Appeal No. EAT/560/92

	EMPLOYMENT APPEAL TRIBUNAL
	58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

		At the Tribunal
		On 23rd February 1994
	Judgment delivered on 7 October 1994

	Before

	THE HONOURABLE MR JUSTICE MUMMERY (PRESIDENT)

	MISS A P VALE

	MR G H WRIGHT MBE

MR W MORGAN	APPELLANT

WEST GLAMORGAN COUNTY COUNCIL	RESPONDENTS

	Transcript of Proceedings

	JUDGMENT

Revised

	APPEARANCES

For the Appellant	TESS GILL
(of Counsel)
Michael Scott & Co
27 Britannia Street
LONDON WC1X 9JP

For the Respondents	MR M BISHOP QC
County Secretary
West Glamorgan County Council
County Hall
Swansea SA1 3JN

MR JUSTICE MUMMERY  (PRESIDENT)          This is an appeal against the decision of the Industrial Tribunal held at Cardiff on 23rd June 1992.  For Full Reasons notified to the parties on 14th July 1992 the Tribunal unanimously decided that the Applicant, Mr W H Morgan, a Senior Lecturer at Swansea College, was not entitled to any relief under the Wages Act 1986 ("the 1986 Act") against his former employer and Respondent to these proceedings, the West Glamorgan County Council ("the Council").  By Notice of Appeal dated 6th August 1992 Mr Morgan appealed against that decision.

	He did not appeal against an earlier decision of the Tribunal notified on 27th May 1992 in proceedings unsuccessfully brought by him under sections 23 and 24 (subsequently repealed) of the Employment Protection (Consolidation) Act 1978 against the Council and the Governing Body of Swansea College ("the Governing Body").  Those proceedings were based on the same events as gave rise to the complaint under the 1986 Act and were dealt with at the same hearing as the complaint under that Act.

The Claim
	Mr Morgan's claim under the 1986 Act was deceptively simple in appearance.  The claim in his notice of application presented on 15th February 1992 was that from 24th December 1991 the Council had unlawfully made deductions from his wages in contravention of S.1(1) of the 1986 Act as a result of the unilateral and unauthorised reduction of his gross annual salary from £26,640 to £23,400, following disciplinary proceedings against him by the Governing Body.

	The Council contended, in its Notice of Appearance dated 3rd March 1992, that the 1986 Act did not apply as no deductions within the meaning of the 1986 Act were made from his pay.  It was admitted that there was a reduction in Mr Morgan's wages as a result of disciplinary action by the Governing Body.  The Council contended that, under the provisions of the Education Reform Act 1988 ("the 1988 Act") it had no option but to follow the instructions of the Governing Body as to the amount of salary to be paid to Mr Morgan following disciplinary action by the Governing Body.

Factual Background
	The relevant facts, as appear from the two Tribunal decisions and the agreed bundle of documents, can be conveniently summarised as follows:-
(1)  From September 1980 Mr Morgan was employed as a Senior Lecturer at Swansea College.  He was originally Head of the Engineering Department.  He later became Section Leader with eight lecturers under him.  His responsibilities included the drafting of timetables for section members and ensuring the observance of the national averaging agreement and other conditions negotiated with employers by the National Association of Teachers in Further and Higher Education ("the Association) of which Mr Morgan became Branch Secretary in October 1990.

(2)  Mr Morgan's contract of employment was dated 1st August 1985.  It provided for a salary according to the range given in the Burnham Report for a Protected Head of Department.  The contract incorporated the disciplinary provisions of the "Silver Book", a national agreement between education unions and authorities.  Section 6 of the Silver Book provided for discipline, suspension and dismissal.  It provided that it was to be read in conjunction with the instrument and articles of Government of the establishment in which the lecturer was serving.  The sanctions available to the provisions of the Silver Book included, in addition to dismissal, (6.5(b), (iii) -
"Transfer to another post within the establishment (in appropriate circumstances and having regard in particular to the terms of the lecturer's contract).

(3)  On 8th October 1991, Mr Morgan was suspended from his administrative duties as a Section Leader after a meeting with Mr C M Lewis, Principal of the College.  There was a dispute about the proposed timetables.  It was alleged that Mr Morgan had failed to obey instructions and deal with complaints.  Mr Morgan denied receiving any complaints.  On 11th October Mr Lewis informed Mr Morgan that he had asked the Governing Body for a disciplinary hearing on two charges of failing or refusing to obey instructions and failing to deal with complaints from subordinate full time staff.

(4)  On 28th October there was a disciplinary hearing by Mr Lewis on the two charges.  Mr Lewis's capacity to take the case was challenged.

(5)  On 7th November 1991, it was resolved at a special meeting of the Governing Body of the College to give plenary powers to the Personnel Disciplinary and Grievance Panel to hear the pending case of Mr Morgan and to hear any future cases referred to that panel.

