At the Tribunal | |
On 19 January 2012 | |
Before
THE HONOURABLE MRS JUSTICE COX
(SITTING ALONE)
APPELLANT | |
RESPONDENT |
Transcript of Proceedings
JUDGMENT
For the Appellant | MR A E ALLSOP (The Appellant in Person) |
For the Respondents |
MR SIMON DEVONSHIRE (One of Her Majesty's Counsel) Instructed by: Gateley LLP Fleet Place House 2 Fleet Place Holborn Viaduct London EC4M 7RF |
SUMMARY
JURISDICTIONAL POINTS – Claim in time and effective date of termination
UNLAWFUL DEDUCTION FROM WAGES
The Claimant appealed against the Employment Tribunal's determination at a Pre-Hearing Review that there was no jurisdiction to determine his claims for unlawful deductions from wages, on the basis both that (1) they were out of time and (2) they were, when properly analysed, claims for damages for breach of contract and outwith the statutory regime for unlawful deductions claims.
Additional questions related to the date when the Claimant's employment had been terminated, and whether the Administrators (the Respondents having gone into administration) had adopted his contract of employment.
No error of law was identified in the ET's decision and the appeal was therefore dismissed.
THE HONOURABLE MRS JUSTICE COX
Introduction
(1) that the Claimant's complaints of unauthorised deductions from wages, save that in respect of PHI cover, were presented out of time, that it was reasonably practicable for them to have been presented in time, and that the Tribunal therefore lacked jurisdiction to hear them;(2) that the Claimant's claim of unauthorised deductions from wages in respect of PHI cover was in substance a claim for damages for breach of contract, and that the Tribunal lacked jurisdiction to entertain it; and
(3) that the Claimant's application for leave to amend his Originating Application to assert further claims should be refused.
"I do not want to waste the time of the [Employment Tribunals] nor the time of the liquidators nor my own time to achieve a hollow victory."
In a subsequent letter to the Employment Tribunal dated 15 April 2010 he acknowledged that determining unsecured claims would be an "academic exercise" and "a waste of the tribunal's time and resources" and that no purpose would be served by their being heard.
"… some conduct by the administrators which amounts to an election to treat the continued contract of employment with the company as giving rise to a separate liability in the administration."
Thus, failing to dismiss an employee in ignorance of his existence after the expiry of the 14-day window permitted by the legislation is not sufficient to constitute an adoption.
(a) from 5 May 1998, when he returned to the UK from the overseas posting, he was paid less than he should have been, and the shortfall in his salary constituted an unlawful deduction;
(b) he should have been paid an enhanced subsistence allowance between November 1998 and September 1999, and the shortfall constituted an unlawful deduction;
(c) he should have been paid a higher salary following reviews in January 1999 and 2000, and the uplifts that were not awarded to him constituted unlawful deductions;
(d) he was entitled to sick pay from March 2000, the non-payment of which constituted an unlawful deduction; and
(e) he was entitled to permanent health insurance (PHI cover) after 28 weeks of sickness absence at 75 per cent of his salary, and the failure to provide this cover constituted an unlawful deduction.
However, the Claimant then served on the Tribunal, on 18 November 2010, a document headed "Amendment of and Up-Dating to the Originating Application", in which he sought to "update" his ETI and expand the claims "for Registration and the Record". In this "update" the Claimant alleged materially:
(a) that the Administrator had adopted his employment through to the date of his notional retirement in August 2008;
(b) that he wished to pursue the claim for unauthorised deduction from wages and withheld and unpaid wages elements of his ET1; and
(c) that this claim included not only the four elements he had identified in his ET1 at paragraphs (a) to (d) above, relating to level of salary, subsistence, salary review and non-payment of salary, but also claims that had not been specifically pleaded as unlawful deductions claims in his original ET1, namely a company car, unpaid annual leave and non-payment of salary in retirement.
(1) whether the Tribunal had jurisdiction to consider the unlawful deductions claims in the original ET1, given the time limits for the presentation of such claims;(2) whether those claims should be struck out as having no reasonable prospect of success, being in reality claims for damages not within the relevant unlawful deductions statutory jurisdiction; and
(3) whether the amendments proposed by the Claimant should be permitted.
