Serv (UK) Ltd v Evans [1996] UKEAT 812_95_2002

EAT
Serv (UK) Ltd v Evans
[1996] UKEAT 812_95_2002 · 1996-02-20

JUDGE PUGSLEY :

This is an appeal from the decision of the Bristol Industrial Tribunal, whose Chairman was Mr Toomer.We have considerable sympathy for Mr Toomer's dilemma, which he recites in the body of his decision. Not to put too fine a point upon it, this was a claim for breach of contract where there has been in both the correspondence and, it has to be said, in some of the documentation, a degree of confusion.The brief facts are the Applicant was an employee of the Ministry of Defence. In the late Spring of 1993, he entered into negotiations with Mr Barzillay and a Mr Foxall, who are representatives of the Respondent Company, with a view to entering their employment. Eventually it was agreed that he should leave the Civil Service and go to work for the Respondent Company but, understandably, the Applicant was concerned as to his job security. He therefore negotiated an arrangement that the Respondent would guarantee to employ him for a period of 12 months, that after a period of 12 months his notice entitlement would be 12 months and - we will refer to the precise terms at a later stage - that if, after a period of 12 months he was made redundant, he would be entitled to six months' gross pay.The Respondents' standard terms and conditions were given to the Applicant. He made certain amendments. These amendments were accepted and incorporated into the actual contract of employment, which is document 6 in the Applicants' bundle. Paragraph 10 states:
"Periods of notice of termination of employment are in accordance with current legislation. Your employment may be terminated by either party giving to the other party the appropriate period of notice verbally and then followed up in writing as detailed below:
10.1 The Employer10.1.1. The notice period following the guaranteed twelve months of employment will be three calendar months10.2 The Employee10.2.1. The notice period is three months."Paragraph 16 contains the following provision:
"Should the company make you redundant after the initial guaranteed twelve months employment, you will be entitled to redundancy payment of not less than six months annual salary."
It is agreed that the contract commenced on 6 September. It seems that the Applicant worked from home. Some time in or about 19 July or before then, the Applicant had a visit from a Mr Foxall who told him that the Respondent was restructuring its organization and that the Applicant's employment would not be continued.There then followed a letter dated 18 July, in which the position was set out. That document appears in the Applicant's bundle of documents at page 11:
"Dear Mr Evans,
Further to our recent meeting as I explained as a result of a reorganisation within the company your position with the company is redundant.Your entitlements are as follows:Full pay to 6 September 1994 (gross) payable in July and August.

Accrued holiday pay (taxable)

I have reviewed your contract of employment with our advisors and I think it is clear that the contract is for 12 months work guaranteed. If your services had been retained after this period you would have been entitled to three months notice. Furthermore the notice period required under your existing contract is only one week whereas you have been given seven weeks notice.I would like to take this opportunity to thank you for all your hard work whilst employed within the company."Clearly, that letter followed a verbal conversation. We invited the parties to consider whether they wish to call for the Chairman's note of that conversation so we could see whether or not Mr Foxall had at that meeting been specific. The answer is that neither party, understandably, wished that course to be taken.Mr Evans replied to that letter and in his letter of 21 July he said this:
"I note that you have reviewed my employment contract and sought advice. I would respectfully suggest that you review the contract again and seek better advice. In paragraph 10.1.1 the contract does state that there will be a `guaranteed twelve months of employment' but this does not state or imply that the contract is for a fixed term. On the contrary, paragraph 3c states `during your first twelve months of employment, this further emphasises the fact that my employment contract was not for a fixed term.
With regard to your assertion that `the notice period under your existing contract is only one week' I would be interested to know which clause details this. The only clause covering the notice of termination is clause 10. Sub-clause 10.1.1 clearly states `The notice period following the guaranteed twelve months of employment will be three calendar months.' Consequently your offer of seven weeks notice is not as generous as you would have me believe and is significantly less than I am entitled to under the terms of my contract."To that letter, Mr Foxall replied on 28 July 1994:
"On review of the contract I agree that it is not a fixed term contract. I made this clear in my letter to you of 18 July. The position regarding your contract is that if you were employed after 12 months you would be entitled to 3 months notice. The notice period relating to your contract before the end of twelve months is as stated in paragraph 10. Therefore we are committed to paying you to 6th September but your notice of termination is required by current legislation. As you have been employed for less than one year this notice period is one week.
As regards the last paragraph of your letter pay in lieu of notice can be paid net and not gross. The employee is only entitled to net pay, but we are paying you gross. As stated in my letter of 18th July you will be paid accordingly.

