MILLER BROS & F P BUTLER LTD v MR R S JOHNSTON [2002] UKEAT 407_01_1403

EMPLOYMENT APPEAL TRIBUNAL

BAILII case number: [2002] UKEAT 407_01_1403

Case No Appeal No. EAT/407/01

Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

Between

MILLER BROS & F P BUTLER LTDAPPELLANT

MR R S JOHNSTONRESPONDENT

Before

Mr Recorder Langstaff

Date 14 March 2002

[1]APPEARANCES For the Appellants MR R MOORE (of Counsel) Instructed By: Messrs Gales Solicitors 512 Wimbourne Road Winton Bournemouth Dorset BH9 2ET For the Respondent NO APPEARANCE OR REPRESENTATION BY OR ON BEHALF OF THE RESPONDENT MR RECORDER LANGSTAFF QC : This appeal from a decision of the Employment Tribunal sitting at Southampton raises important and difficult questions about the jurisdiction of Employment Tribunals in contract claims.

[2]The issue arises in this way. Although the Employment Tribunal dismissed the Respondent employee's complaint of unfair dismissal (which he claimed to have been constructive dismissal by reason of the way in which the Appellants had treated him) it ordered that the sum of £25,000 should be paid by the Appellant employer to the employee. This was, of course, the maximum permissible sum under the Employment Tribunals Extension of Jurisdiction (England and Wales) Order 1994 ("the 1994 Order"). The Employment Tribunal had found that there was a concluded contract which was for the payment of a larger sum, namely £80,000.

[3]The agreement which the Employment Tribunal found had been reached was itself the conclusion of discussions and negotiations which began before the termination of the contract of employment of the Respondent. He had said that he found remaining in his position with the employer impossible. In a letter of 25 April 2000 he attributed this to the failure, allegedly in breach of contract, by his fellow Directors to prevent a relative of theirs causing him "impossible difficulties".

[4]On 25 April 2000, the Respondent wrote to say:

"I shall be bringing proceedings against the Company for compensation for unfair constructive dismissal if we cannot come to terms by negotiation so I look forward to hearing from you in a spirit of constructive negotiation to resolve that issue and the sale-back of my share-holding in the Company. I am sorry matters have come to this but you have had fair warning."

By that letter he also indicated that he did not propose to return to work after a holiday which he was then about to take.

[5]The Employment Tribunal found (at paragraph 1) that the Respondent had been employed until 2 May 2000. It was after that that he agreed the terms which, in his letter of April, he had anticipated negotiating. The Tribunal found that, following a meeting on 11 May 2000 to discuss his financial claims, a total sum of £80,000 was agreed to be paid by the Appellant employer to the Respondent. The agreement itself was reached in the course of a telephone discussion on 13 May 2000.

[6]The finding to that effect is challenged by the Appellant. It is said that it was perverse, and flew in the face of contemporaneous documentation which was before the Employment Tribunal. The Appellant's contention is that no agreement was ever concluded. However, we have not found it necessary to resolve that ground of appeal in the light of our conclusions on the issue of jurisdiction.

[7]The history we have just recited makes it clear that the Tribunal determined a claim in respect of the breach of a contract the terms of which were (on the Tribunal's findings) agreed following the termination of his employment.

[8]Mr Moore who appears for the Appellant, argues that the Employment Tribunal had no jurisdiction to do so. He did not appear before the Tribunal. The argument was not raised before the Tribunal. Nonetheless, a jurisdictional point may properly be taken on appeal notwithstanding that it has not been canvassed below. We could, in the exercise of our discretion, refuse to allow it to be argued. ( Glennie v Independent Magazines (UK) Ltd

[1999] IRLR 719

). However, we have chosen to allow it. We do so because it seems to us a fundamental point. If it is successful, it disposes of the issue and the appeal. It requires no further factual enquiry. It is a discreet one of pure law. The issue

[9]The issue which Mr Moore raises is one of statutory construction. Article 3 of the 1994 Order provides as follows:- "Proceedings may be brought before an employment tribunal in respect of a claim of an employee for the recovery of damages or any other sum … if -(a) the claim is one to which section 131(2) of the 1978 Act [ie the Employment Protection (Consolidation) Act 1978] applies and which a court in England and Wales would under the law for the time being in force have jurisdiction to hear and determine;

(b) the claim is not one to which article 5 applies; and

[10]Mr Moore's point is simply that the claim under the contract of 13 May 2000 was not outstanding on the termination of the employee's employment on 2 May. Nor could it, within the statutory language, be said to "arise on" that termination.

