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	United Kingdom Employment Appeal Tribunal
You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Wedgewood v. Hortimax Ltd [2003] UKEAT 997_01_2503 (25 March 2003) URL: http://www.bailii.org/uk/cases/UKEAT/2003/997_01_2503.html Cite as: [2003] UKEAT 997_1_2503, [2003] UKEAT 997_01_2503

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APPEARANCES

 

For the Appellant	MR NIGEL WRAY (of Counsel) Instructed by: Messrs Myer Wolff Solicitors King William House Lowgate Kingston upon Hull HU1 1YE
For the Respondent	MR MARTYN WEST (Representative) Peninsula Business Services Riverside New Bailey Street Manchester M3 5PB


 


HIS HONOUR JUDGE J BURKE QC

The facts

1. Mr Wedgewood appeals against the dismissal by the Employment Tribunal, sitting at Hull and chaired by Mr Morris, of his complaint that he had been unfairly dismissed by his employers, Hortimax Ltd (formerly called Van Vliet Automation Ltd).
2. Mr Wedgewood was employed by the employers from 1993 as an accountant and bookkeeper. He resigned by letter of 29 February 2000; and on the next day he sent an Originating Application to the Employment Tribunal claiming to have been constructively dismissed. After various interlocutory proceedings, the Tribunal heard his claim over two days in June 2001 and sent their Decision to the parties with Extended Reasons on 6 July 2001; they subsequently made corrections to that Decision which are, for present purposes irrelevant. At the conclusion of Mr Wedgewood and his one witness, the employers' representative made a submission that there was no case to answer; the Tribunal upheld that submission, on the basis that, on Mr Wedgewood's evidence, the time which had elapsed between the date of the breach of contract on the employers' part on which he relied and the date of his resignation was too great; and consequently, they dismissed the claim. In effect, although not expressly, the Tribunal concluded, on the basis of Mr Wedgewood's evidence, that if there had been a serious breach of contract on the employer's part, Mr Wedgewood had affirmed that breach.
3. Mr Wedgewood's Notice of Appeal raised a number of issues; but at the preliminary hearing of his appeal on 15 April 2002, his appeal was permitted to proceed to a full hearing on two issues, which are the issues which have been argued before us. They are:-

(1) Did the Tribunal fall into error in their approach to affirmation?

(2) Did the Tribunal err in agreeing to hear and then deciding the case on the basis of a submission of no case to answer, and without having heard any evidence on the part of the employers, if they wished to call evidence, or being in a position to draw such inferences as they thought right from any decision of the employers not to call evidence.

4. Towards the end of 1999, Mr Wedgewood became concerned that the employers had carried out various breaches of accounting procedures which involved falsification of invoices. On 15 December 1999, he raised his concerns with a Mr Roosenstein, part of the group directorate based in Holland. Mr Roosenstein came over from Holland to a meeting with senior managers, including the Managing Director, at which Mr Wedgewood's concerns were discussed. On the same day as the meeting, 17 December, according to the Tribunal's findings, Mr Wedgewood spoke to Mr Roosenstein by telephone and was told that either the transactions of which Mr Wedgewood was complaining would be reversed, or Mr Wedgewood and the Managing Director would be dismissed.
5. As a result, Mr Wedgewood wrote on 21 December to Mr Besselink of Westland Energie, a German company, who were about to become (and, as far as we know, did become) the principal shareholders in the employers, setting out his concerns about what he saw as fraud and his account of his conversations with Mr Roosenstein. He wrote on the same day to the employers' accountants and auditors. By this time he was away from work through illness.
6. He heard nothing by way of response to these letters until he received a letter from Mr Besselink, dated 16 February 2000, which said:

"We herewith inform you that Sowerby & Rushforth finalised their audit.

We have taken any necessary or appropriate measures and thank you for bringing the information to our attention."

7. Over the next ten days, there were various exchanges between the employers and Mr Wedgewood on the subject of mileage payments, the employers' cancellation of his American Express card given to him for use for company expenditure and the like. The Tribunal found that none of these matters amounted to a breach or serious breach of contract on the employers' part. On 29 February, Mr Wedgewood sent a letter to the employers in which he wrote:-

"I write in order to terminate my contract of employment effective immediately.

This is due to the fraudulent transactions perpetrated by yourself, Ross Hibbs and Duncan Grant whereby money was obtained by deception ……….

