Appeal No.	EAT/1243/99

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 5 July 2000

Before
HIS HONOUR JUDGE WILKIE
MS J DRAKE
MR K M YOUNG CBE

MR M TAYLOR	APPELLANT

CONNEX SOUTH EASTERN LTD	RESPONDENT

Transcript of Proceedings

JUDGMENT

FULL HEARING 

Revised

	APPEARANCES

For the Appellant	MS SEANIN GILMORE
(of Counsel)
Instructed by:
Messrs Langley & Co
Solicitors
Sun Court
66 Cornhill
London 
EC3V 3NB	
For the Respondent	MRS WENDY OUTHWAITE
(of Counsel)
Instructed by:
Messrs Kennedys
Solicitors
Longbow House
14-20 Chiswell Street
London 
EC1Y 4TY	

JUDGE WILKIE:

1.	This is an appeal by Mr Taylor against the decision of the London South Employment Tribunal sent to the parties on 23 August 1999, arising out of a hearing held on 29 June 1999.  The unanimous decision of the Employment Tribunal was that the Applicant was not dismissed by a reason of redundancy and was not unfairly dismissed.  

2.	The Applicant is a Chartered Accountant and was employed on 11 December 1995 by the SouthEastern Train Company, that being a sub division of British Rail.  He was employed as a Company Administrator.  That company was privatised by sale to Connex South Eastern Ltd in 1996.  In 1997 the Applicant was offered a new contract with the title of Deputy Company Secretary and, indeed, that was the name of the position which he occupied.  However, there was never agreement as to the terms of that 1997 contract because although he signed the terms of the contract, he did so subject to amendments, annotated on the document.  The Respondent never agreed to those amendments and therefore as a matter of law, no new agreed contract existed between them.  Accordingly, he was employed on the terms and conditions of employment at which he had held with British Rail and which were transferred to Connex South Eastern Ltd pursuant to the Transfer of Undertakings Protection of Employment Regulations.  

3.	Apparently, at the same time as the privatisation to the Connex South Eastern Ltd, another part of the South Eastern Train Company Empire was sold to Connex South Central Ltd.  The two companies, though linked in ownership, none the less operated independently as was required by the privatisation scheme.  However in due course they came to operate more co-operatively and, subject to the continuing separation for certain statutory purposes were subject to a process, which they have described as ‘synergisation.’ but which means little more than a rationalisation of their structures and methods, subject to the necessary relevant independence continuing.  

4.	It appears that, in connection with that process, on 24 August 1998 the Applicant was presented, without prior warning, with a new contract which the Employment Tribunal regarded as containing a number of new clauses broadly to his detriment.  In fact his salary package was to continue broadly unchanged from that which he held on 24 August 1998, being the follow through from the British Rail salary package.  It was in fact somewhat changed because there was a consolidated sum, rather than a basic salary with a London waiting allowance.  It is unclear whether the new consolidated sum would have on top of it a London waiting allowance as well, but that is not of relevance to us.  

5.	In fact the salary offered in August 1998 was somewhat less than the salary that had been offered in 1997 in the contract which Mr Taylor had declined to accept unamended and which, therefore, had never taken effect as between the two parties.  However, more significantly according to the Employment Tribunal, the proposed new contract offered in August 1998 was to his detriment in that he lost some holiday entitlement and the redundancy entitlement that had been carried over from British Rail.  Under the British Rail agreement, he had a contractual entitlement to a six months redundancy payment.   What was on offer under this new August 1998 contract was that there should simply be a discretion in the company to make payments on top of the statutory minimum up to a maximum of one years basic salary.  

6.	The Employment Tribunal record as one of their findings that, despite these changes to the detriment of employees, out of some 250 employees in Mr Taylor’s grade, only one or two failed to accept both the 1997 and 1998 contracts.  Mr Taylor declined to sign the 1998 contract.  He entered into discussions with Connex South Eastern, and in particular a Ms Ryder who was the Group Legal Adviser.  The position he adopted was that he either wanted maintenance of his redundancy entitlement or substantial compensation by way of salary increase for the loss of that entitlement.  He presented Ms Ryder with an advertised example of a post at £40,000pa but said that he was thinking of a salary of around £36,000pa.  At the time he was, including London waiting, in a receipt of a salary of £30,800.  

