Employment Cases Update

C.F. Capital PLC v Willoughby [2011] EWCA Civ 1115

Date published: 14/10/2011

Appeal against a decision in the EAT that overturned the ET in finding that the claimant had been dismissed and had not, as the ET found, resigned. Appeal dismissed.

The claimant had been employed by CF Capital Plc for 18 years when the banking crisis caused the business to suffer. The claimant was offered the choice to go self employed and be paid a monthly retainer plus a percentage of any sales she made.  At a meeting on 1 December 2008 with her manager, she expressed an interest in such a move, but asked for her manager to provide her with more information before making her decision. This information was not forthcoming, and 3 weeks later the claimant received a letter from her manager confirming her move to self employed status from 1 January 2009. The letter included the words 'The termination of your existing employment contract will be effective from 31 December 2008.' The claimant then sought legal advice, her solicitor confirming that the letter amounted to termination of her contract. After communication between the claimant, respondent and their solicitors, the claimant's manager sought to retrieve the position by saying that he had misunderstood the outcome of the meeting and tried to reassure the claimant that she could continue in employment as before. The claimant maintained her position and claimed unfair and wrongful dismissal. The ET found that the claimant had resigned but that was overturned by the EAT.

In this appeal Rimer LJ reviews those facts and the two previous decisions. He then tackles the three principles grounds of appeal, in particular reviewing the case law behind the submission that the EAT "took too narrow a view of the 'special circumstances' doctrine and wrongly concluded that the concept of mistake, apparently in any circumstances, had no role to play in what could be construed as 'special circumstances'." On this points he notes that

"In my judgment, the true nature of the exception is rather that it is one in which the giver of the notice is afforded the opportunity to satisfy the recipient that he never intended to give it in the first place – that, in effect, his mind was not in tune with his words."

Accordingly, he could see no basis for application to this case as the notice was clear and unambiguous, the claimant had simply accepted the notice, and the respondents could not unilaterally withdraw it.

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Case No: A2/2010/1924

Neutral Citation Number: [2011] EWCA Civ 1115

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL

His Honour Judge Richardson, Mr M. Clancy and Mr T. Motture

UKEAT/0503/09/LA

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 12/10/2011

Before :

LORD JUSTICE LAWS

LORD JUSTICE HOOPER

and

LORD JUSTICE RIMER

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Between :

C.F. CAPITAL PLC (Appellant)

- and -

CATHERINE WILLOUGHBY (Respondent)

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Mr James Boyd (instructed by Bermans LLP) for the Appellant

Mr Fred Banning (of Clarke Mairs LLP) for the Respondent

Hearing date: 18 July 2011

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Judgment

Lord Justice Rimer :

Introduction

1. This appeal by C.F. Capital Plc ('CFC') is against an order of the Employment Appeal Tribunal ('the EAT') made on 13 July 2010. The EAT thereby allowed an appeal by the respondent, Catherine Willoughby, against a judgment of the Newcastle-upon-Tyne Employment Tribunal ('the ET') that was sent (with reasons) to the parties on 7 September 2009. Ms Willoughby had brought a claim for unfair dismissal against CFC which the ET held to be unfounded on the basis that she had not been dismissed but had resigned. The EAT, on appeal, held that she had been dismissed and ordered a remission of the proceedings to a differently constituted tribunal for the determination of her consequential claims. The ET panel comprised Employment Judge Morris, Mrs M. Kelly and Mr J.B. Wright. The EAT panel comprised His Honour Judge Richardson, Mr M. Clancy and Mr T. Motture.

2. By its appeal, brought with the permission of the President of the Family Division, CFC challenges the EAT's order and seeks the restoration of the ET's judgment. James Boyd (who appeared in both tribunals below) represented CFC. Fred Banning (who appeared in neither) represented Ms Willoughby. To explain the issue, I must summarise the facts found by the ET.

The facts

3. CFC is a medium sized business that, at the material time, had about 55 employees. It acts as an intermediary between seekers and lenders of finance for the purchase of capital equipment. Ms Willoughby started employment with it on 17 March 1990. She had various roles, her latest being that of account manager in the sales team. Her line manager was Mr Keeley, a CFC director. They had a good relationship.

4. The banking crisis of 2008 created difficulties for CFC. It recognised the need for costs savings and considered reducing its staff. On 20 November 2008 it dismissed six employees on the grounds of redundancy. It formed a proposal to dismiss a further 18 employees in various departments. It also assessed the sales team as under-performing, although not in identifying potential customers so much as in securing finance for them. It identified a need to reduce the sales team's overheads. Whilst it foresaw that in time there might be redundancies, it recognised that it would continue to need people to sell its products. It decided to hold meetings with the members of its sales team to see if any of them would move from being an employee to becoming self-employed. The meeting with each individual was to be conducted by the director with particular management responsibility for him or her. Mr Keeley was, therefore, to conduct the meeting with Ms Willoughby.

