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	United Kingdom House of Lords Decisions
You are here: BAILII >> Databases >> United Kingdom House of Lords Decisions >> Polkey v AE Dayton Services Ltd [1987] UKHL 8 (19 November 1987) URL: http://www.bailii.org/uk/cases/UKHL/1987/8.html Cite as: [1987] IRLR 503, [1988] ICR 142, [1987] 3 WLR 1153, [1988] AC 344, [1987] UKHL 8, [1987] 3 All ER 974, [1988] 1 AC 344

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Polkey deduction

The phrase 'Polkey deduction' has become a standard concept in UK Employment Tribunals, as a result of this case and later ones, meaning that even if a Tribunal decides a dismissal was unfair, it must separately decide whether the compensatory award is to be awarded in full, or be reduced by a percentage based on their estimate of the probability that the dismissal would have occurred anyway, even had a fair process been followed.

Parliamentary Archives,
HL/PO/JU/18/247

Polkey (A.P.) (Appellant)

v.

A. E. Dayton Services Limited (Formerly Edmunds Walker
(Holdings) Limited) (Respondents)

JUDGMENT

Die Jovis 19° Novembris 1987

Upon consideration in the Cause Polkey (A.P.) against A.
E. Dayton Services Limited (Formerly Edmunds Walker (Holdings)
Limited), That the House had heard Counsel on Monday the
12th, Tuesday the 13th and Wednesday the 14th days of October
last upon the Petition and Appeal of Dennis Polkey, of 38
Graham Street, Radford, Nottingham NG7 3HX praying that the
matter of the Order set forth in the Schedule thereto, namely
an Order of Her Majesty's Court of Appeal of 22nd October
1986, might be reviewed before Her Majesty the Queen in Her
Court of Parliament and that the said Order might be reversed,
varied or altered or that the Petitioner might have such other
relief in the premises as to Her Majesty the Queen in Her
Court of Parliament might seem meet; as upon the Case of A. E.
Dayton Services Limited (formerly Edmunds Walker (Holdings)
Limited) lodged in answer to the said appeal; and due
consideration had this day of what was offered on either side
in this Cause:

It is Ordered and Adjudged, by the Lords Spiritual and
Temporal in the Court of Parliament of Her Majesty the Queen
assembled, That the said Orders of Her Majesty's Court of
Appeal (Civil Division) of the 22nd day of October 1986, and
of the Employment Appeal Tribunal of the 2nd day of October
1984 complained of in the said Appeal be, and the same are
hereby, Reversed, save as to legal aid taxation; That the
decision of the Industrial Tribunal of the 23rd day of
February 1983 be, and the same is hereby Set Aside; and That
the Cause be, and the same is hereby, remitted back to a
differently constituted Industrial Tribunal to do therein as
shall be just and consistent with this Judgment: And it is
further Ordered, That the Respondents do pay or cause to be
paid to the said Appellant the Costs incurred by him in the
Court of Appeal and also the Costs incurred by him in respect
of the said Appeal to this House; And it is also further
Ordered, That the costs incurred by the Appellant in respect
of the said appeal to this House be taxed in accordance with
Schedule 2 to the Legal Aid Act 1974.

Cler: Parliamentor

Judgment: 19.11.87

HOUSE OF LORDS

POLKEY (A.P.)
(APPELLANT)

v.

A. E. DAYTON SERVICES LIMITED

(FORMERLY EDMUNDS WALKER (HOLDINGS) LIMITED)

RESPONDENTS

Lord Chancellor
Lord Keith of Kinkel
Lord Bridge of Harwich
Lord Brandon of Oakbrook
Lord Ackner




LORD MACKAY OF CLASHFERN

My Lords,

The appellant was employed by the respondents ("the
employers") from 19 June 1978 until 27 August 1982 as a van
driver. On that date he was dismissed as redundant. On 8
November 1982 he applied to an industrial tribunal to hold that he
had been unfairly dismissed. On 23 February 1983 the industrial
tribunal dismissed the application. It was accepted on behalf of
the appellant before the industrial tribunal that at the time of his
dismissal it was urgently necessary for the employers to reduce
their overheads in their undertaking and that, in consequence, it
was necessary to make certain of their van drivers redundant.
They had three male van drivers and one female van driver and it
was decided that for the future only two van salesmen should be
appointed. The manager immediately responsible for the appellant
decided that none of the three male van drivers was capable of
performing the task of a van salesman but that the female van
driver was so capable. Some four weeks after the appellant's
dismissal a second van salesman was appointed from outside the
employers' work-force. On 20 August the appellant's branch
manager informed his superior of his decision and without any
consultation with employees or their representative or earlier
warning to the appellant his branch manager called him into his
office on the afternoon of 27 August told him quite out of the
blue that he was redundant and handed to him his redundancy
letter. The appellant was immediately driven home by a fellow
employee. The industrial tribunal characterised this aspect of the
appellant's dismissal by saying: There could be no more heartless
disregard of the provisions of the code of practice than that."



