England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
HIS HONOUR JUDGE LEVY QC
EAT/0068/03/ZT

		Royal Courts of Justice Strand, London, WC2A 2LL
		2 April 2004

Lord Justice Sedley :

This is the judgment of the court.

1. Mr Scott was born on 16 December 1944 and so reaches the age of 60 later this year. He was employed by the Inland Revenue from the age of 16, reaching the rank of senior inspector, until 31 August 2001 when he was dismissed. By then he had already issued proceedings; he now issued further ones. An Employment Tribunal sitting in Norwich (Mr Ash, Mr Jennings and Mrs Greaves), in a decision handed down on 14 November 2002 after a hearing spread over 10 days, found that he had been unfairly and wrongfully dismissed, had been discriminated against on grounds of both sex and disability, and had been victimised. At a remedies hearing shortly afterwards the tribunal made an award of compensation totalling £98,378 but declined to award Mr Scott any part of his costs.
2. On appeal the Employment Appeal Tribunal (Judge Levy QC, Mr Springer and Mrs Vickers) declined to interfere with any element of the award. They did not deal, however, with what has now become the central issue: that the entire claim had been based on the premise that Mr Scott would have had in any event to retire at 60. The Crown's policy had always been that only those who still needed to complete 25 years' reckonable service, or who were engaged when they reached 60 on a project for which they were still needed, could stay on till, at latest, 65. But from 1 April 2002 the Inland Revenue, while formally keeping 60 as the normal age of retirement, changed its rules to allow those who were willing and able to do so to continue to serve until 65. Mr Scott had always said that he had meant to go on working after 60, though he had taken it that this would be as an independent tax consultant.
3. Learning of this policy change while the appeal to the EAT was pending, Mr Scott through his lawyers had sought permission on 11 May 2003 to re-amend his notice of appeal in order to rely on it. On 11 June 2003, two days before the EAT hearing, the Registrar of the EAT refused to allow the re-amendment. No application was made at the hearing, however, to reverse the Registrar's decision. It is only in this court that it has been sought to raise the point.
4. Pill LJ on consideration of the papers granted permission to do so. He wrote:

"The failure to take the point in the EAT would normally be fatal but it was unfortunate that the decision of the registrar was notified only 2 days before the hearing at the EAT and when it was known that the applicant was away on holiday. A factual point was raised in the reasons for refusal: the applicant's knowledge at the time of the remedies hearing. As a point of substance, the point merits the attention of the Court in the context of the ET's findings on unfair dismissal."

5. The Registrar's reasons for refusal were these:

"(1) That the law and [sic: ?on] compensation applied at the date of the application to the Employment Tribunal and ongoing changes are not relevant. On the basis that no litigation would be finalised.

(2) The evidential test is not fulfilled. The changes in the pension scheme were in the public domain by November 2002. The Registrar does not take the view that there has been concealment of this document."

6. The Inland Revenue do not seek to support the first reason, which is patently untenable. They support the second. In relation to it the following questions arise:

•    Is it in any case too late for Mr Scott to contest the Registrar's refusal, no application having been made to appeal it to the EAT?

•    Ought the Inland Revenue to have disclosed the new arrangement?

•    If they were not required to do so, is it still sufficient if Mr Scott can credibly say he was unaware of it?

7. This court also has before it two further applications made on Mr Scott's behalf. The first is by way of renewal of those elements of the original application for permission to appeal which Pill LJ refused. These were a series of challenges to the Employment Tribunal's assessment of compensation, all of which the EAT rejected. Pill LJ took the view that, given that the decisions below were tenable, a further appeal on these issues was not justified. The second application is to re-amend the appellant's notice in order to reintroduce the ET's refusal to award Mr Scott his costs, which was also unsuccessfully appealed to the EAT.
8. Having first heard Paul Rose QC (who did not appear below) for Mr Scott, we gave permission to re-amend the appellant's notice so that the application for permission to appeal on the costs issue was also before us and granted permission to appeal on all issues, reserving our reasons for doing so. Our reasons are in essence these. An appeal from the EAT not being a second appeal within CPR 52.13, it is open to this court to entertain it where no important issue of legal principle or of practice is at stake, so long as careful regard is had to what was said by Hale LJ in Cooke v Secretary of State for Social Security [2002] 3 All ER 279 - essentially that this court should be cautious about re-taking a decision which has already had the attention of a two-tier specialist tribunal. For reasons which will become clear, the issues which Mr Rose has advanced appear to us, even so, to merit this court's attention

