Judge v Crown Leisure Ltd

J U D G M E N T

Thursday, 21st April 2005

1. LADY JUSTICE SMITH: This is an appeal by Mr Thomas Judge from the decision of the Employment Appeal Tribunal (EAT) dismissing his appeal against the decision of an employment tribunal (ET) sitting in Manchester on 26th March 2004. The ET dismissed Mr Judge's claim that he had been constructively dismissed by his employers, Crown Leisure Limited, the respondent to this appeal.

2. The appellant was employed by the respondent as a Special Operations Manager. The respondent operates gaming and amusement machines in arcades and caravan sites in the north- west of England and North Wales. The appellant resigned from his position in June 2003 and alleged that he had done so because his employers had been in fundamental breach of his contract of employment by failing to honour a contractual promise to increase his salary to parity with another Special Operations Manager named Mr Mills. Mr Mills joined the respondent company in June 2001, on a transfer from a related company at a salary of £35,000 per annum plus bonus. This was considerably more than the salaries of the appellant or either of the other two Special Operations Managers. It was common ground before the ET that, soon after Mr Mills' arrival, Mr Fannon, the respondent's Special Operations Director, told the three long-established Special Operations Managers that it was the company's intention, in due course, to bring the remuneration of all four Special Operations Managers roughly into line. What was not common ground was the appellant's contention that, at the respondent's Christmas party, held for staff and their spouses and partners at the Savoy Hotel, Blackpool in December 2001, Mr Fannon had explicitly promised the appellant that he would put him onto the same salary scale as Mr Mills within two years. Mr Fannon denied that any such conversation had taken place. He also said that he would never enter into a contractual discussion at a social event when there were others present and alcoholic drink had been consumed. The ET had to resolve that conflict of evidence.

3. Other evidence before the ET showed that, in April 2002, the appellant had been told that his salary would be increased by 1.5% and that he would receive a bonus of £5,000. That increase would not bring him into parity with Mr Mills. The appellant tendered his resignation on 30th May 2002, but, following discussions with Mr Fannon in which he was offered a further £5,000 bonus, bringing his total remuneration for that year to about £34,000, he agreed to stay on.

4. On 31st May 2002 Mr Fannon wrote a letter to the appellant, in which he said:

"As regards the verbal promises, you are right that they are as meaningful as written ones. They certainly are to me and I feel deeply embarrassed that I cannot keep them as promptly as I would like."

5. The ET expressed the view that the use of the word "promises" in that letter did not mean that Mr Fannon was acknowledging a legally binding contractual commitment, but was merely reiterating his intention to bring the appellant roughly into parity with Mr Mills in due course.

6. The appellant then worked on until June 2003, when he learned that, in that year's pay round, his salary would be increased by 2.5%. Even with bonuses, his remuneration would still be well short of Mr Mills' pay package, which, by this time, was worth about £43,000. The appellant told Mr Fannon that he intended to resign. The two men met and Mr Fannon explained that, with this increase and the substantial bonuses the appellant received, he had done as much as he then could towards the overall objective of eventual parity with Mr Mills. This time the appellant did not withdraw his resignation but left and commenced proceedings alleging constructive dismissal.

7. At paragraph 9 of its decision, the ET referred to the appellant's contention that Mr Fannon had entered into a legally binding agreement to ensure that the appellant would be placed on the same salary as Mr Mills. They then set out the proposition of law upon which they were to base their eventual decision. They said this:

"As a matter of general contract law, in order for there to be a legally binding and enforceable contractual commitment, there must be certainty as to the contractual commitment entered into, or alternatively facts from which certainty can be established. Otherwise, a 'promise' amounts to nothing more than a statement of intention."

8. Then, also in paragraph 9, they observed that, in support of his case, the appellant relied on the words allegedly spoken by Mr Fannon at the Christmas party in December 2001. It was apparent that unless the appellant's version of that event was substantially accepted, the appellant could not succeed. Mr Fannon's other utterances, including the content of his letter of 31st May 2002, did not amount to contractual promises and were no more than statements of intention.

9. In the event, the ET did not accept the account of the Christmas party given by either the appellant or Mr Fannon. They rejected Mr Fannon's denial that nothing at all had been said about remuneration, but they also rejected the appellant's claim that Mr Fannon had given him an explicit promise of parity within two years. They said:

"However, on the balance of probabilities, the Tribunal found that there may well have been some casual conversation in which Mr Fannon, in the convivial spirit of the evening, gave the applicant words of comfort and assurance that he would eventually fulfil his commitment to have all Operations Managers, including the applicant, on roughly the same level of remuneration. The Tribunal was not, however, satisfied that Mr Fannon, particularly in an environment such as that described above, either would have or indeed did enter into any legally binding contractual commitment to the applicant whatsoever."

