United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant

MR SAM NEAMAN (Of Counsel) Instructed by: Bar Pro Bono Unit

For the First Respondent

MR JAMES ARNOLD (Of Counsel) Instructed by: Solicitors in Law Ltd 76 Shepherds Bush Road Hammersmith London W6 7PH

HIS HONOUR JUDGE REID QC

Introduction

1. This is the Appellant's appeal against the Remedies Judgment of the London Central Employment Tribunal ("the ET") held on 12-13 May 2005 and sent to the parties on 18 September 2005. The substantive hearing had taken place over five days between 21 and 27 October 2004, with judgment sent to the parties on 3 February 2005. The case was concerned with the termination of the Appellant's training contract with the First Respondent, Solicitors-in-law Ltd, a company of which Mr Mehrotra, a solicitor, (the Second Respondent) was the sole director and his wife (the Third Respondent) the company secretary. By the end of that hearing the Appellant was persisting in the claims against the Respondents for: (1) unfair dismissal; (2) breach of contract; (3) failure to pay holiday pay; (4) breach of the obligation to give daily rest breaks; (5) failure to provide pay statements; (6) failure to provide written statement of terms and conditions; (7) unlawful sex discrimination, pursuant to ss. 4 and/or 14 and/or 20A of the Sex Discrimination Act 1975; and (8) victimisation.
2. In its 32-page judgment in the substantive claim ("the substantive judgment"), the ET decided that: the Appellant succeeded in her claims of: (i) unfair dismissal;(ii) failure to pay holiday pay; (iii) failure to provide pay statements; (iv) failure to provide written statement of terms and conditions; the Appellant failed in her claims of: (i) breach of contract; (ii) working time (rest breaks); (iii) sex discrimination; (iv) victimisation.
3. In the substantive judgment the ET expressly reserved "matters relating to compensation" to a separate remedies hearing. The Appellant appealed against the substantive judgment by a 90-page Notice of Appeal. It appears she intended to raise four main grounds of appeal, namely: (1) perversity; (2) misunderstanding of the law in respect of the unsuccessful claims; (3) denial of a fair trial under ECHR Art 6; and (4) bias. On 5 August 2005, the Appellant withdrew the appeal and it was dismissed upon withdrawal, but in the meanwhile, on 12-13 May 2005 the ET heard the remedies hearing.
4. On the question of remedies, the ET decided as follows: (1) Unfair dismissal compensation would be reduced to nil due to a "100% certainty that the [Appellant] would have been dismissed" if a fair procedure had been followed. Further the Appellant's conduct prior to dismissal which caused the dismissal made it just and equitable to reduce the award by 100%. (2) Holiday Pay £160.42 was ordered. (3) Payment of un-notified deductions of £168 was ordered arising from the failure to provide written statement of terms and conditions. The ET did not otherwise deal with the failure to provide a written statement. (4) Costs: the ET awarded the Respondents the costs of the entire claim on the basis that "the [Appellant had] throughout acted unreasonably in the presentation of her claims and was misconceived in placing them before the Tribunal."
5. The Appellant initially produced very lengthy grounds of appeal but at a Rule 3(10) hearing on 8 March 2006 (when the Appellant had the advantage of being represented by counsel under the ELAAS scheme) Cox J allowed to go forward to a full appeal only on the three matters set out in a draft amended notice of appeal. Those grounds related to (1) the ET's alleged failure to deal with, and make an award for, the failure to a provide written statement of terms and conditions, (2) the reduction of compensation by 100%, and (3) the award of costs. There was also what was described as an "over-arching" ground as to whether the ET should have perceived the Appellant as unfit to carry on with the hearing and adjourned it. We shall take each of these in turn.

The failure to a provide written statement of terms and conditions

6. At paragraph 5 of the substantive judgment under the heading "Failing to provide written statement of terms and conditions of employment and of subsequent changes contrary to ssl&4 ERA 1996" the ET recorded that "The Respondent conceded that no written statement was provided," and a formal finding to this effect was made at paragraph 51 of the substantive judgment.
7. The Appellant submitted that by s.38 of the Employment Act 2002 the ET is, in these circumstances, obliged to make an award of (or increase its award by) the minimum amount, namely an amount equal to 2 weeks' pay, though the tribunal might award a higher amount, namely 4 weeks' pay. Given the mandatory nature of the award, it was said that the ET erred in law in not making the award.
8. The Respondent replied that the dismissal took place on 6 October 2003 and that this was before section 38 came into force on 1 October 2004. Before that date, although an employee had a right to a written statement the only remedy open to the ET was to make a declaration. It had not jurisdiction to award compensation. The section could not have been intended to have retrospective effect.
9. The relevant parts of the section are:

"(1) This section applies to proceedings before an employment tribunal relating to a claim by an employee under any of the jurisdictions listed in Schedule 5.

