Appeal No. UKEAT/0500/03/ILB

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 27 November 2003

Before
HIS HONOUR JUDGE RICHARDSON
MS J DRAKE
MR T HAYWOOD

INCHCAPE RETAIL LIMITED	APPELLANT

MR MICHAEL ROBERT LARGE	RESPONDENT

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR P MEAD
(of Counsel)
Instructed by:
Messrs Leuty & Lynch Solicitors
3 & 4 Market Place
Wokingham
Berkshire RG40 1AL	
For the Respondent	MR C TEW
(Representative)
CJT Employment Law & Personnel Services
20 Bridge Road
Alveley
Bridgnorth
Shropshire WV15 6JP	

HIS HONOUR JUDGE RICHARDSON

1	This is an appeal against a decision of the Employment Tribunal sitting in Birmingham for which Extended Reasons were entered in the register on 22 April 2003.  The Employment Tribunal held that Mr Michael Large was constructively dismissed by his employer Inchcape Retail Limited (“the Company”).  The Company appeals against that finding.  There is a cross-appeal by Mr Large.

The Facts

2	From 1 August 1987 Mr Large was employed as the Parts Manager by Enterprise Garage at Bridgnorth.  Enterprise Garages was a franchised Volkswagen Dealer.  The Employment Tribunal found that Mr Large was well respected and seen as an asset to the Company.  He was happy in his work.  He was paid £15,000 per annum with a target-based bonus and a company car.

3	The Company took over Enterprise Garages in May 2001.  There was such a garage in Bridgnorth.  There was another in Telford.  The Company itself distributes motor vehicles through a chain of dealerships.  With Volkswagen’s support it decided to reorganise.  Its proposed reorganisation involved centralising trade sales on Telford.  That would lead to the role of Part Manager at Bridgnorth being redundant.  Mr Large’s post would go; but both Volkswagen and the Company valued him highly.

4	Consultation took place.  It was led for the Company by Ms Leslie Ainscough.  There was discussion of a post at Bridgnorth as Operations Manager in Aftersales.  Mr Large was doubtful about his ability to cope with it.  The Employment Tribunal found that he assessed himself as not assertive, lacking in confidence, not sales-orientated and weak at confrontation.  Indeed, it is clear that the Company also was doubtful whether he had the skills for the job.

5	With encouragement from the Company, he applied for that job.  He was interviewed on 21 June.  Ms Ainscough offered it to him as a designate post for six months, to enable him to develop the skills needed to put him through the Assessment Centre.  She proposed a personal development plan to be tailored for him to ensure that he developed the skills sets needed.  His terms and conditions would remain the same but, depending on the result of the Assessment Centre, he would be offered the post permanently.

6	He asked how it would affect the redundancy process.  The response is an important one.  The Tribunal found that Ms Ainscough expressly said:

31	“If we felt you are not going to be able to pass the Assessment Centre we would restart the redundancy process.  I know it is not the ideal situation but I want to give you every opportunity to work with us…”

The Tribunal found that in accepting the post Mr Large relied on the assurances given to him.

7	So, on 29 June 2001 the new post was formally offered to him.  There was a probationary period for six months. During the probationary period his terms and conditions were to remain unchanged.  He was to go to an Assessment Centre.  If successful, he would be offered the position on a permanent basis with terms and conditions to reflect the new post including an increase of £3,000 per annum.

8	In due course, Mr Large started the new job.  It was substantially more responsible.  He found himself in difficulties managing that new job.  He felt out of his depth.  Such training as he attended was, he felt, for experienced line managers.  There was, the Tribunal found, no structured training plan or personal development plan as promised by Ms Ainscough.

9	Mr Large reported to Mr Mills.  Mr Mills permitted him an extended holiday towards the end of 2001 to help him relax.  They had conversations in early 2002.  Mr Large admitted he was struggling.  By early 2002 the probationary period was coming to an end.  Mr Large was entitled to expect the Company to progress the issue.

10	In February 2002, nothing having been said about the six month probationary period coming to an end, Mr Large approached Mr Mills privately and asked about restarting the redundancy process.  Mr Mills rejected any consideration of it, but eventually he checked with Ms Ainscough.  She told him what had been agreed – he then accepted it was open to Mr Large to re-open the process.

