Smiths Industries Hydraulics Co Ltd v Allsop [1995] UKEAT 1056_93_1805

EAT

Smiths Industries Hydraulics Co Ltd v Allsop

[1995] UKEAT 1056_93_1805 · 1995-05-18

JUDGE HULL QC:

This is an appeal to us by Smiths Industries Hydraulics Co Ltd, which, as its name suggests, is part of the well known Smiths Industries Group. They appeal against a decision in favour of a professional engineer, Mr Allsop who was first employed by them as a production engineer on 9 March 1987. He continued with them until he was abruptly dismissed (I hope that is not an unfair expression) on 3 November 1992.

What had happened was that there a compelling need to reduce staff and it was decided that the Production Engineers Department was one of the places where reductions could be made and by a process, which we are not greatly concerned with, it was decided that Mr Allsop and one of the other production engineers should be made redundant. There was a very short notice of this. He was summoned on one day and (I think it was only the next day) when he returned for such discussion as was considered appropriate he, on this occasion, said that he would rather not work out his notice and stay with the firm while enquiries were made of other companies within this very large group to see whether a post could be found for him; and he went straight away.

He presented his application to the Industrial Tribunal on 16 December 1992, complaining of unfair selection for redundancy, unfair dismissal and other matters which really added up to the same complaint and the Respondents entered their Notice of Appearance saying that they had not behaved unfairly.

The Industrial Tribunal spent three days enquiring into the question of unfairness. They sat at Reading under the chairmanship of Mr Jenkinson with two industrial members and they found that Mr Allsop had been unfairly dismissed for redundancy. They found that there was a redundancy situation. It was a genuine redundancy but nonetheless, he had been unfairly dismissed.

When he was told about the redundancy situation, and the fact that he had been selected, he was offered the option of remaining in employment for his period of notice to see if there was a change in circumstances; in particular, whether they could find any vacancies in Smiths Industries elsewhere in the group in the United Kingdom. Alternatively, he could leave with money in lieu of notice. The Manager asked Mr Allsop to go home and reflect and come back and see him the following day. Mr Allsop did not ask any questions at that meeting and when he returned on the following day he opted to take his money and leave.

Mr Bailey, the Production Manager, was aware that there were no vacancies existing or projected in the respondent Company. He had also caused a check to be made with the other Smiths Industries Company in Witney, that being where the Respondents operate, who had no vacancies. Management offered all employees being made redundant the opportunity to remain in employment while they enquired as to vacancies elsewhere in the Group, but no one took up the offer. The Tribunal say at paragraph 9 of their decision:

"9 The Tribunal concludes that management had a difficult task in making a selection of two out of five skilled engineers. We consider that the criteria were reasonable ones for management to adopt in the circumstances and that while they certainly gave Mr Allsop no quarter in their award of points, the difference between the points awarded to Mr Guy and him, as compared to those awarded to those who were retained, was a sufficient justification of the decision of management to select Mr Allsop" .

And then they go on to say, quite rightly:

"10 It is for the respondents to demonstrate to the Tribunal what is the reason for this dismissal. In all the circumstances we consider that they have done so. Mr Allsop was dismissed by reason of redundancy. ....".

So having done that, of course they went on, quite properly, to consider whether the employers had acted reasonably in treating it as a reason for dismissal, which is very frequently and properly interpreted as saying, "Did they act fairly in a procedural way".

In paragraphs 13 - 16 they say:

"13 The way in which the respondents dealt with the matter was in our view flawed in two ways. The respondents formed part of a large and well known group of companies, Smith Industries. Yet, while Mr Bailey made enquiries as to alternative employment with the other company in the group nearby at Witney, no effort was made to do so among the other companies in the group before the decisions to dismiss were made and put into effect.

14 This is the wrong approach. The enquiries should have been made first. The failure to carry this out, renders this dismissal unfair.

15 In addition the Tribunal considers the way in which the decision was put into effect was also procedurally defective. It was left to the council representatives to warn members of the work force that redundancies were to be made but the first Mr Allsop knew of his selection was at the meeting on Monday 30 October. Then he was told, without any prior consultation or warning, and given a period for what was described as reflection, followed by another meeting the next day which was no more than a formality. He had no opportunity to put forward his own point of view in the matter, which might, if management had asked, have included a suggestion that they enquire for alternative employment for him among other companyies(sic) in the group. He had no opportunity to put forward this or any other suggestions.

