Appeal No. EAT/578/89

	ZZZZZZZZZZ APPEAL TRIBUNAL
	4 ST. JAMES'S SQUARE, LONDON, SW1 4JU

		At the Tribunal
		On 25th July 1991
	Judgment delivered 3rd September 1991

	Before

	THE HONOURABLE MR JUSTICE WOOD MC (P)

	MR J R CROSBY

	MR R J LEWIS

C T PEARSON	APPELLANT

KENT COUNTY COUNCIL	RESPONDENTS

	Transcript of Proceedings

	JUDGMENT

Revised

	APPEARANCES

For the Appellant	MRS L COX
	(of Counsel)
	MR B BANKS
	Bruce Piper & Co
	1 Mabledon Place
	LONDON WC1

For the Respondents	MR E M ASHFIELD
(of Counsel)
MR G W SWIFT
County Solicitor
Kent County Council
Maidstone
KENT ME14 lXQ

	MR JUSTICE WOOD (PRESIDENT):  On 19th September 1989 an Industrial Tribunal at Ashford under the Chairmanship of Mrs Cooney decided that the County Council were not liable to make a redundancy payment to Mr Pearson over and above the amount which they had already paid, since the Applicant was to be treated for the purpose as if entitled to such a payment as having been continuously employed only between 11th June 1984 and 31st October 1988.

	His case was that he had been continually employed from August 1955 until 31st October 1988.  The crucial issue involved was a consideration of a gap in employment between 31st May and 11th June 1984.  In paragraph 11 of its Decision the Industrial Tribunal say this -
	"It is not disputed in this case that the applicant resigned from his position as head of the Superannuation Department with effect from 31st May 1984, remained unemployed for 10 days and recommenced employment with the respondent on 11th June 1984 as a Superannuation Technical Assistant."

	Mr Pearson appeals.

	Mr Pearson was born on 5th June 1938 and started work with the County Council in 1955 as a clerk in the Superannuation Department.  He rose to being Head of that Department with effect from 1st April 1975.  Since the latter part of the 1970s the work in the Department has become more difficult and has increased.  He suffered from a bowel complaint which was attributed by his doctor to the anxiety and stress which he was experiencing at work.  Tranquillisers were prescribed, but over the next few years the condition worsened and additional medication was required in order to control it.  
	
	In January 1984 Mr Pearson consulted his doctor suffering from anxiety and complaining of pressure of work.  His doctor advised him that if his condition got worse he might have to consider resigning from his employment and finding different and less strenuous employment. 

	After consideration Mr Pearson decided to apply for early retirement on medical grounds and spoke to his line manager, Mr Mercer, the Assistant County Treasurer, to inform him of his decision.  Mr Mercer was not entirely surprised as he knew of Mr Pearson's problems and he suggested that Mr Pearson return for further discussion when he had "sorted  things out".  At the time of that conversation Mr Pearson intended to look for his future employment outside the County Council.

	Mr Mercer then approached Mr Pearson with a suggestion that he might return to his Department in a non-managerial capacity and after due deliberation Mr Pearson agreed.

	It was then arranged that Mr Pearson would, if possible, retire on grounds of ill-health and be re-appointed as a Technical Assistant in that Department.  He was of course familiar with issues concerning retirement.  Although the particular pension documents were not before the Industrial Tribunal, nor are they before us, it is well within the experience of the industrial members of this Court that to retire on grounds of ill-health normally entitled an individual to a substantially enhanced pension benefit in that he, as in this case, will receive an immediate pension on termination rather than wait for payment until his contractual date of retirement.  It is also well known that in many schemes the final pension is related to the final salary or to an average of the last few years.  The salary of a Technical Assistant in the Superannuation Department was very substantially lower than that of the Head of that Department.

	We do not need to speculate upon the reason, nor should we, for whatever the reason it is clear that Mr Pearson decided to resign on grounds of ill-health and to seek to obtain  a pension on those terms.  The Industrial Tribunal deal with this issue as follows -
"...  In order to be able to draw a pension under the Superannuation regulations, Mr Pearson had to terminate his employment, and the normal procedure in other similar cases had been for there to be a one day break before the new employment with the Council commenced.  In this case however having regard to Mr Pearson's seniority and to the fact that he would be drawing a pension and receiving a salary in his new employment, Mr Mercer was anxious that the Committee which was required to approve the arrangements should not feel that a situation was being manoeuvred to Mr Pearson's advantage.  He therefore suggested a 10 day break between jobs for Mr Pearson and Mr Pearson agreed."

