Appeal No. UKEAT/0013/07/DA

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 5 June 2007
Judgment handed down on 10 August 2007

Before
HIS HONOUR JUDGE BURKE QC
MRS C BAELZ
MR R LYONS

CEX LIMITED	APPELLANT

MR MARK LEWIS	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MS JUDY STONE
(Of Counsel)
Instructed by:
Messrs Dawsons
Solicitors
2 New Square
Lincoln’s Inn
London
WC2A 3RZ	
For the Respondent	MR NIGEL M WOODHOUSE
(Of Counsel)
Instructed by:
Messrs Kidd Rapinet
Solicitors
14 & 15 Craven Street
London
WC2N 5AD	

SUMMARY

UNFAIR DISMISSAL

Polkey deduction

Appeal

The Tribunal found that the employee had been unfairly dismissed under Section 98A(1) and Section 98(4) of ERA.  They then found that if proper procedures had been followed, the Claimant would have had a 100% chance of being retained and made no Polkey reduction.  Held that, following Scope v Thornett and Software 2000 v Andrews, there was evidence that the Claimant might not have been retained which was not so scant that it could be ignored.  Remitted to same Tribunal to reconsider, according to law, the application of Polkey.

PRACTICE AND PROCEDURE

2002 Act and Pre-action Requirements

UNFAIR DISMISSAL

Compensation

Cross-Appeal

The Tribunal uplifted the awards of compensation under Section 31(3) of 2002 Act by only 10%.   Held that they were entitled to take into account the Respondent’s ignorance of the law.  The Tribunal had a broad discretion under Sections 31(2) & (3) which was not restricted by statute or authority beyond “just and equitable”.  Appellate courts should be reluctant to interfere with the exercise of that discretion. 

HIS HONOUR JUDGE BURKE QC

The Tribunal’s Decision and the Nature of the Appeals
1.	The Appellants, CEX Limited (“CEX”), appeal against the award to the Respondent, Mr Lewis, of £52,690.83 by way of compensation for unfair dismissal by the Employment Tribunal, sitting at London Central and chaired by Mr Etherington.  The Employment Tribunal’s reserved judgment was sent to the parties with written reasons on 5 September 2006.  Mr Lewis cross-appeals against one element of that award.

2.	Mr Lewis was employed by CEX, a retail business with over twenty high street outlets, from 1997 until his dismissal on 13 June 2005.  From September 1998 he had been CEX’s Pricing Director; his position was a senior management position.  In March 2005 CEX were in difficult financial circumstances; their founder, Mr Dudani, decided that costs had to be cut if the business was to survive; and he engaged an external specialist, Mr van Veen to, as the Tribunal found at paragraph 4.1:
“… advise and restructure the Company to ensure it operated in a more effective and efficient fashion.”
He gave Mr van Veen authority to make decisions regarding the restructuring.  It was resolved that the London office of the business would close and employees would have to relocate to Watford; and the possibility of redundancies was to be considered.

3.	Mr van Veen decided that the post of Pricing Director was no longer needed and that it should be restructured, retaining some of its duties but adding substantially different and important tasks relating to marketing and the development of ecommerce.  The Tribunal found that, on 2 April 2005, Mr van Veen told Mr Lewis to apply for the restructured post, which was to carry the title of Commercial and Strategy Director, and that he would not be in competition for it.  However, by the time Mr Lewis was to be interviewed for that post on 18 April 2005 there was at least one other rival applicant.  

4.	The Tribunal found, at paragraph 4.1,1 that while there was an overlap between the work Mr Lewis had been doing as Pricing Director and the new post, the latter incorporated substantially different and important tasks, appropriate to be combined with the work which Mr Lewis had exclusively done previously.  However, although on 2 April 2005 Mr van Veen canvassed with Mr Lewis the nature of the proposed new job, believing that it would go to Mr Lewis, there was not, on the Tribunal’s findings, clarity between them as to the extent of that overlap.  Mr Lewis thought that the content of the new job was close to 95% the same as that of his existing job; Mr van Veen believed that figure to be about 70%.

5.	The interview took place on 18 April.  Contrary to expectations Mr Lewis was unsuccessful.  At a meeting on the following day he was informed by Mr van Veen that his lack of success arose from his lack of experience in marketing, trading and ecommerce and from the absence of any display of enthusiasm for the new aspects of the post.  It was not suggested that these were not Mr van Veen’s genuine reasons for not appointing Mr Lewis.  The other applicant also failed to get the post.  

