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Appeal against a decision ruling that the claimant had been unfairly dismissed, or in the alternative, that the Polkey deduction was too small. Appeal against the unfair dismissal was dismissed but the Polkey issue was remitted to the ET.
The claimant was one of five members of the senior management team at the respondent. The respondent needed to make savings and decided that the claimant's role as property manager should be made redundant as this would have the least detrimental impact on the business and the role was not generating income. The Employment Tribunal held that the Claimant had been wrongly dismissed, but ordered a Polkey reduction. In particular, it held: (i) the pool from which the Claimant had been selected consisted of five members (ii) the criteria by reference to which he had been selected, namely that losing him would cause least damage to the Respondent's business was indefensibly subjective, (iii) the process by which the Claimant had been selected was unfair as no real consideration was given to making any of the other four members of the SMT redundant, (iv) the internal appeal process was unfair because it was determined by a person who had made a complaint about the Claimant, (v) that any compensation should be subject to a reduction of 20%. The respondent appealed against the finding of unfair dismissal, but if the appeal was dismissed, they also said the Polkey deduction was too small.
The EAT rejected the appeal against the unfair dismissal decision but solely on the ground that, having decided that the redundancy pool should consist of the five members of the SMT, although the respondent (contrary to the Tribunal's view) applied unexceptionable criteria, it did not conduct the selection process in a fair way. The EAT allowed the appeal on the Polkey issue and remitted this back to the ET.
Appeal No. UKEAT/0605/11/SM
EMPLOYMENT APPEAL TRIBUNAL
FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON, EC4Y 8JX
At the Tribunal
On 17 May 2012
Judgment handed down 29 May 2012
THE MASTER OF THE ROLLS, BARONESS DRAKE OF SHENE, MRS A GALLICO
MITCHELLS OF LANCASTER (BREWERS) LTD (APPELLANT)
MR P TATTERSALL (RESPONDENT)
Transcript of Proceedings
For the Appellant
MR JONATHAN MELIA (Representative)
Northgate Arinso Employer Services
Hollins Brook Way
For the Respondent
MR ANTOINE TINNION (of Counsel)
Jobling & Knape Solicitors
5, Aalborg Square
JURISDICTIONAL POINTS – Worker, employee or neither
Reasonableness of dismissal
REDUNDANCY – Fairness
The Respondent had made the applicant, who was one of five members of its senior management team ("SMT") redundant. The Employment Tribunal held that the Claimant had been wrongly dismissed, but ordered a Polkey reduction. In particular, it held: (i) the pool from which the Claimant had been selected consisted of five members (ii) the criteria by reference to which he had been selected, namely that losing him would cause least damage to the Respondent's business was indefensibly subjective, (iii) the process by which the Claimant had been selected was unfair as no real consideration was given to making any of the other four members of the SMT redundant, (iv) the internal appeal process was unfair because it was determined by a person who had made a complaint about the Claimant, (v) that any compensation should be subject to a reduction of 20%.
THE MASTER OF THE ROLLS
1. This is an appeal from the decision of the Manchester Employment Tribunal (Employment Judge Holbrook, Mr L Campuzano and Ms C Lyle) given on 12 September 2011 – case number 2400441/11. By that decision, the Employment Tribunal ("the Tribunal") held that Peter Tattersall ("the Claimant") had been unfairly dismissed by Mitchells of Lancaster (Brewers) Limited ("the Respondent") and gave directions for a remedies hearing.
The basic facts
2. The Respondent is a brewer and the owner or manager of hotels and public houses. The Claimant was employed as its property manager from 1 May 1998 until his dismissal on 22 October 2010. In that role, he had responsibility for the management of the maintenance team, liaison with local authorities on planning and related issues, and for a number of other property-related and regulatory matters. Jonathan Barker was the managing director of the Respondent and the Claimant's line manager at the time of his dismissal.
3. At all relevant times until the Claimant's dismissal, the Respondent had a Senior Management Team (to which we shall refer as "the SMT") of five people, including the Claimant. During the first half of 2010, the Respondent's trading position, and in particular its cash flow, deteriorated, so that the directors were anxious to make savings. Economies were already being made by June 2010: for instance two members of the Claimant's team had left and were not replaced.
