United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR OLIVER ROMAIN (Representative)
For the Respondent	No Appearance or Representation By or on Behalf of the Respondent


 


HIS HONOUR JUDGE RICHARDSON

1. This is an appeal against a decision of the Employment Tribunal sitting in Manchester, promulgated on 22 November 2002. By its decision the Employment Tribunal ordered the Appellant, Partnership Media Group Ltd ("the Company"), to pay a compensatory award in the sum of £10,558 to the Respondent, its former employee, Mr Hugo.
2. The Company appeals against this decision. It says the compensatory award was excessive. In particular, it says that the Employment Tribunal erred in awarding compensation on the footing that Mr Hugo would have benefited from a long-term disability insurance policy which the Company had taken out.
3. The Company's case today has been presented by Mr Romain. Mr Hugo did not attend but put in written submissions which we have given Mr Romain time to consider this morning. The appeal today follows a Preliminary Hearing which took place in July 2003, at which the Company's grounds were refined to those which concerned the question of Mr Hugo's incapacity and his right to benefit from a long-term disability policy.

The Background

4. Mr Hugo was employed by the Company in January 1997. He was Sales Director. In 1998 he became a one-third shareholder. By its earlier decision, promulgated on 7 September 2001, the Employment Tribunal found that Mr Hugo had been unfairly dismissed on 20 December 1999 but had contributed to his dismissal by his own conduct to the extent of one-third.
5. It is clear from Mr Romain's submissions to us this morning that the Company feels a strong sense of injustice about that earlier decision. But that decision is final. It is not the subject of this appeal and it is binding on us. The Employment Tribunal at that time dealt with a basic award to Mr Hugo and with other claims, but adjourned the assessment of compensation for a further hearing.
6. The principles on which a compensatory award is made may be summarised as follows. Where an Employment Tribunal finds that a dismissal is unfair and makes no order for re-instatement or re-engagement, it proceeds to consider an award of compensation: see section 112 (4) of the Employment Rights Act 1996. Such an award consists of a basic award and a compensatory award: see section 118 (1) of the 1996 Act.
7. The fundamental rule governing the award of compensation is found in section 123 (1) of the 1996 Act. The amount of the compensatory award:

123 (1) "…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."

Further guidance is given by section 123 (2):

(2) "The loss referred to in subsection (1) shall be taken to include-

…

(b) … loss of any benefit which he might reasonably be expected to have had but for the dismissal."

8. It is clear from these provisions that when an Employment Tribunal considers whether an employee has sustained loss which includes loss of a benefit, a two-stage process is necessary. Firstly, the Employment Tribunal must consider what would have happened but for the dismissal. It must ask whether, if the dismissal had not occurred, the employee might reasonably have expected to receive the benefit in question. Secondly, it must ask what actually happened to see whether the employee was worse off as a result of his dismissal and by how much.
9. In this way, an Employment Tribunal will establish the extent of the employee's loss arising out of loss of a benefit. Having established the loss it will consider whether the loss can fairly be attributed to action taken by the employer and whether it is just and equitable to award it, subject to any deduction for contributory fault under section 123 (6). In essence, therefore, an Employment Tribunal has to compare what would have happened in respect of a benefit but for the unfair dismissal with what actually happened.
10. The Employment Tribunal found that Mr Hugo was suffering from a slipped disc at the time of his dismissal. Such was his pain and discomfort that he was able to do very little work until he had had surgery. The operation was on or about 8 June 2000. After that, he made a relatively speedy recovery. By the end of September 2000 he was doing well. His period of loss, therefore, was limited to 33 weeks.
11. The Employment Tribunal accepted his evidence and his wife's evidence about this period, given at the compensatory hearing. We shall return to this evidence later.
12. The Employment Tribunal had to consider what would have happened but for the dismissal. If he was to obtain any substantial compensation Mr Hugo had to satisfy the Employment Tribunal that, had he remained employed, he would have received some financial benefit.
13. This is the relevance of the Long Term Disability Insurance Policy. Under its terms a claim could be made when an employee was incapacitated. The insurer was Unum Limited, called Unum in the Policy. The following are relevant terms of the Policy:

6.1.1 "Benefit is paid for a member when he is incapacitated, beginning on the first day after the end of the deferred period. Benefit will continue to be paid for the duration of the incapacity, as long as the individual for whom benefit is paid remains a member under this policy."

Mr Hugo was a member under the Policy. The deferred period was 13 weeks.

14. The test of incapacity is set out in paragraph 6.3 of the Policy. The relevant test is Test A. That is the test which applies to a working director and to other members of staff in accordance with definitions given earlier in the Policy in section 3:

(i) "If a member is not required by his terms of employment to hold a licence or certificate which is only issued when the member meets certain medical standards, and

(a) UNUM is satisfied that the member is unable, by reason of illness or injury, to perform the material and substantial duties of his insured occupation; and

(b) the member is not following any occupation except as provided under paragraph 6.4,

then the member is incapacitated."

15. If he is following an occupation as provided for by paragraph 6.4, then full benefit is not payable. Proportionate benefit only is payable. The circumstances in which proportionate benefit is payable are set out in paragraph 6.4. We will not quote the whole paragraph. We will quote the first part of it:

6.4 "This rule gives the circumstances under which a benefit may be paid to a member who, although incapacitated, is still able to work either on a reduced basis in his normal occupation for a reduced level of earnings, and does so, or adopts a different and less well paid occupation.

The paragraph goes on to set out circumstances in which a proportionate benefit will then be paid.

16. The Employment Tribunal mentions paragraph 6.4 only in passing. Part of the Company's argument is that it failed to take paragraph 6.4 into account properly. The Company has pointed out that Mr Hugo was able to do some work before his operation in June. It follows, it is submitted, that clause 6.4 would apply and could not properly be left out of account.
17. The amended grounds of appeal argue that in holding that Mr Hugo, if he had not been dismissed, would have benefited from permanent sickness payments from the end of the deferred payment, the Tribunal misinterpreted and misapplied the wording of the Insurance Policy. It did not take account of its findings that he had worked in three periods before and during the deferred period and after it. It ought to have held, it is submitted, that Mr Hugo was following an occupation, was not incapacitated and would not have received benefits. It is argued that the Employment Tribunal misdirected itself in concluding that Mr Hugo was incapacitated when he was in fact able to generate income for himself.
18. Mr Romain, in his submissions today, has adopted the Skeleton Argument he has put in which repeats and takes these points. He has submitted also to us today that it is a strange result indeed that the Employment Tribunal has found Mr Hugo to be incapacitated when he was able to write and did write around the time when he is said to have had surgery, a number of detailed emails arguing his case: see the emails of 6, 7 and 12 June 2000.
19. The Employment Tribunal is, in the procedures laid down under the Employment Tribunals Act 1996, the fact-finding body. The Employment Appeal Tribunal has a jurisdiction only as regards questions of law. We, therefore, look to see what the Employment Tribunal's findings of fact were about Mr Hugo's incapacity. We appreciate that the Company may feel a sense of injustice about these findings of fact; but ultimately it is for the Employment Tribunal to find the facts.
20. In paragraph 5 of its decision the Employment Tribunal recorded that it found Mrs Hugo to be an honest and open witness. She had told the Tribunal that after the termination of his employment Mr Hugo was not in a position to do any work; he could not go out to work, could not have taken employment with another company and spent a great deal of time in bed and in pain because of his back condition; and he did what little work he could because they needed some income. That is a recitation of the evidence, coupled with a finding that Mrs Hugo was honest and open.
21. The Employment Tribunal returned to this question in paragraph 10 of its decision. It accepted that during the period when Mr Hugo would have been qualifying for an enjoying benefits (that is, between the time of his dismissal and September 2000) he did some work. The Employment Tribunal, having referred to Mrs Hugo's evidence, said:

10 "We are satisfied that what work the Applicant did during that period was with great difficulty and was solely out of desperation to generate some income."

The Employment Tribunal went on to set out some of the reasons for that conclusion and said, at the end of paragraph 10:

"We are, therefore, entirely satisfied that during the material period the applicant was unable to work and thus he qualified for the definition of incapacity in the insurance policy, as we have quoted it above."

22. We do not think that the Employment Tribunal lost sight of paragraph 6.4 when it reached this conclusion. The very fact that the Employment Tribunal was evaluating what work he did indicates to our mind that the Employment Tribunal had fully in mind the definition of incapacity in clause 6.3 of the agreement, including the reference to paragraph 6.4.
23. The Employment Tribunal, having found that Mr Hugo would have been entitled to benefit under the Policy as being incapacitated, then had to consider whether he would have stayed with the Company for the necessary 13 weeks deferred period to benefit, had he not been dismissed. At the end of paragraph 11 it concluded:

11 "The essential test for us is whether or not, but for the respondent's conduct, he would have remained in the employ of the respondent for thirteen weeks and we are in no doubt that he would have done. He could not afford to do otherwise unless forced to do otherwise."

The Employment Tribunal therefore went on:

12 "We are thus persuaded that, but for the dismissal of the applicant by the respondent in the circumstances described in our previous decision, the applicant would have qualified for benefits under the insurance policy."

24. The Employment Tribunal also found, although this is not directly the subject of the appeal, that during that thirteen-week period, given the existence of the Policy, and had relationships been different, and Mr Hugo off sick and bed-ridden, he would have been paid his full salary.
25. We have stood back and looked at the Employment Tribunal's findings. It is clear that the Employment Tribunal correctly directed its mind to the difference between what actually happened to the employee and what would have happened but for the dismissal. True, Mr Hugo did some work during the period between December 1999 and September 2000; but had he remained employed he would not have had, on the Employment Tribunal's findings, the desperation which required him to attempt to get something off the ground for himself. The Employment Tribunal was entitled to find that, but for the dismissal, he would have benefited from the policy.
26. We emphasise that the Appeal Tribunal is concerned only with the question whether there is an error of law in the Tribunal's decision. The Company may have a sense of injustice about the facts found; but it is for the Tribunal to find the facts. Having found the facts, in our judgment, the Employment Tribunal correctly applied the law which we have set out. There is no error of law in its decision.
27. It follows that this appeal must be dismissed. The decision of the Employment Tribunal will stand.