Ipsofactoj.com: International Cases [2006] Part 7 Case 8 [CAEW]


COURT OF APPEAL, ENGLAND & WALES

Coram

Crofts

- vs -

Cathay Pacific Airways Ltd

LORD PHILLIPS OF WORTH MATRAVERS, MR

LORD JUSTICE WALLER

LORD JUSTICE MAURICE KAY

19 MAY 2005


Judgment

Lord Phillips, MR

INTRODUCTION

  1. These are appeals from decisions of the Employment Appeal Tribunal ('EAT') delivered in a single judgment by His Honour Judge Peter Clark on 24 June 2004. The decisions dealt with preliminary issues as to whether an Employment Tribunal ('ET') had jurisdiction to entertain the appellants' claims. The appellants ('the pilots') are air pilots. They contend that they currently live in this country. They were employed, under contracts of employment with companies registered in Hong Kong (collectively 'the employers'), to pilot aircraft owned by Cathay Pacific Airways Ltd ('CPA'). They were dismissed. They claim that their dismissal infringed section 94(1) of the Employment Rights Act 1996 ('the ERA'), which provides:

    An employee has the right not to be unfairly dismissed by his employer.

    The first issue that we have to resolve is whether the pilots enjoyed the right conferred by that sub-section.

  2. The pilots allege that their dismissals infringed the terms of their contracts of employment. They contend that an ET in this country has jurisdiction to entertain their claims for wrongful dismissal. In the case of some of them, that contention is disputed and we must resolve that dispute. There was once a further issue as to whether the ET was entitled to decline to exercise its jurisdiction on the ground that England was not the appropriate forum. That issue is academic as it is common ground that the ET now has that power. There remains an issue, however, as to whether it should use it on the facts of the individual cases.

    THE FACTS

  3. Cathay Pacific is Hong Kong's major airline. It flies all over the world. Cathay Pacific aircraft are all registered in Hong Kong. Until the early 1990s all Cathay Pacific pilots were employed by CPA. There was then a change of policy, which was designed to enable some of the pilots to live in countries other than Hong Kong. This was attractive both to some of the pilots and to CPA, which could thereby avoid the expense of paying salaries and allowances that reflected the high cost of living in Hong Kong. Under the new policy, pilots could be allocated a Base Area outside Hong Kong from which their flight cycles would start and at which they would end. Base Areas included Europe and North America. Within the Base Area was a 'Home Base' where the individual cycles would normally begin and end. One such Home Base was London Heathrow.

  4. Pilots for whom Europe was the Base Area entered into contracts of employment with Veta Ltd ('Veta'), in place of CPA. Pilots for whom North America was the Base Area entered into contracts of employment with USA Basings Ltd ('USAB') in place of CPA. Veta and USAB are subsidiaries of CPA and all three companies are registered in Hong Kong. The subsidiaries are little more than shell companies. They supply pilots to CPA under service contracts governed by Hong Kong law. CPA operates the aircraft and gives managerial instructions to all the pilots. CPA has an administrative centre in the United Kingdom; the subsidiaries have no independent presence here. At the centre the only person who had regular contact with the Veta Pilots was the base co-ordinator. Her role was administrative and not managerial.

  5. Of the twelve appellants, five were Veta Pilots, six were CPA pilots and one, Mr. Parrock was a USAB pilot. Mr. Parrock had wanted to be a Veta pilot, but it had not proved possible to accommodate this wish. He lived in England and flew to New York at his own expense to start his flight cycles, although on occasion it proved possible to start or finish these at Heathrow in order to accommodate him. He did not possess the 'green card' that accords to the holder the right to work in the United States. The contracts of employment of all the pilots were governed by Hong Kong law. Their salaries were paid into Hong Kong bank accounts. They held Hong Kong professional pilots' licences. Their personnel files were kept in Hong Kong. All training was devised and carried out in Hong Kong. All disciplinary and grievance procedures took place in Hong Kong. Flight instructions were issued from Hong Kong.

  6. The pilots were amongst 49 Cathay Pacific pilots who were dismissed by letter from Cathay Pacific Management as a result of a senior CPA decision taken in Hong Kong. 21 of these, including some of the Veta and CPA pilots, have started proceedings for breach of contract before the Hong Kong Labour Tribunal. It is not disputed that this Tribunal has jurisdiction over those claims. The claims that the pilots have sought to bring before the ET are for:

    1. Unfair dismissal under Part X of the ERA;

    2. Failure to give written reasons for dismissal under Part IX of the ERA;

    3. Breach of contract in failing to comply with disciplinary procedures for dismissal.

  7. The ET, which sat at London South, was chaired by Mr. AM Snelson, who sat with Ms S Dean and Mr. A Jinkinson. The Tribunal promulgated its decision on March 10 2003. The summary of the facts and the application of the law, as it then stood, to those facts were of the highest quality. The Tribunal held as follows:

    1. It had jurisdiction to entertain the ERA claims of the Veta pilots as their employment had a 'substantial connection' with Great Britain and Heathrow was to be regarded as their principal place of work;

    2. It did not have jurisdiction to consider the ERA claims of the CPA pilots or Mr. Parrock;

    3. It had jurisdiction to consider the contractual claims of the CPA and Veta pilots, but not that of Mr. Parrock;

    4. The contractual claims of the CPA pilots should be stayed on the grounds of forum non conveniens but those of the Veta pilots should not.

  8. The CPA pilots and Mr. Parrock initially appealed to the EAT both against the ET's determination on ERA jurisdiction and against the adverse determinations in respect of jurisdiction in relation to the contract claims. Veta appealed against the decision on ERA jurisdiction and against the decision to entertain the contract claims.

