United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR R.J. CLEEVE (Employment Consultant) Saffron Personnel Consultancy Saffron House 8 Buccleuch Close Clitheroe Lancashire BB7 2EF
For the Respondent	MR S.REDPATH Instructed by: Messrs Kingsley Rose Solicitors 14 Clwyd Street Rhyl Denbighshire LL18 3LA


 


SUMMARY

PRACTICE AND PROCEDURE: Costs

UNFAIR DISMISSAL: Polkey deduction

Failure to consider application of Polkey principle to compensating award for unfair dismissal. Inadequate reasoning to explain full costs order. Case remitted to same tribunal to consider Polkey and costs.

HIS HONOUR JUDGE PETER CLARK

1. The parties in this matter, which came before the Abergele Employment Tribunal, are Ms Davies, Claimant and J & R Farragher, trading as Potens, Respondent. We shall so describe them.
2. By a judgment with reasons promulgated on 21 November 2007 (the liability judgment) a full Employment Tribunal chaired by Employment Judge Gaskell upheld the Claimant's complaint of unfair dismissal brought against the Respondent, her former employer. Following a subsequent remedies hearing on 27 November and by a remedy judgment with reasons promulgated on 17 December (the remedy judgment), that same Employment Tribunal awarded the Claimant compensation for unfair dismissal in the total sum of £36,998.88 plus costs, agreed between the parties, of £17,000.
3. Against both the liability and remedy judgments the Respondent has appealed by separate notices. Both appeals have been case managed by the President, Elias J. As to the liability appeal EAT/0249/08, the President permitted all grounds to proceed to a full hearing, save for that alleging bias on the part of the Tribunal, for which a Rule 3(7) direction was applied after consideration of material forwarded under paragraph (11) of the Employment Appeal Tribunal Practice Direction. That opinion has not been challenged by the Respondent by way of oral hearing under Rule 3(10) nor appealed to the Court of Appeal.
4. The Remedy Appeal (EAT/0250/08) was permitted to proceed to an Appellant-only preliminary hearing. The matter is listed before us today for both full hearing on the Liability Appeal and preliminary hearing of the Remedy Appeal. Having pre-read the papers in relation to both appeals, we invited the advocates, Mr Redpath of counsel, appearing on behalf of the Claimant, and Mr Cleeve, an employment consultant on behalf of the Respondent, to consent to our treating the preliminary hearing of the Remedy Appeal as a full hearing in the interests of saving the expense of a further Employment Appeal Tribunal hearing in the event that some or all of the grounds of the Remedy Appeal were permitted to go to a full hearing. Both advocates, each of whom appeared for their respective clients below, agreed to that course and we have followed it.

Background

5. The Respondent provides residential care to vulnerable adults with mental health problems. The Claimant commenced employment with the Respondent on 1 May 2005. On 1 August 2005 she was appointed Manager Designate of Orme House. At a later date her substantive appointment to that post was confirmed. She had worked at Orme House from and since late May 2005. Her employment ended with her summary dismissal by the Respondent on 25 May 2006.
6. At the time of her dismissal the Respondent's Operations Manager was Nikki Stadames, and the Area Manager for North Wales, covering Orme House, was Susan Yates. The Employment Tribunal preferred the evidence of the Claimant to that of Ms Stadames and Ms Yates where a conflict arose (liability reasons (LR) paragraph 3).
7. The events culminating in the Claimant's dismissal may be summarised in this way. Following three investigatory meetings held with the Claimant on 2, 9 and 16 May 2006 Ms Yates wrote to the Claimant on 23 May, with a copy to Ms Stadames, in the following terms:

"Dear Sian

I am writing to confirm that, after careful consideration of the information gathered at the investigatory meetings held on the 2^nd, 9^th and 16^th May, I require you to attend a Disciplinary Hearing to be held on Thursday 25^th of May at the Head Office at 12noon as agreed.

The disciplinary hearing will consider the following allegations that you failed to act in a manner commensurate with your job role with particular reference to the General Social Care Counsels Code of Practice."

8. There then followed 15 bullet points setting out the various matters alleged against the Claimant. The letter concluded:

"You are entitled, if you wish, to be accompanied by a representative of your choice.

Please confirm your attendance at this Hearing on receipt of this letter."

9. The disciplinary hearing took place on 25 May. Present were the Claimant and Linda James Lockett and both Ms Stadames and Ms Yates. The allegations raised against the Claimant were discussed. The hearing was then suspended whilst the management representatives considered the matter. Upon their return Ms Stadames told the Claimant that all but one of the 15 allegations against her was upheld, characterising that state of affairs as gross misconduct, "negligence or neglect of duty resulting in any loss, or which might expose the company to a serious claim". She was advised that her employment was terminated with immediate effect and of her right of appeal. That outcome was confirmed to her in writing by letter dated 2 June.
10. The Claimant did submit a letter of appeal on 6 June indicating that she would forward detailed grounds of appeal after taking advice from her union. On 28 June the Respondent replied, indicating that an appeal would be convened when the grounds were received. However, none were ever sent and the appeal did not take place.

