United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR G R HOWARD (Solicitor) Peninsula Business Services Ltd Litigation Department Riverside, New Bailey Street Manchester Lancashire M3 5PB
For the Respondent	MR M PILGERSTORFER (of Counsel) Instructed by: Messrs Thompsons Solicitors Congress House Great Russell Street London WC1B 3LW


 


SUMMARY

UNFAIR DISMISSAL: Compensation

The Claimant was unfairly dismissed. She found work, which paid more than the old job but then it paid less and this lesser rate was paid at the date of the remedy assessment. The Employment Tribunal found the new job was inherently insecure and awarded the sum claimed of one year's forward loss at the mitigated rate. Between dismissal and assessment she earned more in total than in the old job. The Employment Tribunal did not err when it did not give the employer credit for this sum toward the forward loss. Dench principles considered.


 


HIS HONOUR JUDGE McMULLEN QC

1. This case is about compensation for unfair dismissal. It is the judgment of the court to which all members appointed by statute for their diverse specialist experience have contributed. We will refer to the parties as the Claimant and the Respondent.

Introduction

2. It is an appeal by the Claimant in those proceedings against the Judgment of an Employment Tribunal sitting at London (Central) under the Chairmanship of Employment Judge Pearl registered with reasons on 31 October 2008. It followed an oral hearing on remedies on 28 May 2008 and a discussion in private on 11 July 2008 following a carousel of three interleaved submissions by each party. The Judgment followed findings in favour of the Claimant on 17 April 2008. The parties were represented below and now represented by Mr Pilgerstorfer of Counsel and Mr Howard of Peninsula Business.

The issue

3. We adopt counsel's depiction that this appeal raises a discrete question of law concerning compensation for loss of earnings for unfair dismissal in the following circumstances:

(a) after an unfair dismissal, an employee initially finds replacement income greater than that which she had in the previous employment

(b) this then reduces such that by the time of a remedies hearing she is sustaining a monthly loss, that monthly loss continuing into the future

(c) the replacement income is freelance work and is inherently insecure

(d) in the period from the dismissal to the remedies hearing, because if the initial greater income, the employee has earned an excess over what she would have earned at the Respondent

4. Is it incumbent upon the Tribunal when assessing future loss of earnings to set off the excess past earnings against the claimed future loss? The Respondent contends it is and the Tribunal erred by failing to do so. The Claimant contends: (1) a tribunal is not required to do so, and remained within the bounds of the discretion given to it by s123 Employment Rights Act 1996; alternatively (2) the Tribunal was entitled to set off the past excess against the future risk of the Claimant's insecure freelance work being lost, provided the award is just and equitable in its amount.
5. The outcome of the case was an award in the Claimant's favour of £20,532 in respect of her claims of direct sex discrimination and harassment, and unfair dismissal, plus an award of costs to be paid by the Respondent of £5,000. The Second Respondent, an individual employed by the first Respondent, is the subject of no apparent finding on remedy.

The facts

6. Since the appeal is narrow the details of the dispute between the parties are not important. The Claimant, a TV journalist, was able to obtain new employment at Press TV following the severance of the relationship with the Respondent. For the first 30 weeks of work she was making more money than she was with the Respondent for she was producing on a freelance basis two shows a week. But after that, and before the assessment, for 19 weeks she was reduced to one show for which she worked three days a week, and so at the time of the assessment she was losing roughly £512 a month as against her previous earnings.
7. The Tribunal awarded her future losses of £6,149, which is the disputed figure on appeal. That was based upon the Claimant's claim that for one year she sought compensation as a result of the statutory tort of unfair dismissal committed by the Respondent. At the time of the assessment, July 2008, she was roughly £5,000 better off than had she worked for the Respondent during that time. But she was recently on a lower rate of pay and on the Tribunal's analysis she was to continue into the future on that rate.
8. There is no dispute about her duty to mitigate, which she fully discharged, nor as to the nature of the Claimant's employment as a freelance. It was inherently insecure and the Tribunal accepted her evidence that it was precarious. The Tribunal noted her evidence that the industry she was in is uncertain and unemployment rates are high. It regarded her claim for one year's future loss as modest. It considered that she should be awarded the sums claimed as to the future and that she should not have to give credit, as it were, for the £5,000 excess during the year or so running up to the assessment.
9. The Tribunal upheld her claim applying section 123 of the Employment Rights Act 1996, which says as follows:

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

…

(4) In ascertaining the loss referred to in subsection (1) the tribunal shall apply the same rule concerning the duty of a person to mitigate his loss as applies to damages recoverable under the common law of England and Wales …."

10. In this case we are not concerned specifically with mitigation, but only section 123(1). The Tribunal addressed itself to relevant authorities to which we will now turn.

Discussion and conclusions

11. We will examine the authorities as we consider the argumenta. Mr Howard simply suggests that the outcome in a just and equitable jurisdiction should be that the £5,000 the Claimant was able to achieve in mitigation in excess of her previous rate of earnings should be brought into account, otherwise the Claimant will receive a bonus and the Respondent is unfairly penalised for compensation which the Claimant is not due. It was wrong of the Tribunal to have separated past earnings from future earnings. The net effect would be to reduce the amount awarded by the Tribunal by about £5,000.
12. Mr Pilgerstorfer contends that a tribunal is not obliged to follow a mechanistic approach and cannot be faulted if it decides in justice and equity to make an award in the terms suggested.
13. In our view the approach to the issue of compensation on appeal is clearly set out by the Court of Appeal in Bentwood Brothers Manchester Ltd v Shepherd [2003] IRLR 364 where Peter Gibson LJ said this:

"10. In considering whether or not the Tribunal has been perverse in their award of 10 years pension payments, I bear in mind that there are many statements in the authorities on the narrow circumstances in which it would be proper for an appellate body to interfere with the assessment of damages by a tribunal. We were referred in particular to Gbaja-Biamila v DHL Ltd [2000] ICR 730 at page 742 paragraph 36 where Lindsay J, the then President of the Employment Appeal Tribunal, said this:

"An appellate court, when reviewing the quantification of compensation by an employment tribunal, should not act as it would when reviewing an award of damages by a jury. In contrast to a jury, the tribunal is expected to give reasons and hence can be judged by those reasons: Skyrail Oceanic Ltd v Coleman [1981] I.C.R 864, 872. That is not to say that the employment tribunal's sovereignty as to facts is here in question. Only if, firstly, a tribunal's given reasons expressly indicate that it has adopted a wrong principle of assessment, or, secondly, (that not appearing by reason of its either correctly stating the principles or stating none) it has arrived at a figure at which no tribunal properly directing itself by reference to the applicable principles could have arrived, will the assessment demonstrate an error of law, the only class of error which this appeal tribunal can correct. That second category may fairly be described as one where the award has been perverse, an award so high or low as to prompt in those aware of the relevant facts found and the applicable principles a reaction that the award was wholly erroneous, even outrageous: see also the collection of definitions of perversity in Steward v Cleveland Guest (Engineering) Ltd [1996] ICR 535, 541."

11. This court, like the Appeal Tribunal, will interfere with such assessments with reluctance, given that the Tribunal as the industrial jury can be expected to make broad brush assessments which reflect the Tribunal's local knowledge and experience."

14. That flexibility of approach was also adopted by the Court of Appeal in Dench v Flynn and Partners [1998] IRLR 653 where Sir Christopher Staughton said this:

"Other rules adopted by the Employment Appeal Tribunal, if such they be, are at most guidance. What has to be assessed in terms of section 123(1) of the Employment Rights Act 1996 is such amount as the tribunal considers just and equitable in all the circumstances, 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. That includes a test of causation, or perhaps the same test twice over, once by reason of the words "in consequence of" and a second time in the words "attributable to".

