United Kingdom Employment Appeal Tribunal

Appeal No. UKEAT/0019/16/RN

 

 

EMPLOYMENT APPEAL TRIBUNAL

FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON EC4Y 8AE

 

 

                                                                                                             At the Tribunal

                                                                                                             On 14 April 2016

 

 

 

Before

HER HONOUR JUDGE EADY QC

(SITTING ALONE)

 

 

 

 

 

 

ARLEY HOMES NORTH WEST LTD                                                                  APPELLANT

 

 

 

 

 

MR J P COSGRAVE                                                                                            RESPONDENT

 

 

Transcript of Proceedings

 

JUDGMENT

 

 

 

 

 

 

 

 

 

 

APPEARANCES

 

 

 

 

 

For the Appellant	MR ANDREW BURNS (One of Her Majesty’s Counsel) Instructed by: Addleshaw Goddard LLP 100 Barbirolli Square Manchester M2 3AB
For the Respondent	MR SIMON HORSFIELD (Solicitor) Gunnercooke LLP 53 King Street Manchester M2 4LQ

 

 

SUMMARY

UNLAWFUL DEDUCTION FROM WAGES

 

Unauthorised deduction of wages - section 13 Employment Rights Act 1996

The Claimant claimed he had been entitled to full pay for 12 months’ sick leave.  That contention was founded upon his case that the Respondent had entered into a binding service agreement with him (as its Managing Director) in January 2007.  The terms of that service agreement included a provision for full pay for sick leave for up to a year.  The Respondent resisted the claim, arguing it had never agreed to be bound by the terms of the 2007 service agreement.  The ET found that the 2007 service agreement had never been signed and had thus remained unexecuted.  Nevertheless, it found the Respondent had agreed to be bound by the unexecuted agreement and that its then Finance Director (Mr Burrows) had authority so as to bind the company in this regard.  The Respondent appealed.

 

Held: allowing the appeal

In this case, the Claimant - the Managing Director, 96% shareholder of the parent company, (the sole shareholder of the Respondent) - had drawn up the 2007 service agreement and had put it to the Respondent’s Finance Director, Mr Burrows (also a 2% shareholder in the parent company), for acceptance.  The ET had found (consistent with Mr Burrows’ ultimate evidence on the point) that the Agreement had never been signed as accepted on behalf of the Respondent.  Allowing that acceptance could be by conduct, it still needed to amount to a final and unqualified expression of assent to the terms of an offer (tested objectively).  That said, absent fraud or misrepresentation, the law would not save a party from a bad bargain or from its own incompetence in failing to fully engage with the terms of the offer put to it.  Terms and conditions which are immediately visible to the other contracting party will form part of the relevant contract even if that other party has not actually read the document (L’Estrange v F Graucob Ltd [1934] 2 KB 394), and where an individual has actual authority to bind a company, it will be bound by any agreement thus reached even if it contained provisions harmful to the company’s interests (Criterion Properties plc v Stratford UK Properties LLC and Ors [2004] 1 WLR 1846 HL).

 

On the question of intention, Mr Burrows’ evidence before the ET had been equivocal and this crucial issue remained unresolved (even on the more limited question as to whether the Respondent was to be taken to have agreed the sick pay provision) by reference to the matters cited in the ET’s reasoning; the various factors relied on by the ET were equally consistent with Mr Burrows having agreed to increase the Claimant’s entitlements as derived from the parent company, with no final agreement having been reached as to the proposed service agreement with the Respondent (Mr Burrows accepting in evidence that he would have been concerned about certain of the remuneration (particularly salary review and bonus) provisions).  The ET had needed to engage with questions as to Mr Burrows’ authority (whether this was derived from the board of the parent company rather than that of the Respondent) as well as whether the performance it had relied on had in fact been that of the parent company.  It had also needed to make a clear determination as to intention in the light of Mr Burrows’ evidence before it.  The failure to make clear findings on these points rendered the decision unsafe and the case would be remitted to a different ET to consider afresh.

