ALBION HOTEL (FRESHWATER) LTD v MR M MAIA E SILVA MRS L A MAIA E SILVA [2001] UKEAT 375_00_1511

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2001] UKEAT 375_00_1511Case No Appeal No. EAT/375/00Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
ALBION HOTEL (FRESHWATER) LTDAPPELLANTMR M MAIA E SILVA MRS L A MAIA E SILVARESPONDENT
Before
His Honour Judge D SerotaLord Davies of CoityDate 15 November 2001
[1]APPEARANCES For the Appellant MR CHRISTOPHER NOLAN Director Appellant Company For the Respondent MR TIMOTHY PITT-PAYNE (of Counsel) Instructed by: Messrs Bond Pearce Solicitors Town Quay House 7 Town Quay Southampton SO14 2PT JUDGE D SEROTA QC This is an appeal by Albion Hotel (Freshwater) Ltd from a Decision of the Employment Tribunal sitting at Southampton, chaired by Mr I A Edwards, which was promulgated on 31 January 2000. The hearing lasted some three days, and Mr and Mrs Silva were represented by Counsel and Albion Hotels by its solicitor. The Tribunal decided that the Applicants had been unfairly dismissed for asserting that the Respondent had infringed a statutory right, namely its failure or refusal to pay a bonus which amounted to an unlawful deduction of wages. Unfair dismissal was, therefore automatic because it arose as a result of the breach of a protected right. We shall refer to the parties as Mr and Mrs Silva and Albion Hotel.[2]A further hearing took place on 24 March 2000, in relation to the question of remedy. Substantial compensation was awarded to Mr and Mrs Silva.[3]The factual background to the proceedings is as follows. Albion Hotels owns a hotel of that name at Freshwater on the Isle of Wight. Mr and Mrs Silva were employed as managers of the hotel on 20 April 1997. Their contract of employment entitled them to a net monthly salary of £1000 together with a bonus calculated by reference to savings on the "per person average bed night cost". The bonus payments were to become due and to be paid with the salary cheque of 31 December of each year.[4]When Mr and Mrs Silva became managers of the Albion Hotel it had both AA and RAC accreditation. The accreditations were of importance to the commercial success of the hotel. However both accreditations were lost in the latter part of 1997. There was a dispute between the parties as to the reasons for the loss of accreditation. This dispute was not resolved by the Tribunal as it was unnecessary to its Decision.[5]The directors of Albion Hotels received complaints from customers as to standards at the hotel, and these were raised with Mr and Mrs Silva from the summer of 1998 onwards. However, over New Year 1999, two directors of Albion Hotels, Mr and Mrs Nolan, stayed at the hotel. The Tribunal concluded that Mr and Mrs Nolan believed there were a number of matters in respect of which Mr and Mrs Silva were failing as managers, but took no serious action to address the situation.[6]The hotel certainly did not flourish. Indeed in January 1999, the directors received an auditors' report showing that cash takings were down for the year by some two thirds, compared with the preceding year.[7]As we have mentioned, Mr and Mrs Silva were entitled to the opportunity of earning a bonus. The bonus should have been paid by the end of December, but there was no agreement between the parties as to whether any bonus had been earned. A meeting took place on 13 January 1999 involving Mr and Mrs Silva, Mr Nolan and Mrs Philp (another director). Mr and Mrs Silva were asserting that a bonus was due to them, but Mr Nolan and Mrs Philp expressed the view that no bonus was likely to be payable on the figures. On 15 January Mr Nolan wrote to Mr and Mrs Silva and made reference to the bonus. Mr Nolan expressed the hope that Mr and Mrs Silva would remain at the hotel. A further meeting took place between the parties on 25 January 1999 when the bonus was again discussed. The Tribunal found that a decision was taken to dismiss Mr and Mrs Silva at that point in time by Mr Nolan, but the decision was not implemented until 10 February 1999, when new managers had been found.[8]A letter from Albion Hotel's solicitors dated 16 March 1999 gave the reason for dismissal as poor management.[9]Because Mr and Mrs Silva had not been employees for the requisite period of time they could not make a claim for unfair dismissal unless they could demonstrate that the dismissal was for infringement of a protected right. Section 104 of the Employment Rights Act treats a dismissal as automatically unfair if the reason (or if more than one, the principal reason) for the dismissal is that the employee had alleged that the employer had infringed a relevant statutory right. An unlawful deduction from wages, contrary to Section 13 of the Employment Rights Act is a relevant statutory right, and a bonus is included within the meaning of "wages" by Section 27(1)(a). The Tribunal also had in mind Section 104(2) of the Act which provides as follows:
"(2) It is immaterial for the purposes of subsection (1) - (a) whether or not the employee has the right, or (b) whether or not the right has been infringed; but, for that subsection to apply, the claim to the right and that it has been infringed must be made in good faith."