11	At a meeting on 14 March with Mr Mills.  Mr Large reported that he was not coping well, that he feared becoming ill from the stress.  It was common ground that he was not going to be appointed to the post which he held as designate. Mr Large now sought a redundancy payment.  He did not wish to relocate.  He did not feel able to afford to lose either salary or car by taking a lower paid post.  He found the whole situation stressful.  He wanted to be paid the redundancy payment and leave.  

12	Mr Mills, however, was not willing to discuss redundancy.  He wanted to retain Mr Large.  He offered him a post at Telford.  Later, Mr Large expressed concern about travelling to Telford, mentioning his elderly parents and his wish not to have family time eaten into by travel.  Mr Large also asked about a Part Supervisor role in Bridgnorth.  It was confirmed this would not have included a company car.  

13	By April he had been offered four possibilities.  Two were in Telford at £15,000 plus company car.  Two were in Bridgnorth at £15,000 without the company car.  Mr Large still wanted to leave with a redundancy payment.  By now he was becoming unwell.  He wrote to Ms Ainscough in April reiterating that the posts offered were unsuitable or created unacceptable domestic problems.  He was signed off by his general practitioner.  Correspondence continued.  Mr Large sought redundancy terms.  The Company said they were offering reasonable alternative employment.

14	On 15 June Mr Dowell, who by this time had taken over the handling of the issue from Mr Mills, told Mr Large that a restructuring would let the Company offer his old post as Parts Manager at Bridgnorth.  Mr Large continued to be off sick.

15	On 2 July Mr Dowell wrote to him to say that the previous position as Parts Manager was open.  The Tribunal said the post was not formally offered.  Mr Dowell was still waiting for the medical examination and report.  Mr Large’s role in the business, Mr Dowell said, was to be discussed when the full nature of his illness was known and when he might return to work had been determined.  It was in response to that letter on 10 July that Mr Large resigned, referring to the destruction of his trust and confidence in the Company.

The Employment Tribunal’s Decision

16	The Employment Tribunal set out the facts in a full and careful decision.  The facts which we have summarised are taken from the findings at paragraphs 3 to 87 of that decision.  The Employment Tribunal concluded that there was a constructive dismissal, and the dismissal was unfair.  Mr Mead, who appears for the Company, challenges the finding of constructive dismissal.  He accepts that if (contrary to his submission) there was a constructive dismissal, the only remaining question is compensation.

17	The Employment Tribunal gave itself a self-direction in law which included a statement of the implied term of trust and confidence in accordance with Malik v Bank of Credit and Commerce International SA [1997] ICR 606.  The statements of law which are set out between paragraphs 88 and 98 are not challenged.

18	The Employment Tribunal set out the submissions of the parties.  The Company’s position was that Mr Large had resigned.  He had not been dismissed.  He wanted to leave the Company having been made redundant and had not been willing to consider any alternative offers of employment the Company made.  The Company, on the other hand, wanted to keep him and sought to offer employment with which he would be comfortable.  It was submitted that the implied term of trust and confidence could not apply to termination itself.

19	The Employment Tribunal’s conclusions are set out between paragraphs 104 and 128.  The Employment Tribunal, having found that Mr Large resigned because he had lost confidence in the Company and the trust and confidence necessary between employer and employee had gone, made a number of criticisms of the Company.  They found that Mr Large had not been given the personal development plan promised or sufficient support to enable him effectively to pursue training while also taking on a job for which he lacked skills and experience (para. 107).

20	The Employment Tribunal found that Mr Mills did not consider the implications of the probationary period being unsuccessful.  He was not aware of discussions with Ms Ainscough.  So it was not until March, some time after the six month trial originally envisaged would have expired, that Mr Mills appreciates there had been a commitment to reopen the redundancy process.  We observe that during this period of delay it is clear that Mr Large was very unhappy in the job that he was doing.

21	Next the Employment Tribunal found that Mr Mills conducted the consultations, not as if Mr Large was someone whose post was redundant but as someone seeking to reduce his responsibilities within the Company while retaining favourable terms and conditions.