The appeal against the Registrar's refusal of leave to re-amend

9. There is an unfortunate conflict of fact and of recollection about what happened before the EAT. But in our judgment there is no need to go behind the evidence adduced on behalf of the appellant that he was on holiday at the time of the EAT hearing and that his then counsel, Mr Clement, took the view that without instructions, which could not be obtained in time, he could not seek to exercise Mr Scott's right of appeal under Rule 21 of the EAT Rules 1993.
10. We do not consider that this is an adequate explanation. In our view it was within the implied or general authority of counsel, in the circumstances I have outlined, to contest the Registrar's decision before the EAT without the need of specific instructions to do so: see Halsbury Laws of England (4^th ed. reissue), vol 3(1), para 518. His instructions were manifestly to seek to raise the non-disclosure issue before the EAT, and Rule 21 of the Employment Appeal Tribunal Rules 1993 allowed notice of appeal to be given orally to the judge, who could refer it to the full EAT: in other words, the application could have been made without expense or formality at the appeal hearing. Contrary to what has been suggested in an affidavit of Mr Scott, his testimony was not required in order to institute the appeal. At worst , if evidence were needed in order to prosecute it, an adjournment would have been called for.

The failure to disclose the change in retirement policy

11. This is a particular misfortune, since in our judgment the Inland Revenue ought to have disclosed its new retirement policy as soon as it was introduced in March 2002. The Employment Tribunal proceedings were at that date still undetermined and it was plain that, if they reached the issue of compensation (as in the event they did), the prospective duration of Mr Scott's employment had he not been dismissed would have been central to the computation of the award. The tribunal chairman in January 2002 had ordered High Court disclosure, which by CPR 31.11 is made a continuous obligation throughout the currency of the proceedings, and the Inland Revenue's initial disclosure had included their original retirement policy (though Christopher Jeans QC for the Inland Revenue tells us that such disclosure is made routinely in employment cases regardless of the issue).
12. The policy which had been in force up to the time of Mr Scott's dismissal and was the subject of initial disclosure stated "The normal retirement age for everyone is 60", and said at TG10.13 in answer to the question Can you stay on after 60?:

"Normally, no. However your managers and Personnel Section will consider it in exceptional circumstances, for example, because you have particular skills or are needed to finish a project.

For it to be allowed, you must be in good health, and working to a satisfactory standard."

13. In the revised form promulgated in March 2002 with effect from 1 April 2002, the policy at TG10.10 now said under the rubric Normal retirement age:

"Under the terms and conditions of you employment, set out in TG 1, the normal retirement age for everyone in the Inland Revenue is 60. However, you now have the option of continuing to work up to the age of 65, so long as you continue to fulfil the health and efficiency criteria."

14. All the calculations of loss put forward on Mr Scott's behalf had taken 60 as their end point. This was not, however, because he did not believe himself to have had any prospect of working beyond that age. His case was that on retirement at 60 he would have sought and found better-paid work as an independent tax consultant to at least the age of 65. Because the medical evidence did not predict that by the time he reached 60 he would not be sufficiently improved to do this, the schedule of loss, apart from a sum for retraining, did not run past Mr Scott's 60^th birthday.
15. The Inland Revenue's in-house trainee solicitor, Alexandra Bentley, in a witness statement made in response to a notice to admit facts, has explained why in this situation she decided that it was not appropriate to disclose the new retirement rule in or after April 2002. She says, first: "I had always understood Mr Scott's case to be that he intended to work within the Revenue to age 60 and not beyond." This is quite right, but what Mr Scott intended was manifestly linked to what he and his advisers understood to be the case, namely that at 60 he would - absent special circumstances - have been obliged to retire. Secondly and more importantly, Ms Bentley points out that the schedule of loss did not claim any prospective loss or reduction of earning capacity, in whatever occupation, after the age of 60. It was only in his (unsuccessful) application in December 2002 to the Employment Tribunal to review its award that Mr Scott for the first time submitted that he was no longer capable of working past 60 because of the trauma caused by his treatment by the Inland Revenue.
16. Ms Bentley goes on, however, to explain that after its introduction in March 2002 she had nevertheless considered whether the change in retirement policy should be disclosed and had taken instructions on it:

"… I discussed its potential relevance to the Appellant's case with the clients from Inland Revenue Central England. I was informed that employment after age 60 was conditional on satisfactory health and efficiency and as the Appellant was retired prior to his 60^th birthday on ill-health grounds, he could not avail himself of that option…. The change in policy was therefore not relevant to the case put by the Appellant nor to his personal circumstances."