(6)  On 8th November 1991, the Council informed Mr Morgan and his representative from the Association that, in the case of Mr Morgan, the Governors intended to operate the procedure for the disciplinary panel under the latest version of a new revised Code of Discipline which was still in a state of negotiation with the Association.  They intended to operate that procedure to conform with the requirements of the Articles of Government which had been approved by the appropriate authorities, but were not yet operative.  The revised Code conferred on the panel (paragraph 4.10(vii)(c) a discretion to "transfer or demote to another post at the same or lower grade."

(7)  On 28th November and 3rd December 1991, disciplinary hearings were held by the sub-Committee of the Governing Body under the Disciplinary Review Code.  The broad thrust of Mr Morgan's defence was that he had not received any individual complaints.

(8)  On 23rd December 1991, the Articles of Government of the College, which had been approved earlier that year by the Welsh Office, came into force.  They were made by the Council, acting as Local Education Authority, in the form of an order dated 20th December 1991 under S.151 of the 1988 Act.  The Articles of Government provided in Article 10 that matters relating to the conduct, discipline and grievance of staff should be regulated in accordance with arrangements made by the Governing Body after consultation with appropriate representatives of staff and, in exercising that power, the Governing Body should have regard to national and local agreements adopted by the Authority for dealing with cases which fall within that category.  It was provided in Article 10(2) that these arrangements should include the establishment of a panel comprising at least three members of the Governing Body to consider such categories of disciplining cases as might be specified by the Governors for the time being.

(9)  Also on 23rd December 1991, the disciplinary panel gave its decision that Mr Morgan was guilty of the charge of continual refusal to obey reasonable instructions from the Principal; that he had not performed in a manner expected of a Section Leader; and that he could no longer hold that position.  The panel decided that Mr Morgan was to be demoted with effect from 24th December 1991 from Section Leader to a lecturer Grade, with a consequent reduction in annual salary from £26,640 to £23,400.

(10)  On 6th January the findings of the panel were sent by letter to Mr Morgan.  He did not appeal against that decision.  The Council acted on that decision, as instructed by the Governing Body.

(11)  On 31st March 1992, the Council ceased to Mr Morgan's employer.

(12)  On 1st April 1992, the beginning of the financial year, a financial delegation from the Council to the Governing Body under the Planning and Delegation Scheme for the Local Management of Colleges under S.148 of the 1988 Act came into force in West Glamorgan.

The 1986 Act
	As Mr Morgan's claim was made under the 1986 Act it is necessary to refer to the relevant provisions.
Section 1(1) provides -
"An employer shall not make any deduction from any wages of any worker employed by him unless the deduction satisfies one of the following conditions ..."
The Council does not contend that either of the statutory conditions is satisfied in this case.

	Sections 8(3) and (4) are relevant to the Council's contention that this case falls outside of the 1986 Act.
"(3)  Where the total amount of any wages that are paid on any occasion by an employer to any worker employed by him is less than the total amount of the wages that are properly payable by him to the worker on that occasion (after deductions) then, except insofar as the deficiency is attributable to an error of computation, the amount of the deficiency shall be treated for the purposes of this Part as a deduction made by the employer from the worker's wages on that occasion.

(4)  In subsection (3) the reference to an error of computation is a reference to an error of any description on the part of the employer affecting the computation by him of the gross amount of the wages that are properly payable by him to the worker on that occasion."

The 1988 Act
	The arguments on the appeal also rely on material provisions of the 1988 Act which came into force on 29th July 1988.  The provisions concern the devolution of control of educational institutions from local authorities to governing bodies.  Chapter III of the 1988 Act contains provisions for the "Finance and Government of Locally Funded Further and Higher Education".  Sections 148 and 149 deal with the "appointment and dismissal of staff during financial delegation."  Section 148 specifically deals with delegation of power as to the appointment and dismissal of staff.  Section 151, which has also been cited, is the first of a group of sections concerned with the government and conduct of maintained further and higher educational institutions and deals with the Instrument and Articles of Government required for maintained further and higher educational institutions.

	Section 148(9) provides as follows:-
	"Subject to any provision of the Articles of Government of the institution 

(a)  The regulation of conduct and discipline in relation to the staff of an institution to which this section for the time being applies ... shall be under the control of the Governing Body; and

(b)  where the implementation of any determination made by the Governing Body in the exercise of that control requires any action which -

(i)  is not within the functions exercisable by the Governing Body by virtue of this Chapter; but

(ii)  is within the powers of the Local Education Authority concerned;

it shall be the duty of the Authority to take that action at the request of the Governing Body."

