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 APPEALTRIBUNAL
REF NO: UKEAT/0446/06/DM

		Royal Courts of Justice Strand, London, WC2A 2LL
		13/12/2007

Lord Justice Maurice Kay :

1. Nigel Mercy commenced employment with Peterborough Software (UK) Ltd in 1991. Sometime later the company became known as Rebus Human Resource Services Ltd. In late 2003 or early 2004 the company was taken over by Northgate Information Solutions plc, since when it has become a wholly owned subsidiary known as Northgate HR Ltd. Mr Mercy worked as a quality consultant. In 2002 the company, then still Rebus, established an Employee Consultation Council (ECC). It comprised five or six employees and two representatives of management. Some of the employees were elected by their peers, others were appointed by management. The purpose of the ECC was to meet quarterly, to share information about company issues, to offer mutual advice, to discuss the best ways of achieving desired results and to act as a channel for dialogue between employees and the management board.
2. On 12 December 2003, when the Northgate takeover was imminent, the ECC met to discuss the implications. On 23 January 2004 the company notified the Department of Trade and Industry of the prospective takeover and the fact that redundancies were expected. On 26 January 2004 there was a presentation to the ECC and to the workforce in which it was indicated that a total reduction of about 180 employees would be likely. In the first instance, volunteers would be sought and there would be consultations with the ECC as to the selection process and criteria in relation to compulsory redundancies. It seems that the search for volunteers and the consultation exercise were substantially successful because by 12 March 2004 Northgate announced that the compulsory redundancies would only number 25. On 15 March 2004 Mr Mercy and a colleague, Mr Deane, who was also employed as a quality consultant, were informed by their line managers that one of them was at risk of compulsory redundancy. The selection procedure was overseen by Northgate's Human Resources Manager, Janet Race. A range of criteria and guidelines had been agreed with the ECC prior to the commencement of the selection procedure for compulsory redundancies. The appropriate selection criteria to be applied as between Mr Mercy and Mr Deane were then agreed with their respective line managers. The line managers arrived at scores for their respective employees by reference to their own knowledge of the employees and the results of previous appraisals. Thereafter Ms Race carried out a "sanity check" on the scoring by the line managers so as to ensure that they had been consistent in their approach. She met with Mr Deane's line manager on 16 March and with Mr Mercy's line manager on 18 March. As a result of her meetings with them, Ms Race made a number of alterations to the scores which had the effect of increasing Mr Mercy's final score and decreasing Mr Deane's. They each ended up with 67 points. In view of that equality, Ms Race applied the length of service criterion. As Mr Deane had 20 years' service as against Mr Mercy's 12 years, Mr Mercy was selected for redundancy. He exercised his internal appeal rights but following internal hearings on 11 May and 9 June his selection stood and, on 18 June 2004, his employment came to an end. He sought compensation for unfair dismissal, together with a protective award pursuant to sections 188 and 189 of the Trade Union and Labour Relations (Consolidation) Act 1992.
3. When the matter first came before the Employment Tribunal, it dismissed the applications for unfair dismissal compensation and a protective award. Although it found one "glaring inconsistency" in the scoring of Mr Mercy, to his detriment, it did not consider that he had been unfairly selected for redundancy. As to a protective award, it found that the ECC had been properly constituted and that the consultation process had been operated in such a way that "it would be almost an abuse of process given the nature of this case to make a protective award".
4. Mr Mercy appealed to the Employment Appeal Tribunal. Following case management directions given by the then President of the EAT, the Employment Tribunal agreed to review its decision on the protective award claim. This resulted in a second decision of the Employment Tribunal which this time found that Northgate had been in breach of the requirements of section 188(4) of the Trade Union and Labour Relations (Consolidation) Act 1992 by failing to provide the employee representatives on the ECC with appropriate information in writing at the commencement of the consultation process. However, it was still not minded to grant a full protective award, considering that it would be "a travesty of justice" to do so against an employer who had acted "so clearly in good faith for what proved to be no more than a formal slip". It therefore limited the protective award to one week's pay.
5. The appeal to the EAT then proceeded to a hearing. The form of the eventual hearing in the EAT was that Mr Mercy was appealing against the rejection of his unfair dismissal application, whilst Northgate was cross-appealing against the second decision of the Employment Tribunal to make a modest protective award. On 6 March 2007, the EAT (Wilkie J, Mr M Worthington and Mr M Clancy) allowed both the appeal and the cross-appeal, as a result of which Mr Mercy lost his protective award but obtained an order that the unfair dismissal issue – essentially, whether the selection for redundancy had been fair or unfair – be remitted for rehearing by a differently constituted employment tribunal. Both Mr Mercy and Northgate then sought permission to appeal to the Court of Appeal. The Employment Appeal Tribunal refused both applications for permission to appeal but, on 30 July 2007, Sir Henry Brooke granted permission to appeal to both parties. We therefore have had to consider Mr Mercy's appeal in relation to his application for a protective award and Northgate's appeal in relation to the remittal of the unfair dismissal case to a differently constituted employment tribunal.

