Appeal No. EAT/0251/01

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 23 September 2002

Before
HIS HONOUR JUDGE D SEROTA QC
MS N AMIN
MRS C BAELZ

HEATRIC LTD	APPELLANT

MR ANDREW HILL	RESPONDENT

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR RODERICK MOORE
(Of Counsel)
Instructed by:
Messrs Gales
Solicitors
512 Wimborne Road
Winton
Bournemouth
Dorset  BH9 9ET	
For the Respondent	MR TIMOTHY HOWARD
(Of Counsel)
Instructed by:
Messrs Aldridge & Brownlee
Solicitors
Kingsway house
13 Christchurch Road
Lansdowne
Bournemouth
BH1 3JY	

JUDGE D SEROTA QC

1.	This is an appeal by the Respondent employer from a decision of the Employment Tribunal at Southampton that was promulgated on 2 January 2001, (Mr Griffiths, Chairman).  The Tribunal decided that the Applicant, Mr Andrew Hill had been unfairly dismissed and he was awarded compensation which totalled £31,482.00.  The matter came before the Employment Appeal Tribunal on 26 June 2001 presided over by His Honour Judge Altman and the EAT on that occasion considered that the Appeal should go forward on one ground only, namely, whether there was sufficient evidence to justify the Employment Tribunal in finding that there was a 90% chance that the Applicant would have made the grade as a salesman, alternatively that that decision was perverse on the grounds that the Employment Tribunal had either misdirected itself as to the law or had not clearly shown that it had directed itself correctly.  We will come to these matters shortly.

2.	The position appears to be this; in September 1997 Mr Hill was employed by the Respondent as a sales engineer.  The Respondent has maintained that his job was more sales than engineering and it became disenchanted with Mr Hill’s capability as a salesman.  The disenchantment was based on what were said to be Mr Hill’s character traits.  He was described as not being outgoing and was wooden in front of clients.

3.	In November 1999 he was appraised and his grade after some discussions was placed at ‘D’ rather than ‘E’ as it had been initially.  If one looks at the documentation which we have in our supplemental bundle at page 17 the ‘D’ grade is described in these terms.  “Slightly below requirements, applicable to individuals whose performance is not quite up to requirements after a reasonable period of training and experience.  Performance is satisfactory in some respects but is marginal on the whole.  Improvement is required.”  ‘E’ grade is “far below requirements” and ‘C’ is “good”.  We would note in passing that only a modest amount of training had been given to Mr Hill; we believe that in his period of two years of employment it was little more than three days.  The result of the appraisal was that Mr Hill was told his position would be reviewed in April 2000.  The Respondent nonetheless remained concerned about Mr Hill’s abilities as a sales engineer and this led to the instruction of Thomas International to prepare (to some extent on the basis of psychometric testing) a personal profile analysis of Mr Hill.  The effect of this analysis was not favourable so far as Mr Hill was concerned and we quote from the report dated 18 November 1999:

“Mr Hill’s characteristics do not appear to conform with the requirements of the Human Job Analysis.  This would suggest that he will not be as forceful, driving, influential and flexible as the job requires.

All the indicators lead us to believe that Mr Hill could prove to be far too structured and organised, too reliant upon being given direction and not as verbal and persuasive as the job requires.  He likes to work at his own pace and may not always recognise the urgency of a situation.”

4.	We have been taken by Mr Moore to the details of that report and in particular to various graphs which we find set out at pages 7 and 8 and the analysis at page 9 so we need say little further about them.  There is nothing in this profile however, that suggests that the position of Mr Hill was regarded as irredeemable in the sense that he might not be able to improve his performance given adequate motivation and training.  However, it is right to say that a discussion did take place between Mr Newton a director of the Respondent, and Mr Harvey who was one of the persons responsible at Thomas International for preparing the report and what Mr Newton recorded Mr Harvey as saying is in these terms:

 “cannot:  change behaviour long term.  “You will never get this guy to be a high “D” (and D relates to dominance) or a high “I” (“I” refers to influence in people’s skills).  We might get him to do it for short periods – for example with assertiveness training – but it won’t be sustainable.””
That is something that did not appear in the personal profile itself but it supported a view which the Respondent already had that Mr Hill would never be an effective salesman.