7.	The company took the position that they could not afford to buy out his enhanced redundancy entitlement by granting him such a salary increase. They effectively required him to agree to have his redundancy entitlement replaced by their discretionary scheme by way of rationalisation of their contracts across the two companies.  Matters reached the stage at which on 23 October 1998 a letter was sent to Mr Taylor, signed by Ms Ryder but apparently substantially drafted by Mr Smith the Human Resources Director.  In that letter reference was made to the negotiations, but it concluded that:
“In the circumstances, I regret that I have no alternative other than to issue you with 3 weeks statutory notice to terminate your contract of employment.  The notice will expire, therefore, on 13 November 1998.”
It concluded as follows:
“Even at this late stage, I hope that you will reconsider your position, recognising that the new contract would operate at no detriment to you.  I attach a copy of the employment contract and confirm that your acceptance of the contract before the expiry of your notice period will be welcomed by the Company and our negotiated settlement will remain in force.”

8.	It seems to us that last paragraph is somewhat disingenuous in claiming that the contract would operate at no detriment to Mr Taylor, particularly given the Employment Tribunal’s findings that there were significant matters of detriment, not least the replacement of the contractual redundancy entitlement.  We are told that Mr Taylor replied to that letter saying that he did not require any substantial salary increase but that he want the retention of his redundancy entitlement.  That response was insufficient for the purpose of the Respondent and, therefore, Mr Taylor was dismissed.  
9.	The Employment Tribunal considered in some detail the question whether there was a redundancy situation in place at the time of these events.  The Respondent throughout had denied that there was a redundancy situation, however the Employment Tribunal, having examined the matter in detail did conclude that there was.  They identified a significant reduction in the responsibilities, of the post which he held.  Their finding was that there was not the slightest doubt that there was in relation to his post a redundancy situation.  Whilst his job title survived, their account of the facts suggested that the only significant function that he retained was the organisation of the Respondent’s archives. 

10.	The Employment Tribunal therefore, against that background turned to consider what was the reason for dismissal.  They concluded that Mr Taylor was not dismissed by reason of redundancy but that he was dismissed for some other substantial reason, namely the refusal of an offer of change in terms and conditions of employment in a situation where the Respondent felt that they no option but to regard that refusal to accept the change in terms and conditions as a sufficient reason to dismiss, bearing in mind their need for commonality of employment terms and conditions and, in particular, in respect of the redundancy scheme.  

11.	Ms Gilmore has sought to argue that the Employment Tribunal decision is simply perverse or based on no evidence at all.  She is, of course, entitled to rely upon the statutory presumption that an employee, who has been dismissed by his employer, shall unless the contrary is proved be presumed to have been dismissed by reason of redundancy.  That statutory presumption is established by s.63 (2) of the Employment Rights Act 1996.  She makes certain telling points about some of the arguments, or reasoning adopted by the Tribunal in support of its conclusion that although there was a redundancy situation, it was not that which caused the dismissal of the Applicant.  
12.	The Employment Tribunal stated that they were convinced that he was not dismissed by reason of redundancy by reason of the fact that the Respondent continued to employ the Applicant for a substantial period of time at a high salary when it would have been cheaper, if it was really contemplating the Applicant’s redundancy, to have paid him the £15,000 redundancy compensation he was entitled to under what was then his contract.  That is a point which has considerable force if used in hindsight because one can then see that indeed they might well have saved money, if that had been their underlying reason.  

13.	As Ms Gilmore rightly points out, what the Tribunal has to focus on was the reason in the employer’s mind at the time of the dismissal and, of course, they would not be equipped with hindsight.  Therefore, that is not a good reason to support the Employment Tribunal’s decision.  Furthermore, in the reasons they say that a Mr Price of the Respondent’s Human Relations Department said that there was absolutely no prospect of the Applicant being dismissed for redundancy. The Employment Tribunal relies on that in support of their conclusion.  It is, however, common ground that the Respondent Company did not employ Mr Price at the time in question. That suggests that at its highest his evidence really amounted to no more than that, as the position held by Mr Taylor was one which had to exist pursuing to the statutory scheme, therefore that position certainly would not have ceased to exist.  That falls significantly short of the account of the Employment Tribunal as to what his evidence amounted to.  Therefore, that too is not a good reason to support the decision of the Employment Tribunal.  

14.	However that may be, the fact is that Ms Gilmore’s argument is one of perversity and has to be pursued in the face of the evidence of the letter of dismissal itself, which gives a specific contrary reason to that of redundancy as being the reason for dismissal.  It is also in the face of the evidence, given at the Tribunal by Mrs Ryder, whose name appears at the foot of that letter, who may not have drafted it but was involved in the discussions with Mr Smith, which led to its being sent.  

