English and Welsh Courts - Miscellaneous

National Industrial Relations Court

		30 October 1972

1. The Hon. Sir John Donaldson: The judgment which I am about to deliver is the judgment of the Court.
2. The industrial tribunal, sitting in London, unanimously decided that Mr. Tewson was unfairly dismissed and that he should be awarded £250 by way of compensation. There is no appeal from the finding of unfair dismissal, but the employers have appealed against the assessment of compensation on the grounds that if the tribunal had directed itself correctly in law it would have been lower, whilst Mr. Tewson has cross appealed on similar grounds, save that he says that the award should have been higher. Both parties have asked that if either appeal or cross appeal succeeds we should ourselves substitute some other figure rather than send the claim back to the tribunal for further consideration. This request involves no disrespect to the tribunal and reflects only a common desire to avoid increasing the costs of the proceedings. As this is the first appeal on the amount of an award for compensation for unfair dismissal, and as a number of points of principle have been argued - and very well argued - by Mr. Silber, counsel for the employers, and by Mr. Adams, counsel for the employee, we thought it right to reserve our judgment.
3. The passage in the tribunal's reasons dealing with this is short: -

"With regard to the applicant's loss of wages, he was paid 64p per hour for a 40 hour week which works out at a weekly wage of £25.60. He was out of work for 4 weeks so that he has lost 4 weeks wages. In addition we are entitled to take into account the circumstances of his dismissal; the fact that it was abrupt, that a sacking without notice involves a degree of stigma and that furthermore the applicant had 11 years' service with the respondents and he has lost the benefit of that."

4. Section 116 of the Act sets out the general principles to be applied in the assessment of compensation. Those principles are not solely applicable to cases of unfair dismissal, but apply to all awards of compensation in respect of unfair industrial practices of which unfair dismissal is only one.
5. The guiding principle is set out in subsection (1) in these terms: -

"the amount of the compensation shall ... be such amount as the Court or tribunal considers just and equitable in all the circumstances, having regard to the loss sustained by the aggrieved party in consequence of the matters to which the complaint relates, in so far as that loss was attributable to action taken by or on behalf of the party in default."

