Appeal No. UKEAT/0452/03/DA

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 9 October 2003

Before
HIS HONOUR JUDGE RICHARDSON
MR P DAWSON OBE
PROFESSOR P D WICKENS OBE

1)	MR A COOPER 2) SHALDENE LTD 
T/A TRANSMISSIONS CLOTHING	APPELLANTS

MR P SMITH	RESPONDENT

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR D BASU
(Of Counsel)
Instructed by:
Messrs Doyle Clayton
Solicitors
Cannongate House
62-64 Cannon Street
London
EC4N 6AE	
For the Respondent	MISS J SHEPHARD
(Of Counsel)
Instructed by:
Messrs Russell Jones & Walker
Solicitors
Swinton House
324 Gray’s Inn Road
London
WC1X 8DH	

JUDGE RICHARDSON

1.	We have before us an appeal and a cross appeal against the decision of the Employment Tribunal sitting at London Central promulgated on 16 April 2003.  The Appellants are Shaldene Limited (“the Company”) and Mr Tony Cooper, described in Tribunal’s decision as the owner of the Company.  The Respondent to the appeal is Mr Smith.
 
2.	There are appeals against the decision of the Tribunal in three respects.  (1)  Mr Cooper, but not the Company, appeals against the Tribunal’s decision to award the sum of £13,184.49 as compensation for unfair dismissal, failure to pay Mr Smith twelve days of accrued but untaken holiday, failure to give him contractual notice of dismissal and failure to provide proper written reasons for dismissal.  (2)  Mr Cooper and the Company both appeal against the Tribunal decision that they unlawfully discriminated against Mr Smith on the ground of his sex.  (3)  Mr Cooper and Shaldene both appeal against the Tribunal’s award of costs assessed in the sum of £5,000.00.  

3.  	There is also a cross appeal by Mr Smith in respect of the Tribunal’s decision to award compensation for loss of earnings as part of the award for unfair dismissal, but not as part of the award for sex discrimination. 

The Procedural History
4. 	In May 1996 Mr Smith began employment as a production manager.  He became the Company’s employee in September 2001 when it acquired the business for which he worked.  According to the findings of the Employment Tribunal Mr Smith was thereafter humiliated, replaced as production manager by a woman called Marion and then finally dismissed on 17 December 2001.  Mr Smith commenced proceedings against both Mr Cooper and the Company making the various claims which we have summarised above.

5.	These proceeding first came before a Tribunal (“the Sigsworth Tribunal”) on 22 April 2002.  By its decision promulgated on 29 May 2002 it found that Mr Smith was unfairly dismissed and that Mr Cooper and the Company had unlawfully discriminated against him on the ground of sex.  It upheld his claims for holiday pay, breach of contract and failure to give reasons for dismissal.  It awarded a total sum of £23,903.00.  Part of that award was for loss of earnings.  The Sigsworth Tribunal at paragraph 6(5) of its decision said:

“We award loss of earnings under the Employment Rights Act, as we would otherwise have to deduct from the compensation the benefits he has received, which would involve a complex calculation for which we have no evidence or information.”

6. 	Neither the Company nor Mr Cooper took any part in the hearing before the Sigsworth Tribunal.  They had not entered a Notice of Appearance.   Later they wrote to the Tribunal asserting that they had never received the Originating Application.   When the Originating Application came to their attention they pointed out that the address for service was incorrect.  

7. 	Following a hearing on 25 October 2002 a second Tribunal (“the Carstairs Tribunal”) revoked the decision of the Sigsworth Tribunal.  It noted that the wrong address had been on the Originating Application.  It noted a submission on behalf of Mr Smith that the documents had been properly served and Mr Cooper and the Company were aware of the proceedings but it said that there was no evidence to that effect and it was clear documents had been sent to the wrong address.  It could not find that proper service had ever been effected.  

8. 	Consequent upon the decision of the Carstairs Tribunal there were immediately served upon Mr Cooper and the Company fresh copies of the Originating Application with instructions to enter a Notice of Appearance.  Remarkably no Notice of Appearance was entered.  In November the Tribunal decided to enter the case as ‘Appearance not entered’ with the consequences set out in Rule 3(3) of the Employment Tribunal Rules of Procedure 2001.  At a hearing in January 2003 applications by Mr Cooper and the Company to review and set aside that decision of 26 November 2002 and for leave to enter an out of time Notice of Appearance were refused.  There is no appeal against that decision.
  