22	Next, the Employment Tribunal are critical of Mr Dowell.  He reflected Mr Mills’ approach.  There was, the Employment Tribunal found, a particularly unfortunate letter to Mr Large’s doctor which gave the incorrect impression that the Operations Manager post was created for Mr Large.  That, the Employment Tribunal found, was wrong and unfair.

23	Having made those criticisms, the Employment Tribunal then dealt with a point the Company had made, namely that it had offered him suitable alternative employment and could not be forced to dismiss him for redundancy.  The Employment Tribunal reviewed the posts and concluded that in relation to Mr Large they were not posts which were suitable.

24	The Employment Tribunal then made a further criticism of the Company.  They said that the approach taken by the Company differed markedly from the approach during the initial redundancy consultation.  They had, we think, in mind in particular the point which they made immediately before, namely that Mr Large was refused a trial period when he suggested this for one of the posts that was on offer.  He had been given a trial period in 2001 as part of the redundancy process then.  The Employment Rights Act 1996 envisages that there may be circumstances where trial periods are appropriate.  The Tribunal found that there had been no unconditional offer of Mr Large’s former post.

25	Having set out these conclusions, the Employment Tribunal summarised its findings in paragraphs 125 to 128.  Those are too long to read as a whole, but they concluded that the Company’s failure to recognise and address Mr Large’s contractual position on the failure of the probationary period was conduct likely to seriously damage the relationship of trust and confidence between the parties.  There was no reasonable or proper cause for it.  It amounted to a fundamental breach of contract.

The Arguments on Appeal

26	Mr Mead has made a number of criticisms of the Employment Tribunal’s reasoning.  They may usefully be dealt with under five headings, following broadly his Skeleton Argument as he did in his own submissions.

27	His first submission is this.  The whole of the Tribunal’s decision, he says, is predicated on an entitlement to redundancy, anchored to a finding that there was a breach of an implied term.  But he contends that once Mr Large had been re-engaged and the trial period had expired there was no further obligation for the employer to consider Mr Large for redundancy.  If Mr Large failed in his new job, submits Mr Mead, then it was for the Company to deal with him in terms of capability.  There was no right for Mr Large to turn the clock back and start the redundancy process afresh; still less to permit him to leave on grounds of redundancy.

28	Mr Mead relies on and refers to section 138 of the Employment Rights Act 1996.  Where renewal of contract or re-engagement takes place the employee shall not be regarded for the purpose of the redundancy provisions of the 1996 Act as dismissed by his employer by reason of the ending of his employment under the previous contract: section 138 (1).  There is provision for a trial period, but any such trial period is within tight constraints: see section 138 (6).  In any event, if there is a trial period, it has to be the employee who terminates the contract: see section 138 (2).

29	We reject this submission.  It is important to appreciate that the Employment Tribunal was not founding its decision on the basis that in 2002 Mr Large had a statutory entitlement to redundancy.  If it had done so, it would have had to consider the impact of section 138 of the Employment Rights Act 1996.  Rather, the Employment Tribunal was founding its decision on what the parties had agreed.  The Company had agreed that the redundancy process would be reopened.  The Tribunal found this as a fact in paragraph 31 of its decision.  The Tribunal found that Mr Large relied on it.

30	An agreement by the Company to restart the redundancy process must implicitly include the possible outcomes of that process.  One outcome might be that Mr Large might be offered and accept employment.  In that event, his contract would be renewed or he would be re-engaged.  Another outcome might be that the Company would have no alternative employment for him at all.  In that case it is implicit in restarting the redundancy process that the Company will let Mr Large go with a payment equivalent to a statutory redundancy payment at least.  A third outcome might be that the Company would offer Mr Large employment which the Company regarded as suitable and thought Mr Large should accept, but which he found unacceptable.  Then, sooner or later, an impasse would be reached.  One can see that Mr Large would have no alternative but to resign.  Whether he would be constructively dismissed would depend on contractual principles and would be closely bound up with the rights and wrongs of his treatment by the Company during the period in question.  

31	Put shortly, by reason of the parties’ agreement, Mr Large did have a right to turn the clock back and have the redundancy process restarted.  The Company clearly gave him that right.  The Tribunal so found.  Indeed, although Mr Mills was not initially aware of the right, he was told about it by Ms Ainscough and accepted it: see the minute of the meeting dated 14 March 2002.