6. This guiding principle is then elaborated and modified in the following subsection as follows: -
7. Subsection (2) makes it clear that the relevant loss includes expenses reasonably incurred as a result of the matters complained of and the loss of any benefit which, but for those matters, the complainant could reasonably have expected. However, the subsection goes on to bring in the common law rules concerning the duty of a complainant to take reasonable steps to mitigate his own loss. Accordingly if he could, acting reasonably, have avoided suffering the loss, incurring the expenses or losing the benefit, the amount of the compensation will be reduced to the extent that the loss, expense or loss of benefit was avoidable.
8. Subsection (3) introduces the further modification that the assessment of the complainant's loss, and thus the amount of the compensation, falls to be reduced having regard to the extent to which the complainant caused or contributed to the occurrence of the matters of which he complains. This is a concept which is akin to, but not necessarily precisely the same as, that contained in the Law Reform (Contributory Negligence) Act, 1945, which forms part of the statute law of all parts of Great Britain. It can apply in relation to a claim for compensation for unfair dismissal but is not relied upon in the present appeal.
9. Subsection (4) (a) makes special provision for the circumstance in which a complainant has refused an offer of employment made in accordance with a recommendation of the Court or a tribunal and subsection (4) (b) for that in which the employer refuses to implement such a recommendation.
10. Subsection (5) relates to the assessment of compensation in the case where the employer dismisses, penalises or discriminates against an employee as a result of pressure by a third party designed to achieve this result.
11. Subsections (4) and (5) are not material to the present appeal and are mentioned solely for completeness.
12. Mr. Silber has submitted that it is well-established that at common law in any action for wrongful dismissal, no account can be taken of injury to the plaintiff's feelings by the manner of the dismissal or, with the possible excepti ~>n of the case of an actor, of the effect of the dismissal upon prospects of future employment (see Addis vs. Gramophone Co. Ltd.^[1]) The measure of damage in such a case is what the plaintiff would have earned during the period of notice, less anything which he in fact earned or, in accordance with the duty to mitigate his loss, he could have earned in that period. In Mr. Silber's submission, much clearer words than are contained in section 116 are required to vary the common law and, accordingly the common law rules apply in relation to compensation for unfair dismissal. Alternatively, Mr. Silber further submits that in the context of section 116, "loss" can only refer to financial loss and the burden is upon the complainant to offer strict proof of every new penny of loss which is alleged.
13. Mr. Adams, on the other hand, has relied upon the fact that section 116 (1) requires the Court or tribunal to award such amount as it considers just and equitable in all the circumstances, the only relevance of "loss," whether financial or otherwise, being that this is one factor to which regard must be had. Accordingly, in his submission, the Court or tribunal has a virtually unfettered discretion and one which is open to review on appeal only in extreme cases.
14. In our judgment, the common law rules and authorities on wrongful dismissal are irrelevant. That cause of action is quite unaffected by the Act which has created an entirely new cause of action, namely the "unfair industrial practice" of unfair dismissal. The measure of compensation for that statutory wrong is itself the creature of statute and is to be found in the Act and nowhere else. But, we do not consider that Parliament intended the Court or tribunal to dispense compensation arbitrarily. On the other hand, the amount has a discretionary element and is not to be assessed by adopting the approach of a conscientious and skilled cost accountant or actuary. Nevertheless, that discretion is to be exercised judicially and upon the basis of principle.
15. The Court or tribunal is enjoined to assess compensation in an amount which is just and equitable in all the circumstances, and there is neither justice nor equity in a failure to act in accordance with principle. The principles to be adopted emerge from the section. First, the object is to compensate, and compensate fully, but not to award a bonus, save possibly in the special case of a refusal by an employer to make an offer of employment in accordance with the recommendation of the Court or a tribunal. Second, the amount to be awarded is that which just and equitable in all the circumstances having regard to the loss sustained by the complainant. "Loss," in the context of the section, does not include injury to pride or feelings. In its natural meaning the word is to be so construed, and that this meaning is intended seems to us to be clear from the elaboration contained in subsection (2). The discretionary element is introduced by the words "having regard to the loss". This does not mean that the Court or tribunal can have regard to other matters, but rather that the amount of the compensation is not precisely and arithmetically related to the proved loss. Such a provision will be seen to be natural and possibly essential, when it is remembered that the claims with which the Court and tribunals are concerned are more often than not presented by claimants in person and in conditions of informality. It is not therefore to be expected that precise and detailed proof of every item of loss will be presented, although, after making due allowance for the skills of the persons presenting the claims, the statutory requirement for informality of procedure and the undesirability of burdening the parties with the expense of adducing evidence of an elaboration which is disproportionate to the sums in issue, the burden of proof lies squarely upon the complainant.
16. Let us now consider the decision under appeal. Our jurisdiction is limited to a consideration of questions of law. Accordingly, it is not sufficient for an appellant to satisfy this Court that, within the range of discretion conferred upon the tribunal, it might or even would have reached a different conclusion. If an appellant is to succeed, he must satisfy this Court that the tribunal has erred in principle. But it is a corollary of the discretion conferred upon the tribunals that it is their duty to set out their reasoning in sufficient detail to show the principles upon which they have proceeded. A similar obligation lies upon this Court, when sitting as a Court of first instance from which appeal lies to the Court of Appeal on questions of law alone. Where it otherwise, the parties would in effect be deprived of their right of appeal on questions of law. No great elaboration is required and the task should not constitute a burden. Indeed, the need to give reasons may well assist in the process of properly making the discretionary assessment of damages.
17. In the present case the tribunal has not made entirely clear the principles upon which it has acted and to that extent has erred in law. We know that the tribunal was aware that the complainant had lost 4 weeks' wages at £25.60 per week and it is therefore probable, but not certain, that about £100 out of the £250 awarded is referable to this factor. As to the balance it must be attributable to the circumstances of the dismissal and the loss of the benefit of 11 years' service. The latter consideration is highly relevant, but the circumstances of the dismissal were only relevant if they were such as to cause or be likely to cause future loss. Injury to Mr. Tewson's pride or feelings is not loss and is irrelevant. But this faces us with the problem of not knowing how much of the compensation is attributable to the circumstances of the dismissal and whether the tribunal based itself upon future financial loss or upon injury to self esteem.
18. In these circumstances, and in the light of the request of the parties to which we have already referred, we shall substitute our own award.
19. In our judgment the claimant is entitled to compensation in the sum of £375. This sum we regard as just and equitable in all the circumstances having regard to the loss sustained by the complainant. That loss falls to be considered under the following heads.

