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You are here: BAILII >> Databases >> United Kingdom House of Lords Decisions >> W. Devis & Sons Ltd v Atkins [1977] UKHL 6 (06 July 1977) URL: http://www.bailii.org/uk/cases/UKHL/1977/6.html Cite as: [1977] AC 931, [1977] 3 All ER 40, [1977] ICR 662, 8 BLR 57, [1977] IRLR 314, [1977] UKHL 6, [1977] 3 WLR 214, (1978) 13 ITR 71

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W. DEVIS & SONS LTD (Appellants) vs. ATKINS (Respondent)
(T) 12981/74
House of Lords: 6th July, 1977

Lord Diplock
Viscount Dilhorne
Lord Simon of Glaisdale
Lord Edmund-Davies
Lord Fraser of Tullybelton)

Fenton Bresler and R. Jones (instructed by R. A. Roberts) for the appelants. Peter Scott (instructed by Treasury Solicitor) as amicus curiae.

Lord Diplock:

My Lords,

1. I agree with the speech about to be delivered by my noble and learned friend Viscount Dilhorne. For the reasons that he gives, I would dismiss this appeal, but in doing so I would add a word of warning as to the application of its ratio decidendi to compensation for unfair dimissal under the law that is currently in force.
2. The employee's claim for compensation for unfair dismissal was brought under Schedule 1 to the Trade Union and Labour Relations Act, 1974. The provisions of this Schedule have since been amended by the Employment Protection Act, 1975. Although paragraph 6(8) of the Schedule which contains the test of what constitutes unfair dismissal remains unchanged, sections 73 to 76 of the 1975 Act provide that an award of compensation shall consist of two amounts - a basic award and a compensatory award. Although the provisions for the assessment of the compensatory award are in substantially the same terms as those of paragraph 19 of Schedule 1 to the Act of 1974, the basic award is assessed as a matter of arithmetical calculation on the employee's pay and period of continous service prior to his dismissal. The right to this amount of compensation is automatic, save that, as in the case of compensatory awards, there is a "contributory fault" provision in similar terms to those of paragraph 19(3) of Schedule 1 to the Act of 1974.
3. Under both the 1974 and 1975 Acts, it is a condition precedent to any award of compensation that the dismissal of the employee should have been "unfair", so an employee who was dismissed for defrauding his employer or some other form of gross misconduct would have no right to compensation. While it is conceivable that Parliament might have intended that a dismissed employee should be entitled to compensation, even though the reason for his dismissal was his own gross misconduct, I find it impossible to ascribe to Parliament an intention that the question as to whether a dismissed employee who had been guilty of gross misconduct was entitled to substantial compensation should depend upon whether or not he had been successful in concealing his own misdeeds until after his dismissal.
4. There were two ways of construing Schedule 1 to the Act of 1974 by which it was possible to avoid this consequence, which Parliament could never have intended. One was to construe paragraph 6(8) as if the overriding provision were the reference in parenthesis to the requirement to have "regard to equity and the substantial merits of the case", as constituting the over-riding consideration so as to exclude from the category of "unfair dismissal" dismissal of an employee who had successfully concealed his gross misconduct. The other way was to construe paragraphs 17(3) and 19(1) as authorising a nominal or nil award when it was just and equitable so to do. The ordinary grammatical meaning of one or other of these provisions had to give way if justice and commonsense were not to be flouted and in the context of the Schedule as a whole the language of paragraphs 17(3) and 19(3) gave way more easily than that of paragraph 6(8).
5. But if the same construction were placed upon paragraph 6(8) in what is now a different context resulting from the amendments contained in sections 71 to 80 of the Employment Protection Act, 1975, the result would be that the compensation provisions for unfair dismissal would have been converted into a veritable rogue's charter, for the tribunal would be bound to award to a fraudulent employee, because he had successfully concealed his fraud, a basic compensation which might well amount to a substantial sum.
6. The actual words of paragraph 6(8) of Schedule 1 to the Act of 1974 remain unchanged; but the context in which they fall to be construed now that the Act of 1975 has come into force, is different. Your Lordships' decision in the instant case is not, necessarily, authority as to their meaning in the new context.

Viscount Dilhorne:

My Lords,

7. In 1962 the respondent entered the appellant's employment. From 1971 until he was dismissed on the 21st October, 1974, he was manager of their abattoir at Preston at a salary of £4,224 per annum. During 1974, difficulties arose, according to the appellants, due to the respondent's consistent failure to comply with directions given to him. He was told to buy the bulk of the animals for the abattoir from farmers, but he continually bought from dealers.
8. So on the 21st October, 1974, he was dismissed by the general manager. On the 23rd October, 1974, a letter was sent to him saying that his employment would be treated as terminated on the 22nd October. That letter stated that the appellants had been dissatisfied and unhappy, as the respondent knew, with the way in which he had been handling the business and with his inability to adapt himself to the wishes of the management. He had been told on the 21st October, and it was repeated in the letter, that he would be paid six weeks' salary in lieu of notice, and in the letter he was also told that the company would make him an ex gratia payment of £6,000.
9. Attached to this letter was a form to be signed by the respondent which stated:

"I agree to the above conditions concerning the termination of my employment and confirm that I have no further claims against the company.

