Cherryhawk (Leicester) Ltd v Stead & Anor [1998] UKEAT 953_97_3006

EAT
Cherryhawk (Leicester) Ltd v Stead & Anor
[1998] UKEAT 953_97_3006 · 1998-06-30
MR JUSTICE KIRKWOOD : This is an appeal by a Respondent company, Cherryhawk (Leicester) Ltd, against a decision of an Industrial Tribunal sitting at Leicester on 29 April 1997 that the Applicant before it, an employee Mr Stead, had been unfairly dismissed.The Extended Reasons of the Tribunal were sent to the parties on 4 July 1997.T Hoskins Ltd was a brewing company. On 4 January 1994 Mr Stead was employed by that company as director of business development. His salary was £17,500 a year and there was a bonus scheme allowing for further remuneration if a sales target of barrels of beer was bettered.There were various other terms in the contract of employment including an obligation on the company to give six months notice of termination and on Mr Stead to give three months notice.In November 1994 Tom Hoskins Brewery Plc was incorporated partly to acquire the freehold properties and other assets of T Hoskins Ltd. Mr Stead's employment continued as before but he was also, from 6 January 1995, a director of the new company. Another working director, and chief executive, was Mr Thistlewaite. Mr Phillips was or became the chairman.Although business was satisfactory for a time the company became insolvent and on 16 January 1996 administrative receivers Smith & Williamson were appointed.On 6 March 1996 Cherryhawk (Leicester) Ltd, whose managing director was Mr Clarke, acquired the Hoskins company. Mr Stead was stood down from work. By the sale and purchase agreement dated 6 March 1996, it was acknowledged and agreed that the transfer of the business constituted a relevant transfer for the purposes of the Transfer of Undertakings (Protection of Employment) Regulations 1981 as amended and that contracts of employment of employees would, on completion, be transferred to Cherryhawk.There was no issue in the case that this was such a transfer of undertaking. The only real issue was whether Mr Stead was an employee at the relevant time. If he was then he had the protection of the Regulations and the non-continuation of his employment amounted to a dismissal that was automatically unfair under Regulation 8(1), unless it could be shown that the principal reason for his dismissal was an economic, technical or organisational reason. In that event other employment provisions, now particularly found in section 98 of the Employment Rights Act 1996 would apply.The Industrial Tribunal found as a fact that Mr Stead was an employee at the relevant time. The Respondent, Cherryhawk, failed to satisfy the Industrial Tribunal of an economic, technical or organisational change and in a result the dismissal was unfair. Cherryhawk appeals against those findings of fact. Though asserting that points of law are involved the Notice of Appeal and skeleton argument predominantly seek to challenge the findings of fact.The Industrial Tribunal found that in or about October 1995 Mr Thistlewaite, the chief executive, published a letter in which he said that the company was trading insolvently. At about the same time Mr Thistlewaite resigned. Mr Stead informed himself of the responsibilities of directors and took advice. He learned that if the company traded whilst insolvent he would have certain responsibilities as a director and could be liable to imprisonment. Accordingly Mr Stead wanted to resign as a director. He had a letter prepared to that effect in October (page 39 of the bundle). He did not send it until December. Mr Stead was minded to leave the company as an employee and he looked elsewhere for employment.Mr Stead applied to Everards Brewery and reached a shortlist of two. Mr Stead's October letter, delivered in December, spoke of "resigning with effect 31 December 1995 as per my service contract". Despite that letter Mr Stead agreed to "stay on with the Hoskins company at their request" though he ceased to be a director on 31 December. Mr Stead did not follow up the opportunity of employment with Everards Brewery, he "would not have turned down the opportunity of a job with Everards if he had not been asked to stay on". No specific time limit was put on how long Mr Stead would stay with Hoskins. Mr Stead continued to use the company car and to work on the same terms, in a practical sense, as before.At a board meeting of 11 January 1996 Mr Stead's resignation as a director was recorded. The original minute states:

"He will however remain with the Company on a temporary basis."

