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
EAT/477/05/CK

		Royal Courts of Justice Strand, London, WC2A 2LL
		27th November 2006

Lord Justice Pill:

1. This is an appeal against a decision of the Employment Appeal Tribunal, ("EAT"), His Honour Judge McMullen QC presiding, of 8 March 2006. The EAT allowed an appeal by Carol Thornett ("the respondent") against a decision of an employment tribunal held at Exeter dated 1 April 2005. The employment tribunal had decided that the respondent was unfairly dismissed but contributed 25% to her dismissal. A total award of £11,600.25 was made in the respondent's favour.
2. The respondent appealed against the quantum of damage and the EAT allowed the appeal stating that the judgment awarding compensation "limited to six months future loss … be set aside and the said limitation be removed". The EAT also stated, at paragraph 35, that "the attention of the tribunal was drawn only to the six months immediately post dismissal and a longer view would need to be taken". The case was, by consent, remitted to the same employment tribunal, subject to that being impracticable or impossible.

The facts found

3. Scope ("the appellants") were formerly known as the Spastics Society. The respondent is a highly qualified engineer and was employed by them from 1 October 1990 until 21 April 2004. She managed their Micro-Technology Support Service ("MTS") at premises in Exeter, Vranch House, made available by the Devon and Exeter Spastics Society. The unit provided aids for disabled persons, principally those suffering from cerebral palsy. Also working at Vranch House were two other engineers, Mr Jones and Mr Warren, and the respondent's personal assistant, Ms Vanstone. The tribunal noted that there was no criticism whatsoever of the respondent's "professional skills, professionalism or dedication to the work".
4. Mr Jones and Mr Warren worked exclusively at Vranch House. The respondent spent three or four days a week carrying out field assessments and the rest of the week at the premises taking part in the manufacture and adaptation of equipment. The tribunal found that there was clearly a requirement for considerable liaison between her and the two engineers.
5. In the summer of 2003, Mr Jones made a complaint against the respondent that she had been bullying him and harassing him . She was suspended on 1 August 2003 and the service at Vranch House went into suspension.
6. The tribunal noted that there were also difficulties with the Chief Executive of the Devon and Exeter Spastics Society, who provided the premises in Exeter. They found that the relationship between the appellants and the Society "continues to be a difficult one". Notice to vacate the premises had been given.
7. Disciplinary hearings were held in relation to the respondent and four allegations involving three members of staff, Mr Jones, the respondent's line manager and a consultant, were considered. Allegations of "unsatisfactory conduct" were found to be proved (25 November 2003) and the claimant was given a "final written warning which was to remain on her file for a period of two years". The respondent's appeal was unsuccessful. She has never accepted the correctness of that outcome. The tribunal declined, rightly in my view, to reinvestigate that disciplinary matter.
8. The tribunal found that the respondent "continues to feel aggrieved at the outcome of that matter". The appellants took the view that the respondent should no longer be involved as the manager of the unit and proposed that she should be relocated to the appellants' school near Cardiff. The proposal was that for the first 6 months the parties should see how matters developed.
9. The respondent objected on the ground that there were no workshop facilities at Cardiff and the tribunal considered her stance to be a reasonable one. The tribunal found that, following a meeting on 4 December 2003, the respondent made it clear that she thought it would be very difficult for her to liaise with Mr Jones. She wrote a note stating: "I cannot see how it could possibly be appropriate or realistic for me to liaise with John Jones in view of what he has done. If I can liaise with him why do I need to be removed to South Wales to do so". She also stated: "I think [briefing Mr John Jones about equipment] would [put me] at the mercy of John feeling bullied". The respondent continued to think that the outcome of the disciplinary proceedings was wrong.
10. The respondent declined to accept the transfer and Mrs Murphy, the appellants' assistant director, regarded her as having resigned. By a letter dated 28 January 2004, the respondent stated that she had not resigned and "did not wish to relinquish her employment with the [appellants] to whom she felt a considerable degree of dedication". Meanwhile, all at the unit, including Mr Jones, stated that they were happy to work with the respondent again. Further discussion was unsuccessful and the respondent's employment came to an end on 21 April 2004 in circumstances which the appellants conceded before the hearing amounted to a dismissal.

