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	United Kingdom Employment Appeal Tribunal
You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Secrett v. Macmahon & Ors [1999] UKEAT 295_99_1106 (11 June 1999) URL: http://www.bailii.org/uk/cases/UKEAT/1999/295_99_1106-.html Cite as: [1999] UKEAT 295_99_1106

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APPEARANCES

 

For the Appellant	MR A SNELSON (of Counsel) APPEARING UNDER THE EMPLOYMENT LAW APPEAL ADVICE SCHEME (ELAAS)


 


MR JUSTICE MORISON (PRESIDENT): The purpose of this hearing is to determine whether there are arguable points of law in an appeal which Mr Secrett wishes to make against various decisions of Employment Tribunals.

1. Broadly speaking, some nine people who have been associated with his legal firm brought complaints alleging non-payment of monies which were due in the course of their employment, compensation for dismissal and redundancy payments. For convenience, we adopt the categorisation of the complainants put forward to us by Mr Snelson of Counsel, who appeared on Mr Secrett's behalf at this preliminary hearing. Four of them were performing what might be described as broadly secretarial functions; three of them were fee earners; two of them were trainee solicitors; one was a qualified solicitor and two of them were clerks within the firm.
2. The points of law, which are said to arise, have conveniently been identified in a Draft Notice of Appeal, which we were presented with this morning. The first ground is that the Tribunal erred in law in failing to consider and uphold the Appellant's argument that the Respondent's contract claim was unsustainable, by reason of the fact that the contract was frustrated by the intervention of the Law Society on 13^th February 1998.
3. All that needs to be said by way of background facts to that submission, is that Mr Secrett was in practice and on 13^th February 1998 The Law Society, in their capacity as a regulatory authority, intervened in the practice, the effect of which was that from that time Mr Secrett was not entitled to carry on his business as a solicitor. The person who was inserted as the intervenor took over the running of the operation. The argument therefore, is that as a result of that intervention by the Law Society, Mr Secrett was unable to carry on practice as a solicitor and that that was an outside event which was capable of qualifying as a frustrating event, so that the contracts of employment of the staff were frustrated and terminated for that reason.
4. Mr Snelson pointed out that section 136(5)(b) of the Employment Rights Act 1996, sets out circumstances in which events which otherwise might have been frustrating events are not accepted as such for the purposes of the law of redundancy. These two matters in particular, that are referred to in that subsection, are an act on the part of an employer which is 136(5)(a), and (b) an event affecting an employer including in the case of an individual his death. It says that where in accordance with any enactment or rule of law those things happen, and they operate to terminate a contract under which an employee is employed by him, the act or event shall be taken for the purposes of this part to be a termination of the contract by the employer.
5. Thus, says Counsel, it is apparent that the statutory scheme contemplates that there may be events which can frustrate a contract of employment, and that this is arguably one of them. He accepts that because of that section, it would not be possible for Mr Secrett to argue that the contracts had been frustrated so as to deny the former employees a redundancy payment. It seems to us with great respect that that argument is unsustainable as a matter of law.
6. The reason why the Law Society intervened was because of the way that they considered the solicitor's practice had been conducted by Mr Secrett and his staff. There is a doctrine that a person cannot rely on a self-induced frustrating event. One can see a comparable example of this in relation to other regulatory authorities and indeed in relation to banks lending money and intervening in businesses when the money isn't repaid. It is not the law that such interventions constitute frustrating events. These are things that occur as a result of events under the control of the party concerned and therefore the doctrine of frustration is not apt to cover the point.
7. Quite apart from that, it is not without significance that Mr Secrett himself did not consider that the intervention of the Law Society of itself had brought the contracts to an end. Indeed he had given notice to the staff which would have been appropriate if their contracts were still in existence but it became impossible for him effectively other than to terminate them as he did. Accordingly we do not regard that first point as arguable.
8. The second argument that was raised related to the trainee solicitor's contract. The case was put in two ways. It is said to be arguable that if the contract of employment was terminated by the Law Society, then clause 19(b) of the Training Contract was effected. Clause 5 of the Contract provides that

"This contract begins on 1^st January 1997 [we take it from Mr O'Donnell's contract] and continues for two years, subject to the provisions for earlier termination.."

The provisions for earlier termination are provided in clause 19 which includes termination by the Law Society, thus the argument was that there couldn't be a breach of contract if effectively the Law Society had terminated the Contract before the end of the two year period.