17. The Inland Revenue knew very well that the case against them was that they were responsible for the illness which had led to the loss of Mr Scott's employment with them. They also knew that under the new system Mr Scott's expectation would have been to remain in his job, if he remained fit and wished to do so, to the age of 65. Turning this round into an assertion that Mr Scott's illness and dismissal before the age 60 made the existence of a prospect of staying on to 65 irrelevant is the kind of reasoning which gives intellectual dishonesty a bad name. These may have been her instructions (and it should be said that she was under no obligation to disclose them), but Ms Bentley ought to have refused to act on them.
18. This leaves the question of the scheduled duration of loss. It is quite correct that Mr Scott and his advisers, with the benefit of medical evidence, had based the calculation on the expectation that by the time he entered his sixties Mr Scott would be able once more to work. (We will come separately to the question whether that concession can be reopened.) But there is in our judgment a paradigmatic difference between a claim made in 2002 for the loss of a job which would in any event have ended in 2004, leaving the claimant to find other work for the next 5 years or so, and the loss of a job which but for the dismissal would, all being well, have carried the claimant through to the end of 2009. In the former case it was for the claimant to prove (a) that he would probably have found other work from the age of 60, (b) that on balance of probability he will not now be able to do so, and (c), had he been able to do so, what his earnings would probably have been. In the latter case he need prove nothing beyond the probable duration of the job he has lost.
19. Mr Scott's schedule of loss was limited to age 60 because he did not seem to be in a position to establish proposition (b). Had he known that, but for his having been driven out of it, his job would probably have been there for him until he was not 60 but 65, his schedule of loss would have taken the normal form of seeking to recover the net loss to the latter date, discounted no doubt for uncertainties and for accelerated payment. Had it done so, the Inland Revenue could not have relied on the illness for which they themselves were alleged to be, and were in due course found to be, responsible; nor, more importantly, could they have relied on the prospect of recovery, since Mr Scott's job had already gone for good. At most they could have contended that his obligation to mitigate his loss meant that the award should be further discounted to reflect what he either would earn or should earn between 2005 and 2009.
20. The tribunal chairman had in January 2002 ordered High Court disclosure. CPR 31.6 includes in a party's standard disclosure any documents which adversely affect its own case or support another party's case. Mr Jeans draws our attention to the decision of this court in British Aerospace v Green [1995] ICR 1006. There Millett LJ pointed (at 1018) out that discovery "is limited to documents which are relevant to an issue in the case. It is not ordered in order to enable a claimant to discover whether there is an issue which he can raise." Stuart-Smith LJ (at 1020) said: "…it is quite wrong to order discovery on the basis that a case may in future be put in such a way that documents may become relevant." These remarks were made in the context of an application, in a claim concerning unfair selection for redundancy, for discovery of the assessments of the hundreds of retained employees. These were legally irrelevant to the pleaded claim, but they were capable of revealing other claims so far unknown and unpleaded. The present case is in our judgment not of this kind. There was a simple question of how many working years with the Inland Revenue Mr Scott had lost. His schedule was clearly geared to an assumed retiring age of 60, and it was plainly relevant to his case that, from a date well ahead of his 60^th birthday, it was going to be usual for Inland Revenue staff to go on to 65. Even if there were doubt about its materiality, the single-page document recording the change in the retirement rule was not so plainly immaterial to the issues as to make it not disclosable, and the decision to withhold it was an error of judgment.
21. It seems to us in these circumstances that an appeal against the Registrar's decision was bound to succeed, whether or not it necessitated an adjournment. Her first ground, as I have indicated, is not relied on by the Inland Revenue. Her second ground, by using the word "concealment", which does not appear in the draft re-amendment, misstates the issue. The only proper decision on the application before the Registrar was that the grounds of appeal to the EAT should be re-amended to raise the issue of non-disclosure. And for the reasons we have given, the appeal itself, had it been entertained by the EAT, should have succeeded.
22. This makes it unnecessary to answer the alternative question whether, absent a duty of disclosure on the part of the Inland Revenue, it would be sufficient that Mr Scott was ignorant - provided his ignorance was not wilful - of the change. This is as it should be. The duty of disclosure is as much a duty to the court or tribunal as a duty to the opposing party. Although surprise is expressed that Mr Scott had not learnt of the change before April 2003, when he deposes it first came to his knowledge, there is no suggestion that he did in fact know of it. The harder question of a party who does know of something disclosable but keeps quiet in order to trap the other party does not arise here.
23. What then is to be done at this late stage? We will defer an answer until we have considered the other issues before this court.