The protective award

6. The issue in relation to the protective award is a technical one arising out of the provisions of sections 188 and 189 of the 1992 Act. By section 188(1) an employer who is proposing to dismiss as redundant twenty or more employees at one establishment within a period of 90 days or less is required to consult about the dismissals

"all the persons who are appropriate representatives of any of the employees who may be affected by the proposed dismissals or may be affected by measures taken in connection with those dismissals."

7. Section 188(2) provides that the consultation shall include consultation about ways of avoiding the dismissals, reducing the numbers of employees to be dismissed and mitigating the consequences of the dismissals. It must be undertaken by the employer "with a view to reaching agreement with the appropriate representatives". By section 188(4) the employer must disclose in writing to the appropriate representatives various categories of information.
8. Where the employees are of a description in respect of which an independent trade union is recognised by their employer, the appropriate representatives for consultation are the representatives of the trade union (section 188(1B)). Where, as here, no trade union is involved, the appropriate representatives of any affected employees are, by virtue of section 188(1B)(b),

"… whichever of the following employee representatives the employer chooses –

(i) employee representatives appointed or elected by the affected employees otherwise than for the purposes of this section, who … have authority from those employees to receive information and to be consulted about the proposed dismissals on their behalf;

(ii) employee representatives elected by the affected employees, for the purposes of this section, in an election satisfying the requirements of section 188A(1)."

9. It is common ground that, in the present case, the employee representatives on the ECC, both elected and appointed, had the necessary authority to fall within the first of those provisions and so there was no question of an election of employee representatives specifically "for the purposes of this section".
10. Mr Mercy's case is that he is entitled to a protective award by reason of a failure to disclose in writing to the employee representatives on the ECC categories of information itemised in section 188(4). Section 189(1) provides that where an employer has failed to comply with a requirement of section 188, a complaint may be presented to an Employment Tribunal and, by section 189(2), if the Tribunal finds the complaint well-founded it shall so declare "and may also make a protective award". The method of calculating such an award is set out in section 190. So far so good. The issue that arises in this case is as to who was eligible to present a complaint to the Employment Tribunal under section 189(1). That subsection provides that a complaint may be presented to an Employment Tribunal on the ground that –

"(a) in the case of a failure relating to the election of employee representatives, by any of the affected employees or by any of the employees who have been dismissed as redundant;

(b) in the case of any other failure relating to employee representatives, by any of the employee representatives to whom the failure related,

(c) in the case of failure relating to representatives of a trade union, by the trade union, and

(d) in any other case, by any of the affected employees or by any of the employees who have been dismissed as redundant."

11. The Employment Tribunal concluded that the ECC provided adequate representatives for the purposes of sections 188 and 189. Mr Mercy did not and does not challenge that finding. The conclusion of the EAT was that, as there were appropriate employee representatives in place, any complaint concerning a failure to provide them with information was susceptible to an application to the Employment Tribunal only at the suit of the employee representatives of the ECC and not by Mr Mercy himself. The complaint did not concern a failure relating to the election of employee representatives, in which case Mr Mercy would have been in a position to complain under section 189(1)(a). It was a complaint of "any other failure relating to employee representatives" falling within section 189(1)(b), and as such could only be presented "by any of the employee representatives to whom the failure related".
12. On behalf of Mr Mercy, Mr Bruce submits that the EAT was wrong in law to reach that conclusion. He maintains that Mr Mercy was entitled to present a personal complaint because the circumstances fall within section 189(1)(d), "in any other case". The EAT rejected this submission and, in my judgment, it was correct to do so.
13. Mr Bruce accepts that a literal construction of the statutory provisions yields the result about which he complains. Nevertheless, he submits that we should adopt a purposive approach, keeping in mind that the purpose of the statutory provision and the Directive to which it seeks to give effect (Council Directive 98/59/EC) is to provide protection for employees. He thus submits that that purpose would be furthered by construing section 189(1)(b) narrowly and section 189(1)(d) widely. The non-union employee representatives do not enjoy the same independence or perform their tasks with the same robustness as trade union officials and this ought to be reflected by acceptance of his proffered wider construction of section 189(1)(d).
14. I do not doubt that traditional trade unionists would view consultative arrangements such as the ones in the present case with suspicion and distaste. However, neither the statute nor its parent Directive made assumptions about the relative merits of independent trade unions and non-union representatives. Article 6 of the Directive provides:

"Member States shall ensure that judicial and/or administrative procedures for the enforcement of obligations under this Directive are available to the workers' representatives and/or workers."

