Appeal No. EAT/1259/01

EMPLOYMENT APPEAL TRIBUNAL
52 MELVILLE STREET, EDINBURGH EH3 7HF

	At the Tribunal
	On 25 April 2002

Before
THE HONOURABLE LORD JOHNSTON
MISS S B AYRE
DR W M SPEIRS

C R S COMPUTERS LTD	APPELLANTS

NEIL MacKENZIE	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellants	Mr K R W Hogg, Solicitor
Of-
Messrs Allcourt
Solicitors
1 Carmondean Centre
Carmondean
LIVINGSTON    EH54 8PT	
For the Respondent	Miss K Lumsdaine, Solicitor
Of-
Messrs Henderson Boyd Jackson WS
Solicitors
19 Ainslie Place
EDINBURGH   EH3 6AU

LORD JOHNSTON:

1.	This is an appeal at the instance of the employer against a finding of the Employment Tribunal dismissing a counterclaim brought by the employer against an admitted obligation to pay a certain sum of money to the respondent employee upon his dismissal for redundancy.  The figure in question was £4,530.06.

2.	The dispute turns around the issue of the settlement charges in relation to the company car operated by the respondent while in his employment, it having been leased.  The condition of the contract in question is as follows:-

“	CRS will make a company car with a lease value of £350 per month available to you.  You have requested a Subaru Impretza Turbo, with extras, which costs more than standard allowance.
		Your contribution towards this company car will be £2160 per annum, which will be deducted from your salary; this being to supplement the standard car allowance of £4200.  Acceptance of this offer will constitute commitment to pay any settlement charges on the lease of the vehicle should you leave for any reason within the first year of employment.  You also agree that any sums due under this clause may be deducted from salary and any other payments due to you.  For your information this has been estimated at £5000 if lease termination occurs at 6 months.”

3.	It appears that the Tribunal heard evidence although the real issue to our mind is a construction of this clause.  The construction put upon it by the Tribunal is as follows:-

“The basic approach in interpreting a provision in a contract is an objective one of determining the meaning of what the parties have said, rather than asking what they intended to say.  The starting point is the words used by the parties, placed in the context of the contract as a whole.  Words are to be given their ordinary grammatical meaning, unless it is clear from the contract that some other meaning is intended.  In accordance with the rules of construction applicable to contracts, the Tribunal cannot take into account what the parties may actually have meant at the time of agreeing to it, nor any of their subsequent actions (except expressly agreed variations) as showing that the provision did not mean what it said: Hooper v British Railways Board [1988] IRLR 517 CA).

In this case I considered that, in the context of the contract as a whole (as described above), the ordinary grammatical meaning of the words “should you leave for any reason” were clear and unambiguous.  ‘To leave’ is variously defined in dictionaries as to go, abandon, depart, decamp, desert, renounce, etc, which are all meanings implying an element of voluntariness.  I therefore considered that the words “should you leave for any reason” were clear and unambiguous and did not cover the position where the applicant was dismissed by the respondent by being made compulsorily redundant, as actually occurred.  I considered there was nothing in the context of the contract as a whole (excluding what the parties may have meant or thought they meant by the words) to lend support to the respondent’s view that the words included all or any circumstances in which the applicant’s employment was terminated.  As the words were not ambiguous nor capable of bearing more than one meaning, it was not permissible to have regard to the surrounding circumstances (about which I heard evidence) to determine their meaning.

I therefore found that in the circumstances of the applicant’s dismissal he had no contractual obligation to pay the settlement charges on the lease of his company car.”

4.	However, there was another issue which the Tribunal treated by way of postscript but it is, in fact, central to the whole question, namely, whether the fact that the employer terminated the contract of employment by the payment of two weeks’ wages instead of two weeks’ notice, amounted to a breach of contract sufficient to prevent, on the principal of unity of contract, the employer now enforcing the contract clause relating to the settlement charges. 

5.	In this context the decision of the Tribunal is as follows:-

“In addition the applicant’s solicitor submitted that in any event the respondent was in breach of the applicant’s contract of employment by not giving him the requisite notice of termination, and so could not enforce contractual provisions against the applicant.

