Hawes & Curtis Ltd v Arfan & Anor (Jurisdictional Points : Claim in time and effective date of termination) [2012] UKEAT 0229_12_0106

EAT
Hawes & Curtis Ltd v Arfan & Anor (Jurisdictional Points : Claim in time and effective date of termination)
[2012] UKEAT 0229_12_0106 · 2012-06-01
[1]This is an appeal by Hawes & Curtis Limited (“HCL”) against a judgment of the Employment Tribunal sitting at London Central dated 9 March 2012. The Tribunal (Employment Judge Hodgson dissenting) held that it had jurisdiction to consider claims of unfair dismissal brought by Mr Shamim Arfan and Mr Aamir Mirza.[2]The appeal is concerned with the “effective date of termination” (“the EDT”) of the employment of Mr Arfan and Mr Mirza. The question for the Tribunal was whether they had brought their claims in time. This depended on whether the ETD was 5 October 2010 or 4 November 2010. If it was the former their claims were out of time.[3]The concept of effective date of termination derives from section 97(1) of the Employment Rights Act 1996 . Section 97(1) provides:
“97 Effective date of termination (1) Subject to the following provisions of this section, in this Part "the effective date of termination"– (a) in relation to an employee whose contract of employment is terminated by notice, whether given by his employer or by the employee, means the date on which the notice expires, (b) in relation to an employee whose contract of employment is terminated without notice, means the date on which the termination takes effect, and (c) in relation to an employee who is employed under a contract for a fixed term which expires without being renewed under the same contract, means the date on which the term expires.”
[4]In this case, as we shall see, HCL dismissed Mr Arfan and Mr Mirza summarily on 5 October. They appealed under HCL’s internal disciplinary procedure. For the most part their appeals were unsuccessful. But, if they are right in their interpretation of a letter dated 4 November, they had some limited success on appeal: the date of termination of their contracts was varied to 4 November and they were paid until 4 November. The question arises: does this limited success on appeal impact upon the EDT? The background facts[5]HCL carries on business as makers and retailers of shirts. Mr Arfan was the manager of its store in Liverpool Street station. Mr Mirza was the store supervisor – in effect the assistant manager – though he worked part-time.[6]On 8 September 2010 Mr Arfan and Mr Mirza, together with one other employee, were suspended on full pay. It is HCL’s case that an audit had identified substantial stock losses at the shop, amounting to some 5,764 shirts between 1 January and 13 August, which it valued at £144,100. They instituted disciplinary proceedings. There was an investigation meeting on 13 September and a disciplinary hearing on 28 September.[7]On 5 October 2010 they were both dismissed. Each received a similar letter of dismissal. The letter said:
“2. Despite our investigatory meeting and disciplinary hearing, our two panels of investigation both chaired by different Senior managers, could not identify a specific individual who would have been responsible for the considerable stock losses as mentioned above. In our view, had the ‘act’ of stock loss been committed by an identified individual, the said person would justify his or her dismissal. 3. The Company is of the view that the act of stock loss was committed by one or more of a group, all of whom could have been individually capable of committing the said act. 4. A proper, extensive [involving many departments], thorough and fair investigatory process was carried out by the Company. 5. Hawes and Curtis Ltd, at this present time, cannot identify the individual who was responsible for the considerable stock losses at its store of Liverpool Street Station. However, the Company has been able to identify a ‘group’ of employees who were responsible for the said act. Unfortunately, amongst another, as both a keyholder and the person in charge, you have been identified as a member of the said group. 6. It is the view of the Company that stock losses at this level would necessarily be either through theft or fraudulent activities, therefore constituting a fundamental breach of trust and confidence and is viewed as gross misconduct. 7. It is the conclusion of the Company, based on the above, that your contract of employment with us be summarily terminated, as of the date of this letter, for reasons of Gross Misconduct.”
