Appeal No. EAT/180/96

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 11 October 1996

Before
HIS HONOUR JUDGE H J BYRT QC
MR D A C LAMBERT
MR J C SHRIGLEY

MR R J PEARCE	APPELLANT

ROY T WARD (CONSULTANTS) LTD
	RESPONDENTS

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MS N JOFFE
(of Counsel)
Messrs Doyles
Solicitors
150 Minories
London
EC3N  1LS	
For the Respondents	MR J KING-SMITH
(of Counsel)
Messrs Waugh & Co
Solicitors
3 Heath Square
Boltro road
Haywards Heath
West Sussex
RH16  1BD

			JUDGE BYRT QC:   This is an appeal and a cross-appeal against a decision of the Industrial Tribunal sitting at Brighton on 7 November 1995, when they held that the Respondent had dismissed the Appellant wrongfully, and they ordered the payment of damages equal to four weeks gross pay.  Further they found that the Respondents counter-claim proved to the extent that they ordered the Appellant to repay relocation expenses of £5,000.  Furthermore, they ordered the Appellant to repay staff loans made to him by the Respondent, amounting to some £11,345 by agreed instalments.

	The facts of the case are as follows: the Respondent is a specialised firm that offers investigatory services to reinsurers in the insurance market.  The Appellant joined the Respondents on 1 November 1993 as a Senior Consultant.  The Respondent had advertised the post and in due course the Appellant had attended for several interviews.  The terms of employment were set out in a formal contractual document, together with some correspondence that accompanied it.  The terms of the contract were similar to those which ordinarily would be offered to monthly salaried staff.  One particular clause in the formal contractual statement indicated the period of notice would be four weeks.  

	One of the letters dated 22 October offered the Appellant a directorship as from 1 April 1994 of the Respondent company on condition that the employers were satisfied at that time that he measured up to the standards required of the job.  In the same letter of 22 October the Appellant was offered relocation expenses up to a maximum of £5,000, which were to be repayable if the contract of employment did not last a full twelve months.  The Appellant accepted the offer of the relocation expenses and so consequently the sum of £5,000 was paid to him.  

	During the ensuing nine months various other interest-free loans were offered to the Appellant.  I do not think it is necessary for me to list those in detail, save to say that one of them was for £595 lent to him to be used as a payment to his landlord as security for rented accommodation.  There was another item of £4,750 which was paid to him as a bridging loan, to enable him to facilitate his purchase of a property.  The Appellant had difficulty in repaying timeously the various loans I have referred to.  Accordingly it was agreed on 21 June 1994 that the Appellant would repay the totality of his loans by instalments of £300 a month. This agreement displaced the original terms on which the individual loans had been given him.

	On 22 April 1994 the Appellant was made a director, not of the Respondent company as had originally been intended, but of a non-trading company within the same group named R T Ward Ltd.  This directorship gave the Appellant no financial advantage or benefit, but enabled him to call himself a director and thereby strengthened his hand when he sought to market the Respondent’s services.  In effect he remained in the same capacity to which he had been appointed on 1 November 1993, namely a Senior Consultant employed by the Respondents.

	In due course the Respondents came to the conclusion that unhappily the Appellant was not measuring up to the standards they required of somebody fulfilling the post of Senior Consultant.  Accordingly he was transferred from the work he was previously doing to some other role which was less up-front.  On 26 September the Respondents decided that they had to get rid of the Appellant.  Accordingly they forthwith terminated his employment on that date (26 September) without notice.  

	Before the Industrial Tribunal, there was a dispute concerning the terms of the loans and there was also a dispute relating to the length of notice that the Appellant was entitled to and hence the damages to which he was entitled.  He was claiming he was entitled to six months notice as a director.  The Industrial Tribunal upheld that he was entitled to only four weeks notice.  That is not a conclusion which is challenged by either party.  In failing to give the Appellant the requisite four weeks notice, the Industrial Tribunal found that they had wrongfully dismissed him and therefore were liable in damages to him.  They then went on to consider the appropriate measure of damages and found that the Appellant’s contract had not been varied by reason of his appointment as a director of R T Ward Ltd.  They found that his appointment as a director was merely to enable him to increase his effectiveness when marketing.  They accordingly assessed his loss at four weeks’ wages.

	There was a counter-claim filed by the employers claiming the repayment of the £5,000 for relocation expenses.  It was a term of that payment that it should be repayable if the Appellant completed less than twelve months service.  The Industrial Tribunal found that it was repayable.  So far as the staff loans were concerned, these had been the subject of the memorandum of 21 June 1994.  The Industrial Tribunal noted that there was no term in that memorandum indicating what was to happen if the Appellant left the Respondent’s employment.  Accordingly they found that his dismissal did not affect the repayment provisions of those loans.  They therefore found that the Appellant was obliged to continue to make the repayments agreed in the memorandum of 21 June 1994.  That is, repayment by thirty-three monthly instalments of £300 each.  

