Veitch Penny LLP - Exeter | Crediton, Devon

Case

Four Seasons Healthcare Limited v Maughan
Employment Appeal Tribunal - (06 October 2004)

Issues

(1)Frustration
(2)Suspension without pay
(3)Arrears of wages

Facts

Mr Maughan was employed by the company as a registered mental nurse working at one of their care homes. Allegations were made against him that he had physically abused a patient and on 17th January 2003 he was suspended from duty. The company’s Disciplinary Procedure stated that his initial suspension would be without pay for a period not exceeding seven days. Mr Maughan was subsequently arrested and was charged with a number of offences by the police. The conditions of bail placed upon him required him not to communicate with any of the prosecution witnesses (which included management and other employees at the home) or enter the home.

Thereafter, Mr Maughan remained on suspension without pay. His union wrote to the company on his behalf asking for his full pay be re-instated in arrears (save for the seven day period laid down in the Disciplinary Procedure). The company’s response was that due to the seriousness of the offences, Mr Maughan would remain suspended without pay until a full investigation had taken place. This decision was based on a police request that the company’s investigation not take place until the criminal prosecution had been completed. Eventually on 30th October 2003, Mr Maughan was found guilty of a number of the offences he was charged with and sentenced to two years imprisonment.

Mr Maughan made a claim to the Employment Tribunal claiming arrears of salary for the period of his suspension. The company contested the claim arguing that Mr Maughan’s contract of employment had been frustrated due to his inability to work as a result of his being charged and bailed. Accordingly, no wages were due to him. At the first instance, the Tribunal rejected the company’s argument and allowed Mr Maughan’s claim awarding him £15,145 in respect of arrears of wages. The Tribunal held that his eventual conviction on 30th October did frustrate the Contract and his entitlement to wages ceased on that date.

The company appealed the decision to the Employment Appeal Tribunal (EAT). First it argued that under Regulation 19 of the Care Homes Regulations 2001, it was unlawful to continue to employ Mr Maughan after his first assault and then accordingly the contract was frustrated from that point. In the alternative, the company argued that the Contract was frustrated when the bail conditions were made because they made it impossible for him to fulfil his obligations as an employee.

In response, Mr Maughan argued that a finding of frustration could not be made because of the company’s disciplinary procedure which specifically provided for summary dismissal in the event of verbal or physical abuse towards residents. This meant it was always open to employers to terminate the contract. He further submitted that even though the bail conditions prevented him returning to the home, the terms of the contract meant that he could have been moved elsewhere. By suspending him, albeit without pay until the criminal proceedings had been concluded, the company could not have regarded the period of bail as significant enough to bring the contract to an end: Suspension, by definition, is a mechanism used to keep the contract alive.

Decision

The EAT dismissed the company’s appeal. It found the original Tribunal had been correct in its decision. It was noted that frustration required some outside event or change of situation which was not foreseen or provided for by the parties within the contract. In this case there was a specific disciplinary procedure which provided for summary dismissal in these circumstances, leaving it open for the employer to terminate the contract. The EAT rejected the submission that the contract was not frustrated by the bail conditions even though this meant Mr Maughan could not attend work.

Comments

This case is a further illustration of the Tribunals’ approach to the concept of frustration, which has been to restrict the circumstances where such a claim is upheld.