That is the ordinary commonsense test of the common law. Was the loss in question caused by the unfair dismissal or by some other cause? The tribunal must ask itself and answer that question, and then ask what amount it is just and equitable for the employee to recover. Rules will no doubt help as guidance in the process, but that is the task which ultimately has to be undertaken."

15. That is the approach to be taken by an employment tribunal and most particularly by a court on appeal from such judgment; that much appears to be common ground between the advocates before us. And see further Evans v Barclays Bank EAT 0137/09.
16. Dench was considered by the Employment Tribunal in our case. Just to set the scene, the Employment Appeal Tribunal had considered on three occasions circumstances where compensation was awarded following the successful mitigation of a Claimant entitled to compensation for unfair dismissal and whether or not that broke the chain of causation. They were: Courtaulds Northern Spinning Ltd v Moosa [1984] ICR 218, Browne-Wilkinson J President and Members, Ging v Ellward Lancs Ltd [1991] ICR 222, Arnold J and Members, and Fentiman v Fluid Engineering Products Ltd [1991] ICR 570, Lord Mayfield and Members.
17. All three were considered by HHJ Peter Clark and Members in Whelan and Anor v Richardson [1998] ICR 318, which case indicated difficulties in the approach on the authorities to this topic. Judge Clark for the EAT said this:

"The correct approach

In the light of the authorities on this topic it is clear that there has not been unanimity in the approach to be taken to this important question of assessment of loss, which constantly arises before industrial tribunals. With the benefit of the learning to date and our experience of the way in which industrial tribunals approach this task, we venture to offer the following guidance.

We begin with some general, possibly trite, observations. Each case must depend upon its own facts. The parties will select whichever authority best suits their cause on the facts of the particular case. Industrial tribunals are charged with doing justice between the parties. Compensation is to be assessed in such a way as to compensate the employee, not penalise the employer, in relation to the compensatory, as opposed to an additional or special award. Neither party should gain a "windfall." Compensation must be that which is just and equitable. Parliament has thereby granted a discretion to industrial tribunals which ought not to be placed in a straitjacket by too rigid statements of principle handed down by this tribunal in appeal decisions. However, that discretion must be exercised in accordance with clear principles, to some extent imported into this field from the common law by the words of the statute.

Against that background we turn to the earlier cases with a view to resolving any real or apparent conflicts in approach.

…

(1) The assessment of loss must be judged on the basis of the facts as they appear at the date of the assessment hearing ("the assessment date").

(2) Where the applicant has been unemployed between dismissal and the assessment date then, subject to his duty to mitigate and the operation of the recoupment rules, he will recover his net loss of earnings based on the pre-dismissal rate. Further, the industrial tribunal will consider for how long the loss is likely to continue so as to assess future loss.

(3) The same principle applies where the applicant has secured permanent alternative employment at a lower level of earnings than he received before his unfair dismissal. He will be compensated on the basis of full loss until the date on which he obtained the new employment, and thereafter for partial loss, being the difference between the pre-dismissal earnings and those in the new employment. All figures will be based on net earnings.

(4) Where the applicant takes alternative employment on the basis that it will be for a limited duration, he will not then be precluded from claiming a loss down to the assessment date, or the date on which he secures further permanent employment, whichever is the sooner, giving credit for earnings received from the temporary employment.

(5) As soon as the applicant obtains permanent alternative employment paying the same or more than his pre-dismissal earnings his loss attributable to the action taken by the respondent employer ceases. It cannot be revived if he then loses that employment either through his own action or that of his new employer. Neither can the respondent employer rely on the employee's increased earnings to reduce the loss sustained prior to his taking the new employment. The chain of causation has been broken."

