Appeal No. UKEAT/0218/06/DM

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 26 October 2006

Before
THE HONOURABLE MR JUSTICE BURTON
MS C BAELZ
MR D BLEIMAN

C & A PUMPS LTD	APPELLANT

MR C THOMPSON	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	Miss Lucy Bone
(of Counsel)
Instructed by:
Croner Consulting Litigation Department
Wolters Kluwer (UK) Ltd
Croner House
Wheatfield Way
Hinckley
Leicestershire
LE10 1YG
	
For the Respondent	Mr H Menon
(of Counsel)
Instructed by:
Messrs Meikles Solicitors
8 North Street
Market Place
Ferryhill
Co Durham
DL17 8HX	

SUMMARY
Unfair dismissal – Mitigation of Loss – Polkey deduction
Employment Tribunal did not adequately deal with the issue of mitigation, whether by reference to the ill health of that Claimant or otherwise (Gardiner-Hill, Savage v Saxena) and made no finding on Respondent’s alternative Polkey defence.  Remedy decision remitted to same Tribunal.

THE HONOURABLE MR JUSTICE BURTON

1.	This has been the hearing of an appeal by the Respondent company C & A Pumps Ltd (“the Appellant”) against a finding on a remedies hearing in favour of the Claimant, Mr Thompson.  The same Tribunal had delivered judgment after a hearing on 21 September 2005, by a judgment handed down on 10 October 2005, making a finding of constructive dismissal in favour of the Claimant.  The decision, against which the Appellant now appeals, was at the subsequent remedies hearing which took place on 27 January 2006 and resulted in a reserved judgment handed down on 7 February 2006.  

2.	The finding of constructive dismissal was on a somewhat limited basis, and may have depended upon its own facts, and this Tribunal’s assessment of them, more than usual.  But the only breach which the Tribunal found of the contract between the Claimant and the Appellant was that the Applicant’s threat to replace the car, which had been made available as part of his remuneration package to the Claimant, by a two-seater van amounted not only to a breach of the contract term, described in paragraph 9 of the liability judgment, that Mr Thompson should have a reasonable motor car, but also a serious breach of contract sufficient to amount to a fundamental breach of contract, such that, according to the analysis by the Tribunal by reference to Western Excavating (ECC) Ltd v Sharp [1978] ICR 221, set out in paragraph 8 of that judgment, there was a significant breach going to the root of the contract of employment, or showing that the employer no longer intended to be bound by one or more of the essential terms of the contract.  

3.	The Tribunal recorded in its liability judgment at paragraph 3.6 that, some 15 months before the eventual constructive dismissal, the Claimant had been absent from work, namely in February 2004, owing to a stress-related illness; and he returned to work on 8 March 2004, when there was the discussion of the possibility that the Claimant might wish to retire early or take redundancy, but the Claimant indicated that he did not wish to do so, and the intention on both sides was then that the Claimant should continue at his work. 

4.	From paragraph 3.12 it is clear that the events of the replacement of the Almera motor car by a Transit Connect van was something that upset the Claimant, and the Tribunal records that on Monday 14 February he notified his line manager that the issue had made him ill with worry and stress, and that by Wednesday 16 February he felt too ill to continue working and went home leaving his car keys.  The Tribunal further recorded, as part of the background facts which led on to their subsequent conclusion, that the Claimant obtained a doctor’s sick note and forwarded it on to the Respondent on 18 February, referring to his suffering from stress and depression.  He was thereafter on sick pay which ran for a limited period before under the contract of employment it reduced to nil, and he remained absent from work until resigning on 13 April, when he sent a letter of resignation, claiming that he had been constructively dismissed because of the removal of his company car.  

5.	The Tribunal records in paragraph 7 that the fact that the replacement of a car with a van was done without any meaningful consultation reinforces the view that the change amounted to a significant breach of his employment contract, and it said this:-

“The impact upon him would be likely to have been more significant bearing in mind that he had a history of stress illness to the extent of requiring him to be absent from work.  However, the removal of the car was in itself a significant breach of a fundamental term of the contract.” 

and we refer to paragraph 9 in which that conclusion was reiterated.  

