Editorial Committee of the Cambridge Law Journal

Frustration for Labour LawyersAuthor(s): David HowarthSource: The Cambridge Law Journal, Vol. 46, No. 1 (Mar., 1987), pp. 47-49Published by: Cambridge University Press on behalf of Editorial Committee of the Cambridge LawJournalStable URL: http://www.jstor.org/stable/4506976 .

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C.L.J. Case and Comment 47

frustration for labour lawyers

The common law is a frequent visitor to labour law. In collective

labour law it comes in the guise of tort, in individual labour law as

contract. It is, however, frequently a troublesome guest. Particularly unwelcome is the tendency of full-dress technical rules, designed for

charterparties, to gatecrash the informal and simple gathering of an

Industrial Tribunal. Two recent cases, which illustrate the problem, concerned reconciling statutory employment protection with the

common law doctrine of frustration. In Notcutt v. Universal

Equipment Ltd [1986] 1 W.L.R. 641 the Court of Appeal (Dillon L.J.

and Sheldon J.) considered the effect of an employee's permanently

incapacitating illness. In F. C. Shepherd Ltd. v. Jerrom [1986] 3

W.L.R. 801 a different Court of Appeal (Lawton, Mustill and

Balcombe L.JJ.) pronounced on the effect of a custodial sentence on a

contract of apprenticeship. In Notcutt a skilled machinist of twenty-seven years' standing

suffered a heart attack. He took time off unpaid, since his contract of

employment provided for no sick pay. After six months his employer, tired of contracting out the work, decided to replace him permanently. The company persuaded him to undergo a medical examination, which

concluded that he would probably never work again. The employer then gave him twelve weeks' notice, in accordance with section 49(1) ofthe Employment Protection (Consolidation) Act 1978. Mr. Notcutt

discovered that under section 50 and Schedule 3 of the 1978 Act he

might be entitled to his previous average weekly earnings during his

notice period, despite his inability to work and despite his lack of

contractual entitlement to sick pay. His claim, however, was dismissed

in the county court on the grounds that the section and schedule were

inapplicable because, despite appearances, the employer had not

"given notice to terminate the contract." Instead the employee's illness had "frustrated" the contract before the purported termination.

Such a situation has never before been considered by the Court of

Appeal. The N.I.R.C. and the E.A.T. have previously accepted the

possibility of frustration by illness, but they have severely restricted its

scope. In Harman v. Flexible Lamps Ltd [1980] I.R.L.R. 418, 419, Bristow J. said:

In the employment field the concept of. . . frustration is normally only in play where the contract. . . is for a long term which cannot be determined by notice. Where the contract is terminable by notice, there is really no need to consider the question of frustration . . . [for] that would be a very convenient way in which to avoid the provisions of the [1978] Act.

In Notcutt, however, Dillon L.J. disagrees with this limitation. He

gives two reasons. First, contracts of employment, though terminable by

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The Cambridge Law Journal

short notice, "may none the less be intended ... by both parties to last many years." Surely Bristow J. might respond that notice provisions allow the parties to deal relatively quickly with radical changes in circumstances, despite the overall long term nature of the agreement. Second, Dillon L.J. sees significance in the fact that "the power of the employer to terminate the contract by notice is subject to the provisions for the protection of employees against unfair dismissal." This turns Harman on its head. The very introduction of employment protection is given as a reason for avoiding it. Certainly, Dillon L.J. is right to think that, left to themselves, the parties would not have contracted on the terms of the 1978 Act; but that does not mean that they have not in fact so contracted (cf. Westwood v. Secretary of State for Employment [1985] A.C. 20).

The important question, it would seem, is, therefore, what terms are imposed by the 1978 Act in these circumstances? In particular, how should Schedule 3 be read? Does it require employers to give sick pay in all circumstances, if the employment is terminated with notice? Or does it not apply where sickness is the reason for the termination? Unfortunately, Dillon L.J. begins his reasoning by saying that he has "found it impossible to discern from the wording of the Act" why the Schedule imposes the liabilities it does. Perhaps a higher court will have to take this question much further than was necessary for Dillon L.J.'s decision.

Nevertheless, Dillon L.J.'s judgment found favour with the more weighty Court of Appeal assembled for Shepherd Ltd. v. Jerrom. Jerrom was apprenticed to Shepherds on the conditions laid down by a Joint Industrial Board. These included a rule that the apprenticeship could only be determined for serious misconduct, a question to be decided by the Board. Jerrom got into trouble, outside work, and was sentenced to Borstal training. He served twenty-eight weeks, after which Shepherds refused to take him back, even after the J.I.B. had supported him. Jerrom claimed unfair dismissal. Shepherds replied that there was no dismissal: the contract was either frustrated or had been repudiated by Jerrom himself.

The Industrial Tribunal and the E.A.T. found neither frustration nor repudiation. The latter point divided the Court of Appeal. Lawton L.J. thought that there was no repudiation-although the offences made imprisonment and thus impossibility of performance foreseeable, such a result was not inevitable. He thus doubted whether Universal Cargo Carriers Cpn. v. Citati [1957] 2 Q.B. 401 applied to personal service contracts, even if it is correct. Balcombe L.J. did find a repudiation by Jerrom. Mustill L.J., without deciding the point, tended to be against it, concluding, after a careful analysis, "Anticipated inability to perform going to the root of the contract is a

48 [1987]

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Case and Comment

repudiation unless it is due to an excepted peril." Since, he suggests, the obligation to work was not "absolute," and Jerrom's offences, though deliberate, were not "directed towards the contract," the exception probably applied.

On frustration, however, all three judges agreed that the Tribunals were wrong. The E.A.T. had taken the view that the eventuality was

provided for by the J.I.B. procedure. The Court of Appeal rejected this for three reasons. First, the parties could not have intended the procedure to apply were Jerrom to be imprisoned for life (Lawton L.J.) or permanently disabled (Mustill L.J.). Second, the procedure was inappropriate in the absence of work-related misconduct (Lawton, Balcombe L.JJ.). Third, imprisonment was not "misconduct," merely an external event. But the first is irrelevant: this case was about Borstal; the second begs the question; and the third is pedantry.

Jerrom was left with a very weak argument that there was no frustration because he himself had been at fault. This pleading of his own wrong failed to impress. Mustill L.J., for example, said that the argument failed to appreciate that frustration operates as a promisor's defence-it matters not whether both sides can or cannot claim its protection. All the promisee therefore achieves by pleading his own fault is to establish his own repudiation.

The disproportionate space devoted to Jerrom's last argument should not obsure the point that the central finding of Jerrom is the same as that in Notcutt: contractual dismissal procedures will count for nothing if they become unexpectedly burdensome for the employer. This rule's dangers are obvious. It would be much better to allow tribunals to reach the merits ("reasonableness" under section 57(3)), and to consider directly and openly such matters as the cost of keeping the employee's job open or the size of the firm.

Professor Hepple ((1986) 15 I.L.J. 69), among others, has called for the decoupling of employment rights from contract law. These cases illustrate why this would be a good idea. Judges frequently referred to common law doctrines or ideas as "natural" or "conventional," implying that the statutory scheme was the opposite. This led them to give too much weight to the need for coherence in contract, and not enough to the policies of the statutue, not least the desire to keep legal technicality out of industrial tribunals. Other important widely accepted policies, such as trying to re-integrate young offenders into society, received even less attention. Yet again the common-law guests have outstayed their welcome.

DAVID HOWARTH.

C.L.J. 49

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