Appeal No. EAT/480/92

	EMPLOYMENT APPEAL TRIBUNAL
	58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 10th May 1994
	Judgment delivered on 21 June 1994

	Before

	HIS HONOUR JUDGE J HULL QC

	MRS M L BOYLE

	MR K M HACK JP

MR D P LOCK	APPELLANT

CONNELL ESTATE AGENTS	RESPONDENTS

	Transcript of Proceedings

	JUDGMENT

Revised

	APPEARANCES

For the Appellant	MISS L LITCHFIELD
(of Counsel)
Messrs Warner & Richardson
Solicitors
29 Jewry Street
Winchester
Hampshire SO15 2EP

For the Respondents	MR M BROMLEY-	MARTIN
	(Of Counsel)
Messrs Woodford & Ackroyd
Solicitors
The Director General's House
Rockstone Place
Southampton SO15 2EP

HIS HONOUR JUDGE HULL QC           Mr Lock, who is now aged 37, was employed by a firm called Pearsons in the estate agents business from 1st November 1975 onwards.  In 1986 the business was transferred to Prudential Insurance.  In 1990 Mr Lock was appointed Manager of the Winchester office.  In March 1991 the Respondents, Connell Estate Agents, acquired many of the offices from the Prudential.  In June 1991 Mr Lock became Manager of the Woolston branch.  By this time, the Respondents' business was suffering because of the slump in the housing market and targets were set for Mr Lock's performance in his new post.  These were the responsibility of Mr Randall, Area Manager.

	Mr Lock was not able to achieve these targets and, after a little while, he was away from work suffering from nervous depression.  When he returned Mr Randall gave him a warning that his job was in jeopardy.

	On 15th October 1991 Mr Randall wrote a letter to Mr Lock complaining of consistent failure to meet "minimum performance expectations" and giving him "one last opportunity to prove your capability as a manager".  The letter contained further targets, and stated that if these were not met by 14th January 1992 Mr Lock's employment with the Respondents would be terminated on that date.  The letter, which was a long one, ended

	"I am confident that we can reverse the unfavourable trends that exist within your branch at present, and I know that we can count on the support of your staff, and I look forward to being able to rescind the termination notice at our meeting in January.  Good luck."

	Mr Randall and Mr Lock had a meeting immediately after this letter was written and it was agreed that rather than waiting until 14th January 1992 Mr Lock should leave at once, with pay up to 14th January 1992.

	On 9th January 1992 Mr Lock complained to the Industrial Tribunal that he had been unfairly dismissed on 16th October 1991.  The Respondents, in their Notice of Appearance, agreed that Mr Lock had been dismissed, but at the hearing by the Industrial Tribunal on 21st April 1992 they contended that he had not been dismissed but had left because of a consensual agreement.

	The Industrial Tribunal, sitting at Southampton, devoted the whole of the first day of the hearing to the determination of the question whether Mr Lock had resigned by agreement or had been dismissed.  After considering the letter and other evidence put before them, as well as the submissions of Miss Litchfield, counsel for Mr Lock and Mr Rolph, solicitor for the Respondents, the Tribunal concluded on this preliminary point that the letter of 15th October 1991 was a notice of dismissal and that what had been agreed between the parties was merely that Mr Lock should not be required to work out his notice.

	Accordingly, the Tribunal then turned to the consideration of the question whether Mr Lock had been unfairly dismissed.  They concluded that he had.  After reviewing the evidence at length they observed
	"... At the end of the day we are left with the distinct feeling that the respondents who had inherited an employee not of their choice and who was in receipt of a salary package not to their liking set him targets which were impossible to achieve.  They had also failed to disclose to him the whole picture concerning the Woolston office only volunteering two months' figures.  It may be that had they told him the full story he would have felt more confident about his reservations and refused to agree the various targets.  We feel that the time scale under which he was being required to "pull the chestnuts out of the fire" was unrealistic and that he should have been given more time.  We are not unmindful of the fact that if, as would seem to be the case, he was an embarrassing overhead which the respondents had acquired in their package deal with the Prudential they could have explained that to him, insisted on him accepting the alternative salary package suggested in May and if he did not accept warn him that if he did not change his mind they would have to give consideration to dismissing him under S.57(1)(b) of the 1978 Act (other substantial reason).  However, to go about the matter by setting him targets on a seemingly impossible time scale cannot be regarded as reasonable ... For these reasons we find that as the respondents did not act reasonably the dismissal was unfair.  The applicant did not seek re-instatement or re-engagement and so we turn to the question of compensation. ..."

