United Kingdom Employment Appeal Tribunal

Appeal No. UKEATS/0032/10/RN

 

 

EMPLOYMENT APPEAL TRIBUNAL

52 MELVILLE STREET, EDINBURGH, EH3 7HF

 

 

At the Tribunal

On 26 January 2011

 

 

Before

THE HONOURABLE LADY SMITH

MISS S AYRE FIPM FBIM

MR P HUNTER

 

 

 

 

CHIVAS BROTHERS LTD APPELLANT

 

 

 

 

 

 

MR DAVID MILLAR RESPONDENT

 

 

Transcript of Proceedings

 

JUDGMENT

 

 

 

 

 

 

 

 

 

APPEARANCES

 

 

 

 

 

For the Appellant	MR M LAMONT (Solicitor) Lamonts Solicitors Miller Chambers 16 Miller Road Ayr KA7 2AY
For the Respondent	MR D HAY (Advocate) Instructed by: Digby Brown Solicitors Causewayside House 160 Causewayside Edinburgh EH9 1PR

 

 

SUMMARY

CONTRACT OF EMPLOYMENT – Notice and pay in lieu

 

Ill health retirement.  Claimant’s application having been accepted by pension fund trustees.  Employment Tribunal’s finding that Respondent liable for pay in lieu of notice reversed on appeal.

 

 

 

THE HONOURABLE LADY SMITH

Introduction

1.            This is an employer’s appeal from the judgment of an Employment Tribunal sitting at Glasgow, Employment Judge Mr C S Watt, registered on 27 May 2010, stating:

 

“The unanimous judgment of the Tribunal is that the respondents shall pay to the claimant the sum of £3,864, being twelve weeks notice pay due to the claimant.”

 

2.            The Claimant was represented by Miss J R Watson, solicitor before the Tribunal and by Mr Hay, advocate, before us.  The Respondent was represented by Mr M Lamont, solicitor, before the Tribunal and before us.

 

3.            We will continue referring to parties as Claimant and Respondent.

 

Background

4.            The Claimant’s date of birth was 14 May 1947 and he was employed by Allied Distillers from 15 May 1978 until their business was taken over by the Respondent in January 2007.  Thereafter he was employed by the Respondent until 31 May 2009.  His employment came to an end after a long period of sickness absence which had begun on 24 January 2007.

 

5.            The issue for the Employment Tribunal was whether or not the Respondent had terminated the Claimant’s employment.  If the Respondent had done so, it was agreed that the Claimant was entitled to pay in lieu of notice.

 

6.            The background facts were not in dispute and can largely be gleaned from reading the exchange of correspondence which formed part of the bundle for the appeal hearing before us.  That correspondence included the following:

 

·                           16 February 2009:  letter from the Respondent to the Claimant referring to a meeting on 19 January 2009.  The letter explains (a) that the Respondent has asked their pension administrators for a current pension quotation for the Claimant, (b) that it would be of no advantage to the Claimant to apply for ill health retirement since he was over 60 years of age and would not suffer financial detriment (which is, we assume, a reference to downwards actuarial adjustment which would have occurred on ill health retirement occurring before 60 years of age), (c) that the best option for the Claimant, if he wished to take his pension, would be to resign and immediately draw his pension, and (d) that if he did not resign, the Respondent

 

“would be in the unfortunate position of having to consider your ongoing employment and address this through more formal channels.”

 

·                           21 February 2009:  letter from the Claimant to the Respondent.  Regarding the options referred to above, he asked to see written information regarding the transfer of his pension from Allied Distillers to the respondent and stated:

 

“I cannot make any decisions until I have the information about my employment with the Company and the pension scheme so until this happens I will not be considering retiring.”

 

·                           5 March 2009:  letter from the Respondent to the Claimant explaining that when he transferred to the Chivas pension scheme, there was no change to the terms of his membership of the scheme (apart from a provision relating to funeral benefit).  The Respondent advised:

 

“…under the terms of your membership of the Scheme the decision on whether early retirement on the grounds of ill health is granted rests with the Trustees.”

 

and that:

 

“If the Trustees determine that an employee meets the criteria for early retirement on the grounds of ill health then the employee will qualify for a pension calculated as if they had reached their normal retirement age (the calculation will be based on pensionable service to the date of the ill health retirement) and if that retirement is before age 60 then an early retirement discount is applied up to age 60.”

