ROADBEACH LTD v MRS A WERNER [2007] UKEAT 0304_07_1110

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2007] UKEAT 0304_07_1110Case No Appeal No. UKEAT/0304/07Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
ROADBEACH LTDAPPELLANTMRS A WERNERRESPONDENT
Before
Mr Recorder LubaDate 11 October 2007
[1]APPEARANCES For the Appellant MR S JACKSON (a Solicitor) Messrs Harding Evans Solicitors Queens Chambers 2 North Street Newport South Wales NP20 1TE For the Respondent MISS E SUTTON (of Counsel) Instructed by: Messrs Hornby Baker Jones & Wood Solicitors 13-14 Clytha Park Road Newport Gwent NP20 4PB SUMMARY Unfair Dismissal. Redundancy Tribunal holds that the dismissal was unfair because the employer failed to arrange an oral hearing of an appeal against dismissal and determined it on the papers. Appeal to EAT allowed. Determination of this employee's appeal on the papers was within the range of reasonable responses open to an employer. Further grounds of appeal allowed in relation to the Tribunal's approach to compensation and costs. MR RECORDER LUBA QC Introduction This is an employer's appeal in an unfair dismissal claim. The appeal seeks to upset an Employment Tribunal's finding that a dismissal was unfair or, in the alternative, to achieve a reduction in, or the elimination of, an award of financial compensation. In the course of this judgment we shall refer to the Appellant employers as "the company" and the Respondent employee as "Mrs Werner". The Facts[2]The company owns and operates a small hotel in South Wales. Mrs Werner was employed by the company at the hotel as Corporate Events & Wedding Manager. Her employment began on 15 October 2004. She was remunerated in that employment with a salary of £25,000 per annum. On 9 June 2006 she was formally given a week's notice of termination of her employment, and on 16 June 2006 her employment did determine by reason of dismissal on account of redundancy.[3]The relevant background to the dismissal can be shortly expressed. The company had in late 2005 and early 2006 experienced adverse trading conditions, such that the hotel was running at a loss. The proprietors of the company asked the General Manager, Mr Goldsmith, to take steps to stem those losses. After a review, Mr Goldsmith determined that the only effective measures he could take were to make redundant certain positions in the company. In his judgment, the appropriate approach was to end the position of Corporate Events & Wedding Manager and to redistribute the responsibilities of that post among other staff of the hotel, save in respect of the matter of co-ordinating weddings, which would become the responsibility of the holder of a new post, of Wedding Co-ordinator, at the modest salary of about £15,000 per annum. That was found by the Tribunal to be the relevant background to the dismissal of Mrs Werner for redundancy. The Tribunal's Judgment[4]Having been dismissed, Mrs Werner made a number of complaints of breach of her employment rights to the Employment Tribunal Service. After a three day hearing the Employment Tribunal at Cardiff (Chairman, Dr Rachel Davies) reached a unanimous conclusion on those complaints. Firstly, the Tribunal determined that Mrs Werner's claim of sex discrimination had not been made out. Secondly, that her dismissal had not been automatically unfair for failure to comply with the provisions of s98A of the Employment Rights Act 1996 relating to pre-dismissal disciplinary procedures. However, the Tribunal, thirdly, held that the dismissal had been rendered unfair within the meaning of s98 of the 1996 Act by virtue of a defective appeals procedure. The Tribunal found that the employee had contributed to her dismissal by her own conduct and reflected that contribution in a reduction of 50 per cent in the award of compensation. It then went on to calculate that award at £6,264.19. Further, the Tribunal ordered, in the light of the procedural background to which we shall have to refer later in this judgment, that the company should pay costs in the sum of £3,000 plus VAT.[5]The short summary we have there given of the facts and the Tribunal's judgment is not intended to substitute for, or replace, the full findings of fact given by the Tribunal itself or the reasons for decision set out in their printed judgment. Rather, the purpose of our summary is to set in context the issues we have to determine on this appeal.[6]For her part, Mrs Werner brings no appeal in respect of those issues on her claim which were dismissed; nor does she appeal against the 50 per cent reduction in the compensatory award on the basis of her own contributory conduct. Rather, as we have indicated, this is an appeal by the employer. The appeal against the finding of unfair dismissal[7]The Employment Tribunal found that the dismissal was ultimately unfair on a procedural basis. They were satisfied that the reason for dismissal was redundancy and that that was, in the circumstances, a genuine reason. However, they found that there was a want of compliance with procedural fairness in that no opportunity was given to Mrs Werner, in her appeal against the decision to dismiss, to have an oral hearing or a meeting with the person considering the merits of that appeal. The Tribunal expressed their conclusions on that issue at paragraphs 36 to 38 of their judgment. We set out those three short paragraphs in full:
