BRIAN POTTER MATTHEW COVE STEPHEN HADLEY v RJ TEMPLE PLC (IN LIQUIDATION) [2003] UKEAT 0478_03_1812

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2003] UKEAT 0478_03_1812Case No Appeal No. UKEAT/0478/03Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
BRIAN POTTER MATTHEW COVE STEPHEN HADLEYAPPELLANTRJ TEMPLE PLC (IN LIQUIDATION)RESPONDENT
Before
His Honour Judge Richardson Mr P DawsonDate 18 December 2003
[1]APPEARANCES For the Appellants MR R O'DAIR (of Counsel) Instructed by: Bryant Hamilton & Co Solicitors, Ibex House Minories London EC3N 1DY For the Respondent MR T CROXFORD (of Counsel) Instructed by DLA Solicitors 3 Noble St London EC2V 7EE HIS HONOUR JUDGE RICHARDSON This is an appeal against a Decision of the Employment Tribunal sitting in Brighton promulgated on 28 th March 2003.[2]Mr Brian Potter, Mr Matthew Cove and Mr Stephen Hadley say they were unfairly dismissed by R J Temple plc ("the Company"). Each presented an Originating Application to the Tribunal on 13 th December 2002. Each application will be out of time if the effective date of dismissal was 13 th September 2002. The material facts are the same in each case. Mr Potter's case was taken as the lead case. The Tribunal held that the effective date of dismissal was 13 th September 2002, so the Originating Application was presented out of time. It was accepted that there were no good grounds for extending time. So the Tribunal dismissed the applications. The facts[3]Mr Potter's case has again been taken as the lead case. He worked as a Regional Managing Director for the Company. His case is that he was an employee of the Company. By September 2002 there was a serious rift between him and the Company. His case is that the Company had unilaterally amended his working conditions, demoted him and reduced his salary and commission levels, to the point where the Company had committed a repudiatory breach of his contract of employment. The Company does not accept that he was an employee, and strongly disputes that it was in breach of contract. For the purpose of testing whether his application is in time these matters are assumed in his favour.[4]On Friday 13 th September Mr Potter had a conference with his solicitor and with counsel. The solicitor then returned to his office. Acting on Mr Potter's instructions he prepared a letter dated 13 th September and faxed it to the Company's office in Brighton. This was both the Company's main office and its registered office. It was received on the fax machine there at 8.21 that evening.[5]The letter asserted that Mr Potter was an employee of the Company and that the Company had "…. unilaterally amended our client's working conditions, demoted him and reduced his salary and commission levels in a wholly unreasonable and unwarranted manner, thereby constructively dismissing him from our employment. Those actions amount to a repudiatory breach of our client's contract of employment which we are authorised to and do, by this letter, accept on his behalf as a resignation, effective forthwith"[6]Why did the solicitor go back to his office on a Friday night, and fax the letter then? The Tribunal found that Mr Potter had been told there was a letter in the post to him suspending him, which he expected to receive on the Saturday morning. Dismissal, and possibly suspension, were reportable events to the Financial Services Agency with whom he was registered. He wanted and intended his resignation to be received by the Company before he received written confirmation of his suspension and before any other disciplinary action could be taken against him.[7]There is no evidence that the letter was read by anyone at the Brighton Office on 13 th September. It is clear that it was read at some point in the following week. Mr Potter, as the Tribunal found, had no intention of attending his place of employment after Friday 13 th September, and treated his obligations as ending that evening. The Tribunal's Decision[8]On behalf of Mr Potter it was contended before the Tribunal that the resignation was not effective until it was read by someone in authority at the Company. In the absence of any positive case put forward by the Company that would have been some time on 16 th September at earliest. On behalf of the Company it was contended that the resignation was effective immediately. That is what it said. That is what Mr Potter intended.[9]The Tribunal referred to the legislation governing unfair dismissal, and to authorities cited by the parties. It concluded that the effective date of termination was 13 th September. It placed considerable weight on what it regarded as the intention of the parties. It noted that Mr Potter used clear and unequivocal words of termination which were intended to operate "forthwith" upon receipt at the Company's office, and treated his obligations as at an end from that moment onwards. The Tribunal drew a distinction between an ordinary resignation, where different considerations might apply, and an acceptance of a repudiation. Submissions on appeal[10]We have received written and oral submissions from Mr O'Dair for Mr Potter and from Mr Croxford for the Company. The case has been adeptly argued through the looking glass. Mr Potter, though he stated expressly that his resignation was with effect from 13 th September, has been constrained by the issue of jurisdiction to argue that it took effect later. The Company, which might otherwise have sought to keep Mr Potter bound for longer, was constrained to argue that the resignation took effect in accordance with its terms.