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United Kingdom Employment Appeal Tribunal
You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Rubenstein & Anor (t/a McGuffies Dispensing Chemists) v McGloughlin (No 2) [1996] UKEAT 767_94_2904 (29 April 1996)
URL: http://www.bailii.org/uk/cases/UKEAT/1996/767_94_2904.html
Cite as: [1996] IRLR 557, [1997] ICR 318, [1996] UKEAT 767_94_2904
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- To the clear rule against recovery of loss not truly suffered (of which a paradigm case, too plain to be included in the authorities cited to us, would be continued payment of full wages by the employer) there are at least two equally clear exceptions, of which the one relevant for our purpose is that for financial provision against the loss, pre-purchased by the plaintiff, the paradigm case being an accident insurance policy with commercial insurers, negotiated independently of the employment relationship.
- Between the two extreme cases lies a spectrum of factual situations, some of the variables being the extent of the employee's contribution, whether the employee's involvement is voluntary or obligatory, if the latter whether the obligation is contractual or statutory, and in the last case whether there is any contribution from general taxation.
- Only by statute can this variety be reflected in any apportionment; the common law must allow in full or refuse deduction of any benefits received and may thereby fail, in either event, to do justice to the situation.
- Under these restraints a wholly principled distinction is difficult, if not impossible, to achieve.
- In these circumstances the courts have required deduction of statutory benefits such as unemployment benefit, supplementary benefit and statutory sick pay, and also of one non-statutory benefit, namely the permanent health insurance provided by the employer in Hussain.
- They have not required deduction of contractual benefits such as contributory retirement pensions, a disablement pension or an incapacity pension, or of one statutory benefit, namely the national assistance grant in Foxley.
- The deductions in point 5 above have been required notwithstanding that the benefits were funded in part by employees' contributions, and the benefits in point 6 have not been deducted notwithstanding that the employees' contributions were only partial.
EAT/1029/94
At the Tribunal
Judgment delivered on 23rd July 1996
HIS HONOUR JUDGE J HICKS Q.C.
MR J D DALY
MRS M E SUNDERLAND JP
JUDGMENT
SUPPLEMENTARY
Revised 30th July 1996
APPEARANCES
For the Appellants MR C HEAD
(Consultant)
Irenion Ltd
Airport House
Purley Way
Croydon
Surrey
CR0 0XZ
For the Respondent MR J BENSON
(of Counsel)
Matthews Darrell
31/35 Cheapside
Liverpool
L2 2DY
See also: Rubenstein & Anor (t/a McGuffies Dispensing Chemists) v McGloughlin (No 1) [1995] UKEAT 767_94_3110 (31 October 1995)
JUDGE HICKS: This Judgment is supplementary to that delivered on 31st October 1995, following the hearing of this appeal on 19th September 1995, and is to be read in conjunction with it. It concerns one only of the issues dealt with in that earlier judgment, namely the cross-appeal against the deduction of £3,751 statutory benefits from the compensation awarded by the Industrial Tribunal (the "deductibility point").
For the reasons given in that judgment (which can conveniently be called "our first judgment") it was provisional in the first instance on the deductibility point, and the parties were given 28 days for further written submissions. The parties did make such submissions, and although they were out of time we directed a hearing for further argument on the deductibility point, in no small measure because in the meantime another panel of this tribunal had reached a different conclusion, based on authority not cited to us, in Puglia v C. James & Sons [1996] IRLR 70. The point was accordingly re-argued on 29th April 1996, and we are grateful to Mr Benson, an behalf of the Respondent employee, and to Mr Head, on behalf of the Appellant employers, for their further assistance.
We were referred to a number of additional authorities, and shall begin by considering them. Most of them are cases concerning claims to deductions from common-law damages and we shall review them, for the most part quite briefly, before turning to the very few authorities on deduction from compensation for unfair dismissal.
Although it was not cited to us it is impossible to conduct any chronological survey of the authorities in this field without recalling that they begin with Bradburn v Great Western Railway (1874) LR 10 Ex 1, which established that money received under an accident insurance policy is not deductible from damages for personal injury.
