Appeal No. EAT/128/92
	I N T E R N A L

	EMPLOYMENT APPEAL TRIBUNAL
	58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

		At the Tribunal
		On 4th December 1992

	Before

	THE HONOURABLE MR JUSTICE WOOD MC (P)

	MR A D SCOTT

	MR G H WRIGHT MBE

WADHAM KENNING MOTOR GROUP LTD	APPELLANTS
 t/a WADHAM KENNING

K STROUD	RESPONDENT

	Transcript of Proceedings

	JUDGMENT

	PRELIMINARY HEARING

Revised

	APPEARANCES

For the Appellants	MR N DEAR
(Of Counsel)
Messrs Leuty & Co
18-26 Crossway House
High Street
Bracknell
Berks

	MR JUSTICE WOOD (PRESIDENT):  This is an appeal by way of a Preliminary Hearing from a decision of an Industrial Tribunal sitting at Reading under the Chairmanship of Mr Warren, who on the 28th November 1991, decided unanimously that Mr Stroud, the Applicant, had been constructively dismissed by his employers, Wadham Kenning Motor Group Limited, and that that was unfair.

	The Company appeal.  At this Preliminary Hearing the Company appear ex parte, in accordance with our usual procedure, and we are looking to see whether we can discern a point of law which merits argument inter partes.

	This is one of those difficult cases where there has been a unilateral change in the terms of employment which, as was conceded, amounted to a constructive dismissal.  In this case the reduction of salary from £9,000 to £5,000 per annum, and where the defence, if that is the right word to use, set up by the employer, was that this was reasonably necessary within the band of reasonable response of an employer to a re-organisation problem after a take-over.  It was therefore some other substantial reason and then when looked at under Section 57(3) the argument goes that it was reasonable to take that course.  They are difficult cases and this Tribunal examined the matter with great care.  They are difficult cases because of the issues which can go to and fro, but are also difficult because it is not always easy to identify one particular factor which may tip the scales one way or the other.  Before looking at the facts of this case we also remind ourselves of the caution given to us by the Court of Appeal that one should not take a decision to pieces like a pleading, but should read it as a whole, to see whether, in looking at it as a whole, there is any discernible error of law and whether the approach has been generally right, and the findings of fact are sufficient to substantiate the decision ultimately reached.

	Approaching this case then, with those principles in mind, what happened here is that Mr Stroud had been employed by the Company or its predecessors before the take-over from June 1960 until his employment ended on the 25th May 1991.  He had formerly been employed by the Great Western Motor Group, and in May 1990 that became part of the present Respondents Wadham Kenning Motor Group.

	After the take-over a Mr Wheeler was appointed to look into the whole of the workings of the Great Western Motor Company.  The decision was made to close down parts of it;  a truck and a van division were sold off and other changes were made.  There were findings of mis-management;  the situation was clearly unsatisfactory.  

	The Applicant worked at the site in Vastern Road in Reading and that part of the business was moved to the Portman Road.  The site at Vastern Road was extremely valuable, said to be like some £7,000,000, and it was too large for the operation that was to be envisaged.  Of some 150 to 160 employees and about 30 people were made redundant.  Thus, it is quite clear that re-organisation was taking place.

	A document was sent to all the sales staff in the December 1990 which indicated, quite clearly, that so far as their financial state was concerned, the position was going to be retained for a further 12 months, at least the Tribunal so found that was a reasonable expectation, and although we have not seen the actual document it seems to us from paragraph 8 of the decision that that was so.  The problems was to try to co-ordinate the sales staff of Great Western with the sales staff of Wadham Kenning.  The decision was that Mr Stroud's salary was going to be reduced from £9,000 to £5,000.  He was told this towards the end of December and he said he would take advice.  A memorandum was sent to him on the 8th February 1991 saying that his basic salary reduction would take effect from the 1st April 1991.  This was clearly, a breach of the terms and conditions of employment and was so conceded.  There was correspondence between Mr Stroud's Solicitors and the Company, but to no effect.  The Company giving fair warning that it would rely upon the principles of Hollister v. NFU [1979] IRLR 238 and that upon the reason as for this act as being business reorganisation.  Ultimately, when Mr Stroud was shown his pay slip he walked out and claimed that that was a constructive dismissal.

	Mr Wheeler, who had been investigating the problems, was the main witness for the Company.  He explained the background in his evidence.  The Tribunal make these findings and comments in paragraph 16 and 17 of their decision.  In paragraph 16 they say:
"16	Mr Wheeler told us that as a part of the reorganisation  in addition to the redundancies motor vehicles were taken away from some employees who had company cars, other employees who had company car had smaller and more economical ones substituted for the ones they originally had and BUPA benefits were withdrawn.  This was all part of the plan to try and effect savings as at that time the company was incurring losses of between £30000 and £40000 per annum.  Mr Wheeler did not have specific figures of actual losses.  He did not have specific figures of those individuals who were made redundant or who had left of their own accord etc and whilst we accept entirely that it is not for us to question whether or not a reorganisation should take place, we do feel that sufficient evidence should be brought before a Tribunal to establish that the steps that have been taken in reaching a decision which affects employees had been reached after proper deliberation.

17	Mr Wheeler makes it clear that another factor that came to his mind and an important one was that since the takeover the company now became part of the Wadham Group.  The salary and wages structure for sales staff within the Wadham Group was technically different to that which they had inherited when they acquired the Great Western Motor Company.  In Wadham's they endeavoured to have a system of paying sales people only by commission with no basic salary although when one looks at the basis of the Wadham Kenning scheme there is a guaranteed level of earnings of either £7500 or 50% of the previous year's gross whichever is the greater.