Mr Stead told the Industrial Tribunal that at the time he had deleted the words "on a temporary basis" with the approval of the chairman, Mr Phillips. The Tribunal had no other evidence on this detail and made no specific findings.Following his approach to Everards Brewery in November/December 1995 and his withdrawal Mr Stead made no other job enquiries. On 16 January 1996 the receivers told Mr Stead that it was essential that he stay on to run the company. He was the only one left who was familiar with it. Mr Stead agreed to do so and he continued to go about the company's business into March 1996 and was organising promotions for 1996. Mr Stead's evidence to the Industrial Tribunal was that it was not envisaged that any buyer would not take him on. Mr Stead also gave evidence that Mr Clarke, the managing director of Cherryhawk, had said that all jobs were safe and that he, Mr Stead, would be employed but would not be a director.On 5 March 1996 Mr Stead was told by one of the receivers, Mr Russell, that the take-over by Cherryhawk would be the following day and that he, Mr Stead, would not be required. That came as a surprise to Mr Stead.At a late stage in the proceedings before the Industrial Tribunal the Secretary of State, as a Respondent, produced a purchase and sales agreement which included a list of employees as those persons employed before and at completion of the transfer. That list included Mr Stead. That was part of the sale agreement and was plainly a carefully prepared contractual document. The evidence of Mr Clarke for Cherryhawk was that that was a mistake. The Industrial Tribunal noted that that document was produced only on the adjourned hearing and that in light of the failure of Cherryhawk to produce it in response to a request for Mr Stead's Solicitor.On 6 March 1996 Mr Stead was sent by the receiver what the Industrial Tribunal found to be a letter of dismissal. The whole case for Cherryhawk was that Mr Stead had resigned as an employee on 31 December 1995 and had stayed on thereafter on an ad hoc basis to help out.The Industrial Tribunal heard evidence from Mr Burdett, the head brewer, that late in 1995 Mr Stead had said he was going to resign as a director and as an employee but later said he would stay on as an employee but not as a director. There was no decline in Mr Stead's performance. Mr Clarke had addressed a meeting of staff and had said that all jobs were safe and there was no suggestion of redundancy.Mrs Wood, Mr Thistewaite's secretary, told the Industrial Tribunal that she had typed the October 1995 resignation letter for Mr Stead. Her evidence was that Mr Stead originally said he was leaving at Christmas. She added that he had cleared his desk and taken things out to his car. That was denied by Mr Stead. Mrs Wood agreed that Mr Stead had been asked to stay on and did so and did not want to leave. She typed various P45s but none for Mr Stead.Mr Barlow, the company secretary, confirmed that the company wanted Mr Stead to stay on in order to keep wholesale sales going.The Industrial Tribunal heard it put to Mr Stead that Mr Russell, one of the receivers, had said to him:
"will you stay on a little while longer?"
Mr Stead had denied that. Mr Russell's evidence was that he told Mr Stead they were keeping him on on current terms. Mr Russell also said that he learned from Cherryhawk on the telephone a few days before 6 March that they did not intend to keep Mr Stead on.Mr Clarke's evidence, in conflict with other evidence, was that he met staff on 22 February 1996 and said that nobody's job could be guaranteed. He said that he believed Mr Stead had resigned. He said that he had told Mr Stead that the purchasers had no aspiration for a sales force and that Mr Clarke had no position for Mr Stead. The Industrial Tribunal found that Mr Clarke gave little substantial evidence on the point.On 6 March 1996 Smith & Williamson, as administrative receivers of the Hoskins company, wrote to Mr Stead a letter which includes these passages:
"I was appointed joint administrative receiver of the above company on 15 January 1996.
In my capacity as an agent of the company I regret to advise you that the company is no longer in a position to make payments to you for services rendered under your contract of employment since the business and assets have been sold to Cherryhawk (Leicester) Ltd.Should you wish us to process claims for arrears of wages, holiday pay, compensation for failure to receive notice, redundancy payments and any bonus payments I enclose the relevant documents."The letter then continues with various detailed matters and concludes:
"Finally I should like to thank you for the co-operation you have shown my staff since my appointment and I hope that you find alternative employment in the not too distant future. I enclose a cheque for your wages for the period up to and including 6 March 1996."
It is important to emphasise that Mr Stead was paid salary at his full rate by the receiver up to and including 6 March 1996, the day their responsibilities ceased.In its Extended Reasons the Industrial Tribunal made theses findings:
"12. Whilst we believe the applicant originally intended to resign as an employee nevertheless he accepted an invitation from Tom Hoskins Plc to stay on and assist towards the sale of the business. Even if he resigned the respondents did not accept that resignation and asked him to stay on which he agreed to do. He would not have turned down the opportunity of a job with Everards if he had not been asked to stay on. He remained an employee of Tom Hoskins until he was dismissed by the receivers on or shortly after 6 March 1996, document 54. That is a letter of dismissal.
13. There was a transfer of the business to the third respondent on 6 March 1996, document R122. The Tribunal have a copy of such document and it is agreed by the parties that that is a true copy of the original agreement which was signed by all parties. The transfer of undertakings regulations applied to that transfer as the third respondent agree in document R106. The sale and purchase agreement specifically states under paragraph 17 that the applicant was to be taken over as an employee of the third respondent. Mr Clarke, the chief executive of the third respondents says that that was a mistake and that there was never any intention to take over the applicant. Nevertheless it is a formal document signed by all parties including Mr Clarke and is binding on all parties. It seems from the evidence that the receivers were told some time before 6 March that the applicant was not to be taken over and yet no attempt was made to rectify the document. Clause 19.1 of the agreement provides that no amendment or variation of the terms of the agreement shall be effective unless in writing and signed by each of the parties.14...The transfer of the business was the principal reason why the applicant was dismissed. Document 54 makes this clear in the first paragraph. Furthermore it is clear in that document's second paragraph that up till then the applicant continued to be an employee..."The Notice of Appeal, skeleton argument and oral argument make the first submission that the conclusion that Mr Stead was employed up to 6 March 1996 was perverse. It is submitted that the only cogent evidence arises from the October resignation and that Mr Stead resigned with effect from 31 December 1995. It is said that there is no finding of fact that he was asked to stay on thereafter on an open-ended basis and reference is made to the minute of the board meeting of 11 January 1996 referring to a temporary basis.We consider it necessary to contrast the Industrial Tribunal's finding in paragraph 2 of the Extended Reason:

"No specific time limit was put on how long he should stay with Tom Hoskins."

