Taylor Freezer (UK) Plc v Merakli & Anor [1997] UKEAT 94_96_0503

EAT

Taylor Freezer (UK) Plc v Merakli & Anor

[1997] UKEAT 94_96_0503 · 1997-03-05

MR JUSTICE KEENE : This is an employer's appeal against the decision of an Industrial Tribunal promulgated on 5 December 1995 that the Appellant deducted certain sums from the wages of each of these two Respondents, contrary to the Wages Act 1986, and against the orders of that Tribunal that such sums should be paid to the Respondents. The amounts involved were in total £4,800.88p to the First Respondent and £3,478.00p to the Second Respondent, though, as we shall point out, the amount actually in issue is in each case somewhat smaller than those figures.

Both Respondents had been employed with a company known as Hubbard Refrigeration Ltd as engineers. We shall refer to that company as "Hubbards". The First Respondent had been so employed since 27 October 1980 and the Second Respondent since 20 October 1983. On 27 October 1994, the Managing Director of Hubbards, a Mr Prior, wrote to each of the Respondents as follows:

"Further to our recent meeting on Monday I write to confirm that with effect from the 1st November 1994 Hubbard Refrigeration Limited will be transferring its London Service operation to Taylor Freezer UK Limited another operating company within the Bullough Group.

All personnel will, subject to a satisfactory interview with Taylors, be offered the opportunity to transfer with continuity of service pension rights etc together with accrued holiday entitlement for 1994. Should you not wish to transfer, you will of course be entitled to redundancy payments as defined by current legislation and we will be happy to provide further information on an individual basis if required.

The agreement between the two Companies is that if you or Taylor Freezer are not happy with the situation after six months your entitlement to redundancy will still apply."

It is not disputed that both Respondents transferred to the Appellant company.

On 10 November 1994 a letter from the Managing Director of the Appellant company, Mr Kinlochan, broadly confirmed the terms of the transfer. He wrote, and we quote from part of that letter as follows:

"The arrangements for the transfer have been explained to you. However, I confirm that your employment with us is regarded as continuous with your time at Hubbard Refrigeration. You have a trial period of six months effective from the 1st November 1994, during which time if you, or we, decide that the new arrangements are not working you can take redundancy on the basis of your period of service with Hubbard. After six months the normal employment conditions will apply. Your salary will remain unchanged at present but at the end of the six months period it will be reviewed. I have enclosed your contract of employment together with other information relating to your conditions of employment with Taylor Freezer (UK) Plc. ..."

The Appellant's enclosed particulars of employment dealt, amongst other things, with minimum notice required to terminate the contract of employment, those periods of notice being one month on the employee's side and either one month or one week per year of continuous employment up to a maximum of 12 weeks, whichever was the longer, on the employer's side. In practice, for each of these two Respondents, the required minimum notice from the Appellant was the same as they were entitled to from Hubbards.

In fact, both Respondents left the Appellant's employment at the end of the six months, the First Respondent sending a letter dated 20 March 1995 saying that he was giving the Appellant one month's notice as from 1 April 1995 and would be "taking my redundancy for my employment with my previous employer Hubbard Refrigeration, as agreed at our meeting with Mr Jim Prior". The Second Respondent seems to have left on the same basis; that at least was the gist of his evidence to the Industrial Tribunal. Both men were paid their redundancy payments in full, but what then became the subject of dispute was whether they were also entitled to money in lieu of notice. This came before the Industrial Tribunal along with certain other issues which are no longer relevant.

The Tribunal decided that they were so entitled and awarded the First Respondent three months' wages in lieu of notice, a sum of £4,500 plus some additional amounts and awarded the Second Respondent 11 weeks' payment of wages in lieu of notice, coming to £3,300 again, with some additional small items. The amounts now at issue between the parties are those amounts of wages to which we have just referred.

The basis for this decision by the Tribunal is put remarkably briefly in the Extended Reasons. On this part of the claim the Tribunal simply said this and we quote from paragraph 5 of its Decision:

"5 On the evidence, the Tribunal finds that the Applicants were entitled to sums of money in lieu of the notice periods as per Mr Prior's letter of 27 October 1994. ..."

Those amounts are then subsequently set out in a calculation. No further explanation of that conclusion is provided. That letter of 27 October 1994 does not in fact mention notice period as such, but refers only to redundancy payments. Notice would, of course, be required if the employer were dismissing the employee but before getting to paragraph 5 of its decision, the Tribunal itself had said that "Both Applicants left the Second Respondent's employment at the end of the six months' trial period" and there is no dispute between the parties that they, to all intents and purposes, resigned.