9. 	In the result, when the substantive hearing Mr Smith’s applications came before the Tribunal (“the Menon Tribunal”) Mr Cooper and the Company were debarred from taking part.  It seems they attempted briefly to do so but then left and took no effective part in the hearing, which led to the decision promulgated on 16 April 2003.

Ground One: awards against Mr Cooper under the 1996 Act
10.	The Menon Tribunal made awards in the sum of £13,184.49 for unfair dismissal, holiday pay, notice pay and failure to give written reasons “jointly and severally” against Mr Cooper and the Company.  It is common ground that that was an error.  The Company was Mr Smith’s employer.  Mr Cooper was not.  There was no legal basis at all for making those awards against Mr Cooper.  In this respect the appeal must be allowed.  In so far as the Employment Tribunal ordered Mr Cooper to pay the sum of £13,184.49 the appeal is allowed.  Those awards of course stand against the Company.  

Ground Two: sex discrimination
11.	The Tribunal heard evidence from Mr Smith.  It found him to be an honest and credible witness.  The Tribunal’s findings included the following.  Mr Smith was the most senior employee when the business was taken over.  On 17 October 2001 Mr Cooper removed Mr Smith’s company car.  On 1 November 2001 he brought a female named Marion (the Tribunal records that Mr Smith did not know her surname) to the office and announced to everyone present that she was the new production manager and that she would now “fill” the orders.  Mr Smith had not been told in advance that his post would be given to someone else.  He was effectively demoted to the post of a production assistant.   Most of his duties were transferred to Marion, leaving him very little to do, even though he had been production manager for several years and was the most senior employee in the business.

12.	The Tribunal found that on 13 December Mr Smith was told by an employee of the Company that he had to accept three months pay as redundancy pay or be sacked.  It records that on 17 December 2001 he considered that his employment had been terminated.  

13. 	The Tribunal then found (paragraph 5(8)):
“The vast majority of the employees of the Respondent company were women.  The applicant was treated less favourably by the Respondents than they treated the female employees.  He was replaced as Production Manager by a female, Marion.”

14.	The Tribunal later said (paragraph 11):
“The Applicant has established a prima facie case of sex discrimination under sections 1(1)(a) 2 and 6(2)(b) of the 1975 Act.  The Respondents have not advanced any explanation to contradict the facts established by the Applicant.  On the evidence it is the unanimous decision of the tribunal that the Respondents discriminated against the Applicant contrary to sections 1(1) (a) 2 and 6(2)(b) of the1975 Act.  The First Respondent is vicariously liable under section 41(1) of the 1975 Act for the acts of the Second Respondent.”

Although the Tribunal does not record it we were told today that Mr Cooper was a manager of the Company as well as the owner.

15. 	On behalf of the Company and Mr Cooper Mr Basu submits that an important element of reasoning was omitted from Tribunal’s decision.  Mr Basu refers to section 5(3) of the 1975 Act, which provides:

(3)   A comparison of the cases of persons of different sex or marital status under [section 1(1) or (2)] or 3(1)[, or a comparison of the cases of persons required for the purposes of section 2A,] must be such that the relevant circumstances in the one case are the same, or not materially different, in the other

16. 	Mr Basu points out that while the Tribunal carefully recited other provisions of the 1975 Act it did not refer to section 5(3) of the Act.  He submits that, although Marion was indeed an obvious comparator there is nothing to show that the Tribunal has applied its mind to section 5(3) of the 1975 Act and compared the circumstances of Mr Smith with the circumstances of Marion.  He referred to the case of Mr M Crowe v London Borough of Enfield (EAT, unreported, 26 October 2000, EAT/1254/99) where Judge Reid said:

“23.	  The first sub-question was: was there less favourable treatment than of a comparator.  It is not enough for the appellant to select someone as a comparator and say “I am treated less favourably than X, therefore, you go automatically on to the question of racial grounds”.  It is essential that the tribunal look at and determine whether the person nominated as a comparator by the claimant is in truth the comparator.  That involves not only looking at the job that is being done (in this case both were doing the same job) but at the other factors which led to the appointment on different terms.”

