United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR N BALDOCK (of Counsel) Instructed by: Messrs Baileyfields Solicitors Renfrew House Ashford Road BETHERSDEN TN26 3AS
For the Respondent	MR C McDEVITT (of Counsel) Instructed by: Messrs Archers Solicitors 78 New London Road CHELMSFORD Essex CM2 0PD

SUMMARY

UNFAIR DISMISSAL: Constructive Dismissal

Employment Tribunal found that the claimant was entitled to resign and claim constructive dismissal. It was conceded that if there were a constructive dismissal, it was unfair. The claimant alleged some eight different breaches of contract, which cumulatively and separately amounted to a breach of the duty of trust and confidence. The Tribunal found that six complaints were not well founded but that two of the breaches were repudiatory. They upheld the claim for unfair dismissal. The EAT held that the Tribunal was not entitled to reach that conclusion in the circumstances. Case remitted to a fresh tribunal to consider those two issues only. Observations about the nature of the causal connection necessary to link the resignation and the repudiatory breach when a constructive dismissal is claimed.


 


THE HONOURABLE MR JUSTICE ELIAS (PRESIDENT)

1. This is an appeal against the decision of the Employment Tribunal sitting in Stratford, which held unanimously that the claimant had been both unfairly and wrongfully dismissed. The employers now appeal that decision. There is also a cross appeal which we deal with separately at the end of this judgment.

The background.

2. The claimant started work on 1 March 2004 as a sales manager. He was involved in the respondent's courier business, but also helped on occasions with their taxi business. He would visit existing customers to obtain further orders, and also seek to secure new orders from prospective customers. He was very successful.
3. The claimant was ill from 20 March 2006 until his subsequent resignation by letter dated 12 April. He visited his GP, who signed him off work from 20 March until 11 April.
4. On 31 March the claimant was contacted by Mr Giles, who was his manager. Mr Giles said that as a gesture of goodwill they would pay Mr Ford full pay for the first week of his absence, and thereafter he would go on statutory sick pay. He also indicated, however, that the company needed to arrange collection of the car, which he said was a pool car. The precise terms of the letter were as follows:

"In view of your being absent for some time with sickness, we will need to arrange for collection of the pool car, as it is required for the business. Please could you kindly contact me to discuss when we can collect the key from you during the course of this weekend?"

This letter was delivered to Mr Ford on Friday 31 March but for some reason was not read by him until Sunday 2 April. Mr Ford then rang Mrs Giles and disputed that the car was a pool car, but was told that it had always been a pool car. By agreement it was collected from Mr Ford later that evening.

5. Mr Ford did not return to work once the certificated absence came to an end, but instead

wrote a letter in the following terms:

"I hereby tender my resignation from my employment with Abbey Cars (West Horndon) Limited.

My resignation is to take effect from the date of this letter.

The reason for my resignation is that I consider that there has been a fundamental breach of my contract of employment in so far as the mutual trust and confidence which should exist between employer and employee. This has broken down due to your behaviour towards me.

There has been a series of breaches during my employment such as not paying me my agreed commission and not giving me the agreed pay rises, placing me in an inappropriate office, not paying the CSA deductions to the CSA which have been taken from my pay, failing to give me payslips and P60s despite my continual requests and more recently the removal of my telephone allowance as shown on one of the few pay slips I have received dated 31/03/06. The most recent breach in the series of breaches is the taking back of my company car on the evening of Sunday 2^nd April 2006 stating that it was a pool car. The car has been my company car since I began my employment with the company, it is part of my remuneration package and thus is a term of my contract. To take it away from me is a breach of contract.

Due to the continual breaches to my contract I consider this last action to have been the last straw and I now consider there to be a fundamental breach of my contract of employment entitling me to resign from my job without notice to you.

Finally, since I commenced my employment with the company I have not been given a statement of the terms and conditions of my employment which I have continually asked for. I was promised a contract setting out my pay/commission structure."

6. Mr Giles replied, asking Mr Ford to reconsider his resignation. He disputed that any commissions were due; noted that two pay rises on basic salary had been given; and said that the difficulty of making CSA deductions was that the CSA would not accept direct debit or standing orders. It was also stated that the car was always a pool car and that this had never been questioned.
7. Mr Giles wrote again on 25 April saying that if he did not hear from the claimant by 28 April he would accept his resignation. He heard nothing, and Mr Ford then presented his claim to the Tribunal.

The Tribunal decision.