15. Thus, without any distinction in the case of independent trade unions, it contemplates that enforcement is available to the representatives and/or the workers. It is clear from the structure of section 189(1) that where the complaint relates to the election of an employee representative, an affected employee has standing under section 189(1)(a). Where it relates to, "any other case", including the appointment of an employee representative, an affected employee has standing under section 189(1)(d). However, where employee representatives are appropriately in place, as they are conceded to have been in the present case, a complaint about a failure relating to them is susceptible to challenge only by them, or one of them, just as a complaint about a failure relating to representatives of a trade union is susceptible to complaint only by the trade union under section 189(1)(c). I accept the submission of Mr Wynne, on behalf of Northgate, that section 189(1) is a carefully devised provision defining and restricting standing to bring a complaint and that where, as here, the complaint is as to breach of the obligation to provide information to appropriate employee representatives, such a complaint can only be presented by "any of the employee representatives to whom the failure related". At that stage, the statute deals with the complaint as a collective rather than an individual matter and limits standing, no doubt so as to prevent the possibility of numerous individual challenges which are not supported by appropriate representatives. If Mr Mercy had understood this at the appropriate time, he could have raised his concerns with his representatives on the ECC and, in the absence of their being able to obtain a satisfactory response from the employer, they could have commenced proceedings under section 189(1)(b). In these circumstances, there is no protection gap in the legislation which results from according the statutory language its obvious and natural meaning. I do not accept that a purposive approach produces a different result.
16. I would dismiss Mr Mercy's appeal.

Unfair dismissal: Northgate's cross appeal

17. The first thing to say about this part of the case is that Mr Wynne criticises the EAT for permitting Mr Bruce to raise the issue upon which he succeeded. He submits that it was not foreshadowed in Mr Mercy's grounds of appeal to the EAT and that, by reference to paragraph 2.4 of the Practice Direction (Employment Appeal Tribunal – Procedure) 2004, the EAT ought not to have allowed Mr Bruce to make the argument. I am not impressed by this pleading point. Whether or not it can be said, on a generous construction, that the issue was raised in the grounds of appeal, it is clear that Mr Wynne had notice in the form of Mr Bruce's written submissions, served more than a month before the hearing in the EAT, that Mr Bruce intended to advance essentially this argument. Mr Bruce accepted before the EAT that he was not able to advance a ground of appeal which would have required a note of the evidence before the Employment Tribunal. However, the point he sought to advance did not fall into that category. Ideally, Mr Bruce ought to have applied for permission to amend his grounds of appeal. If he had made such an application, in the circumstances that I have described, I do not doubt that permission would have been granted. Mr Wynne cannot claim to have been taken by surprise or to have been significantly prejudiced. I am satisfied that the EAT committed no legal error by agreeing to consider the ground of appeal directed against the finding by the Employment Tribunal of a fairly applied selection process.
18. It is plain on the face of the first Employment Tribunal decision that the Tribunal had involved itself in the examination of witnesses in connection with the scoring of Mr Mercy and Mr Deane. At paragraph 4 of the decision the Tribunal stated:

"… the Tribunal actively involved themselves with questioning. The purpose of that questioning was to establish whether there was bad faith in the selection process. Simple error of judgment or a failure exactly to follow this practice may be unfortunate, but that does not necessarily make the matter unfair. It is not our job to do the respondent's job in hindsight for them."

19. In other words, the Tribunal was concerned to rule out bad faith in the selection process. That is a little surprising because counsel have informed us that no-one was asserting such bad faith. At a later stage in the decision the Tribunal referred to the danger of a line manager supporting his particular candidate by "manipulating the marks up, so as to put his candidate in the best possible position". In the event, the Employment Tribunal was entirely satisfied that everyone had acted in good faith. It nevertheless found a "glaring inconsistency" in the scoring of Mr Mercy. It stated (at paragraph 15):

"The real point in the case was the closeness of the markings, in the pool of two excellent workers … The best thing to have done would be to show the other man's markings and to have discussed them fully with him. That is why we went into the markings ourselves. We were not trying to remark. What we were looking to see was if there were glaring inconsistencies. There was one, the mark on the issue of the complainant's capabilities in technical skills and project management was on the mean side but … it was not outside the "band" of reasonableness so as to indicate bad faith that itself would indicate an unfairness."

