Red Bank Manufacturing v Meadows [1991] UKEAT 567_90_1411

EAT

Red Bank Manufacturing v Meadows

[1991] UKEAT 567_90_1411 · 1991-11-14

MR JUSTICE TUCKER: This is an appeal by employers from a decision of an Industrial Tribunal held at Leicester on 6 August 1990 whereby the applicant (the Respondent to this appeal) was awarded the sum of £3,918.78. The same Tribunal had on an earlier occasion decided that the Respondent had been unfairly dismissed. We heard an appeal against that decision and dismissed it. The finding of unfair dismissal accordingly stands. The present appeal relates solely to the question of the calculation of compensation.

The appeal is on the following questions of law, namely whether the Tribunal failed to deal in the decision with arguments addressed to it, and to make any of the findings of fact required to deal with them, or to give any reasons for rejecting them. The arguments were these: firstly, that a fair procedure would have made no difference to the outcome, in that no job would have been found for the Respondent, in which case the award would have been nil, or alternatively that a percentage reduction in the award should be made to reflect the chances that the outcome would have been the same. Secondly, that it being clear that the Respondent's old job had disappeared through redundancy, his loss of earnings could at most be the difference between his actual earnings in his new job and what he would have earned in any job which he might have been offered and accepted by the Appellants. The Tribunal based its calculations on the difference between actual earnings since dismissal and what the redundant job would have paid.

The Appellants are manufacturers of terra cotta and bricks. The Respondent started to work for them in 1957, and had various staff jobs. By 1989 he was responsible for production auditing. He had taken that job in November 1988 by transfer from the wages department. It was common ground, as the Tribunal found, that the new job constituted, effectively, a demotion, although he was paid the same wage. In 1989, redundancies occurred in the Appellants' work force - seventy in June and a further forty-three in August. The Respondent had received an assurance from the Works Director Mr Russell that he still had a job. But on 7 August he was dismissed.

The reason for the finding that the dismissal was unfair, was that there had been no prior warning or consultation with the Respondent. This was contrary to the provisions of paragraph 46 of the Industrial Relations Code of Practice.

The Tribunal were referred to the decision of the House of Lords in Polkey v. A E Dayton Services Ltd

(1988) ICR 142

. On the issue of liability, Counsel for the Appellants concedes that the Tribunal gave themselves an impeccable direction on the law. They reminded themselves of the following passage in the speech of the Lord Chancellor, which occurs at p.153E of the Report:

"If the employer could reasonably have concluded in the light of the circumstances known to him at the time of dismissal that consultation or warning would be utterly useless he might well act reasonably even if he did not observe the provisions of the code."

The Tribunal then said this at para.21 of their earlier decision:

"We are not satisfied on the evidence before us that consultation or warning would have been useless. Mr Meadows' evidence was clear and unequivocal, he told us he would have considered any job had one been offered to him as an alternative to dismissal. He told us that the company had been his life, which after 32 years did not surprise us. It may be that had there been consultation or even discussion prior to dismissal the employers reluctance to consider the applicant for a junior position may have been dispelled. We do not know and it is not for us to speculate what might or might not have occurred".

We have no doubt that the Tribunal had those observations still in mind when they came to consider the question of compensation. Unfortunately, however, they do not make any express reference to the further consideration which ought to have been given to the second stage of the exercise, as referred to by Lord Bridge in his speech in Polkey at p.163D:-

"If it is held that taking the appropriate steps which the employer failed to take before dismissing the employee would not have affected the outcome, this will often lead to the result that the employee, though unfairly dismissed, will recover no compensation or, in the case of redundancy, no compensation in excess of his redundancy payment. Thus in Earl v. Slater & Wheeler (Airlyne) Ltd (1972) ICR 508 the employee was held to have been unfairly dismissed, but nevertheless lost his appeal to the National Industrial Relations Court because his misconduct disentitled him to any award of compensation, which was at that time the only effective remedy. But in spite of this the application of the so-called British Labour Pump principle (1979) ICR 347 tends to distort the operation of the employment protection in two important ways. First, as was pointed out by Browne-Wilkinson J in Sillifant's case, if the industrial tribunal, in considering whether the employer who had omitted to take the appropriate procedural steps acted reasonably or unreasonably in treating his reason as a sufficient reason for dismissal, poses for itself the hypothetical question whether the result would have been any different if the appropriate procedural steps had been taken, it can only answer that question on a balance of probabilities. Accordingly, applying the British Labour Pump principle, if the answer is that it probably would have made no difference, the employee's unfair dismissal claim fails. But if the likely effect of taking the appropriate procedural steps is only considered, as it should be, at the stage of assessing compensation, the position is quite different. In that situation, as Browne-Wilkinson J. put in Sillifant's case, at p.96:

`There is no need for an `all or nothing' decision. If the industrial tribunal thinks there is a doubt whether or not the employee would have been dismissed, this element can be reflected by reducing the normal amount of compensation by a percentage representing the chance that the employee would still have lost his employment.'"

We do not ignore the fact that the Tribunal did state at para.6 of their second decision that they had taken into account all the evidence and documents, and that they said that the fact that they did not mention particular matters did not mean that they had overlooked them. They also stated that the figures which they arrived at and the manner of calculation set out was taken from the evidence. They also refer in para.7 to the argument advanced by the Appellants' Solicitor that no award should be made, alternatively that any loss should be extremely limited and should in any event stop following rejection of an offer of employment.

The Tribunal expressly dealt with the specific questions of the Respondent's duty to mitigate his loss and with his Solicitor's argument for an open-ended loss.

However, it seems to us that since the decision in Polkey it is necessary for a Tribunal when calculating the amount to be awarded for compensation to ask itself this two stage question. If the proper procedure had been followed, and if consultation had taken place, would it have resulted in an offer of employment? This was the question to which the Tribunal did address themselves in the earlier hearing, and to which they gave the answer that it might have done so. What the Tribunal failed to do, and what in our view they should have done, was to go on to consider first what that employment would have been, and second what wage would have been paid in respect of it.

In considering the first of those questions, it would not have appeared to have been open to the Tribunal to conclude that the employment which might have been offered was the Respondent's old job, since that had disappeared through redundancy.

It is not clear from the second decision whether or not the Tribunal did apply the Polkey principles to their consideration of the question of calculation of quantum. While of course Tribunals are not required when giving the reasons for their decisions to deal with all the arguments put before them, we feel in view of the Appellants' Counsel's submissions that it is unsatisfactory in the circumstances of the present case that a fundamental question such as this should not have been seen to be expressly addressed.

Furthermore, we think that the Industrial Tribunal should have made it clear whether or not they considered making a percentage reduction in the award to reflect the chances that the outcome might have been the same even if consultation had taken place.

Counsel for the Respondent submits that there is, implicit in the reasons given by the Tribunal, an underlying analysis based on past practice that the Respondent would have been offered a job at his old wage, and that it is not beyond the bounds of feasibility that that is what would have happened. We are unable to agree with this submission. It seems to us much more likely that there were no actual vacancies. We have the impression from the Tribunal's reasons that they took the Respondent's old wage as the starting point for their calculations, without considering what job would have been available to be offered to justify it.

For these reasons we are of the view that this decision cannot stand, and that the matter must be remitted to the same Industrial Tribunal for further consideration as to the appropriate award.