17.	Mr Basu says there is no sign that this Tribunal has gone through that process.  Therefore, says Mr Basu, when in paragraph 11 the Tribunal says that Mr Smith has established a prima facie case of sex discrimination there is an error of law because the Tribunal has omitted an essential part of the equation.   He takes it that when the Tribunal refers to a prima facie case it is referring to section 63A of the Sex Discrimination Act 1975.  Section 63A provides by sub section (2):

“(2)	  Where, on the hearing of the complaint, the complainant proves facts from which the tribunal could, apart from this section, conclude in the absence of an adequate explanation that the respondent –
(a)	 has committed an act of discrimination against the complainant which is unlawful by virtue of Part 2, or
(b)	is by virtue of section 41 or 42 to be treated as having committed such an act of discrimination against the complainant,
the tribunal shall uphold the complaint unless the respondent proves that he did not commit, or, as the case may be, is not to be treated as having committed, that act.”

18.	He submits in essence that the Tribunal applied section 63A when the complainant had not proved facts from which the Tribunal could apart from the section conclude in the absence of an adequate explanation that the Company and Mr Cooper had committed an act of discrimination.

19. 	We have considered that submission with care.  It seems to us however that one has to take into account the particular circumstances of this case.  The Company and Mr Cooper, being debarred by their failure to serve a Notice of Appearance, were not there to give any evidence.  The only person to give evidence was Mr Smith.  Mr Smith was able to show that a woman called Marion had been brought in to replace him doing his job as production manager, a job in which he had substantial experience in circumstances where the vast majority of the employees of Shaldene were women.  It was not possible for Mr Smith to provide the kind of background detail to which Judge Reid refers in Mr M Crowe v The London Borough of Enfield.  The Tribunal had evidence only from one side.  In our judgment those facts which are set out in paragraph 5(3) encompass what the Tribunal knew or could know about Marion.  In particular they encompass the most important point that she took his precise job, a job which he had been given for some time and in which he had experience.  

20. 	We do not believe that the Tribunal overlooked the need for a comparator.  As Miss Shepherd submits on behalf of Mr Smith it is a daily, bread and butter, issue for Employment Tribunals to consider.  We are entirely satisfied that they had section 5(3) in mind and we are entirely satisfied that when they refer to establishing a prima facie case of sex discrimination that was no more than shorthand for the test set out in section 63A(2) of the 1975 Act, and that in the circumstances of this case the Tribunal committed no error of law.  We accordingly dismiss this part of the appeal and uphold the finding of sex discrimination.  

Ground Three: the award of costs
21.	At the conclusion of the hearing an application was made on Mr Smith’s behalf for costs under rule 14(1) of the Employment Tribunals Rules of Procedure (Schedule One to the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2001.

“(1) Where in the opinion of the tribunal a party has in bringing the proceedings or a party or party’s representative has in conducting the proceedings acted vexatiously, abusively, disruptively or otherwise unreasonably or the bringing or conducting of the proceedings by a party has been misconceived the tribunal shall consider making and if it so decides may make 
(a) an order containing award against that party in respect of the costs incurred by another party …
(2)	Paragraph (1) applies to a respondent who has not entered in appearance in relation to the conduct of any part in the proceedings which he has taken 
(3)	An order containing an award against the party (“the first party”) in respect of the costs incurred by another party shall be -
(a) 	where the tribunal thinks fit an order that the first party pay to the second party a specified sum not exceeding £10,000 …”
 
22.	A tribunal, before making an order under this rule, must hold the opinion set out in paragraph (1).  Moreover it must relate its award of costs to the conduct which it has found to justify the order.  The costs which it awards must be attributable to the conduct which has led the Tribunal to decide to make the order – see per Chadwick LJ in Kovacs v Queen Mary and Westfield College and Another [2002] ICR 919 at paragraph 35.  

23. 	The Tribunal expressed its conclusion as follows:

“Miss Shepherd said that the Respondents’ conduct throughout the history of this matter has been unreasonable.  They had intervened to have the Sigsworth Tribunal decision overturned by the Carstairs Tribunal.  They had intervened at today’s hearing in a further deliberate attempt to delay proceedings.  At no time had they presented any Notice of Appearance.  The unanimous decision of the Tribunal is that it is in full agreement with Ms Shepherd’s submission.  The Respondents’ conduct in these proceedings can best be described as vexatious and otherwise unreasonable.  Despite giving repeated opportunities they have deliberately ignored the requirement to enter Notices of Appearance but instead have chosen to intervene to delay matters even further.  The Applicant has thereby incurred additional costs which he would not have otherwise incurred.  Ms Shepherd asked for a costs order in the sum of £5,000.00 which is comprised as follows:
21½ hours solicitors’ costs at £200.00 per hour:	£4,300.00
Counsel’s fees:				£   700.00
						£5,000.00”

