ALVIS VICKERS LIMITED v MR D B LLOYD [2005] UKEAT 0785_04_0508

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2005] UKEAT 0785_04_0508Case No Appeal No. EAT/0785/04Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
ALVIS VICKERS LIMITEDAPPELLANTMR D B LLOYDRESPONDENT
Before
His Honour Judge J R ReidDate 5 August 2005
[1]APPEARANCES For the Appellant MR GAVIN MANSFIELD (of Counsel) Instructed by: EEF Broadway House Tothill Street London SW1H 9NQ For the Respondent MR D B LLOYD (In person) SUMMARY Respondent dismissed for redundancy. Procedure unfair in that the appeal process was not properly conducted. Employment Tribunal made no Polkey deduction. On proper analysis of fact if a fair procedure had been adopted Respondent would still have been dismissed and at the same date. Therefore there should be 100% reduction. HIS HONOUR JUDGE J R REID QC This is an appeal against the decision of an Employment Tribunal held at Newcastle upon Tyne on 29 and 30 June 2004 by which the Tribunal held the Applicant, Mr Lloyd, had been unfairly dismissed by the Respondent, Alvis Vickers Ltd, ("the Company") and awarded him £55,000 compensation.[2]Mr Lloyd was one of the nine export managers employed by the Company which manufactures armoured vehicles. His area was Greece, Cyprus and Portugal and he had been employed by the Company for eight years. In early 2004 the Company decided that it required to make savings and could no longer justify having nine export marketing managers. Mr Lloyd was identified as potentially redundant because "the potential for meaningful new business in Greece, Cyprus and Portugal was limited", there was insufficient work to sustain Mr Lloyd's role and his overall workload was not as heavy as the other international managers. The Company decided that Mr Lloyd was to be a pool of one so far as consideration of redundancy was concerned, and that it was not appropriate to create a larger pool of all the export managers. It also decided not to ask for voluntary redundancies amongst the other managers because of the value that it placed on retaining those managers in place (particularly given the sensitive nature of the business and the importance of the managers good relations with their customer governments) and the Company's perception (based on the contact of Mr Maiden, the sales and marketing manager, with the export managers) was that none of the other managers would wish to take voluntary redundancy. At the same time the Company was engaged in a redundancy programme which was likely to make a substantial number of other workers compulsorily redundant. A general invitation to apply for voluntary redundancy was issued but none was specifically addressed to the export managers.[3]Mr Lloyd was called to a meeting with Mr Maiden on 29 January 2004 and told his job was at risk of redundancy. Following the meeting Mr Maiden was abroad on business, but by 13 February he had returned and there was a further meeting at which he was told there were no other management positions for which he was qualified. Mr Maiden conducted that meeting with the benefit of guidance notes provided to him for the occasion by Mr Lowry, the personnel manager. Mr Lowry was junior to Mr Maiden. By a letter dated 16 February 2004, handed to him on 19 February, Mr Lloyd was given written notification of his redundancy. The letter gave him a right of appeal though he was not so entitled either by contract or by statute to an appeal.[4]Mr Lloyd appealed against his dismissal and the appeal was heard by Mr Lowry. Mr Maiden was present to state his case and then remained with Mr Lowry while he was deliberating. Mr Lowry's notes stated "having discussed the basis of the redundancy, the decision was to uphold the appeal." Mr Lloyd's dismissal took effect on 27 February. He was given pay in lieu of notice and his redundancy payment.[5]The Employment Tribunal took the view that the dismissal was for redundancy but that it was unfair. They accepted that making Mr Lloyd a pool of one was within the band of reasonable responses, but then went on to make the following findings:(1) that whilst "recognising the value which the Company placed on the other managers remaining in place" it was not within the band of reasonable responses not to see whether any of the other export managers was prepared to take voluntary redundancy, especially since (a) some were older than Mr Lloyd and (b) there was a "failure to operate the requirements of business plan to identify successors for the export managers";(2) that it was beyond the band of reasonable responses to confine the search for alternative positions to positions of the same level and not to consider a more junior post;(3) that there were grave doubts as to "the efforts that truly went into consultation here";(4) that the appeal process did not give rise to a "genuine, independent and fair-minded review of the decision to dismiss". The Tribunal went on to say they had to consider the possibility of a Polkey (see Polkey v AE Dayton Services [1987] IRLR 503 ) reduction but stated "Our conclusion is it would be too speculative for us to assess what the chances would have been of Mr Lloyd keeping his job had a fair procedure been adopted". They therefore made no deduction.