In Parsons v B.N.M. Laboratories Ltd [1964] 1 QB 95 the Court of Appeal held that unemployment benefit was deductible from damages for wrongful dismissal, distinguishing Bradburn on the basis that the benefit was not "purely personal" and that the employer had made a contribution (Sellers LJ at pp 120-122), that it was not "truly analogous" to insurance moneys" (Harman LJ at p 131), or that it was not too remote a consequence of the wrongdoing and was a matter of general right rather than by virtue of a private insurance policy (Pearson LJ at p 143-144). Sellers LJ also referred to the plaintiff's duty to mitigate his loss (p 120).
Foxley v Olton [1965] 2 QB 306 concerned damages for injury in a road accident, following which the plaintiff received unemployment benefit and national assistance grant. John Stephenson J deducted the former (following Parsons) but not the latter, holding that there was no material distinction for this purpose between wrongful dismissal and personal injuries, but that there was one between discretionary (national assistance) and non-discretionary benefits. He, too, referred to the duty to mitigate damage.
Parry v Cleaver [1970] AC 1 was also a personal injuries claim arising out of a road accident, but the benefits in question were not statutory benefits; they arose out of contributory pension schemes of which the plaintiff had been a member in both police and civilian employment. In the police scheme the employee's contribution had been about 28% of the total, the employer providing the balance; in the civilian scheme the proportions were approximately reversed. The House of Lords held that the pensions were not deductible. Lord Reid said that the real and substantial reason for disregarding moneys coming to the plaintiff under a contract of insurance is that "the plaintiff has bought them" (p 14D) and that a pension was intrinsically of a different kind from wages, wages being a reward for contemporaneous work but a pension "the fruit, through insurance, of all the money which was set aside in the past in respect of his past work" (p 16H). It is of some significance, in relation to these comments, that the plaintiff's contributions were only partial. Lord Pearce found no value in distinctions between discretionary and non-discretionary or contributory and non-contributory pensions. In relation to the facts before the House he said:
"There was no pension fund and the employers did not pay their contribution. The whole arrangement was merely a part of the wage structure, and no doubt for bargaining about wages it was useful to allocate notional contributions to employers and employed. That the employer pays actually or notionally to a pensions fund is part of the total cost which he is prepared to pay in respect of the employee's service. Only as a last resort should one try to differentiate between contributory and non-contributory pensions as a dividing line between that which should and that which should not be brought into account."
Lord Wilberforce, the third member of the majority by which the appeal was decided, referred to the statutory compromise by which half of certain benefits were to be deducted in assessing and commented that "this type of solution is not open to the courts". (p 39E)
Lincoln v Hayman [1982] 1 WLR 488 was another road accident claim and concerned the deductibility of supplementary benefit. The Court of Appeal, allowing an appeal from the trial judge who had not taken it into account, treated the question as one covered by the decision in Parsons.
Although Westwood v Secretary of State for Employment [1984] IRLR 209 was an appeal originating in an application to an Industrial Tribunal under the Employment Protection (Consolidation) Act 1978 it nevertheless concerns the common-law measure of damages because it arose under section 122 of the Act, which entitles employees discharged on their employer's insolvency to claim from the Secretary of State the equivalent of the damages for wrongful dismissal due from the employer. The House of Lords held that Parsons was rightly decided and was not affected by Parry v Cleaver and that accordingly unemployment benefit was to be brought into account (although not, on the facts of Westwood, by direct deduction of the gross benefit received). Although it is said at one point in Lord Bridge's speech that the employee "is under a duty to mitigate" (para 19) the principal analysis and reasoning seem to be in terms of causation and remoteness (paras 21, 22).
Palfrey v Greater London Council [1985] ICR 437 was an industrial injury case in which Mr Piers Ashworth QC, sitting as a High Court judge, held that the authorities required him to take into account state benefits in the assessment of common law damages, and that that extended to the statutory sick pay there in question.
