MR RAYMOND HILTON v SHINER LTD - BUILDERS MERCHANTS [2001] UKEAT 9_00_2405

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2001] UKEAT 9_00_2405Case No Appeal No. EAT/9/00Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
MR RAYMOND HILTONAPPELLANTSHINER LTD - BUILDERS MERCHANTSRESPONDENT
Before
Mr Recorder LangstaffDate 24 May 2001
[1]APPEARANCES For the Appellant MR G PRICHARD (Of Counsel) Instructed by: Rock Pulsford 22b/22c Broad Street Staple Hill Bristol BS16 4RN For the Respondent MR D CURWEN (Of Counsel) Instructed by: David Gist & Co 21-23 Clare Street Bristol BS1 1TZ MR RECORDER LANGSTAFF QC In this Appeal from a decision of the Employment Tribunal at Bristol whose reasons were delivered to the parties on 5 November 1999, issues of the relationship between the implied term of trust and confidence and the principles of constructive dismissal fall for decision. The Facts[2]The essential facts as the Tribunal found them are as follows. The Appellant had been for 20 years an employee of the Respondent employer. He worked in their builder's yard in Bristol. His principal job was serving customers. He was trusted to serve them, to deal with their purchases, their payments, and any cash transactions. There was no manager nor foreman, but only 3 employees in the yard. He was the one who looked after the till.[3]Suspicions arose on 3 separate occasions. On each, a customer left the yard with goods for which there was no sales invoice. The customer had been assisted by the Appellant. When challenged with the information, shown a video taken from a CCTV system, and asked for his explanation, the Appellant admitted that he had allowed goods to be removed from the yard without issuing a sales invoice.[4]The Appellant gave an explanation, which involved the striking of a balance between second hand building materials bought by the yard from the customer against the cost of the customers' purchases. No clear accounting record was kept, but the Appellant was going to carry out a private accounting exercise on a small piece of paper which he kept in a drawer.[5]The Employment Tribunal regarded this system as being "… clearly in breach of the normal procedures which would be known to anybody working in a place of this kind. The normal process would be to issue sales invoices for property sold and to issue receipts or purchase invoices in respect of property bought. If a balancing exercise was carried out, then both such invoices should be shown and a balance struck between the parties. This is the only transparent way of conducting such a transaction." The director of the Respondent Company responsible for the yard was not satisfied by the explanation. This dissatisfaction did not, however, lead directly to the Appellant's dismissal. Instead, the employer gave the Appellant a final written warning. In a letter of 23 March 1999, the terms of which are important, is provided:- "Your flouting of well established company procedures leads us to suspect that there was more to your transaction with (the customer) and that it may have involved outright dishonesty on your part. Unfortunately, we have no clear proof of this. We had been advised that in the circumstances set out above, we are entitled to dispense with your services. However, we are prepared to give you a last chance. You should regard this letter as a final written warning. Any further misconduct or other breach of your Contract of Employment on your part is likely to lead to dismissal. Furthermore, we consider that, in view of your conduct, you are not suitable to be employed in a position of trust, and when you return you will no longer be permitted to deal with customers' payments or any cash transactions."[7]Correspondence ensued between the Appellant's solicitors, and those acting for the Respondents. In that correspondence, the Employers solicitors said, amongst other things that:
"Our clients cannot permit your client to return to work in his previous capacity."
And in a letter of 15 April 1999:
"Our clients, assumed, not unreasonably, that, if goods were not booked out by your client and the customer received the goods, your client must have received some sort of payment from the customer from which our clients did not benefit. This is the basis upon which our clients feel they cannot trust your client to deal with customers' payments. On the above facts our clients would have been entitled to dismiss your client. Instead, they are prepared to retain his services but he can no longer be permitted to deal with customers' purchases, payments or any cash transactions. As previously suggested, our clients are prepared for your client to return to work in a new role which would be at the same hourly rate of £3.87 plus overtime at his new supervisor's request. Duties would be loading and unloading vehicles in the yard and warehouses, collating stock in an orderly state, ensuring that the equipment and premises are kept in a clean and good state under our clients' warehouse logistic operations manager."