8. The Tribunal properly directed itself as to the law of constructive dismissal. It was conceded that if there was a constructive dismissal, it was unfair, and therefore the only issue was whether such a dismissal could be established. In this case the employee alleged that there had been a breach of the duty of trust and confidence arising out of the series of incidents identified in the letter, and that taking back the car was the last straw.
9. The Tribunal analysed Mr Ford's complaints, as set out in his letter of resignation reproduced above, into eight categories. They then analysed each category in some detail and rejected most of these. Perhaps most importantly, they did not accept that there had been any failure to pay appropriate commission nor did the employer fail to pay agreed pay rises.
10. The Tribunal also rejected the contention that he had been given an inappropriate office; they found that although the company had on occasions failed to make payments to the Child Support Agency, this was because there were difficulties with the agency, and that subsequently all payments were made. The Tribunal did accept, however, that Mr Ford could have had a genuine concern that payments he was making were not reaching their destination.
11. As to the failure to provide pay slips, the Tribunal found that there were occasions when they were provided late, but could easily be obtained from the accountants; and they concluded that Mr Ford had probably received his P60s. Finally, the Tribunal was satisfied that in principle the company was entitled to take the car back, which was indeed, in the Tribunal's view, a pool car.
12. They did, however, find that there were two contractual breaches. The first was that the claimant had not been paid his telephone allowance for use of his mobile phone at the end of March 2006. He usually received this but on this occasion it was not paid, and no explanation had been given as to why not. Secondly, the Tribunal considered that although the employers were entitled to take the car back, and that it was a pool car, they had done so in an unacceptable manner. The Tribunal's conclusion on the car issue was as follows (para 23):

"… the Tribunal concludes that the respondents were entitled to ask for the car to be returned to them for use by another member of the company for some good business reason. A question therefore arises as to whether the Respondents went about it in the right way. Mr Ford was away ill with low back pain and likely to be receiving treatment and advice from medical practitioners. The fact that Mr Ford was not working did not mean that he might not need to use the car for medical appointments. A letter arrives delivered by hand informing Mr Ford that after the first week which has by now expired he will be on statutory sick pay and that in view of his being absent sick the company will need to arrange for collection of the pool car as it is required for the business. The emphasis appears to the Tribunal to be on the fact that Mr Ford is unwell rather than on any pressing need of the business for this particular car. There is a dispute over what was said on the telephone, but the letter certainly does not ask Mr Ford if he requires the car for medical appointments."

13. The Tribunal's conclusion with respect to each of these matters was as follows:

"The conclusion the Tribunal has reached is that in not paying the allowance towards use of the mobile phone the Respondents were in breach of an express term of the contract and further that the way in which the car was requested to be returned did seriously damage Mr Ford's trust and confidence in his employer and further that a reasonable employee would have had his or her trust and confidence so damaged. There are other concerns that Mr Ford had which the Tribunal has referred to, but some of these are not valid, some had been sorted out and others were of minimal impact at the date when Mr Ford resigned. The Tribunal however concludes that the two particular matters mentioned, both occurring at the end of his employment, were sufficient to permit Mr Ford to resign without notice and claim constructive dismissal."

The law.

14. The essential principles are not in dispute. To constitute a constructive dismissal the employee must resign in response to a repudiatory breach by the employer and not for some unconnected reason. In other words there must be a causal connection between the employer's breach and the employee's resignation. We consider below the precise application of this principle.

The grounds of appeal.