 

HER HONOUR JUDGE EADY QC

 

Introduction

1.                  I refer to the parties as the Claimant and Respondent, as below.  This is the hearing of the Respondent’s appeal against a Reserved Judgment of the Liverpool Employment Tribunal (Employment Judge Wardle, sitting alone on 22-24 July 2015; “the ET”), sent to the parties on 21 August 2015.  Representation before the ET was as before me.  By that Judgment the ET allowed the Claimant’s claim of unauthorised deduction from wages and awarded him £53,437.71 in compensation.  That Judgment was based upon the ET having found that the parties had entered into a binding agreement; the “2007 service agreement”.  The Respondent takes issue with that finding, and it is that which is at the heart of this appeal.

 

The Background Facts

2.                  In March 2005, the Claimant had been part of a management team that - through a non-trading parent company, Arley Homes Ltd (“AHL”), in which the Claimant had a controlling interest and of which he became a Non-executive Director - had acquired the Respondent, a residential property development company.  As a result of his Non-executive Directorship of AHL the Claimant was entitled to be paid a Director’s fee of £250,000 per annum, but there were limitations on the amount he could actually draw as a result of sums still owing for the purchase of the Respondent, and he in fact only drew down £50,000 per annum.

 

3.                  At the time of his appointment as Non-executive Director of AHL - 24 March 2005 - the Claimant was also appointed as a Director of the Respondent (or, at least, its then predecessor in title).  He did not at that stage enter into a written contract of employment with the Respondent, although other Directors did enter into service agreements, which were in the same format and substantially the same terms and were signed by the Respondent and by each employee, as his or her deed, in the presence of a witness.  Although the ET did not record this (and, indeed, made a contrary finding notwithstanding having the relevant evidence before it), it is agreed before me that the Respondent’s Board agreed the Directors’ service agreement, the standard terms of which set out the salary arrangements, including a provision allowing for annual review (but without commitment for increase) by the remuneration committee and for paid sick leave at full pay for 26 weeks.  Although again not recorded by the ET, the Managing Director of the Respondent appointed in March 2005 was a Mr Brown, whose employment contract was in fact with AHL. 

 

4.                  Things did not run entirely smoothly with the Respondent business, and the decision was taken to remove Mr Brown as Managing Director and for the Claimant to assume day-to-day control as Executive Chairman and Managing Director from the end of 2005, albeit that this change in his role and status was not formalised.

 

5.                  The Claimant had always held a controlling shareholding in AHL but as a result of various events this increased from just over 51 per cent to his holding 96 per cent of the shares by January 2007.  It was in 2006/2007 that the Claimant had started to express a wish to tidy up his affairs, which included his remuneration package.  To this end, in early 2007, he entered into discussions with Mr Burrows, a 2 per cent shareholder in AHL and the Respondent’s then Finance Director (appointed as such in August 2005 and working to the standard Directors’ service agreement, earlier approved by the Respondent’s Board).  Their discussions were about putting together a service agreement.  The ET records the Claimant’s evidence on this:

“12. … he had used a template agreement created by the respondent’s solicitors at the time of 2005 acquisition … once finalised he printed off a copy of the agreement … and gave a copy to Mr Burrows to ensure that he was happy with it, which he confirmed that he was.  In regard to the signing of the agreement his written evidence was that he could not remember if Mr Burrows had signed it and that he did not retain his own signed copy because if he needed it he knew that Mr Burrows had it.”

6.                  As for Mr Burrows, his written evidence was that:

“13. … at around this time the claimant showed him a copy of the service agreement that he had produced for himself dated 25 January 2007 … he remembered two things standing out (i) the claimant’s salary of £150,000 and (ii) the sick pay provisions of 52 weeks, which he remembered thinking was more generous than his own but with which he did not have an issue.  In regard to its signing he could not remember now whether or not he had signed it but that it would not surprise him if he did not as for him the agreement simply documented the terms that the respondent was willing to offer to the claimant and that signing it was just a formality adding that there was no doubt in his mind that both parties intended this to be a binding agreement and this was the basis on which he proceeded to implement the agreed terms such as salary, pension provision and other benefits.  In regard to its retention he could not recall what happened to the hard copy stating that he used to keep the directors’ personnel files in his office but that they moved offices in May 2007 and that he ceased to have responsibility for them anyway when Jayne Tarpey became the office manager and that he may have put a copy of the agreement in the claimant’s personnel file but honestly could not remember.”

