Poulter v Fordingbridge Ltd [1994] UKEAT 293_92_2101

EAT
Poulter v Fordingbridge Ltd
[1994] UKEAT 293_92_2101 · 1994-01-21
MR JUSTICE TUDOR EVANS: The Appellant who was employed as the Production Director and was a shareholder in the respondent Company, appeals against the unanimous decision of an Industrial Tribunal held at Southampton in January and February 1992.The Tribunal rejected the Appellant's claim that the respondent Company had, by its conduct, constructively and unfairly dismissed him.He was employed under a contract of employment made on the 4th June 1990 at an annual salary of £26,870. By January 1991 the Company was experiencing severe financial pressures because of the recession as a result of which the directors took a salary cut of 25%. The Appellant agreed but reluctantly. As the year progressed, the financial situation further deteriorated. The Tribunal found that there had been regular weekly discussions between the directors about the Company's financial position. According to the evidence of the Appellant, at a meeting held on the 29th July at which Mr Way the Managing Director and other directors were present, they were told that they would have to accept a 50% reduction of salary. The Appellant told the Tribunal that he made it clear that he would not agree to this reduction but that he was being given no choice. His evidence was that Mr Way made it clear that if the directors would not accept the proposed cut the Company would be wound up.There were two further meetings both on the 1st August 1991. At the first, in the morning, according to the Appellant there was a discussion about the shares held by Mr Hall, who was the Company Chairman, being distributed to the other directors to compensate them, as it were, for the salary cuts which were to come.At the second meeting on that day Mr Way, the Managing Director, according to the evidence of the Appellant, stated that there would have to be a salary cut. The Appellant said that he would not agree to this course and Mr Way made it clear that he would wind up the Company. On the 7th August the Appellant was handed a document (to be found at pages 1-6 in Bundle A) to which we shall come back later. The Appellant's evidence was that he took the document home and, having read it, he came to the conclusion that his salary was going to be cut to £12,000 and that he would have no opportunity to discuss it or to oppose it, and he therefore faxed a letter of the 7th August 1991 in which he said:
"I have now been told that my salary is to be reduced to £12,000 per year and that I really have no choice about this."
In paragraph 15 of their decision the Tribunal found:
"In that letter he terminated his employment and resigned his position as a director of the company. That letter clearly indicates that he had come to the conclusion that it was a `fait accompli' that his salary was to be cut. It also makes it clear that he had been taking legal advice . . ."
It was the Appellant's case before the Tribunal that the conduct alleged amounted to an actual or anticipatory breach of contract justifying his resignation and that the conduct therefore amounted to constructive and unfair dismissal.Apart from the Appellant, the Tribunal heard evidence from Mr Way, Mr Hall, from Mr Baxter, the Financial Director and from Mr Shawcross, the Sales Manager and a director. The evidence is summarised in full detail in paragraph 17-28 of the decision, and we do not find it is necessary for us to repeat the detail of what is recorded. But, briefly, Mr Way told the Tribunal that it was quite clear that the January 1991 cut was inevitable. Initially, it was to be for three months but it had had to be continued because the Company was, as he is recorded as saying, "facing financial disaster" (see paragraph 18 of the decision). In paragraph 20 it is recorded:
"Mr Way maintained that at all times the matter was open to discussion and that no formal decision by 7 August had been taken in regard to the actual salary cuts. They were proposals to be on the agenda."
There was a meeting on the 8th August to discuss the proposal at which the directors agreed that cuts had to be made but no decision was made as to amounts or as to how Mr Hall's compensatory shares would be distributed. Mr Way said that if the Appellant had been at the meeting on the 8th August and if he had refused the reduction:
"that they would have had to have gone back to the drawing board and he believed it would have had to have been accepted that the applicant's salary would not be reduced."
Mr Baxter is recorded as believing that the Company would have to be wound up but he considered that he and Mr Way were prepared to give matters a further try but only if there were extreme cost cutting.Next, Mr Hall gave evidence that he felt it was imperative that directors should give the lead and that, rather than some people becoming unemployed, he would have preferred to see salaries cut.Finally, Mr Shawcross the salesman was a witness who impressed the Tribunal. He gave evidence that everyone would have to take a cut in salary but it was not settled as to how much or necessarily agreed. The Tribunal said:
"He [Mr Shawcross] made one significant statement when he told the Tribunal that he left the meeting on 1st August with the impression that the directors were begging each other and him to think of some other way or come up with some other suggestion as to how the company could be saved without the necessity of cutting salaries to the board members."
The findings of the Tribunal are contained in paragraph 33 of the decision. An important finding is made in paragraph (ii) as follows:
"We find that there was no firm suggestion by 7 August that the salary reduction would take place. The bundle A page 1 indicates that there is only a proposal to reduce the salary. The document in itself makes clear that it is a discussion document."
We interpolate that page 1 refers to proposed salary division. Page 4, which comes from Mr Baxter, states that as he saw it the choice was between liquidation or reducing overheads further. At page 5 Mr Baxter writes:

"I would like to discuss this and make a final decision to-morrow morning."