[8]The letter informed them that they had a right of appeal under HCL’s internal procedure, which was expressly described as non-contractual. They each exercised that right. Their appeals were heard on 27 October by Ms Alexander, HCL’s operations manager. She took time for consideration.[9]On 4 November 2010 HCL wrote to Mr Arfan and Mr Mirza setting out the result of the appeal. Ms Alexander’s conclusions included the following:
“6. The Company had identified a group of employees who were responsible for the stock loss. Unfortunately you are identified as being in that group. 7. It is the honest belief of the Company that the stock loss at its branch of Liverpool Street is due to either theft or fraudulent activities, therefore constituting a fundamental breach of trust and confidence in a contract of employment. 8. The stock losses for the Liverpool Street branch of Hawes and Curtis for the period of 1 st January 2010 to 13 th August 2010 amounted to 5764 shirts. The deliveries, which were signed, amounted to 13574 shirts and the Sales for the same period [figures taken directly from our banking partners] amounted to £8560. Assuming that the average price of a Hawes and Curtis shirt to be £25, the monetary value of the shirts missing from the Liverpool Street branch could amount to £144,100. Therefore the Company thinks that it has reasonable grounds to take any reasonable and necessary actions. 9. The Company believes that its response has been reasonable, faced with such a substantial loss, as stated above.”
[10]In words which are critical to this appeal, the letter then continued:
“Based on the evidence available to her, and as set out in detail in the letter of 5 October 2010 sent to you, Ms Alexander has decided to uphold the decision of summarily terminating your employment but has asked that the effective date of termination of your contract be that of the date of this letter, that is 4 November 2010.”
[11]Conformably with this letter HCL proceeded to pay Mr Arfan and Mr Mirza under the PAYE system that which was due up to 4 November 2010. As the majority found, no party considered these payments either to be notice pay or an ex gratia payment. The Tribunal proceedings[12]Mr Arfan and Mr Mirza both instructed solicitors. They lodged claim forms on 27 January 2011. Each claim form said that the employment ceased on 4 November 2010. As part of the narrative setting out the nature of the complaint of unfair dismissal each claim form mentioned the letter dated 4 November 2010 “upholding the decision to summarily dismiss the claimant and providing for the effective date of termination of the claimant’s employment as at 4 th November 2010.”[13]HCL’s in house lawyer lodged response forms. They did not challenge the termination date put forward in the claim forms; indeed one response form expressly stated the date of termination to be 4 November. Nor did the response forms challenge the way in which the claim form described the effect of the letter dated 4 November.[14]On all sides, therefore, preparations went ahead for a full hearing on the merits. It was listed on this basis for 3 days commencing on 29 February 2012. The parties prepared for a full hearing.[15]On 13 January 2012 HCL’s solicitors wrote to say that they wished to amend the response form to assert that the ETD was 5 October 2010. It was far too late for any preliminary issue to be listed; but at the full merits hearing on 29 February the Tribunal (which was apparently told, to its surprise and ours, that 3 days was insufficient to hear the case) was persuaded to hear the question of jurisdiction as a preliminary issue. The merits hearing is to take place next month (June 2012).[16]The questions which the Tribunal identified were: what was the ETD? Were the claim forms presented in time? If not, was it reasonably practicable to present the claims in time?[17]The witness statements which had been prepared for Mr Arfan and Mr Mirza did not deal with these issues – which had, as we have seen, been raised only the previous month. They gave oral evidence. HCL relied on no evidence at all – written or oral – apart from documents, principally the letters dated 5 October and 4 November. The Tribunal’s reasons[18]On the question of the ETD, the lay members formed the majority. Their reasoning was as follows. “7.57 At 5th October 2010 both parties understood that the claimants had been summarily dismissed in writing on that date. An appeal was held. The respondent upheld the finding of summary dismissal. The respondent wrote to the claimants to tell them the outcome of the appeal on 4th November 2010. In this letter the respondent states "the effective date of termination of your contract be that of the date of this letter, that is the 4th November 2010." If the respondents had not intended to change the date of termination then the change of date would not appear in this letter. 7.58 The claimants continued to be paid under PAYE until 4th November 2010. Neither party considered this to be notice pay. Neither party considered this to be an ex gratia payment. 7.59 The ET1 and ET3 are both consistent with the letter of 4th November 2010. The ET1 states the date of termination is 4th November 2010. In the respondent's ET3 on page 24 of the bundle the respondent states in the relevant box that the date of termination is 4th November 2010. 