[11]Mr Johnston has not appeared before us to respond to this argument orally. On his behalf, Solicitors wrote to the Employment Appeal Tribunal to say he would not be represented nor would wish to address this Tribunal. He made all the points that he wished to make in an answer, and did not wish to participate further in the Appeal. His answer to this point, arising out of paragraph 3 of his Respondent's answer is that:- "… The Tribunal had jurisdiction to hear the claim by reason of the terms of the letter written by the Respondent to the Appellant dated 25 April 2000." We have understood this to be a reference to the paragraph from that letter which we have already quoted above. Because we are conscious of the general importance of the point raised, and that we might have been assisted by submissions from or on behalf of the Respondent, we have endeavoured to explore with Mr Moore the points that the Respondent might have wished to pursue. He is plainly arguing that the wording of Article 3(c) is capable of covering an agreement which is finalised after the actual date of termination of employment, the negotiations for which begin before and are outstanding at that date.

[12]In essence, the question is whether the word "on" in the phrase "the claim arises or is outstanding on the termination of the employee's employment" is to be read in a causative or temporal sense. The law

[13]The Employment Tribunal is a creature of statute. It has no jurisdiction to determine any claim unless statute provides specifically that that should be so. Accordingly, its jurisdiction to determine any claim in respect of contract can be no wider than the words of any applicable statutory provision (such as Article 3 of the 1994 Order) provide.

[14]Read literally, the word "on" might appear to relate to a point in time. However, if one considers the words "… the claim arises … on the termination …" in isolation, it is plain that the draftsman envisaged that the termination might give rise to a claim, and in this sense might have intended the word to have causative rather than temporal effect.

[15]The view of the industrial members of this Tribunal is that it would be most unfortunate in practical terms if it did not have that meaning. Ms Gallico pointed out that it was very common at a senior corporate level for a quick decision to be made as to the continued employment of a senior employee, and for that employee to leave almost immediately, but for terms of separation to be negotiated at the time and thereafter, with a concluded agreement more often than not being reached after the date on which the employee ceased coming in to work. She pointed out that it was common for health insurance provision in employees' contracts, or terms providing for such as the use of a car, to continue in effect for some months after the employee ceased actual work. The contract thus continued to have effect in those respects. Mr Tuffin was concerned that there were many occasions when employer and employee would sit down together after the employee had left service, and would settle the terms upon which the employee was accepted to have left. It would limit the usefulness of the jurisdiction conferred by the 1994 Order if a Tribunal was restricted to dealing with claims in respect of agreements reached at any stage before the actual date of leaving, but not any reached afterwards no matter how intimately connected with the circumstances of leaving that agreement might be.

[16]Moreover, it appeared to us that the interpretation for which Mr Moore contended would cause significant anomalies. For instance, many contracts contain disciplinary provisions which provide for a dismissal to take effect, but to be challengeable by an appeal hearing. If the appeal hearing is successful, the employee is reinstated. If such an agreement were broken by the employer, by failing in breach of contract to permit the employee to exercise the right of appeal, it would follow from the argument that any legal claim in respect of that breach would have to be resolved before the Common Law Courts, and not the Employment Tribunal. If, however, the disciplinary provision provided not for dismissal, but for suspension pending appeal, the result would be the opposite.

[17]Moreover, such an interpretation would have the effect that if a claim, intimated before the date of termination, was allegedly compromised by agreement after the date of termination, an Employment Tribunal could determine whether there was any claim under Article 3(c) which should succeed before it (it would be "outstanding" at termination) yet that Tribunal could not consider any claim by the employee based upon the compromise agreement itself (it would not be). This causes an asymmetry as between employer and employee which appears contrary to the scheme of the Order which in paragraphs 3 and 4 appears to attempt a parity of provision as between them.

[18]Nonetheless, we have been persuaded by the skilful argument of Mr Moore that his preferred interpretation is the correct one.

