Appeal No.	 EAT/853/02/DA

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	                   At the Tribunal
	                 On 9 April 2003
Judgment delivered on 20 May 2003

Before
HIS HONOUR JUDGE BIRTLES
MR A D TUFFIN CBE
MISS D WHITTINGHAM

MR A MANSI & MRS P MANSI	APPELLANTS

1) MR D K WARNE  
2) MR A C STRAW & MRS S M STRAW	RESPONDENTS

Transcript of Proceedings

JUDGMENT

Revised
______________________________________________________________________________

	APPEARANCES

For the Appellants	MR D BARNETT
(of Counsel)
(Bar Pro Bono Unit)
Instructed by:
Messrs Owen White
Solicitors
Senate House
62 - 70 Bath Road
Slough
Berkshire SL1 3SR

For the 2nd Respondents	MR D McILROY
(of Counsel)
Instructed by:
Messrs Charsley Harrison
Solicitors
Madeira Walk
Windsor
Berkshire SL4 1EU	
The 1st Respondent debarred from proceedings	

HIS HONOUR JUDGE BIRTLES
1	Introduction
1.1  This is an appeal from the Decision of an Employment Tribunal sitting at Reading on 11 June 2002.  The Decision of the Tribunal was entered on the register on 28 June 2002.  The Chairman was Mr R Harper.  

1.2  The Employment Tribunal unanimously decided that both Applicants’ claims for unfair dismissal and breach of contract succeeded and it awarded Mr Mansi £2,706.4 and Mrs Mansi £1,292.46.  The Tribunal made no Order as to costs.

2.  The material facts
2.1  Mr Mansi commenced employment with Mr Warne on 29 May 1998.  Mrs Mansi commenced employment with Mr Warne on 30 August 1999.  Mr Warne ran a public house, the Three Elms Public House, Clewar, Windsor.  Mr Mansi was employed as a bar manager and Mrs Mansi as a part-time barmaid.  

2.2  Some time in the middle part of 2001, Mr Warne decided to sell his public house to Mr and Mrs Straw.  On 22 September 2001 Mr Warne told Mr and Mrs Mansi that he was selling his business to Mr and Mrs Straw and that they did not wish to employ Mr and Mrs Mansi because they would be employing members of their own family in the business, in place of the Applicants.  On that day, Mr Warne gave Mr and Mrs Mansi one week’s notice of termination of their employment.  The material part of the letters terminating the employment are as follows:
“It is with great regret that I the above named have to inform you that following discussion between myself and the purchasers of my business Mr and Mrs Straw that they do not wish to continue to employ you at the present time as they intend to operate the business as a family concern by employing their son and daughter.  As a consequence of this, it is unavoidable but you are to be made redundant with effect from Saturday 29 September 2001.  Your wages including any holiday pay will be paid by myself at the close of business that evening.  I trust that in the meantime I can continue to rely on your support.”
In fact the purchase of the business by Mr and Mrs Straw was not completed until 8 October 2001.  Mr and Mrs Straw were fully advised by solicitors at the time and in the transfer document there is a paragraph under the heading “Rider paragraph 14” which states this:

“The seller gives to the employees of the business notice to terminate their employment as at the date of completion and undertakes to the buyer to pay the employees all sums to which they are entitled up to and including the date of completion whether arising under common law, statute, equity or otherwise which will indemnify and keep the buyer indemnified against all costs, claims, liabilities and expenses in relation to any person employed in the business prior to completion “

As the Employment Tribunal pointed out that is clear that the solicitors for Mr and Mrs Straw:
“ were on notice that there was a potential problem with regard to the transfer over of any employees, because, otherwise, there would have been no need to have that rider paragraph at all.  The solicitors acting for Mr and Mrs Straw ought also to have paid regard to the reply to the enquiries before contract and specifically enquiry 10”
The reply states:
“All to be made redundant by the seller”.

2.3  Mr Warne took no part in the proceedings before the Employment Tribunal and no part in the appeal before us.  The Employment Tribunal unanimously held that there was a transfer in the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 1981 and that the transferees of the business, Mr and Mrs Straw, were liable to pay compensation to Mr and Mrs Mansi for their dismissal by Mr Warne, immediately prior to the transfer.  There is no appeal against that Decision of the Employment Tribunal.  

3.  The Amended Notice of Appeal
3.1  The Amended Notice of Appeal dated 16 December 2002 contains four separate grounds of appeal, each of which was ably argued before us by Mr Daniel Barnett of Counsel for the Applicants.  We are grateful to him and to Mr D  McIlroy of Counsel for their submissions.  