	The Personnel Group Committee approved the arrangement on 28th March and Mr Pearson subsequently saw the County Council Medical Officer who issued a certificate dated 16th May for the purposes of the Local Government Superannuation Regulations 1974 certifying that Mr Pearson was incapable of discharging efficiently the duties of his employment by reason of ill health.

	On 12th April two letters were written by Mr Pearson; a formal letter to the County Treasurer, Mr Taylor, indicating resignation on medical grounds and stating he would be leaving on 31st May; the other was an informal letter to Mr Taylor and Mr Mercer thanking them for their efforts to find him a replacement job in his Department.

	By a letter of 8th May Mr Pearson received a formal offer for the position of Technical Assistant with effect from 11th June 1984; this he accepted and took up his position on that date.

	He worked in that position until dismissed by the County Council by reason of redundancy with effect from 31st October 1988.  As indicated in the Decision he received a redundancy payment based upon four years' continuous employment.

	Schedule 13 has caused numerous problems over the years, but we are told that the present issue has never reached this Court.  It concerns the proper meaning of Paragraph 9(1)(a).  The Schedule is given effect by the provisions of S.151 of the Employment Protection (Consolidation) Act 1978 which reads -
	"References in any provision of this Act to a period of continuous employment are, except where provision is expressly made to the contrary, to a period computed in accordance with the provisions of this section and Schedule 13; ..."

Thus although we are considering a claim in redundancy, the principles involved cover all instances where continuity of employment is relevant.

	Section 81 gives the "right to a redundancy payment calculated in accordance with Schedule 4, 13 and 14".  Paragraph 1 of Sch.4 reads -
	"The amount of a redundancy payment to which an employee is entitled in any case shall, subject to the following provisions of this Schedule, be calculated by reference to the period, ending with the relevant date, during which he has been continuously employed."  
Schedule 13 is headed, "Computation of period of employment".

	We need only refer to a few of the paragraphs.
	1(i)  Except so far as otherwise provided by the following provisions of this Schedule, a week which does not count under Paragraphs 3 to 12 breaks the continuity of the period of employment.

	 (ii) ...

	 (iii)  A person's employment during any period shall, unless the contrary is shown, be presumed to have been continuous."
Paragraphs 4 to 7 refer to occasions where a contract of employment exists; Paragraph 9 relates to cases where a contract of employment does not exist.  Although strictly obiter this is clearly indicated in FORD v. WARWICKSHIRE COUNTY COUNCIL  [1983] ICR 273. HL.

	Paragraph 9 reads -
	"Periods in which there is no contract of employment

	9-(1)  If in any week the employee is, for the whole or part of the week -

	(a)  incapable of work in consequence of sickness or injury, or
	(b)  absent from work on account of a temporary cessation of work, or
	(c)  absent from work in circumstances such that, by arrangement or custom, he is regarded as continuing in the employment of his employer for all or any purposes, or
	(d)  absent from work wholly or partly because of pregnancy or confinement,

	that week shall, notwithstanding that it does not fall under paragraph 3, 4 or 5, count as a period of employment.

	  (2)  Not more than twenty-six weeks shall count under paragraph (a) or, subject to paragraph 10, under paragraph (d) of sub-paragraph (1) between any periods falling under paragraph 3, 4 or 5."
The only other Paragraph to which we need refer is Paragraph 24 where a week is defined as""week" means a week ending with Saturday"" (we shall refer to this as the statutory week).

	Although it is easy to understand why in earlier decisions courts had been caused problems with such phrases as "absence from work", it is now quite clear that the first essential and indeed the condition precedent to the application of Paragraph 9 is that there should be no contract of employment in existence when the relevant statutory week is being examined.  The notion of a period of employment is a period of work under a contract of employment and it is to that continuity of employment under the contract of employment that the Schedule is looking.  The gap is between contracts of employment and it is capable of being filled by weeks deemed to be employment under contracts of employment.  It is to the reason for the absence of a contract of employment during a relevant statutory week that one must be looking.