In Hussain v New Taplow Mills Ltd [1988] IRLR 167, another industrial injury case, the issue was the deductibility of money received under a permanent health insurance scheme funded by the employer. In holding that it was deductible Lord Bridge said:
"There are however, a variety of borderline situations where a plaintiff may receive money which, but for the wrong done to him by the defendant, he would not have received and where there may be no obvious answer to the question whether the rule against double recovery or some principle derived by analogy from one of the two classic exceptions to that rule should prevail. Some of these problems have been resolved by legislation, sometimes in the form of a compromise solution providing that a proportion only of certain statutory benefits is to be taken into account when assessing damages. But where there is no statute applicable the common law must solve the problem unaided and the possibility of a compromise solution is not available. Many eminent common law judges, I think it is fair to say, have been baffled by the problem of how to articulate a single guiding rule to distinguish receipts by a plaintiff which are to be taken into account in mitigation of damage from those which are not."
Smoker v London Fire and Civil Defence Authority [1991] IRLR 271 was also an industrial injury claim, the issue being the deductibility of disablement pension benefits under a contractual occupational pension scheme to which the employee was required to contribute. The House of Lords, following Parry v Cleaver, held that they were not deductible.
Hunt v Severs [1994] 2 AC 350 comes from a quite different line of authority, concerned with the recoverability by a personal injuries plaintiff of the value of voluntary services rendered by others. The House of Lords held that such recoverability did not extend to services rendered by the defendant tortfeasor himself. Mr Head, for the employers, relied upon it for the reference by Lord Bridge to the general rule against double recovery, but we do not find that of any assistance on the issue before us, which concerns the relationship between that undoubted principle and the equally sound and well-established principle that a compensating party should not benefit from provision against the relevant loss paid for by the claimant.
The final case cited to us on damages recoverable at common law was Longden v British Coal Corporation [1995] IRLR 642, an industrial injury case in which the benefit in question was an incapacity pension under a staff superannuation scheme contributed to by both employer and employee. The Court of Appeal upheld the trial judge's decision that this pension was not deductible for the period to normal retiring age. In reference to the fact that the employee's contribution was only partial Roch LJ, with whom Ward and McCowan LJJ agreed, relied on the statement by Lord Reid in Parry v Cleaver, referred to above, and on one by Lord Griffiths in Dews v National Coal Board, [1987] IRLR 330, summarising the effect of both as being that "both contributions, of the employer and the employee, are made as part of the consideration the employer pays for the employee's work" (para 23).
Our conclusions from the common-law cases are as follows:
We turn to the unfair dismissal cases, of which the first is Sun and Sand Ltd v Fitzjohn [1979] ICR 268. The benefit in question was sickness benefit, as then named and constituted, although it is treated in Puglia, below, as an authority on its successor, statutory sick pay, rather than on the present sickness benefit. Arnold J, giving the judgment of the Employment Appeal Tribunal, said:
"The matter for consideration seems to us to depend upon whether the amount of the loss sustained by the employee in consequence of her dismissal was the whole amount of lost pay or was the amount of lost pay less sickness benefit. If the employee was entitled to retain the sickness benefit to which she was justly entitled, so long as her employment continued, in addition to receiving her pay, the loss would in our judgment be the net pay lost without any deduction; but if either she was obliged to accept some reduced amount of pay by reference to the sickness benefit she had received or so long as she was being paid under a continuing contract of employment was disentitled from receiving sickness benefit at all, then in either of those cases it seems to us that the compensatory award for lost pay should be reduced by the amount of the sickness benefit which she received."
The appeal tribunal found that if the employee had remained in employment and been ill for the same period she would have been entitled to receive and retain both wages and sickness benefit, and on that basis held that sickness benefit was not deductible. We take the passage quoted above into account, but since the decision went in the employee's favour on the facts the tribunal's view that different facts would have had the opposite effect was strictly obiter. No cases were referred to in the judgment and the three cited in argument do not seem to have any bearing on the point before us. There is no indication that the relevance of any contribution by the employee to the benefit received was canvassed.
The second unfair dismissal case is Hilton International Hotels (UK) Ltd v Faraji [1994] IRLR 267. It is fully discussed in our first judgment and in Puglia, and we need say no more about it here.
