Appeal No. UKEAT/0093/10/SM

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 6 December 2010
                                    Judgment handed down on 13 April 2011

Before
HIS HONOUR JUDGE BIRTLES
MR R LYONS
MRS D M PALMER

MR T PYBUS	APPELLANT

GEOQUIP LTD	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MR NICHOLAS SIDDALL 
(of Counsel)
&
MR PARAS GORASIA
(of Counsel)
Instructed by:
Messrs Gosschalks Solicitors
Queens Gardens
Hull
HU1 3DZ
	
For the Respondent	MR NIGEL GRUNDY
(of Counsel)
Instructed by:
Messrs Hill Dickinson LLP
No. 1 St Paul’s Square
Liverpool
L3 9SJ	

SUMMARY
UNFAIR DISMISSAL
Contributory fault
Polkey deduction

Appeal on compensation issues.  The Employment Appeal Tribunal allowed the appeal on the grounds that (a) failure in reasoning to make a 35% reduction because of the chance of dismissal on clear evidence; (b) failure to take into account the fixed term contract of employment when reducing the period of compensation.  Observations about exclusion of a witness statement in a remedies hearing.

HIS HONOUR JUDGE BIRTLES
Introduction
1.	This is an appeal by Mr Pybus from the decision of an Employment Tribunal sitting in Hull in July and August 2009.  The reserved judgment was sent to the parties on 25 August 2009.  At the same time the Employment Tribunal made directions for a remedies hearing.  The remedies hearing took place on 19-20 October 2009 and the reserved judgment was sent to the parties on 12 November 2009.

2.	The Appellant is represented by Mr Nicholas M Siddall and Mr Paras Gorasia of counsel.  The Respondent is represented by Mr Nigel Grundy of counsel.  We are grateful to all counsel for their written and oral submissions.

The Material Facts
3.	The Claimant was the founder and Managing Director of a company called Sensor Electronics Ltd.  In February 2007 he sold the business though not the company to Geoquip.  The business retained its separate operating identity as a division of Geoquip and the Claimant became an employee of Geoquip.  On 1 April 2008 he was suspended by Geoquip’s Head of Operations, a Mr Bailey, on suspicion of various kinds of misconduct which we need not specify since most were not substantiated.  Mr Bailey carried out an investigation over the following months, culminating in what was in effect a disciplinary hearing on 21 August 2008 before Geoquip’s Managing Director, Mr Martin Scott.  The Claimant’s eventual dismissal on 9 September 2008 was on the grounds of three heads of misconduct (1) namely that he had undertaken, or sought to undertake, private business in competition with Geoquip; (2) that he had irregularly swapped the serial numbers on certain items of equipment sold by Geoquip; and (3) that he was responsible for a number of misrepresentations in, or breaches of, the sale agreement of the Sensor business to Geoquip.  Other allegations were found not to be proved or not to be serious.

4.	The Claimant appealed.  The appeal was decided by Mr Dieter Schwald, a director of Geoquip’s parent company.  In a letter sent on 27 March 2009 he dismissed several of the allegations relied on by Mr Scott but maintained the dismissal on the basis of two charges: 
(1) that the Claimant had sought to compete with Geoquip; and (2) an alleged misrepresentation in the sale agreement in relation to VAT.

5.	We should say something about the nature of the evidence related to the first of the charges ultimately relied on by Geoquip.  This consisted of two main elements.

6.	First, an employee of Geoquip called Dave Pickering gave a statement to the effect that he had been asked by the Claimant at some unspecified date to design a business card - or it may be the logo for a business card - for a company called Outsourced Management Logistics Ltd (“OML”) which bore the Claimant’s home address and mobile phone number.  OML was a dormant company owned by the Claimant which he had set up long before Sensor was sold to Geoquip.  It had originally been called Sensor Supplies Ltd, but he had had its name changed following the sale because Geoquip did not want any other companies to exist with Sensor using the name.  In the disciplinary hearing before Mr Scott the Claimant accepted that he had asked for the card to be designed, but he said that a son of a friend of his, who had mental health difficulties, was involved in a project which involved designing a website and associated materials, and that in order to assist him he had allowed the project to proceed using OML as the company in question.  It is clear that the explanation was given in a somewhat muddled and unconvincing manner and the Employment Tribunal described it as having been “unsatisfactory”.  However, it also observed that there was no evidence that OML had in fact traded since the sale of Sensor to Geoquip, still less ever competed with Geoquip.