7.60 The respondent did not dispute the date of termination until 13th January 2012. The respondent states in a letter to the Tribunal on that date (R1/171) that the respondent made a 'mistake,' that the date of termination was 5th October 2010 and that accordingly the claim is out of time and seeks leave to amend. 7.61 The claimants relied on the respondent's letter of 4th November 2010. The claimants understood the letter of 4th November 2010 to supersede the letter of 5th October 2010. 7.62 In oral evidence the claimant Mr Mirza said when asked about his understanding of the letter of 4th November 2010: 'I understood I had been dismissed ... just the letter' and later he said 'this was the last date of employment.' 7.63 The respondent intended to change the date of dismissal to 4th November 2010 as evidenced by the letter of 4th November. The respondent did not give any oral evidence to the Tribunal regarding the effective date of termination. If it is the respondent's case that the letter of 4th November 2010 was not intended to change date of termination to 4th November 2010 then the respondent could have given evidence to that effect. 7.64 From the above we conclude that on 4th November 2010 both parties considered that 4th November 2010 was the date of termination not 5th October 2010. Accordingly, we take the view that the effective date of termination was 4th November 2010.”[19]These reasons were given orally on 2 March 2012. It appears that counsel for HCL questioned the reasons in some respects, for the members added an additional paragraph, attempting to analyse the position in terms of contract law – in particular in terms of an offer and acceptance in November.[20]It is, of course, the reasoning of the majority which must be scrutinised on this appeal to see whether it is in error. But we will record briefly the reasons of the Employment Judge on the question of the ETD. He said that the letter dated 5 October 2010 contained clear words of dismissal terminating the contract of employment. It was “not open to any party to unilaterally decide the effective date of termination at any time” – it could not be “agreed or unilaterally adopted or extended”. It therefore had to be asked whether something happened to change the position such that there was a new effective date of termination on 4 November 2010. He found the letter of 4 November 2010 ambiguous as to whether there was any intention to change the original decision. He did not think it could be read as a clear intention to vary the effective date of termination. But even it was to be read in that way, he did not think it could be achieved for the purposes of section 97 of the Employment Rights Act 1996 . The contract would have to be reinstated in some manner before there could be a fresh effective date of termination. He could not read the letter dated 4 November in that way: clear words would be needed to reinstate the contract and extend it which did not, in his view, exist in the letter.[21]The Tribunal unanimously agreed that if, contrary to the opinion of the majority, the true effective date of dismissal was 5 October, the Tribunal had no jurisdiction to hear the claim: it would, the Tribunal unanimously found, have been reasonably practicable to have presented the claims to the tribunal within 3 months. That finding is not challenged on appeal by Mr Arfan and Mr Mirza. Submissions[22]On behalf of HCL Mr Daniel Barnett argued that the majority of the Tribunal erred in law in one or more of the following ways.(1) They took into account the parties’ intentions or belief as to the ETD as being either determinative of or relevant to the effective date of termination. He submitted that the effective date must be established objectively.(2) They took into account what he described as an ambiguous statement of intent regarding a change to the effective date of termination. He submitted that a statement of intent, ambiguous or unambiguous, has no impact in law.(3) They found that there was an agreement to extend their contracts until 4 November. That was wrong: none of the essential elements for such an agreement existed. He withdrew an argument based on the burden of proof, and we will say no more about it.[23]Mr Barnett submitted that when an employee is summarily dismissed, the ETD crystallises at the date when the summary dismissal was communicated and cannot be varied by what occurs on appeal. He countenanced a possible exception if there was a contractual appeal procedure, or some other special contractual relationship between the parties; but there was none here. We asked him what the position would be if, on appeal, the employer substituted for the summary dismissal a dismissal upon notice. He submitted that this would not alter the position; an employer had no contractual right to impose a period of notice on the employee in such circumstances.[24]Mr Barnett took us to Fitzgerald v University of Kent at Canterbury [2004] ICR 737 , a case which was concerned with the retrospective agreement of a date of termination; Horwood v Lincolnshire County Council [2012] UKEAT/0462/11, a case which was concerned with resignation, following which the employer set a different date of termination for administrative purposes; and Board of Governors, National Heart and Chest Hospitals v Nambiar [1981] IRLR196. Nambiar was concerned with the ETD in the context of an appeal; and we referred the parties to a recent case of the Northern Ireland Court of Appeal McMaster v Antrim BC [2011] IRLR 235 , also concerned with the consequences of an appeal. Mr Barnett submitted that this case was distinguishable because the appeal procedure was contractual in nature.