	Paragraph 9 becomes relevant where an employee is alleging continuity of employment against his employer.  There must have been an original contract of employment; termination of that contract; a period where no contract exists and finally a subsequent contract of employment with the same employer.  It is upon each statutory (Saturday to Saturday) week during the gap that the enquiry must concentrate.  If any such week does not fall within Paragraph 9 there is a break in continuity, see Paragraph 1(i).  If upon the facts found by them an Industrial Tribunal is unable to reach a conclusion then the presumption of continuity in Paragraph 1(iii) applies.  The limit of "deemed" weeks of employment under Paragraph 9(1)(a) is 26 weeks.  The enquiry into the reason for the gap is necessarily carried out ex post facto; there has in fact been a return to work, a second contract of employment has in fact come into being. 

	Looking at the wording of Paragraph 9 itself we note first, that in (b), (c) and (d) the phrase is "absence from work", and in (a) "incapable of work".   Secondly that the operative words in each sub-paragraph vary;  (a) - "in consequence of"; (b) - "on account of "; (c) - "in circumstances such that" and (d) - "wholly or partly because of".

	It is argued that in (b), (c) and (d) the words are causative, whereas the requirement in (a) is that of a prior condition - a condition precedent, the difference between "causa causans" and "causa-sine qua non".  Whether or not in (a) the words are strictly causative we need not decide.  It is sufficient to meet the purposes of the statutory provisions if one asks, "Why was there no contract of employment in each of the relevant statutory weeks?"  For if there was no complete week intervening there would be continuity.  Another possible way of phrasing the question would be "Why was there no new contract of employment?".

	It is only if the answer is that there was no contract of employment in the relevant statutory week because of incapacity to work in consequence of sickness or injury, that that particular week can count towards continuity.  Whether 'sickness' and 'ill-health' are synonymous we crave leave to doubt, when one sees the distinction made in the statutory provisions for 'sickness benefit', but we need not decide this.  It was not argued before us.  The phrase "incapable of work" is also found elsewhere in statutory provisions.

	Much stress has been laid in the present case on the reason or circumstances surrounding the termination of the initial contract.  It seems to us that there is a danger in concentrating on the dismissal and its cause or on those circumstances surrounding the termination, because it is the absence of a contract of employment during the gap that requires one's attention.

	The only case reported in which this Court has considered a set of facts relating to Paragraph 9(1)(a) is SCARLET v. GODFREY ABBOTT GROUP LTD [1978] ICR 1106.  In that case the employee began working with the employers in February 1977 but was frequently absent from work because of ill health.  On June 30th the employers knew that he had been taken ill at work and had to go home.  He remained off work because of illness but did not inform his employers of the reason and on 6th July he was dismissed because of his poor attendance record.  He was re-employed on 1st August and had in the meanwhile spent that period in hospital.  He remained thereafter employed until August 23rd when he was dismissed.  The issue was continuity of employment for the qualifying period.  This Court in SCARLET was referred to FITZGERALD v. HALL, RUSSELL & CO LTD [1970] A.C. 984.  In that case the House of Lords was considering Schedule 1 of the Contracts of Employment Act 1963 and S.1(8) and Schedule 1 of the Redundancy Payments Act 1965.  The wording however is similar to that of Paragraph 9 of Schedule 13.  The applicant had been laid off because of shortage of work for a period between November 1962 and January 1963.  He remained unemployed between those dates.  He was finally dismissed by reason of redundancy in December 1967 and claimed redundancy payment.  The House of Lords decided that "cessation of work" referred to the employee's work and not the employer's work (this was the true ratio) and remitted the case to an Industrial Tribunal to determine whether on all the facts before it the cessation was "temporary". 