4. At a board meeting on 15 June 2010, attended by the four directors, Jonathan Barker, Andrew Barker, Mrs Hodge and Julie Leigh, there was discussion about steps which had already been taken in order to cut costs, and steps which would have to be taken for this purpose. In this latter connection, it was recorded that Mrs Hodge would "look at whether redundancies can be made at the [SMT] level".
5. At a subsequent meeting of the board, with the same attendance, on 6 July 2010, it was recorded that a "proposed restructure [would] commence on Tuesday 13th July 2010". The Tribunal recorded what happened at that meeting in the following terms:
"[Jonathan] Barker says that the board discussed each of the five SMT roles and concluded that if the role of property manager was cut, this would have the least detrimental impact on the business because this was not a role that generated revenue. Cutting other SMT posts would, in the board's view, have had a detrimental effect on attempts to improve the respondent's trading position. The directors looked at the business skills of each manager and found that, other than [the claimant], they all the relevant skills to bring in revenue."
(It is clear from its subsequent remarks that the Tribunal accepted that this was an accurate description of the approach adopted by the Respondent's board to the process of selecting which member of the SMT would be selected for redundancy.)
6. A week later, the Claimant and all the staff in the Respondent's secretarial scheme were warned that their jobs were at risk of redundancy. During the course of the next ten days, the Claimant attended what the Tribunal called "four individual redundancy consultation meetings with Jonathan Barker". Those meetings proved unfruitful, and, on 26 July 2010, Jonathan Barker gave the Claimant written notice of dismissal. The Claimant appealed against his dismissal, and attended an appeal hearing presided over by Julie Leigh, the Respondent's finance director who reported to Jonathan Barker. Mrs Leigh subsequently wrote to the Claimant on 10 August 2010 rejecting his appeal.
The approach of the Employment Tribunal
7. Having set out the facts in rather fuller detail than they are set out in the preceding paragraphs, the Tribunal summarised the relevant law in an unexceptional way. They referred to the propositions (i) that it was for the Respondent "to show that it dismissed [the claimant] for a potentially fair reason", (ii) that "[r]edundancy is a potentially fair reason for dismissal", and (iii) that the principles set out in Williams & Others v. Compair Maxam Limited  ICR 156 should be borne in mind.
8. The Tribunal then turned to its "Determination". It began by accepting that "the role formed by the claimant had diminished in the months leading up to his dismissal" because, from 2009, "there was less refurbishment work for the Properties Department to do and less work for the claimant to oversee in that regard", and so "an important part of his job had been curtailed", and that "members of its staff had also left, reducing his management function". The Tribunal also "accept[ed] that the respondent concluded that the claimant's role could be absorbed within its existing team of directors and/or SMT", and consequently "that basic legal criteria for redundancy can be made out". The Tribunal further accepted that "redundancy was why the claimant was dismissed. Although he had said in evidence that "he believed certain of the directors to have been guilty of misconduct", the Tribunal was "not satisfied on the evidence of the allegations outlined by [the claimant] operated on Mr Jonathan Barker's mind as the reason for selecting [him] for redundancy."
9. However, the Tribunal went on to find that the Claimant had been unfairly dismissed. In this connection, the Tribunal decided (i) that the pool from which a candidate for redundancy had to be selected had five members, namely the five members of the SMT, (ii) that the criteria by which the Claimant was selected as the candidate for redundancy were unacceptable because they were "wholly subjective and based solely on the views of the directors rather than being objective selection criteria", (iii) that the process by which the Claimant was selected for redundancy did not give him any opportunity to argue against his selection, and "did not involve his case being given particularly detailed consideration", and (iv) that the internal appeal process was unfair because "there was clearly some personal history between the claimant and Mrs Leigh and because she reported to Jonathan Barker "who was of course the dismissing officer".
