United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR J BOWERS (of Counsel) Instructed By: Tower Hamlets Legal Services Town Hall Mulberry Place 5 Clove Crescent London E14 2BG
For the Respondents	MR M WESGATE (of Counsel) Instructed By: UNISON Employment Rights Unit 1 Mabledon Place London WC1H 9AJ


 


MR JUSTICE CHARLES:

Introduction

1. This is an appeal from a decision of an Employment Tribunal sitting at Stratford. The hearing lasted ten days in July 1999. The Extended Reasons were sent to the parties on 8 November 1999.
2. There were six Applicants. Their claims had been selected from 342 applications. The Employment Tribunal did not refer to the particular circumstances of the individual Applicants. It is common ground that the decision relating to the six Applicants affects all 342 Applicants (although we understand that there may be some differences of detail between some of the Applicants).
3. The Respondent before the Employment Tribunal and the Appellant before us is the London Borough of Tower Hamlets (the Council).
4. The decision of the Employment Tribunal was that all of the Applicants were unfairly dismissed.

The reasons for the Employment Tribunal's decision and the general issues on this appeal

5. The Employment Tribunal reached their conclusion that the Applicants were unfairly dismissed on the following alternate grounds, namely:

(a) the Council had failed to prove on the balance of probabilities that the reason for the dismissals was "some other substantial reason" within Section 98(1)(b) ERA 1996, and if they were wrong as to that, in any event

(b) the dismissals were unfair when assessed by reference to the test in Section 98(4) ERA 1996.

Before the Employment Tribunal the Applicants argued that there had been a lack of proper consultation and that the dismissals were unfair for that reason. The Employment Tribunal found against the Applicants on this argument (see paragraph 58(1) of the Extended Reasons) and there is no appeal from this part of their decision.

6. The Council attacked both grounds for the decision of the Employment Tribunal. The Council alleges that the Employment Tribunal erred in law in reaching their conclusion that the dismissal was not for "some other substantial reason".
7. If the Council fails on that ground of appeal it also asserts that in reaching their decision on the alternative basis that the dismissals were unfair the Employment Tribunal erred in law.
8. The Council therefore invite us to set aside the decision reached by the Employment Tribunal.

Some background

9. As explained in the Extended Reasons the contracts of employment of all six Applicants were terminated on 31 March 1997 and they were all re-engaged on different terms.
10. All six Applicants were entitled to "protections" which did not apply to thousands of other employees of the Council.
11. As a result of the terminations and re-engagements the "protections" were changed.
12. In considering the decision-making process of the Council which led to such terminations and re-engagements the Employment Tribunal focus on a decision of the Council's EPC (Equalities and Personnel Committee) made on 17 December 1996.
13. The Employment Tribunal also focus on a report (which we shall refer to as the Protections Report) that was before the EPC on that day.
14. The minutes of the meeting of the EPC record as follows:

"The Chair MOVED and it was

RESOLVED (4 – 2 against)

(1) That Option C, as described in paragraph 4.4 of the report, (the level of protected earnings to be gradually reduced as it is subsumed by successive annual cost-of-living pay awards) be agreed, subject to further consultations with staffside with a view to reaching agreement by mid-February when it is anticipated notices may be sent to staff so that new terms should take effect on 1 April 1997.

(2) That the report be submitted to the Finance and Accommodation Committee for consideration of its financial effects."

15. In the Protections Report Option C was described as a "red circle" and the decision to adopt Option C has been described as a decision to "red circle the protections". We note and do not question the finding in paragraph 36 of the Extended Reasons that the consultation referred to in paragraph (1) of the resolution of the EPC was as to implementation only.
16. In accordance with paragraph (2) of the resolution of the EPC the "protections issue" (and the Protections Report) came before the Council's Finance and Accommodation Committee on 16 January 1997 (as agenda item 5.10). The introduction to that agenda item was a report by the Head of Personnel Services (Martin Williams) and the first two paragraphs of that report are in the following terms:

"1.1 As part of the Council's strategy for addressing the current budget deficit this report sets out options for taking action to minimise the cost to the Council of staff protections.

1.2 This report was considered by the Equalities and Personnel Committee on 17^th December, 1996. The Committee after considering the report agreed:-

the implementation of Option C as described in paragraph 4.4 of the report (the level of projected earnings to be gradually reduced as it is subsumed by successive annual cost of living pay awards), subject to further consultation with Staff-Side, and to refer the report to the Finance and Accommodation Committee for consideration of its financial effects."

We were told that the remainder of that report effectively repeated the Protections Report that was before the EPC.

17. The minutes of the meeting held on 16 January 1997 in respect of agenda item 5.10 are in the following terms:

"5/10 STAFF PROTECTIONS (See report F&A 099/697)

The report of the Head of Personnel Services was introduced by Martin Williams. The report had previously been considered by the Equality and Personnel Committee. Mr Williams requested that the Committee consider two additional recommendations in relation to the application of the Staff Protections policy to the recently revised Redundancy and Redeployment Procedure. Mr Williams advised that he had received representations from Staff-Side who had requested that the Authority consider the retention of the Child Care Allowances. A final decision on this issue would rest with the Equality and Personnel Committee.

In response to a question from Councillor Ludlow, Mr Williams advised that Counsel's Opinion had been sought in relation to the issue of staff protections. Counsel was of the view that Option C, if implemented would be defendable, if subject to legal challenge.

The Chair advised that she was aware that officers had extensively researched the issue of Staff Protections and that Members, in accordance with usual practice, decided upon policy and were responsible for determining the level if any and the scope, if any of Staff Protections.

The Chair MOVED and it was

RESOLVED (By 5 votes to 2)

(1) That in light of the Council's serious financial position, the need to make savings and the other options for budgetary savings being considered by the Council, that the implementation of Option C as recommended by Equalities and Personnel Committee be endorsed, subject to further consultation with Staff Side.

(2) That the Equality and Personnel Committee be requested to consider the application of this policy to the revised Redundancy and Redeployment Procedure.

(3) That the Equality and Personnel Committee be commended to retain the Child Care Allowance (At an approximate cost of £24,000 p.a.)"

