Kraft Foods UK Ltd v Hastie UKEAT/0024/10/ZT

Appeal by respondent against a ruling by the ET that a cap preventing employees, who had been made redundant, from recovering more than they would have earned if they had remained in employment until retirement age, was unjustifiable and accordingly that it constituted unlawful discrimination contrary to the Employment Equality (Age) Regulations 2006 . Appeal allowed: since the purpose of the scheme was to compensate employees for the loss of the expectation of remaining in employment, to impose a cap preventing the “windfall” of an employee recovering more than he could have recovered had he stayed in employment until retirement necessarily constituted a proportionate means of achieving a legitimate aim.


Appeal No. UKEAT/0024/10/ZT



At the Tribunal

On 30 April 2010

Judgment handed down on 6 July 2010







Transcript of Proceedings



For the Appellant

Instructed by:
Darbys LLP
52 New Inn Hall Street

For the Respondent
MS ANNA BURNE (Of Counsel)

Instructed by:
Doyle Clayton
Sovereign House
Vastern Road



Contractual redundancy scheme incorporating a cap preventing employees recovering more than they would have earned if they had remained in employment until retirement age – Cap applied to Claimant, reducing the amount that he would otherwise have received by some £14,000 – Tribunal holds that cap disproportionately applied to those approaching retiring age and was unjustifiable and accordingly that it constituted unlawful discrimination contrary to the Employment Equality (Age) Regulations 2006

**Held**, allowing appeal, that, since the purpose of the scheme was to compensate employees for the loss of the expectation of remaining in employment, to impose a cap preventing the "windfall" of an employee recovering more than he could have recovered had he stayed in employment until retirement necessarily constituted a proportionate means of achieving a legitimate aim - Dicta in **[**Loxley v BAE Systems Land Systems (Munitions & Ordnance) Ltd**](** [2008] ICR 1348 applied – Alternative grounds of appeal based on alleged bias rejected**THE HONOURABLE MR JUSTICE UNDERHILL (PRESIDENT)**
  1. This is an appeal against the decision of an Employment Tribunal sitting at Reading, chaired by Employment Judge Hill, upholding a claim by the Claimant (the Respondent before us) of age discrimination. The claims were heard on 30 September and 1 October 2009, and the reserved judgment of the Tribunal, with Reasons, was sent to the parties on 26 October. The Appellant was represented before us by Ms Yvette Genn and the Claimant by Ms Anna Burne, both of whom also appeared before the Tribunal.
  1. The Claimant was born on 17 March 1946. He was first employed by the Appellant on 14 April 1969 as a process operator in the coffee processing department. In the course of 2008 the Appellant conducted a redundancy exercise. Voluntary redundancy was available to employees on the terms of an established scheme agreed with the recognised trade unions ("the Scheme"). The Claimant's application for redundancy in accordance with the terms of the Scheme was accepted, and he was duly dismissed with effect from 12 December 2008, at which date he had been employed by the Appellant for nearly forty years.
  1. The basic provision of the Scheme is that employees receive 3½ weeks' pay for each year of service: the Tribunal commented that those were, in today's climate, exceptionally generous terms. The Claimant was at the date of his dismissal earning £649.60 p.w., i.e. some £33,800 p.a. On that basis he was prima facie entitled to a payment of £90,100.98 (39.66 x 649.6 x 3.5). However, the Scheme contained a provision – referred to as "the cap" – to the effect that the maximum amount payable should not exceed the amount that the employee would have earned, at his current rate of pay, if he had remained in employment to normal retiring age, being age 65. Since on 12 December 2008 the Claimant was about 2¼ years from his 65th birthday, he could not on his current rate of pay have earned as much as £90,000 before he attained retirement age; and the cap operated so as to reduce his entitlement to £76,560, i.e. a reduction of some £13,600.
  1. The Claimant says that the application of the cap in his case constituted unlawful discrimination contrary to the Employment Equality (Age) Regulations 2006. Reg. 7 outlaws age discrimination in the employment field: it is unnecessary to refer to its precise terms. Reg. 3 defines age discrimination (so far as material) as follows:

(1) For the purposes of these Regulations, a person ('A') discriminates against another person ('B') if-

(a) on grounds of B's age, A treats B less favourably than he treats or would treat other persons, or

(b) A applies to B a provision, criterion or practice which he applies or would apply equally to persons not of the same age group as B, but-

(i) which puts or would put persons of the same age group as B at a particular disadvantage when compared with other persons, and

(ii) which puts B at that disadvantage,

and A cannot show the treatment or, as the case may be, provision, criterion or practice to be a proportionate means of achieving a legitimate aim.

