Appeal No.  UK/EAT/0801/03/TM

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 5 March 2004

Before
HIS HONOUR JUDGE J MCMULLEN QC
MRS M V MCARTHUR
MS B SWITZER

SARAH VINCE-CAIN	APPELLANT

ORTHET LIMITED	RESPONDENT

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR FRANKLIN EVANS
(of Counsel)
Instructed by:
Messrs Sheridan & Stretton 
Solicitors
233 King Street
London W6 9LP	
For the Respondent	MS RACHEL CRASNOW
(of Counsel)
Instructed by:
Messrs Hempsons
Solicitors
Portland Tower
Portland Street
Manchester M1 3LF	

SUMMARY

Refusal of an application by an employer to argue that it is wrong in law under SDA 1975 section 65 to gross up an award for compensation when its own submission to the opposite effect had been accepted by the Employment Tribunal. 

HIS HONOUR JUDGE J MCMULLEN QC
1	On the opening of the appeal a preliminary point has been taken by Ms Rachel Crasnow, appearing on behalf of the Applicant (as we will call her) in these proceedings.  The point, she engagingly told us, would take her 10 minutes and in fact has occupied us constructively for 2½ hours.  It is that we should not deal with one aspect of the Appeal today for the Employment Tribunal is the wrong place and thus the Employment Appeal Tribunal the wrong appeal forum for determining what is essentially the tax liability of the Applicant. 
2	Having heard submissions relating to Employment Tribunal procedure, and to the requirement under Section 65 of the Sex Discrimination Act for a sum to be found payable pursuant to general damage principles, and having considered the material which appears to have been put before the Employment Tribunal, we have come to the view that the case should be heard in full.  It may be that we come to the same conclusion as Ms Crasnow invited us to make, but as we see it the preliminary point fails and we would prefer to hear the case as a whole.  We have no criticism of her for raising this as a preliminary issue, for it initially was attractive to us and did have merits.  We could well see the difficulties her client faced in the problem (not of her making) that the Employment Tribunal and the Revenue are engaged in affecting the sum of money due from the Respondent.  We will hear the appeal and if necessary revisit this once we have heard full argument.  We thank both Counsel for their contributions to this.
3	Following our decision on the first preliminary issue, Ms Crasnow has invited us to consider the issue which arises under what is known as the Kumchyk principle, Kumchyk v Derby City Council [1978] ICR 1116 EAT, that is that a new point may not be raised in the EAT if it were not raised below unless there are exceptional circumstances for which the EAT’s permission would be sought and, if appropriate, given in its discretion.  The issue which this is targeted upon is what is at the heart of this Appeal.  It is whether or not damages awarded by an Employment Tribunal under Section 65 of the Sex Discrimination Act should be grossed up to take account of tax where the award is for loss of earnings.  
4	As can be seen from our first preliminary ruling, this is a point which is free of authority. We do not shrink from our duty to determine a point fairly put to us by an Appellant aggrieved at a decision on a matter of law made by an Employment Tribunal.  The principle, however, which requires us to operate when a new point arises is clearly set out in the following authorities, in addition to Kumchyk: Jones v The Governing Body of Burdett Coutts School [1999] ICR 38 CA; Hellyer Brothers Ltd v McCleod [1987] ICR 526 CA; Glennie v Independent Magazines (UK) Limited  [1999] IRLR 719 CA; Mensah v East Hertfordshire NHS Trust [1998] IRLR 531 CA; Divine-Borty CA; Craig EAT; Dimtsu EAT; Derby EAT. Of those, 5 Court of Appeal and 4 EAT authorities dealing with the issue of new points, it is fair to say that they point in one direction, which is that new points may only within exceptional circumstances be raised at the EAT.  The high water mark we suppose is Mensah where a point of law wrongly conceded by counsel could not be unpicked on appeal to the EAT however unfair that result might appear.  Those then are the principles which inform our approach to the submissions.
5	Ms Crasnow contends that this point not only was not argued but was presented to the Tribunal in precisely the opposite form.  In written submissions of Mr Franklin Evans to the Employment Tribunal there is this:
“3.3	  There is no decided authority in the EAT or above dealing directly with SDA/RRA awards embodying loss of future earnings, but there is persuasive authority to indicate that awards representing compensation for future loss of earnings under the SDA should be grossed up to take account of the incidence of Sched E tax under s.148:-
e.g	Shove v Downs Surgical plc [1984] ICR 532 (EAT)		[Enc.4]
	Kirker v British Sugar plc
	(Unreported; Case No. 2601249/97 ET Nottingham Disability
Discrimination) (NB illustrative only)				[End 5}
	Hamblett v Godfrey (1987) STC 60 (CA)				[Enc 6]

Thus, she submits, quite the opposite to what is being contended today was being advanced by Counsel.  

6	The approach of the Tribunal was to ensure that the Applicant had in her hands her net loss without being subject to tax deductions.  That is why the Tribunal expresses itself both in terms of an amount, and the principle to be followed from which the arithmetic could be deduced.  Although a Tribunal is required under Section 65 to prescribe an amount equivalent to what damages could be obtained in a County Court, the Tribunal here have made it clear what the sum is and has indicated that grossing up would be required.  

7	The submissions to the Employment Tribunal of Mr Evans distinguished between the sums available on an award under the Sex Discrimination Act and otherwise: and on the one hand for loss of earnings, see the passage we have cited, and on the other, for injury to feelings, see paragraph 5 of his submissions.  In those circumstances, Ms Crasnow submits it is not open to the Respondent to seek to have the matter reopened here.  