18. This minute and the report of the Head of Personnel Services to the Finance and Accommodation Committee were before the Employment Tribunal but they do not feature in their reasoning. As I have said that reasoning focuses on the decision of the EPC and the Protections Report (which was effectively also before the Finance and Accommodation Committee).
19. This focus of the reasoning of the Employment Tribunal may be because of the fact that when the Council wrote to the Applicants concerning the decision to adopt Option C, and thus to red circle protections, the Council referred to the decision of the EPC rather than to any later decision. Additionally it may be because the EPC was the committee of the Council which had full delegated powers and which was responsible for determining terms and conditions of employment (see paragraph 11 of the statement of agreed facts). It was thus the committee which had the task of selecting from options within the Protections Report and which subject to further decisions by it, or the Finance and Accommodation Committee (having regard to the financial implications of the EPC decision), or the Council, it was the EPC that made the decision to choose and implement Option C.
20. However, in our judgment this omission in the reasoning of the Employment Tribunal is significant because the later decision of the Finance and Accommodation Committee is (and was pleaded as being) part of the decision-making process of the Council. As the minutes in respect of the decision of the Finance and Accommodation Committee show, that Committee had regard to "the need to make savings, and the other options for budget savings being considered by the Council" (our emphasis). Further in our judgment it is to be remembered that pursuant to the resolution of the EPC the Protections Report (and the decision of the EPC) was to be submitted to the Finance and Accommodation Committee for consideration of its financial effects.
21. On 16 January 1997 the Finance and Accommodation Committee considered a range of budgetary issues in respect of the 1997/1998 budget. This can be seen, for example, from agenda item 5.5 and this is also referred to in paragraph 29 of the statement of Eleanor Kelly (a Local Government Officer) which was part of the evidence put in by the Council before the Employment Tribunal. In paragraphs 27 and 28 of that Statement she refers to the meeting of the EPC on 17 December 1996 and of the Finance and Accommodation Committee on 16 January 1997. Paragraph 31 of that statement indicates that there were two further meetings of the Finance and Accommodation Committee on 7 February 1997 and 26 February 1997. At those meetings that committee considered respectively (i) the six, and (ii) the seventh and final budget report for 1997/1998 and at the last meeting passed the resolutions that formally agreed the budget and made statutory recommendations to the full Council. As we understand it at these two meetings the Finance and Accommodation Committee did not have any specific discussion, or make any specific decision as to staff protections and the implementation of Option C, but on each occasion they approved an appendix which included within it an item for identified savings in respect of staff protection costs in the sum of £300,000 as one of a number of items in respect of the 1997/1998 budget. This appendix reflected the implementation of Option C and the fact that the savings it introduced occurred in 1997/98 (and thereafter).
22. We comment that it also seems from paragraph 35 of Miss Kelly's statement and the chronology we were provided with and which was (we understand) also before the Employment Tribunal that before the consideration by the Finance and Accommodation Committee of the sixth (and thus also the seventh and final) budget report letters were sent to staff with a view to implementing (amongst other things) Option C and thus the red circling of the protections. We add and have had regard to the points that the precise functions of the EPC and the Finance and Accommodation Committee were not explained to us in argument.
23. Paragraph 36 of the Extended Reasons is in the following terms:

"36 The EPC resolved that Option C in the report '(the level of protected earnings to be gradually reduced as it is subsumed by the successive annual cost of living awards), be agreed subject to further consultation with Staff Side with a view to reaching agreement by mid-February when it is anticipated that notices may be sent to staff so that new terms should take effect on 1 April 1997'. The consultation there referred to was, we find, consultation only about implementing the decision which had been made by the EPC."

As I have said we accept the conclusion of the Employment Tribunal in the last sentence of that paragraph but note that it refers to the first of the resolutions of the EPC and not to its second resolution that the Protections Report should be submitted to the Finance and Accommodation Committee for consideration of its financial effects.

General introductory comment

24. In considering the arguments on this appeal we have been very aware of, and have had regard to (i) the point that the Employment Tribunal are the fact finding body who heard evidence as to and considered the documentation concerning the decisions and decision making process of the Council, and (ii) of the approach that this Tribunal takes to the consideration of Extended Reasons and the duty of the Employment Tribunal to explain thereby why the parties won and lost and thus in short that we should not take a literal or narrow approach thereto but should ask ourselves whether assessed fairly and broadly the Extended Reasons include the necessary findings and reasoning and thereby properly explain the approach in law taken by the Employment Tribunal and why the parties won and lost.

The fundamental error of fact which the Council assert was made by the Employment Tribunal

25. We shall deal with this argument first because if it is correct it would support a conclusion that the appeal should be allowed without considering the other arguments.
26. The Council referred us to paragraphs 21, 58(3)(iii) and 60 of the Extended Reasons and the reference and it was submitted on its behalf in particular by reference to the phrases "ending the salary protection" (in paragraph 21) and to "giving up" the benefits / protections (in the other two paragraphs) that the Employment Tribunal fundamentally misunderstood the concept of red circling the protections pursuant to Option C which the Council put into effect.
27. In our judgment it is clear that the Employment Tribunal did not do so.
28. We add that in our judgment this argument of the Council was based on an inappropriately selective and literal reading of the paragraphs relied on.
29. The argument, particularly by reference to the use of the words "ended" and "giving up" was that the Employment Tribunal thought that all protections were being terminated whereas (to use an inaccurate but convenient shorthand) Option C involved change rather than termination or removal (or immediate termination or removal).
30. Firstly, given the length of the hearing and the representation of the parties, it would be surprising if the Employment Tribunal had made this error and in our judgment a proper reading of the Extended Reasons and, in particular, paragraphs 31, 35, 36, 46 and 57 (v) and (vi) thereof shows clearly that the Employment Tribunal read and understood the Protections Report and the extent and nature of Option C (and thus the red circling involved).
31. In our judgment it also follows that the Employment Tribunal appreciated that a part of the Council's case was that it had not chosen the harshest option (ie option E the giving of 12 weeks' notice to effect a reduction to the employees substantive salaries for their posts).
32. Accordingly this ground of appeal fails.

The statement of agreed facts and the approach of the Employment Tribunal

33. Paragraph 20 of the statement of agreed facts is in the following terms:

"20. The Council, because of its budget crisis, decided to red circle existing protections so that salaries would be held at their current level until their protected terms and conditions were subsumed by successive pay awards [457]. The Council chose this from five options presented to the Equalities and Personnel Committee on 16 December 1996 and to the Finance and Accommodation Committee on 16 January 1997. The Council gave notice of termination of the existing contracts and offered new terms and conditions including red circling. All employees accepted the new terms."

