Appeal No. UKEAT/0376/09/DM

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 10 February 2010

Before
HIS HONOUR JUDGE SEROTA QC
MS V BRANNEY
MR J R RIVERS CBE

BRIDGEWATER PAPER COMPANY LTD	APPELLANT

(1)  MR S HILLYER
(2)  MR P REID	RESPONDENTS

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	No appearance or representation by or on behalf of the Appellant	
For Respondents
	MR PETER EDWARDS
(of Counsel)
Instructed by:
Messrs Thompsons Solicitors
247 The Broadway
Wimbledon
London
SW19 1SE

SUMMARY
UNFAIR DISMISSAL 
Reasonableness of dismissal
Procedural fairness/automatically unfair dismissal
S.98A(2) ERA

On its true construction the Respondent’s Long Term Disability Scheme applied to employees while their medical condition was such as to render them permanently incapable of employment in any capacity rather than incapable of working for the Respondent.

HIS HONOUR JUDGE SEROTA QC
Introduction
1.	This is the full hearing of an appeal by the Respondent from the decision of the Employment Appeal Tribunal at Liverpool which was sent to the parties on 16 June 2009.  The Employment Judge was Judge Reed, who sat with two lay members.  The decision was a majority decision, with the Employment Judge being in the minority.  The majority concluded that the Claimants had been unfairly dismissed but rejected unanimously a further claim by them of discrimination on the grounds of disability.

2.	HHJ Peter Clark referred the appeal to a full hearing.  Unusually, the Respondent, although it had prepared a bundle and detailed skeleton arguments, has not appeared.  The Respondent is the English subsidiary of a Canadian company and is now in administration and has taken the view that it would not be a sensible expenditure that could be justified to attend today.  We have been told by Mr Edwards, who has appeared on behalf of the Claimants, that unfortunately it is most unlikely that the Claimants will recover anything other than the monies that they are entitled to recover from the Secretary of State because there will be nothing for them to claim against.  In those circumstances it has to be said that the major point in this appeal is one which is entirely academic.  We shall come to that shortly.

The Facts
3.	We can set out the factual background very simply.  The Claimants both have the misfortunate to suffer from asthma.  They were long-term employees of the Respondent.  Mr Reid had been employed as an electrician from 1996 and Mr Hillyer had been employed, again as an electrician, from 1991.

4.	They were entitled to benefit from a long-term disability scheme; however, for various reasons it was decided by the Respondent to have capability hearings in respect of them both, which were held on 9 July 2008.  The Claimants asserted that the capability hearings were a sham because the decision to dismiss them on capability grounds had been taken prior to the hearings.  They were both dismissed and their appeals were dismissed.

5.	Before we turn to the particular matters to deal with, it is helpful to have regard to the decision of the Employment Tribunal.  The Employment Tribunal accepted that the dismissals were on the basis of capability.  At the interview of Mr Reid that took place on 9 July, the gentleman conducting the capability interview, Mr White, started by saying he would, “Cut to the chase” and it was accepted by the majority of the Employment Tribunal that that evidenced the fact he had decided the outcome of the investigation before it began.  Although Mr White did not say anything similar in the case of Mr Hillyer, the majority inferred it applied to him also, so the dismissal was automatically unfair in that the decision to dismiss had been taken before any of the statutory procedures were gone through, but it was also unfair on ordinary principles.

6.	The Employment Judge, who was in the minority, took a different view of the facts and did not consider that Mr White had in fact, on the evidence, made up his mind to dismiss prior to the conclusion of the interviews, but we do not need to go into this matter at all.

7.	It was not accepted by the Employment Tribunal that the manner in which the appeals were conducted also rendered the dismissals unfair.

8.	In relation to the issue of remedy, there was an issue as to the construction of a long-term disability benefit scheme.  I think in order to understand the way in which this worked, the original position was, as evidenced in the original statement and terms and conditions of employment, this.  We take by way of example the case of Mr Hillyer.  At page 101 there is a provision headed “Payment during sickness or injury”:

“If you are absent from work because of sickness or injury your salary will, at the Company’s discretion, be maintained for a total period of up to six months within one year.
The calculation of benefit will take account of Statutory Sick Pay entitlements, so that employees are neither worse-off nor better-off than when working.
You must submit acceptable Statements for all days of absence.  For short periods of absence, for which Doctor’s Statements are not available, you will be required to complete a form explaining the reason for your absence, and to give this to your supervisor who will forward it to Personnel Department. If these statements are not provided, sickness benefits may be withheld or delayed. 
All forms received, giving information about National Insurance benefits, must be sent immediately to Personnel Department. 
Entitlement to benefit will cease if, in the opinion of the Company Medical Officer, you behave in a way which may retard recovery, or if you refuse suitable employment.  Anybody claiming benefit to which they are not entitled will be subject to discipline and possible removal from the sickness benefit scheme. 
The scheme may be varied if there are changes in the State benefit arrangements, or the issue of Doctor’s Statements etc., or for any other reason.”