6.	After the result of the interview was known, Mr Lewis requested a meeting to discuss what, he said, seemed to be his redundancy – which request led to the meeting on the following day to which we have just referred.  CEX, or Mr van Veen on their behalf, appear to have taken the view that Mr Lewis, as a result of what had occurred, wanted to be made redundant rather than that, in the apparent absence of any other job, they were making him redundant.  The Tribunal were understandably critical of CEX’s misunderstanding of the position; see paragraph 3 of their Judgment.  However, it was not in dispute, that Mr Lewis, having failed to obtain the new post, was dismissed on the grounds of redundancy.  His internal appeal was unsuccessful; and his dismissal became effective on 13 June.  

7.	The Tribunal found, at paragraph 7.1, that Mr Dudani and Mr van Veen were unaware of the statutory dispute resolution procedures set out in Schedule 2 of the Employment Act 2002 and, therefore, of the dismissal and disciplinary procedures set out in Part 1 of that Schedule.  The applicable procedure, the Standard Procedure, was not followed.  As a result the dismissal of Mr Lewis was automatically unfair, pursuant to Section 98A(1) of the Employment Rights Act 1996.
 
8.	The Tribunal next found, at paragraphs 7.2 and 7.3, that, in relation to Mr Lewis’ post as Pricing Director, a redundancy situation existed, the new post being substantially different in content from the pricing director’s post and not, as Mr Lewis asserted, the same job with a different label; but, the Tribunal found, the procedures leading to the selection of Mr Lewis for dismissal were unfair in that:-

(1)	Because neither Mr Lewis nor CEX thought that there was a risk that Mr Lewis would become redundant by not being appointed to the new post, he was not warned of the risk of redundancy; see paragraph 7.3.

(2)	CEX failed to consider their redundancy exercise as a whole and to form selection pools, establish selection criteria, carry out a proper selection exercise and consider alternative positions for those selected for redundancy (paragraph 7.3).

(3)	There was no adequate consultation.  Mr Lewis was never alerted to the possibility that his position was at risk and CEX did not respond appropriately when Mr Lewis was unsuccessful in his application for the new post; see paragraph 7.4.

9.	The Tribunal summarised these findings in these words, at paragraph 8.2:

“…Unfortunately, their failure to appreciate what they were about led them to omit crucial stages of the normal processes to be adopted in the case of redundancy as well as failing to embark upon the statutory processes.”

They therefore concluded that the dismissal was unfair under Section 98(4) of the 1996 Act.

10.	The Tribunal expressed conclusions as to a contractual claim for outstanding salary which are of no relevance to this appeal.  

11.	Having thus concluded that Mr Lewis had been unfairly dismissed, the Tribunal proceeded to assess compensation (neither reinstatement nor reengagement being sought).  They assessed the basic award at nil in the light of sums paid by CEX to Mr Lewis.  They then considered, in the context of the compensatory award, whether had CEX followed appropriate procedures Mr Lewis would in any event have been dismissed; they did so both in the context of Section 98A(2) of the 1996 Act and in the context of what is familiarly described as the “Polkey” principle.  They concluded, at paragraph 8.2, that if appropriate procedures had been followed not only had CEX failed to show that Mr Lewis would on the balance of probabilities have been dismissed – the Section 98A(2) question – but also that there was:

“A 100% chance that Mr Lewis would have remained working for (CEX)”

12.	The Tribunal thus rejected any argument that Section 98A(2) applied to Mr Lewis’ dismissal and rendered it fair or that, pursuant to the Polkey principle, there should be any reduction of the compensatory award which they assessed, on the basis of loss of earnings as to the date of the hearing and for approximately 3 months thereafter, at £47,900.75.  They uplifted that award by 10% pursuant to Section 31(3) of the 2002 Act, explaining their reasons for so doing at paragraph 8.4(i).  The total award, as a result, was £52,690.83.

