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United Kingdom Employment Appeal Tribunal
You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Burglarm Security Ltd v Ferguson [1992] UKEAT 533_91_1906 (19 June 1992)
URL: http://www.bailii.org/uk/cases/UKEAT/1992/533_91_1906.html
Cite as: [1992] UKEAT 533_91_1906
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At the Tribunal
Before
THE HONOURABLE MR JUSTICE KNOX
MR A FERRY MBE
MRS M E SUNDERLAND JP
Transcript of Proceedings
JUDGMENT
Revised
APPEARANCES
For the Appellants MR P WALLINGTON
(Of Counsel)
Messrs Bruttons & Co
288 West Street
Fareham
Hants
PO16 OAJ
For the Respondent MR A FARRELL
(Welfare Rights Worker)
Southampton & District Unemployed Centre
11 Porchester Road
Woolston
Southampton
Hampshire
SO2 7JB
MR JUSTICE KNOX: Application has been made to us in the course of the appeal by Burglarm Security Ltd against a decision of the Industrial Tribunal at Southampton on the 18th June last year and sent to the parties on the 18th July, that the Applicant before the Tribunal, Mrs Ferguson, was unfairly dismissed with a compensatory award. The application is for leave to amend the grounds of appeal. The original grounds of appeal contained as their first ground, a claim to have the Industrial Tribunal's decision reversed on the footing there was such illegality in the contract of employment between Burglarm Security Ltd and Mrs Ferguson that the whole contract was tainted by illegality, and Mrs Ferguson could not rely on it to sustain a claim of unfair dismissal at all. That is not being prosecuted for what we have no reason to suppose are anything other than excellent reasons. What is asked in the application for leave to appeal is to insert in the grounds of appeal the following:
"the Tribunal failed to have regard to or make a finding in respect of letters to the Respondent [that is Mrs Ferguson] in evidence before it which showed that between a date unknown in 1977 and September 1978, the Respondent was paid a sum of £1.30 a week by way of reimbursement of bus fares to and from work without deduction of tax and national insurance. The said payments were illegal and acted to preclude the Applicant from relying on the existence of her contract of employment during the said period so as to establish statutory continuity of employment."
Then the mathematical consequences of that are set out and no particular point on the figures arises at this stage.
Mrs Ferguson's employment started in May 1973 and came to an end at the end of February 1991. She was therefore a long serving employee, and the period of illegality, to use a shorthand expression, is one which is between 15 and 14 years ago and is inserted during the totality of her 18 odd year employment.
The letters thus referred to in the draft amendment to the Notice of Appeal are two in number, one is written by Mr Tongs, Director of Burglarm Security Ltd, dated the 26th August 1977 and addressed to Mrs Ferguson includes the following sentences:
"It should also be pointed out that the £1.30 of this will be tax free."
Pausing there for a moment, this clearly is a rise which had been offered to her earlier in the letter. Continuing with the letter:
"Turning to the question of your bus fares, you will remember that we calculated your rate per hour in order to avoid your paying any tax - thus the £1.30 being tax free did not affect that position. However, I should point out that we did also reduce your hours by 21/2 per week when we moved to Salisbury Road, without any corresponding reduction in salary."
The other letter, again passing from Mr Tongs to Mrs Ferguson and dated in November 1978 said this:
"This is to advise you that your wage is increased by £5.00 per week, representing a salary increase of £3.70 plus the bus fares of £1.30 which will now be incorporated in your wage. This salary increase is back-dated to Monday, 18th September, 1978."
The other factual matter that has been relied on, on behalf of Mrs Ferguson, is that an affidavit by Mr Tongs was before the Industrial Tribunal, he, Mr Tongs, being abroad at the time and in the course of that affidavit he said this:
"Regarding the applicant's statement that she could have performed the duties of one of at least of two other staff members I'm afraid that history tends to disprove her. She had been asked to work extra hours in the past but had always refused to do so on a regular basis. Even holiday cover for other staff members has always been accompanied by demands to be paid illegally `to save on tax & N Ins'."