 

It was also explained that the employee may, in the case of an ill health retirement, receive an enhancement to his pension provided by the Respondent but that any such enhancement was solely at the discretion of the Respondent.  The Respondent summarised the advice given as being:

 

 “... the Trustees can grant ill-Health or Severe Ill–Health Retirement but if they choose to do so then your benefits would be no different to what they would be if you simply took early retirement.” 

 

The Claimant was invited to a meeting and a meeting took place on 11 March 2009.

 

·                           20 March 2009:  letter from the Claimant to the Respondent in which he stated:

 

“As I cannot remember all that was discussed or agreed at the recent meeting, it would be helpful if you would confirm to me in writing what was discussed and agreed regarding my ill health retirement, my pension and the Company’s consideration of enhancing my pension after consultation with the Trustees and how this ended.”

 

·                           9 April 2009:  letter from the Respondent to the Claimant referring to the meeting of 11 March, referring to their having gone over the details of that letter at the meeting  and stating: 

 

“At the end of this meeting you confirmed that you did not wish to resign from the company so I advised you that we will submit a case for ill health retirement to the Trustees.

We will be putting forward your case for ill health retirement to the Trustees on the 20^th May 2009.  To allow us to do so can you please complete the enclosed Employee Questionnaire which needs to be submitted to the Trustees and return it to me at the address below.”

 

·                           2 June 2009:  letter from Respondent to the Claimant stating: 

 

“I can confirm that your application for Early Ill Health Retirement was accepted by the Pension Fund Trustees.  The date of your Early Ill Health Retirement will be 31 May 2009.”

 

The letter also advised that the Respondent had declined to exercise their discretion so as to enhance the Claimant’s pension benefits and added:

 

“We have contacted the Pension Fund to advise them and they will write to you shortly confirming your pension details and will issue with a form that you need to complete and send back to them.  Once they have received this form they will advise you when you will start to receive your pension payments.  Please note that your payments will be backdated to 1^st June 2009.”

 

The Claimant took no action on receipt of that letter.  In particular he did not indicate to the Respondent by letter or otherwise that he did not agree to retiring from their employment as at 31 May 2009.

 

·                           17 June 2009:  letter from the Respondent to the Claimant referring to Mercer Ltd (the relevant pension administrator), enclosing a retirement benefits statement provided by them and advising:

 

“In order to settle your retirement benefits Mercer Limited require the following:

§        Completed retirement benefits statement (Member decision form) showing option

§        Completed Lifetime Allowance declaration form

§        Completion and return of the bank mandate form

§        A copy of your birth certificate

§        A copy of your marriage certificate/registered civil partnership document (if applicable)

§        A copy of your wife’s birth certificate/registered civil partner’s birth certificate (if applicable)

Once Mercer Limited is in receipt of the requested information from you they will be able to commence the settlement process.”

 

·                           11 June 2009:  the “Retirement Benefits Statement” enclosed with  the letter of 11 June 2009 specified the Claimant’s personal details, a “Date of retirement” of 31 May 2009 and the two payment options which were open to him.  One was that he could opt to take a full annual pension of £8,698.56 subject to yearly increases of 5% or RPI if less.  The second option was that he could take a lump sum of £40,599.81 plus a reduced annual pension of £6,090.12 subject to the same yearly increases.  Both options were stated to be on the basis that payment of pension would commence on 1 June 2009 (31 May 2009 being a Sunday).  The Claimant required, accordingly, when completing the “Member decision form” referred to in Mercer’s letter, to state which of those two options he elected to take.

 

·                           22 June 2009:  letter from the Claimant to the Respondent stating:

 

“I refer to your letter of 17 June … and also to our telephone conversation regarding the recent letter from Alistair McAra advising my retirement date.

As requested I have today signed and completed all the paperwork and returned them to Mercer Limited in Glasgow.

I also acknowledge receipt by recorded delivery today a P45 parts 1a, 2 and 3 and a payslip paying me holiday pay.  Would it possible to have a break-down of what I am actually being paid and what period this would cover?  I also note I have been taxed on this sum and assume I will have to claim this back as I am not paying tax at the moment.

I have not checked my paperwork regarding my conditions of employment but would I be entitled to any payment in lieu of notice of my termination of employment?  ....”