 

7.                  As the ET observed, that was a slightly less favourable account, so far as the Claimant was concerned, than Mr Burrows had earlier written in a letter on 20 February 2014, in which he stated he had signed the 2007 service agreement, as produced to him by the Claimant, and would then have filed it, along with the other Directors’ personnel documentation.

 

8.                  As the ET records, in cross-examination, Mr Burrows (called as a witness by the Claimant):

“14. … stepped further back when he accepted that it was likely that the 2007 agreement did not get signed because it never got to the top of the pile.  He was also forced to concede that the 2007 agreement reduced the company’s protection in several respects.  However his evidence was less than clear as to whether the diluting of the company’s position in respect of matters such as the responsibility for review of salary, the operation of the bonus scheme, the non-competition provisions and the ownership of inventions and improvements registered with him at the time and whether he actually raised them with the claimant as matters to be discussed.  As whilst [sic] he stated that with hindsight he may have given the agreement back to the claimant with his comments, which would perhaps explain why there was no copy on file he also stated that his focus was on the front end of the agreement as opposed to what he described as the legalese, which in relation to the former he clarified as the numerical side i.e. what it was going to cost the business in terms of salary, car allowance and pension, which he had no problem with nor with the fact that the agreement made provision for 52 weeks’ sick pay, which he recalled clearly stating that [sic] it was dear to his heart as the claimant had stopped paying him after two months of a sickness absence.”

 

9.                  At this stage, I should record that it is agreed before me that Mr Burrows did not in fact say the 2007 service agreement “never got to the top of the pile”.  His response in cross-examination had been:

“… Reason contract may or may not have been signed - always at bottom of to do list.  It was a case of kept talking about it. … Relationship built completely on trust …”

 

10.              Thereafter the Respondent weathered various difficulties, but in 2013 differences arose between the Claimant and those advising the bank that had assisted in the original financing of the acquisition of the Respondent.  On 17 July 2013, the Claimant was told he needed to resign his Directorship and appoint a Mr John Bowman in his place, with a view to agreeing exit terms by noon the next day.  The Claimant refused to comply.  From 18 July, he no longer attended work, submitting medical certificates stating he was unfit due to stress.

 

11.              It was during the ensuing period, whilst the Claimant was on sick leave, that the dispute as to the Claimant’s contractual terms emerged.  Specifically, there was a dispute as to his sick pay entitlement, and it was in arguing for an entitlement to a year on full pay that the Claimant produced an unsigned copy of the 2007 service agreement.  For the Respondent’s part, it had been unable to find any copy of the 2007 agreement and it took the view that it had not been agreed and that, had the Claimant entered into a service agreement in March 2005 when appointed a Director of the Respondent, he would have been employed on substantially the same terms as the other Directors at that time (so entitled to only 26 weeks’ paid sick leave).

 

12.              Subsequently, the solicitors for the Claimant disclosed a USB drive containing the service agreement document that the Claimant relied on, and the metadata for the file was examined.  The report produced stated that the file was originally created on 15 March 2005 and was last opened, edited, printed and saved on 24 January 2007.  The total editing time was reported as equating to an excess of 8,000 years, which remained unexplained.

 

 

The Issue for the ET and its Conclusions and Reasoning

13.              The issue for the ET was whether the 2007 service agreement was a binding agreement between the parties.  In order to determine that point the ET was required to answer the following questions: (1) was that document properly executed by the parties in 2007, or, if not, did they intend to be bound by an unexecuted agreement? and (2) did Mr Burrows have authority to bind the Respondent in relation to the 2007 agreement? 

 

14.              On the first of the questions thus posed the ET concluded that the 2007 agreement was not properly executed: no signed document had been found, and Mr Burrows - the alleged signatory on behalf of the Respondent - had resiled from his initial position, ultimately accepting in cross-examination that it was likely that it was never signed.