The code of practice referred to is the statutory code presently in
force under the Employment Protection Act 1975, Schedule 17,
paragraph 4 in which paragraph *6 provides:




"If redundancy becomes necessary, management in
consultation, as appropriate, with employees or their
representatives, should: (i) give as much warning as
practicable to the employees concerned . . . ; (iii) establish
which employees are to be made redundant and the order of
discharge; . . ."

The industrial tribunal further found: "There is nothing that
excuses their failure to consult but" - this is the matter that gives
rise to the point of principle in the present appeal -

"at the end of the day we have no alternative but to find
that in this case had they acted in accordance with the
code of practice, as interpreted in the recent case [Williams
v. Compair Maxam Ltd [1982] ICR 156], the result would
not have been any different, and we have therefore
unhappily to reject this application."

The appellant appealed to the Employment Appeal Tribunal but on
his behalf it was conceded that the appeal tribunal was bound by
authority to dismiss the appeal. The only question the Employment
Appeal Tribunal had to consider was whether to give leave to
appeal which they did. The Court of Appeal, Neill and Nicholls
L.JJ. and Sir George Waller [1987] 1 W.L.R. 1147, dismissed the
appeal, held that they were bound by authority to do so, and
granted leave to the appellant to appeal to this House.

This appeal raises an important question in the law of unfair
dismissal. Where an industrial tribunal has found that the reason
for an applicant's dismissal was a reason of a kind such as could
justify the dismissal and has found that there has been a failure to
consult or warn the applicant in accordance with the code of
practice, should the tribunal consider whether, if the employee had
been consulted or warned before dismissal was decided upon, he
would nevertheless have been dismissed? The answer depends upon
the application to this situation of section 57(3) of the
Employment Protection (Consolidation) Act 1978 as amended, which
is in these terms:

"Where the employer has fulfilled the requirements of
subsection (1), then, subject to subsections 58 to 62, the
determination! of the question whether the dismissal was fair
or unfair, having regard to the reason shown by the
employer, shall depend on whether in the circumstances
(including the size and administrative resources of the
employer's undertaking) the employer acted reasonably or
unreasonably in treating it as a sufficient reason for
dismissing the employee; and that question shall be
determined in accordance with equity and the substantial
merits of the case."

Where there is no issue raised by sections 58 to 62 the
subject matter for the tribunal's consideration is the employer's
action in treating the reason as a sufficient reason for dismissing
the employee. It is that action and that action only that the



- 2 -

tribunal is required to characterise as reasonable or unreasonable.
That leaves no scope for the tribunal considering whether, if the
employer had acted differently, he might have dismissed the
employee. It is what the employer did that is to be judged, not
what he might have done. On the other hand, in judging whether
what the employer did was reasonable it is right to consider what
a reasonable employer would have had in mind at the time he
decided to dismiss as the consequence of not consulting or not
warning.

If the employer could reasonably have concluded in the light
of the circumstances known to him at the time of dismissal that
consultation or warning would be utterly useless he might well act
reasonably even if he did not observe the provisions of the code.
Failure to observe the requirement of the code relating to
consultation or warning will not necessarily render a dismissal
unfair. Whether in any particular case it did so is a matter for
the industrial tribunal to consider in the light of the circumstances
known to the employer at the time he dismissed the employee.

I turn to consider how these views accord with the decided
cases. Very early in the history of this legislation and its
statutory predecessors Sir John Donaldson in Earl v. Slater &
Wheeler (Airlyne) Ltd. [1973] 1 W.L.R. 51, 57 said:

"With respect to the tribunal, we think that it erred in
holding that an unfair procedure which led to no injustice is
incapable of rendering unfair a dismissal which would
otherwise be fair. The question in every case is whether
the employer acted reasonably or unreasonably in treating
the reason as sufficient for dismissing the employee and it
has to be answered with reference to the circumstances
known to the employer at the moment of dismissal. If an
employer thinks that his accountant may be taking the
firm's money, but has no real grounds for so thinking and
dismisses him for this reason, he acts wholly unreasonably
and commits the unfair industrial practice of unfair
dismissal, notwithstanding that it is later proved that the
accountant had in fact been guilty of embezzlement. Proof
of the embezzlement affects the amount of the
compensation, but not the issue of fair or unfair dismissal."

