BRITISH ENGINES LTD v MR MICHAEL WALSH [2001] UKEAT 68_00_2102

EMPLOYMENT APPEAL TRIBUNAL

BAILII case number: [2001] UKEAT 68_00_2102

Case No Appeal No. EAT/68/00 & EAT/553/00

Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

Between

BRITISH ENGINES LTDAPPELLANT

MR MICHAEL WALSHRESPONDENT

Before

Mr Justice Lindsay

Date 21 February 2001

[1]APPEARANCES For the Appellants MR RICHARD LINSKELL (Solicitor) EEF Broadway House Tothill Street London SW1H 9NQ For the Respondent MR JAMES RICHARDSON (of Counsel) Messrs Swinburne Jackson Solicitors Cestria House High Clare Chester-le-Street DH3 3PY MR JUSTICE LINDSAY (PRESIDENT) : We have before us by way of a full hearing the appeal of British Engines Ltd in the matter Walsh v British Engines Ltd . Before us today Mr Linskell has appeared for the appellant, British Engines, and Mr Richardson for Mr Walsh, the applicant below. The chronology of the matter is this: on 29th June 1999 Mr Walsh presented an IT1 for unfair dismissal and redundancy. He claimed, and it seems to have been a proper claim, that he had worked for the company for 41 years. He had, he said, been singled out for redundancy and, indeed, he asserted that there was no true redundancy. He also asserted that having been assigned to his particular most recent job he had been assured that he would not be made redundant. The dismissal was on 5th April 1999.

[2]On 22nd July 1999 British Engines put in their IT3. They said, amongst other things:

"Consultations were commenced with the applicant on 26 March 1999. There followed a series of discussions with him culminating in the decision on redundancy being firmed up. The applicant was offered the opportunity to appeal against this decision but this was not taken up. The respondents also considered the possibility of alternative employment for Mr Walsh but none was available. The respondents submit that dismissal of the applicant by reason of redundancy was fair and reasonable in all the circumstances. The respondents specifically deny the assertion by the applicant in section 11 of the originating application that two other employees are doing his old job."

[3]Against that background, the matter went forward to a hearing at the Employment Tribunal at Newcastle-upon-Tyne under the chairmanship of Mr J Hunter and the hearing took place on 10th November 1999. On 29th November 1999 the decision was sent to the parties and it related only to liability and it was:

"The unanimous decision of the Tribunal is that: (1) The claim by the applicant that he was unfairly dismissed is well-founded. (2) The parties shall report to the Tribunal within 14 days whether a settlement has been reached, failing which the case shall be listed for a remedies hearing."

They did not agree terms

[4]On 24th December 1999 a Notice of Appeal was put in as to liability. That is the part of the case with which we now deal.

[5]So far as concerns the facts found, for immediate purposes we do not need to set them out very fully, but there are some that need to be in mind. The company had eight divisions. The foundry was the smallest division. Mr Walsh worked in the foundry. He was the project engineer. It is said that he was the sole post-holder, the only person doing that type of job. The foundry was making substantial losses both in the financial year to 5th April 98 and to 5th April 1999. In the past the company had absorbed the foundry losses but by 1998 and 1999 the company as a whole was making losses. Accordingly, the Board required savings to be found. Work for the men in the factory was reduced. The personnel director and others discussed possible savings. They concluded that £150,000 could be saved in the foundry by taking certain steps. Those certain steps included making Mr Walsh redundant. The steps were taken. It is implicit in the tribunal's reasons that the proposed steps were taken. But notwithstanding those savings, the division, that is to say the foundry, continued to make a loss. It was against that background the tribunal concluded in their paragraph 23 as follows:

" Conclusions There was a dismissal. The reason for the dismissal was that the respondents needed to find overall savings, including employment cost savings, in the foundry. Because of the falling order book the employer's need for people to work in the foundry diminished. The category of such reason for the purposes of section 98(2) of the Employment Rights Act 1996 was redundancy."