15. The grounds challenge the Tribunal's reasoning in two principal ways. First, it is submitted that the Tribunal was in error in finding that either of the two failings identified by it amounted to repudiatory breaches of contract. More specifically, with respect to the telephone allowance, it is alleged that apart from the brief reference in the dismissal letter, this did not figure as a concern of the claimant at all. In those circumstances, it was unfair for the Tribunal to comment that no explanation had been given for the non-payment when none was asked for, and it appeared that the issue was not being pursued.
16. With regard to the return of the car, the employers submit that the crucial objection which had been raised by the claimant was that he had a right to its use and that it was not a pool car. That argument was rejected by the Tribunal. The letter which had requested the return of the car stated it was for business reasons. The only legitimate criticism that could possibly be made is that Mr Ford was not specifically asked whether he still needed the car for medical purposes. That could not be a repudiatory breach. There was no suggestion that there was any intemperate or unreasonable language, or anything of that kind, either in the letter sent or in the subsequent conversation between the claimant and Mrs Giles.
17. Second, it is submitted that even if the Tribunal was entitled to find that there was a repudiatory breach, the Tribunal failed to address the question whether the claimant had resigned in response to the breach. The claimant himself had indicated that the car incident was the last straw in the litany of complaints. He was therefore resigning in response to a course of conduct. The Tribunal rejected almost all of these allegations, including what might be considered the most fundamental ones relating to pay and commission. (The claimant had originally stated that the losses resulting from these breaches amounted to some £40K). There was simply no basis for finding that the claimant would have left in response to these two breaches.
18. The claimant contends that the Tribunal was entitled to reach the conclusion it did. Although it is true that neither the claim to the Tribunal nor the witness statement identified this issue, it was covered by a reference in the claim form to the fact that the claimant was relying on the matters identified in the dismissal letter. The obligation to make the payment was a fundamental term relating to remuneration and the failure was, therefore, a fundamental breach.
19. Similarly, the Tribunal was entitled to conclude that the manner in which the car was recovered, and in particular the fact that the employers did not consider his requirements for the car, was a last straw and was of itself a matter designed to undermine trust and confidence in the employment relationship. It is a matter for the Tribunal to determine whether or not conduct is a repudiatory breach and the EAT can interfere only if there is a material misdirection or if the conclusion is perverse. That is not the situation here.
20. Some reliance is also placed on other findings of the Tribunal which identified certain areas of justified dissatisfaction, such as the late giving of pay slips, an occasion when the office was not properly heated, and Mr Ford's justified concern that there the payments were not being made to the Child Support Agency. However, these were not considered to be of any material significance by the Tribunal and we do not give any weight to them.

Conclusion.

21. We first consider whether the Tribunal was entitled to find that either of these failings, whether considered separately or cumulatively, amounted to a repudiatory breach of contract.

The telephone allowance.

22. The issue here is whether the Tribunal were entitled to find that the failure to pay the telephone allowance was a repudiatory breach. In our judgment, they were not. Both counsel accepted that no relevant questions were directed to why the payment was not made. The issue, as we have said, did not figure at all in the claim or indeed in the witness statements. In truth, this was always a very minor concern and appears to have fallen off the radar by the time the case came to the Tribunal, as Mr McDevitt fairly accepted.
23. We reject the submission advanced by Mr Baldock to the effect that the sum was so small - particularly in comparison with the commission payments - that failure to pay it could not amount to a repudiatory breach. In our judgment it could if, say, a decision had been made deliberately and knowingly to withhold it: see e.g.Cantor Fitzgerald v Callaghan [1999] ICR 639. As Judge LJ pointed out in that case (p.649F), if the non-payment was an oversight or an accounting error it would not usually be sufficient of itself to amount to a fundamental or repudiatory breach. The non-payment may technically be a breach but it would normally give rise to some query from the employee which would frequently lead to the error being rectified. In this case that did not happen because although the claimant raised the issue in his dismissal letter, he made no further reference to it at any stage in the proceedings.
24. It is correct, as the Tribunal noted, that no explanation was offered for the non-payment, but none was sought. It would, in our judgment, be quite unjust for these employers to be found in repudiatory breach because of a failure to proffer an explanation for conduct which was not expressly relied upon by the claimant at all. We appreciate that there was the indirect reference in the claim form to matters identified in the resignation letter, but we do not think that is enough to place the burden on the employer of demonstrating why the payment was not made in circumstances where the non payment no longer appeared to be issue.

The return of the car.

