United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR SIMON FORSHAW (of Counsel) (Who did not appear below) Instructed by: Messrs Clarke Mairs LLP Royal House 5-7 Market Street Newcastle upon Tyne NE1 6JN
For the Respondent	MR JAMES BOYD (of Counsel) Instructed by: Messrs Bermans LLP Solicitors Lancaster House Mercury Court Tithebarn Street Liverpool L2 2QP


 


SUMMARY

UNFAIR DISMISSAL – Dismissal/ambiguous resignation

1. Whether employee was dismissed – unambiguous words of dismissal used by employer – Tribunal erred in law in holding that by reason of "special circumstances" the employer did not dismiss the employee.
2. Cases on "special circumstances" considered and reviewed – in particular Sothern v Frank Charlesly & Co [1981] IRLR 278; Martin v Yeomen Aggregates [1983] IRLR 49; Barclay v City of Glasgow District Council [1983] IRLR 313; Greater Glasgow Health Board v Mackay [1989] SLT 729; Sovereign House Security Services Ltd v Savage [1989] IRLR 115; Kwik-Fit (GB) Limited v Lineham [1992] IRLR 156; and Ali v Birmingham City Council [UKEAT/0313/08/CEA].


 


HIS HONOUR JUDGE RICHARDSON

3. This is an appeal by Miss Catherine Willoughby ("the Claimant") against a judgment of the Employment Tribunal (Employment Judge Morris presiding) sitting in Newcastle dated 3 September 2009. By its judgment the Tribunal dismissed her claims of unfair and wrongful dismissal, holding that she had resigned from her employment.
4. The question which arises on this appeal is whether the Employment Tribunal was entitled to find that a letter sent to the Claimant by her employers CF Capital plc ("the Respondents"), which on its face terminated her employment, should not be regarded as having that effect by reason of "special circumstances".
5. In "special circumstances" the courts have allowed a short opportunity for a change of heart on the part of an employer who has uttered words of dismissal or an employee who has uttered words of resignation. The reference to "special circumstances" in this context finds its origin in Barclay v City of Glasgow District Council [1983] IRLR 313 at paras. 11-12, discussed in a number of later cases.

The background facts

6. The Respondents are specialists in the business of finding finance for the purchase of capital equipment. The Claimant was employed by them for more than 18 years – latterly as an account manager in the sales team. Her line manager was Mr Keeley with whom she had a good relationship both professionally and personally. The Respondents' managing director was Mr Wilding.
7. By late 2008 the Respondents' business was suffering the effects of the banking crisis. There were redundancies in some departments. The Respondents identified the need to make savings in their sales team. But they hoped to avoid redundancies. They decided to hold meetings with the sales team to see whether any of them would move from being a direct employee to being self employed.
8. Mr Keeley arranged a meeting with the Claimant on 1 December 2008. Before the Tribunal Mr Keeley and the Claimant gave differing accounts of this meeting. The Tribunal steered a middle course through their evidence. Its key findings about the meeting were as follows.
9. Mr Keeley explained to the Claimant that by reason of the downturn there was a need to introduce cost saving measures across the business. He told her there would be redundancies announced soon elsewhere in the business. He told her that one measure under consideration was the making of redundancies in the sales team.
10. He explained to her that a possible alternative to the Respondent having to address redundancies in the sales team was for sales staff to become self employed. He explained that there would be a retainer of approximately £1,000 to £2,500 per month together with commission at 50% of gross profit. The Claimant expressed an interest in the possibility and enquired about the tax implications and other terms. She requested detailed terms of the move to self employment in writing. Mr Keeley undertook to provide these details. She indicated to Mr Keeley that she would be prepared to become self employed but only if the terms were acceptable to her. She conveyed to Mr Keeley that she would consider the option upon receipt of the detailed terms.
11. As the Tribunal found, Mr Keeley thought that the discussion had gone much further than it did; he thought agreement had been reached whereby the Claimant's employment would end and she would be re-engaged on a self employed basis. The Tribunal said:

"It is possible that Mr Keeley's friendship with the Claimant (which might have led him to be less direct than he perhaps should have been) and his desire to achieve the Claimant's agreement to become self-employed caused Mr Keeley to think that he had achieved more than he had actually achieved"

12. The Tribunal further said (paragraph 11.20):

"The Tribunal accepts that there was therefore a significant misunderstanding between the parties as to what had and had not been agreed. Nevertheless the Tribunal is satisfied that both the claimant and Mr Keeley were genuine in their respective (albeit different) understandings of the outcome of their meeting. The point should be made that such a misunderstanding could have been readily identified had Mr Keeley produced and sent to the claimant a note of their meeting soon after its conclusion or at least written to the claimant to record the outcome."

13. As December progressed, the Claimant repeatedly (on 5 December, on 12 December and on 17 December) asked for the paperwork which Mr Keeley had said would be provided to her. She was, as the Tribunal found, interested in the prospect of moving to self employment, but needed to receive the detail before making a final decision.
14. On 22 December Mr Keeley wrote to the Claimant, enclosing a form of agency agreement which would effect a move to self employed status. The agency agreement contained detailed terms some of which, as the Tribunal said, could be regarded as onerous. The retainer was set at the figure of £1000 per month.
15. The letter said:

"I refer to our meeting of 2 December 2008.

As discussed during our meeting the Company has been subject to market conditions reflected by the current difficulties within the economic climate and as a result we have experienced a downturn in business transacted.

Despite this economic downturn we have been able to mutually agree to a change in your employment status and our working relationship will continue by your move into self employment.

The termination of your existing employment contract will be effective from 31 December 2008.

Your Agency Agreement will commence 1 January 2009, which is enclosed for your consideration and signature. It reflects our confirmation that a retainer in the sum £1000 will be paid to you on a monthly basis, which is reviewed annually on the anniversary of the Agreement. This retainer is to be deducted from commissions earned on the percentage splits agreed from time to time.

Please find enclosed two copies of this letter and the Agency Agreement. I shall be grateful if you would sign both of each, keeping one and returning the other ones to me."

16. As the Tribunal said, on any view this letter went too far. Even on his own evidence Mr Keeley had not agreed the amount of the retainer or the start date of a move to self employment, nor had he discussed the detailed terms of the agreement. On the Tribunal's findings, furthermore, the letter was simply wrong. There had been no agreement that the Claimant would move to self employment.
17. The Claimant received this letter on Tuesday 23 December – the last day before the Christmas break. The business was then closed until Monday 5 January. By this time the Claimant had taken advice. At 8.45am she telephoned Mr Wilding to say that she would not be accepting the agency agreement. She explained that she had taken advice and been told that the letter dated 22 December amounted to termination of her employment. Her solicitor had advised her to package up all property belonging to the Respondents and not to carry out any further work.
18. The Respondents sought to retrieve the position. Mr Keeley telephoned the Claimant. He was surprised at what he saw as a change of heart on her part. He sought to reassure her that there had been a misunderstanding and if she did not wish to move into self employment her situation would continue as before. Mr Keeley telephoned her again to similar effect. Mr Wilding spoke to her solicitors to similar effect. On 9 January Mr Keeley wrote a letter which the Tribunal accepted as containing his genuine sentiments. He said:

"I was very shocked and concerned to learn when we spoke on Monday 5 January that there has clearly been a misunderstanding concerning our recent discussions about your employment and your move into self employment ...

I had understood from our meeting that you had agreed to move into self employment in view of the economic downturn and its impact on the company. That was why the letter of 22^nd December was sent to you. We had never intended to end your employment without your agreement and clearly if you are not in agreement with this, as now seems to be the case, our letter of 22 December has no effect and we would be very pleased for you to continue with your employment on existing terms. There are many people in this organisation who, like me, have worked with you for many years at this company and previously elsewhere who hold you in very high regard and would be very disappointed to see you go.

