Rossiter v Pendragon plc (Crosby-Clarke v Air Foyle Ltd)

In a transfer of undertaking, an employee’s right to claim constructive dismissal remains governed by ordinary contractual principles. A substantial change in working conditions to the employee’s detriment does not itself create a right to terminate under TUPE. The employee must establish repudiatory breach, acceptance of the breach, and no affirmation of the contract. Council Directive 77/187 art 4(2) allocates responsibility where domestic law treats termination as resulting from a substantial detrimental change; it does not confer a new termination right. A contractual reference to legislation in force from time to time may accommodate foreign flight-time rules after an employer moves its base abroad, absent a contrary contractual restriction.

These conjoined appeals arose from Employment Appeal Tribunal proceedings concerning employees whose employment was affected by transfers of undertakings. In Rossiter, the Employment Tribunal found no contractual breach, no substantial detrimental change and affirmation of the contract. The EAT held that TUPE could permit constructive dismissal without breach and remitted the matter, as reported at [2001] IRLR 256.

In Crosby-Clarke, the Employment Tribunal held that the introduction of Belgian flight-time limitations was a substantial detrimental change and a repudiatory breach. The EAT dismissed Air Foyle’s appeal at a preliminary hearing but granted permission to appeal. The central question was whether a transfer-related substantial detrimental change could entitle an employee to resign without proof of repudiatory breach, together with the proper construction of the pilot’s contractual provisions.

The Court of Appeal unanimously allowed both appeals. Lord Justice Peter Gibson gave the leading judgment, with Lord Justice Jonathan Parker and Sir Christopher Slade agreeing.

1. Rossiter. Under section 95(1)(c) of the Employment Rights Act 1996, the ordinary constructive-dismissal test continued to apply. Following Western Excavating (ECC) Ltd v Sharp [1978] ICR 221, the employee had to show repudiatory breach, acceptance of the breach and no affirmation. Regulation 5(5) of the Transfer of Undertakings (Protection of Employment) Regulations 1981 preserved existing rights; it did not create a free-standing right to resign merely because a transfer involved substantial detrimental changes.
2. Article 4(2) of Council Directive 77/187 was concerned with allocating responsibility where domestic law treated a transfer-related change as causing termination. The Directive provided only partial harmonisation. Rask v ISS Kantineservice [1993] IRLR 133 and Collino v Telecom Italia SpA [2002] ICR 38 supported that approach. Merckx v Ford Motor Company (Belgium) SA [1997] ICR 352 had to be read in the context of an admitted contractual breach. The broader reading adopted in the EAT was unsustainable.
3. The EAT’s reliance on Humphreys v University of Oxford [2001] ICR 405 was misplaced only insofar as it suggested a new right; that authority confirmed preservation of common-law constructive-dismissal rights. The statement in Berriman v Delabole Slate Ltd [1985] ICR 546 was background obiter, and Dabell v Nofotec Ltd (20th February 1992) was wrongly decided on the relevant point. Pendragon’s appeal was allowed, the EAT order was set aside and the ET decision restored. There was no order as to costs.
4. Crosby-Clarke. The contractual reference to government legislation in force meant legislation applicable from time to time. Air Foyle was free to move its principal place of business, with the consequence that Belgian flight-time limitations could become applicable. The new requirements therefore involved no breach, still less a repudiatory breach, and there was no constructive dismissal. Air Foyle’s appeal was allowed, the EAT and ET orders were set aside and the originating application dismissed with costs.

1. Court of Appeal. On 10 May 2002, both appeals were allowed. The court restored the Rossiter Employment Tribunal decision and dismissed Crosby-Clarke’s originating application.
2. Employment Appeal Tribunal. In Rossiter, the EAT allowed the appeal on the legal issue and remitted the case; its judgment was reported at [2001] IRLR 256. In Crosby-Clarke, the EAT dismissed Air Foyle’s appeal at a preliminary hearing and granted permission to appeal.
3. Employment Tribunals. The Rossiter tribunal found no breach, no substantial detrimental change and affirmation. The Crosby-Clarke tribunal found a repudiatory breach arising from the Belgian flight-time limitations and held that the employee had been wrongfully and unfairly dismissed.