Appeal No.	 EAT/586/98 		EAT/589/98

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 29 July 1998

Before
HIS HONOUR JUDGE J HULL QC
MR D J JENKINS MBE
MISS D WHITTINGHAM

(1) MR S M FELTHAM	APPELLANTS
(2) MR W HAMPSHIRE

CO-OPERATIVE INSURANCE SOCIETY LTD	RESPONDENTS

Transcript of Proceedings

JUDGMENT

PRELIMINARY HEARING

Revised

	APPEARANCES

For the 1st Appellant
(Mr W Hampshire)

For the 2nd Appellant
(Mr S M Feltham)	MR M C FELTHAM
(Representative)

IN PERSON

	JUDGE J HULL QC:     These are two appeals to us by gentlemen who were both employed as agents to sell and service, as we understand it, policies issued by the Co-operative Insurance Society Ltd.  The name “agent” is somewhat misleading in this context, although of course it is commonly used; they are, in fact, employees and hence the fact that they are able to complain and do complain of unfair dismissal.

	The matter arises in this way.  The Co-operative Insurance Society is, of course, a gigantic and very well established institution, employing literally thousands of people in similar positions to Mr Feltham and Mr Hampshire, our two Appellants.  There came a time, some years ago, when it was perfectly obviously to the CIS (as I will call them) and to a great many other insurance companies, that they must adapt or die.  There was vigorous competition, both in techniques and in products; first of all from bodies which had not previously joined, or not joined wholeheartedly, in this business, banks and other institutions in this country, and secondly from foreign interests who were prepared to invest money and to market fresh products in this country.  

	That led the CIS and others to decide that they must reorganise.  One other matter was of great importance.  With the much larger numbers of people who were involved, and much larger sums, and new people coming in, Parliament had seen the danger of unregulated behaviour in this field.  Therefore, there have been not only the bodies set up to regulate, but massive statutory modifications of the ordinary common law position, regulations of every description.  That is the general background to what happened in this case.

	The history, as understood by the Industrial Tribunal after a very long sitting, is explained in their Decision.  I am not going to go over the facts again.  We can deal only with points of law.  The Statute which set up our Tribunal in succession to the National Industrial Relations Court provided expressly that we were concerned only with points of law.  Parliament, which set up Industrial Tribunals, said that they, and they alone, were to be the judges of fact.  They were to be the jury and we can no more hear appeals on facts from Industrial Tribunals than any Court could hear an appeal against a verdict of a jury, on the basis that the jury had got it wrong.

	What we are allowed to do is to interfere if we can find any mistake of law and, if we do find a mistake of law which affects the decision, then what we have to do is to say that the appeal will be allowed and we send it back to another Industrial Tribunal, because we have no right whatever to substitute our own views on the facts.  For that purpose, we hold these preliminary hearings (as they are called) in which we hear only the Appellant.  It is enough for an Appellant on an occasion like today if he can show us that there is a fairly arguable point of law.  In that event we are bound to allow the appeal to proceed to a full hearing.

	As to the facts, it is the duty of the Industrial Tribunal to find the material facts on which it bases its decision, and this Tribunal at any rate purports to have done that.  Indeed, it is clear that it was a long and painstaking enquiry.

	What had happened, the Tribunal says, is that the CIS decided upon a reorganisation.  The Tribunal found that, contrary to what the CIS themselves put forward through their Counsel, the CIS was not seeking to make anybody redundant.  What they were seeking to do was to reorganise their salesforce, their methods, their organisation generally, in the interests of their own greater prosperity of course; the prosperity of everybody concerned, including their various staff, including these Applicants.  That is what the Tribunal found was the true object of the reorganisation.

	It was therefore for the CIS first of all to formulate its proposals.  The Industrial Tribunal found that that had been done.  They were perfectly proper proposals to reorganise its business, so that it should comply with the law and so that it could continue to trade profitably and preferably more profitably.  That is the legitimate object of every company and no company can avoid reorganisation from time to time.

	Various proposals, said the Industrial Tribunal, were put to the staff by negotiation and consultation with the Trade Union.  That is a perfectly proper method of consultation.  Consultation means, as the Tribunal said, first of all explaining yourself to the employees; secondly, listening to their suggestions and third, replying to those suggestions and, so far as possible, acting on them where they appear to be sensible and proper suggestions.  That is very important.  The Tribunal found, not that there was individual consultation with each employee, each of the thousands of employees involved, but that there was consultation with the representative body.  