9.	On page 102 one has the  provision relating to long term disability:
“Long term Disability
If your illness or injury continues beyond 26 weeks in any year, the terms of the Long Term Disability Scheme will apply.  The intention of the Scheme is to provide an income of 60% of the salary you received when you were working.
Any National Insurance/Disability Allowance entitlement grossed up to allow for tax, will deducted from the 60% salary.  The difference will continue to be paid until you are fit to return to employment, or until you reach retirement age.  Changes in salary rates within the Company or in National Insurance benefits will not affect the level of payment.  Employees will continue to accumulate pensionable service whilst benefitting from the Long Term Disability Scheme. ”

10.	In 2005 Bridgewater (as I refer to the Respondent) was clearly under some financial pressure and it addressed the issue of long term disability cover in a document that was placed before the Employment Tribunal, dated 19 December 2005, signed by Mr R A Dawson, the Human Resources Manager.  It states:

“Finally the division’s insurance department which provides Long Term Disability (LTD) cover has decided to withdraw that cover.  Given that full costs will now have to be met by the division and given the loss situation referred to above, it is proposed to seek agreement to define the qualifying criterions the employee is unfit to perform work of any kind and to reduce the benefit payable from 60% of salary to 50% of salary.”  

11.	Unfortunately despite the attempts of the relevant trade union, AMICUS, and the Respondent, Bridgewater, the parties were unable to reach agreement and therefore, in effect, employees were offered a new disability scheme by way of variation to their contract.  Both Mr Hillyer and Mr Reid accepted the new terms.  The relevant term is to be found at page 116 of our bundle, at page 3, under the heading “Long Term Disability”:

“The Company operates a Long Term Disability scheme for employees whose medical condition is so severe as to render them permanently incapable of employment in any capacity.  Eligibility to this benefit will be restricted to those members of the Bridgewater Paper Company Pension Plan who have a minimum of 5 years service and who have been absent for 26 weeks.  The Company’s medical advisors will determine eligibility against the medical criterion.  Ongoing cooperation with the Company’s medical advisors, to include attendance at any medical, will be prerequisite to continued eligibility.  The scheme is designed to provide a fallback level of income of 50% of the salary payable at the time of approval of Long Term Disability Benefit.
Any National Insurance Incapacity benefit will be deducted from the 50% of salary payment.  The difference will continue to be payable until either the claimant is fit to return to their original occupation, or the claimant’s normal retirement age.  The level of benefit payable will not increase should salaries payable to employees increase.  Claimants will continue to accumulate pensionable service whilst benefiting from the Long Term Disability Scheme.”

12.	The Claimants maintained that they were permanently incapacitated.  Mr White was not prepared to accept this was the case, and indeed the medical evidence suggested (and we have the relevant medical evidence in the bundle) that the Claimants were unfit for work in any chemical industry by reason of their asthma.  They were unable to work at all for the Respondent because the Respondent simply was not able to provide them with a dust free or chemical fume free environment.  However, both Claimants were considered, on the evidence, to be able to work in an office-based environment away from potential asthma triggers.  Neither of them were considered eligible for ill-health retirement.

13.	Mr White maintained that the Claimants were, under the amendment to their contracts of employment, which I have read, not eligible for long-term disability benefits.  The Claimants maintain that that interpretation was incorrect and they should not have been dismissed.  Their employment, it was submitted, should have continued and payment made under the scheme.  The majority agreed and concluded that Mr White’s interpretation of the scheme, taking its literal words (that is; that their medical condition had to be so severe as to render them permanently incapable of employment in any capacity), should be read as though it was in any capacity in the employment of Bridgewater, and that his construction was one that was outside the band of constructions that a reasonable employer could place on the term.  So the dismissal was unfair on that ground also and the Claimants’ remedy should be based on their entitlement to have continued receiving benefit under the long-term disability scheme.

14.	The Employment Judge, in his minority opinion, found that the interpretation was difficult and he was unable to draw assistance from the previous scheme.  In his opinion the term meant what it said and there was no basis for adding the words that the majority felt should be added so as to provide that the Claimants were entitled to the benefit of the scheme, so long as their medical condition was so severe as to render them permanently incapable of employment in any capacity for Bridgewater.  He said that otherwise an employee would be perfectly able to work elsewhere but still entitled to receive the benefit of the permanent long-term disability scheme and would be absolved of their obligation to seek other work.

15.	The Notice of Appeal has covered a number of grounds.  Firstly, in relation to the effect of section 98A of the Act regarding the reasonable band of responses it was said that the Employment Tribunal had substituted its views from those of the Respondent, it had failed to consider section 98A(2) and had made perverse findings.