July salary net into bank (cheque for tax and ni enclosed)

August salary gross (by cheque)

Including 6 days for September

Holiday pay taxable (by cheque)"

There was then a letter asking for various details of payment, which was answered by 2 August.It was contended on behalf of the Applicant that he was entitled to a period of three months' notice. The originating application which he entered on 14 October said:
"My employment contract states that I should have an initial guaranteed period of employment. After the initial period, should I be made redundant I would be entitled to not less than 6 month (sic) salary. If dismissed I would be entitled to 3 months notice. I was made redundant and offered 6 weeks salary only."
It is highly significant that in that originating application the Applicant gives the date of the end of his contract as 19 July.The employers' Counsel has complained that his clients were very much taken by surprise in that the Tribunal determined the matter of whether the Applicant was entitled to three months' notice in the favour of the employer but that there was, he says, sadly, insufficient notice that the point was going to be taken that there was an entitlement to a half-year's salary, namely, due under the redundancy. He makes the point that had this been in the High Court or County Court, then the pleaded case may have been rather clearer. To that, Mr Munasinghe, who appeared below, said that there had been a letter intimating such a claim, which we do not have, in September. He points out that the originating application, to some extent, does foreshadow the issue of a claim for redundancy.We make no secret of it that we think the Chairman had an extremely difficult task. The reason we say that is this: part of the letter of 18 July to which we have adverted is consistent with saying that the period at which the notice should expire is 6 September, which would mean the Applicant had one year and one day's service. Another part of that letter is consistent with saying the contract is for 12 months' work guaranteed, namely, to expire on 5 September. Again, in that it talks about notice, part of that judgment is consistent with reaching the decision that the Applicant was not summarily dismissed and paid money in lieu of notice but was still in employment until the expiry of the notice. The other part of the letter is inconsistent with that because the Applicant is being paid gross for July and August, which is only possible if employment has ceased. These matters were analyzed by the learned Chairman. He notes in paragraph 8:
"I derive no help from the pleadings because the Originating Application says that the employment ended on 19 July 1994; the Notice of Appearance says at one point that the applicant's dates of employment are correct; and yet in the body of the pleading it is alleged that his employment ended on 6 September. It seems, with respect to all sides that there has been a certain amount of loose terminology in this case.
9. The respondent's evidence is that Mr Foxall told the applicant on the 19th that his employment had ended and that he was a free agent, the implication being that he could immediately have taken work with someone else; although this was not put to the applicant, and Mr Foxall was not really cross-examined on the point either. What is consistent with that evidence is that the salary paid after July was gross; and that it was usually though not invariably the practice of the respondent that people employed in such areas as the applicant, who was engaged in dealing tenders, would be required to leave forthwith and receive pay in lieu [of notice] , rather than being put on what is commonly called, `garden leave'."Further on the Tribunal Chairman at paragraph 11 says:
"Faced with this confusion it seems to me that it is safest to go by what the contemporary document actually says. The words, `you have been given seven weeks notice' is clearly inconsistent with the suggestion that the applicant's employment had terminated with effect from that date and that he was to be receiving pay in lieu of notice: in other words, liquidated damages for breach of contract. I am satisfied, therefore, on a balance of probabilities, that the date of termination of the employment was at the expiry of the notice, and the notice was to expire, as is the clear implication of that letter on 6 September 1994. On that basis, it seems to me, the applicant was in fact employed for one year and one day. The question then is: what effect does paragraph 16 of his contract of employment have?"
We have listened to the arguments on both sides. We have great sympathy with the position in which the Chairman was confronted, faced with confused terminology. It may be that we would not, on those issues, have reached the same decision as the learned Chairman. But he had the opportunity of hearing the parties give evidence. We cannot say he was wrong in law in the decisions he reached on those points. Although, as I say, had we been deciding the matter, we may have reached a different answer but it does seem to us that he posed the right question.However, when we come to the construction of paragraph 16, with the greatest of respect to the learned Chairman, and we have opportunity of sitting as a Tribunal and he was, ironically, sitting on his own, we do think that he has asked the wrong question. In paragraph 12 he sums the position up in this way:
"The first question which has to be determined is what is meant by the phrase, `should the company make you redundant after the initial guaranteed twelve months' employment'? I think that `makes you redundant' means `terminates your contract of employment by reason of redundancy'. It is difficult to see what else it could mean. When, therefore, is the contract terminated? When it comes to an end by the expiry of the notice. The notice expires on 6 September 1994 and that is twelve months and one day; therefore it appears to me that on the strict reading of that contractual term the company has made the applicant redundant after the initial guaranteed 12 months' employment. Therefore, I am satisfied that the applicant has established that he is contractually entitled to redundancy payment which is set out in the body of his contract."
We have carefully considered all the arguments contained in the skeleton argument by both advocates before us and have considered the matter that has been led to the Tribunal reaching this decision. I regret to say that we reach a different conclusion, as a matter of law, than the learned Chairman. Under paragraph 16, the words are:
"Should the company make you redundant after the initial guaranteed twelve months employment, you will be entitled to redundancy payment of not less than six months annual salary."
The danger with the process of reasoning adopted by the learned Chairman, understandably by construing what words meant is that, in our view, he asked himself the wrong question. He started by saying:
"`makes you redundant' means `terminates your contract of employment by reason of redundancy'. ... When, therefore, is the contract terminated? When it comes to an end by the expiry of the notice."
We consider that it is far better to look as a matter of construction at the actual words in paragraph 16:
"Should the company make you redundant after the initial guaranteed twelve months employment, you will be entitled to a redundancy payment of not less than six months annual salary."
I had the benefit of presiding over this Tribunal with Members who have years of experience of industrial life. It is common ground that a letter of dismissal or a dismissal, whether oral or written, cannot be unilaterally withdrawn by an employer.We believe that on any real and realistic interpretation of paragraph 16 that the phrase:

"make you redundant"

clearly contemplates the decision to dismiss on ground of redundancy. Looking at the contract as a whole, what the Applicant was obtaining was a guarantee that he would be in employment for 12 months, thereafter, his notice would be 12 weeks and he would have an entitlement to six months' annual salary in the event of him being made redundant.We consider that the rubicon had been crossed by the conversation which was summarized in the letter of 18 July, which was probably received on 19 July. At that stage the company had dismissed the Applicant on grounds of redundancy. It is true that there was an issue as to when that was to take effect but on our reading of paragraph 16:

"make you redundant"

means the state at which the decision to dismiss has been taken and communicated. It has gone beyond a mere warning. It is a decision which cannot be withdrawn unilaterally by the employer and at that stage the employee concerned is under notice for redundancy, that dismissal cannot unilaterally be withdrawn.We have to say that we consider on the merits of this case, much as we have sympathy for any employee whose position is made redundant, we note that the Applicant himself was not, in those early letters, to which we have adverted, suggesting that he was entitled to a redundancy payment. He, himself, thought his employment had concluded on 19 July and we believe that whether one looks at the contract as a whole or on the particular terms, in terms of legal interpretation, and in accordance with the industrial realities of life, he was not under that contract entitled to the redundancy payment. The company made him redundant, to use the inelegant language of the contract, before the initial guaranteed 12 months. They had committed themselves to a course of action which had legal consequences at that stage and we believe that there was a misdirection of the Tribunal to go, as we say, from the words:

"terminate your contract by reason of redundancy"

to then ask the question, when is the contract terminated? He was made redundant in July. It took effect, as the Tribunal found, on 6 September.In those circumstances, it seems to us, absurd to suggest that this matter should be remitted to another industrial tribunal. We have the power, and both Counsel have conceded and accepted, to deal with the matter ourselves. We, therefore, find there was no entitlement to the redundancy payment of £14,000 and the appeal is allowed.