	In arguing the case before us, the Appellant has taken a point not originally taken before the Industrial Tribunal.  Ms Joffe who has argued the case on his behalf says that the Industrial Tribunal did not have jurisdiction to consider the employer’s claim for the repayment of the relocation expenses and for certain items under the staff loans.  As it was not raised in the Notice of Appeal, Ms Joffe has had to apply to us for leave to amend the Notice of Appeal and drew our attention to the authority of Barber v Thames Television plc [1991] ICR 253.  

	The general rule is that appellants are not able to take points which were not taken before the Industrial Tribunal.  Where, however, the point relates to jurisdiction, there is an additional fact that this Tribunal has to take into account.  In the case of Barber (supra) Mr Justice Knox, as he then was, stressed that where the new point relates to jurisdiction, the overwhelming balance is in favour of allowing it to be taken since a refusal would probably result in the Tribunal making a determination which would be a nullity.  On that basis we have granted leave to Ms Joffe to argue her new point.

	The new issue relates to the Tribunal’s jurisdiction when dealing with matters arising under the Industrial Tribunals Extensions of Jurisdiction (England and Wales) Order 1994.  Ms Joffe has referred us to Article 4 of those regulations which says:

“Proceedings may be brought before an Industrial Tribunal in respect of a claim of an employer for the recovery of damages or any other sum other than a claim for damages or a sum due in respect of personal injuries, if 
(b)  the claim is not one to which Article 5 applies.”

One therefore looks at Article 5 to see whether it applies.  Article 5 is in these terms:

“This article applies to a claim for breach of a contractual term of any of the following descriptions:
(b)  a term imposing an obligation on the employer or the employee in connection with the provision of living accommodation.”

Ms Joffe submits it is crucial to observe that Article 5 isolates “the term” as being the crucial determinant whether Article 5 applies or not.  She says that the relocation expenses of £5,000 and those items of the staff loans which related to living accommodation, such as the bridging loan and security for rented accommodation were all matters caught by Article 5, in that they were connected with the provision of a term concerning living accommodation.

	Mr King-Smith on behalf of the Respondents says that one only has to look at Document No.94, included in our agreed bundle of documents, to see what the relocation expenses consisted of.  He submitted that a substantial number of the matters, compendiously covered by this heading, were nothing to do with the provision of living accommodation at all, but generally related to the overall expenses the Appellant had to meet as he moved his accommodation from Ireland to England so that he could fulfil his obligations under the contract of employment.  He says it would be inappropriate to say the items listed related as a whole to a term connected with the provision of living accommodation.

	We, with respect, think that Ms Joffe is right in her submissions to this extent.  We should isolate the term relevant to the applicability of Article 5.  Here, the term we are considering, is essentially one which concerns the cost of the Appellant moving home.  It is not one connected with the provision of living accommodation.  Our judgment is that Article 5 has no application and accordingly the Industrial Tribunal had jurisdiction to entertain the claim of £5000 for relocation expenses. 
	
	So far as the items relating to the security paid to a landlord for rented accommodation and the bridging loan are concerned, the same argument applies.  The term there was that of a simple loan to the Appellant.  It was not expressly for the purposes of providing living accommodation.  It was a facility which employers extended doubtless on favourable terms to an employee and we do not therefore think that Article 5 applies to that either.  For the same reason, we do not think that the jurisdiction of the Industrial Tribunal is excluded from considering the claims in respect of those matters.

	In consequence, in reviewing this decision, we have approached this matter on the same basis that the Industrial Tribunal did.  The important point to pick up at this stage is that the Industrial Tribunal found that the Respondents had wrongfully dismissed the Appellant.  As I have already indicated, this is not a conclusion or a finding that has been appealed.

	Ms Joffe submits that if the Respondents have been guilty of wrongful dismissal, that amounts to a repudiation of the contract, and releases the Appellant from the further performance of any of the terms of the contract relating to relocation expenses.  In support of that proposition she cited the case of General Billposting Co Ltd v Atkinson [1909] AC page 118.  Furthermore, she says, that in any event an employer who is guilty of breach of contract for wrongful dismissal cannot take advantage of his own wrongdoing.  For that reason, she says, he cannot advance his claim for the repayment of relocation expenses as a result of the dismissal that he wrongfully brought about.  In support of that contention she cited the case of Al Hussein Establishment v Eton College [1991] 1 AER page 267.

	Mr King-Smith has conceded that if the term relating to relocation expenses is not divisible from the contract of employment, the submissions made by Ms Joffe relating to the consequences of the Respondents’ wrongful dismissal, are correct.  But he says that in this case the terms relating to relocation expenses is divisible from the main contract of employment.  In support of that contention, he relies upon the findings and conclusions of the Industrial Tribunal, and in particular their findings in paragraphs 40 and 41 of their extended reasons.  In paragraph 40 the Industrial Tribunal says as follows:

“The Applicant commenced employment with the Respondent on 11 November 1993 [ that should read 1 November 1993].  If the Applicant had not been dismissed wrongly, that is, if he had been allowed to work his four week’s notice, he would still not have completed 12 months’ service.  The relevant wording is clear and unambiguous.  It is not contained in the terms and conditions of employment so that it was not a condition to which the Applicant became subject as a result of him accepting employment with the Respondent.”...