5.	A meeting was called which was attended by Mr Burn, Mr Hill’s line manager, to take place on 14 December.  A script had been prepared for that meeting and perhaps it is important to note what that script provided for.  It provided that the purpose of the meeting was for Mr Burn to discuss the Thomas Report, to listen to what Mr Hill said about it and get a reaction and then list the options.  There were two possible options.  The first option was that if the employment should continue there should be possible training, for example in techniques, as one was unable to train in characteristics.  The objectives would be very tough, and could result in dismissal if not met.  It is noted that Thomas thought that the Applicant would not succeed.  Thomas thought that Mr Hill would find it very stressful and would hate it.  The second option was separation and referred to a compensation package that was to be offered to Mr Hill.  

6.	For some reason and it is by no means clear why, this script was not followed.  It should be borne in mind that Mr Hill’s performance although of concern to the Respondent had not given rise to any formal complaint.  From time to time his character traits, such as being wooden in front of clients had been drawn to Mr Hill’s attention but nothing more.  He was given no warning when he went into the meeting on 14 December that it might result in his dismissal.  What took place at the meeting was, as the Employment Tribunal set out in their Extended Reasons, that Mr Burn did not follow the script.  He dismissed the Applicant:

“Mr Burns says that he dismissed the Applicant as a result of the Applicant’s failure to suggest that there was anything that he could do about improving his performance, but we are satisfied that Mr Hill was not given any opportunity to respond to the bombshell of dismissal.  Far less was he given any opportunity to improve his performance.”

7.	He was dismissed effective 31 December 1999 on the grounds of capability and what the Employment Tribunal had to say about the dismissal was this:

“We are satisfied, therefore, that, by reason of the failure to warn Mr Hill as to the possible consequence of the meeting on 14 December and the fact that he was given to opportunity to improve his dismissal was unfair.  We also bear in mind that Mr Hill believed that the matter was to be reviewed in April 2000.  In addition, we note he was not given the opportunity of appealing against this decision.”

8.	It seems to us that the finding that was made as to unfair dismissal was on the facts inevitable.  We are given to understand that this was perhaps conceded during cross examination, although the fairness of the dismissal may have been raised in final submissions by the Respondent’s solicitor.  We would at this point in time deal with one submission made by Mr Moore and that is that it is implicit in the reasoning in paragraph 7 that had Mr Hill been warned as to the possible consequence of the meeting on 14 December the dismissal could have been regarded as fair.  We reject that submission.

9.	We bear in mind the facts found by the Employment Tribunal that Mr Hill was employed two years standing about whom no formal complaint had been made and would have been recently given to understand that his employment was to be reviewed in April 2000.  The failure to give him adequate notice of the fact that the meeting might result in his dismissal would have itself had rendered the dismissal unfair without the other findings that there was no opportunity given to improve, and that he had been told that his employment would be reviewed in April 2000.  These other matters would also in themselves have rendered the dismissal unfair.  The very giving of notice to Mr Hill would have triggered firstly the incentive to improve his performance in case he was dismissed, and would have triggered, a request from Mr Hill to seek assistance in improving his performance, assistance that the Respondent on the evidence would have given had it been asked to do so had the employment continued.

