Scottish Court of Session Decisions

This appeal, under section 37(1) and (2)(b) of the Employment Tribunals Act 1996, is brought to this court against an Order and Judgment of the Employment Appeal Tribunal, dated 31 August 1998, dismissing an appeal by the appellant under section 21(1)(f) of that Act against a decision of an Employment Tribunal sitting at Glasgow, entered in the register on 2 February 1998, dismissing an application by the appellant for compensation for unfair dismissal, which had been made on 30 June 1997. It is a matter of agreement that, by letter dated 16 June 1997, R22, the appellant was dismissed from her employment by the respondents, with effect from 30 June 1997.

The decision of the Employment Tribunal, then known as an Industrial Tribunal, and the Extended Reasons for it are set out in the document 6/1 in the appellant's first inventory of productions. The Order and Judgment of the Employment Appeal Tribunal is reproduced as part of the appeal to this court. Leave for that appeal was granted by the Employment Appeal Tribunal on 6 October 1998, as appears from 6/1 of the appellant's first inventory of productions.

When the appeal came before us, counsel for the appellant moved us to allow the appeal, reverse the decision of the Employment Appeal Tribunal, reverse the decision of the Employment Tribunal, find that the appellant had been unfairly dismissed by the respondents and remit the case to the Employment Tribunal, so that it might assess compensation under section 112(4)of the Employment Rights Act 1996. While recognising that the appeal to this court from a decision of the Employment Appeal Tribunal was "on any question of law", counsel for the appellant submitted that, on a proper view of the facts, the appellant had been unfairly dismissed on 30 June 1997. In connection with his submissions, counsel for the appellant firstly drew our attention to the statutory provisions which were applicable to the case. He pointed out that, under section 94(1) of the Employment Rights Act 1996, an employee had the right not to be unfairly dismissed by his employer. He then drew our attention to the provisions of section 98 of the same Act, so far as relevant to the circumstances of this case. They are as follows:

Against this statutory background, counsel for the appellants submitted that the Employment Appeal Tribunal and the Employment Tribunal had erred in law in finding that the respondents had established the reason, or principal reason, for the appellant's dismissal, being one entitling the respondents to dismiss her. In particular, such an error had occurred in the finding that the appellant was redundant, the reason set forth in section 98(2)(c) of the Act of 1996. If the court were persuaded that the finding of redundancy was one which the Employment Tribunal had not been entitled to make, in the circumstances of this case, it followed as a matter of law that the dismissal was unfair. The issue before the Employment Tribunal and the Employment Appeal Tribunal had been whether the respondents had satisfied the requirements of section 98(1) of the Act of 1996. Before the Employment Tribunal, the argument had revolved around the issue of whether the appellant was redundant. However, before both the Employment Tribunal and the Employment Appeal Tribunal, it had also been submitted on behalf of the respondents that, on the assumption that redundancy had not been established, the appellant had been dismissed for "some other substantial reason of a kind such as to justify the dismissal of an employee holding the position which the employee held", within the meaning of section 98(1)(b) of the Act of 1996.

Against that background, counsel for the appellant turned to deal with firstly the issue of redundancy and secondly that of "some other substantial reason". He pointed out that, for the purposes of the Act of 1996, redundancy was defined in section 139 thereof. That enactment, so far as relevant to this case, is in the following terms:

Thus, in considering whether the appellant had been redundant, within the meaning of section 98(2)(c), the Employment Tribunal required to have been satisfied that the definition of redundancy just quoted had itself been satisfied.

Counsel for the appellant drew our attention to the fact that provisions in the law of Northern Ireland, which were in similar terms to those of section 139 of the Act of 1996, had been considered by the House of Lords in Murray and Another v. Foyle Meats Limited [1999] 3 WLR 356. In that case it had been held that whether the requirements of a business for employees to carry out work of a particular kind had diminished was a question of fact for the Employment Tribunal and whether the dismissal of an employee was wholly or mainly attributable to that state of affairs was a question of causation and of fact for the Tribunal and did not depend on the terms of the employee's contract or the function that he performed. Reliance was placed upon the observations of Lord Irvine of Lairg L.C. at pages 358 and 360 and Lord Clyde at pages 360 to 362. At page 360 Lord Clyde had said that the so-called "contract test" and "function test", which had previously been used in this area of the law were of no assistance in applying the statutory provisions to a set of factual circumstances.

