Digital Equipment Company Ltd v Clements (No.2)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE BELDAM,LORD JUSTICE POTTER,SIR JOHN BALCOMBE |
| Judgment Date | 04 December 1998 |
| Judgment citation (vLex) | [1997] EWCA Civ J1204-9 |
| Docket Number | EATRI 97/0283/B |
| Court | Court of Appeal (Civil Division) |
| Date | 04 December 1998 |
[1997] EWCA Civ J1204-9
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
Royal Courts of Justice
Strand
London WC2
Lord Justice Beldam
Lord Justice Potter
Sir John Balcombe
EATRI 97/0283/B
MR D RICHARDSON (Instructed by Digital Equipment Co Ltd, Reading TG2 OTE) appeared on behalf of the Appellant
MR D CHRISTIE and MR J MAUGHAM appeared on behalf of the Respondent Pro Bono
Thursday, 4 December 1997
The appellant, Digital Equipment Ltd. (Digital) appeals from the order of the Employment Appeal Tribunal of 5th December 1996 dismissing its appeal from the decision of the Industrial Tribunal of 6th September 1995 and confirming a compensatory award of the maximum sum of £11,000 made to the respondent, Mr Clements, for unfair dismissal.
Mr Clements joined Digital as a project engineer on 21st September 1987. By 1992 he had been promoted to project manager and was working within the Public Administration Group. He was one of fifteen people in a team managed by Ms Williams. Nine of the fifteen members of the team were project managers whose job was not interchangeable with the other six. In January 1994 it became clear to Digital that its business no longer required nine project managers and that it would need to make two redundant. Mr Clements was one of the two selected for redundancy. His employment was terminated by reason of redundancy on 31st March 1994. He was paid 2 months and 3 weeks gross pay in lieu of notice, amounting to £6,326.92. In addition he received a redundancy payment of £22,325. At a hearing before the Industrial Tribunal (chairman Mr D. Teagle) held at Reading on 23rd January 1995 the Tribunal determined that although Mr Clements had been dismissed by reason of redundancy the procedure for consultation had not been fully carried out in his case and consequently he had been unfairly dismissed. The Tribunal determined that had a fair procedure and proper consultation taken place, there was in the circumstances a 50% chance that Mr Clements would have been among the project managers retained and not selected for redundancy. It held that an award of compensation should reflect that finding. The basic award, corresponding to statutory redundancy pay was, in the words of the Tribunal, subsumed in the redundancy payment made to Mr Clements. In order to give the parties an opportunity to agree if they could on the amount of the compensatory award, the Tribunal indicated that its award would cover the period from the date of dismissal to the date of the hearing and for nine months thereafter. As Mr Clements had received pay in lieu of notice, the compensatory award would be calculated from the third week in June 1994. The Tribunal continued:
"In arriving at the gross figure, that is the figure before deduction in respect of payment received, account will be taken of all aspects of remuneration including the company car, pension and life insurance and all other benefits actual or potential. Having arrived at that figure, it will be appropriate to deduct the severance payment made (sec. 74(7)) of the Employment Protection (Consolidation) Act 1978 and to halve the resulting figure and then if the result is more than £11,000 that figure will be the award, if less than £11,000, the actual figure arrived at."
At subsequent hearings the Tribunal determined that Mr Clements' loss over the period was £43,136 and the balance of the redundancy payment at £20,685. The question then arose how the Tribunal should in assessing the compensatory award take account of the finding that he had only a 50% chance of retaining his employment. How should the balance of the redundancy payment after deducting the basic award be brought into account?
For Mr Clements it was argued that the redundancy payment should be deducted from the £43,136 leaving a balance of £22,451; that figure should then be reduced by 50% giving a compensatory award of £11,275. This would result in the maximum of £11,000 being payable. Digital argued that the Tribunal should first reduce the loss by 50% leaving a compensatory award of £21,568 from which the Tribunal should then deduct the £20,685 leaving a balance of £883.
The Tribunal decided in Mr Clements' favour.
Digital appealed to the Employment Appeal Tribunal and their appeal was heard by the Appeal Tribunal presided over by Lord Justice Mummery, then Mr Justice Mummery. On 4th June 1996 the Appeal Tribunal allowed Digital's appeal and substituted a compensatory award of £883.
Mr Clements sought a review of the award on the ground that material decisions had not been brought to Mr Justice Mummery's attention. Mr Justice Mummery granted the review and on 5th December 1996 the Appeal Tribunal presided over by Mr Justice Morison restored the decision of the Industrial Tribunal. From Mr Justice Morison's decision, Digital now appeals to this court. The appeal has been heard two days after judgment was given by another Division of the court in Ministry of Defence v Wheeler & Ors., (unreported) C. of A. 97/1795. Those appeals raised a similar question of the correct approach of an Industrial Tribunal to the calculation of a compensatory award for wrongful dismissal after a finding that a claimant had proved only a percentage chance that he would have continued in his employment had his dismissal not been unfair.
In the Ministry of Defence v Wheeler & Ors, supra, the question arose in the context of unfair dismissal by the Ministry of members of the Armed Forces because of their pregnancy. In each case the amount of the loss suffered by the service women depended upon a comparison between their earning capacity after returning to civilian employment and the amount they could have expected to receive had they completed their engagements in the forces. In the case of Mrs Wheeler, the first of the respondents, the Tribunal found that if she had been permitted to return to the Army following maternity leave she would certainly have done so but by the time of the hearing she had given birth to a second child and the Tribunal assessed her chance of returning to the army following maternity leave as 85% and the chance that she would have completed her full twenty-two year engagement at 20%.
In the other cases before the court the chances of the service women were similarly assessed on a percentage basis. All the service women had, after their dismissal, obtained civilian employment for differing periods but their rates of pay were lower so that aside from questions of chance their loss was the difference between the sums they actually earned and the sums they would have earned had they not been discharged from the Forces.
The Ministry of Defence argued that the Tribunal should in each case have applied the percentages found to the sums they would have earned in the armed forces and having done so should have deducted the sums actually earned. For the service women it was argued that this was unfair. The effect of the Tribunal's finding was that they had lost the opportunity or chance of earning the difference between their civilian earnings and the earnings they would have had in the Armed Forces. The percentage chance should therefore be applied to the difference between the actual and expected earnings.
In its judgment the court illustrated the different result produced by the two approaches. It took the simple example of a service woman who was earning £10,000 per annum in the services and on leaving established a civilian earning capacity of £5,000. On the assumption that she had a 50% chance of returning to service life following the birth of her child, the Ministry of Defence's argument would result in her being held to have suffered no loss at all, i.e. 50% of her service earnings of £10,000 = £5,000, less £5,000 = Nil. On the service woman's argument, her loss was £10,000 minus £5,000 = £5,000, which reduced by the factor of 50%, would be £2,500.
This simple example was sufficient to persuade the court that the Ministry of Defence's method of calculation could not be correct and accordingly the court held that the service women's loss should be calculated on the basis for which they contended.
The court drew attention to a number of conflicting cases which had been decided under the employment legislation. Among the cases to which the court was referred were the decisions of Mr Justice Mummery and Mr Justice Morison in the instant case. Of those decisions the court said:
"In the two Digital Equipment cases apparently conflicting conclusions were arrived at. The payment in issue in that case was a severance payment and not money subsequently earned mitigating the loss, and different considerations may apply to severance payments depending upon whether the payment was made in lieu of earnings or as compensation in respect of an overall loss."
In this appeal it was agreed that the payments made in lieu of earnings should be and had...
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