34. We accept that the term "budget crisis" is not a term of art and does not have a precise meaning. Potentially it has a wide meaning. However this agreed statement of fact is a clear statement that it was agreed that the Council decided to "red circle existing protection" because of its budget crisis.
35. It follows that the statement of agreed facts contained a clear statement that the reason for the "red circling" was the Council's "budget crisis" whatever that term may mean. In our judgment it follows that without a clear abandonment of that agreement by a party it was not open to that party to assert that the reason why the Council decided to "red circle existing protections" was something that was not within the range of meaning of the term "budget crisis".
36. The hearing was conducted against the background of that agreement and thus, for example, the Council decided what witnesses to call, having regard to that agreement.
37. As the Extended Reasons show in the circumstances the term "budget crisis" could apply to either or both of the overspend for 1996/1997 and the budget setting exercise for 1997/1998. "Crisis" fits better with the overspend for 1996/1997 whereas "budget" fits better with the budget setting exercise for 1997/1998. Over the period from December 1996 to February 1997 it is clear from the Extended Reasons and the documents before the Employment Tribunal that the Council were involved in both exercises.
38. In our judgment it follows that if either party wished to argue that the reason why the Council implemented the "red circling of the protections" was not a reason within the extended meaning of the "Council's budget crisis" that party would be advancing a new case which was inconsistent with the statement of agreed facts.
39. Notwithstanding the informality of proceedings before an Employment Tribunal, in our judgment it follows that as a matter of procedural fairness (and thus as a matter of natural justice and as a matter of law) before a party could properly be allowed to advance such a new and different case that party would have to (a) expressly resile from the statement of agreed facts, and (b) seek the leave of the Employment Tribunal to advance such an alternative argument, if the change occurred after the date upon which the hearing commenced (see for example Smith v Zeneca [2000] ICR 800 (in particular paragraphs 33 to 38 of the judgment) and Maund v Penwith District Council [1984] ICR 143 (in particular 149 A to 149 C) which is in the following terms:

If an employer produces evidence to the tribunal that appears to show that the reason for the dismissal is redundancy, as they undoubtedly did in this case, then the burden passes to the employee to show that there is a real issue as to whether that was the true reason. The employee cannot do this merely asserting in argument that it was not the true reason; an evidential burden rests upon him to produce some evidence that casts doubt upon the employer's reason. The graver the allegation, the heavier will be the burden. Allegations of fraud or malice should not be lightly cast about without evidence to support them.

But this burden is a lighter burden than the legal burden placed upon the employer; it is not for the employee to prove the reason for his dismissal, but merely to produce evidence sufficient to raise the issue or, to put it another way, that raises some doubt about the reason for the dismissal. Once this evidential burden is discharged, the onus remains upon the employer to prove the reason for the dismissal."

40. This passage relates to a situation where the employer and employee have not agreed a reason but in our judgment in setting out the respective tasks of the employer and employee it supports our conclusion that in this case if the Applicants wished to challenge the reason as set out in statement of agreed facts they had to produce evidence to do so and had to resile from that statement of agreed facts.
41. This passage in the Maund case also shows that if an employee wishes to make a grave allegation the heavier his burden will be and that allegations of fraud or malice and, we would add, lack of good faith, (i) should not be made without evidence to support them and (ii) should be made and dealt with clearly and unequivocally and not for example left "hanging in the air" in submission or in the reasoning of an Employment Tribunal.
42. In this case if the Applicants wished to advance an argument that the "budget or financial crisis" of the Council was an excuse, or a convenient opportunity to introduce the red circling of protections this would have been a serious allegation going to the good faith of (a) the relevant decision-makers at the time the decision or decisions were made, and (b) the persons responsible for entering into the statement of agreed facts on behalf of the Council and advancing as the Council's case before the Employment Tribunal, that the reason for the "red circling" was the "budget crisis".
43. An allegation that the "budget crisis" was an excuse for, or a convenient opportunity to introduce, or the occasion for, the introduction of the red circling of protections and not the reason for it is a grave one that is directly at odds with the statement of agreed facts.
44. In our judgment if the Applicants in this case wished to make and rely on such an allegation and thereby to challenge or caste doubt on the reason advanced by the Council for the dismissals, they could only properly do so in law by giving clear notice that they were resiling from the statement of agreed facts and obtaining the leave of the Employment Tribunal and thereby giving the opportunity to the Council to call evidence to rebut that suggestion. This was not done and our judgment it follows that if:

(a) the Employment Tribunal permitted such an attack, or

(b) had regard to a submission or suggestion that the reason for the Council's decision was not as set out in the agreed statements of facts and was thus not because of its "budget crisis" (or its financial crisis)

the Employment Tribunal erred in law.

The approach of the Employment Tribunal and the parties

45. This appears in paragraphs 57 (ii) and (iii) of the Extended Reasons. These are in the following terms:

"(ii) Mr Westgate submits that the Respondent cannot show that this was some other substantial reason within the meaning of Section 98 of the Employment Rights Act. His first reason for that submission is that the Respondents have not called any evidence from the decision makers because the evidence of Miss Geldart is that the effective decision maker is the Labour group, and not the relevant committee. Mr Bowers submits that a Council works through established committees, not through political groupings. We think that Mr Bowers is right. While it is realistic to assume that the decisions of the majority party will usually be implemented by the Council, it is in fact the decision of the Council which has the legal effect. A decision of the Labour group which was not subsequently put into effect by the Council would have no legal effect at all.

(iii) It is part of Mr Westgate's submission, as we understand it, that, without calling the Councillors who made the decision in the EPC, the Respondents cannot show what the reason for the dismissals was. Mr Bowers submits that, in approaching the decisions of collective bodies, the presumption is that what was recorded in the minutes is an accurate account of the considerations taken into account. Therefore he submits it is not necessary to call the Councillors to tell the Tribunal what was taken into account in reaching their decisions. Again, we think that Mr Bowers is right. However, it follows that if what is recorded in the minutes is not clear the Tribunal is left in doubt as to what considerations were exactly in the minds of the decision makers. That may result in the Respondents failing to show, on the balance of probabilities, what the reason was. That doubt cannot be removed by calling evidence of officers who can only give their opinion of what was in the Councillors' minds."