	Section 151(1) provides:-
"For every institution providing full time education which is maintained by a Local Education Authority in exercise of their further and higher education functions there shall be -

(a)  an instrument providing for the constitution of a governing body of the institution (to the known as the Instrument of Government); and

(b)  an instrument in accordance with which the institution is to be conducted (to be known as the Articles of Government)."

	Subsection (2) provides that:-
	"... the Instrument of Government and Articles of Government shall be made by order of the Local Education Authority with the approval of the Secretary of State (which may be given subject to such conditions as the Secretary of State thinks fit."

The Decision of the Tribunal
	Applying those statutory provisions to the facts found by it the Tribunal rejected Mr Morgan's claim under the 1986 Act for the following reasons:-
(1)  The claim based on a reduction in his gross pay was outside the 1986 Act.  There was no deemed "deduction" within the meaning of S.8(3).  The Council had acted in good faith.  If, as Mr Morgan argued, the Council acted in breach of his contract of employment, the Council had made a deduction under an error of law and that was an "error of computation" within the wide words of S.8(3).  If, contrary to Mr Morgan's argument, the Council had acted correctly, then there was no deemed deduction because the Council had paid the amount of the wages "properly payable" by it to him.

(2)  Further, if the Council had acted wrongly and in breach of contract by demoting him and reducing his salary, Mr Morgan's claim in law was not for the balance of wages properly payable to him but was for damages for breach of contract, with a corresponding duty to mitigate his loss.

(3)  The provisions of the Burnham Report incorporated in his contract of employment did not protect his salary from reductions in the circumstances of Mr Morgan's case.  It is not necessary to examine the Tribunal's reasoning, since this point has not been pursued on the appeal.

(4)  If, as the Tribunal considered, the Council was not entitled to demote Mr Morgan, he would have not had a contractual right to be paid his pre-demotion wages and could not therefore complain of a deduction from wages in contravention of the 1986 Act.  The Tribunal explained that it was of the view that the Governing 7ody was able to exercise its powers to adopt a disciplinary code under Article 10(1) of the Articles of Government on 23rd December 1991, but the power of demotion was not available to it as the Disciplinary Code was still in draft, in a state of negotiation with the Association and was not therefore ready for adoption.  Further, the disciplinary provisions of the Silver Book incorporated in Mr Morgan's contract did not authorise the transfer of Mr Morgan to a lower post.

The Legal Position
	Save for the "protected earnings" point, the same points were argued by counsel on this appeal as had been argued by each of them before the Industrial Tribunal.  We are indebted to both of them for their detailed and thorough arguments.  We have reached the conclusion that there are errors of law in the decision of the Industrial Tribunal and that this appeal should, therefore, be allowed.  It should be declared that the Council made unauthorised deductions from Mr Morgan's wages in contravention of the 1986 Act.  The matter will be remitted to the Industrial Tribunal to calculate the amount due to Mr Morgan though, unless there is a further appeal, it should be possible for the parties to save further time and expense by reaching an agreement on the amount.

	We have concluded that, on the true construction of the relevant statutory provisions and the application of those provisions to the facts, the legal position is as follows:-
(1)  General
On the assumption that the Governing Body had no power to make the decision to demote Mr Morgan or to require the Council to act on that decision, the reduction in Mr Morgan's wages consequent on the decision to demote was a "deduction" from his wages within the meaning of S.1(1) and section 8(3) and (4) of the 1986 Act.  If the decision to demote him was made by a body which had no power to make that decision or to require the Council to demote him, then Mr Morgan was not demoted from his position as a Section Leader and his wages were unaffected by the decision.  In other words, the amount of wages "properly payable" by the Council to Mr Morgan remained the same after 24th December 1991 as it was before that date.  As the Council subsequently paid him less than he had been previously paid, the amount of the deficiency should be treated for the purposes of Part 1 of the 1986 Act as a "deduction" made by the Council from Mr Morgan's wages.

(2)  Error of computation
The Industrial Tribunal erred in its construction and application of S.8(3) and (4) in regarding the deficiency in Mr Morgan's wages after 24th December 1991 as "attributable to an error of computation" of the gross amount of the wages properly payable by the Council to him.  The question raised by the words of exception in S.8(3), as amplified in S.8(4) is
"Is the deficiency  attributable to an error on the part of the employer affecting the computation by him of the gross amount of wages properly payable by him to the worker?"
Although the error may be one of `any description' within the meaning of S.8(4), it must be (a) an `error' on the part of the employer and (b)  it must be an error which affects `the computation' of the gross wages.  As neither the word `error' nor the word `computation' are defined by statute, they must be given their ordinary meaning.  In its ordinary and natural meaning an `error' is a mistake, something incorrectly done through ignorance or inadvertence.  `Computation' of wages is a matter of reckoning the amount, of ascertaining the total amount due by a process of counting and calculation.  In our view, this case does not fall within the exception for "errors of computation" because, on the facts found by the Industrial Tribunal, the reduction in Mr Morgan's wages was attributable to a deliberate decision made by the Disciplinary Panel of the Governing Body on 23rd December to demote Mr Morgan and reduce his salary.  Although that decision may itself have been the result of an erroneous or mistaken view of the legal and factual position, the reduction in salary and the consequent deduction made from Mr Morgan's wages was attributable to that deliberate decision, and not to an error of computation.