Termination
"7. Since unfortunately having declared your job redundant on 24 September 1999 we have subsequently, at your request, fully reviewed all the points you have raised in your grievance via correspondence and at meetings with our Operations Director and Managing Director. It is our considered view that we have fully responded to all these queries and stated our case, quite clearly, in doing so.// Having now reached this stage, I am sorry to re-confirm that your job is still redundant.// …//In effect all the terms are the same as our original redundancy notification letter dated 17 September .. with the exception of the in-lieu notice payment which is no longer applicable…"
"To clarify: 1. Our letter dated 16 February confirms that your job is unfortunately made redundant.// 2. As the original notice period stated in our letter dated 17 September 1999 has expired, the date the redundancy comes into effect is the 16 February.// 3. I have requested the appropriate department to liaise direct with you to arrange for the return of company equipment with immediate effect. This includes the company car."
"33.3 … It is clear from the letter of 16 February … that the HR Director took the view that CNL had responded to all the grievances. He may have been wrong, but even if he had been he plainly had the authority of CNL to act on his belief, and did so."
"20. On 9 January 2001 the Administrators' officer wrote to Lewis Silkin ... He confirmed the appointment of the Administrators and went on: "The vast majority of the workforce were made redundant on 17 November 2000 with the exception of approximately 20 staff who were retained to assist the administrators.// The information provided by the company in respect of it's (sic) employees unfortunately did not include Mr Allsop and therefore, no redundancy notice will have been issued to him. However, for the avoidance of doubt I confirm that Mr Allsop would be redundant from the above company with effect from 17 November 2000.// The former employees have been issued with application forms RP1, which enables them to claim, up to certain limits, from the Redundancy Payments Service for monies outstanding in respect of redundancy pay, arrears of salary, holiday pay and payment of statutory notice.// I am willing to provide a form RP1 for Mr Allsop, however, the Redundancy Payments Service would, as I understand it, reject his claim on the basis that he had been on long-term sickness (over 26 weeks) and therefore, would state that the contract had become 'frustrated'.// My advice would therefore be to continue with the Employment Tribunal proceedings as they may award a redundancy payment to Mr Allsop together with statutory notice and accrued holiday pay. This may then be claimed from the Redundancy Payments Service on form RP1.""
… written by an accountant, and it is clear on its face that the information available to him about the history of the employment of Mr Allsop was incomplete. He seems to have assumed that because Mr Allsop was on sick leave for a lengthy period his name had, "slipped through the net", and therefore been omitted from the list of current employees at the date of the administration. On that assumption he then made what was plainly intended to be a hurtful suggestion that might lead (and indeed eventually did lead) to the receipt by Mr Allsop of a redundancy payment et cetera from public funds. For the effectiveness or otherwise of the February 2000 termination it has in my judgement no evidentiary value at all."
"…In some limited circumstances Administrators of an insolvent company may adopt the employment contracts of some of its employees whose continuing services they require. The effect of the relevant provisions of the Insolvency Act 1986 was considered by the House of Lords in Powdrill and another v Watson and Another (etc) [1995] AC 394. It was held that on the true construction of those provisions, regard being had to the context and to the mischief aimed at by Parliament, a contract of employment was adopted where the conduct of the Administrator amounted to an election to treat a continued contract of employment with the company as giving rise to a separate liability in the Administration, and was inevitably adopted if the Administrator caused the company to continue the employment for more than 14 days after his appointment. It seems to me clear that for there to be an adoption the contract of employment must subsist at the date of appointment of the Administrators. If, as appears to me to be the case, the employment had been terminated in February 2000, then it did not subsist when the Administration Order was made in November of that year. The letter was, as I have noted, written by an accountant who plainly had incomplete information about the relevant history. However, it cannot in my judgement be read as indicating any willingness by the Administrators to assume any liability to Mr Allsop in the Administration: to the contrary, its plain purpose was to enable him to assert claims the accountant understood might be open to him for payment by the Redundancy Payments Service. Mr Allsop referred to later dealings between himself and the Administrators, but did not draw attention to any other document created by them or with their authority which supported the suggestion that there had been an adoption. The critical evidence of adoption would have been the payment by the Administrators of salary or sick pay, and it is common ground that no such payment was made. In my judgment the Administrators did not adopt the contract of employment. "
"I do not consider that the letter amounted to general or unlimited permission to pursue in the tribunal the claims asserted in the Originating Application: rather, it is suggested a course which the accountant believed would lead to payment by the Redundancy Payments Service. If, however, I am wrong on that point then any alleged abuse by the Administrators of their power under the Insolvency Act to withhold consent to proceedings is a matter with the exclusive jurisdiction of the Court which made the Administration Order. This tribunal has no relevant jurisdiction."
