United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR RICHARD DAVISON (of Counsel) Messrs Parkes Wilshire Johnson Solicitors Highstone House 165 High Street Barnet Herts EN5 5SU
For the Respondents	MR M WEST Peninsula Business Services Ltd Stamford House 361-365 Chapel Street Manchester M3 5JY


 


JUDGE C SMITH QC: This is an appeal by the employee before the Industrial Tribunal, Miss Tanya Jones, against the decision at a Remedy Hearing of an Industrial Tribunal held at London (North) on 21 February 1997, when the Industrial Tribunal held that the Applicant's claim for loss of earnings arising from the discontinuance of her self-employed business as a personal fitness trainer and as an aerobics co-ordinator, were irrecoverable by way of a head of loss, by way of a compensatory payment either under Section 123(1) or Section 123(2)(b) of the Employment Rights Act 1996 arising from the Appellant's unfair dismissal by the Respondents on 30 August 1995.

To understand the point at issue it is necessary to refer back to the Industrial Tribunal's earlier decision made on 5 August 1996, when the Industrial Tribunal held that the Applicant had been unfairly dismissed from her employment as a Duty Manager at the Respondents' Leisure Centre in Belsize Park on 30 August 1995. In the course of that decision the Industrial Tribunal held that, whilst at the Leisure Centre the Appellant carried out work of three different types, namely firstly as a Duty Manager at the Centre in respect of which the Industrial Tribunal held she was an employee of the Respondents; secondly, as a person who took aerobic classes and thirdly, as a personal trainer for members of the public attending at the Leisure Centre as members of the club.

In respect of those second and third activities the Industrial Tribunal held that both were work carried out by the Applicant on a genuine self-employed basis, i.e. by way of a business on her own account. The Industrial Tribunal put the matter in this way at paragraph 2(c) of its earlier decision:

"(c) As part of her duties to allocate instructors to aerobics classes, the Applicant on occasion allocated herself. The Applicant spent other time providing personal fitness training both in the Club and elsewhere. It was accepted that this personal fitness training was work which the Applicant did not carry out on behalf of the Club and was of a genuine self-employed nature. We find that the Applicant's involvement in providing aerobics classes was part of this business and in this capacity the Applicant was self-employed and not an employee of the Respondent."

There is no appeal and has been no appeal against that decision. The Industrial Tribunal also found, as we understand the position that, in the course of her work as a Duty Manager for the Respondents, she was responsible for allocating instructors to the aerobics class timetable and in this way she was able to allocate private work to herself in connection with her own business.

We also deal with this appeal on the basis that, in connection with the personal fitness training activity, the Appellant, because she was "staff" did not have to pay the fee, which was payable by outsiders who wished to provide such services at the Respondents' premises and, in this way the Appellant derived an advantage in carrying out that business.

We further accept, as part of the findings of fact, that certainly with regard to the aerobic classes and also with regard to at least most, if not all, of the personal fitness training activities, all those activities were carried out by the Appellant on the Respondents' premises.

It was against that factual background that the Industrial Tribunal had to consider at the Remedy Hearing whether the Appellant was entitled to be awarded, as part of her compensatory award under Section 123 of the Employment Rights Act 1996, an appropriate sum to be quantified as representing the loss to her since her dismissal and consisting of the revenue she would have received, and be receiving from carrying on her self-employed activities as aerobics class instructor and as a personal fitness trainer.

No quantification of such loss was put before the Industrial Tribunal, but, in our judgment, they plainly dealt with the matter and the issue before them, on the assumption that such a claim was capable of factual quantification. It appears from paragraph 2 of the Extended Reasons that the Appellant had not continued such businesses since her dismissal because she could not return to the Respondents' premises after her dismissal.

The Industrial Tribunal heard submissions on behalf of the Appellant and the Respondents. They, rightly in our judgment, rejected a submission made by Counsel then appearing for the Appellant, that the principles applying to assessing damages of common law had application to the assessment which they had to make and, correctly held, in our judgment, in accordance with submissions made to them by the Respondent, that a compensatory award fell to be assessed in accordance with the statutory scheme provided by the Act. They expressed themselves as follows, in paragraph 4:

"4 Having considered the submissions from both parties and the provisions of Section 123 of the Act we conclude that the Tribunal is only empowered to compensate the Applicant for her loss as an employee. We consider that the reference to loss of benefit contained in Section 123(2)(b) relates to benefits in the nature of employee benefits. We do not consider that the compensation should be assessed in accordance with basic common law principles but consider that it should be assessed in accordance with the statutory scheme provided by the Act. In arriving at this conclusion we had regard to the judgment in Norton Tool Co Ltd v Tewson ICR [1972] 501 where, at page 504, Sir John Donaldson states:

'in our judgment, the common law rules and authorities on wrongful dismissal are irrelevant. That cause of action is quite unaffected by the Industrial Relations Act 1971 which has created an entirely new cause of action, namely, the 'Unfair Industrial Practice' of unfair dismissal. The measure of compensation for that statutory wrong is itself the creature of statute and is to be found in the Act of 1971 and nowhere else'.

