UKEAT/0428/06/RN R A JONES v (1) FRICTION DYNAMICS LTD (IN ADMINISTRATION) (2) DYNAMICS FRICTION LTD (IN LIQUIDATION) (3) FEROTEC REALTY LTD (4) THE SECRETARY OF STATE FOR TRADE AND INDUSTRY [2007] UKEAT 0428_06_2803

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2007] UKEAT 0428_06_2803Case No Appeal Nos. UKEAT/0428/06/RN, UKEAT/0435/06/RN & UKEAT/0447/06Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
UKEAT/0428/06/RN R A JONESAPPELLANT(1) FRICTION DYNAMICS LTD (IN ADMINISTRATION) (2) DYNAMICS FRICTION LTD (IN LIQUIDATION) (3) FEROTEC REALTY LTD (4) THE SECRETARY OF STATE FOR TRADE AND INDUSTRYRESPONDENTSUKEAT/0435/06/RN AMICUSAPPELLANT(1) FRICTION DYNAMICS LTD (IN ADMINISTRATION) (2) DYNAMICS FRICTION LTD (IN LIQUIDATION) (3) FEROTEC REALTY LTD (4) THE SECRETARY OF STATE FOR TRADE AND INDUSTRYRESPONDENTSUKEAT/0447/06/RN SECRETARY OF STATE FOR TRADE AND INDUSTRYAPPELLANT(1) FRICTION DYNAMICS LTD (IN ADMINISTRATION) (2) DYNAMICS FRICTION LTD (IN LIQUIDATION) (3) FEROTEC REALTY LTDRESPONDENTS
Before
His Honour Judge Peter Clark Mr B R Gibbs Mrs J M MatthiasDate 28 March 2007
[1]HIS HONOUR JUDGE PETER CLARK UKEAT/0428/06/RN Judgment The Appellant, Mr R A Jones, was one of 6 Claimants appearing before an Employment Tribunal chaired by Mr A B Rees and sitting at Shrewsbury on 18, 19 and 25 April 2006 which heard a discrete issue in each of those cases, namely whether the Claimants' contract of employment with the first Respondent, Friction Dynamics Ltd (In Administration) was terminated by operation of law or by dismissal. The terminating event was said by the 3 rd Respondent, Ferotec Realty Ltd to be frustration of the contract due to ill-health incapacity.[2]By a Judgment with reasons promulgated on 13 June 2006 the Employment Tribunal rejected that contention in respect of 5 of the 6 Claimants. In the case of Mr Jones they upheld it, finding that he was not dismissed by his employer and thus was unable to pursue his claims of unfair dismissal, breach of contract and entitlement to a redundancy payment. As to which of the Respondents would be liable to compensate him if such claims were made out is not a relevant issue in this appeal. The only question for us is whether the Employment Tribunal erred in law in finding that his contract was frustrated (whilst employed by Friction Dynamics Ltd (the Company), which went into administration on 7 August 2003). The Facts[3]Mr Jones commenced employment with the predecessor of Friction Dynamics, Ferodo, on 5 June 1973. He was a factory operator/machine operator. In April 2001 he had an accident at work. He describes in his witness statement how he was grabbed from behind by a fellow employee called Tewson. As a result he sustained 2 fractured ribs. That was the full extent of his injury. He was initially signed off sick by his GP for 2 weeks. Thereafter he was given a 6 months certificate.[4]Mr Jones was a member of the T & GWU, a union recognised by the Company. It so happened that shortly after Mr Jones went off sick that union called out its members at the factory site where he worked on strike. In subsequent proceedings brought in the Liverpool Employment Tribunal by workers who went out on strike and were dismissed it was found that their dismissals took effect on 1 May 2001. That fits with a letter which is before us, sent to Mr Jones by the Company's Business Manager, Ken Godfrey and dated 1 May 2001. It reads:
"Dear Mr Jones, Industrial action You have taken industrial action and by doing so have repudiated your contract of employment. The Company recognises and accepts your repudiation."