15.	Effectively, therefore, Ms Gilmore has to establish both that the letter itself was a pack of lies as was Ms Ryder’s evidence and that the Tribunal were perverse in not recognising that fact.  However attractively the argument is put, our powers of interference on issues such as this are strictly limited and we can find no basis for concluding that this Tribunal was perverse in relying upon that evidence as truthful evidence as to the true reason for the dismissal.  However, it goes beyond that. At page 27 of the bundle the Employment Tribunal is recorded as setting out the evidential basis for the conclusion that the dismissal was not by reason of redundancy.  They record their findings in the following passage: 
“It is clear to us, on her own evidence, that Ms Ryder would never have dismissed the Applicant of her own initiative.  The only explanation for her continued efforts to produce acceptable terms for him is that she wanted to retain him in employment.  We have not had the benefit of hearing any evidence of Mr Smith and so cannot positively say that it was he who decided that the Applicant must go.  If we are right in saying that it was not Ms Ryder, however, it is most probable that it was Mr Smith.  Ms Ryder reported to Mr Smith that the Applicant would not accept the contract that was offered and, indeed, was asking for an increase in pay.  We believe that Mr Smith concluded that there was only one solution and that was the dismissal of the Applicant.  
The Respondent was in reality looking for someone to do a very different job from that which the Applicant had originally performed when he transferred from British Rail.  The Applicant could have done that job and, indeed by the time of his dismissal was doing a very different job to his original function.  He was undoubtedly over qualified.  He was probably over qualified for the original job but he was certainly over qualified for the job, which he eventually found himself doing.  They had to be an end to the Applicant’s prevarication Either the Respondent had to concede his request for beneficial redundancy terms or it had to pay him substantially more. Possibly it would have had to do both to satisfy the Applicant.  
The Applicant has asked us to conclude that because the Respondent did not exceed to the Applicant’s request for the continuation of advantageous redundancy terms, the implication is that it must have been anticipating making him redundant.  That might of course have been the case, but it does not inevitably follow.  This sort of situation there is always an possibility that employees and the Applicants position will become redundant and there is no reason why management, looking for an easy way out, should agree advantageous terms, which may cause problems in the future.  
In any event, if a large employer like the Respondent makes a concession of this sort, then it will be more difficult for it to draw the line with other employees, seeking the same sort of variations.  Whoever did take the decision to dismiss the Applicant did so because he or she felt that the process of negotiation had to come to an end.  It either had to come to an end with concession to the Applicant’s dogmatic requests or by termination of the relationship.  In our view, despite the Applicant’s value to the Respondent company, the decision was taken that the situation could not continue and could not be remedied by conceding either the beneficial redundancy terms, or the increase in pay and on that basis, they included that he was not dismissed by reason of redundancy.”  

16.	Ms Gilmore has argued attractively and persuasively that a dismissal can be by reason of redundancy if the dismissal is wholly or mainly attributable to a redundancy situation.  In her argument, she has sought to distinguish between the occasion for the dismissal, which may nominally be a refusal to accept an alternative contractual set of arrangements, and the underlying operative cause of the dismissal, which may none the less be a redundancy situation.  So she poses, by way of example a person, who is in a redundancy situation and whose employer says that they can be retained, if they accept a lower level of salary.  That person may, by refusing that lower level of salary, be dismissed. He would nonetheless be dismissed by reason of redundancy; even though nominally his dismissal was due to his refusal to accept the lower level of salary.  Thus the refusal to accept the change in salary may be the occasion, but the operative cause of the dismissal, is the redundancy situation.  

17.	In this particular case, therefore, had the evidence been that, in seeking to renegotiate the contract by way of rationalisation or synergisation the Respondent was seeking to reduce his level of salary so as to approach the rate for the job enjoyed by others doing the same reduced work in other companies, then a refusal by him to accept that lowering of his salary might well have been operatively caused by the redundancy situation.  That is he was being compared with somebody doing a different and less highly valued job than that which he had been initially employed to perform.  Unfortunately for that argument, that was not the change in the contract which was focused on and which gave rise to his refusal to accept change leading to his being dismissed.  

18.	On the contrary, the terms which were in dispute, and in particular the contractual redundancy entitlement term had nothing to do with the rate for the job but had everything to do with the desire on the part of the Respondent to have all employees in the linked companies on the same redundancy terms as well as the same holiday arrangements.  Thus there was no operative causative link between the terms being offered and refused and the redundancy situation which, perhaps lay at the back of, Mr Taylor’s thinking in refusing to forego what were a advantageous terms, in the event of a redundancy taking place.  

19.	Therefore whilst we appreciate the skill and the attractiveness of the argument, in the end, given our limited powers of intervention, we are not persuaded by that particular argument. 