6.	There was no finding by the Tribunal either as to what the condition was, if any, from which he was suffering, whether it was transient or likely to continue for any period, and if so on what basis, nor, on the face of it, any finding that it was the Appellant’s conduct which caused or contributed to such condition or its likely continuation.  

7.	Mr Menon, who has argued the matter ably before us today on behalf of the Claimant, sought to persuade us that there was some implicit finding in the Tribunal’s decision, either as to the nature of the medical condition and/or that it was indeed caused by the Appellant.  We have read the factual paragraphs 3.12 and 3.13, in which it is recorded that that is what at the time the Claimant was asserting.  But there was no finding there that in fact those assertions were correct, nor certainly in the conclusory paragraphs, to which we have also referred.  

8.	We are satisfied that there was no implied finding as to either matter in the liability judgment, and we are confident of that for two reasons.  First, neither a finding as to the nature nor as to the causation of the medical condition was in fact necessary to the conclusion reached by the Tribunal that there was a significant breach of contract by virtue of the replacement or substitution of the car by a van, and the Tribunal’s liability decision did not depend upon anything else. More significantly, because it is not against the liability decision but the remedies decision that this appeal now lies, is the indication  that is indeed the position which can be clearly seen from the Tribunal’s remedies decision itself.  
9.	We read the relevant parts of the paragraph 3 of the remedies decision:
“There were difficult issues involved and it was unfortunate that the Tribunal did not have produced to it some of the evidence which would have been of assistance.  It would have been helpful for the Tribunal to have had medical evidence with regard to the claimant’s medical condition, his ability to work in any capacity, including alternative work and information as to the prognosis.  In addition it would have been helpful to have had assistance with regard to the cause of his medical problems.”  

10.	What appears there to be clearly the case is that the Tribunal is not only saying that there was not before them medical evidence, either as to the nature or extent of the condition or in particular as to its causation, but certainly that they had not made any previous conclusions in either regard.  If they had done so implicitly, as is suggested, in their liability judgment, they would have there said so.  When they come back to the matter of continuing loss of earnings in paragraph 6.3, they again say 
“it has been pointed out that no medical evidence has been produced” 

and this is obviously a pointing out by the Appellant of the absence of any medical evidence.  

11.	The presence or absence of implicit findings as to the medical condition from the liability judgment has been an important part of Mr Menon’s attempt to save the judgment in his favour from the Appellant’s appeal, but in fact, in our judgment, that may not in the end be decisive to the outcome of this appeal, because it is the Tribunal’s judgment relating to the loss of earnings claim which is challenged: and, on its face, that loss of earnings claim - just because of the absence of the medical evidence which the Tribunal lamented in paragraph 3, and noted in paragraph 6.3 - is not grounded upon the existence or nature or effect of the medical condition.  The Tribunal’s contested decision relates to that past and future loss of earnings head which is contained in paragraph 6.3 of the remedies judgment.  It is common ground between the parties that Mr Anderson, the giving of evidence by whom is referred to in paragraph 2 of the remedies judgment, gave evidence on behalf of the Respondent, and in particular as is recited in paragraph 8.9 of the Appellant’s skeleton argument.  That evidence is there recited as follows:-
“Mr Anderson’s evidence was that, in his experience as a local employer, it would have taken someone in the Respondent’s position 4 to 6 weeks to find alternative employment.”  

12.	The Appellant’s solicitors, in the course of preparation of this appeal, wrote a letter to the Claimant’s solicitors dated 7 July 2006 asking them to give confirmation as to three matters, the third of which is:-
“Please further confirm that the Respondent did not challenge the evidence of John Anderson that the Claimant could have found equivalent alternative employment within 4 to 6 weeks.”  

