United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MR M WEST (Senior Advocate) Peninsula Business Services Stamford House 361-365 Chapel Street Manchester M3 5JY
For the Respondent	MR R VINEY (Counsel) Messrs Clifton Ingram Solicitors 22 Broad Street Wokingham Berkshire RG11 1BA


 


JUDGE HICKS QC: Miss Soni was employed by Ravenscourt Laboratories Ltd as Deputy Head of the Haematology Department, and had been in their employment since 4 April 1989. On 11 October 1993 she received a letter informing her of a reorganisation, the result of which was that she was demoted from the position of Deputy Head of the Haematology Department and became a technician. On 19 November 1993 she wrote a letter giving the necessary one month's notice of resignation, which expired on 19 December 1993.

Those facts, as far as the dates of letters are concerned, we have been given by Mr West for the Appellant's employers, without any demur, and we understand that they are agreed facts. They are slightly expanded from the finding of the Industrial Tribunal, which is simply that Miss Soni terminated her employment on 20 December 1993 because of the demotion.

Miss Soni applied for compensation for unfair dismissal. At the hearing before the Industrial Tribunal it was accepted by the employers that she had been constructively dismissed. That concession necessarily carried the implication that they accepted that their conduct in demoting her summarily was a fundamental breach of her contract of employment, which entitled her to accept that repudiation by her resignation.

The issue before the Industrial Tribunal therefore reduced itself to the question of compensation and the Tribunal made an award of £8,525.76, comprising five components. As to four of those components there is no complaint. They included loss of earnings from 20 December 1993 to 31 August 1994. The reason why the loss of earnings was for a period which came to an end on 31 August 1994 was that the Tribunal had found - and there is no appeal against this finding - that Miss Soni, had she not been constructively dismissed in the way which I have described, would have lost her employment by reason of redundancy at the end of August 1994.

That was the reason for the period over which the loss of earnings was calculated. It was calculated by taking the amount which she would have earned as Deputy Head of Haematology with the employers and subtracting the sum which she in fact earned in the other employment which, at some stage during that period, she was able to obtain. That was a perfectly orthodox calculation about which there is no dispute.

The item of the compensation award, the fifth item, which gives rise to this appeal, was dealt with by the Industrial Tribunal in this way in paragraph 10:

"The Applicant has lost the benefit of finding alternative employment of a managerial status due to the fact that she was denied this managerial status by the Respondent. The Tribunal estimates this loss at £2,000.00."

Mr West for the employers puts their appeal on two grounds, the second of which arises only if he is unsuccessful on the first. The first is that the Tribunal erred in law in making any award under such a head because no such head of loss, Mr West submits, is recognised. The second ground of appeal, which arises if the first fails, is that the Tribunal erred in law in giving effectively no explanation of how the figure of £2,000 is arrived at and therefore no sufficient reasons for their decision.

In our view the first ground of appeal fails. The jurisdiction of the Tribunal to award compensation arises under Section 74 of the Employment Protection (Consolidation) Act 1978, which was still in force at the relevant time, although it has since been replaced. That is to say Section 74 deals with the compensatory award; there are other provisions about the basic award and about special awards but we are concerned with the compensatory award. Section 74(1) provides, subject to matters that are not relevant in this case:

"... 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 West's submission is that this head of loss is not loss sustained by the complainant in consequence of the dismissal attributable to action taken by the employer.

As I have said, we reject that ground of appeal. In support of it, Mr West referred us to the case of Norton Tool Co Ltd v Tewson [1972] ICR 501 at 504F and to a short passage in the judgment delivered on behalf of the National Industrial Relations Court by Sir John Donaldson, who says:

"... First, the object is to compensate, and compensate fully, but not to award a bonus,"...

We fully accept that statement of principle, but the fact is that the head of compensation which the Tribunal is dealing with in paragraph 10 is capable in law, assuming that relevant facts are found on admissible evidence, of being part of the loss suffered by a person who is unfairly dismissed. To take the facts of this case, Miss Soni had been of managerial status, as the Tribunal put it, in the sense that she was the deputy head of her department, but the breach of contract by the employer which she was entitled to accept and did accept as repudiation of the contract was demotion to Technician. She thereby lost her managerial status with the employers. She was required in breach of contract to work at that lower level from 11 October until 19 December, some six weeks, and in an application for employment elsewhere, although she was of course entitled to represent herself as having managerial experience, and was perfectly entitled to say that her loss of that status was not due to any misconduct or lack of competence on her part, nevertheless she had not only lost those six weeks of experience of managerial status but in a competitive employment climate it is perfectly possible - it is not for us to find facts, but it is perfectly possible that the Tribunal could have reached a finding - that employers would be to some extent (perhaps only to a small extent) less likely to look favourably on an applicant who had suffered that demotion than one who had maintained her managerial status throughout.

For those reasons it seems to us clear that this is a loss which is in law capable of being part of the loss suffered by an employee who is unfairly dismissed and therefore capable of founding a compensatory award under the Act.

The second ground of appeal is that the Tribunal gave no adequate reasons for either the fact of the award or the amount. As to the fact of the award, reading the decision of the Tribunal in a reasonable and fair way rather than seeking to find fault, it must, we think, be implicit that a detriment of the sort of kind which I have outlined did exist. As to the amount, it is true and apparent on the face of the words of paragraph 10 that the figure of £2,000 is arrived at without any explanation of the course by which that sum has been reached, of the findings of fact on which it is based or the reasoning leading from those facts to the amount of the award. It is also - although this is a minor criticism perhaps in comparison - the case that at the end of paragraph 5 the Tribunal said that they were only awarding compensation up to 31 August 1994, whereas it is apparent that this head of loss by its nature can only be a loss arising from that date onwards, because any consequence of the loss of status during the first eight months is already covered by the fact that the award for that period starts with the money which Miss Soni would have earned as Deputy Head of Department and deducts her actual receipts.

The question then is whether the Tribunal sufficiently stated its reasons in simply using the words "the Tribunal estimates this loss at £2,000". We have come to the conclusion that on this point the criticism is made out on the authority of the well-known case of Meek v City of Birmingham District Council [1987] IRLR 250. What is required, as Lord Justice Bingham said at paragraph 8 of the report, is:

"Although the decision of an Industrial Tribunal is not required to be an elaborate formalistic product of refined legal draftsmanship, it must contain an outline of the story... and a summary of the Tribunal's basic factual conclusions and a statement of the reasons which have led them to reach the conclusion which they do on those basic facts. The parties are entitled to be told why they have won or lost. There should be sufficient account of the facts and of the reasoning to enable an appellate court [EAT or on further appeal The Court of Appeal] to see whether any question of law arises."

Those words are particularly relevant of course to facts and reasons in support of a finding of unfair dismissal but they are in principle equally applicable, with the necessary change of terminology, to a finding and the supporting facts and reasons in relation to the calculation of compensation.

A little later in that report, at paragraph 10, Lord Justice Bingham approves an earlier statement by Lord Justice Eveleigh that:

"... The overriding test must always be: is the Tribunal providing both parties with the materials which will enable them to know that the Tribunal has made no error of law in reaching its findings of fact?"

Insofar as an example in the field of compensation is concerned it is illustrative of that approach, although not perhaps a decision which carries matters any further in principle, that in Tradewinds Airways Ltd v Fletcher [1981] IRLR 272, where the complaint was not that there was no calculation but that the calculation was on a wrong basis, the approach of the Employment Appeal Tribunal in finding an error of law is clearly that a statement by the Industrial Tribunal as to how it arrived at the figure awarded, at least in principle and outline, is appropriate and necessary.

We have come to the conclusion that this statement of reasons and facts is inadequate for that purpose; indeed it is plain that there is no reasoning except the bald statement that the estimate of the loss is £2,000. No doubt there are some areas where little, if anything, more than that can be said. In our view this is not one of them. The nature of the loss entails some consideration. We do not presume to lay down the precise way in which an Industrial Tribunal should state this, but it requires some consideration of such questions as what was the difference between pay at the two levels at the relevant date, with some idea of the projection of that into the future and to future stages of the Applicant's career, and some consideration of the chance that that difference would in fact be realised in the Applicant's future career (because, of course, it is possible - and employers would no doubt wish to argue - that on the facts of such a case as this a fair minded prospective employer might be expected to make little or no difference by reason of the demotion of Miss Soni) in this case. Some consideration of those and possibly other factors would be appropriate, even if only approximate estimates could be made of the effect of each factor, and some reference would clearly be needed, as with finding any facts, to the evidence on which those facts were based and any inferences that had been drawn, either from direct evidence or from the Tribunal's industrial experience.

We are told that there is no real dispute about the difference of level of remuneration, in that it was of the region of £500-£700 per month. One only has to say that to appreciate that, if the Tribunal went through any process of even approximate calculation, they must have heavily discounted that figure for the effect of one or other of the chances that it would not have been fully realised in Miss Soni's future career, but there is absolutely no indication of how that was done or how it affected the mind of the Tribunal. For those reasons we must allow the appeal to that extent. Since we have rejected the appeal on Ground 1 it plainly would be open to the Industrial Tribunal still to make an award under this head, provided it was properly based on evidence and properly explained in their reasons, and having allowed the appeal we must therefore remit the application for reconsideration on the basis of our judgment.

We have not asked either party for any submissions as to whether that should be to the original tribunal if it can be reconvened or to a different one, and if there are any submissions on that point we will hear them before making our order.

After submissions: the case is to be remitted to the Industrial Tribunal, constituted as before if the Members can be reconvened, to reconsider the award under paragraph 10 of their reasons in the light of our judgment.