Compensation - Case Round-Up: January 2017

In this month's round-up, Mark Shulman, consultant solicitor with Keystone Law, looks at recent cases on various principles to be applied when calculating compensation.

Mark Shulman, Consultant Solicitor at Keystone Law

Personal injury award
*Can a personal injury award be made by an ET in the absence of specific expert medical evidence on the issue? Yes, said the EAT in [Hampshire County Council v Wyatt ]()*UKEAT/0013/16/DA.

The Claimant was dismissed and won her claims of unfair dismissal and disability discrimination.

At the remedy hearing the ET awarded 9 months' compensation for future loss, £15,000 for injury to feelings and £10,000 for personal injury.

The Respondent appealed against the personal injury award on the basis that the award of £10,000 for personal injury was perverse and manifestly excessive in circumstances where there was no expert medical evidence to establish causation and/or the severity of and/or prognosis of the Claimant's continuing depressive condition.

The ET's reasoning in relation to the personal injury award was that:

"We were bound to observe that the situation was somewhat unusual in that no medical report had been prepared specifically for the evaluation, as it usually would. [Counsel for the Respondent] suggested there was nothing for us to rely upon in relation to severity, causation or duration, but we did not agree. It was clear that the claimant had suffered moderately severe mental difficulties… It was a matter for us…as to how bad her condition was and how long it was likely to be until it was resolved. In respect of most of the relevant considerations, all any further medical report could tell us was that the claimant made certain claims and the maker of the report either believed them or did not."

*Principles in personal injury cases
*On appeal, the Respondent contended that in all but low value claims (where the compensation could be assessed on a common-sense basis), expert medical evidence was required. Had the ET been right in its approach? Yes, said the EAT, rejecting the Respondent's appeal:

a Claimant can recover compensation for physical or psychological injury caused by the statutory tort of discrimination (Sheriff v Klyne Tugs (Lowestoft) Ltd . Compensation is assessed in the same way as damages for any other tort i.e. to put a Claimant in the position as closely as is possible that he or she would have been in but for the unlawful conduct; * it is for a Claimant to establish by evidence on the balance of probabilities that the act or acts of unlawful discrimination caused or materially contributed to a physical or psychological injury, or to an exacerbation of an existing condition. The Respondent must take the Claimant as it finds him or her; it is no defence to say that the Claimant would have suffered the same injury because of his or her character or psychological temperament ("his or her eggshell personality"); * where the evidence shows that the psychiatric injury had one or more separate material causes in addition to the Respondent's unlawful act or breach of duty, then, provided the resultant harm suffered by the Claimant is truly divisible, an ET assessing compensation will have to conduct an analysis to award compensation only for that part of the harm for which the Respondent is responsible.

The EAT considered that in cases where there are issues as to the cause or divisibility of psychiatric or psychological harm suffered by a Claimant, it is advisable for medical evidence to be obtained. Otherwise, there was a real risk of a lower award or no award being made. The EAT therefore did not agree with the ET's statement that "all any further medical report could tell us was that the claimant made certain claims and the maker of the report either believed them or did not".

In a case where concurrent causes for injury are relied on by the Respondent, it will be in the Respondent's interests as much as the Claimant's to obtain expert medical evidence. The EAT commented that it would expect parties to co-operate in those circumstances and to endeavour where possible to instruct a medical expert on a joint basis.

No absolute requirement
However, there was no absolute requirement for medical evidence, especially bearing in mind the financial cost involved in obtaining such evidence. The ET had felt able to reach a conclusion that the Claimant's condition was caused by a course of treatment that was unlawful and that involved a number of serious instances over a considerable period of time. The Respondent had not argued that the Claimant's depression was divisible. There had been some medical evidence before the ET in the form of Occupational Health reports dealing with the Claimant's illness and medication. The ET also had evidence from the Claimant herself and from her brother-in-law to the effect that after the Claimant's dismissal, she had "lost interest in everything". Her antidepressants were increased, she felt she had no purpose in life and any sense of self-worth had to be provided by her family. Her confidence remained low after the dismissal and she was feeling overwhelmed and unable to cope with day-to-day things.

The evidence entitled the ET to conclude that the Claimant's injury was not divisible. The EAT was therefore satisfied that this was a case where the ET was entitled to conclude that on the balance of probabilities, the acts of unlawful discrimination were proved. That meant, in the absence of any evidence or argument to the contrary, that the Respondent was liable for the full extent of that harm or injury.

*Level of award
*The EAT commented that assessment of general damages for personal injury is not a science. It is a matter of fact to be determined by an ET and not susceptible to a successful appeal unless it is shown to have made an error of principle or to have arrived at a figure that is manifestly too high or too low so as to be capable of being treated as perverse.