For the Appellant, Mr Linden today has made three points: first of all, he says that the Tribunal has failed to give any explanation for the conclusion which it reached in paragraph 5 of its decision and that, as such, there is a failure to give reasons which vitiates the decision and he refers in support thereof to the familiar case of Meek v City of Birmingham City Council

[1987] IRLR 250

Secondly, it is submitted, that the Tribunal's own findings compel one to the opposite conclusion from that which is under challenge. Mr Linden points to the fact that the Tribunal expressly refer to the letter of 27 October 1994 and yet, when one looks at that letter, there is no provision in it for payment in lieu of notice, if the employees were to resign. He rightly says that the only wording in that letter refers to redundancy payment. He points out that the Appellant's particulars of terms of employment were found to apply and that those were inconsistent with the employee's case that the employer had agreed to pay or give notice if the employee resigned.

On that last aspect, we have to say that we do not find that there is a necessary inconsistency between those terms of employment applying during the permanent employment of the Respondents and, at the same time, there being an additional agreement which dealt with the trial period. Nonetheless, Mr Linden submits, that the Tribunal was, in the light of its findings of fact, compelled to find that there was no agreement to pay in lieu of notice, if the employees were to resign at the end of the trial period.

Thirdly, he submits that in any event there is no evidence to support the conclusion which the Tribunal reached. We have before us the Chairman's notes of evidence. They refer to no oral evidence which indicates that there had been any oral term agreed between the parties to the effect that the Respondents would be paid in lieu of notice if they chose to leave at the end of the six months.

Reference is also made, on behalf of the Appellant, to the fact that when the Respondents sent a letter of resignation dated 20 March 1995, there was no indication that they regarded themselves as entitled to wages in lieu of notice, even though the letter spelt out what the writer of that letter regarded himself as entitled to.

Pausing there, we have looked at that letter of 20 March 1995. It does indeed say that the writer, who was the First Respondent in this case, would be taking his redundancy for his employment with his previous employer, Hubbard Refrigeration, as agreed. The letter then went on to say:

" ... can you please make sure that my redundancy is paid to me for those years I've worked, as defined by current legislation. This will include my holiday pay and wages, including expenses due to me."

We note in passing that there is a reference there to wages, whatever that is intended to mean. Mr Linden rightly points out that one week after that letter the same Respondent did make a claim in respect of payments in lieu of notice.

It is finally submitted on behalf of the Appellant that, if this appeal is to be allowed, then this matter should not be remitted to an Industrial Tribunal to reconsider or to give reasons (as the case may be) but rather this Appeal Tribunal should itself determine the matter and should dismiss the Respondents' claim for wages in lieu of notice and substitute its own figures.

As a postscript we do note also that it is submitted by the Appellant that, if the Respondents had objected to being transferred on 1 November 1994 then, as a strict matter of law, there would have been no dismissal under the terms of the Transfer of Undertakings (Protection of Employment) Regulations 1981, and strictly speaking, therefore, there would be no entitlement to redundancy payments at all. But Mr Linden accepts that, in the letter of 27 October 1994, Mr Prior went somewhat beyond that strict statutory position.

On behalf of the Respondent, Mr Crossfill submits that the Tribunal's decision is based on an agreement contained in, or evidenced by, the letters already referred to and in particular, the letter of 27 October from Mr Prior. He argues that those letters were making an offer to the Respondents which went outside the statutory regime and indeed beyond what it was that the Respondents were strictly entitled to. He says that, given the reference to redundancy payments in that letter, it was in effect saying that if they had gone at the end of October 1994 they would have been treated as being dismissed by reason of redundancy and would have got redundancy payments, but would also have been given pay in lieu of notice at the same time. And once, indeed, it was established that they were dismissed, they would have been entitled, of course, to both types of payment. But, he argues, if they chose instead to transfer to the new company and then eventually left at the end of the six months, they could leave on the same terms as before, so that they would experience no prejudice from giving the new employer a trial run. It is accepted, on behalf of the Respondents, that they resigned in March 1995 and were not dismissed then. But it is submitted that they were nonetheless still entitled to this payment because it was part of the agreement which had been reached back in October and under the terms of which they came for the six months trial period.

In essence, it is submitted on their behalf that, when that letter of 27 October in its last paragraph states that if the Respondents were not happy with the situation after six months, their entitlement to redundancy would "still apply", the reference to redundancy was intended to include, not merely redundancy pay in the strict and narrower statutory sense, but also payment in lieu of notice. Mr Crossfill emphasises that these were not lawyers writing these letters and that the reference to redundancy payments simply meant the amount of money that would be received upon being made redundant at short notice. He argues that, if we were to find that this appeal should be allowed, then the matter should be remitted to the Tribunal rather than this Appeal Tribunal substituting its own decision, because the meaning of such words is a matter of fact for the Tribunal of first instance. He also sought at one point to contend that the Tribunal might have reached its decision by the route of finding an implied term within the correspondence to the effect for which he contends.

We begin therefore by asking ourselves whether it was a term of the agreement to transfer that the Respondents would be paid in lieu of notice, even if they were the ones who decided to leave at the end of the six months. Nothing in the correspondence or notes of evidence exists to that effect.

It is clear from the Tribunal's decision and from the concessions made today that the Respondents chose in March 1995 to terminate their employment with the Appellant. They were not dismissed by the Appellant at that stage.