In considering whether the Employment Appeal Tribunal had erred in law, it was instructive to see what contentions had been advanced before it on behalf of the respondents and what decision that Tribunal had reached upon them. In this connection, counsel for the appellant drew our attention to the passage at page 3E-G of that Tribunal's judgment. It showed that it had been contended that the substance of the Employment Tribunal's decision, when looked at broadly and taken in conjunction with the correspondence, showed that the respondents had been making

The decision of the Employment Appeal Tribunal, in the face of that contention, was set out at page 5B-C of their judgment. In that passage, the Employment Appeal Tribunal said this:

It was part of the appellant's submission that that conclusion was erroneous and one which the Employment Appeal Tribunal were not entitled to reach. Looking at the Extended Reasons of the Employment Tribunal, together with the documentary material referred to in them, it was impossible to discern any finding at all of any global assessment of the respondents' business requirements for employees to carry out work of a particular kind, or of any overall reductions in the number of employees in some particular category, carried out or effected by the respondents, or that any such assessment had brought about the dismissal of the appellant. In the Employment Tribunal's Extended Reasons, at page 5G-H, there was a passage which might be thought to constitute such a finding, but which did not in fact do so. It was there said:

A passage at page 3B-C of the Extended Reasons was illuminating. That passage, along with the letter from the respondents' senior personnel officer to the appellant, dated 28 April 1997, R18, demonstrated that the true reason for the dismissal of the appellant was that she individually had held the position of Manager Designate for a period which the respondents had considered was too long. It was submitted that that state of matters did not demonstrate that the requirements of the respondents' business for employees to carry out work of a particular kind had ceased or diminished, or had been expected to cease or diminish. In other words, these findings did not demonstrate redundancy leading to the appellant's dismissal. However, reverting to the judgment of the Employment Appeal Tribunal, at page 5E-G, that Tribunal had apparently fallen into the same error as had the Employment Tribunal. In the passage concerned it was said that:

It was submitted that there was no such category as "effectively redundancy". Either there was a redundancy situation, or there was not. Further, there was material in the case which showed that there was no redundancy situation, so far as the appellant was concerned. In that connection reference was made to document 5 in the appellant's first inventory of productions, an Order for Further Particulars and the response thereto made on behalf of the respondents. The respondents had been called upon to specify (a) the kind of work the applicant was carrying out for the respondents between January 1995 and October 1996 in Sauchiehall Street; and (b) who was currently providing that kind of work for them. The responses were to be found in a letter from Messrs Kidstons & Company, Solicitors, dated 24 October 1997. From that response it was perfectly plain that the work which had been done by the appellant had continued to be done after she ceased to do it by a Mr. John Dunion; he had taken up his position with effect from 7 April 1997.

In summary, counsel for the appellant stated that he relied particularly upon the grounds of appeal 2, 4 and 5.