The Tribunal's Decisions

Liability

11. The Tribunal rejected the original reason for dismissal put forward by the Respondent at the time, namely, gross misconduct. In their form ET3, particulars paragraph (23), the Respondent contended that:

"'Capability, Conduct and Some Other Substantial Reason (loss of trust and confidence)' are the reasons for dismissal ..."

12. A contention referred to at paragraph (20) of the Tribunal's remedy reasons (RR). The Tribunal found, LR paragraph (5):

"The true reason for the dismissal was the Respondent's dissatisfaction with the Claimant's performance as a manager. It was therefore a dismissal by reason of incapacity which is also a potentially fair reason under section 98(2). [The Employment Rights Act 1996 ERA.]"

13. The Tribunal went on to find the dismissal for that reason both substantively and procedurally unfair under section 98(4). As to substantive unfairness, the Tribunal at paragraph 6 gave their own assessment of the strength of nine of the allegations found proven against the Claimant. Having done so, they stated at paragraph 7 that they were fully mindful of the fact that it was not for the Tribunal to impose its views for the legitimate views of the Respondent. At paragraph 8 they set out their expectations judged by the standard of a reasonable employer that, having reached the view which they did about the Claimant's competence as a manager, they would have set out an action plan which would involve monitoring the Claimant's performance. If she failed to co-operate with such a plan, disciplinary proceedings might then follow, possibly leading to dismissal. Instead, the Respondent moved straight to summary dismissal under the wrong label of gross misconduct.
14. Procedurally they found the dismissal unfair under ordinary section 98(4) principles on two grounds. First, the procedure used was entirely confused: the Respondent moved from a performance review to a disciplinary process without the Claimant having any inkling that this was so, (paragraph 9). Secondly, at paragraph 10 they found Ms Yates and Ms Stadames set themselves up as investigators and then as the disciplinary panel. They were effectively judge, jury and executioner in their own case; (query, cause). The Respondent was a large organisation and the concerns of those managers ought to have been investigated by a manager from elsewhere in the organisation.
15. Having found the dismissal unfair under section 98, the Employment Tribunal also considered whether it was automatically unfair under section 98(A)(1) by reason of breach of the statutory dismissal and disciplinary procedure (DDP). They found that it was, (a) because the letter of 23 May did not constitute a step 1 letter (LR, paragraph 11) and (b) because the Respondent failed to call an appeal meeting, having been advised of the appeal, paragraph 12. However, had the appeal point been the only breach of the DDP, they would have applied section 34(4) of the Employment Act 2002 and not awarded an uplift to the compensatory award.
16. Finally, they found that the Claimant had not contributed to her dismissal by her own conduct, paragraph 40. There is no mention of the Polkey principle, to which we shall return, either in their Liability or Remedy reasons.

Remedy

17. The Tribunal awarded four weeks gross pay, limited to the then maximum of £290 per week, under section 120 (1A) ERA (misstated at paragraph 2 RR as section 121(1A)) o the basis of their finding that the dismissal was unfair under section 98A(1). Based on her length of service and her age at dismissal, 38, she would have received just one week's pay in respect of ordinary unfair dismissal under section 119.
18. As to the compensatory award, the Tribunal rejected the Respondent's case that the Claimant had failed to mitigate her loss in her search for alternative employment and awarded a total of £23,361.46 lost earnings to the date of the remedy hearing, credit having been given for monies earned during that period. In addition, the Tribunal awarded 13 weeks future loss of earnings. With loss of statutory rights the net total compensatory award was £27,568.37.
19. Having found that the dismissal was unfair under section 98A(1), the Tribunal considered argument on the uplift in the range 10 to 50 percent (see section 31(3) EA 2002). Having done so, they settled for a 30 percent uplift.
20. Finally, the Tribunal refused an application by the Respondent for a preparation time order but upheld the Claimant's application for costs of the proceedings; making an order for £17,000 costs, the sum agreed between the parties as reflecting those costs, excluding an earlier specific order for costs to which we shall return.

The Appeals

21. We take the appeals together, and, having heard oral argument, set out our conclusions under various heads structured in accordance with the statutory road map as follows:

1. Ordinary Unfair Dismissal

Mr Cleeve does not challenge on appeal the Tribunal's finding that the reason or principal reason for dismissal related to the Claimant's capability, not conduct, whilst asserting the Respondent's case that there was an element of conduct in their reason for dismissal.