I was also instructed to be an accessory to a conspiracy to conceal fraud and I was threatened with dismissal as an alternative in my telephone conversation with Hans Roosenstein on Friday 17 December 1999 at 6.10 pm.

I have lost all trust and confidence in the management of the company and my current state of ill health and suffering is as a direct result of this. Because of what has occurred I have no alternative but to take this action……."

The employers replied that Mr Wedgewood's concerns had been fully and independently investigated and that Westland Energie were satisfied; they denied that there had been any threat to dismiss Mr Wedgewood or to cause him to be involved in a cover-up. They asked him to reconsider his decision; but Mr Wedgewood maintained the stance set out in his resignation letter.

The hearing

8. While it is possible to see Mr Wedgewood's actions in writing as he did, on 21 December 1999, as "whistle blowing", it was either agreed or decided that Mr Wedgewood's claim could not be brought within the amendments to the Employment Rights Act 1996 inserted by the Public Interest Disclosure Act 1998; there is no appeal against the Tribunal's proceeding to hear the claim on its merits, on the basis that it was a traditional constructive dismissal claim without any element of "whistle blowing" or consequent automatic unfairness.
9. The Tribunal heard the evidence of Mr Wedgewood over a day and a half, together with that of a witness whom he called, Mr Pickering. At the conclusion of Mr Wedgewood's evidence, a submission of "no case to answer" was made on behalf of the employers. The Tribunal, in paragraph 3 of their Decision, said of the submission:-

"3. The Tribunal has given due consideration to it, well aware that there are dangers in making such a finding. Also well aware of the provisions in Mrs Betty Mansfield -v- Yorkshire Water Authority EAT/490/85 that the Tribunal is under an 'obligation' to make a decision on this matter in order to save everyone's "time and trouble", and thus to save the Parties costs and expenses where it is appropriate to do so. Those are the balancing factors that the Tribunal has to weigh before it actually considers the law and the substance of the application."

And at paragraph 5(t) the Tribunal said:-

"It is clear to the Tribunal that, on the evidence of the Applicant, which has been given at length with reference to a bundle of documents which is 253 pages, ……that the Applicant has indeed failed to make out a case to be answered that he was entitled to terminate his employment by reason of his employer's conduct at the time that he terminated that employment on 29 February 2000. Accordingly, the Tribunal find that the submission that there is no case to answer is well made in this case. The Tribunal repeats that this decision is made with full knowledge of what the Appellate Courts have said about the dangers of making such a decision and also in full knowledge of the recommendations of the Employment Appeal Tribunal in the case of Betty Mansfield -v- Yorkshire Water Authority cited above. Balancing those factors we take the view that the Respondent has no case to answer and that the Originating Application should be dismissed at this stage."

10. The basis on which the Tribunal found that there was no case to answer was, in brief, as follows:-

(1) If Mr Wedgewood's evidence as to what was said to him on 17 December 1999 was correct, there was a serious breach of contract on the part of the employers (paragraph 5(q) ).

(2) However, that breach occurred on 17 December 1999; it was not until two months later, and thirteen days after his complaint had apparently properly been dealt with and he was so informed, that he resigned (paragraph 5(q) ).

(3) The resignation letter did not rely on any breaches other than that of 17 December 1999 and the alleged fraud which prompted the complaint. While in evidence, Mr Wedgewood had said that the more minor matters to which we have referred above were causative of his decision to resign, those matters did not amount to breaches of contract and could not relied upon as "last straws"; they had not been referred to in the resignation letter (paragraphs 5 (r) and (s) ).

(4) Therefore, it was necessary, if there was to be a constructive dismissal, for Mr Wedgewood to have reacted promptly to the events of 17 December. He did not do so. Instead he reported his concerns for investigation, which were properly addressed. By 29 February, too much time had passed and it was too late; Mr Wedgewood was no longer entitled to terminate his employment (paragraph 5(p)(q)(s) and (t) ).