(2) A comparison of B's case with that of another person under paragraph (1) must be such that the relevant circumstances in the one case are the same, or not materially different, in the other …

The terms of the definition are thus substantially identical to the definitions of so-called "direct" and "indirect" discrimination familiar from other anti-discrimination legislation, with the important exception that in the case of direct, as well as indirect, discrimination, the employer is entitled to advance a defence that the treatment complained of is "a proportionate means of achieving a legitimate aim". In Pulham v London Borough of Barking and Dagenham [2010] ICR 333 we said, at para. 15 (p. 343 F-G):

As Elias J observed in MacCulloch v Imperial Chemical Industries Ltd [2008] ICR 1334 (see para 10 (2), at p 1338a-b), what the language of regulation 3 is intended to express is the classic proportionality test, which has been applied to resolve issues of justification in discrimination cases at least since the decision of the European Court of Justice in Bilka-Kaufhaus GmbH v Weber von Hartz (Case 170/84) [1987] ICR 110. The exercise required of the tribunal on such a test is "to weigh the reasonable needs of the undertaking against the discriminatory effect of the employer's measure and to make its own assessment of whether the former outweigh the latter": see para 10 (4) in MacCulloch, at p 1338c-d.

We adopt the usual shorthand of describing that defence as one of "justification".

  1. It was accepted before the Tribunal that the cap constituted a provision criterion or practice ("PCP") which disproportionately applied to employees in the two or three years preceding age 65, and thus that it would constitute unlawful age discrimination unless it was shown to be justified. The Claimant also advanced, and the Tribunal accepted, a claim of direct discrimination. The Appellant contended before us that there was no basis for such a finding, but both parties were agreed that the issue is of no significance to the outcome of the claim, since the issue of justification would fall to be decided in precisely the same way in either case; and the point was accordingly not pursued.
  1. The Appellant's original pleading of its justification case was short. Para. 3 of the Grounds of Resistance attached to the ET3 pleaded the fact that the payment to the Claimant had been in accordance with the terms of the Scheme (referred to as "the Policy"). It continued:

The Policy is a generous one which has been approved by the recognised trade union(s). It provides for a payment of 3.5 x 8 weeks' pay (which is not subject to the statutory maximum) for each year of service completed save that the amount of the redundancy payment is capped at the total amount of basic pay that the employee would have received between the date of redundancy and the date of his or her normal retirement age. This is to prevent employees receiving a windfall.

Para. 6 reads as follow:

In any event the Respondent maintains that the Policy is justified in that it is a proportionate means of achieving one or more legitimate aims. In particular it strikes a fair balance between the purpose of the Policy, the resulting benefit to employees and the cost to the Respondent whilst preventing employees from receiving a windfall.

  1. Thus, although para. 6 of the Grounds of Resistance invokes some generalities, the essential pleaded justification for the cap is that it was necessary in order "to prevent employees from receiving a windfall". What that means is not expressly spelt out, but – subject to the particular points which we have to consider later in this judgment – it seems to us clear enough and can be summarised as follows. There are two unspoken premises:

(1) that the primary object of the Scheme was to compensate redundant employees for the loss of the earnings which they would have been entitled to receive from their job had they remained in employment; and

(2) that on achieving age 65 an employee would be required to retire - or in any event would lose the legal right to continue in employment.