That letter was followed by a further letter from Mr Godfrey to Mr Jones dated 3 May 2001 in which he stated that, as a result of the industrial action, the Company had decided to suspend payment of sick leave unless supported by a Doctor's Certificate. Then Mr Godfrey wrote again on 22 June, requiring Mr Jones to notify him of his intention to return to work on 27 June, failing which he would be dismissed. That letter has the appearance of a standard form letter to all those believed to be on strike.[5]On 25 June Mr Jones replied. He said this:
"As you know I have been unable to follow my employment because of illness for quite some time. I am being treated by my GP and as soon as the treatment is complete and he says I can return to work I will do so immediately."
[6]On 12 September 2001 Mr Godfrey wrote to Mr O'Leary, Mr Jones' representative informing him that he would receive back sick-pay of £1,343.12, a fact noted by the Employment Tribunal at paragraph 4 of their reasons.[7]Thereafter there was no contact between Mr Jones and the Company until, it is common ground, Mr Rutherford, one of the Joint Administrators, wrote to him and the other 5 Claimants, among others, on 7 August 2003 summarily dismissing him.[8]The Employment Tribunal found that the Company could have expected him to return to work at the end of 2001. His contract of employment was terminated by frustration on or about that time. Frustration of Contract[9]The Common Law doctrine of frustration of contract does not altogether sit well with the statutory concept of dismissal. Its application to the field of employment has been considered in a number of cases, beginning with the Judgment of the NIRC (Sir John Donaldson P presiding) in Marshall v Harland & Wolff Ltd [1972] ICR 101. That and a number of the later authorities were cited to the Employment Tribunal and are recorded at paragraph 2 of their reasons.[10]Applying the common law doctrine to employment contracts the President, in Marshall , set out valuable guidance at page 105. He posed the relevant question in this way:
"In the context of incapacity due to sickness, the question of whether or not the relationship has come to an end by frustration sounds more difficult than it is. The tribunal must ask itself: "
Was the employee's incapacity, looked at before the purported dismissal, of such a nature, or did it appear likely to continue for such a period, that further performance of his obligations in the future would either be impossible or would be a thing radically different from that undertaken by him and agreed to be accepted by the employer under the agreed terms of his employment?""[11]In answering that question the President identified the following factors to be taken into account; the terms of the contract, including the provisions as to sickness pay (Mr Craig Smith, appearing on behalf of the 3 rd Respondent, Ferotec Realty Ltd, which raised the frustration issue below, helpfully told us that the Company operated a sick pay scheme of 6 months full pay followed by 6 months half pay); the nature of the employment, particularly whether the employee was a key worker; the nature of the illness or injury, for how long it had continued and the prospects of recovery; and the period of past employment (a relationship of long standing is less easily destroyed than one of short history). The present case[12]We should first contrast the facts of the other 5 Claimants before the Employment Tribunal whose contracts were found not to have been frustrated. All were, so far as we can tell, genuine long terms sick; all with long service stretching back to the 1960s. They kept in touch with the Company and medical reports were obtained on their progress up until 12 February 2003. There was no suggestion that their jobs had to be filled. They were employed in the same capacity as Mr Jones.[13]What of his case? On the Employment Tribunal findings he was fit to return to work at the end of 2001; far from being incapacitated at the time when, the Employment Tribunal found, his contract was frustrated, he was in fact fit to return. What then, submits Mr Keenan on his behalf, was the frustrating event? It was not sickness, because he was, the Employment Tribunal found, no longer incapacitated for work through illness. Far from being unable to perform his obligations under the contract he chose not to return to work and the Company did not require him to do so, failing which he would be dismissed. That position continued until the Administrator wrote his letter of dismissal on 7 August 2003.[14]In advancing that submission Mr Keenan has very properly taken us to the Court of Appeal decision in FC Shepherd & Co Ltd v Jerrom [1968] IRLR 358, a case which, as I recall having appeared as Counsel for the unsuccessful Claimant, occupied the Court for 5 days, it being thought important, particularly by Mustill LJ, to examine a line of charterparty cases in this matter involving an apprentice who was not taken back into employment following a period of Borstal training imposed on him by a criminal court.