[25]On behalf of Mr Arfan and Mr Mirza, Mr Beard placed reliance on the decision of the Supreme Court in Gisda Cyf v Barratt [2010] ICR 1475 : the underlying purpose of the statute was the protection of the employee’s rights. If an employer, as a result of an appeal, varied a decision to summarily dismiss, granting the employee some extra weeks of employment, it followed that the ETD was varied. The dismissal might still be a summary dismissal for the purposes of section 98(1)(b), but the date on which the termination took effect was changed. Therefore the reasoning of the majority was essentially correct. What counted was not the subjective intentions or beliefs of the parties about the date of termination, still less any agreement as to the date of termination, but rather the variation of the employer’s decision on appeal. The decision of the majority was in essence that HCL did vary the date of termination upon appeal; this was a proper conclusion to reach, involving no error of law. Discussion and conclusions[26]It is important, as a starting point, to keep in mind that the majority found that HCL intended to change the date of termination: see the last sentence of paragraph 7.57 of the reasons, and paragraph 7.63 of the reasons. On their findings HCL did not simply intend to put an artificial label of 4 November as the ETD: it decided to keep the contracts of Mr Arfan and Mr Mirza open until that date, and actual paid them amounts which were neither notice pay nor ex gratia, using the PAYE system which is appropriate if there was a continuing contractual relationship.[27]There is no appeal as such against this finding, but we should say that in our judgment it was a finding which the majority were fully entitled to reach. It accords with the letter dated 4 November and with the manner in which HCL paid Mr Arfan and Mr Mirza until that date. It is fanciful to suppose that HCL would have written the letter in the terms it did, or paid Mr Arfan and Mr Mirza up to 4 November, if the decision on appeal had changed nothing.[28]It is, of course, unusual for an employer who summarily dismisses an employee to vary the date of dismissal on appeal. However there was an unusual feature of this case. The letters dated 5 October and 4 November did not make findings of fraud or dishonesty against either individual; and Mr Barnett confirmed to us that HCL’s case was that the employees were dismissed as being within a group suspected of misconduct (see Monie v Coral Racing [1981] ICR 109). He further confirmed to us that he would have conceded, had the case gone further at the tribunal, that dismissal in those circumstances ought to have been with notice. So it is perhaps not as surprising as it might otherwise be that HCL somewhat changed its position at the appeal stage.[29]This, therefore, is one of those relatively rare (but not unknown) cases where the employer varied the date of dismissal. Such cases in our collective experience on the Appeal Tribunal occur from time to time. We have all had experience of cases where, on appeal, a summary dismissal was changed to a dismissal on notice. Other changes will sometimes occur – such as a decision to extend the duration of employment while further investigations take place. Such cases, by reason of their exceptional nature, are likely to cause difficulty; and it is important to keep first principles in mind.[30]The starting point must be the language of the statute itself. Section 97 distinguishes between contracts which are terminated by notice and those which are terminated by without notice. In the case of a dismissal with notice, the search is for the date when the notice expired. In the case of a dismissal without notice, the search is for “the date on which the termination took effect”.[31]These very words were construed by the Supreme Court in Gisda Cyf v Barratt [2010] ICR 1475 . The appeal related to the question whether a letter of summary dismissal took effect when it was delivered or at the later date when the employee read it or had a reasonable opportunity to read it. It was argued that the law of contract required the former result to be applied in the context of section 97. In rejecting that argument Lord Kerr, delivering the judgment of the court, said (para 37):
“We do not consider, therefore, that what has been described as the "general law of contract" should provide a preliminary guide to the proper interpretation of section 97 of the 1996 Act, much less that it should be determinative of that issue. With the proposition that one should be aware of what conventional contractual principles would dictate we have no quarrel but we tend to doubt that the "contractual analysis" should be regarded as a starting point in the debate, certainly if by that it is meant that this analysis should hold sway unless displaced by other factors. Section 97 should be interpreted in its setting. It is part of a charter protecting employees' rights. An interpretation that promotes those rights, as opposed to one which is consonant with traditional contract law principles, is to be preferred.”
