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United Kingdom Employment Appeal Tribunal |
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You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Maskill v Trafalgar House Construction (Regions) Ltd [1995] UKEAT 134_94_1302 (13 February 1995) URL: http://www.bailii.org/uk/cases/UKEAT/1995/134_94_1302.html Cite as: [1995] UKEAT 134_94_1302 |
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At the Tribunal
THE HONOURABLE MRS JUSTICE SMITH
MR R JACKSON
MR A D SCOTT
JUDGMENT
Revised
APPEARANCES
For the Appellant IN PERSON
For the Respondents MR A STAFFORD
(Of Counsel)
Eversheds Alexander
Tatham
London Scottish House
24 Mount Street
Manchester
M2 3DB
MRS JUSTICE SMITH: This is an appeal against the decision of an Industrial Tribunal sitting at Southampton on 22 March 1993 and 19 November 1993. The unanimous decision of the Tribunal was that there should be no award of compensation for the Appellant, although the Respondents had conceded that he had been unfairly dismissed from his employment with them as a contracts manager.
The history of the matter was that the Appellant had worked for A. Monk & Company Limited, the predecessors of the Respondents, Trafalgar House Construction, since 1963. He had risen through the Company to hold the post of contracts manager and had a generous contract of employment. He was entitled to salary, a company car, participation in a bonus scheme and a contributory pension scheme. There were also a number of other terms to which further reference will be made, some of which were of an unusually generous nature.
The Appellant was made redundant with effect from 9 December 1991. Under the terms of his contract he was entitled to six months' notice in writing. He was not given such notice but was paid six months' gross salary in lieu. That amounted to £14,226. He also received on his departure a statutory redundancy payment in the sum of £5,049 and a contractual redundancy payment in the sum of £1,485.
It is greatly to his credit that the Appellant made considerable and successful efforts to obtain another job and on 30 March 1992 he secured employment with Amey Construction Ltd as senior contracts manager at a salary of £28,500 per annum. His previous salary had been £28,452. In addition to his salary with Amey he was entitled to a company car, a pension scheme and a health care package. It was accepted before the Tribunal, that in many respects his new employment was comparable to that of the old. He certainly suffered no
continuing loss of earnings.
The claim before the Tribunal was brought in respect of five heads of loss arising because it was contended that the new contract of employment was less favourable than the old. In those respects it was contended that he had suffered or would, in future, suffer financial loss. First, in respect of the loss which would or might arise, because under the new contract of employment the Appellant was not entitled to terminal leave benefit, the Tribunal assessed compensation at £2,000, of which no complaint is made before this Appeal Tribunal. Second, because his new contract contained rather less generous provision for sick pay than the old, the Tribunal assessed loss at £2,500, of which no complaint is made before us. Third, in respect of the loss of employer's pension contributions during the short period while the Appellant was unemployed, the sum of £900 was agreed between the parties. Under those three heads, the total loss was £5,400.
Under the fourth head of claim, the Appellant sought compensation for the loss of his accrued pension rights. The Tribunal made a nil award under that head. That forms the first ground in this appeal. Under the fifth head, there was no award. There is no appeal from that.
The second ground of appeal is concerned with whether, and if so to what extent, the Appellant should give credit as against the sums awarded by the Tribunal, in respect of the money which he had received in lieu of notice and the money paid to him under the contractual redundancy scheme. The parties agreed that the contractual redundancy payment of £1,485 should be set off against the award. The Tribunal considered that part of the sum paid in lieu of notice should also be set against the award of compensation. He had received £14,226 but the actual loss suffered by him was three months' net pay. Thus the Tribunal calculated that he was in pocket so far as his loss of earnings were concerned, by the sum of £9,565. With the addition of the contractual redundancy payment they found that he was roughly £11,000 in pocket. They held that £11,000 should be set against the £5,400 at which they had assessed his loss and, that there should, in consequence, be no monetary award.
We return now to consider the first ground of appeal and the basis on which the Tribunal decided against the Appellant in respect of his claim for accrued pension rights. They found first that the two pension schemes, the one operated by the Respondents, and the Amey scheme were essentially very similar. They were both "final salary" schemes. Entitlements were to be calculated by reference to the number of years' service, divided by 60, multiplied by the final salary.