On the basis of those premises, it would go beyond the object of the Scheme – and thus be a "windfall" – for an employee to receive a sum under it in excess of what he would have been entitled to receive had he continued to age 65. To take an extreme example by way of illustration, an employee on the same earnings as the Claimant, and with his length of service, who was made redundant at age 64 and 11 months would receive £90,000 by way of compensation for the loss of the chance to earn some £3,000 in the remaining month of his employment.

  1. Unfortunately, by the time of the hearing that simple point had become somewhat obscured. The Appellant called evidence from its Manufacturing HR Manager, Ms Gamaz. In para. 8 of her witness statement she said:

The aims of the Respondent's enhanced redundancy scheme are:

a) To compensate those opting for redundancy for loss of earnings and benefits and help them secure alternative employment.

b) To encourage volunteering from those who are approaching the end of their careers by offering a payment equivalent to their earnings up to the date of retirement. This has the benefit of encouraging older workers to leave, thus making available space for the development of more junior employees. It also helps minimise the need for compulsory redundancies.

c) To recognise and reward long-service and loyalty amongst its employees.

d) To recognised however the fact that older workers often find it more difficult to secure alternative employment, the scheme provides that payments increase in line with age and service and in all respects other than the cap, mirrors the statutory scheme.

e) To avoid an excessive windfall and reduce the cost of redundancy to the Company (already significantly inflated by allowing volunteering) a cap is in place to ensure individuals cannot earn more in redundancy then they could have earned up to Normal Retirement Age. It should be noted that employees approaching retirement are entitled to generous pension benefits under the non-contributory Final Salaries Pension Scheme which is open to all employees. There are no actuaries reductions applied from the age of 60. The Company makes significant financial contributions to the scheme on an annual basis currently equivalent to circa 20% of the total salary cost.

f) To allow the Company to effectively manage change in such a way that we minimise business disruption or industrial relations issues when implementing restructuring programmes. It is important that we maintain movement in the workforce and the Scheme allows us to do that in a way which does not disrupt the natural diversity in age profile in our workforce as a whole."

  1. In her written opening submissions before the Tribunal Ms Genn paraphrased what she said Ms Gamaz had identified as "the aims of the Redundancy Policy" as follows:

(1) to recognise and compensate for the difficulties that older workers have in the labour market

(2) to reward loyalty

(3) to prevent a windfall

(4) to achieve redundancies in a way that is perceived to be fair and peaceable

(5) to maintain diversity of the workforce (and reasonable flow) against an environment where there is extremely low turnover

(6) to avoid compulsory redundancies

(7) to facilitate planning and managing change with minimal business disruption

(8) to compensate those who opt for redundancy; in effect early retirement.

  1. The Tribunal was critical of that approach on the part of the Appellant on the basis that it mixed up points made by way of justification of the terms of the Scheme generally and points made by way of justification of the actual measure complained of, i.e. the cap: see in particular para. 27 of the Reasons. We agree with that criticism. Ms Genn referred us to a passage in the judgment of Elias P. in this Tribunal in McCulloch v Imperial Chemical Industries Plc [2008] ICR 1334, in which he referred to the importance, when dealing with the justification issue in a case of this kind, of considering "the scheme as a whole" (see para. 35 at p. 1343); but he was there making a rather different point. The ultimate question for the Tribunal in this case was whether the cap was justified; and generalities about, for example, recognising long service and loyalty, or avoiding compulsory redundancy, were neither here nor there.
  1. There was, however, a more particular problem caused by the way that Ms Gamaz, at para. 8 (e) of her witness statement, introduced into her reference to the windfall (described, tautologously, as "an excessive windfall") references to (a) costs and (b) pension entitlement. As to these:

(a) Plainly the Scheme would cost more if it did not incorporate the cap (although whether it would cost very much more is another matter); and it was open to the Appellant, if it wished, to run that as a separate point. But it must be understood that it is a quite distinct justification from the windfall point. The windfall point is – simply – that if you are providing a scheme designed to compensate employees for their lost earnings it must be legitimate to incorporate provisions which prevent it paying out more than the amount of those earnings: to the extent that that argument is good, it is good whether the savings effected are £1 or £1 million.

