Orac Information Systems Ltd v Meehan [1996] UKEAT 1219_95_2102

EAT

Orac Information Systems Ltd v Meehan

[1996] UKEAT 1219_95_2102 · 1996-02-21

JUDGE BUTTER QC:

This is the Preliminary Hearing of an appeal by ORAC Information Systems Ltd in respect of a decision of the Industrial Tribunal held at Reading on 1 August 1995. Before that Tribunal, the Applicant, Mr Meehan, complained that on 2 June 1994, the company had imposed a unilateral change to his contract of employment, by proposing to reduce his salary for July by 50%, and with effect from 1 August to reduce his salary to nil and that this amounted to a constructive dismissal.

In their extended reasons, the Tribunal dealt with the background. The Applicant was employed as an Image Product Manager, with an initial salary of £17,500 per annum and in addition there was a commission scheme. The company gave evidence before the Tribunal concerning its financial state. This was serious and the Tribunal clearly regarded it as such. In the course of their decision, the Tribunal dealt with the law (see paragraph 12 of the decision) and referred to the cases of Wood vWM Car Services (Peterborough) Ltd

[1981] ICR 661

and the case of Wadham Stringer Commercials Ltd v Brown

[1983] IRLR 46

and also the case of Bliss v South East Thames Regional Health Authority

[1987] ICR700

. The case of Catamaran Cruisers Ltd v Williams & Others

[1994] IRLR 386

was not cited to that Tribunal and is heavily relied upon by Mr Johnson, the Managing Director of the company before this Tribunal today.

We have considered that case, not just the particular passage or passages to which he referred, and we take that into account in reaching our decision today. The Industrial Tribunal held in paragraph 13, that it was their unanimous decision that the Applicant was unfairly constructively dismissed. They said:

"... It is clear that the company was in serious financial difficulties and radical measures had to be taken to ensure its survival and not unnaturally, apart from structural and financial reorganisation, the key to survival was increased sales. The applicant was given a target, which he did not achieve and the respondents argued that this was because he did not make the necessary effort, but the applicant argues that because of non-sales responsibilities within the company, he could not reach the necessary targets; whatever the reason for this, the respondents wished to retain his services on the basis of a 50% salary cut for July and 100% salary cut thereafter, though this arrangement was imposed upon him without any prior consultation whatsoever, it was announced at a meeting on a "take it or leave it" basis. The respondents argued that increased sales could have given the applicant bonus in excess of his previous income, but [and this is a crucial passage] we are satisfied that there was no reasonable realistic expectation of the applicant reaching the required target and any employee faced with a demanding work commitment with no guarantee of receiving any remuneration whatsoever, has little choice but to resign"

In paragraph 14, the Tribunal goes on to deal with the question of a fundamental breach, and found there was nothing in the contract which allowed Mr Johnson to reduce the Applicant's salary to nought.

It seems to us, plain, from the reasons given by the Tribunal that they did consider all the relevant circumstances. It seems to us that even if the case of Catamaran Cruisers to which I referred earlier, had been cited to them, the decision would inevitably have been the same. It could not be reasonable, in any circumstances, for there to be a reduction in earnings to a nil salary, when, as the Tribunal found, there was no proper opportunity for the Applicant to earn the commission to which the company referred. In these circumstances and for these reasons, we are unanimously of the view that there is no point in the appeal proceeding further. It follows that the appeal fails and must be dismissed.