16 The Tribunal are unanimous in concluding that for the above reasons his dismissal was both substantially and procedurally unfair".

Those are the criticisms made of those passages and in the first place, Mr Bowers points out to us that paragraph 16 is a rather strange statement. The Tribunal were not concerned, at this stage, with the question of compensation. The Remedies Hearing was yet to be held. They had not been addressed on the subject of whether any unfairness alleged was substantive. They were not addressed, of course, on remedies. And we think the criticism is well justified; that one would normally expect the question of the nature of the unfairness, and its effects, to be discussed at the compensation hearing. But there it was, that was what they said.

Pausing at that point, Mr Bowers makes submissions to us concerning this passage and says that there are really two main criticisms. He says that here the Tribunal were showing the wrong approach to their duties in deciding the question of fairness. The question was not "whether they thought something was unfair, but whether it fell within the range of conduct of a reasonable employer". Some employers might handle this situation in some ways, some in others. And he says, further, that there is no rule that an employer is bound to seek to find alternative employment for an employee who is redundant among all the companies in the same group.

He says: here the Tribunal were showing an erroneous approach; and he says, moreover, when they said he had no opportunity to put forward his own view of the matter, that is a strange thing to say, bearing in mind that when he was asked whether he wanted to stay on and work out his notice while just such enquiries took place in other companies, he said "No". So how does it come about that the Tribunal found these matters unfair?

First of all, we accept much of what Mr Bowers has said to us. Barratt Construction Ltd v Dalrymple

[1984] IRLR 385

and MDH Ltd v Sussex

[1986] IRLR 123

show that there is no general rule that an employer should enquire of all other companies in the group. Indeed, it would be an impossible burden in certain cases. In certain cases one large company will own 100 or more subsidiaries, all carrying on rather different lines of business. One knows that.

So there is no general rule that an Industrial Tribunal must say that unless the employer makes such enquiries that is a sort of unfairness. We think that in spite of those authorities, there is equally no rule that an employer can, with impunity, say "I am not going to bother to enquire of any other companies in the group". Indeed, as one knows, this employer did in this case enquire of one of the other companies and later, as we know from what we have been told, enquire of many other companies in the group to see whether such employment could be found. We think that it is a question of fact and degree for the Industrial Tribunal in each case.

With regard to the statement which is, perhaps, an exaggeration, that he was given no opportunity to put forward his own point of view in the matter, we bear in mind that this was all arranged in a very hurried way. It seems, looking at it simply on paper, to be a strange way to treat a professional man who has been with the company for five years and we think that the Industrial Tribunal, on the facts of this case, were well entitled to look rather carefully at this.

The suggestion that the Industrial Tribunal were applying the wrong test seems to us, in view of the care with which they approached their task, the time they took over it and the way in which they expressed themselves, to be going too far. It is, of course, clear that an Industrial Tribunal must not apply its own subjective test. What it is bound to do is to look at what is reasonable in an objective way and we cannot find here any indication that this Industrial Tribunal, in making these criticisms, were applying some eccentric, personal view of what was right and proper.

We think having considered it as carefully as we can that Mr Bowers' criticism of the substance of this decision is not well founded in the sense that we can find no error of law here and the mere fact that the Industrial Tribunal might have expressed themselves differently and might have approached their task differently, in our view does not amount to an error of law.

So we turn to the other criticism, which in our view is much better founded. The Industrial Tribunal, having given its decision on the question of fairness or unfairness, then adjourned to hold its remedies hearing and the remedies hearing was held on 7 April 1994. Again, the Tribunal sat at Reading with, of course, the same members. Before this both

Mr Allsop himself and the company applied to the Tribunal to review its decision.