We are very sorry that this misunderstanding has occurred and sincerely hope that you will continue your employment with us."

19. Notwithstanding this letter and further correspondence the Claimant maintained her position. Eventually, on 29 January, when they received a jobseeker's allowance form, the Respondents accepted that the Claimant's employment was at an end. They denied, however, that they had dismissed her. They said that she resigned.

The Tribunal's reasons

20. The Tribunal held that "without more" the Respondents' letter dated 22 December 2008 would amount to a dismissal (para. 22):

"Without more, the respondent's letter of 22 December 2008 (page 89) would amount to a dismissal. That is how, in isolation, any reasonable recipient would have read the letter, especially the reference to the "termination of your existing employment contract". Indeed it is how the respondent intended it at the time albeit on the false premise that the claimant had agreed to the termination of her employment and her move to self employed status."

21. The Tribunal then referred to decided cases from which it derived guidance: Sothern v Frank Charlesly & Co [1981] IRLR 278; Martin v Yeomen Aggregates [1983] IRLR 49; Barclay v City of Glasgow District Council [1983] IRLR 313; Sovereign House Security Services Ltd v Savage [1989] IRLR 115; and Kwik-Fit (GB) Limited v Lineham [1992] IRLR 156.
22. The Tribunal found that there were in this case "special circumstances". The Tribunal said (paras. 25 and 26):

"25.1 The claimant's genuine understanding of the outcome of the meeting she had had with Mr Keeley on 1 December was that they both understood that she was interested in a move to self employment and, at her request, Mr Keeley had agreed that he would send details to her; but that was all. A reasonable person with that understanding would have recognised, upon receiving the letter of 22 December, that something was seriously wrong: there had been a mistake and the reference to termination of her contract of employment had been an error.

25.2 The several events commencing on 5 January 2009 (which are recorded at paragraphs 11.29 to 11.35 above) when Mr Keeley first withdrew the words of dismissal, which efforts he, Mr Wilding and the solicitors on behalf of the respondent continued to make during the course of the next few days. The Tribunal acknowledges the delay between 23 December, when the claimant read the letter, and 5 January, when Mr Keeley sought to withdraw the words of dismissal. Such a delay would normally not amount to a withdrawal of a dismissal "almost immediately" (Martin) but in the circumstances of this case it was not until 5 January that the respondent became aware of the misunderstanding between the claimant and Mr Keeley. The words of dismissal were then withdrawn as soon as practicable after the claimant had alerted the respondent to the mistake that it had made. The respondent's managers (in the shape of Mr Wilding and Mr Keeley) then genuinely attempted to recover the position. They, in direct communication with the claimant and in communication with her solicitors (and the respondent's solicitors also in communication with the claimant's solicitors) explained and apologised for what had occurred and that the claimant was welcome to continue in her employment with the respondent. The claimant, however, refused to respond to such overtures.

26. Thus, while, on the face of it, the letter of 22 December would have amounted to a dismissal that dismissal, which was founded on a mistake, was withdrawn, timeously, by the respondent."