 

There is no suggestion of the Claimant, in that letter, querying the references in the correspondence and Mercer documentation to him retiring as at 31 May 2009. 

 

·                 29 June 2009:  letter from the Respondent to the Claimant responding to his letter of 22 June stating:

 

“…  I can also confirm that you would not be entitlement (sic) to payment in lieu of notice as your employment has been terminated under a mutually agreed ill health retirement.”

 

·                 2 July 2009:  letter from the Claimant to the Respondent stating:

 

“…  Having made some enquiries relating to my situation regarding the notice period due from the Company I have been advised that regardless the fact that I am retiring due to ill-health or the fact that it was mutually agreed I am seemingly still entitled to the statutory minimum period of notice which is 12 weeks and if not then payment would be due in lieu of this.”

 

7.            Thus, the Claimant stated, in terms, in that letter of 2 July, that his retirement was “mutually agreed”.  That was his position as stated to the Respondent on 2 July 2009.  That, however, was not his position by the time of the hearing before the Employment Tribunal.  By 2 July 2009, the Claimant had been in receipt of his pension for a month (since 1 June 2009).

 

The Tribunal’s Judgment and Reasons

8.            Put shortly, the Tribunal decided that the Respondent’s letter of 2 June 2009 amounted to a termination of employment by the employer.  The reason for that appears to be explained in paragraph 54:

 

“The Tribunal considers that nothing in the subsequent actings of Mr Millar show that there was a true termination by agreement, since Mr Millar clearly raised the question of payment of notice at the same time as returning the early ill health retirement papers to the pension adviser.”

 

9.            It seems, however, that if they had been assessing parties’ communications and actings up to but not including the Claimant asking, in his letter of 22 June 2009, whether he was entitled to any payment in lieu of notice, they would have been satisfied that there was a mutually agreed termination.  That is evident from the terms of  paragraph 50, where the Tribunal state:

 

“If the claimant in this case had simply returned the papers to Mercer and said nothing else about the terms of the termination of his employment then the Tribunal would have understood the argument put forward by Mr Lamont, ie Mr Millar was perfectly happy about the early ill health retirement which had been processed by his employer.  If the facts were that he completed the forms, returned them to the pensions adviser and raised no other matter with his employer that would indicate that he agreed to the termination.  The Tribunal could understand how it might be said, in these circumstances, that there was a termination by agreement.  However, that is not what happened.  Mr Millar clearly raised the point about his notice payment at the same time as he returned the pensions documentation to Mercer.  In the view of this Tribunal, the claimant’s subsequent actings in this case can not be seen to personally bar him from claiming that there was a termination by the employer and he was entitled to notice.  The claimant raised the question of notice with his employer at exactly the same time as he returned the pensions papers to Mercer.”

 

10.         The reference to personal bar arose in respect that in addition to submitting that there was a mutually agreed termination, Mr Lamont had submitted that, in any event, the Claimant was personally barred from asserting that such termination had not occurred.

 

11.         It appears, accordingly, that the Employment Tribunal’s approach was to regard the Claimant’s query about notice pay as amounting to a condition which he required to be fulfilled before he would agree to take ill health retirement.

 

Relevant Law

12.         The issue for the Employment Tribunal was whether or not the Claimant was entitled to notice pay.  Parties were agreed that if the Claimant’s employment was terminated by the Respondent then he was entitled to such payment in the sum of £3,864.  Accordingly, the question that the Tribunal had to address was whether the Respondent had terminated the Claimant’s employment: had the Respondent dismissed the Claimant?  The notice pay claimed was not due unless it was established that the Respondent had done so.

 

13.         The Respondent denied having done so.  There had, they said, been a mutually agreed termination.

 

14.         In these circumstances, the task for the Employment Tribunal was, to use the terminology of Donaldson MR, in the case of Martin v Glynwed Distribution Ltd [1983] ICR 511at 519:

 

“… to make up its mind whether, on the evidence, the reality of the situation was that the employers terminated the employee’s employment  ...”.

 

15.         They required to determine what really happened, looking at “the realities of the facts” (Birch v Liverpool University [1985] ICR 470 at 483), it being a matter of looking at the substance of what happened.

