Appeal No.	 EAT/188/00

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	                   At the Tribunal
	         On 21 February 2001
Judgment delivered on 18 June 2001

Before
MR COMMISSIONER HOWELL QC
MRS W GALLICO
MR G H WRIGHT MBE

MR H DONALD	APPELLANT

M W PEARCE LTD	RESPONDENTS

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	The Appellant in person 	
For the Respondent	Mr P Harrington
Representative
M & W Pearce Ltd
Great Western Court
Hunts Ground Road
Stoke Gifford
Bristol BS34 8HP	

MR COMMISSIONER HOWELL QC

1	Pursuant to the Order of the Appeal Tribunal at the preliminary hearing on 26 May 2000 there are two points now before us on this appeal by Mr Hamish Badenoch Donald against the decision of the Bristol Employment Tribunal, as varied on review in a statement of Extended Reasons at pages 50 - 55 of the appeal file, sent to the parties on 21 December 1999, following original and review hearings on 10 May and 10 November 1999.  

2	The proceedings effectively before the Tribunal were claims by Mr Donald for breach of contract against his former employers, M & W Pearce Ltd, a project management firm, with whom he had been employed as a Procedures Co-ordinator from 1 January 1997 until the effective date of termination of that employment by the employer on 30 October 1998.  

3	The only two issues that concern us are first, whether the Tribunal were correct in holding that a letter dated 1 October 1998 signed by the Respondents’ Project Manager, addressed to Mr Donald and received by him on the following day, 2 October 1998, was properly to be construed as an effective notice to terminate his employment on 30 October 1998 so that no further payment in lieu of notice was due to him; and second whether they were correct in holding that there was no outstanding liability of the Respondents under a provision of his employment contract in which they had undertaken to pay his actual Social Security liabilities arising on his employment in Germany, where most, if not all, of the actual work on the project was taking place.  

4	On the point about notice, the facts found by the Tribunal were as follows:

“(a)     On a date towards the end of September 1998 the respondent’s management took the decision to dismiss the applicant.  This decision was communicated to Des Pike, the respondent’s project manager, in Dresden.  
(b)    On 30 September 1998 Des Pike met the applicant, explained the position to him telling him that his employment would terminate on 30 October 1998;
(c)      On 1 October 1998 Des Pike wrote to the applicant on notepaper of Meissner & Wurst giving written confirmation of the notice that had been given and thanking him the applicant on behalf of the respondent for his efforts and commitment on the Dresden project ….. This letter was a letter from the respondent written on third party stationery;
(d)     Following the giving of notice the respondent made efforts to relocate the applicant on a job in Portugal but this proved to be impossible and the notice was not rescinded.”

5	We interpose that paragraphs (b) and (c) as typed (pages 52-53 of the appeal file) contain references to “1999” which are obvious errors, as the remainder of the facts and the documents show; and “Meissner & Wurst” was the associated company in Germany for whom the UK company M & W Pearce Ltd (a joint venture company formed by Meissner & Wurst and the Pearce Group Ltd) provided project management, including the services of Mr Donald, under separate contractual arrangements between the two companies.  Mr Donald told us that he had previously done similar work for Pearce as a Consultant, but became an employee of the Respondents with a contract of employment only from 1 January 1997 at the insistence of the client for this particular project in Dresden (the American company AMD ) which required that those managing the project should be employees on the payroll.  However the contract itself (the main provisions of which are before us at page 85 of the appeal file) was for an indefinite period, and not tied to this particular project, although it did provide expressly that his place of employment would be Dresden, subject to the ability of the employer to require him to work at or from other establishments.  It provided for his employment to be terminable by either side in writing on four weeks notice while his continuous service was less than four years.  

6	The letter of 1 October 1998 is also before us at page 100.  As noted by the Tribunal, it is on notepaper of the German company Meissner & Wurst but is in English, in the following terms:

“Dear Hamish
AMD FAB 30 - DRESDEN
Notification of Leaving FAB 30 Dresden
Further to our recent discussions p/m 39-09-98 regarding the above mentioned, this is to confirm that your current employment on this project will cease with effect from Friday, 30th October 1998.
Whilst M + W Pearce will endeavour to find alternative employment within the company or one of the other operating companies controlled by the Pearce Group this unfortunately cannot be guaranteed.
We trust that you will continue to serve “the company” throughout your notice period as you have during the period of your current contract of employment.
We thank you on behalf of M + W Pearce Ltd for your efforts and commitment throughout your period on this project.
Yours sincerely

Des G Pike
Project Manager
FAB 30 Dresden”

