Vesuvius Plc & Ors v Glenn Cowie

Following a 10 day liability hearing the ET found that C had been unfairly dismissed by R and that the dismissal involved age discrimination. The ET gave directions in relation to remedy including requirements to produce schedules and the identification of issues. C produced a schedule with a “grossing up” calculation which included a line for grossing up in respect of NIC. R put in a schedule which did not include such a line but did not specifically raise the issue in writing or orally at any stage.

Following a further three days of hearings on remedy, the ET issued a judgment for over £3 million which included a sum for grossing up in respect of NIC of some £95,000. The judgment sum was paid within 14 days net of income tax which was paid to HMRC. C was also liable to tax in South Carolina on the judgment sum and subsequently paid that tax and a penalty.

In the meantime, R appealed on the basis that it was an error of law to gross up in respect of NIC. C later accepted that this was indeed an error of law but continued to maintain that it was not open to R to argue the appeal because it was relying on a “new point”.

The EAT found that the point was a “new point” but that it would not have caused C to conduct the case differently in the ET and that the EAT could in principle issue a new judgment without the matter being remitted to the ET. However the EAT still had a discretion as to whether to allow the new point to be taken. The EAT was not satisfied that C would not suffer substantial prejudice if the point was allowed to be taken because of the tax he had already had to pay and difficulties “unscrambling” the issues. Other relevant factors were:

Taking account of all relevant factors the EAT exercised its discretion not to allow the new point to be taken on appeal and dismissed the appeal so that the ET’s judgment stands.

This is an appeal by the respondents below, who I shall refer to as Vesuvius, against a judgment for £3.171 million which represented financial loss arising from the claimant’s dismissal in 2020. That judgment was issued by the London Central ET (EJ Adkin and members) on 20 June 2024 following a second remedy hearing held on 13 March 2024 at which both sides were represented by the same counsel as on this appeal.

The error of law relied on is that the “grossing up” calculation the employment tribunal carried out in assessing the claimant’s compensation included a sum in respect of UK national insurance contributions as well as UK and South Carolina tax, which Vesuvius say has resulted in a total award £95,921 greater than it should have been. It is common ground that this was indeed an error of law but the claimant, Mr Cowie, says that the appeal should nevertheless be dismissed in the interests of finality.

Mr Cowie is now 70. He resides in South Carolina. He worked for Vesuvius for most of his career, latterly in the UK under a contract of employment made with the fourth respondent, Vesuvius Holdings Ltd, on 14 August 2018. He was dismissed with effect from 1 March 2020. He brought claims in the employment tribunal alleging unfair dismissal, age discrimination, whistleblowing detriment and victimisation. Following a 10 day hearing in October 2021 he succeeded on liability. At the end of its liability judgment issued on 21 January 2022 the ET made case management directions providing for a three day remedy hearing to be listed, for Mr Cowie to provide a schedule of loss and for Vesuvius to provide a counter-schedule, and for the parties to agree and finalise a list of issues before the remedy hearing.

There was a remedy hearing on 8 and 9 November 2022 leading to a judgment and reasons issued on 10 January 2023. The ET awarded Mr Cowie £20,000 with interest for injury to feelings and £8,976 as a basic award for unfair dismissal. The ET made findings as to the chances of Mr Cowie retiring in any event at various dates. They then recorded at para (5) in the judgement that a final order for a compensatory award would be produced “… following further input (ideally agreement) from the parties on net earnings figures, LTIP, dividends, interest on financial losses and ‘grossing up’…” Again, case management directions were made requiring Mr Cowie to provide a Schedule with calculations and totals including “grossing up, with details of calculations” and providing:

For various reasons, including Mr Cowie suffering a serious heart attack on 5 January 2023, the timetable envisaged by the tribunal was delayed. On 31 July 2023 Mr Cowie’s solicitors, Keystone Law, served a spreadsheet setting out his calculation of loss on Vesuvius’s solicitors, Mishcon de Reya. The spreadsheet showed a figure for net loss and a table showing a grossing up calculation which included lines for the three UK income tax bands, a line for UK National Insurance and a line for South Carolina tax. I was told (and it was not disputed) that the inclusion of NIC in the calculation was the result of a mistake made in good faith, initially by Mr Cowie himself who prepared the first version of the schedule with the help of an on-line program relating to grossing up which included NIC, I imagine because it was designed for purposes other than calculating compensation for loss of employment. Keystone Law’s covering email stated:

On 15 September 2023 Mishcon de Reya wrote to the tribunal complaining about aspects of the spreadsheet and stating:

The second remedy hearing was ultimately listed for 13 March 2024. Both sides were represented by solicitors and counsel, who are all obviously experienced and able. In spite of the tribunal’s earlier direction that there should be one document, both sides produced spreadsheets for the hearing based on the earlier ones I refer to above. They were over £1 million apart in the final figures they reached; Mr Cowie’s spreadsheet included a line for grossing up for NIC and Vesuvius’s did not but there was no indication in the spreadsheets that this was a specific issue. Counsel agreed a list of 13 issues for the hearing which included the following:

Following the hearing but before judgment was given there were further exchanges between the parties’ solicitors and the tribunal. A further spreadsheet was provided by the respondents and Keystone Law wrote to the tribunal about it on 15 March 2024 stating among other things:

The judgment issued on 20 June 2024, which followed two days of consideration in chambers by the tribunal and which ran to over 30 pages, set out the procedural history and then stated:

In relation to issues 9 and 11 the tribunal decided that the award should be grossed up to take account of state income tax in South Carolina (para 124) and that the award for injury to feelings should be grossed up (para 129). In relation to issue 10 the tribunal said only this at para 125:

Although there was no evidence before the EAT on the point, it is common ground that Vesuvius paid that sum to Mr Cowie through their payroll system on 4 July 2024 (ie 14 days after the date of judgment) net of UK income tax which was automatically deducted from the payment and paid to HMRC at an overall rate of about 44.5%. It is a reasonable inference that at that stage no-one had appreciated that the ET’s table 3 contained an error in grossing up for NIC.

Thereafter, once the error came to the notice of Vesuvius, there was no application for a reconsideration by the ET but this appeal was launched on 31 July 2024. The notice of appeal simply stated that the tribunal had erred in including employee’s NIC in the grossing up calculation, referred to the relevant legislation and sought an order that “the ET be required to recalculate the compensatory award, this time excluding employee’s NIC in the grossing up calculation”. The appeal came before HHJ Auerbach on the sift in October 2024. He ordered that it be set down for a full hearing on 9 October 2024. It is reasonable to infer that Mr Cowie’s advisors must have learnt of the point shortly thereafter at the latest. Their Answer to the appeal simply denied there was an error and, in the alternative, raised the principle of finality as a basis for dismissing the appeal.

Mr Cowie obviously received the balance of the judgment sum after deduction of UK tax on or around 4 July 2024. I was told that he delayed paying any tax due in South Carolina for as long as he could but that he ended up incurring a penalty and was finally obliged to pay it last month (October 2025). I was also told that the tax due in South Carolina included income tax at 6.4% plus substantial sums for US social security and Medicare. It would have been better if there had been some proper and more detailed evidence about all this but it was not suggested that there was any reason to disbelieve it.

Sections 401- 416 of the Income Tax (Earnings and Pensions) Act 2003 subject payments made “in connection with the termination of a person’s employment” to income tax for the year in which it is paid. Mr Cowie’s award was therefore subject to UK income tax in the year 2024/5 and it was necessary to gross up the award in respect of that income tax to ensure that he was fully compensated. But there is no equivalent provision in relation to NIC and no NIC was due on the compensation awarded to Mr Cowie. It was therefore plainly an error of law to gross up the award to cover NIC. That much, as I say, is not in dispute.

But Mr Susskind relies on the principle of finality. He drew my attention to what is said about this principle by the Privy Council in the recent case of Primeo Fund v Bank of Bermuda [2024] AC 727 at paras [145]-[156]. In the context of an appeal to the EAT the principle of finality is reflected in the restrictions which are placed by appellate courts on new points being raised on appeal, which the Privy Council deals with at paras [150]-[155]. Although there is no absolute bar on the taking of a new point on appeal, an appellate court proceeds with great caution before it allows a new point to be taken. Where the new point would have caused the parties to conduct the case in the lower court differently or would involve further factual inquiry the principle of finality is likely to be upheld and the new point not allowed. If the new point is a “pure point of law” which can be argued on the basis of facts found in the lower court, the appellate court may allow it to be taken if satisfied that the respondent will not suffer prejudice.

The Court of Appeal in Notting Hill Finance v Sheikh [2019] EWCA Civ 1337 summed up the approach the appellate court should take in this way at para [26]:

Ms Belgrove says that the point raised on the appeal is not a “new point” at all. The parties put forward competing spreadsheets: the claimant’s included a line for grossing up in respect of NIC; the respondents’ did not include such a line and it reached a correspondingly lower final figure. The point was raised in this way before the tribunal and, further, it was implicit in issue 10 in the agreed list of issues.

