Chapman v Goonvean and Rostowrack China Clay Co Ltd

Under the Redundancy Payments Act 1965, redundancy depends on whether dismissal is attributable wholly or mainly to an actual or expected cessation or diminution in the employer’s requirement for employees to perform work of a particular kind. The inquiry is objective and based on the actual commercial circumstances. It is not conducted on the hypothesis that the employer would have continued on the dismissed employee’s former terms. Sections 2(3) and 2(4) concern offers of the same or suitable alternative employment after a redundancy situation has arisen. They do not enlarge section 1(2). Where dismissed employees are replaced to perform the same work at the same wage, but without a costly transport arrangement, the dismissal is not for redundancy.

Seven employees travelled from Port Isaac to their employer’s works under a contractual entitlement to free transport. After redundancies reduced the number using the bus, the employer withdrew the service and told the men that work remained available if they made their own travel arrangements. They were unable to do so, left the employment, and were replaced by local employees.

The industrial tribunal rejected their claims for redundancy payments, and the Industrial Court affirmed that decision. The central issue before the Court of Appeal was whether the dismissals were attributable to a diminution in the employer’s requirement for employees to perform work of a particular kind, and whether the statutory provisions concerning alternative employment altered that inquiry.

The appeal was dismissed unanimously, with costs. Lord Denning MR and Buckley LJ gave reasoned judgments, and Orr LJ agreed with both.

1. The employees had been dismissed for the purposes of the Redundancy Payments Act 1965. Withdrawal of the contractually provided transport was repudiatory conduct, entitling them to terminate the contracts under section 3(1)(c). Buckley LJ also noted the statutory presumption under section 9(2)(b), which placed on the employer the burden of showing that the dismissals were not by reason of redundancy.
2. Section 1(2)(b) required an objective assessment of the employer’s actual commercial circumstances. The inquiry concerned whether the requirement for employees to perform the relevant work had ceased, diminished, or was expected to do so. It did not proceed on a hypothesis that the employer would have continued business on the former contractual terms. The expectation had to be justified by objective circumstances, including the commercial and economic conditions affecting the business.
3. The Court rejected the approach taken in Dutton v C. H. Bailey Ltd. (1968) 3 I.T.R. 355 and Line v C. E. White & Co. (1969) 4 I.T.R. 336, which treated the former terms as the necessary baseline. Lord Denning MR regarded both decisions as wrongly decided and overruled them. Buckley LJ considered that their particular results might have been correct, but that they should not be treated as establishing a general principle.
4. Sections 2(3) and 2(4) did not modify section 1(2). They operated after the redundancy question had arisen and dealt with unreasonable refusals of offers of the same employment or suitable alternative employment. Section 3(2) addressed circumstances in which renewal or re-engagement prevented dismissal. The Act conferred no vested right to continued employment on the former terms.
5. The employer’s requirement for the relevant work had continued. The seven employees were replaced by seven others doing the same work at the same wage. The dismissal resulted from the cost of transporting employees from a distance, not from redundancy. The appeal was therefore dismissed with costs, and leave to appeal to the House of Lords was granted.

1. Court of Appeal dismissed the appeal with costs: [1973] EWCA Civ 1.
2. Industrial Court affirmed the industrial tribunal’s rejection of the employees’ claims.
3. Industrial tribunal rejected the claims for redundancy payments.