That was not signed by the respondent and on the 1st November, 1974, the offer to pay £6,000 ex gratia and six weeks' salary in lieu of notice was withdrawn, the letter of that date stating that since the 23rd October information had come to light that the respondent had been guilty of gross misconduct; and that the appellant would treat the respondent as summarily dismissed.

10. On the 10th November, 1974, the respondent made an application to an industrial tribunal alleging that he had been unfairly dismissed. The appellants sent a notice of appearance dated the 3rd December in which they said that the respondent had been dismissed for gross misconduct, namely, "dishonest dealing in live animals" to the appellants' detriment between June and September, 1974.
11. At the hearing before the tribunal the appellants sought to rely on the information as to the respondent's conduct which had come to their knowledge after his dismissal, in support of their contention that he had not been unfairly dismissed. The chairman indicated that at that stage of the hearing, the tribunal was not concerned with facts discovered by the appellants after the dismissal, though they could become relevant later if the tribunal found that the dismissal was unfair; and the tribunal declined then to hear evidence as to the matters which had come to the appellant's knowledge after he had been dismissed.
12. In their decision the tribunal pointed out that a warning given to the respondent in December, 1973, might be taken to imply possible dismissal but was equally consistent with a change of managers being contemplated, and that, apart from that, no warning of any kind was given to him that his employment was in jeopardy. At the end of the appellants' case the appellants were told that the tribunal was not satisfied that they had established that they had acted reasonably in all the circumstances in dismissing the respondent; and after hearing the appellants' solicitor, the tribunal held that the appellants had acted unreasonably in treating the respondent's conduct as a sufficient reason for dismissing him and found that his dismissal was unfair. They did not think it practicable that he should be re-engaged by the appellants and it was left to the parties to seek a settlement of the proper compensation to be paid with liberty to apply to the tribunal if they were unable to agree.
13. From that decision the appellants appealed to the High Court without success. Their appeal to the Court of Appeal was also dismissed and they now appeal to this House.
14. They not unnaturally resent the stigma which results from the tribunal's decision. In this appeal they do not challenge that decision on the evidence the tribunal heard, but they say the tribunal erred in refusing to hear evidence of the respondent's conduct which came to their knowledge after his dismissal and so in preventing them from establishing that the respondent was guilty of gross misconduct of such a character that, if they had had that information at the time and had acted on it, his dismissal would not have been unfair. In an action for damages for wrongful dismissal an employer can rely as justifying the dismissal on information only acquired after the dismissal (see Boston Deep Sea Fishing & Ice Company v. Ansell^[1], Cyril Leonard & Co. v. Simo Securities Trust Ltd.^[2]). Why then should they not do so when the question at issue is, was the respondent unfairly dismissed? If they cannot do so, it must follow that a dishonest employee who up to the time of his dismissal has successfully concealed his dishonesty, may succeed in obtaining a decision that his dismissal was unfair which, apart from reflecting on his employers, may assist him in obtaining other employment when if the full facts had been known at the time of his dismissal, that would have been fully justified.
15. The Industrial Relations Act, 1971, in section 22(1) stated that every employee in an employment to which the section applied - and the respondent's employment was one to which the section applied - should have the right not to be unfairly dismissed. This Act was repealed by the Trade Union and Labour Relations Act, 1974, but the part of that Act dealing with unfair dismissal was re-enacted in Schedule 1 to the 1974 Act. Paragraph 4 of that Schedule replaced section 22 of the 1971 Act and again declared that every employee in an employment to which the section applied should have the right not to be unfairly dismissed. It provided also that the only remedy of an employee unfairly dismissed was to be by way of complaint to an industrial tribunal.
16. Paragraph 6 of the Schedule so far as material reads as follows:

'"6(1) In determining for the purposes of this Schedule whether the dismissal of an employee was fair or unfair, it shall be for the employer to show -

"(a) what was the reason (or, if there was more than one, the principal reason) for the dismissal and

"(b) that it was a reason falling within sub-paragraph (2) below or some other substantial reason of a kind such as to justify the dismissal of an employee holding the position which that employee held.

•'(2) In sub-paragraph (1)(b) above the reference to a reason falling within this sub-paragraph is a reference to a reason which -

"(a) related to the capability or qualifications of the employee for performing work of the kind which he was employed by the employer to do, or

"(b) related to the conduct of the employee, or..."

