United Kingdom Employment Appeal Tribunal

BAILII case number: [1991] UKEAT 569_89_1209

Appeal No. EAT/569/89

EMPOLYMENT APPEAL TRIBUNAL

4 ST. JAMES'S SQUARE, LONDON, SW1 4JU

At the Tribunal

On 12th September 1991

Before

THE HONOURABLE MR JUSTICE WOOD MC (P)

MR T S BATHO

MR A C BLYGHTON

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MRS S FARRELL          APPELLANT

EXPATS INTERNATIONAL LTD          RESPONDENTS

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Transcript of Proceedings

JUDGMENT

Revised


 


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APPEARANCES

For the Appellant MISS B RICH

Free Representation Unit

13 Gray's Inn Square

LONDON

WC1R 5JP

For the Respondents NO APPEARANCE BY OR

REPRESENTATION ON BEHALF OF THE RESPONDENTS


 


MR JUSTICE WOOD (PRESIDENT): This is an Appeal by Mrs S Farrell, who is one of three Applicants before an Industrial Tribunal sitting at London (South) who were alleging unfair dismissal against their former employer Expats International Limited.

At the Hearing before the Industrial Tribunal, which extended over five days, they were represented by Miss Rich from the Free Representation Unit, and the Company were represented by Mr Edmonds, a Chartered Accountant and a Managing Director, and an Administrator, Mrs Edmonds.

The story was a long and complicated one and has been set out with admirable clarity in a long judgment from the Tribunal. In the end the Tribunal found that all three Applicants had been unfairly dismissed on the 4th May 1989, and when they considered compensation they found that one of them, Mrs Farrell had failed to mitigate her loss, so that she would have lost nothing at all if she had acted as they thought that she should.

Miss Rich raises a number of matters before us, three in number, we take the last first because it seems to us the simplest approach.

The effective date of termination was found to have been the 4th May 1989, and she takes the point that under Section 55(5) of the Employment Protection (Consolidation) Act 1978, if in fact a notice required by Section 49 takes the period of calculation for the purposes of Section 73(3) over the date of the anniversary of the relevant years then the calculation should be based upon the higher number of years. To put that into the present situation the anniversary of the employment, as set out in the Notice of Appearance is the 15th June. From the 4th May, 1981 to 1989 was seven years but by reason of the provisions of Section 55(5) for the purposes of calculation of the basic award under Section 73(3) it should be eight years.

We have looked at the calculation, the figures, and it seems to us that that submission is well founded, and that in any event therefore, the calculation based on seven weeks for the basic award is an error and it should be eight weeks, and that would make a difference of £172 on the basic award.

The second matter which we have raised with Miss Rich, which did not fall the subject of an appeal but nevertheless it is something which she was unable to explain to us and we are at present unable to understand, is that although it was found that Mrs Farrell had wholly failed to mitigate her damages yet she was given seven weeks pay in lieu of notice, which would be in effect, damages for the failure to pay money in lieu of notice. If anything that might have been said to have been eaten up in the basic award but in view of the finding on mitigation neither Miss Rich nor we can see quite how that calculation was made.

To turn to the other issues raised, the first matter raised by Miss Rich was that in looking at the issue of mitigation the Tribunal had failed to direct themselves accurately in law. She drew our attention to paragraph 31 and in the second sentence the Tribunal say this:

"Equally, because Mr Edmonds was acting in person before this Tribunal and in order to be fair to him, although he did not raise the matter himself we have considered whether the Applicants failed in their duty to mitigate their loss."

That phrase is criticised by Miss Rich and it is a phrase which is in effect repeated at the end of paragraphs 33 and 34 where they decide that the other two Applicants, Miss Hare and Mrs Taylor had not failed to mitigate, where they say:

"Against that background we consider that there was no failure by Miss Hare to mitigate her loss."

and as to Mrs Taylor, they say:

"We therefore hold that there was no failure to mitigate on the part of Mrs Taylor".

What is said is that the correct approach should have been, had the Respondents proved on the balance of probabilities, that the Applicants, or any of them had failed to mitigate their loss. It is perhaps, or could be said to be over pedantic, to look at that phraseology and to pick it out and to take the view that the burden of proof was not accurately set out, and indeed this Court is not wholly unanimous on the view on that point. But the majority feel that it was very important to keep the proper approach of the burden of proof in what was, as we will come to examine it, a very delicate balance, because unless one does keep the burden of proof clear in the way in which it should be phrased, there is a danger of saying we think there had been a failure to mitigate and not has a party, namely the Respondents, established that there had been a failure to mitigate. We therefore we feel there was an error in the way that was phrased.

Lastly, Miss Rich criticises the approach of the Tribunal to the consideration of whether the act which they found to have been a failure to mitigate was reasonable and whether they analyzed the situation sufficiently.

