United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR D MEREDITH (Representative) Peninsula Business Services Ltd Riverside New Bailey Street Manchester M3 5PD
For the Respondent	NO APPEARANCE OR REPRESENTATION BY OR ON BEHALF OF THE RESPONDENT


 


HIS HONOUR JUDGE J MCMULLEN QC

1. This case is about breach of contract and the time limit for presenting such a claim. The judgment represents the views of all three members, who pre-read the relevant papers. We will refer to the parties as Applicant and Respondent. It consists of two appeals arising out of the decisions of an Employment Tribunal Chairman Mr S Richardson sitting alone on 4 October 2002 (liability) and 20 December 2002 (remedy and costs).
2. The Chairman heard a claim of breach of contract brought by the Applicant. The Applicant was represented by counsel; the Respondent by Mr Meredith, and again today. The Applicant is content to rely on the Tribunal's decision and is not represented today. The Respondent denied the Applicant's claim for commission over a period of years.
3. The essential issue for the Chairman was to decide whether the Applicant was entitled to commission, and, if so, how much. He decided that the Applicant was entitled to commission but not to the extent that the Applicant had claimed. The finding was in respect of the years 1998 and 1999. At the remedies hearing, that was quantified as being £11,000, after making a necessary deduction. Costs were awarded against the Respondent of £2,500 because of unreasonable conduct prior to the oral hearing in that the Respondent had failed to obey orders sent with penalty notices, and by that failure had caused the elongation of the procedings from one day to a second day. Against those three decisions, the Respondent appeals.
4. Directions sending this case to a Full Hearing were given by Judge Burke QC and members, on 6 June 2003, when the Judge gave a short judgment. He said at paragraph 3:

"The factual background can be very shortly stated. Mr Lynch was employed as a salesman by the employers who carry on a painting and scaffolding business. He was eventually made redundant in February 2002; he claimed that under the terms of his contract, the employers were obliged to pay, but had not paid commission in respect of business which he generated under the terms of a document signed by Mr Thomson, the employer's managing director. The employers disputed that there was any contractual entitlement. Alternatively, they said that, if there had been any contractual entitlement, it came to an end at the end of 1999, when it was bargained away in return for a substantial salary increase plus bonus; and the Tribunal eventually found for the employee up to the end of 1999, but no longer."

5. The Employment Appeal Tribunal indicated that a legal issue had been raised concerning the applicability of Hendricks v Lewden Metal Products Limited EAT/1181/95 to the circumstances of the case (that deals with limitation and we will turn to it in due course). Because of that authority, which was binding upon the Chairman, Judge Burke hoped that there would be full argument on both sides at a Full Hearing and for that reason no doubt constituted this as a three member Employment Appeal Tribunal when otherwise, pursuant to the Employment Rights Act 1996 Section 28(4) the case would have been heard by a Judge alone.

We heard an application to amend the Notice of Appeal on the liability decision to include a claim for perversity, which we dismissed. We did so on the ground that a full opportunity was given at the Preliminary Hearing for the amendments to be made if necessary and the order made it clear that if there were to be disputes about the evidence, they would have to be the subject of an agreement and, in default, of an order for Chairman's notes. A party who fails to take that step cannot begin to make a complaint of perversity unless the perversity is revealed on the face of the Tribunal reasons, which it is not in this case. We refused the application to amend.

The Legislation

6. The Employment Tribunals Extension of Jurisdiction Order 1994 gives effect to Section 3 of the Employment Tribunals Act 1996. It provides for a claim to be made by an employee for the recovery of damages or other sums before an Employment Tribunal, provided the conditions set out in Article 3 are complied with. So far as is relevant, the condition in this case is 'the claim arises or is outstanding on the termination of the employee's employment'. Such a claim must be brought within three months of the ending of the employment. The trigger for the claim is the cessation of employment, for, by the Employment Tribunals Act Section 3, jurisdiction is given to Employment Tribunals in respect of certain cases which are there set. A claim for commission such as the present one falls within that jurisdiction. The Employment Rights Act 1996 Part II makes provision for claims to be made in respect of unlawful deductions from wages. The claims may correspond to breach of contract claims but a separate regime is in force for the bringing of such claims. We are concerned in this case solely with a breach of contract claim.

The Facts

7. The Applicant had been employed since 1996 in the scaffolding and decorating business of the Respondent. As Judge Burke's Tribunal made clear, the Tribunal Chairman had resolved an issue about the claimed commissions in favour of the Applicant, at least for 1998 and 1999. On his way to doing that he resolved a number of disputes arising from conversations between the parties indicating the nature of the commission paid over and above what became a salary of £25,000 a year.
8. The Applicant's case was that he was entitled to commission based upon the work achieved by the Respondent. There were two ways of putting it; either it was one percent of the turnover of the Respondent, or three percent of the expected margin. Schedules were produced by both parties indicating alternative approaches to the calculations. At the end of the liability hearing, on the publication of the Chairman's reasons, both parties were unclear about the basis upon which the commission should be paid. That engendered a sequence of correspondence. At the remedies hearing neither party sought a review but the Chairman said this:

"Having heard both parties' submissions and in order to clarify any ambiguity that arises, the decision should have made it clear that on the facts I found the applicant was entitled to commission of 1% on the turnover of any relevant project."

