Sewell v McCowen [1995] UKEAT 569_94_1311

EAT
Sewell v McCowen
[1995] UKEAT 569_94_1311 · 1995-11-13
MR JUSTICE MUMMERY (PRESIDENT): This is an appeal by Mrs Anne Sewell against the decision of the Industrial Tribunal held at Southampton on 3 May 1994. The Tribunal heard a claim of unfair dismissal and sex discrimination by Mrs Sewell against her former employer, Mr Simon McCowen. The Tribunal reached the unanimous decision, for reasons explained in the decision sent to the parties on 6 May 1994, that Mrs Sewell was not unfairly dismissed, and that the Respondent had not discriminated unlawfully against her, contrary to the Sex Discrimination Act 1975 . Mrs Sewell served a Notice of Appeal against that decision on 13 June 1994. When the appeal was set down for a Preliminary Hearing before this Tribunal, a direction was given on 18 November 1994 allowing it to proceed to a full hearing, which has taken place today.At the hearing Mr Farrell represented Mrs Sewell and Mr Glyn represented Mr McCowen. The case has been well argued. In order to see whose arguments are right, it is necessary to refer first to the Tribunal's findings of fact. This Tribunal cannot disturb the findings of fact. It can only disagree with the decision on those facts, if there is an error of law in the reasoning of the Tribunal.The facts were that Mr McCowen and Mr Dennehy set up a partnership for the training of personnel to operate computers. Mrs Sewell started to work as a trainer on 4 October 1989. In 1990 she was promoted to Manager. She remained in that capacity until she was dismissed on 23 June 1993. There had previously been a company in which Mr McCowen was a director and shareholder, but that had ceased to trade and was replaced by a partnership which took over the business, of which Mr McCowen and Mr Dennehy were "sleeping" partners. The business they carried on was small and unsuccessful. It was only continuing because of an injection of money from the partners. Both of the partners had other businesses. Mr Dennehy had his own business. Mr McCowen was a farmer. The day-to-day management and running of the business was in Mrs Sewell's hands. There were four other employees, two trainers, a secretary and a sales person.In January 1993, Mrs Sewell went on maternity leave. A decision was taken not to employ anybody temporarily to take her place. Mr McCowen was able to devote a little more time to the business, as he had just sold his dairy herd. He carried on the administrative work along with the secretary, with a little help from Mr McCowen's farm secretary. By the end of May 1993, when Mrs Sewell was still on maternity leave, the position in the business had become serious. The partners discussed closing the whole business at the beginning of June. They decided to give it a little more time. They organised two Open Days in June to try and attract more customers. The Open Days were not a success. Mrs Sewell, who had had her baby by then, was asked by Mr McCowen if she would like to help at the open days and she agreed.The partners, after the unsuccessful Open Days, discussed the situation. A decision was reached that they would continue, but they had to make savings. Having managed without Mrs Sewell during her maternity leave, they decided that her post as manager should be abolished and that she should be made redundant. Mr McCowen knew of the time, effort, and loyalty that Mrs Sewell had put into the business. He felt he could not displace one of the two trainers who had built up a successful team to make room for her. Mrs Sewell was not as up to date as the trainers were. It would take some time for her to catch up. The firm could not afford that. Mrs Sewell was paid between 20% and 25% more than either of the trainers. Similarly, Mr McCowen considered that he could not displace the sales person who had just joined the firm earlier on 7 June, as a replacement for someone who had left a month before. Sales were mainly tele-sales. The sales person's salary was 30% less than Mrs Sewell.The Tribunal found, as a fact, that Mr McCowen knew Mrs Sewell well enough to know that she would not enjoy taking on the sales post. Mr McCowen saw her, explained the position and told her she was being made redundant. Her response was to enquire why her and not the sales person. Those were all facts found by the Tribunal.The Tribunal went on to consider three questions. First, whether there was a redundancy situation. Secondly, whether it was fair to dismiss Mrs Sewell, without consulting her. Thirdly, if it was unfair to dismiss her without consulting her, whether it would have made any difference, and whether therefore the Tribunal would have been in a position to award her any compensation. The Tribunal found against Mrs Sewell on all three points. First of all, on the redundancy situation; they said correctly the question was whether Mrs Sewell's dismissal was due to redundancy. They said it was. It was a genuine commercial decision. It was an inevitable commercial decision by partners who have had to reduce overheads. Her post was the one that should go. They said that not only could a reasonable employer have reached that conclusion; they went so far as to say that every reasonable employer would have reached the same conclusion. They did not find that this had anything to do with the birth of the child, or the fact that Mrs Sewell was a woman. This was not a question of her being refused a post on her return from maternity leave. Her maternity leave was not due to expire later. This was