HABIT DIAMOND LTD v MR IAN STEFFORD [2001] UKEAT 75_00_1801

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2001] UKEAT 75_00_1801Case No Appeal No. EAT/75/00Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
HABIT DIAMOND LTDAPPELLANTMR IAN STEFFORDRESPONDENT
Before
His Honour Judge CollinsDate 18 January 2001
[1]APPEARANCES For the Appellants MR RICHARD LEIPER (of Counsel) Instructed By: Messrs Mace & Jones Solicitors 14 Oxford Court Manchester M2 3WQ For the Respondent NO APPEARANCE OR REPRESENTATION BY OR ON BEHALF OF THE RESPONDENT JUDGE COLLINS CBE : This is an appeal against the decision of an Employment Tribunal sitting at Abergele, whose extended reasons were promulgated on 16 November 1999. They had earlier decided at a hearing in relation to which the summary reasons had been promulgated on 11 June 1999 that the respondent had been unfairly dismissed by the appellants and that, after making an appropriate consideration of his position under Polkey principles, he was entitled to six weeks' net loss by way of compensation.[2]At the remedies hearing he was awarded the sum of £1,689.23 and the appeal relates to one point only. When the appellants dismissed the respondent they paid him, as they were bound to do since they dismissed him without notice, three months' salary in lieu of notice. For reasons which are not clear they paid him that salary gross and not net.[3]The Tribunal decided, for reasons which are set out in some length that the appellants were under a legal obligation to pay him the three months' gross and not net. Accordingly, there was no ex gratia element in the difference between the net pay and the gross pay and therefore, it did not fall to be deducted from the amount of compensation which he was entitled to.[4]At the hearing the respondent's solicitor conceded that if the difference between the net pay and the gross pay for the three months period had been ex gratia it would fall to be deducted and Mr Leiper has satisfied us, from an examination of the decision of the Court of Appeal in Digital Equipment Co Ltd v Clements No.2 ICR [1998] at page 258, that concession was correctly made. Therefore the question for us is whether or not the difference between the net and the gross pay was ex gratia or whether the employers were under a legal obligation to make it.[5]It seems to us, with respect to the tribunal, that the tribunal's reasoning went wrong at a very early stage. At paragraph 2 of the extended reasons they say this:
"Mr Owens for the applicant raises the fundamental point that damages for breach of contract should put the applicant in a position he would be in had the breach of contract not occurred."
[6]We think that is wrong in one crucial respect and that the tribunal's reasoning follows from the error. I quote a familiar passage from Chitty on contracts, dealing with the position of the victim of a breach of contract:
"He is, as far as money can do it, to be placed in the same position as if the contract had been performed."
If the contract had been performed the respondent would have been paid three months' salary net of tax and national insurance.[7]That, in our judgment, is the simple answer to the question which is raised in this appeal. The tribunal allowed itself to be sidelined by arguments about what the respondent's tax insurance liability might have been, had he not gained alternative employment. It seems to us, with respect, that these were not matters for the tribunal to concern themselves with. They were matters for the respondent's tax inspector to consider or otherwise matters not for the tribunal and certainly, matters which the employer could not possibly have in mind when making a payment in lieu of notice. The employer could not know what the employee's tax position would turn out to be.[8]It would be novel in our judgment for an employer making a payment to an employee in lieu of notice to make that anything other than net and we think that, in those circumstances, the tribunal were wrong.[9]We shall allow this appeal. We shall declare that the proper basis for compensation was by deducting from the amount, which the tribunal found due, the difference between the gross and the net payment made to the respondent on termination of his employment and we remit the calculation of that sum to the tribunal in the event that the parties cannot reach agreement.