United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MS A REINDORF (of Counsel) Instructed By: Irwin Mitchell Solicitors St Peter's House Hartshead Sheffield S1 2FL
For the Respondents	MR S J ANDREWS (of Counsel) Instructed By: Mason Palmer Solicitors 7 Station Road Royston Barnsley S71 4EW


 


MR RECORDER UNDERHILL QC:

1. This is an appeal from the decision of an Employment Tribunal sitting in Sheffield dismissing the Appellant's claim for unfair dismissal. The essential facts can be summarised as follows:

(1) In 1962, when he was aged 15, the Appellant started work in a small garage business in Sheffield owned by the Respondent. For many years he was its General Manager. As the Respondent, who is now in his eighties, grew older the Appellant in effect took over the complete running of the business.

(2) In February 1999 the Respondent passed the ownership of the business, in all but name, to two of his nephews, Bruce and Ian Pearson. They took a much more active interest in it, and they obtained an accountant's report which apparently suggested that the Appellant had been mismanaging it for many years.

(3) On 6 March 1999 the Appellant went off sick suffering from a severe psychiatric illness which it was plain would disable him from work for the foreseeable future. He attributes his illness to the pressures of dealing with the new owners.

(4) On 5 July 1999 the Appellant instituted proceedings in the Employment Tribunal claiming that he had not been paid sick pay to which he was entitled and that he had not received a proper itemised pay statement.

(5) On 27 July 1999 the Appellant received a letter written on behalf of the Respondent stating that the contract of employment was terminated by reason of frustration with effect from 30 July 1999.

(6) On 8 October 1999 the Appellant applied to amend his claim in the Employment Tribunal to include a claim for unfair dismissal; and permission was granted. That is the present claim.

2. The Appellant's claims, together with claims from his wife, who had also been dismissed by the Respondent and who also claimed arrears, came before the Tribunal on 10 January 2000. The Tribunal held that the contract had not been terminated by frustration and that he had indeed been dismissed, but that the dismissal was not unfair. At a later hearing, in June, he was awarded £3,468.85 by way of damages under the Tribunal's breach of contract jurisdiction, together with £413.15 by way of arrears of sick pay.
3. The Appellant appeals against the dismissal of his claim for unfair dismissal. The passage from the Tribunal's Extended Reasons dealing with this aspect of the case is in the following terms:

"23 … The tribunal are satisfied firstly that the contract was not ended by frustration. Although the letter ending the contract talks of frustration, it is clear that one of the reasons why the dismissal took place at that time was because of the claim for unpaid salary. If there had not been such a claim the matter would have gone on for longer before inevitably there would have been a dismissal on the grounds of ill health. In those circumstances the letter of 27 July is treated as a letter of dismissal and not of notice of frustration.

24 However, looking at the equity and substantial merits of the decision taken by Mr Pearson on behalf of Mr Watts on that day, the Tribunal are quite satisfied that the decision was fair within such equity and substantial merits of the case taking into account the size and resources of the respondent firm.

24 The applicant had not worked since 6 March. It was clear that he would not be going to work again for a substantial period of time. Any medical enquiry would have been superfluous. The applicant was claiming full pay to which he may or may have not been entitled. The respondents in the circumstances were perfectly justified in terminating the contract and such termination was fair.

25 It was clear to them that Mr Bateman would not be returning to do his old job and there was no other job which he could reasonably do. Despite his long service, against which must be set in any event his incompetence in later years as to running the company, the decision to dismiss was fair and his application for unfair dismissal therefore fails."

4. Ms Reindorf, who appears for the Appellant, submits that in that reasoning the Tribunal erred in law in three respects.

(1) The Reason for the Dismissal

5. The question of what was the principal reason for the dismissal is of course central to the exercise which a Tribunal has to carry out under s. 98 of the Employment Rights Act 1996. A Tribunal which fails to address that question and to make an explicit finding as to the principal reason for the dismissal runs a high risk of going wrong in law: see British Railways Board v. Jackson [1994] IRLR 235.
6. In this case the Tribunal did not expressly address the question of what (if any) reason for dismissal the Respondent had shown. However, it did make relevant factual findings. In para. 23, quoted above, it found (while addressing the question of frustration) that, while the state of the Appellant's health meant that he was bound to be dismissed at some point, "one of the reasons" why he was dismissed as soon as he was was the fact that he had advanced a claim to remain on full pay. That reflects its earlier finding, in the factual part of the Reasons (at para. 19), that:

"As it was clear there was no way that such wages could be afforded it [sc the making of the claim] inevitably brought an end to the employment at a rather earlier stage than might otherwise have been the case if only sick pay had been claimed."

