Appeal No.	EAT/1097/97

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 10 December 1998

Before
 THE HONOURABLE MR JUSTICE LINDSAY
LORD D G DAVIES OF COITY CBE
MR K M HACK JP

MR M TAYLOR & OTHERS	APPELLANTS

JOHN WEBSTER BUILDINGS CIVIL ENGINEERING	RESPONDENTS

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellants	MR P TILLETT
(Representative)	
For the Respondents	MR M DUGGAN
(of Counsel)
Mr S Hollis - (ref: sh/clc/webster)
Messrs Thomson Webb & Corfield
Solicitors
Allways House
102 Castle Street
Cambridge CB3 0AJ	

	MR JUSTICE LINDSAY:	We have before us as a full hearing an appeal and cross-appeal in the matter of the Taylor brothers (M P Taylor, R H Taylor and A Taylor) against John Webster Buildings Civil Engineering.   At this instance we deal only with the cross-appeal by John Webster Buildings Civil Engineering.

	There was a decision on 16 July 1997 of the Industrial Tribunal at Bury St Edmunds under the Chairmanship of Mr D R Crome and we have a corrected copy that was finally promulgated on 13 July 1998.   

	The Webster cross-appeal raises two questions which logically arise before the appeal comes to be treated.   The two questions are these;  first of all, did the Industrial Tribunal err in law in treating the three Taylor brothers as employees and, secondly, should new evidence be admitted on the quantification of the award payable to the three men?

	On the issue of whether or not they were employees, the position is that the IT1s of the three brothers, which are identical in their language, asserted that they had been told by the Inland Revenue that they should have been treated as employees.   The assertions in the IT1s included that they were entitled to six week’s notice or pay in lieu.  Redundancy and unfair dismissal was claimed and those aspects were consistent with an assertion they were truly employees of Webster rather than self-employed.   Their IT1s said that they worked for Webster.

	Against that it was plain from the IT3 that was lodged by the Webster side that there was to be an issue in this area.   What the IT3 said was that they were self-employed and only contracted on a week to week basis.   It says also:

“Mr Taylor’s gang were engaged by this company on a self employed basis...”

	So it was quite manifest from a comparison between the IT1s and the IT3 that there was going to be an issue on the subject.   Unfortunately, so far as concerns the employer’s present case, which has been well presented to us by Mr Duggan, no-one on the employers’ side attended at the hearing on 16 July 1997.   Nor was the employer then represented and no evidence was adduced on the employer’s behalf.   Against that, Mr A Taylor, one of the three brothers, gave evidence - it would seem - on a one-for-all basis, namely that his evidence spoke for the other two as well.   Given that all their IT1s were identical that seems to have been a sensible approach.

	The Notes of Evidence which have been obtained since indicate that there was at least some evidence that the Taylors were not genuine sub-contractors, that they were employed and that they worked for Webster.   The Chairman’s Notes (and one has to appreciate they are only notes and the likely evidence would have been more full) say on our page 2E:

“A week later, a genuine sub-contractor came in to do the work we were employed to do.”

	The obvious inference from that is that Mr Taylor was saying that they were not genuine sub-contractors and that they were employed.

	The Notes of Evidence also said:

“Started working for Websters in June 1990.”

	It cannot be said that no Industrial Tribunal properly instructing itself could have concluded as this one did.   It had evidence from one side, totally unchallenged by the other, notwithstanding that it should have been and no doubt was foreseen that an issue on the subject was likely to arise.   We have not called upon Mr Tillett for the Taylor brothers on the cross-appeal but we have the notes of his argument before us and he cites a passage from Lee v Chung and Shun Ching Construction and Engineering Company (1990) IRLR 236 in which Lord Griffiths summarises the law and, so far as relevant, we can look merely at this short passage:

“But where, as in the present case, the relationship has to be determined by an investigation and evaluation of the factual circumstances in which the work is performed, it must now be taken to be firmly established that the question of whether or not the work was performed in the capacity of an employee or as an independent contractor is to be regarded by an appellate court as a question of fact to be determined by the trial court.”

