The claimant, a legal executive employed by a firm of solicitors, was dismissed on the grounds of making a protected disclosure. She worked for the respondent for just 13 days before her dismissal and, but for the dismissal, she would have become a solicitor at the end of her probationary period. The Tribunal upheld claims for per-employment detriment on the ground of having made a protected disclosure, for dismissal following the initial detriment, and for victimisation post-employment by the provision of adverse material to the claimant's former employer. They ruled however, applying Polkey, that compensation should only be paid up to the date on which her 3 month probationary period would have come to an end, on the grounds that the employment would have ended either because the claimant would have been fairly dismissed then anyway, or because the claimant herself would have left voluntarily. The Tribunal made no award of interest on the awards for injury to feelings or personal injury because they concluded that the major causal factor was the dismissal arising out of the detriment for having made a protected disclosure, and any award would not come within the ambit of the Employment Tribunals (Interest in Awards in Discrimination Cases) Regulations 1996. The claimant appealed, arguing that the Employment Tribunal had erred by imposing the cut-off because there was continuing psychological damage and distress both during the after the employment relationship.

The EAT rejected the claimant’s argument, saying that because the employment would have ceased at the end of the probationary period, no forward losses would be attributable after that event. However, they said that the Employment Tribunal had failed to consider the matter of the claimant not being admitted to the Roll of Solicitors as a result of her dismissal, and that her position in the labour market could be markedly different. On the interest issue, the EAT said that the ET was bound to earmark the amount awarded for each wrongful act, as one carried with it an entitlement to seek interest. Both these matters were remitted to the Employment Tribunal.

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Appeal No. UKEAT/0512/09/ZT

EMPLOYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 15 November 2010

Before

HIS HONOUR JUDGE McMULLEN QC

SIR ALISTAIR GRAHAM KBE

MR R LYONS

MS A E DAVIDSON-HOGG (APPELLANT)

(1) DAVIS GREGORY SOLICITORS; (2) MR T HOWARTH (RESPONDENTS)

Transcript of Proceedings

JUDGMENT

**APPEARANCES**

For the Appellant
MR RICHARD POWELL (of Counsel)

Instructed by:
Messrs Irwin Mitchell LLP Solicitors
Imperial House
31 Temple Street
Birmingham
B2 5DB

For the Respondents
MR BARRY HAVENHAND (of Counsel)

Instructed by:
Messrs Davis Gregory Solicitors
25 Rodney Road
Cheltenham
GL50 1HX

**SUMMARY**

UNFAIR DISMISSAL

Compensation

**Polkey deduction**

1. The Claimant was unfairly dismissed on 8 November 2006. The Employment Tribunal found she would have been fairly dismissed or resigned on 16 January 2007 and awarded compensation for economic loss up to then but not thereafter. The EAT upheld this award for even if the manner of the dismissal made the Claimant ill and made it more difficult to seek work, the hypothesis of the limitation of loss, under Polkey, is that but for the dismissal with its attendant unfairness, the employment would have ended anyway.

1. The case was remitted to the same Employment Tribunal to determine whether loss after 16 January occurred, on the footing that by then the Claimant would have been admitted as a solicitor with access to higher paid work.

1. Having awarded compensation and aggravated damages for non-economic loss in respect of three wrongful acts, the Employment Tribunal was bound to earmark the amount awarded for each, as one carried with it an entitlement to seek interest.

**HIS HONOUR JUDGE McMULLEN QC**

1. This case is about the assessment of compensation for dismissal on the grounds of having made a protected disclosure and the calculation of interest on awards made under that jurisdiction. It is the judgment of the court to which all members appointed by statute for their diverse specialist experience have contributed. We will refer to the parties as the Claimant and the Respondents.

**Introduction**

1. It is an appeal by the Claimant in those proceedings against the judgment on remedy of an Employment Tribunal chaired by Employment Judge Olga Harper sitting on 2 June 2009 and again in Chambers registered with reasons on 10 August 2009 at Bristol. The Claimant and the Respondents are represented by Mr Powell and by Mr Havenhand of counsel as at the Employment Tribunal. That Tribunal awarded substantial compensation against the First Respondent only. The First Respondent is a firm of solicitors; the second is its leading light, but no order has been made against him. Proceedings were weighed against another party which were dismissed and not pursued.

1. At a liability hearing over four days with Judgment registered with reasons on 29 February 2008, the Tribunal upheld three of the claims and dismissed others. The Tribunal noted the delays in this case because the subject matter first arose in November 2006. The Tribunal has explained the reasons for which it is not in any way to be criticised, nor are the parties.