24. 	In our judgment there are two difficulties with this paragraph of Tribunal’s decision.  

25. 	Firstly, it is clear that in finding the Company and Mr Cooper to have been unreasonable “throughout the history of this matter” the Tribunal accepted a submission by Miss Shepherd that they had been unreasonable in intervening to have the Sigsworth Tribunal’s decision overturned by the Carstairs Tribunal.  The Carstairs Tribunal had overturned the Sigsworth Tribunal’s decision on the basis that the proceedings had not been served.  Ms Shepherd submitted to the Menon Tribunal in essence that Mr Cooper and the Company had deliberately misled the Carstairs Tribunal.  That argument is based on a single document – a draft Notice of Appearance dated 24 October 2001 (presumably intended to be dated 24 October 2002).  We will not extend this judgment with a full description of the history prior to the hearing of the Carstairs Tribunal.  Suffice it to say it would be a serious matter to find that Mr Cooper and the Company had misled the Carstairs Tribunal.  It would require careful findings of primary fact and proper reasons.  There are none.

26. 	Secondly, the figure of £5,000.00 is (we have been told) the whole of Mr Smith’s solicitor’s and Counsel’s fees from shortly after the Carstairs Tribunal to the conclusion of Menon Tribunal hearing.  It is difficult to see how the whole of those costs could be awarded as being attributable to the unreasonable conduct of Mr Cooper and the Company.  On any view Mr Smith’s solicitors would have had to do some work after the Carstairs Tribunal.   Intervening in the proceedings after failing to serve a Notice of Appearance no doubt increased the costs.  But it is not obvious that the whole of the costs incurred by Mr Smith can be attributed to the unreasonable conduct of Mr Cooper and the Company, and there is no process of reasoning in the Tribunal’s decision on this point.

27.	We have invited the parties to consider whether it is possible to agree a figure which is clearly and unarguably due to the vexatious and unreasonable conduct of the Company and Mr Cooper.  But it has proved impossible today, the parties’ advocates having limited opportunity to take instructions.   We conclude that we must remit to the Employment Tribunal the question of costs under Rule 14.  We urge the parties to agree if they possibly can and rather than engage in another hearing.  We consider that after instructions had been taken it ought to be possible for the advocates to reach some sensible conclusion which avoids the need for a remission.  Ultimately, however, there will be a remission of this matter to the Tribunal in case agreement proves impossible.  

The Cross Appeal
28.	The cross appeal was put as follows.  Once granted that Mr Cooper was not to be responsible for the unfair dismissal award (as we have held above), justice required that the sex discrimination damages be enlarged to include compensation for the discriminatory dismissal.  Reliance was placed on the decision of the Employment Appeal Tribunal in De Souza v London Borough of Lambeth [1997] IRLR 677 at paragraph 19.

29.	However as this matter was discussed it became plain that to substitute an award of damages for sex discrimination in place of an award of damages for unfair dismissal was not a straightforward matter.  The reason is this.  Damages for unfair dismissal are paid gross of certain statutory benefits.  Those statutory benefits are then the subject of recoupment.  Damages for sex discrimination are paid net of benefits.  This very consideration led the Sigsworth Tribunal to make its award of loss of earnings in the way that it did.  Therefore, assuming that this Appeal Tribunal was minded to follow De Souza v London Borough of Lambeth, neither the Tribunal below nor we had the necessary figures to award loss of earnings as compensation for sex discrimination.  

30.	Faced with this difficulty Ms Shepherd told us that she withdrew that part of the appeal.  She was wise to do so.  We note that, so far as we can ascertain from our reading of the papers, the Menon Tribunal was invited to approach compensation in the same way as the Sigsworth Tribunal.  The cross appeal is dismissed on withdrawal.

Postscript
31.	At the start of this appeal it was submitted on Mr Smith’s behalf that Mr Cooper and the Company had failed to comply with the Employment Appeal Tribunal Practice Direction 2002 by failing to include in the Notice of Appeal particulars relating to its failure to enter a Notice of Appearance – see paragraph 16 of the Practice Direction.  It was common ground that there was jurisdiction to hear the appeal of Mr Cooper and Shaldene Limited.  There is no statutory requirement to provide such particulars.  There had been no interlocutory order requiring compliance with paragraph 16.  Paragraph 16 in the particular circumstances of this case would have little if any relevance, for the Company and Mr Cooper do not seek to assert any excuse for failing to enter a Notice of Appearance or applying for an extension of time.  In those circumstances we heard the appeal.