MR PAUL SMITH v MICE TECHNICAL GRAPHICS LTD [2002] UKEAT 1172_00_2310

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2002] UKEAT 1172_00_2310Case No Appeal No. EAT/1172/00Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
MR PAUL SMITHAPPELLANTMICE TECHNICAL GRAPHICS LTDRESPONDENT
Before
Mr Justice Wall Ms S R Corby Mrs R A VickersDate 23 October 2002
[1]APPEARANCES For the Appellant MS NAOMI CUNNINGHAM (of Counsel) Instructed by: Free Representation Unit 4th Floor Peer House 8-14 Verulam Street London WC1X 8LZ For the Respondent MR STUART ARMSTRONG (of Counsel) Instructed by: DKLL Solicitors 10 The Broadway Addington Road Selsdon Surrey CR2 8LH THE HONOURABLE MR JUSTICE WALL This is an appeal by Mr Paul Smith (the Appellant) against the decision of the Employment Tribunal at London (South) refusing him permission to amend his Originating Application to include a claim for unfair and/or constructive dismissal. The hearing was on 21 July 2000, and the decision was entered on the Register and copies sent to the parties on 4 August 2000.[2]Before we embark on the body of the appeal we would wish to express our appreciation to both Counsel for their comprehensive and yet concise Skeleton Arguments and for the skill with which the arguments have been deployed on both sides. It may perhaps be invidious to heap additional praise on Miss Cunningham's head but she appears today on the instructions of the Free Representation Unit and the Appellant can properly feel that he has been most admirably represented in this appeal. Every point that could properly be taken has been taken on his behalf.[3]The actual decision of the Tribunal was to hold that the Appellant's claim for unpaid wages failed. In order to understand how we get to the situation of the current appeal, therefore, we think it necessary to look at the Forms IT1 and the IT3 in more detail than might usually be the case.[4]The IT1 claims, in Box 1: 1) "Loss of Revenue 2) Refund of Deductions to Salary 3) Unpaid Commission" The Respondent employer is named as "MICE Technical Graphics Ltd" and the Appellant gives his position as "Sales Manager CAD Systems Division".[5]Attached to the IT1 are three detailed pages which set out the Appellant's case. He says that he had been working for the Respondent for something like 15 years with a 6 month gap in the middle when he worked for another organisation. He says that in 1999 he had a personality conflict with a lady called Kirsty Walker, who looked after the administration for his Division. He says he was unable to resolve that matter with her and reported the matter to the Managing Director, who spoke to Miss Walker, but no action was taken. However, the atmosphere within the office, he said, became so bad that he spent many days working at home.[6]In due course Miss Walker left and subsequently the Appellant says he worked from home much less frequently. He alleges, however, that Miss Walker had been recording, on the company records, days when he was at home working as days when he was off sick. It got to the point when, by the end of 1999, he says he was notified by the company that on their records he had been off sick for twelve days during the year, of which he was only entitled to be paid for three.[7]The IT1 makes it clear that the Appellant took the view that he had made a very material contribution to the success of the Respondent Company and he reacted strongly to the deductions from his pay. He offered to go into some detail to demonstrate that he had not been off sick on the majority of the days, and in due course he spoke directly to Mr Holding, who is the Managing Director, pointing out that he had worked a very substantial amount of overtime and, as we indicated a moment ago, explaining to Mr Holding that he took the view he had materially contributed to the company's success.[8]He says the response from the Respondent was that it made no difference. Its view was that it was not possible to treat him as being different from anyone else in the company. The Appellant clearly felt aggrieved and the phrase he uses in the IT1 is "I felt I was being extremely unfairly treated and that unless we could sort the matter out amicably and reach and agreement, that if the company was still insistent in penalising me that I would have to take the matter further."