United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR F H LEFEVRE (Solicitor) Quantum Claims Employment Division 70 Carden Place Queens Cross Aberdeen AB10 1UL
For the Respondent	MR S JOHNSTON (Representative) Johnston Consulting 89 Lochleven Road Glasgow G42 9RD


 


SUMMARY

UNFAIR DISMISSAL: Compensation

Only issues were (i) the extent of any Polkey deduction and (ii) compensation. Tribunal found that there was a 51% chance of the claimant retaining his employment had the appropriate procedures been followed but that that would have been on the basis of a lower salary. Compensation assessed on the basis of the lower salary not on the basis of the higher, pre dismissal salary. On appeal in which the only issue was the approach to the assessment of compensation, held that the tribunal had not erred in proceeding on the basis of the lower salary.


 


THE HONOURABLE LADY SMITH

INTRODUCTION

1. This is an appeal from the judgment of an Employment Tribunal sitting at Edinburgh, Employment Judge Professor V. Craig, insofar as that judgment assessed compensation in the sum of £4,777,50. The judgment was registered on 24 April 2008.
2. We will continue to refer to parties as claimant and respondents.

BACKGROUND

3. The claimant was employed as the respondents' finance director at a salary of £63,000 per annum plus a car and pension. His employment was terminated on grounds of redundancy on 31 August 2007, at which time the respondents were in some financial difficulties. He was out of work for ten weeks at the end of which he took up an alternative post at a salary of £50,000 plus 15 per cent by way of pension contributions.
4. The respondents accepted that the dismissal was unfair as they had failed to follow the statutory dismissal procedures. It was, however, also their position that even if the procedures had been followed, the claimant's dismissal would still have taken place. The claimant's position was, put shortly, that the respondents would, in the circumstances that he would have explained to them, have been persuaded to retain him in their employment, albeit that he could see that it might have had to be at a lower salary and that he would have been willing to accept that reduction because of his anxiety to remain in employment. The lower salary referred to before the tribunal was that of £52,000 without a car and without pension. At paragraphs 66 and 67, the tribunal refer to the submissions made by Mr Lefevre on the claimant's behalf as having been:

"66. In the face of such information and presentations by the claimant it is more than likely that Mr Clarkson or at least Mr Clarkson along with the other Directors would have relented and the claimant would have been retained perhaps at a lower salary …

67. Any rational consideration would have conclude [sic] that the claimant was a critically important member of staff and there was at least a 50% chance of the claimant being retained if at a lower salary."

The Tribunal's Judgment

5. The tribunal considered what had been submitted regarding the chances of the claimant retaining his employment with the respondents and, at paragraph 79 found:

"Having heard the evidence the Tribunal is satisfied that had these procedures taken place there was a considerable chance that the claimant would have been able to persuade Mr Clarkson to review and reconsider his decision to make the claimant redundant."

6. They go on and assess that evidence in a clear and logical order and at paragraph 85, state:

"Having heard the evidence the Tribunal was left in no doubt that had a discussion taken place between Mr Clarkson and the claimant these matters would have been placed on the table and there was a considerable chance – at least 50% - that the claimant's redundancy would have been avoided."

7. When the Tribunal refers to 'these matters', that includes the consideration that the retention of the claimant's job would have been on the basis of the reduced salary of £52,000 to which we have referred. At paragraph 98, they assessed the chance of the conclusion being reached that they have referred to, at 51 per cent.
8. The Tribunal then turns to its assessment of compensation and, at paragraphs 100 and 101, states:

"100. Had the claimant's redundancy been avoided it would only have been so as a result of him accepting a reduction in his salary to £52,000 per annum.

101. Accordingly, any loss that the claimant has suffered since his employment came to an end has to be judged against that standard."

9. The tribunal noted that the claimant was out of work for a period ten weeks then, at paragraphs 102 and 103, they explain:

"102. Clearly the claimant has been out of work from the beginning of September until the 14 November but during that period he would have earned a salary of only £52,000 per annum which we estimate to be in the region of £700 per week net making his loss from the end of his employment with the respondent company until he found new employment of £7,000 (700 x 10 weeks).

103. In his new employment, however, the claimant enjoys a salary of £50,000 plus 15% by way of pension contributions. Accordingly there has been no loss suffered by the claimant since he obtained new employment."

10. The claimant was awarded compensation which took account of the Polkey deduction determined upon and also of an uplift to the award under s.31 of the Employment Act 2002 in respect of the respondents' failure to follow the statutory dismissal procedure.

Relevant Law

11. A tribunal's power to award compensation for unfair dismissal is conferred by the terms of s.123 of the Employment Rights Act 1996, the terms of which include:

"(1) … the amount of the compensatory award shall be such amount as the tribunal considers just and equitable 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.