 

The Appeal

16.         Mr Lamont’s principal submission was that it was perverse of the Tribunal to have found that the Respondent dismissed the Claimant.  The facts found clearly demonstrated that there had been a mutually agreed termination.  The Claimant had applied for retirement.  Retirement had been granted with an effective date of 31 May 2009.  The Claimant had completed the necessary paperwork and returned it to the pension administrator, Mercer and he had accepted payment of pension benefits as from 1 June 2009.  The correspondence and the Claimant’s actings showed quite clearly that the termination of his employment was agreed and there was no basis on which it could be said that he had been dismissed.  The Employment Tribunal had somehow elevated the enquiry about notice pay in his letter of 22 June 2009 into a condition that precluded agreement but they had misdirected themselves in so doing.  The source of their misdirection may have been the erroneous summary contained in paragraph 42 of their judgment  that as at 20 May 2009 all that occurred was:

 

“Mr Millar was agreeing to his employers submitting a case to the pension trustees to see whether early ill health retirement could be granted to him.”

 

17.         That was not a conclusion that was open to them on the correspondence.  Then when it came to the conclusion at paragraph 50, the Tribunal had fundamentally erred.  They had ignored the fact that by the time the Claimant asked the question about notice pay, he had already put matters beyond his control; the paperwork had been completed and sent to Mercer.

 

18.         Mr Lamont submitted that the authorities relied on by the Tribunal did not in fact assist; those authorities were Asamoah–Bokye Walter Rodney Housing Association Ltd [2001] EWCA Civ 8  and Walker v Heathrow Refuelling Service Co Ltd UKEAT 0366/04.  We note that Mr Hay did not rely on either case in his submissions and he was, we consider, right to do so.  Neither case is in point.

 

19.         Mr Lamont also referred, by way of illustration, to the case of Willoughby v CF Capital Plc UKEAT/0503/09/LA where an employer was found to have dismissed an employee – he had erroneously referred to a mutual termination of employment having been agreed at a meeting, stated a date from which that termination would be effective and enclosed paperwork for the employee to complete so as to achieve a move to self employed status.  She did not return the paperwork.  She took legal advice, was told that the letter amounted to a dismissal and treated it as such.  Mr Lamont, however, posed the question:  if that employee, rather than treating it as a dismissal, had returned the paperwork, wouldn’t the outcome have been different?  It was his submission that in that it would have been shown that there had been an agreed termination.

 

20.         Mr Lamont’s subsidiary submission was to the effect that the Claimant’s actings were such as to show he acquiesced and he was personally barred from claiming that he was dismissed.  He referred to McBryde: The Law of Contract in Scotland 3^rd edition at paragraph 25-09 in that regard.

 

21.         For the Respondent, Mr Hay submitted that the correspondence was incapable of demonstrating mutual agreement, particularly as regards the date of termination.  He stressed that that date was first mentioned by the Respondent in the letter of 2 June 2009.  He also relied on the fact that the date of retiral stated in the letter of 2 June was retrospective.  We note, however, that it was not the Respondent’s case before the Tribunal that anything turned on the fact that the date of retirement was stated in the Respondent’s letter or that it was retrospective nor is there any cross appeal.

 

22.         Otherwise, Mr Hay submitted that it was a matter of causation – what caused the termination?  It had to be concluded that it was the Respondent that had, he said, done so because there was no conclusive evidence of consensus.  He referred in support of his submissions to the cases of Martin, Birch, Walker, and Burton Group Ltd v Smith [1977] IRLR 351.  Recognising that Birch might not be helpful to the Claimant’s case, he sought to distinguish it on the facts but we do not see that the points of factual distinction as between it and the present case detract in any way from the general observations made as to the applicable principles, to which we have already referred.

 

Discussion and Decision

23.         We are persuaded that the Employment Tribunal reached a conclusion that, on the facts, they were not entitled to reach and that the appeal on perversity is thus well founded.

 

24.         By February 2009, the Claimant had been off work on grounds of ill health for over two years.  He was over 60 years of age.  It can be inferred from the letter of 16 February 2009 that at the meeting to which it refers there had been discussion about the possibility of him retiring and that he had enquired about the possibility of an ill health retirement.  The subsequent correspondence shows that that remained an option in which the Claimant was interested.  The correspondence shows that the alternative (ordinary retirement) is referred to by parties as resignation.  Whilst, since he was over 60 years of age, the amount of pension to which the Claimant would have been entitled on ordinary retirement would not have differed from his entitlement on ill health retirement, there was a chance, in the case of the latter, of a discretionary uplift to his pension being conferred and funded by the Respondent.  The Respondent was not obliged to do so and, in the event, decided not to exercise that discretion in the Claimant’s favour.  It is, though, perhaps understandable that someone in his position would want to have the chance of the uplift, if possible.

