Appeal No. EAT/182/96

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 20 September 1996

Before
HIS HONOUR JUDGE J HICKS QC
MR S M SPRINGER MBE
MRS R A VICKERS

MR K HARRIS & MRS L HARRIS	
APPELLANTS	

THE TRUSTEES FRYSTON MINER'S WELFARE SCHEME	

RESPONDENT	

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellants	MR M GARGAN
(of Counsel)
Horrocks & Co.
Solicitors
11-12 The Square
Airedale
Castleford
West Yorkshire
WF10 3JJ	
For the Respondent	MR P RILEY
(Representative)
Coal Industry Social
Welfare Organisation
Halfpenny Lane
Pontefract
West Yorkshire
WF8 4AY

	JUDGE HICKS QC:   Mr and Mrs Harris, the applicants and appellants, had been employed by the Trustees of the Fryston Miners’ Welfare Scheme as Steward and Stewardess of the Club run by the Trustees since 19th June 1989. There had been, as the Industrial Tribunal found - and none of their primary findings of fact is challenged - a history of verbal and written warnings, and the tribunal’s reasons pick up the history in a little more detail on 31st December 1994, when Mr Harris decided on the morning of that day that the Club would be closed and, having made that decision without consulting the Committee or Trustees, released the staff and the premises remained closed. Immediately after that event Mr and Mrs Harris tendered their resignations but they were not accepted, and they were given an extended holiday.

	In June 1995, some six months later, they were again about to go on holiday. As the tribunal found, their holiday entitlement had already been exceeded. The Trustees for that reason considered that they were not entitled to holiday pay but in the end, on the eve of their departure, it was paid. On their return they were presented by the respondents with a draft written contract, they having hitherto been employed on contractual terms agreed orally. The tribunal found that the terms of that proposed contract were almost identical with a draft which the Harris’s had themselves put forward in the previous October, but the response of Mr and Mrs Harris was a letter from their solicitors which the tribunal characterised as “unfortunate” and as amounting to a threat of proceedings. 

	The Trustees’ response to that - at least the tribunal found that it was a response, although on the face of it it is not expressed as such - was a letter of 30th June  in which the Trustees wrote not to the applicant’s solicitors but to Mr and Mrs Harris themselves, and the letter, after reciting that the employment had been on terms and conditions which were agreed but not in writing, states that there have been a number of breaches which the letter says “have made it necessary for us, the Trustees, to issue the follow written discipline”, so it purports  presumably to be a written warning of some kind. What it then does is to set out under four numbered headings complaints by the Trustees of the conduct of Mr and Mrs Harris. The first deals with the holiday question, the second with the events of 31st December 1994. the third is a general allegation about attitude to customers, with a specific example on the part of Mrs Harris, and the fourth is as to Mrs Harris’s alleged working of short hours. The tribunal found as a fact that all those allegations were factually accurate but criticised that letter also as “ill-conceived”, and said that so far as it purported to be disciplinary it flouted all accepted standards.

	The response to that by Mr and Mrs Harris, on the advice of their solicitors, was to resign on the basis that that letter was a repudiatory breach on the part of the Trustees, and their case before the Industrial Tribunal, therefore, was that they had been constructively dismissed.

	The Notice of Appeal, as amended today by leave, raises a number of points, but in the event Mr Gargan for the appellants, we think quite rightly, concentrated on one ground only as being the substance of the appellant’s case; we agree and also concentrate on that .

	That ground arises in this way. In their reasons the Industrial Tribunal, having dealt with the facts, reminded themselves correctly, as is agreed, that the guiding principles are to be found in the case of Western Excavating v Sharp [1976] QB 761, and that they involve the three stages of asking first whether there was a breach of contract by the employers, secondly whether that breach was of a fundamental term of the contract, and thirdly whether the resignation was in response to that breach. 

	I should mention in passing that although I have said that they rightly reminded themselves of those principles, there is potentially a question whether the formulation of the second stage was completely accurate, but it is no possible consequence in this case, because the finding of the tribunal was that there had been no breach at all, and therefore they did not turn and had no need to turn to the question whether it satisfied the second limb of Western Excavating, however formulated. Turning therefore to the first question of whether there had been a breach of contract, they dealt with it in this way:

“Although as already indicated, we find that the respondents in their dealing with the applicants’ position did not act in the way in which we would expect of a reasonable employer, we equally cannot find that was they did was in breach of the applicant’s contract of employment. The applicants say that the specific term of their contract of employment which was breached, was the implied term of good faith on the part of the employer. We can find no argument with the concept of the implied term of good faith. It is one which is well recognised. On the other hand we cannot find that what the respondents did amounted to a breach of that implied term. ...”

They elaborate a little on that, and later deal with the fact that the resignation was on the advice of their solicitors. But the nub of their decision and the passage which is criticised by the appellants is the one which I have read in full.

