Appeal No. UKEAT/0236/09/RN

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 1 October 2009

Before
HIS HONOUR JUDGE PETER CLARK
MR B BEYNON
MR P GAMMON MBE

MR K KENNAUGH	APPELLANT

MR D LLOYD JONES	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MR K KENNAUGH
(The Appellant in person)
	
For the Respondent	MR D LLOYD JONES
(The Respondent in person)

SUMMARY
UNFAIR DISMISSAL
Constructive dismissal
PRACTICE AND PROCEDURE
Appellate jurisdiction/reasons/Burns-Barke
Whether the Claimant was constructively dismissed by the Respondent.  Questions to be considered by the Employment Tribunal.  Adequacy of the Employment Tribunal’s reasons.  

Appeal allowed.  Case remitted for rehearing by fresh Employment Tribunal.

HIS HONOUR JUDGE PETER CLARK

1.	This hard-fought litigation between Mr Kennaugh, Claimant, and Mr Lloyd-Jones, Respondent; has taken up a disproportionate amount of time and resources in both the Liverpool Employment Tribunal and this Appeal Tribunal.  That said, both parties are entitled to have their case determined properly according to law.

2.	I set out the then procedural history in a judgment which I gave in an earlier appeal on 14 May 2008.  I need not repeat it here.  In a subsequent judgment which I gave on 18 July 2008, I allowed the Claimant’s appeal against the ruling made by Employment Judge Robinson at a prehearing review held on 23 March 2007, that for the purposes of his claim of ordinary unfair dismissal, he had not completed one year’s qualifying employment with the Respondent, his former employer; there had been a breach in the continuity of that employment.

3.	  I interpose that an earlier issue between the parties, as to whether the Claimant was an employee of the Respondent, had been resolved in the Claimant’s favour.  The continuity issue was remitted to the Tribunal for rehearing, leaving it to the Tribunal to decide as a matter of case management, whether the continuity question was to be taken as a preliminary point or whether the point should be taken at a substantive unfair dismissal hearing.  In the event, the latter course was followed and the matter came on for hearing before a full Tribunal sitting on 3 March 2009 and chaired by Employment Judge Reed.

4.	By a Judgment with reasons promulgated on 2 April 2009, the Reed Tribunal reached two material conclusions.  First, that the Claimant did have over one year’s continuous employment with the Respondent, commencing on 2 March 2004 and terminating upon the Claimant lodging his form ET1 in these proceedings on 6 April 2005.  There is no Cross Appeal against that finding. 

5.	Secondly, and before considering the unfair dismissal claim on its merits, the Tribunal considered whether or not the Claimant had been dismissed by the Respondent for the purposes of Section 95 of the Employment Rights Act 1996 (ERA).  Given their finding that it was the Claimant who terminated the contract by commencing proceedings, the question was whether he left the employment in circumstances amounting to constructive dismissal, under Section 95(1)(c).

6.	The Tribunal found that he was not constructively dismissed; first, because the Respondent was not in fundamental or repudiatry breach of the contract of the employment, and secondly, because even if there had been a fundamental breach of contract (which there had not in the Tribunal’s view) the Claimant did not resign in consequence of that breach.  It is against that finding that the Claimant with the permission of HHJ McMullen QC, now appeals to this Appeal Tribunal.  We think that in permitting this appeal to proceed to a full hearing, Judge McMullen, must have had in mind his judgment in the case of Muschet v Parkwood Healthcare UKEAT 0361/08, 16 March 2009, to which Mr Kennaugh has referred us.  In Muschet v Parkwood Healthcare, Judge McMullen reviewed the cases on Constructive Dismissal, including Western Excavating v Sharp [1978] ICR 221, Lewis v Motorworld [1985] IRLR 465 and my summary of the principles to be derived from the Court of Appeal decision in London Borough of Waltham Forest v Omilaju [2005] IRLR  35 in GAB Robins (UK) Ltd v Triggs [2007] ICR 1424, paragraph 32, an analysis which was not challenged on appeal to the Court of Appeal, see [2008] ICR 529; the court was there concerned with our approach to loss caused by that Claimant’s constructive unfair dismissal. 

