MESSRS BLATCHFORDS SOLICITORS v MS M BERGER & 6 OTHERS [2001] UKEAT 207_00_2504

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2001] UKEAT 207_00_2504Case No Appeal No. EAT/207/00Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
MESSRS BLATCHFORDS SOLICITORSAPPELLANTMS M BERGER & 6 OTHERSRESPONDENT
Before
His Honour Judge Peter Clark Mr J Hougham Mr P R A JacquesDate 25 April 2001
[1]APPEARANCES For the Appellants MR A LYNCH QC (of Counsel) Instructed by: Messrs Blatchfords Solicitors 192 Northolt Road South Harrow Middlesex HA2 OEN For the First Respondents For the Second Respondents Miss N Cunningham Free Representation Unit 4th Floor, Peer House 8-14 Verulam Street London WC1X 8LZ Messrs Langley & co Sun Court 67 Cornhill London EC3V 3NB JUDGE PETER CLARK This is an appeal by the Respondent employer Blatchfords, before an Employment Tribunal sitting at London North under the Chairmanship of Mr C T Grazin, against that Tribunal's decision with Extended Reasons promulgated on 4 January 2000, following a hearing held on 9 - 12 November 1999, upholding various of the complaints brought by the seven Applicants. We shall hereafter describe the parties as they appeared below. Background[2]The Respondent is a firm of solicitors. The principal was at the relevant times Mr Michael Tomlinson. The firm had three offices in the London area; a central London office (the Holborn office), at which all seven Applicants were employed, and further suburban offices in South Harrow and Croxley Green. The latter office depended on a single client for its business, a company called Ocwen. Part of Ocwen's work was processed at South Harrow.[3]The Holborn office specialised in personal injury work. Ms Sims was there employed as the cashier; the remaining six Applicants were employed as legal secretaries (the secretary Applicants).[4]On 24 August 1998 Mr Tomlinson received unexpected and unwelcome news. Ocwen announced that they were terminating his retainer with immediate effect. The work was moved to his partner at the Croxley Green office. That left Mr Tomlinson with overcapacity at the South Harrow office.[5]The lease on the Holborn office was due for renewal shortly. He had recently renewed the lease on the South Harrow premises. So Mr Tomlinson decided to let the Holborn lease expire and transfer his personal injury practice to South Harrow. The Holborn lease was due to expire on 29 September.[6]On 25 August he held two meetings with the secretary Applicants. At one meeting, attended by Anita Ozhasoglu and Jennifer Blaze, those employees were asked if they were prepared to move to South Harrow. They indicated that they were prepared to move. At the other meeting the four remaining secretary Applicants were seen; their position was that they would not transfer to South Harrow.[7]As for Ms Sims, she was put in a pool for redundancy selection with the two cashiers then employed at South Harrow. Selection was solely on the basis of length of service. Only one cashier was required. Ms Lee Smith, who had the longest service by some distance (twenty nine years, as opposed to Ms Sims' ten years) was retained. Ms Sims and the third cashier were dismissed.[8]In the event Mss Ozhasoglu and Blaze changed their minds about transferring to South Harrow and by letter dated 23 September informed Mr Tomlinson that they would not after all be moving there.[9]The Respondent's occupation of the Holborn office was extended until 27 November 1998. On that date the Respondent's personal injury practice moved to South Harrow without the seven Applicants. The complaints[10]All six secretary Applicants claimed redundancy payments and damages for wrongful dismissal (pay in lieu of notice); Ms Sims complained of unfair dismissal, as too did Ms Berger and Ms Humphreys. The issues[11]The following issues, material to this appeal, arose for determination by the Tribunal;(1) Was Ms Sims unfairly dismissed by reason of redundancy? If so, was she entitled to any and if so what compensatory award in addition to a basic award? She had received a redundancy payment from the Respondent in the sum £2,902.75.(2) Was there to be implied into the contract of employment of the six secretary Applicants a term which allowed the Respondent to transfer them to South Harrow? If not, was the Respondent in fundamental breach of contract in requiring them so to transfer? If so, were those Applicants constructively dismissed by the Respondent within the meaning of section 136(1)(c) Employment Rights Act 1996 (ERA) when their employment at Holborn ceased on 27 November 1998, each by then having stated that they were not prepared to move to South Harrow?(3) Alternatively, in the cases of Mss Ozhasoglu and Blaze only, had they agreed to a variation to the terms of their contracts whereby they agreed to move to South Harrow, so that in later refusing to move they and not the Respondent were in breach of contract?