Having regard to the whole history of the litigation as I have described it above, I am quite satisfied that Vesuvius are properly to be regarded as seeking to take a new point in the EAT. Deciding the right amount for compensation was a major exercise involving many issues for the tribunal. Both sides were assisted by counsel and solicitors (and Vesuvius was also assisted by KPMG). A list of issues was agreed by counsel before the second and final remedy hearing which the tribunal was entitled to assume reflected all the outstanding issues. Although issue 10 might be generously construed as including the issue of whether there should be grossing up in respect of NIC, there is no express reference to the point in the list of issues (in marked contrast to the position in relation to South Carolina tax). All that was required was for Vesuvius to say expressly at some point that the claimant’s schedule was just wrong to include grossing up in respect of NIC; but for some reason they did not mention the point in any written or oral submission, even when, on 15 March 2024, the point was expressly referred to in correspondence by the claimant’s solicitors. If they had mentioned it, it is reasonable to assume that the point would have been conceded fairly quickly by Mr Cowie’s legal advisors and the tribunal would have avoided the error. Although the tribunal and the claimant must bear some responsibility, the main cause of the error was Vesuvius’s failure to raise the point properly in the tribunal.

Ms Belgrove submitted that the case would not have been conducted any differently by the claimant in the tribunal if the point had been raised there and that the error of law can be corrected by the EAT itself without difficulty as a matter of arithmetic without the need for any further evidence. Although Mr Susskind rightly points out that in the original notice of appeal Vesuvius asked that the matter be remitted to the employment tribunal to recalculate the compensatory award, I accept Ms Belgrove’s submission. Although the tribunal’s Table 3 is not entirely clear, in principle the excess amount should simply be 3% of the grossed up figure ultimately reached by the tribunal. In any event, as HHJ Richardson said in a similar case, it is open to the EAT to adopt the “rough and ready” approach to grossing up which employment tribunals necessarily do (see: Chief Constable of Northumbria v Erichsen [2015] WL 5202327 at para [74]).

That is not, however, the end of the matter. I still have a discretion to exercise and in particular I must consider the question whether Mr Cowie may suffer prejudice if I allow the point to be taken as part of that exercise.

In relation to prejudice, Mr Susskind points out that if the amount awarded by the tribunal’s judgment is simply reduced by £95,000 odd (representing the 3% in respect of NIC) and Mr Cowie is obliged to repay that sum, he will ultimately have received substantially less than his net loss because he has paid UK and South Carolina tax on the £95,000 (totalling it is said some £62,000) as well as the South Carolina penalty, all of which he is unlikely to be able to get back. Ms Belgrove suggested that once the EAT issues a judgment in the correct sum it will be possible to sort matters out with the tax authorities so that he is not out of pocket and/or that matters will be resolved as part of the enforcement process. I am afraid I do not regard this approach as realistic. I think that “unscrambling” something like this with HMRC would not be at all straightforward, still less so with overseas tax authorities (particularly in relation to any penalty already paid), and it would most likely involve Mr Cowie in a great deal of time, expense and stress. Given the somewhat acrimonious nature of these proceeding so far I also suspect that any attempts to resolve matters through the enforcement process would also involve further litigation bringing with it expense and stress. As Mr Susskind points out, all this would come against a background of long drawn out litigation which Mr Cowie for some months would have legitimately believed was over and done with and at a time when he could legitimately be hoping to enjoy his retirement in peace.

For those reasons I cannot be satisfied that Mr Cowie will not suffer prejudice (and quite substantial prejudice) if I allow this new point to be taken. As to other relevant factors, I have outlined above the nature of the proceedings in the tribunal: they were hard fought with legal teams on both sides and lasted a long time. Although the new point is not complicated or difficult or even contentious, I have already expressed the view that responsibility for the tribunal’s error must lie mainly with Vesuvius. I also consider that they should have sought to raise the issue by way of an application for reconsideration in the employment tribunal (possibly at the same time as bringing an appeal): the point may be one of law but it seems to me it is just the kind of point that, being clear and obvious, is ideal for the reconsideration procedure; if they had taken this approach Mr Cowie would have learnt of the point earlier and it may have been possible to unscramble matters more easily. It is right that the point of law could have been conceded much earlier in the course of the appeal by Mr Cowie but he was always on any view entitled to argue the finality point at a full hearing. The amount at stake is substantial but modest in the context of the overall claim.

Taking all those factors into account I have come to the firm view that it would not be right to allow the new point to be taken on appeal.

Since it is the only point in the appeal the inevitable consequence of that conclusion is that the appeal must be dismissed and the award made by the employment tribunal must stand.