As to reasonableness under section 98(4) we are not persuaded that the Tribunal's finding that dismissal for that reason was, on the facts, unfair, was a perverse finding; see Yeboah v Crofton [2002] IRLR 634.

We think that Mr Cleeve does raise a forceful point that the Tribunal substituted their own view for that of the employer, paragraph 6 LR. Such an approach is as impermissible in a capability case (see, for example, Alidair v Taylor [1978] ICR 445 Court of Appeal) as in a conduct case (see Beedell v West Ferry Printers Ltd [2000] IRLR 650), upheld by the Court of Appeal and in which permission to appeal was refused on petition by the House of Lords (see [2001] ICR 965(D)).

However, we accept Mr Redpath's submission that even if the Tribunal fell into error in this respect, their finding at paragraph 8 LR that the Claimant ought to have been given an opportunity to improve with proper guidance and monitoring by senior management, and, if she failed to do so, only then would a reasonable employer commence disciplinary action leading to possible dismissal, and that a failure to do so rendered the dismissal unfair under section 98(4), is unassailable.

In any event, the Tribunal went on to find the dismissal procedurally unfair on two grounds: LR paragraphs 9 and 10. Mr Cleeve takes issue with the first of those grounds but does not seek to challenge the second finding, namely, that Ms Stadames and Ms Yates ought not to have been both investigating and disciplining managers. It follows therefore that the finding of ordinary unfair dismissal stands.

2. Section 98A(1) Unfair Dismissal

Again, the Notice of Appeal raises no challenge to either of the Tribunal's findings of breach of the DDP, the step 1 letter and appeal points made at LR 11 and 12. This finding therefore also must stand.

3. Contribution

Whilst the Tribunal state their finding of no contribution to dismissal by the Claimant's own conduct shortly at paragraph 14 LR, we take that conclusion in the context of the whole of the reasons, particularly the Tribunal's view as to the charges levelled against the Claimant set out at paragraph 6 LR. On that basis we are unable to characterise the finding that the Claimant was not guilty of culpable or blameworthy conduct as legally perverse.

4. Statutory Uplift

Since there is no challenge in the Liability Appeal to the finding of unfairness under section 98A(1), the Tribunal was bound to order an uplift, no exceptional circumstances being advanced. The argument ranged from 35 to 10 percent. The Tribunal fixed on 30 percent. That decision, in our judgment, fell well within the ambit of discretion granted to Tribunals by parliament.

5. Mitigation of Loss

The onus lies on the Respondent to show, on the balance of probabilities that the Claimant failed to take reasonable steps to mitigate her loss. The Tribunal considered the evidence led and arguments advanced by both parties, at paragraphs (7) to (10) RR. Their conclusion that the Respondent had not discharged the burden is one which they were entitled to reach, particularly in relation to the period December 2006 to July 2007, to which Mr Cleeve draws attention. Perversity is not made out on this aspect of the appeal.

6. Polkey

Mr Cleeve tells us that he raised a Polkey Argument before the Tribunal below. Mr Redpath cannot recall the point being raised. In any event, it is a matter which the Tribunal ought to have considered in the context of the compensatory award; see Redbank Manufacturing Co Ltd v Meadows [1992] IRLR 209.

Given the Tribunal's findings at paragraph 8 LR, it may be that there was a possibility of fair dismissal on grounds of capability at some time in the future. That is a judgment for the Employment Tribunal to make. Accordingly, we shall allow the appeal on this point and remit the case to the same Tribunal for further consideration.

7. Costs

An award of costs remains an exceptional course in the Employment Tribunal (see Lodwick v London Borough of Southwark [2004] ICR 884 paragraph 23). A costs order had already been made in this case when the substantive hearing fixed for a date in July 2007 had to be aborted due to inadequate preparation by the Respondent. An award of £1,468.75 costs, Mr Cleeve tells us, was made and has been paid in respect of that wasted day.

We have concluded that in finding that the Respondent's defence to the claim was misconceived, that is, had no reasonable prospect of success, the Tribunal has failed to explain, RR paragraph 23 why it is said that the defence was misconceived from the outset, given the issues raised both as to liability and remedy; still not resolved. Costs orders are not a punishment.

In these circumstances we shall set aside the costs order for £17,000 and remit the issue of costs for reconsideration by the same Tribunal in the light of the Court of Appeal guidance in Lodwick, particularly paragraphs 23 to 27 and McPherson v BNP Paribas [2004] ICR 1398.

8. Disposal

It follows that these appeals are allowed in part. The case will be remitted to the same Tribunal chaired by Judge Gaskell for consideration of the application of the Polkey Principle to the compensatory award made in this case and any necessary adjustment to that total award and reconsideration of the costs issue, giving full reasons for their conclusion on each of these points.