	Then, after that, it came to the point at which the CIS wished to implement its proposals as modified, after consultation.  It appears that there were a number of attempts to persuade those employees who were against what was being suggested.  At first, a majority were against what was being suggested and strenuous efforts were made to persuade them by altering details, by further representations and so on, to agree.  Eventually it came to an ultimatum by the Company:  “These proposals, as modified, must be accepted by a particular date [I think it was 1 April 1996] and if they are not those who will not accept them will have to be dismissed”.  In other words, the CIS was saying “You have, of course, got a contractual right to insist on your present terms.  That can be ended by notice without any breach of contract and if you will not agree to modify your contract, we, for our part, will have to dismiss you”.  The question that arose before the Industrial Tribunal, because a number of agents did not accept that, was whether the resultant dismissals - or resignations treated as dismissals - whether those were unfair or not.

	The Industrial Tribunal had first to consider the reorganisation which was proposed.  The Industrial Tribunal directed itself, perfectly correctly, that it was not qualified itself to say whether the reorganisation was a good or bad thing; whether it was a skilful and proper reorganisation; whether it was in the interests of the CIS and the members of the CIS and the employees of the CIS, or not.

	They then proceeded to make a number of findings of fact, for example, to the effect that the scheme was, indeed, a proper one.  How can that be, says Mr Feltham, when they have no right to decide those matters for themselves?.  The answer is that they have to decide that on the evidence.

	The form of the proceedings before the Industrial Tribunal was that no fewer than 84 agents, all those who had not agreed to the scheme and had therefore eventually been dismissed, made common cause.  They were jointly represented by Counsel and Solicitors before the Industrial Tribunal.  They all complained of unfair dismissal.  The CIS, of course, resisted the applications.

	The Tribunal, by consent, agreed to try the cases of two agents as being representative of all the others.  Needless to say there was a considerable responsibility on the lawyers representing all these 84 Applicants.  They had to decide whether to allow that, or whether to say to the Tribunal, “No, you must not do that”.  [For example] “Mr Feltham or Mr Hampshire or one or 10 or 20 of those we represent, do not agree to that.  They wish their cases to be tried separately”.  That was not done.  The Tribunal proceeded to treat the cases of two as typical of the others.  As I say, they went through and made findings.  They looked into this proposal for reorganisation and they directed themselves, correctly, with regard to the statutory provisions.  They have to look, under Section 98, to see what the reason was for the dismissal.  Section 98 of the Employment Rights Act 1996 says, “It is for the employer to show the reason for the dismissal”, and what the employers said they wanted to show was that the reason was reorganisation and that it was a reason of a substantial sort, which was such that it would justify the dismissal of an employee.  That was not a light burden.

	It is established law that the employer is entitled, subject to the requirements of reasonableness, to run his business in the way that he thinks right.  Of course, he must consult.  Of course, he must satisfy the Tribunal of his good faith.  If this Tribunal had thought that this reorganisation had not been properly thought out; if it came to the conclusion that the real object was to get rid of employees and shed labour and simply make money for shareholders or something of that sort, then this Tribunal would not have been prepared to uphold the fairness of the dismissals.

	So the employer has the burden of satisfying the Tribunal on this essential matter - what is the reason for the dismissal?  The Tribunal heard all the evidence and that included evidence which was intended to show that CIS was wrong.  There was a study by Coopers and Lybrand, suggesting that the figures were wrong.  There was a suggestion on behalf of the employees that this was really in the nature of a smokescreen, that there was a hidden agenda to get rid of employees;  in other words, an ulterior motive of some sort.  The Tribunal considered those matters.  It was their duty to decide whether that was so or not, and they did.  They decided in favour of the CIS.