7.	Returning to basics, what an Employment Tribunal must do when considering the question of constructive dismissal, is first, to identify the relevant term of the contract which the Respondent is said to have breached.  Next, it must find the relevant facts.  What was it that constituted the alleged repudiatry conduct?  If a breach is found, was that a fundamental breach of contract?  If so, was that fundamental breach an effective cause (not necessarily the sole cause; see James v Sirl [1997] IRLR 493) of the Claimant’s resignation.  A further question of waiver of breach may then arise on the facts.  Has the Claimant delayed too long in accepting the breach (see Sharp)?

8.	Those basic questions may require further investigation.  For example, does the so-called last straw doctrine, as explained by the Court of Appeal in Omilaju, have a bearing on the second question posed above?  With those principles in mind we return to the core reasoning of the Reed Tribunal, at paragraphs 26 to 34 of their reasons.  We should set it out in full.  
“Termination
26.  Under section 95 of the 1996 Act, an employee is dismissed where either the employer terminates the contract or, alternatively, the employee terminates the contract in circumstances in which he is entitled to do so without notice by reason of the employer’s conduct.  
27.  The question of who actually brought about the termination was not entirely straightforward.  In our view, the first indication either party gave that he considered the contract at an end was when Mr Kennaugh presented the claim to the Tribunal, on 6 April.  Our conclusion is that the contract therefore was terminated by Mr Kennaugh.  
28.  It follows that he can only successfully claim unfair dismissal if that termination was in circumstances in which he is entitled to terminate it by reason of Mr Lloyd-Jones’ conduct.  It is well established that that conduct must amount to a fundamental breach of contract.  
29.  We took evidence from Mr Kennaugh as to precisely what he had in mind when he decided to present the claim form.  Essentially, he told us that the ‘final straw’ was the receipt of the minutes of the meeting of 31 March, although, clearly he had in mind the fact that he had not received pay for work he asserted he had undertaken.  (Indeed, this is the first matter referred to in the relevant part of the claim form).
30.  It is certainly the case that it was improper for Mr Lloyd Jones to have indicated that the cost of repairs to the vehicle would be deducted from any sums due to Mr Kennaugh.  He was not lawfully entitled to make that deduction.
31.  We were satisfied, however, that that was not a major consideration for Mr Kennaugh.  Rather, his concern was the non-payment of monies allegedly due to him.    
32.  In fact, we concluded that Mr Lloyd Jones was acting perfectly rationally and reasonably in requiring justification for the sums Mr Kennaugh sought.  Mr Kennaugh had submitted such evidence previously.  The requirement that he should do so again did not, in our view, amount to any mistreatment of Mr Kennaugh or any breach of any express or implied term of his contract.
33.  More fundamentally, there were difficulties concerning the mechanics of the termination and Mr Kennaugh’s thought processes.  Although, as we say above, we concluded that the termination of the contract was brought about by the presentation of the claim, we did not consider Mr Kennaugh was really aware that that was what he was doing.  The claim form indicates that his employment terminated in February.  It appeared to us quite likely that Mr Kennaugh already regarded himself as an ‘ex employee’ by the time he sent the claim form.  To put the matter another way, it was not the case that, having considered himself mistreated by Mr Lloyd Jones, and as a consequence thereof, Mr Kennaugh decided to terminate his employment.  It follows that there had been [sic - had there been] a fundamental breach of contract (which we conclude there was not) Mr Kennaugh’s resignation was not a consequence of it.  
34.  In those circumstances, our conclusion is that Mr Kennaugh was not dismissed by Mr Lloyd Jones and it follows that his claim of Unfair Dismissal fails.” 

9.	The first observation we would make is that the Tribunal does not clearly set out the principles of law which it has applied to the facts found.  That is a requirement imposed by ET rule 30(6)(d).  Secondly, it has not set out the term or terms of the contract said to have been breached.  We are left to speculate whether the Tribunal may have had in mind the implied term of mutual trust and confidence, as formulated by the House of Lords in Malih v BCCI [1997] ICR 606.  Thirdly, the relevant findings of facts are economically stated.  We have sought, in the course of submissions to us today, to ascertain precisely what was or were the Claimant’s complaints about his employer’s conduct.

