Appeal No. EAT/101/90

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

		At the Tribunal
		On 30th March 1992

	Before

	THE HONOURABLE MR JUSTICE KNOX

	MR J C RAMSAY

	MS P SMITH

SISTER ROSE LIMITED	APPELLANTS

BRENDA GARRATT	RESPONDENT

	Transcript of Proceedings

	JUDGMENT

Revised

	APPEARANCES

For the Appellants	DR G LIGHTNING
(Managing Director)

For the Respondent	MR N GRUNDY
(Of Counsel)
Casson & Co
3 Bexley Square
Salford
M3 6DB

	MR JUSTICE KNOX:  This is an Appeal by a Company called Sister Rose Limited, which I will call "the Company" from a decision of an Industrial Tribunal sitting at Manchester on the 29th September 1989, the decision being sent to the parties on the 27th November of that year.

	The decision was, by way of preliminary point, that the Applicant before the Industrial Tribunal, Mrs Garratt, was continuously employed by the Company for two years.  The claim is a claim for unfair dismissal and we do not deal with that aspect of the matter because we are only concerned with the preliminary point, whether or not Mrs Garratt had the requisite two years of continuous employment which is required by Section 64(1)(a) of the Employment Protection (Consolidation) Act 1978, which I will call "the Act".

	The Company operates a private health care business advising and treating, mainly women, on a wide spectrum of family health matters and Mrs Garratt was employed as Manageress of one of the Company's consulting rooms in Manchester.  Her employment commenced on the 26th May 1987 and was terminated on the 19th May 1989.  The Industrial Tribunal found that that day a letter was posted and a copy handed to Mrs Garratt by the Managing Director of the Company, a Dr Lightning, who is a Ph.D. rather than a medical Doctor, and who conducted the Appeal on behalf of the Company, before us, in person.  The letter contained what was accepted by Dr Lightning as being an immediate termination of the contract of Mrs Garratt's employment.  At least he accepted that in opening the Appeal, although in reply he resiled somewhat from that proposition and sought to argue that the Contract of Employment subsisted after the delivery of the letter for, at any rate, a short period.  I will return to that aspect of the matter later.  The letter, it seems to us, is wholly unambiguous on this aspect.  It said this, amongst other things:
"This letter is therefore to confirm the termination of your employment, effective immediately from today's date.  You are entitled to two weeks pay in lieu of notice, and the same is enclosed, together with your salary to date and your P45."

The situation therefore was that the employment was terminated without notice, wrongfully, and that took effect immediately from that day, the 19th May.  It is obvious that if that was the end of the story there would not be two years continuous employment subsequent to the 26th May 1987.

	The factual matter which also needs recording is the decision that the Industrial Tribunal reached in paragraph 12 of its decision which is in these terms:
"We then considered Section 49(3) and cannot find that the applicant waived her right to notice nor that she accepted, in the sense of agreeing to a payment in lieu of notice.  The terms of the letter and the respondent's action in changing the locks at the premises where the applicant worked left her no choice."

	Dr Lightning submitted that that was a perverse finding and that no reasonable Tribunal could have reached such a conclusion on the evidence before it.  Quite apart from the fact that there is nothing about that aspect of the matter in the Notice of Appeal we are wholly unpersuaded that there was any amount of perversity in that finding because such evidence as there is before us indicates that what happened was that the letter in question, from which I have quoted, was handed to Mrs Garratt and it contained, what we are told in fact was a cheque, rather than notes, representing the payment in lieu of notice and that was that.  Dr Lightning accepted in the course of argument that there was no question of there being any agreement between Mrs Garratt and him on behalf of the Company for a contractual termination of Mrs Garratt's employment.  It therefore follows, it seems to us, that the Industrial Tribunal had grounds upon which it could find that Mrs Garratt did not accept, in the sense of agreeing to, a payment in lieu of notice.  We were told, and we assume for the purposes of our decision, that the cheque was subsequently cleared.  There is actually nothing in the decision itself that states that in terms, but for the purposes of our decision we assume that that was in fact what happened.  

	The relevant law is statutory and the two sections which are directly in point are, Sections 49 and 55 of the Act.  Section 49(1)(a) reads as follows:
"The notice required to be given by an employer to terminate the contract of employment of a person who has been continuously employed for [one month] or more -

(a)  shall be not less than one week's notice if his period of continuous employment is less than two years;"

there are subsequent paragraphs that deal with other cases but that covers Mrs Garratt's case who was employed for less than two years, if one disregards statutory hypothesis, and under Section 49(1)(a) the notice required to terminate her employment was not less than one week.  Subsection (3) of that Section provides:
"Any provision for shorter notice in any contract of employment with a person who has been continuously employed for [one month] or more shall have effect subject to the foregoing subsections, but this section shall not be taken to prevent either party from waiving his right to notice on any occasion, or from accepting a payment in lieu of notice."