	The Tribunal then recorded that Mr Rolph had invited their attention to Hoover Ltd v. Forde [1980] ICR 239.  They continued -
	"... In the instant case we cannot say that had the applicant appealed someone in authority higher up the chain of command might not have taken the view, as we have, that the targets set by Mr Randall were too stringent and modified them.  We therefore propose to reduce the basic and compensatory awards by 50% because of the applicant's failure to mitigate."
They proceeded to calculate the basic award and assess the compensatory award, making a total of £13,574.19 which they divided by 2, making a total award of £6,787.09.

	It was agreed that this reduction was made under S.74(4) of the Employment Protection (Consolidation) Act 1978 and it was this part of the decision of the Tribunal which alone was the subject of the appeal to us.

	Miss Litchfield submitted that Hoover was on this point wrongly decided.  She referred us to William Muir (Bond 9) Ltd v. Lamb [1985] IRLR 95, a decision of the Employment Appeal Tribunal sitting in Scotland, which reached a contrary conclusion on the same point.  She submitted that as a matter of law a failure by a dismissed employee to appeal against his dismissal could not amount to a failure to mitigate within S.74(4).

	In Hoover the employee was summarily dismissed for missing a night shift immediately before taking his annual leave.  This dismissal was by the night production foreman.  Following that the Personnel Officer told the employee about his right of appeal; but the employee, having thought about it, decided that he would not appeal as he did not think there was any point in doing so.  The following week the employers made another attempt to persuade the employee to appeal; he was told that there was nothing to lose; but eventually he decided not to do so.  In due course, an Industrial Tribunal found that he had been unfairly dismissed, but that he had contributed to the dismissal by his own fault in culpably absenting himself from work, making no attempt to explain or apologise before he went on his holiday, and becoming excited and truculent at the dismissal hearing.   Another matter on which the Industrial Tribunal relied was that the employee had failed to make use of the appeal procedure, which, properly handled, might well have secured a reversal of the decision to dismiss.  On this basis, the Tribunal would have reduced both the basic and compensatory awards by 50%.

	The employers appealed to the EAT on grounds which included the surprising contention that the employee's failure to follow the appeal procedure disentitled him to an award of any sort; this Tribunal rejected that submission.  However, at p.247B this Tribunal said:
	"We have also to consider the submission that the employee failed in his duty to mitigate his loss; see S.74(4) of the Employment Protection (Consolidation) Act 1978.  It does seem to us that where there is an appeal procedure which might result in the rescission of a dismissal decision, and where, as in this case, the industrial tribunal have found that his making use of the appeal procedure might well have secured a reversal of the decision, then it is open to argument, and in our view can properly be argued, that he has not taken all reasonable steps to mitigate the loss which must flow from his dismissal, should it shown to be unfair.  We do not consider bearing in mind the matters that can properly be taken into account, whether it is on the question of contribution by reason of his own culpable or blameworthy fault, or whether it is by reason of his failure to mitigate his loss, that it can be said that his compensatory award should be reduced by 100%.  Although the industrial tribunal in considering the question of contribution erred in taking into account his failure to use the appeal procedure, it does seem that this was a matter which could properly be considered when looking to see whether he had taken all necessary and reasonable steps to mitigate his loss.  In all these circumstances we do not consider that it would be right to find that there was any error in the assessment of the industrial tribunal that his basic and compensatory awards should be reduced by 50%."

	In Muir v. Lamb, the employee was found to have been unfairly dismissed.  The employers appealed to the EAT in Scotland on the ground that since she had not followed the internal appeals procedure, she had failed to mitigate her loss; they suggested that the failure should be reflected in a 50% reduction in compensation.  Lord McDonald MC, giving the decision of the Tribunal, said
	"The appellants accept the finding of unfair dismissal.  They argue however that, because she declined to follow the internal appeal procedure, she had therefore failed to mitigate her loss.  The suggestion was made to us that we should take account of this and reduce the award of compensation by 50%.