Affirmation

11. Mr Wray, on behalf of Mr Wedgewood, submitted that the Tribunal had wrongly restricted themselves to considering the period which passed between 17 December 1999 and the resignation letter on 29 February 2000 only in terms of the length of that period, without considering what explanations there were for the delay and whether, in the light of such explanations, the passage of time justified the drawing of an inference that Mr Wedgewood had affirmed the contract of employment. The plain facts were, he submitted, that Mr Wedgewood was, after he sent his letters of 21 December 1999, drawing the attention of Mr Besselink and the auditors and accountants to what, on his account, had happened and was waiting to see and was entitled to wait to see whether the employers were going to react in a responsible manner; it was the employers' choice not to reply until February 16^th, some two months after Mr Wedgewood's letter; and the time which passed while he awaited that reply should not be held against Mr Wedgewood. Thus the Tribunal ought to have considered, at most, the delay from the receipt of the letter of 16 February to the date of the resignation letter on 29 February, which was, of course, only a delay of twelve or thirteen days.
12. During that short period, Mr Wray submitted, even if the employees had responded sensibly and responsibly to Mr Wedgewood's letters of 21 December, he was entitled to a brief period in which to make up his mind what to do; but the Tribunal was in error in regarding the letter of 15 February as indicating to Mr Wedgewood that the employers had dealt properly with his concerns. Mr Wray drew our attention to paragraph 3 of the employers' Notice of Appearance which said:-

"Following the allegations made by the Applicant a letter dated 16^th February 2000 was sent to the Applicant informing him that a full investigation has been carried out and that his allegation was without foundation."

and he contrasted that assertion with the actual terms of the letter of February 16^th from Mr Besselink to Mr Wedgewood which, because of the use of the word "any" before the word "necessary or appropriate measures", gave no reassurance that any measures had in fact been taken. There was, of course, no opportunity for cross-examination of any of the employers' witnesses to discover what the letter had actually intended to convey.

13. In summary, Mr Wray's argument was that the Tribunal had failed to pay any regard to these matters, and had erroneously assessed the impact of the letter of February 16^th, and that in the circumstances, the passing of time alone could not have been construed as affirmation.
14. Mr West, on behalf of the employers, submitted that the assessment of the effect of the time which had passed was entirely a matter of fact for the Tribunal, that all the arguments put by Mr Wray were addressed to the facts of which the Tribunal were well aware, having heard Mr Wedgewood give evidence for a day and a half. He submitted that we, as the Employment Appeal Tribunal, should not substitute our views as to affirmation for those of the Tribunal, and that we should not allow what was in essence a perversity appeal, unless satisfied that the Tribunal had erred in one of the very limited respects in which a finding of fact can be successfully attacked.
15. Mr West further drew to our attention the fact that Mr Wedgewood had not, at any point in the correspondence, raised any query as to, or made any complaint about, the letter of 16 February and that neither in his resignation letter nor in his Originating Application had he relied on any supposed shortcomings in that letter as a cause of his decision to resign. He referred us to paragraph 5(p) of the Decision where the Tribunal expressly found that Mr Wedgewood had not raised any query as to the measures referred to in the letter, and that Mr Wedgewood did not resign on the basis that he was not satisfied with the reply.
16. Although in Western Excavating (E.C,C) Ltd -v- Sharp [1978] ICR 221 Lord Denning laid down the principle that an employee:

"must make up his mind soon after the conduct of which he complains; for, if he continues for any length of time without leaving, he will lose his right to treat himself as discharged"

it is clear from subsequent decisions that the passing of time alone may not be sufficient to prevent an employee from accepting a fundamental breach of contract and claiming that he has been constructively dismissed. It is, for example, well established that time must not begin to run until the employee knows of the breach; and once he knows of the breach, as Mr Wedgewood did on 17 December, the reasons for the passing of time put forward by way of explanation by the employee may be such that it would be wrong for a Tribunal to draw the inference that the employee has elected to affirm the contract and not to treat the breach as repudiation of the contract. An example might be a case in which the employee is seriously ill during the period of delay; another might be a case in which the employee, rather than reacting immediately to the breach by accepting the employer's repudiation, gives the employer the opportunity to withdraw from the offending course of action, or to remedy the breach.