(4) If any or all of the secretary Applicants were dismissed by reason of redundancy, were they nevertheless disentitled to a redundancy payment by reason of section 141 Employment Rights Act 1996, in that in declining to move to South Harrow they had unreasonably refused an offer of suitable alternative employment?(5) As to the claims of wrongful dismissal brought by four of the secretary Applicants, Mss Blaze, Fontana, Freeman and Ozhasoglu, were they entitled to pay in lieu of notice upon termination of their employment on 27 November 1998?(6) Were those four Applicants, together with Ms Sims, obliged to give credit against their claims for wrongful dismissal and unfair dismissal respectively for payments to each of one month's salary, described by the Respondent as "ex gratia"? The Tribunal Decision[12]The Tribunal resolved the six issues mentioned above as follows: (1) By her Originating Application, presented on 25 February 1999, Ms Sims contended that her dismissal by reason of redundancy was unfair for two reasons, namely:
"(i) other employees were informed that the relocation to South Harrow did not constitute a redundancy situation; and (ii) I was not consulted about the dismissal by reason of redundancy, except insofar as having been implored to work at South Harrow (and having agreed to this), I was subsequently informed that I would not to do so"
Those complaints were developed Ms Day at paragraph 17 of her written closing submissions to the Tribunal, a copy of which submissions is attached to her Respondent's answer to this appeal. The Tribunal dealt with this issue at paragraphs 36 - 38 of their Reasons in this way. Having found that Ms Sims was dismissed by reason of redundancy they found her dismissal to be unfair because; (a) having decided that the entire personal injury team (excluding Ms Sims) should move to South Harrow, the Tribunal could see no justification for excluding Ms Sims from that team. She was prepared to move to South Harrow. (b) it seemed to the Tribunal that the most important factor going to the fairness or otherwise of her dismissal was that Ms Sims was such an important person to the Respondent's practice. She was considered more important than the employee (Ms Lee Smith) who was retained. (c) Whatever may have been the position when unfair dismissal legislation was introduced (Industrial Relations Act 1971), the position in modern industrial relations is that an employee does not act reasonably if it simply relies upon length of service as the only criterion in deciding who should be selected for redundancy. (d) Mr Tomlinson was quite unable to give any explanation, let alone any credible explanation as to why that sole factor (LIFO) was chosen. (e) Having concluded that for these reasons Ms Sims' dismissal was substantively unfair, the Tribunal found it unnecessary to decide whether, on the Applicant's case, the dismissal was also procedurally unfair due to lack of adequate consultation with her over her redundancy, although they had "some doubt as to the strength of that argument" (Reasons paragraph 38).The Tribunal went on to award Ms Sims a basic award of £177.25, being the difference between the redundancy payment already made and the tribunal's calculation of the correct basic award figure of £3,080. In addition she received a "full" compensatory award of £10,958.20. (2) The Applicants were not issued with written contracts of employment, nor written Statements of Particulars of Employment as required by section 1 Employment Rights Act 1996. The question, therefore, was whether there fell to be implied into the contracts of employment of the six secretary Applicants a term as to mobility, that is, whether they could be required to move to another office from the Holborn office at which each had been employed since the start of their employment. The Tribunal's principal findings in relation to this issue are to be found in paragraph 32 of their Reasons, although that paragraph is expressed to refer specifically to the cases of Mss Berger and Humphreys. The Tribunal there record the submission of Mr Nugent, counsel then appearing on behalf of the Respondent, that there was to be implied a term that the Applicants (and we do not understand it to have been suggested that for this purpose any distinction fell to be drawn between the cases of all six secretary Applicants) could be required to work within a reasonable distance of their existing place of employment without breaching their contracts. Reliance was placed on the Court of Appeal decision in High Table v Horst [1997] ICR 409. Pausing there, we doubt whether, as a matter of law, that authority supports the implied contractual term contended for by the Respondent on the facts of this case. In both High Table and in Bass Leisure v Thomas [1994] IRLR 104 , a decision of the