United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	Mr KOLA SONAIKE (of Counsel) Instructed by: Irwin Mitchell Solicitors Imperial House 31 Temple Street Birmingham B2 5DB
For the Respondent	Mr DAMIAN McCARTHY (of Counsel) Messrs Reynolds Williams Solicitors 48/50 Parkstone Road Poole Dorset BH15 2PG


 


SUMMARY

Unfair Dismissal; Constructive dismissal; Contributory fault

Employment Tribunal identified the "primary" reason for an employee's resignation without saying whether he had also resigned because of the non-payment of wages. They were wrong to do so. Remitted to fresh Employment Tribunal to consider the issue of constructive dismissal and whether the conduct of the employee was – in the unusual circumstances of this case – contributory.


 


THE HONOURABLE MR JUSTICE LANGSTAFF

1. This is an appeal from a decision of an Employment Tribunal at Bedford on 26 October 2005. It raises issues first, as to the proper approach to a claim of constructive dismissal; secondly, on the papers at any rate, as to the conduct which was capable of being contributory conduct so far as constructive dismissal was concerned; and thirdly, as to the proper approach which an Employment Tribunal should take to issues identified as such at a case management discussion in advance of the hearing itself.

The facts

2. Mr Shipperley was employed by Nucleus Information Systems Ltd, whom we shall call the Respondent, from 1989. Nucleus Systems provides software to Local Authorities. In 2002 it fell into financial difficulty. Payment of salary to its staff was delayed. On 29 November 2002 Mr Shipperley was given notice that he would be dismissed by reason of redundancy. That notice was oral but was subsequently confirmed in writing on 4 December 2002. The notice period was 12 weeks. He accepted that he would be redundant but he indicated that he wished to leave on 17 January 2003.
3. No issue arises that if he had done so he would have been entitled on that date to be paid his redundancy payment. However, although he had brought forward the date of his dismissal to 17 January, in fact he gave notice on 6 January with immediate effect. The Tribunal examined the reasons why that was. He said, in his IT1 (this being a case in which the form was still then so called) that he had done so because the employer had ceased to pay him. In the IT3 in answer to that allegation the Respondent said that it accepted that at the time he submitted his Tribunal application there were arrears of salary owing to him. It went on to say this:

"The Respondent will say that this was largely attributable to action taken by the Applicant and others before his employment terminated…"

4. The IT1 and the IT3 gave rise to a determination in May 2005 before a Chairman, Miss Palmer, at Bedford. At that hearing the issues in respect of Mr Shipperley were identified and included the following: (a) what was the effective date of termination? and (b) whether he has been unfairly constructively dismissed. The Claimant says that he resigned on 6 January 2003 because he received no pay for December 2002. The issue is whether the Claimant resigned without undue delay in response to a fundamental breach of contract by the Respondent, that is, the failure to pay his wages. This was not disputed by the Respondent, who only disputes that any compensation is payable.
5. When it came to the Tribunal itself, the Tribunal had not only Mr Shipperley's case before it but also the cases of two fellow employees, a Mr Palmer and a Mr Coombes. It had evidence that Mr Palmer, Mr Coombes and Mr Shipperley might have co-ordinated their actions so as to starve the Respondent Company of cash, the better to enable them to make a low offer to succeed Mr Hayes in running the business (he being the previous leading light in it). The Tribunal said, at paragraph 26.7 :

"Mr Shipperley's resignation on 6 January 2003 was co-ordinated and agreed with that of Mr Coombes on the same day. The Tribunal are unanimous in finding that the termination of Mr Shipperley's employment was not by way of redundancy. Rather, as the majority find, the principal reason was to enable both Mr Shipperley and Mr Coombes to further their intention of destabilising the company. Mr Walsh, however, accepts that the primary reason for Mr Shipperley's resignation was his acceptance of the company's default in failing to pay wages on time, rather than redundancy."

If one paused there, it appears from the words used that the Tribunal had identified more than one reason. The majority had regarded the "principal reason", as they described it, but did not identify what other reason or reasons there might be. Mr Walsh, in the minority, identified the "primary reason" as he put it, but did not for his part identify what other reason or reasons there might have been. We do not understand there to have been any suggestion that there was any other motive in play than either ruining the Company on the one hand, or a failure to pay notice pay on the other.

6. Matters did not, however, cease there in the decision. At paragraph 26.9 the Tribunal went on to say this:

"The majority of the Tribunal find that there was no constructive dismissal, because the reason for termination at that point was that Mr Shipperley and Mr Coombes had agreed to submit their resignations at the same time in order to further destabilise Nucleus. Their resignations were part of the plan to ease their acquisition of the Nucleus business. Although Mr Walsh would find that there had been a constructive dismissal which was unfair, Mr Walsh would nonetheless have made a significant reduction to any compensation or basic award by reason of Mr Shipperley's own misconduct."

