Appeal No. UKEAT/0348/08/CEA

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 16 September 2008

Before
HIS HONOUR JUDGE ANSELL
SIR ALISTAIR GRAHAM KBE
MS B SWITZER

WILSON UK LIMIED	APPELLANT

(1) MR N TURTON 
(2) MR A LITTLE	RESPONDENTS

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MR DECLAN O’DEMPSEY
(of Counsel)
Instructed by:
Messrs Paull & Williamson Solicitors
Braemar House 
267 Union Street
Aberdeen AB11 6BR	
For the Respondent	MR CHARLES PRICE
(of Counsel)
Instructed by: 
Messrs FBC Manby Bowdler
6-10 George Street
Snow Hill
Wolverhampton
West Midlands WV2 4DN

SUMMARY

UNFAIR DISMISSAL:  Polkey deduction
The Tribunal wrong to reject Polkey in view of genuineness of redundancy and that respondents would have been in the pool.

HIS HONOUR JUDGE ANSELL
Introduction
1.	This is an appeal from a decision of a Birmingham Tribunal chaired by Mr Swann.  The hearings took place in January and February 2008, reasons being given on 2 April.  The Respondents, Mr Little and Mr Turton, were adjudged to have been unfairly dismissed by reason of redundancy and the Tribunal determined that there should be no Polkey deduction.  It is that conclusion as to Polkey v A E Dayton Services Ltd [1988] which is the one issue on which this Appeal is based, leave having been given by HHJ Clark when he sifted the case on 17 June.

The Facts
2.	The facts can be taken very shortly.  The two Claimants were made redundant.  They were members of a projects department that numbered either four or five.  The reason for the uncertainty concerns the position of Mr Mark who was a manager there.  The Tribunal found that because of downturn in business, there was a true and genuine reason for redundancy.  The unfairness related to the almost total disregard the Tribunal found that was taken by the employers in regard to the procedure that was put into place to choose the two candidates who were to be made redundant. 

3.	The Tribunal in a lengthy decision concluded that, effectively, the decision taken that Mr Turton and Mr Little were to be dismissed was one that was taken before any true consultation with the employees concerned.  The employees were not shown the marking matrixes which were prepared.  It must follow from the Tribunal’s decision that they found the matrixes were, effectively, of little effect since the decision had already been taken.  They found inadequate consultation.  There was not proper consideration given to alternative employment and in general terms they found that the statutory procedures had not been followed although we note there was not a specific allegation of automatic dismissal, it seems within this case.  It was a traditional unfair dismissal.

4.	The Tribunal, in their conclusions, having recited the arguments from both parties found, in paragraph 57, that,:
	“… there was a genuine redundancy situation within the said projects department.”

5.	They do not specifically set out that two jobs had to go although that does not appear to have been challenged, as it were, within the Tribunal’s decision.  Again, it is not challenged within their conclusions that there was a pool of potential candidates which must have included the two Respondents.  That pool may have been four or five.  For the reasons that we have already indicated it appears at some stage that Mr Mark was added certainly to the scoring matrix and therefore there was a suggestion, although there was not a clear finding, from the Tribunal that the pool was five as opposed to four.

6.	In paragraph 58, they then turned to the unfairness of the dismissal and found, as we have already indicated, quite a wholesale disregard for the normal procedures and, effectively, in particular made the finding at the end of paragraph 59 that:
	“… the decision had already been made to make the two Claimants redundant … ” 
as early as the meeting at beginning of May which was very early on in the procedure.

7.	They went on to criticise the rest of the procedure.  The inability of the candidates to know the scores, even their own score, case law indicates is not a proper manner of conducting a redundancy, and the inadequate consultation.  At the conclusion of paragraph 61, they concluded that they were satisfied that:
	“… the claimants were each unfairly dismissed automatically because of a failure by the respondent to follow the statutory dismissal and disciplinary procedure referred to in the law section at the beginning of this our judgment and also by failing to follow a fair procedure generally in selecting the two claimants for redundancy.”