10. In the light of that finding, the ET concluded that there had never been a legally binding commitment by Mr Fannon on behalf of the respondent to bring about parity with Mr Mills within any particular time scale. Accordingly, the respondent had not been in fundamental breach of contract in failing to bring about parity by June 2003. The appellant had not been constructively dismissed; he had resigned and his claim for compensation failed.

11. Before the EAT, the appellant submitted first that the ET's finding of fact about what was said at the Christmas party was perverse. The ET, it was said, had not been entitled to find facts for which neither party had contended. They were bound to accept the account of one or other of the two witnesses. Second, the appellant contended that there had been a procedural irregularity, rendering the conduct of the hearing unfair. The ET had made findings of fact about the conversation in Blackpool which neither party had anticipated would be made. Without giving the parties the opportunity to make representations about the legal impact of those findings, the ET had applied the facts found to what it held to be the law. Third, the appellant contended that the ET had misunderstood or misapplied the law and that it might well not have done had it given the parties the opportunity to address the issue. The legal error identified was said to be that the ET had applied the wrong test to the question of whether there had been, between Mr Fannon and the appellant, an intention to create legal relations. The ET had placed the burden of proving the intent upon the appellant, and that was wrong.

12. The appellant relied on a passage from Chitty on Contracts 29th Edition Volume 1 at paragraph 2-154 where it is said that, in the case of ordinary commercial transactions it is not normally necessary to prove an intention to create legal relations. But if one party is contending that no legal effect was intended by the words used in an apparent agreement, the burden of proving that contention is on that party and it is a heavy burden. The appellant also cited an extract from the judgment of Megaw LJ in Edwards v Skyways Ltd [1964] 1 All ER 494 at 498, which was authority for the view expressed in Chitty.

13. The EAT rejected the argument that it had not been open to the ET to find as a fact that there had been a conversation at the party, as claimed by the appellant, but that its content had not been as specific as the appellant had claimed. That conclusion was plainly right, in my view, and the contention that the ET had not been entitled to find the facts as it did has not been pursued in this court. I say no more about it.

14. At paragraph 18 of its decision, the EAT rejected the contention that there had been a procedural irregularity at the ET. They said that:

"... the central issue before the Tribunal was to determine what was said in Blackpool and what its legal impact was."

15. In paragraph 19, the EAT concluded that the ET could not be faulted in its "essentially factual analysis of what was said."

16. After reviewing the rest of the evidence about the respondent's intention to bring the appellant into parity, the EAT said at paragraph 21:

"Looking both backwards and forwards from the Blackpool meeting, therefore, the Tribunal was required to make a decision about the legal impact of the conversation. It did so, and we are not in a position to interfere with it."

17. Before this court, Mr Mulholland for the appellant has complained that the EAT failed adequately to address the arguments raised before it. They had not dealt adequately with the contention that there had been a procedural irregularity and they had not dealt at all with the contention that the EAT had applied the wrong legal test as to the intention to create legal relations.

18. It seems to me that Mr Mulholland can properly complain of the adequacy of the EAT's explanations of its reasons for rejecting the appeal, both on the question of procedural irregularity, and also in respect of the alleged error of law. It is not, in my view, sufficient for the EAT to say only that it rejected the contention that there had been a procedural irregularity. The passage which followed that statement did not explain why it had rejected the contention. Nor was it sufficient, in my view, for the EAT simply to say that they were not in a position to interfere with the ET's decision on the legal impact of the Blackpool conversation. The application of the law is either right or wrong; it is not a matter of discretion. If the EAT thought that the ET's application of the law was right, it should have said so and explained its reasons.

19. In granting permission to appeal to this court, Peter Gibson LJ observed that, as a second tier appellate body, this court's main concern is whether the ET's decision was correct, rather than with the EAT's reasoning. That is plainly right. It seems to me that this court must now deal with two issues, namely whether there was a procedural irregularity at the ET hearing and whether the ET made an error of law.

20. Mr Mulholland now accepts that it was open to the ET to make the findings of the fact that it made about what had been said at the Christmas party. He complains, and plainly with justification, that neither the appellant nor the respondent had contended for that finding and had not anticipated it. They had not had the opportunity to address the Tribunal upon the legal impact of that finding. Mr Mulholland submits that it is a cardinal principle of fairness that the parties should have the opportunity to be heard on any issue that is likely to be relevant to the decision. As a general proposition, that is obviously right. It is highly desirable that if a tribunal foresees that it might make a finding of fact which has not been contended for, that possible finding should be raised with the parties during closing submissions. If the Tribunal does not realise what its findings of fact are likely to be until after the hearing has finished, it will usually be necessary to give the parties the opportunity to make further submissions, at least in writing, although not, in my view, necessarily by oral argument.