  9. Before the date of the hearing in the EAT, this court gave judgment in Lawson v Serco Ltd [2004 EWCA Civ 12] ('Serco'); [2004] ICR 204. That decision addressed the ambit of application of section 94(1) of the ERA. It led, I believe, the CPA pilots to abandon their challenge to the ET's decision that it had no jurisdiction in relation to their ERA claim. I shall consider Serco in detail in due course. At this point it suffices to say that it does not provide an easy answer to the issues raised on this appeal.

  10. The EAT dismissed Mr. Parrock's appeal in relation to his ERA claim. It also dismissed all appeals in relation to jurisdiction in respect of the contract claims. Applying Serco, it decided that the Veta pilots' case on the application of the ERA was on the borderline and should be remitted to a different ET for a fresh hearing. That ET should also consider whether the Veta pilots' contract claims should be stayed on the ground of forum non conveniens.

  11. The pilots appealed against all findings adverse to them. Veta cross-appealed against the EAT's decision to remit the Veta pilots' claims to the ET. Veta contends that the EAT should have ruled that the ET had no jurisdiction to entertain the Veta pilots' ERA claims or their contract claims. Alternatively the EAT should have ruled that the ET was not the appropriate forum to entertain the Veta pilots' contract claims.

  12. The parties were agreed that we should, if possible, resolve all issues between them. I believe that it is possible to do so. I propose to start with the ERA claims.

    THE CLAIMS FOR BREACH OF SECTION 94(1) OF THE ERA

  13. Section 94(1) of the ERA forms part of Part X of the ERA, which is concerned with 'unfair dismissal'. That Act consolidated a number of different statutes, many of them themselves consolidating Acts, dealing with employment rights. The rights in question are employees' rights; the ERA imposes statutory obligations on employers. Some of the rights and obligations imposed by the ERA can only sensibly apply to protect employees who are working within Great Britain. Others are capable of applying whether the employee is working in Great Britain or abroad. Most, if not all, of the Acts which were consolidated by the ERA had an express provision governing the ambit of their application. These provisions were consolidated in a single section of the ERA, section 196. It provided as follows:

    (1)

    Sections 1 to 7 and sections 86 to 91 do not apply in relation to employment during any period when the employee is engaged in work wholly or mainly outside Great Britain unless-

    (a)

    the employee ordinarily works in Great Britain and the work outside Great Britain is for the same employer, or

    (b)

    the law which governs his contract of employment is the law of England and Wales or the law of Scotland.

    (2)

    The provisions to which this subsection applies do not apply to employment where under the employee's contract of employment he ordinarily works outside Great Britain.

    (3)

    Subsection (2) applies to-

    (a)

    in Part I, sections 8 to 10,

    (b)

    Parts II, III and V,

    (c)

    Part VI, apart from sections 58 to 60,

    (d)

    Parts VII and VIII,

    (e)

    in Part IX, sections 92 and 93, and

    (f)

    (subject to subsection (4)) Part X.

    (3A)

    Part IVA and section 47B do not apply to employment where under the worker's contract he ordinarily works outside Great Britain.

    (4)

    Part X applies to employment where under her contract of employment the employee ordinarily works outside Great Britain if-

    (a)

    section 84 applies to her dismissal, or

    (b)

    she is treated as dismissed by section 96.

    (5)

    For the purposes of subsections (2) and (4), a person employed to work on board a ship registered in the United Kingdom shall be regarded as a person who under his contract ordinarily works in Great Britain unless-

    (a)

    the ship is registered at a port outside Great Britain,

    (b)

    the employment is wholly outside Great Britain, or

    (c)

    the person is not ordinarily resident in Great Britain.

    (6)

    An employee-

    (a)

    is not entitled to a redundancy payment if he is outside Great Britain on the relevant date unless under his contract of employment he ordinarily worked in Great Britain, and

    (b)

    is not entitled to a redundancy payment if under his contract of employment he ordinarily works outside Great Britain unless on the relevant date he is in Great Britain in accordance with instructions given to him by his employer.

    (7)

    Part XII does not apply to employment where, under the employee's contract of employment, he ordinarily works outside the territory of the member States of the European Communities and of Norway and Iceland.

  14. The wording of section 196(2) might have been read as excluding from the application of Part X international pilots who necessarily spend most of their working hours outside Great Britain. However in Todd v British Midland Airways [1978] ICR 959 Lord Denning, MR, when considering the application of the predecessor of section 196(2) to an airline pilot, held at p 965 that:

    A man's base is the place where he should be regarded as ordinarily working, even though he may spend days, weeks or months working overseas.

    The problem with which we are concerned arises, however, because the whole of section 196 was repealed by section 32(3) of the Employment Relations Act 1999 with effect from 25 October 1999. The authorities give little guidance as to the principles of statutory construction that should be applied to a repeal such as this. This question received some consideration by the ET in the present case, but none by this court in Serco. The judgment in Serco does, however, consider the purpose of the repeal of section 196. Pill LJ, who gave the judgment of the court, remarked at paragraph 10:

    Two possible reasons for the repeal of section 196 are evident from the legal context of the 1999 Act. They are obvious without reference to, though confirmed by, a statement of the Minister of State in the House of Commons when introducing the amendment to the Employment Relations Bill which led to the repeal of section 196. The reasons are, first, to meet the requirement of the Posted Workers Directive, Council Directive 96/71/EC (OJ 1997, L 18, P1) and, second, an intention to mitigate the effect of the decision of this court in Carver v Saudi Arabian Airlines [1996] ICR 991, to which case reference will be made.

  15. It is not clear to me how the legal context of the repeal of section 196 makes clear, without reference to the Minister's comments, that it had the two objects identified by Pill LJ. Let me say a word about those objects.