 

15.              On the other hand, the ET concluded that the parties had intended to be bound by an unexecuted agreement.  In January 2007, the Claimant was anxious to get his affairs in order, and that included his remuneration package with the Respondent.  His remuneration had previously remained as it had been in March 2005: that is, limited to £50,000 drawings against an entitlement to £250,000, notwithstanding the change in his position, in particular his assumption of day-to-day control of the Respondent as from December 2005.  There was further background evidence of contemporaneous discussions between the Claimant and Mr Burrows in January 2007 as to the terms of his employment, which included his salary being increased and his car allowance fixed, and those were terms featured in the 2007 service agreement the Claimant relied on and which had - from February 2007 - been put in place.

 

16.              Although there was an anomaly in the editing time recorded for the document, the metadata also supported the conclusion that the Claimant had, in January 2007, amended the original, March 2005, Directors’ template service agreement, for the purpose of recording his terms of employment, and had then printed it off and produced a copy for Mr Burrows.  Mr Burrows in his capacity as Finance Director had no difficulty with those terms, and it was apparent that the agreement he had seen included the 12 months’ sick leave at full pay; first, because he specifically recalled that, and, second, because it was not so out of kilter with the provision made for the other Directors so as to make it unconscionable having regard to the Claimant’s position within the company, his investment and his shareholding.

 

17.              The ET then turned to the question whether Mr Burrows had authority to bind the Respondent in relation to the 2007 service agreement.  It concluded he did.  Mr Burrows was at that time part of an inner circle, including the Claimant and the other minority 2 per cent shareholder (Mr Crompton) which really ran the Respondent.  Decisions, such as the terms of employment of the Managing Director, were going to be reserved to that group rather than the wider Board.  The Respondent Board focused on day-to-day operational issues and at no point considered the service agreement of any Director (as agreed before me, that is incorrect: the Respondent’s Board had agreed the original Directors’ service agreements in March 2005, as the minutes recall).  As Finance Director, Mr Burrows had the authority to make a binding contract and was the most appropriate officer to agree the terms of employment of the Claimant on the Respondent’s behalf, which he did by giving effect to them. 

 

18.              As the ET was satisfied the parties had validly agreed to be bound by the 2007 service agreement, the Claimant was entitled to 12 months’ fully paid sick leave.  To the extent this had not been honoured by the Respondent, it amounted to an unauthorised deduction.

 

 

The Appeal and the Respondent’s Submissions

19.              By its first ground of appeal the Respondent contends the ET erred in law in finding it had intended to be bound by an unexecuted agreement without finding that there had been a final and unqualified expression of assent to the Claimant’s offer.  For there to be a concluded agreement, there had to be agreement to all the terms - an intention to be bound by the entirety of the agreement - even if the relevant signatory for the Respondent had not read all of its terms and even if much of the bargain was a bad one for it.  Mr Burrows’ evidence had been, however, that he had not considered all of the terms, and the ET made no finding of express or implied assent to all the terms.  Moreover, Mr Burrows had said (in answer to the ET) that the agreement would have been in the Respondent’s files even if not signed:

“Only reason wouldn’t have been is if I said to [the Claimant] - need to discuss couple of points - he would have taken away.  If he hadn’t come back to me, wouldn’t have filed.”

 

20.              The ET’s finding of acceptance was dependent upon its finding as to the Respondent’s subsequent conduct in paying the increased salary and car allowance consistent with those terms as recorded in the 2007 service agreement.  That, however, did not indicate a clear intention to be bound by any of the other terms and was only evidence of an agreement to increase the Claimant’s Director’s drawings in terms of salary and car allowance, which was equally consistent with a variation in the terms between the Claimant and the parent company, a point with which the ET had failed to engage.

 

21.              By its second but not unrelated ground of appeal, the Respondent contended the ET reached a perverse finding of fact that the contract “never got signed because it never got to the top of the pile” (paragraphs 14 and 55 of the ET Reasons).  Although that had been the thrust of Mr Burrows’ written evidence, it was not his evidence before the ET, when he accepted there were issues in respect of other terms in the documents that he would have gone back to the Claimant on; so, he would not have accepted it as it stood.  Accepting it could not say there was only one way of reading Mr Burrows’ evidence, the Respondent contended that the ET’s characterisation of his response put it too high and rendered the conclusion unsafe.

