South Tyneside Healthcare NHS Trust v Awotona

J U D G M E N T

1. LORD JUSTICE MUMMERY: I will ask Lord Justice Keene to give the first judgment.

2. LORD JUSTICE KEENE: This case raises a short but not unimportant point about the calculation of compensation in unfair dismissal cases where the employer fails to comply with an order for reinstatement. It is an appeal by Dr Victoria Awotona against the decision of the Employment Appeal Tribunal ("EAT") dated 29th June 2004. By that decision the EAT allowed an appeal by the present respondent, the South Tyneside Healthcare NHS Trust ("the Trust"), against an order made by an Employment Tribunal sitting at Newcastle upon Tyne and sent to the parties on 21st May 2003.

3. Because of the limited nature of the issue in this appeal, the facts can be put quite shortly. Dr Awotona was employed by the Trust as a consultant in obstetrics and gynaecology from 1st February 1995. On 1st December 1998 she was dismissed, allegedly for gross misconduct. She brought a number of complaints before the Employment Tribunal. Not all of them were successful, but the Tribunal found that she had been unfairly dismissed and had been racially discriminated against by way of victimisation.

4. A remedies hearing then took place over the course of five days in December 2002. On the last of those days there was insufficient time for submissions to be heard from counsel on each side and so the matter was adjourned. At the resumed hearing on 27th January 2003 there was an application on behalf of Dr Awotona to reopen her case, so that she could be recalled to give evidence in respect of a further benefit she was said to have lost in the shape of payments from certain family planning procedures which she would have undertaken had she not been dismissed. These were described as amounting to about £9,500 gross per annum.

5. The Tribunal refused the application to reopen her case. It recognised that she had been unwell, but it did not regard that as explaining the failure to raise this head of claim at an earlier stage, which failure was not adequately explained. It also noted that both sides had called their evidence already, and it said that to allow the application would mean a postponement of an uncertain and possibly substantial length. Consequently the hearing proceeded.

6. By a decision sent to the parties on 5th March 2003, the Tribunal ordered her reinstatement by 1st April 2003. It also specified an amount payable by the trust under section 114(2) of the Employment Rights Act 1996 ("the 1996 Act"). That subsection reads as follows:

"(2) On making an order for reinstatement the tribunal shall specify--

(a) any amount payable by the employer in respect of any benefit which the complainant might reasonably be expected to have had but for the dismissal (including arrears of pay) for the period between the date of termination of employment and the date of reinstatement,

(b) any rights and privileges (including seniority and pension rights) which must be restored to the employee, and

(c) the date by which the order must be complied with."

7. The Employment Tribunal specified such sum as would, after payment of income tax and National Insurance contributions, leave an amount of £148,704. Issues as to the remedy for race discrimination were adjourned for a date to be fixed.

8. There was then an interlocutory hearing on 9th May 2003, by which time it had become clear that the Trust had not complied with the order for reinstatement. It was therefore apparent that the further remedies hearing would be concerned not only with compensation for race discrimination, but also with the consequences of the non-compliance with the reinstatement order.

9. Dr Awotona then applied to reopen the question of calling evidence to substantiate a claim for loss of income from the family planning procedures. It was contended on behalf of the Trust that she was precluded from so doing by the ruling of the Tribunal on 27th January 2003, the reasons for which had been spelt out in the extended reasons sent on 5th March 2003. The Trust said that was a final decision on the issue. The Employment Tribunal disagreed. It said this at paragraph 10 of its written reasons sent on 21st May 2003:

"Our previous ruling on this matter was not a decision: it was an interlocutory order. At the further hearing as to remedy, the Tribunal will have to calculate the amount of compensation due to the applicant. That must be viewed in the context of the respondent's failure to comply with the order for reinstatement. By virtue of section 117(2) of the 1996 Act, subject to section 124 (which deals with the maximum under the statute) 'the amount of the compensation shall be such as the tribunal thinks fit having regard to the loss sustained by the complainant in consequence of the failure to comply fully with the terms of the order.' That is the situation whether or not the tribunal eventually concludes that reinstatement was not practicable. Mr Hand contended that if our previous ruling was final for the purpose of section 114(2)(a), it was final in relation to this provision as well. We were unable to agree with that proposition. In our judgment, section 117(2) is so phrased effectively as to re-open the position."

10. It therefore ordered that Dr Awotona could adduce evidence at the further remedies hearing about her loss from family planning procedures not carried out. Its order also stated that "so far as is necessary there is revoked the interlocutory ruling" made at the hearing on 27th January 2003.