  16. In relation to the vast majority of the Act, including part X, the provisions did not apply to employment where 'under the employee's contract of employment' he ordinarily worked outside Great Britain. The interpretation of this phrase by the Court of Appeal in Carver v Saudi Arabian Airlines [1999] ICR 991 produced a result which was generally considered to be unsatisfactory. In that case the appellant had entered into a contract to work for Saudi Arabian Airways as a flight attendant, under a contract governed by Saudi Arabian law. She was then employed in India for four years, followed by six years based in London. She then resigned in circumstances which she alleged, before an ET, constituted constructive and unfair dismissal. The Court held that section 94(1) of the ERA would not apply if, at the time that the contract was concluded, the contract contemplated that the appellant would ordinarily work outside Great Britain. As, looking at the whole period of the contract, it was clear that the appellant's base could be nowhere but Jeddah, section 94(1) did not apply.

  17. The wording of section 196 of the ERA had another unfortunate effect. Council Directive 96/71/EC had the effect of requiring the United Kingdom to ensure that workers posted to them from other member states received the benefit of a number of the rights conferred by the ERA. The effect of section 196 was to deny them this benefit if they ordinarily worked outside Great Britain.

  18. The repeal of section 196 certainly removed the features of the legislation that had led to the decision in Carver and rendered it possible to interpret the ERA in a way which gives effect to the Posted Workers Directive. The Ministerial statement, to which Pill LJ referred, that of Mr. Ian McCartney MP, identified these two consequences of the repeal of section 196 as being objectives of the repeal. But it was not necessary to repeal the whole of section 196 to achieve these objectives, which could have been more clearly achieved by specific amendments to that section. As to the reason for the wholescale repeal of section 196, the Minister said this:

    Section 196 of the Employment Rights Act 1996 generally limits the operation of the Act to employees who ordinarily work in Great Britain. It is a complicated section resulting from several consolidations, some relating to legislation at least a quarter of a century old. After careful consideration we concluded that the complexities are unnecessary. International law and the principles of our domestic law are enough to ensure that our legislation does not apply in inappropriate circumstances.

  19. As the ET remarked, the Ministerial statement did not satisfy the criteria that render legitimate reference to Parliamentary material under the rule in Pepper v Hart [1993] AC 593. I would simply comment that the Minister was optimistic in concluding that principles of international and domestic law would be a satisfactory substitute for the provisions of section 196 in defining the ambit of application of the various Parts of the ERA as, in the context of Part X, this appeal demonstrates. It is time to turn to the manner in which this court in Serco addressed the application of that Part.

  20. The appellant in Serco was a British national domiciled in England, who had been employed by the respondent, a company registered in England, as a security supervisor responsible for airport security on Ascension Island. He was interviewed for his appointment in England, paid in pounds sterling in England and given a 'no tax' coding by the Inland Revenue. He sought to bring a claim for unfair dismissal contrary to section 94(1) of the ERA before an ET in England. The ET held that it had no jurisdiction to hear the complaint. The EAT allowed an appeal, holding that the yardstick in determining jurisdiction was the proximity of the employer to the United Kingdom. The employers appealed to the Court of Appeal.

  21. Pill LJ held at paragraph 8:

    In our judgment, consideration of this issue must start with the section of the 1996 Act creating the statutory right relied on. This case is concerned with the statutory right in section 94(1) of the 1996 Act not to be unfairly dismissed. Section 94(1) provides: "An employee has the right not to be unfairly dismissed by his employer." The question is: what are the employments covered by the section? The answer, in our judgment, is straightforward though it may be difficult to apply in some cases: employment in Great Britain.

  22. I can summarise the reasons that Pill LJ gave for this conclusion as follows:

    1. It was highly improbable that Parliament intended to confer this statutory right on all employees, wherever they worked, provided only that their employers could be served in Great Britain.

    2. The repeal of section 196 was intended to meet the requirements of the Posted Workers Directive and to reverse the effect of Carver v Saudi Arabian Airlines. It did not have the wider effect of removing all territorial restriction.

    3. Consideration of the Act as a whole did not suggest that it was intended to apply world wide.

    4. The governing principle was that all legislation was prima facie territorial. The general principle was that "an enactment applies to all persons and matters within the territory to which it extends, but not to any other persons or matters" Bennion on Statutory Interpretation 4th Edition p. 306.

  23. Having explained his reasoning, Pill LJ continued:

    22.

    We are in no doubt that the employment tribunal had no jurisdiction to consider a claim for unfair dismissal by the applicant. On the evidence he was not employed in Great Britain within the meaning of section 94(1) of the 1996 Act. He was employed on Ascension Island, however strong were his and his employers' British connection. The test applied by the appeal tribunal is not the correct one. Save where there is express provision to the contrary, the Act covers employment in Great Britain. That is its "legislative grasp".

  24. Pill LJ went on to reject alternative tests of the application of Section 94(1) of the ERA did the employment have a 'substantial connection' with the United Kingdom? Was the base from which the applicant was employed within the United Kingdom? Did the applicant ordinarily work in the United Kingdom?

  25. Pill LJ concluded with the following observation:

    28.

    We accept the need for a degree of flexibility in applying the test. The Posted Workers Directive provides protection in a jurisdiction visited. Protection in a jurisdiction from which there is a temporary absence is not necessarily excluded and the existence of the Directive points to the need for a degree of flexibility in deciding where the employment is. A dismissal during a single, short absence from Great Britain, for example, would not normally exclude the protection of the 1996 Act. In most cases it will not be difficult to decide whether the employment is in Great Britain; borderline cases will depend on an assessment of all the circumstances of the employment in the particular case. The residence of the parties may be relevant to where the employment is, but the emphasis must be upon the employment itself. That, we repeat, is the "legislative grasp" of the 1996 Act.

  26. This court in Serco has laid down the test that Part X of the ERA applies to 'employment in Great Britain'. Mr. Lawson has obtained permission to appeal that decision to the House of Lords and, in due course, the House of Lords will rule whether 'employment in Great Britain' is the correct definition of that to which Part X applies. In the meantime we are bound to apply that test. This is not a straightforward matter. The first task is to decide what this court meant in Serco by 'employment'.

