AON Training Ltd & Anor v Dore

J U D G M E N T

1. LORD JUSTICE PETER GIBSON: This is an appeal by AON Training Ltd ("AON") and Mr Alan O'Neill from that part of the order of the Employment Appeal Tribunal ("the EAT") which substantially upheld the decision of an Employment Tribunal ("ET") sitting at Liverpool on 16th December 2003. At that hearing, a remedies hearing, the ET, by a decision sent to the parties on 29th December 2003, awarded Mr Ian Dore £24,074.43 compensation plus interest, and ordered AON and Mr O'Neill to pay that sum.

2. The EAT allowed the appeal to the extent that it ordered that AON alone should be liable to pay the basic award of £240, the sum of £1,952.36 for the unlawful deduction of wages, the sum of £6,442.36 for unpaid commission, and interest on those sums. The result is that AON and Mr O'Neill remain jointly and severally liable to pay £3,500 for injury to feelings and £10,688.81 for compensation for loss, plus interest on those two sums.

3. Permission to appeal limited to the issue of remedies was granted at an oral hearing by Pill and Mummery LJJ on 10th November 2004.

4. The background to this dispute can be summarised in this way. Mr O'Neill set up AON in 1998 and was at all material times its majority shareholder. However, he was disqualified from acting as a director for 12 years from June 2000 for offences of dishonesty, but continued to direct the affairs of AON. He has been fined for acting as a disqualified director.

5. By July 2003 AON had no assets, as the solicitors to AON and Mr O'Neill informed Mr Dore's solicitors. It appears that it had transferred its assets to another company of Mr O'Neill in March 2003, after Mr Dore commenced these proceedings.

6. Mr Dore was an employee of AON from 16th April 2000 until he was dismissed by Mr O'Neill on 17th July 2001. Mr Dore was then 39. His basic annual salary was £25,000, but he received bonuses or commission of up to £40,000 per annum.

7. Mr Dore suffered from dyslexia. At the outset of his employment Mr Dore was informed by Mr O'Neill that he would receive large bonuses and 10% of the shareholding in AON. In July 2001 Mr Dore expressed his dissatisfaction that he had not received what he had been promised. Mr Dore was then required by Mr O'Neill to produce a business plan, which he did, but he was subjected by Mr O'Neill to prolonged and hurtful criticism. Mr O'Neill dismissed Mr Dore on 17th July 2001, and he told the company secretary that he had to sack Mr Dore because he wrote like a 7-year old.

8. Mr Dore commenced proceedings in the ET on 4th October 2001 against AON and Mr O'Neill, alleging (amongst other things) unfair dismissal under the Employment Rights Act 1996 ("the ERA") and disability discrimination under the Disability Discrimination Act 1995 ("the DDA").

9. There was an eight-day liability hearing in the ET at which Mr Dore was represented by an employment law consultant, Mr Bowie. By its decision sent to the parties on 8th October 2003, the ET found (amongst other things) that Mr Dore was disabled within the meaning of section 1 of the DDA; that an operative reason for his dismissal was his disability; that AON was liable for the actions of Mr O'Neill, who was aware of Mr Dore's disability; that Mr O'Neill knowingly aided AON to discriminate unlawfully against Mr Dore; that the principal reason for Mr Dore's dismissal was that he was seeking to rely on the promises made to him about the 10% shareholding, and that that was not a potentially fair reason for dismissal; and that the dismissal was unfair.

10. The case was then adjourned for a remedies hearing. At a review hearing on 21st October 2003 the ET ordered Mr Dore to provide: (a) a breakdown of his income on an annual basis from dismissal to the date of that hearing; (b) the start-up costs of his new business; and (c) all applications for work between the date of dismissal and the date of that hearing.

11. Mr Bowie on 14th November 2003 sent to the ET Mr Dore's tax return for 2002, a statement from his accountant detailing the start-up costs of his business and his income and living expenses for the period April 2002 to that date, and informed the ET that Mr Dore had not applied for any other work and would rely on his efforts to build up his business in mitigation of his loss. The accountant's statement was only that the total borrowing by Mr Dore for his business venture was £48,122.82. No details were given as to when the borrowings took place, nor in what amounts other than the total.