Decision of employment tribunal

11. The tribunal expressed a conclusion as to whether the dismissal was a fair one at Paragraph 16:

"Was it a fair dismissal? The respondent's case [that in Scope] is that there was no other option available and that in the light of Dr Thornett's resistance to the proposed move they had no alternative but to terminate her employment. We disagree. There was another alternative and, in view of the fact that the respondents were driving the situation, we think it is one which should have been pursued. It was an alternative which was not without risks. It had the potential to fail but nevertheless in our judgment a reasonable employer would have followed it as far as possible. The alternative was that the parties should continue to work as before with the claimant returning to Vranch House. She had been given a warning. It is clear that Dr Thornett was unhappy about that but nevertheless we think a reasonable employer would have taken active steps to encourage the parties to work together. It is a situation which would have required careful management and it its impossible for us to reach any conclusion as to whether in the long term it might have worked. The respondents had indicated to the claimant that they valued her services and in those circumstances we think a reasonable employer would have taken steps to explore that option. That was not done. In particular Dr Thornett made it clear that she was not aware of any proposal that she should return to Vranch House one day a week. We think that a reasonable employer at that stage would have appreciated that there might have been a misunderstanding and would set out the proposals with some clarity so that they could have been considered. The respondent's failure to do that in our judgment renders this dismissal unfair."

12. The tribunal went on to find, at paragraph 17, that there was contributory fault to the extent of 25%. They stated:

"… Nevertheless the respondents were faced with a very difficult managerial situation. The claimant made it clear that she had considerable reservations about working with Mr Jones in view of what she described as what he had done. We think that this was an unreasonable attitude for Dr Thornett to take. We think that a reasonable attitude for her to have taken would be to express the view, as had her colleagues, that they were at least prepared to try and make the situation work. We are not oblivious to the potential difficulties of that. In that she failed to do that, we think Dr Thornett's conduct was a contributory factor in the termination of her employment and one which we think would be just and equitable to reflect in our finding and in any award of compensation should we be invited to make one."

13. Having found that the appellants should have taken active steps to encourage the parties to work together, the tribunal concluded, at paragraph 18:

"We have been asked to try and reach some assessment as to how long the situation would have lasted if the respondents had encouraged the parties to try and make the arrangement work. We have not seen Mrs Jones. We have not had any opportunity of hearing any evidence from him and of course it is a highly speculative matter, but nevertheless one which is of importance to the parties. In our view we think the arrangement would have lasted about 6 months. We say that for these reasons. First of all, the respondents had expressed a desire to retain Dr Thornett's evident skills and we think that they could and should have made substantial efforts to try and make the arrangement work. Dr Thornett was probably only going to be there one or perhaps two days a week and so not in Vranch House on a daily basis and Mr Jones had expressed a willingness to try and make it work. For those reasons that is the best assessment we can make. "

14. Compensation was assessed on that basis. The respondent, who was aged 52 and had 13 years service, was found to be entitled to a basic award of £4995. To that the tribunal added a compensatory award of £6605.25 allowances having been made as appropriate. If the six month period is correct, those figures are not challenged by either party.
15. In the course of considering the respondent's situation, the tribunal stated:

"… Our assessment as we have already indicated is that by reason of the changes in the operation of the micro-technology unit and the attitude of landlords, we think that Dr Thornett would have been made redundant in any event at about the end of 2004 or early 2005. Having regard to the difficulties which beset the working relationship we think there is a likelihood that her employment might even have come to an end before that but 6 months is the best assessment we can make. That is the basis on which we approach the compensation in this case."

Decision of EAT

16. The EAT found that the tribunal had erred in law. They stated at paragraph 25:

"It [the employment tribunal] must not launch itself upon a sea of speculation … The proper approach when it recognises that speculation is involved is to accept that it cannot sensibly reconstruct the situation. In a case where the burden falls on the Respondent which seeks to limit compensation, it will have no difficulty in finding that it cannot do so; and it will do so on the basis of submissions and evidence or at least of failure of evidence. "

17. They added at paragraph 27:

"The proper approach, given the nature of the relationships including the evidence before the Tribunal about how the parties could work together, all combine to indicate that it would be wrong to place a limitation in time as to the duration of the relationship. In our judgment, the Tribunal erred when it set out upon the speculative venture. Truly, the evidence was not before it upon which it could make that judgment."