  27. The ERA governs employment rights. 'Employment', as the Shorter Oxford English Dictionary confirms, is a word that has more than one meaning. In particular, it can mean 'the state of being employed' or 'that on which one is employed'. In the former meaning it describes a contractual relationship between employer and employee. When used in that meaning 'employment' has no location, any more than does the state of being married. One can sensibly answer the question 'where were you married?' but the question 'where are you married?' makes no sense. If the question is asked, 'where is your place of employment?' 'Employment' is given the latter meaning. The question is understood as being 'where do you carry on the work on which you are employed?'

  28. Section 230 of the ERA defines employment in relation to an employee as meaning 'employment under a contract of employment'. This does little to clarify the precise meaning of the word 'employment' in that Act. In general, however, where the ERA refers to 'employment' that word bears the meaning of the state of being employed rather than the work on which the employee is employed. It seems to me that in advancing the test of 'employment in Great Britain' Pill LJ was giving the word 'employment' the latter meaning, namely the work on which the employee is employed. The effect of Serco is to restrict protection from unfair dismissal to those employees who, under their contracts of employment, work in Great Britain. This seems clear from the statement in paragraph 28 of his judgment that a temporary absence from Great Britain will not necessarily remove an employee from the protection of the Act.

  29. There are problems with the approach adopted in Serco. That approach proceeds on the premise that the same test falls to be applied to the application of the Act as a whole, whereas this is by no means axiomatic. More particularly, the Posted Workers Directive, which deals essentially with conditions of employment and not with unfair dismissal, requires those parts of the ERA to which it does apply to protect employees who are working in this jurisdiction on a temporary basis. Thus at least part of the ERA must be read as governing relations between employer and employee in relation to a temporary period during which the employee is working in Great Britain. Serco does not recognise that parts of the ERA plainly only provide protection to employees while they are in Great Britain, whereas this is not true of other Parts, including Part X. The territorial test advanced in Serco does not accommodate the fact that two separate, though overlapping, questions fall to be considered:

    1. to what employment relationships does the relevant Part of the ERA apply and

    2. in what circumstances does that Part impose rights and obligations?

    These problems raise difficulties when attempting to apply the decision in Serco to the facts of this case.

    THE PRIMARY CASE ADVANCED ON BEHALF OF THE VETA PILOTS AND MR. PARROCK

  30. Mr. David Griffith-Jones QC, who appeared for all the pilots, strove valiantly to apply the Serco test in a manner that would bring not only the Veta pilots but also Mr. Parrock within the ambit of section 94(1). His primary submission was that any pilot whose tour of duty brought him to Great Britain satisfied the Serco test of being employed in Great Britain. If this was correct, international airlines all over the world would find themselves subject to the obligations of section 94(1) in respect of any of their aircrew who passed through Heathrow. The CPA pilots of whom Mr. Griffith-Jones acts would have had no reasons to abandon their claims under the ERA. Mr. Griffith-Jones' primary submission bordered on the absurd, as he came close to conceding in argument. I suspect that it was largely designed to cater for the particular position of Mr. Parrock. I have no hesitation in rejecting it. Pill LJ plainly did not consider that the application of section 94(1) to 'employment in Great Britain' brought within its ambit any employee whose work brought him within this jurisdiction, however transitory his visit might be. Mr. Griffith-Jones' primary submission cannot stand with the decision in Serco.

    THE VETA PILOTS' ALTERNATIVE CASE

  31. By way of alternative case, Mr. Griffith-Jones submitted that the EAT was wrong to conclude that the Veta pilots fell "right on the borderline" when applying the Serco test as to whether their employment was in Great Britain. The EAT should have determined that the Veta pilots were plainly employed in Great Britain, and we should rule accordingly. He contended that the factors which led the ET to conclude that the Veta pilots' employment had a "substantial connection" with Great Britain led equally to the conclusion that the Veta pilots were "employed in Great Britain". He relied particularly on the following analysis made by the ET.

  32. The ET considered the following question:

    Where do the Applicants carry out their work? Clearly, their work takes them to numerous jurisdictions, but it seems to us that as a matter of practicality and common sense the country where they are based, where they received their flying instructions and where each tour of duty begins and ends, must be regarded at least as their principal place of work.

  33. The ET applied this test to the CPA pilots and concluded that as the CPA pilots were based in Hong Kong, had tours of duty which began and ended in Hong Kong and were paid and managed in Hong Kong, there was no ground for reading the ERA as applying to them. The ET then turned to the position of the Veta pilots:

    In relation to the Veta Applicants, we take a quite different view. It is true that ultimate control over these pilots resided in Hong Kong and that all matters of payroll, grievances, disciplinary procedures, training programmes and so forth were conducted in Hong Kong. It is also common ground that the law of Hong Kong governed the contracts of these Applicants, along with all the others. This is, however, of little or no significance for the purposes of Issue (1). By s 204(1) of the 1996 Act, it is provided that:

    For the purposes of this Act it is immaterial whether the law which (apart from this Act) governs any person's employment is the law of the United Kingdom, or of a part of the United Kingdom, or not.

    Pursuant to the Basings Policy the Veta Applicants were required to resign their CPA employment and did so irrevocably. They were allocated new bases on the footing that they would remain there indefinitely. They were repatriated from Hong Kong and ceased to be resident there. Their tours of duty began and ended in London. Even if a flying cycle began elsewhere, the tour of duty began when they reported to London Heathrow for the purpose of being "positioned" to the port from which the flying cycle was to commence. They were paid a salary designed to reflect a lower cost of living than that experienced in Hong Kong. In short, the centre of their operations was, quite manifestly, London.

