Sensormatic Ltd v Southall [1997] UKEAT 371_97_0906

EAT
Sensormatic Ltd v Southall
[1997] UKEAT 371_97_0906 · 1997-03-26

JUDGE PETER CLARK :

On 21st January 1997 an Industrial Tribunal sitting at London (North) heard a preliminary issue in this claim of unfair dismissal, namely whether the respondent, Mr Roger Southall, ordinarily worked outside Great Britain within the meaning of s.196(2) of the Employment Rights Act ["ERA"], thereby depriving the tribunal of jurisdiction to entertain his complaint. It decided that he did not and that it had jurisdiction. Extended reasons for that decision are dated 10th February 1997. Against that decision the employer, Sensormatic Limited, now appeals.

The facts

The respondent commenced employment with the appellant on 20th January 1992 as a Regional Sales Manager based in the South of England.Following various promotions he was appointed Manager of A new operation based in Dublin, Republic of Ireland, with effect from 1st July 1995. His appointment was confirmed by a letter from the appellant dated 13th July 1995 and headed Contract of Employment. It seems that the respondent did not sign that document. The proposed contract referred to Sensormatic Ireland Limited offering him the position of manager. There is an unresolved dispute as to whether or not Sensormatic Ireland Limited was incorporated at the time that letter was written.The document continued:
"Employment is intended to be permanent and will commence on (To be agreed). The date on which continuous employment began was 20th January 1992. No employment with a previous employer outside the Group of Company counts towards continuous employment. You will be based at the Dublin Office and will not be required to work outside the UK or Ireland for a period of more than one month. You will report in the first instance to Peter Colthurst. There are no applicable collective agreements."
With effect from 1st January 1996 he was appointed Regional Director (Ireland). That new appointment was confirmed by letter dated 17th January 1996. A signed contract of employment dated 7th February 1996 followed.It provided:
"You are employed by Sensormatic Ltd in the position of Regional Director (Ireland)
This position becomes effective from 1st January 1996 . The date on which continuous employment began was 20th January 1992 . No employment with a previous employer outside the group of companies counts towards continuous employment. You are based in the Ireland office and will report to Phil Hollet UK Sales Director . You will not be required to work outside the UK for a period of more than one month. There are no applicable collective agreements."In February 1996 the respondent was informed that his new position would no longer be open for him. He was offered alternative employment which he declined. In due course he was dismissed with effect from 30th May 1996.The tribunal found that the respondent worked in Great Britain for the appellant until July 1995 and that the intention was that he would stay and set up the Irish operation but that his return to England was to be reviewed.After July 1995 his salary was still paid in sterling in the United Kingdom into his bank account here. National Insurance contributions were deducted according to United Kingdom law. His family home remained in England and he visited his family from time to time. The tribunal found that he spent about 40% of his time on the appellant's business attending meetings in Great Britain, perhaps reducing to about 35%.The tribunal concluded that the respondent did not ordinarily work outside Great Britain. They expressed their reasons in this way in paragraph 4 of the extended reasons:
"4 We are satisfied from the evidence that the Applicant ordinarily worked in Great Britain. It is true that under the contract as evidenced by the two letters a great deal of the work was performed in the Republic of Ireland and in Northern Ireland which is not part of Great Britain. We have been influenced mainly by the fact that the employment started in Great Britain, that the employer apart from the first contract where the employer is stated to be Sensormatic Ireland Ltd remained Sensormatic Ltd and we also accept the Applicant's evidence that he spent a considerable proportion of his time in this country attending meetings and dealing with various matters. We discard of course the fact that he visited his family here as this would not be ordinarily working in Great Britain but we are satisfied that he did a considerable amount of work in Great Britain. Having regard to the fact that the employment started in Great Britain, the fact that the operation in the Irish Republic seems to have been considered to be simply a fourth division of the Respondents' operations in Great Britain and the evidence which the Applicant gave to us are not satisfied that the provisions of section 196(2) are satisfied. It has to be demonstrated under that section as we understand it that the employee ordinarily works outside Great Britain and having regard to the authorities on the meaning of the word "ordinarily" we are not prepared to say that this is so. Accordingly we find that the Tribunal has jurisdiction to entertain the Applicant's claim."

