England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE EATRF 97/0904/3

Royal Courts of Justice

Strand

London WC2

Tuesday, 9 June 1998

B e f o r e:

LORD JUSTICE BELDAM

LORD JUSTICE MUMMERY

SIR CHRISTOPHER STAUGHTON

- - - - - -

ANITA CAROLE DENCH

APPELLANT

- v -

FLYNN & PARTNERS (a firm )

RESPONDENT

- - - - - -

(Computer Aided Transcript of the Palantype Notes of

Smith Bernal Reporting Limited, 180 Fleet Street,

London EC4A 2HD

Tel: 0171 421 4040

Official Shorthand Writers to the Court)

- - - - - -

MR P EDWARDS (Instructed by Messrs Steele Raymond, Bournemouth, BH1 1BX) appeared on behalf of the Appellant

MS V BATHER (Instructed by Messrs Flynn & Partners, Bournemouth, BH2 6TA) appeared on behalf of the Respondent

- - - - - -

J U D G M E N T

(As approved by the Court )

- - - - - -

©Crown Copyright

Tuesday, 9 June 1998

J U D G M E N T

LORD JUSTICE BELDAM: Before the court is an appeal from a preliminary decision of the Employment Appeal Tribunal by which it determined that the appellant's appeal to that tribunal did not raise a question of law.

The facts relevant to the issues raised, are that the appellant was an assistant solicitor with the respondent firm. She joined the respondents as an articled clerk (or trainee solicitor) in September 1991. She was then 22 years of age. When she had successfully completed her articles over the next two years, the respondents offered and she accepted, appointment as an assistant solicitor in their domestic conveyancing department. On 16 June 1995 she was given 3 months' notice to terminate her employment on 16 September 1995 on the ground of redundancy. The appellant claimed that she had been unfairly selected for redundancy, alternatively that there was not a redundancy situation at the time.

In October 1996 the Industrial Tribunal sitting at London South found that there was at that time no redundancy situation at the respondent firm, and accordingly the appellant must be taken to have been unfairly dismissed.

The hearing was then adjourned to enable the parties to prepare for a remedy hearing. The tribunal had given an indication that at that hearing they would be concerned with the period of time over which the compensatory award should be calculated. The parties could agree the amount of compensation and, failing agreement, reapply to the tribunal for the compensation to be assessed. This is a useful course for a tribunal to take to dispose of an issue involving a complex calculation of the amount of compensation.

Before the appellant's notice had expired, she made many applications for positions with other firms in the Bournemouth area. Unhappily, the time was not propitious for taking on assistant solicitors in Bournemouth, or in the immediate area. However, on a provisional basis (that is with a 3 months probationary period) she accepted a position with another firm in Bournemouth. She had had considerable misgivings about taking this position, and indeed she had had advice from a member of the respondent firm against doing so. However, she felt constrained to take it as it was the only position at that time which had been offered her and, according to her statement, she considered it her duty (so far as she could) to mitigate any loss she had sustained as a result of being unfairly made redundant. As she feared, the employment with this other firm turned out to be only of the shortest duration. She was employed there from 30 October 1995 until 31 December 1995.

A question had risen whether she was, in addition to the compensatory and basic award for unfair dismissal, entitled to claim a sum over and above her flat salary of £17,000 per annum, made up by profit-related pay. That matter formed the subject of controversy before the tribunal, and was the subject of an application to the Employment Appeal Tribunal for leave to appeal. But happily, as we have been told, all the questions arising from that claim have now been settled between the parties.

The appellant contended that she had lost substantial sums due to her unfair dismissal, but the Industrial Tribunal (in terms to which I shall refer in a moment) considered that she could not claim compensation for the period after she had starting working for the firm she joined on leaving the respondents.

In dealing with this question, the Industrial Tribunal dealt first with the circumstances in which she came to obtain the alternative employment. They said in paragraph 11:

"The Applicant was active in seeking alternative employment and she was successful before she left the Respondent in obtaining a post with a firm of solicitors named Druitts."

The tribunal then considered her employment with that firm, which was a husband and wife partnership firm, and continued:

"The Applicant commenced her employment with Druitts on 30th October 1995, she having decided to take a holiday after the stress of recent months. It had originally been suggested that she began work in the middle of November 1995 when her predecessor was leaving the firm. The Applicant's employment by Druitts was for an unlimited period, initially for three months of a probationary nature. For reasons which were not specified, the Applicant's employment with Druitts was terminated by Mr Horsfall-Turner after a month, her effective date of termination being 31st December 1995. The Applicant's original Application suggested that there was not sufficient work for her at Druitts although in evidence to the Tribunal she referred rather to practices which she found unsatisfactory. There was no evidence that any practices followed by Druitts were contrary to the professional code for solicitors enforced by the Law Society."

