Stuart Peters Ltd v Bell
| Jurisdiction | England & Wales |
| Judge | Lord Justice Elias,Lord Justice Maurice Kay,Lord Justice Scott Baker |
| Judgment Date | 30 July 2009 |
| Neutral Citation | [2009] EWCA Civ 938 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A2/2008/2744 |
| Date | 30 July 2009 |
[2009] EWCA Civ 938
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
(HIS HONOUR JUDGE BURKE QC; MR D JENKINS OBE; MR M WORTHINGTON)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Scott Baker
Lord Justice Maurice Kay and
Lord Justice Elias
Case No: A2/2008/2744
Mr R Kohanzad (instructed by Stuart Peters Ltd) appeared on behalf of the Appellant.
Mr A Elesinnla (instructed by Elizabeth Bell) appeared on behalf of the Respondent.
(As Approved By Court)
Ms Bell was found to be unfairly dismissed by the appellant employer, Stuart Peters Limited. She had been constructively dismissed, resigning in response to conduct by the employer which the Employment Tribunal found had undermined the trust and confidence in the employment relationship. The Tribunal held that she was entitled to a six-month contractual notice period. In calculating unfair dismissal compensation, they found that she could effectively mitigate her loss by obtaining employment at the same level of remuneration at the end of the notice period. Apart from a small sum paid to reflect loss of statutory rights, the compensatory loss was therefore limited to the loss suffered during the notice period itself.
During the notice period Ms Bell found temporary work for a different employer covering a period of some three months. The employers asserted that in assessing loss, Ms Bell should give credit for those sums. The Employment Tribunal declined to offset these earnings against the compensatory award on the grounds that to do so would be inconsistent with the principle established by Sir John Donaldson, as he then was, presiding over the National Industrial Relations Court in Norton Tool Company Limited v Tewson [1972] ICR 501. That principle was affirmed more recently by the Court of Appeal in Langley v Burlo [2007] ICR 290.
It is not disputed that the effect of the principle is that if an employer summarily terminates the employee's contract, then typically the tribunal is entitled to award compensation for the notice period by ignoring any remuneration received by the employee for work done for third parties in that period. In Norton Tool itself the employee was entitled to six weeks' minimum statutory notice and he was dismissed without any pay in lieu. The National Industrial Relations Court held that he did not have to give credit for sums earned elsewhere during that period. As the court recognised, this is quite different from the situation in a wrongful dismissal claim, when such sums will have to be taken into account. Sir John Donaldson gave the reason for adopting the different principle as follows:
“Good industrial practice requires the employer either to give … notice or pay [the appropriate] wages in lieu. The employer was given neither. In an action for damages for wrongful, as opposed to unfair, dismissal he could have claimed that six weeks' wages, but would have had to give credit for anything which he earned during the notice period. In the event he would have had to give credit for what he earned in the last two weeks, thus reducing his claim to about four weeks' wages. But if he had been paid wages in lieu of notice at the time of his dismissal, he would not have had to make any repayment upon obtaining further employment during the notice period. In the context of compensation for unfair dismissal, we think that it is appropriate and in accordance with the intentions of Parliament that we should treat an employee as having suffered a loss in so far as he receives less than he would have received in accordance with good industrial practice. Accordingly, no deduction has been made from his earnings during the notice period.”
Subsequent cases have affirmed that credit will be given for any payment in lieu of notice given by the dismissing employer himself, and that the principle is not a rule of law so that what constitutes good industrial relations practice may vary depending, for example, upon the length of period of notice: see Addison v Babcock FATA Ltd [1987] ICR 173 (CA).
It was argued before the Court of Appeal in Burlo v Langley [2007] IRLR 145 that the approach in Norton Tool was not consistent with the decision of the House of Lords in Dunnachie v Kingston-upon-Hull City Council [2004] ICR 542. Their Lordships had held that section 123 of the Employment Rights' Act 1996, which lays down the way in which a compensatory award should be assessed, only permitted compensation to be paid for financial loss flowing from the dismissal. The EAT in Burlo held that the Norton principle could not stand in the light of Dunnachie since it would result in an employer receiving compensation over and above the loss actually suffered: see [2006] ICR 850. The Court of Appeal disagreed. They concluded that Dunnachie had neither expressly nor by implication affected the Norton principle since that principle was not an issue before their Lordships. It was recognised that in future the House may indeed take the view that the principle was inconsistent with the reasoning in Dunnachie, but there had been no ruling to that effect and the court was bound by authority to apply the Norton principle, which remained good law. However, Smith LJ, whose judgment Mummery and Leveson LJJ agreed, observed that (para 59):
“However, the Court of Appeal in Babcock has in my view made clear there is in Norton Tools no wider principle by which newly formulated precepts of good industrial employment practice can be applied to the assessment of compensation under s.123 of the ERA 1996 if the result of such application would be an award greater than the loss caused to the employee as a consequence of the dismissal.”
The question arising in this appeal is whether the Norton principle applies where the dismissal relied upon is a constructive dismissal under section 95(1)(c) of the Employment Rights Act 1996 rather than a termination by the employer under section 95(1)(a). A constructive dismissal occurs where the termination is not brought about directly by the employer, but rather by the employee accepting a repudiatory breach of contract by the employer and resigning from employment.
The EAT agreed with the Employment Tribunal that it did. They held that there was no legitimate basis for distinguishing between a termination by the employer and a constructive dismissal. Both are equally dismissals within the meaning of section 95(1) of the ERA. Furthermore, there was no authority suggesting that good industrial relations' practice varied as between the two forms of dismissal. The EAT was impressed by the argument that the...
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HR Headlines - London Employment Update
...with effect from 1 October 2009. Compensation for constructive dismissal The Court of Appeal has held in Stuart Peters Ltd v Bell [2009] EWCA Civ 938 that allowances can be made for sums earned by an individual during what would have been their notice period in cases of constructive dismiss......