The Law

S.196(2) of the ERA provides:
"(2) The provisions to which this subsection applies do not apply to employment where under the employee's contract of employment he ordinarily works outside Great Britain."
By s.196(3)(f) subsection (2) applied to this claim of unfair dismissal.Historically this exclusion has led to some debate in the Courts. In Portec (UK) Ltd v Mogensen [1976] ICR 396 the Employment Appeal Tribunal held that an employee could ordinarily work both inside and outside Great Britain and that the correct test was whether he worked outside Great Britain for considerable periods of time in the ordinary performance of his contract of employment.That decision was followed by a different division of the Employment Appeal Tribunal with some reluctance in Wilson v Maynard Shipbuilding Consultants AB [1977] ICR 112 .On appeal the Court of Appeal in Wilson [1978] ICR 376 , overruled both earlier Employment Appeal Tribunal decisions. The following principles emerged from that case:(1) An employee cannot ordinarily work both inside and outside Great Britain.(2) The question of where the employee ordinarily worked cannot be answered simply by reference to what actually happened in practice. It is necessary to look at the terms of the contract, expressed or implied. Maulik v Air India [1974] ICR 528 .(3) In construing the terms of the contract it is necessary to look at the terms agreed at the time of making the contract, subject to any later agreed, rather than unilateral, variation of the relevant term or terms.(4) If the express or implied terms of the contract answer the question where does the employee ordinarily work, well and good. However,(5) In the absence of special factors leading to a contrary conclusion the county where his based is likely to be the place where he is to be treated as ordinarily working under his contract of employment.Following Wilson the point arose again for consideration by the Court of Appeal in Todd v British Midland Airways Ltd [1978] ICR 959 . In the meantime a division of the Employment Appeal Tribunal in Claisse v Keydril Ltd [1978] ICR 812 had decided that it was impossible to determine the question where the employee ordinarily worked in that case by reference to the guidance contained in Wilson . However, Claisse was disapproved by the Court of Appeal in Todd , which affirmed the Court's reasoning in Wilson . Eveleigh LJ agreed with Megaw LJ in Wilson that the employee's working based was not conclusive. He held that for a person to be excluded from bringing a complaint of unfair dismissal his contract of employment must contemplate that he will work almost exclusively outside Great Britain. Sir David Cairns expressly agreed with the reasoning in Wilson .The significance of the employee's base was underlined in Janata Bank v Ahmed [1981] ICR 791 , where Donaldson LJ made clear that the issue was not where the employee's base was, in that case, Dakar or London, but where he ordinarily worked. That question was not necessarily answered in cases of consecutive postings by where he ordinarily worked under each posting, but where he ordinarily worked under the contract.At page 806C-D he said:
"The consecutive posting situation has, of course, to be distinguished from the case where an employee is appointed to a new position, involving a significant variation in his contract of employment, as a result of which he is required to work in one particular country unless and until that contract is further varied. In such a case that will be the place and the only place at which he ordinarily works under his contract of employment."
That passage emphasises the importance of carefully construing the contract. If at the outset of the contract it is contemplated by the parties that the employee will ordinarily work inside Great Britain, a temporary posting abroad may shift the employee's base, but the question then arises whether the contract has been varied, so that under the contract as varied he ordinarily works outside Great Britain unless and until the contract is again varied.Finally, in Weston v Vega Space Systems Engineering Ltd [1989] IRLR 429 , the employee was employed from 1st August 1984 in Germany. That contract of employment was terminated by the employers on 31st March 1986. On 7th April 1986 the parties entered into a new contract under which the employee worked in Great Britain. He was dismissed on 16th June 1987.On his complaining of unfair dismissal an Industrial Tribunal held that it had no jurisdiction to hear the complaint because the employee had not been continuously employed for two years in Great Britain.On appeal, the Employment Appeal Tribunal held that the question was whether under the contract subsisting at the time of dismissal he ordinarily worked inside Great Britain. Continuity was preserved notwithstanding the gap in time between the two contracts. The earlier service under the first contract counted, notwithstanding that under that contract he ordinarily worked outside Great Britain, by virtue of paragraph 1(2) of Schedule 13 to the Employment Protection (Consolidation) Act 1978 (now s.215(1) ERA).

The Appeal

Miss Tether, on behalf of the appellant, submits that the Industrial Tribunal took an erroneous approach in law on a number of grounds. The point which has principally concerned us is this. Nowhere in the tribunal's reasons is there any indication that it had considered whether the terms of the contract, which as the tribunal found initially contemplated that the respondent would ordinarily work inside Great Britain, were varied by agreement to provide that he ordinarily worked outside Great Britain, that is in Ireland, and that such a term was in operation at the termination of the employment. Further, we accept Miss Tether's submission that the identity of the employer is not a material factor. Finally, it appears to us that the tribunal fell into error in looking at how the respondent divided his time in practice, rather than deciding the fundamental question, as Eveleigh LJ put it in Todd , whether the contract (as varied, if that be the finding) contemplated that he would work almost exclusively outside Great Britain.Mr Southall, who represented himself, urged us to uphold the tribunal's decision on the grounds that he was temporarily transferred to set up the new operation in Ireland with a view to his returning to Great Britain when he had done so. He relies upon the tribunal's finding in paragraph 2 of the reasons that the intention was that he would stay and set up an Irish Sales Operation but that his return would be reviewed.In our judgment that finding begs the critical question which remains unanswered by the tribunal. Was his transfer to Ireland a temporary posting which did not involve a variation to the existing contractual terms, or was there a variation whereby he was ordinarily to work in Ireland, subject to the possibility of a further variation under which he would resume ordinary working in Great Britain? It is the tribunal's failure to answer that question which amounts, in our view, to an error of law based on our review of the authorities. For this reason we have concluded that this decision cannot stand. The appeal is allowed.The final question is what are we to do with this case? We have carefully considered whether we are ourselves in a position to decide the issue. We have each of us come to the view that the appropriate course is to remit the case to a fresh Industrial Tribunal for reconsideration in the light of our observations as to the law. That is the order which we make.