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You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Shrewsbury & Telford Hospital NHS Trust v Lairikyengbam [2009] UKEAT 0499_08_2108 (21 August 2009)
URL: http://www.bailii.org/uk/cases/UKEAT/2009/0499_08_2108.html
Cite as: [2009] UKEAT 0499_08_2108, [2010] ICR 66

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BAILII case number: [2009] UKEAT 0499_08_2108
Appeal No. UKEAT/0499/08

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
             At the Tribunal
             On 23 April 2009
             Judgment delivered on 21 August 2009

Before

THE HONOURABLE MRS JUSTICE SLADE

DR B V FITZGERALD MBE LLD FRSA

MR R LYONS



SHREWSBURY & TELFORD HOSPITAL NHS TRUST APPELLANT

DR S K S LAIRIKYENGBAM RESPONDENT


Transcript of Proceedings

JUDGMENT

REVISED

© Copyright 2009


    APPEARANCES

     

    For the Appellant MR GILES POWELL
    (of Counsel)
    Instructed by:
    Messrs Hill Dickinson LLP
    No 1 St Paul's Square
    Liverpool
    Merseyside, L3 9SJ
    For the Respondent MR CHRISTOPHER BRYDEN
    (of Counsel):
    Instructed by
    Messrs Shoosmiths Solicitors
    Quantum House, Basing View
    Basingstoke
    Hampshire, RG21 4EX


     

    SUMMARY

    JURISDICTIONAL POINTS: Worker, employee or neither

    CONTRACT OF EMPLOYMENT: Whether established

    REDUNDANCY: Definition

    PRACTICE AND PROCEDURE: Split hearings

    The ET erred in holding that contracts for the employment of a locum consultant entered into in breach of the National Health Service (Appointment of Consultants) Regulations 1996 as amended were not ultra vires. However the ET did not err in holding that even if they were ultra vires, the locum consultant was an employee within the meaning of the Employment Rights Act 1996 and could pursue a claim for unfair dismissal in respect of the non renewal of his contract. Dicta of Rix LJ in Eastbourne Borough Council v Foster [2002] ICR 234 applied and status of workers performing duties under an ultra vires contract considered.

    Perversity in holding that a position as a locum consultant was 'distinct and different from that of the substantive post' and that dismissal was for redundancy when the locum consultant post was not renewed notwithstanding that the substantive consultant post was vacant.

    The ET erred in determining remedy when the Employment Judge had agreed with the parties that there would be a split hearing.

    Findings of unfair dismissal and breach of contract set aside. Decision dismissing claim for contractual redundancy payment substituted. Unfair dismissal claim remitted for rehearing to a different ET.

    THE HONOURABLE MRS JUSTICE SLADE

  1. Shrewsbury & Telford Hospital NHS Trust ('the Trust') appeals from the Decision of an Employment Tribunal ('ET') entered in the Register on 4 September 2008 that Dr Lairikyengbam was an employee of the Trust and had been unfairly dismissed for redundancy. The ET made a basic award of £5,270 and a compensatory award of £60,600. The ET also found that the Trust was in breach of contract in failing to make a contractual redundancy payment and awarded him £24,118.03 damages. In this judgment references to paragraphs are to paragraphs in the judgment of the ET unless otherwise indicated.
  2. The Grounds of Appeal

  3. Giles Powell for the Trust contended that the ET erred in law in holding that Dr Lairikyengbam:
  4. •    was dismissed for redundancy;
    •    was unfairly dismissed;
    •    was entitled to a contractual redundancy payment;

    Further it was said that the ET erred in determining remedy when it was agreed by the parties and the Employment Judge ('EJ') that there would be a split hearing with a hearing on liability followed by a hearing on remedy.

    Summary facts

  5. By letter of appointment dated 19 March 2003 the Trust appointed Dr Lairikyengbam a locum consultant cardiologist with effect from 12 May 2003. The contract was for a fixed term of six months. His employment in this capacity was extended for a further period from 14 November 2003 to 14 May 2004.
  6. On 14 February 2004 the Trust offered Dr Lairikyengbam employment as a locum consultant for a further period of 12 months from 14 May 2004 to 14 May 2005. He accepted the offer. After the expiry of this term Dr Lairikyengbam continued to work for the Trust as a locum consultant cardiologist. On 25 July 2005 he was issued with a new contract confirming his employment as a locum until 14 May 2006. By letter dated 5 June 2006 he was informed that he would be employed in that capacity for a fixed period until 31 December 2006 and thereafter.
  7. 5. On 15 June 2006 the then Medical Director of the Trust, David Christmas, wrote to all Clinical Directors and Directorate Managers informing them that:

    "If a new Consultant post has been agreed by the Executive Team there will be no automatic locum appointment pending the appointment to the permanent post"

    and that:

    "Under no circumstances should locums be appointed for longer than 12 months."