The letter went on to direct the Appellant that he "should return to work in his new role" on 26 April. The Appellant's response was to write through his solicitors to say that he considered himself to be constructively dismissed. He resigned, with a week's notice. The Arguments before the Tribunal[8]Two arguments were raised before the Employment Tribunal. The Tribunal identified them in these terms:
"The first is based on the implied term of trust and confidence. [The Appellant's] contention is that disciplinary action taken against him was improperly carried out and that that was sufficiently serious to justify him and treating the contract as discharged. The second allegation is that the Respondents demoted him without any express power to do so in their contract of employment and that itself amounted to a fundamental breach of his contract of employment, as a result of a fundamental change in his status."
[9]Those two arguments were reflected in the Tribunal's findings. The Tribunal recorded that it was said on behalf of the Appellant that the letter of 23 March amounted to a demotion. They did not accept that submission. They considered that there was no fundamental change in the Applicant's job.[10]The allegation of breach of trust and confidence was described as the "central nub of the applicant's case". The Tribunal added:
"This is on the basis that this practice he has described had been going on for a long time and was known to the employers."
It is not clear from what follows in paragraphs 13 and 14 of the decision quite what the alleged breach had been said to have been. Nothing in those paragraphs appears to relate to the first allegation that the Tribunal had identified as having been made to them, nor is it clear what the rival arguments were. It may be that the Appellant was suggesting that the form of informal private accounting that he had adopted had been known to his employers to be common practice. The Tribunal made no clear finding as to whether the employer did, or did not, know of the practice, although they commented that the history revealed by the evidence "… does not mean that [the director responsible for the yard] ever approved the system which involved not issuing sale invoices at all" and added:
"this fully justified his suspicions and we regard the offer which was made by the Respondents on 23 March as being a generous offer in an attempt to avoid immediate dismissal of a long serving employee."
[11]In the very next sentence the Employment Tribunal expressed its conclusion:
"We have come to the conclusion therefore that there was no fundamental breach of contract by the respondents and that therefore the applicant left his employment of his own accord."
Appellant's submissions[12]Before us, Mr Prichard for the Appellant argued that the finding that there was no constructive dismissal by the Tribunal was perverse or flawed. This was on two principal grounds. First, the change in the nature of his duties was such as inevitably to amount to conduct by the employer repudiatory of the contract which the Appellant had until then enjoyed. Secondly, he argued that it was hard to see how a job offer whose sole, explicit and entire premise was a perceived loss of trust could be other than a breach of the implied term of trust and confidence, and that on its own would be such a breach as to require a finding that there had been repudiatory conduct by the employer that justified the employee in treating himself as constructively dismissed.[13]In support of his submissions that there was here a demotion, and that the Tribunal were obliged to treat that as a repudiatory breach, Mr Prichard at first drew our attention to McKay Decorators (Perth) Ltd v Miller , unreported, EAT 782/98, 19 November 1988, a decision of an Employment Appeal Tribunal in Scotland presided over by Lord Johnson. He did so in fulfilment of the best traditions of the Bar by drawing attention to a case that might be thought contrary to his submissions. To demonstrate that it was erroneous he drew our attention to commentary to that effect in an IDS supplement on constructive dismissal, which has suggested that this case had adopted a test of "reasonableness" in determining whether or not the conduct of the employer was such that the employee could treat himself as constructively dismissed.[14]McKay was a painter and decorator who was demoted from the supervisory position he had occupied to that of painter and decorator for a period of 2 months as a form of discipline for misconduct. The Employment Appeal Tribunal(a) regarded the act of demotion as breach of contract by the employer (see page 5 C) but(b) did not regard the breach as sufficiently material to entitle the employee to regard his contract as having been repudiated.