Darr & Anor v LRC Products Ltd [1992] UKEAT 442_90_1612

EAT

Darr & Anor v LRC Products Ltd

[1992] UKEAT 442_90_1612 · 1992-10-16

HIS HONOUR JUDGE HULL QC: This is the unanimous decision of the Employment Appeal Tribunal.

The Appellants appeal against the Decision of the Industrial Tribunal sitting at London (North) on 15th June 1990 to make no award of compensation on the Appellants' application in respect of unfair dismissal by the Respondent in April 1989. On 16th October 1989 the Industrial Tribunal held that the Appellants had been unfairly selected for redundancy. On 16th November 1989 the Industrial Tribunal made an order that the Appellants should be re-engaged within 14 days. That order was not complied with and the Appellants accordingly applied for compensation. We are concerned only with the hearing of this application, namely the hearing on 15th June 1990; we have no copy of the Reasons given by the Industrial Tribunal for its decisions at the earlier hearings.

On the face of it the Appellants were entitled under S.72 of the Employment Protection (Consolidation) Act 1978 to a basic award calculated in accordance with S.73, and a compensatory award calculated in accordance with S.74; and also to an additional award under S.71(2); the last being, of course, in respect of the failure to re-engage the Appellants under the Industrial Tribunal's Order. However, the Respondent had made payments to each of the Appellants. We know nothing about these severance payments, as they were called, apart from what appears in the Tribunal's decision; in particular we do not know when and in what circumstances they were made, what discussions preceded them, and what documents there are concerned with these payments. We do not know what evidence material to these matters was before the Industrial Tribunal on 15th June, or at the previous hearings, nor do we know what submissions were made to the Industrial Tribunal. We have been told very frankly by Mr Linden, who appeared for the Appellants before the Industrial Tribunal, that he did not address to the Industrial Tribunal all the arguments which he put before us, nor did he cite all the authorities to which we have been referred. Apparently the Industrial Tribunal took the view that the question of compensation could be dealt with very shortly.

The Industrial Tribunal gave reasons for its decision as follows:

"2. We have now heard further representations and evidence and the conclusion we have reached is that there should be no further order. It is accepted by all concerned that the Applicants are not entitled to any basic awards as these are wiped out by the redundancy payments they have received. We were told, and accept, that they received sums approaching £10,000 in addition to the statutory redundancy pay to which they were entitled, together with 10 weeks' notice money. The ex gratia payments to each of them were £8,762.74. We take the view that the Applicants cannot have the benefit of their notice money and compensation for loss of earnings for that period, as this would duplicate any compensation awarded. Thus what the Respondents said about having paid the Applicants over £10,000 - nearer to £11,000, in addition to the statutory redundancy pay, is correct. It is accepted that the amounts paid to the Applicants are more than we could have awarded within our jurisdiction by way of compensatory awards. We go further than that and say that it is more than the award we were inclined to make of 13 weeks' money with a maximum weekly amount of £172 which comes to £2,236. We take into account all the relevant factors, including the evidence given by the Applicants with regard to their search for another job. We find on the facts, on the balance of probabilities, that they have not carried out their search as diligently as they might have done. We accept that their ages are against them in being considered for potential jobs. However, they were both, in our view, restrictive in their search and were not pursuing it with as much enthusiasm as they were capable of doing.

3. Having regard to all the circumstances, we take the view that the Applicants are not entitled to any award because any such award as we could have made by way of compensatory award or in respect of the Respondents' refusal to re-engage the Applicants is more than amply covered by the ex gratia payments the Respondents have made to the Applicants."

On behalf of the Appellants Mr Linden makes a number of points. First and foremost, he says that the Industrial Tribunal failed to give proper reasons for its decision in accordance with Rule 9(3) of the Schedule to the Industrial Tribunal (Rules of Procedure) Regulations 1985. This, he says, prevents the Appellants and indeed the Employment Appeal Tribunal from seeing whether the Industrial Tribunal approached its task correctly, and dealt with the severance payments in the way the law requires.

Mr Linden submits that it was the duty of the Industrial Tribunal to begin by calculating the amount of the compensatory award without reference to the severance payments. This calculation would of course have to be based on the Appellants' loss of earnings over an appropriate period, and the determination of the appropriate period would involve the Industrial Tribunal reaching a decision on the effect of any failure by the Appellants to mitigate their loss by actively seeking suitable alternative employment. Next, the part of the severance payment which was not already appropriated to the basic award and to pay in lieu of notice must be deducted. If the Industrial Tribunal concluded that a very long period of unemployment were to be anticipated, and that it was just to compensate for a substantial part of this notwithstanding the Appellants' failure to use their best endeavours to find suitable alternative employment, then the entire balance of the severance payments might be absorbed under this exercise, leaving nothing for the additional award. What the Industrial Tribunal appear to have done, says Mr Linden, was to say, "Well, our award of compensation would in any event have been limited to the statutory maximum of £8,950, and that is more than extinguished by the £10,000 or £11,000 which was paid in addition to the redundancy payment to each appellant".

Walter Braund (London) Ltd v. Murray

[1991] ICR 327

makes it plain that the correct method of calculating the compensatory award is to arrive at the just and equitable view of the applicant's loss, to deduct all sums such as the amount referable to the applicant's contribution to his own dismissal, and to apply the statutory maximum to the net sum which results. Clearly the same process must apply where the amount of the applicant's loss is reduced by a severance payment by the employer.

Meek v. City of Birmingham District Council

[1987] IRLR 250

was a case very different on its facts: but it is authority for the general proposition that the Industrial Tribunal's decision should give a sufficient account of the facts and of the reasoning of the Industrial Tribunal to enable an appellate court to see whether any question of law arises.