(a) Immediate loss of wages

20. The Contracts of Employment Act, 1963, as amended by the Industrial Relations Act, 1971, entitles a worker with more than 10 years' continuous employment to not less than 6 weeks' notice to terminate his employment. Good industrial practice requires the employer either to give this notice or pay 6 weeks' wages in lieu. Mr. Tewson was given neither. In an action for damages for wrongful, as opposed to "unfair," dismissal he could have claimed this 6 weeks' wages, but would have had to give credit for anything which he earned or could have earned during the notice period. In the event he would have had to give credit for what he earned in the last two weeks, thus reducing his claim to about 4 weeks' wages. But, if he had been paid the wages in lieu of notice at the time of his dismissal, he would not have had to make any repayment upon obtaining further employment during the notice period. In the context of compensation for unfair dismissal we think that it is appropriate and in accordance with Ihe intentions of Parliament that we should treat an employee as having suffered a loss in so far as he receives less than he would have received in accordance with good industrial practice.
21. Accordingly, no deduction has been made for his earnings during the notice period.
22. We have no information as to whether the £25.60 per week is a gross or a "take-home" figure. The relevant figure is the "take-home" pay since this and not the gross pay is what he should have received from his employer. However, neither party took this point and we have based our assessment of this head of loss on 6 weeks at £25.60 per week or £153.60.
23. Mr. Tewson drew £3 unemployment benefit for a short period, but we were not asked to make any deduction for this and have not done so.
24. Finally, we have taken no account of the extent to which Mr. Tewson's income tax liability may be reduced by his period of unemployment, since we consider that the sums involved will be small and that such a calculation is inappropriate to the broad common sense assessment of compensation which Parliament contemplated in the case of unfair dismissal of a man earning Mr. Tewson's level of wages.

(b) Manner of dismissal

25. As the complainant secured employment within four weeks of his dismissal and we have taken full account of his loss during this period, we need only consider whether the manner and circumstances of his dismissal could give rise to any risk of financial loss at a later stage by, for example, making him less acceptable to potential employers or exceptionally liable to selection for dismissal. There is no evidence of any such disability and accordingly our assessment of the compensation takes no account of the manner of his dismissal. This took place during a heated exchange of words between him and one of the directors.

(c) Future loss of wages

26. There is no evidence to suggest that the complainant's present employment is any less secure than his former employment, and we have therefore taken no account of possible future losses due to short working, lay-off or unemployment, apart from loss of rights in respect of redundancy and unfair dismissal which are considered separately at (d) below.

(d) Loss of protection in respect of unfair dismissal or dismissal by reason of redundancy.

27. These losses may be more serious. So long as the complainant remained in the employ of the respondents he was entitled to protection in respect of unfair dismissal. He will acquire no such rights against his new employers until he has worked for them for two years (see paragraph (a) of section 28 of the Act). Accordingly, if he is unfairly dismissed during that period his remedy will be limited to claiming damages for wrongful dismissal which are unlikely to exceed 6 weeks' wages and may be less. Furthermore, upon obtaining further employment he will be faced with starting a fresh two-year period. This process could be repeated indefinitely so that he was never again protected in respect of unfair dismissal. Whilst it is impossible for us to quantify this loss, which must be much affected by local conditions, we think that we shall do Mr. Tewson no injustice if we include £20 in our assessment on account of it.
28. The loss of rights under the Redundancy Payments Act is much more serious. The claimant is aged 50 and had been continuously employed for 11 years. Accordingly, if he had been dismissed on account of redundancy he would receive about £380. In other words, he had a "paid up insurance policy" against dismissal by reason of redundancy which was worth this amount and would have increased in value at the rate of about £38 per annum, until it reached a maximum of perhaps £800. In his new job, Mr. Tewson will receive no compensation if he is dismissed on account of redundancy within the first two years and, since he is now within 15 years of his 65th birthday, can never build up to the maximum which is based on 20 years' service. We have no evidence as to whether Mr. Tewson is more or less likely to be made redundant in his new employment but, if a redundancy situation does arise, he is clearly more likely to be selected for dismissal on the normal practice of "last in, first out". Nor have we any evidence as to the likelihood that if he had not been dismissed by the respondents when he was, he might thereafter have been dismissed by reason of redundancy. In all the circumstances, we think it just and equitable to base our award of compensation upon approximately one-half of his accrued protection in respect of redundancy - say, £200.
29. The arithmetical sum of these subheads is £373.60, which we have rounded off at £375, which in our judgment represents compensation which is just and equitable in all the circumstances.
30. In conclusion, we wish to emphasise that it is only because the parties so requested that we have substituted our own figure for that of the tribunal. But for that request we should have remitted the matter and, so long as the correct principles were applied and shown to have been applied, would not have interfered if they had awarded a different figure which might have been higher or lower.

Award of compensation increased to £375

Note 1   (1909) AC 488 at 491    [Back]