46. We have the following comments on these two subparagraphs of the Extended Reasons:

(a) Strangely no mention is made to the statement of agreed facts which contains a reason for the "red circling";

(b) Given that agreement we fail to see how Counsel for the Applicants could properly have made his submission that the Council had to call evidence from the decision makers unless it was made clear that such evidence was as to the detail of the reason set out in that agreement and thus not to establish that the reason was as set out in the statement of agreed facts,

(c) We agree with the last three sentences in subparagraph 57 (ii);

(d) Even in the absence of the statement of agreed facts the Employment Tribunal were correct to conclude that the Council could prove its case by reference to minutes - see the Maund case at 149 D to 150 C where Griffiths LJ states as follows:

"In assessing the reason for a corporate decision, it may not always be sufficient to look solely at the reason recorded in the minutes: see Smith v Hayle Town Council [1978] ICR 996, Eveleigh LJ, when considering this question, had this to say, at p. 1003:

'So one comes to consider whether the facts in this case did entitle the industrial tribunal to come to the conclusion that it did, I would have been inclined to think that, when one asks for the reason for corporate action, the action of all concerned in arriving at that decision should be considered and the court should make up its mind, from all the material available, what the corporate mind was thinking. In this particular case certainly one voter voted because of an anti-union prejudice. But can it be said that that should be regarded as the principal reason, or must one be driven to the conclusion – for that is the kind of test we have to apply – that that was the principal reason? It seems to me that, as emphasis is laid in various parts of this Act upon the words 'principal reason', the schedule contemplates that there can be other reasons that operate, but they may not be the principal one. From that it follows that there may be some form of anti-union prejudice that could exist, but nonetheless that would not so cloud the issue as to make an anti-union sentiment the principal reason'.

Furthermore, if all that can be shown is that one councillor out of seven cast his vote for a particular reason, that will not of itself be sufficient to show the principal reason for the decision: see the judgment of Sir David Cairns in Smith v Hayle Town Council [1978] ICR 996, 1003-1004:

' … I think it would be permissible to look at what was said at the meeting in order to see what actuated the minds of those who voted in favour of the resolution. That was done here by the tribunal, and it appears to me that, upon the evidence they had before them, not only was there no compelling evidence that the principal reason for the dismissal was an inadmissible reason but, indeed, the evidence showed that that was not the principal reason. It cannot be that the reason in the mind of one particular man was the principal reason even though his vote may have been decisive'.

For myself, however, I regard a minuted decision of a local council to dismiss on grounds of redundancy as strong prima facie evidence of the reason for the dismissal. I certainly could not agree with the appeal tribunal that 'any presumption of regularity in circumstances of this kind must be provisional and weak'. However, it is not in dispute that such a reason can be challenged. So much for the law."

(e) A minuted decision provides strong prima facie evidence of the corporate mind;

(f) For the purpose of identifying the reason for a decision made by a committee, in our judgment the most important part of the minutes recording a decision of a majority is the minute of the actual decision (i.e. the resolution), or of the reasons for it, rather than the minute of the discussions leading up to that decision, although we naturally accept that those discussions can be looked at particularly if the decision as minuted does not record the reasons for it;

(g) As the Maund case shows what is relevant is the principal reason for the corporate action and therefore the reasoning of a minority is of no real relevance and additionally the individual thinking of those in the majority is not decisive;

(h) When the resolution of the EPC is read with the statement of agreed facts they establish that the reason for the decision of the EPC was the Council's "budget crisis" and to alter the effect of those two documents the statement of agreed facts has to be abandoned and replaced by evidence;

(i) The resolution of the Finance and Accommodation Committee on 16 January 1997 read alone (and together with the statement of agreed facts) leaves no doubt as to what the expressed reason for the decision of that committee in connection with the red circling of protections was. To alter the effect of that minute it has to be attacked with evidence and again to alter the effect of the statement of agreed facts it has to be abandoned and replaced by evidence;

(j) In our judgment the last sentence of paragraph 57 (iii) is wrong and in making that assertion the Employment Tribunal erred in law. That evidence would be hearsay and could remove such doubt. Naturally consideration would have to be given to its weight and the matters upon which such evidence was based. However if, for example, the evidence was based upon that officer's recollection of the discussion at the relevant meeting, or on discussions with the relevant decision-makers, it would be equivalent to the minutes of the meeting (subject to points as to the accuracy of recollection as against the accuracy of the minutes based on contemporaneous notes). The minutes too are hearsay and reflect the understanding of the minute-taker. Such minutes do not purport to record the entirety of the discussion or the thoughts of each of the decision-makers. As the Employment Tribunal examined the minutes of the EPC meeting and the Protections Report to ascertain what the reason for the decision of the Council to implement Option C and thus "red circling of protections" was it follows, in our judgment, that the Employment Tribunal erred in law in excluding from its consideration evidence of officers as to what was said at the relevant meetings or by relevant decision-makers, or as to the input of officials to and the thinking more generally of employees of the Council;

(k) We accept as a general proposition that, if an employer relies only on minutes and they do not clearly establish what the reason relied on was, it can be held that the employer has failed to establish a reason for the purposes of Section 98(1)(b) ERA 1996. However, this was not the case here because the Council also relied on the statement of agreed facts and we repeat that in our judgment the most important part of the minutes are the relevant resolutions and, further in our judgment, if an examination of minutes is to be made those of all the decision-making committees should be taken into account.

47. The approach of the Employment Tribunal is also indicated by paragraph 56 (ii) and (iii) of the Extended Reasons where the Employment Tribunal state:

"56 We agree with Mr Westgate that:

(ii) If the dismissal is for an ulterior motive then even if a proper reason provides an opportunity for a dismissal then the reason will not be made out.

(iii) If the employer wrongly believes that what they are doing does not amount to a dismissal (even if only by termination and re-engagement), then the reason for dismissal has not been made out.

We would add, that the Respondents must show that they had in mind valid considerations when arriving at their decision."

48. As to these paragraphs we comment as follows:

(a) We do not agree with the proposition in paragraph 56(iii) of the Extended Reasons. In our judgment what matters is the reason for the employer's action which amounts to a dismissal. This agreement by the Employment Tribunal with a submission made by Mr Westgate links to the reasoning of the Employment Tribunal contained in paragraph 57(vii) of the Extended Reasons. It follows that this part of the reasoning of the Employment Tribunal is, in our judgment, based upon an error of law.