[15]This was not, therefore, a case in which "reasonableness" was substituted for the accepted test of repudiatory breach recognised as appropriate by the Court of Appeal in Western Excavating (ECC) Ltd v Sharp. It simply recognised that not every breach of contract by an employer was necessarily repudiatory. If it was not repudiatory, then it would not be such a breach as to justify an employee in treating it as sufficient to entitle him to determine the contract[16]Mr Prichard accepted that reasonableness had a role to play, both in indicating that there may, but may not, have been a breach of contract at all, and also as a factor in determining whether the breach was sufficiently material to categorise it as repudiatory.[17]He next relied on Wadham Stringer Commercials (London) Ltd and Wadham Stringer Vehicles Ltd v Brown [1983] IRLR 46 in which the Employment Appeal Tribunal presided over by Browne-Wilkinson J dismissed an appeal against a finding that an employee had been constructively dismissed by reason of the employer's breach of contract in demoting him from his position and in failing to provide him with suitable office accommodation. The Tribunal had regarded a gradual demotion of Mr Brown from a position of fleet sales director, with considerable prestige, to a lesser position in which he was given a tiny, unventilated office which was initially unlit and unserviced, as being a serious and fundamental departure by the employers from their obligations. The argument for the employer was that statutory revisions relating to unfair dismissal suggested that it was not in all cases of fundamental breach that the legislature had envisaged that an employee could say that there had been a constructive dismissal. That submission was rejected, at paragraph 16, in these words:
".. In our view that is an attempt to reopen the argument which the Western Excavating case at Court of Appeal level has put to sleep. The test was either one of reasonableness or fundamental breach. The section had been construed as applying only to cases of fundamental breach. Further consideration of the surrounding circumstances becomes irrelevant once it has been decided properly, on the evidence relevant to that matter, that a fundamental breach has occurred and repudiation has been accepted."
[18]Mr Prichard pointed out that the fact that the employee here had behaved in such a way that, on the Employment Tribunal's findings, the employer might have been justified in dismissing him, could not justify the employer in breaking his contract once the decision had been made that the contract should be affirmed. This, perhaps obvious, proposition he supported by reference to Macari v Celtic Football Club [1999] IRLR 787 , where an employee had been faced with a repudiatory breach of his contract of employment by the Employer. Nonetheless he affirmed the contract. Having done so, the Inner House of the Court of Session held that he could not then disobey what was otherwise a reasonable instruction on the part of his employer. The remedy for a fundamental breach was, if not damages, the ability to treat the contract as discharged. If it was not discharged, the contract remained in force in its entirety. In the same way, Mr Prichard submitted, an employer was not relieved of some of his obligations under a contract of employment where the employee was in repudiatory breach. He had the choice either of accepting the repudiation by dismissing the employee, or of maintaining the contract. In that case, he had to give force to each and every term of it.[19]We accept those submissions. We do not understand them to be disputed by Mr Curwen who appeared for the Respondent.[20]Before us, as before the Employment Tribunal, considerable emphasis was placed by the employee upon an alleged breach of the implied term of trust and confidence. It was submitted that the trust given to the employee had been a significant feature of the work he did for the Respondent. To accuse him of dishonesty, without holding a proper disciplinary hearing, was a breach of the implied duty of trust and confidence. Moreover, Mr Prichard pointed out that in John Lewis Plc v Coyne [2001] IRLR 139, the Employment Appeal Tribunal had imported the criminal approach to understanding what is dishonest, as propounded by Lane CJ in R v Ghosh [1982] QB 1053 , into the field of unfair dismissal. Accordingly, if a man was to be accused of dishonesty by his employer the employer could only properly do so having satisfied the requirements of that approach. The evident lack of trust in removing cash handling and cashiering duties from the Appellant demonstrated a lack of confidence and trust in him. This was, therefore, a plain and obvious breach of an essential condition of a contract of employment.[21]When Mr Prichard identified the formulation of the trust and confidence term upon which he relied, he described it as being an obligation to avoid conduct which was likely seriously to damage or destroy a mutual trust and confidence between employer and employee. So to formulate it, however, omits the vital words with which Lord Steyn in his speech in Malik v BCCI [1998] AC 20 qualified the test. The employer must not act without reasonable and proper cause. Indeed, that qualification was the subject of some discussion in the recent decision of this Tribunal in the case of Clark v Nomura [2000] IRLR 766 (see especially paragraph 40).