(b) As for pension entitlement, if the point of the cap is to see that employees are not over-compensated for lost earnings (i.e. salary), it is simply irrelevant whether they are entitled, at the moment of redundancy, to receive a pension. The point would be equally good, or bad, whether they were or were not. There might, again, be – depending on the facts – an argument that employees who lost out under the terms of the Scheme because of an age-related provision were sufficiently compensated by receiving an immediate pension entitlement: that was, in effect, the argument run by the employers in Loxley, which we discuss below. But it is a separate point.

  1. It is convenient at this stage to consider the decision of this Tribunal, Elias P. presiding, in Loxley v BAE Systems Land Systems (Munitions & Ordnance) Ltd [2008] ICR 1348. In that case there was a contractual redundancy scheme entitling employees to payments by reference (broadly) to their length of service. We should set out paras. 3-5 of the judgment (pp. 1349-1350):

3 Benefits under the scheme were only paid to those under 60 at the date of redundancy. There was a tapering provision which applied to those who had reached the age of 57. The payments which would otherwise have been made to those persons were reduced by 1/36th for every month of service over the age of 57. Accordingly, those over 60 received no enhanced payment under the scheme, and were given only their statutory redundancy payment.

4 In addition to the redundancy payments, the redundancy package also sometimes consisted of a payment in lieu of notice. This was 26 weeks for those who fell within the terms of the redundancy scheme, but only the statutory notice to those over 60 who were outside it. However, the total redundancy package for those over 60 was at least £13,842. The pay in lieu was not automatic; staff could be required to work their notice period.

5 The rationale for excluding those over the age of 60 was linked to the fact that they were entitled to take their benefits under the company's pension scheme at the age of 60. Until sometime around 1996, staff were required to retire at 60 on a full pension. Plainly it would have provided employees close to retirement with a windfall if they had been entitled to take the full redundancy payment. They would have been better off being made redundant than if they had simply worked until retirement. Hence the original justification for the tapering provisions from the age of 57.

Subsequently to the introduction of the scheme, the normal retiring age for employees was raised to 65; but no changes were made to the terms of the scheme. The claimant was made redundant at the age of 61. He was accordingly not entitled to any payment under the scheme. He claimed under the 2006 Regulations. Plainly the non-payment of any sum under the scheme was due to his age: the issue was thus one of justification. The employer could not, as Elias P. observed at para. 6 of the judgment, advance any windfall justification because the extension of the retiring age to 65 meant that employees dismissed after age 60 had suffered a loss of the right to continue to age 65. Instead, therefore, it sought to rely on the fact that the claimant was entitled to an immediate – and, to all intents and purposes, unreduced – pension. The employment tribunal failed properly to address that issue, and the case was remitted for reconsideration, with some observations on how the task should be performed. The actual ratio of the case is thus irrelevant to the windfall issue. However, the legitimacy of a windfall argument was apparently the subject of submissions, and Elias P. went out of his way to address that question (we suspect because he and the lay members will have been well aware of the prevalence of tapers and other provisions in redundancy schemes aimed at preventing a windfall). There seems to us to be a clear, albeit implicit, recognition at para. 5 of the judgment, which we have set out above, that provisions properly directed at the prevention of a windfall were likely to be justifiable. But the recognition becomes explicit at para. 37 of the judgment, where Elias P. says this:

We reject the claimant's submission that preventing a windfall cannot be a legitimate feature of the scheme. One of the purposes of a redundancy scheme of this nature is to cushion workers from the effects of losing their income. This is not required, or at least not to the same extent, where pensions are paid. Indeed, if the position still were that retirement automatically took place at the age of 60 then an employer would in our view manifestly be justified in having a rule which prevented the employee being better off as a consequence of receiving redundancy pay than he would have been if working until retirement age [our emphasis]. That is what the tapering provisions originally achieved until the extension of retirement age in 1996. This is a legitimate means of securing the aims of the scheme. Similarly, it is legitimate to seek to ensure that the aims are achieved in an equitable and fair way. Whether these are better described as aims or as proper means of achieving the aims is perhaps a matter of semantics.

