Appeal No. UKEAT/0079/12/RN
EMPLOYMENT APPEAL TRIBUNAL
FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON EC4Y 8JX
At the Tribunal
On
19 September 2012
Before
THE
HONOURABLE LADY SMITH
MR A HARRIS
MR T HAYWOOD
HOWELLS SCHOOL APPELLANT
MISS
W GERRARD RESPONDENT
Transcript of Proceedings
JUDGMENT
THE HONOURABLE LADY SMITH
Introduction
1.
This is an appeal from the judgment of an Employment Tribunal sitting at
Mold, Employment Judge W Beard sitting with members registered on 28 June 2011. The Tribunal found that the Claimant had been unfairly dismissed and awarded
her a total sum of £7,958.09. The constituent parts of that award were a basic
award of £1,730.75, an award for loss of statutory rights of £300, an award in
respect of loss of earnings of £6,399.58 and an award for failure to provide
terms and conditions of employment of £1,384.60. The loss of earnings figure
was based on the sum of £10,085.16 before the application of a Polkey
deduction of 20% and deduction of sums already received by the Claimant. The
Claimant was compensated for 102 weeks salary at £263.58 per week, £263.58
being her pre-dismissal net weekly earnings. The starting point was,
accordingly, £26,885.16. However, £16,800 was deducted by the Tribunal, being
their allowance for what the Claimant would have earned if she had
appropriately mitigated her loss.
2.
We will continue referring to parties as Claimant and Respondent. The
Claimant was represented by Mr Barrow of counsel before the Tribunal and before
us today. The Respondents were represented by Ms Thelen of counsel before the
Tribunal and before us today.
The Background Facts
3.
Dealing briefly with the background facts, we note that the Respondents
are a school and at the relevant time that school maintained an equestrian centre
as part of its operation. The Claimant was employed as yard manager at the
equestrian centre and she earned, as we have said, £263.58 net per week.
Another woman, Sarah Hamlyn, was employed as the chief riding instructor and
there were a further three employees working at the equestrian centre.
4.
By late November 2009, the Respondent’s bank required a reduction of 25%
in their overdraft facility. Savings required to be and were made in the course
of what the Tribunal referred to as a “thorough overhaul of the school’s
finances”. Those savings included the making of cuts in salaries. Matters
were not helped by the impending loss of a funding stream and a poor winter.
The Respondent’s owner, Mr Locke, concluded that the equestrian centre was not
viable in its then existing form, in particular its fixed costs which were, in
the main, salaries, had to be cut.
5.
On 24 December 2009 the Claimant was told by Mr Locke that she was being
made redundant because of the financial position of the school. Mr Locke
lacked a clear understanding of the role performed by the Claimant, in
particular he had failed to appreciate that both she and Sarah Hamlyn performed
roles which, according to the Tribunal, were virtually the same. There was no
consultation and the Claimant had no opportunity to ascertain and correct Mr Locke’s
misunderstanding. In the event Sarah Hamlyn resigned in the middle of January
2010.
6.
The Claimant accepted in her evidence to the Tribunal that there was a
need to reduce the running costs of the stables and that the Respondent’s
business was running at a loss. Mr Locke told the Tribunal in his evidence that,
as at the date of the hearing in May 2011, the equestrian centre had one
employee whose salary was £7,200 per year and a working student. He also had
sessional workers to whom he paid £50 per day. Mr Locke’s evidence appears to
have been accepted by the Tribunal as credible and reliable.
The Tribunal’s Judgment
7.
The Tribunal found the Claimant’s dismissal to have been unfair. That
finding is not challenged. They concluded that if there had been a proper
consultation, Mr Locke would have considered that the Claimant and Sarah Hamlyn
could have been in a pool for selection. Consultation “…might have resulted in
an outcome where the Claimant and not Sarah Hamlyn would be retained”
(paragraph 26.1). At paragraph 27 they said this:
“The Tribunal take the view that it is not clear that the
Claimant would have been dismissed for redundancy had a fair procedure been
followed. It is not possible to say what would have happened.”
8.
They go on at 27.2 to 27.4 as follows:
“27.2 In our judgment given that there were two individuals
carrying out similar roles we have to start from the premise that in a fair
procedure there was an equal chance of dismissal.
27.3 However we add into that equation the evidence that Sarah
Hamlyn wished to reduce her working hours, and within a short time resigned her
employment and we are drawn to the conclusion that a proper consultation could
have revealed that the claimant was more likely to remain as an employee.