Whether or not it was challenged, the significant fact is that the Appellant was asserting that that evidence was given by Mr Anderson.  

13.	The Claimant’s solicitors did not engage in the exercise of agreement which was launched by that letter of 7 July 2006, either in respect of that confirmation as to lack of challenge before the Tribunal, or in relation to the other two matters which the Claimant’s solicitors were also invited to agree had not occurred before the Tribunal.  It is unfortunate that they were not willing to reach such agreement or any agreement, not least because when it has come before us today, and indeed as was apparent from the concise submissions put forward by the Claimant’s solicitors in opposition to this appeal going forward at the preliminary hearing, they accept that such evidence was indeed given by Mr Anderson.  

14.	Parties must once again be reminded that the days either when one party can obtain notes of evidence from a Chairman, unless it is absolutely necessary, or on the other hand when a party opposing the obtaining of any evidence can simply resist and do nothing are long gone.  Paragraph 7 of the EAT Practice Direction 2004 makes it plain that there is a perfectly simple course which, in the absence of agreement, can be arranged very quickly, whereby such questions as these, particularly those which are seeking to identify what did not occur at the Tribunal, can be dealt with speedily by submission to a Chairman with no need for production of the entire notes.  

15.	It is unfortunate in this case that what then occurred was the Appellant’s solicitors asking for an order for the entirety of the notes of evidence to be produced, rather than limiting themselves to those three questions, and the administration at the EAT simply refused that request.  If limited to the three questions, I have no doubt, as I have said in the course of argument before us today, that such an inquiry could have been simply and straight- forwardly answered by the Chairman.  

16.	However, the significance of all this is that there was, it is now common ground, such evidence before the Tribunal.  What the Tribunal says however in paragraph 3 of its remedies judgment is as follows: 
“the respondents did not produce any evidence to the Tribunal of the type often provided in cases such as this, to indicate what in their view would have been suitable employment for which the claimant could and should have applied or should be applying, which would all be relevant to the assessment of loss of earnings and future loss and to making a decision as to the duty upon the claimant to mitigate his loss and whether he had fulfilled that duty in any reasonable way.”  

17.	Mr Menon is constrained to say that what the Tribunal must have meant is not that the Respondents did not produce any evidence but that the Respondents did not produce any satisfactory evidence.  This forms the backcloth to our conclusions, persuaded by the Appellant, that the Tribunal here did not adequately deal with the issue of mitigation of loss in arriving at its conclusion in paragraph 6.3.  Not only did it reach a conclusion, without reasons, to which we will refer but in particular, perhaps because it had forgotten the evidence of Mr Anderson, it made no reference to his evidence, nor explained why that evidence was persuasive or satisfactory. The obligation, it is common ground, upon the Tribunal, is helpfully set out in the two leading cases on the topic of mitigation, both of which emphasise that the burden lies upon the employer, but that that is only a starting point, namely Gardiner-Hill v Roland Berger Technics Ltd [1982] IRLR 498 and Savage v Saxena [1998] ICR 357.  It is clear that a tribunal must consider the duty of the claimant, and whether it was, in the event, complied with, and if so how, by reference to the facts of the individual case.  

18.	So far as this Tribunal is concerned it deals with loss of earnings in paragraph 6.3, as we have described.  It begins with the passage to which we have already referred:
“It has been pointed out that no medical evidence has been produced. “ 

Having made that statement it is the case that in the rest of the paragraph the Tribunal makes no reference at all to the impact, if any, of any medical condition.  Its conclusion is headed up with this overall statement:
“In all the circumstances the Tribunal does not find that Mr Thompson has taken reasonable steps to mitigate his loss”

19.	Then there is the further conclusion:
“It was not reasonable for him to put off making any such meaningful enquiries until some indeterminate future date or until the date of this hearing some 9 months after the termination of employment.”