The tribunal next considered the period of compensation. They said in paragraph 17:

"Having regard to the period of compensation arising from the unfair dismissal we consider that this should be for a period from 16 September 1995 to terminate on the day on which she commenced employment with Druitts. This employment was not temporary work or work of a different nature to that she was qualified to carry out and taken for the primary purpose of mitigating her loss. It was an appointment, unlimited in duration except for the usual probationary requirement, as a qualified solicitor carrying out work of which she had already had experience and providing her with additional experience in litigation. She sought and was given advice about the appointment before she took it and she was reminded of the particular problems that might arise in sole principal firms. Nevertheless she decided that she would accept what it was hoped was a career move at a salary very little different from what she was enjoying with the Respondent. That in the event she was unable to work amicably with the sole principal of Druitts, for whatever reason, was unfortunate but it is not something for which we consider it would be appropriate to visit the financial consequences upon the Respondent."

The applicant sought to appeal to the Employment Appeal Tribunal against this conclusion of the Industrial Tribunal. At the preliminary hearing His Honour Judge Pugsley ruled that the conclusions set out in paragraph 17 raised no issue of law. He said:

"In our view it was perfectly open for the tribunal on the findings of fact that they had made to come to the view that the applicant fell to be compensated only until such time as she took the new post with [the] firm of solicitors called Druitts. That her loss of job arose from reasons totally unconnected with the unfair dismissal and that approaching the issue in a common-sensical way, having regard to the statutory requirements, that they were perfectly entitled to come to the view that for whatever reason she was unable to work at Druitts, it was not something for which it would be appropriate to visit the financial consequences upon the respondent. We therefore do not consider that issue is one that raises an issue of law that could be argued before a full tribunal."

The provision in section 123 of the Employment Rights Act 1996 relating to the compensatory award requires that:

"Subject to the provisions of this section and sections 124 and 126, the amount of a 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."

Subsection (4) provides:

"In ascertaining the loss referred to in subsection (1) the tribunal shall apply the same rule concerning the duty of a person to mitigate his loss as applies to damages recoverable under the common law of England and Wales or (as the case may be) Scotland."

Therefore, the question we have to consider is whether, the parties having agreed that we should decide this point and not merely remit it to the Employment Appeal Tribunal, the Industrial Tribunal correctly directed themselves in law, in the conclusions which they reached in paragraph 17 of their decision.

For the appellant, Mr Edwards stressed that the appellant was under a duty to mitigate her loss, of which she was clearly conscious, as was shown by her statement put in before the tribunal; that the employment which she took with Druitts was subject to a three month probationary period and, during that period, could certainly not be regarded as permanent employment. It would only become permanent in the accepted sense of the word if, after the period of probation, both parties regarded the employment as satisfactory and as employment which they were prepared to continue.

He emphasised that, in paragraph 17, the tribunal have paid scant reference to the fact that the employment was subject to this probationary period, for they have emphasised that the employment was not temporary or work of a different nature, and stressed that it was an appointment unlimited in duration, "except for the usual probationary requirement". Further, he submits that the tribunal have not approached the assessment of the period over which compensation ought to be calculated in the conventional way by taking the period until the hearing of the assessment, deciding what sum the appellant had lost by reason of the unfair dismissal, giving credit for sums which had been earned by her during that period, and considering whether there was likely in the future to be any continuing consequence from the loss of her employment in which she had achieved secure employment, in the sense that she could not be unfairly dismissed.

He referred us to the well-known case of Courtaulds Northern Spinning Ltd v. Moosa [1984] ICR 218, and in particular the observations of the President of the Employment Appeal Tribunal, Lord Browne-Wilkinson (then Browne-Wilkinson J) at page 227. The President referred to the earlier case of Ging v. Ellward Lancs Ltd (1978) 13 ITR 265, in which Arnold J, in giving the judgment, had held that an Industrial Tribunal had been wrong seek to classify employment which had been taken after unfair dismissal as either temporary or permanent. Lord Browne-Wilkinson said:

"That decision is apparently in conflict with our view. However, in the judgment there is no reference to any argument based on lack of causation which in our view is the critical point. On the facts of the Ging case that is not very surprising: the allegedly 'permanent' employment obtained in September 1976 in fact only lasted for one month as was known at the date of assessment. It is undoubtedly correct to assess past loss in the light of true facts known at the date of assessment and therefore to characterise such employment as being in fact permanent would have been wrong. We do not regard Ging as deciding that in all cases, irrespective of causation, loss of wages is to be awarded down to the date of assessment."