Thus, the tribunal found that the only, or principal reason, for the dismissal of Mr Walsh was redundancy – section 98(2)(a) – and that is by definition a substantial reason of a kind such as may justify the dismissal. There was, in other words, held to be genuine redundancy; that is an inescapable consequence of the tribunal's finding as to section 98(2). Accordingly, the next question for the tribunal was the section 98(4) question which is as follows:

"Where the employer has fulfilled the requirements of subsection (1), the determination of the question whether the dismissal is fair or unfair (having regard to the reason shown by the employer)- (a) depends on whether in the circumstances (including the size and administrative resources of the employer's undertaking) the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissing the employee, and (b) shall be determined in accordance with equity and the substantial merits of the case."

After the passage just read from the tribunal's decision in their paragraph 23, the tribunal continue next to ask themselves whether Mr Walsh's selection for redundancy was reasonable. That is a proper approach under section 98(4). But then they next say this:

"No evidence was given that savings were identified which would address all of the losses being made by the foundry. We note in particular that staffing costs represented only 25% of sales and clearly other significant measures would have to be taken to reduce overheads in addition to redundancy and staff restructuring."

We find those two sentences obscure. It cannot be an observation casting doubt on whether there had been a true redundancy, given the earlier finding that there had indeed been a redundancy and that it was the principal reason for the dismissal of Mr Walsh. What, then, can that mean? It cannot surely mean that if an employer has plans to make savings in several different ways he invariably has to implement all of them simultaneously. Nor is the significance of the passage that the staffing costs represented only 25% of sales understood. It would not, it would seem to us, have been truly material even if it had said that staffing costs were 25% of relevant overheads. But the figure of 25% of sales is entirely perplexing. If the notion intended to be expressed was that the company could and should have made the savings that it hoped to make in other parts of its overall operations, or even in other parts of its foundry operations, other than by dismissing Mr Walsh, then that would represent the tribunal questioning a business decision on matters in respect of which it was unlikely to have had full and adequate information and which a number of cases suggest is not proper territory for the Employment Tribunal to go into.

[6]We have had cited to us in this area James W Cook & Co (Wivenhoe) Ltd v Tipper

[1990] ICR 716

CA , but also one might have in mind the passages in Harvey Volume 1 at section D1 1602 where one finds "It is not open to an employee to claim that the employer acted unreasonably in choosing to make workers redundant. The tribunals will not sit in judgment on that particular decision." In paragraphs 1603 and 1604 there is a long passage which I will not take up time reading but which amplifies, by reference not only to the James W Cook case but to subsequent and indeed, preceding cases, that the tribunal should be loth to intervene in an area which is properly an area for a business decision.

[7]Going back to the passage of the two sentences from paragraph 23, which we have cited, it is far from clear what is truly intended by the tribunal. The passages are, for the reasons we have mentioned, obscure. Indeed, their very obscurity leads to a possibility that the tribunal fails the Meek v City of Birmingham District Council test, in the sense that an appellant wishing to know why he had lost, presented with these sentences, which seem to be regarded by the tribunal as important steps in their conclusions, is faced with sentences which cannot be understood. To that extent the Meek v City of Birmingham District Council test would be failed.

[8]In this part of the argument we do see that there is an error of law which justifies our intervention. It is not the only area that gives rise to serious doubts. The tribunal went on to say, in their paragraph 24:

"No attempt was made to consult with the workforce on the way in which the cost saving exercise should be carried out in so far as it affected staff. …" but Mr Walsh was the only person doing his work to be made redundant. It is arguable that there was no need to consult anyone but him. To attach weight, as it seems the tribunal did, to a failure to consult others when there was no need to consult others, seems to us, an error of law. Then the point is made, again in paragraph 24, as follows: "