1. The Claimant, who is black and from Jamaica, raised claims of breaches of the Race Relations Act 1976 as direct discrimination and as victimisation and both detriment and dismissal contrary to the Public Interest Disclosure Act insertions into the Employment Rights Act, respectively under section 47 for detriment and 103A for dismissal. The Tribunal upheld the claims for per-employment detriment on the ground of having made a protected disclosure in November 2006, for dismissal following the initial detriment on 8 November 2006, and for victimisation post-employment by the provision of adverse material to the Claimant's former employer. Thus, three grounds went forward for remedy.

1. In its liability judgment, the Employment Tribunal set out that the Claimant had a very short working relationship with the Respondent. She was a legal executive. She is highly qualified, having obtained first and second degrees in law and she was en route to becoming a solicitor. All she needed was a period of employment with a firm of solicitors and satisfaction of the CRB in relation to its checks. There is no dispute as to the latter and now no dispute that she would have been admitted to the Roll of Solicitors had she continued in employment at the Respondent until about 16 January 2007. Correspondence between the regulator and the Claimant provides for her to be admitted at the earliest date which was 2 January 2007. So for the purposes of this case, had she not been dismissed in November 2006, she would have been a solicitor at the completion of her probationary period which was 16 January 2007.

1. The Tribunal upheld most of the Claimant's claims against these two Respondents. In a careful judgment from which there is now no appeal, other aspects of it having been the subject of criticism by the parties, the three statutory torts which we have described were the subject of the awards of damages. Unusually, there was an award of aggravated damages. The Claimant was awarded a basic award of £1,160, a compensatory award of £5,083.94, £10,000 for injury to feelings, £9,000 for damages by way of personal injury, psychological and psychiatric damage, and financial loss arising out of that in the sum of £1,504.50 and aggravated damages of £5,000.

1. The issue before the Employment Tribunal on the remedy was put in this way.

"6. ...

(i) In relation to the compensatory award, the period of loss. The respondent contends that the loss should be limited to a short period to reflect the fact that the claimant's employment would have been terminated in any event after a short period. The respondent relies on Polkey v A E Dayton Services Ltd (1987) ICR 142, whereas the claimant contends that she should be awarded financial loss from the date of dismissal up to the date of hearing, and thereafter to reflect a period of future loss."

1. The Employment Tribunal made a central finding of fact for which the evidence before it was cogent. It noted that the Claimant had a history of psychological upset. She was, prior to the first detriment, seeking to obtain employment elsewhere, having been with the Respondent firm for only two or three weeks. She was experiencing difficulties in professional relationships with certain of the staff all of which contributed to the Tribunal's finding as follows.

"It is clear to us that the style in which the first respondent operated was not one that was acceptable to the claimant.

This was a very short employment with the respondent. It is accepted by both parties that the claimant worked in the office for just thirteen days before her employment was terminated. We conclude that on the balance of probabilities bearing in mind the short employment, the difficulties that had arisen in the claimant's working relationship with Mrs Scanlan and the other secretaries, that the employment is likely to have come to an end immediately following the end of the probationary period. The employment would have ended either because the claimant would have been fairly dismissed due to difficult relationship issues or because the claimant herself would have concluded that she did not wish to work in a firm adopting that informal style. The probationary period as defined by the claimant's contract was three months and therefore her employment would have come to an end on 16 January 2007. We therefore award financial loss of that period."

1. The Tribunal, as Mr Powell put it, guillotined the forward losses on the basis that the Claimant's relationship with the Respondent would have come to an end on 16 January 2007 for reasons which were not tortious.

1. As for interest, the Tribunal summarised its position as follows.

"22. We make no award of interest on the awards for injury to feelings or personal injury as we conclude that the major causal factor (supported by the medical evidence) was the dismissal, arising out of the detriment for having made a protected disclosure. An award of interest on damages for personal injury or injury to feelings is made pursuant to the Employment Tribunals (Interest on Awards in Discrimination Cases) Regulations 1996. An award made pursuant to a breach of s.47B does not come within the ambit of those Regulations."

**The Claimant's case**

1. The Claimant argues that the Employment Tribunal erred in law in failing to award losses into the future. It was an error of law for the Tribunal to impose a cut-off because there was continuing psychological damage and distress, both during the employment relationship and after it, evidenced by sick notes and by the Tribunal's description of the Claimant's state which, while falling short of actual certified sickness from absence, showed difficulties ensuing from the dismissal.