(b) For the reasons set out above in our judgment (i) Counsel for the Applicants should not have been permitted to advance, or rely on a suggestion, and (ii) the Employment Tribunal should not have accepted, or taken into account, an argument or suggestion that there was an ulterior motive for the Council's decision to implement the "red circling of the protections" in the absence of an express renunciation by the Applicants of the statement of agreed facts and the leave of the Employment Tribunal.

49. In our judgment on a proper reading of paragraph 57 of the Extended Reasons it appears that the point that the Council had an ulterior motive and therefore the statement of agreed facts is wrong plays a part, or is a factor, in the reasoning contained therein for the conclusion of the Employment Tribunal that the Council had failed to establish on the balance of probabilities that they had a substantial reason for dismissing the Applicants and it follows, in our judgment, that that conclusion is based on an error of law.
50. Further and whether that conclusion on the reasoning of the Employment Tribunal is right or wrong we agree with the submission made on behalf of the Council that the points whether and to what extent the Employment Tribunal took into account an argument or suggestion that the Council had an ulterior motive or found that they did and therefore that the statement of agreed facts is wrong are left "hanging in the air" in the Extended Reasons. This is because if we are right and they were a factor in the reasoning of the Employment Tribunal no findings are made on them and the way in which they were taken into account is not clearly explained. Whereas if we are wrong and they played no part in the reasoning of the Employment Tribunal this is not stated but the points are mentioned. Notwithstanding the benevolent approach to be taken to the interpretation of Extended Reasons this is most unsatisfactory and in our judgment unfair because the points go to the bona fides of the Council and its relevant representatives. In our judgment by leaving these points "hanging in the air" the Employment Tribunal have failed to perform their duty to explain to the parties why they have won and lost (see for example Meek v City of Birmingham District Council [1987] IRLR 250), but further and for the reasons set out below

The first part of the appeal – some other substantial reason – the Employment Tribunal's reasoning and finding as to the reason for dismissal

51. This is contained in paragraph 57 of the Extended Reasons. We have already referred to some of the subparagraphs therein. Naturally we accept that it has to be read with the earlier paragraphs setting out the history and findings of the Employment Tribunal.
52. Paragraph 57(i) is in the following terms:

"(i) The reason for dismissal pleaded by the Respondent is 'difficult circumstances which were not of the Respondents making'. In broad terms this has emerged as 'the financial crisis'."

Again, we comment that there is no reference to the statement of agreed facts. Further if one refers to the reason pleaded the reference to the "difficult circumstances which were not of the Respondents' making" appears in paragraph 18 of the Notice of Appearance. The Notice of Appearance was subsequently amended but, as we understand it, the amendments made no difference to this point or to the points contained in paragraphs 10 to 12 of the original Notice of Appearance which are in the following terms:

"10 On 17 December 1996 the Respondent's Equalities and Personnel Committee considered several options on how to make savings to the cost of staff protections so as to assist in achieving the necessary savings for 1997/98 and avoid the prospect of making compulsory redundancies. The Committee received written comments from Staffside and the Staffside Secretary also addressed the Committee.

11 Members decided that the fairest option was to freeze staff protections, subject to further consultations with Staffside with a view to reaching agreement by mid-February 1997. Members referred the report to Finance and Accommodation Committee. The method of freezing staff protections is explained in an explanatory leaflet entitled 'Staff Protections' which is attached as Annex A.

12 On 16 January 1997 Finance and Accommodation Committee considered a broad range of savings options. It agreed the freezing of staff protection costs and estimated that this would produce a saving to the General Fund of around £300,000 in 1997/98 with additional year on year savings."

As can be see from those paragraphs the Council relied on both the decision of the EPC and its Finance and Accommodation Committee. Earlier in this judgment we have pointed out that the Council "pleaded" both decisions and have set out the resolutions of those two committees.

53. We have already cited paragraphs 57(ii) and (ii) and commented on them.
54. From the starting point set in subparagraphs (i) to (iii) of paragraph 57 the Employment Tribunal set out their reasons for concluding that the Council had failed to establish on the balance of probabilities that they had a substantial reason for dismissing the Applicants. Paragraphs 57(iv) to (viii) are in the following terms:

"(iv) Mr Westgate submits that the Respondents cannot show that the difficult circumstances, ie the financial crisis, was the substantial reason which brought about the dismissals of the Applicants because there is ambiguity about what is meant by 'financial crisis'. We find, that there is substance in this submission. We have drawn attention, in paragraphs 32 to 35, to matters which case [sic] a doubt on the basis of the decision taken by the EPC on 17 December 1996, and in paragraph 35 the words the 'Chair regretted that the Council's budget difficulties compelled members to take drastic decisions to achieve budget reductions which they would not, under normal circumstances consider', do nothing to clarify to this Tribunal what considerations were taken into account when the EPC made its decision. We cannot be sure, on the balance of probabilities, that the members of that Committee acted only on the correct observations of Miss Kelly, and ignored observations of others which suggested that doing something about protections might have some effect on the current budget deficit. In paragraph 4.2.1 of the Report to that Committee, the use of the expression, 'draft 1997/98 budget' increases the danger that some members may have understood the words 'current budget deficit' in paragraph 3.3 to have referred to the 1996/1997 overspend. Consequently, they would have thought, wrongly, that their decision on protections would have had some impact on the current year.

(v) We therefore accept the Applicants submission that if the reason for the decision of the EPC on 17 December 1996 was based on, or included the belief, that 'red circling' the protections affected the budget crisis of 1996/1997, then that reason is not capable of being a substantial reason because the 'red circling' had no effect on it. It is for the Respondent to show on the balance of probabilities what the reason was, and in our judgment the Respondent has failed to show us that the decision maker's decision was based on a matter which was capable of being some other substantial reason. For all this Tribunal has been able to deduce from the minutes, the decision makers may well have thought that 'red circling' the protections had some effect on the 1996/1997 budget crisis. The opinion evidence of Miss Kelly does not make any difference to that uncertainty.