18. In the summary of their decision, the EAT stated:

"the employment tribunal could not sensibly recreate the world as it might have been and should not have reduced the losses."

19. Considering whether there would have been a redundancy, the EAT held that the tribunal's judgment was perverse. The evidence of Mrs Murphy was that if the respondent had stayed, the service would have continued. On the premise that the relationship would not have broken down after six months, the service would have continued. As to the loss of the premises, the EAT stated : "Who knows what would have happened to the relationship with Colonel Wheeler's organisation once he became aware, on this footing, that she was back running the service in the old way or on some attenuated basis?" The EAT did not permit the appellants to raise the argument that the service would have been closed by them in any event.
20. It is not necessary or appropriate to resolve redundancy issues in this appeal. For the appellants, Mr Basu does not seek to rely on the redundancy finding as a justification for the decision that six months was the appropriate period of loss. In their reasoning, the employment tribunal did not rely on it. Mr Basu relies on other factors which were present, as, he submits, did the employment tribunal.
21. The EAT did, at paragraph 34, also give some indication that, upon a remission, the appellants ought not to be able to argue that they would have closed the service in any event. It will be necessary to return to that finding.
22. Mr Basu, for the appellants, submits, first, that there was sufficient evidence to entitle the employment tribunal to conclude that the employment would have lasted only a further six months and, secondly, that their conclusion was sufficiently reasoned. On the first point the material relied on, in summary, is:

a) The respondent was subject to a final written warning given in November 2003 which was to remain on file for two years.

b) The respondent had made it very clear that she thought it would be very difficult for her to liaise with Mr Jones. She had considerable reservations about working with Mr Jones in view of what he had done. She continued to think that the outcome of the disciplinary proceedings was wrong.

c) The finding against the appellants was confined to a failure to have explored the option of encouraging the parties to work together. The tribunal were entitled to conclude that the attempt would probably have been unsuccessful.

d) Notice to quit Vranch House had been given

e) The employment tribunal understood the task to be performed. They referred to the difficulties and stated, both in paragraphs 18 and 20, that six months was "the best assessment we can made.

23. On the second issue, Mr Basu submits that, read as a whole, the decision was sufficiently reasoned. Paragraph 18 should be read in the context of the determination as a whole and the findings made . In submissions on the day of the decision, Mr Basu had argued for a shorter period than six months and the reasons given in paragraph 18 itself were, it is submitted, a response to the submissions in favour of the shorter period.
24. Mr Basu relies on the postscript to the judgment of this court, delivered by Lord Phillips of Worth Matravers MR, in English v Emery Reimbold Strick Ltd [2002] 1 WLR 2409, at paragraph 118:

"There are two lessons to be drawn from these appeals. The first is that, while it is perfectly acceptable for reasons to be set out briefly in a judgment, it is the duty of the judge to produce a judgment that gives a clear explanation for his or her order. The second is that an unsuccessful party should not seek to upset a judgment on the ground of inadequacy of reasons unless, despite the advantage of considering the judgment with knowledge of the evidence given and submissions made at the trial, that party is unable to understand why it is that the judge has reached an adverse decision."

25. For the respondent, Mr Blake submits that the EAT were correct in their conclusion that the employment tribunal could not sensibly reconstruct the situation and, accordingly, no limit should be placed on the compensation. Secondly, and if that submission is not successful, the possibility of the employment not continuing indefinitely could only have been assessed as small, and any resulting discount as insubstantial. Thirdly, there were no findings of fact to justify the six month limitation. Fourthly, the decision was insufficiently reasoned. Pressed as to what should have been awarded, Mr Blake eventually submitted that the sum should be the net current rate of pay to retirement, less the respondent's earnings, and subject to any statutory maximum.
26. The assessment of compensatory awards is governed by Section 123 of the Employment Rights Act 1996. That provides, insofar as is material:

"The amount of the compensatory award shall be such amount as the tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal insofar as that loss is attributable to action taken by the employer".

27. In Polkey v A E Dayton Services Limited [1998] ICR 142, Lord Bridge, at page 163G, approved the remarks of Browne-Wilkinson J in Sillifant's Case [1983] IRLR 91 at 96:

"There is no need for an "all or nothing" decision if the industrial tribunal thinks there is a doubt whether or not the employee would have been dismissed, this element can be reflected by reducing the normal amount of compensation by a percentage representing the chance that the employee would still have lost his employment".