(2) If in the case of proceedings to which this section applies:- (a) the employment tribunal finds in favour of the employee, but makes no award to him in respect of the claim to which the proceedings relate, and  (b) when the proceedings were begun the employer was in breach of his duty to the employee under section 1(1) or 4(1) of the Employment Rights Act 1996 (c. 18) (duty to give a written statement of initial employment particulars or of particulars of change), the tribunal must, subject to subsection (5), make an award of the minimum amount to be paid by the employer to the employee and may, if it considers it just and equitable in all the circumstances, award the higher amount instead.

(3) If in the case of proceedings to which this section applies- (a) the employment tribunal makes an award to the employee in respect of the claim to which the proceedings relate, and (b) when the proceedings were begun the employer was in breach of his duty to the employee under section 1(1) or 4(1) of the Employment Rights Act 1996, the tribunal must, subject to subsection (5), increase the award by the minimum amount and may, if it considers it just and equitable in all the circumstances, increase the award by the higher amount instead.

(4) In subsections (2) and (3)- (a) references to the minimum amount are to an amount equal to two weeks' pay, and (b) references to the higher amount are to an amount equal to four weeks' pay.

(5) The duty under subsection (2) or (3) does not apply if there are exceptional circumstances which would make an award or increase under that subsection unjust or inequitable….

(8) The Secretary of State may by order… (b) make provision, in relation to a jurisdiction listed in Schedule 5, for this section not to apply to proceedings relating to claims of a description specified in the order;…"

10. The only order that it would seem might be relevant under section 38(8) is the commencement order and there is nothing in that order which disapplies the section in the case of dismissals occurring or applications commenced before 1 October 2004.
11. On their face the words of the section seem to us to require a Tribunal making a decision after the commencement date of the section to make a financial award under subsection (2) or (3) as the case might be in the absence of circumstances bringing subsection (5) into play. If Parliament had intended that the section should not have effect in relation to proceedings commenced or dismissals occurring before the section was brought into effect, it could have said so. Similarly the Secretary of State had the opportunity if he thought it right to exclude such cases when he made the commencement order. It does not seem to us that there is any injustice in not doing so. The section creates a new remedy for failure to comply with a pre-existing obligation. It does not create a new obligation. The section had been in existence for some two years before it was brought into effect. If an employer chose to ignore this possible liability, he has only himself to blame.
12. It follows that in our view the ET was in error in not addressing the Appellant's prima facie right to an award under the section and either making an award or giving reasons as to why under subsection (5) no award was being made.

