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Cite as: 2006 SCLR 349, [2005] ScotCS CSIH_54, [2005] CSIH 54

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Everest Ltd v. Dillon [2005] ScotCS CSIH_54 (08 July 2005)

FIRST DIVISION, INNER HOUSE, COURT OF SESSION

Lord President

Lady Paton

Lord Drummond Young

[2005CSIH54]

XA22/04

OPINION OF THE COURT

delivered by THE LORD PRESIDENT

APPEAL TO THE COURT OF SESSION

under

section 37(1) of the Employment Tribunals Act 1996

EVEREST LIMITED

Appellants;

against

JOHN DILLON

Respondent:

_______

Act: Napier, Q.C.; The Anderson Partnership

Alt: Carruthers, Advocate; Balfour & Manson

8 July 2005

[1] This appeal is concerned with the respondent's claim to a compensatory award in respect of his being unfairly dismissed by the appellants from their employment. It is not now in dispute that he is entitled to a basic award and to a payment in respect of his entitlement to notice.

[2] The circumstances are briefly as follows. The respondent was employed by the appellants as a sales agent and as an area sales manager for Strathclyde. As area manager he was responsible for recruiting and training sales personnel, running a sales team and reporting sales to his divisional director. In or about April 2000 the respondent became unwell and was suffering from stress. On or about 23 May 2000 he went off work sick. About a week later he informed his divisional manager that he did not know what was wrong with him and that he was undergoing tests. When he met the divisional manager about three weeks later he did not give any indication as to the underlying health problem, or when, if ever, he would be able to return to work. He refused to step down from being area manager and declined an alternative job. On 15 July 2000 the divisional manager wrote to the respondent on the instruction of the sales director informing him that he would require to appoint someone else as area manager for Strathclyde. The employment tribunal regarded this letter as terminating the respondent's employment. On 2 August 2000 the respondent submitted to the appellants a medical certificate, dated 1 August 2000 and effective for a period of 14 days, which stated that he was absent from work due to "medical investigation". The respondent also stated that he had an appointment for a brain scan. The respondent thereafter submitted a further medical certificate, dated 15 August 2000 and effective for a period of 14 days, which stated that he was absent from work owing to " medical investigation; depression". After the termination of his employment the respondent became depressed. At the time of the hearing before the employment tribunal on 13 and 14 February 2002 he had been in receipt of sickness benefit for some 18 months. However, he had been applying for jobs since about July 2001.

[3] In their decision dated 8 March 2002 the employment tribunal stated in regard to the respondent's fitness for work:

"The medical information provided to the tribunal by the applicant was scant to say the least. The tribunal fully expected to receive a medical report on the applicant's condition standing the fact that he has been in receipt of sickness benefit for a period of 18 months. As Mr Atack [solicitor for the appellant] correctly observed in his submission it is not at all clear whether or not the applicant is fit for work at the present time or not. Prima facie a person in receipt of sickness benefit must be presumed as not being fit for work. No evidence was led on behalf of the applicant as to what the nature of the applicant's illness or his underlying medical problem is that has resulted in payment of sickness benefit. The applicant had suggested that the depression he suffered from following his dismissal had been caused by the fact that he had been unfairly dismissed but beyond this, there is simply no proper evidence to suggest that his current condition has been caused by his dismissal. The tribunal noted that the applicant had been applying for work. It was not, however, his willingness to work that was at issue. It was more his ability to work, and in particular his future ability to work, against a background of continuing receipt of sickness benefit over a prolonged period. In the absence of real and compelling medical evidence the tribunal found itself in a position where they had no alternative but to conclude that the applicant has not been fit to work since the date of termination and no information as to how long this situation might endure. For all the tribunal know the situation could last indefinitely. Accordingly in the absence of evidence as to the reason for the applicant's medical problem giving rise to payment of sickness benefit and a prognosis the tribunal are not in a position to make any assessment of future loss of income. The tribunal recognised this as being, to say the least, an unsatisfactory outcome for the applicant but the onus lies squarely on him to demonstrate to the tribunal as to his capability to work from the date of dismissal to the date of the hearing and onwards. He has palpably failed to do that".

In these circumstances the employment tribunal declined to make a compensatory award.

[4] The respondent appealed to the employment appeal tribunal. His

appeal was based on a number of grounds, including that the decision of the employment tribunal was perverse. When the appeal came to be argued matters took an unusual turn. Without determining the appeal the employment appeal tribunal decided on 24 October 2002 to remit the case to the employment tribunal to reconsider the issue of compensation. In the following paragraphs of their decision they said:

"5. Without determining the matter finally, we have come to the conclusion that the tribunal have not gone far enough into the investigation of the causation issue as between the dismissal and the illness. On the face of it, we consider that the tribunal should have concluded, at least presumptively, there was a connection and thereafter go (sic) on to consider whether the respondent had necessarily satisfied them that, in reality, the employee would not have worked in any capacity subsequent to the dismissal because of his illness.

