ON APPEAL FROM the EMPLOYMENT APPEAL TRIBUNAL
MR JUSTICE KEITH sitting with lay members
UKEAT/0535/09 AND UKEAT/0536/09, BAILII:  UKEAT 0535_09_1407
Strand, London, WC2A 2LL
B e f o r e :
LADY JUSTICE SMITH
LORD JUSTICE ELIAS
|- and -
|CREDIT AGRICOLE CORPORATE AND INVESTMENT BANK
Mr Christopher Jeans QC and Mr Paul Nicholls (instructed by Messrs Osborne Clarke) for the Respondent
Hearing date : 12 April 2011
Crown Copyright ©
Lord Justice Elias:
i) The claimant's salary at the time of his dismissal was £104,000.
ii) If he had been promoted to Head of IRD Risk Management his salary would have increased from £104,000 to £120,000.
iii) In that role he would have received a bonus in each of the years 2009 and 2010 of 70% of his salary. (No express finding was made with respect to later years.)
iv) The claimant secured employment with the Financial Services Authority (FSA) on 3rd November 2008 at a salary of £105,000 (paragraph 26). The FSA would also pay a bonus in that year and thereafter but only of 20% of salary.
v) This job involved a significant reduction both when compared with what he was earning and what he would have earned had he not been denied his promotion. However, the Tribunal found that the FSA job qualified him well for a return to banking. The Tribunal said this (para 29):
'The Claimant was recruited as part of the FSA's drive to recruit experienced and talented people from the private sector at higher salaries than were normally paid in the public sector. Although his title is Associate, it was quite clear when he described to us the details of the job he carries out that it is a job at a fairly high level. He acts as a consultant and goes into banks and reviews their risk operations. He assesses their risk practices and whether they have adequate capital and does stress testing. He has meetings with Chief Risk Officers in the large banks and has first hand experience of seeing how things work at the board level. He has experience of and insight into the relationship between the Bank of England and the FSA. The Claimant is diligent and ambitious and we have no doubt that he will quickly learn and master his new role and that he will do well in it. The experience he will gain and the contacts that he will make from his job will stand him in good stead should he decide to go back into a career with a bank in a market risk / regulatory role. With increased regulatory drives, a risk manager who has regulatory experience as well is likely to be in demand.'
vi) The Tribunal then made certain findings on two matters which figure significantly in this appeal. The first was what would have happened to the claimant had he not been dismissed. The Tribunal noted that the claimant's previous working history showed that in the previous 15 years he had worked for four different employers and that the longest he had stayed with any single employer was five years. It observed that the banking crisis of late 2008 was likely to be resolved by an improvement in market conditions, and that the claimant still had contact with head hunters. In the light of these factors it found that there was :
"a very strong chance, which we put as high as 80%, that the Claimant would have left the Respondent's employment at the beginning of April 2010, having collected his loyalty premiums."
vii) The second concerned the likelihood of the Claimant leaving the FSA and returning to his banking career. The Tribunal's analysis of this reflected much of what it had already said about the prospects of going back into banking (para 36). This is an important paragraph in this appeal and I set it out:
"We next considered the likelihood of the Claimant leaving the FSA and returning to a better paid role in banking. The Claimant has worked for 20 years (the greater part of his working life) in banks, and appears to have had little difficulty in finding new jobs and moving from one bank to another. He had a successful career in trading and risk management. The only reason that he had difficulty in finding a job in banking in late 2008 was because of the extraordinary circumstances that prevailed at that time in the financial services sector. We accept that the Claimant will remain at the FSA for some time so that he can derive the full benefits of learning new skills and gaining experience as a regulator. Having done so, he will be well equipped to return to a risk management/regulatory role in banking. As we have said before, the indications are that in the future regulatory work and risk management will pay a larger part in the role of banks. The Claimant, having had experience of both risk management and regulatory procedures and controls from within the FSA, will be in a good position to seek a high level post within the banking sector. He is also in his current role in a good position to make useful contacts with senior risk officers and managers in banks. The Claimant is diligent and ambitious and will not resign himself to a post where his earnings are lower if there is a potential for him to move into better paid work. Having carefully considered all the evidence it is our conclusion that after the Claimant has been with the FSA for about a period of three years, i.e. at the end of 2011, there is a 70% chance that he will return to banking and be able to secure employment in banking that will pay at the same salary level as he enjoyed before. We took into account that the Claimant will be aged 47 at that time."