	The Industrial Tribunal had found that his qualification service for redundancy payment started on the date of his return to work in January 1963 but gave no reasons for reaching that conclusion.  In commenting on that finding Lord Upjohn says this at p.1001 -
	"My Lords, no one doubts that when he was dismissed on November 27, 1962, there was a break in his employment with the respondents, but that, in my opinion, is by no means conclusive of the matter.  No doubt in many cases a break in employment will prove fatal to a claim to throw  the period of continuous employment back to the period of his earlier engagement; thus, if he gave notice himself for his own reasons, or was dismissed because he was unsatisfactory, it would no doubt be impossible for him to show that his employment was continuous from the earlier date.  But the whole issue in this case is whether the appellant can show that, notwithstanding the legal break terminating his earlier employment, nevertheless the provisions of Schedule 1 to the 1963 Act, properly construed, entitle him to claim that for the purposes of the 1963 and 1965 Acts the period of his employment was continuous from the commencement of his earlier engagement, and this point of law seems to have been overlooked by the tribunal.  That dismissal is not conclusive against the employee's claim is, I think, clear having regard to the whole structure of the Schedule to the 1963 Act.  Thus paragraph 5(1)(a) and (b) seems to contemplate cases where incapacity in consequence of sickness or injury or absence on account of cessation of work may count as a period of continuous employment even where the incapacity or absence has led to or at all events been accompanied by a termination of the employment.  That the period of the earlier employment may be so included in proper circumstances is, in my view, supported by the phraseology in section 24(1)(b) and the definition of "employee" in section 25(1) of the 1965 Act.  In my opinion, reference to those sections is permissible in construing the 1963 Act, for Schedule 1 to that Act is really incorporated into the latter Act." 

	It is to that passage that this Court was referred in SCARLETT.  Mr Justice Phillips cites it and then continues thus -
	"No doubt that passage demonstrates that there may well be such cases which do not fall, for those reasons, within paragraph 5.  The difficulty - and it is really what causes the trouble in this case - is to say, what is the principle that has to be applied in deciding whether any case, and in particular this case, is such a case as Lord Upjohn had in mind at p.1001.  It seems to us that the relevant matter to look at is the absence and consider the circumstances in which it has come about.  Here we are talking about incapacity to work in consequence of sickness or injury, and in the case before the House of Lords they were talking about absence from work on account of a temporary cessation of work.  No doubt it can be said in that type of case that, although there had been a dismissal, the dismissal is really on account of the temporary cessation of work.  And the question perhaps is this: does it have to be shown, where there was a dismissal, that the dismissal was expressly - in a case, for example, under paragraph 5(1)(a) of Schedule 1 to the Act of 1972 such as we are dealing with - on account of incapacity to work in consequence of sickness?  It seems to us that that would be putting the test too high.  If one looks at the circumstances of this case without in any way pre-empting any question which may have to be decided when the case is eventually heard, it is quite clear from the findings of facts, from what was said in the course of the evidence by Mr Roberts for the employers, that this is not the kind of case that Lord Upjohn was talking about, where there was dismissal for misconduct or something of that kind, although the employers certainly took the view that they had not been kept informed as to the reason for the employee's absence." 

	In SCARLETT it seems on the facts that the illness from which the applicant was suffering was one in connection with which he had been dismissed and therefore there was a continuity of the facts and circumstances which explained the absence of a contract of employment during the gap when considering each relevant statutory week.  However, we would respectfully comment that the words of Lord Upjohn were, strictly speaking, obiter and as we have indicated above it seems to us that it is not necessary to analyse the reason for the termination of the prior contract of employment.  The issue is as we have already put it, "Why was there no second contract of employment during each relevant week?"

	It might have been the intention of Parliament that Paragraph 9 should apply in cases where termination come about either by reason of the conduct or resignation of the employee but the Act does not so state.

	It was submitted from the Bar that the sickness or injury and hence the incapability must refer only to the first contract of employment.  It is unnecessary in the present case for us to decide this, but it is possible to think of situations where that would not be so eg, temporary termination of a fixed term contract (teaching) followed by substantial delay and inability to take up a fresh contract due to sickness; or a dismissal on the grounds of capability followed by sudden sickness lasting 12 weeks and re-employment in a different capacity.  The wording of paragraph 9(1)(a) would seem to cover both cases.  Read literally the wording could include the following situation where 'A' and 'B' are dismissed for taking two extra days' holiday in blatant disobedience of instructions and in the following few days 'A' falls seriously ill.  He is subsequently re-employed, why should not the intervening weeks count towards continuity?  Although in some cases it may seem morally right to look for the reason of dismissal, the Schedule does not demand it.