[10]The appeal raises three issues. The first two are issues as to the sufficiency of the evidence upon which the Employment Tribunal reached its conclusion. The third ground of appeal relates to the consideration by the Employment Tribunal of three authorities. These authorities were not referred to by the advocate who appeared before them. The Employment Tribunal did not invite comment from the advocate on the relevance or application of these authorities.[11]Before we consider the grounds of appeal, we should note that we have been informed that Albion Hotels is insolvent and has ceased to trade. In those circumstances it has been represented by Mr Nolan, rather than by Counsel. Mr Nolan has presented his submissions in a competent and measured way, and we do not consider that Albion Hotels has been disadvantaged in any way by its inability to instruct Counsel.[12]The first ground of appeal is in effect that no facts were found by the Employment Tribunal sufficient to justify the finding that Mr and Mrs Silva had been dismissed for asserting that Albion Hotels had wrongly refused to pay their bonus.[13]Mr Nolan drew our attention to that part of its Decision in which the Employment Tribunal considered the important meeting of 25 January 1999. "45 It was during this meeting that Mr Maia e Silva suggested to Mr Nolan that if they could not agree on the figures, they should ask an accountant or a lawyer to go over the figures with them. 46 According to Mr Maia e Silva, the reply from Mr Nolan was, "If you do that, I will dismiss you" and Mr Nolan added, "I cannot have an employee working for me who is suing me". Mrs Maia e Silva suggested that no one was suing anyone. They were merely suggesting that someone helps with the figures and that "you cannot dismiss someone for that". 47 According to Mr Nolan's evidence, there was a suggestion that someone, for example an accountant, should look at the figures and that he thought that that was a good idea and said so. He denied rejecting the suggestion and denied that he threatened to dismiss them."[14]Mr Nolan also drew our attention to paragraph 51 in which the Tribunal record Mrs Silva's evidence that at the time of her dismissal she asked Mr Nolan why they were being dismissed, and Mr Nolan then said that Mr Silva had been telling people he had not paid a bonus.[15]The Employment Tribunal were scathing about the evidence of both Mr and Mrs Silva and Mr Nolan. Thus, they express "considerable doubts" about the remark alleged to have been made by Mr Nolan which we have just quoted as to the reason for dismissal, and rejected Mrs Silva's evidence in this regard. In relation to the disputed versions of events in January and February 1999, the Tribunal conclude that:
"both sides have gilded the lily in respect of their respective allegations and have quite shamelessly exaggerated their respective cases." (See paragraph 61). The Employment Tribunal rejected Mr Nolan's evidence that the reason for the dismissal was either because of the Silvas' poor management, or their false protestations that they were committed to the Albion Hotel, when in reality they were seeking to purchase another hotel, or an alleged suspicion of theft. On the other hand, the Employment Tribunal found that: "….the allegations which we have heard from the applicants are also completely exaggerated. They are not above denying the receipt of awkward or difficult letters and have had little hesitation in adding to their evidence matters which are self-serving, …………..The applicants would not brook any criticism against them whatsoever and would have us believe that everything in the garden was lovely. This clearly was not the case………"
[16]The Tribunal then concluded at paragraph 74 "Because we feel the applicants' evidence, like that of the respondent's witnesses, is exaggerated, we reject the suggestions by the applicants that Mr Nolan threatened to dismiss them if they referred to the calculation of the bonus to an accountant or lawyer, and similarly we reject the evidence of Mrs Maia e Silva that at the time of her dismissal, Mr Nolan said that the reason was that Carlos had alleged that Mr Nolan had failed to pay the bonus." The Employment Tribunal went on to make this crucial finding at paragraph 76:
"However, having heard the evidence, and having considered the allegations and counter-allegations put by both sides, we are quite certain that the dismissal arose because of the dispute over the bonus and that it was the applicants' suggestion that a bonus of over £100,000.000 was payable to them which was the reason for the dismissal"
[17]Mr Nolan submitted that as the Silvas' evidence for that finding in paragraphs 45 - 47 was rejected in terms, there was no evidence to support the finding at paragraph 76. Mr Pitt-Payne, however, has convinced us that this submission, although superficially attractive, is flawed. He points to paragraphs 32 - 44 of the Decision of the Employment Tribunal which record evidence that is largely non-controversial or is Mr Nolan's own evidence. Mr Pitt-Payne points out that the Employment Tribunal rejected in terms (as it was entitled to) Mr Nolan's evidence that the reason for the dismissal of the Silvas was their mismanagement. It also rejected the suggestion that subsidiary reasons for their dismissal were the fact that they made untrue statements as to their loyalty to Albion Hotels, or the suspicion of theft. There is no appeal against those findings. In the circumstances, and as it was clear on the uncontroversial evidence that Mr and Mrs Silva continued to demand payment of their bonus, and complained that it had not been paid, the Employment Tribunal was entitled to find that that was the reason for the dismissal and that it was in breach of the protected right. It thus made no difference, submitted Mr Pitt-Payne, that the Employment Tribunal had rejected substantial portions of the evidence both of Mr and Mrs Silva and Mr Nolan.