"(8)... the determination of the question whether the dismissal was fair or unfair, having regard to the reason shown by the employer, shall depend on whether the employer can satisfy the tribunal that in the circumstances (having regard to equity and the substantial merits of the case) he acted reasonably in treating it as a sufficient reason for dismissing the employee."

17. Paragraph 17(2) provides,

"(2) Where on a complaint under this paragraph the industrial tribunal -

"(a) finds that the grounds of the complaint are well-founded, and

"(b) considers that it would be practicable and in accordance with equity, for the complainant to be reinstated or re-engaged by the employer or to be engaged by a successor of the employer or by an associated employer,

"the tribunal shall make a recommendation to that effect, stating the terms on which it considers that it would be reasonable for the complainant to be so reinstated, re-engaged or engaged.

"(3) Where on such a complaint the industrial tribunal finds that the grounds of the complaint are well-founded, but -

"(a) the tribunal does not make such a recommendation as aforesaid, or

"(b) the tribunal makes such a recommendation and (for whatever reason) the recommendation is not complied with,

"the tribunal shall make an award of compensation, to be paid by the employer to the complainant, in respect of the dismissal."

18. Section 106 of the 1971 Act contained similar provisions and also stated that where the tribunal found the grounds of complaint to be well-founded but did not make a recommendation that the employee should be reengaged, the tribunal should make an award of compensation.
19. Paragraph 19 of the Schedule which appears under the heading "General Principles as to Assessment of Compensation" so far as material reads as follows:

"19(1) Where in any proceedings on a complaint under paragraph 17 above an industrial tribunal makes an award of compensation to be paid by a party to the proceedings (in this paragraph referred to as the party in default) to another party (in this paragraph referred to as the aggrieved party) the amount of the compensation shall, subject to paragraph 20 below, be such amount as the tribunal considers just and equitable in all the circumstances, having regard to the loss sustained by the aggrieved party in consequence of the matters to which the complaint relates, in so far as that loss was attributable to action taken by or on behalf of the party in default.

"(2) The said loss shall be taken to include -

"(a) any expenses reasonably incurred by the aggrieved party in consequence of the matters to which the complaint relates, and

"(b) loss of any benefit which he might reasonably be expected to have had but for those matters,

"subject, however, to the application of the same rule concerning the duty of a person to mitigate his loss as applies in relation to damages

recoverable under the common law of England and Wales or of Scotland, as the case may be.

"(3) Where the industrial tribunal finds that the matters to which the complaint relates were to any extent caused or contributed to by any action of the aggrieved party in connection with those matters, the tribunal shall reduce its assessment of his loss to such extent as, having regard to that finding, the tribunal considers just and equitable."

20. Reverting now to paragraph 6(8) it is to be observed that the paragraph does not require the tribunal to consider whether the complainant in fact suffered any injustice by being dismissed. If it had, then I see no reason to suppose that evidence subsequently discovered of the complainant's misconduct would not have been relevant to that question and admissible. The onus is on the employer to show what the reason was (paragraph 6(1)) and that it was a reason falling within paragraph 6(2) or some other substantial reason of a kind such as to justify the dismissal of an employee holding the position which that employee held. In this case the employers' reason fell within paragraph 6(2) as it related to the conduct of the respondent.
21. Then paragraph 6(8) requires the determination of the question whether the dismissal was unfair "having regard to the reason shown by the employer" to depend on whether in the circumstances the employer had acted "reasonably in treating it as a sufficient reason for dismissing the employee".
22. "It" must refer to the reason shown by the employer and to the reason for which the employee was dismissed. Without doing very great violence to the language I cannot construe this paragraph as enabling the tribunal to have regard to matters of which the employer was unaware at the time of dismissal and which therefore cannot have formed part of his reason or reasons for dismissing an employee.
23. Paragraph 6(8) appears to me to direct the tribunal to focus its attention on the conduct of the employer and not on whether the employee in fact suffered any injustice. If in the tribunal's view the employer has failed to satisfy it that he acted reasonably in treating the reason shown to be the reason for the dismissal as a sufficient reason for that dismissal, the conclusion will be that the dismissal was unfair.
24. Paragraph 6(8) replaced section 24 of the 1971 Act. Section 24(6) so far as material read as follows:

"(6)... the determination of the question whether the dismissal was fair or unfair, having regard to the reason shown by the employer, shall depend on whether in the circumstances he acted reasonably or unreasonably in treating it as a sufficient reason for dismissing the employee; and that question shall be determined in accordance with equity and the substantial merits of the case."

