United Kingdom Employment Appeal Tribunal

BAILII case number: [1994] UKEAT 979_93_2710

Appeal No. EAT/979/93

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 27th October 1994

Judgment delivered on 8 November 1994

Before

THE HON. LORD COULSFIELD

Ms S R CORBY

MR C THOMAS, CBE

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ANSELLS LIMITED          APPELLANTS

MR E L DAVIES          RESPONDENT

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Transcript of Proceedings

JUDGMENT

Revised


 


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APPEARANCES

For the Appellants MR G P MORRIS

(of Counsel)

Instructed by -

Messrs Weightman

Rutherfords

Solicitors

Richmond House

1 Rumford Place

LIVERPOOL L3 9QW

For the Respondent MR I SCOTT (of Counsel)

Instructed by -

Messrs Dawson & Edwards

Solicitors

4 North Street

NEWPORT

Gwent NP9 1JZ


 


LORD COULSFIELD: The respondent was employed by the appellants from 31 January 1990 until 26 November 1992, when he was dismissed. He made a complaint to an Industrial Tribunal which, by a decision dated 15 October 1993, held that he had been unfairly dismissed, and made an award of £10,128.80.

On 31 January 1990, the respondent and his wife were employed by the appellants, the respondent as manager of the Horse and Jockey public house and his wife as his assistant. The appellants took the view that it was important that a couple should be employed in that business. On 22 October 1992, Mr & Mrs Davies were summoned to a disciplinary meeting to discuss deterioration of the performance of the business, which was a matter in respect of which they had received previous warnings. That meeting led to a final written warning for unsatisfactory performance, set out in a letter dated 22 October 1992. The complaints of unsatisfactory performance were justified, in the letter, by comparison between the takings at the Horse and Jockey, those at comparable houses, and the budgeted figures for the Horse and Jockey. On the face of the letter, the figures disclose a significant decline in performance. The letter continued:-

"We agreed that a review of your performance at the Horse & Jockey would take place at the end of period 10 (12th December 1992) and if I can be of any assistance, you must contact me.

However, I must warn you that the likely consequence of your failure to arrest the decline and return the performance to an acceptable level may result in your dismissal from the company."

The letter was signed by the appellants' retail area manager. What happened next was that, because of domestic difficulties, Mrs Davies left her job, husband and children; it later transpired that she had a relationship with another man. The Industrial Tribunal find that the appellants took the view that the respondent, in his very distressed state, would be even less likely to achieve any improvement in performance, and that he was incapable of running the pub without his wife, who had appeared to be the stronger character and had dealt with the till books. They therefore gave the respondent three weeks' notice of dismissal, and they rejected a suggestion that he should continue with assistance. His employment ended on 26 November, three weeks before the review date mentioned in the letter of 22 October.

Having set out the basic facts, the Industrial Tribunal refer to Section 57 of the Employment Protection (Consolidation) Act 1978. They then say:-

"The test we apply is one of reasonableness having regard to the circumstances. A reasonable employer in a capability situation would normally be expected to warn and to give an opportunity to improve before reaching a decision to dismiss. Where he has agreed a fixed period for improvement he would be expected to allow the employee the full benefit of that period, and in our view he would also make allowances for unexpected compassionate situations likely to detract temporarily from capacity to improve."

In the following paragraph, the Industrial Tribunal say that the appellants contended that the unsatisfactory performance was likely to deteriorate further, because of the respondent's distress and his wife's absence, and that accelerated termination of the improvement period was therefore justified. The findings of the Industrial Tribunal continue:-

"17. This is rejected. In our view a reasonable employer would have regarded Mr Davies's distress and his wife's absence as reason to extend the improvement period rather than accelerate it. In his distressed state a fair assessment of his performance could not possibly have been made of him by 12 December let alone at the beginning of November when notice was given.

18. A reasonable employer would have given full and fair consideration to Mr Davies's suggestion of his employing Miss Edwards and at least enquired of her whether she felt able to do the job properly while living three miles away. We are not satisfied that the respondents gave any serious consideration to the suggestion.

19. A reasonable employer would have given full and fair consideration to the possibility of single work elsewhere. According to the respondents Mr Davies was incapable of single management because he was incapable of doing till work. This view was based simply on the fact that in their experience of him he had never done till work. They did not take the trouble to enquire if he could in fact do till work or to offer to train him.

20. We are not satisfied that the respondents gave any serious consideration to the possibility that Mr Davies might have performed better without his wife, given a period for compassionate leave. They made an assumption that he could not perform without making reasonable enquiry.

21. The respondents contended that it was all-important to Mr Davies's position that he should work in a team with his wife.

22. We accept that the wife's presence was important for family image and teamwork purposes and was the practice in the business. But we do not accept that it was so important that her absence left no alternative but accelerated dismissal. The respondents' evidence was that there had been other cases of marriage breakdown where the husband had been tried out with an assistant or was given single management elsewhere."

Thereafter, the Industrial Tribunal find that the reasons for the dismissal related to capability and to some other substantial reason, but that the appellants did not act reasonably in failing to abide by their agreement that the period for improvement should not expire until 12 December, in failing to make allowance for the respondent's distressed state, and making an unsubstantiated assumption that the respondent was incapable of improved performance without his wife. They also refer to the fact that he was given no opportunity to prove his capabilities, and conclude by finding that the dismissal was unfair.

The first contention for the appellants was that the Industrial Tribunal had erred fundamentally by failing to apply the proper test, as explained in Iceland Frozen Foods -v- Jones [1982] IRLR 439, and in substituting their own view for what was reasonable from the view which a reasonable employer might have taken in the circumstances. It was also submitted that the Industrial Tribunal had erred in treating the letter of 22 October 1992 as if it contained a contractual or binding obligation to allow a review period until 12 December. It was submitted that whether the findings of the Industrial Tribunal were examined strictly and line by line or whether they were read broadly and as a whole, the conclusion must be the same and that the Industrial Tribunal had erred in respect of the test to be applied. For the respondent, it was submitted that if the findings of the Industrial Tribunal were properly and fairly read, it appeared that they had applied the correct test. Reference was also made, on behalf of the appellants, to the decision of this Tribunal in Royal Life Estates (South) Ltd t/a Fox & Sons -v- Campbell (21 July 1993, unreported), and, on behalf of the respondent, to Piggott Bros Ltd -v- Jackson [1992] ICR 85.

It is, of course, correct that the Industrial Tribunal nowhere expressly refers to the "band of reasonable responses" test for assessing whether an employer has acted reasonably for the purposes of s.57 of the 1978 Act. It is also true that in the passage from British Leyland (UK) Ltd -v- Swift [1981] IRLR 91, quoted in Iceland Frozen Foods Ltd -v- Jones supra at p.442, Lord Denning observed that the Industrial Tribunal had asked the question whether a reasonable employer would have considered that a lesser penalty than dismissal was appropriate, and that that was not the correct test: and he went on to formulate the band of reasonableness test. It is entirely clear that the band of reasonableness test is the correct test for an Industrial Tribunal to adopt; although it is also true that, as counsel for the respondent pointed out in the present case, Lord Donaldson MR, in Piggott Bros Ltd -v- Jackson supra, at p.89, formulated the question for the Industrial Tribunal, without mentioning the band of reasonableness approach. In our view, although it is manifest on the authorities that the band of reasonableness test is the correct one, and although it is also manifest that it is dangerous for an Industrial Tribunal to formulate its reasons without making express reference to that test, nevertheless the question is not whether a particular formula has been used but whether, as a matter of substance, the Industrial Tribunal have applied themselves correctly to the issue. Whether they have done so or not must be a matter of the proper and fair reading of their findings as a whole.

In the present case, in our view, if the findings are looked at as a whole it is clear that there is an element which runs through them continuously, and which demonstrates that the Industrial Tribunal were applying the correct test. They set out what a reasonable employer would be expected to do in a capability situation and say, first of all, that a fair assessment of performance "could not possibly have been made". They then say that the appellants did not give "any serious consideration to the suggestion made on behalf of the respondent". In their next finding, they say that the appellants "did not take the trouble to enquire" if the respondent could do till work; and they follow that up by saying that they made an assumption that he could not improve, without making reasonable enquiry. Those findings, in our view, are consistent only with the Industrial Tribunal considering, and rejecting, the suggestion that some reasonable employer might have acted as the present appellants did. When the Industrial Tribunal come to deal with the question of the importance of the wife's presence for teamwork purposes, they perhaps come nearest to using language consistent with the application of the wrong test, or the substitution of their own view; but, even there, what in substance the Industrial Tribunal are saying, it seems to us, is that the appellants could not say that they were compelled to dismiss the respondent when their own previous practice contradicted that suggestion.