7. Ms. Reindorf submits that that factual finding amounts in law to a finding that the principal reason for the dismissal was not the Appellant's ill-health (which would be an "admissible" reason under s. 98(2)(a)) but the fact that he had made a claim: that is not a reason falling within s. 98(2) and the Tribunal was bound to find the dismissal unfair. Alternatively she says that at the very least it amounts to a finding that there were two reasons for the dismissal – the making of the claim and the Appellant's sickness – and the Tribunal does not decide which was the principal reason.
8. In the event, it is unnecessary for us to reach a final decision on this point: for reasons which we give below, we take the view that this is a case which will have in any event to be remitted for consideration by another Tribunal. We ought however to say that although the Tribunal did indeed, as Ms. Reindorf submits, fail expressly to identify the principal reason for the Appellant's dismissal, paras. 23 to 26 of the Reasons read as a whole seem to us to show that it must have been treating the Appellant's sickness as the principal reason for his dismissal. It may assist the Tribunal on the remitted hearing if we say that we can see no inconsistency in principle between that (implicit) finding and its finding that the timing of the dismissal was the result of the making of the wages claim. It is not uncommonly the case that an employer will have mixed reasons for a dismissal. The decision as to which was the principal reason must be one involving a broad common-sense judgement. What the Tribunal evidently believed here was that the claim for wages accelerated the date at which the dismissal occurred but represented a trigger rather than a distinct and dominant alternative reason. That is a conclusion which we believe was open to it in law; but it is not of course binding on the new Tribunal.

(2) S. 104

9. Ms Reindorf submits that if – as she contends – the Tribunal held that the principal reason for the Appellant's dismissal was the making of the claim for wages such a reason would give rise to an automatically unfair dismissal under s. 104 of the 1996 Act. The point was not taken below; but we need not consider whether it can be taken before us since the case is to be remitted in any event.

(3) Fairness

10. Ms. Reindorf referred us to the well-known guidance given by Phillips J. in East Lindsey District Council v. Daubney [1977] ICR 566, where he said, at pp. 571-2:

"Unless there are wholly exceptional circumstances, before an employee is dismissed on the ground of ill health it is necessary that he should be consulted and the matter discussed with him, and that in one way or another steps be taken by the employer to discover the true medical position."

11. That is not to be read as establishing a rule of law; and it must also now be qualified to some extent by the subsequent introduction of the requirement that in considering the issue of reasonableness the Tribunal should have regard to the size and administrative resources of the employer's undertaking. Nevertheless it means that in every case involving a dismissal for sickness the Tribunal should explicitly consider, and reach a reasoned decision on, the related questions of (a) whether the employer had sufficient information about the employee's health (including prospects of recovery within a reasonable time) to reach a fair decision to dismiss, and (b) whether there had been adequate consultation between the employer and the employee prior to the decision. In A Links & Co Ltd v. Rose [1991] IRLR 353 the Court of Session said, at p. 356:

"In our opinion … an industrial tribunal, in approaching the question as to whether the employer acted fairly or unfairly must determine, as a matter of fact and judgment, what consultation if any was necessary or desirable in the known circumstances of the particular case, what consultation, if any, in fact took place, and whether or not that consultation process was adequate in all the circumstances. If it was not adequate the dismissal will be unfair … ."

12. In our view that requirement was not satisfied here. The Tribunal's reasoning on the issue of fairness, which is wholly contained in the brief paras. 25 and 26 set out above, is quite inadequate to show its thinking on these two key issues. The question of consultation is not addressed at all. There is no indication of whether the Tribunal simply ignored it or believed it was unnecessary in the particular case – and if so why.
13. The question of the adequacy of the medical information available to the Respondent is less straightforward. The observation in para.25 that "any medical inquiry would have been superfluous" is clearly based on the statement in the previous sentence that "it was clear that [the Appellant] would not be going to work again for a substantial period of time". That statement in turn reflects an explicit finding in para. 17 that

"… the applicant had been unfit for work from 6 March until the date of the hearing [10 January 2000] and that such unfitness for work and the lengthy likely duration thereof was something of which the applicant and the respondents were well aware [our emphasis]."