It was submitted to us that this was not a point that had not been before the Industrial Tribunal and they had, in effect, ruled against the submission.
In our view, the factual material of there being a possibility of a negotiation for an illegal payment was before the Industrial Tribunal, but we are satisfied from what we have heard and seen that the particular submission that is now sought to be advanced, was not. Incidentally, it would seem fairly clear that the first ground of appeal now not pursued, was equally not before the Industrial Tribunal, but that is by the way.
The principle that has to be applied with regard to the question whether one should give leave to raise a point not raised below has been the subject of consideration on numerous occasions in this Tribunal. It is not in issue but that the general rule is that new points of law are not allowed to be taken on appeal in this Tribunal if they have not been taken before the Industrial Tribunal, and that general principle is to be found, in its perhaps most familiar form, in Mr Justice Arnold's decision in Kumchyk v. Derby City Council [1978] ICR 1116. Mr Wallington, in applying for the amendment on behalf of Burglarm Security Ltd, does not seek to challenge that general rule but he seeks to establish that his proposed amendment comes within what is a well established exception to that general rule, although the details and exact ambit of the exception are perhaps less clear. The exception, putting it very crudely is in favour of points which go to jurisdiction. In Barber v. Thames Television Ltd [1991] IRLR 236 the authorities for the general rule and for the exception were rehearsed, and it will suffice for present purposes to quote from the authority which was there relied on as establishing the exception House v. Emerson Electric Industrial Controls [1980] ICR 795 in which Mr Justice Talbot said:
"A little earlier in his judgment, Arnold J. had cited part of the judgment given in the G K N (Cwmbran) Ltd case in which the ground for refusing permission to argue a new point was that it would be unjust to allow new points to be raised upon appeal which had not been raised and argued before the industrial tribunal. We would whole-heartedly indorse what was said by Arnold J. and what would seem to be setting out the settled and accepted practice in this appeal tribunal, and we would not seek to depart from what he said - except, in our view, that where the matter raises the question of jurisdiction, (that is to say, whether the industrial tribunal claimed jurisdiction, or refused to accept jurisdiction) it is open, even if that matter was not raised before the industrial tribunal, to argue it before the appeal tribunal. It would seem to us quite contrary to any principles of justice not so to hold."
and he then gives examples of that where an industrial tribunal quite plainly had no jurisdiction to make an award that they did make, as being contrary to all principles of justice to allow such a decision to stand. In Barber v. Thames Television Ltd which by coincidence was delivered by me, I went on to say this at page 242:
"We do not accept the proposition that any and every contention by a party to an appeal that that party by calling further evidence can show that the applicant's case falls outside the jurisdiction of the industrial tribunal has to be acceded to on appeal. A question of jurisdiction is not necessarily and in all circumstances a trump card which if played upon an appeal automatically determines the appeal in favour of the party playing that card. We would respectfully accept what Talbot J. said:
`If an industrial tribunal had accepted jurisdiction and made a finding in favour of an employee, when quite plainly that industrial tribunal had no such jurisdiction to do so, what they did would have been a nullity and this appeal tribunal ought to say so.'
It does not however follow from this that all jurisdictional points must be allowed at any stage even if they involve a further hearing to establish further facts. In our view in each case the appeal tribunal has to decide on balance whether justice requires that the new point should be allowed to be taken. If it appears on existing evidence that the decision appealed from is a nullity that will be a consideration of overwhelming strength. Where what is relied upon is a chance of establishing a lack of jurisdiction by calling fresh evidence which was always available the case is far less straightforward."
The particular facts of the Barber case were then considered and they are very far removed from this case, and no one suggests that there is a close factual parallel. In fact in Barber's case leave was refused.
In our view therefore, we have to consider whether, on balance, justice requires that this new point should be allowed to be taken and we have reached the clear conclusion that it should not. The factors that we take into account in reaching that decision are the following: first of all it is clear and accepted by Mr Wallington, very fairly, that new evidence would be needed to elucidate whether or not the letters that I have read in part do evidence a contract tainted by illegality. In themselves they do not prove the proposition at all, there are various innocent explanations which are possible, and it is quite uncertain whether there is only a guilty, or perhaps an innocent explanation of what was being done. So that to that extent the case resembles Barber in that there is no more than a chance of establishing illegality by the further evidence that would in any event be necessary.
