Gent Ltd v Davies [1993] UKEAT 354_92_0402

EAT

Gent Ltd v Davies

[1993] UKEAT 354_92_0402 · 1993-02-04

JUDGE HARGROVE :

This is a case in which we have a very great sympathy with the Industrial Tribunal. Two cases of considerable importance which directly impinged upon their decision were reported in the May and August of last year. The Industrial Tribunal had spent a considerable amount of time upon this case which they dealt with in two parts and gave judgment in March of last year. Had those two cases been reported earlier, we have no doubt at all that a totally different approach would have been taken, certainly in the manner in which the Judgment was formulated, than that which was adopted eventually.

The background to the case is that after twenty two years of service Mr Davies was made redundant by the Appellants on 3 January 1991. While the employers made out the case for redundancy the Industrial Tribunal held that the redundancy had been handled unfairly and he had thereby been unfairly dismissed. The decision as to liability was dealt with at one stage and no appeal occurs in relation to that. There was a second hearing some time later dealing with the question of compensation and I intend to call that the compensation hearing.

At that hearing the Tribunal decided to award sums under various headings. First of all the loss of statutory rights at £100, loss of future earnings which was taken at £2,500 pa. A multiplier of 9 was used giving a figure of £22,500. The loss of preference share rights giving a 20% discount produced the sum of £1,345 and loss of pension was calculated at £3,404 giving a total sum of £27,349. The statutory maximum was applied at which obtained at the time and compensation was therefore fixed at £8,925.

The first objection taken by the Appellants is to the figure of £22,500 as loss of earnings. Put shortly it is said that the Tribunal erred because the calculation failed to give any discount on a percentage basis to represent the chance of the employee losing his employment in any event. The two-stage test is set out in Red Bank Manufacturing v Meadows

[1992] IRLR 209

and again précising that approach, it is said that there are two stages; first if proper procedures had been followed and if consultation had taken place - would it have resulted in an offer of employment? Secondly, if an offer of employment would have resulted, what would that employment have been and what wage would have been paid in respect of it?

That matter was developed by this Court. In the case of RAO v Civil Aviation Authority

[1992] ICR 503

the passage of importance occurs at pages 515/516. This sets forth the approach which ought to be taken to the situation which was facing the Tribunal here:

"If an industrial tribunal decides that although the dismissal was unfair the employee would undoubtedly have been dismissed on the same date or within a very short time thereafter, there will be no need to make a complicated assessment of compensation and a week or two weeks' wages will be fair and appropriate. However in most cases a tribunal will need to calculate compensation for loss in accordance with the principles under the statute. It may in some cases think that it is just and equitable to make no award. In others there may be a diminution under section 74(6) in which case the full award will be calculated before being reduced. That final figure £X is the amount of the award which the employee will receive if he was unfairly dismissed. Where the unfairness is upon the failure to comply with Iceland Frozen Foods Ltd v Jones [1983] ICR 17 , it will usually be that an industrial tribunal will be satisfied that the employment would have continued, but for how long? If the unfairness arises from a failure to comply with the guidance in Burchell , then in some cases a tribunal might feel that further investigation might have ensured continuation in employment or it might not. Such investigations might have confirmed the soundness of the reason for dismissal. Likewise in a breach of procedural rules in some cases, there may be some degree of uncertainty. These cases of "uncertainty" arise from the notion that if the proper practice had been carried through the applicant would have been dismissed, and fairly dismissed. As a result he/she would have received nothing. What then is the chance of that applicant recovering £X or nothing? That is the Polkey calculation. If, as in this case, an industrial tribunal takes the view that there is only a 20 per cent chance of recovering £X then so to find is not to recalculate £X but to assess the likelihood of the applicant recovering £X rather than nothing. There is no double penalty."