(vi) The Councillors at the EPC meeting on 17 December were told that the overall saving from the 'red circling' would amount to £0.5 million (GF and HRA). The minutes of the meeting record the Assistant Director of Corporate Finance explaining that that potential saving in 1997/1998 of £0.5 million estimated for 'red circling', were of a broad planning nature. This again may have reinforced the idea of £0.5 million as the potential relevant saving, rather than the £0.3 million which was the potential relevant saving in fact. Though this is a point of lesser importance than the last point, it reinforces our view that the uncertainty as to what the members of the EPC had in mind leads to our finding that it cannot be said that the employers had a substantial reason for dismissing the Applicants. The Respondents must first show the Tribunal what the reason was exactly.

(vii) It is far from clear to this Tribunal whether the EPC realised that their decision to 'red circle' benefits would result in dismissals. When a Councillor, at that meeting on 17 December 1996, enquired about the legal implications under contract law of reducing protections, Mr Martin Williams replied that contract law was not affected by the proposals because they did not involve a cut in the employee's salaries. The solicitor added that the proposal was to reduce the level of protections not to cut the annual increments to salary .Those answers, to that question, could very well have created the impression in the minds of the listeners who were to make the decision that dismissal was not necessary. The Respondents have pointed to the Resolution which includes the words 'notices may be sent to the staff so that new terms should take effect on 1 April 1997', as showing it must have been clear to the Councillors that 'notices' meant dismissal. We do not agree with the Respondents on that point. The statement is consistent with a mistaken view that the employers had a right to change terms of employment on giving notice. This again affects the reason for the dismissal, and again leads us to hold that the Respondents have failed to establish, on the balance of probabilities, that they had a substantial reason for dismissing the Applicants.

(viii) Another reason why we hold that the Respondents have not proved on the balance of probabilities a substantial reason for dismissing the Applicants is that, we are not satisfied that the financial crisis was the true reason for the action on protections. We have traced with some care, the history of the apparent wish by the Council to change the protections situation. We accept the submission of Mr Westgate that the financial crisis provided the opportunity for the 'red circling' of the protections, but did not require it. We are conscious that we should give due weight to the employers perception of its needs, but consider that the actual question whether there was a substantial reason for the dismissal is a matter for this Tribunal to decide. In coming to our decision on this point we have been influenced by the following matters. First the history of the Council's desire to change the situation regarding protections which we have set out above. This had its origins and its development in circumstances unconnected with the financial crisis which occurred at the end of 1996. Secondly, we are not satisfied that the savings were necessary to balance the budget for 1997/1998. We accept Mr Westgate's submission that there is no evidence that the FAC anticipated not being able to balance the budget without these savings. We are influenced in accepting this submission by the fact that the service committees had already identified savings in excess of those required by the FAC, and by the fact that Mr Watson said that it was felt that the staffing budget ought to bear part of the cost of the cuts which were being made. This is the language of gesture, not of necessity, and fails to meet the threshold test contemplated by Section 98 of the Act. Our view that it is the language of gesture is also influenced by the fact that the £300,000 saving per year was a very small percentage of the total salaries budget.

The reasons in paragraphs 57 (iv) to (vi)

55. In its terms, and although it makes no reference to the statement of agreed facts these focus on what is meant by "budget crisis" or "financial crisis" and thus the width of meaning of those terms (which we take to have the same meaning).
56. We accept that there is force in the point that if the decision of the EPC was based on the need or wish to take steps to deal only with the 1996/7 overspend it makes no sense. This is because it is quite obvious that the savings could not be made until the variations were made. But it seems to us that this point and reason:

(a) do not lead to, or support, a conclusion that the Council reached its decision on the basis of the 1996/97 overspend rather than by reference to the 1997/98 budget (alone or against the background of the overspend or together with it), rather

(b) they lead to and support a conclusion that the reason for the red circling and the dismissals was nothing to do with the budget or financial crisis and thus that the real reason was a different one and the Council had an ulterior motive.

In our judgment the above have the result that the reasoning of the Employment Tribunal is unconvincing and lead us to conclude that in reaching their conclusion the Employment Tribunal have had regard to the argument, or suggestion, that the real reason for the red circling and the dismissals was not that recorded in the statement of agreed facts and that the Council therefore had an ulterior motive.

57. This conclusion as to the reasoning of the Employment Tribunal is supported by:

(a) the point that the fact that the EPC meeting took place against the background of the overspend crisis cannot mean that the majority of the members of the EPC failed to appreciate that the savings from Option C would only arise after Option C had been implemented and would not affect the existing overspend. Indeed, in our judgment a conclusion that the majority did fail to appreciate this is contrary to (i) paragraph (2) of their resolution which records their decision to refer Option C to the Finance and Accommodation Committee (who were dealing with the 1997/8 budget), and (ii) more generally the terms of the Protections Report and the minutes of the meeting of the EPC,

(b) the point that as a matter of financial common sense it seems to us to be perfectly reasonable and sensible for the 1997/98 budget to be considered with, and having regard to, the 1996/97 overspend and the crisis it caused,

(c) the statement in paragraph 57(viii) of the Extended Reasons that the Employment Tribunal accept the submission made on behalf of the Applicants that the financial crisis provided the opportunity for the red circling of the protections but did not require it, and

(d) paragraphs 37 to 52 of the Extended Reasons which deal with the proposals for change to the protections and in particular the conclusions at the end of paragraphs 40, 41 and 47 and in paragraphs 46, 50 and 51 and the fact that in contrast to paragraph 8 of the Extended Reasons the Employment Tribunal do not record that those paragraphs relate only to the issue under s. 98(4) ERA

58. Pausing there (and returning to paragraph 49 hereof) in our judgment for the reasons set out in paragraphs 56 and 57 hereof on a proper reading of paragraph 57 of the Extended Reasons the point that the Council had an ulterior motive and therefore the statement of agreed facts is wrong plays a part, or is a factor, in the reasoning contained therein for the conclusion of the Employment Tribunal that the Council had failed to establish on the balance of probabilities that it had a substantial reason for dismissing the Applicants and it follows, in our judgment, that that conclusion is based on an error of law.
59. Further (and returning to paragraph 50 hereof) the reasons in paragraphs 56 and 57 hereof support and confirm our view that whether that our conclusion on the reasoning of the Employment Tribunal is right or wrong the points whether, and to what extent, the Employment Tribunal took into account an argument, or suggestion, that the Council had an ulterior motive, or found that they did and therefore that the statement of agreed facts is wrong, are left "hanging in the air" in the Extended Reasons. In our judgment this is unfair and means that the Employment Tribunal have failed to perform their duty to explain to the parties why they have won and lost (see for example Meek v City of Birmingham District Council [1987] IRLR 250).
60. In our judgment the error of law referred to in paragraphs 58 and 59 hereof mean that the appeal against the finding of the Employment Tribunal that the Council had failed to prove on the balance of probabilities that the reasons for dismissal was "some other substantial reason" within s. 98(1)(b) ERA succeeds.

