Appeal No. EAT/31/91
			EAT/609/91

	EMPLOYMENT APPEAL TRIBUNAL
	58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

		At the Tribunal
		On 17 March 1993

	Before

	HIS HONOUR JUDGE J PEPPITT QC

	MR K GRAHAM CBE

	MR T THOMAS CBE

JANE SAUNDERS & MANNING LTD	APPELLANTS

MR M NICOLAU	RESPONDENT

	Transcript of Proceedings

	JUDGMENT

Revised

	APPEARANCES

For the Appellants	MR M WEST
(PERSONNEL CONSULTANT)
Peninsula Business Services
Stamford House
361/365 Chapel Street
Manchester
M3 5JY

For the Respondent	MR J MORGAN
(OF COUNSEL)
Messrs McMillan Williams
Solicitors
19-23 Shrubbery Road
London SW16 2AS

	JUDGE PEPPITT QC:  By their amended Notice of Appeal the Appellants Jane Saunders & Manning Ltd appeal against two decisions of the London South Industrial Tribunal relating to their dismissal of the Respondent, Mr Nicolau.

	In the first decision made on 12 November 1990, and amplified by written Reasons provided on the 4 December 1990, the Tribunal held that the dismissal was unfair.  By their second decision made on 28 August 1991 with written Reasons on 25 September 1991, the Tribunal determined the amount of compensation payable to the Respondent by the Appellants as a result of that dismissal.  We deal first with questions of liability and we interpose here that the Judgment we are now giving both on liability and on compensation is a unanimous judgment.

	Mr Nicolau was aged 53 at the date of the hearing.  He had been a shoemaker all his working life and for the nine years immediately preceding the termination of his employment he had worked for the Appellants who are manufacturers of footwear for the disabled.  Until January 1990, Mr Nicolau worked in the Last Department.  This was heavy work involving pulling leather over the last to form the upper of the shoe.  In that month he became physically unable to continue that work as a result of pain in the shoulders so with the Appellants' consent he was transferred to a less strenuous job in the Cork Department, initially for a four week trial period.  The Appellants told him that after the trial period they would have to reduce his salary, which was then £290 per week, to a sum which reflected his less onerous duties namely £240 per week.  This was more than the employees then in the Cork Department were receiving.

	In the event Mr Nicolau remained on £290 per week for some seven weeks.  Whilst in the Cork Department he underwent a course of physiotherapy.  The Appellants paid him for the time away from work over the first four or five sessions but then stopped making such an allowance having received from Mr Nicolau's solicitors the letter appearing at page 49 in  the bundle before us.   On 16 May 1990 the Appellants issued a warning letter in relation to an unauthorised day's absence and as they put it "poor work rate".  This was followed by a reallocation of work in the Cork Department which involved the Appellants taking away some of the work on the Respondent's bench and distributing it to others.  This the Tribunal found was work needed urgently and the Respondent was left with a full day's work.  The Appellants' action in reallocating the Respondent's work did not, the Tribunal found, constitute any breach of the Contract of Employment.

	On 17 May this reallocation of work led to an argument between Mr Nicolau and Mr Saunders, a director of the Appellants, in the course of which the Respondent told Mr Saunders that he had no right to tell him what to do.  The argument continued into Mr Saunders' office where the Respondent told Mr Saunders that he had had enough, picked up his tools and walked out.  He subsequently claimed that he had been constructively dismissed.  

	Against this background the Tribunal upheld the Respondent's allegation of constructive dismissal and held it to have been unfair.  The Tribunal found no breach of any express term of the Contract of Employment but considered that in all the circumstances the Appellants had breached to a fundamental extent an implied term that the parties to such a contract should treat each other with mutual trust and confidence.  The Tribunal further found that the actions of the Appellants over a period of time had caused:

"a considerable amount of uncertainty in the applicant's mind caused by the attitude of the respondents as to what exactly was going to happen".

	The Appellants' conduct, the Tribunal held, constituted a breach of that implied term entitling Mr Nicolau to treat the Contract of Employment at an end.  Hence the finding of constructive dismissal.

	Mr West on behalf of the Appellants advanced three broad submissions to us.  First he said there was no evidence to support the finding that the Appellants had breached the implied term found by the Tribunal to have existed; secondly he said such a breach was not advanced by the Respondent as a reason for his resignation at the time when it was given and thirdly, said Mr West, the breach as found by the Tribunal was not canvassed at the hearing, nor did the Tribunal give the parties a hint of what was in their mind so as to give the Appellants, and indeed the Respondent, an opportunity to deal with it on its merits.