20.	Ms Gilmore deploys a third argument which is that the decision itself contains contradictory findings.  This argument focuses upon two passages in the decision: 
1)	The decision that Mr Taylor was not dismissed by reason of redundancy, but for refusing to accept proposed change in terms of employment and
2)	The passage which deals with the reasonableness, or otherwise of the decision to dismiss Mr Taylor for that reason.  
As to that issue the Tribunal were referred to and reminded themselves of the principles in Catamaran Cruisers Ltd v William [1994] IRLR 386.  In the course of their reasoning in dealing with the various factors identified in that case, they say as follows:
“In the present case, however, there is no doubt in our mind that the Applicant was being paid substantially more than was justified by the functions he was performing.  The reason for this was largely historical.  He was also claiming to carry over from British Rail redundancy rights which were not discretionary, as were those generally offered by the Respondent.  In our view it was reasonable for the Respondent to seek not to further exacerbate the inequality of pay and to insist on acceptance of the common standard of redundancy payment.”   
Ms Gilmore relies on the fact that in that particular passage, some reliance seems to be placed upon the fact that, according to the Employment Tribunal; Mr Taylor was being paid: 
“Substantially more than was justified by the functions he was performing.”

21.	The suggestion is that this is a clear allusion to the earlier finding that there was a redundancy situation. Reliance is being placed on the fact that there was such a redundancy situation as a factor affecting the reasonableness of the decision to dismiss him for refusing to accept the proposed contract.  In her skeleton argument Mrs Outhwaite has reminded us of the dangers of engaging in nit-picking and closely examining the terms of decisions and in particular, the passage in the case of Jones v Mid-Glamorgan County Council [1997] IRLR 685 in the Court of Appeal in the judgment of Waite LJ in which he states as follows:  
“The guiding principle, when it comes to construing the reasons of an [employment] tribunal at an appellate level, must be that, if the tribunal has directed itself correctly in law and reached a conclusion which is open to it on the evidence, the use in other passages of its reasons of language inappropriate to the direction it has properly given itself should not be allowed to vitiate that conclusion unless the relevant words admit of no explanation save error of law.”

22.	It seems to us that the exercise that Ms Gilmore is asking us to undertake falls foul of that particular principle.  It seems to us that it is a fair and proper reading of that particular passage that the reference to Mr Taylor being paid more than was justified by the functions he was performing, is no more than an introduction to the succeeding sentences which explains why it was that the Tribunal considered that it was reasonable of the Respondent not to accede to his claim for additional salary, as a buyout for the contractual redundancy entitlement. It thereby illuminates their comment that it was reasonable for the Respondent to seek not further to exacerbate the inequality of pay etc.

23.	Once again, therefore, whilst it has been attractively argued we are not persuaded that particular passage is so at odds with the earlier conclusion of the Employment Tribunal that it discloses an error of law. We conclude that the decision of the Employment Tribunal that Mr Taylor was not dismissed by reason of redundancy is one with which we cannot interfere. 

24.	In considering whether the dismissal was unfair, the Employment Tribunal considered on argument that the Applicant was automatically unfairly dismissed under regulation 8 (1) of the TUPE regulations on the footing that the transfer or a reason connected with it, was the reason or principle reason for his dismissal.  The argument was that the transfer from British Rail to Connex South Eastern Ltd was the reason or the principle reason for the dismissal and that, accordingly, it was a reason connected with that transfer.  

25.	In effect the argument is that the focus of the requirement of the Respondents for Mr Taylor to agree a change in his terms of employment, on pain of being dismissed failing his agreement was the contractual redundancy entitlement which he had held with British Rail and which was transferred in 1996. The argument, in effect, is that there is a clear connection between the proposed change in those terms, his refusal to accept it, his consequent dismissal and the transfer. It was precisely one of those important terms transferred across which was the subject of the attempt compulsorily to renegotiate his contract.  

26.	The reasoning of the Employment Tribunal on this point is fairly short and it is not the clearest part of their decision.  They start off by accepting the Applicant’s submission that there is no particular time limit as to what can be considered as being connected with a transfer.  The Appellant, rightly, does not take issue with that.  They then go on to say that there is no doubt that the chain of causation weakens with the passage of time and that two years appears to be a long time to maintain such a connection.  On one level that may be true, but the weakening of the chain of causation with passage of time is simply because there is greater opportunity for intervening events to occur which break the chain of causation.  The mere passage of time without anything happening does not in itself, constitute a weakening to the point of dissolution of the chain of causation.  

