Title: Appeal No.
Author: KRYAN
Last saved by: Joe
Company: Employment Tribunal Service

Appeal No.	 EAT/138/99

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 16 June 1999

Before
THE HONOURABLE MR JUSTICE MORISON (P)
MR D J HODGKINS CB
MR G H WRIGHT MBE

CHEQUEPOINT  (UK) LTD	APPELLANTS

MR V BETSY	RESPONDENT

Transcript of Proceedings

JUDGMENT

PRELIMINARY HEARING

Revised

	APPEARANCES

For the Appellants

MR A SNELSON
(of Counsel)

	MR JUSTICE MORISON (PRESIDENT):	This is an appeal by Chequepoint UK Ltd against a compensation decision of an Employment Tribunal which was promulgated on 19 October 1998.  We have not been provided with a copy of the original decision of the Tribunal which upheld Mr Betsy’s complaint against his former employers, that they had unfairly dismissed him.  That is a relevant point when we come to consider the appeal for the reasons which we shall give.  

1	At the remedies hearing the Tribunal ordered the employers to pay the sum of £13,672.00 by way of compensation and the recruitment regulations and their affect were attached to the award.  In their extended reasons, the Tribunal indicated that the case had come back to them for an assessment of compensation following a two-day hearing in February and April of 1998.  At the outset of the proceedings, Chequepoint UK Ltd made an application to have the proceedings amended by adding Harada Ltd as the second Respondent.  The Tribunal refused to accede to that application having regard to the date when the alleged transfer of a business had occurred.  Nothing turns on that point for the purposes of this appeal.  

2	In relation to the relevant facts, the Tribunal made these findings:

“The Applicant set up a shell company for a bureau de change business in March 1996 to operate in the Seychelles, his country of origin and London.  (Chequepoint UK Ltd of course are in that business.)  His home was the registered office of the shell company and he was a director of the company.  The company placed  adverts in the Indian Ocean Monthly Magazine in 1996 buy there was no satisfactory response to those adverts in the Seychelles and thereupon the company became dormant.”  

The Tribunal observed that, the existence of the shell company was not disclosed by the Applicant to Chequepoint, and the Tribunal concluded that the establishment of the shell company, but non-pursuit of business by that shell company during the Applicant’s period of employment was:

“…not a serious breach of the requirement under the Applicant’s contract that he “may not enter into another occupation of employment or conduct any trade or business in his spare time, without the prior written approval of the Company”.  The action fell within the category of preparation for conducting a business rather than the actual conduct of a business.”

The Tribunal concluded that the Applicant had received nothing and as a Director of the Company, his only earnings from the business was £208 he had received for part-time working in February 1998 which was after his dismissal.  

3	They then turn to the law.  They correctly set out the provisions of section 122(2) which deal with a reduction in compensatory award due to the Applicant’s conduct.  They set out section 123(1) which contains the general principle that the amount of the compensatory award shall be such as the Tribunal considers just and equitable in all the circumstances, having regard to the loss sustained.  

4	Thirdly they refer to Devis and Atkins which applies to cases where evidence of misconduct is discovered after the dismissal and the House of Lords in that case made it plain that since that was ex hypothesi conduct of which the employers were unaware before the dismissal, it could have no impact as to whether the dismissal was fair or unfair but could well have an impact on the question of whether the employee was entitled to be compensated.  

5	They noted the party’s submissions on the question of the compensatory award and set out their conclusions in relation to the basic award.  They said that it was not just and equitable to adduce that award under section 122(2), nor the compensatory award under section 123(1) and for the purposes of section 122(2), they held that the establishment of a shell company during employment was not conduct warranting reduction of the basic award.

6	For the purposes of the general test under section 123(1) the Tribunal said:

“…applying Devis v Atkins the establishment of a shell company was not action that meant the employee had suffered no injustice by being dismissed.  In reaching their conclusion that it was not just and equitable to reduce the compensatory award under section 123(1) the Tribunal had regard to the fact that the bureau de change business was dormant until November 1997, after the dismissal of the Applicant, and was then activated by the Applicant’s partner, not by the Applicant.  The Applicant’s only benefit from the business was £208 of part-time earnings in February 1998.”

and on that basis they made their award.

7	In a conspicuously able argument, Mr Snelson, on behalf of the Appellant’s, submits to us that there has been a misdirection by the Employment Tribunal in their approach to the question of compensation.  He submits that the Tribunal’s finding, which we have recited, in relation to a breach of contract, was contradictory.  In the first part of the passage to which we have referred, the Tribunal have said that the setting up of the shell company, but non-pursuit of business by it, was not a serious breach of the requirement under the Applicant’s contract.  That was to be contrasted with the next sentence, where they said that the action of the employee fell within the category of preparation for conducting a business, which would not be a breach of contract at all.  Thus there appeared to be a conflict between the proposition that there was not a serious breach and the proposition that there was no breach at all.  

