Appeal No. EAT/334/94

	EMPLOYMENT APPEAL TRIBUNAL
	58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

		At the Tribunal
		On 3rd November 1995

	Before

	THE HONOURABLE MR JUSTICE MUMMERY (P)

	MR D J JENKINS MBE

	MR A D SCOTT

FLIGHT EQUIPMENT ENGINEERING LTD	APPELLANTS

MR D COOK	RESPONDENT

	Transcript of Proceedings

	JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR J CAVANAGH
(of Counsel)
Mr N Chronias
E E F
Broadway House
Tothill Street
London SW1H 9NQ

For the Respondent	NO APPEARANCE BY OR 	ON BEHALF OF THE 	RESPONDENT

	MR JUSTICE MUMMERY (PRESIDENT):   This is an appeal from the decision of the Industrial Tribunal held at Reading on 28th January 1994.

	In the full reasons notified to the parties on 1st March 1994, the Tribunal unanimously decided to make an award of £10,000 compensation to the applicant, Mr Cook.

	Mr Cook had successfully claimed unfair dismissal for redundancy, at an earlier stage in the proceedings, against his former employers, Flight Equipment Engineering Limited. 

	After a hearing on 19th July and 5th November 1993, the Tribunal unanimously decided that Mr Cook was unfairly dismissed. They made no order for re-engagement, but directed that, if the parties could not agree on a compensatory award, then either party should have a right to apply to a Tribunal for a decision on remedy.

	It appears from the decision on liability, explained in the full reasons notified to the parties on 23rd November 1993, that the basis of the Tribunal's decision in Mr Cooks favour was as set out in paragraph 17:

		"17	Taking all the circumstances into consideration, the Tribunal finds that the respondent did not act reasonably insofar as the respondent did not carry out any proper consultation with the applicant before making a decision to make him redundant. The Tribunal finds that the applicant's dismissal was unfair."

	The parties were unable to reach agreement about compensation. The hearing on 28th January 1994 led to the decision under appeal. 

	At the remedy hearing, the Tribunal heard further evidence on behalf of the respondent and from the applicant himself. They stated in paragraph 2 that:

		"2	Before considering the question of the amount of compensation payable to the applicant, the Tribunal had to consider whether any compensation should be paid to the applicant."

	They referred to the submissions made on behalf of the respondent based on Polkey v A E Dayton Services. It was submitted on the respondent's behalf that the only complaint was that the respondent did not carry out any proper consultation with the applicant before making a decision to make him redundant. The submission was that:

		"3  ... that where a dismissal is held unfair because the employer failed to take the necessary procedural steps the employee might recover no compensation since taking the appropriate steps would not have affected the outcome. She argued that consultation would not have made any difference as the position of assistant to Mr Tomkins [that was the position held by Mr Cook] no longer existed."

	Mr Cook claimed that he could have been employed as a product engineer in production control in the finance department or in spares. Mr Tomkins had stated:

		"5 ... that he had carried out the assessment in comparison of the applicant as against the other product engineers as he was advised to do so. A decision had been made to make the applicant redundant before the meeting on 7 July but at none of the meetings was the applicant informed that an assessment had been made or shown to him. "

	The Tribunal found as a fact:

		"5 ... that Mr Tomkins did not act reasonably at the meeting of 9 July, in so far as Mr Tomkins, having prepared an assessment, did not show or discuss it with the applicant to allow the applicant to make any representations in respect of it."
		"6	Mr Tomkins had made up his mind prior to any meeting that the applicant should be made redundant. He did not consider any other position in the workforce in which the applicant could be employed. So far as he was concerned the applicant's job had ceased to exist and that was it, thereby depriving the applicant of something of substantive importance, namely the opportunity of being compared against other employees in other departments in the respondent company."

		"7	The Tribunal finds as a fact that this is not a case in which consultation would have made no difference to the outcome by the omission of the procedural step of the respondent failing to consult with the applicant. The Tribunal finds that having prepared the assessment and compared the applicant with the other project engineers, Mr Tomkins should have shown the assessment to the applicant and allowed him to make representations about it. Mr Tomkins should also have considered other positions in the company in which the applicant could have been employed."
		"8	The Tribunal finds that the unfairness in this case can be properly described as substantive and not procedural and that the applicant is entitled to compensation. 

	They referred to the decision of the Employment Appeal Tribunal in Steel Stockholders (Birmingham) Limited v Kirkwood [1993] IRLR 515. The Tribunal then calculated the amount of compensation. 

	They considered that Mr Cook was entitled to a compensatory award, that he was entitled to wages from 11th July 1992 to 19th July 1993, the date of the first hearing. They produced a calculation from which they made a deduction, leaving a total in excess of the maximum. The Tribunal therefore awarded the maximum permissible, £10,000.00.

	The respondent company was dissatisfied with that decision, and appealed by Notice of Appeal dated 8th April 1994, as amended on 10th February 1995. 

	The Notice of Appeal alleged errors of law on the part of the Tribunal. Those errors have been elaborated by Mr Cavanagh in his excellent skeleton argument and in his oral submissions on behalf of Flight Equipment. Mr Cook has not appeared or been represented. We feel under no disadvantage on that account, since Mr Cavanagh has performed the duty of Counsel, in a case where only one side is represented, of presenting fair, balanced and accurate submissions.

	Mr Cavanagh's main point was that there was an error of law in the Tribunal's decision in paragraph 8. He submitted that the Tribunal had erred in failing to make a percentage assessment of the probability of Mr Cook being retained if the employer had acted fairly, and in failing to reflect that assessment in the award. He submitted that the Tribunal should not have added an additional ground of unfairness at the remedies stage. The additional ground of unfairness was that the dismissal was unfair due to failure to consider Mr Cook for alternative positions. 