27.	Two years may appear to be a long time but that begs the question what has happened in the two years which may have broken the chain of causation.  The Employment Tribunal then goes on to say that determination of this point must be a question of fact which, of course, is correct.  In the next sentence they assert that in their view there had long ceased to be any possibility of the Applicant being dismissed by a reason of the transfer.  That seems to be an introduction to what follows.  They then record that the Applicant had been employed for two years on the same terms and conditions as those upon which he had been transferred, and that the Respondent was endeavouring to rationalise its contractual arrangements.  They then say, and in our judgment this is a matter of some considerable importance: 
“That would have been a matter connected with the transfer if it was still a live issue for those transferred.  The matter had however, been resolved for the vast majority of the employees transferred and in our view this issue has become an individual matter between the Applicant and the Respondent and had ceased to be connected with the transfer from British Rail.”   

28.	We are puzzled by this way of putting it.  On its face it acknowledges that a proposed rationalisation by the Respondent of the terms and conditions of all its employees, which involved the change in the terms upon which an individual or a group of employees was transferred across, and a dismissal pursuant to a refusal to accept that change, would be a matter connected with the transfer.  It seems to presuppose that an individual refusal in the face of everyone else agreeing operates as a cessation of the relevance of regulation 8 (1).  In our judgment that is simply an error of law.  The rights given by regulation 8 (1) are rights given to individuals, capable of being asserted by one individual or more.  

29.	It is true to say that in regulation 6 there are provisions on the effect of a relevant transfer on collective agreements, which may have the effect that a collective bargain, collectively renegotiated pursuant to a transferred collective agreement would preclude any individual whose terms and conditions of employment were governed by that collective bargaining machinery acting so as to refuse the outcome of those negotiations and thereby claiming to retain a connection with the transfer if he were subsequently dismissed.  The position is, that Mr Taylor was of a sufficiently senior level in employment with British Rail and the transferee companies that his terms and conditions was not the subject of any collective bargaining arrangements. They were subject to individual negotiation.  
30.	The fact that the vast majority of his fellows may have accepted the change in terms and conditions put forward which he rejected does not, in our judgment, constitute a proper basis for this Employment Tribunal concluding that, as a result, the proposed change in his terms and conditions had ceased to be a matter connected to the transfer.  If it was connected to the transfer for the majority, then it was connected to the transfer for the individual.  

31.	Furthermore, it is clear from what we have been told today, based on a detailed examination of the schedule of negotiations attached to the Employment Tribunal’s decision that the question of removing the contractual redundancy entitlement was only raised in August 1998.  That is the matter which the Employment Tribunal have concluded as a matter of fact was connected to the transfer, it being the attempt to rationalise contractual arrangements by changing terms and conditions, held under British Rail which had been transferred across.  It is clear that those negotiations with the vast majority of Mr Taylor’s fellows must have concluded a matter of a few weeks before his dismissal as a result of his refusal to accept what his fellows had, a relatively short time before, accepted.  

32.	It seems to us that this Employment Tribunal committed an error, by failing to understand that the relevant negotiations between Mr Taylor as an individual and his colleagues as a group of individuals, had come to an end only a matter of weeks before. It seems, (and we are grateful to both Mrs Outhwaite and Ms Gilmore for drawing our attention to the case) that the reference to the attitude of the majority of employees to the proposed changes and the fact that many employees had accepted it, was a factor, specifically referred to in the Catamaran Cruisers Ltd v William case to be considered on the issue whether a dismissal of an employee refusing to accept a change of contract was or was not reasonable.  

33.	It appears that this may have infected the reasoning of the Employment Tribunal on this separate issue, being one on which Catamaran is irrelevant.  The point about regulation 8 (1) is that if the dismissal falls within its terms it is automatically unfair and the question of the reasonableness or otherwise of the employers attitude does not arise as a relevant issue. Therefore, in so far as the Employment Tribunal appear to have been having regard to the kinds of arguments which would have been relevant had they been considering the reasonableness of the Respondent’s attitude, on this particular question they plainly misdirected themselves on a matter of law.  

34.	It therefore follows that we have concluded that this Employment Tribunal misdirected itself and accordingly that their decision that the dismissal did not fall within regulation 8 (1) cannot stand.  Ms Gilmore has invited us in the light of that and in the light of the evidence to say that we are in a perfectly good position to draw our own conclusions as a matter of fact as to whether this dismissal did or did not fall within regulation 8 (1).  We agree with her that we are in a position to do so.  

35.	It seems to us abundantly clear that, as the subject matter of the insistence by the Respondent’s on the contractual change was an important term which had been transferred across on the occasion of the transfer from British Rail to Connex South Eastern, then the dismissal of Mr Taylor by reason of his refusal to accept that change was a reason connected with the transfer, falling within regulation 8 (1).  

36.	It therefore follows automatically that Mr Taylor’s dismissal was unfair. We so order. The question of remedies will, of course, be remitted to a differently constituted Employment Tribunal.