Appeal No. EAT/1138/95

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 4 October 1996

Before
HIS HONOUR JUDGE H J BYRT QC
MRS J M MATTHIAS
MR G H WRIGHT MBE

B & Q LTD	APPELLANTS	
MS E CAPON	RESPONDENT	

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellants	MR P WOODHOUSE
(of Counsel)
Hepherd Winstanley & Pugh
22 Kings Park Road
Southampton
Hants
SO15 2UF
	
For the Respondent	MR J POINTING
(of Counsel)
Shepherd Harris & Co
2 Cecil Court
London Road
Enfield
Middx
EN2 6HH	

	JUDGE BYRT QC:	This is an appeal from the decision of the Industrial Tribunal sitting at Stratford in East London on 26 July 1995.

	Before the Industrial Tribunal were two Applicants claiming unfair dismissal.  The Respondents to that application, B & Q, now the Appellants before us, contended that the dismissals were by reason of redundancy and the Applicants challenged that contention.

	The Industrial Tribunal heard the issue whether there was a redundancy situation as a preliminary point.  They found that the Respondents had failed to establish the reason for dismissal to be redundancy and therefore that the Applicant’s claim for unfair dismissal succeeded.  B & Q now appeal and therefore are the Appellants here today.

	Both the employees entered an appearance to that appeal.  The appeal against one of the two has been withdrawn with leave of the Court.  That of Miss Capon is however pursued and has been argued out in front of us.

	Ms Capon was employed by the Appellants for a considerable period of time, latterly as an Administration Manager or a Departmental Manager at their Enfield store.  There came a time when the Appellants wished to carry out a restructuring of the management levels of all their stores in the South East of England, East Anglia and the northern parts of Greater London.  Mr Turner, the Appellants’ Regional Manager, gave evidence before the Industrial Tribunal.  He said the restructuring mainly concerned middle management.  Its purpose was to eliminate some of the anomalies which existed between stores.

	The Industrial Tribunal made a number of findings of fact which have to be borne in mind in coming to our decision on law in this case.  The first one was that at the end of the restructuring, a smaller number of employees were required to do a similar amount of work.  

	Mr Turner’s evidence had been that 15 people had been made redundant and they had all been at the departmental management level.  A new departmental management specification was arrived at which required the fulfilment of substantially the same role, but it was a bigger and more demanding job although in the first instance it was to be paid at the same rate.  Thereafter the Industrial Tribunal record that the selection procedure adopted by the employers was to look at the performance of each Manager before deciding who should be dismissed.

	The third finding was an acceptance that the Appellants were reorganising the managerial structure of each store to produce a level and consistent management throughout all their stores.  They went on to find that this meant that a number of employees became surplus to requirements at managerial level.  They referred to a letter dated 12 July 1994 in which the employers had notified the staff that, as a consequence of their decision to restructure, there would be fewer Assistant Managers and Departmental Managers.  

	The Industrial Tribunals asked themselves whether, this amounted to redundancy.  The Industrial Tribunal began by reminding themselves of the wording of Section 81 (2)(b) of the Employment Protection (Consolidation) Act 1978.  The Act defines redundancy by reference to a situation where the requirements of that business for employees to carry out work of a particular kind have ceased or diminished. 

	Then the Industrial Tribunal proceeded to paraphrase what they understood the requirements of that section to be.  They said that B & Q must establish there had been a cessation or diminution of their business in the place where the employee was employed, and in so paraphrasing they focused attention on the diminution of work rather than on the requirements of the business for employees.  

	There were other findings of importance by the Industrial Tribunal.  They found there was a reorganisation of the Appellants’ management structure so as to make it more efficient for doing the work in each of their stores.  

	They said that whilst the Appellants might wish to bring about a justifiable reorganisation of their business, this did not, in the Tribunal’s view, necessarily establish a redundancy situation.

	The Tribunal summarised its approach in paragraph 5 of the Reasons:

“...  The criteria in our view, for a redundancy situation to exist is a diminution or cessation in the amount of work which is being carried out by the employer.  ...”

	They then went on to find that there had been no such diminution or cessation of work and accordingly they rejected the claim that there had been redundancy.

