Devonshire Hotel (Torquay) Ltd v Reader [1995] UKEAT 491_95_3010

EMPOLYMENT APPEAL TRIBUNAL
BAILII case number: [1995] UKEAT 491_95_3010Case No Appeal No. EAT/491/95Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
Devonshire Hotel (Torquay) LtdReader
Date 30 October 1995
[1]BAILII case number: [1995] UKEAT 491_95_3010 Appeal No. EAT/491/95 EMPOLYMENT APPEAL TRIBUNAL 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS At the Tribunal On 30th October 1995 HIS HONOUR JUDGE P CLARK LORD GLADWIN OF CLEE CBE JP MRS R A VICKERS DEVONSHIRE HOTEL (TORQUAY) LTD APPELLANTS MR A READER RESPONDENT Transcript of Proceedings JUDGMENT Revised APPEARANCES For the Appellant MRS J HEADFORD (Solicitor) Messrs Tozers Solicitors 8-10 St Paul's Road Newton Abbot Devon TQ12 4PR For the Respondents MISS K HOUGHTON (of Counsel) Messrs Hutchings, Hutchings and Plum Solicitors 38-40 The Terrace Torquay TQ1 1BN JUDGE CLARK : This is the employer's appeal against a unanimous decision of the Exeter Industrial Tribunal dated 27th March 1995, that the respondent employee Mr Reader had been unfairly dismissed. The appellant was ordered to pay compensation totalling £13,527.00. The material findings of fact are set out in the Industrial Tribunal's extended reasons. In summary the respondent was employed as a night porter at the appellant's hotel from February 1982 to November 1994. He was never issued with a statement of terms and conditions of employment, nor did he enter into a written contract of employment. The respondent complained that he had been unfairly constructively dismissed. It therefore became necessary for the Industrial Tribunal to find on the evidence it heard what were the relevant contractual terms. Until the material events, the Industrial Tribunal found that the respondent worked from 8 p.m. until 8 a.m. six nights a week, that is a total of 72 hours per week. It found that he was paid £176.00 when working, and £144.50 when absent through holidays. Due to poor trading results the appellant decided that economies were necessary. Accordingly, Mr Trewern, the general manager, prepared new shift rotas. He told the respondent that he would be going on to a 40 hour week. The new rosta was due to start on Monday, 7th November 1994. That Monday afternoon the respondent went into the hotel, although he was not rostered to work that evening. The Tribunal found that he had a conversation with Mr Trewern, during which he was told that he would be paid £97.42 a week. On Tuesday, 8th November 1994, the respondent turned up for his new shift from 10 p.m. until 8 a.m. The following morning, 9th November 1994 he handed in a letter of resignation in these terms: "Dear Sir, I have received advice on this matter and have grounds to pursue a claim for constructive unfair dismissal in the Industrial Tribunal Courts. Therefore I regard myself as constructively dismissed by way of the Company's conduct in fundamentally breaching my contract of employment. I will therefore not be reporting for duty henceforward", and it was signed. The respondent duly left the employment never to return. The following issues arose for consideration by the Industrial Tribunal.: Was the respondent constructively dismissed?[2]If so, what was the reason for dismissal?[3]If that was one of the prescribed reasons on Section 57 of the Employment Protection (Consolidation) Act 1978 (the 1978 Act), did the appellant act reasonably in treating it as a sufficient reason for dismissal under Section 57(3)?[4]If the dismissal was unfair, did the respondent contribute to his dismissal?[5]To what remedy was he entitled? The important paragraph in the Tribunal's decision is paragraph 11:
"11 It is the respondent employer that was making the changes to the contract of employment and the terms on which the applicant was employed. It may or not have been a breach of contract to remove what we have called institutionalised overtime from the contract reducing his pay to £144.00. Clearly what Mr Reader was envisaging was a reduction to £97.00. We find that there is a fundamental breach of the contract of employment by the employer and that is in the breach of the obligation to show mutual trust and confidence one in the other. The breach of that led to the understanding by Mr Reader that his pay was going to be reduced to £97.00. Whether a reduction from £176 to £144.50 would be such a breach we find immaterial. That is what caused the rupture of the relationship. That is necessarily unfair. Things might have been different (and our decision might will have been different) had someone taken Mr Reader on one side and said words to the effect of "
