Appeal No. UKEAT/0253/12/KN

EMPLOYMENT APPEAL TRIBUNAL
FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON, EC4Y 8JX

	At the Tribunal
	on 6th March 2013
	   Judgment handed down on 27th March 2013

Before
THE HONOURABLE MR JUSTICE LANGSTAFF (PRESIDENT) 
MRS M V McARTHUR BA FCIPD
MR P SMITH

LADRICK  LEMONIOUS	APPELLANT

CHURCH COMMISSIONERS	RESPONDENT

JUDGMENT

	APPEARANCES

For the Appellant	MR NATHANIEL CAIDEN
(of Counsel)
Instructed by:
Davenport Lyons Solicitors
30 Old Burlington St
London
W1S 3NL	
For the Respondent	MR CHRISTOPHER MILSOM
(of Counsel)
Instructed by:
Pinsent Masons LLP
30 Crown Place
Earl St
London
EC2A 4ES	

SUMMARY
UNFAIR DISMISSAL  
Compensation 
Contributory fault

PRACTICE AND PROCEDURE – Costs
 
A Tribunal found that the conduct of an employee, for which he was unfairly dismissed, was such that there should be no award either basic or compensatory.  An appeal that this was wrong on the basis that a 100% deduction for contributory fault could only be made from a  compensatory award where the conduct was solely causative of the dismissal was rejected, since there was no material to suggest that the unfairness (which was procedural) had causally contributed to the dismissal; as was an argument that the decision was perverse. An argument that despite the accepted approach since Devis v Atkins it was not open to a Tribunal completely to extinguish any basic award by reliance on contributory conduct was rejected: neither principle, nor case-law, nor statutory interpretation supported it.  However, in the light that it will be a rare case in which conduct is so bad as to deprive a long-serving employee of any compensation at all, despite his employer having treated him unfairly, the Tribunal ought to have said what its reasons were for holding that it was just and equitable for compensation to be reduced to nil (observations of Mummery LJ in Moreland, and when giving leave in Perkin v St.George’s relied upon).  Accordingly, the case would be remitted to the Tribunal for redetermination of this point.  
A cross-appeal, arguing that since the Tribunal had determined on balance of probabilities that the claimant had lied about his conduct, it had therefore to be taken that he had advanced his tribunal claims unreasonably, and costs should follow, was rejected: there was no absolute principle to this effect, a Tribunal had a discretion even if unreasonable conduct were shown, and this tribunal had committed no error of law.

THE HONOURABLE MR JUSTICE LANGSTAFF (PRESIDENT) 

1.	An Employment Tribunal at London Central, chaired by Employment Judge Tayler, held that the Claimant had been unfairly dismissed, but awarded him no compensation.  It delivered its reasons for this on the 18th August 2011.  At the same time it rejected the Respondent’s application for an award of costs.  

2.	Both the Claimant’s appeal against the refusal to pay him any compensation at all, and the cross appeal against the decision to refuse the Respondent’s costs, raise matters of principle.  No less than 21 authorities, and 4 extracts from other materials, were submitted, though not all were in the event relied upon.  

The Underlying Facts
3.	Mr Lemonious, the Claimant, was first employed by the Respondent in 1973.  When dismissed for misconduct in February 2010 he had around 37 years’ service.  He had a good employment record.  In the course of his work as a technical support worker, he had to set up computers for new starters.  Between July and November 2009 he sent emails in the names of other employees.  Six of these (sent on 4th November 2009 from an account called “Odd Logins”) featured significantly in evidence:  4 relatively harmless, but two more serious, one of which  suggested to the reader that a fellow employee had committed a criminal offence.

4.	The employer became convinced that the Claimant had sent the emails.   Having been taxed with this the Claimant denied any knowledge.  During ensuing disciplinary procedures, he not only denied sending the emails, but made numerous allegations against his colleagues, suggesting that they might have been involved in the matter, that there had been a form of conspiracy, or that he had been set up.  

5.	The Tribunal found, for reasons delivered on 16th May 2011 that the Respondent believed the Claimant to be guilty, and had therefore considered that he was lying when he denied having sent the emails.  It held the Respondent was entitled to regard the sending of such emails as a serious matter, particularly since the account from which they were sent was anonymous.  Coupled with the lying this rendered the totality of what he had done gross misconduct.  It involved an element of dishonesty.  

6.	The Tribunal determined that the dismissal was unfair.  It did so because the Respondent became “excessively focussed on the technical question” whether it could be shown that the email had come from a particular terminal.  That diverted attention from the rather more human question of who was at the terminal at the time the emails were sent.  The investigation involved informal chats with witnesses. That had insufficient rigour. The Claimant had no advance notice before being confronted with the emails; no proper record was taken of the initial meeting between management and the Claimant; reliance was placed on a conversation between the Claimant and a senior manager which had not been recorded in a file note at the time; a conversation that provided evidence inconsistent with his guilt was not followed up.  The panel hearing his appeal against the disciplinary decision to dismiss consisted of three persons, only two of whom expressed a view as to guilt, but the third wrongly stayed silent.  Accordingly, on procedural grounds, the dismissal was held unfair.  

7.	This left unanswered the claim by the Claimant that he had been wrongfully dismissed in breach of contract, and the argument by the Respondent that the Claimant’s actual conduct was such that his compensation should be reduced in accordance with Sections 122 (2) and Section 123 (6) of the Employment Rights Act 1996.

