Appeal No. EAT/776/94

	EMPLOYMENT APPEAL TRIBUNAL
	58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

		At the Tribunal
		On 24 July 1995

	Before

	THE HONOURABLE MR JUSTICE MUMMERY (P)

	MRS E HART

	MR J A SCOULLER

MR J P PARKINSON FCA	APPELLANT

MARCH CONSULTING LTD	RESPONDENTS

	Transcript of Proceedings

	JUDGMENT

Revised

	APPEARANCES

For the Appellant	IN PERSON

For the Respondents	MR N GRUNDY
(of Counsel)
Chaffe Street
70 Spring Gardens
Manchester
M2 2BQ

	MR JUSTICE MUMMERY (PRESIDENT):  This is an appeal against the decision of the Industrial Tribunal held at Manchester on 10 December 1993 and 1 February 1994.  The Tribunal heard the claim made by Mr John Parkinson against his former employer, March Consulting Ltd.  

	He claimed in his application presented to the Industrial Tribunal on 24 May 1993 that he had been unfairly dismissed from his position as Financial Controller and Company Secretary of March Consulting Ltd and of nine subsidiary Companies, an employment which he had held from 23 January 1989 until 30 April 1993.

	The claim was resisted by March Consulting Ltd in their Notice of Appearance dated 16 June 1993.  They stated that, the reason for his dismissal was redundancy, and elaborated on the circumstances of the dismissal in eight paragraphs attached to section 8 of the Notice of Appearance.

	The Tribunal were required to answer three questions.  First, "What was the reason for Mr Parkinson's dismissal"; secondly, "Whether, in all the circumstances, it was reasonable to dismiss him"; and, thirdly, "What, if any, compensation was he entitled to, if he was unfairly dismissed?".   

	The Tribunal unanimously decided that Mr Parkinson was unfairly dismissed, but also decided that there should be no compensatory award.  The question of a basic award did not arise, because he had been paid and received a redundancy payment.  

	Mr Parkinson was dissatisfied with that decision.  It was a victory, but a Pyrrhic victory.  
He appealed by a Notice of Appeal dated 12 August 1994.  That was amended on 29 August 1994.  

	The appeal first came before the Employment Appeal Tribunal on 3 October 1994 when, on a preliminary hearing, it was directed that the appeal should be allowed to proceed to a full hearing.  

	The Tribunal ordered that the Chairman's notes of evidence be produced and also ordered that an agreed bundle of relevant exhibits should be indexed, paginated and filed with the Tribunal.  Mr Parkinson, who was represented by a Solicitor in the Industrial Tribunal, but has done his own case on this appeal, pointed our attention, on several occasions during the course of today, to remarks made by Mr Justice Pill who presided over the preliminary hearing before this Tribunal.

	Mr Justice Pill said, in explaining the decision that the matter should proceed to a full hearing,

		".... without prejudice as to how the Tribunal at the full hearing might view the point, that we have been surprised by the absence in the Industrial Tribunal's Decision of any setting out of the case which we accept from him that Mr Parkinson did put forward.  It may be that is a point which at the full hearing the Tribunal might like to consider.  He puts his case, at any rate, in part upon the proposition that the Tribunal have not understood the case which was put forward on his behalf."  

	We draw attention to that point at this early stage of the judgment, because it has been a recurrent theme of Mr Parkinson's appeal that the case advanced on his behalf by his Solicitor at the Industrial Tribunal and by him in evidence has never been understood.
  
	In order to evaluate the arguments which Mr Parkinson has advanced, we first remind ourselves that this Tribunal only has a limited jurisdiction.  The jurisdiction is defined by Parliament as a jurisdiction to hear appeals from decisions of Industrial Tribunal on points of law.  We are not an Industrial Tribunal.  We have no power as an Appeal Tribunal to re-hear a case and come to a different decision.  

	What we can do is to examine the decision to see if it contains any legal error.  If it does not, the appeal is dismissed.  If it does, then we have to consider whether to substitute a different decision, or, more frequently, to remit the case to another Industrial Tribunal for a rehearing.