27.4 Doing the best we can, and speculating on the available
evidence as to possible outcomes, we have come to the conclusion that the
claimant had a 20% prospect of being dismissed in a fair process.”
9.
The Tribunal then proceeded to consider whether the Claimant had
mitigated her loss, found that she had failed to do so and estimated what ought,
reasonably, to have been her earnings. They did not, however, address the
question of what the Claimant’s job would have been had she been retained or
what she would have been paid. They simply proceeded to carry out their calculations
on the basis of her pre-dismissal net earnings which were, as we note,
£13,442.58 per year.
The Relevant Law
10.
In the case of Scope v Dr Carol Thornett [2006] EWCA Civ 1600, on the subject of compensation for unfair dismissal, Pill LJ (at
paragraph 34) said this:
“The Employment Tribunal’s task when deciding what compensation
is just and equitable for future loss of earnings will almost inevitably
involve a consideration of uncertainties. There may be cases in which evidence
to the contrary is so sparse that a Tribunal should approach the question on
the basis that loss of earnings in the employment would have continued
indefinitely. But where there is evidence that it may not have been so, that
evidence must be taken into account.”
11.
That, in essence, approves the analysis carried out by this Tribunal in
the case of Red Bank Manufacturing v Meadows [1992] IRLR 209
where at paragraph 10 Tucker J said:
“It seems to us that since the decision in Polkey [1987] IRLR 503 it is necessary for a Tribunal when calculating the amount to be
awarded for compensation to ask itself this two-stage question; if the proper
procedure had been followed and if consultation had take place, would it have
resulted in an offer of employment? This was the question to which the
Tribunal did address themselves in the earlier hearing and to which they gave
the answer as it might have done so. What the Tribunal failed to do and what,
in our view, they should have done was to go onto consider first what that
employment would have been and, second what wage would have been paid in
respect of it.”
12.
That approach was applied by this Tribunal in the case of Weston v
Metzeler (UK) Ltd EAT/303/91 where HHJ Hicks QC said at pages 8 to 9
that he was following Red Bank and explained:
“A tribunal considering the amount of a compensatory award is
concerned in the words of section 74.1 of the Employment Protection
Consolidation Act 1978 with the loss sustained by the complainant. It is not
in dispute that in quantifying that loss the tribunal should apply the same
principles as a court quantifying the loss and damage suffered by a successful
Plaintiff. The first and overriding principle is that an award of compensatory
damages should be such as to put the injured party in the same position so far
as money can do so as the wrongful injury had not been suffered. That entails
a comparison between the real events which actually followed the wrongful act
or omissions and the hypothetical events which would have followed it had it
not occurred.”
13.
If those hypothetical events are the offer and acceptance of a different
job then it is the earnings in that job which must be compared with
actual earnings following the unfair dismissal. Pre-dismissal earnings that
would not have continued are not relevant. No authority peculiar to employment
is needed for such a basic principle.
Finally, we would refer to the case of KPG
Computer Support Services Ltd v Abaymoi EAT/303/92, again a decision of
this Tribunal, the judgment being delivered by HHJ Hicks QC who said:
“We agree with the decision in Red Bank that the two
stages are separate. That is to say first the stage of assessing what are the
respective chances that there would have been; 1) a fair dismissal from
redundancy or; 2) retention in the post or; 3) the offer and acceptance of
alternative employment. And then the second stage of assessing the value of
such an offer and acceptance of all terms of employment if the chances of that
are more than nil.”
The Appeal
14.
There was essentially one point advanced in this appeal. It was as
follows. The Tribunal whilst correctly posing itself the question of the salary
at which the Claimant would have been employed if she had not been dismissed,
failed to answer to it. Ms Thelen submitted that the Tribunal required to
answer that question even if it involved speculation. She did so under
references to the cases of Red Bank, Weston and KPG. The Tribunal could not, without doing so, assess the value of the Claimant’s
claim for compensation in relation to earnings. Ms Thelen submitted there was
ample evidence and material before the Tribunal that, in the Respondent’s
business, times had changed. Costs had been reduced, there was, by the time of
the hearing, only one employee at the equestrian centre and that employee
earned only £7,200.
15.
As to disposal, she submitted that we could determine the matter, which
failing, we should remit to a fresh Tribunal.
16.