10. Having accordingly decided that the Claimant had been unfairly dismissed, the Tribunal went on "to consider whether there was a chance that [he] would still have been dismissed even if a fair procedure had been followed". They decided that there was such a possibility but "given the absence of any objective selection criteria … it is not possible to say whether he would have been more likely than any of the other [four members of the SMT] to be selected for redundancy". They therefore concluded that there was at least a one in five chance that he would have been selected for redundancy if there had been a fair procedure, "so any compensation which the Tribunal orders in these proceedings will be reduced by a factor of 20% to reflect this possibility".
The Respondent's appeal
11. The Respondent now appeals. It challenges the four findings made by the Tribunal and summarised in paragraph 9 above, and therefore contends that the Tribunal was wrong to hold that the Claimant had been unfairly dismissed. In the event of our concluding that the Tribunal's decision to that effect stands, the Respondent's alternative contention is that the 20% reduction accorded by the Tribunal represents much too low a deduction.
12. The Claimant argues that some of the grounds were not specifically raised in the Respondent's Notice of Appeal. While we readily accept that the Respondent's Notice of Appeal was not as clearly drafted as it should have been, we consider that each ground which was discussed in oral argument was raised in the notice. Thus, although point (ii) does not seem to have been raised if one looks at the summary of the issues raised at the beginning of the notice, it is clearly raised as an issue towards the end of the notice (albeit under the somewhat misleading heading of 'pervers[ity]' at the opening part of the notice, and with the rather inapt description of 'illogical[ity]' later in the notice).
13. Accordingly, we propose to consider each of the five grounds of appeal in turn.
The first ground of appeal: the pool size
14. The first ground relates to the size of the pool of those employees considered for redundancy. The Respondent's initial case on this issue is, as it was before the Tribunal, that the size of the pool was one, in that the only person to be considered for redundancy was the Claimant, and that the Tribunal impermissibly substituted its own judgment for that of the Respondent as to the size of the pool. In our view, that is not a proper analysis of the Tribunal's decision. It is true that it was the Respondent's case before the Tribunal that the size of the pool was one, but the Tribunal rejected that as a matter of fact, describing it as "incompatible with the evidence", which was that the size of the pool was five.
15. On that basis, the Respondent rather changed its attack on this first issue, and contended that the Tribunal's finding, that the pool consisted of five persons rather than one person, was not a finding which was open to the Tribunal on the evidence. In our view, that line of attack is equally doomed to failure. The Tribunal's conclusion as to the size of the pool was based on the June board minute, from which we have briefly quoted, and the evidence of Jonathan Barker, who was described as "confirm[ing] that the directors considered each SMT post to assess whether it could be abolished".
16. An appeal against an Employment Tribunal's finding of fact faces, at least as a matter of principle, an uphill task, and, in all but the most unusual circumstances, it can only have any chance of success if the appellate tribunal can be reasonably confident that it has seen all the evidence (whether in the form of statement, or notes of oral testimony) on the relevant issue which was before the Employment Tribunal. In this case, we have been provided with none of the witness evidence, whether in the form of statements or notes of testimony. It is true that the Respondent tried to put in part of Mr Jonathan Barker's written statement before us, but we refused to permit it to do so, partly because it was a last minute application without any notice to the Claimant, and partly because it would not have solved the problem that much of the relevant evidence would still not have been available.
17. In these circumstances, we have no hesitation in rejecting the Respondent's attack on the Tribunal's finding that the pool consisted of the five members of the SMT, rather than one.
The second ground of appeal: selection criteria
18. The Respondent's second attack on the Tribunal's reasoning was that it was wrong to characterise as unacceptable the criteria which were applied by the Respondent for identifying who was to be made redundant.
19. This appears to us to be a much stronger point. As a matter of common sense, it is hard to see how it can be inappropriate for a relatively small company in serious financial difficulty and five employees in a senior management position, to apply the sort of criteria quoted in paragraph 5 above when deciding which of those five senior managers to make redundant. The description of the criteria as "wholly subjective" does not appear to be either helpful or accurate: of course such criteria involve a degree of judgment, but they are none the worse for that. Equally, to object to a criterion because it is "based solely on the views of the directors" does not seem to us to be a fair objection.