8	If our discretion were to be called upon, she contends that there is no compelling reason: there has been no deception, there is no issue which the Employment Tribunal could be expected of itself to raise, albeit this may involve a point a law and not a requirement of fresh evidence.  Finality of litigation conduces to the refusal of the exercise of discretion.  Even if the EAT is fully seised of a dispute between the parties as to the tax consequences of an award of injury to feelings, there is no justification for extending that examination to what we have regarded as the heart of this case, the effect on an award for loss of earnings.  Even if this matter went to jurisdiction, which she submits it does not, the principles would still apply and militate against the exercise of discretion.
9	On behalf of the Respondent, Mr Evans makes the following submissions.  First, the statute has changed, previously ICTA, now ITEPA.  Secondly, there has been a succession of hearings in this case involving meetings in open tribunal, in chambers and by written submissions, culminating in the Reserved Decision on 1 August 2003 when the last oral hearing was 18 December 2002, interspersed with submissions.  That is unfair, contends Mr Evans, for although it is accepted that a party is required to put his or her case in full, that ought not to apply with rigour where there has been a drawn out sequence of hearings.  Thirdly, and most important, it is contended that this matter was raised below.  He too relies on the passage we have cited from paragraph 3.3.  Fourthly, he contends that permission was given by His Honour Judge Peter Clark at the Preliminary Hearing for this matter to be raised and this is only an extension of a point for which permission was given and to which it is intimately linked.  It follows that Mr Evans’s submission is that this matter was before the Employment Tribunal.  He did not address Kumchyk or ask us to exercise our discretion or give grounds for its exercise.

Our conclusions
10	We uphold the submission of Ms Crasnow.  It is clear that the submission made today by Mr Evans is the opposite of that put before the Employment Tribunal.  Any Employment Tribunal reading that submission, without opposition from the Applicant’s Counsel, would most likely follow it.  This Tribunal did so.  It followed the principles embodied in it of grossing up.  Thus, the point was raised but to a completely different purpose to the point now sought to be argued.  

11	The sex discrimination aspects are clearly distinct, for although it is true that certain parts of the written submission focus on termination of employment, the passage we have cited is specifically directed to awards under the anti-discrimination legislation.  It is accepted by Mr Evans that the principle embodied by the 2 tax statutes sought to be brought to bear in this case is the same, although there is some language difference and there is some difference in ambit.  Nevertheless, we hold that the principle embodied in Section 148 ICTA is continued in Section 401 and following of the ITEPA.

12	We reject the contention that the rule that a party should put its case forward all at once is mitigated by the succession of hearings in this case, for we accept Ms Crasnow’s submission that, on the contrary, the parties were given further opportunities to correct or bring their cases up to date.  Although we would disapprove of lengthy periods elapsing between oral hearing and Extended Reasons, the rule which has recently been set by Burton P and members in Kwamin [2004] IRLR, of Extended Reasons emerging no later than 3 months and 2 weeks after an oral hearing, is moderated where written submissions are invited or arrive unsolicited.  Thus a Tribunal genuinely concerned about a point, as in a case such as this and with skilled representation on both sides, is entitled to ask them for further assistance.  If this issue were seriously to be contended, there was a further opportunity for Mr Evans to change his position or to draw attention to whatever changes there may be in ITEPA; that was not done.  We see no injustice to his client.  

13	The Preliminary Hearing before His Honour Judge Clark was genuinely without the other side being present.  The Order given by His Honour Judge Burke QC on the sift entitled the Applicant to put in written submissions in opposition which was not done, but that was permissive not mandatory.  Thus, whatever Judge Clark and Members did at the Preliminary Hearing on 27 November was subject to the usual rule.  It is a provisional decision which can be varied or set aside on application by the party which was not there.  On occasions at a Preliminary Hearing a party does raise a Kumchyk point and seeks permission.  That, of course, would not be granted unless the other side had been consulted.  Judge Clark and Members who gave the Directions were not alert to the point as it is now articulated by Ms Crasnow, and she has raised it in her Skeleton Argument.  It would have been preferable had it been raised in her Respondent’s Answer, but nevertheless the matter is squarely before us today.  She is entitled to take the point. Notwithstanding that permission apparently waving this through was given at a Preliminary Hearing that was, as in any one-party-only hearing, provisional.  Thus, no support can be given to that submission.

14	The point sought to be raised by Mr Evans is truly the opposite of that which he argued below.  We see no compelling reason why he should be allowed to change his position.  The Tribunal has operated on the basis of the submission he made and the figures he put forward.  As he had indicated it is based upon persuasive authority and indeed, as we have shown the parties, a document put before Hooper J and Members in a similar case being heard today, giving guidance to tribunal chairmen, seems to follow the same approach.  Thus, the Tribunal made its decision, encouraged to do so by the submission made by Mr Evans, supported (at least on this point) by Ms Crasnow.  

15	This is a new point. Since our discretion is not sought to be exercised on any aspect, we do not need to exercise it.  It is not justified, in our judgment, for this matter to be raised even though the subsidiary matter of the tax implications of an award to injury to feelings is in play before us. Ms Crasnow’s application is allowed.

16	An application has been made for permission to appeal, indicating that we have erred in law in failing to recognise the connection between the substantive point on taxation of loss of earnings and injury to feelings.  We refuse this application for we consider it has no reasonable prospect of success.  We have sought to apply the 9 authorities which we have cited and we have not exercised our discretion.  If we are wholly wrong in principle the Court of Appeal must tell us on Mr Evans’ application directly to it.