[6]The Company attacked the decision of the Tribunal both on its finding that the dismissal was unfair and on its failure to make a Polkey reduction, which it was submitted should have been 100 per cent.[7]So far as the attack on finding that the dismissal was unfair was concerned , the Company dealt separately with the findings in respect of the selection process and of the appeal process.[8]As to the selection process the Company submitted that, having found the decision not to put all the export managers into a selection pool with the other export managers was not unreasonable, it was perverse or wrong in law for the Tribunal to find that it was unreasonable not to take adequate steps to canvass the possibility of voluntary redundancies. It was submitted that, whilst expressed in terms of reasonableness, the Tribunal effectively substituted its own view for that of the employer. If (as the Tribunal accepted) the Company was justified in seeking to preserve relationships in areas other than Mr. Lloyd's, it would not have been in its interests to seek voluntary redundancies from those staff whom it was seeking to retain. From the Company's point of view, it needed to make one redundancy in the area where it had lost business, and wished to retain its other export managers in their existing places. To have sought voluntary redundancies amongst those managers would have defeated this objective.[9]So far as the Tribunal relied on the ages of the other export managers, there was (it was submitted) no reason to assume that just because of their age, any export manager would have been interested in voluntary redundancy, nor was there any evidence that this was the case. Indeed the only evidence was to the contrary. If the Tribunal's rationale was that older members of staff might wish to take voluntary redundancy, and this would have avoided compulsory redundancy for Mr. Lloyd, this was flawed. Mr. Lloyd was himself 59 and only three members of staff were older, all in areas where Mr. Lloyd did not have experience. It would not have suited the Company's business interest in stability and maintaining contacts to seek a volunteer who would be replaced by Mr. Lloyd. Mr. Lloyd would not himself be much younger than the person he replaced, and would lack the experience and contacts in the relevant area.[10]As to consultation: there were two meetings, and Mr. Lloyd had time to consider his position, and raise the points he wished to rely on between the two meetings. There was, it was said, no evidence that there was any lower ranking position available or that Mr Lloyd had indicated any interest in any such position.[11]So far as the appeal was concerned, the conclusion that the appeal did not give rise to a genuine, independent and fair-minded review of the decision to dismiss was said to be perverse. The Tribunal did not find that Mr. Lowry was in fact influenced in his decision making, nor that he did not give proper consideration to the issues raised in the appeal. Mr. Lowry gave unchallenged evidence that he was not influenced in his decision by Mr. Maiden. An unchallenged explanation was given for why Mr. Lowry handled the appeal, and why Mr. Maiden was present On the basis of this evidence, it would be reasonable for Mr. Lowry to hold the appeal, and for Mr. Maiden to be present. It was submitted that the Tribunal erred in law by applying too strict a procedural standard for an appeal It applied formal standards that may be applicable to a disciplinary appeal to an appeal in the very different context of selection for redundancy. Furthermore, even in the context of a disciplinary appeal it is not necessary that the manager hearing an appeal should insulate himself from the manager who has recommended or implemented a dismissal: Rowe v Radio Rentals Ltd [1982] IRLR 177. The manager hearing the appeal is still essentially exercising a managerial rather than a judicial function.[12]The Company in addition submitted that the Tribunal erred in finding that if an employer offers an appeal in circumstances where it was not obliged to, the appeal must be procedurally fair. There is no obligation, as a matter of general fairness, to provide an appeal against a redundancy decision (see Robinson v Ulster Carpet Mills Ltd [1991] IRLR 348), and there was no contractual entitlement to an appeal, nor was any appeal provided by any policy of the Company It could not be right for an employer to be placed in a worse position by offering a defective appeal hearing than if it had not allowed an appeal at all. The Tribunal erred in failing to apply the band of reasonable responses test to the procedure applied in the appeal. The standard against which the procedure in handling the redundancy should have been measured was the band of reasonable responses as in the analogous situation of a misconduct investigatory procedure: Sainsburys Supermarkets v Hitt [2003] IRLR 23 CA. Further, if the Tribunal's decision is to be taken as a decision that the Company acted outside the band of reasonable responses in the conduct of the appeal, it was said that the decision was perverse.