I refer hereafter to a job in banking at the same salary level as the claimant would have enjoyed if promoted as "equivalent employment".
viii) The Tribunal then considered whether Calyon had complied with the statutory procedural obligations imposed upon them, both with respect to a grievance raised by the claimant when he was not promoted, and when he was dismissed. The Tribunal held that the grievance had been dealt with in accordance with the relevant procedures, albeit somewhat ineptly, but that there had been a fundamental failure to comply with the dismissal procedure. As to the latter, the Tribunal said this (para 40):
"We next considered whether we should uplift any award of compensation for the dismissal on the ground that the statutory dismissal and disciplinary procedure had not been completed. The statutory procedure requires the employer to inform the employee in writing of the grounds that have led the employer to contemplate dismissing the employee, to inform him of the basis for those grounds, and then when the employee has had reasonable time to consider that information to hold a meeting with him to discuss the matter and thereafter to make a decision on whether to dismiss the employee. In the present case, the Claimant was suddenly called into a meeting and was told that he was being dismissed immediately. There was no step one letter and no step two meeting to discuss matters before reaching a decision. The meeting that took place was to inform the Claimant of a fait accompli, it was not a step two meeting. The Respondent is a large employer with huge resources available to it. It knew what the procedures were, it made a conscious and deliberate decision to ignore them. There was no good reason why the procedure could not have been followed. In those circumstances, we think it just and equitable to uplift any award we make by 50%."
i) It assessed the claimant's loss between January and July 2008 based on comparing his actual pay with the pay he would have received if he had been appointed to the Head of IRD Risk Management position (paragraph 42).
ii) It also assessed loss from the end of his employment until he obtained a job with the FSA on the same basis (paragraph 43).
iii) For the period between 3rd November 2008 (when his employment at the FSA commenced) and 1st April 2010 (when the Tribunal had assessed that there was an 80% chance that he would go elsewhere), the Tribunal calculated the claimant's loss by reference to pay he received in his role at the FSA compared with what he would have received had he been promoted (paragraph 44-45).
iv) In relation to the period 2nd April 2010 to 31st December 2011 (the point at which the Tribunal found there was a 70% chance that he would obtain an equivalent job), the Tribunal adopted the same approach in determining loss but it reduced the sum so calculated by 80% to reflect its conclusion that there was an 80% chance that the claimant would leave Calyon in April 2010 (paragraph 46).
v) It then awarded compensation for the whole of the period 1st January 2012 to 31st December 2024 which was the date when it found that he would retire. In effect therefore, it was calculating this head of loss by reference to the whole of the claimant's career. It again made this calculation by reference to the difference between the pay earned at the FSA compared with what the claimant would have received had he carried out the equivalent job, and then it reduced that sum by reference to the findings it had already made as to the likelihood that the claimant would still have been employed by the FSA during that period. First, it reduced it by 80% to reflect its conclusion that there was an 80% chance he would have left Calyon in April 2010; and then it reduced that sum by a further 70% to reflect its conclusion that there was a 70% chance that at the end of 2011 he would return to banking in equivalent employment (paragraphs 47-48). The consequence was that only 6% of the total difference in pay throughout that period was awarded.
vi) The Tribunal added certain additional heads of loss, including a small sum for loss of statutory rights, and £15000 for injury to feelings. (This in fact included £5000 aggravated damages which the EAT subsequently held had been wrongly awarded.)
vii) The Tribunal applied a 50% uplift to the total sum calculated. These were all net payments. The overall loss was assessed at almost £180,000 net of tax, and the uplift was half of that. After grossing up, the total award was almost £375,000.
At this point I simply note that although this was not an illogical way of calculating the loss, it did not in terms distinguish the loss flowing from the dismissal from that which flowed from the discriminatory failure to promote.
The appeal to the EAT.
(i) The EAT allowed the claimant's appeal against the Tribunal's decision that the compensation awarded for the period after April 2010 should be reduced by 80% (or indeed by any amount) to reflect its conclusion that there was an 80% chance that he would have left Calyon's employment in April 2010 (paragraphs 15-18). The EAT considered that this was an irrelevant finding because it did not help identify the claimant's loss. It should have had no bearing on the assessment of compensation.
(ii) The EAT dismissed Calyon's appeal that the Tribunal had been wrong to award career long loss at all (paragraph 24). Contrary to the submissions of Calyon, it held that the exercise was not too speculative and that the Employment Tribunal had had enough evidence to make a sensible prediction about the claimant's future.
(iii) The EAT allowed Calyon's appeal that having found that there was a 70% chance that the claimant would have obtained an equivalent job by the end of 2011, the Tribunal ought to have increased the reduction in respect of years subsequent to 2011 to reflect the fact that the 70% chance must have improved with each passing year (paragraphs 26-27). Indeed, the EAT considered that there was no answer to the appellant's submission on this point. The EAT then went on to determine for itself how the chances would increase. It did so by taking two later dates, namely 2015 and 2019, and calculating the likelihood of equivalence being achieved by that date. It concluded that the discount for the years 2011 to 2015 should stay at 70%; for the years 2015 to 2019 it should increase to 85%; and for the years 2020 to 2024 it should be 92.5%.