32	The second submission which is made on Mr Mead’s behalf, ground 3 in his Skeleton Argument, is closely related to the first.  It is submitted that since there is no entitlement to a claim for a statutory redundancy payment there can be no claim in the alternative for a breach of the implied term for failure to dismiss on grounds of redundancy.  It is, he submits, a legal impossibility for there to be a breach of an implied term due to a failure to dismiss the Applicant on grounds of redundancy: see Johnson v Unisys Ltd [2001] IRLR 279 at paragraphs 42, 46 and 58 in particular.

33	We reject this submission.  Mr Large’s right to have the redundancy process re-started arose from agreement.  As we have said, it was implicit in restarting the redundancy process that it might end with the Company letting Mr Large go with a payment equivalent to a redundancy payment at least.  If that happened, it is a moot point whether there would have been a dismissal or a consensual termination.  But in the unusual circumstances of this case, it is not a legal impossibility that the Company in handling or failing to handle the restarted redundancy process might commit a fundamental breach of contract entitling Mr Large to resign.

34	That is what the Employment Tribunal found to have occurred.  It is very different territory from Johnson v Unisys which has no direct application to the handling of a process of this kind which has been inserted with the express agreement of the parties, which is not in itself a dismissal but which might lead to dismissal.

35	We do not regard the Employment Tribunal here as having found a constructive dismissal where it was legally impossible to do so.

36	It was also submitted (and this is a convenient point to deal with it) that the Employment Tribunal thought that dismissal was either Mr Large’s sole option or the natural outcome of the process.  We reject that submission.  It is clear from paragraph 118 that the Employment Tribunal did not think that the outcome was Mr Large’s sole option.  In paragraph 126 the Employment Tribunal does not say that dismissal was the natural outcome of reopening the redundancy consultation, it was a natural outcome.  It was, as we have already said, one of the possible conclusions of the process.

37	In the unusual circumstances of this case, we see no error of law in the Tribunal’s reasoning.

38	The third submission that was made by Mr Mead related to that part of the Tribunal’s decision which dealt with the posts offered by the Company to Mr Large.  It was said that here that the Employment Tribunal applied the wrong test.  The appropriate test, it is submitted, is whether the Company’s conduct in offering the alternative employment fell outside the band of reasonable responses which the employer offered.  For this submission Mr Mead relies on British Gas Services Ltd v McCaull [2001] IRLR 60 at paragraphs 48 to 50.  That was an unfair dismissal and disability discrimination case where the statutory test applicable involved consideration of what was reasonable.

39	The Employment Tribunal was applying tests appropriate to redundancy.  In our judgment the Employment Tribunal did not fall here into any error of law.  The Employment Tribunal was considering the Company’s promise to reopen a redundancy procedure.  The redundancy procedure in 2001 would have been subject to the Employment Rights Act 1996, Part XI.  The provisions of Part XI direct consideration of the question whether an offer of employment constitutes “an offer of suitable employment in relation to the employee.”  After that, the provision requires consideration of the question whether the employee has unreasonably refused the offer.

40	In our judgment the Employment Tribunal correctly divined what the parties must be taken to have intended when they agreed that the redundancy process would be reopened.  It cannot have been intended that any offer of alternative employment made by the company would be judged by quite different standards to the standards by which it would have been judged in 2001.  The Employment Tribunal was right in judging it by the same standards.  British Gas Services v McCaull is not concerned with a redundancy decision.

41	It was also submitted in any event that the Employment Tribunal had misapplied the test.  Reliance was placed upon the fact that the Employment Tribunal in paragraph 118 of its decision had used the phrase “which was suitable to the employee”.  It was submitted that the Employment Tribunal can be seen to have applied a subjective test in place of an objective one.

42	The Employment Tribunal had correctly stated the terms of section 141 (3) in paragraph 97 of its decision.  When it came to state its conclusion on this point in paragraph 120 of its decision the Employment Tribunal again correctly stated the test.  The question is not whether the offer was suitable to the employee but whether it was suitable in relation to him.  This requires the Employment Tribunal to consider objectively whether the employment was suitable; but it does so in relation to the particular employee with which it is concerned.