 

22.              Third, and in the alternative, the Respondent contended that if Mr Burrows did in fact agree to the terms of the 2007 service agreement then the ET erred in law in holding he had authority to do so from the Respondent.  In making its findings in this respect the ET was actually finding that Mr Burrows had authority from the parent company’s Board; that was what the inner circle actually was.  It would, however, have needed to have found that the Respondent’s Board had resolved that the parent company was to have that authority; it had made no such finding.  There was no evidence of any actual authority having been given to Mr Burrows, and the contract had not been approved at any Board meeting.  On this latter point, the ET had further erred in finding that the Respondent’s Board had not considered and/or approved the service agreement of any Director when in fact the initial service agreements of the other Directors were approved by a Board resolution of 24 March 2005, and Mr Burrows had agreed that any new service agreements would have to go back to the Respondent’s Board:

“AB [Andrew Burns QC]: If completely different contract, presumably would want to get board approval.

SB [Simon Burrows]: If looked completely different yeah.”

 

23.              Fourth, the ET erred in confusing the Respondent with the parent company.  As the ET found, the original obligation to pay the Claimant his Director’s drawings fell upon the parent company.  Relevantly, the Claimant had then replaced a Managing Director of the Respondent who had been employed by the parent.  There was no finding as to whether it had been intended that the position would change and the Claimant be employed by the Respondent, as opposed to maintaining the same position.  When finding that the Claimant’s drawings increased in February 2007, the ET ought to have concluded that the same contract in relation to drawings was with the parent company; at least, the ET needed to engage with that point and reach a clear finding demonstrating it had done so.  The Respondent was not seeking to avoid an unconscionable bargain.  If Mr Burrows had actual authority to bind it, the fact that the 2007 service agreement included provisions harmful to the Respondent would not stop it being binding (Criterion Properties plc v Stratford UK Properties LLC and Ors [2004] 1 WLR 1846 HL), but the evidence of Mr Burrows was to the effect that his authority could not have derived from the Respondent Board but, at most, from the Board of the parent company.

 

The Claimant’s Case

24.              In resisting the appeal the Claimant relied on the findings and reasoning of the ET.  He observed that it would be rare or exceptional for a perversity challenge to succeed (Stewart v Cleveland Guest (Engineering) Ltd [1996] ICR 535 EAT) and in seeking to mount a challenge on that basis the Respondent had to meet the high threshold laid down in cases such as Stewart and Yeboah v Crofton [2002] IRLR 634. 

 

25.              Turning to the first ground of appeal - the challenge to the ET’s finding of acceptance by conduct - that was really a perversity challenge.  The Respondent was arguing that for there to be a concluded agreement there must be agreement to all of the terms and conditions and was contending that Mr Burrows did not consider or agree all of the terms of the 2007 agreement, but that was not the only permissible reading of his evidence.

 

26.              As for the legal principles to be applied, terms and conditions immediately visible to the other contracting party will form part of the relevant contract even if that other party has not read the document (see L’Estrange v F Graucob Ltd [1934] 2 KB 394, per Scutton LJ; albeit accepting that case involved a contract that had been signed by the parties, which was not the present case).  Even if Mr Burrows had not considered each term, that would not be fatal.  Whilst acceptance had to be final and unqualified assent to the offer (whether or not the contract had been read), it could be communicated by conduct; by performing the contract.  Here the ET had found sufficient evidence to support a finding of acceptance by conduct, and this conclusion should only be interfered with if it were manifestly wrong (see the factors relied on by the ET at paragraph 6, which showed it was not).  Specifically, the ET did not find Mr Burrows returned the unsigned contract to the Claimant for his comments and amendments.  At most, it found (see paragraph 14) that Mr Burrows “stated that with hindsight he may have given the agreement back to the claimant with his comments”; it did not find that was what Mr Burrows did, nor was it obliged to do so.  The parties had continued in their relationship consistent with considering themselves bound by the 2007 service agreement.  Even if the Claimant was wrong about that, Mr Burrows’ evidence was sufficient to show agreement to the sick pay provision, and that was all the Claimant needed on the unauthorised deductions claim.