	We accept that to be the law and, given the evidence that was given to the Industrial Tribunal and, most importantly, the absence of any challenge to it, we do not see any point of law in this first question raised by Mr Duggan.   We cannot see error of law in the conclusion that these three men were employees.   What the case might have been had these issues been thoroughly ventilated and challenged and the law thoroughly put in issue is irrelevant.   On the facts as presented to the Industrial Tribunal we cannot say that they erred in law in coming to the conclusion to which they came.   That is one of the two issues on the cross-appeal, the second is the issue of new evidence.

	The new evidence which is sought to be introduced is an affidavit of Mr Webster firstly as to the Taylor brothers working after the point of their dismissal but not later than the date of the Industrial Tribunal hearing and secondly, evidence as to their working even after the date of the Industrial Tribunal hearing.

	Both heads of new evidence would, if admissible, go to the question of the compensation properly payable to the Taylor brothers.   There is not any challenge on the law as to what is the right test for the admissibility of evidence at this stage and it is perhaps conveniently summarised in Harvey, at section T [1587]:

“It is only in exceptional cases that fresh evidence will be admitted in the EAT.   In Wileman v Minilec Engineering Ltd [1988] IRLR 144, [1988] ICR 318, EAT, Popplewell J stated that the test to be applied should be the same as that laid down in Ladd v Marshall [1954] 3 All ER 745  for the admissibility of fresh evidence in the Court of Appeal.   Thus the party seeking to introduce the new evidence must show (i) that the evidence could not have been obtained with reasonable diligence for use at the tribunal;  (ii) that not only must it be relevant, but that it would probably have an important influence on the result of the case, even though it need not be decisive;  and iii) that it is apparently credible, although it need not be incontrovertible.”

	That is a summary which we take to be accurate.   

	Different considerations apply to the two categories of evidence.   Looking firstly as to evidence of the Taylors’ working after 16 July 1997, that is to say after the hearing date that, it would seem to us, is completely irrelevant.   On 16 July 1997 the Industrial Tribunal was required, on that day, to make the best estimates it could, on the evidence that day presented to it, of the likelihood of re-employment for each of the Taylor brothers and when that would be likely to happen, if it was likely to happen.   Whether in fact a dismissed person is employed thereafter is irrelevant so far as compensation is concerned.   If, for example, an Industrial Tribunal on the day reckons that an unemployed man will remain unemployed for a further six months and makes an award on that basis, then it makes no difference if later he is in fact employed after only three months.   Conversely, it makes no difference if he remains unemployed for eighteen months.   The Industrial Tribunal looks at the future as it seems it will be on the evidence presented to it on the day.   

	So the evidence as to employment of the Taylor brothers after the hearing date would fail the test to which we have referred because even if credible it would have had no influence on the size of the awards, which is the function for which it is sought to be introduced.   Of course it would necessarily be evidence that could not be reasonably have been obtained on 16 July, because it lay in the future, but it fails the three-part test to which we have referred because it would be entirely irrelevant.

	Looking at the other category of evidence, that is to say evidence of the Taylors working after dismissal but not later than 16 July 1997 (the period from 21 February 1997 to 16 July 1997) no reason is shown in the affidavit that Mr Webster has put in front of us that suggests that that evidence could not, with reasonable diligence, have been obtained for use on 16 July 1997.   Mr Duggan says that it was not anticipated on the employers’ side that the Taylors ‘would not tell the truth’ as he put it, or that there would be an issue on this area.   Well, it seems to me that an employer who proceeds upon the basis that he need not challenge the other side because they will in any event be telling what he thinks is the truth is taking a terrible risk.  Here it seems to us, if evidence of this category were to be introduced at this stage, that a compelling case would have to have been made out that it could not with reasonable diligence have been obtained and yet Mr Webster’s affidavit is completely silent on the point.

	That there was to be a point is manifest because Webster’s IT3 said:

“...but we understood that Mr Taylor (and his brothers) had been offered work with another contractor (which may or may not be correct)...”

	It was foreseen that there might be an issue in the area.   So this category of evidence fails the ‘reasonable diligence’ test and, accordingly, the evidence which is sought to be introduced is not proper to be introduced.   Having dealt with both limbs of the cross-appeal, we dismiss the cross-appeal in total.   