[18]We have come to the conclusion that Mr Pitt-Payne's submissions in this regard are correct. It would undoubtedly have been helpful had the Tribunal perhaps set out a little more clearly, and in somewhat greater detail, the precise facts which it found to support the conclusion in paragraph 76 of the Decision. However, we are quite clear that the factual basis upon which it made its findings and its reasoning, is sufficiently clear and that the appeal on the first ground, therefore, must be dismissed.[19]The second ground of appeal relates to the finding by the Employment Tribunal that Mr and Mrs Silva had acted in good faith in making the claim that Albion Hotels had wrongfully failed or refused to pay their bonus. As we have noted, by virtue of Section 104(2) of the Employment Rights Act it matters not whether Mr and Mrs Silva were in fact entitled to the bonus, if the reason for their dismissal was that they had complained about its non-payment, provided their claim to the bonus and its non-payment were made "in good faith".[20]The Tribunal came to this conclusion at paragraph 107:
"We have no doubt that the applicants believed they were entitled to a substantial bonus, and that they were acting in good faith in that claim, however misguided they may have been."
[21]Mr Nolan submits that the claim to the bonus was grossly exaggerated, if there was any claim at all, and that the Employment Tribunal failed to consider in determining whether Mr and Mrs Silva acted in good faith, what bonus, if any, would have been due to them, having regard to the somewhat unsuccessful trading of the hotel. Mr Pitt-Payne submits that the question of good faith was essentially a finding of fact for the Employment Tribunal .[22]Again, it seems to us that it would have been helpful had the Employment Tribunal set out the factual basis for its reasoning in somewhat greater detail. However, it is apparent from paragraph 107 that the Employment Tribunal took into account the fact that Mr and Mrs Silva may have been misguided. In our opinion it was not necessary for the Employment Tribunal to find if any bonus was due to the Silvas. It was sufficient if the Silvas believed in good faith that a bonus was due. The question, of whether they were acting in good faith or not was essentially a matter of fact for the Employment Tribunal and the Employment Tribunal clearly concluded that they were acting in good faith. There was clearly material for the Employment Tribunal which would justify that finding and as we have said, the question of whether Mr and Mrs Silva acted in good faith was a question of fact for the Employment Tribunal. The Employment Tribunal had the benefit of seeing and hearing Mr and Mrs Silva. In the circumstances, therefore, this ground of appeal cannot succeed.[23]The third ground of appeal is this: the Employment Tribunal in its determination had regard to the cases of Smith v BTS Coaches (unreported) 40142194, Burton v Intercity Midland Main Line (unreported) 64360/94 Williams v Asda Stores (unreported) 306/96 .[24]The Employment Tribunal had regard to these cases in determining "what it is necessary for an employee to assert" (see paragraph 100 of the Decision) in relation to the allegation that the employer has infringed a statutory right. The Tribunal at paragraph 102, having considered the decisions in Smith v BTS Coaches and Burton v Intercity Midland Mainline referred to the fact that Mr and Mrs Silva had claimed they were owed a bonus, but:
"What is not quite so clear is whether this amounts to an allegation that the applicant had infringed the statutory right."
[25]The Employment Tribunal went on to say at paragraph 103, having again referred to Smith v BTS Coaches and Burton v Intercity Midland Mainline:
"103.….….it appears that in some circumstances a request for a matter which amounts to a statutory right is merely a request and no more, whereas in other circumstances a request which is persisted in might amount to an assertion that the right has been infringed. It is a very fine line between the two." "104. We note from Section 104(3) that the allegation does not have to be spelt out precisely by reference to the section of the Act which it is alleged has been infringed, but nevertheless that the employee must make it reasonably clear to the employer what the right claimed to have been infringed was. 105. In this particular case, it was quite clear to Mr Nolan that the claim related to the bonus. In accordance with the contract, the bonus was due and payable with the applicants' wages due at the end of December 1998. There was, therefore, an existing deduction from the wages of the applicants. 106. The only issue is whether, by persisting in their claim for a bonus, the actions and words of the applicants amounted to an assertion that their statutory right had been infringed, or whether this was merely a discussion about a bonus and how it should be calculated."