8.	There was therefore a finding both of automatic unfair and traditional unfair.

9.	Finally, in paragraph 62 they went on to consider what is the nub of this appeal, that first of all it was submitted on behalf of the employers that if a fair procedure had been adopted it was inevitable that the Respondents would have been dismissed by reason of redundancy.  

10.	The Tribunal goes on to say this:
	“We do not agree with Mr Hendley on the basis of this argument.  There were four members of the projects department and in addition in accordance with the matrix that was prepared following Mr Little’s comments about Mr Mark not being included this took the number up to five.  On the evidence of the claimants each of them could have carried out the work of any of the others in that projects department and given the fundamental flaws that we have identified above in the process that was carried out by the respondent in selecting each of the claimants for redundancy we cannot be certain that it was inevitable that had a fair procedure been followed that either or both of the claimants would have been dismissed (given that Mr Samuels and Mr Mark were each retained by the respondent).”  

Accordingly, they made no percentage reduction; they say, having considered the arguments of Mr Hendley, the application of Polkey and Section 98(A) of the Employment Rights Act 1996.

11.	Mr O’Dempsey argues that the key phrase in that paragraph, namely:
	“… we cannot be certain that it was inevitable that had a fair procedure been followed that either or both of the Claimants would have been dismissed ...” 

was a totally inadequate assessment by the Tribunal of the percentage possibility that dismissal may have resulted and, in particular, ignores the guidance given by the President of this Court in Software 2000 Limited v Andrews [2007] ICR 825 as to the steps that the Tribunal have to follow to assess the impact of the Polkey decision and also Section 98(A)(2).

12.	Both Counsel before us agree that this is a procedure that has to be gone through in stages, the first of which is to consider whether Section 98(A)(2) itself applies which provides that 
	“… failure by an employer to follow a procedure in relation to the dismissal of an employee shall not be regarded for the purposes of section 98(4)(a) by itself as making an employer’s action unreasonable if he shows he would have decided to dismiss the employee if he had followed the procedure.”

In other words, has the employer shown that on the balance of probabilities if fair procedure had been followed there would have been a dismissal.  It is not argued before us that there was that evidence available for the Tribunal to come to that conclusion.

13.	The next stage, therefore, is to consider a contribution and, again, it is agreed that this must be between the range of 0 and 50 per cent because if the probability is more than 50 per cent, Section 98(A)(2) would operate.  It is a percentage reduction that a tribunal have to consider in assessing the possibility that if fair procedures had been followed dismissal may have occurred.

14.	The authorities make it clear that this is a task that the tribunal has to adopt, not speculating but assessing the findings and the evidence that they have concluded and therefore assessing whether on the basis of their positive findings dismissal may have occurred. 

15.	The authorities on the subject are well known.  Polkey v AE Dayton Services Ltd [1988] 1 AC 344 cites with approval dicta of Browne-Wilkinson J in Sillifant v Powell Duffryn Timber Ltd [1983] IRLR 91 at 96 where the learned President of this Court, as he then was, said this:
	“There is no need for an ‘all or nothing’ decision.  If the Industrial Tribunal thinks that there is a doubt whether or not the employee would have been dismissed, this element can be reflected by reducing the nominal amount of compensation by a percentage representing the chance that the employee would still have lost his employment.”

16.	In Wolesley Centres Ltd v Simmons [1994] ICR 503, a judgment of the EAT, HHJ Hague QC having cited the Polkey approval of the Sillifant case and subsequent authorities said as follows:
	“… the assessment of the compensatory award in this kind of case involves a two‑stage process.  First, the tribunal must ask itself whether if the employer had followed the proper procedures and acted fairly the employee would not have been dismissed.  If the answer to that question is reasonably clear one way or the other, there is no difficulty.  But in many cases the answer will be uncertain, in which situation, in order to give proper effect to section 74(1) of the Act of 1978 and the dicta of Browne-Wilkinson J set out above, the tribunal must, as a second stage of the process, make a percentage assessment of the likelihood of the employee being retained which must then be reflected in the compensatory award.”