11. It perhaps is helpful at this stage to set out the terms of section 117 of the 1996 Act, referred to by the Employment Tribunal, in so far as they are material to this appeal. Subsection (1) provides for an award of compensation if an order for reinstatement or re-engagement is made and the complainant is reinstated or re-engaged, but the terms of the order are not fully complied with. In such a situation subsection (2) deals with the amount of compensation. It states:

"(2) Subject to section 124, the amount of the compensation shall be such as the tribunal thinks fit having regard to the loss sustained by the complainant in consequence of the failure to comply fully with the terms of the order."

12. Subsection (3) deals with the situation where the complainant has not been reinstated or re-engaged as required by the order under section 113, that is to say the position in the present case. It provides as follows:

"(3) Subject to subsections (1) and (2), if an order under section 113 is made but the complainant is not reinstated or re-engaged in accordance with the order, the tribunal shall make--

(a) an award of compensation for unfair dismissal (calculated in accordance with sections 118 to 127), and

(b) except where this paragraph does not apply, an additional award of compensation of the appropriate amount,

to be paid by the employer to the employee."

13. Section 124, referred to in those provisions, is the section setting a numerical limit on the amount of a compensatory award for unfair dismissal. It will be necessary to deal in more detail with the terms of that section later in this judgment.

14. The Trust challenged the decision of the Employment Tribunal sent on 21st May 2003 by way of an appeal to the EAT. By the time of the hearing before that body, certain concessions had been made by the parties. It was conceded on behalf of Dr Awotona that the decision of the Employment Tribunal under section 114(2) on 5th March 2003 was not an interlocutory decision, and that the Employment Tribunal did not have jurisdiction to revoke any part of that decision. The Trust, on its side, conceded that Dr Awotona could properly claim for losses arising from missed family planning procedures, in so far as those arose after the date ordered for reinstatement, namely 1st April 2003.

15. In financial terms what was in issue before the EAT was the amount lost between dismissal and 1st April 2003 in respect of such activities, it being contended by the Trust that those had already been dealt with by the award made under section 114(2)(a). For Dr Awotona it was argued that once there had been non-compliance with an order for reinstatement, the Employment Tribunal was entitled under section 117(3)(a) to reconsider all aspects of compensation for the whole period following dismissal, irrespective of any sums specified under section 114(2)(a).

16. The EAT (presided over by Her Honour Judge Wakefield) found in favour of the Trust. It put its reasoning succinctly in paragraph 17 of its judgment:

"In order, however, to put the matter beyond doubt, we are satisfied from the words of the statute in the provisions quoted above, that in calculating compensation under section 117(3) the Employment Tribunal would not be entitled to reopen any issues as to quantum of losses in the period for which the award had already been made under section 114(2)."

17. That proposition is challenged by the appellant and the respondent does not seek to uphold it, in my view rightly. The exercise to be performed under section 114(2) when an order for reinstatement is made is a different one from that to be carried out under section 117(3)(a) when a complainant is not reinstated as ordered by the Tribunal. The statutory wording is different and understandably so, since each provision is dealing with a different situation. Section 114(2) proceeds, in effect, upon the basis that the employee is to be reinstated, and it therefore requires the Tribunal to specify any amount payable by the employer in respect of any benefit which the employee "might reasonably be expected to have had but for the dismissal" for the period between termination of employment and reinstatement. It is not seeking any assessment by the Tribunal of what it would be "just and equitable" to award the employee as compensation for unfair dismissal if and when reinstatement does not take place. That is a different situation, and the test is therefore different. Section 117(3) makes it clear that if an order for reinstatement is not complied with, the amount of compensation for unfair dismissal is to be calculated in the normal way under sections 118 to 127A, plus the additional award under section 117(3)(b). Consequently section 123, amongst other provisions, is brought into play in that situation and one is into the "just and equitable" compensation regime.

18. One illustration of the difference between the two exercises can be seen from the EAT's decision in City and Hackney Health Authority v Crisp[1990] ICR 95, a re-engagement case but where the same principles were applicable as in reinstatement, at least for present purposes. The EAT (presided over by Knox J) held that the amount specified in such a case as payable by the employer under a re-engagement order was not to be reduced on the ground that the employee had failed to mitigate her loss. Yet that of course is in contrast to the position with a compensatory award for unfair dismissal (see section 123(4)). The EAT said that the concept of a reinstatement order was:

"... that an employer is to treat the employee in all respects as if there had not been a dismissal and, once one reaches that basic principle ... it is logical to allow the whole of the pay that would have been received but for the unfair dismissal, ..." (see page 101)

19. I accept that the Tribunal in assessing what is just and equitable as compensation for unfair dismissal is to have regard to the loss sustained by the employee, and that that loss is, by virtue of section 123(2), to be taken to include loss of any benefit which the employee might reasonably be expected to have had but for the dismissal. That item of loss is on the face of it broadly similar to the calculation which would have been carried out under section 114(2), though it will not be confined to the period up to the date for reinstatement. But the assessment under section 123 is a separate and necessarily later exercise than one done under section 114(2), and I can see no reason why the Tribunal should not be at liberty to reconsider the amount of lost benefit even in the period of time between dismissal and the date originally set for reinstatement. There is no need for the Tribunal to revoke the earlier calculation.