The relevance of the reference to "pensions" in the third sentence of that passage is not entirely clear, but no doubt it reflects the particular issues in that case. But the fourth sentence, which we have italicised, is entirely clear and in our view constitutes a statement of principle. Ms Genn placed considerable weight on this passage in her submissions to the Tribunal.

  1. The Tribunal's reasons for rejecting the Appellant's pleaded justification appear at paras. 42-58 of the Reasons. It proceeded, conventionally, by considering first whether the Appellant had shown that the imposition of the cap was directed to a legitimate aim and, secondly whether, if so, it constituted a proportionate means of achieving that aim. The reasoning can be summarised as follows:

(1) At paras. 44-50 the Tribunal addressed an argument which had apparently been advanced orally (it does not appear in Ms Gamaz's statement) to the effect that the existence of the cap encouraged employees involved in a redundancy exercise in their late fifties and early sixties to volunteer for redundancy because they would appreciate that if they took a chance on waiting until the next redundancy exercise they might receive a lesser sum. It rejected that argument on the basis that there was no real evidence that that was either the intention or the effect of the cap. It made the point that potential candidates for voluntary redundancy would only be affected (if at all) by the consideration in question if they were aware of the cap; and it found that such knowledge was not in fact widely disseminated.

(2) At paras. 51-52 it addressed the windfall argument. At para. 51 it recited that the Appellant relied on Loxley, and it quoted most of para. 37, which we have set out above. It continued, at para. 52:

The Tribunal did not accept that that paragraph assisted the Respondents. The position in the case before us is demonstrated by reference to the chart produced by the Claimant's representative. All the people over the age of 60 who had similar length of service to the Claimant would receive a pension but only those who were under the scheme based on the 3.5 week redundancy payment scheme. Clearly, the circumstances in Loxley can be distinguished as all the comparators in this case are ones who receive a pension in the same way as the Claimant. The only difference between them is that one is older than another.

(The "chart" referred to was a table produced by Ms Burne which identified the payments available to the Claimant and to hypothetical employees in the same position as him but who were not so close to retiring age. It does not in fact show anything about their pension positions.)

(3) At para. 53 it dismissed any attempt on the part of the Appellant to justify the cap by reference to the costs which it saved, on the basis that the costs in question appeared on the evidence to be negligible.

(4) At paras. 54-55 it rejected the arguments based on the need to reward long service and to manage change, on the basis – which is clearly correct – that these aims, although no doubt legitimate, had nothing to do with the cap.

(5) It summarised its position on the question of "legitimate aim" at para. 56 in the following terms:

Overall, therefore, looking at whether there are legitimate aims, we are satisfied that there are a number of legitimate aims in the scheme as it exists but we are not persuaded that those aims are ones that make it legitimate to impose the cap. Nor are we persuaded that the cap is such an integral part of the scheme that it has to be looked at in the round. The Respondent has not produced any evidence to show that it is an indivisible part. It is a part but the scheme as drafted could run quite easily without it.

(6) Finally, at paras. 57-58, the Tribunal considered whether, if – contrary to its primary conclusion – there was some legitimate aim for the imposition of the cap, its imposition constituted a proportionate means of achieving that aim. It said, at para. 57:

… The only legitimate aim that might be considered as affecting the cap relates to windfall. In looking at what is proportionate we must be guided by the case of Bilka-Kaufhaus GmbH v Weber Von Hartz – is there a real need and therefore is it appropriate with a view to achieving the objectives pursued? The proportionality requires an objective balance to be struck between the effect of the measure and the needs of the undertaking: Hardys & Hansons plc v Lax 2005 IRLR 726. The loss to the Claimant is just over £13,000. The loss to another person in this round would have been a further £35,000. These amounts are significant to the Claimant and to his colleague. Taken as a proportion of the redundancy bill, they are not significant to the Respondents.