Secondly, this is very ancient history from the practical point of view because what the Industrial Tribunal would be looking at, is what happened between the parties between 1977 and 1978, fourteen years ago.
Thirdly, there is no question of the decision below being a nullity. What there is, is an argument sought to be adduced that there should drop out of computation, because of the rules about continuity of employment a period in the middle of a lengthy contract of employment during which that contract became so tainted with illegality that the employment relationship should not be treated as subsisting to a sufficient extent to enable Mrs Ferguson to rely on it. The basis for the submission with regard to the consequences of illegality that was drawn to our attention is the decision of this Tribunal in Corby v Morrison [1980] ICR 564. It is not necessary in our view to review the several differences between that case and the present one, but certainly it is authority for the proposition that there can well be such illegality in the relationship between employer and employee in the matter of evasion of the income tax laws to disentitle the employee to bring any proceedings on that contract of employment for, in that case, unfair dismissal. It does not seem to us necessarily to follow that an interruption due to illegality fourteen to fifteen years previously, should be dealt with in exactly the same way. However, that is undoubtedly a point which is susceptible, in our view, of argument either way.
Next we take account of the fact that the evidence was available at the time. There is no suggestion of a discovery of new evidence that was not available when the matter was before the Industrial Tribunal, but as against that, we also take into account that at the Industrial Tribunal there was not professional representation, as there is before us today, of a high degree of skill and experience on behalf of Burglarm Security Ltd and that is a significant factual difference between this case and the Barber v. Thames Television case.
We then take account of the fact that the amounts involved are perilously close to something that would warrant the application of the principle of de minimis. True it is that in Corby v. Morrison the Tribunal was not dealing with large sums, the amount there was an extra £5 a week, and that was a decision in 1979 so that inflation perhaps has not reduced that figure to vanishing point since then, but certainly £1.30 is not a very significant sum seen overall.
Finally, we take into account the fact that the submission that the contract as a whole was tainted by illegality has, for reasons that we are very happy to assume are very good and valid ones, been abandoned. We also take into account the fairly clear inference from Mr Tongs' affidavit that a suggestion or a demand to be paid illegally to save on tax and national insurance would not have been greeted with any enthusiasm or complied with by the employer.
For all those reasons we have come to conclusion that on balance this is not a case in which it would be appropriate for us to require this proceeding to start again from square one, which is what would in fact be involved in our view in allowing this amendment and we refuse leave.
* * * * * * * *
Burglarm Security Ltd, which I will call "the Company" appeals against the decision of the Industrial Tribunal at Southampton sitting on the 18th June 1991, and sent to the parties one month later on the 18th July whereby a compensatory award was made in favour of Mrs Ferguson, the employee of Burglarm Security Ltd on the basis that she was unfairly dismissed, that she was not entitled to a basic award because she had received a redundancy payment but that she was entitled to a compensatory award at first fixed in the sum of £8,628. So far as that aspect of the matter is concerned there is no appeal against the finding that Mrs Ferguson was unfairly dismissed. There was a successful application for review in relation to the calculation of the compensatory award and although there was originally, in the Notice of Appeal an issue raised in relation to that, that particular ground of complaint got cured by the review that took place on the 3rd October 1991 and the decision on which was sent to the parties on the 18th October, which amended the compensatory award to one of £7,074.24 pence. The Tribunal resolved what was then a disputed issue about the rate of pay of Mrs Ferguson. The subsisting issues on this appeal are effectively two in number and are both directed at the quantification of the compensatory award and those two issues, although one of them sub-divides itself into two are, was there or was there not a redundancy situation at the time of Mrs Ferguson's dismissal that is susceptible of having an impact on the quantification of the compensatory award. The argument is that if there was such a redundancy situation, that has to be taken into account in assessing the quantum of Mrs Ferguson's award because one of the possibilities must be that she would have been fairly chosen for redundancy and that chance should be, at any rate, taken into account in fixing the quantum of her compensatory award. The other issue is whether it could be right for the Industrial Tribunal to do what it did do, which is to calculate the compensatory award in favour of Mrs Ferguson on a full time employee basis, that is to say working during the whole week and not part of the week, when it is common ground that Mrs Ferguson was, at all material times, a part-time worker and there is no suggestion that she had any contractual entitlement to full-time employment. The basis upon which the Industrial Tribunal came to the conclusion that full-time assessment was appropriate, by way of quantification, was that there was a redundancy situation which should have been resolved by employing her full-time and that it would therefore be appropriate for her to be compensated at the full-time rate.
