NSM MUSIC LTD v MR J H LEEFE [2006] UKEAT 0663_05_2006

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2006] UKEAT 0663_05_2006Case No Appeal No. UKEAT/0663/05Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
NSM MUSIC LTDAPPELLANTMR J H LEEFERESPONDENT
Before
Mrs Justice Cox Mr B Gibbs Mr G LewisDate 20 June 2006
[1]APPEARANCES For the Appellant MS S WATSON (of Counsel) instructed by: SFS Legal Ltd The Orchard Naseby Road Leicester LE4 9FH For the Respondent MR S LENNARD (of Counsel) instructed by: Stefanie O'Bryen Solicitors 20 Shirburn Street Watlington Oxfordshire OX49 5BT SUMMARY Unfair Dismissal – Polkey deduction Appeal on basis that Chairman failed to consider whether a Polkey deduction was appropriate in a failure to consult redundancy unfair dismissal. Respondent had been debarred from taking part after late ET3 and Rule 9 decision. Need for care by Tribunals in such circumstances. Appeal on this ground successful. Other grounds alleging insufficient evidence and/or inadequate reasoning all dismissed. THE HONOURABLE MRS JUSTICE COX This is the full hearing of an appeal by the Respondents below against a Judgment of the Reading Employment Tribunal (ET) in which the Chairman, sitting alone on 18 August 2005, decided that the Claimant was unfairly dismissed and awarded him compensation in the total sum of £48,962.48. The Appeal relates only to the quantum of compensation and specifically the compensatory award.[2]The Claimant was employed by the Respondents as a technical sales manager from 17 September 2001 until his employment was terminated on 5 January 2005. The stated reason was redundancy. He was paid three weeks salary in lieu of notice and the effective date of the dismissal was therefore 26 January 2005. By his ET1, presented to the Tribunal on 25 April 2005, the Claimant complained of both unfair and wrongful dismissal. At the time he presented his ET1 he was seeking an order for reinstatement but subsequently he made it clear that the remedy he sought was compensation.[3]There is an unusual procedural background to this appeal, to which it is necessary to refer. The Respondents posted their ET3 to the Tribunal on 26 May 2005, which was the day before the 28 day time limit under the Rules for filing their response expired, on 27 May. It contained a substantive defence to the claim. The Respondents asserted that the dismissal was fair because there was a genuine redundancy and they explained why consultation was inappropriate in the circumstances of this case and that there were no alternative employment positions available for the Claimant. This ET3 was not received at the Tribunal on either 27 or 28 May and it is unclear in fact whether it has ever been received. On discovering this when contacting the Tribunal on 1 June, the Respondents' representative immediately faxed a copy of the ET3 to the Tribunal on that day.[4]However, on 7 June, the Respondents were notified by the Tribunal that the ET3 would not be accepted because it had not been presented within the statutory time limit and that the Respondents could therefore take no part in the proceedings. On 13 June the Tribunal rejected the Respondents' application for a review of this decision. As the former President of the Employment Appeal Tribunal (EAT) pointed out in his Judgment of 14 December 2005, relating to the procedural issues arising in the earlier appeal in this matter, there would have been a strongly arguable case for a review in the circumstances of this case but the Tribunal refused the application and the Respondents did not appeal against the order refusing the review. Thus, what the President referred to as "the Draconian impact" of the Tribunal's decision was that the Respondents were debarred from contesting not only liability at any hearing but also remedy.[5]A Schedule of Loss was served by the Claimant on 4 August 2005, valuing his claim at that stage at just over £36,000. An amended and updated Schedule of Loss, relied on at the hearing, increased that sum to £46,621 but the Respondents were not served with this updated schedule. Nor were they provided with a copy of the Claimant's witness statement before the hearing took place, although they have subsequently received one and it is before us in this appeal.