 

27.              Turning to the second ground of appeal, the Respondent was arguing that the only permissible factual conclusion, on the basis of Mr Burrows’ evidence, was he had looked at the front end of the 2007 service agreement, noticed the highly favourable (to the Claimant) salary review and bonus clauses and then returned the document to the Claimant with his comments on it, for it to be amended before it was agreed, but it never was amended and thus never agreed.  The difficulty for the Respondent was that it was hard to see how this was the only permissible factual conclusion.  Mr Burrows’ written evidence was that he had seen, read and agreed the terms of the 2007 agreement.  Whilst his oral evidence withdrew from that to some extent, it still contained sufficient doubt for the ET not to make the finding the Respondent contended for.  At best, his evidence was confused.  On the one hand, he acknowledged the 2007 service agreement was the one that was entered into, albeit under cross-examination he said that certain bits screamed out at him.  On the other hand, he thought that he might have made some comments on the agreement and handed it back to the Claimant.  His language was speculative and uncertain when answering questions about whether the contract was signed and about the back end of the contract.  That said, he was clear and unequivocal that (i) he focused on the front end of the contract and (ii) the key commercial terms in the 2007 agreement were implemented.  Given that evidence, the ET was entitled to reach the conclusion that Mr Burrows intended to be bound by the 2007 agreement and that the only reason why it was not signed was that it did not get to the top of the pile or, as Mr Burrows actually said, it remained at “the bottom of the to do list”.  This was in the context of a relationship built “completely on trust - integrity to both of us is everything”.

 

28.              As for the third ground, whether the ET had erred in law in holding that Mr Burrows had authority to enter into the agreement, the Respondent needed to point to a misapplication of the law or a misunderstanding of it (British Telecommunications plc v Sheridan [1990] IRLR 27 CA at paragraph 23).  The relevant finding of the ET was at paragraph 57.  The Respondent was really saying this was perverse.  Mr Burrows’ evidence on this point was as set out at paragraph 15 of his witness statement, and his live evidence was broadly consistent with that, i.e. that the reality was that this small private company was effectively run by the Claimant, Mr Crompton and Mr Burrows.  In any event, even if Mr Burrows did not have authority, the Respondent’s shareholders could ratify the contract unless it was illegal (see Chitty on Contracts, 32nd edition, paragraphs 10-039, 16-006 and 16-015 to 16-018).  In this case, the parent company was the sole shareholder of the Respondent, and its shareholders constituted the Claimant, Mr Burrows and Mr Crompton.

 

29.              Turning to the fourth ground of appeal - the argument that the ET’s conclusions showed confusion as between the parent company and the Respondent - the Claimant disagreed.  The ET appreciated the distinction between the two companies but did not make a finding that the inner circle was the Board of the parent company, simply that it was the inner circle, which made those kinds of decisions for the Respondent.  That was a permissible finding.  The Claimant accepted the ET erred in finding Mr Brown’s service agreement was with the Respondent - it had been with the parent company - but that was not a substantive matter.  Equally, whilst the ET erred in finding the Respondent’s Board had not approved service agreements previously - it had, in March 2005 - again, that was not an issue of substance.

 

30.              Ultimately, it was wrong for the Respondent to argue the agreement reached in 2007 was between the Claimant and the parent company.  The 2007 service agreement had been in the name of the Respondent, not the parent.  It could not be perverse of the ET to find it was the Respondent that was agreeing to be bound by an agreement in its name.  Accepting that the conduct relied on by the ET - the increase in payments to the Claimant and the car allowance - could be consistent with an increase in entitlements from the parent company and the Claimant’s contract with it, the ET was not obliged to so find.

 

The Legal Principles

31.              The main issue that the ET had to grapple with in this case concerned the question of acceptance.  It is uncontroversial before me that acceptance is a final and unqualified expression of assent to the terms of an offer.  Whether there has been an acceptance is to be - consistent with general contractual principles relating to the identification of an agreement - judged against an objective standard.  Acceptance may be by conduct, but (see Chitty, paragraph 2-029) conduct will only amount to acceptance if it is clear the offeree’s alleged act of acceptance was done with the intention (objectively ascertained) of accepting the offer. 