	 We take it to be clearly established that there is no obligation upon an employee who is dismissed to follow up an internal appeal procedure before making application to an industrial tribunal.  This in our opinion is clear from the case of Chrystie v. Rolls Royce (1971) Ltd [1976] IRLR 336 and Hoover Ltd v. Forde [1980] ICR 239.  It is true that in the latter case an industrial tribunal had found that had the dismissed employee availed himself of the appeal procedure the decision to dismiss him might have been rescinded and on that ground apparently his compensation was reduced by 50%.  We are bound to say that we have great difficulty in accepting the reasoning in that case.  It seems to us to be purely speculative to attempt to assess what would have happened in the event of an appeal being taken.  There are many imponderable factors.  One is the manner in which the appeal is handled.  Another is the person or persons to whom the appeal lies.  In an industrial situation it may very often happen that an employee who has been dismissed considers that there is no point in him following up the internal appeal procedure because he does not have confidence in the persons who would hear that appeal.  It would therefore be quite wrong in our view to penalise an employee who has been unfairly dismissed by reducing her compensation because she did not follow through whatever internal appeal procedure may have existed.

	 That is enough to decide the case in favour of the respondent and the appeal is therefore dismissed. ..."

	Although as we have said the Industrial Tribunal in the present case was referred to Hoover v. Forde, there was no reference to Muir v. Lamb.  It appears to us that we must decide which of these cases is correct.

	Section 74(4) of the Employment Protection (Consolidation) Act provides:
	"In ascertaining the said loss [the loss sustained by the complainant in consequence of the dismissal in so far as that loss is attributable to action taken by the employers] the tribunal shall apply the same rule concerning the duty of a person to mitigate his loss as applies to damages recoverable under the common law of England and Wales or of Scotland, as the case may be."
It would appear from Muir that in the view of the Scottish Appeal Tribunal there is no relevant difference between the law of Scotland and England in this respect.

	Although the question whether a plaintiff should take any, and if so what, steps to mitigate any damage which he has suffered is in general a question of fact, there are certain guidelines which are undoubtedly principles of law.  Thus, for example, it is stated in McGregor on Damages, 15th Edition at paragraph 311 (p.190)
	"Although the plaintiff must act with the defendant's as well as with his own interests in mind, he is only required to act reasonably and the standard of reasonableness is not high in view of the fact that the defendant is an admitted wrongdoer".

	Thus (see paragraph 315, at p.192) a plaintiff need not take the risk of starting an uncertain litigation.  He may have to consider an offer made by the wrongdoer himself: see Payzu v. Saunders [1919] 2KB 581.  But (see paragraph 307 of McGregor) not every offer of the party in default will be refused at the plaintiff's peril: this is particularly true with a contract of service.

	It does seem to us, with great respect to the members of the Tribunal in Hoover, that the suggestion that a complainant is or may be under a duty to mitigate his loss by appealing to his employer is a strange one.  If a plaintiff is not generally required to engage in hazardous litigation, a fortiori a party can hardly be expected to try to mitigate his loss by appealing not to a court or tribunal but to the opposite party himself.  The employer has made up his mind to dismiss the applicant, presumably after taking proper thought and carrying out the procedural duties of fairness as well as considering the merits; if the decision was a careful and responsible one, then the prospect of it being reversed on appeal must be remote.  The prospect may be even more remote in the unlikely event that the decision has been an irresponsible and hasty one; in that event, what possible confidence can the employee have in the integrity of the employer?  It is one thing to say that a plaintiff is required, at any rate in certain circumstances, to consider an offer by the wrongdoer; it is quite another to say that if no such offer is made then the plaintiff is under a duty to solicit the wrongdoer to change his mind.

	We are also impressed by the extreme inconvenience of the suggestion that an employee should be obliged to mitigate in this way.  Presumably, since almost every responsible employer has some sort of procedure for appeal or review, the respondent to the employee's application will feel obliged to call evidence about the prospect of success on such an appeal, and one or more responsible and senior members of the employers will have to address their minds to the hypothetical question of what would have happened if the employee had appealed, perhaps on all sorts of hypothetical bases.   That may prompt the employee to adduce the evidence of various employees who have been dismissed and who have used the appeals procedure in vain, to say that they do not think that it was fairly and sensibly operated and that they were dealt with harshly.  Unless such evidence is adduced, the Tribunal will merely have to speculate about what the likely prospects of an appeal would have been, perhaps taking into consideration their understanding of the state of the labour market, and about such matters as the likely objectivity and conscientiousness of the officers responsible for hearing the appeals.  It has many times been stated that endeavouring to predict the likely result of an appeal to an English court is a rash and hazardous speculation; how much more must it be speculative to predict, without any evidence or experience of the system operated by a particular employer, the likely result of an appeal by a dismissed employee.

