United Kingdom Employment Appeal Tribunal

BAILII case number: [1996] UKEAT 753_95_1302

Appeal No. EAT/753/95

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 13 February 1996

HIS HONOUR JUDGE PUGSLEY

MS S R CORBY

MISS S M WILSON

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GRAHAM TATFORD & CO LTD          APPELLANTS

MRS J F YOUNG          RESPONDENT

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Transcript of Proceedings

JUDGMENT

Revised


 


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APPEARANCES

For the Appellants MISS R DOWNING

(Of Counsel)

Messrs Woodford & Ackroyd

Solicitors

The Director General's House

Rockstone Place

Southampton

SO15 2EP

For the Respondent MR W EMERSON

(Of Counsel)

Messrs Gray Purdue & Co

Solicitors

202 London Road

Waterlooville

Hampshire

PO7 7AN


 


JUDGE PUGSLEY: In this case the Appellant seeks to appeal a decision of the Industrial Tribunal sitting at Southampton on 31 March 1995, that the compensatory award payable to the Applicant should not be subject to any percentage reduction and the Appellant would not be permitted to adduce evidence on the matter.

This is a case in which our task has been made much easier because of the clear and careful way in which the Industrial Tribunal have set out their reasons. By a decision promulgated on 16 November 1994, the Industrial Tribunal found that the Applicant was unfairly dismissed. It is unnecessary to go into great detail as to the basis of that decision. Amongst our bundle of papers is a long statement by the Applicant, in which she sets out various matters of complaint. I think it would be sufficient to say that there are various matters in that statement which would certainly suggest that the decision to dismiss her was not due to any redundancy, but for other reasons.

We are told by Mr Ellison, who appeared at the Tribunal for the Applicant, that not all the contents of that statement were adduced in evidence. It suffices for our purpose to say that the Tribunal's decision is unequivocal, namely, that this was a dismissal which took place for redundancy. In paragraph 5 of the decision the Tribunal says this:

"The tribunal has first considered whether the respondent has shown that the dismissal was actually on the ground of redundancy. Pursuant to Section 81(2) of the 1978 Act, it finds that there was a genuine need and intention on the part of the respondent to reduce its management manning levels for good commercial reasons and that, in consequence, the overall requirements of the business for employees to carry out work of the particular kind performed by the applicant had, indeed, diminished. We find that there was a redundancy situation and that the decision taken by the respondent to make redundancies was genuine; it is not for the tribunal to consider whether or not the decision was wise."

and then in paragraph 7 the Tribunal goes on in this way:

"The pool of employees nominated by the respondent for the purpose of its redundancy exercise was the Operations Director and the Depot Manager. We find that the respondent had applied its mind to the issue and the tribunal can not say that the selection of this pool was unfair or unreasonable. These were the only two employees doing similar work and their jobs were not interchangeable or directly comparable with any other management employees."

The Tribunal accepted that the reason given was the real reason, namely redundancy, and that the pool of the Operations Director and the Depot Manager was a fair pool, from which the selection for the one post should be made.

There is a complication in that the Operations Director, was in fact, the husband of the Applicant in this case. However, although the Tribunal decided in the employer's favour, that the reason given was the true reason, and that the pool of the two employees whose positions have already been described, was reasonable, it went on to find that the dismissal was unfair. The reasons for the unfairness of the decision to dismiss are well set out in paragraphs 8 and 9 of their decision. It is fair to the Tribunal to set out those paragraphs in extenso:

"8 The tribunal has considered whether the criteria upon which the applicant was selected were objectively chosen and fairly applied. Taking an overall view of the evidence we find that there were clear indications, from the time of Mr Guthrie's appointment as Managing Director on 1st January 1994, that the applicant was already being "pin-pointed" for redundancy. Whereas Mr Young had been offered a service contract and was being treated normally, the applicant had not been offered a service contract. She was being "cold-shouldered" by Mr Guthrie and her authority was being undermined. Mr Guthrie had sole responsibility, on behalf of the respondent, for making the redundancy selection. His decision was made within 14 days of his appointment. We find that Mr Guthrie came to his decision at an early stage without having carried out any selection procedures that were discernibly fair and reasonable. His decision was based on little more than a subjective choice between the applicant and Mr Young based on his own feeling as to which would discharge the new role better. Whilst there is doubtless a place for intuition in redundancy decisions, an employer (particularly a substantial commercial organisation such as the respondent company) which omits a genuine objective analysis of the respective merits of the candidates is likely to have been acting unfairly. In this case, we find that Mr Guthrie's selection process was perfunctory. He did not investigate or analyse the experience, work record or particular job responsibilities of the two candidates and, we find, made no attempt to carry out an objective assessment of their respective qualities or aptitudes. Crucially, he did not discuss with the applicant, or take other steps, to establish the range of tasks which she was carrying out or her ability, when compared with the aptitude of Mr Young, to continue to perform such tasks within the new role. Mr Guthrie took the view that there was "no need" for him to discuss these matters. The tribunal finds that there was every need in order to act fairly and reasonably in making his selection. In our judgement, the selection procedure, both in conception and execution, was so flawed and inadequate as to render the dismissal unfair."