25. The alleged breach with respect to the car raises a different problem. It is important to identify precisely why the Tribunal found that this amounted to a repudiatory breach. It was not for the principal reason that the claimant relied upon in his letter, namely that it was not a pool car but was a company car allocated to him which he was entitled to retain for as long as he remained employed. As Mr Baldock pointed out, the alleged breach appears to be that the employers had not raised with Mr Ford in the letter that he may need the car, notwithstanding his illness. He submits that it is simply impossible to say that a failure specifically to raise that issue is of itself a repudiatory breach of contract. It was not as if Mr Ford had emphasised that he required the car for his own purposes, even although ill. Mr Baldock accepted that a refusal in such circumstances could in principle give rise to an issue as to whether there was a breach of the duty of trust and confidence. There was in fact some dispute as to whether something along those lines had been said in the conversation between the claimant and Mrs Giles, but the Tribunal expressly did not resolve that issue (see the extract from the judgment in paragraph 12 above). They simply relied on the terms of the letter itself to establish the repudiatory breach.
26. Mr McDevitt accepted that the claimant's case had never been put in quite the way identified by the Tribunal, namely that the manner in which the employers sought to recover the car constituted a breach of contract. However, he submits that his case was that there was no proper or legitimate basis for taking the car back, and this is what the Tribunal found. They held that the emphasis was on the claimant being ill rather than on any business need. This conclusion was open to the Tribunal, as was the finding that it amounted to a repudiatory breach.
27. We agree with Mr Baldock that the Tribunal appear to have focused on the terms of the letter alone. They have reached the conclusion that the reason for taking back the car was the illness of Mr Ford and not any legitimate business reason. We do not think that is a fair reading of the letter. Pool cars are often taken back from employees who are ill or on holiday. They may be the circumstances which trigger the recall, but it does not follow at all that there is not a good business reason for recovering the car. An obvious example is that there may be others who will have to carry out visits to customers which the absent employee would otherwise have undertaken.
28. As Mr Baldock notes, the Tribunal did not reject the claim that there were legitimate business reasons. They were asserted in the letter and there is no finding that they did not exist. Rather, it seems to us that the Tribunal simply concluded that because the immediate cause was the illness, this must have been the predominant reason and this was not a good reason.
29. In our judgment, it was not open to the Tribunal to reach this conclusion. Once it is accepted, as Mr McDevitt does, that the manner in which the car was recovered was not in itself the subject of complaint, then the only legitimate question is whether there was a justifiable reason for recovering the car. We can see that in principle it may be open to a tribunal to find that the decision to recall a car undermines trust and confidence where the employer is faced with a legitimate business claim and there is a competing and powerful claim by the employee to retain the car which is resolved by the employer against the employee. We think that such circumstances are likely to be rare, but we do not discount the possibility.
30. Here, however, there was no evidence that the employers were ever placed in that position. Insofar as there was conflicting evidence about the telephone conversation about that, the Tribunal did not resolve the dispute. It is plainly the case that Mr Giles did not in terms raise with the claimant that he might need to keep the car because of illness, but we do not accept that it is open to the Tribunal to treat this as a repudiatory breach. In our judgment that single failure could not render what is otherwise a perfectly proper exercise of a power conferred by the contract an improper and unreasonable exercise of power, and certainly not one amounting to a repudiatory breach of contract.
31. It follows that in our view neither of these matters considered separately or cumulatively, could amount to a repudiatory breach of contract. Strictly this makes the further issue redundant, but we have heard argument on it and will address it.

Was the resignation in response to the breach?

32. The final ground of appeal is that the Tribunal did not engage with the issue of causation at all. Mr Baldock contends that they had to ask whether the employee resigned because of the repudiatory breach. This they never did. Having found that there were only two breaches and not the eight originally identified, the Tribunal ought to have gone on to consider whether the resignation was in response to these breaches. It was suggested that it was unrealistic to think that they were. The car incident was specifically stated to be the last straw, and the concern over the £30 telephone allowance paled into insignificance when compared with the very significant commission payments in dispute. It is fanciful to think that the claimant would have resigned had he understood that there were only these two breaches.
33. The EAT drew counsels' attention after the hearing to two authorities on which each counsel then made submissions. In Jones v Sirl and Sons [1997] IRLR 493 the employee resigned partly because of a repudiatory breach and partly because circumstances arose where he could obtain another job. The EAT (Colin Smith QC presiding) held that provided the repudiatory breach was a significant or effective cause of the dismissal, that would suffice; it did not have to be the sole cause.
34. In the later case of Nottinghamshire County Council v Meikle [2004] IRLR 703, the issue arose again, in circumstances where some of the complaints raised by an employee were found to be established and some were not. Keene LJ (with whose judgment Thorpe LJ and Bennett J agreed) rejected the notion that the repudiatory breach even had to be a significant cause of the dismissal. It is enough that it is a cause. He stated that the position was as follows (para 33):

"It has been held by the EAT in Jones v Sirl and Son (Furnishers) Ltd [1997] IRLR 493 that in constructive dismissal cases the repudiatory breach by the employer need not be the sole cause of the employee's resignation. The EAT there pointed out that there may well be concurrent causes operating on the mind of an employee whose employer has committed fundamental breaches of contract and that the employee may leave because of both those breaches and another factor, such as the availability of another job. It suggested that the test to be applied was whether the breach or breaches were the 'effective cause' of the resignation. I see the attractions of that approach, but there are dangers in getting drawn too far into questions about the employee's motives. It must be remembered that we are dealing here with a contractual relationship, and constructive dismissal is a form of termination of contract by a repudiation by one party which is accepted by the other: see the Western Excavating case. The proper approach, therefore, once a repudiation of the contract by the employer has been established, is to ask whether the employee has accepted that repudiation by treating the contract of employment as at an end. It must be in response to the repudiation, but the fact that the employee also objected to the other actions or inactions of the employer, not amounting to a breach of contract, would not vitiate the acceptance of the repudiation. It follows that, in the present case, it was enough that the employee resigned in response, at least in part, to fundamental breaches of contract by NCC."