  1. The Notice of Appeal raises four grounds of appeal. Ground 4 concerns the finding of direct discrimination, and we need not consider it further: see para. 5 above. Ground 3 raises an allegation of bias against the Tribunal arising out of the alleged conduct of Employment Judge Hill during the hearing. We prefer to deal with that allegation after we have considered the challenge to the Tribunal's substantive reasoning, which appears at grounds 1 and 2. These read as follows:

Ground 1

  1. The Employment Tribunal erred in law when it concluded that the aims identified by the Appellant were neither legitimate nor proportionate in relation to its determination of indirect discrimination, and in so doing wrongly considered the application of the cap as divisible from the scheme as a whole.

Ground 2

  1. The Employment Tribunal erred in law in reaching a Judgment that no reasonable Employment Tribunal taking proper consideration of the facts and law could have reached in that the Employment Tribunal's Judgment is premised on taking account of irrelevant matters, and ignoring relevant matters and evidence.

Those grounds are extremely general, but they are particularised over several following pages.

  1. We have not found it useful or necessary to consider the entirety of the points made under grounds 1 and 2. In our view the central question in this appeal is whether the Tribunal was right in law to reject the Appellant's case that the cap constituted a proper means of achieving a legitimate aim, namely preventing a windfall in the sense that we have explained above.
  1. In our view the Tribunal's rejection of the "windfall justification" cannot be sustained. Our reasoning is as follows:

(1) It is in our view self-evident that the object of the Scheme was indeed to compensate employees who took voluntary redundancy under it for the loss of the earnings that they had a legitimate expectation of receiving if their employment had continued. That is the general understanding of the purpose of a redundancy payment. As it is put in Harvey on Industrial Relations and Employment Law (see para. E [9]):

The British view of a redundancy payment is that it is in the nature of compensation to the employee for loss of his job; that is to say, for the loss of his expectation of continued employment. It is, so to speak, the price he receives for the compulsory purchase of his existing employment.

In Mairs v Haughey [1994] 1 AC 303, which concerned the taxable status of a contractual redundancy payment, Lord Woolf said this, at pp. 319-320:

In order to decide whether payments made under [a non-statutory redundancy scheme] are taxable under Schedule E, it is necessary to identify the qualities of a genuine non-statutory redundancy payment … Redundancy, whether statutory or non-statutory, involves an employee finding himself without a job through circumstances over which he has no control. It is also a quality of redundancy that it does not give rise to a right to compensation unless the employee has been employed for a minimum period and that the right when it accrues increases, initially, with the period of employment and then subsequently reduces until eventually the employee loses any right of payment upon his reaching normal retirement age.

We note Lord Woolf's reference to redundancy payments reducing as the employee approaches normal retirement age. That is certainly in our experience a standard feature of contractual redundancy schemes and was until recently also a feature of the statutory scheme (as to this, see para. 21 below.)

(2) It necessarily follows that unless the Scheme incorporated a cap it would result in payments which exceeded what was necessary to achieve that object in cases where the employee was close to retirement age. To take the extreme example referred to at para. 7 above, what in such a case - we ask rhetorically - would the employee be receiving his £90,000 for ?

(3) That being so, it in our view also necessarily follows both that it is legitimate for a redundancy scheme to incorporate a provision designed to prevent such excess compensation and that the cap in the present case was a proportionate means of achieving that aim: indeed, it does so with precision, and arguably more accurately than by the application of a taper, which is the other means commonly employed.