We are not concerned with Mr Allsop's application, but so far as the company was concerned, they, through the barrister who was acting for them, had become aware of a decision which had just been announced between the two hearings, Steel Stockholders (Birmingham) Ltd v Kirkwood [1993] IRL 515 and Counsel wished to address the Industrial Tribunal on the question, which they appeared to have decided, whether this was a "substantive" or "procedural" defect or rather one should use the plural, whether these were "substantive" or "procedural" defects in the dismissal of Mr Allsop and he, Mr Schofield, therefore applied to the Industrial Tribunal to review its decision. He had not had an opportunity to address them on that and the importance of the distinction appeared to him to be underlined and shown by the Steel Stockholders case. Of course, the Steel Stockholders decision was based on the interpretation of the Polkey decision.

The Tribunal rejected that and went on to consider the question of compensation, compensation being the remedy for which Mr Allsop had asked. First of all, they comment on the case of Steel Stockholders and then they observed as follows:

"8 The heart of the Industrial Tribunal's decision in the present case is at paragraphs 13, 14 and 15 on page 9 of our decision sent to the parties on 17 November 1993. In paragraph 13 our decision that the dismissal was unfair centres on the fact that while Mr Bailey, the respondents' Production Manager, made enquiries as to alternative employment with one other company in the group of companies of which the respondents form part, nearby at Witney, no effort was made to do so among the other companies in the group before the decisions to dismiss were made and put into effect. That in our view was not a procedural deficiency but in a group as large as that of which the respondents form part, constituted an omission which rendered the dismissal substantively unfair. We do not accept the respondents' submission and do not grant a review of the decision at their request".

Mr Bowers rightly says that that is a strange observation to make. How can an omission of this sort change from being a procedural matter, perhaps a procedural deficiency in the case of a small company, or a small group of companies, but in a group as large as that of which the Respondents form part, become a "substantive" deficiency? How can one say at what point one draws the line, how can one say, "This group is so large that it is a substantive" matter or, "This group is so small that it is merely a procedural matter".

It would be a continual source of uncertainty and indeed, it makes one think that the Industrial Tribunal must in some way have had a different view of what is meant by procedural from that which appears to be the correct one. The question of searching for alternative employment; the question of selection; the question of consultation, all appear to have been treated by the House of Lords in Polkey as procedural matters. And much more important, perhaps, even than that, Mr Bowers said this was the very matter on which Mr Schofield wished to address the Tribunal. It would be natural for him to do it at this stage, whether by way of a review or by way of submissions at the remedies hearing. And here the Tribunal are, on the basis that they have already decided the matter at the original hearing, saying that it is a substantive matter and there is therefore no need to ask the questions of causation which arise out of procedural matters (as shown in Polkey) for this is a case which shows the substantive unfairness which is said in the Steel Stockholders case to be immune from such enquiry. We have been asked by Mr Bowers to look at section 74 of the Employment Protection (Consolidation) Act 1978 and subsection 1 says:

".... the amount of the compensatory award shall be such amount as the tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal in so far as that loss is attributable to action taken by the employer".

That applies, of course, in terms to every case. And we ask ourselves whether there is any justification for saying that, "where there is substantive unfairness the Tribunal is altogether and automatically acquitted from making any enquiry into the loss which was caused by the unfairness as opposed to any additional loss which might have arisen inevitably". We do not propose to decide that. We note that the Steel Stockholders case, as is pointed out by Mr Bowers, was decided on the basis of a concession. If you look at the report in

1993 IRLR 515

and go as far as paragraph 7 of the Employment Appeal Tribunal, chaired by Lord Coulsfield, said there that Lord Bridge's observations in Polkey "do not apply where the grounds for holding a dismissal unfair arise from the substance of the decision, as was, indeed, conceded ...."

And indeed, in later decisions of our own Tribunal, the difficulties have been pointed out. In particular, in a division of the Employment Appeal Tribunal sitting in England, under the chairmanship of Judge Peppitt QC., Highfield Guilds Ltd v Mr L James , Judge Peppitt speaking on behalf, of course, of the Tribunal said:

"It is by no means easy in a case such as this to draw a clear distinction between procedure and substance. There may well, for example, be elements of unfairness in a dismissal which qualify under both heads. Mr Behar submitted that `anything coming between the identification for reason for the dismissal and the dismissal itself was procedural' but we do not consider this definition is apt to cover every situation. We wonder whether it is possible to produce a wholly satisfactory classification of those defects which are and those which are not to be regarded as procedural rather than substantive and we do not envy the task of Industrial Tribunals if they are required to decide where the line is to be drawn. In this connection we have considerable sympathy with the cri de coeur expressed on the subject by the editor of the Industrial Relations Law Reports".