17. During the course of argument, we put to the parties' representatives the passage in Harvey Employment Law Volume 1, paragraphs 523 onwards, in which, by reference to numerous authorities which it is not necessary for present purposes to set out, the learned authors demonstrate that the Tribunal of fact must consider not only the length of time passing between the breach relied upon and the employee's acceptance of that breach, but also the explanation put forward by the employee for that breach and the circumstances of the delay. Neither Mr Wray nor Mr West suggested that these passages were incorrect.
18. In our judgment, it was incumbent on the Tribunal in this case, in assessing on the facts whether there was or was not affirmation, not only to consider the time which passed after 17 December and whether Mr Wedgewood acted promptly after that date but also to consider the context of the delay and any explanation of it given in evidence or arising from the documents. We cannot tell from the Tribunal's Decision whether Mr Wedgewood gave any explanation in evidence; the Tribunal did not set out any explanation on his part and then reject it. Whatever he said or did not say in evidence, it is plain that the letter of 17 December was written in order to seek action to remedy Mr Wedgewood's serious concerns and to ventilate his grievance as to what had happened. We do not suggest that the fact that the letter was written in the terms which it contains or for that purpose necessarily meant that the Tribunal could not draw an adverse inference from the delay; but, save that in paragraph 5(q) of their Decision, the Tribunal record that Mr Wedgewood did not react on 17 December by terminating his employment, but "reported the matter for enquiry" the Tribunal, as we read their decision, did not consider that purpose or the terms of the letter as containing a potential explanation for the delay or any other explanation and looked simply at the passage of time. In this, in our judgment, they fell into error; they omitted to consider material facts.
19. Had the Tribunal considered the facts on a wider basis than merely in terms of time, they might - or might not - have taken the view that it was understandable that Mr Wedgewood should wait until there was some reply to his letters. If they had taken that view, they would have been considering not delay from 17 December to 29 February but a delay of twelve to thirteen days, from receipt of the letter from Mr Besselink of 16 February to the resignation letter on 29 February. We cannot tell from the Tribunal's Decision what view the Tribunal would have reached had they been considering only that much shorter period of delay.
20. We reject any argument that the Tribunal should not, as a matter of law, have considered the period of delay prior to 16 February; the Tribunal were not asked to consider whether the sending of the letter of 16 February constituted a further breach of contract or a breach of contract in the absence of any earlier breach. Nor, it seems, were the Tribunal invited to consider the sending of the letter as a "last straw" which would have enabled Mr Wedgewood to rely on earlier breach of contract even if there had been affirmation of such breach. However, for the reasons we have set out, the Tribunal, in our judgment, ought to have considered whether there was affirmation on a wider basis than merely by looking only at the time which had elapsed and without looking at the reasons why that time had elapsed; if they had done so they may have concluded that they should look only at the period after receipt of the 16 February letter.
21. Further, in our view the Tribunal misconstrued that letter. It is suggested in their Decision that Mr Wedgewood accepted the letter as indicating that his concerns had been adequately addressed; Mr West has not suggested that Mr Wedgewood gave evidence to that effect (although Mr West was not present at the Tribunal's hearing, the employers were represented by a colleague of his from the same organisation). On the face of it, the letter appears to have told Mr Wedgewood very little. In the first sentence Mr Besselink simply told him that the accountants had finalised their audit; no copy of their report or other product was sent to Mr Wedgewood; and he could not have known whether the accountants had finalised their audit, taking into account or ignoring his concerns, what they had done, if anything, about those concerns or whether they had finalised the audit with or without reservations. The second sentence appears, on any sensible understanding, not to tell Mr Wedgewood whether some measures had been taken or no measures had been taken, in the light of his concerns. The words "we have taken any necessary or appropriate measures" are wholly ambiguous; many measures might have been taken; none might have been regarded as necessary or appropriate; there is no indication as to what if any measures had been taken and to what effect.
22. Accordingly, in our judgment, the Tribunal fell into further error in looking at delay on the basis that, in effect, the letter of 16 February was a satisfactory response to Mr Wedgewood's concerns. The letter did not justify that approach. Mr Wedgewood did not expressly complain about the letter (although it could be said to have been included within the fourth paragraph of his resignation letter); but in looking at the period of time after receipt of the letter the Tribunal ought, in our judgment, to have had in mind the true nature of that letter. The Tribunal's words in paragraph 5(q) of their Decision:

"……'out of the blue', some two months after the original event, and 13 days after the matter had apparently been properly dealt with and reported to him, he resigned ……"

do not properly represent the factual picture as it was. In the light of receipt by Mr Wedgewood of an unsatisfactory response to his letters of concern, the effect of the passing of time, when Mr Wedgewood might well have wished to consider the position carefully before acting, might have been viewed in a different light and led to a different conclusion as to affirmation, as compared with that which might have been reached if the letter in response had been wholly satisfactory. The problem might have been seen to have been perpetuated, if not exacerbated, by the unsatisfactory nature of the response.