"36. We find that the dismissal in so far as it was carried out by Mr Goldsmith was fair, and that Mrs Werner contributed substantially to that decision. However we find in failing to give her an opportunity to put her case other than through her actual appeal letters at the appeal stage, the Respondents did not act reasonably, and we find that that failure detracted from the fairness of the dismissal as a whole. Any reasonable employer in similar circumstances would have apprised himself sufficiently of the circumstances of the dismissal to appreciate that Mrs Werner had not put her side of the story at the dismissal stage through her own conduct in failing to take up the offer to consult. He would have appreciated that this was an opportunity for her to remedy her contributory conduct by putting her arguments in a non-obstructive manner. 37. Any reasonable employer in such circumstances would have given her an opportunity to put her case at the appeal stage. Had she been able to put her case she may or may not have been able to put forward some sort of suggestion that could have reduced the impact of the redundancy situation on her, for example by accepting the co-ordinator's post. We do not speculate as to any possible outcome. 38. We find that in failing to give her an opportunity to put her case on appeal the Respondents did not act reasonably within the meaning of section 98 of the 1996 Act. Accordingly the dismissal was unfair."
[8]This appeal is advanced by the company on two strands against what is agreed to be a background in which (1) the employee had no contractual rights to an appeal whether by virtue of a hearing or otherwise, and (2), where there was no applicable statutory right to an appeal hearing.[9]The first strand of the employer's attack on this decision by the Employment Tribunal contends that the Tribunal assumed to itself the question that was for the employer to address (as to whether or not an opportunity should be given for an oral hearing on the appeal). Mr Jackson, making before us the company's case, argued that(1) there was no contractual right to an oral hearing, and that(2) Parliament had provided a statutory process for appeal but that the employee had disabled herself from accessing that by her non-compliance with earlier stages of the statutory procedure. Mr Jackson submitted that the appeal decision-maker was entitled on the material before him to determine the appeal on the papers. His unchallenged evidence, that is to say the unchallenged evidence of the person who took the decision on appeal, was that he had reviewed the file. The appeal decision-taker, Mr Bailey, the new General Manager of the hotel, had had before him two letters from the employee, dated 16 June and 22 June respectively. Mr Jackson submitted that it was not for the Tribunal for itself to decide whether or not an oral hearing of the appeal would have been appropriate or advisable, but rather that the Tribunal had to ask itself whether a reasonable employer, within the band of reasonable employers, could have decided to proceed with the matter without first giving the employee an opportunity to be heard.[10]Mr Jackson reminded us of the useful guidance contained in the case of Sainsbury Co.Ltd v Hitt [2003] IRLR 23 . His submission was that it is not necessary for the employer to show that, in the circumstances in question, an exercise of considering the appeal on the papers alone was inappropriate. Rather, it is for the employee to show, and for the Tribunal to be satisfied, that no reasonable employer could have determined the appeal otherwise than by way of an oral hearing.[11]Turning to the specific facts of this case, Mr Jackson submitted that this was classically a redundancy situation where, in a circumstance of declining business trade, the employer had decided to shed a particular post. He took us to the letters written by Mrs Werner on 16 June and 22 June, to remind us that they raised essentially three contentions. First, that Mrs Werner was not in a redundancy situation at all because others were covering her actual duties in her absence. Secondly, that she had recently been commended for her good work for the company. And thirdly, that the true reason she had been dismissed, and indeed chosen for redundancy, was that she had been pregnant at the time, a matter that, she said, she had earlier revealed to the employer. Mr Jackson reminds us that the Tribunal expressly rejected the contention that Mrs Werner had previously informed the employer that she had been pregnant. In those circumstances, Mr Jackson submits, there was nothing about this case that required an oral hearing. Mr Bailey was perfectly entitled to consider the appeal on the papers, and reject in turn:(1) the proposition that the job was still being done but by somebody else, when he knew that not to be the case;(2) that the dismissal had been for pregnancy, when he knew that not to have been the case; and(3) that the fact that the employee was good in her job could in some way have resolved the circumstances of redundancy.