21. However, the giving of such an opportunity is not, in my judgment, an invariable requirement. That is so for two reasons. First, paragraph 11 of the Employment Tribunal Regulations gives the ET a wide discretion on procedural matters. It seems to me that that discretion is wide enough to encompass a decision as to the appropriate course to take where this kind of situation arises. In any event, if the legal effect of the findings of fact that are to be made is obviously and unarguably clear, no injustice will be done if the decision is promulgated without giving that opportunity. Even if an opportunity should have been given and was not, the consequence will not necessarily be that an appellate court will set aside the decision of the lower court. It will only do so if it concludes that the lower court's application of the law was wrong.

22. It follows that the main issue for this court is whether the ET's application of the law to the facts that it found was right or wrong. Mr Mulholland contended that the ET applied the wrong legal test to the question of whether there was an intent to create legal relations when Mr Fannon spoke to the appellant at the Christmas party. He sought to rely on the same authorities as had been cited to the EAT.

23. In my view, with respect, Mr Mulholland has misunderstood the ET's decision. The Tribunal did not hold that there was no intention to create legal relations. Indeed, in my view, that question never arose. These two men were employer and employee; in effect, legal relations already existed between them. If words had been uttered that were capable of amounting to a contractual promise, it could not sensibly have been suggested that there was no intention to create legal relations. The real point was that the ET found that the words uttered did not amount to a contractual promise. They were too vague and uncertain. They were only a reiteration of the previous statement of Mr Fannon's intention to bring about parity of salary or remuneration in due course. The ET had expressly rejected the appellant's claim that Mr Fannon had promised to bring about parity within two years. A promise to achieve parity within two years might well be sufficiently certain to be capable of enforcement. A promise to achieve parity "eventually" or "in due course" was too vague ever to amount to a binding contractual promise.

24. As I have said, at paragraph 9, the ET had set out the proposition of law which it was to apply. In my judgment, that proposition of law was obviously and unarguably correct. Mr Mulholland does not suggest to the contrary. The ET applied that proposition of law to the facts it found. The conclusion was, in my view, the inevitable consequence of their findings of fact. Although, as I have said, as a general rule Tribunals should be careful to ensure that the parties have an opportunity to make submissions on any matter that might affect the outcome of the case, in the particular circumstances of this case the facts found by the Tribunal could result in only one conclusion. That being so, I do not consider that this Tribunal should be criticised in any way for not having given the parties the opportunity to make submissions on the basis of the facts as found. It follows that, in my judgment, this appeal should be dismissed.

25. SIR MARTIN NOURSE: I agree. I have some sympathy for Mr Judge because if the point on which the Employment Tribunal decided the case was a good one, it was one to be taken by the employers. But that does not mean that the Employment Tribunal could not properly have made the decision they did.

26. I read again what the Employment Tribunal said at the end of paragraph 9 of their extended reasons:

"The Tribunal was not, however, satisfied that Mr Fannon, particularly in an environment such as that described above, either would have or indeed did enter into any legally binding contractual commitment to the applicant whatsoever."

That view, a perfectly tenable one to be taken by a tribunal whose composition includes two industrial members, was formed after they had heard both Mr Judge and Mr Fannon give evidence. The ultimate question is whether there is any real possibility that if Mr Mulholland had been given the opportunity to make the submissions he now seeks to make at a rehearing, the Employment Tribunal would have come to a different view. Mr Mulholland has failed to satisfy me that there is such a possibility. The Employment Tribunal's view must have been based on their impression of the evidence of Mr Judge and Mr Fannon and it is unrealistic to suppose that any submissions by counsel, however persuasive, would have been able to change it.

27. For these reasons, as well as for those given by my Lady, with which I entirely agree, I too would dismiss this appeal.

28. LORD JUSTICE MUMMERY: I agree. For the reasons given by my Lady and my Lord, I conclude that there was no error of law, either substantive or procedural, in the decision of the Employment Tribunal. The appeal is therefore dismissed.

29. Are there any applications?

30. MR CLEEVE: Your Lordships, I make no application for costs. May I take this opportunity of thanking you for granting me the privilege to address you and, at the same time, making that privilege unnecessary.

31. LORD JUSTICE MUMMERY: So the only order is that the appeal is dismissed. You are not asking for any other order.

32. MR MULHOLLAND: No, my Lord.