10.	The Employment Tribunal came to the conclusion having determined that the dismissal was unfair that there was a 90% chance that Mr Hill could have made the grade and only a 10% chance he would have not have met the necessary performance criteria and accordingly his compensation for the relevant period was reduced by 10%.  The relevant paragraph of the Employment Tribunal’s decision is paragraph 8 which we shall read:

“Having determined that the dismissal was unfair, we are invited to go on to consider whether or not Mr Hill would ever have made the grade.  This is because it has an effect on the compensation which is payable to him.  The point was made on behalf of the Applicant that, given the necessary incentive and the necessary training it is surprising what can be achieved.  On the other hand, the Respondents take the view that, bearing in mind the personality profile and Mr Burn’s views of the Applicant’s capabilities, he was never going to be a successful salesman.  We believe that Mr Burn’s assessment is too harsh.  We also believe that it is unwise to place too much reliance upon the personal profile, particularly as we have not been given the personal profile of a successful salesman against which we can judge Mr Hill’s profile.  We find that there was a 90% chance that Mr Hill could have made the grade and therefore it follows that there is only a 10% chance that he would not have met the necessary performance criteria, and the relevant part of his compensation is to be reduced by that amount.”

11.	It was said by Mr Moore in the course of his succinct and powerful submissions that the Tribunal misdirected itself.  The question, it is said, the Tribunal should have asked itself but clearly did not ask itself explicitly, is “what would the Respondent have done if it had not dismissed the Applicant unfairly”?  Mr Moore goes on to submit that there were effectively three possibilities.  The first was that he could have been fairly dismissed had he been told what the purpose of the meeting in December was.  We have rejected that submission.  The other two possibilities were that he would have been given an opportunity to improve his performance with training and that he would have been given an opportunity to continue his employment without further training.  

12.	Mr Moore accepted that Mr Howard who appeared on behalf of the Applicant had correctly stated the law in paragraph 13 of his skeleton submissions in relation to the consideration of the Polkey reduction.  We note that the thrust of the appeal is that the Polkey reduction cannot be justified.  Mr Howard submitted there should be a three stage test.  The first question, is there a material doubt whether or not the employee would have been dismissed if the employer had acted fairly?  In this regard the Tribunal is concerned with what the employer would have done not could have done if it had not acted unfairly: see Trico-Folbeth Ltd v Devonshire [1989] IRLR 396 see May LJ at page 398 paragraphs 10 and 12.  Secondly, if so, can the Tribunal quantify in percentage terms the chance that he would have been dismissed?  It may not be possible to do this in some cases where the exercise would be speculative and we were referred to King v Eaton [1988] IRLR 686 per Lord Prosser at page 691 paragraph 20. Thirdly if the Tribunal can qualify the chance in percentage terms what is the percentage which should be applied to the appropriate part of the compensatory award?

13.	Mr Moore is correct in submitting that there is no explicit statement by the Tribunal that they directed themselves in relation to the first of those questions.  Is there a material doubt whether or not the employee would have been dismissed if the employer had acted fairly?  Against that Mr Howard submits that even though the question is not asked explicitly it is quite clear from the Extended Reasons that the Employment Tribunal had that question very much in mind.  The Tribunal considered the dismissal could only have been fair if adequate notice was given to the Applicant that if his performance did not improve he would be dismissed and that he would be offered training.  The Tribunal found that had such a course been adopted then a necessary improvement would have been affected.  It should be borne in mind that the nature of the performance that was required to be improved was to bring the Applicant from Grade ‘D’ so as to speak on his appraisal to Grade ‘C’, a modest improvement only.  Mr Howard points out that the evidence as reflected in the Chairman’s notes make quite clear that even if the Applicant was unable to say whether training would have improved his performance, he would certainly have availed himself of it.
 
14.	Secondly, it is quite clear that the employer clearly had training in mind.  Had the dismissal been fair the training option would have been discussed.  Mr Hill, in cross examination (and see page 27 of the bundle) believed that the question of training was already in hand.  What Mr Newton said about the matter was this:

“If there had been some willingness from him we would have put him on the training.”

The fact of the matter is that Mr Hill was never given the chance as he would have done had the Respondent acted fairly, to consider improving and expressing a willingness to seek training.