20.	So from that point of view there is:
i.	simply criticism of the Claimant for not taking any steps to mitigate. It would appear that, as he took no steps at all to mitigate, the Tribunal has attempted to put itself in his shoes as to what might have happened had he taken steps which it concluded were proper for him to have taken.  
ii.	no reliance by the Tribunal, as we have indicated, upon the question of his medical condition if any. This is important of course because they had not made any concluded finding as to what condition he was suffering from at the date of his dismissal, never mind whether that had any continuing impact at all thereafter.  

21.	The conclusion of the Tribunal is then set out very shortly indeed in paragraph 6.3:
“The finding in Mr Thompson’s favour, after hearing which he would have received by the middle of October, should have been the latest date for him to be making proper enquiries as to the possibility of getting back to work.  These findings are taken into account in assessing the various heads of loss in the compensatory award.”

The Tribunal appears therefore (though the meaning is far from clear) to have been concluding that it was reasonable for him to take no steps at all until the middle of October.  The basis for this conclusion is also unclear.  

22.	On that basis they award the loss of earnings in full from 13 April 2005 until 13 October 2005.  They then make a partial loss award.  The significance of this partial loss award is not only that they make it as between 13 October 2005 and the date of the remedies hearing on 27 January 2006, but that they continue that same partial loss for a period of 26 weeks from 27 January 2006 through to the 28 July 2006.  On that basis they award the so called partial loss figure at £150 per week in respect of both the second period of past loss - that which post dated the liability hearing - and a forward period of loss for 6 months up to the 28 July.

23.	There is no explanation as to the basis upon which the Tribunal arrives at the figure for partial loss.  So far as the £150 per week is concerned, this is said to derive from the Tribunal’s general awareness as to the type of alternative employment which may have been available, but it is wholly unclear what that is, and why a person with the qualifications and experience of this Claimant should have only taken a job at that level, and why only for the period from 13 October 2005 until the period 28 July 2006.  It does not appear once again that there is any conclusion notwithstanding Mr Menon’s attempt to submit to us that there was some implicit finding - which we have rejected because of the express terms of both judgments - that the medical condition has anything to do with it, i.e. that there was some inability, due to the medical condition, to find any work up to October 2005, and some kind of hampered opportunity after October 2005.  It is not suggested this is a job of a lesser kind because the Claimant would have been too ill to cope with anything better, nor that the job is perhaps only on a half time basis, because the Claimant would have been too ill to have done any full time job.  All that is ruled out, by the stated position of the Tribunal that they have no medical evidence, and were unassisted.  On the other hand, there was also ruled out, because apparently overlooked, any reliance upon the un-rejected, and unchallenged, evidence of Mr Anderson.  

24.	We are satisfied that this conclusion by the Tribunal cannot stand.  This is not a case in which further reasons were sought from the Tribunal under the Burns-Barke procedure, for perhaps two reasons, although it may be simply that neither this Tribunal nor the parties thought of that possibility.  It may have been thought of but ruled out for two reasons.  
i.	This may not have been a suitable case for the supplementation of reasons, given the total absence of evidence, which the Tribunal itself laments.  
ii.	There is, as we shall now explain, a further defence, which the Appellant put forward, and which is not dealt with at all by the Tribunal, namely what can be loosely called a Polkey defence, to which we now turn.  It is again, thanks to the frankness of the Claimant’s solicitors and Mr Menon, common ground that the Polkey argument was indeed run by the Appellant before the Tribunal at the remedies hearing.  

25.	Paragraph 20 of the concise submissions by the counsel then instructed for the preliminary hearing to oppose the matter going forward, stated as follows:-
“It is accepted that the Tribunal does not appear on the face of the judgment to have considered the Respondent’s submission on Polkey. However the Tribunal must have rejected any suggestion that this case was acceptable for a Polkey reduction at all.  It is implicit that he did not consider it probable that the Claimant would have been dismissed within 3 to 4 months as suggested.”
It is thus apparent that a Polkey point was indeed run at the Tribunal, and one of the three questions (which referred to this) raised by the Appellant’s solicitors, in the abortive Paragraph 7 correspondence, to which I have referred, again would have been and should have been answered more positively, had the Claimant’s solicitors addressed their minds to the 7 July letter.  