[12]Miss Sutton, for Mrs Werner, strongly resisted this way of putting the matter on the appeal. She invited our attention again to paragraphs 36 - 38 that we extracted earlier in this judgment and submitted that this was a classic exercise of a Tribunal asking itself the right question. That is to say, whether the failure of the employer to offer an oral hearing of the appeal was within the range of reasonable responses open to an employer. She submitted that the Tribunal had directed itself to the correct question and had for satisfactory reasons that it gave, decided on the particular facts that this was a case in which any reasonable employer would have granted an oral hearing.[13]As to the particular facts, Miss Sutton submitted that this was a case of a small company, where calling-in a reasonably senior employee to discuss her appeal with a newly appointed General Manager would have been not only a sensible but also a reasonable step that any reasonable employer would have taken.[14]Those are the submissions on the first strand of the appeal on the question of unfair dismissal. This is the aspect of the appeal which has caused us most concern. We have concluded by a majority that this ground of appeal should succeed. The majority are satisfied that had the Tribunal directed itself to the correct question, that question would have been 'could a reasonable employer on the material presented to this employer properly have determined that an appeal could be concluded fairly on the papers rather than by oral hearing?'. If an employer could reasonably so have concluded, then this was within the range of responses that a reasonable employer would have made. In those circumstances, had the Tribunal asked themselves that question, the majority of us are satisfied that the Tribunal would have found that it was open to a reasonable employer properly directing him or herself to say that an appeal could be concluded on the papers. Our member in the minority, however, would have rejected this ground of appeal on the particular facts of this case. That is to say, it being a small organisation where the appeal was being conducted with a new manager and where, in particular, the second letter sent by the employee appeared to be making a case that she should be heard on the general redundancy situation. Those facts required any reasonable employer to conduct an oral hearing of the appeal. The minority of us, therefore, would have upheld the Tribunal's decision on that point.[15]However, as we have indicated, there is a second strand to the employer's case on this unfair dismissal aspect: that is the question of whether the Tribunal properly considered and applied the requirements of s98A(2) of the Employment Rights Act 1996 . That statutory provision, in so far as relevant, reads as follows:- "Failure by an employer to follow a procedure in relation to the dismissal of an employee shall not be regarded for the purposes of section 98(4)(a) as by itself making the employer's action unreasonable if he shows that he would have decided to dismiss the employee if he had followed the procedure."[16]In those circumstances, submits Mr Jackson, it was incumbent upon the Employment Tribunal in this case, having heard all the evidence and having identified - contrary to his earlier submission - a failure to follow a fair procedure, to then go on and determine whether "yeah or nay" the employer would on the evidence, in any event, have dismissed. Mr Jackson submits that the Tribunal erred in law in that they simply failed to address this point at all. In so far as they turned their minds to the question of whether or not the employer would have dismissed in any event, they say, at paragraph 37 of their judgment, "We do not speculate as to any possible outcome". Mr Jackson submits that that simply will not do. A Tribunal must, in order to faithfully apply the provisions of s98A(2), ask itself whether the employer has shown that he would have decided to dismiss the employee even if he had followed the procedure. The Tribunal's judgment is entirely silent on that question. It does refer to s98A, but as a consideration of paragraphs 23 to 29 of its judgment indicates, that consideration was limited to the parameters of s98A(1), that is the question whether or not the appropriate statutory procedure had been applied.[17]Miss Sutton's submissions in answer on this strand of the unfair dismissal appeal are very simply that the Tribunal was not obliged to deal with the s98A(2) question because it was not raised with them by the employer. Indeed, we remind ourselves that the evidential burden posed by s98A(2) is on the employer. She submits that, it not having been raised, no complaint can now be made. Moreover, she submits, the point is not developed either in the grounds of appeal for the present appeal nor it is taken in the Appellant company's skeleton argument.