EAT expressly approved by the Court of Appeal in High Table , the relevant contracts of employment contained express mobility clauses, allowing the employer to transfer the employee to a different location from his normal place of work. There was no such express term in the present case. However, for the purposes of the argument advanced, it seems to us that the Tribunal were prepared to assume that the term contended for by the Respondent could properly be implied into the contracts. We are unable to read their reasons, as Ms Cunningham on behalf of Ms Berger asks us to do, as indicating that the Tribunal proceeded on the basis that there was to be implied in her contract a term that she could be required to move to a location within reasonable travelling distance of her home. As to the further questions, was the Respondent in breach of the implied term advanced on its behalf and if so, was that breach repudiatory, the Tribunal answered both questions in the affirmative. They found that the Applicants were employed as central London legal secretaries and that there was a certain cachet to such employment, not present in working in a suburban solicitor's office. In addition, each Applicant would take longer travelling to work. For completeness it follows, we think, that had the Tribunal concluded that there was no implied mobility clause, then the closing of the Holborn office and offer of alternative employment at South Harrow would amount to a repudiatory breach entitling each secretary Applicant to treat herself as constructively dismissed. (3) In the cases of Ozhasoglu and Blaze, Mr Tomlinson wrote to those Applicants on 9 September 1998, stating that the lease on the Holborn office was due to expire on 29 September and that he had decided to transfer the undertaking of Blatchfords from Holborn to South Harrow. He continued:
"May I confirm that you have already indicated that you are content to move with me to South Harrow, subject to me compensating you for any increased travelling expenditure. In all other respects, the terms of your contract of employment will remain unchanged and your statutory rights are unaffected."
That prompted those Applicants to write on 23 September, declining to move to South Harrow. They regarded the extra travel as impractical. By then the Respondent had obtained an extension on the Holborn office until 27 November. On 24 September Mr Tomlinson replied, telling those Applicants that he was entitled to regard them as having resigned as of the 27 November. In these circumstances the Tribunal considered (Reasons paragraph 45) a submission by Mr Nugent that, by indicating on 25 August or later that they would move to South Harrow, these two Applicants had affirmed the contract and could not contend that by requiring them to move the Respondent was in breach of contract. The Tribunal rejected that submission. (4) Section 141 Employment Rights Act 1996 is in two parts. The first question, to be answered objectively, is whether the Respondent's offer of alternative employment in South Harrow was an offer of suitable alternative employment; the second question is whether, if it is, the Applicant has unreasonably refused that offer. That is a subjective question, taking into account the Applicant's personal circumstances. The Tribunal found (Reasons paragraph 28) that the offers of alternative employment in South Harrow were not suitable for these Applicants. The relevant factors taken into account were that these were central London secretaries, coupled with the additional travelling time required to reach South Harrow. In addition, the Tribunal took into account the personal circumstances of the individual secretary Applicants which go, more properly, to the further question of unreasonable refusal had the Tribunal found the offers to be suitable. In any event, the Tribunal found that the secretary Applicants were not disentitled to a redundancy payment by virtue of the provisions of section 141. There is no appeal against that finding. Further, there is no appeal against the finding that, if they were dismissed, they were dismissed by reason of redundancy. (5) Payment in lieu of notice. Each of the six secretary Applicants was awarded damages for wrongful dismissal, that is pay in lieu of the notice of termination to which they were contractually entitled, based on their length of service. It was argued below on behalf of the Respondent that in the case of four of the secretary Applicants, Mss Blaze, Fontana, Freeman and Ozhasoglu, it was made clear to them, by letters dated 9 September or 24 September that their employment would end on 27 November 1998. Accordingly each received proper notice of dismissal by the Respondent and was not entitled to further pay in lieu of notice. The Tribunal rejected that submission. They found (paragraphs 39-40) that the letters of 9 September treated four of the secretary Applicants as having resigned from the employment; in the case of Mss Ozhasoglu and Blaze that contention was raised in Mr Tomlinson's letters of 24 September to which we have referred. The Respondent was bound by those letters. They did not constitute notices of dismissal. (6) "Ex-gratia" payments In the case of those four secretary Applicants and Ms Sims, Mr Tomlinson, in his letters to them of 9 September, and in the case of Mss Ozhasoglu and Blaze, those of 24 September, said this:
"It is always open to you, of course, to give due notice of your intention to leave earlier than the 27 November if you so choose, but if you do decide to stay until (and including) 27 November 1998, as to which I would like to hear from you, I will, in recognition of what I am sure will be your full co-operation, pay ex gratia one months pay"
For completeness we should record that the remaining two Applicants, Mss Berger and Humphreys did not remain with the Respondent until 27 November 1998 and therefore did not receive the payment. It was argued on behalf of the Respondent that in respect of those five Applicants who remained until 27 November and received the additional month's pay, each must give credit against her claim for wrongful dismissal, and in the case of Ms Sims for unfair dismissal, that payment, it being expressed to be made ex gratia. That argument was considered and rejected by the Tribunal at paragraphs 46 - 48 of their Reasons, principally on the ground that the contract of employment was varied, for consideration, whereby if the Applicants agreed to continue working until 27 November 1998 and not leave earlier, the Respondent would pay them an additional payment equivalent to one months pay. Accordingly such payment did not fall to be deducted from damages/compensation for a period beginning on 27 November 1998. The Appeal[13]In this appeal Mr Lynch QC challenges each of the Tribunal's findings on the above six issues, save for the finding on section 141 Employment Rights Act 1996 (issue(4) ). It is convenient to consider his submissions following the same order, omitting issue (4).(1) Ms Sims. Unfair dismissal. The Court of Appeal has recently reaffirmed the principle that in considering the reasonableness of dismissal under section 98(4) Employment Rights Act 1996 it is not for the Tribunal to substitute its view for that of the reasonable employer. Post Office v Foley [2000] IRLR 827 . Although that case, and the conjoined appeal of HSBC Bank v Madden , was concerned with dismissal for a reason relating to conduct, the principle applies equally where the potentially fair reason for dismissal is redundancy. N.C Watling & Co Ltd v Richardson [1978] ICR 1049, 1056 E-F. In the present case Mr Lynch submits that the Tribunal has failed to follow that dictum in two respects: (i) In finding that Ms Sims ought to have been considered in a pool together with the six secretary Applicants, rather than with the two cashiers then employed at South Harrow. (ii) In holding that if the three cashiers formed the appropriate pool for selection, then Ms Sims' superior level of competence to that of Ms Lee Smith ought to have been taken into account. B L Cars v Lewis [1983] IRLR 58 . In addition, he challenges the Tribunal's assertion that in modern industrial relations an employer does not act reasonably if he simply relies on LIFO (i.e comparative length of service) as the sole criterion for selection. Ms Day contends that the Tribunal has not substituted its view for that of the reasonable employer. The true rationale of the Tribunal's conclusion is that Mr Tomlinson failed to provide any credible explanation as to why he chose LIFO as the sole criterion for selection. That finding was a permissible option, see Bristol Channel Ship Repairers Ltd v O'Keefe [1977] 2AER 258; IRLR 13 . Similarly, the finding that the Respondent did not turn his mind to the correct pool. It is this point in the appeal which has exercised us most. However, our conclusion is that Mr Lynch has succeeded in persuading us that on this part of the case the Tribunal fell into error. Our reasons for so finding are as follows. We think that it was open to the Respondent to choose, as the relevant pool, those three cashiers from whom only one was required. To treat this Applicant as part of the personal injury team, along with the six secretary Applicants for whom there was, apparently, work available at South Harrow after 27 November 1998, does not meet the problem that at South Harrow there were potentially three cashiers when only one was required. We can well understand the Tribunal's observation that as a matter of practice the old LIFO principle has, in modern times, been routinely replaced by selection criteria of which LIFO is, it at all, but one component. An illustration of the change in practice is to be found in a