United Kingdom Employment Appeal Tribunal

Appeal No. UKEAT/0011/15/MC

UKEAT/0092/15/MC

 

 

EMPLOYMENT APPEAL TRIBUNAL

FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON EC4Y 8AE

 

 

At the Tribunal

On 1 December 2015

Judgment handed down on 14 March 2016

 

 

 

Before

HIS HONOUR JUDGE LUBA QC

(SITTING ALONE)

 

 

 

 

 

 

MR A KAPOOR APPELLANT

 

 

 

 

 

BALFOUR BEATTY GROUP EMPLOYMENT LTD RESPONDENT

 

 

Transcript of Proceedings

 

JUDGMENT

 

 

 

 

 

 

 

 

APPEARANCES

 

 

 

 

 

For the Appellant	MR A KAPOOR (The Appellant in Person)
For the Respondent	MS CATHERINE RICHMOND (of Counsel) Instructed by: Pinsent Masons LLP 3 Hardman Street Manchester M3 3AB

 

 

SUMMARY

UNFAIR DISMISSAL - Polkey deduction

 

The Claimant was dismissed by the Respondent and brought a claim for unfair dismissal.  The Respondent accepted that the dismissal had been unfair because it had not followed its capability procedure.  On the issue of compensation, it contended that - even if it had applied its capability procedure - the Claimant would have, in any event, been fairly dismissed for “capability” of some other “substantial reason”.

 

After a contested hearing, the Employment Tribunal found that there was an 85% prospect that the Claimant would have been fairly dismissed no later than three months after the actual date of dismissal.  Compensation was correspondingly reduced.

 

Additionally, an invitation to include - as an aspect of compensation - a sum that might have been paid by way of bonus, if the Claimant had remained in employment, was refused.  That was on the basis that the Claimant would have had his employment fairly terminated before the bonus date and/or that it would not have been paid to him if he had been employed simply in the sense of working-out notice of termination of the employment given by his employer

 

The Claimant brought appeals against both the original decision of the Employment Tribunal and against its refusal of a reconsideration application relating to the above points.

 

APPEALS DISMISSED

The Tribunal had not erred in law in respect of either point.  It had been entitled to entertain, and determine, the invitation to make a Polkey deduction and had made no error in its reasoning.  The decision on the bonus issue was unimpeachable.

HIS HONOUR JUDGE LUBA QC

 

Introduction

1.                  These appeals are concerned with compensation for unfair dismissal.  The Claimant was unfairly dismissed by the Respondent, his former employer.  An Employment Tribunal awarded him compensation.  The Claimant contends that, in its calculation of the compensation to be awarded, the Tribunal erred in law.  In particular, he asserts that the Tribunal was wrong to make a significant reduction, in the compensation that he would otherwise have been awarded, to reflect the probability that he would have been fairly dismissed by the Respondent in any event had it followed the correct procedures (i.e. a “Polkey” reduction: Polkey v A E Dayton Services Ltd [1987] IRLR 503, [1988] ICR 142 HL)

 

The Essential Facts

2.                  The Claimant began working for the Respondent in May 2011.  Following a subsequent restructuring exercise, he was redeployed into the role of Strategic Integration Partner Manager from June 2013.  On the Respondent’s account, the Claimant did not perform well in that role - particularly in his dealings with a key business client (“Tech M”).  Additionally, he failed to use an internal reporting system known as “work tracker” to enable his work to be monitored and reviewed.  He was dismissed by letter dated 7 October 2013.  The reasons given were that: he had failed in nurturing a relationship with Tech M; there were concerns about his ability to manage that strategic relationship; and he had failed to use the work tracker.