[9]He says he then received a letter from Mr Holding on the subject. This is the letter we have in our papers dated 5 January 2000, addressed as follows: STRICTLY PRIVATE & CONFIDENTIAL Mr P. Smith Dear Paul, EXCESS LEAVE As we discussed and agreed, I am happy to accept the element of your misunderstanding over your sick days during 1999 and can compromise with you to reach an acceptable solution. I have arranged therefore the following: Total extra days taken 12 Allocated therefore as: 4 days compassionate leave, with pay 4 days brought forward from 2000 holiday entitlement 4 days loss of pay This will leave a balance of 16 days entitlement for 2000. To avoid confusion in the future, can you please make sure sickness is supported by a Doctor's certificate and 'home working' whilst sick is an option not to be used. Regards T.S.Holding"[10]We have to say that we see that as a perfectly innocuous and indeed conciliatory letter. Unfortunately it was not perceived in that way by the Appellant, who immediately had a meeting with Mr Holding telling him that the offer was totally unacceptable. He offered once again to go through the database to demonstrate how he had spent his time. He says he was told not to bother wasting time with that. He once again stressed, he says, that any attempts by the company to penalise him would involve him taking the matter to an Industrial Tribunal or any other means that were available to him.[11]The Appellant then received his notification of salary at the start of February 2000 and saw that he had been deducted the four days. Once again he reacted strongly. He attempted to see Mr Holding. He was unable to do so immediately. He saw the Finance Director and he said to the Finance Director at the end of the meeting that the only thing that had been agreed with Mr Holding was that the Appellant would be forced to leave the company if the company was insistent on their actions and that he would have to take the matter further.[12]Apparently the Finance Director said he was simply following Mr Holding's instructions and the Appellant describes his reaction in the IT1 as:
"I was absolutely furious, and immediately left the company premises, telling them that I required the rest of the week off as holiday to consider my situation, and that I would return the following week. Terry Holding was totally aware of how I viewed their actions, and how seriously I was taking the matter, but at no time during the week did he contact me… I spent the rest of the week fuming, having heard nothing more from the company to indicate that they were in error, and returned on Tuesday the week following…for a meeting with Terry Holding. I told him that I felt I could no longer work for the company and would have to leave under the circumstances, but stressed that I felt they had put me into a position that I could no longer carry on working for the company and WAS NOT resigning because I was a participant in the company share scheme. As this time he told me that Dave Waite had acted wrongly in deducting my salary, and that they still wanted me to work for them."
[13]The Appellant then goes on to deal with the terms of the group share scheme, for which he had been a member for some two and a half years out of the five-year period for qualifying for the benefits of the scheme. As he had entered into the scheme, which is extremely advantageous, he was unwilling to leave the company of his own free will until the conclusion of the five-year period. Under the terms of the scheme he would then, as we understand it, be able to realise his investment at cost.[14]The Appellant says he stressed that, unless the company was able to rectify position in relation to the scheme, he would make a claim to obtain compensation. He also felt that he had no alternative other than to leave the company. He informed them of his decision the following week and also went to see his doctor.[15]The Appellant therefore claimed a little over £8,000 compensation for loss of revenue by not being able to benefit from the shares scheme, a full refund of the money deducted for the four days unpaid sick leave in 1999 and additional pay for commission sales completed in March 2000 less 50% commission on sales to date 17 March pro rata as he was only there for half of the month.[16]He says at the very end of the IT1 letter:
"I have today received their response stating that I chose to leave the company, and that as far as they were concerned 'The Company has concluded its business with you at your request and in a correct and fair manner'."