	The term which the Notice of Appeal alleges was implied by law in the contract of employment was that the respondents would not without reasonable cause conduct themselves in a manner likely to damage or destroy the relationship of trust and confidence between themselves and the appellants as employer and employee. Mr Riley for the respondents rightly accepts that such a term is implied by law in contracts of employment.

	The criticism of the tribunal, therefore, and the error of law which Mr Gargan for the appellants says they fell into, was that they did not express the term which they were considering and the breach of which was in question in the language of trust and confidence, but in the language of good faith. Mr Gargan submits on the basis of the case of  Post Office v Roberts [1980] IRLR 347 that deliberate conduct or bad faith is not a necessary element in the breach of the duty not to damage the relationship of trust and confidence. That is not to say that whether the employer acts in good or bad faith is irrelevant to whether there is such a breach, but it is possible for there to be such a breach, notwithstanding that the employer acts in good faith. Therefore, says Mr Gargan, the tribunal asked themselves the wrong question; that is an error of law, and therefore the appeal should be upheld and the matter remitted. He does not suggest, and clearly he is right in this, that we could decide the matter ourselves; there would inevitably be a remittance to the Industrial Tribunal for a rehearing if he justifies this ground of appeal.

	The course which was taken in the Industrial Tribunal appears partly from what we were told and accept from Mr Riley, who appeared for the respondents there as he does before us, and partly from the closing submissions of the solicitor who then appeared for the appellants, which were reduced to writing and which apparently were only quite shortly supplemented orally, and of which we have a copy. What happened, in so far as is relevant to this point, is that on the first day of the hearing the chairman asked the applicant’s solicitors to formulate precisely the nature of the case being put forward and the reply was expressed in terms of a duty of good faith. So far as that goes, Mr Riley does not purport to be able to recall the exact words used, and as we understand it has no note of the exact terms used, but the relevance of it is this. The tribunal, and presumably and particularly the chairman, expressed themselves as being very familiar with such a concept. Mr Riley, however, who is not legally qualified, was not familiar with it and asked for an explanation, and he has a note summarising the chairman’s reply, which was to the effect that there was between employer and employee a relationship of trust and confidence which must not broken. That was that aspect of it.  The other aspect of it, which appears from the closing written submissions, is that the appellants were through their solicitor submitting that there was a repudiatory breach of the implied contractual obligation of trust and confidence and  that the test of that was objective, which clearly would carry the implication that mere good faith is not necessarily a defence, and that that submission, having been made on first page, then returns on the last page, where there is a suggestion that a Mr Wright, who was involved on the Trustees’ side, knew of the holiday pay situation some four days prior to the Harris’s departure, and yet it was only on that date of departure that anything was mentioned - this presumably relates to the June incident - and then the allegation of breach of the duty of trust and confidence is repeated.

	That being the background, we have to ask ourselves whether the tribunal misdirected itself in law when it addressed this question. We accept that had the tribunal supposed that the only question was whether the employer was in good faith or not, as a subjective matter of the employers’ state of mind, then they would have been misdirecting themselves, and their reply to that question, “there was no breach”, would therefore be one which we could not be sure was arrived at without error of law. But it is not the task of this tribunal to deal with appeals on the basis simply of the correct use of magic words, or by, as it is sometimes put, going through the tribunal’s reasons with a fine toothcomb; the question is, looking at the phrase which they used in the light of what we know about the submissions which were before them, and in the light of the fact that by their reference both in their reasons and in the dialogue to which Mr Riley referred on the first day they plainly showed themselves well familiar with the concept of the implied term of trust and confidence (indeed, as Mr Gargan accepts the chairman himself was person of substantial experience in that role), they asked themselves the wrong question in substance, or only in form. 

	We have to ask ourselves whether in all those circumstances it is to be supposed, or we should conclude, that they applied the wrong test, simply from the fact that they used the words “the implied term of good faith” in their reasons. We have come to conclusion that that would be a wrong conclusion to draw, and indeed a rather fanciful one, because they are referring to the term which the applicant’s solicitor had been advancing during the course of hearing. It is quite apparent that the concept of trust and confidence had been one which was raised and discussed and in the minds of everybody who took part in the hearing, and that in the applicant’s closing written submissions the whole emphasis is on a breach of that term. 

	We find it, as we have said, not just something which we are not forced to conclude, but actually somewhat fanciful to suppose, that in those circumstances the tribunal was under any illusion as to the question which they had to answer. If they asked themselves the right question then there is no doubt, and Mr Gargan accepts, that the answer was not one which we can say was perverse or one which no reasonable tribunal might have reached. In those circumstances we find that the tribunal did not misdirect themselves in law and were not in error, and that the appeal should therefore be dismissed.