1. Secondly, the Tribunal erred in failing to award interest on the part of the award of general damages which is attributable to the victimisation in 2007. Notwithstanding the difficulty described by the Employment Tribunal in the medical evidence it should have attributed part of the damages to victimisation and so should have considered an award of interest which is discretionary.

**The Respondent's case**

1. On behalf of the First Respondent, it is contended that the Employment Tribunal brought to bear its existing understanding of the market. It had fully in mind the circumstances leading to the dismissal and as to what would have occurred had the dismissal not taken place. This was the correct approach in accordance with Polkey v A E Dayton Services Ltd [1987] IRLR 503. In respect of the decision by the Tribunal to pay no attention to the fact that the Claimant would have qualified as a solicitor, it was contended by Mr Havenhand that the Tribunal was well aware of that matter. Interest was a matter of discretion.

**The legal principles**

1. Section 123 of the Employment Rights Act 1996 Act provides as follows.

" ... the amount of the compensatory award shall be such amount as the Tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal in so far as that loss is attributable to action taken by the employer."

1. The principles for the assessment of compensation for unfair dismissal were set out in Norton Tool Co Ltd v Tewson 1973 1 All ER 183 which includes the payment of what is just and equitable having regard to immediate and future loss of earnings, loss arising from the manner of dismissal and loss of statutory rights. It is common ground that a Tribunal should take account of the personal characteristics of the Claimant (see Britain's Arborfield Ltd v Van Uden [1977] ICR 211). In Dignity Funerals Limited v William Douglas Bruce [2005] IRLR 189, Court of Session Inner House held that an Employment Tribunal must decide, in a case where illness is in evidence, whether such illness was caused to a material extent by the dismissal itself and, if so, whether it continued up until the date of the hearing and thereafter. Where dismissal leads to psychiatric illness which results in economic loss, that can be awarded: Dunnachie and Kingston upon Hull City Council (No. 3) [2003] IRLR 384 EAT Burton P. It is an issue in this case as to whether an award can be made for compensation beyond the date on which the employer is able to show a fair dismissal would have occurred (see Edwards v Governors of Hanson School. It does not appear to have been put to the Employment Tribunal in terms such as now appear in Seafield Holdings Ltd trading as Seafield Logistics v Drewett [2006] ICR 1413 but no point is taken as to whether or not a new point arises.

**Discussion and conclusions**

Forward loss

1. We prefer the arguments of Mr Havenhand in respect of the cut-off. The Tribunal begins its exercise in assessing compensation by reference to Polkey and makes a finding which is directly attributable to Polkey. It makes a finding that one of two things would have occurred on 16 January 2007. Either the Claimant would have resigned or she would have been dismissed fairly. That means that none of the unpleasantness, to put it neutrally, of her actual dismissal would have occurred. She would have been dismissed for reasons which were not unlawful or she would have resigned of her own volition as a result of the difficulties she found in the working environment. That means that no forward losses would be attributable after that intervening event.

1. An analysis of all the circumstances was given in a judgment I gave in Gover v Property Care Ltd upheld by the Court of Appeal [2006] ICR 1073 and illustrated in the judgment of Elias P in Software 2000 Ltd v Andrews [2007] IRLR 568. The simple principle is that the Respondent's liability is capped when an event occurs or when it is speculated an event would occur which is not attributable to the unlawful act of the Respondent. These take a number of forms. The factory burns down; there is mass redundancy; the Claimant would have been dismissed for unrelated disciplinary matters or (directly on Polkey) had a proper procedure been conducted. As we said in Gover, the premise is that there will be an unexceptionable event resulting in dismissal or resignation. That means that the unpleasantness arising out of the actual dismissal in this case, of which there is no doubt, would not have occurred. The Claimant, absent the events in November 2006, would have continued unexceptionably to work for the Respondent until 16 January 2007 when the parties would have separated without criticism one of the other, at least in legal terms.

1. On that basis, we see no error in the Employment Tribunal's decision to stop the calculation of forward losses from the date of dismissal beyond the termination of the probation. Where the manner of dismissal causes difficulty in the labour market, that may sound as an additional damages but in our judgment, the correct approach on the facts of this case as determined by the Employment Tribunal is that if you set aside what occurred at the actual dismissal in November 2006, which occasioned the statutory tort of unfair dismissal, then the supposition is the relationship would continue until January 2007.