What seems to have been agreed in October 1994 is that there would be a trial period of six months and that the Respondents would not lose out by transferring for that period. Their redundancy entitlement would still apply, as the letter of 27 October 1994 stated, but what that meant is open to rather more question. Certainly, it seems that they would be in the same position as to redundancy payment, in the narrow sense of that phrase, after the six months as if they had decided initially not to transfer.

Strictly speaking, as a matter of law, they would not have been entitled to redundancy payments or payment in lieu of notice had they decided not to transfer at all at the beginning of November 1994. If they had objected to the transfer then the Transfer of Undertakings (Protection of Employment) Regulations 1981 , (as amended by the Trade Union Reform and Employment Rights Act 1993) would have applied. By virtue of the new Regulation 5, paragraph 4(B) of those Regulations, employees in a situation such as that who object to the transfer are not to be treated for any purpose as having been dismissed by the transferor. But we take the view that there is an argument that the agreement for a six months' trial period did contain terms conferring benefits on the Respondents which went beyond their strict statutory rights. We say that because, as we have indicated, they may not have been entitled to any benefits whatsoever in terms of redundancy payments as a matter of construction of the 1981 Regulations.

This argument that there was some additional benefit conferred as an inducement, so as to persuade them to take up the employment at least for six months with a new employer, is that which has been persuasively advanced today by Mr Crossfill. The problem is that that is not an argument which one can find endorsed as such by the Industrial Tribunal in its decision. There is no indication in the reasoning of the Industrial Tribunal that they took the view that that broader and perhaps somewhat unusual interpretation of the words "redundancy payments" was that which was intended here. There was no evidence that there had been any oral term to that effect.

One is bound to ask: how did the Tribunal get to the conclusion which it reached at the beginning of paragraph 5 of its decision? Was it its interpretation of the word "redundancy" which led it to that conclusion? Was it an implied term, as has been argued by Mr Crossfill, at one point in his submissions? The simple position is that we do not know the answer to those or a number of other questions. And we certainly do not know the reasoning adopted by the Tribunal by which it arrived at that crucial conclusion.

There is in our judgment, therefore, a failure on behalf of the Tribunal to give clear and adequate reasons for the decision which it reached and, in the light of the decision in Meek and many other decisions, the appeal must be allowed on that basis at least. But we do also find the Tribunal's interpretation somewhat remarkable.

Implicit in Mr Crossfill's argument, as he conceded today, is this proposition: that, even if during the trial period the employer in the shape of the Appellant had given three months' notice to the Respondents on 31 January 1995, terminating the Respondents' employment on 30 April 1995, they would nonetheless still have been entitled to three months' wages in lieu of notice, together with statutory redundancy payments. Mr Crossfill is, in effect, forced into that position because were he to adopt any other position, it must follow that the Respondents could not then say that when they resigned they would have been entitled to three months' wages in lieu of notice. The Respondents logically could not be in a better position when they resigned voluntarily than they would have been if the employer had given them three months' notice. But to end up with a position whereby the Respondents are entitled to three months' wages in lieu of notice, at the same time as having been given three months' notice, is a rather remarkable state of affairs. Had that been the agreement, one would have expected to see it spelt out.

Mr Crossfill argues that this was, in effect, a windfall intended as an inducement to the employees to come and work for the six months' period with the new company. As we say, we find this a rather remarkable position for the Respondents to be adopting in respect of the interpretation of this agreement.

We have looked closely, not only at the documents, but also at the Chairman's notes of evidence. We accept the submission by Mr Linden that there is no evidence which we can find for the conclusion reached by the Industrial Tribunal. We propose therefore to allow this appeal, not only on the basis that there is a failure to give clear and adequate reasons, but also on the footing that there is no evidence for the conclusion reached by the Tribunal.

In the light of those conclusions of ours, we have given careful consideration to whether this matter should be remitted to an Industrial Tribunal or whether the correct interpretation of the agreement is one which we can safely determine today. That interpretation is a question of the construction of documents so it is something which, prima facie , could properly fall within the remit of this appellate tribunal.

One member of this Appeal Tribunal takes the view that we can confidently arrive at the correct interpretation of the agreement and can therefore substitute lesser amounts for those which were awarded by the Industrial Tribunal. However, the majority of this Tribunal believes that the correspondence may require interpretation in the light of evidence about how the phrase "redundancy payments" would be interpreted in ordinary everyday usage by those involved in industrial relations in circumstances such as existed here. There may, for example, be tax implications to particular interpretations, which may have influenced the terminology used and the agreement reached.

The majority decision of this Tribunal, therefore, is that this matter should be remitted, and we have concluded that it should be remitted to a fresh Tribunal to consider. We may say that we order that with some reluctance, given the limited amounts of money which are at stake. It is, of course, entirely up to the parties to decide whether a fresh hearing is really worth the costs involved and no doubt they may wish to give that some consideration themselves, but nonetheless that is our order.

This appeal will be allowed and the matter will be remitted to be re-heard by a fresh Industrial Tribunal