Savage v Saxena [1998] UKEAT 605_97_2001

EAT
Savage v Saxena
[1998] UKEAT 605_97_2001 · 1997-12-15

JUDGE HARGROVE QC : This appeal arises from a compensatory award hearing on 4th March 1997.

The appellant had been unfairly dismissed after five years employment with the respondent. The basic award was agreed at £900, and the only other award was £200 for loss of statutory protection.The grounds of appeal are that the Industrial Tribunal was in error in taking into account both the income support and the housing benefit received by the appellant.Secondly, it is said that the tribunal in finding that the appellant had failed to mitigate her loss and was therefore entitled to no sum, had failed to apply the test set forth in Gardiner-Hill v Roland Berger Technics Ltd [1982] IRLR 498 .

Income Support

We are unanimous that income support was not a matter which should have been taken into account. Regulation 5 of the Employment Protection (Recoupment of Unemployment Benefit and Supplementary Benefit) Regulations 1977 provides:
"5.-(1) Where these regulations apply, no regard shall be had, in assessing the amount of a monetary award, to the amount of any income support or any unemployment benefit which may have been paid to or claimed by the employee for a period which coincides with any part of a period to which the prescribed element is attributable."
That regulation is repeated in the same words in the Employment Protection (Recruitment of Job Seekers Allowance and Income Support) Regulations 1996 with the substitution of the words "job seekers allowance" for the words "unemployment benefit". In our view that is conclusive and the tribunal erred by taking such sums into account.