8.	Those rival contentions both involved the same central issue: did the Claimant in fact send the offending emails and, if so, had he actually lied about them to his employer and dishonestly implicated others?  At the Remedies Hearing, the Tribunal examined the available evidence.  It concluded on balance of probabilities (at paragraph 31) that the Claimant had indeed sent the emails.  It then said this: - 
“32.  In such circumstances, in which the Claimant had not admitted sending the  Odd Log ins emails, and was in a position of considerable trust, we consider that his conduct was such as to fundamentally undermine the relationship of trust and confidence between the Respondent and the Claimant such that they were entitled to dismiss him.  His dismissal was not wrongful.  
33.  We also consider that the Claimant’s conduct in sending the Odd Log ins emails, and failing to admit that he had sent them is such that it would not be just and equitable that he receive either a basic award or a compensatory award.  Accordingly, we make no monetary award in the favour of the Claimant.”

9.	The reasoning in paragraph 33 is terse, and not very informative.  It is a pity that such a short paragraph should give rise to such a wide ranging appeal.  

Grounds of Appeal

10.	Mr Caiden, Counsel for the Claimant, raised three grounds in an interesting argument.  He began however by also submitting that an award of nil compensation for both basic and compensatory awards following a finding that the dismissal had been unfair would be exceptional.  He sought to translate this into a principle that exceptionality had therefore to be demonstrated, but rightly moved on from that untenable proposition: in this context, exceptionality is not a matter of principle, but of observation.  

11.	His first ground was that a finding of 100% contributory fault as in paragraph 33 of the Reasons was unjustified where procedural failings by an employer are causally relevant to the dismissal itself.  This he termed the “narrow” basis on which he advanced the ground: a “wider” basis was that the reasoning was insufficient. 

12.	 In Ingram v Bristol Street Parts UKEAT/0601/06/CE Elias P had said at paragraph 29:
“Sometimes procedural failings by the employer will be causally relevant to the dismissal itself, and where that is so a finding of 100% contributory fault is unjustified.”

13.	In Gibson v British Transport Docks Board  [1982] IRLR 228, a number of employees subsequently dismissed were involved in a fracas on a picket line during the course of which a fellow employee was assaulted.  None gave a frank explanation of what had occurred.  None admitted to seeing the assault.  The employer decided to dismiss all.  There were procedural failings, in that the employer had not considered the case of each employee individually.  Their Appeal against a finding that the dismissals were fair was upheld.  Compensation was not, however, assessed at 100%.  The Appeal Tribunal, chaired by Browne-Wilkinson J, accepted that a finding of 100% contribution could not be justified “since (the employees’) conduct cannot have been the sole cause of the dismissal.”  At least part of the cause of the dismissal in that case was not conduct attributable to the individual complainants.   

14.	Usually, Mr Caiden submitted, a Tribunal should consider whether to make a “Polkey” deduction before moving on to consider reductions for contributory fault: see Rao v Civil Aviation Authority [1994] ICR 495 (C.A.)  at 501F - H per Bingham MR.  If the facts are such that a Tribunal could not or would not make a 100% Polkey reduction, this would show that the employee’s conduct was not the only factor in causing the dismissal which occurred.  

15.	The “wider” principle addressed the brevity of the reasoning.  In Moreland v David Newton (T/A) Aden Castings (22nd July 1994): EAT/435/92, Mummery P said, at page 11F-H:
“We agree with (Counsel for the Employer) that, depending on the facts of a case, it is possible to have both a finding of unfair dismissal and a refusal to award any compensation on the grounds of contributory fault, but it is a rare and unusual combination.  Because of its rare or exceptional combination it requires justification by reference to evidence and requires the giving of reasoning.”

On the following page, in respect of a finding that contributory fault justified a reduction of both the basic award and the compensatory award by 100% he commented that:

“As appeared from the decision of Sulemanji v Toughened Glass Ltd [1979] ICR 799 at pages 800 – 802, that is an exceptional course to take and, if that course is adopted, it must be justified by facts and reasons set out in the decision.”

16.	Essentially this is a ‘reasons’ challenge to paragraph 33.  It was not plainly identified in the Grounds of Appeal as such, but we were persuaded that paragraph 4.1.3 of the Notice of Appeal sufficiently covered it.  

17.	Mr Caiden went next to his third ground: perversity.  No reasonable Tribunal would have concluded that no monetary award should be made.  The words “just and equitable” appear in the statute in both Sections 122(2) and 123(6) Employment Rights Act 1996.  Here the conduct of the Claimant was far from the worst.  The Tribunal itself at paragraph 43 described the emails as “relatively mild”.  It did not itself describe the Claimant’s behaviour as lying but rather non-admission.  No allowance was made for his 36 years’ service free of blemish.  For him to leave with no compensation at all could not be thought just and equitable.  

18.	Save as to the “Reasons” point, we did not invite Mr Milsom, for the Respondent, to add to his written submissions on grounds 1 and 3.  

19.	Mr Caiden turned last to his second ground: a bold challenge in principle to the generally accepted approach that a Tribunal may choose to award no compensation whatsoever in respect of the basic award.  Mr Caiden acknowledged that ever since Devis and Sons Ltd v Atkins [1977] AC 931 (H.L.) it had been assumed that Section 122(2) Employment Rights Act 1996 and its predecessors had allowed for 100% reduction for contributory fault.  Nonetheless, he invited us to reconsider this.  