	Before considering Mr West's submissions we should we think briefly outline our understanding of the ingredients of a constructive dismissal, the fountainhead of which is the case of PEDERSEN v CAMDEN LBC [1981] ICR 674.  As we understand it there are three such ingredients.  First there must be a breach by the employers.  Secondly that breach must go to the root of the Contract of Employment so as to justify the employee resigning, and thirdly the employee's resignation must be in response to that breach and for no other unconnected reason.  It is settled law that whether or not there was such a breach and whether that breach was fundamental are matters for the Industrial Tribunal.  The Employment Appeal Tribunal can only interfere if there was no evidence upon which a reasonable Tribunal could have reached the conclusion which it did.

	The term found by the Tribunal to have been breached was the implied term of mutual trust and confidence.  Its existence in the Contract of Employment was a matter of agreement between the parties.  For the purposes of this case we state the ambit of the term in these words:

"There was an implied term of the Contract of Employment that the employer would not without reasonable cause treat the employee in such a way as to undermine the trust and confidence of the employment relationship".

We therefore have to consider whether there was before the Tribunal evidence on the basis of which a reasonable Tribunal could have held (1) that the Appellants breached this term in a fundamental respect and (2) that the Respondent's resignation was in response to that breach.  We stress we are not entitled to substitute any views which we might have for the views of the Tribunal.  Only if the Tribunal's decision can be said to have been perverse in the sense which we have indicated, are we empowered to interfere. 

	We turn firstly to the evidence and the starting point may perhaps be page 22 of the bundle before us which is the Respondent's Originating Application.  In that document Mr Nicolau put his case in this way.

"I considered that I was being harassed by the management and asked the manager why he was behaving like this.  Ultimately, I said to my new trainer that I could not take any more and that I was leaving.  I left the premises at 8.45 am.

I did so because of the unreasonable behaviour of my employer during the previous months and therefore consider that I was constructively dismissed.  I consider that the actions of my employer were an excuse to reduce my basic rate of pay, which I had built up over nearly ten years work in the shoe making department."

	The facts found by the Tribunal appear firstly from paragraph 3 of its Decision which is at page 12:

"The reason why we think that there is a fundamental breach of contract here is because of the attitude of the respondents to the applicant over the period of time during which the situation developed and we now proceed in the decision to outline what did happen."

At paragraph 7 on page 14 of the Decision the Tribunal amplifies that general statement by saying:

"We do not think that the respondents approached the matter of the applicant's undoubted inability to continue doing the job for which they employed him in the proper manner."

and that finding was amplified in subsequent passages in the Decision in five respects.

	Firstly, said the Tribunal, although by reducing the Respondent's pay the Appellants breached no term of the Employment Contract, nevertheless their action left a considerable amount of uncertainty in the Respondent's mind as to what exactly was going to happen.  He was told his wages were to be reduced but that those wages were to be left at his current level for his probationary period of four weeks.  He then continued at the old rate for a further three weeks and it was then reduced without further reference to him.

	Secondly, said the Tribunal, the Appellants having paid the Respondent whilst he underwent his physiotherapy sessions on the first four or five occasions thereafter and without apparent explanation to him, stopped paying him.

	Thirdly, found the Tribunal, there was uncertainty in the Respondent's mind as to what his future employment was to be.  No-one in the Cork Department had any clear idea of what he was supposed to do or how he was to be re-trained.  This failure, said the Tribunal, led to a deterioration in his work.

	Fourthly, the Tribunal considered that the warning letter of 16 May was, in the circumstances, inappropriate.  The Appellants should have recognised that the deterioration in the Respondent's standard of work was something akin to a cry for help and a request by him for further discussion and they should have responded in a sympathetic and understanding manner.

	Fifthly and finally the Tribunal found that the reallocation of the Respondent's work by Mr Saunders and Mr Saunders' attitude towards the Respondent on the occasion of that reallocation, though constituting no breach of the Contract of Employment, was capable of creating further uncertainty in Mr Nicolau's mind and might have been handled differently.