5. The two of them met on 1 December 2008. Mr Keeley explained the problems and the need to save costs. He told Ms Willoughby that one option being considered was to make redundancies within the sales team but that no firm decision had been made. He told her that 11 employees in other teams were to be made redundant, as was to be announced that day. He explained that a possible alternative to redundancies amongst the sales team was for sales staff to become self-employed. CFC would pay a retainer of about £1,000 to £2,500 a month and commission of 50% of gross profit.

6. Ms Willoughby was interested and asked about the tax implications and other terms of such a change. Mr Keeley advised her to speak to Mr Hazel about tax and said that he would provide her in writing with the detailed terms of a move to self-employment. Ms Willoughby indicated to Mr Keeley that she would be prepared to become self-employed but only on terms acceptable to her; and that she would consider this option upon receipt of the detailed terms. The ET found that the only option considered with her was the possibility of her becoming self-employed: CFC had made no decision regarding the possibility of dismissing any of its sales team on redundancy grounds.

7. Whereas the ET found that Ms Willoughby had indicated no more than a willingness to consider the self-employed option upon receipt of the detailed terms, it found in paragraph 11.19 that Mr Keeley perceived the discussions as having gone further: it there found that '[h]e thought that an agreement had been reached whereby [her] employment would end and she would be re-engaged on a self-employed basis.' The ET found, therefore, in paragraph 11.20, that there was a significant misunderstanding between Mr Keeley and Ms Willoughby as to what had and had not been agreed, although it also found that each was genuine in his/her understanding of the outcome of the meeting. The ET noted that the existence of such misunderstanding would have been identified if Mr Keeley had provided Ms Willoughby with a note of their meeting. He did not, however, do that. What he did do was to ask Mr Wilding (CFC's HR and IT manager) to produce the paperwork necessary to change Ms Willoughby's status from employed to self-employed.

8. Following the meeting, Ms Willoughby pressed for the provision of the details of the terms that Mr Keeley had promised. She rang him on 5 December to be told that Mr Wilding was dealing with it. She rang Mr Wilding on 12 December to be told that he was on holiday and that he would be back on 15 December. She rang Mr Wilding on 17 December to be told that the paperwork would be sent to her soon.

9. On 22 December Mr Keeley wrote Ms Willoughby the critical letter upon which all turns. She received it the following day. Equivalent letters were sent on the same day to three other sales employees. The letter read:

'I refer to our meeting of 2 December 2008.

As discussed during our meeting the Company has been subject to a market conditions reflected by the current difficulties within the economic climate and as a result we have experienced a downturn in business transacted.

Despite the economic downturn we have been able to mutually agree to a change in your employment status and our working relationship will continue by your move into self-employment.

The termination of your existing employment contract will be effective from 31 December 2008.

Your Agency Agreement will commence 1 January 2009, which is enclosed for your consideration and signature. It reflects our confirmation that a retainer in the sum of £1,000 will be paid to you on a monthly basis, which is reviewed annually on the anniversary of the Agreement. This retainer is to be deducted from commissions earned on the percentage splits agreed from time to time.

Please find enclosed two copies of this letter and the Agency Agreement. I shall be grateful if you would sign both of each, keeping one and returning the other ones to me.'

10. On its face, therefore, that letter terminated Ms Willoughby's employment on 31 December. I set out what the ET said about it in paragraph 11.26:

'Even on the basis of Mr Keeley's perception of the upshot of the meeting on 1 December, his letter of 22 December goes far further than was appropriate. His evidence was only that [Ms Willoughby] had been keen "to discuss the self employment proposal further" (paragraph 14 of his statement) and that her later decision not to become self-employed "was somewhat at odds with the interest she had shown during" their meeting on 1 December (paragraph 27). At that meeting Mr Keeley had only provided possibilities regarding the amount of the retainer and had not discussed, let alone agreed, the date on which the transition would take place and neither had he discussed with [Ms Willoughby] any of the detailed terms of the Agency Agreement that was offered to her (pages 90 to 102) which are detailed and some of which could be said to be onerous. An appropriate letter at this stage would have advised [Ms Willoughby] of the proposed terms for self-employment (as she had herself requested) and sought to obtain her agreement to those terms including by way of further discussions if she wished. Mr Keeley said in evidence that the intention behind the letter was to give [Ms Willoughby] "an opportunity to reflect on matters and change her mind if she wished". That is not what the letter states.'