We find therefore that any loss the Applicant may have suffered as the loss of her ability to work at the Respondent's premises on her own behalf arising out of the events which led to her dismissal are not matters which fall in the Tribunal's jurisdiction. .."

We have had the benefit of a very able argument made to us by Counsel on behalf of the Appellant and also by Mr West on behalf of the Respondents. We have carefully considered the submissions that have been made to us.

The first submission that is made to us by Counsel for the Appellant is that, in using the expression "we conclude that the Industrial Tribunal is only empowered to compensate the Applicant for her loss as an employee" in paragraph 4 of the Extended Reasons, the Industrial Tribunal were applying the wrong test. However, in our judgment it is plain, from a fair and not too literal reading of the Industrial Tribunal's conclusions as set out in paragraph 4, that the Industrial Tribunal were, in fact, applying the test laid down in Section 123(1) as amplified by Section 123(2)(b) of the Act. As we have already noted they expressly refer to the legislation in those particular sections and remind themselves, in terms, of the seminal judgment of Lord Donaldson in Norton Tool v Tewson.

In our judgment what the Industrial Tribunal were in reality saying was that, applying the statutory test laid down by Section 123(1) and (2)(b) of the 1996 Act, the Appellant's claim for loss of self-employed earnings was outwith the statutory test. In our judgment therefore, this argument, namely that the Industrial Tribunal applied the wrong test fails.

As a second and, as we understand it, a separate argument, Mr Davison submitted that on the application of the right test the Industrial Tribunal would have been bound to conclude, on the particular facts of this case, and on a proper application of the three-stage process involved in construing Section 123(1) as recently defined and described in Simrad Ltd v Scott [1997] IRLR 147, that the loss claimed was a permissible head of claim. Lord Johnston, giving the judgment of the Scottish Employment Appeal Tribunal, helpfully analysed the three-stage process as follows, reading from the headnote:

"The assessment of a compensatory award, in accordance with s.123(1) of the 1996 Act [which he then cites] involves a three-stage process requiring, firstly, factual quantification of losses claimed. Secondly, the tribunal must consider the extent to which any or all of those losses are attributable to dismissal or action taken by the employer. The word 'attributable' implies that there has to be a direct and natural link between the losses claimed and the conduct of the employer in dismissing, on the basis that the dismissal was the causa causans of the particular loss, ie the immediate cause, and not that it simply arose by reason of a causa sine qua non, ie but for the dismissal the loss would not have arisen. If that is the only connection, the loss is too remote. Thirdly, the phrase 'just and equitable' requires the tribunal to look at the conclusions it draws from the first two questions and determine whether, in all the circumstances, it remains reasonable to make the relevant award."

However, in our judgment, application of the three-stage test propounded by the EAT recently in the case of Simrad only serves to illustrate the importance of the need to show a direct and natural link between the losses claimed and the conduct of the employer dismissing, rather than showing no more than that "but for" the dismissal the loss would not have occurred.

In our judgment the Industrial Tribunal were entitled to pay regard to the traditional heads of loss as laid down in Norton Tool as immediate and future loss of wages, together with certain recognised and established fringe benefits, examples of which are given by reference to the decided cases in Harvey at D 2589 to D 2601, eg such benefits as use of a company car, cheap accommodation, tips, school fee allowances, medical insurance and the like. There is no decided case where loss of self-employed earnings have ever been awarded as part of a compensatory award. In our judgment the Industrial Tribunal here drew an appropriate line between losses to the Appellant which were attributable to action taken by her employer, namely her future loss of wages as a Duty Manager and losses arising out of the loss of her earnings from carrying on business on her own account, which were too remote and not so attributable. It may be that if the Appellant had sought to claim the cost of replacing the fringe benefits, to which she was entitled, namely the fees which she had had to pay to be able to carry out her business of aerobic classes and personal fitness activities at other premises, including perhaps, the cost of advertising such services, then such a claim might have been recoverable. However, this was not the head of claim which the Appellant sought to bring within Section 123, nor could it be so because she had discontinued the business after her dismissal.

In our judgment the statutory scheme contained in Section 124 cannot have envisaged that an employer should be liable to compensate an employee by way of compensatory award for losses arising out of the discontinuance by the employee of a business on her own account, after dismissal, which the employee had been carrying out whilst employed by the employer, albeit under favourable or advantageous conditions arising from the terms of her employment. The only arguably proper head of claim in such circumstances, in our judgment, would be by way of a calculation of the replacement value of the fringe benefits arising in a suitable case from such advantageous conditions.

Accordingly, for those reasons this appeal is dismissed and leave to appeal is refused.

Rider

We should add that immediately after giving this judgment we were informed that, in fact, the Appellant had carried on her business after her dismissal and thus her claim before the Industrial Tribunal was for the diminution in her receipts from that business arising from the fact that she was no longer able to allocate aerobics' classes to herself or to benefit from using the Respondents' leisure centre without paying a fee. In our judgment this does not affect our conclusion that the head of damage claimed did not qualify as being within Section 123(1) or Section (2)(b) of the Employment Rights Act 1996 and that the Industrial Tribunal were right so to hold for the reasons we have given above.