ET1 out of time
Reasonable practicability
Jurisdiction to determine unauthorised deductions
"36.2 The leading case on the subject is Coors Brewers Ltd v Adcock and others [2007] ICR 983. In that case the claimants complained that a decision not to award an incentive payment under a discretionary incentive scheme was an unauthorised deduction from wages. The Court of Appeal upheld the decision of the EAT that the case did not fall within the jurisdiction of the tribunal. The claimants' case at its highest was that the employer was under an obligation to put in place a scheme which, properly and fairly operated, was capable of replicating the benefits of an earlier scheme; that if the scheme it had put in place, as operated, did not fulfil that obligation the claimants would have suffered loss; the amount of that loss was unquantified, so that the tribunal was invited to quantify it. The claim was therefore one for damages for breach of contract and not within the scope of the unauthorised deduction regime, which was said by Wall LJ to be "essentially designed for straightforward claims where the employee can point to a quantified loss ... [and] designed to be a swift and summary procedure".
36.7 As to the PHI cover claim, Mr Allsop protested that it was for a quantified sum, namely 75% of salary. That, in my judgment, does not accurately reflect its true nature. Quite apart from the fact that the value of salary at the material time was itself the subject of disputed claims, it is pleaded on the basis that the respondent "failed to consider [Mr Allsop] for" benefit under the Scheme. As in Coors, the claimant asserted that a discretion had been exercised to his detriment, and that this was a breach of contract. The claim is one for damages for breach of contract, and on the Coors principle is not within the jurisdiction of the tribunal.
36.7 In case I am wrong in my conclusion as to time limits, I should record that in my judgement the same is true of the claims:
(a) for salary (pleaded on the basis that Mr Allsop's notional salary "should have been taken into consideration when setting the level of [his] salary on his return to the UK, on the basis that this was a typical salary for this particular position");
(b) for subsistence (pleaded on the basis that the payments" were not increased, as Mr Allsop had been led to expect");
(c) for salary uplift on review (pleaded on the basis that Mr Allsop" had a reasonable expectation of an increase to the same extent as his peers and subordinates"); and
(d) sick pay, (because although it was common ground that sick pay was at 100% for 6 months and 50% for the next 6 months, the salary to which these percentages apply was itself the subject of the claims at (a) and (c) above, which I consider to be claims for breach of contract.
Accordingly, on this ground also I conclude that the tribunal lacks jurisdiction to entertain the claims."
Amendment
(a) the nature of the amendment, and whether it is a minor matter or a substantial alteration pleading a new cause of action;(b) the applicability of time limits and whether any new complaint or cause of action proposed to be added by way of amendment would be out of time, and if so, whether the time limit should be extended; and
(c) the timing and manner of the application, including delay.
"…At the PHR Mr Allsop gave notice of a further new claim that he wishes to pursue, which he frankly said had occurred to him only as he was preparing for the PHR. It is for payments continuing until the death of the later of him and his spouse under what he says is a contractual Income Protection Plan. The basis of the claim is an "Announcement to All Monthly Staff" dated 11 June 1990 of such a Plan, said to be "A significant improvement to terms of employment for monthly staff' (C3 22). The announcement says "Full details and formal amendments to the staff conditions of employment booklet will be issued in due course", but does not say that the Plan is to be insured. Mr Allsop argues that this announcement gave rise to a contractual obligation on the part of CNL: though CNL chose to effect the Long Term Disability Scheme in order to comply with that obligation, the obligation was not expressed to be constrained by the terms or duration of that Scheme."
The appeal
(1) In concluding that he was dismissed in February 2000, the Employment Judge wrongly applied the "without prejudice" rule so as to exclude from his consideration (a) the Respondent's letter dated 25 April 2000 and the Claimant's response of 4 May 2000, and (b) three separate discussions the Claimant had with the Respondent's liquidators between January and April 2010. In denying himself knowledge of these matters the Employment Judge erred in law so that his judgment is fundamentally flawed.(2) The Employment Judge ignored every fact showing that his employment had continued after February 2000 and made speculative explanations, in relation to the facts relied on by the Claimant as showing that it had continued.
(3) The Employment Judge erred in his application of the law as to adoption and in failing to understand the importance of the letter of 9 January 2001.
(4) The Employment Judge reached an incorrect conclusion in relation to his complaints being out of time, on the basis that his decision as to termination was entirely flawed.
(5) The Employment Judge erred in refusing his application to amend and failed to understand both that his original claim for unauthorised deduction from wages would need to be updated to the date on which it progressed to a hearing, and that his proposed amendments related to continuing deductions and were not new claims.
(6) The Employment Judge erred in law and his conclusion was perverse, because he failed to understand "the independence and interdependency between contract terms and conditions of employment, and the income protection plan (IPP) and permanent health insurance scheme (PHI)."