20.	Mr Caiden’s starting point was to point to the difference in wording between Section 122(2), and Section 123(6) of the Employment Rights Act 1996.  Section 122(2) provides: -

“Where the Tribunal considers that any conduct of the complainant before the dismissal (or where the dismissal was with notice, before the notice was given) was such that it would be just and equitable to reduce or further reduce the amount of the basic award to any extent the Tribunal shall reduce or further reduce that amount accordingly.”

21.	Section 123(6) provides:

“Where the Tribunal finds that the dismissal was to any extent caused or contributed to any action of the complainant, it shall reduce the amount of the compensatory award by such proportion as it considers just and equitable having regard to that finding.”

22.	Section 122 (2) does not require any consideration of the cause of the dismissal which has occurred: whereas the focus of Section 123(6) is upon exactly that.  In Devis v Atkins the legislation considered by the House of Lords was in respect of the causation question.  The provision being considered was the Trade Union and Labour Relations Act 1984 Schedule 1, paragraph 19(3):
“where the Industrial Tribunal finds that the matters to which the complaint relates were to any extent caused or contributed to by any action of the aggrieved party in connection with those matters, the Tribunal shall reduce its assessment of his loss to such extent as, having regard to that finding, the Tribunal considers just and equitable.”

Even at the time Devis v Atkins was considered this provision was historical: the law had been altered in 1975, after the date of the events considered in that case.  It was the previous law, without any equivalent provision to that now contained in Section 122(2), which their Lordships considered.  Accordingly, argued Mr. Caiden, the decision could be at best of persuasive force, since it was obiter as to whether a basic award (for which that earlier statute had made no provision) could be reduced to zero.  

23.	In a case in which subsequent misconduct came to light (the particular point of focus in Devis v Atkins) or a dismissal was unfair on purely procedural grounds, a Polkey reduction in overall compensation would achieve justice, with contributory conduct further reducing any sum left which would otherwise have been awarded.  A 100% Polkey deduction is not uncommon.  At the time this possibility was not recognised, for Polkey itself had not yet been decided.

24.	Section 122(2) uses the word “reduce”.  This is not the same as “extinguish”.  The statute should not be construed as if that latter word were included.  

25.	Next, it is established that when considering the impact of contributory conduct the Tribunal should adopt the same principles as adopted in the Civil Courts under the Law Reform (Contributory Negligence) Act 1945: see Warrilow v Robert Walker Ltd [1984] IRLR 304, per Tudor Evans J at paragraph 21.  Section 1(1) of that Act, so far as material, states:-
“damages recoverable in respect thereof shall be reduced to such extent as the Court thinks just and equitable…”

26.	In applying the principles under the 1945 Act, it was held in Anderson v Newham College of Further Education [2003] ICR 212 by the Court of Appeal, per Sedley LJ at paragraph 19, that:- 

“The phrase ‘100% contributory negligence’, while expressive is unhelpful, because it invites the court to treat a statutory qualification of the measure of damages as if it were a secondary or surrogate approach to liability which it is not.  If there is liability contributory negligence can reduce its monetary qualification but it cannot legally or logically nullify it.”

27.	That was a case in which the Claimant was injured when he tripped and fell over a frame supporting a white board which had been stored with its wheeled feet, some 2 feet in length, protruding into a classroom and creating a hazard.  The Judge found the danger would have been avoided if the Claimant had kept a proper lookout for his own safety, and held that that although there was a beach of statutory duty in allowing the board to be stored as it was, compensation should be reduced to nil by reason of the contributory conduct of the claimant.  The Court of Appeal held that where, though there had been a breach of statutory duty, an accident was the entire fault of a claimant there would simply be no liability: if there was liability to any extent, then contributory fault could not extinguish compensation entirely.

28.	 For the Respondent, Mr Milsom pointed out that whereas Anderson related to injury at work caused by breach of statutory duty, in the employment sphere we should be guided by cases such as Ingram v Bristol Street Parts.  The employee there appealed on the ground that the Tribunal erred in law in making a 100% reduction in relation to both basic and compensatory awards.  It was argued on his behalf that Parliament could not have intended that an employee who was found to have been unfairly dismissed for breach of the very basic standards imposed by the statutory procedures (a reference to those under the Employment Act 2002, which were in issue in that case) should end with no compensation.  That (a similar argument to that in Anderson, but in a different context) was rejected: Elias P held (at paragraph 28) that there was no reason in principle why Parliament should not take the view that no compensation at all should be awarded.  Nor did the EAT accept that there could not be 100% contribution where the employer was at fault.  Elias P. observed:

“We do not accept that.  Whenever there is a finding of unfair dismissal, it must follow that the employer has not acted appropriately.  If (the advocate for the employee) were right, there could never be a finding of 100% contributory fault, yet there is House of Lords authority establishing otherwise see Devis v Atkins. … 

Mr Caiden submitted that this reasoning simply relied on Devis, and the decision was related to the compensatory award in any event.  The point at issue was the peculiarity of the principle that there could be a deduction as great as 100% where the dismissal was automatically unfair.  