7.	The second element of the competition case against the Claimant was what purported to be a witness statement dated 6 August 2008 from an employee called James Freear which said that a chief executive officer of a customer of Sensor in Kuwait called Sisco, a Mr Al Shawa, had told him that the Claimant had phoned him - that is to say, Mr Al Shawa - to offer to supply products of the kind offered by Geoquip at a lower price.  The Claimant produced at the hearing before the Employment Tribunal a witness statement dated 19 April 2009 from Mr Freear saying that the statement of 6 August 2008 was a forgery; although it was understood that Mr Freear would be attending to give evidence in support of that statement he did not in the event do so.  This second witness statement from Mr Freear was not available at the original disciplinary hearing.  The Claimant’s evidence was, as the Employment Tribunal noted, unclear as to when he first became aware that Mr Freear would disown the statement of 6 August 2008 and as to why, if he was aware of it before the hearing before Mr Scott, he did not tell Mr Scott.

8.	In addition to these two points Geoquip relied on the fact that the Claimant refused during the disciplinary process to provide his mobile phone records for the comparatively short period which would have covered the conversation which he was alleged to have had with Mr Al Shawa.  Although he explained that refusal by saying that he did not want to give Geoquip the opportunity to trawl through all this conversations over that period, the fact remained that the telephone was one for which Geoquip paid and his refusal to assist in this regard was said by Geoquip to be highly suspicious. 

The Procedural History
9.	The procedural history in this case is somewhat unusual and we therefore think it necessary to set it out.  The Claimant was dismissed from his employment with the Respondent on September 9 on grounds of alleged gross misconduct.  By an ET1 dated March 6 2009 the Claimant presented a claim for unfair dismissal.  By an ET3 dated April 6 2009 the Respondent accepted that the Claimant had been dismissed but asserted that the dismissal had been fair on the grounds of the Claimant’s conduct. 

10.	The matter came for hearing before an Employment Tribunal sitting in Hull on July 20‑23 2009.  By written judgment sent to the parties on 25 August 2009 the Employment Tribunal concluded that the Claimant had been unfairly dismissed.  It further determined that no deduction from the Claimant’s compensation was appropriate on the basis of the principles set out in the decision of Polkey v A.E. Dayton Services Ltd [1988] ICR 142 (HL).  It reserved its position as to a deduction on the grounds of the Claimant’s alleged contributory fault.

11.	The Respondent sought a review of the judgment of the Employment Tribunal under cover of a letter dated 8 September 2009 on the basis of the Employment Tribunal’s erroneous approach to the issues of s.98A(2) of the Employment Rights Act 1996 and Polkey.  It also appealed the decision by Notice of Appeal dated October 1 2009.

12.	The Employment Tribunal had issued directions for a remedies hearing also dated 25 August 2009.  The relevant paragraphs of that directions order are as follows:

“1. 	The legal representatives of both parties should be prepared to deal with the issue of the 	Claimant’s contribution to his dismissal on which the Tribunal will hear full arguments.
2. 	The Claimant’s solicitors should prepare an amended Schedule of Loss up to the date of 	the Hearing.
3.	The Claimant must produce evidence that he has mitigated his loss.  This should be done 	by the Claimant preparing a witness statement dealing with this issue (and anything else 	relevant to the Remedy Hearing), together with copy documentation to show job 	applications that have been made.  The documentation should also relate to the 	Claimant’s earnings since his dismissal.  The witness statement and documents should be 	sent to the Respondent’s solicitors by 2 October 2009.
4. 	If the Respondent disputes any of the Claimant’s proposed evidence or assertions, 	including mitigation, they should serve any witness statements and/or documents on the 	Claimant’s solicitors by 12 October 2009.”

13.	The matter then returned to the Employment Tribunal for determination of the issue of remedy on 19 October 2009.  By a reserved judgment sent to the parties on 12 November 2009, the Employment Tribunal reviewed its previous decision and concluded that a 35% Polkey reduction was appropriate, that the Claimant’s employment would not have continued for more than another nine months from the date of his dismissal, that he had contributed to his own dismissal to the extent of 50% and that he had failed to mitigate his loss.  By Notice of Appeal dated 21 December 2009, the Claimant appealed against the Employment Tribunal’s judgment as to remedy.

14.	By order of the EAT dated 15 February 2010 (HHJ Serota QC) both appeals were set down for a preliminary hearing.  That preliminary hearing was heard on 6 May 2010 before Underhill J (President).  At that hearing the Respondent’s appeal was dismissed and the Claimant’s appeal was permitted to proceed to a full hearing.  The President also gave a reasoned judgment as to the reasons for allowing the Claimant’s appeal to proceed: EAT bundle pages 159-178.