Submissions

23. On behalf of the Claimant Mr Forshaw took as his starting point the Tribunal's finding in paragraph 22 of its reasons. This is, he submits, a finding that the letter dated 22 December contained unambiguous words of dismissal.
24. Once granted this finding, he submits that the Tribunal erred in law in holding that there were "special circumstances", in this case. He took us to the leading cases on the subject; both the ones which the Tribunal cited, and some others – including Gale v Gilbert [1978] IRLR 453; Stern v Simpson [1983] IRLR 52; Denham v United Glass Limited [EAT/581/98] and Ali v Birmingham City Council [UKEAT/0313/08/CEA]. In particular he placed reliance on Greater Glasgow Health Board v Mackay [1989] SLT 729, a decision of the Scottish Court of Session to which the Tribunal was apparently not referred.
25. Mr Forshaw developed his submissions in the following way. He submitted that the "special circumstances" exception was directed to cases where the facts taken as a whole suggested that a person may not have intended to resign (in the case of an employee) or dismiss (in the case of an employer). Thus there might be special circumstances where words were spoken in the heat of the moment, particularly so if they were used by a person with a mental disability. In this case, however, the letter dated 22 December was not written in the heat of the moment; and it was without doubt intended to bring the employment of the Claimant to an end, with a view to her working as self employed. The fact that Mr Keeley had, through his own fault, made a mistake as to the effect of a meeting 3 weeks before did not amount to a special circumstance; the mistake explained why the Respondent terminated the contract of employment, but cast no doubt on their intention to do so.
26. Mr Forshaw criticised the conclusion that a reasonable person in the Claimant's position, receiving the letter dated 22 December, would have appreciated that the reference to the termination of her employment had to be an error. There was, he submitted, no basis for this conclusion in what had gone before; even on Mr Keeley's own account there was (as the Tribunal had found) no justification for the letter dated 22 December. He further submitted that the Tribunal was wrong to consider the conduct of the Respondent so long after the letter dated 22 December. Only conduct in the immediate aftermath of the dismissal was relevant. In effect the Tribunal allowed the Respondent, having dismissed the Claimant, unilaterally to withdraw its dismissal – which is contrary to all authority.
27. On behalf of the Respondent Mr Boyd accepted the Tribunal's conclusion that "without more" the words of the letter amounted to a dismissal. He submitted that the Employment Tribunal correctly identified and set out the legal authorities on the point. The Tribunal was correct to say that in all cases, whether the language was ambiguous or not, the words should be considered objectively: see Kwik-Fit at paragraph 21-22. There are no closed categories of special circumstance: see Sovereign House at paragraph 7, where the test is drawn quite broadly. The circumstances on which the Employment Tribunal relied were relevant. Hence the Tribunal did not err in law.
28. Shortly before the hearing of this appeal the decision of the Court of Appeal in Buckland v Bournemouth University Higher Education Corporation [2010] EWCA Civ 121 was handed down. In this case the Court of Appeal held that where an employer who commits a repudiatory breach of contract had no right to a change of heart and an opportunity to cure the breach; rather, it is the employee's choice whether to treat his employment as at an end. We drew this case to the attention of counsel at the hearing and gave them an opportunity to make submissions on it. Mr Forshaw submitted that it tended to support his case; if there was no right to a change of heart in a constructive dismissal case, why should there be in an ordinary dismissal case? Mr Boyd submitted that if special circumstances were to exist it would go to the question whether there was a repudiatory breach by the employer at all.

Statutory provisions

29. For the purpose of the Claimant's unfair dismissal claim, brought under the provisions of Part X of the Employment Rights Act 1996, the undergirding statutory provision is section 95(1), which provides:

"95     Circumstances in which an employee is dismissed

(1)     For the purposes of this Part an employee is dismissed by his employer if (and, subject to subsection (2) only if)—

(a)     the contract under which he is employed is terminated by the employer (whether with or without notice),

……..

(c)     the employee terminates the contract under which he is employed (with or without notice) in circumstances in which he is entitled to terminate it without notice by reason of the employer's conduct."

30. For the purposes of the Claimant's wrongful dismissal claim, the question is whether the Claimant can establish a breach of contract: see section 3(2) of the Employment Tribunals Act 1996 and reg 3 of the Employment Tribunals Extension of Jurisdiction (England and Wales) Order 1994. In the circumstances of this case the breach would be a termination by the employer without notice.

Conclusions

31. The decisions concerning "special circumstances" mainly relate to cases of resignation rather than dismissal; but we think that in principle the position is the same whether the Tribunal is concerned with dismissal or resignation. We derive the following propositions from the decisions to which we have referred.
32. (1) As a general rule, an employer who uses unambiguous words of dismissal, so understood by the employee, will thereby dismiss the employee and terminate the contract of employment. Conversely, as a general rule, an employee who uses unambiguous words of resignation, so understood by the employer, will thereby resign and terminate the contract of employment.
33. Thus in Sothern at paragraph 19 Fox LJ said:

"...it seems to me that when the words used by a person are unambiguous words of resignation and so understood by her employers, the question of what a reasonable employer might have understood does not arise. The natural meaning of the words and the fact that the employers understood them to mean that the employee was resigning cannot be overridden by appeals to what a reasonable employer might have assumed. The non-disclosed intention of a person using language as to his intended meaning is not properly to be taken into account in determining what the true meaning is."