And (para 41):
“The essential underpinning of the appellant's case, that conventional principles of contract law should come into play in the interpretation of section 97, must therefore be rejected. The construction and application of that provision must be guided principally by the underlying purpose of the statute viz the protection of the employee's rights. Viewed through that particular prism, it is not difficult to conclude that the well established rule that an employee is entitled either to be informed or at least to have the reasonable chance of finding out that he has been dismissed before time begins to run against him is firmly anchored to the overall objective of the legislation.”
[32]Lord Kerr adopted a description of section 97 as a “statutory construct”: see paragraph 35. In Fitzgerald v University of Kent at Canterbury [2004] ICR 737 the parties agreed that a contract of employment should be treated as terminated with effect from a date 2 days earlier than their agreement. It was held that the effective date of termination was not the date they agreed, but the date when they made the agreement – since, until they made the agreement, the contract of employment remained live.[33]Sedley LJ said:
“7. The concept of the effective date of termination “EDT” is a statutory one. It has been present in the employment legislation since its origin in 1971. Its purpose is to give a fixed point of time by which to calculate such things as eligibility for protection against unfair dismissal, continuity of employment, loss of rights on reaching retiring age, the amount of the basic award and (as in this case) the time for lodging an originating application. 20 ….. the effective date of termination is a statutory construct which depends on what has happened to the parties over time and not on what they may agree to treat as having happened.”
[34]Against this background, we turn to consider the effect of an internal appeal against summary dismissal on the effective date of dismissal.[35]The principles which apply where the appeal is entirely dismissed are clear. Generally speaking, in the case of a summary dismissal the EDT will be the date when the summary dismissal is communicated to the employee or the employee has a reasonable opportunity of finding out. The lodging and dismissal of an internal appeal therefore does not usually impact upon the date on which termination takes effect. There are, however, exceptional cases where the employment contract provides, or the parties agree, that the contract shall be kept alive during the appeal process. Those cases are the exception rather than the rule – but in those cases the effective date of termination will relate to the disposal of the appeal.[36]Conversely, if the appeal is allowed in full, so that the employee continues in employment indefinitely, then it is well established that the dismissal decision falls away – the employee remains in employment. As Silber J put it in Ladbroke Betting and Gaming v Ally [2006] UKEAT 0260_06_1105 (11 May 2006) (cited and applied in McMaster v Antrim BC , where the cases on this topic are summarised) - “once the decision to dismiss is overturned the inevitable consequence is (in the absence of any contractual provision to the contrary) that the employment continues”.[37]What if the employer, on appeal, takes a decision which necessarily affects the duration of the employment – for example, if the employer substitutes a dismissal on notice, or extends the period of the contact?[38]In our judgment such a decision will have an impact on the effective date of dismissal. Take first the case where the employer substitutes a dismissal on notice; in principle section 97(1)(a) will apply, and the EDT will be the date on which the notice expired. Take then a case like this, where the appeal varies the date on which termination takes effect. In principle section 97(1)(b) will apply, and the EDT will be the date on which the termination takes effect.[39]We reject Mr Barnett’s submission that, in a case of summary dismissal, the EDT always crystallises on the date of summary dismissal.[40]As we have seen, the EDT is a statutory construct whose application must be guided principally by the underlying purpose of the statute, namely the protection of an employee’s rights.[41]The provision of an internal appeal is integral to the protection of employment rights. For example, the current ACAS Code of Practice on Disciplinary and Grievance Procedures (2009) makes specific provision for an opportunity to appeal: see paragraphs 25 to 28. The Code is statutory: see sections 199 et seq of the Trade Union and Labour Relations Act 1992 . It is to be taken into account where it is relevant to any question arising in proceedings before an employment tribunal: section 207(2). In the provision it makes for appeals the Code follows and applies what has for many years been good employment practice. Employers and employees alike expect internal appeals to be heard; and expect that they will sometimes result in decisions which will change the date of termination of employment.