[17]The Respondent's IT3 makes it clear that issue is joined on a very substantial number of the allegations which the Appellant makes. The Respondent was of the view that the Appellant had taken excessive days off without notification or doctor's certification; that this was not something which could be accepted in his case when other members of the company were not permitted to do so.[18]The IT3 goes through, effectively, a paragraph by paragraph refutation of the allegations and we take it up, for these purposes, at paragraph 18: 18 "In response to receiving his payslip at the end of January and realising our arrangement had been implemented, Mr Smith took the matter up with the Company Secretary, Mr Waite. 19 Mr Smith then became very angry, he returned to his office, loaded the Company's computer into his company care and left the Company's premises. 20 It was decided not to contact Mr Smith, but allow for a cooling off period. At no time did he contact the office to explain his absence. His action left the department short staffed and also he was absent on the Monday when a new, senior member of staff started with the Division. No error was made in actioning to compromise arrangement. The alternative was to deduct the total amount due as result of excess leave. 21 Mr Smith returned to the Company for a meeting. 22 Mr Smith explained at the meeting the strength of his feelings and still he was not prepared to compromise. He said he would therefore have to leave the Company and requested that we make him redundant in order for him to retain his 'Share Option Scheme'. He was told that we could not make him redundant because his job function was needed by the Company and we would need to be able to recruit a replacement. He was also asked to reconsider his decision and was told repeatedly we did not want him to leave. He said that if we made him redundant he would give us a letter relieving the Company from the need for redundancy payments etc."[19]The application to amend the Form IT1 to plead constructive dismissal is dealt with in one paragraph of the Tribunal's reasons which, once again, we think it necessary to read in full. 3 "At the start of the hearing the Applicant applied to add a claim of constructive dismissal to his existing claim. This was opposed by the Respondent. The Applicant gave his reason for the late application the fact that he had not been aware that he could get legal aid until a month ago and that he had seen a solicitor on 4 July who had advised him to claim unfair constructive dismissal but that lack of funds meant that the solicitor could only give advice. The Applicant contended that the facts as pleaded in his IT1 were sufficient to support a claim of constructive dismissal. We do not consider they are. We have to consider whether to exercise our discretion to allow the amendment. We have had regard to the principles in Selkent Bus Co Ltd v Moore [1996] ICR836. The Tribunal has taken into account all the circumstances including the fact that the unfair dismissal claim is out of time, the fact that the amendment sought is substantial, pleading a new cause of action, and that the effect of the injustice and hardship of allowing the amendment as against that of refusing it. Significant extra costs and disruption to the employees business would be incurred by the Respondent if the matter were adjourned and staff required to attend an unfair dismissal hearing to give evidence. There is also the fact that the complaint of constructive dismissal would be out of time. The Applicant's employment ceased on 17 March. The claim of constructive dismissal made today is made after the expiry of the three month time limit prescribed by section 111 of the Employment Rights Act 1996. We have to ask whether it was reasonably practicable for the complaint to have been presented in time (S.111 (3)). The Applicant was sufficiently informed to make the claim he did. There was no reason why he could not have sought advice from a law centre or CAB at an earlier stage. The full facts were known to the Applicant when he presented his claim of unlawful deduction of wages. Having considered all the above matters we are not prepared to grant leave to amend the Originating Application." The Tribunal then turned to deal with the matters which were pleaded in the form IT1.[20]For the Appellant, Ms Cunningham launches a wholesale attack on this paragraph of the Tribunal's reasoning and submits that it has failed to apply the criteria set out in Selkent , albeit that it refers to the case itself. First of all she submits that on the facts as pleaded in the IT1 the Tribunal was wrong to hold that those facts were insufficient to support a claim of constructive dismissal. Secondly, she submits that the Tribunal wrongly had regard to its mistaken belief that the complaint of unfair dismissal was out of time by the time leave to amend was sought. Thirdly, that it gave undue weight to the hardship which would be caused to the Respondent if the application to amend were granted and, fourthly, that it wrongly failed to have any regard to the hardship caused to the Appellant by refusing leave to amend, or to balance this against the hardship to the Respondent in permitting the amendment.[21]Both Counsel referred to a well known passage in the judgment of Mummery J (as he then was) in Selkent giving the judgment of the Employment Appeal Tribunal in that case. It appears, at page 843 of the ICR report: (4) "Whenever the discretion to grant an amendment is invoked, the Tribunal should take into account all the circumstances and should balance the injustice and hardship of allowing the amendment against the injustice and hardship of refusing it. (5) What are the relevant circumstances? It is impossible and undesirable to attempt to list them exhaustively, but the following are certainly relevant:(a) The nature of the amendment . Applications to amend are of many different kinds, ranging, on one hand, from the correction of clerical and typing errors, the addition of factual details to existing allegations and the addition of substitution of other labels for facts already pleaded to, on the other hand, the making of entirely new factual allegations which change the basis of the existing claim. The Tribunal have to decide whether the amendment sought is one of the minor matters or is a substantial alteration pleading a new cause of action.(b) The applicability of time limits . If a new complaint or cause of action is proposed to be added by way of amendment, it is essential for the Tribunal to consider whether that complaint is out of time and, if so, whether the time limit should be extended under the applicable statutory provisions, e.g., in the case of unfair dismissal, section 67 of the Employment Protection (Consolidation) Act 1978 [as it then was].(c) The timing and manner of the application . An application should not be refused solely because there has been a delay in making it. There are no time limits laid down in the Regulations 1993 for the making of amendments. The amendments may be made at any time – before, at, even after the hearing of the case. Delay in making the application is, however, a discretionary factor. It is relevant to consider why the application was not made earlier and why it is now being made: for example, the discovery of new facts or new information appearing from documents disclosed on discovery. Whenever taking any factors into account, the paramount considerations are the relative injustice and hardship involved in refusing or granting an amendment. Questions of delay, as a result of adjournments, and additional costs, particularly if they are unlikely to be recovered by the successful party, are relevant in reaching a decision.[22]We think there is considerable force in the submissions which Ms Cunningham makes in relation to paragraph 3 of the Tribunal's reasons. In particular, we are of the view that this case fits into the category to which Mummery J accorded the title, a "label case"; and, although we listened to an extremely interesting argument addressed to us about the factual basis of the Tribunal's assessment of a claim for constructive dismissal, and an argument based on Housing Corporation v Bryant [1999] ICR 123 , this was essentially a matter of fact for the Tribunal which could only be overturned if it was perverse, we are nonetheless of the view that the discretion exercised by the Tribunal is open to very severe attack in this respect.[23]It does not seem to us that the Tribunal gave any real consideration to the potential hardship to the Appellant. There is emphasis on the hardship to the Respondent. The facts of the Appellant's claim are essentially contained in the form IT1 and answered by the Respondent and if that was the case the application could not properly be considered out of time, particularly, as Ms Cunningham pointed out, that if the Applicant had left Box 1 in the Form IT1 empty if would have been arguable under Home Office v Bose [1979] ICR 481 that the application would have been deemed to be in time.[24]We bear in mind, of course, that we are dealing with the exercise of a judicial discretion but, in our judgment, the exercise here can be demonstrated to be quite seriously flawed. Were it necessary, therefore, and were this the only factor in the case, we think it likely that we would have so decided and would have set aside the decision on the basis of the failure of the Tribunal to deal appropriately with the Appellant's application for permission to amend.[25]However, it is not the only point in the case, and in the event, we find ourselves in agreement with the second limb of the argument put forward in Mr. Armstrong's Skeleton Argument put forward on behalf of the Respondent; namely that the amendment, even if granted, would have made no difference to the outcome of the case.[26]At paragraph 27 of the Skeleton, Mr. Armstrong puts forward the following argument: 27 "If, contrary to the above [that is, his arguments in relation to Selkent ], it is found that the Tribunal did make an error of law, it is submitted that the appeal should be dismissed on the ground that the claim for constructive dismissal would have been unsuccessful even if the Appellant had been allowed to amend his Originating Application. After considering the application to amend the Tribunal proceeded to hear the Appellant's existing claim which included a claim for unlawful deduction of wages. It is this deduction of wages which is relied upon as giving rise to a claim for constructive dismissal. In deciding the claim for unlawful deduction of wages, the Tribunal concluded there had been no unlawful deduction because the Respondent had acted within its own rules, which were part of the Appellant's contract (see paragraph 9 of the Decision). In the circumstances, the Respondent did not commit any breach of contract in deducting the Appellant's wages and because a repudiatory breach of contract is necessary to found a claim for constructive dismissal (see Western Excavating Ltd v Sharpe [1978] QB 761 ) the Appellant's claim for constructive dismissal was bound to fail in any event. The Appellant has not appealed against the Tribunal finding that the deduction was lawful and authorised by the rules and therefore the Appellant's contract."[27]Ms Cunningham's only answer to this point has to be that it was the manner in which the Respondent dealt with the issue of deduction from the Appellant's wages which gives rise to a fundamental breach of the implied term of mutual trust and confidence in the contract of employment, and that the Respondent's conduct in this respect is sufficient to entitle the Appellant to repudiate the contract. We are unable to accept that argument.[28]The Tribunal in dealing with the remaining facts of the case could, we think, have perhaps been more forthcoming in its findings. Much of the recitation of the evidence is simply that and does not indicate what the precise findings of fact made being made by the Tribunal were. But taking the matter up at paragraph 4 (E) the Tribunal found this: 4 (E) "There is a conflict of evidence as to whether or not the Applicant was told that he would be paid for sick days if he provided a medical certificate. However in January Mr Holding suggested a compromise whereby he would be paid for 4 days, 4 days pay would be deducted from his salary as unpaid leave and 4 days would be deducted from his holiday entitlement for the following year. This was not acceptable to the Applicant who told Mr Holding that any attempt to penalise him would involve the Applicant in taking the matter to a Tribunal. Mr Holding's evidence was that as the Applicant was not prepared to offer a counter proposal that compromise had been actioned. (F) When the Applicant received his pay notification in early February he realised that the 4 days pay had been deducted. He left the premises and stayed at home for a week considering matters. He subsequently told the company he would have to leave. He asked Mr Holding if he could be made redundant in order to retain his share option scheme but was told his job function was needed and a replacement would have to be recruited. Mr Holding asked him to reconsider his decision but he left. 5 The Applicant claims the money deducted from his salary loss of earnings, loss of the benefits of the share option scheme and a reference. The Tribunal asked Mr Harding (??) if there was any reason why he could not provide the Applicant with a reference and he replied that he would be happy to do so."[29]In relation to the share options scheme the Tribunal found that the Respondent had acted in accordance with the rules of the scheme and that the Appellant was not entitled to compensation. Similarly, in relation to money deducted from the Appellant's salary for days of sickness, the Tribunal concluded their reasons with this paragraph: 9 "The provisions as to sickness are set out in the staff handbook at page 61 which forms part of the employees' contract of employment. This was accepted by the Respondent as somewhat ambiguous and has been more clearly worded in subsequent editions. Paragraph 1 provides that up to 3 days a year may be claimed for absence due to sickness. Paragraph 4 states that after the 3 days a doctor's certificate would be needed. We accept the Respondent' evidence that if staff took sick leave when they were not entitled to it the amount would be deducted from their salary. Before any deduction was made if staff had exceeded their entitlement this was pointed out to them and an agreement reached as to how it would be repaid. We consider that the Respondent had acted within their own rules in deducting the 4 days pay and so no unlawful deduction was made."[30]Skeletal as those reasons are, we are entirely unable to draw from them, or indeed from the combination of the IT1 and the IT3, conduct which was sufficiently fundamental to warrant a repudiatory breach of the implied term of trust and confidence. Furthermore, the findings of the Tribunal, in relation to the two critical contractual obligations were that the Respondent had acted reasonably and within its own rules. These are findings by the Tribunal which it was entitled to make and which, in our judgment, it would be impossible to overturn on appeal. The same underlying facts, moreover, found the basis upon which the Appellant asserts that the Respondent was in breach of contract. On these findings, in our judgment, any application for constructive dismissal based on a breach of contract by the Respondent would be bound to fail.[31]In those circumstances the appeal must be dismissed. We repeat our gratitude to both Counsel for their help.