[13]Mr Lloyd in response said the export managers were primarily marketing people and had transferable skills. He himself had been transferred from selling in South America to Greece when a colleague fell ill and subsequently died. It was unfair to have selected him when there were other managers who had spent less time with the Company (including the person who had taken over South America whom he regarded as less well-qualified) and there were three mangers who were older than him, one of whom was past retirement age. The question of whether he would have been prepared to take a junior job was never raised and even though the other jobs available were technical jobs for which he was not qualified, there was always the possibility of retraining him.[14]In our view the Company's submissions as to the Tribunal substituting its own judgment for that of the employer are well-founded. The Tribunal accepted that the decision to place Mr Lloyd in a pool of one was within the reasonable range of decisions. Having so found, it was then illogical for the Tribunal to proceed to hold that the Company's failure to seek voluntary redundancies amongst those people whom the Company had decided it wished to retain was outside the band of reasonable responses to the situation in which it found itself. In our view the Tribunal in so doing was substituting its own judgment for that of the Company.[15]As to the Tribunal's findings as to consultation, the Tribunal was entitled to observe that they had grave doubts as to the efforts that truly went into the consultation process, but it does not appear that this was the basis on which they found that the dismissal was unfair.[16]As to the apparent failure to consider or offer other jobs, the Tribunal's view was that it was beyond the range of reasonable responses to assume that Mr Lloyd would not have been interested in a more junior position. As a general rule where an employee in a senior position who is being made redundant is prepared to take a more junior position, he ought in fairness to make this clear at an early stage so as to give his employer an opportunity to see if it is a feasible solution: see Barratt ConstructionLtd v Dalrymple [1984] IRLR 385. This general rule is not a hard and fast one: see Dial-A-Phone v Butt (unrep, 30 Jan 2004). As Bean J pointed out in Lionel Leventhal Ltd v North (unrep, 27 October 2004) it is a question of fact. Among the possibly relevant factors he mentioned were whether or not there was a vacancy, how different the jobs are, and the difference in remuneration. The problem in this case is that because Mr Lloyd never raised the question of accepting a more junior post at any stage before the Tribunal hearing (or, so far as the notes of evidence go, at the hearing), there was no evidence that there were any more junior jobs available for which Mr Lloyd was qualified and it was not possible to investigate whether he would have been able or willing to take any such post. In our judgment it was simply not open in those circumstances for the Tribunal to hold that the dismissal was unfair because of the Company's failure to consider alternative employment for Mr Lloyd beyond equivalent positions.[17]So far as the appeal process was concerned, whilst there was no obligation on the Company to allow an appeal to Mr Lloyd, in our view once the Company had decided to do so and Mr Lloyd had entered into the appeal process, it was incumbent on the Company to conduct the appeal process properly. The appeal process had, in the words of the Tribunal, to "be fair and procedurally sound". Whether this obligation is analysed in terms of a consensual variation of the terms of Mr Lloyd's contract of employment or in terms of estoppel does not seem to us to matter. We reject the suggestion that the Company could permit an appeal process but then conduct it in a manner which was unfair and procedurally unsound.[18]The Tribunal found that the appeal was unfair and procedurally unsound. It is true that it had evidence from Mr Lowry that he was not influenced in his decision by Mr Maiden, and that Mr Lloyd (who was appearing in person) did not challenge that evidence, but that did not oblige the Tribunal to accept the evidence. It is clear it did not. It is impossible to say that this decision was incorrect in law or perverse. Mr Lowry was junior to Mr Maiden. It was he who had advised Mr Maiden on the procedure to be adopted in making Mr Lloyd redundant. He conducted an appeal in which Mr Maiden presented the Company's view. Mr Maiden then stayed with him while he made his decision. His contemporary note was "Having discussed the basis of BL's appeal, the decision was to uphold is redundancy". This hardly suggested an independent exercise of judgment, what ever explanation Mr Lowry gave of it to the Tribunal. It is hardly surprising the Tribunal formed the view that the appeal did not give rise to a "genuine, independent and fair minded review of the decision to dismiss."