  8. On 6 November 2006 the Trust advertised for the appointment of two consultant cardiologists.
  9. Notwithstanding Mr Christmas's instruction of 15 June 2006, on 27 November 2006 a further letter of appointment was sent to Dr Lairikyengbam extending his contract for a fixed period up until 30 April 2007. A final contract was issued to him which confirmed that his locum appointment would be for a period from 1 January 2007 to 31 March 2007. The contract was signed and returned by Dr Lairikyengbam on 15 January 2007.
  10. Dr Lairikyengbam applied for one of the two vacant consultant cardiologist posts. The ET noted that he was professionally qualified to apply for the substantive post and had been a member of the Royal College of Physicians since 1998. He was called to an Advisory Appointments Committee ('AAC') meeting on 18 December 2006. Dr Lairikyengbam's application was unsuccessful.
  11. 9. On 8 February 2007 the Trust informed Dr Lairikyengbam that it had decided not to extend his locum contract beyond 31 March 2007. By letter dated 19 February 2007 it notified him

    "that the termination of your contract of employment on the grounds of expiration of your fixed term contract will take effect on this day and that this letter constitutes formal notice of termination."

    The letter went on to confirm that:

    "Due to the length of your contract of employment with the Trust you are entitled to a redundancy payment as your employment with us has been over 2 years. Your entitlement to redundancy will be based on all "reckonable service" in line with Section 13 of the Agenda for Change: NHS terms and conditions of service."

  12. The Deputy Head of Human Resources of the Trust, Miss Walton, met Dr Lairikyengbam on 5 March 2007. The ET found that she told him that the Trust would make a financial saving 'if a locum post was not filled' and had decided not to employ a locum pending an appointment to the substantive post. Miss Walton informed Dr Lairikyengbam that he was entitled to an enhanced contractual redundancy payment of £89,988.03 and handed him an undated letter confirming the Trust's decision and that he would be receiving a contractual redundancy payment.
  13. Dr Lairikyengbam was offered but did not accept possible alternative employment. The ET held that his rejection of the offer was reasonable. It considered the role to be unsuitable and in any event no firm offer was made.

  14. Having received advice from solicitors, Mr Wraith, the Trust's Head of Human Resources, wrote a letter dated 30 March 2007 to Dr Lairikyengbam which the ET found was received by him on 2 April 2007. This was after 31 March 2007 when he ceased working for the Trust. The letter informed Dr Lairikyengbam that the Trust did not consider that his position was redundant since there was no reduction in the need for the work which he carried out. Therefore he was not entitled to and could not be paid a redundancy payment. Further, he was told that the Trust had been advised that :
  15. " ….. your contractual position was in fact ultra vires i.e. there was no legal authority to continue your contract as a locum beyond the first year."

    Reference was made to the fact that pursuant to the National Health Service (Appointment of Consultants) Regulations 1996 ("the Regulations") the Trust had no power to appoint a locum consultant for more than 12 months. He had been appointed as a locum consultant from 14 May 2003. His appointment to work after 14 May 2005 was therefore in contravention of the Regulations. Dr Lairikyengbam was informed that:

    "NHS Trust[s] must act within the law because they are statutory bodies. They cannot make ultra vires decisions. They are required to act in accordance with the Regulations and any directions given by the Secretary of State. Trusts cannot employ Consultants in contravention of the Regulations.
    Therefore, you are informed that your employment as a locum Consultant beyond 12 months was unlawful and in all likelihood, entirely void."

  16. No statutory dismissal procedures were followed by the Trust in respect of the non renewal of Dr Lairikyengbam's contract. The Trust did not make him any statutory or contractual redundancy payments.
  17. In addition to Dr Lairikyengbam a further eight locum consultants had worked for the Trust for more than 12 months at or around that time.
  18. The Judgment of the Employment Tribunal

  19. The ET held that Dr Lairikyengbam was an employee within the meaning of the ERA and so could pursue claims under that Act. The ET considered the argument advanced by the Trust that Dr Lairikyengbam was not an employee of the Trust as after 14 May 2004 any contract it had with him was ultra vires and wholly void.
  20. The ET considered and applied the dictum of Browne-Wilkinson LJ (as he then was) in Rolled Steel Ltd v British Steel Corporation [1986] 1 Ch 246 at 304D:
  21. "The critical distinction is, therefore between acts done in excess of the capacity of the company on the one hand and acts done in excess or abuse of the powers of the company on the other. If the transaction is beyond the capacity of the company it is in any event a nullity and wholly void.
    If, on the other hand the transaction (although in excess or abuse of powers) is within the capacity of the company, the position of the third party depends upon whether or not he had notice that the transaction was in excess or abuse of the powers of the company."

