Appeal No. UKEATS/0013/06/MT 

EMPLOYMENT APPEAL TRIBUNAL
52 MELVILLE STREET, EDINBURGH, EH3 7HF

	At the Tribunal
On 12 September 2006

Before
THE HONOURABLE LADY SMITH
MISS J GASKELL 
MRS G SMITH

SUPERDRUG STORES PLC	APPELLANT

MS J CORBETT	RESPONDENT

Transcript of Proceedings

JUDGMENT

APPEARANCES

For the Appellant	Mr Kennedy, Solicitor
The Employment Law Firm Ltd 
ELF House 
3 Eastwood Court
Wiltshire Road 
Marlow 
Bucks
SL7 1JG	
For the Respondent	No appearance or representation by or on behalf of the Respondent	

SUMMARY

The Tribunal awarded an obviously excessive sum of £1420 for loss of statutory rights, without explanation of their reasons for doing so.  Appeal allowed and case remitted back to the same tribunal for reconsideration of the matter.  

THE HONOURABLE LADY SMITH

Introduction 
1.	The claimant was employed by Superdrug Stores (who we will refer to as the respondents) between 14 November 1994 and 17 May 2005.  On 18 May 2005, she began working for Marks and Spencer Plc and was working in that employment at the time of the hearing on 8 November 2005.  An employment tribunal sitting at Edinburgh, Chairman Ms S O’Brien QC, found, in a judgment registered on 2 December 2005, that her employment was terminated as a result of a constructive dismissal that was unfair.  That much is not challenged by the respondents.  

2.	The tribunal awarded compensation.  One element of the award was said to be in respect of loss of statutory rights.  At paragraph 26, the tribunal state:

“The claimant has lost statutory rights, and the Tribunal assesses that head of loss on the basis of 10 years times the basic net salary of £142, bringing out £1,420.”

3.	No further or other explanation of that part of the award is given.  In particular, it is not explained whether it is intended to represent compensation for the loss of protection from unfair dismissal which it would have taken the claimant until 17 May 2006 to acquire (a further six months or so beyond the date of the hearing before the tribunal) or for the loss of the right to long notice which she had built up in her employment with the respondents or, as would have been possible, for both.  

Respondents’ Submissions on Appeal 
4.	Mr Kennedy submitted that the tribunal had erred in awarding £1,420 in respect of “loss of statutory rights”.  They had, in making the award, used the conventional label for compensation for loss of protection from unfair dismissal. Such an award normally attracted a “going rate” of £250 (Singh v Watch Security Limited UKEAT/0772/03/MAA).  In awarding £1,420, the tribunal had wildly exceeded its discretion, perhaps borne of undue sympathy for the claimant.  

5.	In the event that the tribunal had applied the wrong label and in fact intended to make an award for loss of the statutory right to long notice, there was a clear failure in expression in the judgment and there was no evidence to support the application of that label; there was, for instance, no evidence as to the claimant’s rights to notice under her new contract with Marks and Spencer.  

6.	In the event that the tribunal intended to make a composite award for both loss of protection from unfair dismissal and loss of the right to long notice, there was still a clear failure of expression and reasoning.  It was not possible to tell how the award was arrived at.  £1420 would, however, still be excessive, given the speculative nature of any such award.  Any award for the loss of the right to long notice depended on a double contingency namely that the claimant not only found a new job but that she was dismissed from it before building up the same notice rights as she had in the job from which she had been dismissed.  

7.	Mr Kennedy referred to English v Emery Reimbold & Strick Ltd [2003] IRLR 710, Daley v AE Dorsett (Almar Dolls) Ltd [1981] IRLR 385 , and SH Muffett Ltd v Head [1986] IRLR 488.  

Claimant’s Submissions 
8.	There was no appearance for the claimant before us but a written submission was provided by her representatives, Granton Information Centre.  It was in the following terms:
“1.  It is submitted that the Tribunal acted within its powers in awarding the respondent the sum of £1,420 for loss of statutory rights.  Although not explicitly stated by the tribunal, it would appear that the award is intended to reflect the respondent’s loss of all statutory rights, including her statutory entitlement to notice pay.  The respondent had been employed for a period of ten years, and had thus accrued an entitlement to ten week’s notice of dismissal.  Since it will take ten years to build up this entitlement again it is submitted that it is appropriate to make an award reflecting this.  