3.2  The first ground of appeal is that the Employment Tribunal erred in law in not making any separate compensation for the failure to consult in accordance with Regulation 10 and 11 of the Transfer of Undertakings (Protection of Employment) Regulations 1981.  In paragraph 18 of its Decision the Employment Tribunal say this:
“Also, for the avoidance of doubt, we make a finding that there was a failure to consult in accordance with Regulation 10 of the TUPE Regulations and Regulation 11.  We exercise our discretion in relation to Regulation 11(4) not to make any separate compensation for that.  We propose to deal with the case by making or considering a basic and compensatory award in the usual way.  It is just and equitable to take this approach.”

There is no dispute that there was a failure to consult Mrs Mansi.  Under Regulation 2 and 8A: there were no appropriate representatives in this case.  

3.3  The law relating to the remedy is contained in Regulation 11(4).  It provides as follows:
“Where the tribunal finds a complaint under paragraph (1) above well-founded it shall make a declaration to that effect and may -
(a)  order the employer to pay appropriate compensation to such descriptions of affected employees as may be specified in the award; or
(b) if the complaint is that the transferor did not perform the duty mentioned in paragraph (3) above and the transferor (after giving due notice) shows the facts so mentioned, order the transferee to pay appropriate compensation to such descriptions of affected employees as may be specified in the award.”

Mr Barnett accepts that he has to succeed under Regulation 11(4)(a) because Regulation 11(4)(b) does not apply to the facts of this case.  

3.4  The issue therefore is what does Regulation 11(4)(a) mean?  Mr Barnett argues that it requires the Employment Tribunal to do two things.  First, it shall make a declaration that there has been a breach of the consultation procedures, and, second, that the Employment Tribunal must award appropriate compensation as specified in Regulation 11(11).  Mr McIlroy argues that that language of Regulation 11(4) is quite clear: the Tribunal shall, and therefore must, make a declaration but it may award compensation, it is not required to do so.  In our judgment, Mr McIlroy is correct.  Parliament is to be taken to be well aware of the difference between a mandatory “shall” and the permissive “may”.  We do not think that the use of the disjunctive “or” separating Regulation 11(4)(a) from Regulation 11(4)(b) alters that conclusion.  In our judgment, the Employment Tribunal was fully entitled on the facts of this case not to make an award of appropriate compensation under Regulation 11(4)(a) if it thought it could do justice to the case by taking it into account in its award of the compensatory element of dismissal.  In our judgment, there is no error of law here.  

3.5  In the second ground of appeal, the Employment Tribunal reduced Mrs Mansi’s period of loss to only six weeks from the date of dismissal.  The approach of the Employment Tribunal is set out towards the end of paragraph 20 of its Decision.  The Employment Tribunal say this:
“Mrs Mansi has, for whatever reason, done considerably less than her husband in seeking to mitigate her loss and applying the just and equitable test we think that this has to be reflected.  The agreed basic award for Mrs Mansi is £405.  We think that the appropriate loss from the date of the dismissal is 6 weeks.  The agreed weekly figure is £89.37. £89.37 x 6 = £536.22.  In fact she has worked one day at the Bexley Arms and was in receipt of £27.50 which reduces that figure to £508.72.”

3.6   The ground of appeal is that because Mrs Mansi was severely limited in her ability to apply for work because of her Leukaemia, she needed a non-strenuous, local job with flexible working hours: see her witness statement, paragraph 5.  It is unchallenged evidence, but the Employment Tribunal took into account information about part-time employment produced by the Respondents and in our view there is no error of law by the Employment Tribunal. While the effect of Leukaemia is to restrict Mrs Mansi as to the number of hours she can work and how far she can travel to work, it does not mean that she could not work if there was work available.  In our view there is no error of law in the Decision of the Employment Tribunal.