20. Equally, however, the Tribunal in my judgment has no power to revoke that section 114 calculation, except where there is an application for a review. The amount specified under section 114(2) remains the amount specified, and it may still have a role to play even where reinstatement does not take place. As the respondent points out in its skeleton argument, the amount specified under that provision is referred to when the 1996 Act deals with the statutory limit on the amount of the compensatory award. Section 124(1) provides for a monetary limit to the compensatory award for unfair dismissal, but section 124(4) allows for that limit to be exceeded in certain circumstances. It states:

"(4) Where--

(a) a compensatory award is an award under paragraph (a) of subsection (3) of section 117, and

(b) an additional award falls to be made under paragraph (b) of that subsection,

the limit imposed by this section on the compensatory award may be exceeded to the extent necessary to enable the aggregate of the compensatory and additional awards fully to reflect the amount specified as payable under section 114(2)(a) or section 115(2)(d)."

21. So that enables the normal statutory limit on the compensatory award to be exceeded to the extent necessary "fully to reflect the amount specified" under section 114(2)(a). That provision was inserted to prevent employers from benefiting from the statutory limit simply by not reinstating an employee when ordered by a Tribunal, thereby reversing, in effect, the decision in O'Laoire v Jackel International Ltd [1990] ICR 197. I would emphasise that it is not intended to operate so as to replace the normal calculation of the compensatory award or any part of it. It is only for the purpose of calculating the statutory limit that one takes account of the amount specified as payable under section 114(2)(a). That limited role can readily be appreciated if one postulates a case where there is no question of the statutory limit on compensation operating. In such a case the Tribunal's task is to assess the amount of compensation payable under sections 118 and 123 for unfair dismissal in the normal way. It is not bound by any earlier decision as to the amount specified under section 114(2)(a). It is only if the Tribunal gets to the later stage of considering the statutory limit on compensation under section 124 that such an amount previously specified comes into play.

22. It follows that in my judgment the EAT was wrong to reach the conclusion which it did and the parties are right to have concluded that this appeal should be allowed. For the reasons I have set out, I would so order.

23. MR JUSTICE SULLIVAN: I agree.

24. LORD JUSTICE MUMMERY: I agree.

(Further submissions as to costs)

25. LORD JUSTICE MUMMERY: For the reasons which have been given, the appeal is allowed. The appellants ask for an order that the respondents pay the costs of the appeal. That is not resisted.

26. The appellants ask for the costs to be summarily assessed. That procedure is not resisted, but points have been taken by Mr Hand QC on certain items in the appellant's breakdown of the costs of this appeal. The bill submitted, with some deductions which have been made, totals £23,206.79. The particular items in the breakdown which have been challenged by Mr Hand are, first, under the heading of "Attendance on documents" a total of 35 hours (9 hours being at £173 and almost 27 at £163 an hour), producing a sum for attendance on documents alone at nearly £6,000. The point was made that it is difficult to see the justification for spending so much time in relation to documents on an appeal confined to a question of law and on which there are very few relevant documents apart from the pleadings, the decision in the Employment Tribunal and the judgment of the Employment Appeal Tribunal.

27. Criticism is also made of the "Attendance on Client" figure of £815, which is arrived at by 5 hours at £163 an hour, in the context of an appeal that again is simply on a legal question, being the short point of construction of the relevant provisions of the Employment Rights Act dealt with by Lord Justice Keene in the leading judgment.

28. The third item which Mr Hand criticises is the decision to have junior counsel in the Court of Appeal at a substantial fee, when he was not briefed as counsel either in the Employment Tribunal or the Employment Appeal Tribunal, and there has been separate payment for the disbursement in relation to counsel's advice and drafting.

29. We have considered these criticisms. We think it is fair to say that they are recognised to some extent by Mr Langstaff in defending the bill, reduced, he suggested, to £17,500. Having given consideration to the points that have been made, we are of the view that the items identified by Mr Hand are unreasonable. We would reduce the total of £23,206.79 to £16,000. We do not think it is necessary to itemise the way in which we have made the reduction under the various headings.

ORDER: Appeal allowed with costs assessed summarily in the sum of £16,000.

(Order not part of approved judgment)

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