The third and last case in this group is Puglia v C. James & Sons (supra). The Industrial Tribunal, in dealing with compensation, had deducted sickness and invalidity benefit. The employee appealed, originally as to costs only, but after a preliminary hearing three further grounds were added, of which one concerned the deduction of benefits. The appeal was heard before the President, Mrs R. Chapman and Mr R. Sanderson on 24 October 1995, after the first hearing of the present appeal and after our first judgment had been written, but before it had been handed down. On the hearing of Mr Puglia's appeal he appeared in person and applied unsuccessfully for an adjournment. After some further discussion he withdrew without, it would seem, having made any submissions of any significance on the substantive grounds of appeal. The appeal tribunal nevertheless treated the appeal as still being on foot and heard counsel for the employers. Judgment was reserved. On 31 October the President, on my behalf, handed down our first judgment in this appeal. On 16 November he handed down the reserved judgment of himself and his colleagues in Puglia.
After reciting the facts and the history of the proceedings, of which the account above is only a small part, the President dealt with the grounds of appeal. Statutory sick pay was held to have been correctly deducted on the authority of the Sun & Sand case, on the basis that Mr Puglia would not have been entitled to full wages plus sick pay if still in employment. As to invalidity benefit the President said:
"The deduction of invalidity benefits received by Mr Puglia over the relevant period is more controversial and places us in some difficulty in the absence of proper argument from Mr Puglia. It could be argued on behalf of Mr Puglia, relying on the recent decision of the Appeal Tribunal in Hilton International Hotels (UK Ltd v Faraji [1994] IRLR 267, that the tribunal erred in law in deducting invalidity benefits from the compensatory award.
He then summarised the reasoning in Faraji and the submissions of counsel for Mr Puglia's employers that it should not be followed, in the course of which he cited Palfrey v GLC, Sun & Sand and Lincoln v Hayman. The President continued:
" At the end of Mr Cavanagh's argument we were left in doubt as to how we should proceed. The decision in Faraji was reserved and is recent. Although the Appeal Tribunal is not bound by its own decisions, those decisions are persuasive. There are legal virtues in consistency and certainty. On the other hand, if it appears that a decision was reached without the Appeal Tribunal's attention being drawn to all the relevant authorities, it is per incuriam. If wrong, the error should be corrected. It has come to our attention since the conclusion of argument that in a more recent decision of the Appeal Tribunal (McGloughlin) dated 19 September 1995 (not reported), doubts were expressed about the correctness of the decision in Faraji on the non-deductible nature of invalidity benefits."
Having referred briefly to our first judgment and its "tentative conclusion" the President concluded that part of the judgment as follows:
" The present position is confused and uncertain. At one point we considered adjourning the matter for assistance from an amicus, but we are reluctant to incur further delays and costs on this matter. We have been persuaded by the citation of authority not cited to the Appeal Tribunal in Faraji or in the case of McGloughlin, that there was no error of law in the deduction of both invalidity benefit and statutory sick pay. We therefore dismiss the appeal at that point."
This judgment, also, is entitled to and has received our closest and most respectful attention as a decision of another panel of this tribunal, but in considering whether we are persuaded to depart from our provisional conclusion we take into account the difficulties under which our colleagues there laboured, as they themselves recognised, in particular by the fact that the appeal was argued for the respondent only and that they learned of our first judgment only after argument was complete. Moreover, although additional authorities were cited to them that aspect of the matter was carried yet further when the appeal was re-listed before us.
That brings us to the reconsideration of the conclusions provisionally reached in our first judgment. We should dispose first of a factual point. In our first judgment we described the relevant benefits as consisting of "Invalidity Allowance". We did so because they were so described at the hearing before us. It is, we understand, now common ground that that cannot have been the only relevant benefit. By section 31 of the Social Security Contributions and Benefits Act 1992 a person who satisfies certain age and contribution conditions is entitled to sickness benefit in respect of any day (after the first three) of incapacity for work which forms part of a period of interruption of employment. By section 33 sickness benefit ceases after 168 days and, again subject to age and contribution conditions, is replaced by an invalidity pension. In certain circumstances a person entitled to an invalidity pension is also entitled under section 34 to invalidity allowance. It does not appear which of these benefits Miss McGloughlin received - Mr Head thought probably all three - but it is common ground that the same principles apply to all for present purposes, and in particular that all are contributory benefits within Part II of the Act, which was the basis on which we approached the issue in our first judgment.