The Employment Tribunal's award

24. The other grounds of appeal are these:

•    That the sum of £15,000 awarded for injury to feelings was too low

•    That the sum of £15,000 awarded for personal injury in the form of psychiatric damage was too low

•    That it was perverse of the employment tribunal in the light of its findings not to award Mr Scott his costs.

These look unpromising as appeal issues, especially when they have already been rejected by a specialist appeal tribunal. But Mr Rose submits with some force that they raise questions of general importance in modern employment law.

The tribunal's findings

25. It is necessary first to summarise the Employment Tribunal's findings. A fellow employee, Miss Fitch, had complained that Mr Scott's conduct towards her amounted to sexual harassment. Those responsible for dealing with the complaint, without investigation, took it more seriously than any reasonable person could have done. (We are troubled by this finding, and will return to it below.) Mr Scott's denials were ignored. Instead other female staff were invited to support Miss Fitch's complaint, though in the event this yielded nothing further. Mr Scott's wife, also an Inland Revenue employee, was interviewed and asked why she did not divorce him. The accusation was found proved against Mr Scott on evidence which could not possibly justify it, and his own cross-complaints were dismissed. In consequence the Inland Revenue settled a claim brought against it by Miss Fitch for £5,000 and publicised the fact among its staff at a time when Mr Scott was going through the internal appeal process, an event the Tribunal described as disgraceful. From mid-1999 Mr Scott suffered increasing distress and clinical depression as the higher echelons of the Inland Revenue took refuge in procedure rather than address the substance of what was going on, blaming Mr Scott alone for the strident tone of his protestations. Finally, to his shock, it was decided to retire him on medical grounds, despite a letter from his GP pointing out that it was what he perceived (rightly, the tribunal found) as his unfair treatment that was rendering him medically unfit. The tribunal concluded that a woman accused of sexual harassment would not have been treated like this, and that Mr Scott's dismissal amounted to victimisation for resisting his treatment.
26. The Employment Tribunal's findings against the Inland Revenue include a denunciation of management for having taken Miss Fitch's complaint seriously in the first place and for not having subjected her to "penetrating questions" about it. The tribunal described dismissively as "the totality of what is purported to be a formal complaint" the following:

"When talking to me at my desk he intentionally stands as close to me as he can. In fact so close he moves my chair.

When I enter his room he often stares at me in a way that I find degrading and uncomfortable. Sometimes when talking to me I find him looking at my breasts.

In April when asking him to uncapture a tax return he said: 'You don't want to do that again because next time it would be a smacked bottom'.

Also in April I asked whether the conservatory that he was having built was a big one, he raised his eyebrows and replied 'Cor, yes!'

Again in April when asking him to uncapture a tax return he said 'Anything for you'.

On 19 May he said 'Ah, today we get the legs as well' whilst looking at me up and down.

Also on 19 May I caught him looking down my top when I was bending down to place files on his desk."

27. On this the tribunal commented:

"…Without detailed explanation and elaboration and investigation we cannot for a moment believe that any reasonable person viewing matters objectively could or would view the allegations as serious. Some may have been worthy of censure; many were trivial in the extreme and relied almost totally on Miss Fitch's perception. Either those involved in giving equal opportunities advice in the Revenue were motivated by misplaced zeal or were keen to create as much discomfort for Mr Scott as they could."

The underlining is in the original. Similar sentiments are repeated later in the extended reasons.