 

3.                  The Claimant brought a claim to the Employment Tribunal contending that he had been unfairly dismissed.  In its Answer to that claim, the Respondent conceded that the Claimant “was unfairly dismissed, on the basis that it did not follow a fair procedure in relation to the Claimant’s dismissal” but it asserted that “the Claimant would have been dismissed by reason of capability and/or ‘some other substantial reason’ in any event”.  Its grounds of resistance gave Particulars at paragraphs 3.1 to 3.5 of why it contended that was so.  Its position was that “the Claimant has suffered no loss as a result of the procedural unfairness and, accordingly, is not entitled to receive any compensation”.  The original grounds of resistance had continued at paragraph 4 with: “Further, and/or in the alternative, the Respondent submits that the Claimant’s actions as detailed above caused or contributed significantly to his dismissal and any compensatory award should be reduced accordingly”.  However, that sentence was deleted in the amended grounds of resistance.

 

4.                  Given that position on the pleadings, the Employment Tribunal directed a hearing to consider the award of compensation.  Most specifically, on 17 February 2014, the Regional Employment Judge directed that “Polkey arguments will be considered at the hearing, if appropriate by reference to the applicable law and facts”.

 

5.                  The hearing was listed for 3 March 2014 before Employment Judge Wade (sitting alone).  The Claimant and Respondent were each represented by specialist employment counsel.  The matter before the Judge was within relatively narrow compass.  As the Claimant’s counsel put it in her written closing submissions for that hearing “The Respondent confirms that it does not rely on contributory fault.  The Respondent’s main assertion is based on Polkey”.

 

The Tribunal’s Judgment

6.                  The Judge reserved judgment.  By a subsequent Order dated 24 June 2014 she required the Respondent to pay compensation assessed at £21,651.  Her Order was accompanied by Written Reasons.  The Claimant was dissatisfied with the sum awarded and applied for a reconsideration of the Judgment and Order.

 

7.                  The Judge conducted a hearing of that reconsideration application on 20 November 2014. The Claimant was unrepresented and the Respondent was represented by Ms Richmond of counsel who had appeared at the earlier hearing (as she does on these appeals).

 

8.                  The Judge issued a further Reserved Judgment dated 11 December 2014.  By her Order she increased, modestly, the amount of compensation to £21,740.  But for the Written Reasons she gave, she rejected the majority of the grounds upon which reconsideration of her earlier Judgment had been invited.  She promulgated a revised version of her earlier Judgment.  I need not give an account of it at this stage but will refer to the relevant passages in dealing with each of the grounds of appeal.

 

The Appeals

9.                  There are two appeals.  The first, from the original Judgment and Order.  The second, from the Judgment and Order promulgated following reconsideration.  Both were directed for consideration at a Preliminary Hearing by a division of the EAT.

 

10.              At that hearing, on 1 July 2015, the Claimant was represented by volunteer counsel assisting under the ELAAS Scheme.

 

11.              Following the Preliminary Hearing, HHJ Eady QC directed the appeals to a Full Hearing (albeit limiting the grounds to be pursued).  She gave short Reasons in relation to her ruling but in particular considered that the Claimant had demonstrated a reasonably arguable point as to “whether the ET [Judge] properly considered the Polkey question against the [Respondent’s] own capability procedure and made the requisite findings of fact in relation to that and/or whether her approach thus gave rise to an error of law”.

 

12.              The Claimant produced a helpful skeleton argument for the appeals and made his oral submissions with great ability and clarity.  I also derived considerable assistance from the written and oral submissions of Ms Richmond, appearing for the Respondent.

 

The Relevant Law Applicable in this Case

13.              The Judge was primarily concerned with ascertaining the appropriate “compensatory award” under Employment Rights Act 1996 section 123.  That requires the making of an award of “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”.

 

14.              In some cases that award falls to be discounted or reduced by the factors identified in section 123(6), i.e. “Where the tribunal finds that the dismissal was to any extent caused or contributed to by any action of the complainant, it shall reduce the amount of the compensatory award by such proportion as it considers just and equitable having regard to that finding”.  But as indicated above, the Respondent in this case had withdrawn any contention for a reduction on this basis.

 

15.              It is, however, now settled law that the award which might otherwise have been made can be reduced or extinguished where the employee would have been, or was likely to have been, dismissed fairly by the Respondent at the same time or within a reasonable time thereafter: Polkey v A E Dayton Services Ltd [1987] IRLR 503, [1988] ICR 142 HL.  In the near three decades which have passed since the House of Lords identified this possibility, the principles for making a “Polkey reduction” have become relatively well settled.