a genuine redundancy. They found that Mr McCowen's reasons for not considering offering her alternatives, both of which would have meant dismissing someone else to make room for her, were such that any reasonable employer could have reached them in all the same circumstances. That is the decision on redundancy.On consultation, the Tribunal said that lack of consultation normally means that the dismissal is unfair, unless there are exceptional circumstances. They referred to the fact that there were only four employees in the business. That is, four as well as Mrs Sewell. Everybody knew everybody else. The partners were aware of the capabilities, skills, loyalty and hard work of all the employees. In the circumstances, the Tribunal felt that it was difficult to think what there could possibly have been to consult about. The only possibility was the displacement of the sales person, to see if Mrs Sewell would accept the post of 30% of their salary without a car. Mr McCowen knew her well. He could not see her accepting a job on tele-sales on these terms and therefore chose not to consult her. The Tribunal's conclusion on consultation was that it was always difficult for Tribunals to deal with lack of consultation. They started on the basis that there should be. In this case, with the size of the employer and the knowledge that everyone had of one another, they concluded, though they said it was a marginal matter, that a reasonable employer could have decided that consultation would achieve nothing and was therefore something of a charade. For those reasons they found that the dismissal was fair.Thirdly, on the question of compensation, they said that, if they were wrong about that, and the dismissal was unfair because of lack of consultation, they were satisfied, on the evidence, that whatever consultation had taken place, there would have been no different result. She would have been made redundant, and therefore she would not have been awarded any compensation by the Tribunal.That is the decision. Mr Farrell has argued that the decision is wrong, both on the question of whether or not there is a redundancy, and on the question, whether the dismissal was fair or unfair, for lack of consultation. On the redundancy situation point, there was an initial objection to Mr Farrell arguing that, because it was not contained in the Notice of Appeal. The Notice of Appeal made these points:"(a) the Tribunal erred in law in that in coming to its conclusions on consultation, knowing that the normal approach of a Tribunal is that lack of consultation is likely to mean the dismissal is unfair, reached a conclusion that there were exceptional circumstances in this case. These conclusions were based on the small size of the business. (b) they asked themselves the wrong question i.e. whether a fair procedure would have made any difference to the decision to dismiss. That is a relevant consideration in assessing compensation but is an error in law in judging the fairness or unfairness of the dismissal. (c) they erred in law in concluding that a reasonable employer could have decided that consultation would achieve nothing and therefore was something of a charade. The respondent in this case admitted he knew nothing about employment law and had not considered alternatives to the dismissal of the appellant."...There is nothing in the Notice of Appeal about a point being taken that the Tribunal erred in law in holding that there was a redundancy situation. When Mr Farrell sought to raise the point, which was set out in the Skeleton Argument served on 23 October 1995, but was not seen by the Respondent's Counsel till November 1995, Mr Glyn, the Respondent's Counsel, objected to the amendment on a number of grounds. He said it was being made late. It raised a new and different point of appeal, which did not arise out of the existing points of the appeal. He added that there was not a point of law anyway, and it stood no prospect of success. Mr Glyn was not, however, able to say that his client's case would be prejudiced by us allowing this point to be raised at a late stage. He had been alerted to it a week ago in the Skeleton Argument and had come prepared to argue it. In those circumstances we decided to have full argument on this point, though we did not give leave to make an amendment to the Notice of Appeal, because, if there is nothing in the point, then it would not be proper to allow an amendment to be made.The essential question, having heard all the arguments, is whether there is an error of law in the finding that there was a redundancy situation. Mr Farrell's argument on this was that the requirements for work in the Respondent firm did not change. He said there was an increase in staff on 7 June, when a new sales person had been employed. That is not correct. The sales person employed on 7 June was to replace someone who had left the previous month. He said the sales person's job was a position which Mrs Sewell was quite capable of performing and had been performing before her maternity leave. Mr Farrell referred to the section which deals with the definition of redundancy, Section 81(2) :
"For the purposes of this Act an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is attributable wholly or mainly to- (b) the fact that the requirements of that business for employees to carry out work of a particular kind, or for employees to carry out work of a particular kind in the place where he was so employed, have ceased or diminished or are expected to cease or diminish."
