United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR MARTYN WEST Deputy Advocacy Litigation Manager Peninsula Business Services Ltd Riverside New Bailey Street Manchester M3 5PB
For the Respondent	MR ADAM OHRINGER (Of Counsel) Instructed by: Law for All PO Box 230 Brentford Middlesex TW8 9FL


 
SUMMARY

Transfer of Undertakings, Contract of Employment -&- Unfair Dismissal

Appeals against:

1. Order refusing Appellant a review of decision that Respondent had been continuously employed for a period including time when Respondent worked for a previous employer. Appeal decision.
2. Employment Tribunal's decision on mitigation of costs – appeal allowed and remitted to different Employment Tribunal.


 


THE HONOURABLE MR JUSTICE SILBER

I. INTRODUCTION

3. Miss Louise Hickson ("the Respondent") brought a claim against the London Fitness Consultancy ("the Appellant") for unfair dismissal as she had been dismissed on 20 September 2002. The Appellant defended the claim both on substantive grounds and also by way of a preliminary point, which was that the Respondent did not have the requisite continuity of employment of 12 months which is required in order to bring a claim for unfair dismissal. The Appellant accepted that the Respondent had been employed by them but that period of that employment by itself would not, as is accepted by all parties, have given the Respondent sufficient continuity of employment to claim unfair dismissal.
4. A preliminary issue was ordered to be heard on this point with the case for the Respondent being that for the purpose of showing continuity of employment, she was entitled to have taken into account her previous employment with Portland Square Fitness Limited ("PSF"). As that company had previously run the gym at which the Respondent worked and which had subsequently been taken over by the Appellant. Indeed, it is common ground that the Appellant had purchased the gym from PSF by an agreement ("the Purchase Agreement") dated 4 January 2002. One of the terms of the Purchase Agreement was that the Appellant would take over all of the employees of PSF and there was a Schedule to the Agreement listing PSF's employees, but it did not include the name of the Respondent.
5. Two issues were ordered to be tried by the Employment Tribunal at a preliminary hearing which was held on 10 April 2003. Only one of those was relevant to this appeal and that was whether the Respondent had been an employee of PSF prior to the purchase of that business by the Appellant. The case for the Appellant was that the Respondent had not been an employee of PSF prior to the Purchase Agreement between PSF and the Appellant as she had been a self-employed, part-time freelance worker for PSF who also worked as an actress. Thus, the case for the Respondent was that the Respondent was first engaged by them as an employee, with the result that the Respondent did not have 12 months' continuity of employment.
6. At the preliminary hearing, the Employment Tribunal found first that the Respondent had been an employee of PSF since 27 March 2000 and second, that the operation of the Transfer of Undertakings (Protection of Employment) Regulations 1981 meant that the Respondent's employment transferred to the Appellant as a result of the Purchase Agreement. Thus, the Employment Tribunal held that the Respondent had the requisite continuity of employment to bring a claim for unfair dismissal. That decision is not the subject of any appeal, although we will have to return later to consider how the evidence emerged at the preliminary hearing as that forms the basis of one of the issues raised on this appeal.
7. The Appellant subsequently applied to the Employment Tribunal for a review of the decisions reached on the preliminary issue. The basis of that application was that for reasons which we will explain, the Appellant was taken by surprise at the hearing when the Respondent called a Miss Record to give evidence and that they had had no prior notice of it. The basis of the application for the review was that the Appellant then wished to call Mr Harris who was previously the moving force behind PSF in order to give evidence to rebut the evidence which had been given by Miss Record. The Employment Tribunal listed the hearing of the application for review on 5 May 2002 with, it seems, the substantive hearing for unfair dismissal to follow if the application for the review was unsuccessful.
8. At the hearing of the application for a review, the Employment Tribunal rejected the Appellant's application for review for reasons which were sent to the parties in May 2004. In addition, by separate reasons which were sent to the parties on the same date, the Employment Tribunal also found that the Respondent had been unfairly dismissed by the Appellant and that the Appellant should pay to the Respondent £12,909.84 compensation. The Appellant then appealed against those decisions on a number of grounds. At a preliminary hearing of the Appellant's appeal, Mr Justice Burton, President of the Employment Appeal Tribunal permitted the Appellant's appeal to go forward solely on two grounds of which the first was a challenge to a decision of the Employment Tribunal refusing the application of the Appellant for a review of its earlier decision that the Respondent had been an employee of PSF. The second matter in respect of which Mr Justice Burton gave permission for the Appellant to appeal was whether the Employment Tribunal considered properly whether the Respondent had mitigated her loss. We will deal with each of these points in turn.