The 100% reduction

13. The Appellant submitted that whether by means of a Polkey reduction, or by way of contribution, the ET erred in law in reducing compensation for unfair dismissal by 100%. The ET found that the Appellant was dismissed for misconduct but that the misconduct fell short of gross misconduct. The misconduct which the ET found had in fact caused the dismissal was the refusal of the Appellant to obey Mr Mehotra's instruction to produce a letter confirming the availability of deposit funds in the account of a client, Ms M Kothari. The Respondents maintained unsuccessfully that the dismissal was for capability - namely the Appellant's various ailments which had affected her ability to work in the weeks leading up to the dismissal. The ET found that this was not the true reason for dismissal.
14. There is no suggestion in the ET's findings of fact that the Appellant had ever been disciplined before, or had any record of misconduct (or indeed lack of capability). Conversely, on the day of the "misconduct", the ET found as a fact that: "[the Appellant] had become in general very agitated and did not appear to Mrs Mehrotra to be thinking clearly - getting confused as to facts and figures in regard particularly to transactions involving Ms M Kothari..." The findings of fact of the ET appear to be that the Appellant refused to follow Mr Mehrotra's instructions because (despite "calculating and re-calculating figures") she genuinely did not believe that Ms Kothari in fact had the requisite funds. On 30 September 2003 she was, according to the ET, "in general very agitated" and "did not appear to be thinking clearly", and was "calculating and re-calculating" the figures. On 2 October 2003 the Appellant seemed "incapable" of writing the letter. On 3 October 2003 the Appellant arrived at the office "manifesting signs of agitation", and still believed that she should not write the letter as she believed (erroneously and unreasonably, but genuinely) that there were no sufficient funds and that such a letter could not in all conscience be written. The ET found as a fact that the Appellant was "prone to misconstrue matters that she did not understand or of which she was partially ignorant...." Mr Mehrotra "dismissed her on the 6 October [2003] when she indicated that she would not be in work the following day", after told Mr Mehrotra of "the stress and mental exhaustion she was suffering." He did so by telephone from his hospital bed where he was recovering following treatment after he had suffered a heart attack.
15. The ET said that had the dismissal been for capability, it would have had "no hesitation" in finding it both procedurally and substantively unfair. The ET found that the misconduct was not gross misconduct justifying summary dismissal; no fair (or indeed any) procedures were followed. The ET also found that no written contract of employment (or statement of terms and conditions) had been issued to the Appellant. No disciplinary rules or handbook had been issued to her.
16. On behalf of the Appellant reliance was placed on the ACAS Code of Practice "("the ACAS Code") which sets out nine "core principles of reasonable behaviour", the fifth of which is: "Never dismiss an employee for a first disciplinary offence, unless it is a case of gross misconduct." It was then pointed out that s.207(2) of the Trades Union & Labour Relations (Consolidation) Act 1992 provides that "In any proceedings before an [employment] tribunal. The [ACAS Code of Practice] shall be admissible in evidence, and any provision of the Code which appears to the tribunal... to be relevant to any question arising in the proceedings shall be taken into account in determining that question." Counsel referred to Lock v Cardiff Railway Company [1998] IRLR 358 and submitted that the ET was obliged to have regard to the ACAS Code, even if it is not specifically referred to, particularly in the case of an unrepresented applicant.
17. It was submitted that, having regard to the ACAS Code and Lock, the ET erred in holding that dismissal for this "first offence" of misconduct (if procedurally properly approached) would have been fair, and that if (as it was submitted it did) the ET took into account the Appellant's "period of increasingly erratic behaviour" prior to the act of misconduct, this was an error of law, since neither the Respondents nor the ET ever characterised the "erratic behaviour" as misconduct per se, and to the extent that it signified anything, it signified that the Appellant was not at all well at the time of her so-called "act of misconduct". This, it was said, should have been taken into account in her favour rather than against her, by both the Respondents and the ET.
18. In any event (the submission continued), had a fair procedure been followed – ie (1) the Appellant's alleged misconduct investigated; (2) the Appellant been given a proper notice and particularisation of the act of misconduct that she was charged with; (3) the Appellant had been given a chance to state her case, including the right to be accompanied at a disciplinary hearing and, if necessary a right of appeal-, it would have emerged (a) that the Appellant's refusal to write the letter stemmed from a genuine if mistaken belief that she was not entitled to do so and (b) (as the ET's findings of fact and the papers in the case as a whole showed) that the Appellant was suffering from the early stages of a serious mental breakdown of some sort at the date of the "misconduct".
19. Counsel went on to submit that the Appellant, at the date of the act of misconduct, and at the date of her dismissal (6 October 2003) was disabled within the meaning of the Disability Discrimination Act 1995, and that a fair disciplinary procedure would have put the First Respondent on notice of such disability. To the extent that the Appellant's erratic behaviour, agitation, apparent inability to calculate the correct amount of money in the account, leading to her (genuine) belief that a fraud was taking place, and her irrationally obstinate reaction to that belief, were all symptoms of her current mental condition. Thus, it was said, it was clear that prior to dismissing the Appellant further consideration should have been given to adjustments that the First Respondent would have been under a duty to make and a dismissal would have been in breach of the 1995 Act and so unfair.
20. Counsel for the Respondents replied that the ET had been entitled to make the finding that it did. There had been a direct and repeated failure to obey a lawful instruction, and (although the misconduct was conceded not to have amounted to gross misconduct) it could be held to justify dismissal even though a first disciplinary offence.
21. In our view counsel for the Appellant is over-egging the pudding in seeking to bring the 1995 Act into the equation. With the benefit of hindsight it would be possible to see that the Appellant was at the start of what would turn out to be a prolonged period of ill-health, but there was no proper basis at that time for suggesting she was or would become disabled within the meaning of the 1995 Act. Similarly, given the manifest breakdown in trust and confidence that occurred and other matters which were referred to before the ET (in particular the question of a letter which the Appellant sought to require Mr Mehrotra to sign whilst he was in hospital) but not resolved, the EAT cannot say that a properly conducted disciplinary process would not have resulted in her dismissal. Where it does seem to us the ET erred was in taking into account as incidents of earlier misconduct the incidents of erratic behaviour and agitation which were referred to by the parties in the course of their evidence but which were never alleged by the Respondents to amount to misconduct. In this we hold that the ET erred in law, and misdirected itself in determining there was a 100% certainty that the first Respondent would have dismissed the Appellant even if a fair procedure had been followed and that the dismissal would undoubtedly have been fair.