13.	CEX’s appeal focuses on one aspect only of the Tribunal’s Judgment.  There is no appeal against the Tribunal’s conclusions as to unfair dismissal under Section 98A(1) or Section 98(4) of the 1996 Act; nor does CEX criticise the Tribunal’s conclusion as to Section 98A(2) or as to the calculation of the compensatory award.  It is the Tribunal’s conclusion that there should be no reduction in that compensation pursuant to the Polkey principle which is the target of CEX’s appeal.  It was implicit in their skeleton argument and expressly confirmed by Miss Stone to us that CEX do not argue for a Polkey reduction in excess of 50%.  If they were to do so, it would necessarily be part of their case that the Tribunal ought to have found for them under Section 98A(2) of the 1996 Act and, therefore, not against them under Section 98(4); but that is not their case.  Their argument is, therefore, that the Tribunal ought so to have applied the Polkey principle as to make a reduction in the compensatory award of up to but not more than 50%.  

The Law
14.	There is no substantial dispute between the parties as to the relevant principles of law.  The authorities have been considered in detail recently in the Court of Appeal in Scope v Thornett [2007] IRLR 155 and in the Employment Appeal Tribunal in Software 2000 v Andrews (EAT/0533/06.  Judgment handed down on 26 January 2007).  

15.	In Scope the Court of Appeal, allowing the employer’s appeal from the Employment Appeal Tribunal, restored the Tribunal’s decision that the employee would have been dismissed, in the absence of unfairness, six months later than he was in fact dismissed.  Pill LJ, with whom Laws and Gage LJJ agreed said at paragraphs 34 – 37:

“34.     Having regard to those authorities, I am unable to accept Mr Blake’s first three submissions.  The employment tribunal’s task, when deciding what compensation is just and equitable for future loss of earning will almost inevitably involve a consideration of uncertainties.  There may be cases in which evidence to the contrary is so sparse that a tribunal should approach the question on the basis that loss of earnings in the employment would have continued indefinitely but, where there is evidence that it may not have been so, that evidence must be taken into account.
35.     There was such evidence in this case and it is summarised in paragraph 22 above.  It was not a case in which the employment tribunal could have ignored the countervailing factors, as the EAT appear to suggest.  In the recent tribunal on this issue has been upheld in this court.  There was evidence in this case which, to put it at its lowest, created a risk, which a fact-finding tribunal could not ignore, that the employment would not have continued indefinitely.  I respectfully disagree with the EAT’s conclusion in their paragraph 27, cited in paragraph 17 above, that the employment tribunal should not have set out on the venture.
36.    The EAT appear to regard the presence of a need to speculate as disqualifying an employment tribunal from carrying out its statutory duty to assess what is just and equitable by way of compensatory award. Any assessment of a future loss, including one that the employment will continue indefinitely, is by way of prediction and inevitably involves a speculative element. Judges and tribunals are very familiar with making predictions based on the evidence they have heard. The tribunal’s statutory duty may involve making such predictions and tribunals cannot be expected, or even allowed, to opt out of that duty because their task is a difficult one and may involve speculation. Giving judgment in the leading case on loss of earning capacity, Moeliker v A. Reyrolle & Co. Ltd [1977] 1 WLR 132, an important head of damage in personal injury cases, Stephenson LJ when seeking words to define the correct approach to be followed stated, at page 144:
“I avoid “speculation” because this head of damage can really benothing else”.
37.     When Lord Prosser, in King, spoke of making decisions with more or less confidence” he was not saying that a prediction could only be made when confidence was complete; on the contrary, he contemplated prediction when there was “less” confidence. As already stated, however, there may come a point, at which evidence of countervailing factors is so slight that an indefinite continuation of the employment may be held to be an appropriate prediction.”

16.	Pill LJ also approved of the observations of Buxton LJ in Gover v Property Care Limited [2006] ICR 1073, in particular that an Appellate Court should tread very warily when it is being asked to substitute its own impression and judgment for that of the Tribunal on a question which arises under Section 123 of the 1996 Act, i.e. the assessment of what compensatory award is just and equitable.

17.	In Software 2000 the EAT, presided over by Elias P, provided guidance as to how the Tribunal should approach the case in which it was argued by the employers that Section 98A(2) applied and that the dismissal should be regarded as fair as a result and that, the Tribunal ought to have reduced the compensatory award made to the employee.  Section 98A(2) was material because, in Kelly Madden v Manor Surgery [2007] IRLR 17, the EAT had held that the effect of Section 98A(2) was to effect a partial reversal of Polkey to the extent that if an employer satisfied the Tribunal on the balance of probabilities that the employee would have been dismissed even if their procedures have been adopted, then the dismissal must be held to be fair.  A Polkey deduction was relevant because, if the Tribunal were to find that there would have been a chance of such dismissal falling short of 50%, then the Tribunal must find that the dismissal was unfair but reduce the compensation accordingly in line with the decision in Polkey itself.  See Software 2000 at paragraph 34.