12. For the remedies hearing Mr Dore provided a schedule of loss, claiming a compensatory award based on the salary of £25,000 for 113 weeks from 17th July 2001, that is to say a sum of £41,287. No claim was made in respect of interest on the borrowing for his new business. No claim was made in respect of bonuses or commission. In the schedule it was said that he had no income between 17th July 2001 and March 2002, but that he had earned £15,000 in total from March 2002 to 10th September 2003. It was said that that was supported by his nil tax return and what were said to be disclosures from his accountant. It was suggested in the schedule that the £15,000 should be deducted from the compensation claimed.

13. At the remedies hearing on 17th December 2003, the ET found that Mr Dore had not complied with its order of 21st October 2003. It gave Mr Dore the option of an adjournment of the hearing so that further information could be provided, but at the risk of an adverse costs order, or of a decision being reached on the evidence available that day. Mr Dore chose the latter. He gave oral evidence, but the ET found that evidence unsatisfactory as it lacked detail. The ET said that therefore it made its decision on the documentary evidence before it. To my mind, it is quite plain that it made that decision on that evidence alone.

14. The ET found that Mr Dore had not applied for work since his dismissal, but had sought to establish his own business as he did not want to be subjected to the treatment he had received from anyone like Mr O'Neill again. The ET found that Mr Dore had borrowed the £48,122.82 to set up a refurbishing and building company. It awarded him interest at 7% for 113 weeks from the date of dismissal to the date of the hearing, and a further year's interest for future loss.

15. The ET, in paragraph 7 of its extended reasons for its remedies decision, set out its calculations of Mr Dore's loss. They included, so far as relevant, £250 for loss of statutory rights, £7,320.22 interest on the borrowings for 113 weeks and £3,368.59 interest on the loan for a further 52 weeks. In paragraph 9 it also awarded interest at 7% on £7,320.22 and £250 for 56½ weeks, which totalled £575.77.

16. AON and Mr O'Neill appealed on a number of grounds. So far as relevant to the present appeal, in addition to challenging Mr O'Neill's joint liability for awards which could only properly be made against AON (which challenge, as I have indicated, succeeded), they challenged the award of compensation for loss which they said Mr Dore had not established in his evidence.

17. The EAT (His Honour Judge Prophet presiding) said that the ET had not specifically indicated that it was accepting that the decision by Mr Dore to set up his own business was one which it was reasonable for him to take. However, the EAT said that that was what the ET decided and that it was appropriate for the ET to deal with the matter of compensatory loss in the way that it did. The EAT commented that the ET was doing its best on limited information available to it, and that the award was by no means excessive and, having regard to the findings as to how Mr Dore was treated, could well be described as modest. Accordingly, it dismissed the appeal relating to the quantification of the loss.

18. On the application for permission to appeal to this court, Pill LJ said that there were only two disputed items which were the subject of challenge. One was the 7% interest on £48,122.82 for 113 weeks. The other was the future loss, the 7% interest on the borrowings for one more year.

19. Pill LJ noted a concession by Miss Omambala, who appeared for AON and Mr O'Neill, that the disputed awards could be made either under the DDA, in respect of the disability discrimination claim, or under the ERA, in respect of the unfair dismissal claim. Pill LJ noted that the principal reason for the dismissal was the reliance by Mr Dore on the promise made to him in respect of the 10% shareholding and that the dismissal was unfair. Pill LJ said that it was open to the ET to make an award under both Acts, but the Lord Justice continued:

"20. Where there is, in my judgment, force in Miss Omambala's submissions, is in relation to the assessment of compensatory loss and the lack of reasoning upon it. The claim on behalf of the applicant was made under this head as a loss of salary. That is, with respect, the way in which I would have expected it to be made. Mr Dore attempted to set up a business of his own and, before he did so, he was out of currently remunerative work and not making money, and it is no surprise that what was claimed was a salary of 113 weeks amounting to a total of £41,287. That, of course, is substantially higher than the award actually made.