[15]The argument advanced on his behalf, that for frustration to arise it must be an event outside the control of both contracting parties and that the Claimants incarceration was as a result of his own fault, was rejected. The doctrine of self-induced frustration was considered. The Court held (per Lawton LJ, paragraph 22; Balcombe LJ, paragraph 77) that the frustrating event was outside the control of the parties. It was the act of the judge who sentenced him which brought the contract to an end.[16]Miss Hewitt, on behalf of the Secretary of State responsible for guaranteeing payment of certain debts owed to former employees of insolvent employers, has adopted a neutral stance in this appeal as she did below. Mr Smith, on behalf of the 3 rd Respondent, accepts that the Company did not acknowledge that the long-term sick, including Mr Jones, had repudiated their contracts of employment, although he points out that Mr Jones failed to meet his obligations by failing to return to work in late 2001 when, on the Employment Tribunal's findings, he was fit to do so. Analysis[17]In our view Mr Keenan is correct in submitting that at the time at which the Employment Tribunal found that Mr Jones' contract was frustrated there was no frustrating event in place. He had recovered from the effects of his two cracked ribs sustained in April 2001. There was nothing then preventing the Claimant from returning to work and fulfilling his contractual obligations. Thus, the argument which failed for the Claimant in Jerrom succeeds in this appeal. In the absence of a frustrating event the only reason for non-performance of the contract, putting the case at its highest for the employer, was the employee's repudiatory act in failing to present himself for work. But an unaccepted repudiation, as Asquith LJ observed in Howard v Pickford Tool Co Ltd [1951] IKB 417, 421, "is a thing writ in water and of no value to anybody". That repudiation remained unaccepted up until the date on which the Company's Administrator terminated Mr Jones' employment on 7 August 2003. It was that dismissal which was the terminating event. Disposal[18]For these reasons we shall allow this appeal. We agree with Mr Keenan that no further findings of primary fact are necessary. Applying the law to the facts we set aside the Employment Tribunal's finding that Mr Jones' contract of employment was frustrated and substitute a declaration that he was dismissed by the First Respondent, the Company in Administration, in the same terms as that at paragraph (c) of the Employment Tribunal's Judgment in relation to the other 5 Claimants. UKEAT/0435/06/RN AMICUS - V- FRICTIONS DYNAMICS ET AL UKEAT/0447/06/RN SECRETARY OF STATE -V- FRICTION DYNAMICS LTD (IN ADMINISTRATION) (2) DYNAMICS FRICTION LTD (IN LIQUIDATION) (3) FEROTEC REALTY LTD HIS HONOUR JUDGE PETER CLARK Judgment Background(1) that there was a relevant transfer from Dynamics to Dynamex and Realty(2) that Amicus, among other unions, was recognized by Dynamics(3) the special circumstances defence, excusing lack of consultation, was not made out. The Appeals (1) failure to give adequate reasons (2) failure to take relevant factors into account (3) perversity(4) prejudging the issues(5) misapplication of the Litster principles. (a) adequacy of reasons (b) reason for dismissal (c) perversity Adequacy of Reasons "'A bald statement saying that X's evidence was preferred to Y's is, we think, both implausible and unreasoned and therefore unacceptable; and it might appear to have been included simply to try and prevent any appeal. It seems to us likely the there will be a great deal of background material which is non-controversial. There is no need to recite at length in the decision the evidence which has been received. What a tribunal should do is state their findings of fact in a sensible order (often chronological), indicating in relation to any significant finding the nature of the conflicting evidence and the reason why one version has been preferred to another. It is always unacceptable for a tribunal to assert its conclusion in a decision without giving reasons'" "(6) Written reasons for a judgment shall include the following information – (a) the issues which the tribunal or chairman has identified as being relevant to the claim; (c) findings of fact relevant to the issues which have been determined; (d) a concise statement of the applicable law; (e) how the relevant findings of fact and applicable law have been applied in order to determine the issue;" The Shrewsbury Judgment "The Tribunal has carefully noted the inferences to be drawn in para 24 of (Mr Allen's) written submissions. The Tribunal has also carefully noted the inferences put forward by Miss Hewitt … in para 7 of her written submissions." Reason for dismissals "This particular case is more closely akin to that of the case of Honeycombe 78 Limited where the claimants were not employed in the business immediately before the transfer." Perversity Disposal