18.	After considering the earlier authorities and Scope, the EAT set out the following principles as emerging from the cases at paragraph 54:

“54.	     The following principles emerge from these cases: 
(1)	In assessing compensation the task of the Tribunal is to assess the loss flowing from the dismissal, using its common sense, experience and sense of justice.  In the normal case that requires it to assess for how long the employee would have been employed but for the dismissal.
(2)	If the employer seeks to contend that the employee would or might have ceased to be employed in any event had fair procedures been followed, or alternatively would not have continued in employment indefinitely, it is for him to adduce any relevant evidence on which he wishes to rely.  However, the Tribunal must have regard to all the evidence when making that assessment, including any evidence from the employee himself. (He might, for example, have given evidence that he had intended to retire in the near future).
(3)	However, there will be circumstances where the nature of the evidence which the employer wishes to adduce, or on which he seeks to rely, is so unreliable that the tribunal may take the view that the whole exercise of seeking to reconstruct what might have been is so riddled with uncertainty that no sensible prediction based on that evidence can properly be made.
(4)	Whether that is the position is a matter of impression and judgment for the Tribunal.  But in reaching that decision the Tribunal must direct itself properly.  It must recognise that it should have regard to any material and reliable evidence which might assist it in fixing just compensation, even if there are limits to the extent to which it can confidently predict what might have been; and it must appreciate that a degree of uncertainty is an inevitable feature of the exercise.  The mere fact that an element of speculation is involved is not a reason for refusing to have regard to the evidence.
(5)	An appellate court must be wary about interfering with the Tribunal’s assessment that the exercise is too speculative.  However, it must interfere if the Tribunal has not directed itself properly and has taken too narrow a view of its role. 
(6)	The s.98A(2) and Polkey exercises run in parallel and will often involve consideration of the same evidence, but they must not be conflated. It follows that even if a Tribunal considers that some of the evidence or potential evidence to be too speculative to form any sensible view as to whether dismissal would have occurred on the balance of probabilities, it must nevertheless take into account any evidence on which it considers it can properly rely and from which it could in principle conclude that the employment may have come to an end when it did, or alternatively would not have continued indefinitely.  
(7)	Having considered the evidence, the Tribunal may determine
(a)	That if fair procedures had been complied with, the employer has satisfied it - the onus being firmly on the employer - that on the balance of probabilities the dismissal would have occurred when it did in any event.  The dismissal is then fair by virtue of s.98A(2).
(b)	That there was a chance of dismissal but less than 50%, in which case compensation should be reduced accordingly.
(c)	That employment would have continued but only for a limited fixed period.  The evidence demonstrating that may be wholly unrelated to the circumstances relating to the dismissal itself, as in the O’Donoghue case. 
(d)	Employment would have continued indefinitely.
However, this last finding should be reached only where the evidence that it might have been terminated earlier is so scant that it can effectively be ignored.”

19.	The last sentence of that extract is, we infer, derived from and is certainly consistent with paragraph 34 of the Judgment of Pill LJ in Scope to which we have already referred.

20.	Although in the past the Tribunal’s task in seeking to decide what would or might have happened had fair procedures been complied with has been, perhaps disparagingly, described as “reconstructing the world as it never was” or “as it might have been”, these two recent authorities spell out with clarity that that task has to be carried out if Section 98A(2) and/or the Polkey principle is/are raised; the fact that such a task involves speculation is not to be regarded as a reason for not carrying it out.  The Tribunal must consider what would have happened but for the unfairness.  It is open to the Tribunal to find, as a matter of probability, that the employee would have been dismissed if the relevant procedures had been followed – in which case (in a case in which the dismissal was not automatically unfair under Section 98A(1) the Tribunal must find the dismissal to have been fair.  So far as the Polkey principle is concerned in a case to which Section 98A(2)) applies but it is not established as a balance of probability that the Claimant would have been dismissed in any event at the same time, the Tribunal must seek to determine whether there was more than a minimal chance that the employee would not have been dismissed – in which case the Tribunal must assess the percentage of such a chance and apply that percentage to whatever would have been the award on a 100% basis, or that the employee would not have been dismissed i.e. that there was no more than a minimum chance that he would have been dismissed absent unfairness – in which case the employee will be entitled to compensation on a 100% basis.  It is important for Tribunals to bear in mind, pursuant to paragraph 7 of the guidance in Software 2000, that the last alternative can only be chosen by the Tribunal if the evidence that the employment might have been terminated earlier is so scant that it can be effectively ignored.  