[6]On 18 August 2005, the Claimant's claim was heard by a Chairman sitting alone and the Respondents were neither present nor represented, the Tribunal having determined that they were not entitled to take any part in the proceedings. The Claimant gave evidence and the Chairman refers in his reasons to having seen a bundle of documents although it is not entirely clear what that bundle comprised or how extensive it was. The Chairman held that the Claimant had been unfairly dismissed. He then concluded that the basic award of £1,215 to which the Claimant was entitled had already been discharged by payment of the statutory sum for redundancy by the Respondents. He then made a compensatory award in the total sum of £48,962.48 which was more than the sum claimed in the Claimant's updated schedule.[7]No written reasons were given for this Judgment, which was sent to the parties on 22 September 2005 and simply set out the finding of unfair dismissal and the order that the Respondents had to pay the above sum to the Claimant. A note of the oral reasons given at the time, made by Counsel for the Claimant, Mr Lennard, and included in our bundle, is extremely brief and provides little detail as to the reasoning behind the Chairman's decision. The Respondents sought written reasons for the Judgment but this request was refused. The Respondents then appealed against that refusal and this was the subject of the previous appeal, to which we have referred, which was heard by the former President on 14 December 2005.[8]The outcome of that appeal, so far as is relevant, was that the President himself made a request under Rule 30(3)(b) of the 2004 Rules for the Tribunal to provide written reasons for its Judgment. There is no necessity for us to refer here to the President's detailed decision on the scope and effect of Rules 8 and 9 of the 2004 Rules, but the following passage from paragraph 7 of his Judgment seems to us to have some relevance to this appeal, namely, that where the effect of a decision under Rule 9 is that a Respondent is debarred, whatever the nature or quality of his default, from contesting both liability and quantum of compensation then:
"it is all the more important for an employment tribunal carefully to consider the position in the light of such orders as it has made in protecting, so far as is proportionate, the position of a debarred respondent."
We agree.[9]In addition, in furtherance of the overriding objective and in order to achieve fairness in such circumstances, it seems to us of particular importance, when providing written reasons for decisions made in the absence of a party who has been debarred from taking any part in a proceedings, that those reasons are sufficiently full and so expressed as to enable that party to understand the basis for the conclusions arrived at and, as here, for the compensation which has been awarded under the various heads of claim.[10]Following the President's decision, written reasons for this Judgment were then sent to the parties on 31 January 2006. The Chairman referred to the procedural history and stated that at the hearing on 18 August, he had heard evidence from the Claimant by way of a written statement and oral evidence and that he had received a bundle of documents. He set out his findings of fact at paragraphs 4 and 5 as follows:
"4. The claimant commenced employment with the respondent on 17 September 2001 and his employment was terminated on 5 January 2005 on the grounds of redundancy. The respondent followed no procedure whatsoever and gave no indication that it had considered the claimant's individual situation before deciding that he was redundant. The claimant's evidence to the Tribunal was that his dismissal for redundancy would have been avoided had he been consulted. 5. At the time that he was dismissed the claimant was earning £50,000 per annum. He was paid up until the end of January 2005. The claimant was paid an appropriate redundancy payment. Following his dismissal the claimant discovered that contributions that should have been made by the respondent to his pension fund as part of his remuneration package had been underpaid by a sum of £2208.48. Up to the date of the hearing the claimant's loss of pay amounted to £19,457,58 salary and unpaid pension contribution of £2812.59. The claimant had sought to mitigate his loss by looking for alternative employment. He had during that time received £4360.34 by way of earnings from two separate periods of employment. During that same period the claimant had decided to retrain as a driving instructor and produced evidence that he had paid a total of £2915 for that training. He was also due to pay a further £190 in fees. The claimant anticipated that he would be able to commence work as a driving instructor by the first or second week in November 2005. Thereafter he would have a continuing monthly loss of £1299.28."