10.	From the Tribunal’s reasons we deduce the following strands of complaint: 
(1) At paragraph 15, the Tribunal record that the Claimant had not carried out any actual work for the Respondent after mid-February 2005.  That, we are satisfied, explains why the Claimant put as the date of the termination of his employment in the Form ET1, 18 February.  Indeed, the Claimant was initially told by his supervisor, Mr Knott, that he wished him to work on 3 and 4 March, but was then told that he was no longer required.  The system of payment, it is common ground, was that the Claimant was only paid for work actually done.  That decision was taken against a background of email correspondence between the parties about how much was or was not owed to the Claimant by way of outstanding wages.  That aspect and any possible link is not further examined in the Tribunal’s reasons.  
(2) The dispute as to arrears of wages and the grievance raised by the Claimant in February in this respect.  
(3) The question as to who was to make good or pay for repairs to a damaged vehicle.

11.	We note that the Tribunal’s finding at paragraph 16 that as at 31 March the Respondent was waiting for a quote for repairs to the vehicle, and it was implied that the costs of those repairs would be taken out of the sums otherwise due to the Claimant - a course which the Tribunal viewed as an unlawful deduction from wages (paragraph 30).  Mr Kennaugh tells us today that he did not receive the minutes of the meeting held on 31 March between the Respondent and his Accounts Clerk, Ms Twigg, at which the Claimant was not present, until a date later than 14 April.  Thus the minutes themselves could not have influenced his decision to commence these proceedings and thus terminate his employment, on the Tribunal’s findings.

12.	Turning to the Claimant’s grounds of Appeal, we can deal shortly with grounds 2 and 3.  Ground 2 is a complaint that the Tribunal did not deal with the proposition that the Claimant had been actually (not constructively) dismissed on 2 March, when his supervisor cancelled his work scheduled for 3 and 4 March.  Two points arise: first, as Mr Lloyd-Jones submits, there is no suggestion of an actual dismissal in the Claimant’s Form ET1; but secondly, if the cancellation of work did amount to a repudiatry breach by the employer, such breach required acceptance by the employee.  An unaccepted repudiation is a thing writ in water, as Asquith LJ famously observed.  Here, there is no evidence of acceptance prior to presentation of the Form ET1.  Ground 3 seeks, it seems to us, to resurrect issues over unlawful deductions from wages which have now been finally resolved.   

13.	However, ground 1 is a different matter.  It is directed to the Tribunal’s finding of past breaches.  On this aspect we are unable to accept Mr Lloyd-Jones’ submission that the Reed Tribunal has produced a sufficiently reasoned judgment properly identifying the applicable law, applying it to all relevant facts found and arriving at a permissible conclusion.  In our judgment these reasons are not, “Meek compliant”.  The relevant contractual term is not identified. The full extent of the Claimant’s complaints, identified above, as to the Respondent’s conduct, which Mr Lloyd-Jones very fairly accepts were fully before the Employment Tribunal, are not analysed with sufficient care and all necessary findings of fact made.  The Tribunal has not directed itself as to the possible cumulative effect of the matters relied on, as amounting to a potential breach of the implied term of trust and confidence.

14.	We take just two features: cancelling pre-planned work in a zero hours contract where no work means no pay, and on this Tribunal’s findings, implicitly threatening to make an unlawful deduction from wages owing, if any, in respect to the vehicle damage.  On a third aspect, the dispute as to arrears of wages, we accept as a matter of law that a genuine dispute as to wages owed will not necessarily amount to a repudiatry breach of contract on the part of the employer; see Financial Techniques (Planning Services) Ltd v Hughes [1981] IRLR 32 (CA).

15.	Further, if on a proper analysis, a repudiatry breach is found, we are not satisfied that this Tribunal dealt properly with the question as to whether or not it was an effective (not necessarily a sole) cause of the Claimant’s resignation.  On the face of paragraph 33 of their reasons, it is unclear precisely what the Tribunal concluded was the Claimant’s motivation for quitting the employment and starting these proceedings.

16.	In these circumstances we are driven to conclude, with considerable reluctance in view of the history of this matter, that this Tribunal Judgment cannot stand.  Consequently, the appeal is allowed and the matter remitted to a fresh Employment Tribunal for a rehearing on the issue of constructive dismissal, and if that issue is resolved in favour of the Claimant, the question of substantive fairness or unfairness of that dismissal.