29.	In Chaplin v Rawlinson [1991] ICR 553, the Appeal Tribunal presided over by Wood J held that if contributory fault were established then on principle it should weigh equally in respect of both the basic and compensatory awards:  see also Royal Society for the Prevention of Cruelty of Animals v Cruden [1986] ICR 205.  The Appeal Tribunal held that it was open to the Tribunal to reduce the basic award to nil.  It thought that justice and logic required that power.  Chaplin was in turn relied on by the Court of Appeal in Perkin v St Georges Healthcare NHS Trust [2006] ICR 617 (see paragraph 53). Mr Caiden argued that this Appeal was not however dealing with any challenge to the 100% contributory fault principle, and thus was not binding authority that a Tribunal was entitled to go to the extent of 100% contributory fault in reduction of the basic award.

Discussion

30.	We shall set out our conclusions on these arguments before we turn separately to the Cross Appeal.  The starting point to consider each of the three grounds has to be the wording of the statute.  

31.	 As to the narrower basis on which Mr.Caiden put the first ground, it is a necessary finding so far as reduction of a compensatory award on the basis of contributory conduct is concerned that the dismissal has to some extent been “caused or contributed to” by an action of the Complainant.  We would accept that it could not be just and equitable for the reduction to be 100% if the dismissal of the Claimant were caused not only by his conduct, but by other factors too, outwith his control.  As to this first ground, however, a comparison between the approach in respect of an unfair dismissal and the approach in the case of a tort in a case such as Anderson in the civil courts must recognise their essential differences.  A dismissal is an act entirely within the control of the employer, usually, though not always, achieved by its intentional act.  In one sense, therefore, it is always caused by the employer’s act: but that is not to say it is caused by the employer’s fault, in the same way as a breach of statutory duty imposed on an employer by health and safety regulations will always be its fault. Further, an employer may dismiss for a mixture of considerations.  To establish the starting point for determining the fairness of dismissal, the employer must show the reason, or if more than one the principal reason, for the dismissal.  The statute itself contemplates a mixture of reasons.  It is only where the sole cause is the misconduct of an employee that a Tribunal could award no compensation.  

32.	Though we would accept as a proposition Mr Caiden’s submission that a finding of 100% contributory fault would be perverse where procedural failings by an employer had been causally relevant to the dismissal itself, his third ground fails because that principle is beside the point here.  The fact that the employer dismissed the claimant does not make its fault the cause of the dismissal. There is no logical basis upon which we could see that any of the employer’s procedural failings identified by the Tribunal could individually or collectively have caused the dismissal.  The sole reason for it, the Tribunal seemed to think, was the employee’s conduct in sending the offending emails, lying about having done so, and (we would add) blaming others for what had happened, alleging a conspiracy or set up against him.  Elias P in Ingram recognised that it was “sometimes” that procedural failings would be causally relevant: that leaves a wide territory in which they are not.  The Tribunal Judge was fully entitled here to regard the facts of this case as falling within that territory.  Indeed, Elias P. had specifically recognised in Ingram that it was open to a Tribunal to hold that there should be a 100% contributory reduction.  He said (starting at paragraph 28): 
There is no reason in principle why Parliament should not take the view that no compensation at all should be awarded, even where the employer’s procedural failings are significant, if the justice of the case does not merit it…

29.    Second, it is alleged that the finding of 100% contributory fault was in any event perverse given the procedural defects.  Mr Sykes submitted that there could not be a finding of 100% contribution where the employer was at fault.  We do not accept that.  Whenever there is a finding of unfair dismissal, it must follow that the employer has not acted appropriately.  If Mr Sykes were right, there would never be a finding of 100% contributory fault, yet there is House of Lords authority establishing otherwise: see Devis v Atkins. … Mr Sykes referred to certain obiter comments of mine in the case of Kelly-Madden v Manor Surgery [2007] ICR 203 at paragraph 61, which he submits supports the conclusion that where there are significant procedural errors by the employer the finding of 100% contributory fault is never appropriate.  I was not intending to lay down such a principle; indeed, I was purporting to follow the Gibson case and nothing I said in Kelly-Madden should be treated as inconsistent with it.”

It was clear that in that case Elias P thought that the 100% contributory deduction applied not just to the compensatory award but also to the basic award.  

33.	The point by reference to Polkey, set out at paragraph 14 above, is of no assistance.  Polkey poses a different question.  It asks not what caused the actual dismissal which occurred, in respect of which compensation is to be ordered, but whether that compensation should be limited because of the chance that the employer might at some later time fairly dismiss the employee.  It does not involve establishing a question of past fact, but assessing future possibilities.

34.	Given that a Tribunal may decide that a compensatory award should be reduced by 100%, it cannot be perverse to make such a deduction, at least where it is open to a Tribunal to conclude that the sole cause of the dismissal which occurred was the misconduct of the employee.  On the evidence here such a finding was open to the Tribunal.  We reject the “narrower” basis for Ground 1.  