[19]We do so for these reasons. First, we have to take the apparent meaning of the words from the face of the Order itself. The "termination of the employee's employment" invites the question as to what the scope of "termination" is, and whether it may be regarded as a process, or whether it must be regarded as an event which occurs at a single point in time.

[20]The 1994 Order was made under section 3 of the Employment Tribunals Act 1996 . That Act defines "employment" as "employment under a contract of employment". (In this respect it echoes section 230 of the Employment Rights Act 1996 ). The definition may at first sight appear circular. It leaves as elusive precisely what the characteristics of "employment" under the "contract of employment" may be. However, it indicates that "employment" is a state of fact, which is provided for contractually. It appears to us to relate to the use or "employment", in that sense, of a worker for the purposes of the employer. Employment, in this sense, will have a finite date when it ends. The termination of employment under a contract of employment is thus the moment when, as a matter of practical fact, the employee ceases to work for the employer.

[21]Article 7 of the 1994 Order provides for time limits, calculated by reference to the effective date of termination of the contract. That expression is not defined in the Order. Nor is it defined in the Employment Tribunals Act 1996. But that Act consolidated provisions which derived in the main from the Employment Protection (Consolidation) Act 1978 . Those provisions of the 1978 Act which do not directly relate to Employment Tribunals and to the Employment Appeal Tribunal are consolidated in the Employment Rights Act 1996 . Accordingly, quite apart from the desirability of reading employment legislation as one whole where possible, the expression "effective date of termination" in the Employment Rights Act 1996 shares a common derivation with the provisions which gave rise to the right to make the 1994 Order. Indeed, the Order was originally made under the 1978 Act, even if it now has effect as if made under the Employment Tribunals Act 1996 . Accordingly, it is legitimate in our view to have regard to section 97 of the Employment Rights Act 1996 , which deals with the meaning of the effective date of termination. The effective date of termination as specified by section 97(1)(a) means in relation to an employee whose contract of employment is terminated by notice given by him, the date on which the notice expires. Although the phrase is different - "effective date of termination of the contract" on the one hand, as against "termination of the employee's employment" on the other - we think the Order envisages an ascertainable date, rather than a process.

[22]This view is supported by the reasoning in Capek v Lincolnshire County Council

[2000] IRLR 590

. In that case an Employment Tribunal had held that it did not have jurisdiction to entertain a claim in respect of breach of contract where it was presented before the effective date of termination of his employment, notwithstanding that the causes of action concerned of were outstanding on termination. In reaching that conclusion, Mummery LJ, who gave the only reasoned judgment of the Court of Appeal, set out the history to the 1994 Order. He pointed out that the 1994 Order followed on the decision of the House of Lords in Delaney v Staples

[1992] ICR 483

in which it was held that the Industrial Tribunal had no jurisdiction to adjudicate on a claim for payment in lieu of notice, because the Tribunal had no general jurisdiction over claims for breach of a contract of employment. He noted that Lord Browne-Wilkinson had said that it brought the law into disrepute for an employee to be forced to bring two sets of proceedings for small sums of money in relation to one dismissal, which was wasteful both of time and money, and also that the position was capable of remedy by exercising the power to confer jurisdiction on Industrial Tribunals to deal with claims for breach of contract. He noted also (at paragraph 4) that a similar problem of duality of proceedings arose when a dismissal from employment gave rise both to a claim for unfair dismissal (within the exclusive jurisdiction of the Employment Tribunal) and to a claim for wrongful dismissal (within the jurisdiction of the County Court or High Court only). He pointed out that the 1994 Order was made to remedy this state of affairs as Keene J had said in Sarker v South Tees Acute Hospitals NHS Trust

[1997] IRLR 328

, at 331:

"… [the 1994] Order extending the jurisdiction of industrial tribunals is intended to avoid the situation where an employee (or for that matter an employer) is forced to use both a tribunal and a court of law to have all his or her claims determined. In simple terms, the purpose of the extension of jurisdiction was to enable an industrial tribunal to deal with both a claim for unfair dismissal (which we take as an obvious example) and a claim for damages for breach of the same contract of employment. Two sets of proceedings are thus avoided."

[23]A claim for breach of a contract made after the date of termination of employment, albeit relating to the rights and liabilities that might have arisen before or in respect of termination, does not give rise to the same risk of duality of proceedings as that which the legislative policy identified by Mummery LJ and Keene J envisages.