21.	In a case of automatically unfair dismissal under Section 98A(1), the partial reversal of Polkey does not apply; there can therefore be a greater than 50% Polkey reduction; but the principles set out above apply.

22.	It is material to note that the Employment Tribunal did not have the benefit of the Court of Appeal’s decision in Scope or of the EAT’s decision in Software 2000 before them; both those decisions were handed down and reported some months after the decision in the present case.

Submissions
23.	The appeal had been put forward by Ms Stone on four grounds, in summary that:-

(1)	In concluding that Mr Lewis’ employment would have been continued indefinitely had there been “explanation and discussion within the right cooperative, collaborative and consultative environment” the Tribunal erroneously applied to CEX a higher standard than the law required.  The Tribunal had to consider what would have happened if there had not been the unfairness which they identified as rendering the dismissal unfair and not would have happened in the more elevated environment which they described.

(2)	The Tribunal failed to take into account evidence that the employment would or might have been terminated in any event, absent the unfairness, which evidence was not so slight that it could be effectively be ignored.

(3)	The Tribunal’s conclusion, in the light of the evidence, that the prospect of Mr Lewis’ employment continuing indefinitely was 100% was perverse.

(4)	The Tribunal did not consider whether to make a percentage reduction; and approached the Polkey issue on an all or nothing basis.  

24.	Mr Woodhouse, on behalf of Mr Lewis, submits in relation to those four grounds as follows (again in summary form):-

(1)	In the passage in paragraph 8.2 criticised by Ms Stone the Tribunal were intending only to describe the situation which would have prevailed had CEX acted fairly and followed statutory procedures and were not applying any higher test.  Had CEX so acted there would have been the environment described by the Tribunal.

(2)	The Tribunal did have in mind the evidence relied upon by CEX as demonstrating a real risk to Mr Lewis’ continued employment; they reached the decision that, if CEX had acted fairly and had not erroneously proceeded on the basis that Mr Lewis wanted to be made redundant, Mr Lewis’ position would have been secure; that was a matter of judgment for them.

(3)	The Tribunal’s decision was not perverse; they gave reasons for their decision which were not reasons which no reasonable Tribunal could rely upon; the high test for perversity was far from satisfied.

(4)	The Tribunal did consider the Polkey issue by assessing the chance of Mr Lewis’ continued employment as was demonstrated by the last sentence of paragraph 8.  

25.	In oral argument Ms Stone went first to Ground 4, then to Ground 1 and then to Grounds 2 and 3 which she took together.  We will follow her order.

Our Conclusions
Ground 4
26.	Ms Stone submitted that at the start of their consideration of the Polkey issue in paragraph 8.2 the Tribunal can be seen to have applied the wrong test when they said:

“Also in considering awards (whether in regard to an automatically unfair dismissal or a dismissal under section 98(4) the Tribunal finds that the Respondent did not satisfy it that, had it followed appropriate procedures, the Claimant would in any event have been dismissed.  It is the Tribunal’s finding to the contrary …” 

and that thereafter the Tribunal continued to consider the issue only in a “binary” manner i.e. by considering only whether Mr Lewis on the balance of probabilities would have been dismissed or would have been retained, absent unfairness.  Perhaps because the Tribunal confused the Section 98A(2) exercise with the Polkey exercise they did not recover, she argued, from or correct that faulty approach; had they done so they could not have reached the conclusion that Mr Lewis would have been retained indefinitely and would or should only have concluded that there were all the minimal chances that he would not have been so retained.

27.	We are unable to accept these submissions.  In a case to which Section 98A(1) applies, but the Tribunal have decided that the employers have not discharged the requisite burden of proof, it is open in law to the Tribunal in deciding the Polkey issue and carrying out the exercise described by the Court of Appeal in Scope and by the EAT in Software 2000 to conclude that the employee would, absent unfairness, have remained in his employment indefinitely – in other words to assess the chance that he would have been dismissed at nil or that he would have been retained at 100%.  It seems to us likely that the sentence we have quoted above reflects the Tribunal’s view in respect of Section 98A(2) which they were asked to consider, albeit one of the reasons for the dismissal being unfair was that it was automatically unfair pursuant to Section 98A(1).  Kelly Maddon had not then been decided.  However, in the final sentence of paragraph 8.2, the Tribunal, having set out the circumstances which had led them to their conclusion, said:

“In those circumstances the Tribunal does not consider it appropriate to make any deduction from the award we make to the Claimant; we believe there is a 100% chance that he would have remained working for the Respondent.”