[18]Mr Jackson's rejoinder to those submissions is that this is a question of pure law which it was the duty of the Tribunal to address. In any event, it is so closely connected with the Tribunal's jurisdiction in relation to Polkey that it should have been addressed. Moreover, he draws our attention to paragraph (d) of the grounds of appeal, which set out that the Tribunal erred "by failing to apply the Employment Rights Act 1996 section 98A in order to make a finding that the dismissal was fair". Further, he drew our attention to paragraph 8 of the grounds of appeal, in which it is submitted that "Accordingly, the dismissal ought to be declared fair having regard to the application of the Employment Rights Act 1996, section 98A". He contends that the matter fell for determination by the Employment Tribunal. They did not deal with it by virtue of their own misdirection and the matter is properly raised before us in this appeal.[19]We are unanimously satisfied that the submissions of Mr Jackson on this element of the appeal are made out. It seems to us that it was incumbent upon the Employment Tribunal in this class of case to address that particular point. The evidence before the Tribunal, as they themselves recount, made it absolutely plain that this was a straightforward redundancy situation. No alternative method of dealing with the redundancy situation was canvassed by the employer as being a possibility; moreover, no specific alternative was put forward by the employee, notwithstanding her submission of an extensive witness statement.[20]That the Tribunal should have determined this question is not least clear from the judgment of this Employment Appeal Tribunal given in the case of Softwear 2000 Ltd v Andrews & Others [2007] IRLR 568 . In that case, at paragraph 54, this Tribunal (the President presiding) set out the proper approach to cases of this kind. At sub-paragraph 54.6 the judgment includes this:
"The s.98A(2) and Polkey exercises run in parallel and will often involve consideration of the same evidence, but they must not be conflated. It follows that even if a Tribunal considers that some of the evidence or potential evidence to be too speculative to form any sensible view as to whether dismissal would have occurred on the balance of probabilities, it must nevertheless take into account any evidence on which it considers it can properly rely and from which it could in principle conclude that the employment may have come to an end when it did, or alternatively would not have continued indefinitely."
That makes amply the point as to the requirement for the Tribunal to consider the matter for itself.[21]That section 98A(2) "works" in the way submitted by Mr Jackson is accepted by this Employment Appeal Tribunal in the decision Alexander v Bridgen Enterprises Ltd [2006] IRLR 422 . At paragraph 58 of the judgment of the Employment Appeal Tribunal in that case (the President presiding) it is said as follows:
"…Although we have heard no argument on this point it seems to us that even where the statutory procedures are complied with but the dismissal is unfair under Section 98(4) Polkey will still apply, where on the balance of probabilities the employee would not have been dismissed even had a fair procedure been complied with but where there is a chance that he might have been. (That chance would, of course, have to be less than 50 per cent otherwise Section 98A(2) would bite and the dismissal would be fair.) The compensation would in those circumstances have to be reduced accordingly."
Although that passage proceeds on the basis of an assumption as to the law made in the absence of argument it seems to us with respect that it is legally correct; moreover, Mr Jackson submits that it has been followed and applied in other cases.[22]In those circumstances, this ground of appeal simply must be allowed. The Tribunal failed to address the question of s98A(2) on the matters before them. It seems to us that, had the Tribunal properly directed itself on the other findings of fact that it made, the only possible conclusion that it could have reached would have been that the employer had shown that it would have decided to dismiss the employee even if it had followed the process of permitting an oral appeal hearing. In those circumstances, not only does this limb of the first aspect of the appeal succeed but the result is that we are unanimously of the view that the appeal must be allowed on this point and the finding of unfair dismissal reversed.[23]That is sufficient to dispose of the appeal but in the light of the cogent submissions that have been made to us in writing and orally by Mr Jackson and Miss Sutton, and in view of the possibility that we may be wrong on the first aspect of the appeal, we shall proceed to deal with the other three aspects raised in the Appellant's Notice. The appeal in respect of the Polkey reduction[24]Mr Jackson contends that the Employment Tribunal failed to deal adequately, or at all, with the question of a Polkey reduction in the award that might otherwise have been made by way of the financial recompense to the employee. First, he says that the Tribunal adopted an unfair procedure which shut out the employer company from properly developing its case on the Polkey reduction possibility. Mr Jackson, who did appear below, put to us that the Employment Tribunal had directed that the evidence in the case be heard in two stages, first, as to liability, and secondly, and separately, if liability were to be found in the Claimant's favour, on the question of remedy. Neither party has called for the notes made by the Tribunal Chairman and neither has put before us an agreed note of what occurred below. However, we accept from Mr Jackson, who was present, the account that the Tribunal had decided to proceed in that way. It seems to us that, given that the substantive claims included a substantive claim of sex discrimination by way of dismissal for pregnancy, it is highly likely that the Tribunal decided to hear the evidence on liability first.