[24]Secondly, Mummery LJ in paragraph 42 of his judgment noted that termination of employment was necessary to trigger the jurisdiction of the Tribunal, and that in those circumstances it made sense that the time prescribed for presenting a complaint should begin with that date of termination. It appears that he saw the same necessary correspondence as that between the "effective date of termination" in Article 7 and "termination" in Article 3. Thirdly, if the expression "the claim arises … on the termination of the employee's employment" was apt to describe the termination process, rather than a fixed date, that argument would have presented a route by which the Court of Appeal could have reached a contrary conclusion on the appeal of Capek which (see paragraph 32 and following) Mummery LJ would have wished to reach if he could.

[25]Further, if the legislative intention had been to cover compromise agreements arising after the date of termination, the appropriate word would seem to be "from" – and it would have been a simple matter of drafting to have provided that a claim which was "outstanding on or arose from" the termination of employment was within the jurisdiction.

[26]Further, Mr Moore pointed out that the jurisdiction of the Employment Tribunal in matters of contract was plainly both limited, and intended by Parliament to be so limited. Only a restricted range of contractual claims fall within its jurisdiction. Not only is there no persuasive reason to regard the legislative purpose, identified in Capek , as requiring a more generous interpretation of the vital phrase in this case, but, if anything, the reverse is the case. Jurisdiction in contract is in any event shared by the County Court or High Court. The width of the jurisdiction does not exclude any party from his or her rights. Where there is a general absence of jurisdiction in a particular body, and such jurisdiction as there is is conferred only to avoid the inconvenience of the duality of proceedings in cases where it naturally arises, there is more good reason for a restrictive than there is for a liberal interpretation of the provision conferring that jurisdiction.

[27]For completeness, we should record that we were referred in argument by Mr Moore to the case of Rock-it Cargo Ltd v Green

[1997] IRLR 581

, a decision of this Tribunal presided over by Kirkwood J. The judgment reviewed an argument by Counsel for the Appellant that a compromise agreement relating to the termination of employment which was, in the circumstances of that case outstanding on the termination of employment, was not within the scope of the 1994 Order. The argument was that it was not a contract connected with employment within section 3(2)(a) of the Employment Tribunals Act 1996 . In support of that argument, it was submitted that there was an inconsistency in permitting such a compromise agreement as there was in the case before the Tribunal as being one in respect of which the Employment Tribunal had jurisdiction, yet declining jurisdiction in respect of other compromise agreements that were not outstanding on nor arose from termination.

[28]At one stage, we had thought that that argument implicitly accepted that a compromise agreement might relate to the circumstances of termination but be outwith the jurisdiction of the Employment Tribunal because it was reached after the date of termination. If so, that would correspond to the case before us. If so, the absence of any suggestion that the relevant phrase might be read as Mr Johnston might suggest would lend some comfort to our preferred approach. So, too, would the insistence on taking a literal approach to this particular legislative instrument (see paragraph 16 of the judgment). However, on reflection it seems that the judgment is unclear as to the nature of the compromise agreements to which Counsel's argument referred. In particular, a distinction appeared to be drawn between compromise agreements which were in the language of the judgment "outstanding or arose from termination" and other compromise agreements. The phrase "outstanding or arose from" is obviously intended to reflect the wording we have to consider but is an imprecise replication of it, such that the change of the word "on" to "from" leaves us uncertain as to the compromises spoken of. In the light of that, we do not think we can place any weight upon that authority in the present case. Conclusions

[29]In conclusion therefore, despite the unattractive results which may ensue, we see no alternative but to interpret Article 3(c) of the 1994 Order as limiting the jurisdiction of an Employment Tribunal to a claim which is either outstanding on the date of termination of the employee's employment, or which arises on termination on a temporal sense. A compromise agreement which, if it was made at all, was made only some days later could not, on this wording, fall within the jurisdiction of the Tribunal. It follows that this appeal must be allowed. Such claims as Mr Johnston may have in respect of the agreement he alleges will have to be pursued before another Court.

[30]Given that there is no prior authority on the point, that it is one which gives rise to a number of difficult practical consequences, and that it is one upon which we have been persuaded by argument from one party only, we give permission to Mr Johnston to appeal should he upon consideration wish to do so.