If one paused there one would recognise that, taking the paragraph in isolation, it is capable of supporting submissions which Mr McCarthy made before us for the Respondent, that is, that the Tribunal were here focusing upon one reason, and one reason only, for the dismissal. However, it is equally capable of relating to the time at which the dismissal was made. The point appealing to the Tribunal was that the apparent co-ordination as to the date on which both Mr Coombes and Mr Shipperley resigned owed everything to their intention to bring the Company down rather than a response, individual in each case, to the non-payment of wages.

7. The Tribunal dealt with Mr Coombes and returned to the question of what might have been in the minds of Mr Shipperley and Mr Coombes at paragraph 28.1, where it noted that they had shared concerns about the non-payment of wages and the process of negotiations for the purchase of the business. This again suggests that both may have been in the minds of Mr Shipperley and Mr Coombes. The Tribunal continued at paragraph 29 to observe that the Claimants were involved in taking steps to acquire the Respondent's business and in so doing placed themselves in a position of conflict of interest where they stepped outside the bounds of legitimate negotiation or tactics.
8. At paragraph 32 the Tribunal repeated that the majority found that Mr Shipperley was not constructively unfairly dismissed, as his decision to resign was primarily a result of the agreement between himself and Mr Coombes to co-ordinate their resignations and to destabilise the Company. That repeats once again the word "primary".
9. Read fairly and as a whole, it is our view that the Tribunal decision indicates that the majority had in mind more than one reason for dismissal. The repeated use of the word "primary" and its analogue, "principal", do not seem to us to be the accidental misuse of language for which Mr McCarthy contends. A Tribunal has only words with which to express its reasoning. Where it uses words repeatedly in the context here as it does, no other conclusion is fairly open to us.
10. We note, strengthening our view as to this, that in paragraph 17 the Tribunal expressed the view that, having heard the evidence of the Claimants and of Mr Hayes (he giving evidence for the Respondents), its members had concluded that whilst each had told the truth as he might see it, there had been exaggeration and self-serving. The Tribunal therefore was not prepared to say, or did not say, that Mr Shipperley was lying when he said, as he undoubtedly said in evidence, that the reason for his resignation on 6 January 2003 was because he had not been paid salary. Rather, its observations in paragraph 17 suggest that was not the whole story. It seems to us therefore consistent with that that the Tribunal decision probably indicates a view that there were two reasons at least for his resignation, one being that he had not been paid, the other, which the majority thought the "primary" reason, and Mr Walsh a "secondary" reason, being to destabilise the Company.
11. The decision of the Employment Tribunal led to a request for a review. That was held some ten months after the hearing. At that review, Mr Shipperley complained that the identification of the issues at the case management discussion was in terms that suggested to him that there was no real issue as to his having resigned in response to non-payment of wages. Rather, the issue was about conduct which might affect compensation. The Tribunal did not accept, that but repeated at paragraph 13 (as at paragraph 18 of their earlier finding) that he had resigned primarily as a result of an agreement between himself and Mr Coombes to co-ordinate their resignations and thereby to destabilise the Company. Once again, the same language is used.