Again in Vokes Ltd, v. Bear [1974] I.C.R. 1, 5 Sir Hugh
Griffiths, referring to the statutory predecessor of this section,
said:

"We are unable to accept the submission that 'the
circumstances' are limited to those directly affecting the
ground of dismissal, in the sense submitted by [counsel for
the employers], 'The circumstances' embrace all relevant
matters that should weigh with a good employer when
deciding at a given moment in time whether or not he
should dismiss his employee. The subsection [section 24(6)
of the Industrial Relations Act 1971] is focusing the
tribunal's attention upon 'the dismissal', that is, the
dismissal on March 2. The question they have to ask
themselves is whether on March 2 the employers were
acting reasonably in treating redundancy as a sufficient
reason for dismissing the employee on that date. The



- 3 -

tribunal are entitled to take into account all the
circumstances affecting both the employers and the
employee at the time of the dismissal. In the present case,
no doubt the time would have come when the employers
would have to dismiss the employee for redundancy for the
good of the company as a whole, but the tribunal were fully
entitled to take the view that that moment had not yet
arrived by March 2. The employers had not yet done that
which in all fairness and reason they should do, namely, to
make the obvious attempt to see if the employee could be
placed somewhere else within this large group. The position
is somewhat analogous to the case of a warning. An
employer may have good grounds for thinking that a man is
not capable of doing his job properly, but in the general run
of cases it will not be reasonable for him to regard that
lack of capability as a sufficient reason for dismissing him
until he is given a warning so that the man has a chance to
show if he can do better. So in this case there was a
redundancy situation but there was no compelling reason why
the axe should fall until the employers had done their best
to help the employee. It is therefore with satisfaction that
we find that there is nothing in the wording of section 24(6)
of the Act of 1971 which compels us to take the view that
behaviour which we think most people would consider
manifestly unfair is nevertheless to be deemed fair under
the Act. If the employers had made all reasonable attempts
to place the employee in the group and had failed, then the
time might have come when it would be reasonable for
them to regard the redundancy as a sufficient reason for
the dismissal, but until that moment had come the tribunal
were entitled to take the view that it was not reasonable to
dismiss for redundancy and accordingly that it was unfair."

This approach to the legislation was endorsed in this House
in W. Devis & Sons Ltd, v. Atkins [1977] AC 931. Viscount
Dilhorne, in a speech with which the other members of the House
sitting in the appeal agreed, said of the statutory predecessor of
section 57(3), at p. 952:

"It [paragraph 6(8) of Schedule 1 to the Trade Union and
Labour Relations Act 1971] appears to me to direct the
tribunal to focus its attention on the conduct of the
employer and not on whether the employee in fact suffered
any injustice."

After quoting, with approval, the principal part of the
passage I have already cited from Sir John Donaldson in Earl v.
Slater & Wheeler (Airlyne) Ltd, and after referring to the
statutory provision then entitling the tribunal to take the code into
account Viscount Dilhorne said, at p. 955:

"It does not follow that non-compliance with the code
necessarily renders a dismissal unfair, but I agree with the
view expressed by Sir John Donaldson in Earl v. Slater &
Wheeler (Airlyne) Ltd. [1973] 1 W.L.R. 51 that a failure to
follow a procedure prescribed in the code may lead to the
conclusion that a dismissal was unfair, which, if that
procedure had been followed, would have been held to have
been fair."

- 4 -

So far, the current of decision is entirely in accordance
with the views I have expressed, but the tribunal in the present
case were bound by a stream of authority applying the so-called
British Labour Pump principle [British Labour Pump Co. Ltd, v.
Byrne. [1979] I.C.R. 347].

Browne-Wilkinson J. in Sillifant v. Powell Duffryn Timber
Ltd. [1983] I.R.L.R. 91 thus described the principle, at p. 92:

"even if, judged in the light of the circumstances known at
the time of dismissal, the employer's decision was not
reasonable because of some failure to follow a fair
procedure yet the dismissal can be held fair if, on the
facts proved before the industrial tribunal, the industrial
tribunal comes to the conclusion that the employer could
reasonably have decided to dismiss if he had followed a fair
procedure."