  22. The ET held at paragraph 43:
  23. "In this case we consider that the employment of the claimant by the respondent was within the capacity conferred on them by the Act; it was not a nullity or wholly void employment. That the appointment of the claimant as a locum consultant was outwith the provisions of the Regulations may mean that the respondents were employing the claimant, and for that matter the other locum consultants whose fixed term contract[s] had been serially renewed, in a manner that was within the capacity of the Trust but in a manner that was in excess or in abuse of those powers. In the circumstances of this case we consider that the employment of the claimant was not ultra vires and that the contract of employment that was terminated was that of a fixed term contract and is not wholly void."

  24. In paragraph 45 the ET described the Regulations as:
  25. "…a statutory framework by which the basic powers conferred by the Act ['NHSA'] should be implemented. We consider that these Regulations, in much the same way as the Employment Act 2002 (Dispute Resolution) Regulations 2004 and other Statutory Instruments were on occasions observed by the Respondents, like other NHS Trusts and public sector employers in the breach as well as in the compliance. … Failure to observe the Regulations does not render the employment of the claimant by the respondent in exercising of their primary powers under the Act to be ultra vires."
  26. If the employment of Dr Lairikyengbam as a locum consultant after 14 May 2005 was an ultra vires exercise of the Trust's powers, in the alternative the ET held at paragraph 48 that:
  27. " … as a result of the findings of fact that we have made above we consider that the claimant was an "employee" of the respondent within the meaning of s.230(1) of the Employment Rights Act 1996 and had been since his first fixed term contract was renewed and continued to be until his dismissal."

  28. The ET held that Dr Lairikyengbam was dismissed by reason of redundancy. At paragraph 46 the ET held:
  29. "We find that the Claimant's position as a locum Consultant was a role that was distinct and different from that of a substantive post of Consultant Cardiologist, that his position was redundant and that the Claimant reasonably rejected an offer of alternative employment that in substantive terms was not a suitable offer of alternative employment."

  30. The ET did not consider that the provisions of Regulation 4(1)(f) of the Employment Act 2002 (Dispute Resolution) Regulations 2004 ('Dispute Resolution Regulations') applied in the circumstances of this case to exempt the Trust from compliance with them. Accordingly the ET held the dismissal of Dr Lairikyengbam to be automatically unfair.
  31. The ET also held that the Trust was in breach of contract by failing to make Dr Lairikyengbam a contractual redundancy payment.
  32. The ET proceeded to make awards without conducting a remedies hearing. Maximum compensation for unfair dismissal was awarded which included a sum in respect of the loss of the contractual redundancy payment. The balance of the contractual redundancy payment was awarded by way of damages for breach of contract.
  33. The Relevant Statutory Provisions

    The National Health Service and Community Care Act 1990 ('NHSA')

    Schedule 2
    16
    (4) Subject to sub-paragraph (5) below, an NHS Trust may-
    (a) pay its staff such remuneration and allowance, and
    (b) employ them on such other terms and conditions, as it thinks fit.
    (5) An NHS Trust shall-
    (a) in exercising its powers under sub-paragraph (4) above, and
    (b) otherwise in connection with the employment of its staff,
    act in accordance with regulations and any direction given by the Secretary of State.

    The National Health Service (Appointment of Consultants) Regulations 1996 as amended ('the Regulations')

    Regulated appointments
    3.    These Regulations apply to appointments to consultant posts on the staff of an Authority in England, except appointments which are exempt appointments.
    Exempt appointments
    5.—(1)  An appointment is an exempt appointment if the person appointed is—
    (c) a person whose employment in a post is to be for an initial period not exceeding six months—
    (i) pending the appointment of a permanent post holder,
    and … in respect of whom any further period of employment in that post is to be for a period not exceeding six months and to be subject to prior consultation with the relevant college and to the satisfactory performance of the duties of the post during the initial period;
    Selection by Committees
    8.—(1)  An appointing Authority shall—
    (b) … refer to the Committee any application received by the Authority
    Appointment by Authority
    9.—(1)  An Authority shall not make an appointment to which these Regulations apply unless the name of the person to be appointed has been submitted to it by a Committee under regulation 8.

