Appeal No. EAT/1045/95

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 9 October 1996

Before
HIS HONOUR JUDGE H J BYRT QC
MRS M T PROSSER
MR J C SHRIGLEY

MR M DUNKLEY	APPELLANT

A M WIDDOWSON & SON LTD
	RESPONDENTS

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR BOB BLYTH
(Rights Adviser)
Leicester City Council
4th Floor, Block A
New Walk Centre
Welford Place
Leicester LE1 6EG	
For the Respondents	MR S GASTOWICZ
(of Counsel)
Messrs Rich & Carr
24 Rutland Street
Leicester LE1 9XG	

	JUDGE H J BYRT QC:  This is an appeal against the decision of the Industrial Tribunal sitting at Leicester on 18 July 1995 when it unanimously dismissed the Applicant’s, (now the Appellant’s) claim that he had been unfairly dismissed.  

	The facts of the case, as found by the Tribunal, are as follows:  the Respondents’ bankers or accountants had, in April 1994, indicated then that, as a result of a turn down of business, there was a need for the Respondents to reorganise themselves.  Indeed, the Industrial Tribunal refers to the fact that part of the loss had been due to the Company losing a customer which counted for something like 10 to 12 percent of the Company’s business.  As a result of that, in December 1994, a notice was sent to the Appellant, along with all the other employees, indicating that their contracts of employment would terminate on  31 March 1995.  It went on to advise them that they would be receiving new contracts inviting them to re-enlist under new terms.  Unhappily, the Respondent Company delayed sending the new form of contract until 23 March, some seven days before the date when the old contracts of employment would automatically terminate.

	So far as the Appellant is concerned, he had some advance warning of what the new terms would be.  On 1 March he had a meeting with a Mr Smith when the main changes in the new contract were discussed and, in particular, his attention was drawn to clauses 5(1) and 8(7).  Clause 5(1) reserved the right of the employers, in their absolute discretion, to deduct from the Appellant’s pay without limit any losses suffered by the Company as a result of the Appellant’s negligence or breach of Company rules.

	There was another term, clause 8(7) which stipulated that upon the termination of the Appellant’s employment, the Company reserved the right to require him to take any unused holiday during his notice period. 

	One Appellant objected to these two clauses and on 28 or 29 March - there seems to be some doubt about the specific date - he went to see the commercial director of the Respondent Company, Mr Holland, to tell him that he wanted legal advice before signing and that he objected to these particular clauses.  He was told by Mr Holland that if he did not sign by 31 March he would cease to be an employee, and that was it.  

	On 31 March the Appellant wrote a letter saying that he considered it was not in his best interests to sign the new form of contract.  That same day he saw the Chairman of the Company, Mr Hawksworth.  Mr Hawksworth gave him some time and explained to him how he defined those particular clauses.  Apparently, the Appellant was not satisfied with Mr Hawksworth’s explanation and, as a result of his not signing the new contract, his old contract terminated that day.

	The Industrial Tribunal’s findings on the critical issues arising under s.57(1) and 57(3) are set out in paragraphs 8 and 9 of their reasons and they might be briefly stated as follows:  they found that the employers were entitled to reorganise their business in view of their financial pressures.  2.  They found that the new contract did not differ substantially from the previous contract, although they accepted that the two sub-clauses to which I have just referred amounted to new terms in the new contract.  3.  They found that the two new clauses were not unreasonable and they stated that this was confirmed by the fact that 140 out of 145 of the employees in the Company had accepted the new contract.  4.  They found that the Appellant had been dismissed for some other substantial reason, that being one of the grounds set out in s.57(1)(b) and, furthermore, they found that the dismissal had not been unfair.  That was their determination of the matters which had to be decided under s.57(3).

	Suffice it to say that the findings in paragraphs 8 and 9 are very sparse and this Tribunal has been concerned as to whether there are sufficient findings of fact and reasons stated for their conclusions to meet the requirements of the case of Meek v City of Birmingham District Council [1987] IRLR 251.