25. In that section too attention was focused on the conduct of the employer and not on whether the employee in fact suffered an injustice. I do not myself think that any significance is to be attached to the fact that the reference to equity and the substantial merits of the case appears at the end of the subsection and in the middle of paragraph 6(8). The important change made by that paragraph was the placing of the onus of satisfying the tribunal that the dismissal was fair on the employer.
26. In Earl vs. Slater and Wheeler (Airlyne) Ltd.^[3] Donaldson J. pointed out that under section 24 of the 1971 Act there was no presumption one way or the other as to whether a dismissal was fair or unfair or as to whether the employer acted reasonably. No doubt the change made in the 1974 Act was to remedy that omission. He held in that case that the tribunal had erred in holding that an unfair procedure which led to no injustice was incapable of rendering unfair a dismissal which would otherwise have been fair; and he said:

"The question in every case is whether the employer acted reasonably or unreasonably in treating the reason as sufficient for dismissing the employee and it has to be answered with reference to the circumstances known to the employer at the moment of dismissal.

"If an employer thinks that his accountant may be taking the firm's money, but has no real grounds for so thinking and dismisses him for this reason, he acts wholly unreasonably and commits the unfair industrial practice of unfair dismissal notwithstanding that it is later proved that the accountant had in fact been guilty of embezzlement. Proof of the embezzlement affects the amount of the compensation, but not the issue of fair or unfair dismissal".

I will deal later with the question whether such proof would affect the amount of compensation to be paid.

27. In St. Anne's Board Mill Co. Ltd. vs. Brien^[4] Griffiths J. applied the test formulated by Donaldson J. but thought that the question whether the employer had acted reasonably or unreasonably in treating the reason as sufficient for dismissing the employee had to be answered with reference not only to the circumstances known to the employer at the moment of dismissal, but also with reference to circumstances of which he ought reasonably to have known at that time. He held that it was not permissible to take into account circumstances which had come to light after the dismissal, of which the employers neither knew or reasonably ought to have known in deciding whether the employers behaved reasonably at the time of dismissal.
28. In my opinion it is not the case that an employer can establish that a dismissal was fair by relying on matters of which he did not know at the time but which he ought reasonably to have known. The Schedule does not so provide. If, however, the reasons shown appear to have been a sufficient reason, it cannot, in my opinion, be said that the employer acted reasonably in treating it as such if he only did so in consequence of ignoring matters which he ought reasonably to have known and which would have shown that the reason was insufficient.
29. The decision of the Court of Appeal in Abernethy vs. Mott, Hay and Anderson^[5] was on the 1971 Act. Lord Denning M.R. said that the reason shown for the dismissal "must be a reason in existence at the time when he is given notice. It must be the principal reason which operated "on the employer's mind." He went on to say that it must be made known to the man before he is given notice or told to him at the time. I do not see anything in the Act which makes it a condition of fair dismissal that the man dismissed must know before he is given notice or told at the time that he is given notice the reason for it. I prefer the view of Cairns L.J. who said,

"A reason for the dismissal of an employee is a set of facts known to the employer, or it may be of beliefs held by him, which cause him to dismiss the employee. If at the time of his dismissal the employer gives a reason for it, that is no doubt evidence, at any rate as against him, as to the real reason, but it does not necessarily constitute the real reason. He may knowingly give a reason different from the real reason out of kindness..."