The Employment Tribunal then, at paragraph 107, as we have already noted, went on to find that the applicants believed they were entitled to a substantial bonus and were acting in good faith. At paragraph 108, the Employment Tribunal continue:
"108. We have thought long and hard about this issue and we must confess that we do not find it easy. 109. Section 104 seems to be rather difficult to apply, and the various reported and unreported cases are not necessarily easy to reconcile. 110. As we have stated above, there seems to be a very fine line between alleging that you have a right (in this case to a payment of a bonus) and alleging that that right has been infringed. 111. Having considered the evidence and having given this whole matter very careful consideration, we have finally reached the conclusion that what took place at the two meetings on 13 and 25 January 1999, and in particular at the second meeting, did amount to an assertion that the respondent had infringed the applicants' statutory right, namely the payment of a bonus which, according to their contract, was due on 31 December 1998, and that it was that assertion which was the reason for the dismissal."
[26]The three authorities to which we have referred were not cited by Counsel for Mr and Mrs Silva or the solicitor for Albion Hotels. They were evidently considered by the Tribunal after the conclusion of submissions. The Employment Tribunal did not draw these authorities to the attention of the parties or their advocates before concluding their Decision.[27]Mr Pitt-Payne submits, and it is not suggested, that the interpretation of the authorities by the Employment Tribunal was wrong. Mr Pitt-Payne then submitted that no suggestion is made that had the parties been alerted to those authorities and made submissions upon them, the Employment Tribunal would have dealt with the matter differently. It may be, however, in our opinion, that had the authorities been considered by the advocates, submissions would have focused on the relevant evidence, and the findings of fact that the Employment Tribunal should have made. We cannot say what the decision may have been in those circumstances. Mr Pitt-Payne also suggests that the proper course to have adopted, if Albion Hotels was dissatisfied at not having been able to make submissions on those authorities, was to have sought a review of the Decision of the Employment Tribunal.[28]Mr Pitt-Payne was not able to draw to our attention any authority as to the propriety of a Court or a Tribunal relying upon cases which have not been cited by the parties, but which the Court or Tribunal considers to be relevant and material to its decision.[29]Nothing that we say hereafter should be thought to have any bearing on the case where a Court or Tribunal refers to an authority not cited by the parties, which is necessary to explain the background or some point of law that is uncontroversial.[30]It was the experience of His Honour Judge Serota at the Bar that whenever a Court wished to refer in its judgment to an authority it considered to be material and relevant, it would not do so without drawing it to the attention of the parties and inviting them to make submissions upon it. We believe this to be a fairly universal practice. However, Mr Pitt-Payne submits that it is no more than good practice, and is not a rule of law.[31]We would refer to paragraph T901 of Harvey on employment law, where the learned authors consider the duty of the Tribunal to act fairly. Under the heading "Opportunity to be heard" one finds this at paragraph 901….. "the principle also means that the tribunal itself must not decide an issue in the case without having given both parties the opportunity to deal with it." Reference is made to the decision of Hereford and Worcester County Council v Neale [1986] IRLR 168 at 175, CA) where, for example, in cases of unfair dismissal, the issue of contributory fault is overlooked at the hearing and it is necessary for the Tribunal to make a finding of fault :
"the correct course is to recall the parties before it reaches a decision in order to give them the opportunity to make submissions and call evidence if they wish. What must not be done is to make the finding without such an opportunity having been given."
At paragraph 902 we find this:
"If the point is likely to be decisive of the case (eg because it goes to the question of jurisdiction), yet is has not been raised by the parties, then it is all the more vital that they should be alerted in clear terms of the importance which the tribunal attaches to it."
[32]Harvey draws attention to the decision of Eltek (UK) Ltd v Thomson [2000] ICR 689 in support of the proposition that:
"…..the fact that a tribunal is in breach of its duty not to decide matters that have not yet been raised in argument and on which neither party has been given an opportunity to comment will not always result in the decision being set aside."