	Different considerations, of course, might apply.   We do not encourage further consideration of this aspect but there might be an aspect to be considered.   If the Websters can show that the Taylor brothers gave perjured evidence, different considerations might apply but that is not before us.  We are simply concerned with the question of whether particular new evidence should be admitted in the computation and we say that it should not.   Accordingly, as indicated, we dismiss the cross-appeal in total.

	Having thus dealt with the cross appeal in the matter Taylor v John Webster Civil Engineering, now we deal with the main appeal, which is by the three Taylor brothers, M P Taylor, R H Taylor and A Taylor.   Again, of course, the Respondent is John Webster Buildings Civil Engineering.   Again, the only hearing was on 16 July 1997 at Bury St Edmunds under the Chairmanship of Mr D R Crome and a finally corrected version of the decision of that day was promulgated on 13 July 1998.   

	The unanimous decision of the Tribunal was that all the Applicants, that is to say the three Taylor brothers, “were unfairly dismissed but that the compensatory reward in each case should be reduced by 40%”.  The Tribunal decided:- 

“The respondent is order to pay:-
(1)	To Anthony Taylor the sum of £1,134.00 basic award and £9,238 compensatory.
(2)	To Michael Taylor the sum of £1,134.00 basic award and... £5,828 compensatory.
(3)	To Roger Henry Taylor the sum of £1,134.00 basic award and... £5,828 compensatory.”

	It will be noted that in the heading they say simply that the compensatory award should be reduced in each case by 40%.   

	Looking at the way in which the Industrial Tribunal seems to have proceeded, it seems to have been as follows;  first of all that each Applicant was entitled to a basic award of £1,890 but then, secondly, that that had to be reduced by 40% for the reasons that are referred to in the Polkey case. I will refer to that kind of reduction as a ‘Polkey Reduction’.  (It is a reduction which reflects the likely chance of the three Applicants being dismissed even had they been fairtly treated.)  Thirdly, 21 weeks elapsed from the date of the dismissal down to the date of the hearing and so the Industrial Tribunal awarded 21 weeks net pay and applied the Polkey Reduction to that.   Then, fourthly, they estimated the future period of unemployment of each of the brothers and computed a loss by reference to net prospective earnings and applied the Polkey Reduction to that and then they added £250 for loss of statutory rights, and they applied the Polkey Reduction to that. They made no mention of any redundancy payment notwithstanding that the dismissal was in terms held to be by reason of redundancy.   That seems to have been the method which the Industrial Tribunal used to come to its conclusion.

	When the matter came before the Industrial Appeals Tribunal as a preliminary hearing His Honour Judge Peter Clark, in a very helpful analysis, looked at the matter with some care and suggested that there might have been - and of course he was only concerned at that stage with possible points of law - that there might well have been an error of law in the Industrial Tribunal’s formulation.   He suggested that the proper course might well have been other than as the Industrial Tribunal had used.   The proper course he suggested was as follows;  that, first of all, there should have been a redundancy payment, that that redundancy payment should not be reduced by a Polkey Reduction and that the award of the redundancy payment would extinguish what otherwise would have been a basic award; that there should have been an award of six weeks net pay in lieu of notice, not reduced by the Polkey Reduction, that that award of six weeks would automatically reduce the remaining period to be compensated for of the 21 weeks down to 15 weeks;  that there should have been an award of 15 weeks pay reduced by the Polkey factor and there should then have been an award for the period of unemployment anticipated after the hearing, reduced by Polkey and that there should have been an award of £250 for loss of statutory rights, again reduced by Polkey.   That is what his Honour Judge Peter Clark suggested might have been the correct approach and, to no-one’s surprise, the three Taylor brothers, by Mr Tillett, wisely embraced that formulation.   

	That formulation throws up figures such that Mr A Taylor would get £11,634, made up of redundancy, £1,890;  six weeks net pay, £1,170;  compensatory, including loss of statutory rights, £8,574, total:   £11,634.   His two brothers would get a total of £8,155 each, made up of redundancy, £1,890;  six weeks net pay, £1,092;  compensatory, including loss of statutory rights, £5,173, hence a total of £8,155.   Those figures are greater than the figures which the Industrial Tribunal awarded by a margin which Lord Davies has been careful to calculate but which I won’t repeat.