	These were the conclusions that the Industrial Tribunal came to.  We have next to consider what if any evidence there was to support them.  We start with the evidence of Mr Nicolau himself.  At page 27 of the bundle before us the Chairman's Notes of Evidence  record him as having said:

"Mr Manning said I would have 4 weeks on full pay with training.  I agreed to this.  Mr Manning said it was a 4 week trial period to see how I got on.  I was asked by Mr Jane on many occasions how I got on and I said it was worse.  Mr Jane said I would get used to it.  I had to hammer corks together.  After 4 weeks I went to see Mr Manning.  He asked me how I felt.  I said it was more difficult than lasting.  Mr Manning said I would get used to it more and more and that I was to get £240 not £290 a week.  I said the work was worse than when I started.  Mr Manning refused to send me back to lasting.  Mr Manning said that he had spent a lot of money in training me.  This was at the end of March and then I had three days off sick.  I was upset.  I did not see how they could do it to me."

	A little later, again on page 28 of the transcript the Respondent said:

"The following Friday everyone asked if I was leaving.  I asked who spread the rumours and was shocked and surprised.  I was told that Mr Jane had told them.  Next week I approached Mr Jane.  I said I was angry about the rumours spreading.  Mr Jane said it was not him but Mr Saunders... I asked continually what the position was and was I going to get my job back."

On page 29 of the bundle:

"Mr Manning said we were getting nowhere.  He left.  Mr Jane said that the time of the physiotherapy would be stopped.  Before this I had been paid for the time off for the physiotherapy.  I felt I was being harassed and was being forced to leave my job.  I complained that they were not helping me....  Mr Jane came and told me to write every job I did in the book.  Mr Saunders came up and picked up a last and showed me that the cork was not done properly.  He said that the cork was too thick by an 8th of an inch and was wasted.  I explained the problem.  And asked how many people had to tell me how to make cork.  I felt degraded, humiliated and embarrassed." 

On the occasion of the resignation Mr Nicolau's evidence was that in Mr Saunders' office he said to Mr Saunders:

"I have had enough and there were too many people interfering Mr Manning, Mr Chambers, Mr Saunders and Mr Allard.  I walked out."

Finally, on page 32 of the bundle, in answer to a series of questions by the Tribunal itself Mr Nicolau said:

"I knew nothing about the corking jobs.  I wanted to look into pension when I was told that I could not go back to my old job.  I wanted to make a decision as to what to do.  There was some work on my bench.  I did not check how much.  I was humiliated by the action of the respondents."

	In these passages it seems to us that there was ample evidence before the Tribunal that the Respondent left because of the Appellants' treatment of him.  If asked to describe that treatment he would have said, we suspect, that he left because the employers were harassing him.  There were so many people telling him what to do and so little indication of where his future was to lie, that he did not know where he was or what was going to happen to him.  This is, we consider, tantamount to what the Tribunal found.  The precise adjective applied to the Respondent's state of mind is immaterial.  Whether uncertainty or harassment is a proper definition of what the Tribunal found to have occurred we think matters little to their conclusion.  What the Tribunal found was that as a result of the employers' treatment of him for which in our judgment there was ample evidence, the Respondent was disturbed and distressed to an extent which caused him to tender his resignation.

	Accordingly we reject Mr West's first submission that there was no evidence upon which the Tribunal could have come to the conclusion that the Appellants breached the Contract of Employment in a fundamental respect. 

	The next question we have to decide is whether there was evidence entitling the Tribunal to find that it was that breach which caused Mr Nicolau to resign.  True he did not say at the time of his resignation, or before the Tribunal, that he was leaving because the Appellants had unreasonably lost confidence in him, nor did he say in terms that he was uncertain in his mind as to his future.  Still less did he assert a breach by his employers of an implied term of confidence and mutual respect.  But we have to consider what he did say in the light of the circumstances in which he said it.  Mr Nicolau is not a lawyer, nor an industrial relations expert.  We consider that in broad terms what he said was sufficient to entitle the Industrial Tribunal to find the necessary causation.  His Originating Application, as I have indicated, spoke of harassment by the management with, as he put it, three different people involved in his re-training.  His evidence that he asked continually what the position was and whether he was to get his job back and his remarks at the final meeting with Mr Saunders that too many people were interfering with him, and that he was being harassed, it seems to us make it plain that he resigned because of the conduct by the Appellants.  That conduct, whatever adjective is applied to it, was the substance of finding of fundamental breach of contract by the employers.

	We consider therefore that the evidence called before the Tribunal entitled it to find that the Respondent resigned in response to the breach of his Employment Contract for which the Appellants were found to have been responsible.