The factual background was that Mrs Ferguson was very long-term employee of the Company. She started work on the 7th May 1973 and received notice terminating her employment on the 30th November 1990, so that her employment, in fact, came to an end on the 28th February 1991. Her duties were concerned with the running of the office. The Company, as its name suggests, carries on business installing and maintaining intruder alarms and Mrs Ferguson worked as a clerk/typist doing the usual things that one would expect, typing, filing and dealing with the telephone and preparing contracts. No one suggests that her work was other than satisfactory, there is no suggestion of her being in any way defective in the services that she gave to the Company, and she plainly was a long-time employee. The Company was a small one, there is a certain degree of internal contradiction in matters of detail in the Industrial Tribunal's decision about precise numbers, but the overall position in the office, appears fairly clearly to be as follows. There were employed there in connection with office work, two full-time employees, a Mrs Cutler and a Mrs Warby. Mrs Cutler appears to have been employed from the 4th December 1989 and Mrs Warby from the 12th July 1990. Those dates appear from notices that were served by the Company on those two ladies giving them their terms and conditions of employment, and they are not significantly different from what the Industrial Tribunal found, although there are minor internal contradictions in the Industrial Tribunal's decision on this matter. For example, in paragraph 9 of their decision they say Mrs Pat Warby commenced in June 1990, whereas in paragraph 20 they say she had been with the Respondents since July 1990. In fact to go by the terms and conditions of employment the latter seems to have been the correct analysis, but not much turns on the difference between the two.
There was then Mrs Ferguson, who was part-time, as I have mentioned and had been there since May 1973. There was also a Mrs Tongs, the wife of the Managing Director. Mr and Mrs Tongs, divorced in the summer of 1990 and Mrs Tongs left on the 24th August 1990. She was replaced by a lady who is variously described in the decision as Mrs Watt and Mrs Wyatt, but the latter seems the more probable. However that may be, she was taken on on the 2nd September 1990 and that being not much more than a week after Mrs Tongs left, one is not surprised to find that the Industrial Tribunal took the view that she was effectively replacing Mrs Tongs. What they actually say in paragraph 31 was:
"Mrs Wyatt was a part timer carrying out similar duties to Mrs Tongs."
Then over and above a manager was taken on for a short time in September of 1990. He was a Mr Graham but he only lasted for a month before he was dismissed and the next person who took over his duties, although probably not quite exactly qualified in the same way, was a Mr Middleton who was an engineer but who handled part of the office side of the business. Those were the people who were concerned with the administration in one way or another. Another factor that was significant was that the directors, who were Mr Tongs, whom I have mentioned and a Mr Laird came to the conclusion that the quality of management control needed building up and computers should be introduced and a better record system put in place in the office. There is nothing to suggest that any of the people who were employed, and in particular the ladies who were employed in the office, had previously got significant computer experience, indeed the contrary is mentioned in relation to one or two of them. Mrs Warby is recorded in paragraph 2 as not having any particular skill with regard to computers but as having shown interest in them. In those circumstances Mrs Ferguson's dismissal, understandably, came as a shock to her. It occurred following on after consultations which the management, in the shape of Mr Tongs principally, properly had with the staff generally. Mr Tongs saw Mrs Ferguson on the 8th October 1990, when the possibility of redundancy for Mrs Ferguson was specifically raised and he consulted other members of the staff around about that time. He then went back to Cyprus which seems to have been, at any rate part of the time, his base. But immediately before he went to Cyprus, which happened on about the 20th November 1990, he had a Board meeting with Mr Laird and they decided that Mrs Ferguson should be dismissed and she was dismissed, overtly on the basis of redundancy and she received, as I have already mentioned, a redundancy payment.