It is because one of its statements is contained in British Labour
Pump Co. Ltd, v. Byrne that it has been called the British Labour
Pump principle although it did not originate in that decision. In
Sillifant's case the Employment Appeal Tribunal were urged to hold
that the principle was unsound and not to give effect to it. After
referring to the cases which introduced this principle, namely
Charles Letts & Co. Ltd v. Howard [1976] I.R.L.R. 248 a decision
relating only to compensation, Lowndes v. Specialist Heavy
Engineering Ltd. [1977] I.C.R. 1, British United Shoe Machinery Co.
Ltd, v. Clarke [1978] ICR 70 and the British Labour Pump case
itself, Brown-Wilkinson J. continued, at p. 97:

"Apart therefore from recent Court of Appeal authority and
the Lowndes case, the British Labour Pump principle appears
to have become established in practice without it being
appreciated that it represented a fundamental departure
from both basic principle and the earlier decisions. If we
felt able to do so we would hold that it is wrong in
principle and undesirable in its practical effect. It
introduces just that confusion which Devis v. Atkins was
concerned to avoid between the fairness of the dismissal
(which depends solely upon the reasonableness of the
employer's conduct) and the compensation payable to the
employee (which takes into account the conduct of the
employee whether known to the employer or not). In our
judgment, apart from the authority to which we are about
to refer, the correct approach to such a case would be as
follows. The only test of the fairness of a dismissal is the
reasonableness of the employer's decision to dismiss judged
at the time at which the dismissal takes effect. An
industrial tribunal is not bound to hold that any procedural
failure by the employer renders the dismissal unfair: it is
one of the factors to be weighed by the industrial tribunal
in deciding whether or not the dismissal was reasonable
within section 57(3). The weight to be attached to such
procedural failure should depend upon the circumstances
known to the employer at the time of dismissal, not on the
actual consequence of such failure. Thus in the case of a
failure to give an opportunity to explain, except in the rare
case where a reasonable employer could properly take the
view on the facts known to him at the time of dismissal



-5-

that no explanation or mitigation could alter his decision to
dismiss, an industrial tribunal would be likely to hold that
the lack of 'equity' inherent in the failure would render the
dismissal unfair. But there may be cases where the offence
is so heinous and the facts so manifestly clear that a
reasonable employer could, on the facts known to him at
the time of dismissal, take the view that whatever
explanation the employee advanced it would make no
difference: see the example referred to by Lawton L.J. in
Bailey v. B. P. Oil (Kent Refinery) Ltd. [1980] I.C.R. 642.
Where, in the circumstances known at the time of dismissal,
it was not reasonable for the employer to dismiss without
giving an opportunity to explain but facts subsequently
discovered or proved before the industrial tribunal show that
the dismissal was in fact merited, compensation would be
reduced to nil. Such an approach ensures that an employee
who could have been fairly dismissed does not get
compensation but would prevent the suggestion of 'double
standards' inherent in the British Labour Pump principle.
An employee dismissed for suspected dishonesty who is in
fact innocent has no redress: if the employer acted fairly
in dismissing him on the facts and in the circumstances
known to him at the time of dismissal the employee's
innocence is irrelevant. Why should an employer be entitled
to a finding that he acted fairly when, on the facts known
and in the circumstances existing at the time of dismissal,
his actions were unfair but which facts subsequently coming
to light show did not cause any injustice? The choice in
dealing with section 57(3) is between looking at the
reasonableness of the employer or justice to the employee.
Devis v. Atkins shows that the correct test is the
reasonableness of the employer; the British Labour Pump
principle confuses the two approaches."

I gratefully adopt that analysis. The Employment Appeal
Tribunal, however, went on to hold that they were bound by the
decision of the Court of Appeal in W. & J. Wass Ltd, v. Binns
[1982] I.C.R. 486 which held that the British Labour Pump
principle is good law and to that decision of the Court of Appeal I
must now turn.

In that case an employee was dismissed for misconduct
which had occurred on the morning of the day on which he was
dismissed. There was evidence of previous misbehaviour by the
employee but the industrial tribunal held that the case had to be
determined on the basis of what had happened on that morning and
that the employers had acted reasonably and had fairly dismissed
the employee even though they had not warned him about his
previous misbehaviour or given him an opportunity to explain his
conduct on that morning. The industrial tribunal decided that even
if there had been an investigation the employee would still have
been dismissed because on the balance of probabilities the
employers would not have accepted his explanation and the
dismissal was therefore fair. The Employment Appeal Tribunal
reversed the decision of the industrial tribunal but the Court of
Appeal, Waller and O'Connor L.JJ and Sir George Baker, Sir
George Baker dissenting, restored the decision of the industrial
tribunal. Waller L.J. said, at p. 493:

- 6 -

"[Counsel for the employer] submitted that the test in the
British Labour Pump case goes further than section 57(3) of
the Employment Protection (Consolidation) Act 1978
requires, and submits that it is the statutory test which
must be complied with. This in my opinion is strictly
correct, and if the employer and the industrial tribunal are
satisfied in an exceptional case that no opportunity to
explain need be offered and that the employer in the
circumstances acted reasonably in accordance with equity
and the substantial merits of the case, the test would not
apply. But since in the majority of cases fairness would
require an opportunity to explain, as indeed many industrial
contracts provide, then in such cases the British Labour
Pump case provides useful guidelines. It was argued by
[counsel for the employee] that the British Labour Pump
case was itself not in accordance with the observations of
Viscount Dilhorne in W. Devis &. Sons Ltd, v. Atkins [1977]
A.C 931, 949-958. That case was dealing with a different
point, namely, whether a dismissal can be justified as fair
when the fact, or facts, are not known at the time of
dismissal but are discovered afterwards. I do not find
anything in the speech of Viscount Dilhorne which throws
doubt on the reasoning of the decision in the British Labour
Pump case."

At p. 496, O'Connor L.J. after holding that the employee's
conduct on the morning of dismissal justified summary dismissal
went on to consider the industrial tribunal's finding that the
explanation proffered by the employee was not acceptable. He

said:

"For my part I think that once the industrial tribunal made
that finding they would have been entitled to say that the
employee had not been prejudiced in any way by not being
asked to explain his conduct and that the dismissal was fair.
The industrial tribunal in fact applied the British Labour
Pump Co. Ltd, v. Byrne test and found in favour of the
employers. I can find no ground for disturbing that finding.
I do not think that any question of law was raised before
the Employment Appeal Tribunal. I am satisfied that the
decision of the industrial tribunal was not perverse. I see
no reason for disturbing it."

Sir George Baker said, at pp. 498-499:

"the failure to give the employee any opportunity to explain
why he should not be dismissed seems to me to be in the
circumstances of this case a denial of natural justice which
elimated equity or fair play. There are cases where instant
dismissal without an opportunity of explaining would be fair.
. . . Then there must be many cases where it is clearly
for the tribunal to decide whether, in the words of
Stephenson L.J. in W. Weddell & Co. Ltd, v. Tepper [1980]
I.C.R. 286, 297, the employers have acted 'without making
the appropriate enquiries or giving the employee a fair
opportunity to explain himself. . . .' Viscount Dilhorne in
his speech in W. Devis & Sons Ltd, v. Atkins [1977] A.C.
931. . . said, at p. 953: 'If, however, the reasons shown
appear to have been a sufficient reason, it cannot, in my



- 7 -

opinion, be said that the employer acted reasonably in
treating it as such if he only did so in consequence of
ignoring matters which he ought reasonably to have known
and which would have shown that the reason was
insufficient.'

Like Waller L.J. I do not think that this throws any doubt
on the reasoning in the later decision of the Employment
Appeal Tribunal (Slynn J.) in British Labour Pump Co. Ltd,
v. Byrne [1979] I.C.R. 347 which the industrial tribunal in
the present case purported to apply as the right test."

He went on to conclude on the evidence, differing in this respect
from his colleagues, that the evidence did not show that after the
employee had given his explanation the employers would probably
still have dismissed him and for this reason he held the dismissal
was unfair. The opinions of the Court Appeal thus do not add to
the reasoning in the cases examined by Browne-Wilkinson J. in
Sillifant.

The only other Court of Appeal decision remaining for
consideration that supports the British Labour Pump principle is
that in the present case [1987] 1 W.L.R. 1147. The Court of
Appeal held themselves bound by the decision in W. & J. Wass
Ltd, v. Binns and, in my opinion, they were clearly right in that
aspect of their decision. Neill L.J., taking up the point which
had been described by Browne-Wilkinson J. as the double standards
aspect of the British Labour Pump principle, says, at pp. 1153-
1154:

"The question can then be asked: if an employer cannot
justify dismissal and if an employee cannot complain of a
dismissal on the basis of facts not known to the employer
at the time of dismissal, how can it be right for an
industrial tribunal to embark on the speculative exercise of
examining facts which were not known to the employer at
the time of dismissal in order to decide whether a
procedural defect made any difference? At first sight, this
question appears to require the answer that such an exercise
would be contrary to the decision in W. Devis & Sons Ltd,
v. Atkins [1977] AC 931 because it would allow an
employer to rely on facts not known to him at the time of
dismissal, or, where an internal appeal procedure has been
put in operation, not known to him at the time when the
final decision: to uphold the dismissal was taken. On further
analysis, however, it seems to me that an answer on these
lines overlooks the crucial distinction between the reason for
a dismissal and the manner in which the dismissal is
effected."