21. It does not appear from the extended reasons of the Employment Tribunal, dated 16th December 2003, why they adopted the course that they did. They do state that Mr Dore's evidence was 'unsatisfactory as it lacked detail.' They added that the decision was made on compensation on documentary evidence before it and no doubt that included the interest which was payable upon the loan which he had obtained in order to set up his proposed business. Having confirmed that Mr Dore had been dismissed 'at a moment's notice and ridiculed for his disability', the Tribunal goes straight on in paragraph 4 to refer to the borrowing and to the interest.

22. It is not clear to me how that can be the proper way to assess a compensatory loss, and the Tribunal did not attempt to justify it. Miss Omambala says that the conventional way of assessing it was placed before the Tribunal, and they do not state why they do not deal with it in that way, save in their reference to 'lacking detail', to which I have referred.

23. Miss Omambala does make the point that there is no specific finding by the Tribunal that a loss of earnings over the prolonged period for which they awarded loss of interest was justified, and no specific finding that Mr Dore was justified in attempting to set up his own business over a prolonged period of time rather than seeking salaried or waged employment. However, her main point is that, even if they did find expressly or implicitly that his conduct was reasonable, they have not explained, and there could be no basis for explaining, she submits, how loss of interest on a loan is an appropriate head for a compensatory award."

20. Pill LJ commented in paragraph 24:

"That, in my judgment, is arguable."

21. On the appeal before us Miss Omambala challenges the compensatory award of £7,322.22, the interest on the loan for 113 weeks, and £3,368.59, the interest on the loan for a further 52 weeks. She submits that the ET erred in making a compensatory award in that sum, and that the ET also failed to give adequate reasons.

22. So far as the DDA claim is concerned, Miss Omambala points out that under what is now section 17A(3) of the DDA, the compensation must be quantified by applying the principles applicable to the calculation of damages in claims in tort. She submits that the losses to be compensated must have arisen naturally and directly from the act of discrimination, and that it cannot be said that the interest on a business loan qualifies as such. She also submits that the ET failed to adopt the proper approach to the assessment of compensation. It did not assess what Mr Dore's earnings were from his new business. It did not deduct that sum from the sum he would have earned had he remained employed by AON.

23. On the ERA claim, Miss Omambala points out that section 123(1) of the ERA provides for the compensatory award to be such amount as the ET considers just and equitable in all the circumstances, having regard to the loss sustained in consequence of the dismissal, in so far as that loss is attributable to action taken by the employer. By section 123(2)(a) that loss is taken to include any expenses reasonably incurred by the complainant in consequence of the dismissal. She points out that the ET could only award compensation in respect of losses attributable to the actions of AON under the ERA claim. She says that the ET should have quantified the loss by considering whether Mr Dore's employment would have continued indefinitely or for some more limited period, and whether the loss of remuneration was attributable to the dismissal. She submits that a "but for" test is not sufficient.

24. Miss Omambala criticises the ET for its lack of reasons and lack of findings in support of what it decided. She points out that it did not say expressly that it was reasonable for Mr Dore to set up his own business and to borrow the sums which he did.

25. Miss Omambala refers to the remarks of Lord Phillips MR in English v Emery Reimbold & Strick Ltd[2002] 1 WLR 2409 at paragraph 19, that if the appellate process is to work satisfactorily the judgment must enable the appellate court to understand why the lower court reached its decision. However, I would comment that one of the decisions in the English case demonstrated that even where no reasons are given, it may be that the appellate court will be able to infer what were the reasons of the lower court for its decision.

26. Miss Omambala said that the court should allow the appeal and, if it feels that the ET has failed to make the necessary findings of fact to support a compensatory award, it should set aside that award in respect of the disputed elements without making any further order. Alternatively, she submits that it should remit the case back to a fresh ET. Pill LJ noted a concession by her that realistically what she is seeking is the remission to another ET.