15.	Pursuant to the order of Underhill J the Respondent has served an Answer to the appeal: EAT bundle pages 154-157, and the parties have served additional evidence addressing the events of the hearing before the Employment Tribunal on 19 October 2009.

The Employment Tribunal Conclusions on Liability
16.	The Tribunal’s broad conclusions are set out at paragraphs 75-79 of its judgment:

“75. The Tribunal cannot find that the investigation conducted by the Respondent was of the standard a reasonable employer would achieve in these circumstances. Reliance was placed by the Respondent on the 251 page dossier placed before Mr Scott but quantity is not quality. Statements of employees were used without any indication of the circumstances in which they made the statements nor were they challenged in any respect. The makers of the statements were not called to the Disciplinary Hearing so the Claimant had no chance to question them or to put their comments into context. They may have had a dispute with the Claimant; some may not have had an accurate recall of events some 18 months earlier.
76. Mr Bailey made no attempt to contact those involved in negotiations or the structuring of the Asset Sale especially the solicitors and the accountants. Despite the complexity of some of the charges relating to accounting treatment there was no evidence of any approach to the Respondent’s auditors nor was a forensic accountant instructed to prepare a report nor were the stock takers questioned. Although Mr Bailey claimed at the Disciplinary Hearing (page 417) that he had used “a professional forensic accountant firm” there is no evidence of such in the dossier.
77. While the Tribunal does not accept the Claimant’s charge that there was a conspiracy to get rid of him, there must be some concern about the central role played by Graham Bailey. No evidence was given about his qualifications or experience in business or his ability to conduct a complex disciplinary investigation. No information or explanation was given as to his methodology. He was dismissed by the Respondent in circumstances they were unwilling to disclose.
78. The Tribunal conclude that the investigations into the two matters for which the Claimant was summarily dismissed were inadequate and not that which a reasonable employer would have undertaken especially given the seriousness of both allegations. This means that the dismissal is therefore unfair.
79. Accordingly arguments about whether any flaws in procedure would make no difference do not need to be considered. However as mentioned above we do not find that there has been any failure by the Respondent to complete the statutory dismissal and disciplinary procedure so the Claimant was not automatically unfairly dismissed.”

17.	The Tribunal ended that judgment on liability by rejecting a submission from the Claimant’s representative that the Respondent had no authority to discipline the Claimant in respect of conduct committed before the Respondent became his employer: judgment paragraph 80.  There is no appeal against that finding.

18.	Finally, having found that the Claimant was unfairly dismissed, the Tribunal then looked to see if there was evidence that the Claimant had contributed to his dismissal.  It indicated at paragraph 82 of its judgment that it invited both legal representatives to make more detailed submissions on this point at the remedy hearing, and indicated five areas where it considered that there was potential contribution by the Claimant to his dismissal. 

The Remedy Hearing
19.	This took place on 19 October 2009.  The reserved decision was sent to the parties on 12 November 2009: EAT bundle pages 78-87.  The judgment makes the following findings:

“1. Having reviewed their decision the Tribunal confirms its finding that the Claimant was unfairly dismissed and that it was not possible to apply Section 98A(2) of the Employment Rights Act 1996 because of the speculative nature of the evidence.
2. The Tribunal accepts that a Polkey reduction of 35% is appropriate to reflect the risk that dismissal could have occurred had proper procedures been followed.
3. The Tribunal also finds that even if the Claimant had continued in employment such would not have lasted more than 9 months.
4. The Tribunal finds that the Claimant contributed to his dismissal to the extent of 50%.
5. The Claimant is awarded a Basic Award of £4,042.50 and a Compensatory Award of £9,376.25 making a total of £13,418.75 which the Respondent is ordered to pay to the Claimant.”

20.	In its Reasons the Tribunal refer to the Respondent’s application for a review and the fact that it was ordered to take place on the same day as the remedy hearing.  The Tribunal first deal with the Claimant’s application to put in a further witness statement by him: EAT bundle pages 61-77.  That witness statement sought to deal with the issue of mitigation: paragraphs 27-34 but also with the five points identified by the Tribunal in paragraph 82 of its liability judgment on the issue of contributory conduct: paragraphs 3-26.  The Claimant also sought to introduce a witness statement from Mr Freear dated 19 October 2009 which alleged that his previous witness statement, dated 6 August 2008, which had been placed before the Tribunal at the liability hearing and was relied on by the Respondent, was a forgery.  The witness statement is at EAT bundle pages 58-60.  The Employment Tribunal considered this issue at the beginning of its judgment.  The relevant part of paragraph 2 says this:

“Prior to the hearing however, there was an issue concerning the Claimant having served additional witness statements and also a statement from a person who did not attend to give evidence at the hearing on liability.  The Claimant’s statement was largely concerned with his explanation of the areas which the Tribunal had identified for submissions to be made on the issue of contribution.  Having looked at the statement, the Tribunal indicated that it was not appropriate for the Claimant to put such matters in evidence.  The issues relating to contribution should rest on the findings of the Tribunal at the main hearing in July 2009; the purpose of the Remedy Hearing was to hear submissions on whether or not those incidents had contributed to the Claimant’s dismissal.  Accordingly, only paragraphs 27 to 34 inclusive of the Claimant’s witness statement which related to the mitigation of his loss was considered to be admissible.  The other statement was from James Freear.  Mr Freear had been scheduled to attend the liability hearing but he did not attend and no reason was given for his absence.  The Tribunal did not consider it appropriate that after a decision had been made on liability and on the various issues, that the Claimant should be permitted to present Mr Freear’s evidence as a witness.  Accordingly he was informed that he would not be needed and his statement was not read.”

21.	The Employment Tribunal went on to deal with the Respondent’s application for a review about (a) the applicability of section 98A(2) of the Employment Rights Act 1996 and whether it should have considered a percentage reduction pursuant to Polkey.  The Tribunal concluded that given the uncertainty concerning any outcome of any further enquiries which the Respondent would undertake, section 98A(2) did not assist the Respondent since the evidence produced did not show that the Claimant could have been fairly dismissed: judgment paragraph 9.  The application for a review in respect of section 98A(2) failed but the Tribunal did accept that it was appropriate to consider whether there should be a percentage reduction in accordance with Polkey.

22.	The Tribunal went on to consider the application of Polkey and made a reduction of 35%: judgment paragraph 11.  It also considered whether the Claimant’s employment would have continued indefinitely or for only a limited fixed period.  It found that it would be unlikely that the Claimant would have remained in employment for the remaining 19 months of his three year contract.  It held that the issues between the parties, particularly those relating to the financial operation of Sensor, would have resulted in the Claimant’s employment with the Respondent only lasting for a further 9 months from the actual date of dismissal, i.e. 9 September 2009: judgment paragraphs 12-14.

23.	Finally, the Employment Tribunal considered the issue of contribution and decided that the Claimant was 50% to blame for his dismissal: judgment paragraphs 16-20.  The material findings are at paragraph 20 where the Tribunal say this:

“20. Findings of contributory conduct
20.1 There are two matters which are relevant here.  The first is the creation of the business card and the website for a different company.  We have previously found that the Claimant gave an inadequate explanation for this conduct.  Although the respondent could have investigated further, the fact remains that the Claimant’s conduct was suspicious, particularly when he should not, as an employee, have been competing with the Respondent.  This is one of the cornerstones on which the Respondent relied when dismissing the Claimant for competing with them.
20.2 The Tribunal also found that the persistent refusal of the Claimant to provide his mobile phone records for a 14-day period in connection with the allegation that he had contacted Mr Al Shawa to be culpable or blameworthy conduct.  Although the mobile phone belonged to the Claimant, the Respondent Company reimbursed him in full for all its charges on the basis that he had to use it for business.  There was little justification for his persistent refusal to reveal the records for the limited 14-day period for which they were sought and inevitably meant that the Respondent could regard his refusal as highly suspicious in the context of the purpose for which the records were required.
20.3 The Tribunal find that on the basis of these two incidents, the Claimant was 50% to blame for his dismissal.”

24.	The Tribunal went on to assess the compensation: judgment paragraph 21.  In respect of mitigation of loss the Tribunal said this:

“21.4 When assessing the amount of financial loss in addition to the reductions referred to above, the Tribunal also considered whether the Claimant had mitigated his loss.  He gave evidence that he had not been able to obtain an alternative job.  However he had now set up a company in Dubai where he would represent manufacturers in Dubai and the Middle East.  He intended to sell those products to other companies around the world.  He would either receive a commission on such sales or he would purchase the items himself and then sell them on at a profit.  Unfortunately to date he has not been successful in obtaining any orders, although he has had various enquiries and given quotations.  In addition the Claimant has rented an apartment there which is occupied by his daughter who assists him in the business, although the Claimant himself remains based in the UK.
21.5 Although the Tribunal recognises that it is not easy for a man aged 54 to obtain a similar job at a similar salary, nevertheless there is some argument that the Claimant has tried very little to take steps to mitigate his loss.  Although he is in a specialised industry, he was essentially a salesman and, as such, had transferable skills.  He made no attempt to look for any sales jobs, either in the UK or elsewhere.
21.6 The Tribunal finds that the Claimant has not mitigated his loss and he is not entitled to compensation up to the date of the remedy hearing nor for any future loss.
21.7 The Tribunal does accept that in order for the claimant to look for and obtain a suitable job would probably take 6 months and accordingly agree that he should be awarded his net pay of £900.00 per week for that period.  Although the respondent did not produce any evidence by way of advertisements or opportunities on line which would have been suitable for the Claimant of which he should reply, the Tribunal using its own knowledge of the local job market does consider that after 6 months the Claimant could have obtained a sales position at £500.00 per week.  Accordingly he is entitled to the shortfall (the difference between £900.00 and £500.00) of £400.000 for three months which is the remainder of the 9 month period." 