After reference to the statutory provision he goes on, at pp.
1154-1156:

"It will be seen therefore that a complaint of unfair
dismissal will succeed where the employer fails to establish
that the reason for dismissal was one of those specified in
section 57(2) or where the tribunal reaches the conclusion
that even though the employer has fulfilled the requirements
of section 57(1) he acted unreasonably in treating the



- 8 -

reasons shown by him as a sufficient reason for dismissing
the employee. But, on the other hand, a complaint of
unfair dismissal will not succeed merely because of the
manner in which the dismissal was carried out. A failure to
observe a proper procedure may make a dismissal unfair, but
this is not because such failure by itself makes the dismissal
unfair, but because the failure, for example, to give an
employee an opportunity to explain may lead the tribunal to
the conclusion that the employer, in the circumstances,
acted unreasonably in treating the reason for dismissal as a
sufficient reason. The tribunal will look at the practical
effect of the failure to observe the proper procedure in
order to decide whether or not the dismissal was unfair.
Where an employee is dismissed for alleged misconduct and
he then complains that he was unfairly dismissed, it is to be
anticipated that the industrial tribunal will usually need to
consider (a) the nature and gravity of the alleged
misconduct; (b) the information on which the employer based
his decision; (c) whether there was any other information
which the employer could or should have obtained or any
other step which he should have taken before he dismissed
the employee. Similarly, in a case of alleged redundancy, it
is to be anticipated that the industrial tribunal will usually
need to consider (a) the information on which the employer
based his decision to dismiss the employee as redundant and
the method of selection which he used and (b) whether
there was any other information which the employer could
or should have obtained or any other step which he should
have taken before he dismissed the employee. In some
cases of misconduct, however, the misconduct may be so
grave and the information available to the employer so clear
that the tribunal will be likely to conclude that no further
inquiries by the employer were necessary .... But in many
cases of misconduct, the tribunal will need to consider
whether the employer, either in accordance with some
disciplinary procedure or otherwise, should have taken steps
to obtain further information either from the employee or
from elsewhere because such information might throw light
on the sufficiency of the employer's reason for dismissal.
But the failure to obtain this information does not ipso
facto render the dismissal unfair, and it seems to me to be
both logical and desireable to require the industrial tribunal
to try to evaluate the effect in practice of the failure.
Thus, as [counsel for the employees] acknowledged, there
may be cases where the evidence of misconduct is not so
clear as to justify instant dismissal and which could be
capable of explanation, but where, on examination, the
employee has no explanation to put forward. In such a
case, the failure to seek an explanation from the employee,
which fairness would in principle require, will not make any
difference. In a case where dismissal is on the ground of
redundancy, the matter may have to be looked at rather
differently because the system adopted for the selection of
the individual for redundancy may be at the very centre of
the inquiry when the tribunal comes to determine whether
the employer has acted reasonably or unreasonably in
treating redundancy as a sufficient reason for dismissing the
employee concerned. The decision of the appeal tribunal In
Williams v Compair Maxam Ltd. [1982] ICR 156



- 9 -

demonstrates the importance of the use of a fair system.
Furthermore, it is to be noted that section 59 of the Act of
1978 contains special provisions rendering dismissal on the
ground of redundancy unfair .... But where section 59
does not apply, it seems to me to be proper and indeed
necessary for the tribunal to investigate the effect of the
failure to consult the employee or to warn him or to hold
discussions or as the case may be. In some cases, the facts
may show beyond peradventure that no discussions or other
steps could have made any difference whatever because the
state of the company was so grave. In other cases, the
matter will be more evenly balanced. But, for my part, I
can see no objection in principle to the tribunal seeking to
evaluate the effect in practice of any failure by the
employer to observe the provisions of a code of practice or
of the guidelines prescribed in cases such as Williams v.
Compair Maxam Ltd.. . . . Prima facie, as the reason for
dismissal was redundancy, the reason was a valid reason.
The failure to consult did not automatically render the
dismissal unfair; it was for the tribunal to determine
whether that failure showed that the employers had acted
reasonably or unreasonably in treating redundancy as a
sufficient reason for the dismissal of the employee. For
that purpose, they had to look at all the circumstances
including the consequences of the failure."

In my opinion, the learned Lord Justice's answer on first
sight was correct. With much of what he says I would
respectfully agree but I cannot accept it all. For example in
referring to a case of dismissal for misconduct where the evidence
of misconduct could be capable of explanation and no explanation
has been invited before dismissal the examination of which the
learned Lord Justice speaks is an examination of matters other
than the employer's conduct which could not be known to the
employers until after the decision to dismiss had been reached and
therefore it was not available to the employer at the time he
reached that decision. Perhaps the point is highlighted most
plainly in the very last sentence which I have quoted. The
consequences of the failure determine whether or not the employee
suffered an injustice. This is not to be confused with the question
whether the employer acted reasonably.