  1. We would have reached this conclusion quite apart from authority. But we draw strong support from the observations, albeit made obiter, of Elias P. in Loxley: see para. 12 above.
  1. It appears from para. 52 of the Reasons that the Tribunal rejected the windfall argument because both those employees who were affected by the cap and those who were not would equally be entitled to receive full pensions (at least if aged over 60). But that is, with respect, beside the point. As we have sought to demonstrate at para. 11 (b) above, the windfall argument is entirely independent of any question of entitlement to pension.
  1. In her excellent submissions on behalf of the Claimant Ms Burne made a number of points which we will address in turn.
  1. First, she pointed out that the amount of a redundancy payment under the Scheme is not calculated by reference to the employee's anticipated loss of earnings: instead it depends entirely on length of service. That, she submitted, contradicts our proposition at para. 17 (1) above that the purpose of the Scheme is compensatory: an employee is entitled to payment even if he or she walks into an equally well-paid job the next day and suffers no loss of earnings at all. The point is well taken. But the same is true of the statutory and contractual schemes referred to in the passage which we have quoted from Harvey and in Lord Woolf's speech in Mairs. The truth is that redundancy schemes are conceptually something of a hybrid. Although the purpose is indeed to compensate employees for the loss of their jobs – that is the loss of the earnings that they would have been entitled to received if, in accordance with their expectation their employment had continued measure of compensation adopted is not geared to an assessment of the amount of that loss. That may seem anomalous; but the anomaly, if that is what it is, is long-established and rooted in industrial practice. It would be impossible to determine in each case at the moment of termination the loss that an employee is liable to suffer on redundancy so as to provide a sum payable to him at that point. Instead, there is a well-recognised equity in calibrating the payment by reference to length of service: the longer that an employee has been employed, the higher the value which it "feels fair" to place on the loss of his or her job. If the dismissal is positively unfair – as opposed simply to being unrelated to any personal conduct or characteristics of the employee – he or she will of course be entitled to a compensatory award based on an assessment of actual loss. But the fact that such an assessment is carried out in those, different, circumstances does not undermine the proposition that the underlying purpose of a redundancy payment is also compensatory (and NB that the amount of a contractual redundancy payment, insofar as it exceeds the statutory minimum, falls to be deducted in the calculation of a compensatory award if the employee has been unfairly dismissed).
  1. Secondly, Ms Burne pointed out that the "taper" originally provided for in the statutory scheme – most recently embodied in s. 162 (4)-(6) of the Employment Right Act 1996 – was repealed by the 2006 Regulations (see Schedule 8). She submitted that that implied a recognition that the practice of tapering not only was age-related but could not be justified; and tapering does an essentially equivalent job to that done by the cap incorporated in the Scheme with which we are here concerned. Again, the point is well taken. But we do not know what the Secretary of State's thinking was when he decided to repeal the taper. We do not believe that it can safely be inferred that he believed that the taper was unjustifiable; and even if he did it does not follow that he was correct or that his conclusion can be read across to the circumstances of the present case. (We should add that we have since the hearing looked at the two consultation papers which preceded the making of the 2006 Regulations – Age Matters and Coming of Age - and there is no discussion of the rationale for removing the taper.)
  1. Thirdly, Ms Burne told us (and Ms Genn accepted) that the evidence before the Tribunal was that employees who wished to work beyond age 65 were normally permitted to do so; so that the Claimant's loss might well in fact have exceeded the amount recognised by the cap (though Ms Genn made no concession as to what would have happened in his case. But that is immaterial unless he had a legal right to work beyond that age, which it is not suggested that he did. (The same reasoning would also apply to any objection that the Claimant might in fact have earned more than £649 per week in his last 2¼ years, e.g. as a result of pay increases or other non-contractual benefits.)
  1. Fourthly, Ms Burne submitted that the Tribunal's finding at para. 57 of the Reasons that the cap was a disproportionate means of preventing a windfall was a finding of fact, with which on ordinary principles this Tribunal ought not to interfere. But, with respect to the Tribunal, the reasoning in para. 57 is wrong in principle because the Tribunal has failed to appreciate what the nature of the windfall is. Once it is recognised that the purpose of the Scheme is to compensate employees for the loss of the opportunity to earn remuneration over the remainder of the employment, then, as we have noted at para. 16 (3) above, a provision which prevents them recovering more than they would have been entitled to earn had the employment continued is necessarily justifiable whether the amount of the windfall is large or small.
  1. For all those reasons we must allow the appeal and dismiss the claim.
  1. In those circumstances it is not necessary for us to consider the Appellant's alternative ground of appeal based on bias. But we believe that we ought briefly to deal with it in case the matter goes further, though we will not do so in great detail. The Appellant's case as pleaded in the Notice of Appeal, and supported in an affidavit from the solicitor with conduct of the case, Ms Bradley, made essentially three points:

(1) The Employment Judge is said, in effect, to have got the wrong end of the stick at an early stage of the hearing, claiming that the question of the age that employees became entitled to pension was "crucial" and had not been properly addressed by the Appellant in its evidence. She insisted on a short adjournment to enable further instructions to be obtained. But the point was in fact of no significance.