[22]Thus, in order to determine whether there has been a breach of the implied term two matters have to be determined. The first is whether, ignoring their cause, there have been acts which are likely on the face of them seriously to damage or destroy the relationship of trust and confidence between employer and employee. The second is, whether that act has no reasonable and proper cause. There is an element of artificiality which must be recognised in dividing the test in this way, because it may be that the act is seen by the employee and employer as so bound up with legitimate reasons for doing it that it is unlikely to damage the relationship of trust and confidence between them, or that, conversely, it is certain to do so. It is not, therefore, a test to be applied to any set of facts by rote. Nonetheless, in circumstances such as the present, it is helpful.[23]To take an example, any employer who proposes to suspend or discipline an employee for lack of capability or misconduct is doing an act which is capable of seriously damaging or destroying the relationship of trust and confidence between employer and employee, whatever the result of the disciplinary process. Yet it could never be argued that an employer was in breach of the term of trust and confidence if he had reasonable and proper cause for the suspension, or for taking the disciplinary action. The distinction is clear from a case such as Gogay v Hertfordshire County Council [2000] IRLR 703 . There an employee was suspended. Suspension was permissible under the contract. However, the right to suspend that individual in the circumstances of that case was the result of a capricious decision. There was no reasonable nor proper cause for it on the facts. The Court of Appeal upheld a finding that there had thereby been a breach of the implied term of trust and confidence. Respondents' Submissions[24]Mr Curwen emphasised that in the circumstances of the present case there could not be said to be any breach of the implied term of trust and confidence if the qualifying words in its full formulation were given full and proper effect. The Tribunal expressly regarded the offer to retain the Appellant in employment, though in a modified capacity, as a generous one. They plainly regarded the offer as reasonable. The suspicions of the director were "fully justified". Accordingly, it was entirely reasonable that the Appellant should be restricted to duties which did not thereafter involve the handling of cash.[25]As to the first point that Mr Prichard made, Mr Curwen contended that the Appellant had not pleaded the case that the Respondents were guilty of a fundamental breach of contract by demoting him. He had concentrated, rather, upon the alleged breach of trust and confidence. The focus of the Tribunal was thus not directed to a comparison of the duties which the Appellant had performed prior to the end of March 1999 with those he was to perform after that. He contended that it was open to the Tribunal to conclude that the change in duties to which the letters of March and April referred was not fundamental. The Tribunal were right to conclude that the Appellant had been employed as a yard operative. He was a yard operative before March 1999, and after it. Moreover, since the implied term of trust and confidence was bilateral, the Tribunal should bear in mind that the employee had committed an act which undermined trust and confidence. Once he had done so he could not then contend that the employer was in breach of contract by not trusting him. Conclusions[26]We think the critical question is whether or not the Employment Tribunal were entitled to conclude that there was no repudiatory breach by the employer. That involves asking whether there was a breach, and, if so, whether that was sufficiently material a breach to justify the Appellant in accepting it as discharging him from the obligation to continue in service.[27]One of the difficulties for us in reaching this issue is that Employment Tribunal did not consider any written contract. It appears that there may have been none. The Appellant was engaged over 20 years before his dismissal. His job description had never formally have been reduced to writing. In such circumstances, the only material available to identify what it was that he was obliged to do for his employer, and to identify the obligations of the employer, was the way in which the contract had been performed. Yet the fact that a person works for another by carrying out tasks of a particular nature, in a particular way, over a long period of time does not necessarily mean that he is obliged as a matter of contract to perform each and every one of those tasks, nor does it mean that he is necessarily obliged to continue