11. I make two comments. First, I interpret the second sentence as reflecting the ET's finding as to Mr Keeley's understanding at the conclusion of the meeting of 1 December, although it is manifestly at odds with its findings in paragraph 11.19 referred to in paragraph [7] above. Taking the paragraph 11.26 finding as the relevant one (as Mr Boyd, for CFC, was content to do), it is not apparent to me that there was any significant misunderstanding between Ms Willoughby and Mr Keeley at the end of the meeting of 1 December. Her position was that she wanted to consider the self-employment proposal further; and that was his understanding of her position. Second, it follows that, in writing the letter of 22 December, Mr Keeley might, on one view, be regarded as having made an egregious mistake: because, until Ms Willoughby had been given the details of the proposed self-employment arrangement and had gone firm with CFC that that was the road down which she wished to travel, the letter was premature.

12. Following the receipt of the letter, Ms Willoughby sought legal advice. The result was that on the morning of 5 January 2009 she rang Mr Wilding to inform him that she would not be accepting the Agency Agreement, that the letter of 22 December had terminated her employment and that she had been advised to pack up all CFC's property that she had and do no further work for it. Mr Wilding asked Mr Keeley to ring her back, which he did shortly afterwards. Mr Keeley expressed surprise at what he saw as a change of heart on her part but assured her that, if there had been a misunderstanding and she did not wish to become self-employed, her situation would continue as before. He told her that he would consider the position further and call her again.

13. He rang her later that day and they had an inconsequential conversation. He also rang her on the following day, 6 January, to be told that she had been advised that he should speak to her solicitors. He rang them, explained that there had been a misunderstanding, that Ms Willoughby was held in high regard at CFC, that there was never any intention simply to terminate her employment and that she should return to work. The solicitors replied that they believed she had been dismissed. Mr Keeley wrote to Ms Willoughby on 9 January in terms that the ET found to be pleasant, conciliatory and genuine. He explained CFC's position, apologised for the misunderstanding and expressed the hope that she would continue in employment. Ms Willoughby did not reply to his letter. He telephoned her on 13 January, when he expressed a wish to meet her to try to resolve matters, a conversation he confirmed in a letter of the same day. Ms Willoughby did not reply to that letter either.

14. Correspondence followed between solicitors. CFC's stance, as expressed in its solicitors' letter of 23 January was that it remained keen for Ms Willoughby to resume her duties as soon as possible and that '[s]ince the letter of 22 December 2008 has no effect, employment with [CFC] continues on its existing terms.' There was no response to that and shortly afterwards CFC accepted that Ms Willoughby's employment was at an end, although not as a result of her dismissal. Its stance was that she had resigned.

The ET's decision

15. The ET held that 'without more' Mr Keeley's letter of 22 December would amount to a dismissal. That, it said, is how:

'… in isolation, any reasonable recipient would have read the letter… Indeed it is how CFC intended it at the time albeit on the false premise that [Ms Willoughby] had agreed to the termination of her employment and her move to self employed basis.'

16. The ET referred to (but did not cite from) various authorities and said that they required an objective view to be taken of the letter's words of termination. The question, it said, was 'how would a reasonable recipient of the letter … have construed the words in that letter in all the circumstances of the case'. It was satisfied that there were 'special circumstances' that had to be taken into account. The first was that at the close of the meeting of 1 December Ms Willoughby's understanding was that both she and Mr Keeley understood that she was interested in a move to self-employment, but that was all:

'A reasonable person with that understanding would have recognised, upon receiving the letter of 22 December, that something was seriously wrong: there had been a mistake and the reference to the termination of her contract of employment had to be an error.'

17. The second 'special circumstance' was that, once Ms Willoughby had on 5 January 2009 alerted CFC to its mistake, Mr Keeley promptly withdrew the dismissal. The ET's conclusion was that, in those circumstances:

'26. Thus, while on the face of it, the letter of 22 December would have amounted to a dismissal that dismissal, which was founded on a mistake, was withdrawn, timeously, by [CFC].

27. Instead, [Ms Willoughby] brought her employment to an end when she refused to return to work and this was more formally confirmed to [CFC] when it became aware that she had applied for Job Seeker's Allowance.

28. Thus, [Ms Willoughby] was not dismissed and, therefore, her complaint that she was unfairly dismissed is not well-founded and is dismissed.'