On that analysis it appears that the crucial question is whether the repudiatory breach played a part in the dismissal. There must be a causal connection between the repudiation and the resignation; if they are unconnected acts then the employee is not accepting the repudiatory breach.

35. It follows that once a repudiatory breach is established, if the employee leaves then even if he may have done so for a whole host of reasons, he can claim that he has been constructively dismissed if the repudiatory breach is one of the factors relied upon. We respectfully agree with this reasoning. We think it would be invidious for tribunals to have to speculate what would have occurred had the employee been faced with the more limited grounds of legitimate complaint than he had perceived to be the case.
36. Moreover, if there is a repudiatory breach which entitles the employee to leave and claim constructive dismissal, we see no justification for allowing the employer to avoid that consequence merely because the employee also relies on other, perhaps unjustified or unsubstantiated, reasons. The employee ought not to be in a worse position as a result of relying on additional, albeit misconceived, grounds.
37. Accordingly, although it is true the Tribunal did not in this case specifically engage with the question of whether there was a causal link between the repudiatory breach and the dismissal, that was no doubt because in the circumstances of this case this appeared not to be in dispute. It was never suggested that the employee did not resign because of the list of grievances that he set out in his letter. It follows from the reasoning in the Meikle case that if any of those matters constituted a repudiatory breach, the resignation would be enough to establish the constructive dismissal.
38. Accordingly, on the assumption that the withholding of the telephone allowance was a repudiatory breach, the resignation which was stated to be in part in response to it, inevitably amounted to a constructive dismissal.
39. The position is more difficult with the car, simply because the breach which the claimant identified was not the same as the breach the Tribunal identified. Mr Baldock submits that in these circumstances it cannot be inferred that the claimant left in response to the breach identified by the tribunal.
40. We see some force in that argument, but we think it adopts too narrow a view of the relevant breach. The Tribunal found that the company acted in repudiatory breach in reclaiming the car. That was in essence the complaint. Had it amounted to a repudiatory breach, we think that the decision to resign in response to taking the car would be causally connected to the alleged breach, albeit not in quite the way the claimant believed.

The cross appeal.

41. Mr McDevitt submitted that the Tribunal had failed to make findings on certain factual matters in dispute demonstrating hostility between Mr Giles and the claimant. These were not matters which were relied upon as part of the constructive dismissal claim. However, it is submitted that they have a bearing on the context in which the resignation took place. We do not accept that the Tribunal erred in law in failing to make findings on these matters. They were essentially peripheral, and it is not an error of law for a tribunal to fail to make findings on all issues in dispute. Accordingly, we reject this submission.

Disposal.

42. However, for the reasons we have given, we do not consider that the Tribunal was entitled to find that the conduct of the employer amounted to a repudiatory breach of contract.
43. That leaves the important question of how we should now dispose of this matter. We have found this a troublesome issue. On the one hand, we find that the conclusions of the tribunal with regard to the two alleged breaches are unsustainable. On the other, we are left in some doubt as to whether there may have been some confusion about precisely what aspects of these two claims were in issue. In particular, there may have been some uncertainty as to whether the telephone allowance was still a live matter or not. We are left with a lurking concern that the claimant may have a legitimate grievance if there is no further consideration of these two claims. In the circumstances we think that the fairest outcome would be for the case to be remitted to a fresh tribunal to consider whether the failure to pay the telephone allowance and/or the retaking of the car, which the Tribunal has found was a pool car, constituted repudiatory breaches whether taken separately or together. We think that the Tribunal should hear evidence again about those matters. If they are repudiatory breaches, then the finding of unfair dismissal is sustained; if not, the case fails.
44. It follows that the appeal succeeds. The finding of unfair dismissal cannot stand. The case will be remitted to a fresh tribunal to determine the issues identified in this judgment.