Further, in my opinion, the statutory test shows that at
least some aspects of the manner of dismissal fall to be
considered in considering whether a dismissal is unfair since the
action of the employer in treating the reason as sufficient for
dismissal of the employee will include at least part of the manner
of the dismissal. Accordingly, it is not correct to draw a
distinction between the reason for dismissal and the manner of
dismissal as if these were mutually exclusive, with the industrial
tribunal limited to considering only the reason for dimissal.
Nicholls L.J. agreed with Neill L.J. as did Sir George Waller. Sir
George, however, added some observations.

At p. 311, he said:

"The industrial tribunal, having inquired into what would
have happened if the code of practice had been complied
with, came to the conclusion that it would have made no



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difference. In other words, the employers acted reasonably
in treating redundancy as a sufficient reason for dismissing
the employee."

In my view, with great respect, these two sentences show
that Sir George was treating the question whether the employee
had suffered injustice as the same question as whether the
employer had acted 'reasonably.

In my opinion, therefore, the additional reasons given by the
Court of Appeal in the present case for supporting the British
Labour Pump principle involve an impermissible reliance upon
matters not known to the employers before the dismissal and a
confusion between unreasonable conduct in reaching the conclusion
to dismiss, which is a necessary ingredient of an unfair dismissal,
and injustice to the employee which is not a necessary ingredient
of an unfair dismissal, although its absence will be important in
relation to a compensatory award.

It follows that I do not agree with the decision of the
Court of Appeal in the present case and this appeal should be
allowed, the British Labour Pump principle and all decisions
supporting it are inconsistent with the relevant statutory provision
and should be overruled and, in particular, the decision of the
Court of Appeal in W. & J. Wass Ltd, v. Binns [1982] LC.R. 486
should be overruled. "

That leaves for consideration the appropriate form of order
to be made by the House. Counsel for the appellant asked that
the House should hold that the appellant's dismissal had been
unfair and remit the case to the tribunal to consider remedy.
Counsel for the employers, while accepting that the British Labour
Pump principle and W. & J. Wass Ltd, v. Binns were wrong and
that accordingly the industrial tribunal had applied the wrong test
in coming to its conclusion, submitted that on the findings of the
tribunal supplemented by the evidence the tribunal were bound to
hold that the dismissal was fair since a reasonable employer
considering the facts known to this employer at the date of the
dismissal could reasonably have concluded that observance of the
code would make no difference to the conclusion.

The notes of evidence available to your Lordships are
necessarily only a brief summary and the tribunal's findings do not
deal exhaustively with all the matters that appear to have been
raised in the evidence; in particular they do not deal with the
evidence that appears to have related to an appeal by the
appellant to the employers to rescind the dismissal. In these
circumstances I consider that no adequate basis exists for your
Lordships to determine whether this dismissal was fair or unfair.
The industrial tribunal asked themselves the wrong question when
they applied the British Labour Pump principle. It is not apparent
what their answer would have been if they had asked themselves
the correct question. In my opinion the proper course is to remit
this case to a new industrial tribunal for consideration in the light
of your Lordships' judgment. The respondents must bear the
appellant's costs in the Court of Appeal and in this House.

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LORD KEITH OF KINKEL

My Lords,

I have had the opportunity of considering in draft the
speech delivered by my noble and learned friend on the Woolsack.
I agree with it, and for the reasons he gives would allow the
appeal and remit the case to an' industrial tribunal differently
constituted.

LORD BRIDGE OF HARWICH

My Lords,

I have had the advantage of reading in draft the speech of
my noble and learned friend the Lord Chancellor and I agree with
it. I add some short observations of my own because of the
importance of the case.