The EAT's decision

18. The EAT, in a judgment delivered by Judge Richardson, reviewed the authorities and concluded that the ET's judgment and reasoning were in error. The EAT agreed with the ET that the letter of 22 December amounted to a dismissal of Ms Willoughby and that it could not be read in any other way. The ordinary principle is that an employer who uses unambiguous words of dismissal, so understood by the employee, will thereby dismiss an employee, just as an employee who uses unambiguous words of resignation, so understood by the employer, will thereby resign. Whilst there are exceptions to those principles, they are limited and tribunals should not be astute to find exceptions. The fundamental question for a tribunal will be whether, in the special circumstances, the person to whom the words were addressed was entitled to assume that the decision which they expressed was a conscious rational decision; or whether there were circumstances that ought to indicate to their addressee that they were not meant, or should not be taken, at face value. In recognising the existence of such exceptions, said the EAT:

'39. Without doubt the main practical problem which the law has sought to address in these cases has been the problem of words spoken in anger in the heat of the moment. In ordinary human experience we generally take people to mean what they say; but we often make allowances for words spoken in anger, recognising that they may soon be retracted and may reflect no more than a momentary, flawed intention on the part of the speaker. The law caters for this eventuality; but the law will not serve the wider interests of justice unless employers and employees are usually taken to mean what they say.

40. We think the Court of Appeal's decision in Buckland [a reference to Buckland v. Bournemouth University Higher Education Corporation [2010] EWCA Civ 121; [2010] 4 All ER 186] also points to a limitation in the "special circumstances" rule. The Court of Appeal decided that an employee who commits a repudiatory breach of contract has no right to an opportunity to cure the breach. There is a logical distinction between an employer who commits a repudiatory breach of contract and an employer who uses express words of dismissal – the former is by definition acting in breach of contract, the latter not necessarily so. But the distinction is not necessarily clear cut. An employer's words of dismissal may be the culmination of a course of conduct amounting to a repudiatory breach, or they may themselves amount to such a breach. In such circumstances there can be no room for the "special circumstances" doctrine. An employer who is in fundamental breach cannot improve his position by using express words of dismissal.'

19. Applying that approach to the appeal, the EAT concluded that the ET had not applied the correct test. Having correctly recognised that the letter of 22 December included unambiguous words of dismissal, the ET failed to ask itself whether Ms Willoughby was entitled to regard the dismissal decision expressed in the letter as a conscious, rational decision. It was not enough that, as the ET found, Ms Willoughby would have concluded from the letter that something was seriously wrong and that CFC had made a mistake. If the perception that the dismissing employer or the resigning employee was or might in some way have been mistaken in issuing a letter of dismissal or resignation were of itself a special circumstance, the exception would, in the EAT's view have overtaken the rule. Employees must often think that an employer is making a mistake in dismissing them, but they are still generally entitled to take a letter or words of dismissal at face value. Ms Willoughby and her lawyers were entitled to do so in this case. No doubt a reasonable person, knowing what had happened on 1 December, would upon receiving the letter of 22 December have recognised that something was seriously wrong. But there was no reason why he would necessarily consider that the reference to termination was an error. He might equally think that the employer was bent on riding roughshod over the employee's rights and her reasonable requests for information about the proposed change to self-employment. In fact, the reference to termination in the letter was not an error. In any event the ET ought not to have held that CFC's change of heart on and after 5 January 2009 was timeous: there was no retraction until after Ms Willoughby had taken a decision based on legal advice.

The appeal

20. The first ground of appeal was that, whilst the EAT identified the correct legal test, it misapplied it. Unlike the ET, it erroneously focussed its attention not upon whether, in the circumstances, Ms Willoughby ought to have been aware that the words of termination should have been taken at face value, but instead upon the intention of CFC. The second ground was that the EAT took too narrow a view of the 'special circumstances' doctrine and wrongly concluded that the concept of mistake, apparently in any circumstances, had no role to play in what could be construed as 'special circumstances'. The third ground was that the EAT was wrongly influenced by Buckland in arriving at the conclusion it did. In his oral argument, however, Mr Boyd advanced submissions in development only of the first two grounds.

21. Mr Boyd accepted that the relevant finding by the ET as to Mr Keeley's understanding at the end of the meeting of 1 December was as it explained in paragraph 11.26 of its reasons. He accepted, therefore, that there was no relevant misunderstanding by Mr Keeley as to Ms Willoughby's intentions. It was common ground between them that she was interested in a possible switch to self-employment status but had not yet agreed to such a switch; she wanted first to see and consider the details, which Mr Keeley had promised to provide but never did. All that he did do was to write to her on 22 December giving her what was in practice a week's notice terminating her employment. (As she was no doubt entitled to longer notice than that, the letter probably also, on its face, constituted a repudiatory breach of her employment contract, which she accepted on 5 January 2009, although that was not a feature to which any argument was addressed).