 

32.              As further observed in Chitty, when acceptance is said to have been made by conduct:

“2-030. … the terms of the agreement may be more difficult to ascertain than where the agreement was negotiated by express words.  The difficulty may be so great as to force the court to conclude that no agreement was reached at all.  But sometimes the court can resolve the uncertainty by applying the standard of reasonableness or by reference to another contract (whether between the same parties or between one of them and a third party), or even to a draft agreement between them, which had never matured into a contract. …”

 

33.              Absent fraud or misrepresentation, the law will not save a party from a bad bargain or from its own incompetence in failing to fully engage with the terms of an offer.  Terms and conditions immediately visible to the other contracting party will form part of the contract even if that party has not actually read the document (L’Estrange), and where an individual has actual authority to bind a company it will be bound by any agreement thus reached even if containing provisions harmful to the company’s interests (Criterion Properties).

 

34.              As for the role of the EAT in an appeal from an ET’s decision on these matters, it is limited to questions of law; the EAT must not interfere with permissible conclusions reached by the Tribunal of first instance unless truly perverse (and see, e.g., Stewart and Yeboah).

 

Discussion and Conclusions

35.              There is no challenge to the ET’s finding that there was no signed agreement.  Contrary to what appears to have been his first attempt at recollecting these events, Mr Burrows resiled from his initial response that he had signed the 2007 service agreement.  The ET found, however, that the parties had intended to be bound by that agreement even unsigned.  That finding did not depend upon Mr Burrows having read the entirety of the terms of the agreement.  It did require, however, that - having those terms available to him (and assuming, at this stage, actual authority on his part to bind the Repondent) - he agreed the contract with the intention that the Respondent should be bound by those terms.

 

36.              The ET seems to have understood Mr Burrows to be saying that this was indeed the intention: the agreement was in place and just awaited the formal signing-off by the parties but never got to the top of the pile.  That does not quite represent Mr Burrows’ evidence according to the agreed note.  His “always at the bottom of the to do list” was rather more ambiguous and allowed that more remained to do rather than just the formal signing of the document.  That said, I accept Mr Horsfield’s point that the assessment of that evidence was for the ET, and I would not find the ET’s conclusion perverse on that particular point.

 

37.              As for the context relevant in this case, there had been email correspondence between the Claimant and the Respondent’s Finance Director in this regard.  Further, as the ET found, the Claimant wanted a record of what he considered to be the terms of his employment.  It was thus that he amended the earlier, March 2005, template for the Directors’ service agreements, so as to record what he considered the terms that should apply.  The ET inevitably focused on the issues of remuneration and sick pay, but the document was far more comprehensive.  It is some 13 pages long, and, as one might expect, also contains provisions relating to restrictive covenants and termination (towards the back of the document) and as to bonus and salary review (both rather higher up in the list of terms).  I do not read the ET’s findings as going so far as to say all of those matters had been agreed between the Claimant and Mr Burrows before the service agreement was drawn up.  Certain points had been discussed and no difficulties identified.  But the Claimant then went away and drew up a complete service agreement, and it is that which he printed off and put to Mr Burrows for acceptance.  In contractual language, that constituted the Claimant’s offer.  It was not signed by Mr Burrows or by anyone else acting for the Respondent, and it did not go to the Respondent’s Board for approval.

 

38.              Assuming Mr Burrows had the authority to bind the Respondent in respect of a service agreement with the Claimant and staying with the question of intent, the thrust of Mr Burrows’ evidence was that he would probably not have got around to the terms towards the back of the document, the provisions relating to the non-compete clauses and so on.  He would have seen that as “legalese” and, although used to signing off employment contracts, he would generally not see it as required of him to check those provisions.  If he was entering into a bad bargain for the company he was working for, that would be because he had not properly engaged with those provisions; it would not mean that they would not be binding.  That is, however, not quite how his evidence reads in respect of the bonus and salary review clauses.  Those appear in the earlier sections of the document, amongst provisions that Mr Burrows said he had engaged with.  Mr Burrows was in the unenviable position of trying to recall what he had in mind and had done some 8½ years previously.  He could well recall the broad brushstrokes: the trust existing between him and the Claimant, the difficulties they had weathered together, and the fact that when he looked at service agreements he would focus on the front end and not the legalese at the back.  He was also clear that certainly some of the front-end terms in the 2007 service agreement were unobjectionable so far as he was concerned: the salary seemed right, as did the car allowance, and, indeed, both of those matters were honoured by conduct (whether that was on the part of the parent company or the Respondent).  He also specifically remembered the sick pay provision.  He had cause to do so, and, whilst he might have felt that the Claimant had not been generous to him in that respect, Mr Burrows recalled reflecting on this and thinking it was something that could be agreed for the Claimant.  But when it came to other aspects of the front-end agreement, he was unsure that he had - or would have - agreed to those for the Respondent.  On the salary review provision (which left it that the Claimant would review his own salary), Mr Burrows said:

“… could well have said to him hang on a min that’s not right we need to change it but then it would never have been changed.”