For the Claimant, Mr Barrow submitted that the assessment of
compensation under section 123 of the Employment Rights Act 1996 was a
discretionary exercise which ought not to be interred with. He referred in
support of that submission to the case of Chief Constable of Lincolnshire
Police v Natasha Caston [2009] EWCA Civ 1298 and CICB v Beck
[2009] EWCA Civ 619 as referred to by HHJ McMullen QC in his decision when he
considered this case on the sift.
17.
Mr Barrow pointed to the Tribunal having referred to Red Bank
and Polkey correctly. This was not a case where the Claimant’s
job had disappeared. Mr Locke had wanted to keep on either the Claimant or
Miss Hamlyn. The import of that submission seemed to us to be that the
Tribunal were then entitled to proceed on the basis that that would necessarily
be at the same salary as before. He submitted that there was no evidence that
the Claimant’s job would have changed. He referred to the same authorities as had
Ms Thelen. In addition he referred to the case of Fuller v London Borough of Brent [2011] EWCA Civ 267 at paragraph 30, although we observe
only for the latter part of that paragraph. He omitted quotation of the earlier
part which advises:
“Another teaching of experience is that as with other Tribunals
and Courts there are occasions when a correct self direction of law is stated
by the ET but then overlooked or misapplied at the point of decision.”
18.
Mr Barrow submitted that in the passage in which the Tribunal had
concluded that there was but a 20% chance of the Claimant being dismissed if
the Respondent had followed a fair procedure, they had also found that it was
not possible to reach any view about what salary she would have received if she
had been kept on. We pause to observe that, on one view, that proposition
wholly undermines the Claimant’s case since it would suggest that no
loss of earnings could be allowed for. We think, however, that the import of
Mr Barrow’s submission was intended to be that the Tribunal had, in fact,
concluded that they could properly assume that the Claimant would have carried
on being paid at her pre-dismissal rate.
19.
Mr Barrow moved his cross-appeal, namely a submission that the Tribunal
had erroneously applied the 20% Polkey deduction to the award for
failure to supply the Claimant with a copy of her terms and conditions of the
employment. The cross appeal was conceded. It was plainly an error on the
part of the Tribunal to apply the deduction to that part of the award
The Decision
20.
We are satisfied that this appeal is well founded. The Tribunal
certainly asked themselves the right question, namely, if there was a chance that
the Claimant would have been kept on in the Respondent’s employment, what
salary would she have been paid? However, they failed to answer it. We cannot
read the passage founded on by Mr Barrow at paragraph 27, as beginning to do
so. It deals solely with a different question - the initial Polkey
question of whether or not there was a chance of the Claimant not being
dismissed if a fair procedure had been followed.
21.
The Tribunal were, for the reasons advanced by Ms Thelen and explained
in the authorities to which we have referred, obliged to answer the question. We
are satisfied that they had made findings which, in fact, provided them with
the answer. It was that the financial circumstances of the business were
undergoing a significant change for the worse at the time of the Claimant’s
dismissal which meant that salaries were being cut, the number of employees
employed at the equestrian centre had been reduced from four to one and, by the
time of the hearing, less than 18 months later, the most that was being earned
there by anyone was £7,200, the salary being paid to the single, regular
employee.
22.
Thus, putting matters are their highest for the Claimant, the most she
could have hoped was to have earned £14,400 during the two-year period which
the Tribunal, in their discretion, considered was the appropriate compensatory
period.
23.
We are satisfied that there is no need for a remit here. It is plain
that on the Tribunal’s findings in fact, the only answer to their unanswered
question was and is that the Claimant’s award ought to have included nothing
for loss of earnings since what she would have earned at the equestrian centre would
have been exceeded by what, if she had mitigated her loss, she would have
earned in alternative employment. That is even before any allowance is made for
the payments actually made to her by way of redundancy pay and sums earned in
the meantime.
24.
The arithmetical result is then that the award payable to the Claimant
ought to have been as follows. First, a basic award of £1,730.75 and £300 for
loss of statutory rights, a total of £2,030.75 to which there required to be
applied a Polkey deduction of 20% (£406.15) bringing out a figure
of £1,636.60 as compensatory award. To that, there requires to be added the sum
of £1,384.60 for the failure to provide terms and conditions of employment.
The total award payable to the Claimant is thus £3,021.21 and we will pronounce
an order upholding the appeal and substituting for the award made by the
Tribunal the sum of £3,021.21.