Constructive dismissal

12. The language used by the Tribunal envisages that it is sufficient to answer the question 'Has an employee been constructively dismissed?' by identifying that which is the primary, main or principal reason for his dismissal. If a Tribunal thinks that that is the law, the sooner it is disabused of the notion the better. The law of constructive dismissal is the law of repudiation of a contract and its acceptance by the party who is entitled to accept.
13. It arises in this way. A contract is a bargain. If one party to the contract by his behaviour indicates that he does not intend to be bound by the contract in future, the other party has a choice. He may choose to accept the behaviour of the party in breach as terminating his own obligation to perform his own duties under the contract. He may, alternatively, insist that the contract continue and be left with his remedy for breach, if he has one. Thus, acceptance of repudiation is accepting the breach of one party (which has the effect of indicating that that party no longer intends to perform the contract, as it was, in accordance with its terms) as ending the obligations of the other party under it. In the employment sphere therefore, one looks to see whether or not the employer has broken the contract. If he has, one looks to see whether the breach is such as to be repudiatory, that is, to indicate that he no longer intends to be bound by the contract. Sometimes this is described as a fundamental breach, though the word "fundamental" may be more obfuscatory than helpful.
14. The second question, 'Is the breach sufficiently serious to justify the innocent party in treating it as entitling him to terminate his own performance of the contract?' follows from the nature of the basic legal principles we have outlined.
15. The third question, 'Is the acceptance in response to the breach?' again naturally flows: if it is not, then the innocent party is not exercising the choice which the party in breach of conduct has afforded him.
16. The fourth point (as it is sometimes thought to be) - that this acceptance must take place within a reasonable time - is no more than a recognition that, factually, if an employee continues in employment for more than a period of time, he will by doing so be indicating that he has indeed made the choice. The choice here, however, is to remain in contract. He does not lose the right to complain about the breach, but does lose the right to accept the breach as terminating his obligation to perform his side of the bargain.
17. All this is trite law, but what it means is that where there is a breach which is sufficiently serious which has been committed by an employer, an employee is entitled to accept it. It does not matter what other motives he may have for doing so. Frequently, employees will have mixed motives. They may find the working arrangements less than congenial. That may not be a breach of contract, but it does not mean that if they have those arrangements primarily in mind that they are not entitled to accept a breach of sufficient seriousness as repudiatory. It does not matter either that part of the motivation for accepting repudiatory conduct as such may be that there is some ulterior advantage which the employee concerned may gain if, for instance, the employee may think that by accepting a repudiation he may be in a better position to bargain with others or maybe even with the employer whose service he has left. That may, depending upon the circumstances, be an entirely unacceptable motive, but it does not mean that his act of acceptance is any less constructive dismissal.
18. All this, which we have expressed at some length in case there remains any confusion about it, was expressed rather more pithily in the judgment of Keene LJ in the case of Nottinghamshire County Council v Meikle [2004] IRLR 703, see paragraphs 33-34. Accordingly, if this Tribunal thought that any part of the reason for the resignation of Mr Shipperley on 6 January was that he had not been paid, there would have been no other conclusion open to them other than Mr Shipperley had been entitled to accept that non-payment as putting an end to his (Mr Shipperley's) obligations to continue performing his side of the employment bargain.
19. Focusing upon the "primary" or "principal" reason did not answer the question addressed to the Tribunal. If the Tribunal had adopted the view of Mr Walsh, he, for his part, would have found that there was contributory conduct. It must be said that it is very rare for a claim for unfair dismissal which is constructive to be open to any finding that there has been contributory conduct. This is because such a finding necessarily assumes that there has been a breach by the employer which is accepted by the innocent employee. However, it is not entirely impossible, and the facts of this case indicate a situation which, might, but not necessarily would, justify such a conclusion to a Tribunal.
20. It must be remembered that the test of whether conduct is contributory is whether it caused or contributed to the dismissal, not whether it is blameworthy in some other respect. Here the Respondent alleges that Mr Shipperley, in combination perhaps with Mr Coombes, a Mr Palmer, and perhaps a Mr Willoughby, had deliberately sought to sabotage the possibility of Nucleus Systems obtaining lucrative contracts. If by so doing they starved the Company of cash, that might be a reason for the Company having no money with which to pay the wages. If the failure to have sufficient cash to pay the wages led in turn to delayed or to non-payment of those wages, which was the breach upon which Mr Shipperley relied (if he did), it might said that there was a causative link between the conduct of Mr Shipperley and his colleagues and the dismissal which occurred.
21. That is a chain of causation which we do not say we would have found. But nor do we say that it can necessarily be dismissed. It seems to us to be open to argument and to the exploration of evidence and motive before a Tribunal. The interesting argument about whether or not the Tribunal in question, in deciding as it did as to the reason for the resignation on 6 January, decided a point which had not been raised properly before it by the parties, or was bound by the acceptance - if it was such, by the Respondent in the IT3 -reflected in the decision of the case management conference as to what were the issues for determination, does not need to be explored. This is because, for the reasons we have given, we have come to the clear conclusion that this Tribunal did not properly focus upon the reasons for the resignation. It was not enough to focus simply upon the primary or principal reason, as it did.
22. The case must therefore be remitted without our resolving those issues, but we mention them because they may be important in determining whether the case should be remitted to the same Tribunal, as Mr McCarthy asks, or to a different one as Mr Sonaike, who appears on behalf of the Appellant, seeks.
23. We have come to the conclusion that this case must be remitted to a fresh Tribunal. That Tribunal should hear the issue as to whether or not Mr Shipperley was dismissed on 6 January 2003. That will involve the Tribunal in making a finding as to whether any part of his reasoning was an acceptance of the admitted breach by the employer to pay him his wages. We do not understand it to be in dispute that the wages had not been paid, nor do we understand it to be disputed that such non-payment is sufficiently serious to justify an acceptance. If the Tribunal comes to the conclusion, as it may well, that it was part of the reasoning that part of the reasons for the resignation was that the employer had not paid the wages when due, it will then, if invited to do so by the Respondent upon whom the burden of proof here lies, wish to consider whether or not any conduct by the Appellant was blameworthy and was causative of his resignation. This may well involve examining the financial consequences, if they can be identified, of anything which it is said he was party to at an earlier stage.
24. We do not wish to confine the Tribunal too closely, beyond what we have already said, in examining that issue and such as the parties properly put before it. We do, however, think it should be a fresh Tribunal for these reasons. First, as Sinclair Roche & Temperley v Heard [2004] IRLR 763 discusses, there has been some considerable passage of time since the original Tribunal. Although the case is undoubtedly memorable, one of the difficulties may be rehearing some facts which were heard at the earlier hearing along with new material and coming to an assessment which is not unconsciously influenced by either on the one hand the familiarity of some of those facts to the former Tribunal, or by a view as to the conclusion.
25. Since it was suggested that this Tribunal might not have addressed the issues as the case management hearing had indicated, we think that too is part of the matters we should have in mind. We recognise also that it may be easier within a short timescale to obtain a hearing date if a Tribunal from the past does not have to be reconstituted. This case is now one which is becoming so ancient that it deserves to be heard with every speed.
26. For those reasons, we allow this appeal. We remit the claim to a fresh Tribunal.