	There was some evidence placed before this Tribunal on this point, in the form of an affidavit sworn on behalf of the company with comments by the Tribunal Chairman to the effect that the Tribunal had not introduced an additional ground of unfairness. The Chairman's position was that the Tribunal had included these matters to which the company have taken objection, to substantiate its findings that the unfairness was substantial, not procedural. 

	Mr Cavanagh submitted that the finding that Mr Cook had not been considered for other positions was one which no reasonable Industrial Tribunal properly directing itself in law could have made. He also objected to the introduction of "the additional ground of unfairness" as breaching the rules of natural justice. 

	For the purposes of deciding this appeal, it is not necessary to examine each of these grounds in detail. In our view, it is enough to persuade us that this appeal should be allowed and the matter remitted to a different Industrial Tribunal for reconsideration of remedies that there is an error of law in the direction in paragraph 8 of the decision. That paragraph refers to Steel Stockholders case, and draws a distinction between substantive and procedural unfairness. The unfairness in this case is described as substantive. On that basis it is held that Mr Cook is entitled to compensation without deduction.

	We agree with Mr Cavanagh that that passage is erroneous in law in the light of the recent decision of the Court of Appeal in O'Dea v ISC Chemicals Ltd t/a Rhone-Poulenc Chemicals [1995] IRLR 599. In the Steel Stockholders case, the Appeal Tribunal referred to the well-known passage in Lord Bridge's speech in Polkey v A E Dayton Services Ltd [1988] ICR 142, at 162F to 163A, and drew a distinction between procedural and substantive unfairness. It held that the Polkey principle, in relation to reduction of compensation, did not apply to a case such as Steel Stockholders where the unfairness was regarded as substantive.

	In his skeleton argument, Mr Cavanagh submitted that the Appeal Tribunal's decision in Steel Stockholders which was applied by the Industrial Tribunal in this case, was wrong. Even if this Tribunal were not prepared to hold it to be wrong, it did not apply in this case, because the unfairness found was properly categorised as procedural, not substantive. In the skeleton argument, Mr Cavanagh deploys a convincing set of reasons why the Industrial Tribunal erred in purporting to follow Steel Stockholders and why, in any event, the distinction between substantive and procedural defects is an unhelpful one. It is unnecessary to deal with those criticisms of Steel Stockholders in detail, since in the case of O'Dea v ICS Chemicals Ltd the Court of Appeal has given authoritative guidance as to how the question of compensation should be dealt with, and had indicated that Steel Stockholders is no longer to be treated as good law, in so far as it draws a distinction between substance and procedure unfairness relevant to the assessment of compensation.

	Mr Cavanagh cited the whole of the judgment of Peter Gibson LJ which deals under the heading "Amendment" with this point, starting at paragraph 20. It is unnecessary to repeat the whole passage. Later Tribunals, whether at the Industrial Tribunal level or here, can read for themselves how the matter is reasoned. The crucial part of the judgment is paragraph 25. That sets out, in the context of Lord Bridge's speech in Polkey, the proper approach to the assessment of compensation in this case. 

		"	In my judgment, in a case where the reason or principal reason for dismissal is redundancy but the employer acted unreasonably in some particular respect in the process of selecting the applicant for redundancy so that the dismissal was rendered unfair, it is for the industrial tribunal to decide what it is just and equitable  in all the circumstances to award the applicant, having regard to the loss sustained by the applicant in so far as that loss is attributable to action by the employer (s.74(1) of the Act.) To a case such as the present, where the industrial tribunal are satisfied that the particular defect in what the employer did only deprived the applicant of a chance that he would have been retained in the absence of such defect, the applicability of the dictum, already cited, of Browne-Wilkinson J and its good sense seem to me obvious. I do not regard it as helpful to characterise the defect as procedural or substantive nor in my view should the industrial tribunal be expected to do so, though in fact in the present case the industrial tribunal did repeatedly describe the defect as procedural. [He concludes] The fact of the matter is that Mr O'Dea lost only a one in five chance of being retained, and I can see no arguable case that he should have been compensated on the same footing as if he was bound to have been retained but for his trade union activities."

Hutchison LJ agreed with Peter Gibson LJ's judgment, and Balcombe LJ in paragraph 34 of the decision said:

		"I agree with Peter Gibson LJ on the points arising out of the amendment issue and there is nothing I would wish to add on this issue."

	The comments of Browne-Wilkinson J in the case of  Sillifant v Powell Duffryn Timber Ltd [1983] IRLR 91 at page 97 are set out at paragraph 22 in O'Dea. They were also cited and approved by Lord Bridge in his speech in Polkey.

	We agree with Mr Cavanagh that it must follow from that passage in Peter Gibson's LJ judgment that the Tribunal made an error of law in paragraph 8 of the remedies decision. 

	We also agree with Mr Cavanagh that, even if Steel Stockholders were regarded as good law, the unfairness in this case was properly described as procedural rather than substantive, and that the Tribunal misdirected itself on that point. 

	The matter must be remitted to the Industrial Tribunal to reconsider the whole question of remedies, on the basis of the approach explained in paragraph 25 of the judgement in O'Dea v ISC Chemicals. This is a case where it is preferable for the matter to be remitted to a differently constituted Tribunal.

	The order is that the appeal is allowed, and that matter of remedy is remitted to a different Tribunal.