 

16.              In my judgment they are well distilled in the following passage from Harvey’s Employment Law:

“Where evidence is adduced as to what would have happened had proper procedures been complied with, there are a number of potential findings a tribunal could make.  In some cases it may be clear that the employee would have been retained if proper procedures had been adopted.  In such cases the full compensatory award should be made.  In others, the tribunal may conclude that the dismissal would have occurred in any event.  This may result in a small additional compensatory award only to take account of any additional period for which the employee would have been employed had the proper procedures been carried into effect … In other circumstances it may be impossible to make a determination one way or the other.  It is in those cases that the employment tribunal must make a percentage assessment of the likelihood that the employee would have been retained …” (paragraph 2551).

 

17.              In Software 2000 Ltd v Andrews [2007] IRLR 568, Elias P gave the following guidance at paragraph 54(7):

“(7) Having considered the evidence, the tribunal may determine:

(a) That if fair procedures had been complied with, the employer has satisfied it - the onus being firmly on the employer - that on the balance of probabilities the dismissal would have occurred when it did in any event.  The dismissal is then fair …

(b) That there was a chance of dismissal but less than 50%, in which case compensation should be reduced accordingly.

(c) That employment would have continued but only for a limited fixed period.  The evidence demonstrating that may be wholly unrelated to the circumstances relating to the dismissal itself …

(d) Employment would have continued indefinitely.”

 

18.              In the instant case, the Judge concluded that a Polkey reduction should be made.  She found that: (1) the Claimant would probably have been dismissed three months later than the date upon which he was dismissed; but (2) there was a 15% chance he would not have been.

 

 

The Grounds of Appeal

19.              At the outset of the appeal hearing, the Claimant not only confirmed that he was very properly confining himself to only those grounds allowed to proceed by Order of HHJ Eady QC but that he was also not pursuing grounds 8 and 9 of his Notices of Appeal.

 

20.              I heard argument from both parties on the grounds that remained in both appeals.  Although there is some overlap, I shall deal with each of the grounds in turn.

 

Ground 1

21.              By this ground it is said (in summary) that the Judge erred by focussing on the alleged “conduct” or “contribution” of the Claimant instead of adopting the approach required by Polkey, i.e. to consider what the particular employer would have done in relation to termination of the particular employment if it had not unfairly terminated the employment when it did.  The complaint, in essence, is that the Judge paid undue attention to the alleged acts or omissions of the Claimant (i.e. his conduct) instead of considering what would or might have happened had the Respondent applied its normal process for dealing with capability issues in the workplace.

 

22.              At the forefront of the Claimant submissions was the proposition that the Judge ought not to have entertained any issue of the Claimant’s “conduct” at all because: (a) any reliance on conduct as justifying a reduction in compensation had been expressly abandoned by amendment of the Respondent’s case; (b) the Claimant had accordingly not come prepared to deal with the point and had had no opportunity to canvass it with the Respondent’s witnesses before he came to give his own evidence; and (c) he had been given no notice of any “change of tack” on the Respondent’s part.  As he put it in his skeleton argument, the Respondent had “attempted to make its Polkey case on the Claimant’s behaviour”.

23.              The Claimant accordingly submitted that the Judge had been wrong, on the basic principles of natural justice to permit this course.  The Respondent, he contended, had been estopped from proceeding in this way because of its amendment and by the terms of its correspondence (to which I was taken).  Further, the Judge had erred when, having allowed the hearing to take this course, she then allowed “conduct related” issues to infect her own assessment.

 

24.              The Claimant went so far as to suggest that it was “very rare” for a Polkey reduction to be made in “capability” dismissals.  The unfairness in this case had been failure by the Respondent to follow its procedure for capability cases.  The Claimant’s “conduct”, he asserted, had never been in issue.

 

25.              It seems to me that this ground really breaks down into two parts.  First, (whether framed by way of estoppel or want of natural justice) that the Claimant was met with a case of which he had had no notice.  Second, that any issues of “conduct” had no place in a Polkey assessment where the dismissal had been unfair for want of compliance with a capability procedure.