17.	In Gover v Propertycare Ltd [2006] ICR 1073, Buxton LJ approved a passage from the EAT decision given by HHJ McMullen QC.  This appears at letter A at page 1083 of the decision.  Judge McMullen QC said this:
	“In that passage the tribunal is doing what it is engaged to do: to draw upon its own industrial experiences and circumstances such as this and to construct, from evidence not from speculation, a framework which is a working hypothesis about what would have occurred had the respondent behaved differently and fairly.  The tribunal acknowledged that there would have been a radical overhaul of all employment terms.  In the passage at para 144, it has made a finding that that would have occurred and if the claimants had failed to adopt them, as they appeared particularly unattractive, their dismissals would have occurred in any event.”

18.	Finally, in Software 2000 Limited v Andrews [2007] ICR 825, the President in this Court, Elias J, in a helpful passage at paragraph 54 set out the principles to be adopted.  
“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 section 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 that 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 section 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 O’Donoghue v Redcar and Cleveland Borough Council [2001] IRLR 615;. 

(d)	that 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.”

19.	Finally, following on from the Software case, Elias P, in Enfield Technical Services Ltd v Payne [2008] ICR 30, said this at paragraph 69:
“Equally, however, we think that the Tribunal did err in concluding that because the failure to consult was such a fundamental defect, it necessarily precluded any assessment of the outcome of those consultations.”

20.	Mr O’Dempsey argues that the failure that Elias P highlighted in the Enfield case is one which appears to have been followed by the Tribunal in this case.  The Tribunal, clearly affected by what was a serious breach in terms of procedure and consultation in this case, has, he argued, failed to go through the process that Elias P suggested should have been gone through in the Software case and the fact it involved a degree of speculation was, as Elias JP said, not a reason for refusing to have regard to bear evidence.

21.	He argued that in particular that notwithstanding the serious breaches found to have been carried out by the employers in this case, there were two important factors upon which a Polkey deduction could, and indeed should, have been based.  Those two factors were firstly, that there was a genuine redundancy situation and, secondly, that the two Respondents formed part of the potential pool whether it be a pool of four or five.  Notwithstanding that there were issues in relation to consultation and the possibility of alternative employment, the Tribunal still had sufficient facts for them to have made a reduction.  He argues that the evidence was not so speculative, again, to use Elias P’s words, that they should have, effectively, have avoided this issue.

22.	Mr Price argues that, firstly, again following the Software case, this Court should be loathe to interfere with any exercise of a Tribunal’s discretion in fixing or deciding not to assess a Polkey contribution.  He argued these are matters, effectively, for the Tribunal.  They are the industrial jury.  They heard the evidence and were, therefore, be the proper people to assess whether there was any evidence above the level of scant which could have formed the basis of a Polkey reduction.

23.	He argues that the evidence was so uncertain, so riddled with difficulty, that the Tribunal were entitled to come to a view at the end of the day that no proper prediction could properly be made.

24.	The difficulty we have with that submission is that the Tribunal’s decision on this issue is phrased in terms that they are looking for certainty rather than possibility.  Certainty may be the requirement in terms of balance of probabilities when one is assessing Section 98(A)(2) but certainty is not what is required when dealing with the possibilities of a Polkey deduction.  It is something more than scant or uncertainty but it is of a level which still requires the Tribunal to enter into a degree of speculation as indicated on the basis of the facts they have found.

25.	It is firstly, the failure of the Tribunal to go through the process that causes us concern against the background, whereas we have indicated already, they made clear findings about the genuineness of the redundancy and the involvement of the Respondents in the pool. 

26.	It is, therefore, for those reasons that we have no hesitation in setting aside the Polkey finding and inviting this same Tribunal, when they deal with the issues of the Remedy Hearing, to reconsider their decision on Polkey and our order will invite them to do so in the light of the guidance set out in the case of Software 2000 Limited v Andrews.

Conclusion
27.	Accordingly, this Appeal is allowed.