We agree with Mr Woodhouse that, in that sentence, the Tribunal, expressing their conclusions as based on the circumstances they had described, were using Polkey language i.e. they were setting out that they had approached the Polkey question by considering what was the chance that Mr Lewis would have been retained absent unfairness.  The earlier passage on which Ms Stone founded her argument is not, in our judgment, inconsistent with that entirely correct approach. If the Tribunal had not considered the effect of Polkey by considering and determining on the evidence the appropriate percentage chance that Mr Lewis would have been retained, there is no reason for their expressing themselves as they did in terms of a 100% chance.  

28.	The argument that, had the Tribunal approached their task correctly in law, they would or could not have come to the decision which they reached is, in reality, a perversity argument or an argument that they failed to consider facts which would or should have caused them to reach a different decision.  Such an argument, albeit deployed in support of Ground 4, properly belongs to Grounds 2 and 3.  Ground 4 is based on a misdirection by the Tribunal as to the correct approach in law to the application of the Polkey principles; for the reasons we have set out there was, in our judgment, no such misdirection.  

Ground 1
29.	The core of Ms Stone’s argument on this ground is the sentence in paragraph 8.2, from which we have quoted in paragraph 23(1) above.  In our judgement that sentence must be read in the context of paragraph 8.2 as a whole.  If approached in that way, the impugned sentence is properly to be read as amounting to no more than a description of what would have been the prevailing environment had CEX not made the series of errors described by the Tribunal in paragraphs 7.1 – 7.5 of their judgment which led to the conclusion that the dismissal was unfair.
 
30.	In paragraph 8.2, three sentences before the impugned sentence, the Tribunal summarised those errors; we have cited this sentence before but repeat it:
“…Unfortunately, their failure to appreciate what they were about led them to omit crucial stages of the normal processes to be adopted in the case of redundancy as well as failing to embark upon the statutory processes.”

The Tribunal went on in the next sentence to find that, had CEX embarked on either or both of those processes, Mr Lewis would have remained in employment with them.  It was open to the Tribunal to conclude that, had proper redundancy procedures been pursued or had there been a statutory letter as required by step 1 of the relevant statutory procedure at a meeting for the purpose of discussion as required by step 2 of their procedure, there would have been the type of environment which the Tribunal then proceeded to describe.  The Tribunal’s use of the word “right” in the impugned sentence indicates, in our judgment, that what they had in mind was the environment which would have existed had CEX proceeded correctly and not unfairly.  When paragraph 8.2 is read as a whole, we see nothing in it which demonstrates that the Tribunal, in resolving the Polkey question, provided their answer to that question in the context of some more cooperative, collaborative or consultative atmosphere than that which would have prevailed had CEX acted fairly.

Grounds 2 and 3
31.	We have already pointed out that the Tribunal did not have the advantage of the guidance contained in paragraph 34 of Scope and at the end of paragraph 54 of Software 2000 that evidence that the employee might not have continued in employment indefinitely must be considered and that a finding that an employee would have continued in employment indefinitely should only be made where the evidence that the employment might have been terminated earlier is so scant that it can effectively be ignored.  

32.	Ms Stone relied on some 17 findings made by the Tribunal which, individually or collectively, she submits, amount to factual material of substance which could not be ignored and which indicated a real chance that, absent unfairness, Mr Lewis would not have been retained at all or would not have been retained indefinitely.  We do not need to set all of these findings out; they are set out at paragraph 16 of Ms Stone’s skeleton argument and can be summarised under these headings:-

(1)	CEX were, as a result of financial difficulties, engaged in a restructuring process.

(2)	As part of that process Mr Lewis’ post was to disappear and a new job was to be created which required less pricing work and which incorporated substantially different and import tasks in ecommerce and marketing.

(3)	There was a redundancy situation in relation to Mr Lewis’ post.

(4)	Mr Lewis was unfamiliar with these new requirements and, despite a number of meetings between Mr Lewis and Mr van Veen before the interview, was unsuccessful at interview for the new post because he lacked experience in marketing, branding and ecommerce and do not show enthusiasm for the new aspects of the job.