Without stating the matter at any greater length, we therefore have determined that the matter should be remitted back to the same tribunal to further consider, against a background of further submissions, but no further evidence, whether or not there is some causal connection between the period of unemployment after the dismissal and the illness being at least exacerbated by the dismissal itself. At the very least, consideration requires to be given to some form of notice payment".

[5] When the case came again before the employment tribunal the question of notice payment was resolved. As we indicated earlier in this opinion, that is no longer a live issue. As regards the question of a compensation payment it can be seen from their further decision dated 22 April 2003, that they had some difficulty in reconciling the two paragraphs which we have quoted. They also had difficulty in interpreting the words "any capacity" in paragraph 5. They inferred, however, that they should consider whether or not the respondent could satisfy them that due to his illness he would not have worked for the appellants in any capacity subsequent to his dismissal. On the question of causation, they referred to their previous observation that there was "no proper evidence to suggest that the applicant's current condition had been caused by his dismissal". They went on to say:

"The applicant did, however, give evidence that he had begun to feel better at the point when he was dismissed and that thereafter he became very depressed. The tribunal accepted the veracity of this evidence. They find, therefore, that there is some basis upon which they can conclude and do indeed conclude that the applicant's illness post dismissal was either caused or contributed to by his dismissal".

[6] They further stated that they concluded that the appellants had closed their minds to the respondent retaining his job while carrying out no work, and to the respondent's offer to carry out some administrative work from home. They were entirely satisfied that he had taken all reasonable steps to mitigate his loss. He had given evidence of applying for other jobs. They accepted that he found it difficult to obtain work in the double glazing field in Scotland while the proceedings remained in dependence. They held that he was entitled to an award of compensation from 15 January 2001 (following the end of the contractual notice) until the second hearing on 24 March 2003. As regards future loss, they considered that it would be reasonable to award compensation until 14 July 2003, being the day before the third anniversary of his dismissal. There was a reasonable expectation that by that time the respondent should have found employment in the double glazing industry. On that basis they found him entitled to payment of a compensatory award of £32,401.

[7] This time it was the appellants who appealed to the employment appeal tribunal, but without success. In their decision dated 14 January 2004 the employment appeal tribunal agreed with the submission for the respondent that there was no error of law on the face of the employment tribunal's decision at the second hearing. They observed, at paragraph 10, that it seemed to them that the employment tribunal had done no more than make an award on a jury basis to reflect a period of unemployment directly attributable to the dismissal which was not overtaken or superseded by unconnected illness. They stated, in paragraph 11, that they considered that the employment tribunal had properly applied their minds to the issues which they had raised and had reached a conclusion with which they should not interfere.

[8] Section 123(1) of the Employment Rights Act 1996 provides that " 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 in so far as that loss is attributable to action taken by the employer". Mr Napier, who appeared for the appellants, accepted that, in accordance with that provision, an employee would be entitled to compensation for loss of earnings where his dismissal had caused him to be unfit for work. However, as was pointed out by Lord Coulsfield in the decision of the employment appeal tribunal in Devine v Designer Flowers Wholesale Florist Sundries Ltd [1993] IRLR 517 at page 519, the employee would not necessarily be entitled to compensation for loss of earnings for the whole period of such unfitness. The tribunal would require to consider how far that loss was attributable to action taken by the employer, and arrive at a sum which was just and equitable. In Dignity Funerals Limited v Bruce, 2004 SLT 1223 the Second Division of the Court of Session referred at paragraph 13 to Devine, observing:

"The tribunal therefore had to decide whether the depression in the period after the dismissal was caused to any material extent by the dismissal itself; whether, if so, it had continued to be so caused for all or part of the period up to the hearing; and if it was still so caused at the date of hearing, for how long it would continue to be so caused. It was essential that the tribunal should make clear-cut findings on these questions before any question of a compensatory award could arise".