[11]Paragraphs 6 to 8 of the reasons entitled "Law and Conclusions" set out the Chairman's findings on both unfair dismissal and compensation. On the basis of the evidence he had heard, the Chairman said (at paragraph 6) that he had no hesitation in deciding that the Claimant had been an employee and had been dismissed; that there was a potentially fair reason for the dismissal, namely redundancy, but that the dismissal was "unfair both procedurally and substantively." There is no appeal from that decision.[12]At paragraphs 7 and 8, addressing compensation, the Chairman then found as follows: "7. The claimant provided evidence of his attempt to find alternative employment since his dismissal. He also provided evidence of the limited earnings that he had achieved and the cost of his retraining and the further limited fees payable before he could qualify as a driving instructor. The Tribunal was quite satisfied that he had taken reasonable steps to mitigate his loss. The Tribunal was also satisfied that the claimant would be able to commence full-time work as a driving instructor as from 18 November 2005 and thereafter his monthly continuing loss would be reduced to £1299.28. The claimant would attain the age of 59 on 19 June 2006 and the Tribunal concluded that it would be appropriate to award compensation by way of future loss of earnings for a period of 12 months from 18 November 2005. 8. The claimant was entitled to a basic award of £1215 which had already been discharged by the payment of a sum for redundancy. The Tribunal ordered a compensatory award made up as follows:- a) Loss of statutory rights 250.00 b) Unpaid pension contribution up to 5/1/05 2,208.48 Loss of net earnings to 18/8/05 19,457.77 Unpaid pension contribution From 5/1/05 to 18/8/0[5?] 2,812.59 Cost of retraining 2,915.00 Future retraining costs 190.00 27,583.62 Less earnings From 5/1/05 to 18/11/05 4,360.34 Total loss of earnings From 5/1/05 to 18/11/05 23,223.25 23,223.25 c) Future net loss of earnings and pension payments to 18/11/05 9,897.84 d) Future net loss of earnings and pension payments from 18/11/05 to 18/11/06 15,591.36 total £48,962.48[13]The appeal is brought against the Tribunal's decision on the amount of the compensatory award. In her submissions on behalf of the Respondents, Ms Watson very helpfully condensed the rather lengthy and discursive grounds of appeal set out in the Notice to the following four grounds, which we shall deal with in turn. She told us that she is not pursuing the grounds of appeal which relate to the effects of the Claimant's failure to raise a grievance and that the grounds relating to the quantum of the Claimant's pension entitlement are no longer in issue in this appeal.[14]Ms Watson contends, first, that the Tribunal erred in failing to consider the question of causation of loss and what has been referred to in this appeal as the Polkey principle. As she points out, section 123 (1) of the Employment Rights Act 1996 provides:
"123 Compensatory award (1) …the amount of the compensatory award shall be such amount as the tribunal considers 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 is attributable to action taken by the employer."
[15]Thus, as is common ground, in determining the quantum of a compensatory award, a Tribunal must decide what loss, if any, was caused by the Respondent's actions. In the present case, the Tribunal found that the Respondents had followed no procedure whatsoever. They gave no indication that they had considered the Claimant's individual situation before deciding that he was redundant. In order to assess the correct measure of damages therefore, the Tribunal had to determine what difference it would have made, if any, if the Respondents had consulted the Claimant before dismissing him, or what chance of the Claimant retaining his employment had been lost by the Respondents' failure to consult him.[16]We agree with Ms Watson that given that the Respondents had been prevented from participating in this hearing and from raising this issue themselves, it was of particular importance that the Chairman considered it of his own motion in order to ensure fairness as between the parties. In support of her submissions, Ms Watson referred us to the well-known case of Polkey vAE Dayton Services Ltd [1987] IRLR 503 and to a number of subsequent cases where the long-standing principle established in that case has more recently been considered and applied. In the case of Wolesley Centers Ltd v Simmons [1994] ICR 503 the EAT said as follows at 508 C-G:
"…a finding that a dismissal is unfair does not mean that an employee is entitled to full compensation for the loss resulting from the loss of his job. He is only entitled to the loss he has sustained which is attributable to action taken by the employer, so that, if he would have been dismissed even if the employer had acted properly and fairly, the employee's compensatory award is likely to be small or even nil. In Polkey v. A. E. Dayton Services Ltd. [1988] ICR 142 , 163 Lord Bridge of Harwich quoted with approval dicta of Browne-Wilkinson J. in Sillifant v. Powell Duffryn Timber Ltd. [1983] I.R.L.R. 91, 96: "