[19]It follows that the Tribunal was entitled to hold, as they did, that the dismissal was unfair, though only by reason of the failure to provide a fair appeal process and not for the other reasons relied upon by the Tribunal. This leads on to the question of the Polkey reduction.[20]On behalf of the Company it was submitted that the Tribunal was wrong to say that it would be too speculative to assess the chances of Mr. Lloyd keeping his job had a fair procedure been adopted and therefore that it would not be just or equitable to make a Polkey reduction. If the Tribunal had addressed the question raised in Red Bank Manufacturing Ltd v Meadows [1992] IRLR 209 , it could only properly have concluded that there was no alternative offer of employment that would have been made if a fair procedure had been followed. On the evidence available to the Tribunal, the only proper findings open to it were that: no export manager had come forward, for voluntary redundancy. There were no posts available other than technical posts for which the Mr. Lloyd would not have been suitable. Mr. Lloyd would not have taken a non-managerial post. The Tribunal erred in failing to make such findings, or in the alternative, its failure so to find was perverse. The only appropriate finding for the Tribunal was that there should have been a 100 per cent Polkey reduction. Mr Lloyd is response said that he would have been prepared to take any job. Thus what would have happened if the Company had acted properly was entirely hypothetical.[21]The Tribunal referred itself to King v Eaton No.2 [1998] IRLR 686, but gave no substantial reasons as to why it felt that assessment was too speculative. It did not set out which elements of the dismissal process were so flawed that it could not reconstruct what might have happened. We have to consider the question against the background that we have decided that the only basis on which the Tribunal was justified in holding the dismissal was unfair related to conduct of the appeal.[22]The Tribunal had found that there was a diminution in the need for an employee as export manager to cover the Greek territory; the Company had an interest in not changing export managers unless there were good business interests or reasons for doing so, and that the decision to put Mr. Lloyd in a pool of one was not outside the band of reasonable responses. If Mr. Lloyd was being considered (fairly) in a pool of one, the range of possible outcomes was very narrow, and assessment as to the outcome of a fair procedure was easily possible. The Tribunal did not to address the question of what alternative positions would have been open to Mr. Lloyd once his position as export manager for Greece was redundant.[23]In the circumstances, the only finding that could be made was that if a fair procedure had been followed, Mr. Lloyd could only have remained in the Company's employment if either another export manager had chosen voluntary redundancy; or there had been a more junior post available, and Mr. Lloyd had been willing to take it. The evidence on voluntary redundancy was that volunteers across the business were sought and that no managers came forward and that no managers had indicated they were willing to retire. There is no evidence that any export manager had indicated the desire to retire at the time. As to suitable alternative employment: there are no findings in the Decision as to what alternatives were available. The only evidence was that the only other management positions available within the Company were of a technical nature for which Mr Lloyd would not have been qualified. There was no evidence that Mr. Lloyd would have accepted a non-managerial post, or that any such posts were available for him.[24]In Red Bank at para 10 Tucker J said:
"However, it seems to us that since the decision in Polkey it is necessary for a Tribunal when calculating the amount to be awarded for compensation to ask itself this two-stage question: if the proper procedure had taken place, would it have resulted in an offer of employment? This was the question to which the Tribunal did address themselves in the earlier hearing, and to which they gave the answer that it might have done so. What the Tribunal failed to do, and what in our view they should have done, was to go on to consider first what that employment would have been, and second what wage would have been paid in respect of it."
[25]In the present case it seems to us that the proper answer to the first part of the question is that on the material before them the Tribunal was obliged to find there was no prospect of Mr Lloyd obtaining other employment with the Company either as an export manager or in any other capacity. It should therefore have held that the Polkey reduction should be 100 per cent.[26]It follows from this conclusion that given the payments already made to Mr Lloyd in respect of pay in lieu of notice and redundancy payment there is no further sum due to him. We therefore allow the appeal to the extent of discharging the order that the Company pay Mr Lloyd £55,000 compensation. The declaration that he was unfairly dismissed stands.