	We turn now to the third point advanced by Mr West on the Appellants' behalf.   We approach it in the light of the fact that the existence or otherwise of the implied term as to mutual trust and confidence and its breach, was not only canvassed at the hearing but had been asserted in a letter from the Respondent's solicitors to the Appellants dated 23 May 1990, page 52 of the bundle.  Mr West's complaint was that the Tribunal had not formulated to the parties their prospective finding as to the nature of the Appellants' breach and had thus not given them an opportunity to deal specifically with it.  Mr West relied on BURKETT & OTHERS v PENDLETONS (SWEETS) LIMITED [1992] ICR 407, a case where the employers had relied upon redundancy as the principal reason for dismissal and the Tribunal had held the dismissal justified not on that ground but for some other substantial reason under section 57(1)(b) of the Act.  

	This Court held that where the Tribunal was minded to find a reason for dismissal other than that pleaded and argued by the parties, it was required to give the parties an opportunity to deal with that different ground and that failure to do so amounted to an error of law.  In our judgment that case is a very far cry from the present where all the Tribunal did was to apply to the Respondent's state of mind an adjective different from that canvassed at the hearing when that state of mind was found to have resulted from acts and omissions by the Appellants which were the subject of both evidence and argument before it.  The reasons for the dismissal remain the same.  Accordingly we reject Mr West's third submission.  With that rejection the appeal on the ground against liability fails.

	We turn now to the appeal against the Tribunal's decision upon compensation.  

	Mr West who has conducted this appeal with no little skill and significant restraint, urged two points upon us.  First of all he said that at the hearing the Tribunal was invited to depreciate by a percentage the compensation awarded to the Respondent in the light firstly of the probability that but for the termination of his employment the Respondent would have found the work too hard for him and would he have opted for a lesser paid job and perhaps would have resigned and secondly in the light of the probability that he would in any event have had to give up his work as a result of the depressive and cardiac illness from which he subsequently suffered. 

	The authority for such a percentage deduction, the well known case of POLKEY v A E DAYTON SERVICES LTD [1988] ICR 142 was referred to the Tribunal.  The Tribunal made no such deduction and Mr West submitted that there was no reference in its decision to indicate that it had been considered.  He referred us to an unreported decision of this Court LINGARD v HEPWORTH REFRACTORIES LIMITED EAT/555/90, a decision given on 29 April 1991 in which the President said (at page 10(g):

"Any Tribunal considering a compensatory award should consider the application of the Polkey principle to the issues before it, and then make its findings accordingly."

     We do not think the Tribunal here can be criticised in the light of the Hepworth decision.  In the course of its decision on compensation the Tribunal made specific reference to the fact that a Polkey submission had been made to it, the relevant passage is at page 18 and reads as follows:

"There was also the question said the Respondents whether the Applicant could have continued on to do the lighter work and they also submitted that account should be taken of the fact of his illness in April this year."

	The Tribunal made no deduction from the total compensation awarded to the Respondents but that should not be taken as an indication that they had failed to consider whether as the Appellants had submitted that they should.  It is not incumbent upon an Industrial Tribunal to deal specifically with every argument it rejects but having said that, the reasons for this Tribunal's rejection seem to us in any event to be set out in one or other of the two Judgments relating to this matter.  At page 18 of the bundle the Tribunal found that the Respondent's illness was:

"due entirely to the fact that he had been dismissed and the consequent depression caused to him by being out of work so that we do not propose to make any cut-off date because of this as we feel that the illness is entirely due to the actions of the Respondents."

At page 15 in the course of the first Judgment, the Tribunal found that the deterioration in the Respondent's work in the Cork Department was caused not by his shoulder problem but by the Appellants' treatment of him.  He had previously been a good employee.

	It is strictly unnecessary for us to go as far as that because in our judgment there is nothing in the decision upon compensation which indicates that the Tribunal did not consider and reject the percentage submission made to it but if more were needed we merely indicate that facts were found which perhaps might provide the explanation of why it was rejected.

	We come finally to Mr West's second submission that there was no admissible evidence upon which the Tribunal was entitled to find as it did, that the Respondent's depressive and cardiac illness was due to the fact that he had been dismissed.  The only evidence to that effect before it was the evidence of the Respondent.

	In some cases the link between an illness and its cause may require the calling of medical evidence but in a case such as this, where no other cause in particular for the Respondent's depression was advanced, and that depression occurred shortly after the dismissal, we consider that the Industrial Tribunal was entitled in the absence of any evidence of the contrary to reach the conclusion that it did.  They heard the Plaintiff cross-examined rigorously on the subject and in our judgment were justified in concluding that what he said was right.  For all these reasons we have come to the unanimous conclusion that this appeal must be dismissed.