 

26.              As to the first part, I have no hesitation in rejecting the assertion that the Respondent was estopped from advancing the points it did or that there was any unfairness in the conduct of the hearing by the Judge.  As Ms Richmond correctly contended, the amended grounds of resistance had expressly identified that whether by reason of capability or “any other substantial reason” the Claimant would have been dismissed in any event.  Ample Particulars of why that was said to be the case were given at paragraphs 3.1 to 3.4 of the amended grounds.  It is precisely those matters that were in play before the Judge.

27.              My assessment of the correspondence that I was shown and of the amendment to the pleading is that it was all limited to the abandonment of reliance on section 123(6) rather than a disavowal of what was pleaded in the sub-paragraphs of paragraph 3 in the amended grounds.  If, there had genuinely been a volte face in the way the Respondent’s case was being advanced before the Judge, the Claimant’s own experienced counsel would have objected and drawn the matter to the attention of the Judge.  Nothing of that sort occurred.

 

28.              As to the second part of the ground, I reject the contention that the issues engaged with by the Judge have no proper part to play in a Polkey assessment.  The Judge spells out in her Written Reasons at paragraph 25 that the “evidence pointed to the probability that the Claimant would have been dismissed if a fair procedure had [been] applied” and then gives four clear examples (at paragraphs 25(a)-(d)) to sustain that assessment. 

 

29.              The high watermark of the Claimant’s case on ground 1 was that in her Reasons given upon the reconsideration application (at paragraph 3.1) the Judge had made her own “clear finding” that “the Claimant’s behaviour and failure to co-operate … contributed very substantially to the dismissal”.  That, said the Claimant, puts it beyond doubt that she had allowed “conduct” issues to dictate her assessment.

 

30.              I can detect no error.  The Judge is there doing no more than to frank her earlier findings that the Respondent had made out its case that it would have dismissed - in any event - taking into account the very “factors” that it had pleaded.

 

31.              Although the Claimant took me to a wide range of authority in support of this ground, I found it of limited, if any, assistance.  In particular, nothing put before me made good his proposition that conduct issues had no place in a Polkey assessment where the background unfairness was failure to follow a capability procedure.

 

32.              In short, I accept the submission made in the Respondent in its skeleton argument at paragraph 8 that “It was necessary for the Tribunal to focus on the conduct of the Claimant in order to make findings as to the likelihood that he would improve his performance and remain in employment as a result of the formal capability procedure”.  In my judgment it was not only “necessary” but was a task correctly and amply undertaken by the Judge.

 

Ground 2

33.              This ground contends that proper application of the various stages of the Respondent’s own capability procedure would not have enabled the Claimant to have been dismissed earlier than six months later than when he was.  The Judge, it is said, was wrong to substitute a capability procedure, which she would have adopted herself, in order to determine that a dismissal would have occurred after only three months.

 

34.              Founding on passages of the judgment of this EAT in Hill v Great Tay Primary School [2013] ICR 691 at paragraph 32, the Claimant contended that the Judge had failed to make her “assessment of chance relating to what the employer who was actually before [her], might have done”.  The Respondent would have, the Claimant submits, applied its own procedure and have seen it through to the end.  He took me through the procedure in some detail to show that it allowed no “short cut” of the various stages envisaged and was underpinned by rights of appeal available at each stage.

 

35.              In my judgment, the Judge was not embarking on a frolic of her own but was engaging with the “capability proceedings” on which the employer itself ought to have embarked: see her Written Reasons at paragraph 26.  She had already found as a fact that - at the date he was actually dismissed - his immediate line managers had formed the genuine views that any improvement on his part would be unlikely to undo the damage done to customer relations and would be “too little too late”.  From that starting point she was entitled to then find that by three months into the capability process (had it been adopted) “the Claimant would probably have exhibited the same refusal to accept his managers’ guidance and lack of insight into how he was getting it wrong”.  That extract from paragraph 26 of her Reasons is followed by her explanation that, at that point, the process would have been abandoned and the Claimant dismissed.  I can find no fault with the approach or the outcome.