Further, we do not agree with the argument, on behalf of the appellants, that the Industrial Tribunal contributed to a wrong approach to the decision by misdirecting themselves as to the effect of the letter of 22 October 1992. The letter itself uses the word "agreed", and what the Industrial Tribunal say about it is no more than a reference to the terms of the letter. They do not approach it as if it were a contract, nor, in our view, treat it as if it were in some way binding. They treat the question of the period for improvement as one relevant to reasonableness in the whole circumstances of the case. With regard to the case of Royal Life Estates South Ltd -v- Campbell supra, it is sufficient to say that, in our view, the Employment Appeal Tribunal there were considering an Industrial Tribunal decision in terms which were radically different from those in the present case, and that it was, in that case, manifest from paragraph after paragraph of the decision that the Industrial Tribunal had followed a wrong approach. As we have indicated, in our view that cannot be said in the present case. In all the circumstances, therefore, the first contention on behalf of the appellants must be rejected.

The second main ground of appeal relates to the assessment of compensation. We do not think it necessary to recite the Industrial Tribunal's calculation of the sum which they have awarded. It is sufficient to say that they allowed, in effect, a loss of wages, subject to deductions, for 45 weeks which elapsed between the dismissal and the date of assessment of compensation, and added an allowance for 10 weeks' future loss. They also made an assessment of the respondent's loss through loss of accommodation which he enjoyed at the Horse and Jockey, and other benefits. What they did not do was to make any assessment of the chance that, had the respondent not been dismissed on 26 November 1992, his employment would have terminated on 12 December, or on some later date, in any event. It was submitted, on behalf of the appellants, that although it could not be said that an Industrial Tribunal was required to consider the chance of the employment terminating in every single case, nevertheless it was their duty to take that into account in assessing compensation when the facts of the case required it, and that the facts of the present case were facts which manifestly required such consideration to be given. In that connection, reference was made to Polkey -v- A E Dayton Services Ltd [1988] ICR 142 and to the whole discussion of the assessment of compensation in Harvey Industrial Relations and Employment Law, Section D paras. 2541 and 2544-62. The respondent's reply to this contention was that it might be appropriate in a case such as Polkey, where the dismissal was being held as unfair on essentially procedural grounds, to assess the chance that the employment would have ended in any event; but that was not so in every case, and that to introduce such a requirement would introduce a wholly novel and speculative element into the assessment of compensation by Industrial Tribunals.

In our view, it is well established that, in assessing what is just and equitable compensation, an Industrial Tribunal does require to make an assessment, in appropriate circumstances, of the chance that the employment would have come to an end, even where the unfairness of the dismissal does not arise from a procedural failure but from some other reason. It is sufficient to refer to Winterhalter Gastronom Ltd -v- Webb [1973] ICR 245, in which it was held that, in assessing compensation in the case of a dismissal for lack of capacity, the Industrial Tribunal should have decided what, in all the circumstances, would have been a fair period to give the employee to improve his performance after a warning, and then evaluating the chance that he would have been able to so improve his performance as to retain his position. That decision appears to us to be directly applicable to the circumstances of the present case. Further, in our view, the appellants were well-founded in saying that, in view of the manifestly unsatisfactory performance disclosed by the figures set out in the letter of 22 October 1992 and the previous warnings, this was a case which cried out for such an assessment to be made. It follows that it will be necessary to allow the appeal in this respect, and remit the case to the Industrial Tribunal to re-assess the award of compensation.

A number of other matters were raised in the appeal. It was suggested that the Industrial Tribunal should also have made an assessment of the respondent's contribution to bringing about his dismissal. There was, however, nothing in the findings to suggest that any contention that he had so contributed was advanced to the Industrial Tribunal, and we do not think that it was their duty, in this case, to investigate or make a finding upon it in the absence of some such contention. It was also suggested that the Industrial Tribunal decision was perverse but, on analysis, this argument is no more than a different way of putting the main head of appeal. Finally, it was suggested that the Industrial Tribunal had miscalculated the allowance they made to the respondent for the loss of accommodation at the Horse and Jockey, in respect that, at the date of assessment, the Industrial Tribunal were informed that the respondent had a caretaking job and that the implication was that he also enjoyed the benefit of accommodation. This issue was raised in an application for a review to the Industrial Tribunal, and was rejected by them. In our view, this is no more than an attempt to interfere with a decision of the Industrial Tribunal on a question of fact.

In the whole circumstances, however, the appeal will be allowed in so far as relating to the award of compensation and the case will be remitted to the same Industrial Tribunal to reconsider the award in the light of what we have said above.