II. THE APPEAL AGAINST THE REFUSAL TO REVIEW THE DECISION

9. Starting with the refusal of the Employment Tribunal to review the decision that the Respondent had been an employee of PSF prior to the purchase of the business by the Appellant, Mr Martin West, on behalf of the Appellant, contends that it is necessary to look at the context in which the hearing on 10 April 2003 took place in which, as we have explained, the decision on the preliminary issue was made and which was then the subject of the subsequent application for review. Before the hearing on 10 April 2003, the Appellant had prepared a bundle of documents and in a letter of 30 March 2003 sent to the Respondent, it listed those documents. The Appellant followed up that letter of 30 March 2003 with a letter of 5 April 2003 to the Regional Secretary of the Employment Tribunal with a copy to the Respondent. In that letter of 30 March 2003, the Appellant enclosed four copies of the Appellant's documentation, which they had listed in their earlier letter of 30 March 2003. This letter also stated, as was the case, that a further copy of those documents had been sent to the Respondent. It was also said by the Appellant in that letter that they had received no copies of the documentation which the Respondent had advised in her letter of 18 March 2003 and 31 March 2003 that she wished to use at the hearing.
10. It is common ground that the Appellant did not receive anything further prior to the hearing in the form of documentation from the Respondent. Indeed, it was only at the hearing itself that the Appellant was given a bundle of documents upon which the Respondent was seeking to rely. This bundle of documents significantly included a statement from a Miss Record, who had previously been employed by PSF and whose witness statement recorded that she would support the contention of the Respondent that she, the Respondent, had been employed by PSF.
11. Thus it was just before this hearing that the Appellant first realised that the Respondent was going to call Miss Record. It would seem that the Respondent had, in fact, sent the bundle of documents to the Appellant, but it had not been received by the Appellants before the hearing. There was before the Employment Tribunal, at the hearing of the preliminary issue, a substantial quantity of documents produced by the Appellant, which showed first, that at her own request, the Respondent had been regarded as self-employed for tax purposes, second, that she was also accepted as self-employed by the Inland Revenue and third, that she regularly delivered invoices. It is also noteworthy that on 4 December 2001 which was just before the Purchase Agreement was made, the Inland Revenue wrote to PSF stating that they accepted that the Respondent provided her services to them on a self-employed basis. All this evidence adduced by the Appellant was very relevant, but not conclusive that the Respondent was not an employee of PSF.
12. It is said on behalf of the Appellant that once it knew at the start of the hearing that a former employee of PSF was going to be called, it needed to call its own witness to explain what the Respondent's status was when she worked for PSF. So, the Appellant contends, that it would have wished to call Mr Harris who had been able to cast doubt on the evidence adduced by Miss Record. Thus the position at the start of the hearing of the preliminary issue was that the Appellant's representative had been thrown by the unheralded arrival, not only of documents which had not been previously seen by him, but also the fact that a witness in the form of Miss Record would give evidence on what the Respondent was doing for PSF before the Appellant acquired the gym. It was, of course, necessary for the representative of the Appellant to question Miss Record without the benefit of the evidence of Mr Harris. It is noteworthy that the Appellant did not specifically ask for an adjournment, although it was not legally represented.
13. When the application for review came in front of the Employment Tribunal, it was explained that the basis of the Appellant's application for review was Rule 30, Schedule 1 of the Employment Tribunal (Constitutional Rules and Procedure) Regulations 2001 and in particular sub-rules (d) and (e) of the Regulations. Rule 31 provides that:

"Subject to the provisions of this Rule, a Tribunal shall have power on the application of a party or of its own motion to review any decision on the grounds that

(d) New evidence has become available since the conclusion of the hearing to which the decision relates provided that the existence could not have been reasonably known of or foreseen at the time of the hearing or

(e) The interests of the justice require such a review."