	It is to be borne in mind that the IT1s had claimed specifically six weeks pay in lieu of notice plus statutory redundancy payments, plus compensation for unfair dismissal.   Looking at the law on the subject and looking first therefore to the basic award and redundancy payment, the basic award is in most cases calculable exactly as would be a redundancy award.   The basic award is to reflect a lost redundancy award;  that is its function.
	In Harvey at section D [2503]:

“The basic award is equal to the statutory redundancy compensation to which the employee would have been entitled had he been dismissed for redundancy at the date of dismissal.”

	It is reducible in five ways and they are set out in Harvey, again in section D, [2508] & [2509].   One of the ways in which the basic award can be reduced is by way of receipt of a redundancy payment.   What Harvey says is:  

“...where the employee is dismissed for redundancy and receives a redundancy payment, in which case the payment is offset against the basic award, usually thereby reducing it to nothing.   However in order for the reduction to be made the dismissal must actually be by reason of redundancy.”

	As I stated earlier, that was expressly so found by the Industrial Tribunal.   

	The Polkey form of reduction is not one of the forms of reduction of which Harvey speaks and Mr Duggan accepts that no authority can be found for a Polkey Reduction of a basic award.   Given that the whole point of the basic award is to reflect a lost redundancy award, and that the redundancy award would be payable on dismissal it does not seem right to reduce for the chances or not of dismissal.   It is a predicate in the whole approach that that sum would be payable and whether it is labelled ‘redundancy’ or whether it is labelled ‘basic award’ really does not matter for immediate purposes.

	So it seems to us that it was here correct to award a redundancy payment and to allow that to reduce or offset the basic and, indeed, to reduce it to nothing.   Moreover it seems to us right that that first head, be it called basic or be it called redundancy, is not reduced by Polkey and there is no authority for any such reduction.

	Turning to the question of an award of six weeks net pay;  the notice period that would have been applicable if the Taylor brothers were to have been duly dismissed was six weeks.   Insofar as Polkey reflects the possibility of a due dismissal of the employees in question, in this particular case that due dismissal could only have operated after six weeks, or at the expiry of six weeks.   It thus seems right to us in principle not here to reduce the six weeks award by reference to Polkey and again, Harvey says something of relevance, at [2545], speaking of Polkey:

“In these circumstances compensation should be awarded for the additional time which the employee would have been employed had the dismissal been fair...  [Then it refers to The Mining Supplies Longwall v Baker [1988]IRLR 417]...where a dismissal was held to be unfair for lack of consultation and the EAT held that ‘had a reasonable period for consultation occurred the dismissal would have been delayed by a week, accordingly compensation was limited to that period.’ [and then a reference to Abbots & Stanley v Weston Glynn Web Steels [1982]IRLR 51 where compensation was awarded on that basis].”

	Loss of statutory rights is dealt with in Harvey at [2626]:

“Usually a sum is awarded to take account of the fact that the employee will have to requalify for minimum notice rights and unfair dismissal protection.   Until recently this has always been a small sum, perhaps £30 or so, however in Daly v Dorset [1981]IRLR 385 the EAT held that ‘in a time of economic recession the value of a longer notice period is more beneficial than it was’ and they awarded a sum of half the employee’s statutory notice entitlement... in some cases the sum could be significant.”

	What the sum was here found to be was £250 each.   One cannot say that that is an irrational figure, indeed it seems to be a figure that one very frequently comes across, but that would seem to be appropriate to be a figure to be reduced by the Polkey Reduction.   Taking these matters into account  we do therefore see that the Industrial Tribunal’s approach was wrong in law.   We gratefully adopt the analysis that Judge Peter Clark gave and have added to it the quotations from Harvey which we accept to be the appropriate law in this area.   

	The figures therefore should be £11,634 and £8,155.   Those we believe to be the correct figures and they are arrived at in the manner we have indicated.   Accordingly what we do is set aside as error of law the Industrial Tribunal’s award of the other figures and replace those IT figures with the new figures £11,634 and £8,155 computed in the manner which we have indicated.