Without Prejudice material
(a) The Claimant's employment should continue until he was fit enough to return to work; alternatively, he should receive benefits under the PHI scheme.(b) He should receive compensation for his other alleged losses, which were essentially those that had originally been pleaded.
(c) He should receive an ex gratia payment in consideration of his agreeing not to bring claims in respect of unfair and wrongful dismissal, disability discrimination and personal injury.
The Claimant's other grounds
(a) the conclusion of the Employment Judge that the majority of his pleaded claims did not engage the unlawful deductions jurisdiction, but were in reality claims for damages;
(b) his decision that the claims sought to be added by way of amendment were legally misconceived and did not come within the unlawful deductions jurisdiction;
(c) his decision, in the exercise of his discretion, to refuse to allow the amendments sought; and
(d) his conclusion that the Administrators did not adopt the Claimant's contract.
"It might appear somewhat artificial for an employee who is not at work anyway to have to give notice of an intention that part of her absence should count as holiday; but that merely reflects the artificiality of a period of long-term sickness counting as holiday at all. In any event, the giving of notice is more than a formality. Without it the employer, who is not otherwise paying the employee, or is paying him only sick pay, will not know whether, or - just as importantly - when he is obliged to make any payment under Regulation 16."
"The applicant is entitled to contractual sick pay for six months at full salary and at half salary for a further six months, during any 12-month period. In addition, the applicant has a contractual entitlement to the receipt of benefits under the Respondent's permanent health insurance scheme, after the first 28 weeks of his current sickness absence, subject only to acceptance by the insurer. Under this scheme the applicant may receive payments equivalent to 75 per cent of his usual salary payments. The Respondent failed, however, to consider the applicant for the same."
"Income Protection Plan - this plan is offered to all employees who complete five years' service. However, due to the seniority of your position within the company you will be enrolled from your date of commencement […]. In the event of prolonged disability you will be guaranteed 75 per cent of your net income after state benefits and taxes have been taken into account. See the scheme notes for further details."
"The meaning of the word 'adopt' in sections 19 and 44 of the Act of 1986 therefore has to be gathered from the context in which it is used. It is important to bear in mind that the appointment of an administrator or receiver does not terminate the employee's contract of employment with the company. Only if the company (acting by the receiver or administrator) is noticed terminating the employment or, by failing to pay wages as they accrue due, repudiate the contract of employment will the contract with the company terminate. Therefore so long as wages are paid by the company, the employee remains the employee of the company. The Court of Appeal … lost sight of this factor when, in the passage I have quoted …, they wondered how the employee continued to be employed if there had been no adoption by the administrators. Therefore the mere continuation of the employment by the company does not lead inexorably to the conclusion that the contract has been adopted by the administrator or receiver."
"The mischief aimed at by the Act … must mean that the concept of adoption of the contract covers at least accepting liability for payment for services rendered to the administrator under contracts which he has continued."
"6. The question of whether or not the contracts of employment have been adopted has been considered in detail by the House of Lords in [Powdrill]. In a full speech, Lord Browne-Wilkinson discussed the existing case law in relation to the meaning of the word 'adoption' in this context, and the history of the legislation in which adoption of the contracts had arisen. Miss Hilliard placed particular reliance on the following passage in his speech:
'In my judgment, as Mr Sumption submitted, adoption in Section 19 and 44 can only connote some conduct by the administrator or receiver which amounts to an election to treat the continued contract of employment with the company as giving rise to a separate liability in the administration or receivership.' (p 449)
That statement was of importance because in the Court of Appeal in the Powdrill case, the court had held that the mere continuation of employment of a company's employees by an administrator was to be deemed to be an adoption of their contracts of employment. What Lord Browne-Wilkinson was pointing out was that it was important to find some conduct on behalf of the administrator or receiver which could be treated as a election or could be regarded as an election to continue the contract of employment, viz some activity by the administrator or receiver which could be regarded as him exercising a choice as to whether or not the contracts of employment were to be adopted."
"It appears to me that it is not necessary to resolve whether that is the meaning of the last two passages which I have quoted from the speech of Lord Browne-Wilkinson. I think the important direction given in Powdrill is that contained at the top of p. 449. It is necessary to look at the facts and to decide whether there has been some conduct by the administrator or receiver which can legitimately be treated as an election to continue the employment. In my view, Miss Hilliard is right in this case in saying that there is no conduct by the administrators which could be said to amount to an election to treat the contracts of employment as continuing. Her arguments have persuaded me that in this case the administrators have at all times, once they knew of the existence of the contracts, made it clear that they elected not to continue the employment of any of these employees. It follows that I will give the administrators the declaration which they seek."
Conclusion