reported Industrial Tribunal decision to which Mr Lynch referred us, Greig v McAlpine [1979] IRLR 373. There, an Industrial Tribunal at Liverpool, chaired by Mr P McCarthy, expressed the view that where an employer adopts the principle of LIFO as the basis for selection that will in most circumstances be accepted as a reasonable criterion; if he adopts criteria other than LIFO he must be able to show (the onus then being on the employer, pre Employment Act 1980 ) that the criteria adopted are reasonable. Twenty years later Mr Grazin's Tribunal held that the opposite is now correct. That no reasonable employer today would adopt LIFO as the sole criterion. In our judgment neither view can be advanced with certainty. The question in every case is, as Browne-Wilkinson J said in B L Cars v Lewis , paragraph 15, was the selection one which a reasonable employer could have made? To regard the LIFO principle alone as wholly impermissible is to substitute the Tribunal's view for that of the reasonable employer. Equally, it is not open to the Tribunal to substitute its view as to the appropriate criterion, here relative competence of the candidates for selection, itself a subjective criterion (cf Williams v Compair Maxam [1982] IRLR 83 ) for the objective criterion of length of service. Each case depends on its own facts. We can envisage a case in which a Tribunal concludes, on the evidence, that the employer applied certain criteria, or even the single criterion of length of service, with a view to eliminating a particular employee unfairly. In these circumstances it may well be that the criterion used may be justifiably criticised. However, that is not this case. As to Ms Day's argument that what the Tribunal was doing was finding that the Respondent had acted unfairly because he could not explain why he had chosen LIFO as the sole criterion, it does not seem to us that that finding, of itself, renders immaterial the earlier errors in approach. Indeed, it is not entirely easy to follow that part of the Tribunal's reasoning. This is not a case where the Respondent failed to explain the criterion used for selection (cf O'Keefe ). Rather, Mr Tomlinson said that he had to choose between three employees for one job and he decided to do so on the basis of the single most objective criterion, comparative length of service. What further explanation is required? It follows that we accept Mr Lynch's submission that the Tribunal fell into error in their approach to the fairness or otherwise of Ms Sims' dismissal. We shall allow this part of the appeal. The question then arises as to what course we should take in her case. Mr Lynch invites us to substitute a finding of fair dismissal. We have carefully considered that invitation but we shall decline it for two reasons. First, we think that the question posed by Browne-Wilkinson J in Lewis is one that is essentially for the Employment Tribunal. See Morgan v Electrolux Ltd [1991] IRLR 89 . Secondly, even if the fresh Tribunal to whom we shall remit Ms Sims' unfair dismissal claim conclude that the dismissal was substantively fair, that still leaves open the procedural question left unanswered by Mr Grazin's Tribunal, was the dismissal unfair due to a lack of adequate consultation with the Applicant? If so, then the compensatory award will require revisiting in the light of Polkey vAE Dayton Services Ltd [1988] ICR 142 .(2) Mobility Clause Mr Lynch submits that the Tribunal found, as a matter of law, that there was to be implied a term of the contracts of employment that the Applicants could be required to work within a reasonable distance of their existing place of work. We shall make that assumption. The question then is whether by requiring the secretary Applicants to move to South Harrow the Respondent was in breach of that term and that such breach was repudiatory. The answers to those questions are essentially a question of fact for the Tribunal, Pedersen v London Borough of Camden [1981] ICR 674 ; we can only interfere with the Tribunal's finding if it can be said to be Wednesbury unreasonable. Mr Lynch's principal argument is that in answering those questions the Tribunal took into account irrelevant factors, namely the personal circumstances of the Applicants; for example, Ms Blaze's involvement in a part-time book keeping course (Reasons paragraph 21) and her membership of a steel band (paragraph 43); that the Applicants' partners were unhelpful in performing domestic responsibilities (paragraph 24) and that three of the Applicants, Mss Berger, Fontana and Humphreys each had an aversion to using the Underground system (paragraph 29). We reject that submission. As we read the Tribunal's reasons as a whole those factors were taken into account in determining, for the purposes of section 141 Employment Rights Act 1996, whether the Applicants could be said to have unreasonably refused offers of suitable alternative employment at South Harrow. They were not considered by the Tribunal in relation to the question of breach of contract. On the other hand, the physical distance between Holborn and South Harrow and the distinction between working for a central London as opposed to a suburban practice were properly taken into account by the Tribunal in concluding, permissibly we find, that the required move from Holborn to South Harrow was a fundamental breach of the implied term assumed to form part of the contract of employment.