Anglo Scottish Petroleum Co Ltd v Hyland [1993] UKEAT 768_92_1806

EAT
Anglo Scottish Petroleum Co Ltd v Hyland
[1993] UKEAT 768_92_1806 · 1993-06-18

JUDGE HAGUE QC:

This is an appeal by Anglo Scottish Petroleum Co Ltd ("the Company") against the decision of an Industrial Tribunal sitting at London (South) and entered in the register on 11 September 1992 in favour of Mr Hyland. The Tribunal decided that Mr Hyland had been constructively dismissed under section 55(2)(c) of the Employment Protection (Consolidation) Act 1978 and that his dismissal was unfair, and awarded him the sum of £10,593.28 as compensation.Despite its somewhat grandiose title, the Company is a small company marketing lubricants, employing only a few sales representatives and a small administrative staff. Mr Hyland started employment with the Company as a sales representative on 24th May 1989. The terms of his employment were set out in a letter dated 15th May 1989, which stated his salary as £575 per calender month, but was silent as to when payment was due. However, this was clarified by a later statement of the terms and conditions of employment contained in a completed printed form, which stated that Mr Hyland's remuneration "is at the rate of£575.00p per month and is paid at calendar month intervals and will normally be paid on last day of month" . The word "normally" might suggest that there could be some element of flexibility in the date of payment. Under the terms of the letter dated 15th May 1989, Mr Hyland was also entitled to commission on sales, payable one month in arrears against sales invoiced in any month.Mr Hyland was provided with a motor- car and was allowed petrol expenses. He was also allowed other "out of pocket" expenses of 1% of his sales over the first £1500 payable monthly "after all your debtors have paid" .Prior to July 1991, the Company had factored a substantial proportion of its invoices, but this became expensive and the Company decided to cease factoring. This led to cash-flow problems and the salesmen were urged to try to get existing customers to pay promptly and to accept new customers only on COD terms.On 21 August 1991, Mr Jones, the Company's Managing Director (and also himself a salesman), reported to the staff in an internal Company Memorandum that the Company had suffered losses for the year 1989/90 and that these were being reduced but continuing; and the salesmen were again urged to seek prompt payment by customers. This was again repeated in a hand-written letter dated 25 August from Mr Jones to the four other salesmen (including Mr Hyland). This letter was accompanied by a typed letter to the staff to the same effect, explaining that the priorities for monthly payment were the oil company suppliers on the 20th of the month, the Inland Revenue on the 25th and services, monthly salaries and other suppliers on the 30th. It was further explained that for that month (August 1991) a a further £8000 was needed before other suppliers, salaries and services could be paid. Mr Jones continued:
"At the speed money is coming in it will be early September before I can post you salary cheques, unless you all get moving on collecting monies."
He then set out a break-down of a total of £29,843 owed to the Company and continued:
"The money is there, all we have to do is to get it. Cheques not promises will speed up the process to get the further £7500 to cover salaries and others. As the expensive factoring disappears so it is back to us all to collect monies, as what comes in can then go out again."
Mr Hyland's salary cheque for August 1991 had not been received by him by 9 September 1991. He elected to treat the non-payment as a constructive dismissal and left the Company's employment on that date. It appears from Mr Hyland's Application to the Industrial Tribunal that a cheque for his August salary was in fact paid to him on 16 September 1991. In his Application, he also complained of the Company's failure to pay certain costs and other expenses.In the Company's Notice of Appearance (IT3), prepared and signed on its behalf by Mr Jones, it was denied that Mr Hyland had been dismissed, and the Company's defence was set out in some detail. The letters mentioned above were summarised and copies annexed, and it was stated that:
"All the sales staff wages (and my own salary) were calculated and pay slips made out ready for 31.8.91 but as sufficient money had not come in before 9.9.91, no cheques were posted."
We were told that Mr Jones gave evidence to that effect before the Tribunal.Before coming to the decision of the Tribunal, is convenient to refer to two matters. First, it is settled by Western Excavating (EEC) Ltd -v- Sharp [1978] QB 761 that in order for an employee to claim a constructive dismissal, there has to be a breach of his contract of employment which entitles him to terminate the contract. For that purpose, a mere breach of contract by the employer is not sufficient, and the breach must be a serious or "fundamental" breach (as it is often referred to), i.e. as Lord Denning MR put it in the Western Excavating case at p.769B:
"..... the employer is guilty of conduct which is a significant breach going to the root of the contract of employment, or which shows that the employer no longer intends to be bound by one or more of the essential terms of the contract."