Senior counsel for the respondents moved us to refuse the appeal, contending that the findings of the Employment Tribunal and their reasoning and that of the Employment Appeal Tribunal were not open to serious criticism. However, having said that, he accepted that there were certain shortcomings in the judgment of the Employment Appeal Tribunal and in the Extended Reasons of the Employment Tribunal. In particular, at page 5F-G of their judgment, the Employment Appeal Tribunal had appeared to conflate the concept of redundancy and some other substantial reason of a kind such as to justify the dismissal, which, it was acknowledged, were distinct concepts. At this stage, senior counsel for the respondents drew our attention to the historical background of the appellant's position, as explained by the Employment Tribunal at page 2B and following of their Extended Reasons. The appellant had been in a vulnerable position following upon the closure of the Renfrew Superstore, which had previously been operated by Clydesdale, but which had been closed by the respondents. In that connection, reference was made to the letter of 4 August 1994, R4. Initially, following the closure of the Renfrew Superstore, the appellant had been seconded to the post of Manager at the Greenock shop. With effect from 19 September 1994, she had been appointed Manager Designate - Sauchiehall Street shop. Thereafter, in March 1995, as appeared from the letter dated 21 March 1995, R6, the appellant had been offered the position of Deputy Manager - Sauchiehall Street shop, which she had not accepted, as appeared from page 2G of the Employment Tribunal's Extended Reasons. The passage between pages 2H and 3C of those Reasons showed that the appellant had been in a category of supernumerary managers, some of whom had been chosen for redundancy. It had been found as a fact by the Employment Tribunal at page 3B that the appellant had been aware that the post of Manager Designate - Sauchiehall Street shop was not a substantive post, but a holding post for an employee who was supernumerary. The respondents' practice had been to move persons from supernumerary positions to substantive positions. With a view to the appellant being found a substantive position, she had been seconded to the respondents' Dumbarton shop, with effect from 14 October 1996. Following that, the meeting of 4 April 1997 had been held, described in the letter of 28 April 1997, R18. This showed that the respondents were seeking to move the appellant out of the supernumerary category of management. It was submitted that that pointed to the effecting of a reduction of the numbers of those employed in management, which was the kind of work which the appellant had been employed to do. The appellant had refused the offer of appointment as the Manager of the Dumbarton shop, following which it was decided that she should be dismissed by reason of redundancy. This step had been taken in pursuance of a reduction in the number of supernumerary managers. All this was described in the Extended Reasons of the Employment Tribunal between pages 2H-4D.

When pressed as to the stage at which the requirements of the respondents' business for persons in management had diminished, it was suggested that that had occurred from April 1997 onwards. It was not argued that it had occurred on the closure of the Renfrew Superstore. Following upon that event, the appellant had been kept on in a floating category of supernumerary managers. It was acknowledged that there were no specific findings in the case relating to the diminution in the requirements of the business for persons to carry out that kind of work. In particular, it was accepted that there was no specific source which could be seen as a basis for the suggestion narrated at page 3F-G of the Employment Appeal Tribunal's judgment. However, it was clear that the respondents had employed both permanent and temporary managers and that the numbers of persons in the latter category had varied. When the appellant was dismissed, that was against a background of a reduction in the numbers of supernumerary managers.

If the view were to be taken that there was no sufficient factual basis for a finding of redundancy, it would still open to the respondents to show that there was some other substantial reason of a kind such as to justify dismissal in relation to the appellant. That other substantial reason was the legitimate wish of the respondents to remove the appellant from the supernumerary capacity, in which she had been employed for too long. In these circumstances, while the primary submission of the respondents was to the effect that there was just sufficient material in the case to entitle the Tribunals to have concluded that there was a dismissal by reason of redundancy, if that view were not to be accepted, as an alternative, the case should be remitted to the Employment Tribunal for inquiry into the existence of some other substantial reason. The findings in fact and legal reasoning of the Employment Tribunal in relation to that matter were inadequate and would require to be augmented.

This is, of course, an appeal on a question of law from the decision of the Employment Appeal Tribunal, sustaining the decision taken by the Employment Tribunal. Since the Employment Appeal Tribunal reached the conclusion that the decision of the Employment Tribunal should be sustained, it appears to us that it is proper to examine, first of all, the decision of the Employment Appeal Tribunal itself and thereafter, the decision of the Employment Tribunal, with a view to deciding whether questions of law have been correctly handled by them. Looking firstly at the decision of the Employment Appeal Tribunal, it has accepted that the Employment Tribunal's conclusion that the appellant was dismissed by reason of redundancy should be sustained. In the passage in their judgment at page 3F-G, they narrated the contention of the respondents that the substance of the decision of the Employment Tribunal

The Employment Appeal Tribunal at page 5B-C, plainly with considerable hesitation and without enthusiasm, appears to reach the conclusion that the contention which we have just narrated was justified, in the light of the factual material which was available in the correspondence and in the evidence which the Employment Tribunal felt able to accept.

