Frank Timis v Alexander Osipov

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLady Justice Rafferty,Lord Justice Sales,Lord Justice Underhill
Judgment Date19 Oct 2018
Neutral Citation[2018] EWCA Civ 2321
Docket NumberCase No: A2/2017/2282

[2018] EWCA Civ 2321

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM EMPLOYMENT APPEAL TRIBUNAL

Simler P

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Lord Justice Underhill

(Vice-President of the Court of Appeal (Civil Division))

Lady Justice Rafferty

and

Lord Justice Sales

Case No: A2/2017/2282

Between:
(1) Frank Timis
(2) Antony Sage
Appellants
and
Alexander Osipov
Respondent

and

Protect
Intervener

Mr Daniel Stilitz QC and Mr Simon Forshaw (instructed by Clyde & Co LLP) for the Appellants

Mr Bruce Carr QC (instructed by Brahams Dutt Badrick French LLP) for the Respondent

Ms Schona Jolly QC and Mr Christopher Milsom (Instructed by Leigh Day & Co.) for the Intervener

Hearing dates: 9 th & 10 th July 2018

Lord Justice Underhill

INTRODUCTION

1

The issues in this appeal can be summarised as follows, albeit at the cost of some over-compression:

(1) The Respondent, Mr Alexander Osipov, to whom I will refer as “the Claimant”, was employed by an oil exploration company called International Petroleum Ltd (“IPL”) as its CEO. Two of IPL's directors were Mr Frank Timis and Mr Antony Sage, who are the Appellants. Mr Timis is IPL's largest individual shareholder. Mr Sage was at the material time its Chairman.

(2) In late October 2014 Mr Timis, with the agreement of Mr Sage, decided that the Claimant should be summarily dismissed, and the dismissal was effected by an e-mail from Mr Sage sent on 27 October.

(3) An Employment Tribunal found that the principal reason for the Claimant's dismissal was that he had made protected disclosures – that is, that he was a whistleblower. It accordingly held that he had been unfairly dismissed by IPL, by reference to section 103A of the Employment Rights Act 1996, which proscribes “whistleblower dismissal”: that decision is not challenged before us.

(4) However, the ET also held that by their conduct in relation to his dismissal the Appellants had subjected him to a detriment, or detriments, contrary to section 47B of the same Act, which proscribes “whistleblower detriment” by individuals employed 1 by the same employer, as well as by the employer itself; and that they were jointly and severally liable, with IPL, to compensate him for the losses suffered as result of his dismissal in an amount then quantified at £1,744.575.56. That decision was in substance upheld by the Employment Appeal Tribunal, although the amount had to be re-calculated and is now agreed as £2,003,972.35.

(5) The principal issue on this appeal is whether it was open to the ET to award the Claimant compensation against the Appellants, as individuals, for the losses occasioned by his dismissal. It is their case that such compensation could only be awarded by way of compensation for unfair dismissal and thus only against IPL (since only the employer can be liable for unfair dismissal).

(6) There is also an issue as to whether, even if Mr Timis is liable on the basis found, the same reasoning can apply to Mr Sage.

2

In most discrimination cases the issue of the individual liability of a co-worker is of limited practical significance because the employer usually discharges the full amount of the award. But that is not always so. In this case we were told that IPL is insolvent and that the Claimant is accordingly looking to recover from the Appellants personally. We were also told that the Appellants have the benefit of directors' insurance which will cover the full amount of the claim 2; but that would not always be so. The issue of the extent of individual liability in such cases is one of real importance, and for that reason the whistleblower charity Protect (until recently known as Public Concern at Work) has applied for and been given permission to intervene in the appeal.

3

I should mention for completeness that IPL also initially sought permission to appeal, but its application was adjourned to the full hearing because it was unclear how the pleaded grounds, which went only to the liability of the individuals, affected its own liability. In the event an order was made by consent prior to the hearing dismissing its appeal.

4

The Appellants have been represented before us by Mr Daniel Stilitz QC and Mr Simon Forshaw. Mr Forshaw also represented them (and IPL) in the EAT and in the final stage of proceedings in the ET; but at the main hearing in the ET they were represented by Mr Damian Brown QC. Mr Bruce Carr QC has acted for the Claimant throughout. Protect has been represented by Ms Schona Jolly QC and Mr Christopher Milsom.

THE STATUTORY PROVISIONS

5

It is necessary to start with the applicable statutory provisions. These have a complicated legislative history, which it is necessary to understand in order to address the issues raised by the appeal. I will accordingly trace their development chronologically.

THE EMPLOYMENT RIGHTS ACT 1996

6

Whistleblower protection is effected by provisions of the Employment Rights Act 1996 first introduced by the Public Interest Disclosure Act 1998, though some further changes were made, only a few months later, by the Employment Relations Act 1999. It will be useful to make some points about the overall structure of the 1996 Act first. Two Parts are relevant for our purposes – Part V, “Protection from Suffering Detriment in Employment”; and Part X, “Unfair Dismissal”. I take them in reverse order.

Part X

7

I start by observing that the right not to be unfairly dismissed goes back to the Industrial Relations Act 1971, and Part X of the 1996 Act is only the latest of a series of statutory embodiments of that right, all in substantially similar terms. The key provisions to note are as follows.

8

Section 94 (1) provides for the basic right not to be unfairly dismissed, as follows:

“An employee has the right not to be unfairly dismissed by his employer.”

“Employee” is defined by section 230 (1) and (2) of the Act in the narrow sense of a person employed under a contract of service. Section 95 is headed “Circumstances in which an employee is dismissed”. I need only set out sub-section (1), which reads:

“For the purposes of this Part an employee is dismissed by his employer if (and, subject to subsection (2), only if)—

(a) the contract under which he is employed is terminated by the employer (whether with or without notice),

(b) he is employed under a limited-term contract and that contract terminates by virtue of the limiting event without being renewed under the same contract, or

(c) the employee terminates the contract under which he is employed (with or without notice) in circumstances in which he is entitled to terminate it without notice by reason of the employer's conduct.”

Section 98 sets out the well-known test of unfairness applicable in the ordinary case.

9

There follow a series of sections – originally sections 99–105, but since added to and given the heading “Other Dismissals” – which provide for a dismissal to be automatically unfair where the reason (or principal reason) is one against which particular protection is regarded as necessary. I will refer to such reasons as “proscribed grounds”.

10

Section 108 requires employees to have a minimum qualifying period before they can bring an unfair dismissal claim, though, as will appear, that is disapplied in cases of dismissal on proscribed grounds.

11

Sections 111–134 (Chapter II) deal with enforcement. Section 112 provides for two different kinds of remedy – reinstatement or re-engagement (under sections 113, elaborated in sections 114–117), or compensation (under section 118, elaborated in sections 119–127). Formally, reinstatement or re-engagement are the primary remedies, in the sense that the tribunal can only make an award of compensation where it has decided not to make an order under section 113.

12

Section 118 provides that compensation for unfair dismissal shall take the form of a basic award (calculated in accordance with sections 119–122) and a compensatory award (calculated in accordance with sections 123, 124, 126 and 127). I should set out the terms of section 123 (1)-(2), which contain the basic principles governing the amount of a compensatory award, together with sub-sections (4) and (6):

“(1) Subject to the provisions of this section and sections 124, 124A and 126 the amount of the compensatory award shall be such amount as the tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal in so far as that loss is attributable to action taken by the employer.

(2) The loss referred to in subsection (1) shall be taken to include—

(a) any expenses reasonably incurred by the complainant in consequence of the dismissal, and

(b) subject to subsection (3), loss of any benefit which he might reasonably be expected to have had but for the dismissal.

(3) …

(4) In ascertaining the loss referred to in subsection (1) the tribunal shall apply the same rule concerning the duty of a person to mitigate his loss as applies to damages recoverable under the common law of England and Wales or (as the case may be) Scotland.

(5) …

(6) Where the tribunal finds that the dismissal was to any extent caused or contributed to by any action of the complainant, it shall reduce the amount of the compensatory award by such proportion as it considers just and equitable having regard to that finding.”

13

Section 124 provides for a cap on compensation, which has increased over the years. It was originally applicable in all cases, but, as will appear, it has since been disapplied in the case of some (though not all) kinds of automatically unfair dismissal.

Part V

14

As originally enacted, Part V contained four sections conferring on employees the right not to be subjected to detriment on various grounds corresponding to the proscribed grounds under Part X. The rights in question do not go as far back as the...

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