	Mr Blyth has argued his case on behalf of the Appellant with considerable force.  Without any disrespect to Mr Blyth, we think that the one ground of substance he has relates to the sufficiency of the Tribunal’s reasons.  In considering the findings of the Tribunal, we have looked at each in turn and we find that the Tribunal had sufficient evidence as was indicated in paragraph 2 of their reasons for coming to the conclusion that the employers were entitled to reorganise their business in view of financial pressures.  We equally are satisfied that on that ground the reason for the dismissal was as found by the Tribunal to be some other substantial reason as set out in s.57(1)(b).  The fact that the Appellant wrote his letter indicating that signing the contract was not in his interest establishes that there was a constructive dismissal but, of course, that is not the end of the matter.  When considering whether the dismissal was fair or unfair one has to look at the requirements of s.57(3) and that was the subject matter of the remaining findings of the Industrial Tribunal.   

	The first of those findings was that the new contract did not differ substantially from the previous contract.  Although they say the two new paragraphs, 5(1) and 8(7), were not substantial departures, the Tribunal do not give any indication as to why they thought that this was so.

	When looking at the two clauses, we see that no real problem arises so far as clause 8(7).  Whilst some people might think that it was harsh to require an employee to take his holiday entitlement at the time of the termination, we accept that, in the case of a small company, faced with financial problems, the inclusion of such a clause, if accepted by the employee, would be a reasonable one.  However, we have difficulties about clause 5(1).  It is not for us, of course, to express our own views about the significance of that clause.  This would essentially be a matter within the province of the Industrial Tribunal.  However, it is certainly within our province to review the reasons, if stated, for their conclusions that clause 5 did not represent a substantial departure from the existing terms and as a new term was in itself not unreasonable.

	The clause gives the employer absolute discretion to deduct from the employees’ wages any losses suffered by the Company as a result of his negligence or breach of company rules.  This term was a change from the provision which had been in the earlier contract to the effect that, in the event of the employee causing damage to the Company’s or customer’s property, he could be summarily dismissed.  We are advised that the latter provision is not an uncommon provision in an employment contract.  The new clause, however, taken literally, is of a more draconian effect.  Taken at its face value the employee becomes liable not only for damage to property.   The loss referred to could include injury caused to a fellow employee.  Liability arises in the event of the employee’s negligence or breach of  Company rules and it is within the employer’s absolute discretion whether this has happened.  It is not a case of being able to go to a Court of law for the determination of the issue.  Further, the employer has absolute discretion to take part or all of the employee’s wages for an unlimited period of time.  The consequence of the old clause was that if the employee had been summarily dismissed for causing damage to the employer’s property of a trivial nature, for instance, he could in fact go to the Industrial Tribunal and have the matter tested as to whether a dismissal for this particular reason was fair or unfair.  The new clause, however, might well have a different effect.  If, at the end of a month, having been deprived of his wages, the employee saw fit to leave the employment of this company, thereby being the subject of constructive dismissal, and he then went to an Industrial Tribunal for the purposes of having a determination as to whether his dismissal was fair or unfair, he would arguably have great difficulty in establishing his dismissal was unfair if he had signed a contract in these terms.  Overall, it could be said that, far from this new clause being no substantial departure from what existed previously, it was a new term of substantial significance in the new contract and one which radically differed from the corresponding term in the old contract.