Well look here, Mr Reader, calm down a bit, you are getting about £20.00 a week less and you are working about half the hours, that is actually quite a good deal for you". But nobody did that. The changes were being made by the respondent employer and it is up to them to do it in a way that the employee can understand. Here they did not do that and so we find that the application succeeds. Mr Reader was constructively dismissed and the dismissal was unfair since no reason within section 57(2) of the Employment Protection (Consolidation) Act 1978 can be given for it in these circumstances." Now, in that paragraph, the Industrial Tribunal appear to have answered questions (1) to (3) of the five I have outlined above. At question (4), the question of contribution, was dealt with at paragraph 12, where the Tribunal say:
"12 We have considered section 73(7B) and section 74(6) of the Act which cannot apply to the facts here. Even if the applicant worked out the figure of £97.00 himself (which we did not think was the case) those sections would still not be applicable. It is up to the employer to explain clearly. Here Mr Trewern explained the matter once and would not do so again; and all he explained was that Mr Reader's hours had been reduced to 40."
Finally in paragraphs 14 to 17 of the decision the Industrial Tribunal carry out a calculation of the respondent's loss, he having indicated that he did not seek reinstatement or re-engagement. Now, against that background, the appellant employer takes four points before us. The first, is in relation to the Tribunal's finding that there was a fundamental breach of the contract of employment entitling the respondent to treat himself as discharged. That finding is at paragraph 11 of the decision which I have read, and the Tribunal found that there was a breach of the fundamental implied term of "mutual trust and confidence", and that this arose in that the appellant failed to communicate properly to the respondent the precise nature of his reduction in pay and the need for it. We remind ourselves that the question of whether or not there has been a fundamental breach of the contract is essentially one of fact, see Woods vWM Car Services (Peterborough Ltd [1982] ICR 693 . Having considered the Industrial Tribunal's findings and reasoning we cannot say that this conclusion was perverse, and accordingly we reject this ground of appeal. The second point taken by Mrs Headford on behalf of the appellant is not raised in the Notice of Appeal but appears in her skeleton argument. We have allowed Mrs Headford to argue the point in circumstances where Miss Houghton had indicated that she is not taken by surprise. This submission focuses on paragraph 11 of the decision. Having found that a fundamental breach of the contract occurred, the Industrial Tribunal then say "that is necessarily unfair", and Mrs Headford submits, based on well established authority including the Court of Appeal decision in Savoia v Chiltern Herb Farms Limited [1982] IRLR 166 , that a finding of constructive dismissal does not end the Industrial Tribunals enquiry; it must nevertheless go on to consider whether the employer has established a reason for dismissal prescribed by Section 57(1) or (2) of the 1978 Act, and if so, whether in all the circumstances the employer acted reasonably in treating that as a sufficient reason for dismissal under Section 57(3). Here it is said that the appellant raised a possible reason, that of business re-organisation amounting to "some other substantial reason" under Section 57(1)(b) of the Act in its form IT3. In the grounds for resisting the application the employer said this:
"... This exercise was purely one of economics in order for the company to minimise expenses in a period of close to nil income during what has been one of the harshest trading periods for a number of years. We submit that we did not make Mr Reader redundant nor did we constructively dismiss him. All the company did was protect the future employment of it's management and staff by implementing an economically sound business policy."
