Appeal No.	 EAT/740/99/JES

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 21 October 1999

Before
HIS HONOUR JUDGE ALTMAN 
MRS T A MARSLAND
MR J C SHRIGLEY

THE SHIELD GUARDING CO	APPELLANTS

MR G D VAN STADEN	RESPONDENT

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellants	Mr ANDREW FRASER-URQUHART
(Of Counsel)
Messrs Fladgate Fielder
Solicitors
25 North Row
London W1R 1DJ	

JUDGE ALTMAN:
1	This is an appeal from the Employment Tribunal sitting at London (South) on the 16 April 1999.  The Employment Tribunal found that the Appellant had made an unlawful deduction from wages of £493.68.  The Chairman sitting alone made detailed findings of fact.  He found that the respondent began work for the appellants on the 10 December 1998 and that he had to sign and acknowledge the terms and conditions of his employment before being given an opportunity of actually reading them.  There were two potentially relevant clauses.  The first dealt specifically with the Appellants entitlement to make deductions of pay of an amount entirely within the discretion of the appellant in circumstances which do not apply here.  The Employment Tribunal then quote the provisions as to notice referring to an obligation on the part of the employee to give 2 weeks notice of termination and continuing.

“You agree that failure to give the stipulated notice in writing to leave the company or to return company property including any uniform after the termination of employment will result in the forfeiture of all terminal monetary benefits and previous earned pay”.

2	It has been argued before us that just relates to two weeks notice but of course it is much broader than that covering all sums due.  

3	On the 30 December the Respondent gave notice of termination to expire on the 4 January.  When told of the obligation to give 2 weeks notice the respondent offered that period of notice and it was rejected.  Whilst it did not form part of the decision of the Employment Tribunal, we have canvassed with Counsel, Mr Fraser-Urquhart, the proposition that in fact the Respondent did not fail to give the stipulated period of notice because before his employment ended, and before his earlier notice had been accepted, he had offered to give two weeks notice. And so it appeared to us there was an argument at least that he was not in breach of his contract in any event.  We have been told however today, that if that matter had been canvassed the answer given would have been that the offer of two weeks notice was given in such a tone of voice and with such a facial expression that it could not be relied upon. 

4	The clause to which we have referred has two very obvious features which apply where due notice is not given by an employee.  In construing whether or not a clause is a penalty clause, Mr Fraser-Urquhart correctly points out that it must be judged at the time the contract is entered into and not at some later time, and what the Tribunal would be looking at is a pre-estimate of loss.  But of course, what happens in a particular situation may well provide fairly good evidence as to the reliability of any such pre-estimate.  

5	In this case there was no evidence put before the Employment Tribunal of what loss was actually sustained by the Respondents as a result of the employee’s leaving.  Nor was any evidence put before the Tribunal of a general kind of the sort of loss that is incurred in this type of situation.  I revert to what we said a few moments ago.  The clause has two very obvious features.  First the amount of money to be withheld is not limited by any other factor than that it is the total sum due, whatever that may be.  

6	Secondly the provision operates as a consequence of failure to give notice.  It is not on its terms related to any damage suffered by the employer.  For those reasons on the face of the clause it cannot be construed as being related to compensation for damage.  The chairman found at the conclusion of his decision as follows:

“I refer to the provision at paragraph 11, is it legal?  In my view it is not.  It is a penalty and as such cannot be enforced”.

7	The argument before us is on three grounds of appeal.  First, under the heading of “misdirection or error in law”, it is said that there was an error because the Tribunal had heard no evidence as to the matters needed to determine whether a contractual clause is a penalty clause, and therefore the Tribunal’s conclusion was unsupported by evidence.  The clause itself of course was the essential evidence upon which the Employment Tribunal relied.  No other evidence within the decision has been drawn to our attention by Mr Fraser-Urquhart that the Tribunal failed to take into account.  We have probed with Mr Fraser-Urquhart what evidence of loss would have been put before the Tribunal, to such an extent that we ended up with the appellant representative making calculations actually as our proceedings were going  on.  

8	So the suggestion that there was no evidence upon which such a conclusion could be based carries no weight because there was the clause and parties always have an opportunity to call evidence before Tribunal.  Another matter was raised before us during the course of argument, it is suggested that the appellants tried to canvas these matters before the Tribunal in relation to the sorts of losses that they received, and were stopped from doing so.  We would make a number of observations about that.  First there has been no application to amend the grounds of appeal to include a complaint which is the way in which the proceedings were being conducted. 

9	Secondly no such ground was included in the notice of appeal.  

10	Thirdly when we look at the original notice of appearance before the Employment Tribunal, the respondents relied exclusively on the terms and conditions of employment and do not relate to any collateral evidence or facts.  Although they were litigants in person, the notice was put in by Mr Kedward, the director of Human Resources at the appellants limited company.  And finally the circumstances which should have been drawn to the Tribunal’s attention have been outlined by Mr Fraser-Urquhart as follows.  

11	First there is the rapid turnover of staff in this sort of business, secondly the obligations that the appellant has to his clients, thirdly that the appellant would suffer loss if an employee in his words “ups and offs” and that this is a common feature, fourthly that there is the need to expend money in covering for an employee who has gone, and fifthly that this clause is related to the benefits payable and the amounts involved because it is expressed to cover sums due.  In other words it does not require any additional payment to be made by the employee.  

12	It seems to us those are all very good reasons for doing one of two things, namely introducing a penalty, or providing a genuine means of calculating loss.  But there is no evidence before us that those propositions favour one rather than the other. 

13	Ground two suggests effectively that the decision was perverse, complaining that the tribunal failed to take into account the loss to the appellant if its employee did not give the notice that was required.  However, as there was no evidence of that we find it difficult to see how an argument can be sustained that a decision of an Employment Tribunal is perverse because it based its decision on the evidence before it and failed to take into account evidence which was not before it.  This is not a proposition which we consider could found an argument for appeal.

14	The third ground is that no adequate explanation to the parties was given as to why the Tribunal so concluded.  That is true.  In the final sentence which I have quoted the decision that it is a penalty is not explained in terms.  However, we can think of no other conclusion to which the Employment Tribunal properly directing itself could have come, and the conclusion is, on the face of it, so obvious that the absence of a reason, whilst it may leave some unfortunate puzzlement on the part of the parties, cannot in this case, it seems to us, be regarded as an error of law.  The clause itself has no relationship on the face of it whatsoever to loss, there was no evidence before the Tribunal of loss, the notice of appearance as presented did not seek to rely upon loss, and we have been told of no evidence that was going to be adduced in relation to loss and our researches during the course of these proceedings lead us to conclude that such evidence was not available at the time for it was being calculated today.

15	The clause is unrelated to loss.  There may be a substantial sum of back pay owing, a person after many years service may have earned a lot of holiday pay, and he may come back from holiday hoping to be paid that money and give the wrong period of notice.  There could be a very substantial sum of money owing to him which would be still forfeit no matter how much it was.  On the other hand the employer may incur thousands of pounds replacing an employee who has walked off without warning.  Or, the employer may find that just as an employee leaves, a long serving employee who had been away but wants to come back walks in the door and can pick up where the other man has left off and in that situation the employer loses not a penny.  The clause would operate, come what may.  It is on the face of it a penalty.  We can see no other way in which it could be described.  

16	We find no point of law which merits this matter being argued in full before the Employment Appeal Tribunal and the appeal is dismissed at this stage.