	The Tribunal then went on and concluded that the new term was not unreasonable.  We have been told by Mr Gastowicz, who has argued the case for the Respondents lucidly and with great articularity, that we are not entitled to look behind that finding of the Industrial Tribunal and substitute our views. We entirely accept that proposition .  But he also told us that, during the course of the day’s hearing before the Industrial Tribunal, this clause was put into a context which made plain it does not have the draconian consequences which, at first reading, it might seem to have.  We understand that when the Appellant had his discussion with the Director on 28 March, a minute was taken of the discussion in which it was recorded that the Director explained to the Appellant the limitations which had to be read together with this particular clause.  Mr Gastowicz said that that is a factor which the Industrial Tribunal, might well have taken into account in deciding its effect was not so different from that of the old term and that overall it was not unreasonable.  It could be said, he suggested, that the minute itself would have constituted a variation of the term or, indeed, a collateral contract which would have enabled the employee to avoid the more draconian effects of the clause.  We do not know whether the employee was ever told that a minute was being taken of that definition.  We do not know whether he was given a copy of that minute.  We do not know whether the Industrial Tribunal paid any attention or took any account of those factors.  Accordingly, when the Tribunal says simpliciter that it found this particular clause 5 and clause 8(7) to be not unreasonable, that is all that we have to go on when asking whether the Tribunal’s findings in these respects were findings a reasonable Tribunal could come to.

	Further, the Industrial Tribunal seems to have attached importance to the fact that 140 out of 145 of the employees signed the new contract.  They looked upon that as confirmation of the fact that the clause we are concerned about was not unreasonable.  That could, in circumstances, be an important factor for an Industrial Tribunal to take into account.  In this particular case, however, it was argued as one of the issues before the Tribunal that there had been wholly inadequate consultation and that, at the end of the day, the employees had not been given adequate time in which to make an informed assessment of the implications of these new clauses.

	We do not know what consultation or opportunity for considering the implications of these clauses was given to the other 140 members of staff.  Indeed, if they had as little opportunity for considering the matter as the Appellant, one might imagine that they were more influenced by the fear they would otherwise lose their employment if they did not sign up than by the issue of unreasonableness or reasonableness of the clause in question.  We do not know what conclusions the Industrial Tribunal came to about the implications arising from the lack of consultation or the opportunity for considering the implications of these clauses.  We do not know what conclusions they came to about the validity of the vote of the other 140 members.

	In paragraph 9, the Tribunal considers the ultimate question they had to decide, namely whether in all the circumstances of the case the dismissal was fair or unfair.  The section requires them to take into account the equity and the substantial merits of the case.  We do not know what factors the Industrial Tribunal took into account because paragraph 9 consists of just two lines.  There is no way in which the parties or a review tribunal can check whether they applied the right tests and made the right approach to this ultimate and all important question.

	The case of Meek to which I have earlier referred has this passage in the judgment of Bingham LJ as he then was:

“It has on a number of occasions been made plain that the decision of an Industrial Tribunal is not required to be an elaborate formalistic product of refined legal draftsmanship, but it must contain an outline of the story which has given rise to the complaint and a summary of the Tribunal’s basic factual conclusions and a statement of the reasons which have led them to reach the conclusion which they do on those basic facts.  The parties are entitled to be told why they have won or lost.  There should be sufficient account of the facts and of the reasoning to enable the EAT or, on further appeal, this court to see whether any question of law arises;”

The part of that passage to which we attach importance is the statement that there must be a summary of the Tribunal’s basic factual conclusions and here, more especially, a statement of the reasons which have led them to reach the conclusions which they do on those basic facts.  When one is considering how specific that statement of reasons must be, the passage goes on to say  that:

“There should be sufficient account of the facts and of the reasoning to enable the EAT or, on further appeal, [the court of appeal] to see whether any question of law arises; ”

Having regard to the sparsity of the statements of the Industrial Tribunal’s reasons in paragraphs 8 and 9, we find it impossible to check with any certainty whether any question of law arises.  For that reason, we propose that this case should be remitted to the Industrial Tribunal with a direction that there should be further findings on this matter.

	We think it important that the Industrial Tribunal should clarify the factors they took into account in coming to their conclusions that there was no substantial difference between the new and corresponding terms of the old contract.  Secondly, they should spell out the factors they took into account in deciding that clause 5(1) was not an unreasonable clause to include in the new contract and, thirdly, the factors they took into account in concluding that the dismissal was not unfair. 

	To that extent, the appeal is allowed.