Strand Transport Services Ltd v Whitworth

On 28 September 2007 Mr Garry Whitworth was dismissed by his employer Strand Transport Services Limited from his job as General Manager of the Head Office in Rochdale. Strand, which has three other depots and specialises in the transportation of hazardous waste across the country, told Mr Whitworth that he was redundant.

On 23 May 2008 the employment tribunal at Manchester (ET) upheld his claim for unfair dismissal and awarded him £21,219.60. The ET held that the consultation process on the pleaded redundancy grounds had been a sham and that Strand had not made them out as grounds for a fair dismissal. The ET rejected Strand’s contention that appropriate consultation with Mr Whitworth would have made no difference to the outcome of the exercise. Strand had argued in the ET that there was a strong likelihood that Mr Whitworth would have been fairly dismissed, even if Strand had, as it maintained it had, complied with the requirements of procedural fairness: Polkey v. AE Dayton Services Limited [1988] 1 AC 344 at 355 B-D. If established, the Polkey principle would eliminate the compensatory element from an award for unfair dismissal.

Polkey was a redundancy case in which the employer failed to consult the employee prior to dismissal. It was held that if the employer could reasonably have concluded that, in the light of the circumstances known to him at the time of dismissal, consultation would probably be pointless and make no difference to the outcome, he might well have acted reasonably and no compensation would be awarded to the employee. The dismissal might not be substantively unfair, even though the employer had failed to observe the consultation requirement in the redundancy procedure. The decision on the Polkey pointis one for the ET to make in the particular case and in the light of the circumstances known to the employer at the time he dismissed the employee.

On 2 December 2008 the Employment Appeal Tribunal (EAT) at a preliminary hearing dismissed the appeal in which Strand argued that the ET’s decision on the Polkey point was inadequately reasoned and perverse.

Strand appeals to this court with permission granted by a single Lord Justice on 6 May 2009.

In pleading redundancy as a potentially fair reason for dismissing Mr Whitworth, Strand said that it was centralising its functions. The ET concluded that centralisation was not made out by Strand with reference to the position held by Mr Whitworth in Strand’s business. Strand relied on the alleged effects of the introduction of the FLEET IT system. The ET concluded that Strand had not established that the introduction of that system made such a substantial impact on the position of General Manger as was suggested. Strand has not appealed against those findings.

During the course of the ET hearing Strand raised for the first time a case that Mr Whitworth’s responsibilities as General Manager had been “swallowed up” by those of the different Depot Managers. This aspect of the redundancy was neither mentioned to Mr Whitworth in the reasons for his dismissal nor in Strand’s Grounds of Resistance to the claim in the ET3. Strand nevertheless argued that the “swallowing up” aspect had been considered by it at the time of dismissal and that it had been raised in discussion with Mr Whitworth. Strand relied on passages in its witness statements to which the EAT and this court were taken. The ET concluded that Strand failed to make out the case of “swallowing up” or that it had been discussed with Mr Whitworth.

The ET concluded that redundancy was not established as the ground for Mr Whitworth’s dismissal. No other potentially fair ground of dismissal was advanced. It followed that his dismissal was unfair. Strand sought to fall back on the argument that, if it had followed the required consultation procedure, it would have decided, in any event, to dismiss Mr Whitworth for redundancy. In short, procedural unfairness did not affect the substantive fairness of his dismissal and by the operation of s 98A(2) ERA 1996 the dismissal was not unfair.

However, it was common ground that Strand was bound to follow the statutory dismissal procedures then in force. The ET concluded that Strand had not complied with the statutory procedure, which thereby gave rise to an automatic unfair dismissal. Strand, however, invoked the related Polkey principle to support the contention that Mr Whitworth was not entitled to compensation for unfair dismissal, because he would in any event have lost his General Manager’s job on the ground of redundancy.

The ET noted that the related points based on section 98A(2) of the 1996 Act, Polkey and the “swallowing up” of Mr Whitworth’sjob were not pleaded in Strand’s detailed grounds of resistance. They were not identified as issues at the beginning of the hearing. The ET’s conclusion was that there was “no evidence” to support the position taken by Strand on those points. It had not discharged the burden of proving that it could have fairly dismissed Mr Whitworth.

The EAT could find no error of law in the ET’s decision and dismissed Strand’s appeal.

In opening Strand’s appeal Mr James Boyd asserted that his case was correctly summarised in the reasons given by Rimer LJ for granting permission to appeal: that it was properly arguable that the ET had not sufficiently explained why Strand had lost its case on the Polkey point, that the point deserved separate express consideration (which it did not get) and that the EAT had been over-charitable in concluding that the ET rejected it because the evidence was insufficient to support it. He contended that the appeal should be allowed and the case ought to be remitted for re-hearing by a fresh ET.