 

36.              Ms Richmond was right to remind me that far from constituting a “straightjacket” the capability procedure in this case was described as a non-contractual “framework arrangement”.  I consider that it was wholly unreal to construe the scheme as one locking-in the Respondent for some six months - even in the case of a senior employee lacking sufficient insight to see why improvement in his performance was required and in what respect.  The Respondent might well have taken the option - at the three-month stage - to abandon the capability route and dismiss for some other reason given “the commercial risks of the Claimant continuing to fail” (at paragraph 26 of the Written Reasons.  That was the Respondent’s pleaded case and the Judge was at liberty to adopt it, on the factual findings she made.

 

37.              The Judge had plainly engaged with the proposition that the adoption of the capability process might have served to provide a “wake up call” sufficient to cause a radical change on the Claimant’s part.  Indeed, that is precisely why she identified a 15% prospect of dismissal not having occurred.  As she explained, (at paragraph 5 of the Reasons on reconsideration) “this was a matter for informed speculation and that is what I undertook”.  I am not satisfied that she made any error in this respect.

 

Grounds 3 and 4

38.              Ground 3 contends that the Judge failed to set out and apply the relevant law and ground 4 is based on a want of sufficient reasoning to sustain the decision (even if the Judge did direct herself in accordance with the relevant law).  Although both grounds were developed fully in the skeleton argument for the Claimant - and in his succinct oral submissions - it is not necessary for me to set them out with greater particularity.

 

39.              As to ground 3, it is - at first blush - surprising that the Judge did not set out the statutory provisions that form the basis of her jurisdiction or any summary of the leading authorities.  In some cases that omission may undermine a decision.

 

40.              But this “omission” must be seen in context.  Both parties were here represented by experienced specialist counsel.  The issue (whether to make a Polkey reduction, and if so to what extent) was the primary focus of the evidence and submissions on both sides.  It was, as I have said, a hearing within narrow compass.  Provided, in those circumstances, that the Judge directed herself in accordance with the relevant principles she need not have set them out - when they were obvious to the parties before her.

 

41.              The Claimant’s particular contention is that had the Judge cited authorities such as Software 2000 (see above), most particularly subparagraphs 54(3) and 54(4), she would have avoided the asserted conflation of the issues of “contribution” and “likelihood of dismissal” and would have been more reticent in accepting the Respondent’s evidence as reliable and relevant.  I am satisfied that no such conflation occurred.

 

42.              The Particulars of ground 4 contend that, linked to the failure to direct herself in accordance with the authorities, the Judge gave - in the respects particularly identified in the skeleton argument - insufficient or insufficiently intelligible reasons for accepting the Respondent’s evidence or for failing to determine some of the issues raised on the evidence.

 

43.              In my judgment, the Judge erred in none of the respects asserted under these two grounds.  Her revised Written Reasons (even without their amplification by the Reasons given on the reconsideration application) suffice to demonstrate the application of the correct legal principles to the facts of the case.  The Judge has determined the central issues in dispute, which is all that she was required to do.  The Reasons are ample and enable any reader to understand what findings were made, what conclusions were reached and what reasoning led to them.

 

Grounds 5, 6 and 7

44.              These grounds relate to a bonus payment.  The Claimant’s case was that he should have been paid a bonus due for payment on 16 March 2014.  His claim before the Tribunal included a claim for that amount.

 

45.              In so far as the claim founded on a contractual entitlement on the part of an employee, it could not succeed because the Claimant had been dismissed (unfairly) in October 2013 and, even if he had been fairly dismissed on the date identified by the Tribunal (11 January 2014) his employment would have ended prior to the bonus date.

46.              The Claimant’s case was that the Judge ought to have awarded a sum equivalent to the bonus as part of the compensatory award.  His case (factually) ran as follows: (a) the Judge had decided that I would not fairly have been dismissed until 11 January 2014; (b) had I been dismissed on that date I would have been entitled to three months’ notice; (c) that would have meant that I would still have been employed on 18 March 2014 and been entitled to receive the bonus; and (d) in so far as the award of the bonus was a matter of “discretion” then (i) that discretion had to be exercised fairly and reasonably (Horkulak v Cantor Fitzgerald International [2004] IRLR 942 CA) and (ii) the Respondent had conceded that performance had no bearing on whether the bonus would be paid.  Even if the bonus was somehow “caught” by the Judge’s reasoning on Polkey, it - like the rest of the award - should only have been reduced by 85% and the balance was payable.