	Mr Woodhouse for the Appellants says that the Industrial Tribunal’s error of law stems directly from their paraphrase of the relevant section of this Act.  He emphasised his point by drawing our attention to a number of authorities, two of which we think of special significance.  The first is the case of Delanair Ltd v T L Mead [1976] IRLR 340 where Cumming-Bruce L J said as follows:

“The relevant question of fact for determination is whether the employers have shown that the decision to dispense with the services of a foreman/electrical in the maintenance department. was the result of an appraisal of the requirement of the business for employees to carry out that work.  If such an appraisal was made and a decision taken that the work formerly done by Mead could be redistributed over the remaining staff, that reallocation of his work brought about his dismissal on the grounds of redundancy . ....”

	And a little later he says:

“... We accept the criticism made by Mr Irvin that the test apparently applied by the Industrial Tribunal on its face was the wrong test, as the Tribunal concentrated upon the question whether there had been a diminution in the type of work and not upon the question whether the requirement of the business for employees to carry out that type of work had diminished.”

	The second case Mr Woodhouse referred us to was McCrea v Cullen & Davison Ltd [1988] IRLR 30.  There Gibson LJ said:

“S.11(2)(b) ] [the section we are having to consider in this case] when applied to the facts of this case may be reduced to the proposition that an employee is dismissed by reason of its redundancy if the dismissal is attributed to the fact that the requirements of the business for employees to carry out the work of management has diminished.  It will be seen that what the section is directed towards is not a diminution in the work of management but a diminution in the requirement of the company for employees to do the work of management.”

	Mr Pointing, for Ms Capon, began his submission by accepting, as indeed I think he had to, the proposition which I have just read from the McCrea case.  He accepted that the section we are considering is not directed to a diminution in the work of management, but a diminution in the requirements of the company for employees to do the work of management.  But he says, the reorganisation undertaken in this case was not so much to streamline the structure of the company, but was primarily aimed at rooting out a weak management and with that aim in mind, the axe had fallen on Ms Capon.  In support of his contention that the Industrial Tribunal was then focused, he pointed to paragraph 3 of the reasons which says:

“3  In cross examination, Mr Turner admitted that 15 people were made redundant at Department Manager levels.  The new role was substantially the same role as the former Department Managers, but was bigger and more demanding and would carry at first the same salary, although it was intended later to carry out a salary review.  The decision had been that not everyone was capable of managing at that level and the desire of the Respondents was to obtain uniformity in all stores as far as possible..  ...”

	In reliance on that passage Mr Pointing says unhappily, Ms Capon fell into the category of persons with weaker management capability.  The aim of the whole restructuring was to eliminate the likes of her.

	He contended that this was not a redundancy situation.  He referred us to North Riding Garages Ltd v Butterwick [1967] 2 QB 56.  That is authority for the proposition that where a person is primarily dismissed for incompetence or, inadequacy or capacity that does not lead to a redundancy situation.

	We have considered with care Mr Pointing’s submission on this, but we feel that his argument proceeds on a false premiss.  We believe that the Industrial Tribunal here accepted that there was a total reorganisation of the structure of the company over an extended area of the country and that the primary purpose of it was to induce a greater efficiency with the staff that remained in employment.  There is no suggestion contained in the Industrial Tribunal’s reasons that the aim or the motive for the reorganisation was the elimination or the rooting out  of the weaker elements of management.  

	There is reference in the paragraph 3 on which Mr Pointing places such reliance to the selection process, the underlying principle being the performance of each manager.  But we read that not as an indication that that formed any important part of the employer’s desire to reorganise.  It is merely a reference to the selection stage of what the employers thought to have been a redundancy situation.  

	We believe that the Industrial Tribunal here accepted the wrong test by focusing so heavily on the diminution or otherwise of the amount of work that was available for the employees to do.  We are satisfied that, on their own findings, they found there had been a total reorganisation, that that had taken into account the altered requirements of the business for the employees and that it was that which had diminished and had led to a redundancy situation.

	In all the circumstances we feel that we must allow this appeal.  This case must go back therefore to a differently constituted Industrial Tribunal for them to hear this as a case of proven redundancy.