  34. Mr. Christopher Jeans QC appeared for all three employer companies. He challenged the ET's analysis. He submitted that the Veta pilots' connection with Great Britain was less significant than their connection with Hong Kong. More fundamentally he submitted that the burden was on the pilots to demonstrate that their employment was in Great Britain and that they could not do this simply on the basis that this was the base from which they began and ended their flying cycles.

    DISCUSSION

  35. The argument before us proceeded to a large extent on the premise that it must be possible to identify one particular country as the 'place of employment' of an airline pilot. I have concluded that this premise is unsound, applying the meaning that Pill LJ gave to that phrase, namely 'the place where the pilot works'. In this context there is an analogy to be drawn between the position of an air pilot and the position of a mariner. Section 196 provided that, subject to a number of qualifications, a person employed to work aboard a ship registered in the United Kingdom should be regarded as a person who under his contract ordinarily worked in Great Britain. This part of section 196 was replaced, on the repeal of that section, by complex provisions relating to mariners in section 199. The important point is that express provisions are required to cater for the question of whether and how the ERA applies to mariners. Absent express provisions I do not consider that mariners could fall within the Serco test.

  36. I have concluded that the same is true of international airline pilots. The place where they work cannot naturally be said to be Great Britain just because that is where their flight cycles begin and end. To bring such pilots within the Serco test, it is necessary to give a different meaning to 'employment in Great Britain' from that given to that phrase in Serco. One has to postulate that the 'place of employment' of a pilot means the place where he is based, or the place with which his employment has the closest connection. Such was the approach adopted by Lord Denning, MR, in Todd v British Midland Airways. But in Serco Pill LJ expressly stated that tests such as these were not the appropriate tests for the application of section 94(1) of the ERA.

  37. For these reasons, I would hold that, so long as Serco remains binding authority, section 94(1) of the ERA cannot apply to international airline pilots. It is open to question whether, as a matter of policy, this is a desirable result. The concept of unfair dismissal was first introduced by the Industrial Relations Act 1971. That Act appeared designed to regulate aspects of industrial relations in this country. The test of fairness for the purpose of section 94(1) is now set out in sections 98 to 106 of the ERA. Most of the specific examples of unfair dismissal in sections 99 to 106 involve a failure to comply with obligations that only apply when employees are working within Great Britain. The general provisions of section 98 require an employer to demonstrate that he has dismissed the employee for a legitimate reason and that it was fair so to do. The latter involves considering all the relevant circumstances including 'the size and administrative resources of the employer's undertaking'.

  38. If English law is to give protection of this kind to aircrew who fly all over the world, I am inclined to think that the justification for so doing is likely to depend on the fact that the airline which employs them has connections with this jurisdiction that makes English law the appropriate law for regulating the activities of the airline. Thus, for instance, it would not seem surprising if employment rights of pilots employed to fly British registered planes by British Airways, a company registered in and having its headquarters and principle place of business in this country, should be governed by English law.

  39. While, as a matter of policy, there may be a case for an interpretation of the ERA that extends to airline pilots' protection against unfair dismissal, I do not believe that the decision in Serco leaves it open to the court so to interpret section 94(1). If it were, and I were to attempt the exercise, I would, for the reasons that I have given, conclude that the section 94(1) does not extend to any of those who are employed, whether by Veta or USAB or CPA, to pilot Cathay Pacific aircraft. I would conclude that the law of Hong Kong was the appropriate law to regulate their employment. This reaction is strengthened by the fact that the contractual terms of employment of the pilots subject their contracts to provisions of Hong Kong Ordinances which govern employment rights. These include the right to personal accident insurance, statutory holidays, sickness allowance, and maternity leave. None of these matters is decisive, but they illustrate the fact that Hong Kong law is the law that one would naturally expect to apply to the employment regime of the pilots of a Hong Kong airline.

  40. For these reasons I would dismiss the appeal of the Veta pilots and allow Veta's cross appeal in relation to the decision reached by the EAT in respect of the Veta pilots' ERA claim.

    MR. PARROCK'S ALTERNATIVE CASE

  41. Mr. Griffith-Jones argued that, although Mr. Parrock's Base Area was North America, and his flight cycles normally began and ended in New York, Great Britain was his place of employment. This surprising assertion was founded on the contention that, because Mr. Parrock did not hold a "green card", the United States could be ruled out as a potential place of employment. This left a choice between Great Britain and Hong Kong. Because Mr. Parrock lived in this country and sometimes began and ended his flight cycles here, his position more closely resembled that of the Veta pilots than that of the CPA pilots. It followed that Great Britain should be treated as his place of employment.

  42. The fact that the New York authorities permit Mr. Parrock to begin and end his flight cycles in New York without possession of a green card certainly supports the proposition that Mr. Parrock's place of employment is not the United States. It does not, however, lead to the conclusion that his place of employment is Great Britain. It supports the conclusion that international pilots do not have a terrestrial place of employment if that phrase is treated as the place where they work. Whatever meaning is given to place of employment, so far as Mr. Parrock is concerned, Great Britain is not that place. My reasons for rejecting the Veta pilots' ERA appeal apply with even greater force in the case of Mr. Parrock. For these reasons I would dismiss his ERA appeal.

    THE CONTRACT CLAIMS

    Jurisdiction

  43. Article 3 of the Employment Tribunals Extension of Jurisdiction (England and Wales) Order 1994 provides:

    (1)

    Proceedings may be brought before an Employment Tribunal in respect of a claim of an employee for the recovery of damages or any other sum .... if:

    (a)

    the claim is one .... which a court in England and Wales would under the law for the time being in force have jurisdiction to hear and determine.

    The pilots contended that there were two bases upon which an English court would have jurisdiction to hear and determine their claims for breaches of their contracts of employment:

    1. Jurisdiction could be established by service within this country pursuant to the CPR.

    2. Jurisdiction could be established by service abroad pursuant to the CPR.

    I shall deal with each in turn.