20. We are reinforced in this view by observations in the EAT decisions of Ball v Balfour Kilpatrick Limited (EAT/823/95), and Darlington Memorial Hospital NHS Trust v Edwards and Vincent (EAT/678/95), quoted in Morgan v Wales Rugby Union  ILR 376, para 32, and, more recent observations in Samsung Electronics (UK) Limited v Monte-D'Cruz [UK EAT/0039/11/DM] paras 27 & 29.
21. The Tribunal in this case also criticised the criteria adopted by the Respondent because they were not "capable of being scored or assessed or moderated in an objective and dispassionate way". Just because criteria of this sort are matters of judgment, it does not mean that they cannot be assessed in a dispassionate or objective way, although inevitably such criteria involve a degree of judgment, in the sense that opinions can differ, possibly sometimes quite markedly, as to precisely how the criteria are to be applied, and the extent of which they are satisfied, in any particular case. However, that is true of virtually any criterion, other than the most simple criterion, such as length of service or absenteeism record. The concept of a criterion only being valid if it can be "scored or assessed" causes us a little concern, as it could be invoked to limit selection procedures to box-ticking exercises.
22. We would therefore accept that the Tribunal went wrong on this second point; in our view, the criteria which the Respondent applied when deciding which senior management post to make redundant were unexceptionable.
The third issue: the process adopted
23. We turn then to the third issue, namely the process by which the Claimant was selected for redundancy. We find this the most difficult point on the appeal, essentially for two reasons. The first is our concern that any finding the Tribunal may have made against the Respondent on this third issue could have been infected by their finding on the second issue, which we have effectively reversed, namely that the criteria applied by the Respondent were unacceptable. The second problem is that the Tribunal has not expressed its conclusions on the third issue very satisfactorily - in particular in their statement that "our impression is that [the claimant's] reasoning was not given particularly detailed consideration".
24. However, we have concluded that the Tribunal was entitled to reach the conclusion that the procedure adopted by the Respondent, and pursuant to which the Claimant was selected for redundancy, was not fair. First, and most importantly, there is the crucial finding by the Tribunal that "saving [the claimant's] current role was not really a credible possibility given that the directors had already decided that [he] was the only person at SMT level who was potentially to be made redundant." Accordingly, following the identification of the pool of five candidates for redundancy, there was no process which involved the Respondent considering whether, or gave the Claimant any chance of persuading the respondent that, any SMT post other than the Claimant's should be selected for redundancy.
25. This conclusion is supported by the very fact that the Respondent's case before the Tribunal (and indeed before us) was that the redundancy pool consisted of the Claimant alone from the inception. That is a strong indication as to how the Respondent approached the whole question of selecting an employee for redundancy, and underscores the conclusion that the Respondent never gave open and fair consideration as to whether another of the four members of the SMT should be selected for redundancy.
26. In our view, the effect of the Tribunal's findings is this. Having reached the conclusion, which we have upheld, that the redundancy pool consisted of the five members of the SMT, the Respondent then immediately selected the Claimant as the candidate for redundancy, and all the activities thereafter were concerned with persuading the Claimant to accept a different role or to leave the Respondent. At no time was consideration given to the possibility of another member of the SMT being selected for redundancy, and in particular at no time was serious consideration given to any argument put forward by the Claimant as to why any other member of the SMT, rather than him, should be selected for redundancy.
27. In our view, that was a conclusion which it was open to the Tribunal to reach.
The fourth issue: the internal appeal process
28. The next issue is whether the selection of Mrs Leigh as the appeals officer was, as the Tribunal concluded "outside the range of responses which a reasonable employer would have taken" in the circumstances. This is the sort of point which an appellate court should be slow to overturn. However, we are of the view that the Respondent is correct in saying that the Tribunal reached an impermissible conclusion on this issue.
29. We note that there was no objection by the Claimant to the choice of Mrs Leigh as the appeals officer, and there is no reason not to believe that she gave him a full and fair appeal hearing. It is true that Mrs Leigh had submitted a grievance against the Claimant, but she had withdrawn it within a month of it being raised, and there is no suggestion that it caused any subsequent difficulty between them. As for the Tribunal's second point that Mrs Leigh reported to Jonathan Barker, that is the sort of difficulty inherent in an internal appeals procedure in a small company, and the Tribunal's conclusions give no reason to doubt her evidence that it did not in any way affect her decision.