14. The Employment Tribunal rejected the claim for review based on each of these grounds. Mr West, who appeared on behalf of the Appellant today, did not attach much significance, correctly in our view, to the provisions of Rule 31(d). In our view, the Employment Tribunal were quite right not to enable a review or to permit a review on that ground because this was not a case of new evidence becoming "available since the conclusion of the hearing to which the decision relates", as is required by that provision. Furthermore, the Appellant was unable to show that the existence of this material "could not have been reasonably known of or foreseen at the time of the hearing". It seems clear that Mr Harris was somebody, who the Appellant could find and obtain information from whenever they wished or whenever they needed it.
15. The Tribunal then turned to consider Rule 31(e) and Mr West attaches significance to this provision because he contends that the Employment Tribunal erred by not granting a review on the basis of that provision. It is worthwhile remembering that although the discretion under that provision is undoubtedly wide, it is not boundless. The discretion under that provision has to be exercised judicially and with regard not just to the interests of the party seeking the review but to the interests of the other party and to the public interest requirement, that there should, as far as possible, be finality of litigation.
16. The first submission made by Mr West is that the evidence of Mr Harris would, or might well have had a determinative effect on the outcome of the preliminary issue. That, in our view, entails a two stage enquiry of which the first step is to consider the evidence before the Employment Tribunal and its finding without Mr Harris's evidence and the second step is then to determine what effect the evidence of Mr Harris, if adduced, would have on the outcome of the preliminary issue of whether the Respondent was an employee of PSF. The conclusions of the Employment Tribunal on this preliminary issue at the first hearing which were reached without the benefit of Mr Harris's evidence are set out at paragraphs 9 to 13 of the decision of the Employment Tribunal sent to the parties on 1 August 2003. The Tribunal said, and this is at page 35 of the bundle:

"9. In considering whether the Applicant was an employee of Portman Square Fitness Limited, the Tribunal applied a multiple test. The Tribunal looked at all factors which pertained to the relationship between the Applicant and Portman. The Tribunal took the view that all facts pointed to the Applicant being an employee, save for her tax treatment.

10. Such factors included those which had been set out in the findings of fact. They include the fact that the Applicant was provided with a job specification, the fact that she had fixed hours, the fact that she worked three fixed times on set shifts, the fact that Portman believed that she was an employee and treated her as such, the fact that she needed permission to take time off or to change her shift. The fact that she was told from June 2001 that she was entitled to holiday, the fact that after the Respondents took over in February 2002, there was no change in the work she did or the way that she was treated, the fact that she was subject to management control on a daily basis by Kerry Record and then Laurent Lery, the fact. significantly. that the Applicant was disciplined by Miss Record soon after March 2000, the fact that she wore the company's uniform and the fact that she ran the business while she was at work, fulfilling a variety of roles.

11. The Tribunal asked itself the question – was the Applicant in business on her own account? The answer plainly here was, no she was not. The Tribunal were not satisfied that the Applicant was self-employed when applying that test.

12. The Tribunal asked itself if there was mutuality of obligation which is an essential feature of employee status. The Tribunal took the view that there clearly was mutuality of obligation here. Evidence by the shifts which the company required the Applicant to work and the Applicant's obligation to work such shifts.

13. The Tribunal then asked itself what factors were inconsistent with employee status? The only factor that the Tribunal perceived was the Applicant's tax treatment and her belief that this made her self-employed. Although the Tribunal took this into account, the Tribunal did not consider that it outweighed the other factors which overwhelmingly pointed to employee status. The Tribunal's decision therefore is that the Applicant was an employee of Portman Square Fitness Limited. Her employment therefore started on 27 March 2000 and continued with them up until 31 January 2002".

17. It now becomes necessary to move on to the second stage of the investigation which is to consider what effect the evidence of Mr Harris would have had, if adduced, on the outcome of the preliminary issue of whether the Respondent was an employee of PSF. There are two faxed notes from Mr Harris of John Harris Fitness who had been the prime moving force between PSF to Mr David Butler, the prime moving force in the Appellant's. In the first one, Mr Harris states that:

"I can certainly confirm that Ms Hickson would not accept employee status while she was working with Portman Square Fitness. She made it clear that her main profession was an actress and model. Therefore, not only was she limited in the number of hours she could work, but that she could not have a set work schedule as her time at the fitness club would have to be adjusted to her acting jobs. Portman accepted these conditions. I believe that our accountant, Jonathon Kendall, can confirm this. He recommended that we employ Miss Hickson but she made it clear that her other commitments took precedence".

18. In another faxed message, Mr Harris writes about Miss Record, but Mr West accepts quite correctly, that he cannot derive any benefit from this. The view of the Employment Tribunal as to the value of Mr Harris's evidence was explained in the last sentence of paragraph 8 of their reasons of 27 May 2004:

"Furthermore and more conclusively, the Tribunal were not satisfied that allowing the Respondents the opportunity to call Mr Harris to rebut the evidence of Kerry Record would have affected the Tribunal's decision".