27. Mr James Stuart, for Mr Dore, submits that the ET's decision on the compensatory award should be upheld. He complains about the way AON and Mr O'Neill have behaved on this appeal. He complains of the lack of specific grounds of appeal on the appeal to this court. He has said that he did not know what was in the judgment of this court until it was handed to him by the court today. He has complained that what Miss Omambala has been seeking to do in this court is to advance totally new reasons which had not been aired below. He points out that the grounds of appeal in the notice of appeal to the EAT and the grounds of appeal to this court did not specify what have now proved to be the main grounds of appeal to this court.

28. If that is wrong and Mr Stuart has to deal with the matters now advanced by Miss Omambala, he submits that in substance there is no difference in the statutory requirements for assessing compensation under the DDA and under the ERA in circumstances such as the present, where the act of discrimination is the unfair dismissal. He says that it is plain that the ET thought it reasonable for Mr Dore to have sought to mitigate his loss by setting up his own business. If this court concludes that the ET has failed to set out its reasons and make findings adequately, he asks that the case be remitted. He is content that such remitter should be to a fresh ET.

29. We indicated at the outset that we found it surprising that as a practical matter AON and Mr O'Neill should be seeking to appeal from the decisions below. Both the EAT and Pill LJ had indicated that the awards might be thought to have been modest. It is clear that there must be a real risk that if this appeal succeeded to the extent that the case had to be remitted for reconsideration of the disputed elements of the compensatory award, there was a real possibility that the ET, guiding itself correctly, might arrive at an award at least as great as that which has been awarded. We are told by Mr Stuart that Mr Dore has had to incur considerable expense in connection with this dispute and he is simply anxious that the matter should be brought to an end.

30. However, Miss Omambala, after taking instructions, continued with the appeal. Accordingly, we have to deal with it.

31. Before I go to the substance of the case, I should deal briefly with Mr Stuart's procedural objections. To my mind, he has justification for complaining that AON and Mr O'Neill have failed to be as helpful as they should have been in setting out precisely what its grounds of appeal to this court are and in making available to Mr Dore the material which should have been provided to him well in advance of this hearing. I am, however, not persuaded that it would be appropriate for us to dismiss the appeal on the ground that the particular grounds advanced before us had not been indicated in the notice of appeal to the EAT or the grounds of appeal to this court. We are told by Miss Omambala that she did argue both before the EAT and before this court on the application for permission to appeal the very points which are now the focus of her appeal.

32. This court having granted permission to appeal on that basis, I think that we must proceed to hear the substance of the appeal on the points which this court indicated were properly arguable. No application was made to set aside this court's decision, although that would have been available to Mr Dore, not having appeared at the without notice hearing for permission to appeal.

33. Accordingly, I turn then to the substance of the decision. The ET's decision on the compensatory award leaves a great deal to be desired, even allowing for the fact that the evidence put before it was unsatisfactory and that Mr Dore had failed properly to put his case in his schedule of loss on which the ET decided the case. The conventional way to assess compensation, both under the DDA and the ERA, arising from a dismissal where the employee attempts to mitigate his loss by setting up his own business is demonstrated by the case of Gardiner-Hill v Roland Berger Technics Ltd[1982] IRLR 498. That was an unfair dismissal case. The ET should, first, calculate what sum represents loss of remuneration. It should then consider the costs incurred in mitigating loss and such a sum, if reasonably incurred, should be added to the loss. From that sum should be deducted the earnings from the new business. All that is of course on the assumption that the ET is satisfied that mitigation in that form was reasonable in the circumstances. What the ET in the present case has done, without explaining why, is to ignore both the loss of remuneration from employment with AON and the earnings from the new business, but to treat as the compensation interest on sums borrowed for the purposes of the new business. Moreover, it has calculated that interest from the date of dismissal.

34. For my part, I am prepared to infer that the ET did find it reasonable for Mr Dore to start up a business of his own, rather than to seek employment elsewhere. He had had an unpleasant and unfortunate experience as an employee of AON, to which the ET draws attention. He had substantial earnings from his job with AON. Indeed, the ET said he had lost his job just as his salary started to increase substantially.