The Tribunal accepted evidence that Appellant's annual pension under the Monk Scheme would be £13,197.96 at the date of leaving in 1991. According to the trustees, that sum would have grown to a projected figure of £25,050 per annum at normal retirement age of 65. So far as the Amey scheme was concerned, they considered that as the joining salary was equivalent to that which the Appellant had received with the Respondents, it would be reasonable to assume that the Appellant's salary on retirement from Amey would be roughly equivalent to the salary he would have enjoyed with the Respondents but for his dismissal. It would follow that the pension earned during the period between 1991 and age 65 would be roughly the same, in either scheme.
The Appellant had called the evidence of an actuary, Mrs Pegram. She had, as we are told, put two reports before the Tribunal and she also gave oral evidence.
Her evidence was based upon the foundation that the two pension schemes were very similar, save in one respect. Under the Amey scheme, the pension to be paid after retirement carried with it a guaranteed increase of 5% per annum or, in accordance with the retail price index if lower. Under the Respondents' pension scheme, there was no absolute entitlement to any increase in the level of pension. However, the trustees had a discretionary power to pay such increases and, historically, it could be seen that such increases had been paid at the rate of about 5% per annum. The Tribunal considered that this was a minimal difference between the two schemes.
Mrs Pegram had given evidence that following his dismissal, the Appellant had taken the advice of Noble Lowndes and Partners Limited, pension advisers to the Respondents' pension trustees, that it would be in his interests to take his accrued lump sum out of the Respondents' pension fund and re-invest it in a pension policy with the Norwich Union.
Mrs Pegram was highly critical of the projected figures which had been quoted to the Appellant at the time of taking that step. It appears that the Norwich Union had advised that the pension fund would grow at 13% per annum and that the sum invested, which had been withdrawn from the Respondents' scheme, would produce a pension of £33,200 per annum at retirement age. Mrs Pegram was critical of that advice on two grounds. First she said that the 13% growth rate was far too optimistic and that a more realistic rate of growth would be 7% which would produce, on the sum invested by the date of retirement, a pension in the region of £25,000 a year, rather than £33,000.
She was also critical because she said that the mere act of withdrawing the fund from the Respondents' scheme caused the Appellant immediate financial loss. The sum he had withdrawn had been £82,495. The value of the fund required by the Respondents' pension scheme to produce the appropriate level of pension at retirement was £109,150. The difference was explained by the fact that, because pension increases awarded by the trustees were discretionary, provision had to be made for them so long as the Appellant remained within the scheme. If he left the scheme it was no longer necessary to provide for any such increases. Hence the fund withdrawn from the Respondents' scheme was less than the value of the fund if left within the scheme. Mrs Pegram gave evidence that the Appellant had already suffered a financial loss and would, at pensionable age, suffer a loss of pension.
She sought to assess that loss in two different ways. The first was by reference to the capital value of the fund to which the Appellant would have been entitled at the age of 65 had he remained in the Respondents' scheme, as compared with the capital values of the two funds which he has instead, namely the Norwich Union fund and the Amey fund. The calculation goes as follows. The value of the Respondents' fund at age 65 would have been £192,000. The projected value of the Amey fund at age 65 is £61,850. Mrs Pegram then apparently assessed the value of the Norwich Union fund at its current value of £81,000, i.e. slightly less than the sum of money which had come into the Appellant's hands on taking his fund out of the Respondents' scheme.
That calculation results in an estimate of the loss to the Appellant of £49,150. In their decision, the Tribunal were not overtly critical of it. However, as it seems to us, that calculation is manifestly flawed in that it does not compare like with like. What should have been compared with the £192,000 was the £61,850 from Amey, plus the projected future value of the Norwich Union fund at the age of 65. We do not know what that would have been, but it must have been more than £81,000. Consequently, if, as appears to be the case, the Tribunal ignored that first method of calculation, we think that they must have been right to do so.
Mrs Pegram advanced an alternative way of calculating the loss. That was to look at the annual pension which the Appellant would receive on retirement. She had calculated and put forward in her report the figure of £42,000 per annum as representing a projection of what the Appellant would have received had he remained with the Respondents and in their scheme. That figure appears to have been accepted by the Tribunal. She also calculated that the Amey scheme would produce at the age of 65 an annual pension of £13,800. That figure appears to have been accepted also. As we have indicated earlier, she was extremely critical of the projection of £33,200 as the annual pension to be received at aged 65 from the Norwich Union scheme. She thought it was over optimistic and felt that a figure of £25,000 was more realistic. Thus she thought the Appellant would receive a pension of about £38,000. Consequently, she calculated that there would be a short fall in the annual pension of approximately £4,000. After allowing for tax she assessed the loss at about £3,000 per annum. It appears to us that on her figures the gross loss would be about £3,200 and the net loss about £2,400 per annum.