22. Against this background, Mr Boyd's starting point was an express acceptance that, when CFC sent Ms Willoughby the letter of 22 December, it intended to dismiss her. That concession might perhaps be thought to mark the end of CFC's appeal since it is not immediately obvious why an unambiguous notice of dismissal, intended by the employer to take effect as such, does not do precisely the work that the employer intended of it. Mr Boyd's submission, however, was that it is not as easy as that. The validity of the dismissal notice did not just turn upon what CFC intended. It was also essentially dependent upon whether it was reasonable for the recipient to take it at face value. The further submission was that Ms Willoughby (or, perhaps more accurately, the reasonable recipient of the notice) could not take it at face value because it would be apparent to such recipient that the notice was fatally vitiated by a mistake. The mistake was that a dismissal notice could and should only properly have been given when and if CFC and Ms Willoughby had first reached agreement that she wished to switch to self-employment. As they had not done so, the giving of the dismissal notice was premature and was a mistake. Once the mistake was understood, as CFC claims it was by 5 January, it was entitled to withdraw the notice, with the consequence that the parties would be treated as continuing to be employer and employee as if the dismissal notice had never been written.

23. That submission is not one that I find it easy to follow or accept. CFC intended to dismiss Ms Willoughby by its letter of 22 December. It also intended that she should recognise its letter as one of dismissal, as indeed she did: on 5 January she acknowledged the termination of her employment. She has not sought to say that the dismissal was vitiated by mistake. On the contrary, she has accepted the letter as terminating her employment. CFC's stance is, however, that it is entitled to be relieved from the consequences of its own intended act on the basis that it would have been open to her to assert that the notice was of no effect. It is saying that its own prior mistake, to which Ms Willoughby could, had she chosen, have pointed, was sufficient to vitiate its notice.

24. Mr Boyd's course to that conclusion as a matter of law was via the invocation of the so-called 'special circumstances' exception that is referred to or applied in several authorities in the field of employment law. To decide whether Mr Boyd's course is a navigable one, I turn to the applicable principles of law.

25. First, the giving by an employer to his employee of a notice of dismissal cannot be unilaterally retracted, but may only be withdrawn by consent. See Riordan v. The War Office [1959] 3 All ER 552, at 557I to 558D; Harris & Russell Ltd v. P.S.G. Slingsby [1973] IRLR 221, at paragraphs [3] and [4].

26. Second, employment law is, at least in large part, a branch of contract law. The principles of contract law ordinarily require that a person's intentions are ascertained not by reference to his subjective intentions but objectively, by reference to how a reasonable man would interpret them. His intentions will therefore be ascertained by reference to a consideration of the words used, whether written or oral, in the context in which he used them. In the present case, the reasonable recipient of CFC's letter of 22 December would have no doubt as to what it meant or what its legal effect was. He might, given his assumed understanding that Ms Willoughby had not agreed to a switch to self-employment and that CFC knew that she had not, be surprised by the writing of such a letter to her. But such surprise would not require him to interpret it in other than its ordinary way.

27. Third, the 'special circumstances' exception to which I have referred is one that finds its expression and application in several reported authorities. They are cases in which either the employee has given an oral notice of resignation or (less commonly) in which the employer has given an oral notice of dismissal. The words of the notice so given may, on the face of it, be clear and unambiguous and may take effect according to their apparent terms. Indeed, the general rule is that they will do so. The authorities recognise, however, an exception to that general rule: namely, that the circumstances in which the notice is purportedly given are sufficiently special that it will or may not take such effect. For example, the words of notice may be the outcome of an acrimonious exchange between employer and employee and may be uttered in the heat of the moment such that there may be a real question as to whether they were really intended to mean what they appeared to say. In such circumstances it will or may be appropriate for the recipient of such a notice to take time before accepting it in order to ascertain whether the notice was in fact intended to terminate the employment. If he does not do so and, for example, simply (and wrongly) accepts an employee's purported resignation at face value and treats the employment as at an end, he may find himself on the receipt of a claim for unfair or wrongful dismissal. The general rule and the 'special circumstances' exception to it have been recognised in several authorities of both the EAT and this court.

28. In Sothern v. Franks Charlesly & Co [1981] IRLR 278, Mrs Sothern, the office manager of a firm of solicitors, announced at a partners' meeting that 'I am resigning', following which the partners thanked her for her services. She returned to work the following day and claimed that if the firm wanted her to leave, it would have to dismiss her. She was told she had resigned and that her resignation had been accepted. She claimed, however, that she had been unfairly dismissed. The ET held that, in the circumstances in which she uttered the words she did, her words were too ambiguous for a reasonable employer to interpret them as in fact amounting to a resignation. The EAT found that the ET had made no error of law. The Court of Appeal, however, allowed the employer's appeal, holding that Mrs Sothern had used words of resignation that were unambiguous and were so understood by the employer. The appeal was therefore disposed of on the basis that the case was governed by the general rule. But Fox LJ also alluded in paragraph [21] of his judgment to the 'special circumstances' exception to it, where he noted that:

'… this is not a case of an immature employee, or of a decision taken in the heat of the moment, or of an employee being jostled into a decision by the employers…'.

