the time and expenditure already devoted by the parties and the Tribunal to these issues – is it too much to hope that, with horizons narrowed and identified, the parties, as persons involved in business can now negotiate a satisfactory solution on the basis of mutual compromise? What about a focus upon breach of contract on the premise that the letter of the 27^th October should never have been sent?