Those briefly are the background facts. The Industrial Tribunal having dealt with that turned to see what was the reason for the dismissal, and in doing that they approached the matter correctly on the footing that the onus is on the employer, where there is an allegation of unfair dismissal, to show to the Industrial Tribunal what was the reason, or if there was more than one, the principal reason for the dismissal, and secondly that it was a reason falling within subsection (2) of Section 57 of the Employment Protection (Consolidation) Act 1978 of which the third is that the employee was redundant.
The Industrial Tribunal then examined the question, was whether Company, had satisfied the onus of proof in claiming that the reason for Mrs Ferguson's dismissal was redundancy? They reviewed the staff situation and said this about it:
"In fact, as a result of the staff changes in the summer and autumn of 1990, staff steadily increased. Mrs Tongs was part-time and left in August 1990; Mr Middleton (and his predecessor Mr Graham) were full time. Mrs Wyatt was a part timer carrying out similar duties to Mrs Tongs. Mrs Cutler had been appointed some 18 months previously with no relevant office experience, she worked full time as did Mrs Warby who was recruited in July 1990. She too did not have any particular office experience.
It therefore appears that far from reducing staff, staff were steadily increased, and the respondents have certainly not decreased their overheads, a matter that was admitted by Mr Laird in his evidence, in spite of the fact that this was apparently the object of the exercise."
That is a reference back to a finding by the Industrial Tribunal in paragraph 22:
"Mr Laird and Mr Tongs decided that they wanted to make a part timer member of staff redundant and decided that the only way they could do this was to select the applicant."
and also to the earlier findings that the Company was not showing a profit and that at their meeting before Mr Tongs returned to Cyprus, Mr Tongs and Mr Laird discussed reducing their overheads and then considered the various members of staff who might be made redundant to achieve that end.
The Industrial Tribunal then looked at what Mr Laird had said by way of explanation to Mrs Ferguson when she asked why she was being dismissed and observed that Mr Laird was somewhat short in giving reasons saying that "he did not know the reason for her dismissal at the meeting of the 30th November". It seems not unfair to regard that as rather disingenuous on his part given that he was a member of the Board which had taken the relevant decision. That however is not an essential feature to this case. What is an essential feature is the conclusion that the Industrial Tribunal expressed regarding redundancy as being the reason for dismissal and that is contained in paragraph 34 of the decision which reads as follows:
"On examining this evidence we do not feel that the respondents have satisfied us on the balance of probabilities that redundancy was the reason for the dismissal. One possible reason has been adduced by the applicant (but it is only speculation, and Mr Tongs was not in Court to be cross-examined), is that he wanted a clean sweep following his divorce and that in some way perhaps resented the applicant remaining since she had been a colleague of his former wife."
There is therefore a clear finding that there had been a failure by the Company to satisfy the onus of proof under Section 57(1) of showing what was the reason and that it was a subsection (2) reason.