[11]Mr O'Dair submits that where an employer commits a fundamental breach such that the employee is entitled to terminate the contract, but the employer wishes the relationship to continue, the employee must elect to terminate the contract. Moreover, such an election to terminate must be communicated to the other party, and is not effective until it is communicated. This, he submits, is a general proposition of law, applicable to employment cases.[12]Mr O'Dair accepts that communication by fax will suffice for these purposes, even if the fax is not read when it is received, but says that this rule only applies where the fax is received during working hours. He also accepts that if, on Friday evening or over the weekend, a person authorised by the Company to receive faxes had been in the office and received the fax, that would have been a sufficient communication. But, he says, nothing less will suffice. In support of his proposition he relies on common law authorities - principally The Brimnes (1975) 1 QB 929 at 969-970 .[13]As a subsidiary point, Mr O'Dair says that if (contrary to his main submission) communication by fax suffices when the fax is received on the machine, that rule can operate only against the user of the receiving fax machine, because it rests on an estoppel or implied representation by the user that he will accept communications in that way. Therefore, he says, Mr Potter was not bound by that rule, and it does not apply to him.[14]Mr Croxford submits that the Tribunal was correct. He submits that communication by fax outside hours was sufficient. He submits that Parliament intended the effective date of termination to be easily ascertainable. If termination was not on 13 th September, the date intended by Mr Potter, it would be impossible for him to know with certainty when the effective date of termination occurred. He refers to authorities in support of the proposition that the effective date of termination may be varied by agreement of the parties. He says there is no universal rule that electronic communications are only effective within working hours. He submits that in the case of a company it is plainly sufficient that a fax should be sent to an office which is both the main office and a registered office.[15]We were referred to, and will ourselves refer to, a number of authorities, including two recent decisions of the Appeal Tribunal (one unreported) which were not before the Employment Tribunal. Effective date of termination – general principles[16]Section 95 of the Employment Rights Act 1996 determines when, for unfair dismissal purposes, an employee is dismissed. By section 95(1)(c) an employee is dismissed if - "the employee terminates the contract under which he is employed (with or without notice) in circumstances in which he is entitled to terminate it without notice by reason of the employer's conduct."[17]Section 97 of the 1996 Act defines "effective date of termination". So far as relevant section 97 provides "(1) ….. in this Part "the effective date of termination" … (b) in relation to an employee whose contract of employment is terminated without notice, means the date on which the termination takes effect"[18]Section 97(1)(b) is the relevant provision in a constructive dismissal case: see BMK Ltd and BMK Holdings Ltd v Logue (1993) ICR 601 at 609F. So the relevant question is: what was the date on which the termination took effect?[19]It has repeatedly been emphasised that section 94 should be given a common sense and practical interpretation.[20]In Robert Cort & Son Ltd v Charman (1981) IRLR 487 Browne Wilkinson J, giving the judgment of the Appeal Tribunal, said:
"We consider it a matter of the greatest importance that there should be no doubt or uncertainty as to the date which is the "effective date of termination"
. An employee's right either to complain of unfair dismissal or to claim redundancy are dependent upon his taking proceedings within three months of the effective date of termination (or in the case of redundancy the effective date). These time limits are rigorously enforced. If the identification of the effective date of termination depends upon the subtle legalities of the law of repudiation and acceptance of repudiation, the ordinary employee will be unable to understand the position"[21]In that case the employer had dismissed the employee with pay in lieu of notice. It was argued for the employee that, since this was a repudiatory breach of contract, it did not have effect until the employee accepted it. The Appeal Tribunal assumed that as a matter of contract this was the law. But the Appeal Tribunal nevertheless held that the effective date of termination was the date when the employer dismissed the employee with pay in lieu of notice, not some later date when he accepted the repudiation.[22]In Crank v HMSO (1985) ICR 1 the employee and the employer agreed retrospectively to treat 2 nd September as the date of termination of employment, even though the employer did not send in his resignation until 14 th September. It was held that the effective date of dismissal was 2 nd September. Even though, in fact, the employment was terminated after that date, the earlier date was the "common sense" answer. See also Mowlem Northern Ltd v Watson (1990) ICR 751 (where the date was postponed) and Lambert v Croydon College (1999) ICR 409 (where the date was agreed).[23]In Newman v Polytechnic of Wales Students Union (1995) IRLR 72 at 73 the Appeal Tribunal said "The effective date of termination has to be decided in a practical and common sense manner, having regard particularly to what the parties understood at the time of dismissal" Constructive dismissal and resignation – general principles .