Mr Farrell argued that a dismissal, for the purposes of that provision, occurs by reason of a redundancy, if it is attributable wholly or mainly to the fact that the requirements of that business for employees to carry out work of a particular kind has ceased or diminished. He said, that on the findings of fact made by the Tribunal, Mrs Sewell's work had not ceased or diminished. It had simply been reallocated. Moreover, the number of employees generally had increased. He argued that the Tribunal should have concluded that, because the overall requirements for work and for employees had not changed, the reason for dismissal was not redundancy as the employer claimed. Since the employer had failed to show a potentially fair reason for dismissal, namely redundancy, the dismissal was unfair.In our view, that argument is not correct. We accept the submission of Mr Glyn that there was a finding by the Tribunal that there was a redundancy situation. That is essentially a finding of fact. There is no error of law by the Tribunal in the interpretation of Section 81(2)(b) or in the application of it to the facts of the case. On this point Mr Glyn helpfully referred to a decision of the Northern Ireland Court of Appeal on identical provisions for redundancy in the Northern Ireland legislation on Contracts of Employment and Redundancy Payments. The case is McCrea v Cullen & Davison Ltd [1988] IRLR 30 page 32. Paragraph 11 assists his argument on this point. Referring to the equivalent provisions of 81(2)(b) (S11(2)(b) in the Northern Ireland legislation) the Court of Appeal said this:
"... when applied to the facts of this case may be reduced to the proposition that an employee is dismissed by reason of redundancy if the dismissal is attributed to the fact that the requirements of the business for employees to carry out the work of management has diminished. It will be seen that what the section is directed towards is not a diminution in the work of management but a diminution in the requirement of the company for employees to do the work of management. Though the work of management remains to be done the Applicant will be redundant if the company has so organised its affairs that the work is done by fewer employees. So the question resolves itself into one of fact, namely, is Mr Bailey merely doing the work formerly done by the applicant, in which case there is no redundancy but the replacement of one employee by another to do the work of the other, or has he undertaken the work of the applicant additionally to his own, in which case there has been a reduction in the number of employees required to do the work and the applicant's dismissal is attributable to redundancy."
One of the cases relied on for the exposition in that passage is a decision of the Employment Appeal Tribunal in Sutton v Revlon Overseas Corporation Ltd [1973] IRLR 273 where, in dealing whether there was a redundancy situation, Mr Justice Donaldson said that the issue was reduced to the question whether the reorganisation of the business was such that its requirement for a separate and additional employee to carry out the work of a chief accountant had ceased.We agree with Mr Glyn that, on the facts found by this Tribunal, applying Section 81(2)(b) the Tribunal were entitled to come to the conclusion expressed in paragraph 5 of the decision, that this was a redundancy situation. It appears from the exposition in McCrea v Cullen & Davison that the kind of reorganisation which took place here after Mrs Sewell went on maternity leave, is capable of giving rise to a situation where she was redundant. Mr Farrell sought to distinguish McCrea's case by saying that was a case where work had been reallocated among other employees. This was a case where the employer himself, Mr McCowen, had taken on administrative duties formerly carried on by Mrs Sewell. In our view, that is not a ground of distinction. The Tribunal had correctly interpreted Section 81(2)(b) on the facts of this case. There is no error of law on whether there was a redundancy situation.The second point is the consultation point. Mr Farrell referred to the decision of the House of Lords in Polkey v AE Dayton Services and reminded us that the failure of an employer to follow a proper procedure in dismissing an employee, is likely to result in a finding of unfair dismissal. The proper procedure in a redundancy case will include consultation. He said that an exception only arises where 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 referred to the speech of the Lord Chancellor in Polkey v AE Dayton Services and to the speech of Lord Bridge, who referred to the exception in rather different terms.Mr Farrell's submission was that, whichever approach was adopted, whether that of Lord Mackay or Lord Bridge, the position here was that the Tribunal erred in law because Mr McCowan had told the Tribunal that he knew nothing about employment law and he therefore could not have made a deliberate decision not to consult. He was not aware of any of Mrs Sewell's circumstances in regard to whether Mrs Sewell would have accepted a lower paid job or one with reduced hours and responsibilities. On this point, Mr Farrell went on to point out that Mrs Sewell was the longest serving member of staff; she trained all the other staff employed in the firm; she was capable of doing any job within the firm. If consultation had taken place, Mr McCowen would have been in a position to know that she would have accepted either of the positions available: the position of a trainer, which would have required a week's refresher course, or the position of a tele-sales person; a position that she was doing, even with her responsibilities as a manager. Mrs Sewell believed that the Tribunal erred in law in putting themselves in the position of what they would have done, had they been the employer, and coming to a decision in paragraph 9 that it was difficult to think what there possibly could have been to consult about. What they should have done is to decide what a reasonable employer would have done in the circumstances. If they had done that, they would never have reached the conclusion that these circumstances were exceptional.On that part of the case, we have the benefit of guidance which the Industrial Tribunal Chairman did not have, but, it seems on his reasoning, did not need, because he anticipated in paragraph 10 of his decision, the correct approach to lack of consultation in redundancy situations as stated by the Court of Appeal in Duffy v Yeomans & Partners Ltd [1995] ICR 1 . What the Tribunal said in paragraph 10 of the decision was that there normally should be consultation, but there was no unfairness in lack of consultation, if a reasonable employer could have decided that consultation would achieve nothing. That approach of the Tribunal is the correct approach. The Court of Appeal analysed the House of Lords decision in Polkey v AE Dayton Services in some detail, referring to the approach stated by Lord Mackay in his speech and the observations of Lord Bridge in his.After considering the rival submissions on the correct approach, the judgment of

Lord Justice Balcombe said at page 7(g):

"In my judgment there is no warrant for the proposition that there must be a deliberate decision by the employers that consultation would be useless, with the corollary that, in the absence of evidence that such a decision was made, a finding by an industrial tribunal that a dismissal for redundancy was reasonable is necessarily wrong in law . There is nothing in the wording of section 57(3) of the Act of 1978, or in its exposition by Lord Mackay L.C. in Polkey v Dayton Services Ltd . ... to lead to such a result; if and in so far as that is the effect of Lord Bridge's speech, then I agree with the judgment of Ralph Gibson L.J. in Hooper v British Railways Board I.R.L.R. 517, 528, cited above, that we must give effect to the principles formulated by Lord Mackay L.C. with which all the other law lords agreed."