	An incidental result of the decision in Hoover, if relied upon by employers, will be that an appeal through all the stages of the employer's appeal process will be seen as an essential preliminary to any application to an industrial tribunal for compensation for unfair dismissal.  We cannot think that this would be welcomed either by employers or by trade unions who normally have the duty of representing their members on such appeals or by employees themselves, who may have to wait a considerable period, where there is a succession of appeals, before they can decide whether to continue with their applications to the tribunal.

	We are obliged therefore to choose between the two decisions.   We have with respect come to the conclusion that Muir is to be preferred to Hoover and that the failure of an employee to operate the internal appeals procedure after dismissal cannot as a matter of law amount to a failure to mitigate his loss under S.74(4) of the Employment Protection (Consolidation) Act 1978.

	Miss Litchfield also submitted to us that the Industrial Tribunal should not have reduced the basic award because of Mr Lock's failure to operate the internal appeals procedure, for the short reason that S.74(4) applies only to the calculation of the compensatory award and there is no corresponding provision in S.73 relating to the calculation of the basic award.  This submission appears to us to be self-evidently correct and Mr Bromley-Martin, counsel for the Respondents, was unable to make any submission to the contrary.

	If we are incorrect in holding that failure to operate an internal appeals procedure cannot as a matter of law amount to a failure to mitigate under S.74(4), then it still appears to us, on the facts of the present case, that such a failure could not possibly have that effect here.  As we have said, the employers, although at first they admitted that Mr Lock had been dismissed, spent the first day of the hearing before the Industrial Tribunal contending that in fact he had not been dismissed.  In those circumstances, it appears that it would have been perfectly ridiculous to suppose that an attempt by Mr Lock to appeal could possibly have been successful.  The employers, when they came to think about the position, would presumably have said, "You have nothing to appeal about, you have resigned".  If they were right about that, then they could not possibly entertain an appeal, and so far from being open to persuasion they were prepared to spend a whole day before the Industrial Tribunal contesting the matter.

	Miss Litchfield added, if there were any need to do so, that there was of course no evidence whatever before the Industrial Tribunal that such an appeal would have succeeded, and indeed, in view of the contentions made by the employers, any attempt to call such evidence would have been ludicrous.

	Miss Litchfield added one further point, clearly fatal by itself to the employers' case, when she said that the burden of proof was on the employers to show that there had been a failure to mitigate.

	Mr Bromley-Martin observed that it w was generally a good thing that employees should be encouraged to make use of internal procedures for appeal before they came to industrial tribunals.  When we asked him whether his clients had observed this advice, he was of course obliged to admit that they had not.  He said, however, that the employers had well established procedures for dealing with all types of grievance and added, what was undoubtedly correct, that Mr Lock had on previous occasions invoked his rights under these procedures.  He also pointed out that Mr Lock was represented by a solicitor.

	He said further that Miss Litchfield's submissions missed the point; the real contention for the employers was that Mr Lock should have invoked his right to appeal or to complain under the internal procedures, against the fixing of targets which the Industrial Tribunal had found were unrealistic.  Such an appeal might well have succeeded.

	There is a fatal difficulty about that submission, as it seems to us, in that the duty to mitigate does not arise until the cause of action (in this case the unfair dismissal) is complete.  Mr Bromley-Martin also submitted that in Muir v. Lamb the EAT was confused, failing to distinguish between an alleged obligation upon the employee to appeal and the common law duty to mitigate which was established by Hoover v. Forde.  We do not think that the Scottish EAT was confused at all.  Mr Bromley-Martin further submitted that there was much evidence before the Tribunal, which was set out by them in their review of the case, that it would (as a matter of inference) have been reasonable to expect Mr Lock to operate the internal appeals procedure.  No doubt many of these matters might have influenced Mr Lock in deciding whether to appeal, but for the reasons we have set out above no sensible person in Mr Lock's position could seriously have entertained the notion of continuing with an appeal if his employers were contending that he had not in fact been dismissed.

	For the reasons which we have stated, this appeal must succeed and Mr Lock's compensation must be assessed without any deduction.  It appears to us that the compensatory award falls to be limited by the statutory maximum of £10,000 and there must therefore be a small reduction in the total of £13,574.19, but we will hear submissions on this point if either party wishes to make them.