There is no need for an 'all or nothing' decision. If the industrial tribunal thinks there is a doubt whether or not the employee would have been dismissed, this element can be reflected by reducing the normal amount of compensation by a percentage representing the chance that the employee would still have lost his employment." We think that it follows from the Polkey decision and from later authorities, including Red Bank Manufacturing Co. Ltd. V. Meadows [1992] ICR 204 ; Rao v. Civil Aviation Authority [1992] I.C.R. 503; K. P. G. Computer Support Services Ltd. v. Abayomi (unreported), 21 December 1992 and Dunlop Ltd. V. Farrell [1993] I.C.R. 885, that the assessment of the compensatory award in this kind of case involves a two-stage process. First, the tribunal must ask itself whether if the employer had followed the proper procedures and acted fairly the employee would not have been dismissed. If the answer to that question is reasonably clear one way or the other, there is no difficulty. But in many cases the answer will be uncertain, in which situation, in order to give proper effect to section 74(1) of the Act of 1978 and the dicta of Browne-Wilkinson J. set out above, the tribunal must, as the second stage of the process, make a percentage assessment of the likelihood of the employee being retained which must then be reflected in the compensatory award."[17]We turn, against this background, to the present case. In his pleaded case in the ET1, the Claimant's main criticism of the Respondents' conduct was that he had not been consulted about his redundancy and was just given the letter of dismissal on 5 January. He made no suggestion however that consultation by his employers would have avoided his dismissal. Nor did he contend that anyone else had been recruited to replace him after he was dismissed. The primary case being advanced by the Claimant, who was legally represented at this time, was that there was no genuine redundancy situation.[18]In his witness statement, the Claimant referred amongst other things to the following matters in paragraphs 2 to 5:(a) There were originally four people in his technical support team, one of whom was made genuinely redundant when the systems server was relocated to the manufacturing company.(b) During 2003-2004, the Respondents were embroiled in litigation in the USA which involved payment of substantial legal fees and put financial pressure on them. There were cash flow problems and their financial situation remained precarious, which was a concern to the Claimant in relation to payment of compensation.(c) On 5 January 2004, the Claimant was asked to attend a meeting and was told by the managing director that the bank had applied pressure on the Respondents to reduce their wages bill. His position was one of a number earmarked for redundancy. He was not consulted, but simply handed the letter dated 5 January.(d) After the termination of his employment, the Claimant heard rumours about the Respondents' financial difficulties. The financial director had also been made redundant. The Claimant had also heard that the Respondents had launched two new products in his field and did not know who was carrying out his previous duties. He had two or more other junior people in his department, one of whom had been taken on about 7 months before the Claimant left.[19]Nowhere in his witness statement however, did the Claimant contend that, if he had been consulted by his employers, his own dismissal would have been avoided. It is correct that at paragraph 4 of the written reasons the Chairman has recorded merely that:
"The claimant's evidence to the Tribunal was that his dismissal for redundancy would have been avoided had he been consulted."
If this evidence was given, it can only have been a contention of the Claimant made in the course of his giving oral evidence and we have no note of the oral evidence given by the Claimant at the hearing, either in the form of an agreed note or as a result of the Chairman's notes of evidence having been called for and provided for this appeal. Even if this evidence was given however - and we have no reason to doubt that it was - the Chairman, more importantly, does not expressly state whether or not he accepts this evidence and finds this as a fact or explain, if he does, his reasons for accepting it and the basis for such a finding.[20]Mr Lennard, for the Claimant, submits that the Chairman's acceptance of the Claimant's evidence on this point is implicit from paragraph 4. In our judgment, however, having concluded on balance that the reason for the Claimant's dismissal was redundancy and that the dismissal was substantially and procedurally unfair, it was then incumbent upon the Chairman, in particular in the absence of the Respondents, to go on expressly to consider causation of loss and whether or not he should make a Polkey deduction from the compensatory award, having regard to the loss he considered was caused to the Claimant by the Respondents' actions and the evidence he had heard about the Respondents' general financial situation and other redundancies. Instead, after finding at paragraph 6 that the reason for dismissal was redundancy, and that the dismissal was unfair, the Chairman proceeded immediately at paragraph 7 to the question of mitigation of loss. In doing so, in our judgment, he was in error.