[9] Mr Napier submitted in support of the appellants' appeal to this court that the employment tribunal had no proper basis in law in their second decision for making a compensatory award. They had erred in law. It was well recognised that the employment appeal tribunal should be reluctant to interfere with an assessment of compensation made by an employment tribunal on the facts of the individual case (Leonard v Strathclyde Buses Ltd 1999 S.C. 57 at page 63: and Bentwood Bros (Manchester) Ltd v Shepherd [2003] IRLR 364 at section 11). It would be otherwise if the employment tribunal misdirected themselves in law or reached a perverse decision. In the present case the employment appeal tribunal should have recognised that the employment tribunal was entitled to reach their original decision. Instead they had not determined the appeal, but had interfered with the decision-making process by remitting the case back to the employment tribunal "to think again". They had also given the employment tribunal a strong indication as to the conclusion which they should have reached. Moreover, they had stated that there was at least a presumption in favour of a connection between the dismissal and the illness, a proposition which was unsound in law. In the result, without hearing any further evidence, the employment tribunal had contradicted the conclusion which they had reached in their original decision, apparently on the strength of evidence given by the appellant that he had begun to feel better at the point when he was dismissed and that thereafter he became very depressed. Mr Napier added that, if the court considered that there was or might be a basis for the employment tribunal making a compensatory award, the case should be remitted to the employment tribunal for further consideration.

[10] Mr Carruthers, who appeared for the respondent, maintained that it was implicit in the first decision of the employment appeal tribunal that they had regarded the original decision of the employment tribunal as perverse. They had adopted a pragmatic way of dealing with the situation by remitting back to the employment tribunal. He disputed the claim that the employment tribunal had been influenced by the employment appeal tribunal in reaching their second decision. He accepted that the two decisions of the employment tribunal did not sit easily with one another. However, their second decision should be allowed to stand. They were entitled to conclude that the respondent was ill after his dismissal and that that illness was caused by the dismissal. The evidence given by the respondent, which was supported by the two medical certificates, had not been disputed. The appellants had not led evidence by way of rebuttal. They had not had the respondent medically examined. Mr Carruthers went on to point out that since the respondent had been employed by the appellants for over 16 years, he limited his search for alternative employment to the field with which he was most familiar. That was entirely reasonable. Until his dispute with the appellants was resolved he was unable to make progress. The employment tribunal had to consider whether, aside from his illness, the respondent would be fit to be re-employed, and take a decision as to what was just and equitable.

[11] We do not accept the submission of Mr Napier that the employment appeal tribunal should be understood as having remitted this case to the employment tribunal so that they could reconsider a factual finding which they had made. In their original decision the employment tribunal referred to the evidence of the respondent that the depression which he suffered following his dismissal had been caused by the fact that he had been unfairly dismissed, without stating that they had considered whether that evidence, which they appeared to have accepted, by itself or in conjunction with any other evidence, showed that his depression had been caused by the dismissal. We interpret the remit back to the employment tribunal as intended to deal with that question. In that connection we note that in support of his appeal to the employment appeal tribunal the respondent relied on evidence which, he maintained, had not been taken into account by the employment tribunal. The remit was consistent with the practice of the employment appeal tribunal which was recently approved by the Court of Appeal in Barke v SEETEC Business Technology Centre Ltd, 16 May 2005. As explained by the employment appeal tribunal in Burns v Consignia (No.2) [2004] ICR 1103, that practice was adopted where an employment tribunal was considered to have failed to deal with an issue or to have given no reasons or no adequate reasons for a decision. In such circumstances the employment tribunal would be invited to clarify, supplement or give their reasons before the appeal was finally determined. The Court held that the practice was competent, being supported by, inter alia, section 30(3) of the Employment Tribunals Act 1996. It was recognised that it served the purpose of saving cost and avoiding delay. In the present case, it may be noted, neither party took objection to the course which was taken by the employment tribunal.

[12] On the other hand we consider that there was no warrant for the employment appeal tribunal indicating to the employment tribunal what they should hold, let alone in reliance on any presumption. This was an error of law on the part of the employment appeal tribunal. However, we are not persuaded that these remarks influenced the employment tribunal in reaching their conclusion. In that decision they point out that paragraph 6 of the decision of the employment appeal tribunal's decision seemed to conflict with paragraph 5. There is nothing in the reasoning of the employment tribunal which suggests that they were influenced or that they applied any presumption.

[13] This leaves us with the merits of that decision. The conclusion to which the employment tribunal came is clear and unequivocal. The evidence on which the respondent relied was in itself undisputed, and the appellants did not lead contrary evidence. We consider that the employment tribunal were entitled to come to that conclusion. There is nothing to indicate that they misdirected themselves in law. In these circumstance the appeals fails.

[14] We should add that it was a matter of concession that the full amount of invalidity benefit received by the respondent in the period from 15 January 2001 to mid-January 2002 should be deducted when calculating the amount of the compensatory award (cf. Morgans v. Alpha Plus Security Ltd. [2005] IRLR 234). We were advised that, after deduction of the relevant invalidity benefit, the respondent's compensatory award would be £30,399.