United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MR M RYDER (of Counsel) Messrs J R Jones Solicitors 56A The Mall Ealing London W5 3TA
For the Respondents	MR R W ASTON (Solicitor) Messrs Aston's Solicitors 57 Love Lane Pinner Middlesex HA5 3EY


 


MR JUSTICE KEENE: On the 15th December 1994 an Industrial Tribunal at London (North) issued a decision that these three appellants had been unfairly dismissed because they had been selected for redundancy by way of a procedure which was substantively flawed. Each appellant had received a redundancy payment which equated with a basic award for unfair dismissal, but the tribunal decided that no compensatory award should be made to any of the appellants. It did award Mr McMahon £150 under the provisions of the Wages Act 1986 and nothing further turns upon that.

It is the decision that no compensatory award should be made which is now the subject of this appeal. There is no cross-appeal by the respondent against the finding of unfair dismissal in each case.

The appellants were all employed by the respondent as Sheriff's Officers. They were all dismissed in October 1993 on the ground of redundancy. The tribunal's decision that no compensatory award should be made was based on the failure of the appellants to mitigate their loss. It referred to evidence given by a Mr Heyter, the operations manager of C & E Associates, a debt collecting firm specialising in the recovery of Community Charge and Council Tax debts and of non-domestic rates. The tribunal in its decision summarised the evidence on this as follows:

"6. ... His evidence was that Mr Phillips and Mr McMahon both worked for his company from the 1 November 1993, Mr Phillips until April 1994 and Mr McMahon for two weeks. He stated that his firm had work available, that his employees were paid on a commission only basis following two weeks training when they received a wage of £100 per week, and that it was possible for employees to earn on average between £800 and £1,000 per month.

7. Mr Bruce's evidence on his attempts to mitigate his loss were that after a month abroad he sought work in a number of occupations but unsuccessfully. He became ill in March 1994 and had not sought work since. He said he did not want to do debt collecting work or to be paid on a commission basis and that the debt collection work undertaken by other agencies was more dangerous than at Nathan's. He had worked for Nathan's for six years and prior to that had owned a business for five years and had been self employed. He had wanted to return to some kind of administrative or executive post similar to work he had undertaken ten to fifteen years ago.

8. Mr Phillips' evidence was that he had worked for C & E Associates on a part time basis only so that he could look for alternative employment in a different field. He had been unsuccessful but had ceased to work for C & E Associates in April 1994.

9. Mr McMahon's evidence was that he went to work for C & E Associates for two weeks but gave the job up when he found he would be paid on a commission only basis. He had eventually found work as an HGV driver."

We have seen the Chairman's Notes of Evidence and it is clear that the figures quoted by Mr Heyter in paragraph 6 of the decision of £800 to £1,000 per month were of gross earnings.

The duty to mitigate one's loss is expressly made part of the principles to be applied by an Industrial Tribunal when calculating a compensatory award. What was at that date s.74(4) of the Employment Protection (Consolidation) Act 1978 is now s.123 of the Employment Rights Act 1996, but s.74(4) provided as follows:

" (4) In ascertaining the said 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 of England and Wales or of Scotland, as the case may be."

The Industrial Tribunal in its decision referred to this duty and then said that an applicant:

"... will initially be entitled to look for work in the same kind of employment and at a similar rate of pay as that which has been lost. Only after some time when these possibilities look unlikely is he expected to seek different employment and possibly at a lower rate of pay."

The grounds of appeal attack that statement on the basis that there is no principle that an unfairly dismissed employee may seek different employment and possibly at a lower rate of pay only after some time when the possibilities look unlikely etc. That wholly misunderstands what the tribunal was saying at this stage in its decision. As we read that passage, it was not seeking to suggest that there was any restriction on the date at which a dismissed employee can look for a different type of employment. It was correctly indicating that at a certain stage he will be obliged to consider different employment if his attempts to find employment in a similar field have failed, and that he cannot simply sit back and say that the same type of work as he had previously been doing is not available. On that basis we can see nothing to criticise with that particular statement by the tribunal below.

The decision in this case then went on in paragraph 11 to say this:

"11. However, the evidence of all three Applicants in this case is that they did not want similar work and they did not want to be paid on commission rather than having a wage. The principle which has been applied by the Tribunal is that the employees unfairly dismissed may if they choose, change the direction of their employment and seek a different kind of job and thereby mitigate their loss. If there is work available within their own field they may choose that. What they may not do, at least not at their former employers expense, is unsuccessfully to seek work in a new field and then expect to be compensated by their former employer for loss of earnings, if they could alternatively immediately have taken work in the field that they had just left."

The tribunal then went on to say that in coming to that decision it had considered whether there was any significant difference between wages remuneration and commission remuneration and had come to the conclusion that there was not. It consequently did not award any compensation for loss of earnings.