Housing Benefit

We are divided on the issue of whether housing benefit should be deducted. Bearing in mind that any decision upon this point will effect calculations before many Industrial Tribunals, we have set out the opposing reasons at length.Miss Whittingham considers that guidance can be obtained from the manner in which this tribunal has dealt with questions of invalidity benefit. In Hilton International Hotels (UK) Ltd v Faraji [1994] IRLR 267 the EAT held that invalidity benefit was not deductible from the compensatory award. That decision compared invalidity benefit with an "insurance" type of benefit and , as such, did not fall to be deducted. The Court considered cases such as Parry v Cleaver [1970] AC 1 HL and Smoker v London Fire and Civil Defence Authority [1991] IRLR 271 HL . Miss Whittingham takes the view that that case should not be followed in the light of Puglia v C James & Sons [1996] IRLR 70 . In this Court Mummery J presiding, pointed out that the decisions in Palfrey v GLC [1985] ICR 437 and Sun & Sand Ltd v Fitzjohn [1979] IRLR 154 had not been cited in Hilton . In the former case Mr Piers Ashworth QC sitting as a Deputy High Court Judge, held after a full review of the authorities:
"It seems to me from these decisions that the common law position is that benefits received from the state must be taken into account in assessment of damages. Whether or not that should be the law it is not for me to say but it seems to me clear from these decisions that that is indeed the law and I do not think that any valid distinction can be drawn between unemployment benefit, supplementary benefit, sickness benefit, industrial injury benefit and so on ... Were it not for the statutory provisions in s.2 of the Law Reform (Personal Injuries) Act 1948 the whole of those benefits would fall to be deducted in assessing damages. That section applies to certain state benefits, including invalidity benefit, and provides that half of the relevant benefits received for the period of five years from the date of the accident should be taken into account."
Hilton was also criticised in Rubenstein and Roskin v McGloughlan [1996] IRLR 557 where a differently constituted Court from that both in Hilton and Puglia held at page 561:
"We conclude that in the case of invalidity benefit, which is clearly not a pure 'insurance' payment, fully funded by the employee's contributions, to produce a 'just and equitable' solution requires either detailed evidence of the funding position or a broader approach. In our view the latter is to be preferred and, having regard to the analogy of the statutory system as well as to more general considerations of equity, we consider that one half of the invalidity benefit should be deducted."
In that case the Court provided an addendum to the original decision as a result of considering the Puglia decision. At page 564 after reviewing that case and a large number of other authorities, the Court held as follows:
"Our starting point, as we have said, was the autonomy of s.74(1) of the 1978 Act and our conclusion, in particular, that the requirement that the tribunal shall award what is 'just and equitable' releases it from the straitjacket of the 'all or nothing' approach of the common law. Nothing in the further material now before us detracts from that conclusion. On the contrary, the wider selection of authorities illustrates vividly the difficulty and artificiality involved in drawing the line between cases in which there is to be no deduction and those in which benefits are to be deducted in full, where that is the only choice, and contains references by judges of the highest authority to the unwelcome constraints which that imposes.
Secondly, we drew attention to the fact that Parliament, in mitigating the extremity of the common law as it applies to contributory benefits within the statutory social security regime, had in a number of situations adopted solutions which involved treating employer and employee equally, either by dividing the value of the benefits between them by the device on half deduction or by removing it from both by requiring recoupment. That remains true, and no sufficient reason has in our view been advanced for treating it as irrelevant or insubstantial in relation either to the merits of adopting some intermediate course between full deduction and none or, if that is to be done, to the choice of half deduction as the appropriate level. On the contrary, the authorities refer to the statutory provision for half deduction as an example of a compromise (by inference desirable) unavailable in quantifying common-law damages."Miss Whittingham concludes that the Hilton decision should no longer be followed and the guidance provided by Puglia and Rubenstein is that either in whole or in part that invalidity benefit should be taken into account. In the case of housing benefit, Miss Whittingham considered that an analogy could and should be drawn with invalidity benefit. Once the approach of what is "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 attributable to the action taken by the employer" is established then unless (as in the case of income support) there is specific statutory provision for exclusion then the presumption should be that a benefit should be taken into account. Put at its simplest, if an employee would normally spend £X upon rent before dismissal, and after the dismissal £X are provided through housing benefit, it is not just and equitable to an employer that that sum should not be considered. The argument that the result would be that an employer would benefit by the Court taking into account housing benefit applies equally to invalidity benefit and carries no weight with the Court in Puglia .Miss Whittingham accepted that in relation to housing benefit provisions exist whereby any sum which is or becomes over paid if the Industrial Tribunal ignored housing benefit in the computation, may be recovered. The procedure for such recovery is complex. In reality an Industrial Tribunal which failed to take housing benefit into account would at the very least be affording the employee the credit of double housing benefit until such time as the excess was recovered, if it was recovered at all. The Court of Appeal in Babcock FATA Ltd v Allison [1987] IRLR 173 pointed out that the object of unfair dismissal compensation is to compensate the employee fully but not to award a bonus. The failure to take into account housing benefit would result, at least potentially and probably actually, in such a bonus being awarded.It is important that Industrial Tribunals should so far as possible have a consistent and uncomplicated set of guidelines to assist in measuring compensation. Apart from the statutory exceptions, there is no basis for requiring a tribunal to apply a different approach to one social benefit payment from another. Accordingly if invalidity benefit is to be dealt with upon the basis of Puglia then housing benefit should for the sake of consistency and simplicity follow the same route.The majority considered that housing benefit should be excluded from the computation. We have been convinced by Mr Copley's argument that housing benefit stands apart from invalidity benefit, has its own special code of enforcement, review and recovery; and the exclusion of such benefit from consideration will not result in double compensation. Further, if that benefit is taken into account, the result could be in certain circumstances that the employee would suffer a detriment.The starting point for consideration must be s. 123 of the Employment Rights Act 1996 . In Hodgson v Trapp [1989] AC 807 , a personal injury case, it was held that at common law when assessing compensation account must be given for receipts to which the injured party would not have otherwise have been entitled. However, housing benefit does not come within the scope of that rule, since it is not sufficiently approximate to the loss sustained in consequence of the dismissal in so far as that loss is attributable to the action taken by the employer. Housing benefit results from the inability of an applicant to meet reasonable housing needs from his resources. Furthermore, it is paid not in respect of the individual but in respect of the needs of the household. In this it differs markedly from invalidity benefit. Rubenstein is clearly right in indicating that there is:
" ... a statutory provisions constituting its own code for the assessment of compensation, and not to be assumed to be equivalent to the common law damages."
In assessing what is just and equitable, the fact that a wrongdoer derives a benefit from a situation cannot be so described. If the tribunal in the present case is correct, then the respondent will derive a profit in that the sum that has been utilised, housing benefit, will be credited to him.It will be equally wrong if the employee was to derive a double benefit. In order to understand why this does not occur in the case of housing benefit it is necessary to look in some detail at the statutory provisions.To qualify for housing benefit it is necessary first to assess the applicant's earnings. By Reg. 28(1)(g) of the Housing Benefit (General) Regulations 1987 it is provided that "earnings" means any remuneration of profit derived from that employment and includes: (g) any award of compensation made under section 68(2) or 71(2)(a) of the Employment Protection (Consolidation) Act 1978 (remedies and compensation for unfair dismissal);"It follows that once a person has received an award for unfair dismissal and is in receipt of housing benefit, his earnings have altered. He is obliged to notify such a change of circumstances under the Housing Benefit (General) Regulations 1987 Reg. 75 which reads:
"75.-(1) Subject to paragraph (2), if at any time between the making of a claim and its determination, or during the benefit period, there is a change of circumstances which the claimant, or any person by whom or on whose behalf sums payable by way of housing benefit are receivable, might reasonably be expected to know might affect the claimant's right to, the amount of or the receipt of housing benefit, that person shall be under a duty to notify that change of circumstances by giving notice in writing to the designated office."
It will be noted that the requirement to notify only applies while the housing benefit payments are in operation. That does not however mean that if the award is made after housing benefit has ceased that the employee is entitled to retain the sum. By Reg. 79 of the same Regulations, it is provided:
"79.-(1) Subject to paragraph 1A, any determination or decision of a Review Board may be reviewed at any time by the appropriate authority if-
( a ) there has been any relevant change of circumstances since the determination or decision was made;"Further, by Reg. 79(3) it is provided:
"(3) Subject to paragraph (5), where a determination is revised on review, the determination as revised shall have effect-
( a ) in a case to which paragraph (1)(a) applies, from the date on which the relevant change of circumstances is to have effect, in accordance with regulation 68 (date on which relevant change of circumstances is to take effect);"When one looks at s.68 it provides:
"68.-(1) Except in cases where either regulations 8(3) (eligible housing costs) or regulation 26 (disregard of changes in tax, contributions, etc) applies and subject to paragraphs (2) to (7) and to regulation 69(7), a change of circumstances which effects entitlement to, or the amount of housing benefit ("change of circumstances") shall take effect from the first day of the benefit week following the date on which the change of circumstances actually occurs, and where that change is cessation of entitlement to any benefit under the benefits Acts, the date on which the change actually occurs shall be the day immediately following the last day of entitlement to that benefit."
S. 68(6) provides:
"(6) Where the change of circumstances is that income, or an increase in the amount of income, other than a benefit or an increase in the amount of a benefit under the Contributions and Benefits Act, is paid in respect of a past period and there was no entitlement to income of that amount during that period, the change of circumstances shall take effect from the first day on which such income, had it been paid in that period at intervals appropriate to that income, would have fallen to be taken into account for the purposes of these Regulations."
Accordingly, there is power to "claw" back any over paid benefits, or to claw back any sum which has been received by way of an award for unfair dismissal. The position is made even clearer by the definition of overpayments in Reg. 98 of the Housing Benefit (General) Regulations 1987 which provides:
"98. In this Part "overpayment" means any amount which has been paid by way of housing benefit and to which there was no entitlement under these Regulations (whether on initial determination or as subsequently revised on review or further review) and includes any amount paid on account under regulation 91 which is in excess of the entitlement to housing benefit as subsequently determined."
To make doubly clear, Reg. 99(1) establishes that:
"99.-(1) Any overpayment, except one to which paragraph (2) applies, shall be recoverable."
Consequently, double recovery should not occur.On the other hand if the Industrial Tribunal lessens the award by the amount of the housing benefit but still makes a compensatory award, then the Authority which has made payment of housing benefit can upon the basis of the compensation hold that there has been a change of circumstances which entitles them to recover the housing benefit. There is no provision for the Authority to take into account the manner in which the Industrial Tribunal has computed the loss. However inequitable this may seem, the Authority would have a right to recover any sum which had been apparently overpaid on the emergence of the new circumstances. There is a further difficulty, in the ordinary course of events a person in receipt of housing benefit can seek a review under Reg. 81, and if not satisfied apply for a further review by a Housing Benefit Review Body. If an Industrial Tribunal takes housing benefit into account problems can arise when upon review an alteration takes place in the housing benefit payable by the Authority.We therefore conclude that it would not be just or equitable to allow a defaulting employer to retain the benefits and to place an unfairly dismissed employee at the disadvantage that we have set forth above.