[24]It is well established as a general principle of the law of contract that where one party has committed a repudiatory or anticipatory breach of contract the aggrieved party has an election to accept the repudiation or to affirm the contract. If the aggrieved party affirms the contract he remains obliged to perform his part of it. If he accepts the repudiation he is relieved of his obligation to perform his part of it.[25]It is now well established that this general principle of the law of contract applies to contracts of employment. If an employer commits a repudiatory breach of contract, an employee is not free from his contractual obligations if he has affirmed the contract. He is only free from his contractual obligations if he has accepted the repudiation.[26]An act of acceptance of a repudiation does not have to be in any particular form. It is sufficient that the communication or conduct clearly and unequivocally conveys to the repudiating party that the aggrieved party is treating the contract as at an end. The aggrieved party need not personally, or by an agent, notify the repudiating party of his election to treat the contract as at an end. It is sufficient that the fact of an election comes to the repudiating party's attention. Even notification by an unauthorised broker or intermediary may be sufficient. See for these principles Vitol SA v Norelf Ltd (1996) AC 800 at 810-811.[27]In Vitol SA v Norelf Ltd the issue was whether mere failure to perform the contract was capable of amounting to acceptance of a repudiation. The House of Lords held that it was. Lord Steyn said at 811F "..I am satisfied that a failure to perform may sometimes signify to a repudiating party an election by the aggrieved party to treat the contract as at an end. Postulate the case where an employer at the end of a day tells a contractor that he, the employer, is repudiating the contract and that the contractor need not return the next day. The contractor does not return the next day or at all. It seems to me that the contractor's failure to return may, in the absence of any other explanation, convey a decision to treat the contract as at an end."[28]We have two observations to make concerning this common law rule.[29]Firstly, in the general law of contract it will be comparatively rare for the precise date of termination to be of crucial importance. In Vitol SA v Norelf Ltd the House of Lords was not concerned with the date of termination. Given that even indirect and unauthorised communication of acceptance may suffice, the common law approach will not always yield a clear date.[30]Secondly, we think there will be circumstances where, on the common law approach, a party who has accepted a repudiation will be absolved from his contractual obligation before he communicates acceptance. In the example which Lord Steyn gave, this must technically have been the case: unless he was already absolved from performance of the contract the contractor was bound to return the following day. If a repudiating party makes himself unavailable it must, we think, be the law that the aggrieved party can still accept the repudiation and treat the contract as at an end. If a repudiating party happens to be unavailable, for reasons which are neither his fault nor the aggrieved party's fault, there might be hardship to the aggrieved party if there were a universal rule that he remained bound until communication was effected. For the purpose of this appeal, which is concerned with the effective date of termination under the 1996 Act, we do not need to explore these questions in detail. Suffice it to note that the common law rules will not always provide a neat and easy answer to the question when the contract was terminated. Acceptance of repudiation and effective date of termination[31]In Edwards v Surrey Police (1999) IRLR 456 following a long series of incidents at the workplace which she felt made her position untenable the employee wrote a letter of resignation dated 17 th July. The Tribunal made no finding as to when the letter was communicated to the employer. The Tribunal held that the effective date of dismissal was 17 th July. Since she had presented her application on 17 th October she was a day out of time. The Appeal Tribunal allowed her appeal.[32]Giving the judgment of the Appeal Tribunal Morison P said "The question is, when did the employee terminate the contract under which she was employed? If an employee is required to communicate the fact that she is terminating her employment when she is alleging constructive dismissal then the communication in this case was … given no earlier than 18 th July and probably the following Monday"[33]After discussion of Robert Cort v Chapman the Appeal Tribunal said it would regard it as a remarkable proposition that a contract of employment could be terminated, or the termination could take effect, without communication between the parties to it. Morison P continued:
"It seems to us that employers should know where they stand when an employee leaves…… It is not an infrequent occurrence that employees find their working life intolerable, walk out in a huff, but do not intend to bring their employment relationship to an end. It seems to us that, unless there has been proper communication from the employee of the fact that they are regarding themselves as no longer employed, by words or conduct, their employment relationship has not terminated."