23. Accordingly, for these reasons, we conclude that the Tribunal's conclusion that by 29 February Mr Wedgewood was no longer entitled to terminate his employment by reason of the employers' conduct cannot stand.
24. We should add a further word of explanation about the arguments in this case and in this appeal. It is, of course, well established that:

(a) a subsequent breach of contract on the part of the employers, albeit not of itself fundamental, may entitle an employee to rely upon past affirmed fundamental breach, and

(b) subsequent conduct, short of a breach of contract, may also have such an effect. This is the essence of the "last straw" doctrine. However, it was not argued, either before the Tribunal or before us, that the letter of 16 February constituted a "last straw" and enabled Mr Wedgewood to rely on the events of 17 December, despite any affirmation arising from the delay between 17 December and 16 February. Nor was there any appeal against the Tribunal's approach, in paragraph 5(s) of their Decision, to the minor matters of dispute between the parties, namely that they were not capable of amounting to a "last straw" or "last straws" because they did not constitute breaches of contract. The "last straw" doctrine simply has not featured as part of this appeal.

Submission of no case

25. In view of our conclusion on the affirmation issue, it is not necessary to take up much time or space on this issue. However, since the claim will have to be reconsidered, as we explained below, it may be of some assistance if we refer to it briefly.
26. The most recent, albeit unreported, authority on submissions of "no case to answer" before Employment Tribunals, at least in the context of a constructive dismissal claim, is Logan -v- The Commissioners of Customs & Excise (EAT/686/00, judgment delivered on 23 May 2002). The EAT, in that case, went through all the relevant authorities which, using different words, express the general principle that:

"it is only in exceptional cases that it will be unnecessary to hear both sides before reaching
a decision"

(per HHJ Peter Clark in Hackney LBC -v- Usher [1999] IRCR 705.

27. In that case, the EAT decided that, in order to assess whether the conduct relied upon as constituting the "last straw" was sufficient where there was a dispute as to that conduct, it was necessary for the Tribunal to hear evidence from both sides. However, it was pointed out that there might be a constructive dismissal case in which it was perfectly clear at the end of the employee's evidence that there never had been any repudiatory breach at all; such a case, it was said, might be regarded as a rare and exceptional case in which a submission of no case might succeed. See paragraph 17 of that decision.
28. Mr West referred us to the unreported decision of the EAT in Elwick -v- Kingston upon Hull City Council (EAT/209/94, 28 July 1994) in which the EAT suggested that a Tribunal in a constructive dismissal case may be entitled to consider, at the end of the employee's evidence, whether he has done enough to persuade them that they ought to hear what the employers are going to say. While we do not differ from the remarks of the EAT in that case, presided over as it was by Morison P, it is necessary to point out that the judgment was given on an ex-parte preliminary hearing only and contained no reference to any of the authorities. The principles which should apply, with which Elwick is not inconsistent, are those set out in the authorities reviewed in Logan. Applying those authorities, in this case, if the Tribunal's Decision on affirmation had withstood the attack upon it in this appeal, we would have regarded this as a case of a rare and exceptional kind in which it was clear, at the end of the employee's case, that his claim had to fail because there was no repudiatory breach on which he could rely. We do not see what evidence from the employers could have affected such a conclusion. The Tribunal in this case directed themselves, in general terms, correctly as to the dangers of proceeding on a submission of "no case to answer"; in our judgment, having regard to the view they took as to the effect of delay, they did not err in exercising their discretion so to proceed.
29. Whether they would or should have so proceeded if they had approached the affirmation issue in the manner which, according to this judgment, we would have regarded as correct in law, is not a matter as to which we can or should express a view. If, in the course of any hearing of this case hereafter, there is a submission of "no case to answer", the Tribunal, no doubt, will direct themselves along the lines set out by the EAT in Logan and the authorities there cited.

Conclusion

30. We have considered carefully whether this case could be remitted to the same Tribunal on a limited basis so as to avoid a re-hearing. We have reluctantly concluded, particularly because no evidence from the employers was before the Tribunal, that such a limited remission would not be appropriate. In all the circumstances, we remit the claim for re-hearing by a differently constituted Tribunal. The claim must be considered as a straightforward constructive unfair dismissal claim; it has already been determined that this is not a "whistleblowing" case and there is no basis on which that determination can be re-opened.