(2) Following the adjournment the Tribunal saw counsel and solicitors in the absence of their clients to ascertain what the result of the further enquiries was. On that occasion the Judge is said to have asked Ms Genn "quite emphatically" why the Appellant was defending the claim. She is said to have said that it would be hard to justify the cap given the smallness of the savings effected by it. Ms Bradley says that she showed irritation and frustration when Ms Genn made it clear that the Appellant was sticking to its guns.

(3) Following these two incidents, the Judge is said to have maintained "an irritated and impatient approach" towards the Appellant. Ms Bradley goes so far as to say that in ten years' experience she "[had] never previously experienced such clear antipathy towards a party as demonstrated by the Employment Judge on this occasion". It is in fact unclear whether that comment is directed to the Judge's comments during the hearing generally or only to the episode summarised at (2) above; but Ms Bradley gives no evidence of any other incident during the hearing, and apart from that episode she appears to base her allegations of bias on what she takes to be the hostile tone of the Reasons.

  1. In the usual way, comments were sought from the Claimant's representatives and the Tribunal members themselves. An affidavit was lodged from Ms Wisener of the Claimant's solicitors, and comments were received from all three members of the Tribunal (though the Judge herself had little recollection of events).
  1. As to point (1), on our analysis the Judge's interest in the pension question was indeed misplaced. But it is not at all uncommon that in the early stages of a hearing (and not only a hearing at first instance) a tribunal may go off down a wrong track; but that is all part of the dialectical process, and it is counsel's job to bring it back again. If the error persists into the final reasoning that will give a substantive ground of appeal, but that has nothing to do with bias.
  1. As to point (2), Ms Wisener confirms that the Judge did on the occasion in question enquire whether the claim could not be settled, in view of its small size and what she said was the difficulty in justifying the cap when it effected so small a saving. She says however that she appears often before Judge Hill and that it is not uncommon for her to encourage the parties to settle; and she saw no sign of any irritation when Ms Genn made it clear that the Appellant intended to continue to defend the claim. There is nothing objectionable in principle in the tribunal, in an appropriate case, suggesting settlement and in that context, if it thinks fit, giving an indication of its provisional views or of the difficulties faced by one or both parties. There is of course always a risk that such interventions will be taken as indicating a closed mind, and they should be made only with some caution; it would have been better if the Judge on this occasion had said explicitly that the views that she was expressing were only provisional. But she was addressing counsel and solicitors, in the absence of the parties, and we do not believe that in those circumstances it was necessary to spell out what they as professionals would have clearly understood to be the case. It might have been different if she had been addressing the parties directly, and particularly if they were unrepresented.
  1. As to point (3), one of the lay members in his comments describes Judge Hill's style as "robust", and Ms Wisener says that she is known for taking a firm line with counsel who, or whose clients, have not prepared or thought through their cases properly. We can see nothing in Ms Bradley's evidence to suggest that the irritation and "antipathy" of which she complains should have been interpreted as going beyond this. Although we have found for the Appellant on the substantive issue in the case, we have ourselves observed that the case as advanced before the Tribunal – and indeed, we have to say, before us – was not as clearly focused as it should have been: see paras. 8-11 above. There was therefore a basis for legitimate criticism. Judicial styles vary, and even if there was a degree of asperity in the Judge's comments, we do not believe that an informed observer would have come close to concluding from them that the Tribunal would not be considering the issues in the case fairly and on their merits. The position might, again, be different if the parties had been unrepresented; but counsel are professionals, and can properly be expected to cope with a level of robust questioning and criticism which would be inappropriate when addressed to a layman.
  1. If, therefore, the appeal had turned on the issue of bias we would not have allowed it.

Published: 08/07/2010 21:28

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