Employers contesting a claim of unfair dismissal will
commonly advance as their reason for dismissal one of the reasons
specifically recognised as valid by section 57(2)(a), (b) and (c) of
the Employment Protection (Consolidation) Act 1978. These, put
shortly, are: (a) that the employee could not do his job properly;
(b) that he had been guilty of misconduct; (c) that he was
redundant. But an employer having prima facie grounds to dismiss
for one of these reasons will in the great majority of cases not
act reasonably in treating the reason as a sufficient reason for
dismissal unless and until he has taken the steps, conveniently
classified in most of the authorities as "procedural," which are
necessary in the circumstances of the case to justify that course
of action. Thus, in the case of incapacity, the employer will
normally not act reasonably unless he gives the employee fair
warning and an opportunity to mend his ways and show that he
can do the job; in the case of misconduct, the employer will
normally not act reasonably unless he investigates the complaint of
misconduct fully and fairly and hears whatever the employee
wishes to say in his defence or in explanation or mitigation; in the
case of redundancy, the employer will normally not act reasonably
unless he warns and consults any employees affected or their
representative, adopts a fair basis on which to select for
redundancy arid takes such steps as may be reasonable to avoid or
minimise redundancy by redeployment within his own organisation.
If an employer has failed to take the appropriate procedural steps
in any particular case, the one question the industrial tribunal is
not permitted to ask in applying the test of reasonableness posed
by section 57(3) is the hypothetical question whether it would have
made any difference to the outcome if the appropriate procedural
steps had been taken. On the true construction of section 57(3)
this question is simply irrelevant. It is quite a different matter if
the tribunal is able to conclude that the employer himself, at the
time of dismissal, acted reasonably in taking the view that, in the
exceptional circumstances of the particular case, the procedural
steps normally appropriate would have been futile, could not have
altered the decision to dismiss and therefore could be dispensed
with. In such a case the test of reasonableness under section
57(3) may be satisfied.

- 12 -

My Lords, I think these conclusions are fully justified by the
cogent reasoning of Browne-Wilkinson J. in Sillifant v. Powell
Duffryn Timber Ltd. [1983] I.R.L.R. 91 to which my noble and
learned friend the Lord Chancellor has already drawn attention.

If it is held, that taking the appropriate steps which the
employer failed to fake before dismissing the employer would not
have affected the outcome, this will often lead to the result that
the employee, though unfairly dismissed, will recover no
compensation or, in the case of redundancy, no compensation in
excess of his redundancy payment. Thus in Earl v. Slater &
Wheeler (Airlyne) Ltd. [1973] 1 W.L.R. 51 the employee was held
to have been unfairly dismissed, but nevertheless lost his appeal to
the Industrial Relations Court because his misconduct disentitled
him to any award of compensation, which was at that time the
only effective remedy. But in spite of this the application of the
so-called British Labour Pump principle [British Labour Pump Co.
Ltd v. Byrne] [1979] I.C.R. 347] tends to distort the operation of
the employment protection legislation in two important ways.
First, as was pointed out by Browne-Wilkinson J. in Sillifant's case,
if the industrial tribunal, in considering whether the employer who
has omitted to take the appropriate procedural steps acted
reasonably or unreasonably in treating his reason as a sufficient
reason for dismissal, poses for itself the hypothetical question
whether the result would have been any different if the
appropriate procedural steps had been taken, it can only answer
that question on a balance of probabilities. Accordingly, applying
the British Labour Pump principle, if the answer is that it
probably would have made no difference, the employee's unfair
dismissal claim fails. But if the likely effect of taking the
appropriate procedural steps is only considered, as it should be, at
the stage of assessing compensation, the position is quite different.
In that situation, as Browne-Wilkinson J. puts it in Sillifant's case,
at p. 96:

"There is no need for an 'all or nothing' decision. If the
industrial tribunal thinks there is a doubt whether or not the
employee would have been dismissed, this element can be
reflected by reducing the normal amount of compensation by
a percentage representing the chance that the employee
would still have lost his employment."

The second consideration is perhaps of particular importance in
redundancy cases. An industrial tribunal may conclude, as in the
instant case, that the appropriate procedural steps would not have
avoided the employee's dismissal as redundant. But if, as your
Lordships now hold, that conclusion does not defeat his claim of
unfair dismissal, the industrial tribunal, apart from any question of
compensation, will also have to consider whether to make any
order under section 69 of the Act of 1978. It is noteworthy that
an industrial tribunal may, if it thinks fit, make an order for re-
engagement under that section and in so doing exercise a very
wide discretion as to the terms of the order. In a case where an
industrial tribunal held that dismissal on the ground of redundancy
would have been inevitable at the time when it took place, even if
the appropriate procedural steps had been taken, I do not, as at
present advised, think this would necessarily preclude a
discretionary order for re-engagement on suitable terms, if the



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altered circumstances considered by the tribunal at the date of the
hearing were thought to justify it.

For these reasons and for those given by my noble and
learned friend the Lord Chancellor I would allow the appeal and
remit the case to be heard by another industrial tribunal.

LORD BRANDON OF OAKBROOK

My Lords,

I have had the advantage of reading in draft the speech
delivered by my noble and learned friend, on the Woolsack. I
agree with it, and for the reasons which he gives I would allow
the appeal and remit the case to a new industrial tribunal.

LORD ACKNER

My Lords,

I have had the advantage of reading in draft the speech
delivered by my noble and learned friend on the Woolsack, . I
agree with it, and for the reasons which he gives I would allow
the appeal and remit the case to a new industrial tribunal.

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