	We make this point specifically, because a large part of Mr Parkinson's presentation consisted of a detailed review of the facts leading up to his dismissal.  As far as the facts were concerned, we go by the facts found by the Industrial Tribunal as set out in their extended reasons.  It is not for us to go through the whole exercise again, checking fact by fact whether the Tribunal have covered the entire ground of dispute.  

	The Tribunal listened to the evidence on each side.  We have seen how much evidence was given from the notes of evidence.  The Tribunal decide what the facts are.  That involves deciding (in the case of a conflict of fact) whose evidence is to be preferred.  They may infer findings of fact.  We have explained to Mr Parkinson that they can make findings of fact on oral evidence given by a witness on oath before them.  It is not necessary for every finding of fact to be fortified by a document tending to prove that fact.  Oral evidence on oath is as much evidence, as proof of a fact by a contemporaneous document.

	The second point on which we draw attention is this.  The findings of fact are set out in the decision.  Those facts are quite simply this; that Mr Parkinson is a Chartered Accountant; he is of some 35 years standing; he was appointed Financial Controller in 1989; he subsequently became Company Secretary.  His case, which he said was not understood by the Tribunal, was described in paragraph 2 of the decision as this:

		"2  .... .  He has presented an Originating Application complaining that he was unfairly dismissed on 30 April 1993 and he alleges that in June 1992 he had been asked by the Managing Director to resign because the Chairman was out to get him and on 9 September 1992 was informed by the said director that the board had decided to appoint a financial director and his position would be redundant at the end of the current financial year and was subsequently given formal notice of dismissal effective 30 April 1993.  He denies the existence of a genuine redundancy and claims that the accounting and secretarial and other duties which he performed still continued to be performed in his absence."

	On the other side, the Company's case was that: 

		"3. .... the reason was redundancy as they had operated without a financial director since 1990 and the financial management of the company was shared by the applicant and their managing director that in April 1992 they declared pre-tax losses, it had become clear to the board supported by their auditors that a financial director should be appointed (sic) there was planned consultation with the applicant over the reorganisation which was preempted by the applicant opening the discussion with the managing director in May 1992 when he claimed he was unhappy about his long-term future with the respondents.  They say that they subsequently decided that the applicant could not be considered for the position of financial director for a number of reasons set out in paragraph (5) of the said notice [Notice of Appearance]."

	The Tribunal noted a significant fact in the presentation of the Respondents' case:  they asked for and were given leave to amend their Notice of Appearance by adding a further reason for dismissal, namely "some other substantial reason of a kind such as to justify the dismissal of an employee holding the position which that employee held, namely a genuine business reorganisation".   By that amendment the Company invoked Section 57(1)(b) of the Employment Protection (Consolidation) Act 1978.  

	The Tribunal dealt with the detailed facts before they identified the relevant law and applied it to the case.  In addition to the facts already mentioned they stated that the Company carried on the business of management and technical consultants with a number of subsidiary companies.  The workforce is about 80 people.  

	Mr Parkinson was appointed Financial Controller in 1989.  He became Company Secretary.  In April 1992 the Company's financial position became difficult.  There were losses of approximately £90,000.  The Company became concerned about financial management.  The losses that were mentioned in the decision, as well as in notes of evidence, were expressly stated to have nothing to do with Mr Parkinson.  Further:  

		"5(f)  On 11 June 1992 ... there was a meeting between the respondents' [Company] auditors a firm of chartered accountants when the respondents' chairman announced that they were reviewing their financial management arrangements and wished to seek the auditors' views on their current financial organisation structure, the systems presently in use and the calibre of the staff.  The auditors suggested that the respondents really needed a financial director to properly manage its affairs that the present arrangements were unsatisfactory.

		(g)  The chairman outlined the history regarding previous financial director appointments and commented that none of the existing directors wished to take on the position.