35.	However, on the “wider basis” upon which Mr Caiden put his first ground we would have expected to see some reasoning which carefully set out why it was just and equitable (the central statutory phrase) in the light of the claimant’s conduct to reduce the basic and compensatory awards to the extent of 100%.  Though there is no principle of exceptionality, such a result is rare.  This is emphasised in case-law.  Not only is this apparent from Moreland (see above) but (for example) Wall L.J. in Perkin quoted Lord Justice Mummery in giving permission to appeal the Court of Appeal in that case as saying:
“It is unusual to hold that there was a 100% chance that employment would have been terminated, even if the procedure had been fair.  It is also unusual, but legally possible, to find a conclusion that an applicant who succeeds in establishing that there was procedural unfair dismissal has contributed to his dismissal to the extent of 100%”

Further, even if the conduct were wholly responsible for the dismissal, it might still not be just and equitable to reduce compensation to nil. Though there might be cases where conduct is so egregious that that is the case, it calls for a spelling out by the Tribunal of its reasons for taking what is undoubtedly a rare course.  In particular, it must not be the case that a Tribunal should simply assume that because there is no other reason for the dismissal therefore 100% contributory fault is appropriate.  It may be the case.  But the percentage might still require to be moderated in the light of what is just and equitable.

36.	Although, in our view, and subject to the second Ground of Appeal, it was open to the Tribunal to conclude that the claimant’s conduct was such as to extinguish the claim for a basic award in its entirety, the reasoning is so succinct at paragraph 33 that the Claimant must be unsure why precisely his conduct is so bad that he should receive nothing despite his employer being at fault.  We, for our part cannot see whether there was – as there might have been- an error of law in the decision - such as an assumption that the basic award and compensatory award were necessarily to be subject to precisely the same reduction, or that the question of how far to reduce an award in both cases was to be answered by the question of causation, ignoring that the only statutory consideration in applying section 122(2) is what is ‘just and equitable’.  On this basis, therefore, we uphold the ground of appeal.

37.	Mr. Caiden’s second ground seeks to overturn both practice and understanding since Devis v Atkins was decided.  This is a tall challenge.  It relates, however, only to the basic award.  Mr Caiden accepts for this ground that it is open to a Tribunal to conclude that the sole cause of a dismissal is the blameworthy conduct of the employee, and that it may be just and equitable in that light to reduce a compensatory award to nil.  Not only did Devis v Atkins contain the expressions of view which we have set out above, but so far as we are aware on any occasion when the matter has been raised the court has decided to the same effect.  It is said, however, by Mr Caiden that so far as he is aware no detailed argument has been heard in any case on what is at heart an issue of statutory construction.  

38.	The argument has to face the fact that case law (including that of Perkins v St George’s in the Court of Appeal, and Chaplin v Rawlinson and Ingram v Bristol Street Motors before the Employment Appeal Tribunal) accepts without any recorded reservation, or contrary decision, that the deduction may apply.  Mr Caiden’s argument that Ingram simply relied upon Devis ignores the fact that the reasoning of the EAT was placed on a wider footing: see the citation above from paragraph 28.

39.	We reject the argument by extension from the application of the Law Reform (Contributory Negligence) Act 1945 in other contexts.  Mr Caiden’s reliance on observations in Anderson is misplaced.  That was a case of breach of statutory duty.  The duty concerned was imposed upon the Defendant in order to protect workers from the consequences of their own inadvertent inattention.  The very reason for such legislation is likely to be that experience has taught that in many situations employees do not take the care of themselves that might be expected of most people.  For this reason, a court will be scrupulous to avoid too easily concluding that an accident is the entire fault of the employee, where the employer has been in breach of the statutory requirements.  If, however, the employee is solely so responsible, then, as is plain from Boyle v Kodak Ltd [1969] 1 WLR 661, and from the judgment of Sedley LJ in Anderson v Newham College read as a whole, there is no liability to apportion under the 1945 Act.  In this context, therefore, there is no room for 100% “contributory negligence”: for there is no liability against which it may be offset.   “100% contributory negligence” is a misleading phrase – as Sedley LJ observed it is expressive, but unhelpful.  If the fact is that the employer is at fault to some extent in causing an accident which has occurred, then there must be an apportionment.  That is the reason why paragraph 19 of the judgment in Anderson ends with the sentence upon which Mr Caiden places such heavy reliance:
“If there is liability, contributory negligence can reduce its monetary quantification, but it cannot legally or logically nullify it.”

The point is that in order for there to be liability, there has to be some fault relevant to the cause of the accident, of which the employer is guilty. 

40.	The context within which an unfair dismissal claim is determined is different.  Although it might be said that the employer is at fault (for that is the sole reason that the parties are in the territory of arguing about compensation at all), in a conduct case the employer’s fault is reactive to the conduct of the employee, or at least to the employer’s perception of it.  If that conduct is such as to be the sole cause of the dismissal then the only way in which to reflect that is by an appropriate adjustment of the awards of compensation: there is no other route equivalent to extinguishing liability, as there is in the case of an industrial accident. 

41.	In short, the observations in Anderson were made in a different context, are easily to be explained in that context, and do nothing to displace the reasoning in the cases since Devis v Atkins even if few if any cases have given any detailed consideration to the point.  

42.	The argument that compensation is in play only because the employer has been at fault, and therefore that that fault should be recognised by some award, is met not by denying the possibility that the employee’s conduct may be so bad as to justify no award at all, even where the consequence is that an employee loses a job which he has loyally performed without complaint for nearly forty years as here, but rather in demanding that the justification for such a course on the facts must be made clear. 
 