[21]Ms Watson submitted in the alternative that the decision to attribute the whole of the Claimant's loss to the actions of the Respondents was perverse in the light of the Chairman's conclusion on the evidence that there was here a genuine redundancy situation. We prefer, however, to regard this as a failure by the Chairman to consider causation of loss and the two stage test referred to in Wolesley and whether or not a Polkey deduction was appropriate on the evidence. Alternatively, there was a failure by this Chairman to make findings and to provide adequate reasons for his decision to attribute the whole of the Claimant's loss to the actions of the Respondents. Notwithstanding Mr Lennard's submissions to the contrary it is simply not possible, in our judgment, to infer simply from the final sentence of paragraph 4 that the Chairman properly had regard to this issue and arrived at a conclusion which was sustainable on the evidence before him. In circumstances where the Respondents had been debarred from participating, there was a need for the Tribunal to take particular care to ensure that justice was done as between these parties. We find that his failure to address this matter and to explain his conclusions was an error and his decision cannot stand. For these reasons the Respondents' appeal therefore succeeds on this first ground.[22]We turn then to consider the three remaining grounds of appeal, but we are all agreed that none of them discloses errors of law which merit interference by this Appeal Tribunal.[23]The second major ground of appeal is that the Tribunal erred in concluding that the Claimant had taken reasonable steps to mitigate his loss. Ms Watson contends that the Chairman made no findings as to what alternative employment he had sought or as to how many positions and the nature of the positions he had applied for. Her general attack proceeds on the basis that there were insufficient findings of fact to support the Chairman's conclusions as to mitigation of loss. In particular, she submits that there was no consideration of whether the Claimant's failure to pursue an internal appeal against his dismissal constituted a failure to mitigate. Further, she submits that there was no analysis of the Claimant's decision to re-train as a driving instructor and incur fees to do so, and of the reasonableness of that decision, when he was contending that such a change of career would result in a continuing partial loss of earnings. In the alternative, Ms Watson relies on a "Meek" failure by this Chairman to provide adequate reasons for his conclusion that the Claimant had taken reasonable steps to mitigate his loss. The Meek principle has now of course been statutorily enshrined in rule 30(6) of the 2004 Rules. We were not, however, persuaded that there was merit in these submissions, for the following reasons.[24]At the hearing the Claimant, then aged almost 59, read out his five-page witness statement in giving his oral evidence. In that statement - which the Appellants have seen, and which is before us - he set out in some considerable detail the efforts he had made to obtain new employment, which had proved largely unsuccessful. Whilst we agree that the Chairman's reasons could have been fuller on this topic, in our view, the Chairman set out sufficient findings of fact and reasoned conclusions in paragraphs 5 and 7 to render unsustainable the attack upon his decision on mitigation of loss. It is quite clear to us from the Chairman's written reasons that there was ample evidence of the steps which this Claimant had taken in mitigation, and that the Chairman accepted the honesty and reliability of the Claimant's evidence on these matters. We agree with Mr Lennard that there is no necessity for the Chairman to repeat every paragraph of the Claimant's witness statement as to the steps taken in mitigation of loss in his written reasons. Rule 30 does not require this.[25]There is one matter relating to paragraph 5 with which we must deal briefly. The Chairman found that the Claimant had received £4360.34 by way of earnings from two separate periods of employment. At the time of his Judgment however, in August 2005, it is clear from his order before written reasons were provided, that the sum referred to is the combination of the Claimant's evidence of his earnings actually received, £1440, together with his notice payment of £2920.34 as set out in the Schedule of Loss. The written reasons therefore do not accurately reflect the order which was made by the Chairman at the time, and they appear to have conflated the two separate items. No doubt this is due to the unfortunate gap in time between his oral reasons and the provision of written reasons pursuant to the request from the EAT.[26]The Claimant's solicitors informed the Respondents of this error some time ago and Ms Watson accepts that this is in fact correct. It is clear from the Claimant's evidence, as set out in his witness statement, that the only employment the Claimant had which had earned him money during this period was as a casual part-time gardener at the sum of £80 per week for some 18 weeks, thereby producing the sum of £1440. Thus, whilst the Chairman's reasons are in error in this one respect, this error does not invalidate our conclusions as to the adequacy of his general reasoning and conclusions on the issue of mitigation of loss. This ground of appeal is therefore dismissed.