30. In Merseyside and North Wales Electricity Board vs. Taylor^[6] O'Connor J. held that the tribunal had erred in considering matters which had occurred subsequent to the dismissal. He said that those matters could not be relevant in considering whether the employer acted reasonably or unreasonably in treating the reason as sufficient for dismissing the employee.
31. In Da Costa vs. Optolis^[7], however, Phillips J. held that evidence of irregularities unknown to the employers at the time of the dismissal was admissible on the issue whether or not the dismissal was fair. I do not think that this was right, for those irregularities had no bearing on the dismissal and could not affect the question whether the employers had acted reasonably in thinking that the reasons they had then were a sufficient ground for dismissal.
32. These observations in these cases which I have cited except those of Phillips J. in the last mentioned case all support the conclusion to which I have come on consideration of the statutory provisions. It follows that the tribunal, Phillips J. and the Court of Appeal in the present case were in my opinion right in deciding that the evidence of misconduct discovered since the dismissal was irrelevant and inadmissible on the issue whether the employers had acted reasonably in treating the reason for which they had dismissed the respondent as a sufficient reason for doing so. For that misconduct, if it occurred, cannot have influenced the employers' action then.
33. If it were the case the consequence of so holding, that an employee guilty of grave misconduct successfully concealed up to the moment of his dismissal was under the Schedule entitled to substantial compensation, that would indeed be a powerful reason for seeking to give paragraph 6(8) a different construction. In Attorney-General vs. Prince Ernest Augustus of Hanover^[8] it was said that it was wrong to consider one section of an Act in isolation and I must therefore consider the question whether that construction of paragraph 6(8) has that consequence in the light of the other provisions of the Schedule.
34. Before doing so, however, I should point out that it is not clear from the decision of the tribunal whether they would have held the dismissal unfair if it had not been for the failure to give the respondent at any time before his dismissal a clear warning that his employment was in jeopardy. They clearly attached importance to that. Paragraph 133 of the Code of Procedure approved by Parliament in 1972 stated among other things that normally there should be an oral warning or in the case of more serious misconduct a written warning setting out the circumstances, and paragraph 3 of the Schedule entitles the tribunal to take into account that paragraph of the Code when deciding whether a dismissal was or was not fair.
35. It does not follow that non-compliance with the Code necessarily renders a dismissal unfair, but I agree with the view expressed by Donaldson J. in Earl vs. Slater and Wheeler (Airlyne) Ltd.^[9] that a failure to follow a procedure prescribed in the Code may lead to the conclusion that a dismissal was unfair, which, if that procedure had been followed, would have been held to have been fair.
36. Section 106(5) of the 1971 Act and paragraph 17(3) of the first Schedule to the 1974 Act both say that if the dismissal is held to be unfair and the tribunal does not recommend re-engagement or its recommendation as to re-engagement is not complied with the tribunal "shall" make an award of compensation. Despite this provision, in Earl vs. Slater and Wheeler (Airlyne) Ltd. the tribunal held that the unfairness of the dismissal due to the employers' failure to give their employee an opportunity of dealing with the allegations against him had caused the employee no loss. Donaldson J. expressed the opinion that there was under the 1971 Act no room for an award of nominal compensation and that as the tribunal had found the employee had suffered "no conceivable injustice", they must have assessed the compensation as nil. The court held that the claim for compensation was rightly dismissed and so dismissed the appeal.
37. Paragraph 17(3) must be read with paragraph 19 and the requirement that the tribunal shall make an award of compensation read with that paragraph in my opinion means that the award must be in accordance with the general principles as to assessment stated in paragraph 19. Paragraph 19(1) requires the compensation to be "such amount as the tribunal considers just and equitable in all the circumstances, having regard to the loss sustained" by the employee in consequence of the matters to which the complaint relates in so far as that loss was attributable to action taken by or on behalf of the employer.
38. The paragraph does not, nor did section 116 of the 1971 Act, provide that regard should be had only to the loss resulting from the dismissal being unfair. Regard must be had to that but the award must be just and equitable in all the circumstances, and it cannot be just and equitable that a sum should be awarded in compensation when in fact the employee has suffered no injustice by being dismissed.
39. In assessing what, if any, compensation should be awarded a tribunal is in my opinion entitled to take into account evidence of misconduct which came to light after the dismissal. I agree with Donaldson J's. observations in Earl vs. Slater and Wheeler (Airlyne) Ltd^[10]. about that. I do not, "however, agree that an award of nominal compensation is not permissible for I do not exclude the possibility that such an award might in certain circumstances be just and equitable.
40. Paragraph 19(3) does not in this case assist the employers for it cannot be said that the employee's gross misconduct, if he was guilty of it, in any way caused or contributed to his dismissal. Where that subsection applies, it is I think clear that a tribunal can reduce the assessment which they would otherwise have made to nil or to a nominal amount if they consider that just and equitable.
41. In Maris vs. Rotherham County Borough Council^[11] a decision on the 1971 Act, the tribunal had held that the employee's conduct had been such that it was not just and equitable to award him compensation. They did not consider section 116(3) (replaced by paragraph 19(3)) namely whether the employee's dismissal had been caused or contributed to by his conduct. On appeal Griffiths J. held that section 116(3) should be given a wide construction. On the facts of that case it appears that the employee's conduct did contribute to his dismissal. Griffiths J. held that he was not entitled to any compensation, and he said that in his opinion section 116(1) (now replaced by paragraph 19(1)) was not concerned with whether or not compensation ought to be awarded. With that I do not agree; both paragraph 19(1) and paragraph 19(3) provide that the compensation to be awarded is to be an amount just and equitable in all the circumstances. If Griffiths J's. view as to section 116(1) is right, it would mean that subsequently discovered misconduct could not be taken into account in assessing contribution either under section 116(1), as he thought that was not concerned with whether or not compensation ought to be awarded, or under paragraph 19(3) as that subsequently discovered misconduct cannot have affected what happened at the time of the dismissal.
42. It can be argued that if the construction I have put on paragraph 19(1) is correct, paragraph 19(3) is unnecessary, it being comprehended within paragraph 19(1). I do not, however, think this is any reason for not giving that interpretation to paragraph 19(1), for 19(3) may have been inserted to make it clear that regard is to be had to what in argument was loosely called contributory negligence.
43. In Da Costa vs. Optolis^[12] Phillips J. said that the tribunal were entitled if they had decided that there was an unfair dismissal, to take matters which occurred subsequent to the dismissal into account in assessing the compensation, and said that it was quite plain that in the circumstances they would have assessed the compensation had any been due at nil; and in Courtney vs. Babcock and Wilcox (Operations) Ltd.^[13] Lord Macdonald delivering the judgment of the Employment Appeal Tribunal in relation to an employee's appeal against the decision of the industrial tribunal that though unfairly dismissed, he was not entitled to any compensation said: -