(3) Agreed Variation Mr Lynch points to the Tribunal's use of the words "agreed to move to South Harrow" (Reasons paragraph 9) and "agreed to move" (paragraph 11) in relation to the conversations between Mr Tomlinson and Mss Blaze and Ozhasoglu between 24 August and 9 September 1998. In these circumstances, he submits, the Tribunal was bound to find that the parties had consensually varied the existing term of the contract as to mobility to allow expressly for the transfer to South Harrow. Accordingly the Respondent could not be in breach by requiring these Applicants to do that which they had agreed to do. We found that submission deeply unattractive as a matter of industrial relations practice, and, happily, wrong as a matter of law. As Ms Day points out, at paragraph 6 of their reasons the Tribunal found that on 25 August Mr Tomlinson simply told these two Applicants that the firm would be moving to South Harrow (at that stage it was thought at the end of September, when the lease was due to expire on the Holborn office) and they were asked whether they would be prepared to move to South Harrow. According to Mr Tomlinson's letter to both Applicants dated 9 September they "indicated" that they were. No formal offer of alternative employment was made, on those findings, before the letter of 9 September when the date of moving was given as 27 November. Having considered that offer the Applicants declined it by their letters of 23 September. It is not surprising that, by way of shorthand, the Tribunal described those Applicants as having "agreed to move". We do not understand the primary facts as found to give rise to a clear and unequivocal acceptance by these Applicants of an offer of alternative employment at South Harrow, such as to amount to a consensual variation of the contractual terms.(4) Payment in lieu of notice Mr Lynch repeats before us the argument unsuccessfully advanced below. He submits that by refusing to move to South Harrow the four secretary Applicants (excluding Mss Berger and Humphreys) were effectively giving notice of termination to take effect on 27 November 1998 for the purposes of section 95(1)(c), and presumably section 136(1)(c), Employment Rights Act 1996. They were not entitled to additional pay in lieu of notice. We reject that submission. The correct analysis, in our judgment, is that by his letters of 9 and 24 September Mr Tomlinson, on behalf of the Respondent, was in anticipatory breach of contract. He could not require the Applicants, contractually, to move to South Harrow. On 27 November what had been anticipatory became an actual breach. On that day the contracts ended. There was no prior notice of termination by the Respondent or the Applicant. These Applicants were entitled to contractual pay in lieu of notice.(5) Ex gratia payment The use by an employer of the expressions "ex gratia" may be misleading. It suggests an extra contractual payment. It may not be so. In Edwards v Skyways Ltd [1964] 1 AER 494 the Defendant company negotiated "ex gratia" severance payments with the redundant pilots' trade union. Megaw J held that the payments were contractually enforceable. Similarly, in this case it is clear form the wording of Mr Tomlinson's letters that in consideration of the Applicants remaining in employment until the date of the move to South Harrow, 27 November 1998, they would receive an additional payment equivalent to one month's pay. Those who fulfilled that condition were contractually entitled to the payment. It was not a payment made by reason of the termination and thus deductible from damages for wrongful dismissal or compensation for unfair dismissal, but in respect of the Applicant's continuing to work until the termination date. Further, the payments were not made in respect of the notice period post-termination of the contract and did not fall to be deducted from damages for wrongful dismissal/compensation for unfair dismissal in accordance with the principles in Addison v Babcock FATA Ltd [1987] 2 AER 784(CA) and Roadchef Ltd v Hastings [1988] IRLR 142 (EAT). Conclusion[14]It follows that the appeal will be allowed to the extent only that the finding of unfair dismissal in the case of Ms Sims is set aside. That complaint will be reheard by a fresh Employment Tribunal. We make no Order as to costs in the appeal.