Once it was accepted that the ET was entitled to characterise the personal injury as "moderately severe" (with a compensation bracket of £15,000-£44,000), there was no error of law in the ET's figure of £10,000 for personal injury. Whilst £10,000 was on the low side, the ET also made an award for injury to feelings and the EAT was satisfied this was because the ET had been conscious of the potential for overlap and double recovery.
Accordingly, there was no error of law in the ET's award for personal injury.

Same principle for unfair dismissal losses
The Respondent also argued that awarding loss of earnings for a period extending for nine months beyond the date of the Remedy Hearing resulted in a perverse and manifestly excessive award in the absence of medical evidence. But the EAT rejected that contention, applying the same principle as above so that medical evidence was not required when considering financial loss awards in unfair dismissal cases. ETs are expected to deal with compensation for unfair dismissal in a rough and ready way, applying common sense and their best judgement to what is just and equitable in the particular case. Provided the ET takes account of all relevant evidence as to the realistic prospects of an individual's chances of obtaining alternative employment in the future "having regard to the vagaries of life", it will apply the law correctly.

The recent case of [Wright v Silverline Care Caledonia ]()Ltd UKEATS/0008/16/JW confirms that a Claimant's refusal to accept an offer of re-engagement following his constructive dismissal, did not necessarily amount to a failure to mitigate.

The Claimant was constructively unfairly dismissed by the Respondent during a management restructuring. The ET decided not to make any compensatory award on the basis that the Claimant had failed to mitigate his loss having declined an offer of re-employment.

The ET's decision stated that in relation to mitigation:

"the test is whether an employee's conduct in refusing an offer of re-employment was reasonable on the facts of the case."

The Respondent conceded that the ET's statement was not the correct legal test.

Mitigation principles
The EAT, agreeing with the Respondent, pointed out that the ET's statement was indicative of its failure to understand the principles in Wilding v British Telecommunications PLC [2002] ICR 1079. That case confirmed that it is not enough for the wrongdoer to show that it would have been reasonable to take the steps they proposed. It was necessary to show that it was unreasonable of the innocent party not to take them. There is a difference between acting reasonably and not acting unreasonably – the Claimant does not have to show that what he did was reasonable. The applicable test is therefore whether the employer had shown that the employee's conduct was unreasonable.

In the context of the present case, the Respondent was in repudiatory breach of contract and the Claimant had responded by resigning. All the indications were that the Claimant considered that the relationship had broken down beyond repair.

However, the ET had interchangeably used the concepts as to "whether the claimant's refusal of re-employment was reasonable" and whether the Claimant had unreasonably refused the offer of re-employment. This did not reflect what was said in Wilding: "if there is more than one reasonable response open to the wronged party the wrongdoer has no right to determine his choice. It is where and only where the wrongdoer can show affirmatively that the other party has acted unreasonably in his duty to mitigate that the defence will succeed".

Where there has been a constructive dismissal it may be reasonable for the employee to refuse to go back however unintentional the breach and however much the offer of re-employment appears to satisfy his previously stated objectives. It may equally be reasonable for such an employee to accept the offer and return to employment with the same employers if he is able to move on from what occurred. He will only be acting unreasonably if on the facts found he could be expected to adopt only the second of those two possible courses of action.

Burden of proof
That error of law by the ET (in applying the wrong test for failure to mitigate) had been compounded because the ET had also incorrectly considered the burden of proof. The ET had looked at the circumstances either as if it was incumbent on the Claimant to prove he had mitigated his loss, or at best neutrally as if no burden of proof was applicable. However, it was for the Respondent to demonstrate it was unreasonable for the Claimant to refuse to return.

Therefore, the ET's reasoning on the compensatory award was unsound and could not stand. The case was remitted to a fresh ET to consider the amount, if any, of a compensatory award for the Claimant.

Double deductions: Polkey and contributory fault
In [Lenlyn UK Ltd v Kular ]()UKEAT/0108/16/DM the EAT considered whether an ET had correctly concluded that that there should be both a Polkey deduction to reflect the chance that the Claimant would have been dismissed in any event within 6 weeks and in deciding that the Claimant also contributed to his dismissal.

The employer found that £1.9m had disappeared "on the Claimant's watch". The Respondent decided that the Claimant should be made an offer by way of a protected conversation instead of being subjected to disciplinary proceedings. The Claimant did not accept the offer but instead resigned. His claim of constructive unfair dismissal was upheld at the ET but his award was subject to a Polkey deduction and reduced further for contributory fault.

The ET asked itself in relation to the compensatory award "… whether the employee would have been dismissed even with fair process [sic]". The ET considered what would have happened if the Claimant had not resigned – there would have been a disciplinary procedure and the Claimant would have made all the points he had made to the ET. It concluded that there was the prospect he would have faced dismissal and the majority found "a 75% chance that the claimant would have been dismissed at the conclusion of the fair disciplinary process".