[27]In the third ground of appeal, Ms Watson challenges as insufficiently reasoned, the Chairman's decision to award the Claimant his losses, including future losses, for a period of almost two years from the time of his dismissal to November 2006. She submits that the Chairman provided no basis for his decision that this was an appropriate period and that he had adopted an unduly favourable approach to the Claimant in the circumstances. Alternatively, she relies again on a "Meek" or Rule 30 challenge to the adequacy of the Chairman's reasoning. We disagree. The Chairman's approach and his reasoning as to the period of loss and of future loss seem to us to be clear. We agree with Mr Lennard that, in the circumstances, the Chairman's assessment of the period of continuing loss was moderate and sufficiently explained, and we can identify no error in the his conclusions as to the appropriate period of loss for which this Claimant should be compensated. The Chairman was faced with a man of almost 59 years of age, with technical skills and commercial experience. He accepted his evidence, concerning his efforts to find alternative employment. The award, comprising a total loss up to November 2005 and partial loss thereafter to November 2006 was entirely within the bounds of what a reasonable Tribunal could award. This ground of appeal is therefore also dismissed.[28]In her fourth and final ground of appeal, Ms Watson seeks to make a general attack upon the overall level of the compensatory award, on the basis of there being a lack of evidence to substantiate what was, in her submission, an unduly favourable award for this Claimant under the various heads claimed (namely, past and future loss of earnings, the costs of re-training) and a lack of analysis by the Chairman in arriving at the various figures awarded. She relies once again on a "Meek" or Rule 30 challenge to the Chairman's reasoning in the alternative. She makes essentially three submissions under this general ground:(1) That there was no evidence to support the sums awarded in respect of re-training as a driving instructor, that is, the sum of £2915 already paid, and £190, required to be paid in the future. However, the Claimant referred at paragraph 15 of his witness statement to having invested £3000 on this driving training course, and the Chairman finds at paragraph 5 that the Claimant produced evidence to show that he had paid a total of £2915 for that training and that he was also due to pay a further £190 in fees.(2) That it is unclear where the continuing monthly loss figure of £1299.28 comes from and that there was no evidence to support it. However, the note of the order made by Counsel on the date of the hearing shows that the Chairman had accepted Counsel's submission as to this figure, being a combination of the difference between his former salary and his likely earnings as a self-employed driving instructor, that is, the sum of £882.60 and the continuing pension loss element of £416.68, thereby achieving the total continuing monthly loss figure of £1299.28.(3) That in awarding continuing partial losses to November 2006, the Chairman did not, in his reasons, address the prospective earnings from the Claimant's specialist grass maintenance business, which the Claimant said he hoped to run as from the Spring of 2006. This, Ms Watson submits, was relevant to the claim for loss of future earnings and yet is not referred to at any stage by the Chairman in his reasons.[29]However, it is clear from the Claimant's witness statement that he referred to a grass maintenance business only as a possibility in the future. We agree with Mr Lennard's submission that this was such a speculative matter that the Chairman was entirely justified in regarding it as too speculative to be taken into account for the purposes of calculating the Claimant's future loss, which award, for the reasons we have already given, was well within the bounds of what could be awarded by a reasonable Tribunal. There is inevitably speculation when a Tribunal is considering losses for the future and Ms Watson fairly recognised, in her submissions to us, the fact that Tribunals will adopt a broad brush or rough-and-ready approach when endeavouring to calculate awards under this head. We do not regard the Chairman's failure to refer to this wholly speculative matter expressly in his written reasons as amounting to an error which requires us to interfere with his award.[30]This ground of appeal therefore also fails. Thus, we allow the appeal in respect only of the first ground. Having heard the parties' submissions on disposal, we remit the question of causation of loss and the Polkey point to a fresh Tribunal for determination, having regard to this judgment.[31]We also agree, having heard from both Counsel, that the decision of the Tribunal should be varied to the extent that the recoupment provisions apply to the sum of £1455.15. Counsel agreed the following figures, which were submitted in writing and which we shall incorporate in this judgment. The monetary award is £48,962.48. The prescribed element is £23,223.28 from 5 January 2005 to 18 August 2005. The amount by which the monetary award exceeds the prescribed element is £25,739.20.