United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MISS ELIZABETH MELVILLE (of Counsel) Instructed by: Messrs Thompsons Solicitors The McLaren Building 35 Dale End Birmingham B4 7LF
For the Respondent	MR CLIVE SHELDON (of Counsel) Instructed by: Boston Borough Council Municipal Buildings West Street Boston Lincolnshire PE21 8QR


 


HIS HONOUR J McMULLEN QC

1. This case is about compensation for unfair dismissal. We will continue to refer to the parties as Applicant and Respondent. It is an appeal by the Applicant against a Decision of an Employment Tribunal sitting at Nottingham, Chairman, Mr J W Calladine, over four days in 2001 promulgated with Extended Reasons on 27 July 2001. A review was sought but was refused. The Applicant and the Respondent were represented by Counsel, as today. The Tribunal paid tribute to the careful submissions, oral and written, of both Counsel.
2. The issues before the Tribunal, following the Applicant's claim for unfair dismissal arising out of a relevant transfer pursuant to TUPE, were: was there any economic entity? Was there a transfer of the entity, or part of it, from the Respondent to Boston Mayflower Ltd. If so, was the Applicant assigned to the part transferred? Was there a dismissal, and, if so, was it fair, and if unfair, what was the compensation attributable to loss?
3. The Tribunal concluded that there was an economic entity; there was a transfer from the Respondent to Boston Mayflower Ltd; the Applicant was not assigned to the part transferred, and so his contract of employment did not transfer. There was thus a dismissal and it was automatically unfair, since it was connected to the transfer. The Tribunal assessed loss, which is the subject of this appeal.
4. The Applicant originally raised a number of points, some of which were dismissed at a preliminary hearing, and one of which has been settled during the course of today's hearing, with the congratulations of this Tribunal to both Counsel engaged upon that endeavour. So what remains is a single point relating to the assessment of loss.
5. The brief facts are that the Applicant had been employed by the Respondent and came to be its principal legal adviser. The Respondent is a local authority with a housing function, which decided to transfer its housing functions to a vehicle which became known as "Boston Mayflower Ltd" (BM). The housing stock was to be conveyed to it on a date ultimately agreed to be 29 November 1999. The Applicant had been engaged in the Respondent or a predecessor local authority with continuity of service dating back to 1988.
6. The transfer duly took place. At all relevant times, the Applicant who foresaw what might happen, made clear that he was not to be assigned to work on the housing stock which was being transferred, that is that he did not work in the part transferred, and would not transfer by operation of law under TUPE. The Tribunal upheld that claim and thus it was that the Respondent had no defence to his claim of unfair dismissal, arising automatically out of the transfer when his employment terminated on the date of transfer.
7. The Applicant then reached an agreement with BM which included a compromise agreement under section 203 of the Employment Rights Act 1996. By this agreement, the Applicant was entitled to be paid by BM £18,000. It was to be paid whether or not the Applicant's employment did transfer to BM by reason of the transfer, and whether or not Regulation 5 applied to him. It was intended to be a compromise agreement under the statute.
8. The Applicant, shortly thereafter, commenced proceedings against the present Respondent by an Originating Application presented on 16 February 2000. It will be noted that he did not proceed against BM. In due course, it was conceded that the compromise agreement was void because the Applicant never entered into the employment of BM and thus was not in a position to take advantage of the provisions of section 203 which applies to employees. It was thus a void compromise agreement.
9. The Applicant, having succeeded in his case, proceeded to a remedy hearing, and the Tribunal found that his total loss was £28,531.98. From this loss, about which only one point is taken, a sum of £18,000 was deducted. That of course reflects the payment made by BM.
10. The Tribunal came to the view that the Applicant would be awarded a compensatory award of £7,852.85 and a basic award of £2,530. Thus, what is at stake in these proceedings is the account to be given, if any, to the £18,000 which the Tribunal deducted from the award of compensation to be made payable by the Respondent.
11. The Tribunal, as we have made clear, was referred to a number of leading authorities on the assessment of compensation, the principal one being Courage Take-Home Trade Ltd -v- Keys [1986] ICR 874 (EAT).
12. In her submissions to us today, and in her Skeleton Argument, Miss Melville has contended that justice and equity point in favour of the Applicant retaining the benefit of £18,000 because the Respondent behaved badly. She contends that the Tribunal was not bound by Courage and that the common law principles for the assessment of loss apply. Yet on the other hand, the approach of the Employment Appeal Tribunal in Rubenstein v McGloughlin [1997] ICR 318 to the assessment of damages was held to be independent of common law principles, the jurisdiction being entirely statutory. Miss Melville contended that the judgment in Parry -v Cleaver [1970] AC 1, drew attention to two exceptions to the usual assessment of loss. These are insurance payments and payments by way of benevolence, either of which categorised the payment due to under the compromise agreement here. In addition, at our invitation following our pre-reading last week, submissions were made by her based on Needler Financial Services Ltd -v Taber [2002] 3 All ER 501, a judgment of Sir Andrew Morritt, VC.
13. Applying this authority Miss Melville contended that the payment of the money pursuant to the compromise agreement was the occasion for the payment to the Applicant, but it was not caused by, or part of the same transaction as, the negligence or wrongdoing, i.e. the unfair dismissal of the Respondent. The benefit to the Applicant came by contractual negotiations with third parties and had nothing to do with the Applicant's relationship with the Respondent. Further, she submitted that cases involving statutory benefits, where some account is taken in the assessment of loss, of benefits forthcoming through the State, are not relevant in this case, since in our case, there was simply a purchase by the Applicant from BM, which justified the payment of £18,000.
14. Mr Sheldon argued strongly for the chronology to be reviewed in this case. As we have said, the transfer on 29 November 2000, was followed by the compromise agreement and shortly thereafter, the Originating Application. As he put it, this would not be insurance because the Applicant had not already sued BM. This is not the kind of after-the-event insurance for which there are ample modern precedents. It cannot be described as insurance, nor as benevolence. Insofar as he addressed Miss Melville's point on Needler, the chronology and the facts disclosed a single course of dealing of a continuous nature, beginning with the statutory wrong committed by the Respondent and including, as part of it, payment made by the transferee, BM. He submitted that the Decision of the Employment Tribunal could be overturned only if it were perverse, no point of law arose, and that this matter, being so much a matter of discretion for an Employment Tribunal, should be impregnable.
15. He submitted there were only two exceptions to the assessment of loss, that is benevolence and insurance, and the primary question, as a matter of justice and equity under Employment Rights Act 1996 s 123, is "What should the Applicant get to put him into the position which he would have been in without the statutory wrong of unfair dismissal?" This is a principle of the assessment of loss and is not about the mitigation of loss. This case was on all fours with Courage.
16. It is necessary first to look at what the Tribunal's task was. Section 123 says this:

"(1)…….the amount of the compensatory award shall be such amount as the tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal in so far as that loss is attributable to action taken by the employer.

…

(4) In ascertaining the loss referred to in subsection (1) the tribunal shall apply the same rule concerning the duty of a person to mitigate his loss as applies to damages recoverable under the common law of England and Wales…"

The compromise agreement, which is accepted to be void, fell under section 203, and we need say no more about it.

17. The interpretation of that section was given by the Employment Tribunal, having paid attention to the submission that the £18,000 should be excluded. It considered the Courage case. Courage involved the payment under a void compromise agreement to an employee of a sum of money. On the employer challenging on the decision on liability, a cross-appeal was lodged by the employee, Mr Keys, against the setting off of the money he received under the void agreement. The Employment Appeal Tribunal, in robust terms, dismissed that cross-appeal. The judgment given by Mr Justice Popplewell, on behalf of himself, Mr Lambert and Mr Powell, included this:

"We have come to the clearest possible conclusion that it would be unjust and inequitable in all the circumstances if this employee were allowed to take advantage of the employers. There may be situations in which a Respondent has unduly persuaded an employee to accept a figure by way or agreement, or brought pressure on him. It may be that in that situation, an industrial tribunal would rule that the employer could scarcely be heard to say that it was unjust or inequitable if he were called on to pay a further sum. That question must, in the end, depend upon the particular facts of the case, but in the present case, we entirely agree with the industrial tribunal when they said 'This is not what an ordinary man would regard as fair'. It was taking advantage of a section of the statute, and it is our view that justice and equity in this context imparts that it was not just and equitable to award any further compensation."