Applying the agreed figure for turnover of £1.3m and deducting £2,000, which is uncontroversial, the award of the Chairman was £11,000. As against that, the figures and the statements produced by the Respondent indicated a figure of £155 as being appropriate. The

Chairman thus decided in favour of the Applicant's contention. Again, on his way to making the decision in favour of the Applicant, the Chairman decided that he had jurisdiction and that the claim was presented within time.

The Legal Principles

9. In Henricks above, the Employment Appeal Tribunal considered that there should be some relationship between the limitation period in claims under Part II of the Employment Rights Act (as it now is) and claims for breach of contract. The authority was summarised in the IDS Tribunal Procedure Handbook at pages 17-18, which was shown to the Chairman by Mr Meredith. The Chairman rejected the contention that this was binding authority and decided that he had jurisdiction to hear the case. In our judgment he was correct to do so for the following reasons.
10. In Capek v Lincolnshire County Council [2000] IRLR 590, the Court of Appeal decided, in a judgment given by Mummery LJ, with which Laws and Pill LJJ agreed, that claims under Part II and the 1994 Order are entirely separate, although they may cover the same ground. The Court of Appeal was not referred to Henricks. Given that there is a free-standing right to claim under the 1994 Order, the limitation provisions are to be found in it and nowhere else.
11. We decline to follow Henricks in the light of the judgment of the Court of Appeal making clear the separation of the two claims. In Henricks it was decided that it would be wrong to allow a claim to be resurrected post-termination, which could have been made, for example, two years earlier, as in our case. The reasoning for that was based on the principle of finality of litigation and also that it seemed to be the will of Parliament that claims should be made quickly and that a person who had a valid Part II claim should make it within three months and should not be allowed, under a different label, to make such a claim post-termination. It seems to us, with respect to the Employment Appeal Tribunal in that case, that the approach to limitation must be found, and only found, in the 1994 Order, if at all. The only question then is whether a claim was outstanding.
12. The claim for breach of contract in 1999 was not satisfied. It had, as the Chairman found, been made, and robustly rejected, by the managing director of the Respondent. Thus, on his leaving the Respondent, the Applicant remained entitled, as now found by the Chairman, to his commission for 1999. As long as he made his claim within three months of his leaving it was validly made under the 1994 Order. Thus, in ordinary language, his claim for commission was outstanding at the time he left. We see no reason why we should not apply that ordinary language to the language of the Order. We hold that his claim was outstanding within Article 3 at the time he left and therefore that the Chairman was correct to allow the case to proceed.
13. Reliance is placed on the passage in Henricks which indicates that a person must make a complaint at the time in order for it to be outstanding at the time he or she leaves. Given the findings which we have cited above there can be no doubt that the Applicant was complaining and having his complaints rejected during the course of his employment, and as the Chairman rightly says, it was unrealistic to expect a person to make such a complaint in all the circumstances. Thus, we uphold, for the reasoning given on page 18 of the IDS Handbook, the decision by the Chairman to continue to hear the case.
14. In any event, as a matter of practical reality, if this claim was stopped on limitation grounds, the Applicant would still have a right for six years following 1999 to make a claim in similar terms to a County Court, although we express that view tentatively, since we have not heard full argument about it. Thus, it seems to us, the Tribunal Chairman did not err by hearing the case and we dismiss the first ground of appeal identified by Judge Burke's Employment Appeal Tribunal.
15. The second ground relates to the way in which the calculation of the commission was made. It is first contended that the Chairman changed his mind between the first and second decisions. We cannot agree with that, since the Chairman was simply taking the opportunity, given to him by the parties pointing out the lack of clarity, to make clear what he meant in his original decision. Thus, he came to the conclusion, that the Applicant was entitled to one percent.
16. With some force, Mr Meredith has shown us the schedules produced by his clients before the Employment Tribunal, indicating the margin on each contract and not simply the turnover. It is true, as he submits in his skeleton argument, that a number of utterances from the Applicant indicate a concern also to know the margin so that the calculations might be done. We consider the Applicant would not have known the margin on each of the contracts when he made his agreement as to commission, and what he based his decision upon, in that contractual relationship, was the expectation which would be reflected in the turnover. So, on that approach the Chairman cannot be faulted when he said that the commission was based upon a relationship to turnover, in this case, one percent. Therefore, we reject the second ground of appeal relating to the formulation.
17. As to costs, this is very much a matter of discretion, as Mr Meredith frankly accepted. The Chairman has demonstrated how the case went into another day as a result of confusion and failure by the Respondent to comply with orders. It may well be that the Respondent did not consider that the documents which were being sought were relevant. It may well be that it considered it had given this as sought. The point is, the Chairman found it had not and was in breach of orders made by the Tribunal, coupled with penalty notices.
18. There is a very high threshold to be crossed by an Appellant seeking to overturn a decision on costs, particularly when full reasons are given for the award as here. Mr Meredith, in his careful arguments, has not been able to surmount that high threshold. Thus, we see no reason to interfere with the decision.