Canning v E O Burton (East Anglia) Ltd [1993] UKEAT 729_91_1312

EAT
Canning v E O Burton (East Anglia) Ltd
[1993] UKEAT 729_91_1312 · 1993-12-13

JUDGE HARGROVE:

The Appellant had run a timber business on a site at Banham through a limited company. The premises at Banham were owned by the Appellant personally. In December 1989 the limited company went into liquidation. The Respondent Company purchased stock, plant and machinery and went into business on the site employing the Appellant on 18 December 1989.The Appellant was in personal financial difficulties including mortgages on the Banham premises and upon his home. He made it clear to the Respondents that he needed a rental from the premises of £24,000 per annum in order to meet his mortgage obligations. There was an agreement for a temporary lease which was endorsed by the County Court on 31 August 1990 and was therefore not subject to the Landlord and Tenant Act 1954 provisions. That lease was due to expire on 30 October 1990.On 12 October 1990 the Appellant was given a warning about targets not being reached but nothing turns on that as there is no allegation that the dismissal was for misconduct. Negotiations took place between the Appellant and the Respondents and the Tribunal deals with these crucial negotiations at paragraphs 7 and 8 of their reasons:
"7. Then there was the question of the rent which the respondents would pay to the applicant. The applicant had considerable financial liabilities. There was a mortgage secured on the Banham property; there was a further mortgage, as we understand it, on his house. He needed some £24,000 per annum in order to discharge his liabilities. The respondents and the applicant agreed that the respondents would pay a monthly rental based on this annual sum, whilst a lease was prepared.
8. The Tribunal has had a bundle of documents put before it. From this bundle it is clear that there was correspondence concerning a lease eventually being agreed. Surveyors were instructed on both sides. The respondents employed Ingleton Wood and the applicant Percy Howes."The negotiations broke down and on 29 October vacant possession of the premises was sought by the Appellant's solicitors. There was a discussion between Mr Godwin on behalf of Burtons and Mr Canning in connection with the rental. The Tribunal dealt with this in the following manner:
"14. At this meeting, we are satisfied that Mr Godwin said he was not going to pay the £24,000 a year rental. The question of the applicant resigning if he insisted upon this was raised by Mr Godwin. The applicant for his part made it clear that he wished to have the £24,000 a year rental. The applicant then left the office building. He spoke to the employees. One of them, Mr Langley, gave evidence before the Tribunal. There was a slightly ambiguous conversation and it is not wholly consistent with either a dismissal or a resignation when he said words to the effect that he was leaving. Thereafter the applicant worked no longer for the respondents.
19. We are satisfied that the rent was discussed; the question of the respondents, through Mr Godwin, being very dissatisfied with the applicant claiming £24,000; that Mr Godwin did indicate that if the applicant insisted on this amount the employment would have to come to an end; that the applicant then left the building. We find that the applicant, having said that he would insist on £24,000, had no choice. Mr Godwin was making it clear that the employment would come to an end. Subject to the next paragraph, this is a dismissal."The Tribunal went on to hold that the negotiations had taken place in bad faith on the part of the Appellant and that this amounted to a repudiation of the contract of employment. The negotiations are described as a charade and that it was a breach of the fundamental term of mutual trust and confidence for the Appellant not to negotiate in good faith.The Tribunal held that the acceptance of the repudiatory breach was still a dismissal for conduct but that the " Burchell " test was not appropriate since dismissal was the only answer to the situation. Alternatively, the Tribunal considered "some other substantial reason" as the basis for dismissal but does not seem to have reached any final conclusion upon that aspect.The core of the decision is that the negotiations were not carried out in good faith or were a charade. No mention of this is made in the Notice of Appearance, all that is alleged is that he asked for a rent which was hardly market rent. When one looks at the evidence there is nothing which will substantiate that. He was negotiating at arms length. The employer was well aware of his interest in the property. He was under no obligation to negotiate with the employers at all, he was entitled to ask whatever he thought he might obtain. It is a unique proposition that where there is a negotiation of arms lengths, where the employee is exercising a legal right that he is entitled to exercise, where it is not alleged there is any aspect of competition with the employer's interests, that there is some duty which restricts the employee's rights qua landlord in his negotiations with his employer. His surveyors had assessed the property and had indicated that a rental of £26,700 was a proper rental. The surveyor on the other side claimed that the figure was £18,000. The Appellant's surveyor made certain adjustments and reached £23,855. The Respondents' surveyor refused to contemplate any figure apart from £18,000. There was never any question of the two surveyors being appointed to arbitrate. Insofar as it can be alleged that the Appellant refused to move on his negotiations, it is obvious that in fact it was the Respondent who was, if anything, the more intransigent. Even if the position of being landlord did have certain advantages, there is nothing inimical to the duty of an employee if, in his individual capacity, he seeks to obtain some benefit from the position in which the employer has placed himself. It was always open for the employer to move away and find other property which would afford him similar accommodation at the lower rental if his surveyor had rightly estimated the market.The matter which seems to have affected the Tribunal's mind is the refusal of the Appellant to move from the figure of £24,000. As we have already indicated this cannot amount to bad faith and is a perverse finding of fact. Furthermore, the finding that such activity could amount to a fundamental breach is erroneous in law.Those errors are, in our view, sufficient to dispose of this matter but we consider that the Appellant has also made good his objection that the Tribunal did not consider section 57(3) of the 1978 Act. Having decided that there had been a dismissal for conduct the Tribunal rejected the application of the " Burchell " test. No chance was given to the employee to explain matters fully. No investigation took place at all. The employer presented the employee with an ultimatum upon the basis that if the employee wanted £24,000 rent he (the employer) wanted the employee's job. It seems to us eminently a case where the " Burchell " test ought to have been applied.This appeal is allowed and the case will be remitted to a different Tribunal.