9. The tribunal also finds that the dismissal was procedurally unfair. Mr Young's expressed view that Mr Guthrie should consult the applicant was noted but not acted upon. The applicant was informed of the decision to make her redundant on 26th January 1994 without any prior warning or consultation whatever. The invitation extended to her to spend her "consultation period" of 48 hours at home and to try and discover for herself if any other employees were about to leave and create job vacancies betrays an ignorance on the part of the respondent as to the purpose of consultation in the context of a dismissal. It appears to have believed that the consultation was to be carried out between the applicant and her fellow employees rather than, as it should have been, between the respondent and the applicant, for the purpose of enabling the applicant to discuss any aspect of the redundancy including any ways in which it might have been averted."

For these reasons the Tribunal finds that the dismissal was substantially and procedurally unfair. No criticism is made as to the decision of unfair dismissal. By consent, the issue as to remedy was adjourned. It is against the decision as to compensation that the appeal is launched. Miss Dowling, who had not appeared on the earlier occasion, submitted that the Tribunal had a legal duty to decide what would have been the result if Mr Guthrie had behaved differently from the outset. She wanted to introduce on behalf of the Respondent, evidence by Mr Guthrie, which would include what would have been the detailed results if a fair selection criteria had been used, adopted and applied, instead of the methods which had in fact been used.

The Tribunal noted that that would be evidence of a hypothetical exercise. I think there can be no better way of summarising the Tribunal's view by saying that in paragraphs 5, 6 and 7 the Tribunal rejected that submission. It said this:

"5. In advancing her interesting argument as to the application to this case of the decision in Polkey v A E Dayton Services Ltd (1987) IRLR 503, HL, Miss Downing conceded that if her submission was found by the Tribunal to be correct the practical result would be that in most unfair dismissal cases, particularly redundancy cases, respondents would have the right to produce evidence at the remedies hearing for the purpose of enabling the Tribunal to effectively re-hear the substantive dismissal issue on the hypothetical basis that the respondent had not made the errors of commission and/or omission that had been identified by the Tribunal as having actually rendered the dismissal unfair."

6. Mr Emerson on behalf of the Applicant submitted that the Polkey principle, which Miss Downing says applies to this case, does not apply because it applies only to procedural unfairness whereas the Tribunal has found that this dismissal was substantively unfair. That decision not having been appealed, he says, the Respondent is precluded from seeking to apply the Polkey compensation principles because their application is restricted to cases where there have been only procedural irregularities.

7. Labels can be confusing and even misleading. Suffice to say that the ingredients of the unfair dismissal identified in the Tribunal's extended reasons as being substantive are, in our judgement, not those which were intended to be included within the category of procedural steps envisaged in the Polkey case. The substantive reasons found in this case go to the root of the unfair dismissal and we therefore reject the Respondent's submissions that this is a case where the Tribunal should carry out the hypothetical exercise of disregarding the actual conduct of Mr Guthrie and speculating as to what the result might have been if he had handled the whole situation differently from the outset."

8.For those reasons our decision is that this is not a case where we should consider making a percentage reduction of the compensation payable to the Applicant on the principles set out in the Polkey case."

I have read from that judgment in extenso because it well sets out the issues upon which the Tribunal proceeded. Before us in her Skeleton Argument and also in her submissions to us, Miss Downing has said this: the correct approach in assessing compensation is that the Tribunal should follow a two-stage procedure, asking (1) has a proper procedure been followed and (2) had the employer acted fairly, would the employee not have been dismissed? She can say if the answer is "no", full compensation would follow. If the answer is "yes", nominal compensation would follow. If the answer is unclear and there is an element of doubt, the Tribunal must make a percentage assessment of the likelihood of the employee being retained. She goes on to say that there is no need for an "all or nothing" approach and she cites Polkey, which in turn cites the well-known dicta of Mr Justice Browne-Wilkinson in Sillifant v Powell Duffryn Timber [1983] IRLR 91. She notes that Rao v C.A.A. [1992] ICR 503 shows that this exercise is not concerned solely with redundancy cases.