18	However the scheme that he had inherited was certainly not one that he was happy with.  The other factor that concerned him was that with a basic pay, indeed with any basic pay, but certainly one of £9,000, this would cause concern if the fact was found out by other sales staff and could cause problems.  Mr Hopkins who told the applicant that his basic wage was to be reduced had not part in the decision.  It was Mr Wheeler who had made the decision to effect the reduction."

Now, there is the explanation and the overall background facts to this matter. 

	It was conceded by Mr Leuty, who was the Solicitor acting for the Company, that there had been a constructive dismissal.  The Tribunal looked at the case of Hollister;  they looked at the case of Chubb Security Ltd v. Harper [1983] IRLR 311 and Richmond Precision Engineering v. Pearce [1985] IRLR 179 and also an earlier case Sycamore v. Myer [1976] IRLR 84.  The judgments in Richmond Precision Engineering looks at Hollister and at Chubb Security and gives the very clearest direction of the approach for an industrial tribunal to take.  If one reads paragraph 20 and paragraph 30 of that decision there is clear guidance for the Industrial Tribunal.  They refer to the cases and in paragraph 21, in the latter part, they say this:
"The onus is firmly on the employer to prove the reason for dismissal so that he must how just what his business reasons were and that they were substantial and even that does not conclude the matter.  The Tribunal still need to be satisfied that the employer acted reasonably in the case of an employee who has lost his job and in Chubbfire Security v. Harper in the headnote it was made clear that it is for the Industrial Tribunal to make a finding as to the advantages to the employers of the proposed reorganisation and whether it was reasonable for them to implement it by terminating existing contracts and offering employees new ones.  In the absence of such a finding the Industrial Tribunal should consider whether the employers are acting reasonably in deciding that the advantages to them of implementing the proposed reorganisation outweigh any disadvantages which they should contemplate an employee might suffer.

Then in paragraph 22 the Tribunal look at the overall situation and they decide that the act of the employers was not reasonable.

	Mr Deal has, if we may say so, presented his submissions succinctly and logically as one would expect, and we are grateful to him.  He takes a number of matters, I will come to the main one at the end, he says first of all, that the Tribunal did not make a finding as to the reason for the dismissal.  It was quite clear here, that there was no issue that reorganisation was taking place, it is clear that in the absence of what we have chosen to call the "defence" of the employers, there was constructive dismissal.  Therefore, the real issue was as to whether the act of the employers, in treating Mr Stroud in this way, was reasonable.  That being the issue, and it being so clear that the reorganisation was for some other substantial reason, we think it clear from the decision that that was found, because otherwise there would be no point in going on to the issue of reasonableness.  That criticism, therefore, is not in our judgment, well founded.

	The next matter criticised is that because they do not specifically mention these factors in the last paragraph, the Tribunal failed to take into account, first, the desire to bring Mr Stroud's salary into line with the others.  Secondly, that the Company had taken other steps than reducing his salary, namely, redundancy and withdrawing benefits, and the desire was that both sets of employees should be treated the same.  All those matters are dealt with in the overall findings of fact and must have been well within the minds of the Tribunal and we do not accept that issue either.

	The third one was that the Tribunal were wrong in directing themselves, that the employers must show the Tribunal what their business reasons were for the reorganisation.  We do not think that that was actually what the Tribunal were saying in the passages to which we have referred.  It was quite clear that there was a reorganisation and they cautioned themselves that it is not for them to substitute their own reasons for the reason of the employer.  That seems to be, to our minds, quite clear from the way they set out their approach in the decision.  The real point here taken and the substantial point taken by Mr Deal is that in that passage in paragraph 21, to which we have already referred, the Tribunal forsake the broad approach of reasonableness or to pick the wording of Lord Justice Beldam in the Richmond Precision Engineering Ltd case, he says this:
"When that question has had to be considered in other cases, as has been pointed by Mr Sefi, Industrial Tribunals have approached it on the basis of considering the range of response open to an employer in the circumstances and if the action taken by the employer to dismiss is within the range of reasonable responses in a similar situation, then the dismissal is, providing all the other requirements are complied with, fair."

and he submits here that the Tribunal did not take the broad approach, it confined itself to considering whether the benefit to the employers outweighed the disadvantage to Mr Stroud, the Applicant.

	That is a facet, but if one looks at paragraph 21 and reads the whole, it seems to us, quite clearly, that the Tribunal were not in error and indeed, when one reads Chubb and when one reads Richmond Precision Engineering they could not have been under any illusion as to the correct approach.  We therefore feel that it is to take too finer point to look at the detailed drafting of paragraph 21.

	It seems to us in this case that the Tribunal approached it correctly and they came to the issue of reasonableness.  When looking at reasonableness and the advantages to one side the disadvantages to the other, proportionality, they are entitled to look at the whole, and one of the criticisms they made was that they did not really have as much factual evidence before them to carry out that balancing exercise as they might have done.  And they make that criticism in paragraph 16.  But doing the best they can on the evidence before them they reach a decision which, in our judgment, they were perfectly entitled to reach.  In fact, the Industrial Members here looking at the whole of this evidence take the view that it was inevitable that they would reach that decision on the evidence before them.

	We can find no error of law here and this appeal must be dismissed at this stage.