The emphasis of "permanent employment" was relied upon in this case by Miss Victoria Bather appearing for the respondent. She says that, in effect, the tribunal came to the conclusion that the employment obtained by the appellant was permanent employment. If she lost that employment, it was the loss of that employment which caused any future loss and not the unfair dismissal. She referred us to the more recent case of Whelan v. Richardson [1998] IRLR 114. In that case, in a helpful judgment in the Employment Appeal Tribunal, Judge Peter Clark laid down, for the assistance of Industrial Tribunals, a series of propositions making it clear, he said, that he was not seeking to fetter the exercise of discretion by Industrial Tribunals on the facts of any individual case.

Those propositions are undoubtedly helpful, as one would expect from Judge Peter Clark, but in the last of them he said:

"As soon as the applicant obtains permanent alternative employment paying the same or more than his pre-dismissal earning his loss attributable to the action taken by the respondent employer ceases. It cannot be revived if he then loses that employment either through his own action or that of his new employer. Neither can the [respondent employer] rely on the employee's increased earnings to reduce the loss sustained prior to his taking the new employment. The chain of causation has been broken."

I consider that statement needs qualification. No doubt in many cases a loss consequent upon unfair dismissal will cease when an applicant gets employment of a permanent nature at an equivalent or higher level of salary or wage than the employee enjoyed when dismissed. But to regard such an event as always and in all cases putting an end to the attribution of the loss to the termination of employment, cannot lead in some cases to an award which is just and equitable.

Although causation is primarily a question of fact, the principle to be applied in deciding whether the connection between a cause, such as unfair dismissal, and its consequences is sufficient to found a legal claim to loss or damage, is a question of law. The question for the Industrial Tribunal was whether the unfair dismissal, could be regarded as a continuing course of loss she was subsequently dismissed by her new employer with no right to compensation after a month or two in her new employment. To treat the consequences of unfair dismissal as ceasing automatically when other employment supervenes, is to treat as the effective cause that which is simply closest in time.

Causes, in my view, are not simply beads on a string or links in a chain, but, as was said many years ago, they are influences or forces which may combine to bring about a result. A tribunal of fact has to consider the appropriate effect of the wrongful or unfair dismissal and the effect of the termination of any employment which is subsequently obtained. That is a function which an Industrial Tribunal is called upon frequently to perform and, provided it does not regard itself as rigidly bound in every case to take the view that a subsequent employment will terminate the period of loss, it seems to me that it will be able, fairly and equitably, to attribute to the unfair dismissal the loss which has been sustained.

In my view, in paragraph 17 of their decision the Industrial Tribunal did in this case misdirect themselves. They took the view that, once the appellant had accepted the employment with Druitts that any further loss was not something which they could visit upon the respondent. In my view, in the circumstances of this case it may be appropriate for the Industrial Tribunal to consider for what period of time after the appellant lost the employment with Messrs Druitts the consequences of her losses flowed from, or were attributable to, her unfair dismissal by the respondent.

For those reasons, I consider that this matter should be remitted to the Industrial Tribunal for them to decide, on the evidence which will be before them, for what period of time and in what amounts the loss claimed by the appellant should be awarded, taking into account sums which she received when she was with Messrs Druitts and sums which she has since earned in temporary positions covering for solicitors who are absent from their work.

For those reasons I would remit this matter to the Industrial Tribunal.

LORD JUSTICE MUMMERY: I agree

SIR CHRISTOPHER STAUGHTON: We have been referred to a number of cases where the Employment Appeal Tribunal has appeared to lay down rules for the calculation of compensation, with particular reference to cases where the employee obtains other employment before the date when compensation is assessed. One rule appears not to be in dispute: that the employee's loss is to be assessed as at the date of the remedies hearing. But it is also true, as was said by the Employment Appeal Tribunal in Whelan v. Richardson [1998] IRLR 114 at page 117, that that date is necessarily arbitrary. One must avoid, if one can, it giving rise to arbitrary results.

Other rules adopted by the Employment Appeal Tribunal, if such they be, are at most guidance. What has to be assessed in terms of section 123(1) of the Employment Rights Act 1996 is 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. That includes a test of causation, or perhaps the same test twice over, once by reason of the words "in consequence of" and a second time in the words "attributable to".

That is the ordinary common sense test of the common law. Was the loss in question caused by the unfair dismissal or by some other cause? The tribunal must ask itself and answer that question, and then ask what amount it is just and equitable for the employee to recover. Rules will no doubt help as guidance in the process, but that is the task which ultimately has to be undertaken.

I agree for the reasons given by Beldam LJ that this case should be remitted to the Industrial Tribunal.

ORDER: Appeal allowed with costs; legal aid taxation of the appellant's costs.