The ET also considered contribution, reminding itself that the conduct should be "culpable or blameworthy" and assessed the Claimant's contribution to his dismissal at 30%. Both parties appealed.

It was conceded by the Respondent at the EAT that on the basis of Rao v Civil Aviation Authority [1994] ICR 495, it was open to the ET in principle to make both a Polkey deduction and a deduction for contributory fault. It was for the ET to decide whether it is appropriate in a particular case to make both types of deduction.

However, in relation to a possible Polkey deduction, the EAT stated that the question was not what chance there was that a reasonable employer would have dismissed the Claimant fairly, but rather whether the Respondent in the particular case would have done so (Grantchester Construction (Eastern) Ltd v Attrill . Looking at the ET's reasoning, the EAT doubted whether it had appreciated that the issue was to assess the chances that the Respondent (as opposed to some other employer) would have dismissed fairly. The ET's reference to "the conclusion of the fair disciplinary process" suggested that the ET may have assumed that the Respondent would have dismissed fairly.

The EAT allowed the cross-appeal on this point and remitted the case for the ET to consider again, in the light of all its findings about this employer's conduct, what chance, if any, there was that the Respondent would have dismissed the Claimant fairly, and if so, within what period.

*Contributory conduct
*The Claimant contended that the Polkey deduction was based to a significant extent on the ET's findings about his culpable conduct. The factors which the ET had taken into account on both Polkey and contributory conduct were very similar and so there was a risk of double-counting.

The EAT agreed. The ET should have considered whether in the light of that overlap, it was just and equitable to make a finding of contributory fault, and if so, what deduction there should be. That overlap meant that there was a "real risk" that the Claimant was being penalised twice for the same conduct.

The Claimant's cross-appeal on this point was also allowed and the case remitted for the ET to consider again (after it has reconsidered the Polkey issue), what deduction (if any) for contributory fault would be just and equitable in the light of the overlap.

Life-long losses*
*In [Lennon-Knight v Yakira Group Ltd ]()UKEAT/0186/16/RN the EAT ruled that an ET should not have limited future loss to the period which a medical expert said would be required to complete the Claimant's period of rehabilitation – this would still leave losses for which she would be uncompensated.

The Claimant won her claim of automatic unfair dismissal for whistleblowing and was awarded over £120,000 in compensation. She appealed on remedy and at the remitted remedy hearing the ET increased the future loss from 1 year to 2 years by considering a medical opinion that 2 years would be a period of rehabilitation for the Claimant.

The Claimant once again appealed on the basis of future loss. She argued that, given the agreement between experts that the Claimant would never regain her career at the level of Finance Director with commensurate remuneration - a fact accepted by the Respondent and acknowledged by the ET - it was wrong in principle for the ET to impose a two-year cut-off to reflect the medical expert's opinion that it would take that length of time for the Claimant to complete her rehabilitation to its optimum position.

Wrong to limit loss
The EAT agreed, referring to the judgment of Elias LJ in [Wardle v Crédit Agricole Corporate and Investment Bank ]()[2011] ICR 1290 CA. In that case Elias LJ drew a distinction between the majority of cases where future loss should be awarded up until the time when the employee was likely to obtain a job equivalent to that which he or she had with the Respondent and those rare cases where there was no real prospect of the employee ever obtaining an equivalent job.

Applying that approach to the agreed evidence, this was plainly a lifetime loss case. It was wrong in principle to limit the loss to the two-year period that the medical expert opined would lead to optimum recovery by the Claimant. At that point the Claimant would still not attain her pre-termination career level of Finance Director. She would, as the ET found, have been obliged to take a less well-paid job. The difference in pay between her pre-termination salary and that at best as a Financial Controller with a lower salary, was not spelt out in the ET's Reasons. But on their findings it represented a continuing partial loss for which she was not compensated.

*Calculating future loss
*The ET had therefore fallen into error in its approach and the case was further remitted to the ET on the issue of remedy. The assessment to be made would be on the basis of loss, albeit partial, continuing for the remainder of the Claimant's working life on an appropriate multiplier basis (it was not necessarily sufficient simply to apply the Ogden tables and some adjustment might be needed and would need to be explained by the ET). The multiplicand (representing the amount of the partial loss) would be dependent on the level of earnings anticipated by the ET (which may vary during the future continuing loss period according to the Claimant's anticipated future career progression).

Mark Shulman is a Consultant Solicitor with Keystone Law and an accredited workplace and employment mediator. His blog on new employment legislation can be found here.

Published: 20/01/2017 10:35

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