Dame Elizabeth Lane, agreeing, said, at paragraph [25], that Mrs Sothern's words meant 'I resign' and, in the context, they expressed an intention to resign and were so understood and accepted. They were not idle words, or words spoken under emotional stress which the employers knew or ought to have known were not meant to be taken seriously.

29. Martin v. Yeomen Aggregates Ltd [1983] IRLR 49 was a case in which an employer was said to have given an effective oral dismissal. During an argument between a director of the employer and an employee, the director purportedly dismissed the employee but then, within five minutes (having realised that the dismissal was in breach of an agreed disciplinary procedure and that he was not authorised to do what he had purportedly done), withdrew the dismissal and told the employee that he was suspended for two days, as was then confirmed by letter. The EAT upheld the ET's decision that there had been no dismissal, on the grounds that the words were used in the heat of the moment and withdrawn almost immediately. Kilner Brown J, in delivering judgment of the EAT, said:

'14 … It has obviously been contemplated in this Appeal Tribunal and has been contemplated for years that in the heat of the moment words which clear enough standing alone would indicate a dismissal can lose that effect if one looks at the surrounding circumstances. Of course, it must be a question of degree. Of course, you may get a situation in which the change of mind is so late that it is impossible to recover from the dismissory words expressed in the first place.

15. We have no doubt whatsoever and, hoping that this matter may well be tested in the Court of Appeal, perhaps impertinently, confidently assert that it is a matter of plain common sense, vital to industrial relations, that either an employer or an employee should be given the opportunity of recanting from words spoken in the heat of the moment. We agree entirely with the first conclusion of the Industrial Tribunal that, having done what they did, withdrawing the original spoken words, saying that a man was suspended and telling him that, in the circumstances there was no dismissal…'.

30. The 'special circumstances' exception was again considered by the EAT in Barclay v. City of Glasgow District Council [1983] IRLR 313. The employee, who suffered from various disabilities, including what Lord McDonald described as 'high grade mental deficiency', followed an altercation with his employer by making a request for 'his books' the next day, a Friday and pay day. He also, reluctantly, signed a blank form that was used by his employers when an employment terminated. He returned to work on Monday and was sent home. Had he resigned? The ET held that he had but the EAT reversed its decision. Lord McDonald explained the right approach as follows:

'11. On the other hand we do not consider that in the circumstances of this case the matter rests there. It is true that if unequivocal words of resignation are used by an employee in the normal case the employer is entitled immediately to accept the resignation and act accordingly. This has been authoritatively decided by the Court of Appeal in Sothern v. Franks Charlesly & Co [1981] IRLR 278 to which we were referred. It is clear however from observations made in that case that there may be exceptions. These include cases of an immature employee, or of a decision taken in the heat of the moment, or of an employee being jostled into a decision by employers (Fox LJ at paragraph 21); they also apply to cases where idle words are used under emotional stress which employers knew or ought to have known were not meant to be taken seriously (Dame Elizabeth Lane, paragraph 25). There is therefore a duty on employers, in our view, in an appropriate case to take into account the special circumstances of the case.

12. It may be that the majority of the Tribunal were correct in holding that when the appellant demanded the books on Thursday, 15.4.82, notwithstanding that it was in the heat of the moment, he meant it at the time. The real question however is whether or not in the special circumstances the respondents were entitled to assume that this was a conscious rational decision. It is true that the majority refer to the exceptional circumstances of the case but we do not consider that having regard to the observations in Sothern v. Franks Charlesly & Co [1981] IRLR 278 it is sufficient to dismiss the unusual aspect of this case in this way. We consider that the proper approach is to have regard, not merely to what was said on 15.4.82, but to what happened the following day and indeed to the fact that the appellant did report for work on the following Monday apparently under the impression that he was still employed. At the very least there was, in our view, an obligation upon the respondents when the appellant reported on Friday, 16 April to seek some form of confirmation that his act of resignation was in fact a genuine one and fully understood. Instead of that they adopted what we consider to be the indefensible practice of requiring him against his will to sign a blank document which presumably on some subsequent occasion was filled in by them with the word "resigned" written opposite the entry "reason for leaving". Further we agree with the observation of the dissenting member that in the special circumstances of this case a reasonable employer would at least have consulted with one of the appellant's sisters before assuming that the appellant meant the words which he had used. For these reasons we propose to allow the appeal.'