30. Furthermore, as the Tribunal effectively accepted, if Mrs Leigh was not to be the appeal officer, the only alternative would have been Andrew Barker, who was on holiday, but, as the Tribunal said, the appeal process could have waited for his return. However, it seems clear that the Claimant had made allegations of financial impropriety against Andrew Barker, and, subject to one point, that seems to indicate that he would have been a significantly more objectionable person to act as appeal officer than Mrs Leigh. The point made in reply on behalf of the Claimant is that there is no evidence to show he had made any allegations against Andrew Barker until the present Tribunal proceedings were instituted. However, that seems to us to be inconsistent with the Tribunal's statement that it was not satisfied on the evidence "that the allegations outlined by the claimant operated on Mr Jonathan Barker's mind as the reason for selecting [him] for redundancy". That strongly suggests that those allegations had been made by the time that the Claimant had been selected for redundancy, and before the appeal process started.
Conclusion on unfair dismissal
31. In these circumstances, before turning to the final issue, we conclude that the Tribunal's decision that the Claimant was unfairly dismissed should be upheld, but solely on the ground that, having decided that the redundancy pool should consist of the five members of the SMT, although the Respondent (contrary to the Tribunal's view) applied unexceptionable criteria, it did not conduct the selection process in a fair way.
The appropriate reduction
32. That leaves as the outstanding point the issue whether the Tribunal's 20% reduction in compensation can stand. In our view, it cannot. The basis upon which the Tribunal decided that the Claimant was no more, and no less, unlikely to be selected for redundancy than any of the other four members of the SMT if there had been a fair selection process, was on the basis that the actual selection criteria used by the Respondent were unacceptable. This meant that, so far as the Tribunal was concerned, there was no basis for concluding that the Claimant was more likely or less likely to be selected for redundancy than any of the other four members of the SMT.
33. In light of our disagreement with the Tribunal as to the acceptability of the criteria for selection, it seems to us that, on the facts found by the Tribunal, there must have been a significantly greater likelihood of the Claimant being selected for redundancy than for any of the other members of the SMT to be so selected. We refer again to the facts summarised by the Tribunal, as set out in paragraph 5 above, which criteria were, as mentioned above, clearly accepted by the Tribunal as having been "applied" by the Respondent.
34. That gives rise to the question whether we should decide the amount by which the 20% deduction is to be increased, or whether that is an issue which should be referred back to the Tribunal. In that connection, we note the following points: (i) The Tribunal is the primary fact finder; (ii) the Tribunal will have, or can be provided with, all the written and oral evidence which was given at the hearing before it, whereas we do not have such evidence; (iii) these proceedings will have to be remitted to the Tribunal in any event for a remedies hearing; and (iv) although we have reversed the Tribunal on two of the four issues relating to the question of whether the Claimant was unfairly dismissed, there is no reason why the matter should not be remitted to this particular Tribunal. In those circumstances, we think it more appropriate that, rather than our deciding on the appropriate percentage deduction (as proposed by the Respondent), we should order that, on remission, the Tribunal should consider the amount by which the 20% reduction should be increased, in the light of our decision.
35. In these circumstances, we dismiss the Respondent's appeal insofar as it seeks to challenge the decision that the Claimant was unfairly dismissed, but we allow the appeal to the extent that the 20% reduction in damages as determined by the Tribunal is significantly too small a reduction, and accordingly we remit the question of the reduction to the Tribunal to be heard at the same time as the remedies issue.
36. For the avoidance of doubt, we do not consider that it would be appropriate for either party to be permitted to adduce further evidence to the Tribunal so far as the question of the reduction is concerned. We would also hope that, in the light of our conclusions, coupled with those of the Tribunal, the parties will be able to see their way to resolve what remains of their dispute without incurring the further cost delay effort and uncertainty of a further hearing.