 

And, on the bonus:

“… again, I can’t remember [if] I raised it at the time or not”.

 

More generally, his evidence was that he:

“… would have passed comment - given it back to [the Claimant] with my comments.  Genuinely can’t remember if we signed it off or not.”

 

And that:

“SB: … At that time I kept directors personnel files.  If had been signed, would have been sitting in that personnel file.

EJ: What if hadn’t been signed - still in file.

SB: Only reason wouldn’t have been is if I said to [the Claimant] - need to discuss couple of points - he would have taken away.  If he hadn’t come back to me, wouldn’t have filed.”

 

39.              That evidence raises an obvious question as to whether Mr Burrows was saying he had intended to bind the Respondent to the terms of the 2007 service agreement.  Had that been the intention, his evidence suggests the agreement would then have been filed even if unsigned. 

 

40.              I have been unable to see that the ET’s conclusions on this crucial question engage with this aspect of the evidence.  The Claimant contends this was simply a matter of assessment; the ET was entitled to conclude this part of the evidence was outweighed by the other considerations that it took into account.  I therefore turn to those other matters. 

 

41.              There is no challenge to the finding that, in January 2007, the Claimant was seeking to regularise his position, but the ET’s finding that this included the regularisation of his terms of employment with the Respondent does not engage with the question why this should not have been taken to have been with the parent company, which had, after all, employed the previous Managing Director and which had been paying the Claimant’s drawings of £50,000. 

 

42.              This was relevant to the question of intention at the particular time (when Mr Burrows failed to sign the 2007 service agreement but apparently agreed that certain improved terms should immediately be put into effect).  It also feeds into the matters considered by the ET as evidencing acceptance by conduct.  When considering the increase in the Claimant’s remuneration, the ET fails to engage with the question whether this was in fact an agreement that the Claimant’s benefits from the parent company should be improved at that stage, with an outstanding question as to any agreement with the Respondent itself.  That would be consistent with the failure to keep a copy of the 2007 service agreement on file and with Mr Burrows not taking the matter back to the Respondent’s Board, which he said he would have felt he had to do if the service agreement of one of the Respondent’s Directors differed substantially - as this would have done - from those agreed in March 2005.  It would also be consistent with Mr Burrows considering his authority at this stage to be sufficiently covered by the agreement of the three shareholders of the parent company, the members of the parent company’s Board and with the increased remuneration being paid to the Claimant as from February 2007. 

 

43.              In my judgment, the failure to engage with these points - which go to the distinction between the Respondent and the parent company and which derive from the evidence of Mr Burrows, in response to the ET, as to what he would have done with the agreed (even if unexecuted) service agreement - renders the ET’s decision unsafe.  These are matters that went to the question of Mr Burrows’ authority (although on that point I appreciate Mr Horsfield’s submission that that could have been rectified).  They further went to the question whether there was any agreement on the part of the Respondent as opposed to the parent company (including, in respect of the conduct relied on, whose conduct was it?).  They meant there was an unresolved question as to intention to be bound by the 2007 service agreement; whether Mr Burrows’ evidence meant it could not be said that there was an unqualified intention to be bound by the entirety of the agreement as opposed to the increase in remuneration and the car allowance and (quite possibly) sick pay.

 

44.              I would not say that the evidence on these points was all one way - indeed, neither advocate before me suggested that it was - and I can allow that an ET could make an assessment either way.  I do consider, however, that a failure to engage with and to determine these points renders the ET’s conclusion unsafe.  It means that, further, I do not feel able to salvage even a finding specifically on the sick pay issue.  That being so, I must allow this appeal.  In so doing, I should acknowledge the high standard of advocacy demonstrated by both representatives on this appeal; it has been of great assistance.