There the Industrial Tribunal are saying that the term relating to the relocation expenses was not a part of the contract of employment.  Paragraph 41 suggests an ambiguity in the reasons of the Industrial Tribunal when they say:

“The Tribunal takes the view that the relocation expenses and car loan provisions are divisible from the terms and conditions of employment.”...

suggesting that they were terms of the contract of employment, but divisible.

	We think helpful to consider afresh what are the terms of the contract.  They are substantially set out in the formal statement of terms of contract which the Respondents sent to the Appellant on 22 October.  It is signed by both parties and forms the centre core of the contract.  On 22 October the Respondents sent the Appellant two letters of the same date.  One was sent by Mr Preston, the Respondent’s accountant.  In his letter he supplemented various terms set out in the formal statement of contract.  There were various provisions relating to medical and pension schemes.  At the request of Mr Preston the Appellant signed that letter too, signifying his acceptance of what was set out in it.  On the same date there was another letter which was sent to the Appellant by the Respondent’s managing director, Mr Ward.  In that letter, Mr Ward talked about the circumstances in which the Appellant could look forward to being made a director.  It sets out the circumstances in which he would participate in a profit-sharing scheme, the offer of the relocation expenses, car loan, and various matters relating to accommodation.  

	In our judgment, the formal statement and both those letters of 22 October constitute the Appellant’s contract.  We are not certain whether, in saying that, we are departing from the findings of the Industrial Tribunal.  If we are, we think that any conclusion to the contrary would be an error of law.  Having said that, however, the next issue is whether the term relating to relocation expenses contained in one of the letters is divisible from the rest of the contract.  To be divisible it has to be manifestly plain it is coincidental to the remaining provisions of the contract.

	In this particular case Ms Joffe submits that the terms relating to relocation expenses clearly cannot be severed from the main provisions of the contract.  She says that whether the relocation expenses are paid was dependant upon whether the Appellant entered into the contract of employment.  Likewise, all the provisions relating to their repayment, are dependant upon the date when the Appellant’s employment terminated.  In those two main and important respects she submitted that the term relating to relocation expenses was inexplicably inter-woven with the main provisions of the contract of employment.

	In making his contrary submissions, Mr King-Smith has relied upon the arguments advanced in the Reasons by the Industrial Tribunal.  Our judgment is that the term relating to relocation expenses is not divisible from the contract of employment and we so find for the reasons advanced by Ms Joffe.  We are satisfied that this is a point of law upon which the Tribunal fell into error.  It follows that the Respondents’ wrongful repudiation of the contract released the Appellant from further performance of the agreement.  This much Mr King-Smith conceded.  In our judgment therefore the Appellant is not obliged to pay the relocation expenses.  To that limited extent the appeal will be allowed.

	So far as the staff loans are concerned, that is a different matter.  The provisions relating to the loans which were incorporated in the memorandum of 21 June are quite clearly separate and apart from the main contract of employment and upon that issue, the Industrial Tribunal directed itself correctly.  The provisions of that memorandum still bind the Appellant, as indeed do the conditions for the terms for repayment.  That was indeed the conclusion of the Industrial Tribunal.  

	The Respondents further cross-appeal on a couple of peripheral matters accepted by the Appellant.  It is said the Industrial Tribunal failed to comply with the provisions of The Industrial Tribunals (Constitution and Rules of Procedure) Regulations 1993 Article 10(3)(b), in that it failed to spell out the sums it considered the Appellant liable to pay under that memorandum of agreement.  We have asked Counsel to consider whether the amounts owing under that finding of the Industrial Tribunal, can be agreed.  It would save this case having to be remitted to the Industrial Tribunal.  I shall be enquiring of Counsel whether they are able to agree.

	Further, it is said that the damages to be awarded to the Appellant should be net amounts rather than gross amounts of his monthly wages.  Ms Joffe concedes this point.  In our judgment, this submission is correct and the award needs to be corrected accordingly.  The last point made by the Respondents is to the effect that the damages do not constitute wages within the meaning of the Wages Act.  That again is something which is accepted by Ms Joffe and we accept too.  In each of those respects, we hold that the cross-appeal must be allowed.

	So far as compliance with Article 10 is concerned, Ms Joffe and Mr King-Smith, have you been able to agree or do you think you will be able to agree?  There are two aspects to be dealt with.  First, there is the interest aspect and second, the arrears accumulated in the payments under the memorandum need to be computed.  If you cannot agree, the matter will have to be remitted for the Tribunal to order.  

	In the event of the parties being unable to agree these matters, the case will have to be remitted to the same Tribunal for a computation of the amounts owing.  We do not make an order costs.