See also Sovereign House at paragraph 7 (May LJ); Greater Glasgow Health Board at 731 (the Lord Justice Clerk (Ross), 734 (Lord Wylie), 737 (Lord Cowie); Kwik Fit at paragraph 31 (Wood J).

34. (2) This general rule is of wide application; and exceptions are of a limited nature. Tribunals should not be astute to find exceptions: Sovereign House at paragraph 7 (May LJ), Greater Glasgow Health Board at 737 (Lord Wylie) and Ali at paragraphs 12-17 (Silber J). We shall return to this point.
35. (3) The fundamental question for the Tribunal to consider will be: in the special circumstances, was the person to whom the words were addressed entitled to assume that the decision which they expressed was a conscious rational decision (Barclay at 315 (Lord McDonald); Greater Glasgow Health Board at 731, 733 (the Lord Justice-Clerk (Ross)). We think that Lord Cowie expressed the same concept in slightly different words: were there special circumstances which ought to indicate to the person to whom the words were addressed that the words were not meant or should not be taken at face value?
36. Thus Lord McDonald said:

"The real question is whether or not in the special circumstances the respondents were entitled to assume that this was a conscious rational decision."

37. Lord Wylie said that the proper question was:

"whether the [employers] knew or ought to have known that the [employee's] resignation was anything other than a conscious or rational decision"

38. (4) Since this is the fundamental question, the special circumstances will bear on the question whether the decision was conscious and rational. This is, we think, why the only special circumstances which have thus far been recognised in the cases are words expressed in the heat of the moment and soon retracted – see Martin, Barclay (where the employee in addition suffered from learning difficulties), Sovereign House and Kwik Fit. Thus in Kwik Fit Wood J said:

"Words may be spoken or actions expressed in temper or in the heat of the moment or under extreme pressure ("being jostled into a decision") and indeed the intellectual make-up of an employee may be relevant (see Barclay). These we refer to as special circumstances. Where special circumstances exist it may be unreasonable for an employer to assume a resignation and to accept it forthwith. A reasonable period of time should be allowed to lapse and if circumstances arise during that period which put the employer on notice that further enquiry is needed to see whether the resignation was really intended and can properly be assumed, then such enquiry is ignored at the employer's risk."