Additional points on the reasoning in paragraph 57

61. Further in our judgment the reasoning in paragraphs 57 (iv) to (vi) demonstrates the following further errors of law:

(1) Having regard to the Maund case it demonstrates an approach that (i) puts too high a burden on the Council to establish its reason, (ii) fails to recognise that the relevant exercise is to identify the principal reason for the corporate decision, (iii) wrongly embarks on speculation as to what the members of the EPC may have had in mind, (iv) fails to have proper regard to the EPC resolution itself and in particular paragraph (2) thereof, and (v) fails to have proper regard in determining the reason for the corporate decision to the reasoning of the officers of the Council who wrote and presented the Protections Report that is contained therein (and to the evidence of officers of the Council) because the EPC adopted one of the options in the Protections Report and the minutes do not show that they rejected the reasoning in that report (see paragraphs 46 (c) to (g) and (j) above).

(2) Although decisions of the Finance and Accommodation Committee are referred to in the history (see paragraphs 22 to 25 of the Extended Reasons) and these references include one to the fact that a meeting thereof was due to take place on 16 January 1997 that meeting (and later meetings of the Finance and Accommodation Committee – see paragraphs 21 and 22 above) is not referred to chronologically after the meeting of the EPC on 17 December 1996. It follows that (as mentioned in paragraph 18 above) in both the history and the reasoning set out in the Extended Reasons the decision reached at the meeting of the Finance and Accommodation Committee on 16 January 1997 relating to staff protections, the agenda for and the minutes of that meeting (which are referred to in paragraphs 16, 17, 20 and 21 above) are not taken into account or even mentioned albeit that as we have pointed out that decision was "pleaded" by the Council, the reference to that committee is included within the decision of the EPC and the minutes and resolution of that committee were before the Employment Tribunal. As the resolution of the EPC shows it was the Finance and Accommodation Committee which was to consider the financial effects of the Protections Report and the decision of the EPC to adopt Option C. The minutes of the meeting of the Finance and Accommodation Committee show that this is what it did. Further those minutes show a direct link between the decision to "red circle the protections" and the budget setting exercise for 1997/1998 (see for example the terms of the resolution of that committee itself and appendix C to the agenda item 5.5). In our judgment this failure of the Employment Tribunal to refer to the decision of the Finance and Accommodation Committee on 16 January 1997 in reaching its conclusion that the Council had failed to show on the balance of probabilities that it had a substantial reason for dismissing the Applicants has the consequence that their reasoning is fatally flawed. This is because if, as they do, the Employment Tribunal base their conclusion on a lack of certainty arising for the minutes:

(a) they leave out of account a part of the decision-making process recorded in the minutes that is relied on by the Council, and

(b) in our judgment it was incumbent upon them to deal with that reliance upon the minutes and resolution of the Finance and Accommodation Committee, even if it was only to say that this was not a relevant part of the decision-making process.

In our judgment this is particularly the case, if as they do, the Employment Tribunal take distinctions between the 1996/97 overspend and the 1997/98 budget by reference to the thinking or understanding of members of the EPC. In any event in our judgment this failure is a further example of the Employment Tribunal failing to properly explain their decision that the Council had failed to prove the reason it advanced and therefore lost.

62. Further in our judgment the points made by the Employment Tribunal in paragraph 57(vii) relating to whether the EPC realised that their decision to "red circle" benefits would result in dismissals contain errors of law:

(1) Firstly in our judgment whether or not the majority of the EPC realised that their decision would result in dismissals does not alter the reason for their decision to "red circle" by adopting Option C and thus the reason why the dismissals took place. This is a free standing point.

(2) Secondly this subparagraph contains a large amount of speculation on the points whether some or all of the members of the EPC appreciated legal points (some of which can be fine ones) relating to:

(i) contract law on variation or rescission / termination and notices ending contracts of employment coupled with an offer to re-employ on new terms, and

(ii) dismissal as defined by s. 95 ERA (which includes constructive dismissal) upon which a claim for unfair dismissal can be based and resignation,

based solely on the minutes of the EPC and is therefore a further example of the errors referred to in paragraph 61(1) and (2) hereof. Also by concentrating only on the minutes of the EPC this subparagraph leaves out of account the part played in the decision making by the advice from senior counsel referred to in bold type in the "staff protections – explanatory leaflet" and which in the same bold type states that "the Authority is terminating existing contracts".

63. In our judgment the errors of law referred to in paragraphs 61 and 62 hereof also lead to the result that the appeal against the finding of the Employment Tribunal that the Council had failed to prove on the balance of probabilities that the reasons for dismissal was "some other substantial reason" within s. 98(1)(b) ERA succeeds.
64. We were referred to a number of authorities on the correct approach to determining what is "some other substantial reason" within s. 98(1)(b) ERA in respect of an argument by the Council that notwithstanding the statement in paragraph 55 of the Extended Reasons that the parties were agreed as to the law the Employment Tribunal misstated (particularly in the last phrase of that paragraph) and misapplied the test. In view of our earlier findings and the view expressed in paragraph 67 below we do not deal with this argument.

The second part of the appeal – reasonableness

65. The relevant reasoning of the Employment Tribunal is contained in paragraphs 58 (1), (2) and (3) of the Extended Reasons under the headings: "Lack of consultation", "Alternative ways of making savings" and "General consideration of Section 98(4)", and paragraphs 59 and 60 of the Extended Reasons. Under the first two headings in paragraph 58 the Employment Tribunal rejected the arguments advanced on behalf of the Applicants but under the third heading and in paragraph 60 where they stated that:

"------------- We have considered this matter very carefully and are conscious of the seriousness of the decision to which we have come. We are however of the view that no reasonable employer would have dismissed these Applicants because they have failed to give up protections against the background of the history recited above. Protections were intended to continue in extraordinary circumstances, in crisis such s the difficult financial circumstances in which the Respondents found themselves until renegotiated by mutual agreement. In our judgment, the dismissals here were not within the band of reasonableness to which Mr Bowers has referred us."

the Employment Tribunal found in favour of the Applicants that their dismissals were unfair.