26.	Just as we are satisfied that there was no implicit finding by the Tribunal as to the causation, or even the nature and effect, of the medical condition, so we are satisfied there was no implicit finding by the Tribunal rejecting the Polkey case, and this is another basis on which this judgment would not have been saved by the Burns-Barke procedure.  The case, as explained by Miss Lucy Bone, who has appeared today for the Appellant, and argued the matter persuasively and conclusively, which was put forward, and would be put forward, is that if indeed, as asserted by the Claimant, the Claimant was suffering from some stress condition, of such materiality that it would indeed have had some effect on mitigation of loss after dismissal, then had the Claimant not been dismissed it would have had the effect of his continuing on sick pay, as he was, until such time as he could and would have been fairly dismissed.  That argument is plainly one which is of some substance, at least as an alternative to the main defence that he had no sufficient medical condition such as to give him any support in the argument that he could not and should not have mitigated his loss. Yet the Tribunal did not address it. It may be that they overlooked the argument which it is common ground as it was put before them. That in itself is a ground for allowing this appeal so that the matter can be remitted, for it to be considered.  

27.	We are satisfied that the remedies judgment must be set aside both because there was inadequate consideration by the Tribunal of the mitigation argument - erroneous in law by non-application of the two leading authorities, to which we have referred, and of the principles underlying s123 of the Employment Rights Act 1996 - and also by reason of the Tribunal’s failure to deal with the Polkey defence. That likely outcome became speedily apparent in the course of this hearing, both when we indicated that Ms Bone had a fair wind behind her, and from the very position from which Mr Menon was forced to take up both in his skeleton, and in his oral arguments, that the apparent gaps in the Tribunal’s conclusions could be made good by an assertion of implicit findings, which we have rejected.  So the issue has been whether the matter should be sent back to the same or another Tribunal, and whether there should be any restriction or inhibition on the way the matter can and should be argued at rehearing. So far as the former is concerned, both parties are agreed that the matter should be referred back to the same Tribunal which has had the benefit of hearing the evidence at the liability hearing and the remedies hearing, and that is a course with which we can agree, as both parties wish it.  The particular reason why that will be of benefit in this case, although we have no doubt that the Tribunal is going to need to consider and reconsider its judgment very carefully, in the light both of this judgment and of fresh evidence which is bound to be adduced before them, is tied in with the question of whether there should be any inhibition on the argument.

28.	 It is always a concern when an appeal is successful only to the extent of being remitted - and we are satisfied this is not a case in which we could substitute on appeal our own judgment as to what the outcome would or should be - that a claimant usually can get some advantage by being able to run second time round what he could and should have run first time round.  Thus for example, on some occasions, even though an appeal is successful, it can be said that certain evidence, which has been suggested to be available by way of some round of new evidence, should not be admitted even at the second hearing.  But, ordinarily, where a hearing is remitted it will be remitted to be heard ab initio and in full without restriction. The difficulty is that what is contended by Ms Bone - neither counsel having appeared below before the Tribunal on either occasion – is that it was not a part of the Claimant’s case, as argued before the Tribunal, that the medical condition, insofar as it can be shown to have existed, or existed to any material extent or in any material form, and particularly insofar as it may be said to have continued after the termination of employment, was caused or contributed to by the breach of contract found by the Tribunal, i.e. by reference to the substitution of the car.  Mr Menon has fairly said that he has spoken to his instructing solicitor, who appeared at the Tribunal, who is unable to say that that was indeed argued.  