They then dealt with other heads of loss as follows:

"12. Normally Tribunals would award £150 to each Applicant for loss of his statutory rights and in these instances the Tribunal would indicate that it would be appropriate for the employers to make such a payment without the necessity for the Applicants to seek a review. No evidence was put to the Tribunal as to whether or not Mr Phillips or Mr McMahon had suffered loss in respect of pension rights, and each may apply for this matter to be reviewed should there have been a loss the value of which cannot be agreed between the parties."

On behalf of the appellants Mr Ryder criticises the finding that it was unreasonable for the appellants not to have taken employment with C & E Associates. He rightly recognises that this was a finding of fact by the Industrial Tribunal, but he contends that it was one to which no reasonable tribunal properly directing itself could have come and therefore an error of law is disclosed. In particular, reference is made to the fact that pay with C & E Associates was on a commission basis and not by way of a salary; that there was evidence that it was possibly of a lower amount; and that the type of debt collecting involved was more dangerous than had been the type of work with the respondent. Mr Ryder argues that, had the Industrial Tribunal compared earnings in work for C & E Associates with those earnings achieved with the respondent, then the tribunal might have decided that it was reasonable not to take jobs with C & E Associates. But, he says, the tribunal does not do any comparison between the two sets of earnings, nor do they seem to have taken account of the position in respect of pensions in the new job as compared to the old when considering this question of reasonableness.

An attack is also made on the way in which the tribunal expressed the law on mitigation in paragraph 11 of their decision to which we have just referred. It is contended that the tribunal should have considered the reasonableness of the conduct on the part of each of the appellants and not treated it as if it were a principle of law that they should not be seeking work in a new field when work is still immediately available in the type of employment which they have been doing with the respondent.

As for the amount of pay being different, there does not seem to have been detailed oral evidence before the tribunal as to the appellants' levels of pay by the respondent. But there was documentary evidence in the form of the originating applications from these appellants which the appellants seem to have confirmed orally in evidence and which the respondent does not seem to have challenged. Those originating applications show gross levels of annual pay of the appellants as follows:

Mr Phillips: £15,700

Mr Bruce: £13,850

Mr McMahon: £11,850.

The range of monthly earnings with C & E Associates quoted by Mr Heyter is equivalent to annual figures of £9,660 to £12,000 again gross. However, we note that there is no suggestion that any of the appellants gave evidence that the level of pay was a factor which rendered C & E Associates work unsuitable for them, and in those circumstances the tribunal below was, in our view, entitled to proceed on the basis that the level of pay would not justify rejecting such employment.

The method of pay is however another matter. We can see that earnings on a commission basis lack that element of certainty which is present in a salary. It might be argued, no doubt, that such uncertainty works both ways, in that there is no guaranteed minimum but equally there is no ceiling on earnings. It may be that this appeal tribunal, had it been sitting at first instance as an Industrial Tribunal, might have seen this difference in the method of pay as significant. But that is not of course the test of perversity. The tribunal below were clearly very conscious of this difference between the two methods of pay and, by itself, we cannot see that there is anything wrong in law in the conclusion which they reached on it.

Again, on the dangers involved in the work provided by C & E Associates, the extent of such dangers is a matter of degree and as such is best assessed by the tribunal which hears the witnesses. Evidence was after all given expressly by someone in a senior position with C & E Associates and we only have a brief record of the evidence which he gave. The tribunal refers in its decision expressly to evidence on that topic both from that individual and from some of the appellants, and it is clear to us that the tribunal took this aspect into account. Taking all the evidence on this particular part of the case into account, we find it impossible to say that the tribunal's decision on this particular aspect of the case was outside the range of decisions permissible for a tribunal properly instructing itself. It was not perverse of it to have decided that the appellants had acted unreasonably in failing to take up employment with C & E Associates.

Did they approach that issue on an incorrect legal basis? The well-established test on the topic of mitigation is whether the claimant took reasonable steps to find alternative employment: see Fougère v Phoenix Motor Co Ltd [1976] ICR 495 and Archibold Freightage Ltd v Wilson [1974] IRLR 10. When the Industrial Tribunal here in paragraph 11 of its decision spelt out what an employee can and cannot properly do, they are not, as we read their decision, seeking to do any more than apply that established test to the circumstances which arose in the present case. We do not read their decision as seeking to lay down a universal proposition of law. But if similar work is immediately available, it will rarely be reasonable for an employee to turn his back on that and to say he no longer wishes to do that kind of work and then expect his ex-employer to compensate him while he searches for a different kind of employment. We therefore do not regard the tribunal below as having erred in law in its approach on this.

Where we do find the tribunal's decision difficult to follow is in its conclusion that the appellants' failure to mitigate resulted in a nil award of compensation. There are a number of problems which arise here. First, the evidence from Mr Heyter was of a range of earnings possible with C & E Associates and there was no finding by the tribunal where in that range each of the appellants would have come, had he taken employment with C & E Associates. Secondly, even on the basis of gross earnings, there seems to be a residual shortfall in the case of Mr Phillips and Mr Bruce between what they had been earning with the respondent and what they would have earned with C & E Associates, even if they were to have achieved the top of Mr Heyter's range, as to which there is of course no finding. Thirdly, calculations of loss should be carried out in net and not gross terms. The tribunal seems to have proceeded on the basis that by failing to take up employment, at least on a longer term basis with C & E Associates, the appellants had somehow thereby forfeited their entitlement to any compensatory award. That is not so. They may still have suffered a loss, had they mitigated by taking up such alternative employment, and it is necessary for any tribunal in that situation to investigate whether there was or was not such a residual loss and if there was such a loss, how much is the extent of that loss.