The Notice of Appeal
25.	The Notice of Appeal is at EAT bundle pages 89-94.  It raises five grounds of appeal.  We take each ground of appeal in turn.  

Ground 1: The Evidence Issue
26.	Mr Siddall submits that the Employment Tribunal was wrong to exclude the Claimant's evidence as to the issue of contribution/Polkey and also the evidence of Mr Freear.  We have set out the relevant part of paragraph 2 of the remedies judgment which deals with this issue.

27.	Before dealing with the submissions, we think it helpful to set out what we see as the relevant law.  The Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004, Schedule 1, rule 14 provides as follows:

"(2) So far as it appears appropriate to do so, the Employment Judge or Tribunal shall seek to avoid formality in his or its proceedings and shall not be bound by any enactment or rule of law relating to the admissibility of evidence in proceedings before the courts.
(3) The Employment Judge or Tribunal (as the case may be) shall make such enquiries of persons appearing before him or it and of witnesses as he or it considers appropriate and shall otherwise conduct the hearing in such manner as he or it considers most appropriate for the clarification of the issues and generally for the just handling of the proceedings."

Rule 27(2) of the same Regulations provides as follows:

"Subject to rule 14(3), at the Hearing a party shall be entitled to give evidence, to call witnesses, to question witnesses and to address the tribunal."

28.	In ALM Medical Services Ltd v Bladon [2002] IRLR 807 at paragraphs 15 and 19, Mummery LJ said this:

"15. A party is entitled to adduce evidence relevant to the issues in the case and to put questions on relevant matters to the other party and to his witnesses.  It is for the Tribunal, with the assistance of the parties and their representatives, to identify the relevant issues for decision and to exercise its discretionary case management powers to decide whether the evidence adduced or the questions put to the witnesses in cross-examination are relevant.  The exercise of the discretion will rarely be disturbed on appeal: it can only be successfully challenged if it can be shown that the Tribunal has exercised it contrary to legal principle or otherwise in a manner which is plainly wrong.
…
19.  It was the duty of the Tribunal to hear and consider all the relevant evidence from ALM and to allow ALM to challenge Mr Bladon's evidence on the relevant issues, before finding the facts and reaching a decision on the issue of protected disclosure and on the reasons for the written warning and the dismissal."

29.	In Digby v East Cambridgeshire District Council [2007] IRLR 585 at paragraph 12, His Honour Judge Peter Clark said this:

"12. Since the point is raised directly in the present case we shall decide it.  In our judgment the approach taken by Langstaff J in Krelle is correct.  A tribunal has a discretion, in accordance with the overriding objective, to exclude relevant evidence which is unnecessarily repetitive or of only marginal relevance in the interests of proper, modern day case-management.  However, that discretion must be exercised judicially.  It may properly be challenged on appeal on Wednesbury principles.  The guiding principle is to ensure justice between the parties."

30.	Mr Siddall submits that the evidence of the Claimant contained in his witness statement prepared for the remedies hearing was relevant as we have indicated.  The part of the Claimant's witness statement which was excluded by the Tribunal (paragraphs 1-26 and 35) on the basis that they related not to the issue of mitigation of loss but to the issue of contribution and were an elaboration of the evidence already given by the Claimant at the liability hearing on those issues.  In other words, it was an attempt to improve his evidence where the Tribunal had identified weaknesses in it: remedies judgment paragraph 2 and liability judgment paragraph 82.  Put simply it was an attempt to have a second or third bite of the cherry in respect of matters which had already been determined by the Employment Tribunal.  In those circumstances it seems to us to be well within the discretion of the Tribunal to exclude those paragraphs of the Claimant's witness statement as being either irrelevant and/or unfair because it is attempting to readdress issues upon which the Employment Tribunal had already made findings of fact.