[34]So there is clear authority, binding on the Appeal Tribunal, that the effective date of termination will not be until acceptance of a repudiatory breach is communicated. But Robert Cort v Chapman was not concerned with ascertaining the date when acceptance was communicated.[35]In George v Luton Borough Council (EAT/0311/03) , an unreported decision of this Appeal Tribunal, the employee wrote a letter dated 30 th July to a named manager of her employer, the council, resigning with effect from 31 st July. The letter was received by the council on 1 st August, opened and date stamped, presumably by someone responsible for opening the post and distributing it. But the person to whom it was addressed was not there. So the letter was passed to a personnel advisor, who acknowledged it on 2 nd August, and accepted the resignation. The employee presented her originating application, relying on constructive dismissal, on 1 st November, The Tribunal held that it was out of time, as it would be if the effective date of termination was on or before 1 st August. The employee appealed. Edwards v Surrey Police was cited.[36]Giving the judgment of the Appeal Tribunal, Judge Serota QC, having stated that the letter dated 30 th July was an acceptance by the employee of a repudiation, continued - "Is it sufficient that the letter should be received and opened or is more required in the sense that a person must be proved to have actually seen and read the letter? Bearing in mind that, as it seems to us, when determining a contract, notice is required to be given not to a named individual but to the other contracting party, it seems to us that the communication is made when the letter is received, or if we are wrong about that, when it is opened"[37]Later he said - "It seems to us that the receipt of the letter by the council, as evidenced by the fact that it was opened and date stamped on 1 st August, is a sufficient communication to the Council"[38]He also observed that the case with which he was dealing was not a case of a letter which was simply lying in a post box over the weekend. He did not say, or need to say for the purpose of the decision, whether the Appeal Tribunal regarded that factor as in any way decisive. Our Conclusions[39]The effective date of termination for the purposes of unfair dismissal will not necessarily be the date yielded by an analysis following classical principles of contract law. Often the two dates will be the same. But the scheme of the 1996 Act is in certain respects simpler and more straightforward. Subtle legalities must take second place to what an employee will commonly understand. Such was the conclusion of the Appeal Tribunal in Robert Cort & Son Ltd v Charman.[40]If the effective date of termination is the date on which the fax was received in the Company's office, a sensible result is achieved. This is the date on which Mr Potter, having made his election, communicated it in the clearest terms. As the Tribunal found, he intended to resign with effect from that date, and no longer considered himself bound from that date. He had a fax confirmation sheet to tell him when his communication was received.[41]If receipt of the fax is insufficient to fix the date of termination, Mr Potter could not with certainty know what date it was. It might have been as late as 16 th September, when the office opened on Monday. But if an authorised member of staff read it on the Friday, Saturday or Sunday, the date would be earlier. It is certainly not out of the question for a senior member of management to be in the office late, or go in the office at the weekend. So Mr Potter could not sensibly rely in any event on the date being later than 13 th September.[42]Further if, as Mr O'Dair submits, the effective date of termination depends on receipt of a fax at a time when the office is open, there will be room in other cases for debate and doubt. Many offices have no fixed opening hours.[43]For these reasons, we believe that we will reflect the intention and purpose of the 1996 Act, and follow the approach of the Appeal Tribunal in Robert Cort & Son Ltd v Charman , if we hold that where an employee communicates his immediate acceptance of a repudiation by fax, the effective date of termination is the date of receipt of the fax, not any later date when it is read or acted on. This is also consistent with the conclusion of the Appeal Tribunal in George v Luton Borough Council that communication of acceptance is complete when a letter is received.[44]The appeal is therefore dismissed.