3.7  The third ground of appeal is that the Employment Tribunal erred in law in refusing to make an Order for costs.  The proceedings were heard in the course of one day, and the Respondents assert (and it is not disputed) that the whole hearing was concluded by 2.25 pm on that day.  The case was fought by the Respondents on the grounds of both liability and quantum.  The evidence was, quite clearly, extremely short.  The Tribunal’s reasoning on costs is found at paragraph 21 of the Decision, where they say this:

“Having announced our decision on quantum, the applicants’ representative then addressed the Tribunal on the question of costs setting out her argument clearly in her skeleton argument.  This was resisted in principle and amount by the second respondent.  The Tribunal has to be satisfied in accordance with Rule 14 of Schedule 1 of  the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2001 that a party, in bringing proceedings, has acted unreasonably or the conducting of the proceedings has been misconceived before the Tribunal can consider making an order of costs against that other party.  One of the main thrusts of the applicants’ submission on costs was that there had been late compliance with the interlocutory orders of the Tribunal.  There had been late compliance but it was not so late that any prejudice was caused to the applicants.  The Tribunal do not find that the conduct of the respondents was unreasonable or misconceived and therefore do not make an order for costs accordingly.”

3.8  Before us, Mr Barnett conceded that it could not be reasonably argued that late compliance with Tribunal Orders in this case could justify an award of costs.  Instead, he said that the argument was that there was a failure by the Employment Tribunal to consider that there was no prospect of success in the Respondents arguing either that there was no TUPE transfer at all, or that there was an ETO defence which was taken before the Employment Tribunal: EAT bundle pages 69-70.  It is quite clear from the Decision of the Employment Tribunal that it did consider as to whether TUPE applied, and if so was it a TUPE transfer: see paragraphs 7-11 of the Decision.  Second, the Employment Tribunal decided that there was no ETO reason for the dismissal in this case: Decision paragraph 12.  The Tribunal say in paragraph 8:
“We have considered this case at length”
 and in paragraph 12:
 “We have considered in some detail the approach of the respondents to say that there was an economic technical or organisational reason for the dismissal.”

It is quite clear in this case that the Tribunal did apply its mind to the relevant issues and clearly did not consider that the arguments on liability raised by the Respondents before it were misconceived within the meaning of Regulation 2(2) and Rule 14 of the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2001.  In those circumstances it is not surprising that the Tribunal, having considered the question, decided not to make an Order for costs and we can find no error of law in that approach.  

3.9  The final ground of appeal was that the Tribunal erred in law taking into account Mr Mansi’s income from his other job at the Ex-Serviceman’s Club in reducing his loss and calculating his compensatory award.  The Employment Tribunal’s Decision on this point is found at paragraph 20 of its Decision where it says this:
“With both the applicants the test is the just and equitable one and in reaching our decision in relation to quantum, we bear that very much in mind.  We take the view that it would be just and equitable to award Mr Mansi a compensatory award for a period of 11 weeks from the date of the termination of his employment and he is entitled to one week’s notice in addition.  We also take the view that not withstanding the fact that he was also working for a club at the time when he was working for the respondents, his income from the club is income received after his dismissal from the respondents and should be taken into account.”

3.10   The facts here are that at the date of the Employment Tribunal hearing (11 June 2002) Mr Mansi had been working at the Ex-Serviceman’s Club in Windsor for the previous four years.  This covered the period of his employment at the Three Elms Public House: see his witness statement, paragraph 12 (EAT bundle page 47).  This evidence was not disputed.  In our view, the Employment Tribunal was in error here.  Section 123(1) of the Employment Rights Act 1996 provides as follows:
“(1) Subject to the provisions of this section …….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 or (as the case may be) Scotland.”

The loss suffered by Mr Mansi, attributable to his dismissal, was the loss of his weekly wage paid by Mr Warne.  He did not lose the wages paid by the Ex-Serviceman’s Club in Windsor.  That payment and that employment had nothing to do with any Respondent.  It predated the dismissal and continued after it; it was separate employment.  Furthermore, in our judgment, the common law duty to mitigate loss under section 123(4) of the 1996 Act, cannot operate so as to enable a Tribunal to reduce compensation payable under section 123(1) of that Act in these circumstances.  There was separate employment which predated the dismissal and continued after it.  In our view the duty to mitigate loss under section 123(4) must apply only to employment which commences after dismissal.  To do so would be to unjustly reward an employer for dismissing an employee who has the initiative and energy to have alternative employment which predates the dismissal.  In our view that cannot be just and equitable in all the circumstances, and in our view, the Employment Tribunal made an error of law in adopting this approach.  

4	Conclusion
It follows from the above reasoning that we dismiss the appeal on the first three grounds of appeal and allow the appeal on the fourth ground of appeal.  Counsel have agreed that the figure deducted by the Tribunal in relation to the fourth ground of appeal is £1078.  In the circumstances, it is not necessary to remit this case to the Employment Tribunal and we therefore alter the Employment Tribunal’s Decision to the extent that we award Mr Mansi the further sum of £1078.