28. We wish to record our concern about this passage and the approach it betokens. Sexual harassment is a serious matter in the workplace and needs always to be addressed where there is a complaint about it, but it does not have to become the subject of a state trial every time it arises. Incidents trivial in themselves can acquire a measure of seriousness, or perceived seriousness, if they appear to be recurrent. That is one why reason why they should not be considered in isolation. What Miss Fitch had described in her complaint was a situation which is not uncommon in workplaces, and perceptions which, whether correct or mistaken, are usually real. We do not agree with the tribunal that it would have been appropriate for management simply to explain to Mr Scott that Miss Fitch's allegations "even if true were trivial" and to do no more than warn him "as to remarks and conduct which could be taken out of context or cause upset to a sensitive young woman". The complaint was one which it would have been wrong for management to trivialise or to ignore, and we do not accept that management displayed an understanding of sexual harassment "that beggared common sense".
29. Miss Fitch's was nevertheless the type of complaint which, if sensitively addressed, can be straightforwardly resolved. It is quite common to find that the man about whom the complaint is made does not appreciate that his habits or mannerisms are making a female colleague embarrassed or uncomfortable, and that once it is explained to him he will take care not to let it happen again. It is also not uncommon to find that the man is aware of the effect his behaviour is having but thinks it acceptable. Frequently, nonetheless, a careful explanation coupled with a warning is enough. Neither of these things appears to have been attempted here. Had they been, the tribunal's findings give every reason to think that Miss Fitch would not have wanted to make a formal complaint. Even if Mr Scott had proved completely resistant to them, a change of locations might have solved the problem. But it was in fact Mr Scott who responded to the formal complaint by pointing out, albeit in a somewhat intemperate letter, that mediation had not even been attempted.
30. If and to the extent that the tribunal meant to criticise the Inland Revenue's leap straight into accusatory procedures, we would therefore have no disagreement with them, nor with their criticism of how the inquiry was then handled and of the resultant 'fine' of £2,500 to be docked from Mr Scott's salary. But to the extent that they chose to amplify their critique by pouring scorn on Miss Fitch's complaint, we respectfully but strongly disagree with them. This was exactly the kind of situation which, if management ignores or trivialises it, can make the workplace a source of tension and unhappiness and escalate into formal disputes. The problem was that, the disciplinary wheels having been set prematurely and unnecessarily in motion against Mr Scott, nobody seemed willing or able to halt them. The fact that, once started, it was a process which might well involve seeing if other female staff had had similar problems with Mr Scott (something the tribunal considered simply to demonstrate "a desire to uphold [Miss Fitch's] allegations"), and the fact that finding the case against Mr Scott proved made it almost impossible to defend Miss Fitch's claim, only emphasise the unwisdom of the rush to judgment.
31. We have taken some trouble to express our view on this matter, not because it is itself the subject of the appeal before the court, but because it bears on one of the questions which are before us as well as on a policy issue which Employment Tribunals are regularly having to deal with. In relation to costs, Mr Rose has, naturally enough, relied on the strength of the tribunal's findings as making their refusal to award costs perverse. Mr Jeans has been driven to submit that their refusal to award costs shows that they cannot have meant everything they said about the reprehensibility of the Inland Revenue's conduct. For the reasons we have given, we cannot accept either approach. To the extent that the tribunal were critical of the Inland Revenue for taking Miss Fitch's complaint seriously, they were in error and their findings have to be correspondingly discounted. For the rest, their findings were open to them and we have to assume that they meant what they said.

Injury to feelings

32. This court in Vento v Chief Constable of West Yorkshire Police (No.2) [2003] ICR 318 gave authoritative guidance on the scale on which awards for injury to feelings caused by unlawful discrimination should be made. The award of £15,000 in the present case lies at the lower end of the highest of the three bands, representing the worst class of case. It is Mr Rose's contention that the tribunal should have made an award at or much closer to the top of the band, £25,000. The ruinous effect of the discriminatory acts on Mr Scott's morale and wellbeing had been spelt out in medical evidence which the tribunal accepted and to which we will turn when we deal with the psychiatric injury.
33. In relation to the undoubted injury to Mr Scott's feelings, this court is less well placed than either of the tribunals below to say precisely where it stands on the scale of such injuries. It is not said that the Employment Tribunal made any overt error of fact or law in coming to its figure, but it did not of course have the advantage of the decision of this court in Vento. The question for the EAT was whether, now that Vento had set a scale, the award tribunal's award fitted appropriately into it. They concluded that, having regard to the Vento scale, it could not be said that the award of £15,000 was perverse.