66. It is clear that the Employment Tribunal reminded themselves of the "range of reasonable responses" approach and we reject the argument advanced on behalf of the Council that although they purported to apply that test the Employment Tribunal failed to do so. In our judgement this argument is in reality one that the Employment Tribunal reached the wrong conclusion.
67. Also in our judgment if we had found in favour of the Council on the arguments relating to the approach to determining what is "some other substantial reason" within s. 98(1)(b) ERA (referred to in paragraph 64 above) this alleged error of law would not "carry forward" into this issue.
68. In respect of the second issue on this appeal relating to s. 98(4) ERA we are particularly conscious of our role and jurisdiction and that of the Employment Tribunal and thus in short of the point that an Employment Tribunal is an "industrial jury" who hear the evidence and decide the facts.
69. Also in our judgment when paragraph 60 of the Extended Reasons (cited above) is read in isolation and together with paragraph 58(2)(iii) & (iv) thereof there is force in the argument that the decision of the Employment Tribunal recorded in paragraph 60 of the Extended Reasons is within the range of decisions open to them. Indeed their conclusion was not attacked on the basis that it was perverse.
70. The points mentioned in paragraphs 68 and 69 above make us reluctant to interfere with the conclusion of the Employment Tribunal on s. 98(4) ERA but we have concluded we should do so because in our judgment the errors of law identified in paragraphs 58 and 59 above are carried forward into and affect the reasoning on this part of the decision.
71. The fact that they are carried forward is confirmed by paragraph 58 (3)(i) of the Extended Reasons and even in the absence of such confirmation we are of the view that the errors of law referred to paragraphs 58 and 59 hereof would carry forward because (i) the error referred to in paragraph 58 goes to the approach of the Employment Tribunal to their fact finding exercise, and (ii) the error referred to in paragraph 59 goes to their duty to explain their reasons having regard to the grave points referred to therein (i.e. whether and to what extent the Employment Tribunal took into account an argument, or suggestion, that the Council had an ulterior motive, or found that they did and therefore that the statement of agreed facts is wrong).
72. In our judgment those errors carry forward and affect the reasoning in paragraph 58(3) of the Extended Reasons because:

(1) The points on which they are based (i.e. whether the Council had an ulterior motive and the statement of agreed facts was not correct) raise issues of lack of good faith and procedural issues going to the basis of the fact finding exercise carried out by the Employment Tribunal which has the effect that it would be unfair to ignore them on the basis that the Employment Tribunal have made the assumption recorded at the beginning of paragraph 58 of the Extended Reasons, and in any event

(2) on the assumption made by the Employment Tribunal that the difficult circumstances the Council found itself in (i.e. the budget or financial crisis) were "some other substantial reason" within s. 98(4) ERA, nonetheless these errors of law:

(a) affect the issue of the range of reasonable responses open to the Council because they relate to the view taken by the Council, and which a reasonable employer could take, on the "protections", including for example (i) whether they were conditions of a very special nature, and (ii) what the Employment Tribunal describe as the reasonable expectations of the employees,

(b) relate to serious points concerning a possible ulterior (and therefore additional and subsidiary) motive and thus to points of fairness in the fact finding exercise and the explanation of the conclusion reached, and

(c) relate to the history concerning proposals for change of the protections which the Employment Tribunal deal with in some detail in paragraphs 37 to 51 of the Extended Reasons.

As to the example in point (2)(a) we accept and note that how the point whether there was or was not an ulterior (and therefore an additional and subsidiary) motive would affect those issues would depend on the thinking of the relevant decision makers which could be that they did not think that the protections were very special and therefore that they could be altered when a convenient opportunity presented itself, or that they thought that they were very special and that an excuse was required for their alteration.

73. In our judgment for the reasons set out in paragraphs 70 to 72 hereof the errors of law referred to paragraphs 58 and 59 hereof mean that the appeal against this part of the decision of the Employment Tribunal should also be allowed.
74. The errors of law referred to in paragraphs 61 and 62 hereof are also carried forward into this part of the Employment Tribunal's reasoning by paragraph 58 (3)(i) of the Extended Reasons and the errors referred to therein which relate to the Employment Tribunal's approach to the minutes of the EPC and their failure to look at any other part of the decision making process of the Council can also be said to go to the basis of the fact finding exercise carried out by the Employment Tribunal. But if those were the only errors of law we are doubtful that they would have caused us to overturn the finding on s. 98(4) ERA because it seems to us that those errors are focused on the fact finding in respect of the reason for the dismissals and thus the consideration by the Employment Tribunal of the decision of the EPC on 17 December 1996 rather than the history relating to the introduction of the protections and the proposals that the protections be changed. In our judgment (i) that focus means that the errors are more easily overcome on the basis of the assumption by the Employment Tribunal that their decision on "some other substantial reason" is wrong, and (ii) it is the history relating to the introduction of the protections and the proposals for their change which are more relevant to the issue under s. 98(4) ERA.

Overall conclusion

75. We allow the appeal and remit to a differently constituted Employment Tribunal all the issues in the case with the exception of the issue whether there had been a lack of proper consultation and the dismissals were unfair for that reason which is a discrete issue and as mentioned in paragraph 5 above was decided by the Employment Tribunal against the Applicants (see paragraph 58 (1) of the Extended Reasons) and is not the subject of an appeal. The decision on that discrete issue therefore stands and remains binding on the parties. For the avoidance of doubt we confirm that we do not exclude from the consideration of the newly constituted Employment Tribunal the issue dealt with in paragraph 58(2) of the Extended Reasons under the heading "Alternative ways of making savings" because in our judgment this is not a discrete issue on which a new Employment Tribunal could simply accept the finding in paragraph 58(2) of the Extended Reasons.

General comment

76. We express the hope that if and when this case comes before a newly constituted Employment Tribunal that (i) the factual issues between the parties are fully and accurately defined by, for example a statement of case and of defence and a schedule of disputed facts, (ii) any statement of agreed facts is fully recognised and given effect to by the parties, (iii) full statements are put in on behalf of the Council describing its decision making process and thus for example the role and powers of each committee, and (iv) statements setting out fully the matters relied on to support any allegation of lack of good faith on the part of the Council are prepared on behalf of the Applicants.