		(h)  Mr Bonney suggested that the job of financial director would be regarded as an exciting prospect for many accountants and that a suitable candidate should be - qualified - have at least 4 years post qualification experience and be experienced in a professional environment.

		(i)  He stated his opinion and that of his audit manager were less than complimentary of the applicant they regarded him as a good book-keeper but lacking in the management involvement which might be expected of a financial controller and they found he was difficult to deal with."

	Mr Clarke's view (he was the Managing Director of the Company) characterised Mr Parkinson "as more interested in problems than solutions and said that he stood back from involvement in the business and responsibility for its financial performance".  There were three brief conversations in June 1992 between Mr Clarke and Mr Parkinson in addition to a meeting on 29 June, when Mr Parkinson was told that he should look for another job.  There was no mention of redundancy at that stage.  Mr Parkinson wrote to the Company on 5 August asking for clarification of his position.  There was no reply to that letter.    

	On 9 September there was a meeting between Mr Parkinson and Mr Clarke.  Mr Parkinson was told he would receive a reply to his letter of 5 August.  At 6.00 pm on 9 September Mr Clarke saw Mr Parkinson and told him that: 

		"(m) .... the board wished to effect a reorganisation of their financial accounting and management information related activities, and as a consequence the position of Financial Controller would become redundant.  They recognised that he has an extended (6 months) period of notice and although they would wish to make the necessary changes as soon as possible, they were prepared to delay implementation until the end of our financial year, some 7½ months hence.  We also note that the position of Financial Controller will become redundant no later than 30 April 1993.  

		(n)  On 10 September the applicant saw the chairman who .... which confirmed what Mr Clarke had told him on the previous day."  

	A letter was sent by Mr Clarke to Mr Parkinson on 5 October.  That is set out in full in the decision.

	On 14 October the Company wrote to Mr Parkinson confirming his dismissal on 30 April and they allowed him to work out his notice and obtained a position for him in one of their other subsidiary companies.  

	The Company now employ a Financial Director who is responsible for part of Mr Parkinson's former duties and the remainder is done by two clerks.  Mr Parkinson told us that the Financial Director was not in fact appointed until 1 May 1994.  

	Those were the facts found by the Tribunal.  No doubt there were many other facts before the Tribunal, as recorded in the Chairman's notes of evidence.  There are many other facts which Mr Parkinson has put before us on this appeal.  But the facts on which we must decide this appeal are those in the decision and no other.

	The Tribunal referred to Section 57(1); that is the correct section and poses the question "What was the reason for the dismissal".  The answer to that question is a question of fact. The Tribunal held that the reason for Mr Parkinson's dismissal was "some other substantial reason of a kind such as to justify his dismissal"; that is within the wording of Section 57(1)(b).  They identified that reason as follows.  The reorganisation of the Respondents' Financial Department resulting in the loss of the position of Financial Controller; and the appointment of a Financial Director who would take on some of the Applicant's former work, the balance to be done by two clerks.  

	The next stage for the Tribunal, having found that reason, was to ask, under Section 57(3), "whether this was a fair dismissal in all the circumstances?".  The Tribunal referred to the correct section.  They correctly summarised it.  Their answer was that it was not a fair dismissal.  They were unanimous in the view that it was reasonable for the Company to review their financial management arrangements following the financial problems they had faced, to take advice of their auditors and to accept the advice that a Financial Director was needed to manage their affairs and that Mr Parkinson was not suitable for that position.  However, they were unanimous in the view that no reasonable employer would have dismissed Mr Parkinson, following that discussion with their accountants, without meaningful consultation with him.  

	The Company failed to do that.  Accordingly, the response of the Company in dismissing him could not be said to fall within the band of reasonable responses available to a reasonable employer, having regard to the facts.  Accordingly, the complaint of unfair dismissal succeeded.