Mr Wallington submitted to us that that was a decision which it was impossible for the Industrial Tribunal to arrive at in the light of the findings of fact that they themselves had made and whether or not that type of situation is correctly characterised as perverse, we are satisfied that if it was indeed the case that the only legitimate conclusion from the facts found by the Industrial Tribunal was that there was indeed, a redundancy situation, it would constitute an error of law not to express that inevitable conclusion. On balance however, we have come to the conclusion that it is not possible to say with the necessary degree of certainty, that that conclusion, that there was a redundancy situation, was the only possible one to reach in this case. It seems to us possible and arguable that the Industrial Tribunal took a much more long term view than just looking at the situation at the end of November when Mrs Ferguson was given her notice, and looked at the overall situation, so far as manning was concerned from the summer through the autumn of 1990. That is certainly suggested by paragraph 31 where they refer to the result of the staff changes in the summer and autumn of 1990, leading to the conclusion that staff steadily increased. It may be, arguable that was not a correct view to take on the facts and that it would have been better, and indeed the correct way of approaching the matter, to fragment the time scale and not look at the situation overall from the middle of 1990 down to November but to look at it in stages. The possibility of looking at it overall though, is one, which we feel, is not something that we ought to exclude as being necessarily an improper way of approaching the question. That leads us to the conclusion that although there are, plainly, quite strong factors in favour of the conclusion that there was indeed a redundancy situation, it is not the only possible solution on the facts found. Such indications obviously include the fact that Mrs Ferguson was given a redundancy payment; that the management was looking to reduce their overheads; that the Company was not making a profit; that they had introduced computerisation and that there were no very obvious candidates for handling that computerisation, in the sense of previous by acquired skills. There may well be other arguments in either direction, but we do not find that overwhelming case that we would have to find for a redundancy situation to be the only possible solution. However, we also have the quite exceptional circumstance that the award that has been made in favour of Mrs Ferguson is, in our view, only explicable on the basis that there was indeed a redundancy situation. Paragraph 52 is what deals with this in terms, it reads as follows:
"The evidence from Mr Laird has been that the respondents wanted to retain a full time employee and that they wanted a part timer to be made redundant. They did not offer the possibility of full time work to the applicant as we have already stated; nor did they consider reducing the hours of the other staff. We have already indicated that according to the evidence of the applicant she would have considered (and probably taken) a full time job because she enjoyed the work; she had been there for many years and her husband was out of work. We therefore, feel it appropriate to compensate the applicant at the full time rate which would be £164.00 per week net."
That figure later had to be adjusted but that is neither here nor there.
That conclusion seems to us clearly to be only explicable on the footing that there was indeed a redundancy situation and that it not only should, but would have been solved, by Mrs Ferguson being made a full time member of staff, a situation that she had never theretofore held in the eighteen years that she had been there. We find that a startling internal contradiction in the decision of the Industrial Tribunal. In the middle of the Tribunal's decision they specifically find that they are not satisfied that there was a redundancy situation, and at the end of the decision they reach a conclusion which is only explicable on that footing. Those two, in our view, simply cannot satisfactorily stand together.
We do not feel able because it is not our function to find facts to express a view whether or not there was a redundancy situation in this Company, and given that the decision that there was no such situation is the subject of very serious internal contradiction as we see it, there is no alternative but for us to remit this matter to the Industrial Tribunal, not of course to reopen the question of unfair or fair dismissal, because that is water under the bridge, but to re-examine the question whether there was or was not a redundancy situation in the context of the quantum of Mrs Ferguson's compensatory award.
That leaves the question of the award on the basis of full time rate of remuneration to Mrs Ferguson. We desire to say this about that. We are satisfied that in this particular decision that was arrived at on a basis which does involve an error of law, namely, the substitution of the Industrial Tribunal's view for that of the management as to what should be done, given that there was, and assuming that there was, a redundancy situation. It is most succinctly summed up in the way in which Mr Wallington put it in argument to us, that what was found was that the employers, the Company, should have taken Mrs Ferguson on as a full time employee. Now that may be a tenable management view but it is not what was required, from the point of view of assessing the quantum of her compensatory award, which is to compare what would have happened if she had not been unfairly dismissed, with what did happened when she was. The latter half is fairly obvious. What happened was that she received no pay after her notice ran out and her redundancy payment is neither here nor there in that equation. What is less obvious is what would have been earned by her but for her dismissal, and to conclude that she would have been paid at full time rates when she was only employed part time in the whole of her long service with this Company, is something which in our view does involve an improper substitution of what the Industrial Tribunal thought the right management decision was. It would indeed, in our view, require the most exceptional case for a compensatory award for unfair dismissal to be properly made on the footing of full time employment when there was never either full time employment or any entitlement to full time employment. The possibility of there being a reorganisation that would have produced full time employment is not, in our view, a justification for that process. H
owever, these are matters which will need, we fear, sadly to be reconsidered by an industrial tribunal when it comes to reconsider the quantum of the compensatory award in the light of this decision.