Now, it is right to say that the applicant appeared in person before the Industrial Tribunal and the respondent was represented by Mr Gilfoyle its accountant. There were therefore no professionally qualified advocates before the Industrial Tribunal. But it seems to us that the employer was there setting out a set of facts which could amount to some other substantial reason for dismissal if the Tribunal found against them that there had been a constructive dismissal. It is also clear from the decision itself that evidence was led which would support that contention. For example, in paragraph 4 of the Tribunal's extended reasons they note:
"... The hotels were making substantial losses and part of Mr Trewern's job was to make changes to the way the hotels were run in order to try and bring them back to profit."
We note that such a reason, that is some other substantial reason was found in the constructive dismissal case of Genower v Ealing Area Health Authority [1980] IRLR 297 , which was referred to in the Court of Appeal judgments in Savoia v Chiltern Herb Farms Limited . And looking at paragraph 11 it is clear to us that the Industrial Tribunal never considered that potential reason for dismissal, and we reach that conclusion from the words "that is necessarily unfair" after the finding of constructive dismissal, coupled with the final sentence of that paragraph where the Tribunal say "Mr Reader was constructively dismissed and the dismissal was unfair since no reason within section 57(2) of the Employment Protection (Consolidation) Act 1978 can be given for it in these circumstances." We think that their reference to Section 57(2) indicates quite clearly that they never considered whether there was a reason shown under Section 57(1)(b) of the Act. We cannot accept Miss Houghton's submission that it is implicit in paragraph 11 that the Industrial Tribunal considered and rejected that reason for dismissal. Accordingly we are satisfied that the Industrial Tribunal ought to have considered whether there was "some other substantial reason" for dismissal but failed to do so. I then move to the third point taken by the appellants. It follows in Mrs Headford's submission that the Industrial Tribunal failed to make a consequent finding as to reasonableness under Section 57(3). The Tribunal did not reach that stage because it found that no reason for dismissal had been made out. We have approached the case from a different perspective as Miss Houghton invites us to do. She says given the Industrial Tribunals findings and taking the decision in the round, would the result have been any different had the Tribunal gone through stages (2) and (3), that is reason for dismissal and reasonableness. If not, she submits, we should not disturb the Industrial Tribunal's overall conclusion. We cannot accept that that is a proper way of looking at the case. It seems to us that the Tribunal's failure to consider "some other substantial reason" and if necessary the consequent question of reasonableness renders this decision fatally flawed. For the reason. If the Industrial Tribunal had found "some other substantial reason" but that the dismissal was unfair on procedural grounds, for example a failure to communicate properly with the respondent, that may have had an effect on the Industrial Tribunal's approach to the assessment of compensation under Section 74(1) of the Act. Finally, the fourth point advanced by the appellants. This relates to the finding in paragraph 12 of the decision in relation to the contribution under both Section 73(7B) and Section 74(6) of the Act. We have consider that paragraph and we do not accept, as Mrs Headford contends that the Industrial Tribunal shut their minds to the possibility of a finding of contribution. Rather, we think, they considered on the facts that there was no question of the respondent contributing to his dismissal under either subsection. And we think that that finding must in any event stand. Accordingly, having identified two errors of law in this decision, we think that the case must be remitted to the Industrial Tribunal. We have considered whether it should be the same or a fresh Industrial Tribunal. Argument has been advanced on both sides in relation to this matter, and on balance we think it should go to a different Industrial Tribunal. That Tribunal will proceed on the basis: First, that the respondent was constructively dismissed, and secondly, that he did not contribute to his dismissal. The issues it will have to decide are: (a) Have the employers shown a reason for dismissal within Section 57(1)(b) of the 1978 Act, and if so; (b) did the employer act reasonably in treating that as a sufficient reason for dismissal under Section 57(3); (c) if not, what is the proper level of compensation to be awarded to the respondent. That final question will be approached in the light of the state of the affairs as at the time of the second Industrial Tribunal hearing, and in the light of submissions made by both sides based on any finding of unfair dismissal by the second Tribunal as to the proper level of the compensatory award, bearing in mind the provisions of Section 74(1) of the Act. In those circumstances the appeal will be allowed on that footing.