18. That approach, at least in respect of guidelines 1 to 4, was expressly approved by the Court of Appeal in Dench but a slightly modified approach was enjoined in respect of Guideline 5, for Beldam LJ said this:

"The emphasis of "permanent employment" was relied upon in this case by Miss Victoria Bather appearing for the respondent. She says that, in effect, the tribunal came to the conclusion that the employment obtained by the appellant was permanent employment. If she lost that employment, it was the loss of that employment which caused any future loss and not the unfair dismissal. She referred us to the more recent case of Whelan v Richardson [1998] IRLR 114. In that case, in a helpful judgment in the Employment Appeal Tribunal, Judge Peter Clark laid down, for the assistance of industrial tribunals, a series of propositions making it clear, he said, that he was not seeking to fetter the exercise of discretion by industrial tribunals on the facts of any individual case.

Those propositions are undoubtedly helpful, as one would expect from Judge Peter Clark, but in the last of them he said:

"As soon as the applicant obtains permanent alternative employment paying the same or more than his pre-dismissal earning his loss attributable to the action taken by the respondent employer ceases. It cannot be revived if he then loses that employment either through his own action or that of his new employer. Neither can the [respondent employer] rely on the employee's increased earnings to reduce the loss sustained prior to his taking the new employment. The chain of causation has been broken."

I consider that statement needs qualification. No doubt in many cases a loss consequent upon unfair dismissal will cease when an applicant gets employment of a permanent nature at an equivalent or higher level of salary or wage than the employee enjoyed when dismissed. But to regard such an event as always and in all cases putting an end to the attribution of the loss to the termination of employment cannot lead in some cases to an award which is just and equitable."

19. That proposition was expressly adopted by Mummery LJ and by Sir Christopher Staughton. The authorities, therefore, indicate that there is no automatic guillotine upon a person's continued losses compensable by a former employer when the employee takes on new work. The paradigm case is where the employee obtains permanent alternative employment paying more than the rate in the previous lost job. It follows that in a case where there is either a loss or the work obtained is not permanent, that guideline will not be directly applicable and thus it is understandable that a more flexible approach, as set out in paragraphs 19 to 21 of Beldam LJ's judgment, is correct.
20. The principle of flexibility, in the interests of deciding what is just and equitable, was also used by Mr Pilgerstorfer in argument by analogy with Morris v Richards [2004] PIQR Q3 [2003] EWCA Civ 232 dealing with an employee who suffered a road traffic accident as a result of negligence by a driver, lost her job, found another job (at Toshiba) and then left that as a result of discrimination. Schiemann LJ summarised the position and the award of damages in the following way:

"The judge's award of general damages and special damages up to the time that she took the job with Toshiba is not challenged. What gives rise to this appeal is his finding that she can recover damages in respect of the time after she resigned from Toshiba. The defendant appellants submit that the judge was not entitled to make this award since these damages were too remote. …."

21. In considering whether losses following the loss of the second job were to be laid at the door of the tortfeasor Shiemann LJ went on to say this:

"The proper approach in a case such as the present is to start from the now undisputed facts that the defendant was to blame for the injuries suffered by the claimant and that by reason of the defendant's wrongful action she lost the job which she liked and for which she was trained. The fact that she obtained another job and then lost it will not automatically disqualify her from recovering from the tortfeasor damages in respect of the period after the loss of her new job ("the period in issue"). The crucial question is whether, in respect of the period in issue, it is just that she should recover damages from the tortfeasor. If she was at fault in losing her new job then she will have difficulty in recovering for the period in issue. If she was not at fault then in general she will recover. The question whether she was at fault is one which in principle the trial judge should resolve bearing in mind that it was the wrongful act of the defendant which put the claimant in the position of having to find a new job and that therefore she should not be judged too harshly. Such an approach seems consistent with two shipping cases which were cited to us – "The Metagama" and The Fritz Thyssen, the former a House of Lords case and the latter a first instance judgment affirmed in this court – and also with the approach of this court in Melia v Key Terrain Ltd (1969) No 155B cited in Kemp & Kemp The Quantum of Damages para. 13-007. That was a case where the injured man had, after the accident, been offered two jobs - one paid £3 a week less than the other. He had taken the more congenial but worse paid job and the tortfeasors submitted that this part of the loss was self-inflicted and should therefore not be borne by them. Rejecting this submission, Sachs LJ, with whom Karminski J agreed, said this:

"The question for consideration is whether the claimant should have mitigated the damage he suffered by taking a job which would have brought him in an extra £3 a week but would have involved him in night work on alternate weeks. He has never in his life before done night work and has a strong distaste for it. It also involved repetitive work of a type of which he had not previous experience and to which many people are averse.