The role of aggravated damages

34. The tribunal added £5,000 to the total general damages for injury to feelings and psychiatric harm to reflect the aggravation of the damage through the manner of its infliction. Mr Rose submits that two heads of damage are legally and factually distinct. Mr Jeans points out that this court's characterisation in Vento of the highest band of award (paragraph 65(i)) describes it as covering "the most serious cases, such as where there has been a lengthy campaign of discriminatory harassment on the ground of sex or race", a formulation which seems, at first blush, to incorporate elements of aggravation. But when one reads on in Vento one sees that (in paragraph 67) this court went on to deal discretely with aggravated damages, and that (in paragraph 69) it concluded that the proper award to Ms Vento was £18,000 for injury to feelings plus a further £5,000 as aggravated damages, evidently reflecting the outrageous form which the discrimination had taken. It follows, in our judgment, that paragraph 65(i) should be taken to be dealing solely with the kinds of treatment which may make the injury to a person's feelings even graver than they would otherwise have been, and that aggravated damages are intended, as this court said in Alexander v Home Office [1988] IRLR 190, to deal with cases where the injury was inflicted by conduct which was "high-handed, malicious, insulting or oppressive".
35. For these reasons we do not accept Mr. Jeans' submission that the aggravated damages awarded by the tribunal should be aggregated with and be treated as part of the damages for injury to feelings. Mr Rose's challenge, in other words, is to an award of £15,000, not of £20,000. He submits that the tribunal cannot on the one hand describe the effect on Mr Scott of the Inland Revenue's conduct as strongly, and as unappealably, as it has thought it right to do, and on the other hand place the consequent injury to his feelings merely on the cusp between the serious and the most serious.
36. There is force in this submission. Mr Rose has reminded us of what the tribunal found in this regard: that "nobody appeared to be listening" to Mr Scott's case; that Miss Fitch's claim was settled, and the settlement publicised, on the implicit footing that Mr Scott was guilty; that Mr Scott became seriously distressed; that the chairman and deputy chairman of the Inland Revenue showed no interest in looking into his case when he took this "unfolding tragedy" to them; that almost everyone in the organisation appeared to be, and in a sense was, against him; that - in a step which "almost beggars belief" - he was further criticised for failing to show remorse; that he was, in all, "vilified"; that his over-reactions were themselves the result of the "very great stress and strain" he was now under; and that the specialists who reported on him found him to have a severe anxiety disorder exacerbated by stress, anger and frustration, all of which the tribunal found to have caused by his treatment. In the remedies decision the tribunal spoke of Mr Scott's having "suffered, continuously, enormous injury to his feelings". Mr Jeans made it no better for his client by stressing, through the tribunal's findings, that Mr Scott had been quick to take offence and had continuously overreacted to events. Had there been a question of contributory conduct, this might have helped the Inland Revenue; but in its absence, all the evidence does is explain why the injury to Mr Scott's feelings was even greater than it might have been to those of a more sanguine individual.
37. There is no doubt, in our judgment, that a markedly higher award for injury to feelings would have been unappealable. It may be, too, that the tribunal would have made such an award had they had this court's decision in Vento before them. But that is not to say, even in the light of Vento, that the figure of £15,000 was so low that the tribunal must have acted either on a wrong principle or on an erroneous evaluation of the facts which its had itself found. In the end we do not feel able to differ from the view of the EAT that the facts found by the Employment Tribunal were not such as to make their award of £15,000 for injury to feelings untenably low.

Psychiatric harm

38. The 6^th edition of the invaluable guidelines issued by the Judicial Studies Board for the assessment of general damages in personal injury cases places "moderately severe" psychiatric damage in a monetary bracket between £10,000 and £28,500, of which the core lies between £15,000 and £20,000. The principal indicators for this bracket are problems with coping capacity and with personal relationships, treatability and future vulnerability. It is also considered to matter if the injury has resulted from a breach of trust.
39. The Employment Tribunal, in making their award of £15,000 for the psychiatric harm done to Mr Scott, said:

"Had it not been for Dr Lovett's assessment that there was a good chance that the majority of his symptoms of depression will disappear within twelve months, we would have put it at the top of the moderately severe and possibly into the severe category Although not at the top end, for reasons we have indicated, it comes well off the bottom rung, so to speak"

40. Although one can see how the tribunal came to base their award on this premise, it does not accurately represent what Dr Lovett had said. In his final report Dr Lovett had said that Mr Scott would probably experience symptoms of his anxiety disorder "for at least one year after the conclusion of his case", though having obtained a finding in his favour on liability he was "somewhat more relaxed". The report also anticipated that Mr Scott would require psychological support "certainly for the 12 months post-litigation".
41. Mr Jeans invites us to treat a probable 12-month purchase of the sequelae as an inference which the tribunal were nevertheless entitled to draw from the medical evidence as a whole. This submission faces the difficulty not only that the tribunal did not say that the proposition was their own inference, but that the evidence before them would not have justified them in drawing it. There was nothing to controvert Dr Lovett's expert evidence in this regard. Moreover, Dr Lovett gave it as his opinion that while with time the psychological sequelae would steadily diminish, Mr Scott would never work again:

"Even if he showed a full recovery from his depression and anxiety and found a suitable job, the first episode of confusion, conflict or sense of something not being entirely [fair] would almost certainly cause a relapse in his condition."