It is true that in the Scottish Employment Appeal case of Steel Stockholder v Kirkwood [1993] IRLR 515 it is suggested that the line of enquiry which is envisaged, is only appropriate where there is procedural unfairness. However, the wisdom of that decision has been questionned by Mr Justice Knox in the case of Boulton & Paul Ltd v Arnold [1994] IRLR 532 and has been the subject of a degree of academic criticism in the sense that the distinction between procedure and substance, is not one that is easily identifiable. We are happy to say that we now have the decision of O'dea v ISC Chemicals Ltd [1995] IRLR 599 a decision of the Court of Appeal. Lord Justice Gibson showed a distaste for the somewhat metaphysical concept of trying to distinguish between procedural and what is substantive. He approved the editor's notes in the Industrial Relations Law Reports in [1993] IRLR 599 and he said in paragraph 25 of that judgment:

"In my judgment in a case where the reason or principal reason for dismissal is redundancy but the employer acted unreasonably in some particular respect in the process of selecting the applicant for redundancy so that dismissal was rendered unfair, it is for the industrial tribunal to decide what is just and equitable in all the circumstances toward the applicant, having regard to the loss sustained by the applicant insofar as that loss is attributable to action by the employers (Section 74(1) of the Act). To a case such as the present, where the industrial tribunal are satisfied the particular defect in what the employer did only deprived the applicant of a chance that he would have been retained in the absence of such defect, the applicability of the dicta of Mr Justice Browne-Wilkinson and its good sense seems to me obvious. I do not regard it as helpful to characterise a defect as procedure or substantive, nor in my view should the industrial tribunal be expected to do so, though in fact in the present case the industrial tribunal did repeatedly describe the defect as procedure. The fact of the matter is that Mr 0'dea lost only a one in five chance of being retained and I can see no arguable case that he should have been compensated on the same footing that he would have been bound to have been retained but for his trade union activities."

In a nutshell, this is the position as we see it. The employer made a genuine decision to make a reduction in the workforce. He selected a reasonable pool, namely the Applicant and her husband. The Tribunal found as a fact that the reason for dismissal was redundancy. That was not a mere pretext. The pool was only two. What Miss Dowling submits is that, in saying that no reduction should be made, the Tribunal, without the benefit of hearing any evidence as to what the effects would have been had more objective criteria been applied and had consultation taken place, is assuming that the Applicant would, in any event, have retained her job. She says that that is to ignore the statutory obligation under Section 74(1) which requires a Tribunal to determine what loss flowed from the dismissal.

We have come to the view that the arguments put forward by Miss Dowling are overwhelming. It may be that the Tribunal, after determining the issue, may still come, as Miss Dowling concedes, to the decision that the Applicant is entitled to a 100% compensation, since no deduction would be made against the possibility she would not have been retained. It seems to us, that what we loosely called the Polkey calculation, has to be made. We do not accept that there is a distinction that can easily be drawn between procedure or substantive. We believe, following the judgment of Lord Justice Gibson, what the Tribunal is bound to ask itself is: in the light of the grounds for finding the dismissal unfair, what would have been the percentage chance that she would have retained her post?

In our view, it is open to the Respondents to call such evidence, and to make such calculation as they consider right. In that it is binding upon us we cheerfully accept the servitude to O'dea v ISC Chemicals Ltd.

We therefore allow the appeal. Before we do so, we add one further matter. We remind ourselves that Industrial Tribunals were brought into being to provide an efficient and expeditious way to deal with disputes between an employer and employee. We note with sadness that unhappily that simple aim has become encrusted with a degree of legalism. As one of the Members pointed out during the hearing, this is not even an appeal against a final determination.

It might be helpful to give consideration to the practice, which occurs in some Industrial Tribunals, of determining the issue of whether the dismissal was unfair and, if so, whether or not there should be any reduction of compensation on the Polkey basis in the same hearing. We are bound to say that if matters are taken piecemeal, then a Tribunal is often ploughing the same furrow twice.

We are not in any way suggesting that our views should be regarded as laying down a definitive rule of law. However, this case does neatly illustrate the inordinate expense to which parties are put, when in fact hearings are split up in the way that has occurred in this case.

We have not heard any argument to suggest this case should be remitted to any other than the original Tribunal. The appeal is allowed so that evidence can be called and arguments put as to the issue of whether there should be a reduction in compensation.