(5)	The only alternative position of which Mr Lewis was aware had gone.

(6)	Mr Lewis’ appeal failed.

33.	To this list Ms Stone added the point that on the Tribunal’s conclusions, there should have been a properly carried out redundancy exercise; if a fair procedure had been followed, it would have involved the creation of pools, the application to candidates in pools of objective criteria and then a reasonable selection process; see paragraph 7.3 of the Tribunal’s Decision.  It was, she submitted, not possible on the Tribunal’s findings for them to decide that the result of such an exercise would have been the obtaining by Mr Lewis of the new post.  

34.	These were all, Ms Stone submitted, countervailing factors which pointed away from a 100% chance that Mr Lewis’ employment would have continued indefinitely absent unfairness but which the Tribunal did not take into account in paragraph 82.

35.	There is, in our judgment, nothing to indicate that the Tribunal did not have the first three of these clusters of facts well in mind when they came to consider the Polkey issue.  They formed the essential background to the existence of that issue; the Tribunal had to consider compensation because the dismissal of Mr Lewis for redundancy, caused by CEX’s financial difficulties and the consequent restructuring which brought about the abolition of Mr Lewis’ post was, as the Tribunal found, unfair.  The failure of Mr Lewis’ appeal against that unfair dismissal was not, as we seek it, relevant to the Polkey issue; the Tribunal found at paragraph 7.2 that the appeal did not operate to remove any of the unfairness; it did not add to the picture.  Had there not been the unfairness which the Tribunal identified the appeal is unlikely to have affected the eventual outcome.  The absence of any reference to it in paragraph 8.2 does not, on proper analysis, give rise to any justified criticism of the Tribunal.  

36.	However, we take a different view about the fourth and fifth of the facts or clusters of facts which we have identified above and about Ms Stone’s additional point.  A finding that there was a 100% chance that Mr Lewis would, absent unfairness, have continued in the employment to CEX amounts to a finding that the Tribunal were certain that he would do so.  The evidence (and indeed findings) that he failed to secure the new post, which Mr van Veen before the interview wanted and expected him to get because he lacked experience in the aspects of that post which were not part of his previous post and did not show enthusiasm for those aspects of the post was not found by the Tribunal to constitute so slight or scant an indication that, absent unfairness, Mr Lewis might not have secured that post that it could be safely disregarded.  The Tribunal did expressly consider Mr Lewis’ lack of enthusiasm for those new responsibilities and said, in paragraph 8.2 that, absent unfairness, Mr Lewis would have appreciated how important (1) those new responsibilities and (2) a show of enthusiasm for them was; and it is understandable that the Tribunal should consider that Mr Lewis would have shown more enthusiasm if there had been full consultation and explanation; but enthusiasm alone would or might not have been sufficient to render irrelevant his lack of experience; and the Tribunal do not appear in paragraph 8.2 to have considered how Mr Lewis’ lack of experience in these new areas would or could have been addressed or overcome.  In paragraph 7.4 the Tribunal described Mr van Veen as saying in evidence that training could have been a possibility; but there appears to have been no evidence or consideration as to whether training would have been available or satisfactorily available so as to enable CEX to be confident not only that they could but also that they should appoint Mr Lewis to the new post.  It does not appear from the Tribunal’s judgment that they considered, in relation to the application of the Polkey principle, how Mr Lewis’ lack of experience would or could have been approached had fair procedures been adopted, at least to the point of asking themselves whether that difficulty was one which was of so little substance that it could have effectively been ignored.

37.	Because the Tribunal concluded in paragraph 8.2 that Mr Lewis would, absent unfairness, have obtained the new post (they do not expressly say that but Ms Stone and Mr Woodhouse were in agreement – as are we – that that is what the Tribunal in paragraph 8.2, read as a whole, decided) they did not consider whether there were any alternative posts to which Mr Lewis could have gone if he did not obtain the new post; and if there was evidence which indicated that he might not get the new post – as, in our judgment, there clearly was – the Tribunal could not have been certain that he would continue in CEX’s employment; unless it was certain that, in such an event, there would have been an alternative post.  The only evidence appears to have been that another management post, that of Operations Director – was no longer available even before Mr Lewis was interviewed; see paragraph 4.12.  The Tribunal did not make any further findings about alternative posts.  