On page 8

Lord Justice Balcombe continued:

"... It is what the employer (as a reasonable employer) could have done which is required to be tested; so the tribunal must ask whether an employer, acting reasonably, could have failed to consult in the given circumstances."...That is the correct approach on the present state of the law. That is the approach which was adopted by this Tribunal before Duffy v Yeomans & Partners in paragraph 10 of the decision. There is no error of law in that approach. In other words, this Tribunal have reached the conclusion by applying the correct test that this was an exceptional case. It was fair to dismiss a person for redundancy in the absence of consultation. As there is no error of law on that point, we must reject Mr Farrell's argument on that aspect of the case. Mr Farrell made a number of other observations on the case. He said that the Tribunal erred in law in coming to the conclusion that consultation would have achieved nothing, when they were told by Mrs Sewell that she would have considered either of the two positions if they had been offered to her.The Tribunal only said that consultation would have made no difference in relation to the question of compensation, not on the question of whether there was or was not an unfair dismissal. On the question that the dismissal was fair, the Tribunal applied, as already explained, the correct test: that a reasonable employer could have decided that consultation would have achieved nothing. That is not the same as saying that consultation would have achieved nothing. We therefore find that Mr Farrell's arguments, though skilfully and fully argued, do not identify an error of law in this decision. We agree with the submissions made by Mr Glyn on the points of redundancy situation and lack of consultation.It follows that the appeal must be dismissed. We do not want to leave the case without saying this. This, as the Chairman of the Tribunal explained in the decision with the concurrence of the two lay Members, was an exceptional case. That is clear from what he said in paragraph 9. He has explained in the decision what are the exceptional circumstances that make it fair to dismiss without consultation. We wish to make it clear that nothing said by the Industrial Tribunal in this case, or by us in our judgment, should detract from the importance of consultation. Even in small firms, where there are only a few employees who all know each other and are well aware of each others capabilities, skills, loyalty and hard work, the position is that in all but the most exceptional cases, there should be consultation. A good reason for that rule exists, as explained by Judge Hull in the case of Mrs Poate v Holiday Inn Worldwide in his judgment on 2 November 1994 where he says this and we agree with it:
"It is of course normal for warning and consultation to take place and as been pointed out in many many cases, it is really a matter of common sense. The purposes of consultation are various. First of all leaving aside anything else it is courteous and humane to consult people when you are thinking of making them redundant or have decided provisionally to make them redundant. Of course there is the possibility that the employee may have ideas for ways in which redundancy can be avoided altogether, so far as he or she is concerned. The employee may be able to make suggestions about alternative employment, may indicate that he or she would be prepared to accept less well paid work or work on less favourable terms or re-train for other work or to go abroad even; or to do other things which would help the employer out in the emergency which arises. Then of course there are other matters which have been pointed out in other cases, such as the question of the length of notice which is appropriate and whether the employer can help the employee in some other way by finding him employment. Perhaps with quite a different firm by giving him a good reference and so forth. These are all matters which might be raised in consultation. Clearly it will be a very bold thing for any employer to say, or indeed any person to say, I can dispense with consulting somebody nothing that person could possibly say would make me change my mind in any material way. That is a very strong thing to say."
We agree with that. Nothing, in our view, said in Duffy v Yeomans detracts from the importance of consultation in all but the exceptional circumstances which may exist, when a Tribunal can conclude that a reasonable employer could have decided that consultation would achieve nothing. It will be rare that a reasonable employer could have decided that consultation would achieve nothing. Judge Hull's exposition of the matter shows a whole number of things that consultation, when it takes place, might achieve. With those remarks we return to the order in this case. The appeal is dismissed because there is no error of law in the decision.