[42]Given this background, it would be surprising if a decision on internal appeal to change the date at which an employee’s contract was terminated were irrelevant to the EDT. To apply section 97(1) in this way would create a quite unnecessary trap for employees, while conferring no useful benefit on employers. Employees would find, as in this very case, that an employer argued for an EDT quite different to the date stated following an appeal hearing. Employers, having varied the date of termination, can have no legitimate complaint if the EDT complies with the varied date. We do not find it at all surprising that on both sides for more than a year it was common ground that the employment terminated on 4 November.[43]This is not to say that the effective date of termination depends on any agreement between the parties. It depends, as Sedley LJ observed in Fitzgerald , on what happened between the parties; and it is to be objectively determined. But in our judgment the decision reached at an internal appeal is part of what happened between the parties for the purposes of establishing the EDT; and in the (no doubt rare) case where the decision at an internal appeal results in a change of the date on which the employment is terminated, that decision is to be taken into account in determining the EDT.[44]We therefore regard this case as quite different from Fitzgerald (where the parties sought to backdate the termination) or Horwood (where the date of resignation was plain, but the employer took a different date for administrative purposes). Here the date was changed as part of the disciplinary and appeal process itself.[45]Mr Barnett placed reliance on the decision of the Appeal Tribunal in Nambiar . In that case the employee refused to obey an order; he was summarily dismissed. He appealed under the internal appeals procedure. The appeals panel, having obtained medical evidence, said(1) that the employee should not return to his job, but(2) that every effort should be made to find suitable alternative employment for him. The employee insisted on reinstatement, rejected offers of alternative employment and claimed unfair dismissal. It was held that the date of dismissal, for the purposes of considering the reasonableness of the decision to dismiss, was the time when he was summarily dismissed, although what occurred at the internal appeal was relevant.[46]We think it is critical to the reasoning in Nambiar , which was not a case on the EDT, that the appeal panel rejected the employee’s argument that he should return to his old job; indeed it said that he should not return to his old job at all. He was therefore summarily dismissed; and the result of the appeal did not alter that summary dismissal. Other cases show that, if the appeal panel had reinstated him, and the employers had refused to comply, the effective date of dismissal would indeed be after the hearing of the appeal: see London Probation Board v Kirkpatrick [2005] IRLR 443 and McMaster v Antrim Borough Council .[47]The majority’s initial reasoning is contained in paragraphs 7.57 to 7.64. We consider that this reasoning is in substance correct. Contrary to Mr Barnett’s submission, we do not think the Tribunal’s reasoning turns on a finding about the subjective intention of one party or the other or both: it turns on the Tribunal’s finding about the decision taken on appeal, the communication of that decision, and the way in which HCL acted on the decision by making additional payments under PAYE. These findings fully justify the Tribunal’s conclusion that the EDT was 4 November.[48]We wish, however, in conclusion, to say a word about the contractual position.[49]The majority’s additional reasoning seems to have been added after the probing of counsel, and seeks to analyse the matter in contractual terms – in particular offer and acceptance. We do not think the reasoning is correct; the letter dated 4 November is not in reality an offer of any kind, and we find it difficult to spell out a contract of the kind which the majority suggest. We are inclined to think the contractual position can be stated simply: just as the contract of employment revives indefinitely if an appeal reinstates the employee, so it revives for a limited period if an appeal varies a summary dismissal to a dismissal on notice or a dismissal on some other date.[50]We do not, however, think that contractual analysis was essential to the exercise of determining the EDT, for the reasons set out by the Supreme Court in Gisda , which does not seem to have been cited to the Tribunal. Nor do we think the majority’s additional reasoning detracted from its earlier reasoning, which we regard as essentially correct. 51. Given the proximity of the appeal to the hearing in June, we announced at the conclusion of the appeal hearing that the appeal would be dismissed. These are our reasons.