This is not simply about Mr Scott's future employability: it is about his continuing emotional fragility, whether in or outside paid work.

42. Given this evidence, Mr Rose submits, their award was manifestly too low. The tribunal themselves said that, but for the optimistic prognosis which they had mistakenly thought was Dr Lovett's, they would have made an award near, and possibly above, the top end of the moderately severe bracket. This seems to us to be right, and to require a revision of the award in the light of the evidence correctly appraised. We do not think that this court is the best forum for this exercise. The case needs to go back to the Employment Tribunal for a reappraisal of its award for psychiatric damage.

Costs before the ET

43. The Employment Tribunal was asked but declined to award Mr Scott his costs on the ground that the Inland Revenue's defence of the claim had been vexatious and unreasonable. The employment jurisdiction is, for sound policy reasons, ordinarily a cost-free jurisdiction, and for our part we would not want to see that principle compromised or eroded. But a tribunal is empowered by its regulations to make an award of costs where a party's conduct of proceedings has been (inter alia) vexatious or unreasonable or misconceived. The power, in other words, is a disciplinary power, not a compensatory one. In discrimination cases it may be properly used against a respondent who, for example, has spitefully or unfairly used the tribunal proceedings to pursue the unjust accusation that led to the act of discrimination in the first place. But it is not there simply to penalise a party who has fought a heavy case and lost heavily.
44. The EAT took the view that, as appraised by the Employment Tribunal, this was a case of the latter kind. The tribunal had spelt out in detail why they did not consider the case a proper one for the award of costs. "We look at what the party did at the time, with the state of knowledge or understanding it had, the risks involved in litigation and whether they thought on reasonable grounds they were justified in defending the case… We then consider the conduct of the case itself …". They were critical of the Inland Revenue for not conceding unfair dismissal earlier in the proceedings, but on balance they did not consider it a proper case for an award of costs.
45. Mr Rose draws our attention to regulation 2 of the Employment Tribunals (Constitution etc) Regulations, which defines "misconceived" in rule 14 as including "having no reasonable chance of success". The introduction in 2001 of this criterion alongside the traditional ones of vexatious, abusive, disruptive or unreasonable bringing or pursuit of proceedings, as Scott Baker LJ said in Gee v Shell UK Ltd [2003] IRLR 82, para. 23, has lowered the threshold for awarding costs.
46. Mr Rose then turns to some of the Employment Tribunal's findings: that managers "had no insight or understanding of the reasons for Mr Scott's conduct and his increasingly desperate tone"; that their criticism of his lack of remorse for something he had not done "almost beggars belief"; that "any reasonably intelligent senior manager" should have spotted the unsatisfactory nature of the procedures that had been used; that others, possibly with their own agenda, had got Miss Fitch to make her complaint a formal one; that no attempt had been made to establish the true facts; that the review process had been hollow; and that "facts had been found by persons who never saw a single witness, in circumstances where no proper witness statements were taken, no detailed questioning was carried out and Mr Scott was expected to defend himself without sight of the majority of the flimsy evidence against him". The question, Mr Rose submits, is not whether even so the Inland Revenue thought they were in the right (a factor to which the tribunal expressly, and possibly conclusively, accorded weight), but whether they had reasonable grounds for thinking they were (a question not directly addressed by the tribunal in relation to costs, but strongly addressed by them elsewhere). We accept this submission.
47. The tribunal were influenced - for they said so - by the fact that not all Mr Scott's claims had been pursued (he had dropped the named individual respondents) or had succeeded (one inconsequential head of claim had failed). This, Mr Rose submits, had nothing to do with whether costs should be awarded to Mr Scott: they had at best to do with whether he should recover them in full. We think that this is right. There is also force in Mr Rose's contention that this was not simply a "standard and hard-fought fight": it was a drawn-out contest which, on the tribunal's clear findings, the Inland Revenue were doomed to lose, yet in which not even unfair dismissal was conceded until a late stage.
48. The tribunal refer to a number of other factors. They refer to attempts at settlement, observing that as it turned out the applicant did not recover anything like the damages he had sought. They refer also to the fact that he recovered no more than was offered on the day of the remedies hearing. The hearing before the tribunal fell into two parts, the first consisting of a week starting on 17 May 2002 and the second a week in August 2002. Mr Ash, who had investigated Mr Scott's complaint in the manner described and criticised by the tribunal, was cross-examined in the first week. We were given to understand that his evidence was important in changing the general perceptions of the case.
49. There were three schedules of loss served by Mr Scott, respectively seeking £106,000, £250,000 and a sum of the order of £100,000 special damages, without figures for general damages. The award of special damages was agreed finally in the sum of £57,363. This sum is substantially lower than that sought in the final schedule of loss, but the disparity is not such as seems to us to justify its being taken more than marginally into account by the tribunal in considering whether the Inland Revenue's conduct of the proceedings was 'misconceived'. It is not clear to us that the tribunal did in fact direct its attention to the question whether the respondent's case was doomed to failure, and if so, from what point of time.
50. We have noted earlier in this judgment the logical difficulty in which Mr Jeans finds himself in defending the refusal to award costs. Even so, we would be reluctant in the ordinary way to differ from the EAT's conclusion that the refusal, notwithstanding the tribunal's muscular findings of fact, was not perverse. We do, however, consider, particularly since the case has to go back to the Employment Tribunal for a fresh appraisal of the damages for psychiatric injury, that there are deficiencies of reasoning which require the decision on costs to be taken again. Here too we think that it is the original Employment Tribunal, which has devoted a great deal of time and attention to the detail of this case and which alone (as Mr Jeans stresses) has the first-hand feel of how it was conducted, which is best placed to retake the decision. When it comes to do so, the tribunal will need to bear in mind that the case for a costs award does not include (as Mr Rose readily accepted) the tribunal's misplaced criticism of the significance of the initial complaint.