20. In the following concluding paragraphs the Tribunal stated:

"The procedure for selection for redundancy was reasonable. The respondents, in good faith, tried to create a level playing field upon which to make a choice between two good men. They used, as best they could, the tools available for them to use. They tried to keep a check on a manager's enthusiasms for their individual workers. The markings at the end of the day were done in good faith. We may not have come to the same conclusion … but that does not mean that the process was unfair … The claimant was not … selected unfairly for redundancy."

21. The EAT considered that the Employment Tribunal had erred in law. In paragraph 42 of its judgment, the EAT stated:

"The problem … was that the ET expressed itself in a way in which it appeared that they were looking for a glaring inconsistency as evidence of bad faith which itself would indicate an unfairness. The passage in which they say so, at the end of paragraph 15, when allied to the passage in paragraph 4 … suggests that the ET was saying that the only circumstance in which unfairness could arise, where there was glaring inconsistency in the operation of the selection criteria, was where there was bad faith. In our judgment that goes too far in restricting the circumstances in which an ET could, consistent with its obligation not to take a fine tooth comb to the decisions of the respondents or to remark the assessments, nonetheless intervene. The lawful basis for intervention would be where glaring inconsistency, whether as a result of bad faith or simple incompetence, evidenced a decision which was outside the band of reasonableness. The position, therefore, is that we are left with the impression that the ET applied an erroneously restrictive test when considering the impact of what it concluded was a glaring inconsistency upon the fairness or otherwise of the dismissal. In those circumstances we are persuaded that the ET in its decision erred in law and, accordingly, the appeal must succeed."

22. Mr Wynne submits that the EAT was wrong in that conclusion. He submits that the error resulted from the very mischief referred to by the EAT, namely the taking of an overanalytical, "toothcomb" approach to the decision of the Employment Tribunal. He refers to well-known authorities such as Hollister v National Farmers' Union [1979] ICR 542, Jones v Mid-Glamorgan County Council [1997] ICR 815 and McLoughlin v Jones [2006] EWCA Civ 1167. It is, of course, inappropriate for the EAT or this Court to take a pedantic approach or to subject the decision of an Employment Tribunal to overzealous textual exegesis. The question has to be whether the Employment Tribunal significantly misdirected itself on the law, not whether a single loose phrase can be elevated into manifestation of a material legal error.
23. In my judgment, the EAT was correct to hold that the Employment Tribunal in this case erred in law. It is not possible to read paragraph 15 of the decision otherwise than as meaning that a glaring inconsistency produced in good faith did not or could not amount to unfairness in the administration of the selection procedure. The final sentence in paragraph 15 appears to place the outer limit of the band of reasonableness at the point where bad faith begins. At the very least, it leaves me, as it left the EAT, with a lack of satisfaction that the possibility of a glaring inconsistency, albeit one imbued with good faith, was not considered as having the potential to found unfairness in the selection. In my judgment, the analysis of the EAT was correct and I would dismiss Northgate's cross appeal.

Remittal to a different tribunal

24. Mr Wynne's final submission is that, even if the EAT was correct to reach the conclusion that there was an error of law in the decision of the Employment Tribunal, it ought not to have remitted the matter to a different tribunal. Mr Wynne submits that it should have gone back to the same tribunal in such an eventuality. He refers to the factors impacting on such a decision as set out in Sinclair Roche & Temperley v Heard [2004] IRLR 763, at paragraph 46, per Mr Justice Burton (President).
25. The difficulty facing Mr Wynne is that of establishing an error of law in the judgment of the EAT, the relevant passage of which is at paragraph 43 where Wilkie J said:

"We are not in a position to make a decision on the material before us and therefore the outcome of the appeal is that the matter must be remitted to a new tribunal to consider unfairness, but limited to the application of the selection criteria."

26. Whilst I do not feel able to say that it would have been inappropriate to remit the matter to the same tribunal (assuming it to be readily convenable), I cannot detect an error of law in the alternative disposal preferred by the EAT. It is not self-evident that, on any application of the matters referred to in Sinclair Roche & Temperley, the EAT would have been bound to conclude that the matter should go back to the same tribunal. This aspect of the case appears to have been the subject of very limited submissions to the EAT. In my judgment the decision to remit to a different tribunal was a permissible one. I would also dismiss Northgate's appeal on this point.

Conclusion

27. It follows from what I have said that, in my judgment, the EAT was correct to identify errors of law in the decisions of the Employment Tribunal. I find no such errors in the judgment of the EAT. Accordingly I would dismiss Mr Mercy's appeal and Northgate's cross appeal.

Lord Justice Wilson:

28. I agree.

The President of the Family Division:

29. I also agree.