As between a claimant and a tortfeasor the onus is on the latter to show that the former has unreasonably neglected to mitigate the damages. The standard of reasonable conduct required must take into account that a claimant in such circumstances is not to be unduly pressed at the instance of the tortfeasor. …the claimant's conduct ought not to be weighed in nice scales at the instance of the party which occasioned the difficulty."

22. Applying those principles it seems to us that there is no requirement on an employment tribunal faced with an employee who presents with mitigated loss to operate a guillotine at any stage. That is only likely to occur in a case which fits the EAT's Guideline 5 in Whelan. It must be borne in mind that the Tribunal is doing what is just and equitable in having regard to the loss sustained by the Claimant as a result of the Respondent's unfair act. It operates as a double test of causation, as Sir Christopher Staunton pointed out.
23. A tribunal may, if it is just and equitable, take an overall approach, look at all of the actual and probable losses and deduct all of the mitigation. On the other hand it may, permissibly, decide to draw a line between past and future losses and apply different tests. After all, what a tribunal is required to do is to speculate as to the future, see Scope v Thornett [2007] IRLR 155. It is an essentially different exercise from that of assessment of past losses, which can be decided as a matter of fact. As to the future, based upon an impression of what is likely to occur, the tribunal must to some extent speculate. If a tribunal decided to approach past and future losses in that different way, it would be committing no error of law in our judgment.
24. Thus the essential question is should the EAT intervene? We find no error of law in the Tribunal's approach and will operate on the basis of caution in dealing with an assessment of loss by an Employment Tribunal as required of us by the judgment in Bentwood Brothers.
25. Lest we are wrong and it be thought that there were an injustice in this account, we have also heard argument from the parties in relation to what Mr Pilgerstorfer contends is an alternative way of factoring in risk. This is an analysis of the Tribunal's finding as to the precarious nature of the work. Working backwards from the finding, the Tribunal would not have committed an act of injustice upon the Respondent had it factored in the £5,000 the Claimant earned in excess of her pre-dismissal earnings and taken a view about the risk of losing the current job.
26. In detailed figures Mr Pilgerstorfer takes, in simple terms, the projected loss by the Claimant on the hypothesis that she continues to work for Press TV at a rate which pays her £500 a month less than she was receiving at the Respondent. This gives her £6,149 which is the loss awarded by the Tribunal in this case. However, if she were to lose that job she would lose £32,149.
27. Doing the arithmetic in respect of both of those possible projections, that is losing the job or maintaining the job at its present rate, Mr Pilgerstorfer contends that £6,172 should be added to £4,968 to give a total of £11,141, which represents the way in which the Tribunal could factor in risk based upon the inherent uncertainty of the new job at roughly 20 per cent of the full loss, or 80 percent of the mitigated loss. If, as the Respondent urges, £5,000 is to be brought into that equation, then the Claimant still would end up with roughly the disputed figure.
28. This is an exercise in after-the-event consideration, trying to assist to support the justice and equity in the Tribunal's award. It is not strictly necessary but since we adopt this it reaches the same overall conclusion. It should reassure the Respondent that had the Tribunal assessed the risk to the Claimant in the inherently insecure environment she was working, the result would have been the same.
29. It is fair to say the Claimant's claim for one year's future loss at the rate of the mitigated loss was what the Claimant put to it. But it follows from the finding as to the precarious nature of the job, that without assessing a risk the Respondent might be getting an unfair advantage in the compensation. So from that alternative perspective too, the award is both just and equitable and we see no error of law in it.
30. The appeal is dismissed.