Disposal

51. This case has therefore, in our judgment, to be remitted to the Employment Tribunal so that it may make a fresh award of compensation for psychiatric injury based on the precise content of the expert evidence, and so that it may reconsider the question of costs.

Employment with the Inland Revenue until 65

52. There is no basis for now reopening the future loss of earnings claim in its existing form, and none has been suggested to us. But, returning in this context to the non-disclosure of the new retirement age of 65, the same is not in our judgment the case with the possibility of Mr Scott's continuing in employment in the Inland Revenue after the age of 60. This was not disclosed as we have held earlier in this judgment it should have been; but we can see no way of allowing an appeal from the EAT on grounds which were known to the appellant's representatives when they came before the EAT but which for insufficient reason were not pursued there.
53. Nevertheless, the claim is now being remitted on general damages for psychiatric injury and on costs to the Employment Tribunal and to that significant extent is still live. Now that the factual possibility of continuing with the Inland Revenue to 65 is known, it will be available to be canvassed at the resumed hearing. Employment Tribunals are given a wide discretion as to how proceedings are to be conducted before them. It is not for us to dictate how Mr Scott should put his case, nor to say whether the tribunal must entertain it. However, as Mummery J pointed out, giving the judgment of the EAT in Selkent Bus Co Ltd v Moore [1996] ICR 836, paragraph 24, there are no time limits laid down in the rules for making amendments, so that amendments may be made before, at and even after the hearing of a claim. As Mummery J also pointed out, it will naturally be relevant for the tribunal to consider why the application was not made earlier and why it is now being made. He gave as an example the discovery of new facts or new information from documents produced in the course of the case. In every case, the paramount consideration will be the relative injustice of granting or refusing the amendment.
54. It is in this light that we would expect an application by Mr Scott to amend his schedule of loss to include earnings in the Inland Revenue to the age of 65 to be considered by the Employment Tribunal when it sits again pursuant to this court's order. We have made clear earlier in this judgment for what purpose the new information may and may not properly be canvassed.

Venue

55. To the extent indicated, therefore, this appeal will be allowed and the case (failing settlement) remitted for further hearing. It must if possible go back to the same Employment Tribunal as before. If, but only if, this proves impracticable, it will have to go before such other tribunal as the Regional Chairman may designate.

Order:

56. Appeal allowed to the extent identified in paragraph 55 of the judgment.
57. The case be remitted to the Employment Tribunal on the issues identified.
58. The respondent to pay the appellant's costs to be subject to detailed assessment if not agreed.
(Order does not form part of the approved judgment)