	We can only interfere with those findings of fact, their essential findings of fact about the cause of the dismissal, the justification for the dismissal, if there is a mistake of law involved.  If the Tribunal is satisfied with the reason put forward by the employers for the dismissal, then it must go on to consider whether the employers acted reasonably in treating it as a cause for dismissal.  They had, of course, to consider the whole history, how it came about that the two Appellants and the other 82 Applicants to the Tribunal were dismissed.  Was it a case of saying “You will agree or else” - and giving them 48 hours to make up their minds - or was it a reasonable way of proceeding, negotiating, consulting, reconsidering, putting the matter forward, explaining; had the employers behaved in a reasonable way?  The Tribunal found that they had.  It would be tedious for me to go through this Decision and go through the various matters which they considered.  They considered a good many matters.

	So far as we can see (and all of us have thought about this carefully) the Tribunal did consider all the matters which they ought to consider.  They reached the conclusion that, in every way, the employers had acted reasonably.  That does not mean that the Tribunal would have taken the same course themselves, or that they thought that it was the right course to take, or anything of that sort.  The Tribunal are forbidden to consider that.  What they have to do is to look and see whether what the employers were doing fell within the range of behaviour which could be expected of a reasonable employer.

	We are told by Mr Hampshire that this particular employer, the CIS, invested money in sponsorship of a football club and at the same time, or near the time, when it was dismissing 84 of its employees, was putting up £4 million sponsorship for a football club.  Now that is the sort of thing which a Tribunal would have to consider if its attention were invited to it.  We do not know whether it was.  But it can be said at once that any Company which puts up so much as a penny to sponsor anybody, if it does not do so bona fide, in good faith, in the interests of the Company, in other words for selfish purposes of furthering the Company’s interests, is acting unlawfully.

	A Company has no right to act simply in the interests of charity and when a company sponsors some pleasant endeavour such as a football club, a marathon, or a yacht race, the motive, of course, the reason, has to be the interests of the Company, which will thereby attract public approval and business and draw attention to its name and its product.  So that, I am afraid, does not in any way make us think that CIS was behaving in an unscrupulous or improper way.

	It was also said that CIS gave gigantic pay rises to its Directors or to its top management at about this time.  Again, that is a matter which a Company is entitled to do only if, in good faith, it thinks that it is in its own interests.  A great deal can be said about excessive pay rises at a political level; that is nothing, of course, to do with us.  But the fact is that this is an exceedingly unjust world and these factors, by themselves, do not show that the Company was behaving unreasonably.  The matters which were put before this Tribunal they undoubtedly considered.  It was a hearing which took eight days and their Extended Reasons stretch for something like 29 pages.

	It seems to us a very thorough Decision.  It is not a pleasant matter for an Industrial Tribunal, or for us, to consider a case where a large number of men and women have lost their living.  The fact is that it can truthfully be said that they lost their living because they failed to submit to proposals, which were put to them, and that was what led to the enquiry of the Industrial Tribunal.

	Mr Feltham senior, to whom we are very grateful, says that the Industrial Tribunal accepted what, says Mr Feltham, are non facts.  The answer is that every Tribunal, every Court, has to proceed on the evidence which it receives, and decide which evidence to accept and which to reject.  It is often perceptible after a case is over that, if other evidence had been called, a different conclusion of fact might have been reached.  This Tribunal, so far as we can possibly see, acted on the evidence which was before it and it was guided, of course, and helped by three Counsel, as well as Solicitors, in the course of its long enquiry.

	Then Mr Feltham says that they failed to take into consideration industrial practice and he says that other companies have reorganised without penalising their staff like this.  We are quite sure that this Industrial Tribunal was well aware of that, that a great many Companies have reorganised without redundancies or without dismissing anybody.  The CIS hoped to do so.  They were prevented from doing so because their plans could not be accepted by the 84 dissidents (if I can call them that).  

	Mr Feltham pointed out to us that there is a danger of this area of the law becoming too complicated.  That is true.  But this Tribunal appears to us to have gone, in spite of the complexity of the enquiry, straight to the point and not to have been dismayed by any of the complications of the law.  They failed, said Mr Feltham, to take into consideration the size of the Company.  But it appears to us that they did.  There are repeated references to the enormous size of the CIS and their workforce.  Mr Feltham asks us to say, “This comes within the definition of perversity” .  He refers to Neale v Hereford and Worcester County Council [1986] ICR 471 CA and perhaps he might have referred to East Berkshire Health Authority v Matadeen [1992] IRLR 336.  He says this is a decision which makes one say, “My goodness, that must be wrong”.  All we can say is that this does not make us say, “This decision must be wrong”.