    Service within this country

  44. CPR 6.5(6) provides that a foreign company may be validly served without the permission of the court in circumstances where, inter alia,

    1. it has "a place within the jurisdiction where the corporation carries on its activities"; or

    2. it has "a place of business within the jurisdiction".

    The CPA pilots, the Veta pilots and Mr. Parrock all argued that their respective employers carried on their activities at CPA's offices in London. The validity of this contention has not been challenged so far as the CPA pilots are concerned. CPA accepts that service could be effected on them at these offices and that, in consequence, the English Court would have jurisdiction over their breach of contract claims. Thus the jurisdiction of the ET over the CPA pilots' breach of contract claims is not disputed.

  45. Both the ET and the EAT held that Veta carried on its activities within this jurisdiction by employing and equipping aircrew and supplying their services to CPA and that Veta could be served at CPA's offices. Mr. Jeans challenged both conclusions. It seems to me that Veta's activity of supplying the services of pilots to CPA is carried on within this jurisdiction in as much as the Veta pilots are supplied to commence their flight cycles at Heathrow. I am less confident about the conclusion that CPA's offices were a place at which this activity was carried on. The evidence of precisely what took place at those offices is too scanty to lend firm support to that finding. However, in the light of my conclusions on the other issues in relation to this part of the appeal, the question is academic and I propose to take it no further.

    Service abroad

  46. CPR 6.20(6) provides that a claim form may be served out of the jurisdiction with the permission of the court if a claim is made in respect of a breach of contract committed within the jurisdiction. The employers accept that the pilots' claims are in respect of breaches of contract committed within the jurisdiction inasmuch as, if the pilots' dismissals were in breach of contract, the breaches were committed when the letters of dismissal were received by the pilots within the jurisdiction. The issue in respect of service abroad arises as a result of CPR 6.21(2A), which provides that the court will not give permission for such service unless satisfied that England and Wales is the proper place in which to bring the claim. The employers argued below that a Court of England and Wales would have no jurisdiction to hear and determine a claim requiring service out unless so satisfied. The ET accepted that this argument was valid. Mr. Griffith-Jones has challenged that finding. He contends that CPR 6.20(6) establishes jurisdiction and that CPR 6.21(2A) merely deals with the circumstances in which that jurisdiction will be exercised.

  47. I am inclined to think that Mr. Griffith-Jones is correct, but this is a wholly arid dispute in the light of the common ground that now exists in relation to forum non conveniens. In the circumstances of this case the question of whether England and Wales is the proper place to bring the contract claims is indistinguishable from the test to be applied when deciding whether those claims should be stayed on the grounds that England is not the appropriate forum in which to pursue them. Accordingly I propose to turn to consider that question.

    FORUM NON CONVENIENS

  48. The EAT held that the ET had jurisdiction, on the grounds of forum non conveniens, to decline to permit the pilots' contract claims to proceed by exercising the power to adjourn the hearing conferred by rule 15(7) of the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2001, which were there in force. The pilots initially challenged this finding, contending that this rule did not permit an indefinite stay of proceedings and that the ET had been under an absolute obligation to exercise its jurisdiction to hear their contract claims.

  49. The position has now changed. The 2001 Regulations were, with effect from 1 October 2004, replaced by the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004. Rule 10(h) adds to the power to adjourn conferred by the 2001 Regulations the power to stay "the whole or part of any proceedings". It is common ground that this court has the same power and that we should exercise it if we conclude that England is not an appropriate forum in which to bring the claims for breach of contract.

    DISCRETION

  50. The principles governing the stay of proceedings on the ground of "forum non conveniens" were laid down by the House of Lords in Spiliada Maritime Corps v Consulex Ltd [1987] AC 460. In essence the task of the court is to consider whether England or the foreign jurisdiction is clearly the more appropriate forum. The pilots' claims for breach of contract are advanced against Hong Kong employers under contracts of employment governed by Hong Kong law, in respect of which the Hong Kong Labour Tribunal has jurisdiction. That Tribunal is already seized of a number of claims from pilots, including Veta and CPA pilots. On the face of it Hong Kong is clearly the more appropriate forum for the breach of contract claims.

  51. Had ERA claims been proceeding before the ET, there would have been a strong case for arguing that this factor made the ET the more appropriate forum for the parallel claims for breach of contract. As I have concluded that no ERA claims lie, it follows that I would stay all breach of contract claims.

  52. For the reasons I have given, I would dismiss the pilots' appeals, allow Veta's cross-appeal, declare that the ET has no jurisdiction in respect of any of the ERA claims and direct that the breach of contract claims be stayed. Having regard, however, to the view of the majority, the Veta pilots' appeal will be allowed, Veta's cross-appeal dismissed and the Veta pilots' ERA and breach of contract claims remitted to the ET for determination. Mr. Parrock's and the CPA pilots' appeals will be dismissed.

    Lord Justice Waller

  53. I gratefully adopt the facts and identification of the issues set out in the judgment of the Master of the Rolls. Despite the powerful logic of his approach, I simply cannot accept the conclusion which he reaches in paragraph 37 that by virtue of the strict application of the Serco test Section 94(1) of the ERA cannot apply to international airline pilots. He questions whether that is a desirable result. I question whether it is a result to which we must be driven when applying the Serco test. This also causes me to question whether the conclusion he reaches on the Veta pilots contrary to the decision of the ET is itself correct.

  54. I start with the fact that by a decision of the Court of Appeal in Todd v British Midland Airways [1978] I.C.R. 959, this court did hold under the legislation then in force that an Industrial Tribunal did have jurisdiction to consider the claim of a pilot, employed by British Midland on their international flights and based in Great Britain, in relation to his dismissal for an incident that occurred in Tunis. The court was concerned to construe the then equivalent of Section 196 and rule on whether he was "ordinarily working outside Great Britain". They ruled that because "his base" was in England, he was to be treated as ordinarily working in England, and the Tribunal did have jurisdiction.