    Employment Rights Act 1996 ('ERA')

    230 Employees, workers etc
    (1) In this Act "employee" means an individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment.
    (2) In this Act "contract of employment" means a contract of service or apprenticeship, whether express or implied, and (if it is express) whether oral or in writing.
    98 General
    (1) In determining for the purposes of this Part whether the dismissal of an employee is fair or unfair, it is for the employer to show—
    (a) the reason (or, if more than one, the principal reason) for the dismissal, and
    (b) that it is either a reason falling within subsection (2) or some other substantial reason of a kind such as to justify the dismissal of an employee holding the position which the employee held.
    (2) A reason falls within this subsection if it—
    (c) is that the employee was redundant, or
    (d) is that the employee could not continue to work in the position which he held without contravention (either on his part or on that of his employer) of a duty or restriction imposed by or under an enactment.
    98A Procedural Fairness
    (1) An employee who is dismissed shall be regarded for the purposes of this Part as unfairly dismissed if-
    (a) one of the procedures set out in Part 1 of Schedule 2 to the Employment Rights Act 2002 (dismissal and disciplinary procedure) applies in relation to the dismissal,
    (b) the procedure has not been completed, and
    (c) the non-completion of the procedure is wholly or mainly attributable to failure by the employer to comply with its requirements.
    (3) For the purposes of this section, any question as to the application of a procedure set out in Part 1 of Schedule 2 to the Employment Act 2002, completion of such a procedure shall be determined by reference to regulations under section 31 of that Act.
    139 Redundancy
    (1) For the purposes of this Act an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to—
    (b) the fact that the requirements of that business—
    (i) for employees to carry out work of a particular kind,
    ……
    have ceased or diminished or are expected to cease or diminish.

    Employment Act 2002 (Dispute Resolution) Regulations 2004

    ('Dispute Resolution Regulations').

    4(1) Neither of the dismissal and disciplinary procedures applies in relation to the dismissal of an employee where–
    (f) the reason (or, if more than one principal reason) for the dismissal is that the employee could not continue to work in the position which he held without contravention (either on his part or on that of his employer) of a duty or restriction imposed by or under any enactment;

    Employee within the meaning of the ERA?

    Contentions of the parties

  34. Mr Powell on behalf of the Trust contended that employment of Dr Lairikyengbam after 14 May 2004 was contrary to the Regulations, beyond its power, ultra vires and void such that he was not an employee within the meaning of the ERA. Accordingly he had no right to claim unfair dismissal and did not have a contractual or statutory right to a redundancy payment. He referred to Credit Suisse v Allerdale BC [1997] QB 306. In that case a claim by a bank for repayment under a guarantee given by a local authority of a loan to a company created by the Council to develop a site by building a leisure pool and time-share units was dismissed. The establishment of the company and the giving of the guarantee were part of a scheme designed to circumvent the controls imposed on local authority borrowing and fell outside both the express and the implied powers of the Council and were therefore ultra vires. Mr Powell drew attention to the judgment of Neill LJ at page 343 in which he held:
  35. "Where a public authority acts outside its jurisdiction in any of the ways indicated by Lord Reid in Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147, 171 the decision is void. In the case of a decision to enter into a contract of guarantee the consequences in private law are those which flow where one of the parties to the contract lacks capacity."
  36. Mr Powell relied on the judgment of the Court of Appeal in Rolled Steel Products (Holdings) Ltd [1986] 1 Ch 246 as establishing that a contract which is beyond the capacity of a contracting party to enter into is wholly void.
  37. Mr Powell contended that the important question is whether the act being challenged, here entering into contracts to employ Dr Lairikyengbam as a locum consultant for periods beyond 14 May 2004, was within the capacity of a party to an agreement but was an abuse of its powers. In this regard he referred to the dictum of Browne-Wilkinson LJ in Rolled Steel at page 304D:
  38. "The critical distinction is, therefore, between acts done in excess of the capacity of the company on the one hand and acts done in excess or abuse of the powers of the company on the other. If the transaction is beyond the capacity of the company it is in any event a nullity and wholly void: whether or not the third party had notice of the invalidity, property transferred or money paid under such a transaction will be recoverable from the third party. If, on the other hand, the transaction (although in excess or abuse of powers) is within the capacity of the company, the position of the third party depends upon whether or not he had notice that the transaction was in excess or abuse of the powers of the company."