28. In Lambe v 186K [2005] ICR 307, this court considered how tribunals should approach the question of compensation in cases where a dismissal may have occurred in any event. Giving the judgment of the court, Wall LJ, at page 323 cited with approval the judgment of Lord Prosser in the Court of Session in King v Eaton Limited (No.2) [1998] IRLR 686. The procedure by which an applicant was made redundant in King was found to be unfair and the issue was whether the applicant would have been made redundant had a fair procedure been followed.
29. Lord Prosser stated, at paragraph 19:

"It seems to us that the matter will be one of impression and judgment, so that a tribunal will have to decide whether the unfair departure from what should have happened was of a kind which makes it possible to say, with more or less confidence, that the failure made no difference, or whether the failure was such that one cannot sensibly reconstruct the world as it might have been."

30. Wall LJ stated that the formulation "provides tribunals with a straightforward and sensible yardstick with which to approach such cases". At paragraph 60, Wall LJ adopted that approach and stated:

"[That]approach to the facts of the instant case leads us to the conclusion that on the evidence available to it, the Tribunal was entitled to conclude that in the Appellant's case, whilst both the process of selection for redundancy and the absence of consultation was unfair, it was unlikely that the Appellant would have found alternative employment with the Respondent or any of its associated companies at the conclusion of an extended period of consultation. The Tribunal was entitled to find that what the Appellant wanted was his job back, and that he was not willing to consider the alternative offered by the Respondent, which the Tribunal found was both a promotion and commanded a higher income. In short, this was not a case in which it was impossible for the Tribunal sensibly to reconstruct the world as it never was: the Tribunal was entitled to come to the conclusion that an extended period of consultation should have taken place, but that at the end of it, the Appellant would still have left the Respondent's employment."

31. The effect of Polkey was also considered in this court in Gover v Propertycare Ltd [2006] ICR 1073. That was a case in which compensation for loss of earnings was confined to a period of four months during which consultation as to proposed terms of employment took place. Buxton LJ stated, at paragraph 19:

"Second, and more generally, the principle recognised in Polkey is not narrowly limited to the facts of that case, as the claimants sought to suggest, but is merely an example of the general application of the requirements of section 123(1). The rigid rule sought to be drawn from that case does not follow from the observations in the case and is quite inconsistent with the statutory obligation that underpinned it. By contrast, a broad principle of the type recognised in Polkey, of which the application in that case is only an example, does respect the statutory guidance."

Having referred to Lord Prosser's statement in King, cited with approval in Lambe, Buxton LJ stated, at paragraph 22:

"That, when applied to an employment tribunal, indicates very strongly that an appellate court should tread very warily when it is being asked to substitute its own impression and judgment for that of the tribunal. I have set out how the employment tribunal approached the issue in this case, and despite the lengthy criticisms addressed to that treatment I am not persuaded that they went outside the very wide ambit permitted to them by Lambe".

32. Considering the facts in Gover, Buxton LJ concluded, at paragraph 24:

"The employment tribunal correctly directed itself; and brought its experience to bear on the 12 days of evidence that it had heard. It was well aware, as its analysis shows, of the difficulty and unusual nature of the task, but it did not err in law in embarking on that task."