Coming back to the findings, the Tribunal found:
"(v)The evidence of the meeting of 8 August indicates that no positive decision had been taken on that day to reduce salaries. It was still under discussion.
(iv)The applicant [as he then was] was part of a team made up of directors of the company. He chose to assume that his salary had been reduced by 7 August. His letter of termination makes that quite clear.(v)We can find no evidence in this case to support the applicant coming to the conclusion that at 7 August his salary had been reduced.(vi)We do not find that there was a justifiable anticipatory breach on the evidence we have heard. Had the applicant waited only a few hours he could have attended the board meeting. If at that board meeting the respondents had behaved in a way as suggested in his letter of 7th August, then a different position might have prevailed."The Tribunal then accepted that, if someone's salary is reduced without consent, that would be a fundamental breach of contract but they held that that had not happened on the 7th August and that the Applicant, by tendering his resignation and resigning his position, had brought about the termination of his own contract.On behalf of the Appellant, Mr Lord has made these submissions: either that there would have to be a cut in salary or that the Company would go into liquidation. Either course, submitted Counsel and this is not as we understand it challenged by Mr James on behalf of the Respondent, would be either an actual or an anticipatory breach justifying resignation and the conduct of the employer would amount to constructive and unfair dismissal. Counsel submitted that the Tribunal found that it was not certain that the salary would be cut, that that is a conclusion which is not justified, but in any event that would simply leave the other alternative, that is liquidation, and that would amount to an anticipatory breach.In our view, the submission which is made on behalf of the Appellant, is not well founded because there was another possibility plainly found by the Tribunal in the findings to which we have referred. In particular in (vi) there is the finding that, in effect, had the Appellant not "jumped the gun" and had he gone to the meeting on the 7th August and we now quote the finding of the Tribunal:

"then a different position might have prevailed."

There is, in our view, clear evidence to support that conclusion. It is to be found in the review of evidence contained in paragraph 23 of the decision where, as we said earlier, the Tribunal record that Mr Way had told them that had the Appellant refused to accept a reduction in his salary at the meeting on the 8th August they would:
"have had to have gone back to the drawing board and he [Mr Way] believed it would have had to have been accepted that the applicant's salary would not be reduced."
There is, therefore, a finding of fact fully supported by evidence, to show that there is, or was, an alternative to the two possibilities upon which the argument on behalf of the Appellant, on this part of the appeal, is based.It follows for the reason we have given that we are unable to accept the first way in which the matter is put.Then, Mr Lord referred us to "Chitty's on Contract" in passages in which the test for deciding whether an anticipatory breach has taken place is propounded. In paragraph 1713 the learned Editors write:
"If before the time arrives at which a party is bound to perform a contact he expresses an intention to break it, or acts in such a way as to lead a reasonable person to the conclusion that he does not intend to fulfil his part, this constitutes an anticipatory breach of contract and entitles the other party to take one of two courses. . ."
We need not read any further from that paragraph.Counsel submitted that the conduct here properly led the Appellant, as a reasonable person, to the relevant conclusion. But Counsel accepted that a "non-firm" suggestion would not be enough. In the light of that concession, we turn again to the decision and the findings in paragraph 33(ii) where the Tribunal conclude that there was no firm suggestion of salary cut and that it was only a proposal.In those circumstances, we accept the submission of Mr James on behalf of the Respondent, that it is not shown that a reasonable person could have come to the conclusion which the Appellant did. There is the finding that there was no firm suggestion. There is, as we have said, the finding that if he had gone on the 8th August to the meeting other propositions may have prevailed.For the reasons we have stated, we have come to the conclusion that this appeal must fail. Before we part with the case we should point out, that in paragraph 34 of the decision, the Tribunal came to an alternative finding that, on the assumption that the Appellant was correct in that there had been a fundamental breach of contract, then their conclusion would have been that the reduction in salary was brought about by a re-organisation of the Company's wages structure which would amount to some other substantial reason, as stated in Section 57(1)(b) of the Employment Protection (Consolidation) Act 1978 and on that alternative view of the case, the Tribunal found as follows:
"That re-organisation came about as a necessity for the company to remain viable and survive. He was in the team of directors and would be expected to assist in the survival of the company. We find that the dismissal in those circumstances would be fair and would be for some other substantial reason."
In view of the conclusion to which we have come on the first aspect of the appeal, it is not been necessary for us to hear the submissions of Mr Lord and Mr James on that point. We therefore do not find it necessary to express any alternative views.Counsel questions whether the Appellant is a shareholder or not? If he is not, it is to be deleted from text.