Mr Pitt-Payne drew our attention to that decision of the Employment Appeal Tribunal chaired by Lord Johnston. In that case, the applicant made a complaint that she had been dismissed for a reason related to pregnancy, contrary to Section 99 of the Employment Rights Act 1996 . The Employment Tribunal heard a preliminary issue to determine whether the applicant was an "employee" within the meaning of Section 230(1) of the 1996 Act. The Tribunal found she was not an employee, but that she was a contract worker, within the meaning of Section 9 of the Sex Discrimination Act 1975 and on that basis, her claim against her employer was permitted to proceed. On appeal to the Employment Appeal Tribunal, the employer contended that the Tribunal should not have added a claim under Section 9 of the 1975 Act. The Employment Appeal Tribunal dismissed the appeal on the basis that the introduction of the claim under the Sex Discrimination Act 1975 was merely a different formulation, albeit under a different provision, of the basic claim made by the applicant, and had not added any new factual element in the case. The Employment Appeal Tribunal then went on to hold that although there was prejudice to the employer in having to face up to a claim it was not prepared to meet when introduced, as the matter was still at a preliminary stage, the employer would be able to meet the claim on the final hearing and that the prejudice to the employee, in being debarred from proceeding with the claim, far outweighed the prejudice of the employer. The decision not to set aside the original order was thus based on facts quite different to those in the present case.[33]We note that the Employment Appeal Tribunal found specifically that Section 9 was "merely a re-labelling, albeit by a different section" of the issue already before the Tribunal. The Employment Tribunal regarded it as "highly significant" that the Appellant would not have complained if the original claim had been based in the alternative. The Employment Appeal Tribunal, in the circumstances, dismissed the appeal but concluded at paragraph 15 as follows:
"we wish to emphasise strongly that we deprecate the way in which this matter has arisen. We consider that in many cases it would be contrary to natural justice to require a party to face up to a claim introduced for the first time by a tribunal, not having been focused in the hearing but took place before it."
The Tribunal referred to the facts of that case but made clear that :
"we would not, however, like this to be regarded as any form of precedent. We consider the unusual circumstances of this case to be precisely that and would hope that such does not happen again."
[34]We find this guidance of considerable assistance. In our opinion the right to a fair hearing requires notice of all material matters of fact and law to be given to the parties, if the Employment Tribunal wishes to make determinations on points not argued by the parties. The consideration of the three authorities to which we have referred by the Employment Tribunal in the present case was material to their Decision. Even though no complaint was made as to the principle to be deduced from these authorities, the application of that principle to the facts was highly material to the Decision. The parties were not able to make submissions as to the relevant acts that were material to the somewhat fine distinction between asking for a bonus (which would not be regarded as an assertion of a breach of the statutory right) and asking persistently which might amount to an assertion of breach of a statutory right. We can well understand how Albion Hotels is aggrieved at having been deprived of the opportunity to make submissions in this regard.[35]In our opinion, where an Employment Tribunal considers that an authority is relevant, significant and material to its decision but has not been referred to by the parties, it should refer that authority to the parties and invite their submissions before concluding its decision. This is more than mere good practice. Failure to do so may amount to a breach of natural justice and of the right to a fair hearing. The failure of the Tribunal to invite submissions from the parties on the three authorities was doubtless inadvertent. The Employment Tribunal may not have recognised the particular significance it attached to the authorities, and the balancing exercise it undertook in relation to the relevant facts. However, the consideration of the authorities played a significant and material part in the decision. It seems to us accordingly, that there has been significant procedural unfairness and this ground of appeal succeeds.[36]We have considered with very great care the appropriate Order to make. In many, if not in most cases, where there has been a procedural defect as occurred in this case, the proper course will be to send the case to a differently constituted Employment Tribunal for rehearing. However, in the particular circumstances of the present case, we are not minded to make such an Order. As we have mentioned, Albion Hotels is insolvent. It is unlikely that Mr and Mrs Silva will see very much, if any, of their compensation. In those circumstances we are most reluctant to put the parties to the expense of a re-hearing, or indeed, to impose such a re-hearing on an Employment Tribunal, when the results seem likely to be largely academic. In those circumstances and exceptionally, we shall remit the matter to the Employment Tribunal to enable the Tribunal to hear submissions on the three authorities that were not referred to by the parties, and upon any findings of fact, that either party may wish the Tribunal to make in determining the question whether Mr and Mrs Silva asserted that Albion Hotels had infringed a right as opposed to their merely asserting the statutory right.[37]Even though it would have been open to Albion Hotels to have sought a review of the Employment Tribunal's Decision, its failure to do so does not in our opinion preclude its right to appeal.