  39. Mr Powell submitted that whilst the Trust has the capacity to employ consultants, doing so in a way prohibited by the Regulations renders the resultant contract ultra vires. The Regulations govern the appointment of consultants. These include requirements which were not carried out by the Trust in Dr Lairikyengbam's case. Exceptions to compliance with these requirements include the appointment of locum consultants for a maximum period of 12 months. Mr Powell contended that the employment of Dr Lairikyengbam as a locum consultant for periods beyond 14 May 2004, 12 months after the commencement of his work as a locum, was ultra vires and void. Accordingly such ultra vires employment could not give rise to any statutory or contractual employment rights.
  40. Mr Powell also cited Hinckley and Bosworth BC v Shaw [2000] 9 LGR 9 in support of a contention that if it was ultra vires, Dr Lairikyengbam could not enforce the contract of employment against the Trust even if it was not unlawful on its face.
  41. Mr Powell further contended that the ET erred in law in holding that even if contracts for Dr Lairikyengbam to work as a locum consultant after 14 May 2004 were ultra vires, there was an employment relationship between Dr Lairikyengbam and the Trust such that he was an employee within the meaning of the ERA. Mr Powell submitted that such an argument would be contrary to the rejection by the Court of Appeal in Credit Suisse of a contention that the Court has a discretion as to how invalid decisions are to be treated.
  42. After the close of oral submissions, Mr Powell asked for and the parties were granted permission to make submissions in writing on the effect of the judgment of Mr Justice Treacy in Rose Gibb v Maidstone and Tunbridge Wells NHS Trust [2009] EWHC 862 on the issue of ultra vires on the outcome of this appeal.
  43. Mr Powell submitted that the judgment in Rose Gibb supported his contention that Dr Lairikyengbam was not an employee after 14 May 2004. He pointed out that in the case of Rose Gibb the NHS Trust alleged that an agreement to pay a sum of money under a compromise agreement was ultra vires because the amount agreed was unreasonably high. It was said that the contracts with Dr Lairikyengbam in issue in this case are ultra vires on the same principle. They were entered into in breach of the Regulations which was also an established basis for holding an agreement to be ultra vires.
  44. Christopher Bryden on behalf of Dr Lairikyengbam contended that the ET did not err in law in holding that he was an employee of the Trust. The Trust had power to appoint staff and thus the power to appoint him as a locum consultant. He supported the approach of the ET by which it held that the Regulations set out a framework in which 'the powers should ideally be exercised'. He contended that the ET did not err in reaching the conclusion in paragraph 45 that failure to comply with the Regulations 'did not render the contractual relationship with the Claimant in its entirety null and void'.
  45. Mr Bryden also sought to uphold the alternative finding of the ET that even if the contracts for employment of Dr Lairikyengbam as locum consultant for periods after 14 May 2004 were void, some employment relationship must still have existed with the Trust. As the irreducible core elements of a contract of employment were established, it was open to the ET to conclude that Dr Lairikyengbam was an employee. Moreover, it was said that this Tribunal should not interfere with the finding that Dr Lairikyengbam was an employee as it was a finding of fact.
  46. Discussion

  47. By paragraph 16 of Schedule 2 to the NHSA as amended, the power of the Trust to employ staff is to be exercised in accordance with regulations made by the Secretary of State. The Regulations apply to appointments to consultant posts except those which are exempt appointments (Reg 3). They lay down certain preconditions for the appointment of consultants. These include the requirement in Regulation 9(1) that a Trust shall not make an appointment of a consultant unless the name of the person to be appointed has been submitted to it by an Advisory Appointments Committee ('AAC').
  48. Exempt appointments include the appointment of a consultant whose employment in a post is to be for an initial period not exceeding six months pending the appointment of a permanent postholder. A further period of employment in that post is to be for a period not exceeding 6 months. The appointment is subject to prior consultation with the relevant college and to satisfactory performance of duties. It may be that a locum consultant could be appointed for a further period but such appointment would not be an exempt appointment and would have to comply with all the requirements of the Regulations including selection of a person whose name had been submitted to the Trust by the AAC.
  49. The employment of Dr Lairikyengbam as a locum consultant for periods after 14 May 2004 did not comply with the requirements of the Regulations. In our judgment it cannot be said that the Regulations are not mandatory but merely procedural and directive. Whilst the Trust has a general power to appoint staff, that power is circumscribed by the Regulations. The appointment of a consultant to a specialist post if he or she were not approved by the relevant college would not be compliant with the Regulations and would be beyond the 'capacity' of the Trust. In our judgment no distinction can be drawn between the effect of failure to comply with such a provision in the Regulations and the failure in this case. In Credit Suisse it had been submitted on behalf of the claimant bank that a discretion as to its effect could be exercised where a decision was ultra vires not for lack of statutory authority but because of some procedural impropriety. Neill LJ at page 343 rejected an argument that ultra vires decisions of local authorities can be classified into categories of invalidity with those which are ultra vires on procedural grounds being enforceable.
  50. There are many examples of agreements of public bodies being held to be ultra vires although the authority had capacity to carry out the type of act complained of. In Eastbourne Borough Council v Foster [2002] ICR 234 Mr Foster's contract of employment as Director of Environmental Services was terminated for redundancy on 28 September 1998. However in order that he would benefit from enhanced early retirement pension provisions, a compromise agreement was entered into whereby the Council agreed that he would remain employed until 31 August 1999, 9 days after his 50th birthday. After receiving advice that the compromise agreement was ultra vires, the Council commenced proceedings to recover payments made to Mr Foster after the date on which his post disappeared on the basis that continued employment after 28 September 1998 when he was redundant was ultra vires. The local authority had capacity to employ Mr Foster. However since the purpose of continuing to employ him until his 60th birthday was to enable him to draw a pension and enhanced compensation and not because the Council needed his services, the compromise agreement to do so was held to be ultra vires.
  51. In Hinckley and Bosworth Borough Council v Shaw the Council had the power to increase the salary of its employees but an increase awarded for the main purpose of enhancing an employee's redundancy or retirement benefits was unlawful and beyond the powers of the authority to make. Thus such an agreement was void. In Rose Gibb a compromise agreement on termination of employment was held to be ultra vires because it was irrationally generous. In all these cases, the public body had capacity to do the act complained of but it was held to be ultra vires because the power to do so was exercised for a collateral purpose or in breach of statutory provisions.
  52. 38. The Trust had no power to employ a consultant in respect of whose appointment the Regulations had not been complied with. The contracts with Dr Lairikyengbam entered into to take effect after the expiry of the 6 month extension to the initial 6 month term of his contract were ultra vires. In our judgment the ET erred in holding that the employment of Dr Lairikyengbam as a locum consultant after 14 May 2004 was not ultra vires. The Trust could only have so employed him if it had complied with all the requirements of the Regulations.