"Decisions of this sort not infrequently are made in Scotland. They are intended to reflect the position where a dismissal is unfair for technical reasons, but it is proved that had the technical fault not existed dismissal would still have occurred…. In the common law of Scotland the concept of injuria absque damno is not unfamiliar in the field of reparation... and for that reason it may be possible in this country more readily to accept that a dismissal can be unfair, i.e., contrary to the statute, without automatically attracting compensation. In the present case had we been able to agree with the tribunal that the dismissal was unfair we would not have disagreed with their conclusion that the appellant had suffered no loss in consequence."

44. The last case to which I need refer is Trend vs. Chiltern Hunt Ltd.^[14] In that case Phillips J., delivering the judgment of the Employment Appeal Tribunal, said that it was open to an industrial tribunal to decline to award any compensation under paragraph 19(1) if on the evidence they were satisfied that the employee had not suffered any loss. With that statement 1 entirely agree, but Phillips J. went on to say that paragraph 19(3) is left to deal with cases where compensation ought to be awarded but the amount reduced on account of the behaviour of the employee. With that I do not entirely agree, for paragraph 19(3) requires the tribunal to consider whether a dismissal was "to any extent" caused by action of the employee. It does not preclude the tribunal from coming to the conclusion that the dismissal was wholly caused by his conduct and, in the light of that conclusion, thinking it just and equitable to reduce the compensation it otherwise would have awarded to a nominal or nil amount.
45. Phillips J. thought there was an inconsistency in finding a dismissal unfair and then not awarding compensation. He said the tribunals would be wise before so holding, to consider whether to do so involved a basic inconsistency. He referred to Kemp vs. Shipton Automation Ltd.^[15], where the opinion was expressed that to award less than 20 per cent (i.e., a contribution of more than 80 per cent) was likely to be seen as verging on the inconsistency and that an employment appeal tribunal would feel free to vary the tribunal's award:

"if it is satisfied that it is based on a wrong principle, e.g. is inconsistent with the finding of unfair dismissal".

46. In Courtney vs. Babcock & Wilcox (Operations) Ltd.^[16] Lord Macdonald said that they would wish to reserve the position in Scotland as to the suggestion that the apportioned award of compensation should not be less than 20 per cent. "This", he said, "savours of a tariff and is contrary to the broad jury approach normally adopted in Scotland in matters of this nature."
47. It would indeed be unfortunate if this United Kingdom Act was differently applied in England and Scotland with an employee in England getting 20 per cent compensation and one in Scotland a nil award in similar cases. But this should not occur for in my view the dicta in Kemp vs. Shipton Automation Ltd² on which Phillips J. based his conclusions and his conclusions were wrong.
48. Under the provisions of the Schedule I do not see that there is any inconsistency in finding that there was in the terms of the Act an unfair dismissal, and in awarding no compensation. If, contrary to my view, there is any such inconsistency it would arise not only in relation to paragraph 19(3) but also in relation to paragraph 19(1) where, as I have pointed out, Phillips J. held that despite an unfair dismissal there could be a nil award.
49. Phillips J's. observations as to the alleged inconsistency were related it would apear only to paragraph 19(3), but a man may bring about his dismissal wholly by his own misconduct and yet as I have indicated that dismissal may be unfair through failure to warn him that his employment was in jeopardy. In such a case, and there may be others, there is no inconsistency and in such a case, whether it is considered under paragraph 19(1) or 19(3), the just and equitable award might be one of nil compensation. I can see no justification for the assertion that an award of compensation should be less than 20 per cent.
50. Having considered these authorities and the statutory provisions it is in my opinion clear that in assessing compensation the tribunal is entitled to have regard to subsequently discovered misconduct and, if they think fit, to award nominal or nil compensation.
51. It is not therefore necessary to strain the language of paragraph 6(8) so as to avoid a result which Parliament cannot possibly have intended, namely, that a dishonest employee who has cheated his employers and has successfully concealed his defalcations up to the time of his dismissal, whose conduct, if known, would justify his summary dismissal, should in addition to the proceeds of his dishonesty, obtain "compensation" from his employers.
52. There are two matters which I wish to add. The first is that it must not be inferred that the respondent was guilty of any misconduct. The allegations as to that remain to be proved. The second is that the respondent who was not represented before this House, lost nothing thereby. Mr. Peter Scott appeared as amicus curiae and made every point which could be made in favour of the respondent clearly and concisely and I would like to express my thanks to him for his helpful and cogent argument.
53. In my opinion the tribunal was right to refuse to hear the evidence of misconduct when they did and I would dismiss the appeal.