	Finally, the Tribunal came to a conclusion on compensation.  They said that failure to consult was a procedural defect resulting in unfair dismissal.  They directed themselves correctly to the House of Lords decision in Polkey v A E Dayton Services Ltd [1987] IRLR 503 and stated their conclusions as follows:

		"10.  ....  we are satisfied having regard to the evidence that it would not have made any difference if there had have been meaningful consultation, the respondents had the views of their auditors as to his capabilities.  His job in the reorganisation had disappeared and in our view he would still have been dismissed.  Accordingly there will not be a compensatory award."

	What is wrong with that decision?  Mr Parkinson was unable to find few things right with it.  It is necessary for us to deal, in some detail, with his arguments.  His main ground of appeal was that the reason for his dismissal was not that found by the Tribunal in paragraph 7 of the decision.  

	The purpose of this argument was to avoid the consequence of no compensation.  If Mr Parkinson could show that there was no reason for his dismissal within Section 57(1)(b), there was no other reason and therefore, his dismissal would be substantively unfair.  It would be difficult for the Tribunal in those circumstances to refuse an award of substantial compensation.

	That is the reason behind the rather odd situation in which a person, who has won the case, seeks to appeal in part the substantive finding of unfair dismissal and wants us to confirm the finding of unfair dismissal, but on a different ground, that is that there was no reason within Section 57(1) and Section 57(2) and the Tribunal were wrong in finding that there was a reason within Section 57(1)(b).  He faces a substantial obstacle in this argument because the question "What the reason was for a dismissal" is a factual question.  He can only succeed on the appeal if he shows that the Tribunal misdirected themselves in law.

	The Tribunal did not misdirect themselves in approaching the matter on the basis that reorganisation of a business can constitute "some other substantial reason".  It is clear from the case of Genower v Ealing Hammersmith and Hounslow Area Health Authority [1980] IRLR 299, that the reorganisation or restructuring of the business, may be a reason which falls within Section 57(1)(b).  We have been referred to paragraph 18 of the judgment which says:

		"18  So, it seems to us that really the Tribunal was right here in considering what were the reasons which had led the employer to decide to move Mr Genower from his section to another section.  They came to the conclusion, as we read their decision, that one of the reasons was a reorganisation or a re-structuring of the sections.  It is perfectly plain on the decision of the Court of Appeal in Hollister v The National Farmers Union [1977] IRLR 238, which is followed by this Tribunal in Bowater Containers Ltd v McCormack [1980] IRLR 51, that a re-organisation or re-structuring of a business may well be a reason which falls within s.57(1)(b.  Indeed, it may be that if, to quote from the Court of Appeal judgment, `a sound good business reason' is shown, this may constitute a `substantial reason' within the meaning of the section, even if the alternative to taking the course they propose is not that the business would come to a standstill but is merely that there would be some serious effect upon the business." 

	The Tribunal were entitled to approach the matter on the basis that reorganisation or restructuring of a business could be "some other substantial reason".  What was the error in holding that there was "some other substantial reason" in this case?  

	The points made by Mr Parkinson were these.  He said that you had to look at (what he called) "the moment of dismissal" or the time of dismissal.  That was 9 September 1992 when he was told that he would be dismissed.  He said that, at that time or at that moment, the Company had not made a decision to implement the action upon which they subsequently relied as "some other substantial reason".  

	He said that if you looked at the position on 9 September 1992, you could not find, on the evidence, a decision to appoint a Financial Director.  The earliest point at which you could find that decision was 20 October 1992.  He said that, as a matter of law, the employer, who relied on this reason, had to show that the reason existed at the moment of dismissal and was based on facts which were sufficiently made known at that time to the employee.  

	He argued (and this is a related argument), that there is no provision in Section 57(1)(b) for what he described as "an intended other substantial reason".  He said that the section required the existence of an actual reason at that time.  He returned to the fact that the Financial Director had not been appointed either prior to, or by the end of, the Industrial Tribunal hearing (10 December 1993 / 1 February 1994).  

	The actual appointment was not made until some 17 months after the notice period had expired.  He argued that, to be a valid "other substantial reason", the cases showed that a business reorganisation had to be a genuine business reorganisation.  An indication that this was not a genuine one, was the fact that the appointment of a Financial Director was not made until much later.