9. For the reasons which we have just given it does not seem to us to be arguable that there has been a termination by the Law Society. On the contrary, there was a termination by Mr Secrett of the contracts of employment. But the second way in which it was put relates to clause 20 of the conditions of the Training Contract which provides, "This contract would not normally be terminated by" and then it identifies two events, namely the resignation or appointment of any partner, or the merger of the firm with another body, firm, company or individual.
10. Thus, says Mr Snelson, if one looks at the contract, clause 5 is subject to the provisions of earlier termination including clause 20. That this contract would not normally be terminated by these two events at least contemplates the possibility that there might be termination for other reasons, including the fact that the Law Society had intervened in the practice. That point does not also seem to us to be an arguable point of law because we are satisfied that paragraph 20 of the terms of the Training Contract, are not the provisions for earlier termination which refers only to paragraph 19, but in any event paragraph 20 is dealing with two specific matters which was needed to be provided for namely what happens when a partnership is reconstituted, when one partner leaves, or another partner arrives, and what happens if there has been a merger. Accordingly, we do not consider that that argument is capable of being reasonably sustained so as to require this matter to proceed to a further hearing.
11. We now turn to arguments in relation to the losses as assessed by the Employment Tribunal in relation to two cases in particular, that is Mr O'Donnell and Miss Broadhurst. What is said in paragraph 4 of the Draft Notice of Appeal, paragraph 2 having been deleted, is

"Further or alternatively the Tribunal erred in holding that the Respondent was entitled to damages in respect of loss allegedly to have been suffered after the date on which but for the Appellant's earlier breach, the contract could lawfully have been terminated by the Appellant, when such a holding was as a matter of law, not open to the Tribunal."

What that paragraph is directed to is the way the Tribunal looked at the damages which Miss Broadhurst and Mr O'Donnell had suffered as a result of their training contracts having been prematurely, and on this analysis, wrongfully terminated. The essence of the point is this; that if a training contract has been wrongfully terminated, the only period of qualifying for a period of loss is the balance of the contract then remaining outstanding which would have run had it not been unlawfully terminated and that the Employment Tribunal has erred in law in looking at the matter on a longer period of time.

12. In relation to Miss Broadhurst, we have to say that we do not regard that point as arguable. It seems to us that where there is a training contract which has been unlawfully terminated, it is open to a Tribunal to conclude that the loss and damage that is directly attributable to the wrongful termination may include losses which occur in the future, that will depend upon the steps taken to mitigate the damage which has been sustained. In principle the same point can be made in the case of Mr O'Donnell, but for reasons which we shall give in relation to other points raised, we are of the view that in any event the approach of the Employment Tribunal in relation to part of Mr O'Donnell's loss is arguably not correct.
13. So we turn therefore, to the calculation of the losses against that background. In relation to Miss Broadhurst, the Tribunal said this, in paragraph 4 of the decision,

"Her final training course has not been fixed. The earliest she could have sat her final exam was November 1998. She considers that because of her experience working for the Crown Prosecution Service prior to 1997, it is likely that the training contract would have ended on 27 November 1998. She would then have been a qualified solicitor and able to earn money as such. On the evidence that she presented, I am satisfied that she could have expected to earn £22,000.00 per annum. Her loss of a chance, which was a foreseeable consequence of the breach of contract, I assess at the rate of three-quarters of £22,000.00 per annum, less tax and national insurance. That is £12,375.00. That represents 9 months' salary as a new qualified solicitor. The breach of contract had put back her opportunity to earn that by 9 months. The first respondent is therefore ordered to pay damages to the applicant in that sum."

Subject to a point of quantification to which we will turn in a moment, it does not seem to us that that approach by the Employment Tribunal can be criticised. It was suggested that the Tribunal had failed to value the loss of a chance, but instead, had determined that 9 months would be an appropriate period of time to take and have treated that as a certainty.