33. O'Donoghue v Redcar and Cleveland Borough Council [2001] IRLR 615 was also a case in which the employment tribunal's conclusion that the employment would not have continued longer than a date six months after the effective date of termination was upheld in this court. Mr Blake fairly draws attention to factual differences between that case and the present case.
34. Having regard to those authorities, I am unable to accept Mr Blake's first three submissions. The employment tribunal's task, when deciding what compensation is just and equitable for future loss of earnings will almost inevitably involve a consideration of uncertainties. There may be cases in which evidence to the contrary is so sparse that a tribunal should approach the question on the basis that loss of earnings in the employment would have continued indefinitely but, where there is evidence that it may not have been so, that evidence must be taken into account.
35. There was such evidence in this case and it is summarised in paragraph 22 above. It was not a case in which the employment tribunal could have ignored the countervailing factors, as the EAT appear to suggest. In the recent cases I have cited, the analysis of the employment tribunal on this issue has been upheld in this court. There was evidence in this case which, to put it at its lowest, created a risk, which a fact-finding tribunal could not ignore, that the employment would not have continued indefinitely. I respectfully disagree with the EAT's conclusion in their paragraph 27, cited in paragraph 17 above, that the employment tribunal should not have set out on the venture.
36. The EAT appear to regard the presence of a need to speculate as disqualifying an employment tribunal from carrying out its statutory duty to assess what is just and equitable by way of compensatory award. Any assessment of a future loss, including one that the employment will continue indefinitely, is by way of prediction and inevitably involves a speculative element. Judges and tribunals are very familiar with making predictions based on the evidence they have heard. The tribunal's statutory duty may involve making such predictions and tribunals cannot be expected, or even allowed, to opt out of that duty because their task is a difficult one and may involve speculation. Giving judgment in the leading case on loss of earning capacity, Moeliker v A. Reyrolle & Co. Ltd [1977] 1 WLR 132, an important head of damage in personal injury cases, Stephenson LJ when seeking words to define the correct approach to be followed stated, at page 144:

"I avoid "speculation" because this head of damage can really be nothing else".

37. When Lord Prosser, in King, spoke of making decisions "with more or less confidence" he was not saying that a prediction could only be made when confidence was complete; on the contrary, he contemplated prediction when there was "less" confidence. As already stated, however, there may come a point, at which evidence of countervailing factors is so slight that an indefinite continuation of the employment may be held to be an appropriate prediction.
38. The parties should of course take care to place before the tribunal the material on which they seek to rely to establish how long the employment would have continued but for the unfair dismissal and tribunals can be relied on to scrutinise that evidence carefully when performing their duty to make a just and equitable compensatory award. They should adopt the flexible approach recommended by Buxton LJ in Gover.
39. It is important, however, that, when a conclusion is reached as to what is likely to have happened had the employment been allowed to continue, the reasons for that conclusion and the factors relied on are sufficiently stated. While there was material before the employment tribunal which may have justified the six months limit (I am not of course making a finding of fact myself), the reasons for the employment tribunal's decision do not emerge with sufficient clarity to permit their determination to be upheld. The reasons given in paragraph 18 of the determination may well have been a response to cogent submissions by Mr Basu for a period shorter than six months, but the two factors mentioned in that paragraph both operate in favour of a longer rather than a shorter period. The factors which may operate in the opposite direction, while present in the determination, are not related to the analysis at paragraph 18.
40. There is no analysis in the determination as to how the employment is expected to have ended after six months, whether disciplinary action of the kind taken in late 2003, a breakdown of attempts to work together which would have permitted a fair dismissal, or a resignation by the respondent. Further, as the EAT pointed out, the employment tribunal's use of the expression "highly speculative matter" in paragraph 18 damages the credibility of their assessment, though they did go on twice to use an appropriate expression: "the best assessment we can make". The determination, as stated, does not sustain Mr Basu's stalwart attempts to create an adequate set of reasons.
41. In my judgment, the case must be remitted to the employment tribunal. The finding of unfair dismissal and the ground on which it was made (paragraph 16 of determination) will stand as will the finding on contributory fault (paragraph 17). The figures in paragraphs 20 and 21 dealing with quantum are also agreed and final, subject of course to the six months issue. Beyond that and save that basic questions of credibility should not be reconsidered, the remission should in my judgment be at large. It is open to the employment tribunal to assess, in accordance with the principles stated, such future period as their analysis of the evidence requires, or, if it is necessary to achieve a just and equitable result, to adopt a different approach such as considering a percentage reduction.
42. I do not accept, as appears to be suggested by the EAT, that six months should be treated as a starting point above which the determination has to be made. There is force in the EAT's criticism of the employment tribunal's handling of the redundancy issue but the issue should be open for consideration on the remission. Evidence should be permitted as to what would have happened, or what was likely to have happened, to the appellants' MTS operation at Vranch House. It appears from a note of evidence submitted that the issue was raised at the hearing, though not in much detail.
43. I would allow this appeal only, and to the extent indicated, on the terms of the remission.

Lord Justice Laws:

44. I agree.

Lord Justice Gage:

45. I also agree.