They say they do not find it necessary to decide whether they are going to follow the Steel Stockholders case. And Mr Bowers also invited our attention to the case of Wolesley Centers Ltd v Simmons

[1994] ICR 503

, where this Tribunal under the chairmanship of

Judge Hague, QC., also dealt with the matter, citing from what was said in Polkey decision. They cite Lord Bridge's approving citation of what Browne-Wilkinson J., as he then was, said in Sillifant v Powell Duffryn Timber Ltd

[1983] IRLR 91

, 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 award of compensation by a percentage representing the chance that the employee would still have still lost his employment".

We do not think that it is appropriate to do more than notice these matters of doubt and difficulty. Of course there are cases in which the Tribunal are quite unable to embark on the enquiry which is said to be, now, normal in the case of procedural unfairness, following the Polkey decision. In Harvey , paragraph 2550 of Part D it is pointed out that if the employer calls no evidence, produces no evidence on which the Tribunal could find what is likely to happen if procedural fairness had been followed, the employer only has himself to blame if the Tribunal says, "Well, we feel quite unable to say more than that there has been unfairness and the unfairness has led to dismissal and we cannot enquire into the percentage which would be appropriate to allow as a discount for the possibility that he might yet have been fairly dismissed".

We, as I say, are not going to go into all those difficulties. There may equally, we think, be cases where there has been what is undoubtedly, in the ordinary view of the matter, substantive unfairness and the Tribunal may yet say, "Well it is quite a plain case in which the unfairness has not caused the whole of the loss which is being claimed".

The point here, it appears to us, is this. The employer wished to put before the Tribunal matters which the employer would submit showed that the loss suffered by the Applicant, Mr Allsop, either was not caused at all by any unfairness which the Tribunal had found, or, alternatively, should be discounted for the possibility or probability that even had perfect fairness been observed, his dismissal, and the loss which flowed from it, would still have taken place.

It is a familiar situation. This was eminently a case in which such a submission should and would have properly been made. There was, it appears to us, confusion in the mind of the Tribunal here. They had not been addressed on this matter and they seem to have dealt with it summarily, not having considered it with the aid of the submissions which Mr Schofield wished to make to them.

We think, therefore, that there has been a mishap here which is certainly a matter of law. It is regrettably common for there to be a misunderstanding. If the Tribunal says, "We will hold a remedies hearing later" then the advocates will normally confine themselves at the first hearing to the question whether there has been unfairness; and the causation of the loss will naturally be dealt with at the second hearing unless it is agreed otherwise.

It is true, as Mr Bowers pointed out to us, that that may mean recalling witnesses. So it may in particular cases be convenient to deal with it at the first hearing. But whenever it is dealt with, it must be dealt with with the benefit of the submissions which the parties wish to make to the Tribunal and here, through the mishap which seems to us to have occurred through the misunderstanding on the part of the Tribunal, it did not take place in a fair and proper way. The Industrial Tribunal did not attend to the submissions. They should either have reviewed their decision as Mr Schofield asked them to, or have invited his submissions on the matter of (if I may call it that) the Polkey discount, including all such questions of causation as Mr Schofield wished to put before them.

It is quite plain that they are under a duty to include in their enquiries consideration of the provisions of section 74 and they, unhappily, seem to have made a mistake in doing their duty there.

In those circumstances, the matter must be remitted to the Industrial Tribunal so that they can carry out their duty with the benefit of such submissions as the advocate for the company and, of course, Mr Allsop himself wish to make to them on that topic and they must then decide the essential question whether they find that all this loss was caused by the unfairness which they found, or some of it, or indeed, none of it.

I should say that we have received a letter from Mr Allsop. We have read that and with Mr Bowers' assistance have considered the contents of that letter in arriving at our decision.