Mitigation

In W Devis & Sons Ltd vRA Atkins [1977] IRLR 314 it was decided that there was no inconsistency in finding that there was an unfair dismissal and in awarding no compensation. One can imagine circumstances where an employee who is offered an equivalent position at the same rates of pay and with same benefits as that from which he has been unfairly dismissed and refuses to take them so that there is no break in his employment, could be said to have failed to mitigate his loss to the extent that his loss ceases to exist.What occurred here was tantamount to a finding of 100% failure to mitigate. The tribunal held as follows:
"2. The Applicant was dismissed by the Respondent on 1 November 1995. Since that time, she has failed to find any work whatsoever. After leaving the Respondent's employ the Applicant dismissed the childminder who was caring for her elder son and about November 1996. She has made perhaps 10 telephone calls and written one letter in 18 months' unemployment. She is not prepared to travel to work. She has not interviewed prospective childminders for part time or temporary work, nor has she investigated alternative arrangements.
3. There was no medical evidence to show that the Applicant was unable to work. Whilst there is a hand-written note on the loss schedule referring to notice pay, evidence was not led in this regard, nor did Mrs Howell make any submissions on notice pay. Miss Savage's weekly loss, once credit is given for income support and housing benefit, is exactly £2. That does not take account of the saving on childminder's fees, and in all probability there is no loss at all.4. The Tribunal is not satisfied that the Applicant has made any serious attempt to seek alternative employment, and finds it incredible that a skilled medical secretary should be unable to find any work at all during so long a period. We find that the Applicant has failed to mitigate such loss as remained.5. Accordingly, we are not minded to make any compensatory award, save £200 for loss of statutory industrial protection. The basic award is agreed by the parties at £900."The difficulty with that finding is that it implies that had the appellant taken proper steps to mitigate her loss she would have been employed upon the day following her dismissal. That is inherently unlikely. One can well understand the tribunal being surprised by the failure of the appellant to obtain work for so long a period. Moreover, the appellant disputes even upon the Industrial Tribunal's own figures that the loss was only £2 per week. She calculates it at some £45 per week.In Gardiner-Hill v Roland Berger Technics Ltd [1982] IRLR 498 the tribunal ought to have carried out the following analysis:(1) Identify what steps should have been taken by the appellant to mitigate his loss.(2) Find the date upon which such steps would have produced an alternative income.(3) Thereafter reduce the amount of compensation with the amount of income which would have been earned.The failure to carry out that analysis has produced an understandable error. A blanket reduction of 100% is not consistent with the Gardiner-Hill case where at page 500 it was held:
"Moreover, although it is not necessary for us to go into it in great detail, it is well-established that it is inappropriate in dealing with failure to mitigate damages to reduce the amount of the compensation by a percentage. In order to show a failure to mitigate, it has to be shown that if a particular step had been taken, Mr Gardiner-Hill would, after a particular time, on balance of probabilities have gained employment; from then onwards the loss flowing from the unfair dismissal would have been extinguished or reduced by his income from that other source. In fixing the amount to be deducted for failure to mitigate, it is necessary for the tribunal to identify what steps should have been taken; the date on which that step would have produced an alternative income and, thereafter, to reduce the amount of compensation by the amount of the alternative income which had been earned. Since that is the principle of mitigation, a reduction of a percentage of the total sum representing compensation for the whole period is inappropriate."
There is a further matter which causes some unease. On 28th June there was a hearing before a different Industrial Tribunal upon the question of whether the Originating Application was out of time. In the course of considering various factors, that tribunal held as follows:
"4. Following the termination of employment, the Applicant was concerned to claim benefits. She is a single parent with two small children. Her husband is out of the country, and has been refused leave to enter it. The loss of her job meant that it was an obstacle to obtaining leave for him to enter.
. ..7. It is clear from the chronology that there were various delays, periods of time when nothing was being done to advance the case, and the explanations of the Applicant were put forward in her testimony, which we accept. Her immediate concern was the personal effect of losing her job. Furthermore, she was very ill, with depression. It was so bad that at one point she had to hand over her children to a friend to look after for her. She encountered debt, and her telephone was cut off for non-payment, increasing her sense of isolation, and her difficulty in dealing with everyday affairs, such as going to her solicitors."It is unfortunate that the decisions of the two Industrial Tribunals are so far out of harmony.It is contended on behalf of the respondent that this was a decision with a broad brush approach. And that because smaller amounts are involved, it is not a case where upon the basis of Fougère v Phoenix Motor Co. Ltd [1976] ICR 495 the EAT involved. It is said that the amount involved must be trifling in any event. It is further maintained that the tribunal having found that there was no serious attempt to seek alternative employment is entitled to reach the view that no sum should be paid. Finally, it is said, that questions of mitigation are questions of fact for the Industrial Tribunal and should not be disturbed by the appellate court save where there is a clear error of law.We are unanimously of the view that in relation to mitigation there is an error of law which we have indicated above.We have been urged to substitute our own finding in relation to a period during which even if the appellant had been diligently seeking work she would not have obtained it. We were further invited to make an award upon that basis. We are unanimous in rejecting that application, although it has the attractions of speed and economy. It was not proposed to call any evidence but to base any such calculation on matters agreed between the parties.Accordingly the remedies hearing will be remitted to a differently constituted tribunal.