Costs

22. It was submitted for the Appellant that the ET erred in law in making a costs order against the Appellant in respect of her entire claim when: (1) she was successful on four of the eight claims that she had; (2) the Respondents only conceded three of those four at the start of the substantive hearing; (3) the Respondents maintained to the end a case on unfair dismissal which the ET found to be incorrect (ie that she was dismissed on capacity grounds). Whilst it was conceded that the ET might have found that the Appellant's sex discrimination claims were misconceived: (1) it was not such a clear case that a costs order should be made; (2) the unfair dismissal claim and the three other claims were manifestly not misconceived - they succeeded.
23. It was further submitted that the ET erred in law in failing to take into account, or apparently even notice, the Appellant's mental state at the time of her dismissal and throughout the proceedings. Even if the ET did not have proof of the Appellant's mental state, it must have been obvious that there was clear evidence of mental instability - including but not limited to: (1) a 90-page further and better particulars; (2) a quantification of her loss at £9.5 million, rising to £13.05 million "as she considered the matter over the course of the five-day hearing", rising to £21 million by the time the ET wrote their judgment; (3) a 90-page notice of appeal which had been entered by the time the ET gave its judgment on costs; (4) the ET's own finding of erratic and agitated behaviour; (5) the contemporaneous evidence of "stress and mental exhaustion"; (6) the obviously bizarre manner in which the Appellant put her case.
24. The question of costs was being dealt with under the old (ie 2001) regulations. By regulation 14, so far as relevant, "Where, in the opinion of the tribunal, a party has in bringing proceedings, or a perty … has in conducting proceedings, acted vexatiously, abusively, disruptively or otherwise unreasonably, or the bringing of the proceedings by a party has been misconceived, the tribunal shall consider making, and, if it so decides, may make- (a) an order containing an award against that party in respect of the costs incurred by another party…."
25. The Tribunal dealt with costs in a single paragraph. The relevant part reads: "It is the Tribunal's finding that the Claimant has throughout acted unreasonably in the presentation of her claims and was misconceived in placing them before the Tribunal. Accordingly the Tribunal orders, under rule 14(1), 3(c) and (6) Schedule 1 that the Claimant pays the costs of the three Respondents as assessed on taxation by the county court." Those costs have been assessed at a figure in excess of £40,000.
26. In our view there is substance in the Appellant's complaints. First, it is difficult to see how complaints on which she succeeded could be described as "misconceived" or how it can have been wrong or unreasonable to bring those complaints to the ET. This was not a case in which parts of the claim were conceded immediately proceedings were issued. Three of the four heads on which she succeeded were conceded at the opening of the hearing (i.e. after a part at least of the Respondents' costs must have been incurred). One of the four heads was contested unsuccessfully to the bitter end of the substantive hearing. It is difficult to conceive how this could ever have been thought of as a case where the Respondents were entitled to all their costs.
27. Further the ET's reasoning shows it did not approach the question of costs as required by the regulations. The old regulations required a two stage approach: the Tribunal has first to decide whether in conducting the proceedings the party has acted "unreasonably" (to put it shortly) and then to decide whether it should make an order. The ET did not adopt a two stage approach. It decided that the Appellant had acted unreasonably and "accordingly" made the order. It does not appear to have considered whether (given the unreasonable behaviour) it was in the circumstances appropriate to make an order for costs (and, if so, what order). In particular it must have been apparent to the ET (and there was medical evidence before the ET to support it) that the Appellant had significant mental difficulties. The report of Dr Agrawal dated 23 March 2005 (i.e. 2 months before the remedies hearing) found that her "mental health problems cause severe disability". But notwithstanding the evidence of mental illness and the extent to which she succeeded, the ET does not seem to have done more than decide that her conduct was unreasonable and immediately to proceed to order her to pay the whole of the costs.

The "overarching" point

28. It was suggested that in any event the case should be sent back because the ET should have perceived that the Appellant was mentally ill and should of their own motion have stopped the hearing. We are unable to agree with this submission. The Appellant was not a patient. She was entitled to conduct her own affairs. She was described by Dr Agrawal as having "good insight". She had shown herself able to seek an adjournment if she felt she needed one. She had asked for (and obtained) an adjournment of the remedies hearing from the date originally fixed in March 2005. She was apparently able to produce and deal with a bundle of some 500 pages. In our view, whilst there may be cases in which a Tribunal finds that as a matter of justice it should adjourn a hearing despite no adjournment being requested, this was not such a case.

Conclusions

29. For the reasons given above we take the view that the case should be remitted to the same ET to re-consider in the light of this judgment whether an award should be made for compensation for failure to provide a written statement of terms and conditions, what compensation for unfair dismissal should be assessed and whether it should be reduced (and if so, in what way), and whether an order for costs should be made (and, if so, in what form).
30. We should add that we have every sympathy with the ET in having had to deal with a claimant who was plainly extremely difficult and thoroughly unreasonable, as was apparent even before the EAT, where she was largely protected from her own excesses by experienced counsel acting pro bono, to whom we are more than usually grateful. She should not assume that this success means that she will necessarily receive a 100% award, or that any award she does receive will bear any relationship to the extraordinary figures she sought to put forward before the ET, or that she will necessarily be immune to an order for costs. Those are all matters for the ET on the remitted hearing unless even at this late stage the parties can come to some form of compromise.