	Mr Feltham says that “This decision will open the door to anyone who wishes to asset-strip a Company.  Fair industrial practice forbids a Company to go on like this”.  That is precisely the sort of general matter which every Industrial Tribunal must take into consideration.  It is a fallacy to say that any Company can come along, take over another Company, strip its assets and dismiss all its workers.  Any such conduct will almost certainly be viewed by an Industrial Tribunal as unfair and will lead to substantial awards of compensation.

	The fact is, equally, that Parliament recognises and that the Courts and Tribunals have recognised, on a basis of received wisdom and law, that any Company is entitled and, indeed, bound to reorganise itself and that that may result in dismissals.  It is the Tribunal’s task, when those occur, to say whether all has been done fairly or not.  I dealt with the point about the Tribunal saying, quite rightly, that they were not qualified to form any conclusions of their own about the reorganisation.  They had to act on the evidence, which they heard from various witnesses, and Mr Feltham asked us to bear in mind that the financial service market has been continuously reorganising itself for many years now.  Then he says that the training costs which were put forward by the Company were incorrect.  Again, a matter for the Tribunal, a pure question of fact for the Industrial Tribunal to consider.

	Then there was no negotiation with individuals.  Well, there was negotiation with the Union, and it was a matter again for the Tribunal to say whether there should, in addition, have been negotiation personally, with each of the 6,000 or more people involved.

	Mr Hampshire also raised points with us.  He said that the Industrial Tribunal did not pay any consideration to his statutory rights under section 104 of the Act.  Section 104 of the Employment Rights Act 1996 provides as follows.  An employee shall be deemed to be unfairly dismissed if the reason is that he has brought proceedings against the employer to enforce a relevant statutory right such as, for example, a right not to be discriminated against on the ground of gender or race or disability.  

	But the dismissal was not on the grounds that Mr Hampshire or any of the other salesmen had sought to enforce their statutory rights.  They had sought to insist on their contracts.  That is why they were dismissed, together, of course, with all the other matters which were also causes of the dismissal.  So Mr Hampshire’s argument appears to us to be ill-founded and the Tribunal were not ignoring Section 104.

	Mr Hampshire also says that it was not necessary to dismiss himself and the other 83, because 98.5 per cent of the workforce had been kept on.  That, with all respect, begs the question.  The point is that that the 98.5 per cent plus were all those who had (if one puts it like this) knuckled under.  They were working on the employer’s terms and had agreed to them and that is the difference.  So that is not, it seems to us, a logical ground for criticising the Industrial Tribunal’s decision.

	Then Mr Hampshire says that the reasons put forward by the CIS, their losses on various types of business, were not borne out in the annual report.  Perhaps only a skilled accountant could advise on that because, of course, annual reports do not necessarily show losses on particular areas of business.  Indeed, many Companies regard the question of where losses and profits have been made as a matter of considerable confidence and wish to publish in their reports simply overall figures.  We do not know if that was so, but it was a matter again which was pure fact for the Industrial Tribunal.  Mr Hampshire disagrees with the alleged cost of training.  That too was a matter of fact for the Tribunal.  He makes the points, which I have referred to, about the Company’s alleged extravagance, with its pay rises and its sponsoring of a football club, and then he says again that the decision cannot be correct.  He says that the Industrial Tribunal has decided this case on commercial grounds having said they were not able to.  I have done my best to say how that contention, in our view, is incorrect.  He says, “We (that is to say those who were dismissed) were the high earners.  The reason we were sacked really was because of our efforts and hard work which made us expensive”.  That may be so, as a hypothetical matter.  On the face of it, the harder they worked and the more they earned, the more the CIS would earn, but that is an outsider’s comment.  It was a matter of fact for the Industrial Tribunal.  As I say, we have all read all the papers in the case.  If we had succeeded in spotting any point of law, any one of us, that would have been enough.

	We have now listened, gratefully, to Mr Hampshire and Mr Feltham and we have to say (and we are not at all happy to say it) that even with their assistance, we cannot find a single fairly arguable point of law which arises in this case.  Therefore we must dismiss the appeals, at this stage, without allowing them to go to a full hearing.