Mr Boyd said that it was self-evident that the ET failed to deal expressly with the Polkey point, which was a central issue in the proceedings. It neither made necessary findings of fact for deciding it nor supplied sufficient reasons to justify the rejection of it. It failed to consider whether or not the compensatory element of damages should be reduced by a percentage to reflect the likelihood of a fair dismissal on following the proper procedure. All that the ET had done was to mention the point only to dismiss it by saying that there was no evidence to support it. Mr Boyd took the court to passages in the witness statements which he said were the raw material for a potential Polkey argument. He said that they pointed to a strong likelihood that Mr Whitworth could have been dismissed fairly.

A judgment under appeal must always be read in its entirety, in a fair and reasonable manner and in its proper legal and factual setting: the case pleaded, the issues presented for decision, the evidence adduced and the rival submissions are all part of the total picture. Isolated passages in a judgment should never be condemned out of context or subjected to overcritical analysis.

The ET noted Mr Boyd’s submission on the Polkey point (paragraphs 25 and 27) to the effect that Mr Whitworth would have lost his job in any event, if a fair procedure had been followed. ETs dealing with unfair dismissal cases are fully familiar with this line of argument. It is true, as highlighted by Mr Boyd, that in those particular paragraphs of the judgment the ET did not make findings of fact or spell out its reasoning, save to say that it was given “no evidence” in support of the submission and that the witnesses were not taken to the point. I would agree that, taken in isolation from the rest of the ET’s judgment, conclusionary statements of that kind are less than a party is normally entitled to expect as explanation for the rejection of an argument.

The ET’s treatment of the point is, however, adequately explained by reference to other passages in the judgment and the all-important context in which the point was argued. The Polkey point was never pleaded or even identified as an issue at the outset. It emerged in the course of the hearing. The context was the “swallowing up” point. The ET’s findings of fact on the late case of “swallowing up” meant that the Polkey argument was swallowed up with it.

As Ms D’Souza for Mr Whitworth stressed, the essence of Strand’s unpleaded unfolding case on “swallowing up” was that it was part of its thinking at the time of dismissal and that it had been discussed with Mr Whitworth. The ET rejected that case, saying that there was nothing in the notes of the relevant meeting of 9 July 2007 to support Strand’s contention: see paragraph 19 of the judgment. The evidence on which Strand relied was not accepted by the ET, which went on to be critical of the evidence given by Strand’s Managing Director/owner, Mr David Greenhalgh, and its Finance Director, Mr Paul Fallon. The ET commented adversely on their evidence on the facts material to redundancy (paragraph 12 and 21).

When the ET judgment is read with care from beginning to end, as it should be, the reason why Strand lost on Polkey is plain enough. Its case was that it had fairly and reasonably dismissed him for redundancy following actual consideration of, and consultation with him on, the “swallowing up” point. That point was neither mentioned in the note of the critical meeting with Mr Whitworth nor in the ET3. Strand’s evidence on that aspect of redundancy in the witness statements and in the answers of Mr Greenhalgh in cross examination was not accepted. It was correct for the ET to conclude that there was “no evidence” to support the Polkey point in the commonly accepted sense that no relevant facts were established by credible evidence. According to Ms D’Souza the Strand witnesses were not even asked whether dismissal would have resulted, if a fair procedure had been applied. In my judgment, the ET’s rejection of the Polkey submission was not perverse. The only sensible criticism of the ET is that parts of its judgment could have been better arranged and expressed, but that does not amount to an error of law.

In my judgment, it was not properly open to Strand to argue that, in the light of the circumstances known by it at the time of the dismissal, it could have fairly dismissed Mr Whitworth for redundancy on the “swallowing up” ground. Its case that it had in fact done so fairly by reference to what was in its mind at the time and to consultation about it with Mr Whitworth prior to dismissal was comprehensively rejected on the facts. Strand’s Polkey contention involved it in intellectual contortions. It was based on a hypothesis, which flatly contradicted its own evidence of what was actually in its mind at the time of discussion and dismissal.

At the end of the hearing the court announced its unanimous decision that the appeal would be dismissed for reasons to be given in writing. After hearing submissions on costs the court made an order that Strand pay Mr Whitworth’s costs of the appeal with an enhanced rate of interest from 19 June 2009 having regard to a Part 36 offer. On the basis of a schedule submitted on behalf of Mr Whitworth the costs were assessed at £7,129.54 to which it will be necessary to add a small lump sum to be calculated and agreed between the parties to reflect the enhanced rate of interest payable on costs from 19 June 2009 to judgment.

I agree.

I also agree.