  53. Difficulties arise in the employment context where a former employee of a public body continues working under an ultra vires arrangement. That body may, as here, have the power to employ the individual but not in the circumstances in which he or she was employed. The courts then have to consider the nature of the arrangement under which they work. This is a difficult question. In our judgment the approach of the Court of Appeal in Foster provides a helpful analysis of the legal consequences of continued work carried out under a void contract.
  54. In Foster The Deputy High Court judge held that:
  55. "…Mr Foster's contract of employment terminated on 28 September 1998 and was replaced by an arrangement which was of no legal effect; therefore he was not under any contract of employment at any time thereafter, nor (probably) was he in any other contractual relationship with the council, though it is not necessary for me to decide just what the right legal analysis of his relationship with them was at this time." (para 19)

  56. The Court of Appeal, overturning the judgment below, held that although the compromise agreement was ultra vires, the conduct of the parties could not be ignored for all purposes. Mr Foster's employment continued on a different basis until it was terminated by notice after his 50th birthday. Rix LJ agreed with the Judge below that since the compromise agreement was void, Mr Foster's original contract of employment came to an end on the date when his post disappeared and not on the date after his 50th birthday as had been agreed in the ultra vires compromise agreement. It was submitted on behalf of the Council as has been submitted by Mr Powell on behalf of the Trust that it was impermissible to achieve the result of an ultra vires agreement by other means such as implying a new contractual relationship between the parties. On behalf of Mr Foster it was contended either that the original lawful contract had not come to an end because of the ineffectiveness of the compromise agreement or that there was a continued 'relationship of employment'. Rix LJ held:
  57. "32. In my judgment, the correct analysis lies between these two positions. Although it is impermissible to accord any validity to the compromise agreement and I agree that it therefore follows that no reliance can be placed on any promise or representation that merely reflects an alternative legal foundation for binding the council to an undertaking that it had no power to give, nevertheless the conduct of the parties still exists in the real world and cannot be ignored for all purposes.
    35. In my judgment, Mr Foster's employment by the Council continued, but on a new basis. What that new basis was, and whether it involved a new contract of employment, I will consider below. In the meantime it seems to me that not to accept that the relationship and status of employment continued is to acknowledge less than the reality of the situation demands, while at the same time to accept the reality of that relationship is to do no more than the invalidity of the compromise agreement allows. In other words, I believe that this solution does justice both to the facts that occurred, and to the doctrine of ultra vires and thus to the need to ignore, and not by other means to give effect to, the false formal basis upon which the parties mistakenly believed themselves to be acting."

  58. Rix LJ then considered what followed from the continued existence of a de facto relationship of employment with the Council albeit that the parties considered they were implementing an agreement which was void. He considered that Craven-Ellis v Canons Ltd [1936] 2 KB 403 was relevant and applicable to the basis upon which Mr Foster worked after 28 September 1998. In that case a director carried out work under a contract which was void because he did not hold necessary qualifying shares. The Court of Appeal held that he was entitled to be paid for his work on a quantum merit basis. Greer LJ held at page 412:
  59. "In my judgment, the obligation to pay reasonable remuneration for the work done when there is no binding contract between the parties is imposed by rule of law, and not by an inference of fact arising from the acceptance of services or goods. It is one of the cases referred to in the books on contracts as obligations arising quasi ex contractu …."
  60. Rix LJ cited the approval of Craven-Ellis by Lord Templeman in Guinness Plc v Saunders [1990] 2 AC 663 at page 693 in which he referred to the case in terms of an implied contract:
  61. "… there was no obstacle to the implication of a contract between the company and the plaintiff entitling the plaintiff to claim reasonable remuneration as of right by an action in law."