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

(a) …

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

12. The structure of s.123(1) is such as to make it clear that the overriding duty imposed on a tribunal is to award what is just and equitable in the circumstances. Although the assessment exercise involves, initially, the calculation of such loss as has been sustained by the claimant as a result of the dismissal (the first two stages of what Lord Johnston referred to as a three stage process in the case of Simrad v Scott [1997] IRLR 147), the tribunal requires, in all cases , then to ask itself what, bearing in mind that figure and all the circumstances of the case, would be a just and equitable award ( the third of the stages identified in Simrad). It may be the same figure as the calculated loss. It may be a different figure. It may be that the circumstances are such as to indicate that there should be no award at all, notwithstanding that there has been calculable loss resulting from the dismissal.
13. As regards s.123(2)(b), the reference there to loss including only such benefits as a complainant could reasonably expect to have received is consistent with the 'just and equitable' principle that sets the tone for s.123(1).
14. The case of Norton Tool Co Ltd v NJ Tewson [1972] IRLR 86, an early decision in the life of the Industrial/ Employment Tribunals which was relied on by the claimant, stressed the importance, when awarding compensation , of doing so in accordance with the principles enshrined in the predecessor to s.123, s.116(1) of the Industrial Relations Act 1971. At paragraph 6, the National Industrial Relations Court referred to those principles as being to compensate fully for loss sustained but also to make such award as is just and equitable. The Simrad approach is consistent with that.

The Appeal

15. The single ground of appeal before us was in the following terms:

"The Tribunal erred in finding that a just and equitable award to the Claimant could only be estimated against losses related to the period from his dismissal to the date of his new job and then only on the basis of a theoretical salary of £52,000. His losses were actual from dismissal to the date of the Tribunal and into the future, and calculation fell to be made in accordance with the principles set down in Section 123(1) of the Employment Rights Act 1996."

16. For the claimant, Mr Lefevre confirmed that he took no issue with the tribunal's findings in fact. Nor did he take issue with the Polkey deduction or the amount of the s.31 uplift. His criticism was confined to a consideration of paragraphs 100 and 101. In support of his ground of appeal he submitted that the tribunal's approach defied logic and law. The respondents had not in fact offered to employ the claimant at £52,000 per annum. The only purpose in the evidence regarding the lower salary was to take the claimant's case to the point of succeeding on the question of there being a significant chance that the claimant would have retained his job. It was otherwise irrelevant and should not have been taken into account by the tribunal. His submissions referring to the lower salary matter should have been regarded as only relating to 'winning the case', not to compensation. The claimant's case remained, as the tribunal should have appreciated from his schedule of loss, that he was entitled to be compensated for continuing losses on the basis of his pre dismissal salary.
17. The tribunal should, he submitted, have followed the three stage process discussed in the case of Simrad. That process required, in his submission, the tribunal to start by calculating loss of earnings under reference to the salary the claimant was earning at the time of his dismissal, namely £63,000 per annum plus a car and pension. He also relied on the case of Norton Tool Co Ltd.
18. Mr Lefevre also appeared to seek to make a submission that the tribunal had not provided adequate reasons although he accepted that he had no ground of appeal to that effect.
19. In summary, Mr Lefevre submitted that the tribunal's award was absolutely improper in terms of achieving justice or equity and we should find that it had erred in law. There should be a remit to the same or to a differently constituted tribunal.
20. For the respondents, Mr Scott Johnston submitted that the tribunal had not erred in law. They had provided a reasoned and fathomable judgment which was based on correct principles. They had the claimant's schedule of loss, it was accepted that any loss sustained was attributable to the dismissal and the tribunal had plainly considered what compensation was, in all the circumstances, just and equitable. They had carefully assessed the evidence and reached the conclusion that the best the claimant could have reasonably expected was to retain his job but at the lower salary of £52,000. The tribunal had accepted that there was no prospect of his old salary package continuing. It was clear that they had considerations of justice and equity in mind.
21. Further, s.123(2)(b) in terms referred to the need to have regard, when considering losses, to the benefits that an employee could reasonably be expected to receive. The 'just and equitable' provision of s.123(1) imbued the tribunal with a discretion which it had exercised appropriately. The appeal should be refused.

Discussion

22. We are not persuaded that the tribunal erred. From the facts found by them they inferred, as they were entitled to do, that the claimant had a 51 per cent chance of retaining his job had a fair redundancy procedure been followed but that that would, on the claimant's own hypothesis, have been on the basis of a lower salary. It was never suggested that he would or could have been retained at his old salary package. The tribunal's findings are quite clear in that respect; all that they were persuaded of was that discussions would have been on the basis that the claimant would have been retained at the lower salary.
23. The tribunal did not fail to take account of the fact that the claimant's pre dismissal salary was considerably higher. They made a finding in fact as to what it was. They had the claimant's quantification of loss which was based on that salary and have recorded that Mr Lefevre made submissions to the effect that compensation should be awarded for a period of 52 weeks, a submission which was obviously made on the basis that there was a continuing shortfall i.e. that compensation should be calculated on the basis of his pre dismissal salary.
24. What the tribunal then did was, correctly, to have regard to the overriding objective that the only compensation awarded should be such compensation as it is just and equitable to award. We consider it to be inconceivable that any tribunal could have considered it just and equitable to award compensation on the basis of the claimant's pre- dismissal salary in the circumstances of this case. The best that the claimant could have hoped for was that he would be retained in the respondents' employment at a salary of £52,000. Whilst his dismissal meant that he 'lost' his higher pre - dismissal salary, where he was never going to retain it cannot be just or equitable to base the award on that salary. Plainly, it was just and equitable to base the award on the best that he could have hoped for, namely a salary of £52,000.

Disposal

25. In these circumstances, we will pronounce an order dismissing the appeal.