7	As noted above, the only question for us to consider is whether the Tribunal erred in holding the terms of that letter effective as a notice under Mr Donald’s contract to start the four weeks period running to bring his employment to an end on 30 October 1998, 28 days after he received it.  Given the findings of the Tribunal that Mr Pike was the Respondents’ Project Manager on the spot in Dresden, was the person who talked to Mr Donald and explained the position to him on 30 September 1998, and then told him that his employment [sic] would terminate on 30 October 1998, we do not for our part see that there can be any ambiguity at all about the nature of the notice being given by the letter that Mr Pike signed on the following day referring specifically to the discussion the previous afternoon.  Although it does, as Mr Donald pointed out, refer specifically to his current employment on the “AMD FAB 30 - Dresden” project (which had of course been the reason for his becoming an employee in the first place),  we do not think any reasonable person reading that letter as a whole, in the context in which it was written, could take it as other than a notice to terminate Mr Donald’s current employment under his contract with M & W Pearce Ltd.  The references in the second and third sentences of the letter to “an alternative employment” being possible but not guaranteed, and to Mr Donald continuing to serve the company throughout his notice period, in our judgment permit no other interpretation; and the matter is placed beyond all conceivable doubt by the fact that the letter was following up the discussion of the previous afternoon, when as the Tribunal expressly found, Mr Donald had been told that his employment would terminate on 30 October 1998.  As the Tribunal also found the letter to have been written by Mr Pike in his capacity as manager on behalf of the Respondent, we cannot for our part see that there was any arguable ground for challenging the Tribunal’s decision that it was effective to bring Mr Donald’s employment to an end on 30 October 1998 in accordance with the terms of his contract. 

8	The second point Mr Donald sought to argue before us was that the Tribunal had been wrong in rejecting his claim for additional money from the Respondents under a supplemental provision of his contract relating to his secondment to work overseas.  The contractual provision on which this claim was based, which it is not in dispute was incorporated into Mr Donald’s contract of employment with M & W Pearce Ltd, is set out so far as material in a letter from the company dated 9 May 1997 at page 94 of the appeal file as follows:

17     Tax and social security
17.1  The employer will operate a tax and social security equalisation scheme during the Term.  This means that, in general terms, the employee will pay the equivalent of the UK tax and social security contributions that he/she would have paid, had he/she remained in the UK.
17.2  Under this method, an amount similar to that which the employee would have paid to the UK tax and social security authorities, on his/her base pay, uplift and normal UK taxable benefits and expenses, will be deducted monthly, from his/her gross salary.  The employee will therefore receive each month a net amount on which no further tax or social security will be payable by the employee.  In return, the employer will pay the employee’s actual tax and social security liabilities arising on his/her employment in Germany.”

9	What happened in fact was that during the period while he was working in Germany as an employee of M & W Pearce Ltd, Mr Donald became liable to German tax on his earnings, as a result of having already established residence there while working as a sub-contractor. But under the reciprocal Social Security arrangements in the two countries, he was not required to pay any Social Security contributions in Germany, but throughout remained an insured person liable to pay earners’ contributions to the UK Social Security scheme.  As the Tribunal succinctly put it in their finding of fact in paragraph 14(j) of their Extended Reasons:

“(j) The respondent had undertaken to pay “the employee’s actual tax and social security liabilities arising on his employment in Germany.”  The circumstances of the applicant’s employment resulted in the tax liability arising in Germany and the social security liability arising in the UK.”

10	The basis of Mr Donald’s complaint under this head, as we understood it, was that because under the reciprocal social security arrangements he had remained in the UK Social Security scheme and had not come under any liability to make contributions as an employee to the German scheme, he had in effect forfeited the chance of remaining in Germany and claiming benefits there as an unemployed worker after his employment with M & W Pearce Ltd came to an end.  His contention was that the employer’s obligation to pay his “actual tax and social security liabilities” should be construed as an obligation to ensure that he became a member of the German Social Security scheme and to secure the payment of contributions into that scheme, so that on termination of his employment he would have been able to remain in Germany and claim benefits under it, which he considered more advantageous.  

11	In our judgment that too is a completely impossible argument and the Tribunal were entirely right to reject it.  In our view the contractual provision is quite unambiguous: it is to pay any actual liability for Social Security contributions that arises on the employee’s employment in Germany, so far as this exceeds the normal liabilities of a UK employee.  No such additional liability in fact arose in this case at all, because under the reciprocal Social Security regulations Mr Donald remained liable to pay contributions as an employee under the UK scheme and did not have any liability to make contributions to the German scheme.  Again it appears to us completely unarguable that if there was no actual liability, it could have been a breach of the contractual provision in Clause 17.2 for the employer not to make some additional payment in respect of it, or take steps of its own to get Mr Donald admitted, as an insured person under the German scheme on a voluntary basis (even if the rules of that scheme would have permitted this).  For our part we cannot see that there is any ambiguity in paragraph 17.2 in defining the extent of the employer’s obligations, and in our judgment the Tribunal were right beyond argument in holding that there had been no breach of contract on the part of the Respondents, the liability for Social Security payments having in fact arisen in the UK and having been duly met.  

12	For those reasons, we unanimously dismiss this appeal.