16.	We deal with those matters briefly.  We do not consider that any of these matters are seriously arguable.  We simply do not know what the evidence was before the Employment Tribunal and it is impossible for us to say on the material before us that the majority were wrong in finding there had been a decision taken prior to the capability interviews, to dismiss the Claimants.  Once that finding stands, it must follow that the decision of the majority that the dismissal was automatically unfair cannot be impeached because the decision to dismiss will have been taken prior to the statutory procedures having been gone through.

17.	That deals with matters relating to the unfairness of the dismissal but leaves the issue of the construction of the scheme.  We would make the following general observations before considering the question of construction.

18.	Firstly, it is clear that the provision introduced in 2006 in relation to long-term disability was intended to, and did, replace the provisions relating to payment during sickness or injury and long-term disability in the terms and conditions of employment.

19.	Secondly, it is clear that insofar as long-term disability is concerned, the provisions of the terms and conditions of employment were expressly made subject to the terms of the long-term disability insurance scheme.  The major difficulty that Mr Edwards has, as it seems to us, is that it is very important to know what that scheme provided.  It was not available to the Employment Tribunal and it has not been made available to us.  I have the great benefit of sitting with Ms Branney and Mr Rivers, who have considerable industrial experience and knowledge of long-term disability schemes.  As Mr Rivers pointed out during the course of submissions, these schemes usually have, as a condition of eligibility, total and permanent incapacity, or total incapacity.  It would be highly unusual for a scheme to provide that cover is given notwithstanding that a claimant is able to carry out his employment simply on the basis that he cannot work for a particular employer or cannot do a particular job.

20.	The Respondent in its skeleton argument has submitted that applying ordinary canons of construction to the meaning of the first sentence, in particular of the long-term disability provision in the amendments to the contract of employment, the scheme means what it says, and in accordance with what might be regarded as usual practice, the disability scheme paid out for employees whose medical condition was so severe that they were permanently incapable of employment in any capacity.  There is no need to read into that provision dealing with eligibility the words “for the Respondent”.  It would be unusual for there to be such a provision and the views of the Employment Judge appeared to be apposite.

21.	It is also right to say that, in considering the construction of this clause, one needs to have regard to the matrix of fact and that matrix of fact includes the fact that the clause was introduced at a time when, firstly, the Respondent was under financial pressure and seeking to cut costs; secondly, where it was to have undertaken to meet the additional cost of paying directly long-term disability cover because its insurers had withdrawn.  In those circumstances it would be most unlikely, in our opinion, that it would be taking on an unusual burden of paying long-term disability payments in respect of persons who were able to work but unable to work for Bridgewater because of its peculiar circumstances, that is, where even the office involved exposure to chemical or dust.

22.	We have had the benefit of helpful submissions by Mr Edwards and he submits to us that the construction of the majority was correct and the Claimants were entitled to the benefit of the scheme, so long as they were unable to work for the Respondent, notwithstanding that they were perfectly able, on the medical evidence, to work outside an environment in which there was dust and some form of chemical fumes.  He points in particular to the latter part of the clause that provides that National Insurance Incapacity Benefit will be deducted from the 50 per cent of salary payment and this difference would continue to be payable:

“Until either the Claimant is fit to return to their original occupation or the Claimant’s normal retirement age.”

23.	It was submitted by Mr Edwards, firstly (and this is not controversial) that the scheme was only available to persons who remained employed, but, secondly, that the reference to “payment until the claimant is fit to return to their original occupation” showed that it was intended to refer to their employment by the Respondent.  He also drew attention to the word ‘employment’ in the contracts of employment and submitted that the term ‘employment’ throughout the contract meant employment in the post in which they were employed by the Respondent.  We are not able to agree with that submission, which is contrary to the natural meaning of the clause.

24.	In our opinion, the views of the minority, Employment Judge Reed, as to the construction of the clause is correct.  The Claimants were not entitled to the benefit of the long-term disability payments unless their condition rendered them permanently incapable of employment in any capacity.  That, in our view, cannot properly be limited to employment in any capacity with the Respondent.  The plain and natural meaning of the words do not enable us to reach that conclusion, neither is there anything in the matrix of fact that would point to that conclusion.  If anything, the matrix of fact would point to the contrary conclusion and Mr Edwards is not able to point to any previous provision that would have extended eligibility under the original scheme to a person who, although able to work, was permanently incapable of working for the Respondent, notwithstanding, as we have said, he was able to work elsewhere.

Conclusion
25.	The appeal is dismissed but allowed solely in relation to the construction of the long-term disability provision, which on its true construction does not apply to the Claimants because notwithstanding that they were permanently incapable of employment in any capacity for the Respondent, they could not demonstrate they were permanently incapable of employment in any capacity for other employers.

26.	We would like to express our gratitude to Mr Edwards for his great assistance if we have not been able to accept all his submissions.