On behalf of the Council, Mr Bishop QC, submitted that the exception in S.8(3) should be given a wide meaning.  An error of computation include an "error of any description".  That can include an error of law.  It is not confined to an error arising from faulty arithmetic.  The reason for the error is immaterial.  We are unable to accept this argument.  We agree with Miss Gill, who argued the case on behalf of Mr Morgan, that deductions of wages made in consequence of a deliberate decision, even if that decision is legally erroneous, is not a deduction in consequence of an error of computation within the meaning of sections 8(3) and (4).  There was, in this case, a considered and deliberate decision to pay Mr Morgan less than he received as a Section Leader.  If that amount was less than the amount of wages properly payable to him, it is to be treated as a deduction for the purposes of the 1986 Act.  It is not a correct approach to seek to go behind that deliberate decision and ask whether it was attributable to an error which could be described as "an error of any description."

(3)  Debt or damages
The Industrial Tribunal also erred in law in holding that, if there was no power to demote Mr Morgan, his claim in law was for damages, not for wages properly payable to him and he could not therefore complain under the 1986 Act of a deduction made in contravention of it.

Mr Bishop QC sought to support the Tribunal's decision.  He submitted that, if the Council had no power to demote Mr Morgan, as required by the Governing Body, and acted in breach of contract by unilaterally varying his contract without his consent, Mr Morgan had a choice: he could either treat the contract of employment as at an end and sue for damages or he could hold the Council to the contract and sue for damages.  In either case it was a matter for action by him in the civil courts, not for the Industrial Tribunal under the 1986 Act.  The reality was that Mr Morgan was not doing the same job as previously.  He had been downgraded.  He was being paid at the appropriate rate for his new job as a lecturer.  The purpose of the 1986 Act was to protect an employee who suffered deductions from wages which he had earned.  Mr Morgan had not earned wages as a Section Leader after his demotion on 24th December 1991.  In brief, his claim, assuming that he had one, was for damages, not wages.

We are unable to accept this as a correct legal analysis.  If, as assumed for the purposes of this argument, there was no legal right or power to demote Mr Morgan and terminate his contract of employment as a Section Leader, then that contract continued in existence.  There was no finding of fact that Mr Morgan had accepted a repudiatory breach of the contract of employment by the Council.  His claim under the 1986 Act was for the balance of wages payable under that contract which still existed.  Employment under that contract had not come to an end.  The contract had not been terminated either lawfully or unlawfully.  In those circumstances the distinction between debt and damages is immaterial: see Rigby v. Ferodo Ltd [1988] ICR 29 per Lord Oliver at p.36, A-C.

(4)  Power to demote
We agree with the Tribunal's ultimate conclusion that there was no power to demote Mr Morgan.  The Council had taken the point in its Notice of Appearance that it had no option but to observe the decision of the Governing Body to demote him and make a consequent deduction in his salary.  That is not a valid argument if, on a proper analysis, the Governing Body had no right or power to make a decision to demote.  If it had no right or power to make that decision it had no right or power to require the Council to act on it so as to reduce Mr Morgan's wages.

The decision of the Governing Body to demote Mr Morgan as Section Leader and the consequent acting upon that by the Council was ineffective for the following reasons:-
(a)  The Council continued to employ and control the contract and discipline of Mr Morgan until the provisions of the 1988 Act were implemented and those matters were transferred from the Council to the Governing Body.  On a proper construction of the 1988 Act that did not happen under S.148 until financial delegation had taken effect.  In the case of West Glamorgan that did not happen until 1st April 1992.  It follows that the Governing Body had no power to make the decision to demote prior to 1st April 1992, even though the Governing Body had adopted Articles of Government before then.  Those Articles of Government did not provide for the delegation of conduct and discipline of staff from the Council to the Governing Body nor did they contain powers to demote staff as a disciplinary penalty.

(b)  Further, the disciplinary procedure used at the hearings of the Governing Body, which resulted in the decision to demote, had not been adopted by the Governing Body pursuant to the Articles of Government and could not therefore properly be used by them either at the hearings or for the making of a decision.  The disciplinary procedure remained in draft and in negotiation and, on the facts found by the Tribunal, had not superseded the arrangements for conduct and discipline as contained in the Silver Book which, as mentioned above, did not contain any power to demote.

Conclusion                      
     For all those reasons this appeal is allowed.