31.	The Tribunal also excluded the witness statement of Mr Freear dated 19 October 2009.  In its original liability decision, the Employment Tribunal had considered Mr Freear's first witness statement dated 19 October 2009, when he stated that his statement of 6 October 2008 used by the Respondent was false: liability judgment paragraph 56.  The Employment Tribunal made findings of fact and expressed its views at paragraph 82.  The witness statement of Mr Freear dated 19 October 2009 merely repeated what he had said in his first witness statement dated 19 April 2009.  However, he also purported to give an explanation as to why the Claimant had not mentioned at the appeal hearing before the Respondent on 20 April 2009 the existence of Mr Freear's statement of 19 April 2009 or that his original statement of 6 August 2008 was false.  That explanation contradicted what had been said by the Claimant in evidence at the liability hearing: see the note of Ms Alison Ledger of Halliwells LLP who is a trainee solicitor attending the liability hearing: EAT bundle pages 136-140.  Again, this was an attempt to re-open matters upon which the Employment Tribunal had made findings of fact at the liability hearing.  There was no application for a review by the Claimant.

32.	Furthermore, a careful reading of the Employment Tribunal's judgments make it clear that the Tribunal (a) did not consider that Mr Freear's evidence bore on any of the five potential arrears of contributory conduct by the Claimant: liability judgment paragraph 82 and remedies judgment paragraph 20 and (b) of little value in assessing the outcome of a fair procedure under section 98A(2): remedies judgment paragraphs 8 and 11.  The critical person was in fact Mr Al-Shawa, not Mr Freear.  Finally, we have anxiously considered the effect of the word in paragraph 3 of the directions given for the remedies hearing on 25 August 2009: EAT bundle page 56.  To repeat the direction said this:

"3. The Claimant must produce evidence that he has mitigated his loss.  This should be done by the Claimant preparing a witness statement dealing with this issue (and anything else relevant to the Remedy Hearing), together with copy documentation to show job applications that have been made.  The documentation should also relate to the Claimant's earnings since his dismissal."

33.	In the light of the Tribunal's findings at paragraphs 78 and 82 of the liability judgment, and paragraph 2 of the remedies judgment, we do not think that the Tribunal was opening the door to the Claimant to give further evidence on matters upon which the Tribunal had already reached a conclusion.  That is certainly true of the Claimant's own additional witness statement and in the case of Mr Freear, the passages we have cited in the remedies judgment make it clear that his evidence was either not relevant or that it would be unfair to admit it.  There was no Wednesbury unreasonableness.

Ground 2: The 35% Polkey Deduction Issue
34.	In Software 2000 [2007] IRLR 568 at paragraph 54, Elias J summarised the law in this way:

“54. The following principles emerge from these cases:
(1) In assessing compensation the task of the tribunal is to assess the loss flowing from the dismissal, using its common sense, experience and sense of justice.  In the normal case that requires it to assess for how long the employee would have been employed but for the dismissal.
(2) If the employer seeks to contend that the employee would or might have ceased to be employed in any event had fair procedures been followed, or alternatively would not have continued in employment indefinitely, it is for him to adduce any relevant evidence on which he wishes to rely.  However, the tribunal must have regard to all the evidence when making that assessment, including any evidence from the employee himself.  (He might, for example, have given evidence that he had intended to retire in the near future.)
(3) However, there will be circumstances where the nature of the evidence which the employer wishes to adduce, or on which he seeks to rely, is so unreliable that the tribunal may take the view that the whole exercise of seeking to reconstruct what might have been is so riddled with uncertainty that no sensible prediction based on that evidence can properly be made.
(4) Whether that is the position is a matter of impression and judgment for the tribunal.  But in reaching that decision the tribunal must direct itself properly.  It must recognise that it should have regard to any material and reliable evidence which might assist it in fixing just compensation, even if there are limits to the extent to which it can confidently predict what might have been; and it must appreciate that a degree of uncertainty is an inevitable feature of the exercise.  The mere fact that an element of speculation is involved is not a reason for refusing to have regard to the evidence.
(5) An appellate court must be wary about interfering with the tribunal’s assessment that the exercise is too speculative.  However, it must interfere if the tribunal has not directed itself properly and has taken too narrow a view of its role.
(6) The s.98A(2) and Polkey exercises run in parallel and will often involve consideration of the same evidence, but they must not be conflated.  It follows that even if a tribunal considers some of the evidence or potential evidence to be too speculative to form any sensible view as to whether dismissal would have occurred on the balance of probabilities, it must nevertheless take into account any evidence on which it considers it can properly rely and from which it could in principle conclude that the employment may have come to an end when it did, or alternatively would not have continued indefinitely.
(7) Having considered the evidence, the tribunal may determine:
(a) That if fair procedures had been complied with, the employer has satisfied it – the onus being firmly on the employer – that on the balance of probabilities the dismissal would have occurred when it did in any event.  The dismissal is then fair by virtue of s.98A(2).
(b) That there was a chance of dismissal but less than 50%, in which case compensation should be reduced accordingly.
(c) That employment would have continued but only for a limited fixed period.  The evidence demonstrating that may be wholly unrelated to the circumstances relating to the dismissal itself, as in the O’Donoghue case.
(d) Employment would have continued indefinitely.
However, this last finding should be reached only where the evidence that it might have been terminated earlier is so scant that it can effectively be ignored.”