We have come to the conclusion that Mr Linden is correct is this submission and that the written reasons of the Industrial Tribunal are insufficient to show what award they were minded to make as a compensatory award, how the severance payments were taken into consideration and how the statutory maximum applied to the sums at which the Industrial Tribunal arrived. It appears to us that the Industrial Tribunal may very well have made the error which the Appellants fear, and applied the two necessary calculations in the wrong order. In any event the Appellants are not able to say what compensatory award the Industrial Tribunal would have considered appropriate and how it was arrived at. They are unable to see, and this Appeal Tribunal is unable to see, whether the Industrial Tribunal correctly applied its minds by making the necessary calculations in the correct way. In our judgment, this case must therefore be remitted to the same Industrial Tribunal in order that it may carry out the necessary calculations and give proper reasons for its decision.

Supposing that the necessary calculations show that there is a surplus, ie that the severance payments were more than enough to satisfy the compensatory awards, then Mr Linden submitted that no part of this surplus should be deducted from the additional award; S.71(2) required the Industrial Tribunal to award between 13 and 26 weeks' pay by way of additional award. However, the existence of the surplus was a factor to be considered in deciding where, in the permitted range of between 13 and 26 weeks, the additional award should fall. Mr Linden referred to Mabirizi v. National Hospital for Nervous Diseases

[1990] ICR 281

. The additional award, said Mr Linden, is in respect of the refusal of re-engagement ordered by the Industrial Tribunal, rather than the dismissal itself; it is obligatory that it should be made; and there should be no automatic deduction of the surplus, to which we have referred, or any part of it.

Mr Kempster, for the Respondents, contended that there was no reason why the surplus should not be deducted from the additional award, even if this were the minimum 13 weeks' pay: the language of S.71(2), requiring the Industrial Tribunal to make an additional award, was similar to that of S.68(2), referring to the basic award and the compensatory award, and it was well settled that severance payments would go to reduce those.

In Mabirizi this Tribunal, presided over by Knox J, observed at p.289B -

"The additional award is by definition something which is awarded over and above the compensatory award and it follows that it is not intended to cover something which is adequately and properly covered by the compensatory award. We respectfully agree that the subject matter of compensation is the loss of reinstatement or re-engagement, but the compensation is not intended to be a precisely calculated substitute for financial loss but rather a general solatium to be arrived at by fixing the appropriate point on the scale which Parliament has fixed, disregarding irrelevant exceptions, between 13 and 26 weeks' pay. It is self-evident that the additional award cannot be the product of a precise loss in individual cases but rather a determination of the point where within the obligatory range the award should be fixed and that in our view should depend on all the merits of the case.

An employer's conduct is the most obvious factor to be taken into account and a finding of a deliberate refusal without any reasoned justification to support it will doubtless in most cases warrant an award at or near the top of the scale, but Parliament has given industrial tribunals a very wide discretion within fairly narrow outer limits and we deprecate attempts to define how that discretion should be exercised beyond what is contained in Morganite Electrical Carbon Ltd v. Donne

[1988] ICR 18

A little later the judgment added -

"... We consider that it would in principle be wrong to use as a factor in fixing an additional award something which was properly and adequately covered by the compensatory award. ..."

From this it is apparent that factors other than financial loss are material to the determination of the appropriate sum for the additional award.

Both counsel referred to Chelsea Football Club & Athletic Co Ltd v. Heath

[1981] IRLR 73

where the Employment Appeal Tribunal, presided over by Slynn J, considered the question whether an ex gratia payment should be deducted from the basic award, so as extinguish it if the payment were sufficient. As a matter of law, this Tribunal decided that such a deduction was permissible. After considering the straightforward case in which the amount of the ex gratia payment is specifically referable to the basic award, the Tribunal continued at paragraph 17 (p.75) -

"The case is more difficult where a general payment is made and in each individual case it is a question of construction as to whether the payment made is to be taken to have included any rights which the employee might have under the provisions of the statute. If the employer makes a general payment - particularly if it is made ex gratia - he will risk the argument that he has not paid something which is referable to the liability for the basic award should he be held to have dismissed unfairly. But it seems to us that there could be cases in which a payment is made and which is, as a matter of construction or of fact, to be taken as including such rights as the employee may have under the statute, even if entitlement to the monies is initially denied by the employer."

As we have said, we do not know anything about the circumstances of the severance payments, and it is apparent from the passage which we have just cited that the evidence concerning these matters may well be of critical importance to the questions whether the severance payments were made by reference to the possible additional award, and whether the additional award is to be reduced by reference to, or extinguished by the simple deduction of, any surplus from the severance payments if these extinguish the compensatory awards. We do not know whether there is, when the Industrial Tribunal has considered the evidence, made the necessary findings of fact and carried out the appropriate calculations with regard to the compensatory awards, going to be any surplus at all. In deference to the arguments addressed to us we would express the view (which in the circumstances must be obiter) that we can see no reason in law why an employer should not make a payment to a dismissed employee on the express basis that it is offered and accepted in satisfaction of, or in contribution towards, any additional award under S.71(2) if such an award should in due course be made: and whatever the evidential difficulties it may be possible to establish that such a result follows by implication, from analysis of the facts.

As we have already indicated, this case must be remitted for further consideration by the Industrial Tribunal, and the question whether the additional award which the Industrial Tribunal will make is to be reduced by or, as the case may be is satisfied by, the amount of any surplus from the severance payments is one which the Industrial Tribunal will have to consider in the light of the findings it has already made, the further calculations it will now have to make, and any further evidence and submissions addressed to it.