Western Excavating (ECC) Ltd v Sharp

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeTHE MASTER OF THE ROLLS
Judgment Date14 Nov 1977
Judgment citation (vLex)[1977] EWCA Civ J1114-6
Docket NumberBAT/319/76

[1977] EWCA Civ J1114-6

In The Supreme Court of Judicature

Court of Appeal

On Appeal from the Employment Appeal Tribunal

Before:

The Master of the Rolls (Lord Denning)

Lord Justice Lowton and

Lord Justice Eveleigh

BAT/319/76
Western Excavations (E. C. C.) Ltd.
Appellants
and
Colin John Sharp
Respondent

MR. A. C. SMITH (instructed by Messrs, Stephens & Scown, Solicitors, St Austell) appeared on behalf of the Appellants.

MR. F. GILBERT (instructed by Messrs. Whitford & Son, Solicitors. St. Columb) appeared on behalf of the Respondent.

THE MASTER OF THE ROLLS
1

Mr. Sharp was only employed by the ChinaClay Company for twenty months. He left of his own accord. Yet he has been awarded 658 as compensation for unfair dismissal. There seems something wrong about that award. What is it? To fill in the details, he started work with the Company on 9th July, 1974. One of the terms was that, if he worked extra time, he could have time off in lieu. One day in February 1976 ho wanted to play a card game for a team. He asked the foreman for three Fours off. The foreman said that he could not have it that afternoon as there was a lot of work to be done. But Mr. Sharp took it off and played his game of cards. Next morning - Friday, 27th February, 1976 - the foreman dismissed him, giving him two weeks' notice for failing to carry out a reasonable order. He appealed to a panel set up by the Company under its disciplinary procedure. On 5'th' March, 1976 the panel allowed his appeal, saying: "Having considered all the evidence presented to us, we are of. the. unanimous decision that the Dismissal be withdrawn, as there was room for confusion the way the situation was left, but having regard to the seriousness of what has happened, we substitute the Dismissal with five working days suspension without pay".

2

Thus he lost five days1 pay. He does not dispute the justice of the panel's decision. But it left him in financial difficulties. He was living with a woman who was, in modern terminology, his "common law wife" and their two children. His take-home pay was 42. 40 a week. He had no savings, but he had holiday pay accrued to him of 117. 17 net.

3

As a result of the five days loss of pay, he had no money to pay his household expenses. He went to the Social Security and was given 6. 45. But that was not enough to carry on. So he wentto his employers. He asked for an advance on-his accrued holiday pay. He was told, quite correctly, that it was against company policy to pay holiday pay unless the holiday was itself actually taken. He then asked for a loan. He said he wanted 40. The welfare officer told him that the Company could not make him a loan to that extent. The welfare officer suggested that Mr. Sharp should see him again to discuss the details. That did not satisfy Mr. "Sharp. He said: "If the Company cannot help me, I must sort C it out myself. I shall have to obtain my holiday pay". That is just what he did. He went to see the workshop manager, and said: "I don't want to leave, but circumstances force me to do so. I am leaving and want my holiday pay now". So on 11th March, 1976 he picked up his holiday pay of 117. 17, and left. He went straight off to the Industrial Tribunal and claimed compensation for unfair dismissal.

4

The Industrial Tribunal were divided in opinion. Two of them thought Mr. Sharp should be compensated. He should be awarded 658. They said that the Company "ought to have leant over backwards to help him": and that the Company's conduct "justified Mr. Sharp in terminating his employment in order to obtain his accrued holiday pay and so meet his commitments". The third member disagreed. He thought that Mr. Sharp ought to have talked to the welfare officer again. He held that "Mr. Sharp's decision to resign was not caused or originated by any misconduct on the part of the Company, but was solely his own personal decision. There had, therefore, been no dismissal whether constructive or otherwise.

5

The Company appealed to the Employment Appeal Tribunal. They said significantly: "If each one of us- individually had beensitting on this industrial tribunal, we would have been minded to take the same view as that of the minority member". But they dismissed the Company's appeal because they said they were "forced to the conclusion that it is impossible to say that this industrial tribunal went so badly wrong in law, or reached such a conclusion that no reasonable tribunal could have come to it".