The findings are to be found in part of paragraph 35. The Tribunal say this:

"Turning to Mrs Farrell, she falls into a completely different category in this respect. We say this because we have held that she agreed to return to the Respondents' business and work. Whilst she evidently changed her mind upon that, and decided not to go through with the arrangement, the Respondents had agreed that she could return and therefore she could have done the same work with them at the same wage as before. When Mrs Farrell decided not to take up that opportunity, she gave up the chance to mitigate her loss in a manner whereby she would have lost nothing at all, and she voluntarily abandoned the arrangement."

The majority look to the whole history of this matter and the history is to be found set out in the Reasons. There was a small Company which had been established way back in the early 1980's, these three Applicants were part of it, some of them were Directors in it. There came a time in the early part of 1989 when Mr Edmunds decided that the Company might be sold. He undoubtedly entered into discussions with a Mr Dorsett and there were heads of agreement. There were meetings and the three Applicants were not in favour of the proposal. The atmosphere in the office deteriorated and there were tensions. In April 1989 solicitors were consulted and the worst fears of the Applicants became apparent. The solicitors took the view that the proposals mooted were tantamount to a conspiracy to defraud and that they, the solicitors would be unable to take any part in the arrangements. Matters came to a head, there was a suggestion of voluntary liquidation, it was thought that the Company was solvent but the Applicants made it clear to Mr Edmunds that they were not prepared to proceed any further with negotiations or arrangements which might be put forward by this Mr Dorsett or his companies.

The atmosphere deteriorated and on the 3rd May there was a crisis; on the 4th May letters were drafted by Mr Edmunds and they in effect, were letters of dismissal saying that there was a complete breach of trust, and that the Applicants could no longer be trusted to have access to the clients' records and he was dismissing them.

The three were distressed, Mrs Farrell particularly so, and she reacted; they all went to see a solicitor and took advice from him. They had cheques, P45s and payslips. However, on the evening of the 4th May Mrs Farrell telephoned Mr Edmunds; she said that the contents of the letter was untrue, and that was clearly accepted by the Industrial Tribunal. She met him in the street, she telephoned and Mr Edmunds persuaded her to return on the Monday. She could not do that but she did `phone Mr Flowers, the administrator, and said she would be back on the Tuesday. However, she did not return and she never worked for the Company again.

In fact, the three ladies have set up in business, in competition, on their own; that business for the purposes of calculation is clearly seen from the schedule to have started up from the 8th September 1989; it is happy news that that is flourishing.

The issue therefore, so far as mitigation was concerned was, as we have said from paragraph 35, that Mrs Farrell changed her mind and decided not to go back to work for the Company. Thereby, it was held, that she wholly failed to mitigate her damage.

Two aspects of this matter are worrying the majority, the first that there does not seem to us to be a sufficiently careful analysis of the various stages in that final crisis. There is the letter of the 4th May, further discussions and thirdly a decision, not to go or return to work. The reasons the thinking and the logic behind each stage, needed in our judgment to be examined if one is looking at the failure to act reasonably in mitigation. The second point is, that in that analysis there were circumstances which were highly relevant and required to be balanced; hence of course, the importance of the burden of proof. Miss Rich set them out and they are summarised as follows: first there was this very difficult atmosphere of acrimony and distrust that clearly prevailed in the Company office, and the distrust of course, was based upon the fact that legal advice had been given that the proposed arrangement was fraudulent; secondly, there was the inconsistency of the behaviour of Mr Edmunds and that is set out in the Decision; thirdly, that there was this wholly untrue allegation in the letter of the 4th May and lastly perhaps, that the Tribunal found that the three Applicants were acting entirely reasonably in setting up their own business, so that in one breath they are deciding that Mrs Farrell, together with the other two Applicants was reasonable to set up their own business, but in the same breath they are saying that she should have returned to the Company.

Well it is difficult to analyze the matter further, it is probably undesirable that we should analyze the matter further, but the four points which we raised in our judgments cause us to have anxiety about this matter. There are some errors of law, there are some errors perhaps in the balancing and assessment of the evidence and we bear in mind the approach and guidance given by this Court in Fife & Scientific Furnishing Limited [1989] ICR 648, and we have decided that the matter must be remitted to be reheard.

We would however, before leaving this Appeal make this comment. We have been told by Miss Rich that these three ladies, the three Applicants, have in fact put the Company into liquidation in the County Court. The sums which were awarded by this Tribunal are therefore unlikely to be recovered. If Mrs Farrell wholly succeeds in her arguments on the rehearing, on a quick calculation it seems to us that it will make a difference of something like £1,100 which she may never recover. As we have already indicated during submissions, Mrs Farrell was perfectly entitled to raise this Appeal; to come here and to ask us to give our decision on the issue which she raised but whether it is desirable to pursue the matter on a rehearing in front of an Industrial Tribunal is a matter for her and those advising her.

This Appeal will be allowed and the matter will be remitted for a rehearing on the issue of mitigation of Mrs Farrell to a fresh tribunal.