43.	If some albeit nominal compensation had to be awarded (as is Mr. Caiden’s submission), then this amounts to that which was roundly rejected by Viscount Dilhorne in Devis at 957 F-H:

“The suggestion, half-heartedly made, that there must at least be some recognition in money terms albeit minimal, savours of a tariff… I do not see that there is any inconsistency in finding that there was in the terms of the Act an unfair dismissal and in awarding no compensation” 

44.	It is also open to the objection made by Wood J in Chaplin at 563 D-E that if the principle were that something must be awarded, parties would seek nominal awards simply because there was no power to award nothing.

45.	Accordingly, the only reason for concluding that there could not be 100% deduction of a basic award by reason of contributory fault would be if the statute had to be interpreted to that effect.  Mr Caiden argues that the statutory wording in Section 122 (2) uses the word ‘reduce’.  It does not add “…or extinguish”.  A deduction in the ordinary sense of the word always leaves something of the original.  Thus the statute, he argues, excludes the possibility of a nil award.  

46.	For two reasons, this is erroneous.  First, it focuses impermissibly on one word in the subsection.  The relevant part of the subsection reads “to reduce … the amount of the basic award to any extent…” (emphasis added). Those last three words are important.  It would be contrary to them to hold that a basic award could be reduced only to some extent.  It makes it plain that the word ‘reduce’ is used in the sense that there might be a reduction to nil.  

47.	Secondly, the word ‘reduce’ is also the word used in Section 123 (6).  The argument made by Mr Caiden is in respect of the basic award alone.  He accepts that it is open to a court to reduce a compensatory award to nil.  But there is no warrant for interpreting “reduce” in one sense in Section 123 (6), and in a contrary sense in Section 122 (2).  All the more is this the case since in section 123 (6) the words “to any extent” do appear –  however there they do not qualify “reduction”, but instead the “cause or contribution” to the dismissal: so that, on the language of the sub-section, there would be more reason to read Section 123 (6) as excluding the possibility of a nil award as there is in respect of Section 122 (2).  

48.	Accordingly, neither arguments of principle nor of statutory interpretation assist his argument, and case law is against it: it fails.  

The Cross-Appeal
49.	Mr Milsom argues that the Tribunal was bound to award costs against the Claimant, because of the element of dishonesty in his claim.   Once the Tribunal had decided that he had sent the offending emails, and knew perfectly well that he had done so, his repeated denial of it, blaming of others and allegation of conspiracy represented dishonest behaviour. The Tribunal here had decided on a balance of probabilities that the Claimant had sent the emails and therefore that he had lied about them.  If a judge finds it more likely than not that something took place, then in our legal system it is treated as having taken place.  A judge cannot sit on the fence: see per Baroness Hale in B v (Children) Care Proceedings: Standard of Proof [2009] 1AC 11, at paragraphs 32-33.  In the same case, at paragraph 13, Lord Hoffmann had said: 

“if a legal rule requires a fact to be proved (a “fact in issue”), a judge or jury must decide whether or not it happened.  There is no room for a finding that it might have happened.  The law operates a binary system in which the only values are zero and one.  The fact either happened or did not.  If the Tribunal is left in doubt, the doubt is resolved by a rule that one party of the other carries the burden of truth.  If the party who bears the burden of proof fails to discharge it the value of zero is returned and the fact is treated as not having happened.  If he does discharge it, a value of one is returned and the fact is treated as having happened.”

50.	By Rule 40 of the Employment Tribunal’s (Constitution and Rules of Procedure) Regulations 2004, Schedule 1 it is provided that a Tribunal shall consider making a costs order against a paying party where any of the circumstances in paragraph (3) apply.  Those circumstances are:-
“…where the paying party has in bringing the proceedings… acted vexatiously, abusively, disruptively or otherwise unreasonably, or the bringing or conducting of the proceedings by the paying party has been misconceived.”

51.	In Daleside Nursing Home Ltd v Mathew (18th February 2009) UKEAT/0519/08 the Appeal Tribunal, presided over by Wilkie J, considered an employer’s appeal against a refusal by a Tribunal to award costs in respect of a claim of direct race discrimination in which what had been alleged was unambiguously explicit racial abuse. On the particular facts of the case that allegation was a deliberate and cynical lie.  The facts that the lie was both explicit and at the heart of the case created an overwhelming case for an award of costs, yet the Tribunal  failed properly to address the point and came to a perverse conclusion.  Costs were awarded.  

52.	In Nicolson Highlandwear Ltd v Nicolson [2010] IRLR 859 Lady Smith in the Appeal Tribunal held that an Employment Judge had erred in finding that the Claimant before the Tribunal had not acted unreasonably.  He had been an unreliable witness, at times seeming unable to distinguish between truth and fiction; his conduct was deliberate and blatant and he was unrepentant.  Nonetheless, he presented a claim to the Tribunal saying that what he had done was simply “allegedly bad paperwork”.  He thus persisted with a claim when he must have known that he had been dismissed on well-founded grounds of dishonesty.  That amounted to unreasonable conduct.

53.	On the back of those authorities, Mr. Milsom argued that once it had been established that the Claimant had committed the very act he repeatedly denied doing, the Respondent should have had the full benefit of the consequences: the claimant’s denial of sending the email was not “arguable”.  He had made a case which was materially dependent on advancing untruthful assertions (see Arrowsmith v Nottingham Trent University [2012] ICR 159 per Rimer LJ at Paragraph 35).  The Tribunal had placed undue weight upon the balance of probabilities in determining that there had been a lie, its decision to make a nil award, and on the finding that there had been unfair dismissal.  If it had balanced those against any due consideration of the “nature, gravity and effect” of the Claimant’s conduct a costs award, at the very least in respect of the Remedy Hearing, had to follow.