to perform those tasks in exactly the same way as he has been doing, nor does it necessarily imply that he may not, within his contract, be asked to perform duties which hitherto he has not been required to do. In Carmichael v National Power Plc [1999] ICR 1226 , Lord Hoffmann, with whom Lords Goff and Jauncey expressly agreed, thought that in such circumstances it would be open to an Employment Tribunal to find as a fact what were the terms of the contract. He concluded that the parties' might intend that the terms of a contract could evolve by conduct as time went on, and noted that this "would not be untypical of agreements through which people are engaged to do work, whether as employees or otherwise." (At 1234 C-D). With that guidance, we think that it was open to the Employment Tribunal here to have derived the essential terms of the contract between the Appellant and his employers as a matter of fact. To that extent, we think that it was open to the Employment Tribunal to find that the Appellant's employment was as a yard operative. However, it is not clear that when the Tribunal reached that finding they did so after considering the terms it would have been proper to derive from the conduct of the parties over the years, rather than simply adopting a broad description of where he worked as though that defined the content of his job. The Tribunal had earlier found (at paragraph 5) that the "principal job" of the Appellant was "serving customers." The letter of 15 April 1999 proposed to take away from the Appellant his dealing with customers' purchases, payments or any cash transactions. The work he was to return to do was described as a "new role". The duties described in that letter as being those to which he should return do not relate at all to dealing with customers. It therefore looks as though the employer was proposing that what had been the principal job of the Appellant should no longer be his job.[28]Where part of an employee's role has been to be trusted to handle money, there is an inevitable loss of status and probably satisfaction for him in being required no longer to do so. Customers of the business coming to the yard, who had been served by him fully in the past, would have to be told that he could no longer handle their money.[29]Requiring an employee to cease doing what has been his principal job, and to require him to take up a new role, in circumstances in which there had been no allegation of dishonesty against the employee would in our view amount to a variation of the employee's contract. We do not think that such a variation could be imposed upon the employee without his consent. To attempt to do so would, we think, almost always be capable of being a repudiatory breach. Whether it reached the materiality sufficient for the breach to be repudiatory has to be judged objectively, by reference to its impact upon the employee, as the cases to which we have referred show. Once the breach is of sufficient materiality to be regarded as repudiatory, the motive that underlay it becomes irrelevant, as Brown-Wilkinson J pointed out in Wadham Stringer v Brown. The presence of an allegation of dishonesty thus makes no difference.[30]We are conscious that it might have been open to the Employment Tribunal to find that the Appellant was employed to perform a wide range of duties, of which he could be directed to do some only. In such a case he could have been employed as a yard operative, and asked (as part of the duties which he could be invited to perform) to handle the purchases of customers. It would not then be necessarily be a breach of contract for him, after April 1999, to be invited to concentrate on other aspects which had always been part of his job (the loading and unloading of vehicles, sweeping the yard etc). However, the Employment Tribunal does not make it clear that this was the way in which they approached the matter. Had they done so, they should have considered whether it was inconsistent with the employer's description of the job to which the employee would return as a "new" role and that he would "no longer be employed in a position of trust" suggesting that the handling of money had been a necessary part of his duties.[31]Moreover, the Employment Tribunal dealt with this issue tersely but confusingly in these terms at paragraph 12:- "First it is said on behalf of the Applicant that the letter of 23 March amounted to a demotion. We do not accept that. We consider there was no fundamental change in the applicant's job. The applicant's employment was as a yard operative and it was obvious that the respondents would be wary of leaving him in charge of the till in view of his admitted blatant and fundamental breaches of these procedures. It is a fundamental part of any person dealing with customers that he does not allow those customers to take away goods without issuing a sales invoice for them, even where the customer is in credit." The latter part of this paragraph suggests that the Tribunal regarded the reasonableness of the employer's conduct as relevant in determining whether there had been a fundamental change in the Appellant's job, and makes it unclear what factors led to the conclusion expressed in the third sentence.