The applicant’s contract of employment provided:
		“15	NOTICE OF TERMINATION
Where employment is terminated by the company the following periods of notice will be given:
	Employees leaving within three months will be given one weeks notice in writing.  Employees leaving after the first three months but less than one year will be given two weeks notice in writing.  Employees leaving after one year will be given four weeks notice in writing.  
Employees will be obliged to give the same notice as above in writing of their intention to terminate their employment with the company.”
There was no provision for the respondent making payment of sum in lieu of notice.

It was agreed in this case the applicant had been dismissed without notice on 31 August 2000, albeit he would have been paid 2 weeks’ salary as compensation for loss of notice, apart from the dispute over the car payment.

The respondent was therefore in breach of contract in dismissing the applicant and, as the contract has to be regarded as a whole, it cannot enforce the other provisions of the contract against the applicant.  So in any event it cannot enforce payment by the applicant of the settlement charges on the lease of his company car.”

6.	Mr Hogg, appearing for the appellants, dealt first of all, quite properly, with the question of enforceability accepting that if his client was in breach of contract such as to render the clause relating to settlement charges unenforceable, the case came to an end.  He submitted however, that payment of wages in lieu of notice was not a breach of contract and certainly not a material one sufficient to cause the whole contract to be repudiated by the employer and therefore render other clauses unenforceable.

7.	On this question, Miss Lumsdaine, appearing for the employee, submitted that there was a breach of contract by reason of the fact that the notice provision was not worked out, there being no express term in the contract which permitted payment in lieu of notice.  Accordingly, she submitted, the Tribunal had come to the correct decision.

8.	As a matter of general law, for a breach of contract to be sufficient to prevent the party in breach enforcing the other terms of the contract, it must be material in the sense of going to the root of the contract and amounting to a repudiation by the offending party of the whole contract; in other words, such as would lead the other party clearly to the conclusion that the offending party was no longer going to be bound by the basic terms of the contract.  The issue of materiality is therefore at the heart of the question before us and we are entirely satisfied that if, and we have some doubt about this, payment of wages in lieu of notice is a breach of contract, it is certainly not a material one going to the root of the contract having regard to the fact that the employer is not putting the employee in any worse position than he was otherwise entitled to be and cannot, therefore, be said to be acting in such a way as to repudiate the whole contract.

9.	In these circumstances we agree with the position adopted by Mr Hogg and consider the Tribunal misdirected itself on this question.

10.	That being so, the issue of the construction of the clause opens before our consideration.

11.	This issue turns on what is meant by the words “should you leave for any reason”.

12.	Mr Hogg’s position was that this was entirely unqualified assertion of fact which did not depend upon the reason for leaving being a voluntary act on the part of the employee.  In any event, he said the matter had to be re-explored in evidence to determine the intention of the parties but for the reasons which we shall give, we do not consider that to be necessary.

13.	Miss Lumsdaine, in this context, asserted that the Tribunal had adopted the correct approach.  There was a distinction between involuntary and voluntary determination and the clause only applied to that consideration.  In any event, if there was any ambiguity it should be construed against the employer in favour of the employee under the contra proferentem. rule.
14.	We consider that this question of construction can be tackled by us at this level, not requiring any evidence.  It is clear to us, that the background to the clause was that the fact that the employee was receiving a car or getting the use of a car of a far higher calibre than the company would otherwise have provided and the price he had to pay for that was an agreement to accept the settlement charges in respect of the leasing company if he ceased to work for the company.  We say that since we have no reason but to accept the position that “leave for any reason” means precisely that and can be habile to cover both voluntary and involuntary cessation of employment.  We are fortified in this view by the fact that the termination clause in the contract uses the word “leave” in the context of the employer giving notice, thus suggesting again that there is a context far wider than a mere voluntary act on the part of the employee.

15.	In these circumstances we consider this appeal succeeds and that the company is entitled to enforce the contract which means that the respondent employee, on the figures before us, owes the appellant £6,521.36.  This sum exceeds the agreed sum due to the appellant by £1,991.30.

16.	In these circumstances the appeal is allowed.  The order is quashed and the counterclaim will be upheld and an order made against the respondent to pay the appellants £1,991.30.