	The position was that he had been simply replaced as Company Secretary and Financial Controller by a Financial Director designate.  The genuine business reason was not a sound business reason.  He addressed us at length on the facts relating to this.  He asserted that the Company had claimed to have suffered a loss of £300,000 between April 1991 and November 1992 in respect of unwise loans to, and investment in a business venture owned by, the Company's Chairman.  That business venture is called Monarch.  

	The pre-tax losses in the financial year preceding the dismissal were used as an excuse for the alleged reorganisation.  They amounted to £57,478, due to the writing-off of £70,000 as expenses and £117,348 as a bad debt in respect of money lent by the Company to Monarch.  In the financial year of dismissal, the Company had in fact declared a pre-tax profit of £305,040 after writing-off a further £110,000 which had been lost.

	He argued that for a finding of "some other substantial reason" the Company had to show that it justified the dismissal of an employee holding the position which that employee had.  If it was found that a Financial Controller and Company Secretary had qualifications, as defined by the auditors, and was a Shadow Director, as defined by Section 741 of the Company's Act 1985, but was not suitable for formal appointment as the  Company's Financial Director, because he was said to have lacked the ability or capability, then the principal reason for the dismissal should have been "lack of capability", not "some other substantial reason".  If that was the case, the Company should have relied on Section 57(2)(a) and not Section 57(1)(b).  

	Pausing there, we have considered those arguments.  There is no doubt in our mind, having looked at the notes of evidence, and at the extended reasons for the decision, that these arguments were put to the Industrial Tribunal.  They considered them and they came to a conclusion which Mr Parkinson finds it impossible to accept, but which we find impossible to fault.  

	The fact is that all these points relate to one question "what was the reason for dismissal?".  All of Mr Parkinson's arguments amount to one thing, that the reason for dismissal was that the Chairman of the Company was "out to get him"; that it was not a genuine business reorganisation; that it did not fall within Section 57(1)(b) and that, therefore, his dismissal was unfair for that reason. 

	The difficulty Mr Parkinson has is that the Tribunal did not accept that factual analysis of the situation.  They came to the conclusion that it did come within Section 57(1)(b).  We are unable to find any error of law in that conclusion.  

	A number of Mr Parkinson's arguments were based on a faulty reading of a large number of authorities and a misunderstanding of the approach of Industrial Tribunals or, indeed, courts generally, to decisions on a disputed question of fact.  

	The central part of Mr Parkinson's argument was that you had to focus, in order to determine the reason for dismissal, on one single point of time; that was 9 September 1992 and then ask what the reason was at that time.  You should exclude consideration of what was done later, during the period of notice.

	In our view, that approach is not justified by the authorities which he has cited.  In fact, in our view, the authorities cited point to the opposite approach.  We refer, for example, to Stacey v Babcock Power Ltd (Construction Division) [1986] IRLR 3 which points out that there is nothing in the authorities to preclude an Industrial Tribunal from looking at, and taking into account, changes in circumstances between the date on which the employee was given notice of dismissal and the date on which that notice expired.  That was a redundancy case, but the same principle would apply in dealing with a case within Section 57(1)(b).

	In order to determine whether when they dismissed him the Company had the reason for Mr Parkinson's dismissal (which they relied on at the hearing) one looks not only at 9 September 1992 but at the history of events leading up to that date and to the subsequent history of events, including, for example, the minutes of the board meeting on 20 October 1992, referring to the appointment of an external appointee to the vacant post of Financial Director.

	That, in our view, is sufficient to deal with the arguments of Mr Parkinson on the question of the reason for the dismissal.  There is no separate point which arises under Section 57(3).  If the reason for dismissal was Section 57(1)(b) then the Tribunal correctly directed themselves on Section 57(3).