18. The judgment in Courage is sought to be distinguished in this case on the grounds that the wrongdoing here was of the employer in committing the unfair dismissal. As Miss Melville has argued before us, there were findings in the Tribunal's Reasons critical of the approach of the employer, and indicating that, indeed, it was the employer who misled the Applicant. We accept the force of that. This was not, by any means, a one-way street. It was, however, clear that the Applicant had no intention of returning the £18,000 to BM paid under the void agreement. Whether or not BM could move against him now is an open question. Just for the purpose of clarifying our minds, Mr Sheldon pointed out that it might be open to the Applicant to contend that value had been given and that he had not caused additional costs to be incurred by BM at the Employment Tribunal, lasting four days, by having them joined as a Second Respondent, and they had some security. The Tribunal certainly were impressed by the intention of the Applicant to keep that money, and no doubt formed the view that BM would not move against him. The Tribunal also formed the view that the Applicant, being a solicitor, was well informed and knew precisely what he was doing. It seems to us that Miss Melville's case is not assisted by the approach to Courage which she advances since it appears to us that the Tribunal, in our case, did have fully in mind those aspects of Courage which might have a bearing upon its Decision in our case.
19. The principal issue, it seems to us, is whether or not the benefit forthcoming from the compromise agreement falls within what is just and equitable to be awarded having regard to the loss sustained. Here the Tribunal was very firm. What was just and what was equitable appear, in our view, to be classic statements of what is a matter of feel and factual determination by the Employment Tribunal, having regard only to one matter, that is to the loss sustained. In ordinary terms, the loss sustained by this Applicant was £28,000 of which he already had an up front payment of £18,000. It remains to be seen whether that view is sustainable as a matter of law. But certainly as a matter of fact the Employment Tribunal was, in our judgment, entitled to balance the issues of loss, as against the factors which Miss Melville put forward by reference to Courage.
20. Two propositions were advanced by reference to Parry -v- Cleaver and we will deal with them. First, was this analogous to a payment of benevolence, because Lord Reid at page 14 in Parry -v- Cleaver, drew upon the judgment of Andrews LCJ in Redpath -v-Belfast and County Down Railway [1947] NI 167, 170. There the company sought to bring into account sums received by a plaintiff from a distress fund. It was held that they would not be brought into account, for otherwise:

"the springs of private charity would be found to be largely if not entirely dried up"

Lord Reid went on to remark:

"It would be revolting to the ordinary man's sense of justice, and therefore contrary to public policy, that the sufferer should have his damages reduced so that he would gain nothing from the benevolence of his friends or relations or of the public at large, and that the only gainer would be the wrongdoer."

It seems to us that the categorisation of the payment from BM is not apt to be included within the term "benevolence", or as it had earlier been described, "charity". It was a commercial deal done by BM with the Applicant.

21. We then turn to the second exception, that is insurance. For the reasons advanced by Mr Sheldon, we reject Miss Melville's contention that this was a contract of insurance. The compromise agreement could not be described as insurance.
22. What then remains is a third category, if indeed it is one, set out in Needler. We have considered the approach which informed the judgments in that case. There, an employee of Ilford in an occupational pension scheme was, by the negligent representations of a financial services company, induced to leave the scheme and to take out a personal pension plan with a mutual life insurance society in 1990. In 1997 the society was demutualised in order to enable it to compete successfully in the new era. The employee received shares which he ultimately sold, and he benefited to the tune of almost £8000. Thereafter, he discovered that the pension which he had gone into under the mutual scheme was not as good as that at Ilford. On a complaint to the Ombudsman, his complaint was upheld and his loss was assessed, but the company, when ordered to make payment to him, insisted on bringing into account and having offset against its liability, the value of the shares. The issue, therefore, was whether that was the correct approach in law. As the Vice-Chancellor held, see paragraph 24.:

"…..the authorities to which I have referred establish two relevant propositions. First, the relevant question is whether the negligence which caused the loss also caused the profit in the sense that the latter was part of a continuous transaction of which the former was the inception. Second, that question is primarily one of fact."

The Vice-Chancellor decided that there was a break in the causation, since the demutualisation decision of the company was the reason for the vouchsafing of the shares to the former employee, and was not connected to the negligent advice. The employee was able to retain the benefit he had received from the shares.

23. In our judgment, whether or not Needler adds another category, the principle which the Vice-Chancellor set out is highly instructive. It is a question of fact, in our judgment, to consider the loss, and if that is the case, this Tribunal ought to be upheld, unless it has decided perversely. But in any event, there is a continuous sequence of events, as we see it. There was a close relationship between the Respondent and BM. It was, after all, the Authority's judgment that its statutory duties could be discharged by BM, and BM was set up for that purpose. They worked closely and took over, via a relevant transfer, the housing stock and, no doubt, some staff. Very quickly thereafter, BM, decided to inure itself against a claim by the Applicant, and then the Applicant launched proceedings solely against his former employer.
24. As we see it, the payment of the £18,000 under the compromise scheme was part of a continuous transaction, the inception of which was the unfair dismissal of the Applicant by the Respondent. We see nothing unfair in, as it was put to us, the Respondent gaining the benefit, in that it need not pay £18,000 it would otherwise be required to pay, because of the transaction with BM. That, after all, as Mr Sheldon puts it, is an incident of the rule on mitigation. If the Applicant had gone out and got a job immediately, then all his earnings would have been offset against the loss which the Tribunal would assess, and the Respondent would benefit.
25. In our judgment the Tribunal weighed the relevant contentions and questions of fact, which it was for it to do, and came to a conclusion which was correct in law. The appeal is dismissed.