43	So long as it applies the correct test, it is a matter of fact for the Employment Tribunal to decide whether an offer is suitable in relation to an employee.  We are satisfied, notwithstanding the slight elision of the test in paragraph 118, that the Employment Tribunal has applied the correct legal test.  It has not been argued and could not be argued that the Employment Tribunal was perverse if it applied the correct legal test.

44	We reject this submission.

45	The fourth line of submission that was made related to the application of the implied term of trust and confidence.  It was submitted that the Company’s case has always been that it wished to retain Mr Large.  Any deterioration, it was submitted, in relations between the Company and Mr Large, arose only because they would not allow him to leave on the basis of redundancy.  That, it is submitted, cannot be a breach of an implied term of trust and confidence.  It is submitted that it would be absurd if a company wishing to retain an employee’s services was found to be in breach of the implied term because effectively it had not made him redundant.

46	We have already summarised the conclusions that the Employment Tribunal reached: they included the failure to give a personal development plan or support to Mr Large; a failure timeously to consider the implications of the probationary period being unsuccessful; the manner in which the redundancy consultation process was undertaken by Mr Mills and Mr Dowell; Mr Dowell’s letter to the doctor; the different approach from that which was undertaken during the initial redundancy consultation.

47	So long as an Employment Tribunal directs itself correctly in law, it is a matter of fact for the Employment Tribunal to determine whether there has been a breach of the relationship of trust and confidence.  It often happens that an employer who wishes to retain an employee is found to have been in breach of that relationship.

48	Given its criticisms and given its conclusions in paragraphs 125 to 128 of its decision, we cannot say that the Employment Tribunal erred in law in the conclusion which it reached.

49	The final submission that was made on Mr Mead’s behalf related to perversity, as it was said to be, in findings of the Employment Tribunal.  There was in the preparation for this case some difficulty in agreeing a note of evidence; but in the event we do not think that the substantial grounds of perversity that are put forward by Mr Mead require a note of the evidence.

50	The principal point which he makes on perversity is this.  He accepts that in June 2001 the new job was offered to Mr Large subject to a probationary period.  He points out, however, that in October a form of contract was signed by Mr Large.  The form of contract, he says, was for a permanent contract.  The form of contract makes no reference to any probationary period.  It was, therefore, he says, perverse for the Employment Tribunal to have proceeded on the basis that Mr Large still had a probationary period.

51	We have no hesitation in rejecting that submission.  It is clear, both from written witness statements and from the Tribunal’s decision that there was to be a probationary period of six months.  It is clear that the position which was undertaken by Mr Large was described as “designate”.  When the form of contract was sent to him in October it continued to describe the position as designate.  Moreover, it had been agreed in June that when the position became permanent there would be an increase in pay of some £3,000.  The contract in October did not provide that pay increase.

52	The Employment Tribunal was entirely within its rights to conclude that the probationary period survived the provision of a written contract in October.  Not only was it not perverse, in our judgment it was clearly correct.

53	That was, in terms of its consequences for the case, the main perversity point that was taken by Mr Mead.  Another perversity point related to some findings of the Tribunal concerning Mr Mills.  Criticism was made of a finding by the Tribunal that it was common ground that Mr Large would not have been considered suitable for permanent appointment.  Criticism was made of the Tribunal’s finding that Mr Mills agreed that Mr Large would not pass the assessment test and was not going to be appointed to the post on a permanent basis.

54	These criticisms are again entirely misplaced, for it is clear from Mr Mills’ statement, which we have in our bundle and in particular paragraph 6, that Mr Mills did indeed know that he would not pass the Assessment Centre and it follows that he would not be appointed to the post on a permanent basis.

55	It is said, again, that the Tribunal was perverse in concluding that the contractual position was unclear: see paragraph 125 of the Tribunal’s decision.  The Tribunal is saying in context that in the lengthy period after his probationary period was over, he was struggling increasingly in a post for which he did not have the skills or experience and his contractual position was at that time unclear.  It was certainly unclear to Mr Mills who was denying his entitlement to reopen the redundancy process.

56	For these reasons we conclude that the Employment Tribunal did not err in law and we dismiss the appeal.