A second preliminary point arises from section 74(4) of the Employment Protection (Consolidation) Act 1978. It was the starting point of our reasoning in our first judgment that section 74(1), providing for the amount of a compensatory award to be "such .... 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", constitutes its own code and is not to be assumed to be equivalent to the common law of damages. There is, however, an exception to that proposition in section 74(4), which provides that in ascertaining the loss the tribunal "shall apply the same rule concerning the duty of a person to mitigate his loss as applies to damages recoverable under the common law". That provision had not been overlooked in argument but was not mentioned in our first judgment because it was common ground that it had no bearing on the issues in this appeal. The same was true when the appeal was re-argued. In view of the references to mitigation in Parsons, Foxley and Westwood, however, we should indicate why we accept the parties' tacit concession that section 74(4) does not assist either of them. In our view the subsection is not concerned with the rule that benefits actually obtained and flowing from the same cause as the loss claimed must be set off; although such benefits can be described in a general sense as "mitigating" the damage the issue can equally well, or better, be characterised as one of causation or remoteness, or simply as part of the quantification of the loss truly suffered. The use of the word "duty", however heretical to some minds, does in our view serve the purpose of indicating clearly that the subsection is directed to situations in which the question is whether the claimant has failed to take reasonable steps to avoid or reduce loss in circumstances in which credit would have to be given for such avoidance or reduction. Here the reverse situation obtains; the benefit has without doubt been obtained and it is the question whether credit should be given which is the matter in issue.
We therefore ask ourselves whether in the light of the further authorities and submissions now before us we should affirm or depart from the conclusion on this issue provisionally reached in our first judgment.
Our starting point, as we have said, was the autonomy of section 74(1) of the 1978 Act and our conclusion, in particular, that the requirement that the tribunal shall award what is "just and equitable" releases it from the straitjacket of the "all or nothing" approach of the common law. Nothing in the further material now before us detracts from that conclusion. On the contrary the wider selection of authorities illustrates vividly the difficulty and artificiality involved in drawing the line between cases in which there is to be no deduction and those in which benefits are to be deducted in full, where that is the only choice, and contains references by judges of the highest authority to the unwelcome constraints which that imposes.
Secondly we drew attention to the fact that Parliament, in mitigating the extremity of the common law as it applies to contributory benefits within the statutory social security regime, had in a number of situations adopted solutions which involved treating employer and employee equally, either by dividing the value of the benefits between them by the device of half deduction or by removing it from both by requiring recoupment. That remains true, and no sufficient reason has in our view been advanced for treating it as irrelevant or insubstantial in relation either to the merits of adopting some intermediate course between full deduction and none or, if that is to be done, to the choice of half deduction as the appropriate level. On the contrary the authorities refer to the statutory provision for half deduction as an example of a compromise (by inference desirable) unavailable in quantifying common-law damages.
Thirdly we concluded that the just and equitable result in the case of benefits such as those in question here, to which the claimant had contributed but which were not in the category of pure insurance moneys, fully funded by her, was to deduct one half. Our reasons for that choice, which were the analogy of the statutory provisions already referred to and general considerations of equity, still stand, but to them we would now add the consideration emphasised by Lord Reid and Lord Pearce in Parry v Cleaver, by Lord Griffiths in Dews v NCB and by the Court of Appeal in Longden v BCC, that the manner in which contributions are nominally apportioned between employer and employee is largely irrelevant; the industrial reality is that wage levels take that apportionment into account and that the whole difference between what the employer pays and what the employee receives goes into the pool from which benefits are funded. That consideration also justifies there being a general rule over a range of broadly similar situations, which is clearly desirable on practical grounds, as the parties here agreed. In the common-law cases that consideration was part of the reason for allowing full deduction rather than none, but where an intermediate solution is possible it points to equality between employer and employee as the just and equitable solution; moreover a nil deduction would (if there is an alternative) be unduly favourable to the employee where, as here, there is a further contribution from general taxation.
We therefore consider that the conclusion to which we had provisionally come in our first judgment should stand and be affirmed.
The result is that the employers' appeals against the finding of unfair dismissal and against the assessment of compensation are dismissed, as is the employee's cross-appeal against the costs order, but that her cross-appeal against the assessment of compensation is allowed to the extent of substituting for the deduction of £3,751 benefits one of only half that amount.