  55. The judgments in that case came under scrutiny in Carver. As quoted in Carver Lord Denning M.R. had said this:-

    But in other cases there is more difficulty. I refer particularly to the type of case we have here of the airline pilot. He is based in Great Britain, but ordinarily works for the greater part of his time on international flights overseas. Mr. Todd ordinarily worked for 53 per cent of his time outside Great Britain. In those circumstances, Megaw LJ and his colleagues departed from the literal words of paragraph 9(2) and adopted a liberal approach. They looked at the 'general legislative purpose' such as I described in Nothman v Barnet London Borough Council [1978] ICR 336, 344. The legislative purpose must have been that men who were based in Great Britain should be entitled to the protection of the [Trade Union and Labour Relations Act 1974], even though they ordinarily worked outside Great Britain. This court adopted what may be called the 'base' test. Megaw LJ said [1978] ICR 376, 387: 'It is, in the absence of special factors leading to a contrary conclusion, the country where his base is to be which is likely to be the place where he is to be treated as ordinarily working under his contract of employment.'

    The 'base' test, if I may say so, is a good sensible way of overcoming the literal meaning of the words 'ordinarily working' in the statute. It affords good guidelines for the tribunals which have to deal with so many of these cases. A man's base is the place where he should be regarded as ordinarily working, even though he may spend days, weeks or months working overseas. I would only make this suggestion. I do not think the terms of the contract help much in these cases. As a rule, there is no term in the contract about exactly where he is to work. You have to go by the conduct of the parties and the way they have been operating the contract. You have to find at the material time where the man is based.

  56. As Mantell LJ said in Carver [1001G-H] "It is this passage and particularly the last sentence which has formed the foundation for what has been called the "function" test being that for which Mr. Bean [acting for Mrs. Carver] has argued so persuasively in this court". But in Carver Mantell LJ continued by explaining that the other members of the court in Todd had used language consistent with the previous authorities which established the "contract test". The position in Carver was that Mrs. Carver had been employed by Saudi Arabian Airlines under a contract governed by Saudi law which obliged her to "be based in any location to which Saudi operates in or out of the Kingdom ...." She was trained in Jeddah, then transferred to Bombay her place of domicile, but after 4 years moved to London. The argument of Mr. Bean founded on a "function" test was that because Mrs. Carver was based in England at the time of her dismissal, the Tribunal had jurisdiction over her claim for wrongful dismissal. That was rejected by Mantell LJ in these words:-

    Like Sir David Cairns, I consider that Wilson's case and the Janata Bank case are binding upon us as they were upon the tribunal which was, therefore, obliged to consider the position as it appeared at the date of the contract. So viewed and "looking at the whole period of the contract" it is clear that the applicant's base could be nowhere other than Jeddah.

  57. No doubt was being cast upon the actual decision in Todd. But that decision was to be construed as a decision that by virtue of the application of the "contract test" i.e. the position when the contract of employment was made, and by virtue of that contract Mr. Todd's base being in England, he ordinarily worked in England and was thus "employed" in England.

  58. That decision strove to bring international airline pilots employed by British companies under contracts that "based" them in England within the protection of the relevant legislation. It did so although a contrast could have been drawn between the provisions of the Sex Discrimination Act 1975 which contained provisions specifically dealing with "employment on aircraft", as well as persons employed on ships, whereas the ERA did not. [See Section10 (1) and 10(2)(b) of the Sex Discrimination Act 1975].

  59. I find it difficult to contemplate that a pilot such as Mr. Todd, who by virtue of his contract was found to be ordinarily working in Great Britain under the previous legislation, and thus the subject of employment to which that legislation applied, is because of the repeal of the provisions of Section 196 now no longer employed here and now denied the benefits of the wrongful dismissal legislation.

  60. In Serco Pill LJ discussed Todd saying this :-

    Mr. Moffett submitted that, upon the repeal of section 196, a reversion to the "base" test is appropriate. We do not accept that submission. The test was irrevocably linked to the wording of section 196, and earlier legislation, and the concept of "ordinarily working". It is not appropriate to a statutory regime which does not include the section. Nor does it comply with the test as now enacted, that is, whether the employment is in Great Britain, thought the location of the employee's base may throw some light on where the employment is.

    We accept the need for a degree of flexibility in applying the test. The Posted Workers Directive provides protection in a jurisdiction visited. Protection in a jurisdiction from which there is a temporary absence is not necessarily excluded and the existence of the Directive points to the need for a degree of flexibility in deciding where the employment is. A dismissal during a single, short absence from Great Britain, for example, would not normally exclude the protection of the 1996 Act. In most cases it will not be difficult to decide whether the employment is in Great Britain; borderline cases will depend on an assessment of all the circumstances of the employment in the particular case. The residence of the parties may be relevant to where the employment is, but the emphasis must be upon the employment itself. That, we repeat, is the "legislative grasp" of the 1996 Act.

  61. My view is that the court in Serco would not have contemplated that Mr. Todd under the Serco test no longer had the protection of the unfair dismissal legislation. As far as international airline pilots employed under similar contracts to those under which Mr. Todd was employed even if the Serco test is the appropriate test, in my view that test must be construed with sufficient flexibility to bring their employment within the unfair dismissal provisions of the ERA. In other words under their contracts, their employment is in Great Britain, and as I would see it, in their cases their "base" throws a clear light on where they are employed.

  62. If that is so for pilots such as Mr. Todd, what then is the answer so far as the Veta pilots are concerned with their very strong connections with Hong Kong? The position of these pilots is clearly not straightforward as the EAT recognised. The EAT are also right in saying that because Serco had not been decided it is not possible to say that the ET actually applied the right test. But I would like to add my tribute to the ET's judgment in this case, and it seems to me that it must be possible to decide this issue by reference to their very detailed findings. The fact that the decision is difficult is not a basis for remitting the matter to a fresh tribunal to start again, and only if one was driven to do so by some lack of findings should it be contemplated that the further costs of remission should be incurred.