We reflect further that Hoskins persuaded Mr Stead to stay in employment on exactly the same terms as before and he was so employed at the time the administrative receivers took over. The administrative receiver persuaded Mr Stead to stay on as the only person who was familiar with the business and treated Mr Stead as employed on exactly the same terms as hitherto, up until 6 March.It seems clear, in our judgment, that there was evidence on which the Industrial Tribunal could reach the conclusions of fact it did and regard the perversity argument in that respect as ill-founded.Counsel for the Appellant sought to argue on an analytical basis that the letter of resignation, when handed in, amounted to a resignation and that any employment thereafter was only on an ad hoc basis. It was an error of law, he said, that the Industrial Tribunal looked for the employer's acceptance of the resignation. That is a reference to the passage I have just read from paragraph 12 of the Extended Reasons.It seemed to us that that argument foundered even as it was developed. Mr Stead's contract of employment called for three months notice on his side. The letter, as the Industrial Tribunal found, was not handed in until December 1995. Either it was a resignation with immediate effect, Mr Middleburgh for the Appellant argued; or if not, it was a notice of resignation with effect from 31 December. In neither instance, therefore, was three months notice given. In that event the employer could accept the resignation as of immediate effect or to take effect a few days later or it could require Mr Stead to work out his three months period as the contract required. In view of the contractual terms it was not, as it seems to us in the circumstances, open to Mr Stead to resign on the spot without the acquiescence of the employer.The Industrial Tribunal found that the employer did not accept the resignation but asked Mr Stead to stay on. We do not therefore accept Mr Middleburgh's argument that Mr Stead effectively terminated his contract of employment either in mid-December or on 31 December 1995. The Industrial Tribunal was entitled to find that it ran on. Furthermore, we do not read that finding by the Industrial Tribunal in paragraph 12 as a formalistic one. The Industrial Tribunal was there, in our judgment, reflecting what actually happened in the work environment.That submission is followed by an argument that the Industrial Tribunal did not make clear findings whether it preferred Mr Stead's account that he stayed on on an open-ended basis to the Appellant's account, that it was on a temporary basis only.We have already referred to the passages in the Extended Reasons in which the Industrial Tribunal found there was no specific time limit. It is, in our judgment, implicit in the Industrial Tribunal's findings that it preferred the evidence from Mr Stead to that of Mr Clarke and indeed to that of the case for the Appellant. The Industrial Tribunal made no finding about the amendment by Mr Stead to the minute of 11 January nor in the circumstances was it necessary for it to do so.The Tribunal found that Mr Stead was dismissed on 6 March 1996. It referred to the letter (at page 50 for the bundle) that was sent to him from the receivers and we have already remarked that that letter recited payments up to and including 6 March 1996. It was argued that the finding contradicted the evidence, that it was on 5 March that Mr Stead was told by a receiver that he would not be required. We do not have any finding as to quite how that conversation went. We note from Mr Stead's form IT1 that the receiver told Mr Stead that he had been asked by Cherryhawk to dismiss him but we have no more than that. In our judgment the Tribunal were entitled to go to the letter of 6 March and indeed the sale agreement, which embodied the Appellant's contractual obligations, in deciding the date of termination.Mr Middleburgh pursued his argument that 5 March was the proper date of termination in an endeavour to establish a termination prior to transfer. From there his argument led to the decision of the Court of Appeal in Wilson v St Helens Borough Council [1998] ICR 387, to demonstrate that such a dismissal was a nullity, and that in failing to turn up for work on 6 March 1996 or thereafter, Mr Stead in effect withdrew from work and resigned. That is, with respect, an unrealistic submission in the light of the information Mr Stead had that he would not be required after the transfer. The actual, practical situation was, as found by the Industrial Tribunal, that the dismissal was on 6 March and that the transfer of undertaking regulations applied to preserve Mr Stead's employment situation.Finally we heard argument that the Industrial Tribunal erred in law in not finding the dismissal for a valid economic, technical or organisational reason. That, it was argued, was a perverse finding. The evidence of Mr Clarke was that there was no need for a national sales force. That was, it is argued, an ETO reason. The sale of assets agreement did not, however, envisage that there was to be any ETO reason why Mr Stead should not be employed and specifically said he would be. The Industrial Tribunal found that Mr Clarke gave little substantial evidence on the point and that what he did say was insufficient to outweigh the written provisions of the agreement. That was a decision to which the Industrial Tribunal was perfectly entitled to come on the material before it.This appeal does not turn on any misdirection of itself in law by the Industrial Tribunal. The Appellant has, in reality, sought to re-argue the facts of the case to a different conclusion than that reached by the Industrial Tribunal. The Industrial Tribunal brought together the documentary evidence, the oral evidence, its impressions of witnesses and viewed all that in the light of its business and industrial experience and reached a clear conclusion. No ground has been established for any possible interference with it by this Employment Appeal Tribunal, with the result that this appeal will be dismissed.