Lord Simon of Gbisdale:

My Lords,

54. I have had the privilege of reading in advance the speech delivered by my noble and learned friend, Viscount Dilhorne. I agree with his conclusion that the appeal should be dismissed. I also agree with his analysis of the cases decided under the relevant provisions of the 1974 Act or their forerunners in the 1971 Act.
55. The tribunal has to determine whether or not a dismissal was "unfair" within the meaning of Schedule 1 to the 1971 Act. This depends primarily on the construction of paragraph 6(8). But it was argued on behalf of the appellants that the construction which found favour with the courts below produces injustice, in that an employee who has successfully concealed gross misconduct up to the time of his dismissal (even though it is available by the time the question whether the dismissal was fair or unfair falls for determination) is entitled to prevent its adduction in such a way as to secure for himself a finding of unfair dismissal, with consequent stigma on the employer and keudos and compensation to the employee. In this last connection paragraph 19 of the Schedule (dealing with the principle governing the assessment of compensation) also calls for consideration.
56. Under paragraph 6(8) the employer must satisfy the tribunal that he acted reasonably in treating "it" (i.e., the reason shown by the employer as the reason for the dismissal of the employee) as a sufficient reason for the dismissal. This leaves no room for the adduction of evidence of matters which would have constituted such a reason if they had been but were not known to the employer at the time of the dismissal. The reference to "equity and the substantial merits of the case" merely shows that the word "reasonably" is to be widely construed; but they in no way affect the proposition that what must be shown to be reasonable and sufficient is the employer's action in treating the reason shown by him (the employer) as the reason for dismissing the employee. The words have a plain, primary and natural meaning.
57. The plain, primary and natural meaning of words used in a statute may be modified if that meaning produces injustice, to the extent necessary to obviate the injustice, provided that the words used are susceptible of such modification of meaning. If an employee who has successfully concealed serious misconduct which would have justified his dismissal could automatically receive compensation on a finding that his dismissal was "unfair", there would be a strong case for seeing whether the words of paragraph 6(8) are susceptible of the modification required to obviate the injustice. I think that it would be extraordinarily difficult to modify the language without rewriting the sub-paragraph.
58. It must be remembered that the evidence acquired after the date of the dismissal and before the date of the tribunal's determination need not necessarily relate to misconduct by the employee previous to the dismissal. Take the case of the employee dismissed on the ground that he was incapable of his work, there being no evidence to justify such an allegation at the time of the dismissal. But suppose it subsequently came to the knowledge of the employer that unknown to himself or the employee at the time of the dismissal the employee was suffering from a heart condition which in fact rendered him incapable to his work without danger. Would such evidence be relevant to whether the dismissal was fair? Then take the case posed by my noble and learned friend, Lord Fraser of Tullybelton, during the course of the argument. The reason for the dismissal is again that the employee was incapable of his work - in every way a baseless allegation. However, after the dismissal an accident does render the employee incapable of his work. It would hardly produce justice if such evidence could be adduced in order to determine whether the dismissal was unfair.
59. However, it is unnecessary to embark on the exercise of trying, in the interest of justice, to see how far the plain, primary and natural meaning of the words in paragraph 6(8) is susceptible of modification in order to obviate injustice, since paragraph 19(1) can be easily modified to obviate the injustice of an employee who has successfully concealed misconduct up to the time of his dismissal securing an award of compensation.
60. I would myself, on the natural meaning of the words in paragraph 19(1) as they strike me, read "having regard to..." as governing (and therefore limiting) "just and equitable in all the circumstances". But the converse reading does no great violence to the language - namely, reading "just and equitable in all the circumstances" as the governing phrase (so that "having regard to..." would not limit "considers just and equitable in all the circumstances"). The fact that my noble and learned friend Viscount Dilhorne considers that this is the natural way of reading the sub-paragraph satisfies me that, even were my first impression of the language correct, it would require little modification, involving no real violence to the language, to produce such a result as to obviate injustice.
61. In other words, although an employer cannot rely under paragraph 6 on serious misconduct unknown to him at the time of the dismissal so as to transmogrify what would otherwise be an unfair dismissal into a fair dismissal, he could rely on such conduct under paragraph 17(2)(6) to establish that it would not be practicable and in accordance with equity for the employee to be reinstated or re-engaged by him; and again under paragraph 19(1) to minimise compensation (indeed, to justify a nil award). I do not consider that a finding that a dismissal was "unfair" in these circumstances (although no doubt wounding to a careful employer) is sufficient to justify the virtual re-writing of paragraph 6(8).
62. I have felt some misgiving when the Schedule to the 1974 Act is read in the light of sections 71 to 80 of the Employment Protection Act, 1975. By section 71, on a finding of unfair dismissal the employee can demand an order of reinstatement or re-engagement. Although there is, on the face of it, a discretion in the tribunal whether or not to order reinstatement or re-engagement, the fact that an employee was guilty of successfully concealed misconduct does not appear to be one of the matters which the tribunal can take into consideration: see section 71(6) and (7). Moreover, an employee found to have been unfairly dismissed seems to be in any event entitled to a basic award of compensation under sections 73 to 75 of the 1975 Act; though a compensatory award of compensation over and above the basic award seems by section 76(1) to be subject to the like equitable discretion as that given by paragraph 19(1) of the Schedule to the 1974 Act.
63. In other words, when the 1974 Schedule is read with the 1975 Act, the means are not apparently available to obviate any injustice which might arise from reading paragraph 6(8) of the Schedule to the 1974 Act in its plain, primary and natural sense. But in Kirkness vs. John Hudson and Co. Ltd.^[17] it was held that in the absence of ambiguity it is not permissible to seek guidance in the construction of a statute from a later statute, even though Parliament has directed that the later statute shall be construed as one with the earlier (see especially Lord Reid^[18]). A fortiori, it is not permissible to rely on a possible injustice which may arise when the earlier Act is read together with a later Act in order to modify the plain, primary and natural meaning of the earlier Act, when such meaning alone produces no injustice in the earlier Act itself, and it is the earlier Act alone which falls for construction.
64. I doubt, however, that Parliament, in enacting sections 71 to 80 of the Employment Protection Act, 1975, had in mind the grave injustice which would result where serious misconduct concealed by an employee was discovered between the date of his dismissal and the determination by the tribunal. Parliament might well wish to consider this situation. Nor would I wish to exclude the possibility suggested by my noble and learned friend on the Woolsack that paragraph 6(8) of the Schedule to the 1974 Act might be held to have a different meaning when read with sections 71 to 80 of the 1975 Act than that which it bears when read with paragraphs 17 and 19 of the Schedule to the 1974 Act itself.