19. We have come to the clear conclusion that this reason cannot be criticized or challenged in any way for the following five reasons. First, Mr Harris's evidence does not enhance or take any further the Appellant's case as it merely says that the Respondent did not want to be regarded as an employee of PSF but that is just what the Tribunal said in its original decision when it explained that the Respondent was regarded as an employee for tax purposes, although they did say that that was offset by other factors which showed that she was an employee. Second, Mr Harris's evidence does not undermine in any way the central conclusions of the Employment Tribunal which set out their reasons as to why the Respondent should have been regarded as an employee of PSF.
20. Third, Mr Harris's evidence is brief and it lacks any cogent details or any particulars. Fourth, it is not suggested that Mr Harris's evidence would have led to the Employment Tribunal regarding Miss Record as being a discredited witness. Finally we ought to add that if, which is not the case, we had any doubts whatsoever about the correctness of the decision of the Employment Tribunal to refuse to grant a review in the light of Mr Harris's evidence, we would have reached that decision on the basis that any challenge would have to be on the basis of Wednesbury unreasonableness and we are firmly of the view that this decision of the Employment Tribunal falls a long way short of being Wednesbury unreasonable.
21. A second plank in Mr West's argument that the Employment Tribunal's decision to refuse a review was erroneous is based upon the fact that the Employment Tribunal said in paragraph 8 of its reasons of 27 May that, in paragraph 8:

"The Tribunal noted firstly that the Applicant offered the exchange of witness statements to the Respondents by letter dated 8 April 2003 but the Respondents had not replied. If the Respondents had replied, it would follow that they would have had Kerry Record's statement prior to 10 April 2003".

It is now accepted that the Appellants had not received this letter of 10 April 2003 and thus there might well be some error in the Employment Tribunal's determination. Nevertheless we do not consider that this means that an error of law was made by the Employment Tribunal for two reasons. First, as we have explained, the Employment Tribunal said that it was not satisfied that allowing the Respondents an opportunity to call Mr Harris's evidence to rebut the evidence of Kerry Record would have affected the Tribunal's decision. Second, in any event, it is pointed out that the Appellant could have sought an adjournment during the hearing of 10 April but it chose not to do so. Finally, we are of the view that having looked at the evidence and all the reasoning of the Employment Tribunal, it is quite clear that it carried out a fair and proper balancing exercise before concluding that a review should not be allowed. Thus, we dismiss the appeal against the refusal of the Employment Tribunal to review the decision that the Respondent was an employee of PSF.

III. THE MITIGATION ISSUE

22. We now move to the second ground of appeal which is that the Employment Tribunal failed to deal properly with the issue of mitigation. It is common ground between the parties first, that this complaint is justified and second, that this matter has to be remitted. The issue between the parties is whether this matter should be remitted to the same Tribunal as Mr Ohringer for the Respondent contends or to a different Tribunal as Mr West, on behalf of the Appellant, contends.
23. We drew the attention of Counsel to the helpful guidance given by Mr Justice Burton in the case of Sinclair Roche & Temperley –v- Heard [2004] IRLR 763 in which he set out the factors which would be of relevance in determining whether there should be a remission to the same Employment Tribunal or to a different Employment Tribunal. We take into account all the factors which are set out helpfully and clearly in paragraph 46 of the Judgment of this Appeal Tribunal. It is necessary to bear in mind that when the Employment Appeal Tribunal dealt with the question of quantum of compensation on 5 May 2004, it spent the day not only looking at that matter, but also considering the question of whether there should be a review and whether the Respondent had been unfairly dismissed. It is quite clear that the issue of mitigation would have taken up a very small part of their deliberations in the light of all these other issues to which we have referred. In our view, there is a very substantial risk that they would by now have forgotten about this aspect of the case. That was regarded by Mr Justice Burton as being a significant factor.
24. A second point of consideration is that not much in the way of costs would be saved by remitting this to a different Tribunal as compared with the same Tribunal. The general view is that whoever deals with the hearing, it is going to take between two hours and half a day.
25. A third factor of importance to us is that we are very concerned about how old this claim is. As we have explained earlier, the dismissal of the Respondent took place almost three years ago in September 2002. Nobody is at fault for not getting it resolved more speedily but we are very concerned that this matter should be resolved as quickly as possible. Therefore we take the view that that factor constitutes an additional reason why the matter should be looked at a different Tribunal because inevitably there will be, particularly at this time of the year, a delay before the matter can come on if the same members of the Tribunal have to be assembled, bearing in mind everybody's holiday arrangements. We are keen that this matter should be dealt with expeditiously and therefore, for the reasons which we have sought to explain, we remit it to a different Tribunal so that it can deal with this issue as expeditiously as possible.
26. Finally, we would like to express our gratitude to Mr Ohringer and to Mr West for their helpful, clear, concise submissions.