31. Sovereign House Security Services Ltd v. Savage [1989] IRLR 115 similarly raised a question as to whether certain words uttered by an employee evinced an intention to resign. The ET had held that his words had been used in the heat of the moment and should not have been accepted at face value by the employer; and that the employee had not resigned, but had been subsequently dismissed. The decision was upheld by the EAT and also by the Court of Appeal, which accepted that there was evidence entitling the ET to arrive at the conclusion that it did. May LJ said, at paragraph [7]:

'In my opinion, generally speaking, where unambiguous words of resignation are used by an employee to the employer direct or by an intermediary, and are so understood by the employer, the proper conclusion of fact is that the employee has in truth resigned. In my view tribunals should not be astute to find otherwise. However, in some cases there may be something in the context of the exchange between the employer and the employee or, in the circumstances of the employee him or herself, to entitled the Tribunal of fact to conclude that notwithstanding the appearances there was no real resignation despite what it might appear to be at first sight.'

May LJ then referred to Fox LJ's judgment in Sothern's case and, in relation to paragraph [21] (which I have cited above), said that Fox LJ was there contemplating the possibility to which he, May LJ, had referred, namely 'that if one is concerned with an immature employee or decisions taken in the heat of the moment, then what might otherwise appear to be a clear resignation, should not be so construed'. May LJ also referred to the like qualification that Dame Elizabeth Lane had made in Sothern's case.

32. Greater Glasgow Health Board v. Mackay [1989] SLT 729 is another case in which the EAT had to consider the 'special circumstances' principle. The day after a disciplinary hearing, the employee had an altercation with her superior. She stated that she was leaving and then wrote out a letter of resignation, which she addressed and delivered to the department manager, which he accepted. She did not return to work. Three weeks after writing her letter of resignation, she wrote asking to withdraw her resignation, to which the employer declined to agree. She complained that she had been unfairly dismissed. The ET held that she had and the EAT upheld its decision. The Court of Session allowed the employer's appeal.

33. Lord Ross referred to Sothern's case and to Barclay's case and said, at 732/733:

'Far from the respondent's resignation having taken place when she was in a fit of temper or was suffering from acute anxiety, it appears that her resignation bore all the hallmarks of a deliberate and conscious act. No doubt she resented some things which Mr Martin had said, but she did not merely say that she was leaving but she took time to sit down and write a letter of resignation. That letter is well expressed and clear in its terms. It appears to me that even if it is assumed that her statement that she was leaving was made in the heat of the moment, the respondent had a full opportunity to reconsider the matter and, if so advised, to withdraw the resignation. Instead of that the respondent sat down and wrote out the letter of resignation, thus confirming what she had already stated orally.

On the findings I am satisfied that there is no justification for thinking that the appellants knew or ought to have known that the resignation was not a conscious or rational decision. It was not a case of an employee flouncing out in a fit of temper, nor was it a case of an employee offering her resignation at a time when her employers knew or ought to have known that she was not herself but was suffering from an anxiety state.'

34. Lord Wylie, at 736, said this:

'In essence, as I understood counsel for the respondent to concede, this is a "heat of the moment" case and I question whether the unambiguous language used by a mature employee of some years' standing at the time of the confrontation alone would have precluded the application of the general rule in Sothern so as to bring it within the exception. Be that as it may, the terms of the letter which she subsequently wrote are I my view conclusive and for these reasons I would allow the appeal. I would only add that where possible exceptions to a general rule are suggested in obiter dicta such as that used in the case of Sothern, there may be a tendency for tribunals to apply the exception to the rule rather than the rule itself and I wish to emphasise that only in highly exceptional circumstances will this be justified.'

35. Lord Cowie, after referring to the exceptional circumstances referred to by both Fox LJ and Dame Elizabeth Lane in Sothern's case, said at 737:

'These exceptions are not as I understand the position meant to be definitive, because each case must turn on its own facts and circumstances, but they are meant to indicate the sort of situations where at first sight words are used or acts are done which clearly and unambiguously indicate that the employee is terminating his own employment or is being dismissed, but where special circumstances are present which ought to indicate to the employer or employee that that was not intended or at any rate put him on his guard and cause him to realise that the words or acts should not be taken at their face value. Examples of these situations were quoted to us by counsel. In particular reference was made to [Martin's case and Barclay's case].'