[32]On the facts recorded by them, and the documents before them, we think it would be difficult if not impossible to come to the conclusion that there had been no fundamental change in the Applicant's job. The question whether such a change as was proposed was justified is a different and distinct question. However, the starting point of the Appellant's argument was that there had been such a change. He was entitled to know, from the Tribunal's reasons, why it was that they have concluded that there was none. Paragraph 12 is so economically expressed as to be uninformative. We cannot tell how the Employment Tribunal reached a conclusion which could only be justified with some difficulty. Terms of Trust and Confidence[33]We have some sympathy with the Employment Tribunal. Much of the argument below was, we understand, devoted to the impact of the implied term of trust and confidence. On this aspect of the case, we find that the Appellant's contentions were ill founded.[34]The implied term, as formulated in Malik v BCCI , is qualified by the requirement that the conduct which is complained of must be engaged in without reasonable and proper cause. Other cases have referred to the duty as being one not to act arbitrarily nor capriciously in the exercise of a discretion or power open to an employer. It has been termed an obligation of fair dealing. Merely to say that an employee is no longer trusted to handle money, when it is plain that the employer still has sufficient confidence in him to wish to continue to employ him, is not in our view a breach of the implied term not to conduct oneself so as to be likely seriously to damage or destroy the relationship between employer and employee, in circumstances where there are fully justified suspicions of dishonesty and the alternative to retention in employment is dismissal. The Employment Tribunal found that, far from being conduct which destroyed the relationship, it was a "generous offer in an attempt to avoid immediate dismissal of a long-serving employee."[35]In reaching the view that the offer was reasonable and generous, the Employment Tribunal had had regard to a history which included the fact that the employer had put the allegations of his misconduct to the employee, and had received an explanation. Although, no doubt, there might have been more by way of formal disciplinary proceedings, this was a small workforce. To insist on a formal disciplinary process as an essential precursor to the fairness of an offer of continued employment (as distinct from dismissal) was not something which the Employment Tribunal were bound to do.[36]Because the Employment Tribunal took the view that there here been no repudiatory breach of contract by the employer by altering the essential duties which the Appellant had to perform, they concluded that the Appellant had resigned. Accordingly, the Tribunal did not record any decision in its reasons as to the fairness of that dismissal. When the extended reasons were first given, orally, the Tribunal went on to deal with that issue. When the draft written reasons came before the Chairman, he revised them by excluding that part of the reasons. We are, of course, bound to consider the extended reasons which the Employment Tribunal promulgated as such, and they do not contain any consideration of fairness.[37]In the light of the conclusions to which we have come, we are obliged to allow the Appeal upon the first ground. It must be remitted to the Employment Tribunal. It follows from what we have said that it would be open to that Tribunal to conclude that there was here no change of duties which was sufficiently material so as to make the termination of employment a constructive dismissal. Such a conclusion would, however, be so surprising on the facts and documents before us that the reasoning followed would have to be clear, cogent and full. Realistically, the issue is likely to be whether the constructive dismissal by the employer or the employee is fair or unfair, which will depend upon whether the employers act in offering the appellant what was described as a new role was acting reasonably or unreasonably in accordance with Section 98(4) of the Employment Rights Act 1996.[38]Accordingly, we have no alternative in the circumstances of this case but to allow the Appeal, and to remit the case for hearing in accordance with the judgment of this Tribunal. Mr Prichard has asked that remission be to a differently constituted Employment Tribunal, because the present one has expressed a view albeit not as part of their extended reasoning, and Mr Curwen is content with that course. Accordingly, although this should not be seen as a criticism in any way of the Employment Tribunal, we accede to his request.