	We were also referred to COLLINS v. NATS (SOUTHEND) LTD [1967] ITR 423, a decision of an Industrial Tribunal sitting in London under the Chairmanship of Sir Diarmaid Conroy QC.  The facts are succinctly stated thus in the decision -
	"The respondent company had a lady's dress shop.  In May, 1953, the applicant started working for them, originally on the sales side and subsequently as assistant manageress of what can be described as one department of this shop.  Towards the end of 1964 she had trouble with chilblains and had had to have operations on her legs.  As a result of this she found it difficult to stand for long periods, and Mr Bellos, the proprietor, suggested that she should leave and come back when she was better.  As a result, she left, she says, about the 28th or 29th November 1964.  She was paid off.  She managed to find other work which was of a sedentary nature, where she did not have to stand.  She did not draw any sickness benefit during that period.  A little before Christmas, 1964, she met Mr Bellos.  He asked her when she was returning, and as a result of this discussion she did return and started working again on 18th January 1965.  She continued to work in that business until the end of December 1966.

	 As a result of the demolition of the shop premises, the business had to close down, and although the respondents found another shop, her department was not re-opened in the other shop.  On 30th December 1966, she was dismissed.  She was paid her pay up to 14th January and thus her employment terminated.  We find that she was dismissed and that she was dismissed by reason of redundancy."

	From the use of the word "department" towards the start and finish of this passage, we assume that the work carried out by Mrs Collins for the respondents was the same both during the first and second contracts of employment.  The work on which she was engaged during the interim period in the gap was for a different employer and therefore irrelevant.  In answering the question which we have posed above namely "Why was there no contract of employment with the respondent during each relevant week?", the answer is clear.  It was because of sickness.  It happened to be that sickness from which Mrs Collins was suffering at the termination of her first contract of employment, but it need not have been.  We find no particular help from this case in trying to construe Paragraph 9(1)(a).
   
	The Applicant also put his case on Paragraph 9(1)(c) of the Schedule.  The wording of that seems clear, there must be an arrangement that he is to be regarded as continuing in the employment of his employer for all or any purposes.

	The Industrial Tribunal look at the wording of both Paragraph 9(1)(a) and (c) and we do not accept that their findings of fact are only relevant to the one issue or the other.  The relevant findings are in paragraphs 16, 17, 18 and 19.  We cite certain passages from those paragraphs.
	"16.  ...  The applicant in this case gave notice for his own reasons, namely to obtain an entitlement to a pension, and had it not been for his wish to do this he would have continued his employment without a break."

	"17.  We are satisfied from the judgment of Phillips J in Scarlett v. Godfrey Abbott Group Ltd [1978] ICR 1106 that, in order for there to be continuity of employment under paragraph 9(1)(a), then, despite the wording of the paragraph, the employee's absence must be connected with the sickness or injury, even if it is not on account of it.  The applicant's absence was not so connected, since there was nothing connected with his medical problem which would have prevented him from carrying straight on in the new position."

	"18.  In considering paragraph 9(1)(c) of Schedule 13 of the 1978 Act, we have found that there was no arrangement by which the applicant was regarded as continuing in the respondent's employment during the period of his absence.  Mr Taylor's letter to the applicant dated 16 April, cannot in our view be construed as evidence of any such arrangement. ..."

	"19.  The arrangement between Mr Mercer and the applicant was that there should be a period of time during which the applicant would not be regarded as continuing in the respondent's employment for any purposes, and such an arrangement was essential if the applicant was to become entitled to his superannuation benefits."  

	Despite the able submissions of Mrs Cox we are unable to discern any error of law in the approach of this Industrial Tribunal to the issues before it.  It had to answer the question "Why was there no contract of employment during the statutory week in the middle of the gap?"  and "Was there an arrangement whereby Mr Pearson was to be regarded as continuing in the employment of the County Council for all or any purposes?"  The answer in each case was against the Applicant and the decision must stand.

	This appeal is dismissed.

	Leave to appeal.