1. We agree with the analysis put forward by Mr Havenhand that on the two scenarios posited by the Employment Tribunal, there would be no continuing loss. If the Claimant resigned, there could be no claim and secondly, if she had been dismissed on 16 January, it would be fair. It would not sound either as a claim for unlawful interference with the rights against protected disclosure and against discrimination. We consider that his analysis is correct and so the Employment Tribunal was correct also to do that.

1. We accept that the manner of dismissal may cause continuing losses. It may cause psychological or psychiatric injury which makes it more difficult for the Claimant to find work immediately and so cause further economic loss. But that was not the situation in this case. We have been shown no authority where there has been a finding of non-economic loss following the manner of dismissal when there has been an intervening act, for example, a finding that the relationship would unimpeachably have come to an end. Edwards is not on the point, dealing as it does with illness caused by the employer which leads to unfair dismissal. Dignity Funerals does not address the intervening ending of the relationship. There is logic in saying that as economic loss does not continue, nor does non-economic loss. But we can see an argument that if illness is caused by the dismissal, and damages are awarded for the illness, the period of the award is not limited by a projected fair dismissal. That is not this case. In those circumstances, this part of the first ground of appeal must be dismissed.

1. The second part of this ground relates to the correct comparison and we adopt the Dunnachie approach of looking at the old job and the new job. As it happens, on these findings or at least on the inferences we draw from the findings, the Claimant would have moved into the different status of a solicitor from being a trainee or a legal executive by 16 January 2007. So again, setting aside the actual dismissal in November as though it had never happened, she would continue to have worked. She would have been admitted to the Roll of Solicitors and then left. Her position in the labour market, it seems to us, could be markedly different. This is a matter which the Employment Tribunal has failed to consider and must now consider on our direction. It may make no difference at all. There may be no difference in the market for legal executives or solicitors. It may be that the Claimant would have been able to obtain work at a solicitors' firm which would enable her, as she could at the Respondents, to apply for admission to the Roll while currently employed.

1. Those are matters which we do not have sufficient material upon to make a decision. We are not asked to make a decision but simply to refer the matter back and we would say that, if the position is to be compared with 16 January 2007, the Claimant must be clothed in the robes of a solicitor on that date, for she would have been admitted.

Interest

1. Ground 2 of the appeal relates to the payment of interest. It is complained that the Tribunal did not award interest. We agree with the criticism made on behalf of the Claimant by Mr Powell about this. We have every sympathy with the Employment Tribunal in dissecting the medical evidence which it was given, and with the consultants who provided this material too. However, the Claimant has proved statutory torts under three different jurisdictions, detriment and dismissal in November 2006 and victimisation in 2007. Different statutory regimes apply.

1. In respect of the award of damages for victimisation, the Tribunal distinguishes between a major causal factor and what Mr Havenhand concedes must be a minor factor and not simply a totally trivial one. On that basis, the Tribunal must do the best it can. Since it has found a victimisation, it must make a finding as to what remedy is available. In the course of doing so, if it awards compensation, it should award it on the revised scales of Chief Constable of West Yorkshire Police v Vento (No. 2) [2003] IRLR 102. We infer that the Tribunal did not regard the victimisation as trivial and therefore generating no just and equitable award. An award obviously was made. A figure out of the global sum needs to be attributed to it and interest needs to be considered under the Employment Tribunals (Interest on Awards in Discrimination Cases) Regulations 1996. It is open to a Tribunal to make no award of interest. On our analysis above, any award would be small and interest even smaller. It is a very minor part of this case but a Tribunal is required to make such a finding and to consider making an award of interest which is in its discretion. This ground too will go back to the Employment Tribunal but we hope the parties might agree it.

1. Finally, it was open to the Claimant to indicate that there were continuing financial losses as a result of the detriment but those matters were not advanced. This case was properly based upon a Polkey consideration as the Tribunal's taxonomy of the issues before it showed and it was correct for it to approach it on that basis. The principal shock to the Claimant for which the Tribunal found it was just and equitable to award substantial sums was for the dismissal and its unexpected nature.

**Disposal**

1. Having canvassed the issue with counsel, neither counsel nor we have any difficulty in sending it back to the same Tribunal applying, as we do, the factors in Sinclair Roche & Temperley v Heard [2004] IRLR 763. It is open to the parties to make submissions to this Employment Tribunal and it can make directions. The appeal is allowed in part.