29.	Mr Menon points both to the liability judgment, where the complaint by the Claimant at the time is recorded (without conclusion by the Tribunal), in paragraph 3.12, that he felt too ill to continue working, and to the ET1, at paragraph 12, where it is said the Claimant was the subject of various jibes and comment by fellow employees and was called various names, which is said to have caused the Claimant’s health to deteriorate and he was forced to be absent from work from sickness because of stress and anxiety. So far as that is concerned, Miss Bone persuasively points out that the assertion in the ET1, to which we have just referred, is not borne out in the Employment Tribunal’s judgment.  The fact that there were jibes by the fellow employees is referred to in the judgment as emphasising the significance of the loss of the car, but such was not itself found to be a breach of contract by the employer and indeed it would need responsibility to be ascribable to the employer, before it could be found to amount to a breach by the employer.  

30.	Certainly it was not found, in so far as mocking occurred, either itself to have been a breach of contract or that that indeed did cause the medical condition, because there is no finding of causation at all, as we have already indicated, and certainly no finding that the jibes, if they occurred, themselves amounted to a breach of contract, with any causative effect on his medical condition. Consequently, although it is stated by the Claimant that he felt ill because of what had happened, that is nowhere enshrined in any finding by the Tribunal, nor even encapsulated, as Mr Menon appears to be accepting, in any argument by the solicitor representing the Claimant at the Tribunal.  

31.	Miss Bone accepts that at any remitted hearing fresh hearing would be admissible.  She does not seek to say that either party should be prevented from adducing further evidence, either as to the medical condition of the Claimant at the time of, or subsequently to, the constructive dismissal, or indeed as to the availability of other jobs and of the steps that could have been taken by the Claimant.  Her case relates only to some kind of debarring of the Claimant from pursuing any case that any condition, if it existed, was caused by the Respondent.  It does not appear to us that Miss Bone necessarily has need for valid concern. First, if in fact the Claimant had a continuing condition, such as to justify taking no steps to mitigate his loss, it does not appear to us at any rate to be necessarily relevant whether that condition was or was not caused by the employer.  Secondly, if it is to be suggested now that the condition was caused by the breach of contract in question by the employer, it is an extremely late suggestion, and one which will no doubt be the subject of considerable critical comment by the Appellant, and may well not be evidenced anywhere in any contemporaneous documentation.  It certainly appears not to have been run at the liability hearing, and certainly not, as is expressly stated in paragraph 3 of the remedies judgment, at that latter hearing.  

32.	It is possible however, that it may be relevant in the context of a Polkey defence as to what the causation of the medical condition was.  We are unable to say that there is or should be in this case any dividing line between what was adduced or argued on the first occasion and what now should be permitted to be argued, particularly given that both sides accept that the evidence will be heard fresh, and can be supplemented by any fresh evidence as to medical or other conditions.  We are satisfied that there should be no embargo placed upon the issues that can be run on the fresh remedies hearing which we order before the same Tribunal.  

33.	We have been told by Mr Menon that the Claimant has now obtained other employment, although, it seems, not until after the expiry of the period for which the Tribunal allowed.  That may or may not be coincidental.  It is clear that the Tribunal, on this fresh remitted hearing, will have to look at the true position up to date in full, and will be permitted to do so.  However, the issues to which the Tribunal will be looking will be on this occasion, we hope, assisted by the medical evidence which both sides may now adduce.  We conclude that the failure before the Tribunal was that almost exclusively of the Claimant who, if he wanted to run any impact on the litigation of his condition should have produced that medical evidence.  But whatever may have been the case in the past, medical evidence can now be adduced and argument can be put forward, by the Claimant as to the causation, impact, effect and alleged ongoing nature of any medical condition that he can establish, and of course by the Respondent, either as to the causation or impact or lack of it of any such medical condition, or as to whether, if it did exist, it would have in any event justified them, after a short period of statutory sick pay, in dismissing the Claimant in any event, so that the loss would be very substantially reduced below the substantial sum awarded by the Tribunal. 

34.	In those circumstances this appeal is allowed and is remitted to the same Tribunal for a rehearing of the issue on remedies.