  63. Having formed the view that the place where the contract "bases" international airline pilots does throw light on whether they are under their contracts "employed in Great Britain", it seems to me that the findings of the ET lead to the conclusion that the international airline pilots under their contracts with Veta are also employed in Great Britain. That I should hasten to say is not because they are employed by a company separate from Cathay Pacific, it is simply because the contract requires them to live and work in the way it does.

  64. I will quote again paragraph 21 of the ET decision:-

    Where do the Applicants carry out their work? Clearly, their work takes them to numerous jurisdictions, but it seems to us that as a matter of practicality and common sense the country where they are based, where they receive their flying instructions and where each tour of duty begins and ends, must be regarded at least as their principal place of work.

  65. That seems to me to be so close to the Serco test with that degree of flexibility, which Pill LJ foresaw as necessary, to make the conclusions of the ET ones we should treat with the greatest of respect. Those conclusions are set out by the Master of the Rolls, but I will quote again the nub of them:-

    Pursuant to the Basings Policy the Veta Applicants were required to resign their CPA employment and did so irrevocably. They were allocated new bases on the footing that they would remain there indefinitely. They were repatriated from Hong Kong and ceased to be resident there. Their tours of duty began and ended in London. Even if a flying cycle began elsewhere, the tour of duty began when they reported to London Heathrow for the purpose of being "positioned" to the port from which the flying cycle was to commence. They were paid a salary designed to reflect a lower cost of living than that experienced in Hong Kong. In short, the centre of their operations was, quite manifestly, London.

  66. I think the ET were entitled to come to the conclusion they did, and would have come to that conclusion even if the decision in Serco had predated their decision.

  67. To test the result I have finally stood back and posed to myself this question in the context of considering the position of all the pilots involved in the appeal - were some Cathay Pacific pilots employed in Great Britain? I think on the ET's findings the natural answer to that question is that those based by their contracts in England, i.e. the Veta pilots, were.

  68. I would accordingly respectfully differ from the conclusion reached by the Master of the Rolls on the Veta pilots.

  69. It would also follow that, as paragraph 51 of the Master of the Rolls judgment recognises, if the ET has jurisdiction in relation to the unfair dismissal claims, the ET would on that basis be the appropriate forum to hear the breach of contract claims of the Veta pilots. Otherwise I agree with the Master of the Rolls judgment on the service abroad aspect.

    Lord Justice Maurice Kay

  70. I have come to the same conclusion as Waller LJ and for substantially the same reasons. The Serco test is the one which we must apply. It is easy to state "employment in great Britain" but not always easy to apply. As Pill LJ said (at paragraph 28), it calls for

    an assessment of all the circumstances of the employment in a particular case.

  71. Whilst the Court rejected a reversion to the "base" test as the test, it acknowledged that "it may throw some light on where the employment is". In my judgment, it is particularly likely to do so where the task which is the reason for the employment is inherently mobile and international. The factors which are said to pull in the opposite direction in the present case for example, training and payment in Hong Kong are relevant but, in my view, far from determinative. I pose a hypothetical example. Assume that the cabin crew on flights from London to Hong Kong are employed in all other respects on the same basis as the Veta pilots but their training and payment take place in England. I would find it to be unacceptably anomalous if they were considered to be employed in Great Britain because of the weight accorded to those factors but their pilot colleagues on the flight deck were considered not to be.

  72. On one level, it may be that the different approaches to a case such as this depend on whether the perspective is employer centric or employee centric. Hence the different emphases of the rival submissions in the present case. However, when applying the Serco test, it is apt to keep in mind the context, namely the statutory conferral of employment protection and rights. They are not unlimited but nor are they to be approached in a more restrictive way than the statute demands. The limitation is now "employment in Great Britain", but, as Pill LJ said (paragraph 28), there is a "need for a degree of flexibility in applying the test". In my judgment, the present appeals illustrate the boundaries of that flexibility. I have no difficulty in concluding that the CPA pilots and Mr. Parrock are not employed in Great Britain. However, the circumstances of the Veta pilots are materially different, for the reasons given by Waller LJ. I, too, conclude that if the Employment Tribunal had applied the Serco test, it would have found them to have satisfied it. I respectfully disagree with the Master of the Rolls when he interprets the Serco test as axiomatically excluding international airline pilots from the protection of section 94(1) of the ERA. Moreover, I would find that to be a regrettable result with unfortunate consequences for a significant number of other employees in a labour market which is increasingly globalised and whose work is highly mobile. Lines have to be drawn but where employment has the characteristics referred to in paragraph 21 of the ET decision (set out in the judgment of the Master of the Rolls and Waller LJ), I view it as included rather than excluded by the Serco test. This would have the consequences for the Veta pilots stated in the final paragraph of the judgment of Waller LJ. Apart from that, I too agree with the Master of the Rolls about the service out of the jurisdiction.


Cases

Lawson v Serco Ltd (2004) EWCA Civ 12

Todd v British Midland Airways [1978] ICR 959

Carver v Saudi Arabian Airlines [1999] ICR 991

Pepper v Hart [1993] AC 593

Spiliada Maritime Corps v Consulex Ltd [1987] AC 460

Legislations

Employment Rights Act 1996: s.94, s.196, s.230

Council Directive 96/71/EC

Employment Tribunals Extension of Jurisdiction (England and Wales) Order 1994: Art.3

Authors and other references

Bennion, Statutory Interpretation, 4th Ed

Shorter Oxford English Dictionary

Representations

David Griffith-Jones QC & Joanna Heal (instructed by Messrs Simpson Millar) for the Appellants

Christopher Jeans QC & Anya Proops (instructed by Messrs Eversheds) for the Respondents


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