Secondly, the timing of the payment of his pay is obviously an important element of a contract of employment from the employee's point of view. Most employees have regular commitments, such as rent or mortgage payments, as well as other normal outgoings of a regular nature, and any delay in payment of an employee's salary may well create substantial difficulties for him. But it is not the law that every delay in due payment constitutes a fundamental breach by an employer. Thus, a short delay caused by illness, mistake, postal delays or the like would not normally fall into that category. The matter is very much one of fact and degree, depending on all the facts and circumstances of the particular case. A relevant circumstance may be the employer's cash-flow problem of which the employee is fully aware. For example, in Adams -v- Charles Zub Associates Ltd [1978] IRLR 551, the employee was the senior consultant of a firm of management consultants, which (to his knowledge) relied heavily on income from overseas clients. He was told his April salary, like the salary of other members of the firm, would be paid out of monies due to be received from an Argentinean company. There was a delay in the payment of those monies and the employee was paid some 9 days late. In the meantime he had decided to treat the employer's failure to pay as a constructive dismissal. The Industrial Tribunal found that in the particular circumstances of the case the delay did not amount to a fundamental breach on the part of the employer, and this Appeal Tribunal (by a majority) upheld that decision.We turn to the Reasons set out in the decision of the Tribunal in this case. Those Reasons, which were in full form, are brief. Paragraph 1 sets out shortly the material terms of Mr Hyland's contract of employment but does not state when his monthly salary was due. Paragraph 2 reads:
"In January 1991, the salary cheque which Mr Hyland had received from the Respondents failed to be met on presentation, and, although it was subsequently honoured, Mr Hyland had to pay extra bank charges for the re-presentation of the cheque, and, what is more, his own credit standing with his bank was seriously damaged."
Paragraph 3 dealt with expenses, as to which the Tribunal say they cannot make a finding. That paragraph also says that "Mr Hyland complains that his salary was frequently paid late" , but the Tribunal make no findings as to whether or to what extent that complaint was justified.Paragraph 4 of the Tribunal's Reasons reads as follows:
"The matter was brought to a head when Mr Hyland's salary cheque for August had not been received by him by 9 September 1991. Mr Hyland elected to treat that non-payment as a fundamental breach of his contract of employment, and to leave the Company's employ. We agree that the non-payment of salary by the 9th of the following month was such a fundamental breach, and find that it fell within the provisions of Section 55(2)(c) of the Employment Protection (Consolidation) Act 1978. Accordingly, Mr Hyland was dismissed by the Respondents for the purposes of that Act and is entitled to a remedy for that dismissal."
The remaining substantive paragraph deals with the questions of remedy and the quantification of compensation.The Company has appealed against that decision on a number of grounds, but we found it necessary to hear argument and deal with only the first ground, which was that the Tribunal failed to give any or any sufficient reasons for its decision.The basis of that argument is to be found in paragraph 9(3) and (4) Industrial Tribunal (Rules of Procedure) Rules 1985, which read:
"(3) The tribunal shall give reasons, which may be in full or in summary form, for its decision.
(4) The reasons for the decision of the tribunal shall be recorded in a document signed by the chairman, which shall also contain a statement as to whether the reasons are in full or in summary form."These rules are not significantly different from the previous rules which were considered by the Court of Appeal in Meek -v- City of Birmingham District Council [1987] IRLR 250 in which Bingham LJ (with whom the other members of the Court of Appeal agreed) said:
"It has on a number of occasions been made plain that the decision of an Industrial Tribunal is not required to be an elaborate formalistic product of refined legal draftsmanship, but it must contain an outline of the story which has given rise to the complaint and a summary of the Tribunal's basic factual conclusions and a statement of the reasons which have led them to reach the conclusion which they do on those basic facts. The parties are entitled to be told why they have won or lost. There should be sufficient account of the facts and of the reasoning to enable the EAT or, on further appeal, this court to see whether any question of law arises;....."
Those dicta have been followed and applied in several other cases. A recent example is Wadham -v- Carpenter Farrer Partnership [1993] IRLR 374, in which the Industrial Tribunal's decision was set aside because there were no sufficient findings of primary fact and "no sufficient direction in law from which we can ascertain what the Tribunal had in mind as to theprinciples to be applied" : per Wood J at p.377.The majority of us accept the argument of Mr Gilmartin, Counsel for the Company, that the Reasons given by the Tribunal in this case fail to measure up to those yardsticks. The Reasons merely state one side of the case. They contain no reference at all to the letters referred to above or to the evidence of Mr Jones. There is no analysis or discussion of the contract of employment or of the reasons why Mr Hyland's salary was paid late. In particular, there are no reasons given why the Tribunal regarded the late payment as being in the circumstances, not merely a breach of Mr Hyland's contract, but a fundamental breach. As Bingham LJ said the Meek case, the parties are entitled to know why they have won or lost. The Company and Mr Jones would have no idea why their defence was rejected.The majority of us wish to make it plain that we express no view at all as to whether the decision of the Tribunal was right or wrong in finding a fundamental breach. All we are saying is that, in our view, there are insufficient materials in the Tribunal's Reasons, by way of findings of fact and by way of directions in law, to enable us to discern whether any point of law arises in that finding.The minority (Mr Garfield Davies) is unable to agree. He considers that the Tribunal's reasons for their conclusion are sufficiently apparent. He points out that Parliament has deliberately left questions of fact to the Industrial Tribunal, and that whether or not a breach of contract is a fundamental one is essentially a matter of fact to be decided by the Tribunal. He considers that the Tribunal in this case, having heard the evidence, came to a conclusion of fact and there was ample evidence to support that finding, which therefore cannot be interfered with by this Appeal Tribunal.In the result, however, by a majority the appeal is allowed, and the decision of the Tribunal set aside. The case will be remitted to a differently constitute Tribunal for rehearing.