The Tribunal were not satisfied that the Appellant had proved, on the balance of probabilities, that he would in fact suffer any such loss. They took the view that they could not tell, some 12 years in advance, whether the Norwich Union projection was over optimistic or whether it might be met. It seemed to the Tribunal that a small difference in the growth rate, of a percentage point or two, would make a very large difference to the loss suffered. Indeed, it may even be, as it appeared to the Tribunal, that the Appellant would be better off as a result of leaving the Respondents putting his money into the Norwich Union and taking the job with Amey, than he would have been had he remained in the Respondents' scheme until retirement.
The Tribunal considered that the figures were too uncertain and that there were too many speculative elements in the calculation for them to conclude that the Appellant had suffered or will suffer a loss. Still less were they satisfied as to the amount of any possible loss. They expressed their final conclusion in the following way:
"8 .... Even if there had been a loss of which we could reach a confident view, it must further be borne in mind that the applicant may, arguably, have a pension scheme with Amey which is marginally preferable to his old one in that cost of living increase are guaranteed up to a maximum of 5% instead of being discretionary. The loss, if loss there be, would not make its impact on the applicant's daily life for twelve years yet. Given the uncertainties of the portion, we doubt that we should find it just and equitable to make any award at this time".
In this first aspect of the appeal, Mr Maskill has raised four points. First he wished to introduce fresh evidence which he said had only come to his notice during the last two or three days. He claimed, he told us, that he had learned from a present employee of the Respondents, that there have been improvements in the Respondents' pension scheme which render that scheme very much better than the Amey scheme. He complained that the whole basis on which the assessment had been made by the Industrial Tribunal was now seen to have been erroneous.
He had not complied with the rules of court which apply where a party seeks to adduce fresh evidence on an appeal. We were concerned at his position. He was represented below, as we have indicated, and had the advantage of an actuary to assist him, but before this Appeal Tribunal he has been unrepresented. We did not wish him to suffer as a result of that. Accordingly we gave him the opportunity to have this appeal adjourned so that he could make a proper application for the admission of fresh evidence. However, we felt obliged to warn him of the possibility that an order for costs could be made against him if, on examination, the point proved to be of no substance. In the event, he decided not to pursue that point further.
His second, third and fourth points were those raised in the Notice of Appeal. First, he attacked the finding that he had not suffered any loss of accrued pension rights on the basis that the only evidence before the Tribunal was the evidence of Mrs Pegram. She had said that he had suffered a loss. She had calculated that loss and it was, he submitted, perverse of the Tribunal to reject her evidence and say that they were not satisfied as to his loss. Mr Maskill asserted that everybody knows, and all the financial institutions recognise, that a change of employment in mid-life almost always results in a pension loss.
We have some sympathy with the Appellant's position, particularly bearing in mind the recent publicity about the losses which have been suffered by holders of pension funds. However, we can only interfere with the decision of this Industrial Tribunal, if we are satisfied that their decision is perverse.
We consider that the Tribunal were entitled to reject Mrs Pegram's evidence to the extent that they did. They did not reject it in total. They simply declared that her evidence was based upon so many uncertainties, that they were not satisfied, on the balance of probabilities, that the Appellant had proved his point. It seems to us, from the analysis which we have already made, that the Tribunal was entitled to reach that conclusion. The first basis of Mrs Pegram's calculations seems to us to have been patently erroneous, if accurately reported by the Industrial Tribunal. The second basis depended upon the validity of her criticism of the Norwich Union projections. It seems to us that the Tribunal were entitled to express their doubts and uncertainties in the way in which they did.
Mrs Pegram had advanced a third argument, namely that the mere act of opting out of the Respondents' scheme had caused the Appellant to suffer immediate loss. Mrs Pegram had suggested that because that loss had accrued as a result of Noble Lowndes' advice, and because Noble Lowndes gave advice to the Respondents' pension trustees, the Respondents should be liable for that loss. The Tribunal did not expressly reject that argument, but it seems to us that it was an argument which could not possibly have been sustained. The decision to take his money out of the Respondents' scheme must be taken to have been the Appellant's personal decision and not one which could be attributed to the Respondents in any way.
The second point taken under this aspect of the appeal was that the Industrial Tribunal ought to have followed the guidelines set out in a booklet available to them for the purpose of assisting in the assessment of pension losses. That booklet was before them and was apparently referred to in evidence. The Tribunal did not refer to it in their decision, and Mr Maskill submits that they should have done so.