In this case the problem arises from the manner in which this tribunal reached its conclusions. At paragraph 7 the reasoning is set forth:

"With regard to future loss of earnings the Tribunal, having heard the evidence of both parties, took the view that had the respondents behaved reasonably as was set out in the original decision and offered the other positions available to the applicant, then he would have been likely to have obtained one or other of them, namely either that of a Sales Service Engineer or of a Stockist Representative. The Tribunal accepted that his original job as a Service Supervisor was redundant and he would not have retained this."

They then turn to the calculation of the sums which he would have received had he been so employed.

It is contended on behalf of the Appellants first of all that the very fact that there is set out in the Judgment the expression "likely" indicates that there must have been a degree of uncertainty about whether the appointment would have been made and it is therefore urged that that degree of uncertainty of less than 100% ought to have been reflected in a percentage finding. It is also drawn to our attention that it is difficult to say that there was certainty in this case of employment had the proper procedures gone through. In the light of the evidence given by those involved in the personnel function of the Appellant Company, who had expressed the view to the Tribunal, the Respondent was not suitable for this particular group of employment. That is not to say that the Tribunal made any finding that he was not suitable and indeed that is not what is urged by the Appellant, what is said is that taking account of the fact that those views were held, there must have been some doubt whether even if all the procedures had continued properly, he would still have obtained a post.

The Respondents contend that this is really a matter of fact, that the Tribunal have by making the award they have, obviously applied both tests properly and have also impliedly reached the conclusion that there is certainty that he would get this appointment and that in the event there is no deviation from the test applied both in Red Bank and in RAO .

We are of the view that unfortunately the manner in which the Tribunal has expressed itself does not conform with the tests as laid down in Red Bank and RAO and therefore the decision is in that respect defective.

There are further objections to this decision. It is apparent that there are at least two major miscalculations. How these have come about it is difficult to say, suffice it for our purposes to note that they did occur and they are material. The first is that in calculating the loss the amount of commission which the Respondent was receiving was put at £1,900. In fact it is plain, and plain upon the figures put before the Industrial Tribunal, that the correct figure was some £3,576.17 upon the basis of 10 months' receipt. Re-calculating that sum for a twelve month period, the correct figure to be deducted would have been one of £4,291.40.

The second area of error occurs because the Tribunal overlooked the fact that there should have been deducted from the award the sum which had been paid in lieu of notice to the Respondent. That sum was in excess of £4,000 and does not appear anywhere in the calculations.

A third objection to the calculation occurs, according to that view adopted by the Appellant, that a multiplier of 9 was taken in working out the number of years of loss of wages. It has been urged upon us that to take a 9 year figure is unprecedented because that figure is supposed to represent a period of time during which there would have been a divergence between what the Respondent ought to have earned had he been properly appointed and that which he was earning in the post which he did eventually manage to obtain. It is said that that must be wrong because of two things. First, because it is contrary to the evidence in that it was accepted that his commission was steadily climbing - and that is a finding of the Tribunal - and secondly because it is said that a 9 year period is an impossibility of calculation.

We are quite certain it is not the calculation we would have made but nonetheless we consider it to be within the discretion of a Tribunal to make that type of calculation. In all the circumstances therefore, this was a decision which was, we regret to say, fatally flawed. We have considered whether or not it should go back to the same Tribunal but there has, so we are told, been alterations in the position of the Respondent and in the light of that and in the light of the fact that we are now looking at a wholly different matrix of circumstances, we are of the view that in order that justice shall not only be done but be seen to be done, we intend to remit this for hearing before a different Tribunal.

Before leaving this matter I am urged by both my colleagues (and it is a view with which I entirely agree) to place this before both parties. This is a matter which has now gone on for many years. The delay has been considerable. We do not put that at anybody's door, we merely say that it has occurred. This is a matter which obviously ought to be terminated as soon as possible and we would urge upon the parties as strongly as we can, the need in the interests of not only good sense but the restoration of a little peace, that this matter should be if possible considered by both parties with a view to avoiding any further protracted litigation. That is merely a suggestion of course. It has no force whatsoever but I may say it is a view that we certainly take.