Discussion 

54.	We cited Rule 40 (2) above insofar as Mr Milsom relied upon it when we set out his argument above.  However, after the words in paragraph (2) which we have there set out, follow these words:

“Having so considered, the Tribunal… may make a costs order against the party if it… considers it appropriate to do so.”  (emphasis added)

In short, before a costs award may be made, two matters must be established: first that at least one of the circumstances in paragraph 3 applies; but, second that it is appropriate to make the order.  There is a discretion to be exercised in respect of this second matter.  As always in exercising a discretion, there is a broad margin around the decision with which an appellate court will not interfere.  In order to upset the exercise of such a discretion, an Appellant must be able to show that some error of approach in principle was made, a factor was wrongly taken into or left out of account, or the decision was perverse.

55.	The cases upon which Mr Milsom relies do not set out any such principle as he advances.  In Daleside, the Appeal Tribunal went out of its way to state the opposite: not only noting that the case itself did not raise any issue of legal principle of general application, but also stating expressly that nothing said was intended to set out any general statement of legal principle.  The decision turned upon the particular clear cut facts of the case.  Nicolson is an example of factors wrongly considered, and overall perversity. Between paragraphs 34 and 40, Lady Smith identified seven specific matters taken into account which the employment judge should not have taken into account.  She was able to summarise her conclusion by holding that the decision was perverse, reached on the basis of irrelevant considerations, and failing to take proper account of the context.  Although the last sentence of paragraph 41 – “the unreasonableness was such as would have led any reasonable Employment Judge to conclude that an award of expenses (in England, “costs”) ought to be made” is expressed in general terms which may be extrapolated to other cases, the case is far from one in which it was put as a general proposition that lying to an employer and maintaining the lie before an Employment Tribunal would always and inevitably merit an award of costs. 

56.	 In opposing the cross-appeal Mr Caiden for his part relied on HCA International Ltd v May-Bheemul UKEAT/0477/10 (23rd March 2011).  The Appeal Tribunal there dealt with the submission made by a party seeking costs that it would be perverse not to award costs to the successful party where there was a finding that the losing party’s central allegation was untrue, or had not been established at a trial and was held to be wrong.  It commented, at paragraph 33 in a judgment delivered by  Cox J:
“In our view, (Counsel for the Appellant) seems to be seeking impermissibly to extract from these cases a principle that an award of costs must follow when a party fails to establish a central allegation in their case.  We reject this submission and we do so without hesitation.  
34.   It is correct that, in a number of the cases cited, appeals against decisions not to award costs were upheld on the basis that the decisions were perverse.  However, on an analysis of each case, it is clear that the EAT concluded only that it was in light of the specific facts found by the Tribunal that their decision that the Claimant had not behaved unreasonably was one which was unsustainable.”

The case is useful for a careful analysis of those authorities.  We accept its analysis and conclusion.  

55.	Moreover, it has the support of the Court of Appeal: in Arrowsmith v Nottingham Trent University [2011] EWCA Civ 797, [2012] ICR 159 Rimer LJ endorsed the words of Cox J in HCA International where she said: 

“…in some cases, a central allegation is found to be a lie.  That may support an application for costs, but it does not mean that on every occasion that a Claimant fails to establish a central plank of the claim, an award of costs must follow.”

57.	The argument that where on balance of probabilities a Tribunal finds against a fact central to a claim, the Claimant must be treated as having known that fact throughout, to the extent that he has lied and has behaved unreasonably for the purposes of Rule 40 depends upon the application of the words of Lord Hoffmann and Baroness Hale in the case of B.  The opening words, quoted above, of Lord Hoffmann in paragraph 13 are “if a legal rule requires a fact to be proved…”.   Those words must not be lost sight of.  Where, for instance, what is required to be proved is fact A, to establish which it is necessary to determine facts B, C and D then it would be a mistake to treat each of those facts as separately being conclusively established if the Tribunal were inclined to think that each was more likely than not: for if it were possible accurately to ascribe a percentage likelihood to each of, say, 60% the result would be that the combination of  B, C and D would be only 21.6% likely to establish A – in other words A would be improbable to a relatively high degree.  Yet treating B, C and D once established on a balance of probability, however slim, as established to the extent of certainty would render fact A proved.  This result would not be faithful to the uncertainties in the evidence.  The fact which required to be proved here was that applicable to the determination of a claim of costs (for that is the “legal rule” concerned).  In context, that is whether the claim was misconceived – as to which it plainly was not, since it succeeded - or whether the conduct in bringing it was unreasonable.  Given that not every lie is such that making it is necessarily either unreasonable conduct or, if unreasonable conduct, should give rise to an award of costs, the decision as to costs depends very much on other facts and circumstances.  In short, to determine a Claimant lied about a central plank of his claim is not necessarily to ascertain that he acted unreasonably in pursuing a claim in respect of it: it is that latter assessment (or fact) which comes within the principle set out by Lord Hoffman, and not whether or not what was said was a lie.