    At paragraph 43 Rix LJ held:

    "Whether the obligation imposed by law in such a case is normally described as contractual, quasi-contractual or restitutionary, may not matter for the purposes of this case, since in any event I would consider that where, as here, the relationship between the parties is best described as a relationship of employment the law must necessarily impose a contractual solution."
  62. The Court of Appeal applied this approach to hold that Mr Foster's employment continued after 28 September 1998 albeit on an entirely different basis.
  63. The Court of Appeal in Foster considered it necessary to make a distinction between the compromise agreement which was unenforceable as being ultra vires the Council and the necessity of recognising the reality that Mr Foster had worked for the Council pursuant to the ultra vires agreement. The Court held that such work was performed under a contract of employment.
  64. The authorities put before us in this area have been concerned with the entitlement to monies under ultra vires agreements (Rose Gibb, Hickley & Bosworth). We are not aware of any apart from Foster and Craven-Ellis in which the status of a worker who continued working under a contract an aspect of which rendered it ultra vires was considered.
  65. Dr Lairikyengbam was suitably qualified to occupy a consultant Cardiologist post and, as the periodic contractual renewals testify, regarded as competent. However he had not been recommended for appointment by the AAC as was required by the Regulations if the Trust were to continue to employ him as a consultant after 14 May 2004. As in the case of Mr Foster, there was no general prohibition on the Trust which prevented it from employing him. There was no suggestion that the parties did other than regard the relationship between them as one of employment with all its attendant responsibilities and liabilities.
  66. We apply the approach of the Court of Appeal in Foster to hold that although agreements to employ Dr Lairikyengbam as a consultant after 14 May 2004 were ultra vires the Trust nonetheless he is to be treated as performing his duties under a contract of employment during that period.
  67. Conclusion

  68. The ET erred in holding that contracts for the employment of Dr Lairikyengbam as a locum Consultant Cardiologist after 14 May 2004 were not ultra vires. However the ET did not err in holding in the alternative that after that date he continued to be an employee of the Trust within the meaning of ERA Section 230(1).
  69. Error in finding dismissal for redundancy?

  70. Mr Powell for the Trust contended that the ET erred in holding that Dr Lairikyengbam was dismissed by reason of redundancy. He submitted that the ET erred in drawing a distinction between the work of a locum Consultant Cardiologist and that of a Consultant Cardiologist and therefore considering that there was a reduction in the requirement for a locum Consultant Cardiologist. He contended that the ET erred in failing to consider whether there was a reduction in the requirement of the Trust for employees to carry out the work of a Consultant Cardiologist.
  71. The unchallenged evidence on behalf of the Trust was that as at 31 March 2007 there remained a requirement for the work of a Consultant Cardiologist to be done. Dr Lairikyengbam had been interviewed for but was unsuccessful in obtaining the post. The evidence was that prior to and after 31 March 2007 there were six Consultant posts in Cardiology in the Trust. On the expiry of Dr Lairikyengbam's final contract there was a vacant consultant post which the Trust was seeking to fill. There was a requirement for the work to be undertaken but no appointment had been made. It was contended on behalf of the Trust that the ET erroneously placed reliance on the Trust's earlier view that Dr Lairikyengbam was redundant and had mentioned that he would receive a contractual redundancy payment.
  72. For Dr Lairikyengbam Mr Bryden contended that the ET did not err in law in considering whether he was dismissed for redundancy and that the decision that he was so dismissed was not perverse. He rightly submitted that a party asserting that the decision of an ET is perverse has a high hurdle to overcome.
  73. Discussion

  74. For a dismissal to be held to be by reason of redundancy it must be wholly or mainly attributable to the fact that the requirements of the employer for employees to carry out work of a particular kind have ceased or diminished or are expected to cease or diminish. The Regulations apply to appointments to 'consultant posts'. (Reg 3). There was no evidence before the ET that the Trust had a locum consultant cardiologist post.
  75. Regulation 5 permits the appointment of a person for employment in a consultant post for a short fixed term 'pending the appointment of a permanent post holder'. Such a person occupies the post 'locum tenens', literally 'holding the place'. The Regulations do not provide for locum consultant posts to be established independently of the substantive post which is being held on a temporary basis by a locum. The evidence did not support a conclusion that the Trust had a requirement for a locum Consultant Cardiologist in addition to a Consultant Cardiologist. There was no suggestion in the evidence before the ET that Dr Lairikyengbam would continue as a locum once a Consultant Cardiologist had been appointed on a permanent basis.
  76. The label of redundancy initially given by the Trust to the dismissal of Dr Lairikyengbam did not affect its proper characterization. There was no evidence that the requirement for a Consultant Cardiologist had ceased or diminished on the termination of Dr Lairikyengbam's appointment. In our judgment the conclusion of the ET that the work of a locum was materially distinguishable from that of a consultant cardiologist and that the Trust has a requirement for an employee to carry out the work of a locum consultant cardiologist in addition to its requirement for an employee to carry out the work of a consultant cardiologist was not one which was open to it on the evidence. In our judgment the findings of fact by the ET and the applicable Regulations do not support a conclusion that Dr Lairikyengbam was dismissed for redundancy on 31 March 2007 when his locum consultant contract came to an end. Accordingly the ET reached a perverse conclusion in deciding that he was dismissed for redundancy.
  77. Conclusion

  78. The decision of the ET that the reason for the dismissal of Dr Lairikyengbam was redundancy was reached in error of law and is perverse.
  79. Error in finding unfair dismissal?