35.	Mr Siddall makes three submissions.  The first is that the Employment Tribunal erred in excluding the evidence of the Claimant and Mr Freear.  For the reasons we have given we do not accept this submission.  

36.	The second submission is that the Employment Tribunal failed to give adequate reasons as to how (or why) it concluded there was a 35% chance of the Claimant being fairly dismissed and the factors relied upon in support of its conclusion.  The failure to give adequate reasons is an error of law: English v Emery Reimbold [2003] IRLR 710.  Mr Siddall relies on a passage in Pinewood Repro Ltd (trading as County Print) v Page [2010] UK EAT/0028/10/SM.  At paragraph 47 His Honour Judge Ansell said this:

"Accordingly, we cannot find fault with the Tribunal's determination on this issue nor do we find fault on the Polkey issue.  At the end of the day, the Tribunal determined that there was no cogent evidence from the employer as to whether he would have been dismissed in any event, leaving only the evidence from the respondent, which suggested that he would not have been dismissed in the redundancy selection exercise that actually that possibility was clearly accepted by the Tribunal.  We, therefore, agree that there was no cogent evidence which would have allowed the Tribunal to speculate with the degree of certainty suggested in the Software case.  In our view, the "one in three argument" is completely fallacious - it is not evidence based."

37.	In this case, the only reasoning given by the Tribunal is in paragraph 11 of its remedies judgment where it said this:

"11. Although the outcome of the further investigations is speculative, one possibility must be that Mr Al Shawa could have confirmed the statement made by James Freear in August 2008.  Therefore, the Tribunal accept that there is a chance that after adequate investigations the Claimant would have been dismissed.  It estimates the chance of such a fair dismissal occurring to be 35% (or a one in three chance) so that the Claimant's compensation should be reduced accordingly."

38.	With respect to the Tribunal, it seems to have forgotten that in its liability judgment it severely criticised the investigation undertaken by the employer: liability judgment 28-48.  The Tribunal went on to examine the two allegations which were left against the Claimant after the appeal hearing before Mr Schwald: liability judgment paragraphs 51-74.  It again criticised the Respondent and found that the investigation conducted by the Respondent was not of a standard that a reasonable employer would achieve in these circumstances: liability judgment paragraphs 75-78.  No evidence was put before the Tribunal by either the Claimant or the Respondent as to what Mr Al-Shawa might or might not have said if he had been asked in a reasonable investigation.  It was open to the Respondent to obtain a statement from Mr Al-Shawa and put it before the Tribunal together with its application for a review.  For whatever reason it did not do so.  There was simply no evidence before the Employment Tribunal upon which it could find that there was a one-third chance that Mr Al-Shawa would confirm the statement made by Mr Freear in August 2008.  The conclusion of a one-third deduction was not evidence based.

39.	Mr Siddall's third submission is based upon Yeboah v Crofton [2002] IRLR 634 per Mummery LJ at paragraphs 92-95.  We do not find perversity in this case.  

40.	However, for the reasons given, we allow the appeal on ground 2.

Ground 3: The 9 Month Polkey Issue
41.	We note the President's comment in paragraph 38 of his judgment at the preliminary hearing: EAT bundle page 176.  However, it does not seem to us necessary to decide which is the correct label.  The point at issue is clear.  The Tribunal deal with this issue at paragraphs 12-14 of its judgment which we have set out earlier in our judgment.  We have carefully considered the grounds of appeal but in our judgment there is only one on which we will allow the appeal.  Paragraph 6.3.4 of the Notice of Appeal argues that the Tribunal failed to have regard to the fact that the Claimant was employed under a fixed term contract of employment and thus failed to consider what effect an early termination would have on the Claimant's right to payment thereunder: EAT bundle page 93.  The contract of employment is at EAT bundle pages 181-184.  It is dated 15 February 2007 and was the operative contract at the date of dismissal.  The section dealing with notice of termination is at EAT bundle page 183.  If notice of termination is given by the employer then the period of notice is three months "which notice can only be served by the Employer on or after the expiry of 3 years from the date hereof."  That is therefore a 3 months notice period which can only be served on or after the expiry of three years from 15 February 2007, ie, 15 February 2010.  Both counsel agree that there was no evidence to justify a dismissal for misconduct.  It follows that the contractual period of notice must be the relevant one to be considered by the Employment Tribunal.  The Claimant was actually dismissed on 9 September 2008, ie, some 21 months before he could be dismissed under the contract of employment.  The contract of employment was before the Employment Tribunal but it did not apparently consider it.  This is an error of law. 