39. In our judgment these are the fundamental principles which Tribunals ought to apply when considering this question.
40. Without doubt the main practical problem which the law has sought to address in these cases has been the problem of words spoken in anger or in the heat of the moment. In ordinary human experience we generally take people to mean what they say; but we often make allowances for words spoken in anger, recognising that they may soon be retracted and may reflect no more than a momentary, flawed intention on the part of the speaker. The law caters for this eventuality; but the law will not serve the wider interests of justice unless employers and employees are usually taken to mean what they say.
41. We think the Court of Appeal's decision in Buckland also points to a limitation in the "special circumstances" rule. The Court of Appeal decided that an employer who commits a repudiatory breach of contract has no right to an opportunity to cure the breach. There is a logical distinction between an employer who commits a repudiatory breach of contract and an employer who uses express words of dismissal – the former is by definition acting in breach of contract, the latter not necessarily so. But the distinction is not necessarily clear cut. An employer's words of dismissal may be the culmination of a course of conduct amounting to a repudiatory breach, or they may themselves amount to such a breach. In such circumstances there can be no room for the "special circumstances" doctrine. An employer who is in fundamental breach cannot improve his position by using express words of dismissal.
42. With these considerations in mind, we turn to the reasoning of the Tribunal.
43. We agree with the Tribunal that any reasonable recipient of the letter dated 22 December would read it "in isolation" as amounting to a dismissal. The words "the termination of your existing contract will be effective from 31 December 2008" are unambiguous; they cannot to our mind be read in any other way.
44. Thereafter, however, while acknowledging the careful reasoning of the Tribunal's judgment, we part company with the Tribunal's conclusions, for the following reasons.
45. Firstly, we do not think the Tribunal has applied the correct test. It has not asked or answered the question whether the Claimant was entitled to regard the decision expressed in the letter as a conscious, rational decision. We note that Greater Glasgow Health Board was not cited to the Tribunal; if it had been, we think the Tribunal would more readily have acknowledged the exceptional nature of the special circumstances required if the Respondent's letter was not to be given effect in accordance with its terms.
46. The Tribunal concluded that the Claimant, reading the letter dated 22 December, ought to have concluded that something was seriously wrong and that the Respondent had made a mistake. This on its own cannot be a special circumstance. If the fact that an employer or employee was or might in some way have been mistaken in issuing a letter of dismissal or resignation were of itself a special circumstance, the exception would to our mind have overtaken the rule. Employers must often think that employees are making a mistake in resigning; but they are still generally entitled to take a resignation at face value. Employees must often think that an employer is making a mistake in dismissing them; but they are still generally entitled to take a letter of dismissal, or words of dismissal, at face value.
47. The Tribunal went a step further, saying that in effect that by reason of prior events the Claimant ought to have realised that the reference to termination of her contract was an error. But, as the Tribunal itself said in an earlier paragraph, the reference to termination of the contract was intentional, not an error; any error lay in the Respondent's underlying premise. If the Tribunal had asked the correct question, it would have held that the Claimant was entitled to regard the decision expressed as a conscious and rational decision.
48. It was naturally to be expected that the Claimant would take the letter dated 22 December, and the accompanying agency agreement, to obtain some urgent advice. A lawyer would be expected to tell her that the letter terminated her employment with effect from 31 December. To our mind the Claimant and her advisers were entitled to take the letter at face value; and the Claimant was entitled to take the view that her employment had been terminated by the clear words of the letter dated 22 December.
49. We would add that we have difficulty with part of the reasoning in paragraph 25.1 of the Tribunal's reasons. It is no doubt true that a reasonable person, knowing what happened on 1 December, would have recognised on receiving the letter dated 22 December that something was seriously wrong. But we do not see why a reasonable person would necessarily consider that the reference to termination of her contract was an error. A reasonable person, knowing that the letter falsely claimed that she had agreed to change to self employment, and knowing that her requests for information as to the terms of self employment had never been met, might equally think that her employers were bent on riding roughshod over her rights and reasonable requests. (We note that in her statement the Claimant said she was upset to receive the letter, as one might expect.) Indeed the reference to termination of her contract was not an error; Mr Keeley intended to terminate her contract; the error was in Mr Keeley's own understanding of what had taken place on 1 December; and we do not see why, on the Tribunal's findings, the Claimant should have expected him to have this misunderstanding.
50. Further, we consider that the Tribunal ought not to have held that the Respondent's change of heart on and after 5 January 2009 was timeous. We think that in this field of law if a clearly expressed dismissal is not to be taken at face value it must be retracted in short order. The reasonable period of time to which Wood J referred in Kwik Fit was "relatively short, a day or two": see paragraph 33, where Wood J emphasised that the Appeal Tribunal primarily had in mind the conduct of an employee rather than an employer when considering even this period of time. In this case there was no retraction until after the Claimant had taken the letter to her lawyers and taken a decision based on their advice. The intervention of a holiday period is to our mind no excuse in the circumstances of this case, where the letter was to take effect on 31 December and the Respondent should have expected the Claimant to take urgent legal advice.
51. For these reasons the appeal will be allowed. We declare that the Respondent dismissed the Claimant; and we remit the matter to a fresh Employment Tribunal to consider remaining issues on this basis.