	Section 55 has three relevant subsections (4), (5) and (7).  They read as follows, so far as relevant:
(4) In this Part `the effective date of termination' -

(a)...........

(b) in relation to an employee whose contract of employment is terminated without notice, means the date on which the termination takes effect;

(c) ...........

(5) Where the contract of employment is terminated by the employer and the notice required by section 49 to be given by an employer would, if duly given on the material date, expire on a date later than the effective date of termination (as defined by subsection (4)) then, for the purposes of sections ... 64(1)(a) .... the later date shall be treated as the effective date of termination in relation to the dismissal."

That leaves one asking what the material date is, and that is answered by subsection (7) which reads, so far as is relevant:
"`Material date' means -

(a) in subsection (5), the date when notice of termination was given by the employer or (where no notice was given) the date when the contract of employment was terminated by the employer;"

	It is evident, and was not disputed in argument, that both the effective date of termination as defined by subsection (4), and the material date for the purposes of subsection (5), were in this case the 19th May 1989.  

	The recital of these statutory provisions indicates that, on the face of it, this was a case where subsection (5) applied.  The contract of employment was terminated by the employer, the Company.  A notice required by Section 49 to be given by the Company, if duly given on the 19th May 1989, would expire on a date later than the 19th May, that is to say one week later on the 26th May, and subsection (5) prima facie, requires that later date to be treated as the effective date of termination for the purposes of the Rule in Section 64(1)(a) which requires two years of continuous employment.

	The basis on which the case was principally argued before us was that that conclusion was not the correct one in the light of what was said by the Employment Appeal Tribunal in the decision of Staffordshire County Council v. Secretary of State for Employment [1988] IRLR 3.  Dr Lightning read to us and relied upon the following passage in the headnote of that decision.  
"The Industrial Tribunal had wrongly held that the provisions of s.49(3) which refer to waiving the right to notice or accepting a payment in lieu do not override the statutory notice requirements of s.49(1).  The words of s.49(3), `but this section shall not be taken to prevent either party from waiving his right to notice on any occasion or from accepting a payment in lieu of notice', can only mean that the effect of s.49(1) will not continue if there is such a waiver or payment in lieu.  Once a party has waived his right to notice or accepted a payment in lieu of notice, the contract of employment is brought to an end and nothing is left upon which s.49(1) can bite."

	The decision was one which turned on transitional provisions under the Wages Act 1986 concerning the availability of redundancy payments and rebates for employers in connection with it.  That is an issue which is of course entirely different from what is before this Tribunal on this Appeal.  But the provisions of Section 49(1) and (3) which I have already read were regarded as at least potentially relevant, to the operation of Section 90(3) of the Act which is concerned with entitlement to a redundancy payment, and indeed it is right enough to say that there is a strong family resemblance between Section 90(3) and Section 55(5).  The former reads:
"Where the notice required to be given by an employer to terminate a contract of employment by section 49(1) would, if duly given when notice of termination was given by the employer, or (where no notice was given) when the contract of employment was terminated by the employer, expire on a date later than the relevant date as defined by subsection (1), then for the purposes of section 81(4) and paragraph 1 of Schedule 4 and paragraph 8(4) of Schedule 14, that later date shall be treated as the relevant date in relation to the dismissal."

It is evident that that bears a strong resemblance to the provisions of Section 55(5).  If one substitutes for "the effective date of termination" in the latter, "the relevant date" in Section 90(3) one gets a very close similarity.

	The citation of that passage out of the headnote in the Employment Appeal Tribunal in the Staffordshire County Council case is a graphic illustration of the danger of taking words out of their context.  What Mr Justice Popplewell said in full after quoting what the Industrial Tribunal, from whom the Appeal was brought had said at page 7 is as follows:
"We do not think that this aspect is capable of elaborate argument.  We accept the proposition that by the second half of s.49(3) starting with the word `but ' that once a party has waived his right to notice or has accepted payment in lieu of notice that brings the contract of employment to an end.  Accordingly there is nothing left upon which s.49(1) can bite and the words of s.49(3) `but this section shall not be taken to prevent' can only have the meaning that the effect of s.49(1) will not continue if the remaining provisions of s.49(3) come into operation.

There may be questions of what waiving in the context of that section means and there may be arguments about whether an employee has properly accepted a payment in lieu of notice so as to deprive him of what may be some of his rights.  Those questions do not arise in the instant case, and we leave them for consideration on some other occasion."