It is conceivable that the tribunal took the view that in net terms there would have been no residual loss if the appellants had taken employment with C & E Associates, but if that had been its view it has failed to make that clear and as such has failed to provide proper and adequate reasons for its decision. In either case there would be an error of law. Our view, however, is that the tribunal here failed to investigate the extent of any residual loss, as they should have done as a matter of law. This decision will have to be remitted for this reason alone.

However, there are a number of specific additional matters to which attention will have to be given on any further hearing.

First of all, no consideration seems to have been given to the position of Mr Bruce as it was at March 1994 when, as the tribunal found, he became ill and could no longer work. He would have received sick pay had he remained with the respondent. Indeed there may be other financial implications of that illness. Whatever those may be, it is important that those should be investigated and reflected in any calculation of compensation in his case.

Secondly, the tribunal should look at the whole package of benefits which the appellants were entitled to as salaried employees of the respondent and take that into account in calculating any loss. As part of that, the tribunal which deals with this remitted matter should deal finally, as the tribunal here did not, with compensation for any loss of pension rights.

Next, the £150 for loss of statutory rights should be subject of a formal order by the Industrial Tribunal.

We would just add a few comments as to the principles to be applied on any reassessment of compensation. It is important that the position of each of these appellants be considered separately in calculating their loss and hence compensation. Their likely earnings with C & E Associates might have been different had they taken up a position with that company, and there may well be other differences. But in any event these three appellants cannot be lumped together as if each of them was in exactly the same position.

Next, the tribunal reconsidering the quantum of compensation will be entitled to consider other factors beyond those in mitigation, such as those factors implicit in the "just and equitable" approach embodied in s.74(1) of the 1978 Act as it was. The Industrial Tribunal in this case made passing reference to a 10% reduction in the case of Mr McMahon, but did not have to apply such an approach either in his case or in the case of either of the other appellants because of the tribunal's decision on mitigation. On any reconsideration of this matter, it will be open to the respondent to argue that reductions on a "just and equitable" basis should be made to compensation for any of these three appellants, so as to reduce compensation payable after failure to mitigate loss has been allowed for on a properly quantified basis.

For completeness, we make it clear that we do not accept two subsidiary arguments advanced by Mr Ryder in this case. It was contended that the tribunal should have considered whether the month which Mr Bruce took off as a holiday before seeking employment was reasonable or not. It is right that the decision is silent on this, but in the light of the conclusion we have reached on mitigation, that is an irrelevant consideration. The position on the evidence is that Mr Bruce could have obtained a job with C & E Associates, had he performed his duty to mitigate. In those circumstances there is no requirement for the tribunal to consider whether the month which he took off was reasonable or not. We can see no argument whatsoever that a dismissed employee is entitled to any significant amount of time, merely because he had been dismissed before seeking alternative employment by way of mitigating his loss.

Secondly, the argument has been advanced that the tribunal should have considered how much longer a fair procedure would have taken, had the employer adopted a substantively fair procedure. The fact is, as is conceded by Counsel for the appellants, that that was not a point raised in argument by or on behalf of any of the appellants. A tribunal cannot be expected to deal with such issues when they are not raised by the parties. It is not its task to root around to try to discover other arguments which have not been raised by one or other of the parties before it, and in this case we cannot see the tribunal went wrong in law in the approach which it adopted.

Before we conclude this judgment we wish to say that we find the brevity of the Chairman's Notes of Evidence in this case surprising. For what we are told was a full day's hearing on quantum, the 1½ pages of typed notes seem remarkably brief. It is had the unfortunate consequence that it has lead to arguments before us about what other evidence was given before the tribunal, and also about how the tribunal Chairman conducted the proceedings. May we say on that last aspect that we are not impressed by complaints about the way in which the proceedings below were conducted. There is no allegation of bias or other procedural error in the grounds of appeal, nor has there been any application before us or at any stage to amend the Notice of Appeal to allege procedural irregularity before the Industrial Tribunal. In those circumstances we attach no weight to any complaint now raised about any procedural irregularity that there may have been.

Our conclusion is, therefore, that the tribunal was entitled to conclude that the appellants should have mitigated their loss by obtaining employment with C & E Associates. However, having reached that conclusion, the tribunal needed to examine with greater care the question of whether the appellants would still have suffered a loss in respect of which some compensatory award ought to have been made. It is on this latter aspect that we allow this appeal and on which we shall remit this matter for reassessment of compensation, that reassessment to be carried out on the basis of the principles which we have outlined in the course of this judgment.

We take the view that this matter should be remitted a freshly constituted Industrial Tribunal.

Legal Aid taxation granted to the appellants.