 

47.              Like the Judge herself (at the reconsideration hearing), I was initially attracted by the simplicity of this approach.  However, the Judge rejected it for the reasons briefly given at paragraph 38 in her initial Written Reasons and for the reasons spelled-out at greater length at paragraphs 4.3 to 4.5 of her Written Reasons on reconsideration.  Put shortly, she found in the alternative that either: (1) any possibility of an award in respect of bonus was foreclosed by the application of her factual findings as to payment in lieu of notice; or (2) even if the Claimant had been treated as having been in employment in March 2014, the bonus would not have been payable or paid.  Either alternative, if correct, was sufficient to sustain the outcome.

 

48.              On the first of the Judge’s alternatives, Ms Richmond relied on a finding of fact (Written Reasons at paragraph 31) that the Claimant had been dismissed with pay in lieu of notice in October 2013 and that, even if a fair dismissal could not have taken place until January 2014, the Claimant would on that date also have actually had his employment terminated with pay in lieu - so that he would not in fact have been in employment in March 2014.

 

49.              However, the Claimant was right to draw my attention to the later finding by the Judge that the Respondent had had no contractual right to dismiss with pay in lieu, i.e. that the Claimant was entitled to remain in employment for the three month notice period (see paragraph 4.2 of the Written Reasons on reconsideration).  I confess that I found it difficult to follow the Judge’s subsequent explanation (at paragraphs 4.3 to 4.4) as to why in those circumstances the bonus would not fall into the pool of items for a compensatory award.

 

50.              Given that, Ms Richmond focussed her arguments on upholding the Judge’s second alternative.  She reminded me that the scheme was for a non-contractual performance-related discretionary bonus.  The concession made in the Respondent’s evidence that performance had no bearing was made before the detail of the “Management Incentive Scheme” was put in evidence by the Claimant and was thereupon retracted.  The Scheme’s own guidelines for the exercise of discretion included: “You … must not have given notice at the time the bonus is paid in order to receive any bonus payment”.  The Judge, she submitted, had been entitled to find that the bonus would not have been payable if, in analogous circumstances, the employee had been given (as opposed to having given) notice: see paragraph 4.5 of the Written Reasons on reconsideration.

 

51.              In my Judgment, the second alternative, as explained by the Judge is clear, cogent and logical and discloses no error of law.  Horkulak is authority only for the proposition that discretionary bonuses should not be withheld unreasonably or capriciously.  In a scheme in which it is expressly stated that the bonus will not be paid to an employee working out notice he has given, it is inconceivable that the only reasonable exercise of discretion would have been to make payment to an employee working out notice he has been given by the employer.

 

52.              There having been no bonus payable, no question of an award of 15% of its value can arise.

 

Conclusion

53.              For the reasons given above, the appeals have not succeeded on any of the grounds deployed, notwithstanding the considered and well-measured manner in which the appeals were advanced.  Accordingly, both appeals fall to be - and are - dismissed.

 

Endnotes

54.              I heard this case on 1 December 2015 when sitting as a Recorder at the EAT.  It was my final case in that capacity.  I sincerely regret the delay that has occurred thereafter in the preparation and promulgation of this Judgment.  Sadly, the demands of my new full-time judicial role in another jurisdiction have not allowed me the opportunity to return to this matter earlier.

 

55.              My judgment was circulated in draft to the parties, in the usual way, and I am grateful to them for the typographical matters identified for correction.  Those have been incorporated to the extent that I considered appropriate.  However, the Claimant has lodged a written submission, by letter of 9 March 2016, inviting me to be “open to change [my] mind on the decision overall” and making a case for such a change.  I have read with care what has been written but see no cause to change my judgment or my conclusions as to the disposal of the appeals.