2.  The decision of the case of the court in Hilti (Great Britain) Ltd v Windridge 1974 IRLR 53, is relevant to this case.  In Hilti, the tribunal’s decision to make an award to compensate the respondent for the loss of entitlement to an extended statutory notice period, although considered a little on the high side, was upheld by the NIRC.  This decision was followed by the EAT in Daley v AE Dorsett (Almar Dolls Ltd) 1982 ICR 1.”  

Discussion 
9.	We are satisfied that the tribunal have erred.  

10.	Firstly, the tribunal have wholly failed to do what was required of them as regards explaining their decision.  They have stated that they are making an award for loss of “statutory rights”, an expression which normally denotes the nominal award (usually £250) that is made to allow for the fact that even if a claimant finds alternative employment, he will be without protection from unfair dismissal until he has been in his new job for a year.  They have proceeded, however, to make an award which is almost six times the normal sum awarded, without explanation.  It is not possible to understand on what basis they have done so.  They have not complied with the requirement that, if justice is to be done,  parties should be able to understand from a judgment, the reason why any award has been made.  As was commented in the case of English, at paragraphs 19 - 21:  

“If the appellate process is to work satisfactorily, the judgment must enable the appellate court to understand why the judge reached his decision ……………………………The essential requirement is that the terms of the judgment should enable the parties and any appellate tribunal readily to analyse the reasoning that was essential to the judge’s decision.”  

11.	Separately, we note that the claimant had been in the respondents’ employment for over ten but less than eleven years and that she would, accordingly, have been entitled to ten weeks notice in the event of fair dismissal (Employment Rights Act s.86).  That was a right that was lost to her when she was dismissed.  Such loss can properly give rise to an award of compensation (see:  Hilti (Great Britain) Ltd v Wondridge;  Daley v AE Dorsett (Almar Dolls) Ltd;  S H Muffett Ltd v Head) and it may well be that that was what the tribunal intended to do here in making the award of £1,420;  it does rather look like it.  However, it is not appropriate to calculate such an award on the simple arithmetical “multiplier” basis set out by the tribunal.  Firstly, in using the figure of ten, the tribunal have ignored the fact that the claimant had already acquired, in her new job, a statutory entitlement to one week’s notice and they have given no consideration to what contractual entitlement she might have had.  Secondly and more importantly, as was commented in the case of Muffet [1986] IRLR 488, an award for the loss of long notice depends on a double contingency namely that the employee not only secures alternative employment but that she is dismissed from it before building up the same notice period entitlement as before.  It was anticipated that the award would only be made in the “exceptional case”.  In Hilti, the latter part of that contingency was referred to as being a “very speculative matter” and the view was, accordingly, expressed, that they did not expect it to attract other than a very small award in the average case. 

12.	Even if allowance is made for the possibility that the tribunal intended to make a composite award part of which was to cover the loss of protection against unfair dismissal, that is something which, as we have indicated, normally attracts a nominal sum and would, in this case, have been in respect of an un-elapsed portion of the requisite 12 month period of only some six months.  The figure awarded could, that being so, properly be less than £250.  That would mean that the tribunal had awarded significantly more than £1,000 in respect of the loss of the right to long notice which, at the claimant’s salary levels certainly looks far too high.  It seems clear that the tribunal have not taken account of the high degree of speculation that is involved in arriving at an appropriate award for loss of long notice, assuming that that was something that they were intending to make an award for.  

13.	Further, we were advised that they heard no submissions on the matter of loss of the right to long notice.  They should not have made an award in respect thereof without doing so.  Having heard submissions, what they required to do was as was summarised by Sir Ralph Kilner Brown in the Muffet case at p. 489 - 490:

“ ..an industrial tribunal must apply their minds to the question.  We recognise the force of Lord McDonald’s observations in the unreported case of Gourlay v Kerr that such loss can only be significant in an exceptional case because it depends on the double contingency that the dismissed employee will get a new job and, second, that he would be dismissed from that job before building up the same entitlement to the period notice applicable to the first job.  In our judgment an industrial tribunal must use its knowledge of local conditions and consider the remoteness or otherwise of these contingencies.”  

14.	In all these circumstances, we are satisfied that the appeal should be allowed, the award for loss of statutory rights set aside and the case be remitted to the same tribunal to hear submissions and determine what award, if any, is appropriate under both that head, by which we mean to refer to the generally recognised head in respect of the loss of the right to protection from unfair dismissal and also, in respect that the tribunal seemed to have it in mind, the head generally referred to as the loss of the right to long notice.