35. The ET, it seems to me, must have considered that someone with a disability such as that under which Mr Dore suffered, dyslexia, might well have had difficulty in obtaining another appropriate job, and that therefore to start up his own business in the way that he did was reasonable. It must have thought that the borrowing to set up that business was also reasonable.

36. However, there was no evidence as to the terms of the borrowing, nor the date from which it began, nor, if it was borrowed (as it appears to have been) in more than one tranche, what were the tranches in which the total sum was borrowed. I do not understand how the borrowing could have commenced on the very day that Mr Dore was summarily dismissed. It would seem to be more than likely that it must have been after that date that he started borrowing money. But because of the lack of details relating to that borrowing, the sum which the Tribunal finds as the amount of interest for 113 weeks seems to me to be almost certainly one based not on actual interest incurred, but on some other generalised notion as to what would be fair to compensate Mr Dore.

37. However, if one is to take into account a sum which is essentially a sum which goes to mitigation for a loss, then one would have thought it inevitable that the Tribunal would have to consider what was the loss which was being mitigated by the starting up of the new business and, as I have indicated, the ET does not say what it thought was the remuneration which Mr Dore lost. Nor would it be proper for the ET to ignore any benefits which Mr Dore received from the new business, and we know that he claimed that his receipts amounted to £15,000.

38. The ET decision does not explain any of these matters. I do not think that it can be right for the ET simply to take a figure of interest on an actual borrowing in the way that it has done, and to say that that represents the total compensation properly payable under either of the two relevant Acts. It is impossible for the appellants to know what was the reasoning which lay behind the ET's conclusion on that matter.

39. For this reason, it seems to me inevitable that the ET's decision on the disputed items of compensation cannot stand and that there must be a remitter to the ET. It matters not whether it goes back to the same ET or whether it goes to a fresh ET. That can be a matter left to be decided by the Regional Chairman.

40. However, I must also add this. It is with the greatest reluctance that I make this order, simply because I cannot believe that sensible parties to litigation would wish to go on incurring costs and expenses in relation to what is a fairly small sum, when the dispute, now that both parties are properly represented by solicitors and counsel, could, one would have thought, be compromised in sensible negotiations. I would urge the parties to think long and hard before this matter goes back for a hearing before the ET.

41. However, for the reasons which I have indicated, it seems to me that the awards relating to the disputed items, including any interest on those items, cannot stand, and that the order of the EAT and the decision of the ET to that extent must be set aside and the appeal allowed.

42. LORD JUSTICE NEUBERGER: For the reasons given by my Lord, Lord Justice Peter Gibson, I too would remit the matter. I share his regret. I also echo his hopes that, even at this late stage, a sensible arrangement could be arrived at by the parties without the incurring of further costs and further litigation.

43. SIR MARTIN NOURSE: I agree.

(Further argument on costs)

44. LORD JUSTICE PETER GIBSON: We are now asked to determine the question of costs.

45. Miss Omambala submits that she should have her costs. Mr Stuart submits that the appellants have behaved so badly that this court should reflect its disapproval of that behaviour and make an order accordingly.

46. In our judgment, the appellants have not behaved well and that there should be some reflection of that in the award of costs which we should make.

47. We will direct that the costs in this court should turn on the outcome of the remitter or of any settlement of the proceedings to this extent. If the appellants reduce the amount which is to be payable to Mr Dore below that which is in the order which we have set aside, then there should be no order as to costs in this court, but that otherwise Mr Dore should recover his costs. In other words, if he recovers as much or more than in the present order which we have set aside, he will have his costs here as well.

ORDER: Appeal allowed; if the appellants reduce the amount which is to be payable to Mr Dore below the order which has been set aside today, then there should be no order as to costs in this court; if Mr Dore recovers as much or more than in the present order which has been set aside today, he will have his costs of this appeal; counsel to lodge a draft minute of order.

(Order not part of approved judgment)