 

25.         The tenor of the Claimant’s letter of 20 March 2009 shows not only a continued interest in the option of ill health retirement but a desire to achieve a prompt resolution.  Prior to that letter there had been another meeting and it is significant that the Claimant asks the Respondent to confirm.“…what was discussed and agreed regarding my ill- health retirement, my pension and the Company’s consideration of enhancing my pension after consultation with the Trustees.” (our emphasis).

 

26.         The letter of 9 April shows that at the meeting referred to in the Claimant’s letter of 20 March 2009, the Respondent agreed to put forward a case for the Claimant for ill health retirement to the pension fund trustees – the Respondent would have had no business making such an application had they not been satisfied that that was what the Claimant wanted to do.  The Claimant needed to complete an “Employee Questionnaire” before that could be done, and he did so.  He did not query the Respondent informing him that they were going to make the application for his ill health retirement.  We cannot accept that these facts are able to bear the gloss that the Tribunal put on them in paragraph 42 of their reasons.  It was not a matter of a hypothetical enquiry being made of the Trustees to find out what would be their reaction if the Claimant did apply for ill health retirement (which is how the Tribunal have interpreted it).  The facts demonstrate, rather, that an actual application was made.  There was nothing tentative about it, as the Tribunal seems to suggest.

 

27.         The letter of 2 June 2009 reports to the Claimant that he has been successful in achieving what was evidently his objective, namely ill health retirement.  We do not see that anything turns on the fact that the date of retirement is specified for the first time in that letter or that it is a retrospective date.  Further, by completing, signing and sending to Mercer, the relevant paperwork which clearly showed a retirement date of 31 May 2009 and financial options calculated on the basis of a start date of 1 June 2009, the Claimant confirmed his agreement to retiring as at 31 May 2009.  He advised the Respondent that he had sent the signed paperwork to Mercer.  He did not query the fact or date of his retiral.  We note that his letter of 22 June also refers to his having received his P45 and a payslip paying him holiday pay which was due to him.  He accepted the P45 and holiday pay without demur.  He accepted payment of his pension as from 1 June.  These were not the actions of a man who was having a termination which he did not want, imposed on him.  The facts as ascertained from the correspondence and the Claimant’s actions clearly showed that what really happened was that there was a mutually agreed termination.

 

28.         Turning to the query about notice pay that was raised in the letter of 22 June, we do not agree with the Tribunal’s analysis at paragraph 50.  It is contradictory – they appear to accept that everything up to the posing of that question showed that there was a mutually agreed termination.  If that was what had happened, that meant that on 31 May, the Claimant’s employment was at an end.  The Respondent could not have terminated his employment thereafter because it had already been terminated.  Further, we note that the Tribunal’s decision that there had been no agreement to terminate appears to be based on the proposition that where, having reached agreement, one party “raises a matter”, his doing so renders the earlier agreement ineffective.  That is not correct in law.  The fact that one party asks, after an agreement has been concluded, whether the other party will confer some further benefit on him can have no effect on the earlier agreement.  It may, if he is fortunate, result in a further agreement; it may not.  Whatever happens, though, the outcome of that party’s efforts to secure “icing on the cake” makes no difference to the cake itself; it will remain baked and ready to eat.

 

29.         We observe, further, that it is evident from the terms of his letter of 2 July 2009 that the Claimant himself thought that his retirement was one which was mutually agreed.  He wrongly thought that he was also entitled to pay in lieu of notice but there is no question of his understanding being other than that he had agreed to what happened so far as his retiral was concerned.  In short, matters started with the Claimant enquiring, after a long sickness absence, about retiring on ill health grounds and progressed to an agreed ill health retiral being achieved.  There was no basis on which it was open to the Tribunal to find otherwise.

 

30.         In these circumstances, we do not require to deal with the submissions on personal bar and do not propose to do so.

 

31.         We will pronounce an order upholding the appeal and dismissing the claim.