58.	In our view what the Tribunal was saying was that the fact that the Tribunal concluded on balance that the Claimant was guilty of the conduct of which the employer thought him guilty did not have the automatic consequence that costs would follow.  There is nothing exceptional or untoward about that conclusion.  At paragraph 40 the Tribunal went on to consider whether, assuming that the conduct were unreasonable, it was appropriate to award costs. It was addressing here the discretionary second part of the rule.  In doing so it would have to remember that costs are rarely awarded in Tribunals.  The jurisdiction is intended to be cost neutral as between the parties, in line with the purpose of Tribunals more generally to afford swift, summary and inexpensive justice in appropriate cases.  

59.	The Tribunal did not, in our view, take into account any impermissible consideration in reaching its determination in respect of costs.  Whatever might have been our own determination of the costs question, the decision was within that generous ambit within which reasonable disagreement is possible. The costs appeal fails.

Conclusion
60.	The one ground to succeed in respect of both appeal and cross-appeal is the Appellant’s ground that, at paragraph 33, the Tribunal simply failed adequately to set out its reasons.  This is particularly so given that as we have observed in dealing with the second ground of appeal, the Tribunal would have had to have found that the conduct was so egregious as to preclude any award.  What is “just and equitable” may not always be easy to explain at any length.  However, given that the employer had not dealt fairly with a long serving employee, in respect of whom (though he lied) the offending emails were (per paragraph 43) “relatively mild”, it is not obvious why the Tribunal felt it was just and equitable to reduce what would otherwise have been his compensation to nil.  Even a few short words might have sufficed, but they are not there.  In a case such as this there is a clear distinction to be drawn between the basic award and the compensatory award.  The latter requires causation for the dismissal to be established.  The former requires no such matter to be proved.  Though usually (see the cases set out at paragraph 29 above) the percentage reduction may be the same for both basic and contributory awards, this does not have to be the case: and since the employer is necessarily at fault, since it has acted unfairly towards its employee, cogent reasons are required to show why nonetheless it is just and equitable that compensation should be nil.

61.	If the ground of Appeal, relying essentially upon the inadequacy of reasoning, had been flagged up more clearly in the Notice of Appeal, we suspect a Burns/Barke order would have been made.  It is open to the Tribunal to justify its reasoning, as such an order would have expected it to do.  Not many words are likely to be needed. However, in the light of the considerations we have identified – and in particular the need carefully to examine what is just and equitable for the basic award separately from that which is just and equitable in the context of causal blameworthy conduct, in relation to the compensatory award, we have little doubt that the Tribunal will wish to re-visit its determination afresh, though in the light of the findings of fact it has already made.   

62.	The judgment in Sinclair, Roche, Temperley v Heard [2004] IRLR 763 sets out the principles to be considered when deciding whether a case should be remitted to the same or a different Tribunal.  Of the matters identified in paragraph 46 in that judgment there is no question here of there having been a totally flawed decision; nor that the passage of time is likely to have made this Tribunal forget the case.  There is a risk of “a second bite of the cherry” (see paragraph 46.5) but at 46.6, the Appeal Tribunal said:

“In the balance of all the above factors, the Appellate Tribunal will, in our view, ordinarily consider that, in the absence of clear indications to the contrary, it should be assumed that the Tribunal alone is capable of a professional approach to dealing with the matter on remission. …
 Employment Tribunals are all too familiar with the need to apply a different legal approach to a case today, from that which they applied last year, or even last week… ..where a tribunal is corrected on an honest misunderstanding or misapplication of the legally required approach .. then, unless it appears that the tribunal has so thoroughly committed itself that a rethink appears impracticable, there can be the presumption that it will go about the tasks set them on remission in a professional way, paying careful attention to the guidance given to it by the appellate tribunal.”

63.	 Given that this is a case in which the Tribunal entirely permissibly may have had a good reason for the view it expressed, and could have been invited (on review, or under the Burns/Barke procedure) to say what that reason was,  without there being room for either [party to object to this very tribunal doing so; given our confidence in its professionalism to take a fresh look in case it may have given inadequate consideration to all the arguments (not least because there were several others in play at the Remedy Hearing); given that we are confident that the Tribunal will have the integrity to make an award  putting in balance on the one hand the employer’s fault, and setting against it the seriousness of the employee’s conduct, whilst bearing in mind that it will be a rare case in which the latter so outweighs the former as to produce an award of nil compensation, and finally, given that it will be proportionate to have the same Tribunal re-hear the same issue (otherwise, an expensive re-hearing would be required) we determine that the matter should be remitted to the same Tribunal.  We should make it clear that the Tribunal should reconsider the extent of reduction in respect of both the compensatory and basic awards, given the paucity of its reasoning relating to both.

64.	However, finally, we would add this.  There are some cases in which the relative expense of a further hearing may outweigh, or be such a significant proportion of any likely award that it would be far better for the parties to devote their energies to negotiation or settlement than to relitigating a decision.  Whereas we cannot dictate this course, and our formal order must be that the matter be remitted to the same Tribunal (if not administratively inconvenient to do so) for reconsideration of the issue upon fresh argument from both parties, and (if, but only if, the Tribunal requires it) such fresh evidence as the parties wish to call, we would be failing in our duty if we were not to draw attention to the parties our own view that an agreed outcome has much to recommend it.