	The other area on which we have heard argument is on the Polkey point.  We have already read the reasoning of the Tribunal as to why no compensation should be awarded in the circumstances to Mr Parkinson, even thought he had been a victim of unfair dismissal.  
	On this point Mr Parkinson argued that there was a legal error in that the Tribunal incorrectly applied Polkey.  He pointed out that the Company's case was that, had they carried out meaningful consultation, it would not have made any difference to the outcome.  He said that Polkey should only be applied to cases of a procedural defect where the employer omits to carry out meaningful consultation, as a result of the employee having committed a serious offence.  He emphasised the use of the word "merited" in the quotation from Browne-Wilkinson J, judgment in the Sillifant case, as set out in Lord Bridge's judgment and asked "how could he have merited dismissal when nothing was said by way of criticism of him or by way of contributory fault".  So he said, in the absence of any finding of any fault on his part, it was wrong to apply Polkey so as to disentitle him to any compensation.

	In our view, this argument rests on a misunderstanding of the decision of the House of Lords in Polkey.  The reasoning of the House of Lords in relation to the effect of, for example, lack of consultation on the amount of compensation rests on Section 74(1) of the 1978 Act, which provides that:

		"74(1)  .... the amount of the compensatory award shall be such amount as the tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal in so far as that loss is attributable to action taken by the employer."

	We agree with the comment in Harvey on Industrial Relations and Employment Law, Volume 1, Section D, paragraph 2548, where this comment is made on the applicability of Polkey in claims concerning compensation for unfair dismissal:
  
		" .... the overriding stipulation is that the tribunal should award what is just and equitable and equitable. .... .  Where the employee would have been dismissed had fair procedures been employed, then whatever the reason for dismissal, it will be open to the tribunal to say that it is just and equitable for no compensatory award to be made even if the employee has in no sense been at fault."

	Finally, Mr Parkinson returned to the theme that, looking at the decision overall and the notes of evidence, the Tribunal had not understood his case.  This is a serious criticism (if it is right), because the paramount task of any Tribunal is to understand the case which is advanced on each side.  He made a number of points in order to support his submission that the Tribunal had not really understood his case.  He said their decision was inconsistent with a number of pieces of evidence.  

	He referred again to the fact that the Company had declared pre-tax profits in the year of his dismissal and in a substantial amount, over £300,000; that the pre-tax loss in the year to April 1992 was used as the excuse for the dismissal, and there would, but for the provision of £187,348 in respect of the write-off of loans made to the Chairman's private Company, have been a profit of £130,000.  He said that the decision was inconsistent with evidence that he, Mr Parkinson, was in dispute with the Chairman and Managing Director both in respect of monies lent to the Chairman's private Company, Monarch, and the transfer to profit and loss account of £34,000 being money paid in error to the Company, by clients and which should have been repaid.  

	The Tribunal should have had regard to the law on this issue and not simply relied on the auditor's view that this was not an illegal act.  He said that the decision was also inconsistent with the fact that he was a shadow director of the Company.  The Tribunal had inferred that they did not understand that term and they ignored its implications.

	We mention those matters because, whatever Mr Parkinson may believe about the Tribunal's lack of understanding of his case, we are as confident as it is possible to be at this stage removed from the Industrial Tribunal, that they did understand his case.  They heard it in detail, evidence given by him and contrary evidence from witnesses for the Company.  The fact that they did not accept Mr Parkinson's case does not mean that they did not understand it.  It means simply that, when they came to look at the case as a whole, with  conflicting claims and assertions made on each side, they preferred the evidence given on behalf of the Company.

	In those circumstances, we are unable to find a legal error in this decision.  We agree with the arguments put forward by Mr Grundy.  He said that really this was a straightforward case in which the principal question for decision by the Tribunal was, "what was the reason for dismissal?".  The Tribunal had answered that question clearly in the terms of Section 57(1)(b) and paragraph 7 of the decision.  That was a finding of fact from which there is no appeal.

	We agree with him that the case is as simple as that.  As to the Polkey point, we agree with him also that the Tribunal came to a decision which they were entitled to on the evidence before them.  There was no error of law in their interpretation and application of the decision in Polkey.

	In those circumstances, as there is no error of law in the decision, the appeal will be dismissed.