8	It was also submitted to us that the Employment Tribunal have not directed their attention to the question as to whether there had been a breach of the implied duty of trust and confidence and whether that should not be taken into account in assessing the compensation, either under section 122(2) or under section 123(1).  

9	Secondly, Counsel submitted to us that the Tribunal had incorrectly applied the Devis v Atkins approach.  It was not a question of all or nothing as the Tribunal, it was submitted, appeared to think.  Under the Devis v Atkins approach it is possible that the Tribunal will come to the conclusion that the employee was entitled to some money even though he was not entitled to the full amount because of undiscovered, or previously undiscovered breaches of contract.  

10	Thirdly it was submitted to us that the Tribunal had misdirected itself in relation to the statement that it was not just and equitable to reduce the compensatory award under section 123(1).  It wasn’t a question of reducing the compensatory award under that section.  The reductions are made under section 122(2).  It is a question of awarding what is just and equitable which may involve giving the Applicant less than otherwise the full extent of his losses.  

11	It seems to us that on the basis of this decision as it stands, we cannot find fault with the approach of the Employment Tribunal.  As we understand the decision, the Tribunal was satisfied that if there was a breach of contract in this case, it certainly was not a serious breach because the Applicant had not done enough to warrant a description of his behaviour as a serious breach.  That was a question of judgment as to precisely what the evidence was as to:  what happened; what the nature of the advertisements were and so on.  

12	That was a judgment of fact for the Employment Tribunal and is not, as we think, a point of law.  Whilst it is often possible to find fault with the precise language of an Industrial Tribunal’s decision, we are not prepared to say that the Tribunal has been inconsistent in the passage to which Mr Snelson referred.  What the Tribunal was saying was that if there was a breach it was not a serious one – we consider that that is the effect of what they said in that paragraph.  

13	As to the approach to Devis v Atkins we consider it unfair to suggest that the Employment Tribunal has misdirected itself.  It is clear that they are having regard to section 123(1) when they come to apply the judgment in Devis v Atkins.  They are asking themselves the question what is just and equitable having regard to the conduct which subsequently came to the attention of the employer, but about which they did not know at the time of the dismissal.  It was not conduct which fell within section 122(2), because it was not as we understand it, conduct which contributed to the dismissal, which is what is required under that subsection.  Whereas section 123(1) is dealing with the after acquired knowledge of conduct which may well impinge on what is just and equitable to award under section 123(1).  

14	They were correct therefore to be looking at the conduct of this individual which was not known to the employers, as we understand it, at the time of the dismissal.  We are to some extent handicapped by not seeing the decision on liability and it is probably right that we should not do so, so that we are not tempted to seek to weigh the conduct of the parties having regard to all the facts of the case.  We must take this decision as it stands and analyse it for ourselves and to see whether it complies with the obligations to get the decision correct in law.  

15	We consider that the Employment Tribunal was entitled in its judgment to decide what was just and equitable.  We think it is unfair to criticise them for using the word “reduce” in the context of section 123(1).  It is obvious that the Tribunal start with the assumption, subject to any discussion of reduction, that what losses the employee has suffered it would be just and equitable to award.  But there may be reasons which make it not just and equitable for that award to be made, and in that sense one could use the word “reduce”.  But it is plain that they were not confusing the process between section 123(1) on the one hand and section 122(2) on the other, because they dealt separately with 122(2) in their second conclusion.  

16	It seems to us that they were entitled to conclude what he had done had not gone far enough to disentitle him under the just and equitable principle to the full compensation to which he otherwise would be entitled.  They noted that the business was dormant as they previously held.  They noted that he was not the main participant as was evidenced by the fact that it was activated by his partner, and not by himself after the dismissal, and they correctly took into account what it was that he had received as part-time earnings after his dismissal.  That was a matter that had to be taken into account in the calculation of the overall award.  

17	For those reasons we do not accept any of the points which have been made ably to us by Mr Snelson.  This was a decision that the Tribunal was entitled to come to itself on the question of compensation.  It need hardly be said that it is rare if ever that the Employment Appeal Tribunal will be persuaded that there is a point of law to be raised in relation to a remedies hearing.

18	Mr Snelson has asked for leave to appeal and we unanimously reject that application.  It does not seem to us that this appeal raises any principle of law or probably any point of law with great respect to Mr Snelson.

© Copyright 1999

EAT/138/99

EAT/138/99
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