  80. It was contended on behalf of the Trust that the decision of the ET in paragraphs 49 to 51 of the Judgment that the dismissal of Dr Lairikyengbam was automatically unfair or unfair by reason of the fact that he was not given a step 1 meeting or an appeal hearing in accordance with the Dispute Resolution Regulations was wrong in law and was perverse. Mr Powell submitted that the ET took no account of the Trust's submission that the decision to allow the fixed term contract to expire without being renewed because of the need to comply with the Regulations was a reason for dismissal within the meaning of ERA Section 98(2)(d) and the dismissal was fair in all the circumstances. Further it was said that the ET did not have regard to the fact that by reason of regulation 4(1)(f) of the Dispute Resolution Regulations the Trust was not required to comply with the statutory dismissal procedure in respect of the non renewal of Dr Lairikyengbam's contract.
  81. Mr Bryden pointed out that the Trust did not suggest that it had complied with the statutory dismissal procedure. On behalf of Dr Lairikyengbam he contended that the ET found that the reason for his dismissal was redundancy. In the light of that finding, ERA Section 98(2)(d) did not apply and the ET was entitled to find that his dismissal was automatically unfair for non compliance with the statutory dismissal procedure.
  82. Discussion

  83. We have held that the ET erred in concluding that Dr Lairikyengbam was dismissed for redundancy.
  84. By 9 March 2007 the Trust may have decided not to continue Dr Lairikyengbam's employment after the expiry of the fixed term on 31 March 2007. This decision was conveyed to him at the meeting on that date when he was given a letter to that effect. Further it appears that it was after that date the Trust received advice that continued employment of Dr Lairikyengbam would be ultra vires. On the findings of fact made by the ET we are not in a position to substitute a decision as to the reason for the dismissal of Dr Lairikyengbam and its fairness.
  85. Conclusion

  86. The decision that the dismissal of Dr Lairikyengbam was automatically unfair for non compliance with the Dispute Resolution Regulations is set aside. The decision as to the reason for Dr Lairikyengbam's dismissal and its fairness including consideration of the applicability or otherwise of the statutory dismissal procedure will be for an ET at a remitted hearing.
  87. Entitlement to a contractual redundancy payment?

  88. No special definition of redundancy was relied upon to assert a right to a contractual redundancy payment. It was not suggested to the ET or to us that any different criterion gave rise to entitlement other than dismissal for redundancy within the meaning of ERA Section 139. In light of our conclusion that the ET came to a perverse conclusion in holding that Dr Lairikyengbam was dismissed for redundancy we also hold that it came to a perverse conclusion in holding that Dr Lairikyengbam was entitled to a contractual redundancy payment.
  89. Error in determining remedy?

  90. Mr Powell submitted that the ET erred in law and acted perversely in that it determined remedy following a hearing at the start of which the EJ made it plain that the ET would only consider liability at that stage. It was said that additional evidence would have been given and submissions made if the parties had been made aware that the ET was also going to decide remedy.
  91. Very fairly Mr Bryden accepted that it was expressly agreed between the parties and the EJ that the hearing would proceed by way of a split trial of liability followed by quantum. However it was contended on behalf of Dr Lairikyengbam that the fact that the ET went on to determine quantum having heard the evidence that it did and having satisfied itself that it was able to do so does not amount to an error of law or perversity.
  92. In her comments on this Ground of Appeal the EJ wrote that she agreed with the parties that 'evidence on remedy could be called after a determination on liability'.
  93. Conclusion

  94. In our judgment it was seriously prejudicial to both parties for the ET to determine remedy on the basis of evidence and submissions at a hearing which had been agreed by the parties and the ET to be for the purpose of determining liability.
  95. The decision on remedy is set aside.
  96. Outcome

  97. The appeal against the findings by the ET of unfair dismissal and breach of contract is allowed. The decisions on liability and remedy are set aside.
  98. In light of our conclusion that the decision of the ET that Dr Lairikyengbam was dismissed for redundancy was perverse we substitute a decision that his claim for a contractual redundancy payment be dismissed.
  99. The claim by Dr Lairikyengbam for unfair dismissal is remitted to a differently constituted ET for determination in the light of this judgment.


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URL: http://www.bailii.org/uk/cases/UKEAT/2009/0499_08_2108.html