14. That is not the way we read what is written in that paragraph. What the Tribunal Chairman has done, in our judgment, is properly to ask himself the question what would have happened if the contract had not been broken? He is then dealing with a hypothetical situation, taking into account the changing fortunes and chances of life and came to the conclusion that 75% of the appropriate figure was a correct representation of the percentage chance. The words "that represents 9 months' salary as a new qualified solicitor. The breach of contract had put back her opportunity to earn that by 9 months" was no more than a statement that that was the effect of his decision in terms of the application of the percentage chance to the base figure.
15. In relation to Mr O'Donnell on the other hand, the position is somewhat different. In paragraph 3 of the decision the Employment Tribunal said this;

"The applicant has mitigated his loss. He got work straight away with another firm of solicitors. That was a clerking job, but at the same salary – so there is no loss on a day-to-day basis. He started on 2 March 1998. The Law Society is likely to decide that it regards this as a period of training, but they are unlikely to do so until the middle of December. It will be backdated, but it does mean, and this is very important, that the applicant is unable to qualify as a solicitor until then. He took the final examinations in August 1998 and passed. Had the contract with Mr Secrett run its course, the Applicant was in a position as of about 1 September 1998, to apply for a job as a qualified solicitor. On the evidence, I find that the rate of remuneration would have been in the order of £18,000.00 a year. Because of the breach of contract by Mr Secrett, this opportunity had been delayed some 3 months or so."

In relation to this approach of the Employment Tribunal, we consider that it is arguable that the Tribunal have erred in law in concluding that a delay by the Law Society in its procedures was going to cause a loss for which Mr Secrett was liable in damages for breach of contract. Whether that is so or not, is not a matter we need to express a concluded opinion about at this time, but we are all of the view that that issue is arguable.

16. Finally, it seems to us to be arguable in the case of both the decision of Mr O'Donnell and of Miss Broadhurst, that the Tribunal have erred in the quantification of the loss, having arrived at the amount through the process of reasoning which I have described. It seems to us that the Tribunal have taken as the figure in both cases, a figure which does not take into account the earnings which they themselves were receiving, but have assumed that there is no alternative income coming in. That means that the figure of £12,375 in Miss Broadhurst's decision, and the sum of £3,400 in relation to Mr O'Donnell's decision should be reviewed at a full hearing.
17. In addition, in relation to Mr O'Donnell alone, it is we think, arguable that the Tribunal have not carried out a balancing exercise when assessing the loss of the chance as they had properly done in paragraph 4 of the decision in relation to Miss Broadhurst. For those reasons, it seems to us that most of the appeals are unarguable but that there are three points in relation to these two appeals which are arguable.
18. We were told in addition, that it was proposed to have an appeal in relation to decisions given by the Tribunals in relation to the two clerks. No Notice of Appeal has yet been received as I understand it, though any such appeal would be out of time and we are not prepared to say anything about those appeals at this time.
19. In addition to that, there is a submission made in relation to the case of Miss MacDonald. It is suggested that the Employment Tribunal have failed to take into account an offer of suitable alternative employment. That submission was made in the context of a redundancy situation. There are circumstances where an employer is able to make an offer of suitable alternative employment, which if refused, will disentitle the employee to a redundancy payment. But in this particular case, it has to be said that no offer of suitable alternative employment was made before her contract was terminated, and in any event, such offer as was made was not made by Mr Secrett who couldn't make it, but was by the first Respondent to the various appeal proceedings and wouldn't qualify under the statutory legislation as an offer of suitable alternative employment.
20. Another way of putting the point would have been to have suggested that her failure to take this post in some way indicated that she was not mitigating the losses which she was sustaining that is not as a matter of interest something which was raised initially in the Notice of Appeal and in any event does not seem to us a matter that gives rise to an arguable point of law fit for hearing before a full Tribunal.
21. The Employment Tribunal were dealing with the cases as presented to them and it seems to us that the way they have dealt with Miss MacDonald cannot be criticised. It follows therefore, that the matters are allowed to proceed to a full hearing on a limited basis only. It also follows therefore that there are a number of outstanding judgments which Mr Secrett is going to have to meet at this time. The fact that to a limited extent, these appeals have been allowed to proceed does not of course mean that all the liabilities are to be regarded as contingent on the determination of the appeal and I am sure that that is fully understood by all the parties and if any further directions are needed we can give it.
22. At this time therefore, we would simply say that in the respects identified in this judgment, copies of which will be available and included in the file, the appeals in relation to Mr O'Donnell and Miss Broadhurst are arguable. All other matters are to be dismissed.
23. I would like to give some directions to the two appeals which we have allowed to go through. The first direction I give is that there be no notes of evidence required. The second direction that I give is that these two appeals raise very short points, which can be dealt with very shortly in, I would estimate, an hour and a half, no more. They should be listed as Category C because they do not raise any particularly special important points of law, although obviously the results are important to the parties and I would have thought that it would be sensible, bearing in mind the extent of the litigation going on between these parties, that this appeal should come on for a full hearing as soon as possible in our listing system so that the matter can be put to rest one way or the other.