It appears to us somewhat surprising that the Employment Appeal Tribunal felt able to take that view, in the light of what is said at page 4A-E of their judgment. In that passage, having narrated the provisions of section 139 of the Act of 1986 and having pointed out that the definition of redundancy contained in that section requires that attention should be focussed, not upon the particular position of the particular employee, but upon the overall position of the employer with regard to the kind of work being carried out by the employee at the time, it observes: "It is far from clear to us that the Tribunal properly directed itself to that question, at least in its findings...". However, leaving that aspect of the matter aside, in our view, there was insufficient material in the evidence which the Employment Tribunal narrated and accepted and in the correspondence before us to justify the inference that the respondents did indeed make a global assessment throughout their business of the need for the particular number of supernumerary managers which they were employing immediately prior to the appellant's dismissal; or that they reached the conclusion that the requirements of their business for employees to carry out that particular kind of work had ceased or diminished, or was expected to cease or diminish, in consequence of which the appellant was dismissed. While it is possible that there was other material before the Employment Tribunal which might have been capable of justifying the view which was taken, we can not discern that material within the curtilage of the Extended Reasons compiled by that Tribunal, upon which we must rely. On that ground alone, we consider that the present appeal must be allowed.

Furthermore, it appears to us that the Employment Appeal Tribunal, at page 5 of their judgment, misdirected themselves in relation to certain other important matters. Referring to the possibility, ventilated before them, of a fresh hearing being ordered before the Employment Tribunal, it says this:

First of all, it appears to us that the Employment Appeal Tribunal, for reasons which we do not understand, feel confident in predicting what might be the outcome of a fresh hearing before the event. Secondly, it appears that the Employment Appeal Tribunal considered that the other substantial reason contemplated could only be "effectively redundancy". We are unable to follow this reasoning, which appears to confuse the issue of some other substantial reason with the issue of redundancy. The two are plainly distinct.

Turning to the decision of the Employment Tribunal, which the Employment Appeal Tribunal felt able to sustain, in our opinion that Tribunal has misdirected itself in law, which, ipso facto must undermine the decision of the Employment Appeal Tribunal. The essence of its decision is set out at page 5F-H of the Extended Reasons. Having set out the requirements of section 139(1)(b) in a manner to which we take no exception, the Tribunal says this:

It appears to us that in this passage, the Employment Tribunal adopted an erroneous approach to the application of section 139(1)(b). They focused, not upon the requirements of the respondents' business for employees to carry out work of a particular kind, but upon the individual position of the appellant as Manager Designate - Sauchiehall Street shop, namely the particular contractual position of the appellant. This appears to us to reflect an approach based upon the so-called "contract test" disapproved by Lord Clyde in Murray v. Foyle Meats Limited. In any event, in this important part of the reasoning of the Employment Tribunal, there is no indication that that Tribunal addressed itself to the correct issue of whether the requirements of the respondents' business for employees to carry out work of a particular kind, in particular, supernumerary management work, had ceased or diminished, or were expected to cease or diminish. To say simply that the respondents had decided that the work of a Manager Designate "should no longer continue" reflects, in our view, an erroneous approach to the issue which truly arose under section 139(1)(b)(i) of the Act of 1996.

In addition to these considerations, it is plain from page 5C-D of the Extended Reasons that the issue of some other substantial reason was argued before the Employment Tribunal. So far as we can see, that Tribunal has ignored that submission reaching no view upon it. Furthermore, it appears to us that the Employment Tribunal has failed to consider the issues raised by section 98(4) of the Act of 1996, that is to say the question of whether the dismissal was fair or unfair, having regard to the reason for it shown by the employer. In our view, without the consideration of that issue and the making of a determination upon it, it would be impossible to determine the appellant's application for compensation for unfair dismissal, as the Tribunal have done. For all these reasons also we consider that the present appeal must be allowed.

There was discussion before us as to the course which ought to be followed, in the event of the allowance of the appeal. We agree that it would be impossible for us to substitute a finding of unfair dismissal for the decision concerned. In these circumstances, we consider that the case must be remitted to the Employment Tribunal for the purpose of that Tribunal reaching a fresh decision, in the light of a correct approach to all of the legal issues involved. We consider that the remit must be to the Employment Tribunal as it was previously constituted, since that Tribunal heard and recorded the evidence. We do not contemplate that it would be appropriate for any party to lead new evidence, since both parties have already had a full opportunity to lead any evidence which they thought to be material. However we contemplate that the Employment Tribunal will require to hear new submissions upon the evidence already adduced and, if so advised, make new or revised findings of fact.