14. What is however wholly unclear is on what finding or evidence that finding was based. The Respondent had had no medical report. Mr. Pearson had met the Appellant on one occasion since he went off sick, and the Appellant's wife on two other occasions; but these meetings are only briefly referred to in paras. 12 and 13 of the Reasons (in a section dealing with the Appellant's wife's claim rather than his) and there is no finding as to what, if anything, he learnt about the Appellant's illness and the prospect of recovery. It may be that the explanation lies in para. 16 of the Reasons, where the Tribunal says that it has refused to take any account of medical evidence sought to be adduced by the Appellant as to his condition – "beyond it being agreed that the applicant would not be able to return to work until early in the New Year and even then not in his present employment". It is not clear from those words exactly what was agreed: although Mr. Andrew had appeared before the Tribunal he did not base his case specifically on any agreement, and Ms. Reindorf, who did not appear below, was in no position to assist. But an agreement as to what the state of the Appellant's health in fact was cannot as such support a finding as to what the Respondent knew at the time. And even if the Respondent did have reason to believe at the time that the Appellant was bound to be away for a further "substantial period" (though it is to be noted that in para. 19 the Tribunal uses the different phrase "for the foreseeable future"), the question still remains whether it was reasonable to proceed to dismissal without any attempt to obtain any more precise information and where the immediate trigger appears to have been not any consideration about the state of the Appellant's health but the making of a claim to sick pay.
15. It follows that we believe that the decision of the Tribunal on the issue of fairness was legally flawed and the case must accordingly be remitted to a differently constituted Tribunal, which will have to consider in particular the questions of the adequacy of the steps taken by the Respondent to establish the Appellant's true medical position and the adequacy of such consultation, if any, as occurred – directing itself in accordance with East Lindsey District Council v. Daubney and A Links & Co Ltd v. Rose.
16. There are some ancillary points with which we should deal.
17. First, we should say that we have considered whether we could confine the remitted issues solely to the issue of reasonableness, so that the (implicit) finding of the first Tribunal as to the principal reason for the dismissal stood. But in our view that course did not make sense, not only because of the unsatisfactory nature of the Tribunal's approach to that issue (even if the actual decision were right) but also because the Tribunal considering the issue of the reasonableness of the decision to dismiss the Appellant is obliged to do so having regard to the reason shown. There might be real awkwardness in a Tribunal having to decide that issue on the basis of a reason found by another Tribunal on other evidence. This gives rise to the further question whether, on the remitted hearing, it is open to the Appellant to advance the case, referred to above, that the dismissal was automatically unfair by reason of s.104. No doubt the Appellant will need permission to amend his originating application to advance a case based on s. 104, and that application will have to be determined by the Employment Tribunal in the usual way. But Mr. Andrew submitted that the Appellant was absolutely debarred from taking the new point "second time round", relying on Church v. West Lancashire N.H.S. Trust [1999] ICR 586. In our view the circumstances here are substantially different from that case. The fact is that there has to be a new hearing on all issues, and we can see no reason in justice why the Appellant should be precluded – if the other conditions for permission to amend are met - from putting his case on any legal basis that the evidence may support.
18. Secondly, the Respondent sought to uphold the Tribunal's decision to dismiss the Appellant's claim on the basis that he had not been dismissed at all and that the termination of the contract had occurred by frustration. The Tribunal had rejected that submission (see para. 23), but Mr. Andrew submitted that it was wrong to do so. In our view the Tribunal's decision on the issue of frustration is wholly inadequately reasoned: such reason as is given does not, with respect, address any of the questions raised by a plea of frustration as developed in such cases as Notcutt v. Universal Equipment Co (London) Ltd. [1986] ICR 414 and Egg Stores (Stamford Hill) Ltd. v. Leibovici [1977] ICR 260. That issue too will therefore have to be considered by the new Tribunal unless we were to take the view that notwithstanding the Tribunal's failure to give proper reasons the plea of frustration was bound to fail. We cannot go so far. The question whether a contract has been terminated by frustration can only be answered in full knowledge of the relevant factual circumstances: the decision of the Tribunal does not contain the necessary material for us to reach a view on that.
19. Thirdly, it may be worth reminding the Appellant that the remission of his claim does not mean that it will necessarily succeed nor that, if it does, he will recover substantial compensation. The Tribunal at the re-hearing may come to the same conclusion on liability, on more adequate grounds; and it may also be that, for reasons to do with his health or otherwise, a Tribunal assessing compensation would find that the Appellant's employment was likely to terminate fairly in the near future in any event. We make this observation not in order to pre-judge in any way what the Tribunal may decide: for all we know, the facts may come out very differently from how they appear now. But we are very concerned that a claim of this kind will now have to be reconsidered by another Tribunal the best part of three years after the events in question. If the parties are able to resolve their differences by compromise that may be in both their interests.
20. Finally, this is likely to be a case where, in view of the delays to date, and the overlap between the evidence relating to liability and remedy, it would not make sense to have a split hearing. It may also be sensible to allow more than one day for the hearing. But this can be no more than a suggestion.