36. Finally, I shall refer to how Wood J explained the 'special circumstances' exception when delivering the judgment of the EAT in Kwik-Fit (GB) Ltd v. Lineham [1992] IRLR 156. After referring to the authorities, he said:

'31. Let us first look at the problem from the approach of sound management. As we have said, the industrial members take the view that the way in which this industrial Tribunal have expressed themselves puts too high a burden on employers. If words of resignation are unambiguous then prima facie an employer is entitled to treat them as such, but in the field of employment, personalities constitute an important consideration. Words may be spoken or actions expressed in temper or in the heat of the moment or under extreme pressure ("being jostled into a decision") and indeed the intellectual make-up of an employee may be relevant (see Barclay [1983] IRLR 313). These we refer to as "special circumstances". Where "special circumstances" arise it may be unreasonable for an employer to assume a resignation and to accept it forthwith. A reasonable period of time should be allowed to lapse and if circumstances arise during that period which put the employer on notice that further enquiry is desirable to see whether the resignation was really intended and can properly be assumed, then such enquiry is ignored at the employer's risk. He runs the risk that ultimately evidence may be forthcoming which indicates that that in the "special circumstances" the intention to resign was not the correct interpretation when the facts are judged objectively.

32. How then is that approach to be reconciled in law? This is not a purely commercial context. In the sphere of industrial relations these special circumstances may arise due to those conflicts of personalities or individual characteristics. A resignation by an employee is a repudiation of the contract of employment, a fundamental breach. It should be accepted by the employer within a reasonable time (see Western Excavating (ECC) Ltd v. Sharp [1978] IRLR 27 CA, per Lord Denning at p. 29, 15; see also London Transport Executive v. Clarke [1981] IRLR 166). In many cases the acceptance will be by inference. Thus where words or actions are prima facie unambiguous, an employer is entitled to accept the repudiation at its face value at once, unless these special circumstances exist, in which case he should allow a reasonable time to elapse during which facts may arise which cast doubt upon that prima facie interpretation of the unambiguous words or action. If he does not investigate these facts, a Tribunal may hold him disentitled to assume that the words or actions did amount to a resignation, although – to paraphrase the words of May LJ – Tribunals should not be astute so to find.

33. One then asks, what is the reasonable period of time? It may be very short – Martin [1983] IRLR 49. It may be over a weekend – Barclay [1983] IRLR 313. The test is objective and one of reasonableness. It is only likely to be relatively short, a day or two, and it will almost certainly be the conduct of the employee which becomes relevant, but not necessarily so.'

Discussion and conclusion

37. The 'rule' is that a notice of resignation or dismissal (whether given orally or in writing) has effect according to the ordinary interpretation of its terms. Moreover, once such a notice is given it cannot be withdrawn except by consent. The 'special circumstances' exception as explained and illustrated in the authorities is, I consider, not strictly a true exception to the rule. It is rather in the nature of a cautionary reminder to the recipient of the notice that, before accepting or otherwise acting upon it, the circumstances in which it is given may require him first to satisfy himself that the giver of the notice did in fact really intend what he had apparently said by it. In other words, he must be satisfied that the giver really did intend to give a notice of resignation or dismissal, as the case may be. The need for such a so-called exception to the rule is well summarised by Wood J in paragraph 31 of Kwik-Fit's case and, as the cases show, such need will almost invariably arise in cases in which the purported notice has been given orally in the heat of the moment by words that may quickly be regretted.

38. The essence of the 'special circumstances' exception is therefore that, in appropriate cases, the recipient of the notice will be well advised to allow the giver what is in effect a 'cooling off' period before acting upon it. Kilner Brown J, in paragraph [15] of his judgment in Martin's case understandably referred to such a period as an opportunity for the giver of the notice to recant, or to withdraw his words; and this is in practice what is likely to happen. I would, however, be reluctant to characterise the exception as an opportunity for a unilateral retraction or withdrawal of a notice of resignation or dismissal since that would be to allow the exception to operate inconsistently with the principle that such a notice cannot be unilaterally retracted or withdrawn. In my judgment, the true nature of the exception is rather that it is one in which the giver of the notice is afforded the opportunity to satisfy the recipient that he never intended to give it in the first place – that, in effect, his mind was not in tune with his words.

39. That being the nature of the rule and of the 'special circumstances' exception to it, I can see no basis for the application of the latter in the present case. CFC's problem is that, as Mr Boyd conceded, it intended by its letter of 22 December to dismiss Ms Willoughby. Its giving of such a notice may perhaps have been a mistake. But it was not one based on a misunderstanding by Mr Keeley that she had agreed to be dismissed on 31 December, because he knew that she had not. As Mr Banning submitted, the only rational explanation for his letter was a mistaken expectation on his part that she would accept the proposed self-employment terms, whereas she did not. All that she did was to accept the notice terminating her employment. The notice was clear and unambiguous and it terminated her employment just as CFC had intended. In my judgment it took effect according to its terms and, once given, CFC could not unilaterally withdraw it. The 'special circumstances' exception provides CFC with no escape from that conclusion.

40. I would dismiss the appeal.

Lord Justice Hooper :

41. I agree.

Lord Justice Laws :

42. I also agree.