It is to be noted that in that particular case there could be no such question because there was the clearest possible evidence that what happened was that after service of a notice due to expire on the 31st August, the employer wrote to the employee offering that he should take up the option of retiring, not on the 31st August as previously notified but, on the 31st July 1986, and that was accepted in terms so that there was, on any view, a consensual agreement between the two, the employer and the employee, substituting the 31st July for the 31st August as the appropriate date for the termination of the contractual relationship.

	The question then arose, how far, if at all the operation of Section 49(1) was excluded by Section 49(3).  But, and this is the important point, there was absolutely no doubt in that case that there was a consensual arrangement between the parties altering the previously agreed date in the employer's notice.  In fact the case went to the Court of Appeal and was reversed in a way that does not, in terms, involve the rejection of what Mr Justice Popplewell has said but rendered it irrelevant, because the Court of Appeal held that the provisions of Section 49(1) were not excluded by subsection (3) of that Section.  Lord Justice May dealt with this aspect of the matter in paragraph 23 of the report at [1989] IRLR 117 at 121 saying this:
"The argument raised by Mr Soule in relation to the third issue in this case which I have earlier identified, was briefly that by agreeing to short notice, as did Mr Baxter, [the employee] the latter waived, as he was entitled, his entitlement to a notice complying with s.49(1) and thus there was no scope for the operation of s.90(3) in the calculation of `the relevant date'.  With all respect to this argument, I agree with Mr Laws' submission that on a proper construction of the relevant statutory provisions it just is not sustainable.  Whether waived or not, as to which it is unnecessary to express any final view, s.49(1) still `requires' a notice of a specific length to be given and if on the facts this has not been done, then in my opinion s.90(3) still applies to the circumstances of the case, notwithstanding any waiver."

It is clear from that decision that the question of waiver was rendered irrelevant.  Lord Justice Glidewell agreed with Lord Justice May and said at paragraph 30 on the same page of the report:
"I agree with May LJ about this.  The fact that an employee has waived his right to notice, or accepted a payment in lieu of notice, under s.49(3) is relevant only to his rights in contract.  It has no relevance to his rights to a redundancy payment.  The reference in s.90(3) to the notice required under s.49(1) is merely a way of describing the period of notice.  It does not import any part of s.49 into the redundancy payment apparatus."

It was submitted to us on behalf of Mrs Garratt, the Respondent on the Appeal, that we should follow that interpretation which has been called the descriptive approach to Section 49(1) and Section 90(3) taken together, and using that same approach in combining Sections 55(5) and 49 hold that in any case the period of employment is extended by Section 55(5) if Section 49(1) is apt to do so regardless of whether or not there has been a waiver of a right to notice or an acceptance of payment in lieu of notice.  It is not in fact, in our view, necessary for us to resolve the potential differences of approach which have, at any rate in the context of redundancy, been the subject of some doubt and debate in text books.  Notably in Harvey on Industrial Relations and Employment Law, Section III, paragraphs 1090 to 1091, contains a description of the issues that are involved.  In our view what Mr Justice Popplewell said in the Employment Appeal Tribunal in the Staffordshire case, even assuming it not to have been overruled by the Court of Appeal, which as already mentioned is plainly arguable, is no sort of authority for the proposition that the cashing of a cheque tendered in payment of damages for a fundamental breach has any retrospective effect on a termination by the employer by that fundamental breach.  As we see the operation of Section 49 and 55 this is a classic case that Section 55(5) was intended to provide against, namely, a wrongful repudiation by an employer depriving, at one and the same time, an employee of his or her employment, and cutting short by a period which was not available under the general law, that period of employment in such a way as to exclude the employee from the remedies that that employee would otherwise have.  It is clear on the mathematics that if one adds the week that Section 49(1)(a) treats as the minimum available period of notice for Mrs Garratt and adds that on to the period between the 26th May 1987 until the 19th May 1989 one does arrive, just, at the requisite two year period.  If there is a wrongful repudiation by an employer such as to terminate the employment contract the payment and later acceptance of damages, in respect of that wrongful repudiation, cannot in our view undo the fundamental breach that has previously occurred and the termination of the employment thereby effected, and we do not read Mr Justice Popplewell's decision, which was aimed at questions of redundancy, as being intended to say the contrary.  It is notable of course that there was in that case an express reservation by him of the necessity of looking carefully at the question of whether there really was a waiver or not and there is in this case a specific finding by the Industrial Tribunal that Mrs Garratt did not accept, in the sense of agreeing to, a payment in lieu of notice.

	For those reasons, in our view, this Appeal fails. 

	I should add that there was an ultimate appeal by Dr Lightning to us to do justice, and he submitted that to achieve that end it would be desirable to remit this case to the industrial tribunal for all the issues to be debated, including whether or not Mrs Garratt did accept payment in lieu of notice.  In our view far from achieving justice by such a process we would be achieving exactly the opposite and we decline to do so.