It appears to us that there is no merit in that argument. The Tribunal were not obliged to follow that guidance. In particular, were they not obliged to do so in a case where actuarial evidence was available to them. In any event, as it seems to us, the guidance is principally concerned with demonstrating how best to calculate the loss if it appears that there has been a loss. It must first be necessary for a Tribunal to conclude, on the balance of probabilities, that there has been a loss. As this Tribunal were not satisfied that there was any loss, the guidance in the booklet would be of no assistance to them.
The third criticism of this aspect of the decision arises from the penultimate sentence of the passage to which we have referred, where the Tribunal said this:
"8 .... The loss, if loss there be, would not make its impact on the applicant's daily life for twelve years yet".
Mr Maskill submits that that is an erroneous direction by the Industrial Tribunal. If the Appellant had suffered a loss, the fact that it would not impinge upon him for 12 years was not a reason, he submitted, for not making an award. If that was what the Industrial Tribunal meant, we would agree with Mr Maskill's submission. The fact that a loss will not be felt until some time in the future is a reason for discounting the sum to be awarded to take account of accelerated receipt, but it is not a reason for refusing to make an award. However
it does not appear to us that that error, if such it was, could make any difference to the result on this part of the appeal. The Tribunal had already found that they were not satisfied that there was any loss or that there would be in the future. This passage was mere speculation as to what the position might have been if they had found there would be a loss. That, in effect, disposes of the first aspect of this appeal.
The second aspect was concerned with whether the Tribunal were entitled to deduct the sum received by the Appellant as pay in lieu of notice from the award of compensation. The Appellant, Mr Maskill, submitted that his pay in lieu, being contractual, was in effect sacrosanct and that he should not, under any circumstances, have been required to set it against an award made by the Tribunal under other heads of loss. Second, he complained particularly that the Tribunal had not taken into any account the costs which he had incurred in seeking employment during the three months of his unemployment.
Dealing with the first point, the Tribunal referred themselves to two cases TBA Industrial Products Ltd v Locke [1984] ICR 229 and Addison v Babcock FATA Ltd [1987] ICR 805. The submission had been made to them on the Appellant's behalf, that on the basis of those decisions, no credit need be given for the payment in lieu of notice. The Tribunal considered that they were not bound by those decisions. They considered that they were entitled to deduct the payment in lieu if they thought it appropriate. They made it clear that they did think that it was appropriate because otherwise the Appellant would be very much in pocket. Were they wrong in reaching the conclusion that they were free to make that deduction? We have looked at the case of Addison v Babcock FATA Ltd [1987] ICR 805 which we freely admit we find to be not an easy case to understand. We have also looked at the case of Horizon Holidays Ltd v Grassi [1987] ICR 851 and the case of Isleworth Studios Ltd v Rickard [1988] ICR 432. It is clear to us, having examined those cases in some detail, that there is no rule of law that a payment in lieu of notice must not be deducted. It may well be that there are many cases in which such a deduction would not be appropriate, but there is no rule of law which prevents it.
It seems to us that the proper approach is that adopted by the Tribunal, namely to apply the provisions of Section 74 of the Employment Protection (Consolidation) Act 1978 and to exercise their discretion to make such award as they think is just and equitable in the circumstances. If, as happened here, such an exercise includes the deduction of a payment received in lieu of notice, then that, as it seems to us, is in accordance with the law. We detect no misdirection of law in the Tribunal's approach.
We have some sympathy with the Appellant as to his second point, namely that he had incurred costs in seeking his new job. He accepted that he had not advanced a specific figure to the Tribunal below as representing these expenses, although he told us that the general point was argued by his counsel. We consider that the point, if taken properly below, would be an attractive one and that some account should be taken of the costs incurred by a dismissed employee in seeking work.
However, in this case the Tribunal came to the conclusion that the Appellant was roughly £11,000 in pocket taking into account the payments that he had received and the actual loss of wages that he had suffered during his unemployment. His assessed loss was £5,400. It seems to us that the Tribunal's failure to take his expenses into account, as we are told they were invited to do, cannot have made any difference to their conclusion that this Appellant should not be entitled to a financial award. He has not sought to suggest that the expenses which were incurred were of such magnitude as would have made any difference to the final result.
In those circumstances we do not consider that this Tribunal has erred in either of the respects alleged and accordingly this appeal must be dismissed.