15.	We also draw attention to the passage we have already referred to, paragraph 6 of the Extended Reasons, that Mr Hill was not given the opportunity to respond to the bombshell of dismissal and far less was he given any opportunity to improve his performance.  Mr Hill submitted in those circumstances that he should not suffer any Polkey reduction at all whereas the Respondents maintain there should a 100% Polkey reduction but we bear in mind that this is a case where the Employment Tribunal saw the parties and heard the evidence and it seems to us that they were justified on the evidence in coming to the conclusion that given the incentive of the threat of dismissal and training there was a 90% chance that Mr Hill could have made the modest improvement to make the grade. 

16.	We are satisfied that the Employment Tribunal could have set out its reasoning much more clearly than it did.  It could, and in our view should, helpfully to the parties have set out in terms, that it was addressing the question as to what would have happened had the Respondent acted fairly.  But looking at the matter in the round and looking at the evidence that was before the Tribunal it was quite clear that a fair dismissal was bound to envisage a period when Mr Hill would have regarded himself as under noticed if his performance did not improve together with the offer of training.  The fact that training would have been offered does not appear to have been an issue before the Employment Tribunal as the Respondent assumed that if the employment continued further training would have been offered.

17.	It is said that the decision of the Employment Tribunal might be regarded as perverse.  Perversity is always extremely difficult to prove.  Attention was drawn to the well known cases on the subject and in particular we have read the passage in Stewart v Clevland Guest (Engineering) Ltd [1994] IRLR 440 in the judgment of this Tribunal given by Mummery J at paragraphs 33 and 34.  It seems to us that the ground of perversity cannot be made out, either in relation to the question as to whether the Tribunal applied the correct test or alternatively in relation to the 90% chance or 10% reduction, as one chooses to see it.  

18.	The Employment Tribunal, as we have been reminded, saw the witnesses.  The principal complaint that was made against Mr Hill was not that he was not meeting sales targets but related to such matters principally as that he was wooden when meeting customers.  The Tribunal who saw him give evidence would have been in a good position to form a view as to his nature and his public performance and would have been well able to consider whether he might with the incentive of a possible dismissal hanging over him unless there was improvement and with possible training, have come to the conclusion that he might have made the modest improvement necessary to enable him to meet the accepted standards.

19.	In our opinion if one applies the ‘goodness gracious me that must be wrong’ test as we were invited to by Mr Moore to the 90% determination by the Employment Tribunal we all came to the conclusion that we would not have considered the decision wrong.  We might put the matter rather more elegantly when this judgment comes to be corrected but it seems to us that that was a percentage well within the remit of the Employment Tribunal, which as we say heard the evidence, saw the parties and was in a position to weigh up the various relevant matters.

20.	It is said by Mr Moore that there is nothing to show where the 90% figure came from and therefore, it must be perverse.  In our view that is not the case.  The Employment Tribunal clearly had to weigh up matters.  It clearly had in mind the evidence that a fair dismissal would, as we have said entailed giving Mr Hill the opportunity to improve his performance else faced with the possible sanction of dismissal and also the possibility of training.  Bearing in mind the modest improvement that was required to be achieved it seems to us that the 90% chance he would have made the grade can easily be understood.  

21.	In the circumstances, although as we have said the Employment Tribunal could have spelt out its decision a little more fully and made clear explicitly what in our view is implicit in its Extended Reasons that it asked itself the question of what the employer would have done had it acted fairly.  It seems to us that the Employment Tribunal did correctly direct itself in this regard and did come to a conclusion that was justified on the facts and gave sufficient explanation as to why it came to its conclusion to the parties.

22.	Before we conclude this judgment we would like to express our gratitude to both Counsel, both to Mr Moore and Mr Howard who have both argued their cases with great persuasion and also with commendable brevity.  It is not something that we simply say because we feel it is courteous to do so.  All of us were greatly impressed with the quality of the submissions that we have received from both Counsel and we would like to make that clear.