6

So Mr. Sharp (who left work of his own accord, because he was not granted a loan as to the full amount he asked) was awarded 658 compensation. It does seem strange. "Especially as the Industrial Tribunal said that: "…. in finding against the Company, we imply no criticism of their general treatment of Mr. Sharp or of their personal administration and procedures as a whole, On the contrary, we consider all these aspects to have been quite excellent, and the Company to have been good, responsible and careful employers. We regard the events of 9th and 10th March as something exceptional."

7

THE LAW

8

Until recently, an ordinary servant had no security of tenure. He could be dismissed on a month's notice or a month's salary in lieu of notice, although he might have served his master faithfully for years. That was altered by the provisions of the Industrial Relations Act, 1971, which have now been re-enacted in Schedule 1 'of the Trade Union and Labour Relations Act, 1974. Paragraph 4 says that: "… every employee shall have the right not to be unfairly dismissed by his employer". If he is unfairly dismissed, he can complain to an Industrial Tribunal. The Tribunal may recommend that he be reinstated in his job, if that is practicable. Alternatively, it may award him compensation in such amount as is fair and equitable. It may be as much a 5, 200. So, whereas at common law an employer could dismiss a man on a month's notice ora month's wages in lieu, nowadays an employer cannot dismiss a man even on good notice, except at the risk of having to pay him a large sum should the Industrial Tribunal find that the dismissal was unfair.

9

These provisions are not confined to cases where the employer himself dismisses the man. They also apply to cases where the man leaves of his own choice - if he can show that it was due to the way the employer treated him. In other words, compensation is payable, not only for actual dismissal, but also for "constructive dismissal". We have here to consider the doctrine of "constructive dismissal".

10

THE STATUTORY PROVISIONS

11

The circumstances in which an employee qualifies as being "dismissed" by his employer were first set out in the Redundancy Payments Act, 1965 in these words: An employee shall "be taken to be dismissed by his employer if, but only if, - (a) the contract under which he is employed by the employer is terminated by the employer, whether it is so terminated by notice or without notice, or (b) where under that contract he is employed for a fixed term, that term expires without being renewed under the same contract, or (c) the employee terminates that contract without notice in circumstances such that he is entitled to terminate it by reason of the employer's conduct".

12

A similar provision was contained in Section 23 of the Industrial Relations Act, 1971, but with the significant omission of sub-section (c).

13

In the Trade Unions and Labour Relations Act, 1974, the original provision was re-enacted, but with sub-section (c) restored. But on being restored there was an important amendment. The amended sub-section (c) reads: "(c) the employee terminates that contract with or without notice, in circumstances such that he is entitled to terminate it without notice by reason of the employer's conduct".

14

Those words "with or" were inserted because it was realised that sub-section (c) as enacted in 1965 left a gap. A man who was considerate enough to give notice was worse off than one who left without notice.

15

Sub-section (c) has given rise to a vast body of case law as to what comes within it. It is spoken of as "constructive dismissal". It has given rise to a problem upon which there has been a diversity of views among chairmen of Industrial Tribunals and among the Judges of the Employment Appeal Tribunal. On 28th July, 1977 the Employment Appeal Tribunal attempted to settle these differences in the case of Wotherall (Bond St. W. l) Ltd. v. Lynn (1977) Industrial Relations Law Reports 333: but they were unsettled again by the discovery of some obiter dicta in this Court in Turner v. The London Transport Executive (unreported, but given on 6th May, 1977). This led the Employment Appeal Tribunal on 4th October, 1977 to think that they ought to follow those obiter dicta and- to give guidance accordingly. It is to be found in their decision in Scott v. Aveling Barford Ltd. (at present unreported). But this guidance was expressed to be given as an interim measure pending an authoritative statement of the law by the Court of Appeal or the Court of Session.

16

It is with diffidence that we approach the task. The rival tests are these;-

17

THE CONTRACT TEST

18

On the one hand, it is said, that the words of sub-section (c) express a legal concept which is already well settled in the books on contract under the rubric "Discharge by breach". If theemployer is guilty of conduct which is a significant breach going to the root of the contract of employment; or which shows that the employer no longer intends to be bound by one or more of the essential terms of the contract; then the employee is entitled to treat himself as discharged from any further performance. If he does so, then he terminates the contract by reason of the employer's conduct. He is constructively dismissed. The employee is entitled in those circumstances to leave at the instant without giving any notice at all or, alternatively, he may...

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