42.	There is a second basis for allowing the appeal under Ground 3 which is that there is no reasoning as to why the Employment Tribunal picked a nine month period.  It appears to be a figure plucked from the air.  While there were clearly differences between the Claimant and the Respondent and it was also clear that there had been some discussion between them of a commercial settlement, the Tribunal gave no adequate reasoning as to how they arrived at the figure of nine months. 

Ground 4: Contribution
43.	Mr Siddall submits that the Employment Tribunal erred in concluding that the Claimant had contributed to his own dismissal to the extent of 50%.  He concedes that, as this is a question of fact, an appellate tribunal will seldom interfere: Holier v Plysu Ltd [1983] IRLR 260.  Mr Siddall criticises the Tribunal for the reasons set out in paragraph 38 of his skeleton argument.  

44.	We prefer the submissions made by Mr Grundy.  The Employment Tribunal considered the issue of contributory fault and identified five areas at paragraph 82 of its liability decision.  At the remedies hearing it heard detailed submissions upon each of those five areas and concluded that only two of those five areas amounted to contributory conduct: remedies judgment paragraphs 16-20.  A careful reading of those paragraphs show that the Tribunal carefully considered whether the conduct of the Appellant in those two areas, ie (a) the creation of the business card and the website for a different company and (b) the persistent refusal of the Claimant to provide his mobile phone records for a 14 day period in connection with the allegation that he had contacted Mr Al-Shawa to have contributed to his dismissal.  We think that Mr Siddall's criticisms of particular words "was suspicious": paragraph 20(1); "culpable or blameworthy conduct"; and "… the Respondent could regard his refusal has highly suspicious" to be semantics.  The conclusion of the Tribunal is clear.  We find no error of law in Ground 4.

Ground 5: The Mitigation Issue
45.	It is trite law that the burden of proof is on the Respondent to prove that the Claimant has failed to mitigate his loss: Bessenden Properties Ltd v Corness [1974] IRLR 338.  

46.	The Tribunal summarised the evidence they heard in paragraph 21.4 of their judgment.  That is based on the Claimant's own evidence to the Tribunal.  For the first six months (ie from 9 September 2008 to March 2009) he did not do anything.  He did not consider alternative employment or apply for any jobs at all.  In March 2009 he decided to start a speculative business venture in Dubai which had not led to any orders at all up to the date of the remedies hearing (a period of some seven months).  The Appellant did not disclose any bank statements or management accounts or any other accounting information in relation to the business venture in Dubai.  Based on that information supplied by the Appellant himself, it is open to the Respondent to argue and the Tribunal to accept, that the Claimant had not taken reasonable steps to mitigate his loss.  We do not regard this as a case where the Employment Tribunal have shifted the burden of proof and require the Claimant to prove that he had mitigated his losses.  Neither can we find failure to apply the reasonableness test.

47.	Mr Siddall then submitted that the Employment Tribunal applied an arbitrary date when the Claimant ought to have been back at work in the (admitted) absence of any evidence to support the same.  It also failed to consider the effect of the economic downturn upon its purported “knowledge of the local job market”.

48.	As an industrial jury the Employment Tribunal is entitled to take into account their own knowledge of the local job market.  It beggars belief that in October 2009 it had no knowledge of the effect of the economic downturn on the local job market.  In the absence of any evidence from either side it was forced back into its local knowledge.  The choice of a 6 month period was one the Tribunal was entitled to make and it is not perverse.

Conclusion
49.	For these reasons we allow the appeal on grounds two and three.  We have carefully considered the submissions made by both counsel as to disposal.  We have carefully considered what Jacob LJ said in Buckland v Bournemouth University [2010] IRLR 445 but that seems a long way from this case.  Following the guidance in Sinclair, Roche & Temperley v Heard [2004] IRLR 763 we think the appropriate course of action in this case is to remit the case to the same Employment Tribunal to consider its assessment of compensation based upon findings in this judgment.