[25]The grounds of appeal and skeleton argument put forward by Mr Jackson go on to particularise what is said to have been thereafter the unfair conduct of the Tribunal, in rejecting his submission that it was necessary for the employee, Mrs Werner, to be recalled to give evidence on the question of whether or not there were prospects of her continuing in the employment of the company in some capacity. He submits that he was deprived of the opportunity to explore that issue to the extent that it would have been suggested, in answer to enquiries on that point, that Mrs Werner would have taken the lower paid and newly created position of Wedding Co-ordinator. He submits that the way in which the Tribunal conducted itself procedurally deprived him of the opportunity of exploring that matter in evidence.[26]Moreover, quite separately from the procedural complaint, Mr Jackson complains that the Tribunal erred in law, in approaching the whole question of a Polkey reduction in the way it did. Indeed, he submits that the Tribunal effectively declined to engage in precisely the speculation as to what may have happened had the dismissal not been procedurally unfair, that the authorities require. In this context, his submission was strengthened by reference to paragraphs 49 to 54 of the judgment of this Tribunal in the Softwear case. This, he submitted, was a plain case in which the Tribunal had to speculate as to whether the employee would be kept on in any capacity on the evidence which was before the Tribunal. He submits that the high likelihood is that employment would not have continued. He has taken us in his skeleton argument, particularly at paragraph 13, to a whole range of factual matters which were in evidence which stack up in support of the likelihood that employment would not have continued. He submits that had the Tribunal properly addressed the Polkey reduction question, it would have produced no other answer than that the employee would have been dismissed in any event.[27]Miss Sutton submits in reply that the Tribunal did consider the Polkey question and that there was no procedural irregularity. She draws attention to the fact that at paragraph 42 of its judgment the Tribunal record:
"Mr Jackson for the Respondents, submitted that compensation should not be based on Mrs Werner's final net wage, but on a reduced figure to reflect the probability that she would have been dismissed in any event or would have stayed on in the co-ordinator's role at £14,000 per annum. We have considered the various possibilities that could have arisen out of successful consultation and are not satisfied that she would necessarily have been dismissed, or necessarily been on a reduced salary."
[28]In those circumstances, Miss Sutton says, there is an indicator that the Tribunal did entertain procedurally Mr Jackson's submissions and rejected them on the basis that they were not satisfied that the employee would have necessarily been dismissed.[29]In rejoinder, Mr Jackson asked rhetorically: where is any evidence by the employee in support of the contention that there was any role in which she would have continued in employment? There is not, he submits, anywhere in her lengthy witness statement an assertion that there was anything she could have done in employment for the employers in any particular role, nor is there an assertion that she would have taken the reduced salary position of Wedding Co-ordinator. Those matters, Mr Jackson submits, show that the Tribunal failed entirely to grapple with the Polkey question.[30]We are unanimously satisfied that this ground of appeal succeeds in both its dimensions. First, it does appear to us that there was a procedural irregularity in the Tribunal's conduct of this aspect of the case before it. The issue of the capacity and inclination of Mrs Werner to continue in the employer's employment (had there not been the procedurally unfair dismissal) did require to be explored in evidence and Mr Jackson, for the employers, was denied the opportunity to explore it. Moreover, even if there had not been that procedural irregularity, on the findings made by the Tribunal itself we are quite satisfied that the question of a Polkey reduction fell for consideration and was not adequately, or at all, considered by this Tribunal. In those circumstances, had we been satisfied that the dismissal was unfair we would, in any event, have remitted the question of a Polkey contribution to a new Tribunal. We did not consider that we had sufficient material before us to review the circumstances and make a Polkey reduction for ourselves. We should indicate for the sake of completeness that had we been minded to remit the decision on the Polkey reduction, it would not have been to a Tribunal of the same constitution as considered this matter previously. The appeal against the basis of compensatory award[31]We can deal with this point