Lord Edmund-Davies

My Lords,

65. For the reasons set out in the speech of my noble and learned friend, Viscount Dilhorne, which I have had the advantage of reading in draft, I hold that Phillips J. and the Court of Appeal arrived at the right conclusion in this case and that the appeal should accordingly be dismissed. My misgivings that this would be grossly unfair to the employers, were the allegation of criminal misconduct by the employee established, are assuaged by the conclusion which my noble and learned friend has drawn regarding the assessment (and possible extinction) of compensation. I also desire to adopt the important observations in the final paragraph of the speech prepared by my noble and learned friend, Lord Simon of Glaisdale.

Lord Fraser of Tullybelton:

My Lords,

66. I have had the advantage of reading in draft the speech of my noble and learned friend Viscount Dilhorne. I agree with it, and for the reasons stated in it I would dismiss this appeal.
67. I share the anxiety expressed by my noble and learned friends Lord Diplock and Lord Simon of Glaisdale as to the possible effect of paragraph 6(8) of the Schedule to the 1974 Act when read along with sections 71 to 80 of the Employment Protection Act, 1975. This seems to be a matter which requires early attention from Parliament.

Appeal dismissed

Note 1   (1888) 39 ChD 339    [Back]

Note 2   (1971) 3 All E.R. 1313    [Back]

Note 3   (1973) 8 I.T.R. 33    [Back]

Note 4   (1973) 8 I.T.R. 463    [Back]

Note 5   (1973) 8 I.T.R. 228    [Back]

Note 6   (1975) 10 I.T.R. 52    [Back]

Note 7   [1976] I.R.L.R. 178    [Back]

Note 8   [1975] A.C. 436    [Back]

Note 9   (1973) 8 I.T.R. 33    [Back]

Note 10   (1973) 8 I.T.R. 33    [Back]

Note 11   (1974) 9 I.T.R. 288    [Back]

Note 12   (1974) 9 I.T.R. 288    [Back]

Note 13   [1977] I.R.L.R. 30    [Back]

Note 14   (1977) 12 I.T.R. 180    [Back]

Note 15   (1976) 11 I.T.R. 232    [Back]

Note 16   [1977] I.R.L.R. 30    [Back]

Note 17   [1955] A.C. 696    [Back]

Note 18   ibid at 735    [Back]