The consultation that did take place was short and was conducted after the respondent had identified that the applicant was potentially redundant." The consultation consisted of two meetings, on Friday, 26th March 1999 for half an hour and Monday, 29th March 1999, again for half an hour. That latter meeting then was adjourned for 50 minutes and completed without, it would seem, any further involvement on Mr Walsh's part. The actual dismissal took place on 5th April 1999. No subject is identified by the tribunal as being a subject on which Mr Walsh wished to address the panellists further than he did. No request for an adjournment was recorded. It is said that he did not have the opportunity in the short time available to consult and take legal advice but there is no suggestion that he had asked that he should or that it had been indicated to him that further time would not be permitted. He did have the opportunity to lodge an internal appeal and did not do so. Whether an hour's discussion with a single individual's case can be fairly concluded to be short or not, is, perhaps, not material. What is material is whether the consultation was inadequate or unreasonable and there is no finding as to that, merely that it is short. If, as appears likely, the tribunal held it against the employer that the consultation was short without finding it to have been inadequate or unreasonable, that too, in our view, would be an error of law. As for the sentence or part of the sentence that "the consultation that did take place was not only short but conducted after the respondent had identified that the applicant was potentially redundant" one has to note the word "potentially". To consult a man only after his redundancy has been actually decided upon would manifestly be unfair, but to consult a person only after he has become potentially redundant seems to us a matter which cannot represent a just criticism of the employer's processes and to the extent that it is here included by the Employment Tribunal in its conclusion (and, therefore, must be taken to have been relied upon by the tribunal) that, too, represents, in our view, an error of law. The respondent says that the tribunal should have concluded that the discussion with Mr Walsh was only after the decision had actually been made to make Mr Walsh redundant, but the tribunal do say "potentially redundant" which takes away force from that point. The respondent says in his skeleton argument that the tribunal should have found that the consultation was inadequate, but, again, they held only that it was short. The appellant is justified in requiring us to examine the decision that was made rather than the decision that might have been made.

[9]We have, in our view, identified a number of errors of law in the important section headed "Conclusions". There is no cross-appeal as to there being no true redundancy or that the only or principal reason for the dismissal was something other than Mr Walsh's redundancy. But, whilst we have identified errors of law in the tribunal's reasoning in relation to the section 98(4) part of the case, we feel quite unable to say that the only proper conclusion that the tribunal could have come to was that Mr Walsh had been fairly dismissed.

[10]Mr Richardson has carefully drawn our attention to issues such as the criteria for selection for redundancy; their actual deployment as against Mr Walsh; the degree of consultation that should have taken place and the speed of consultation and the subject of how far alternative employment was truly investigated by the company in relation to Mr Walsh's case. We do not feel able to come anywhere near to a view such that, on setting aside the decision, we would only conclude that Mr Walsh had been fairly dismissed.

[11]Accordingly, we allow the appeal. We set aside the decision, head 1, and we remit to the same tribunal as before, unless that is impossible to constitute or materially impracticable. It will be for them to re-examine the section 98(4) question and to re-express themselves in relation to section 98(4) on the footing that the requirements of section 98(1) were fulfilled by the employer in that it had been shown that Mr Walsh's redundancy was the reason or the principal reason for the dismissal.

[12]If either side wishes to call further evidence on the remitted hearing, they are to apply to the Employment Tribunal for directions. The Employment Tribunal will then be able to consider whether it needs any and, if so, what new or further evidence in order fully to be able to deal with the section 98(4) question which we remit to it. It will be open to the Employment Tribunal to decide to receive no new or further evidence or to regulate what evidence it will wish to receive. Given that the liability hearing was as long ago as 10th November 1999, it may well choose to receive new or further evidence, but that will be entirely a matter for the Employment Tribunal itself. As also will be the degree to which and the manner in which the parties are to be able to refer to what notes of earlier evidence now exist. So the question of what evidence is to be used in relation to the remitted question is very much put back to the same tribunal as before.

[13]Accordingly, we allow this liability appeal and remit as we have indicated.

[14]There was also a remedies decision promulgated on 12th April 2000 after a hearing over some two days split with a big gap between them from 10th November 1999 to 28th March 2000. The Tribunal awarded Mr Walsh £12,000, the then statutory maximum. It seems to us to follow (but we can take this up with Counsel if necessary) from our decision on liability that the remedies decision must equally be set aside, although we would very much hope that (as is, of course, a matter entirely for the Employment Tribunal) if the tribunal finds the dismissal to have been unfair at the remitted hearing, that such parts, if any, of the decision of the 12th April 2000 on remedies as represent incontestable findings of fact should truly inform the negotiations which we would hope would then take place between the parties.

[15]So, as to the liability decision, we allow the appeal and remit as we have indicated and, on the remedies decision, subject to further address from Counsel, we set it aside and simply hope that such parts of it are recognised to be incontestable should inform the negotiations which we would rather hope would take place between the parties.