relatively briefly. The Employment Tribunal, in calculating future loss, treated the appropriate multiplier for future loss as the full £25,000 per annum salary that Mrs Werner had enjoyed immediately prior to her dismissal. That, submits Mr Jackson, is only consistent with the Tribunal having directed itself that but for the dismissal a £25,000 per annum salaried post would have been available with the hotel. He submits, firstly, that there was no such job. Secondly, there was no evidence of any such job. The post from which Mrs Werner had been dismissed, had on any view not continued, and it had not been filled. Further, to the extent that it might have been said that the employee would have continued in at least some salaried capacity, there was no finding by the Tribunal as to what capacity that would have been or indeed a direct finding that it would have been continued employment at £15,000 let alone £25,000.[32]In response, Miss Sutton submitted that the Tribunal had made no error in this respect. The question of what compensation to award was at large, and it was for the Tribunal to make an award which was just and equitable. We are unanimously satisfied that this ground of appeal is also made out. The Tribunal have tendered no explanation, let alone a reasonable explanation, as to why future loss was assessed on the full salary for a post which no longer existed. In those circumstances, again, had we not reversed the finding of unfair dismissal we would have had to remit the question of the assessment of compensation to a newly constituted Tribunal. The appeal on costs[33]This aspect of the appeal requires us to say something about the history of the proceedings. After the claim had been commenced before the Employment Tribunal Service, the employers failed to put in any Respondent's Answer. No response was entered in good time or at all, and a one day hearing was fixed before an employment tribunal to determine remedy on Mrs Werner's claim. Only on the occasion of that hearing did the employers attend with representatives and seek to contest the claim on its merits. The hearing was adjourned and a Respondent's Answer was then promptly put in. The Tribunal, in those circumstances, had obviously to consider the question of costs because plainly the adjournment had been occasioned by the unreasonable conduct of the employer and Mrs Werner was entitled to the costs thrown away. However, her counsel before the Employment Tribunal, urged that the Tribunal should go further than dealing with the costs thrown away on that adjournment and should enlarge the award of costs as a result of the unreasonable conduct of the employer considered in the context of the litigation as a whole. The Tribunal acceded to that submission, and in addition to the costs of £1500, which they attributed to the costs thrown away by the adjourned hearing, they made a further award of £1500 costs on account of the unreasonable general conduct of the employers.[34]In the appeal, Mr Jackson for the company, does not dispute the jurisdiction of the Tribunal to make an award of costs in relation to the abortive hearing of 21 February 2007; although he formally submits that those costs should be limited to £750 reasonable costs. In the course of exchanges with this Tribunal, he did not feel able to advance material developing the contention that £1500 was an unreasonable figure for the costs thrown away. But at the heart of his submission on this aspect of the appeal was the proposition that there was no material before the Tribunal to justify the award of a further £1500 costs.[35]Miss Sutton ably attempted to demonstrate to us that there was some further unreasonable conduct of the employers beyond 21 February or indeed prior to 21 February which had caused additional costs. The best she was able to do was to suggest to us that the effect of the employers coming late with a substantive defence was that the hearing extended from the original one day to become a three day case. That, she said, occasioned additional costs.[36]With the greatest of respect to those submissions, we simply cannot accept them. It is not possible to deduce any unreasonable conduct on the employer's part beyond the late submission of a Respondent's Answer and the consequent abortive hearing on 21 February 2007. It must certainly pay the costs thrown away on that occasion. However, in our judgment, there is nothing to sustain the exercise of the Tribunal's discretion to increase those costs to £3,000 or indeed any other figure. Although we are always reluctant to interfere with the judgment of a Tribunal on a question of costs this, in our judgment, is a plain case in which the Tribunal has acted in the exercise of its discretion without factual justification. In those circumstances we shall allow this aspect of the appeal to the extent of varying the order of the Tribunal from an award of £3,000 plus VAT costs to an order of £1500 plus VAT costs.[37]In those circumstances and for those reasons we are unanimously agreed that the outcome is that this appeal should be allowed. The Tribunal's judgment that there has been an unfair dismissal should be set aside and its order in respect of costs should be reduced from £3,000 plus VAT to £1500 plus VAT.