(iv) The EAT allowed Calyon's appeal against the uplift of 50% and substituted a figure of 10% (paragraphs 46-47). The EAT held, contrary to the submissions of Calyon, that the Employment Tribunal had been entitled to say that the gravity of the procedural breach would in a normal case justify the maximum 50% uplift, but it concluded that the Employment Tribunal had erred in failing to have regard to the very significant size of the award overall. The EAT held that following the reasoning of the decision of the Court of Appeal in Abbey National v Chagger  ICR 397, this was a material misdirection entitling it to substitute its own conclusion. The additional compensation had to be proportionate and the payment of an extra £90,000 was wholly disproportionate. The EAT held that in the circumstances the uplift should be reduced to 10% before grossing up the tax.
(v) The EAT however rejected the argument that the employment tribunal had erred in law in applying the uplift to heads of damage in respect of which there had been no breach of procedures. The contention was that the uplift should apply to that part of the compensation which was attributable to the claimant's dismissal only and should exclude that which was attributable to the discriminatory failure to promote him, since with respect to the latter the Tribunal had found that there was no breach of procedure. The EAT held that given the substantial link between the discriminatory refusal to promote and the dismissal, the Tribunal was entitled to find that it was just and equitable to apply the uplift to the whole of the award.
The issues raised by the appeal and cross appeal.
The statutory uplift.
"If, in the case of proceedings to which this section applies, it appears to the Employment Tribunal that
(a) the claim to which the proceedings relate concerns a matter to which one of the statutory procedures applies,
(b) the statutory procedure was not completed before the proceedings were begun, and
(c) the non-completion of the procedure was wholly or mainly due to failure by the employer to comply with a requirement of the procedure,
it must, subject to sub-section (4), increase any award which it makes to the employee by 10 per cent and may, if it considers it just and equitable in all the circumstances to do so, increase it by a further amount but not so as to make a total increase or more than 50 per cent."
Statutory uplift: the issues on appeal.
(1) Is it relevant to have regard to the size of the compensation awarded when exercising the discretion to increase the award pursuant to section 31(3)?
(2) Was the Tribunal entitled to conclude that the circumstances of the breach were such as to attract an uplift of 50%?
(3) When applying the uplift, did the Tribunal apply it to the appropriate elements of the compensation?
Is the amount of the compensation relevant to the section 31(3) discretion?
"Parliament would not have intended the sums awarded to be wholly disproportionate to the nature of the breach".
Was the Tribunal entitled to find a 50% uplift?
Was the Tribunal entitled to apply a 50% uplift in this case?
Was the uplift applied to the appropriate elements of compensation?
(1) Was the Tribunal entitled to assess the claimant's loss by reference to his whole career?
(2) If so, was it entitled on the evidence to limit the likelihood of his gaining equivalent employment by the end of 2011 to a 70% chance?
(3) Ought the Employment Tribunal, as the EAT held, to have concluded that the likelihood would necessarily increase in subsequent years; and if so, ought the assessment of that increase to have been done in a more precise way than was adopted by the EAT?
(4) Was the EAT entitled to treat the Tribunal's finding that there was an 80% chance that the employee would have left by 1 April 2010 had he not been unlawfully dismissed as irrelevant to the calculation of future loss?
Future loss: should it have accrued over the whole career?
The 80% reduction.
"69. … The task [of the employment tribunal] is to put the employee in the position he would have been in had there been no discrimination; that is not necessarily the same as asking what would have happened to the particular employment relationship had there been no discrimination. The reason is that the features of the labour market are not necessarily equivalent in the two cases. The fact that there has been a discriminatory dismissal means that the employee is on the labour market at a time and in circumstances which are not of his own choosing. It does not follow therefore that his prospects of obtaining a new job are the same as they would have been had he stayed at Abbey. For a start, it is generally easier to obtain employment from a current job than from the status of being unemployed. Further, it may be that the labour market is more difficult in one case compared with another. For example, jobs may be particularly difficult to obtain at the time of dismissal and yet by the time they become more plentiful, when in the usual course of events Mr Chagger might have been expected to have changed jobs had he remained with Abbey, he would have been out of a job and out of the industry for such a period that potential employers will be reluctant to employ him. In addition, he may have been stigmatised by taking proceedings, and that may have some effect on his chances of obtaining future employment.
70. The result of these factors is that the discriminatory dismissal does not only shorten what would otherwise have been Mr Chagger's period of employment with Abbey; it also alters the subsequent career path that might otherwise have been pursued.
71. It follows that, in our judgment, the period during which Mr Chagger would have remained in employment with Abbey had there been no discrimination is irrelevant given that this is a case where he would only leave for another job. The employment tribunal concluded that Mr Chagger would not have left Abbey unless and until he was able to move to a post at least as favourable as his Abbey job. In our view that is a wholly realistic assumption; few employees voluntarily leave employment for a worse paid job. We are not sure that Abbey were contending otherwise."
Lady Justice Smith:
The Master of the Rolls: