United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR S DEVONSHIRE (of Counsel) Instructed By: EEF Broadway House Tothill Street London SW1H 9NQ
For the Respondent	MS C McCANN (of Counsel) Instructed By: Lambeth Law Centre Race Discrimination Unit 14 Bowden Street Kennington London SE11 4DS


 


HIS HONOUR JUDGE ANSELL:

1. This appeal relates to part of an award of compensation in the sum of £49,840 ordered to be paid by the Appellants to the Respondent as compensation for unlawful discrimination on the grounds of race and by way of victimisation within Section 2 of the Race Relations Act 1976 to include interest.
2. This award followed a remedies hearing on 25 January and 11 March 2002, the decision being promulgated by a London South Tribunal on 19 June 2002.
3. This award followed a decision promulgated on 4 October 2001, when the Tribunal held that the Respondent to this appeal had suffered in two areas of discrimination. Firstly, he had suffered discrimination by what the Tribunal broadly described as harassment in the course of his employment, from a date in mid to late June 1999 to 6 August which was his last working day on which date there was also a confrontation and further racial abuse. Secondly, there was finding of victimisation. He made a complaint which resulted in the three offending co-workers being spoken to by a supervisor but they reacted adversely to him and the racial abuse and exclusion became worse. Then taking advantage of the Respondent's absence on holiday, the Appellants terminated his contract and the Tribunal had concluded that the termination was an act of victimisation because of his complaints about the way that he was being treated.
4. The Appellants' particular complaint in this case relates to that part of the Tribunal's award that related to financial loss, both from the date of dismissal to the date of hearing and thereafter. The Respondent had been engaged by the Appellants through a recruitment agency and through Euro City International Ltd, the Respondent's own corporate alter ego as a sub-contractor, fitting aircraft interiors at Camberley, and racial abuse had been suffered when he transferred to the night shift in June 1999 working with four other sub-contractors, Messrs Hardy, Lewis, Ward and Shiveral. He had continued as a sub-contractor up to the date of termination on 13 August. There was evidence before the Tribunal that the Appellants had announced in December 1999 that the factory in Camberley, where the Respondent worked, would close and there would be a relocation during 2001 to South Wales.
5. The Respondent's case before the Tribunal was that he was entitled to claim four years' financial loss on the basis that he was a permanent employee and would have remained a permanent employee, despite the fact that the business was to relocate to Wales. The Tribunal in its first decision held that the Respondent was a contract worker but the remedies hearing proceeded on the basis that the Respondent would have transferred to a permanent job in Wales. The Appellants' case was that the Respondent had not applied for a job in Wales and would have not been successful, since he would have been treated by the Appellants as being over-skilled and overpriced. There was evidence before the Tribunal that the move to Wales represented a downgrading of skills and, therefore, salary for the company.
6. Further, the Tribunal in its findings, as regards personal injury, had said this:

"18 The Respondent's medical evidence, which is essentially an examination of the general practitioner records in respect of the Applicant, shows that he had suffered from high blood pressure and tension headaches before the act of discrimination. However, it is clear from the Applicant's evidence that he has suffered from the same symptoms to a considerably increased extent, and other symptoms: sore throats, nausea, anxiety, night sweats and tremors. The night sweats are particularly significant.

19 It appears to the Tribunal that these are consequences of unemployment rather than the original acts of discrimination: but as we set out later in these reasons, that unemployment is attributable, to a substantial extent, to the acts of discrimination. ..."

The Tribunal dealt with its overall findings as regards financial loss, firstly, in paragraph 27, as follows:

"27 To judge the financial loss suffered as a result of the act of discrimination, the Tribunal has to attempt to assess what would have happened but for the discrimination. We have to take account of all these uncertainties and difficulties which would have stood in the way of Mr Ogunsanya continuing to be gainfully employed as he had for many years previously. We have to decide on the identification of a period of loss, calculate the total loss for that period, and then apply to it a percentage to reflect what might have been. See Ministry of Defence v Cannock [1994] IRLR 509. We take that period in this case to be the whole of the period of loss from the date of dismissal to the date of hearing: 128 weeks. We consider the appropriate percentage to be 50%. We have taken account of the various factors to which we have referred, and we also take account of the fact that Mr Ogunsanya has found it so very difficult to find alternative employment."

7. Later in the award they deal with their precise calculation and take a figure of £400 per week as the Respondent's net weekly loss. This figure was based on his earnings whilst at Camberley, less tax and National Insurance.
8. Later in the decision, in paragraph 34, the Tribunal find as follows:

"34 ... We are satisfied that he will continue to have difficulties for up to two years or thereabouts in finding employment. The schedule of loss shows a period of 80 weeks before he returns to his pre-existing position. We consider 80 weeks to be something of an underestimate. However, we consider that the combined uncertainties should be reflected in a discount of 75%. ..."

Again, they base this calculation on a net weekly loss of £400 per week.

9. The Appellants, through both powerful written and oral submissions from their Counsel, Mr Devonshire, make serious complaint about the Tribunal's findings (or lack of them). He points to a number of uncontradicted or unchallenged matters of evidence, which the Tribunal failed to take into account, and which had or could have considerable impact on their calculations of losses. He complains that the Tribunal, whilst identifying some of the issues relating to the possible re-employment of the Respondent in South Wales, failed to make clear findings in relation to what would or would not have happened. He also makes similar complaint in relation to the Tribunal's approach concerning the medical evidence and the Tribunal's failure to make clear findings in relation to the impact of that evidence on the Respondent's future employment prospects. He also complains that the Tribunal erred in taking a figure of £400 net weekly loss, a sum far in excess of what the Respondent would have been earning had he achieved permanent employment in South Wales.
10. The Respondent seeks to uphold the Tribunal's award and maintains that the Tribunal correctly identified the various uncertainties ie future employment in South Wales, medical condition and variation in weekly wage and incorporated these within the phrase "uncertainties and difficulties" to which we have referred in paragraphs 27 and 34 of the Decision. In addition, they seek to cross-appeal raising a tax issue in relation to the award. They contend that under Section 148 of the Income and Corporation Taxes Act 1988 only the first £30,000 of an individual's award for financial loss in connection with the termination of that individual's employment is not chargeable to tax. Therefore, the element of the award which exceeds £30,000 would be chargeable to tax and should have been grossed up by the Tribunal, since the Respondent's loss of earnings had been calculated on a net, rather than gross figure.

The Law

11. Both Counsel set out for us clearly the two approaches adopted by Tribunals in this Court in assessing future losses. Those positions can be conveniently titled the "all or nothing" approach: see O'Donoghue v Redcar & Cleveland Borough Council [2001] IRLR 615 and the evaluation of a loss of a chance or percentage approach: see Ministry of Defence v Cannock [1994] IRLR 509. Both decisions make it clear that the correct approach for a Tribunal is to identify what would have happened, but for the discrimination, by taking into account the various factors of the case. In the O'Donoghue case the Tribunal were satisfied that the chances of a possible fair dismissal taking place after an actual unfair dismissal were 100% ie certain by a particular date. The Court of Appeal found that it was legitimate in that case to avoid the complicated problem of some sliding scale percentage estimate of chances of dismissal as time progressed by assessing a safe date by which the Tribunal were certain, if it felt able to be certain, that dismissal would have taken place and making an award of full compensation in respect of the period thereto. However, Cannock establishes that if a Tribunal believes there is doubt as to whether or not the employee would have been dismissed in any event, then they are required to adopt the percentage approach and to make an assessment as to what would have happened, but for the discrimination.
12. In the light of this background, we then move on to consider the particular complaints made by the Appellants.

(1) Firstly, the Appellants point out that there was uncontradicted evidence before the Tribunal that the contracts of all the contract workers engaged with the Respondent had been terminated by December 1999. Two of the men concerned had in fact left in September 1999 and the other two left on 10 December. The Appellant contends that the Tribunal should have asked itself whether the Respondent's contract with Britax would have determined come what may in December 1999 and should have concluded that this provided the limit or cut-off point to his claims for losses.

The evidence was that thereafter there was a recruitment freeze at Camberley from December 1999 and redundancies throughout 2000. The new factory opened in South Wales at the beginning of 2001, although the complete transfer did not take place until the middle of that year. There was evidence that one of the other sub-contractors working with the Respondent had six short-term contracts during 2000 and another fellow sub-contractor had two contracts at Camberley in early 2001. None of these matters were referred to by the Tribunal and Mr Devonshire contends that the Tribunal misdirected itself by not asking the question as to whether the Respondent would, in any event have ceased working for the Appellants in either September or December 1999, particularly as it appears that the opportunity for work for contract workers at Camberley, from the beginning of 2000 until the middle of 2001, was extremely limited.

(2) Secondly, even if the Tribunal were to conclude that there was the possibility of further work and that September or December 1999 did not provide a clear cut-off date, the Appellants contend that the Tribunal have failed to make any findings with regard to the apparent limited availability of work for contract workers at Camberley up to the middle of 2001. This uncertainty was not mentioned as one of the factors that the Tribunal took into account.

(3) Thirdly, the Appellants contend that the Tribunal failed to give clear findings as to whether or not the Respondent would or may have found employment with the Appellants in South Wales. In paragraph 23 of their Decision, they accept that Mr Ogunsanya, who had expressed in his evidence the wish to transfer to South Wales, had given evidence honestly, however they went on to say that "He is not in a position to know the full facts of the circumstances relevant to this head of claim". Further, in paragraph 26 of the Decision, they set out the Respondents' (the Appellants here) position which they appear to have accepted as follows:

"26 It is clear from the evidence put before us by the Respondents that the Respondent company has radically changed in the meantime, having relocated to Wales, had, for a lengthy period of time, a recruitment ban, and having ceased to require people with the skills of Mr Ogunsanya, in favour of more unskilled workers. It is also a matter of which we take judicial notice that the aircraft industry as a whole has collapsed since last year, especially since 11 September 2001."

Further, the Appellants contend that the Tribunal failed to deal with the issue as to why the Respondent did not apply for work with the Appellants in South Wales. It is contended by the Respondent that he could not have been expected to seek employment with a firm who had discriminated against him, but again that was a feature that the Tribunal failed to identify and deal with.

(4) Fourthly, the Respondent contends that, even if there was the very limited chance of employment for the Respondent in South Wales, from the middle of 2001 onwards, why did the Tribunal base their calculations on an amount for net weekly loss equivalent to that which he was earning in Camberley, rather than the uncontradicted evidence that earnings in South Wales would have been considerably less. Counsel for the Respondent contends that this was one of the uncertainties that the Tribunal had in mind when applying a discount of 75% to the losses in the third and fourth year, but there is no finding from the Tribunal to deal with that matter.

(5) Fifthly, the Appellants complain about the manner in which the Tribunal dealt with the Respondent's medical condition and whether that affected his chances of obtaining employment. We have already referred to the Tribunal's findings with regard to the medical evidence and their finding that the Respondent's medical condition, which he described in his written evidence as a loss of confidence, was the consequence of the unemployment, rather than the original acts of discrimination. But they then went on to say that, "for reasons set out later, that unemployment is attributable to a substantial extent to the acts of discrimination". However, there are no findings later in the Decision as to that "substantial extent". Indeed they refer, in paragraph 26, to the substantial collapse of the aircraft industry, particularly since 11 September 2001. Further, in paragraph 31, they refer to his endeavours to find alternative employment, or consider re-training, and point out that his age of 49 may be against him. The Appellants therefore contend that it was wrong for the Tribunal, if they did, to take into account the Respondent's medical condition, since it was only a consequence of unemployment, rather than discrimination. In any event, they further contend that the Tribunal failed to make clear, whether the medical condition was, indeed, a factor that they took into account.

13. We find considerable force in the Appellants' submissions. Whilst we accept the Respondent's contention that the Cannock approach to reflect what loss was attributable to the Appellants' unlawful discrimination and what was not, these matters of chance, which have to be assessed in a broad and sensible manner, must be based on some clear view of the Tribunal as to the Respondent's future employment prospects, even if that process by its very nature must involve a degree of uncertainty.
14. In Mallet v McMonagle [1970] AC 166 at page 176, Lord Diplock said thus:

"... But in assessing damages which depend upon its view as to what will happen in the future or would have happened in the future if something had not happened in the past, the court must make an estimate as to what are the chances that a particular thing will or would have happened and reflect those chances, whether they are more or less than even, in the amount of damages which it awards."

We have already referred to paragraph 27 of the Decision, where the Tribunal identified its task as having to take account of all these "uncertainties and difficulties" which would have stood in the way of the Respondent continuing to be gainfully employed, as he had done for many years, and in calculating the period of loss for the first 128 weeks stated that they had taken account of the various factors to which they had referred, but the only particular factor they mentioned was that the Respondent had found it so very difficult to find alternative employment. The Tribunal then went on to deal in detail with a contention from the Respondent that the reason for his long period of unemployment was that he had been black-listed in the industry at the instigation of the Appellants. The Tribunal were not satisfied that the evidence justified such a finding but did add, at the end of that paragraph, that there were several other factors which are capable of explaining difficulties in finding employment in the aircraft industry. In our view this clearly related to general economic factors, rather than matters flowing from the unlawful discrimination. Again, in paragraph 34, the Tribunal use the expression "uncertainties" as their reason for imposing a substantial discount to the losses sustained in the third and fourth year, but again there were no specific findings.

15. We are left in no doubt that the Tribunal failed to deal adequately with the five matters which we have outlined above and failed to give proper effect to the uncontradictory evidence that we have summarised relating to events from September 1999 onwards. There is also the clear possibility, although it will be a matter for them to decide that, if the Respondent's contract with Britax would have determined in any event by December 1999, they should have concluded that this provided the limit or cut-off point to his claims for losses. Further, we are satisfied that the Tribunal failed to give adequate reasons for the basis on which they calculated his losses and, in particular, the discount that they applied. We therefore propose to admit this matter to the Tribunal for reconsideration of the financial loss section of the compensation claim and would invite them to deal with the following specific matters, namely:

(1) But for the discrimination and the dismissal in August 1999 is there any chance that the Respondent would have remained as a contract worker with the Appellants beyond either September or December 1999?

(2) If the answer to question (1) is yes, what level of contract work would the Respondent have obtained from the Appellants at the Camberley factory between January 2000 and June 2001?

(3) What were the chances of the Respondent obtaining permanent employment with the Appellants in South Wales?

(4) Did the Respondent's unemployment and/or medical condition result from the act of discrimination and what effect did that have on his future employment prospects?

(5) What was the appropriate figure to use for net weekly loss after the middle of 2001 ie once a factory in South Wales had opened?

16. With regard to the cross-appeal, had we not been remitting the matter to the Tribunal for further consideration we would have had great difficulty in dealing with this, since the matter was not raised at the original hearing before the Tribunal and normally we can only deal with such new matters, if it is a submission of law, not dependent on any fresh findings of fact. The Appellants argued that this question does involve findings of fact in relation to the Respondent's tax status and his personal tax position in the likely year of receipt of compensation. There is also a legal argument as to whether an award of compensation for race discrimination does fall within Section 148 of the Income and Corporation Taxes Act and also whether the requirement to calculate the net loss and gross it up to reflect the tax payable by the employee on any sum received over £30,000, which is accepted as the usual approach in computing damages for wrongful dismissal (see Shove v Downs Surgical [1984] ICR 532), should be adopted as the correct approach in cases of compensation for race discrimination.
17. It seems to us that these are matters which can also be addressed to the Tribunal at their reconsideration, when they will be able to give further consideration to the issues of fact and law that we have just outlined.