38.	However, there is, additionally to the above, a further point persuasively made by Ms Stone as to the effect of the Tribunal’s conclusion, at paragraph 7, that CEX ought, if proper redundancy procedures were to have been followed, to have carried out a redundancy exercise with pools, the adoption of objective criteria and the ascertainment of employees who were to be made redundant by the well-known, traditional and familiar method.  On that basis, absent unfairness, the ascertainment of those who were to be made redundant and the selection of the employee for the new post would – or at least could (for it is possible but Mr Lewis might have been properly regarded as in a pool of one) – have involved processes the results of which the Tribunal could not have predicted, at least to the point of certainty.  There is nothing in the Tribunal’s judgment which tells us what if any evidence there was as to the number of other management employees or management posts and how many such posts were or were not to be retained or deleted; that is so, we believe, because the Tribunal were not asked to consider how a full redundancy exercise would have been carried out and what the result would have been; the Tribunal were (unless there was a body of evidence which is not described in the Judgment and to which we have not been referred) simply not able to be certain what, in relation to Mr Lewis, the outcome of the exercise would have been.  They did not make any finding as to the outcome of that exercise in paragraph 8.2; the hypothetical carrying-out of such an exercise, absent unfairness, amounted to a countervailing factor which the Tribunal did not consider and as to which the Tribunal made no conclusion that it was of so slight importance that it could safely be ignored.  

39.	For these reasons, in our judgment the Tribunal erred in law in concluding that it was certain that Mr Lewis would have been employed by CEX indefinitely absent unfairness.  There was material which indicated at least that he might not have been employed indefinitely; and the Tribunal did not find that such material was of so little substance that it could be effectively ignored; in the case of the hypothetical redundancy exercise they do not appear to have considered it at all.  

40.	We have, of course, in reaching the above conclusions applied the guidance in Scope and Software 2000 which was not available to the Tribunal.  Nevertheless, applying that guidance, our conclusion is that the Tribunal erred in law in the respects we have set out.  

41.	In the circumstances it is unnecessary for us to consider the alternative ground based on perversity.  

42.	We should state that we have borne very much in mind the principle, set out in Gover and approved in Scope, that the Tribunal’s decision as to what is just and equitable should not lightly be the subject of criticism on appeal, and that an Appellate Court should tread very warily when it is being asked to substitute its own impression and judgment for that of the Tribunal.  We have not been asked to substitute our own impression and judgment for that of the Tribunal; we have concluded that this appeal succeeds on a different basis; but we have had at the forefront of our mind the importance of not interfering with the Tribunal’s exercise of its discretion unless a plain error of law has been made out.  For the reasons we have set out we have concluded that such an error has been made out.

The Cross-Appeal
43.	Section 31(3) of the Employment Act 2002 provides as follows:

“31(3)	If, in the case of proceedings to which this section applies, it appears to the employment tribunal that--
(a)	the claim to which the proceedings relate concerns a matter to which one of the statutory procedures applies,
(b)	the statutory procedure was not completed before the proceedings were begun, and
(c)	the non-completion of the statutory procedure was wholly or mainly attributable to failure by the employer to comply with a requirement of the procedure.
it must, subject to subsection (4), increase any award which it makes to the employee by 10 per cent, and may, if it considers it just and equitable in all the circumstances to do so, increase it by a further amount, but not so as to make a total increase  of more than 50 per cent.”

44.	That subsection is a mirror-image of Section 31(2) which contains similar provisions for the reduction of the relevant award if the applicable statutory procedure was not completed wholly or mainly by reason of the failure of the employee.  

45.	Both provisions are subject to Section 31(4) which relieves the Tribunal of the duty to make a reduction or increase of 10% as a minimum if there are exceptional circumstances which will make such a reduction or increase unjust or inequitable and gives the Tribunal a discretion to make a lesser reduction or no reduction or increase as it considers just and inequitable in all the circumstances.  It was not suggested that, on the facts, this was a case which fell within Section 31(4).

46.	The Tribunal at paragraph 8.4(i) gave these reasons for increasing the compensatory award to Mr Lewis under Section 31(3) by the minimum 10%:

“NOTES
(i)     In regard to the uplift of the award by 10% (section 31(3) Employment Act 2002), the Tribunal considered that the minimum award specified in that section was appropriate, that is to say just and equitable in all the circumstances of the case given, our belief that the Respondent’s failure to adopt the statutory dismissal procedure stemmed from ignorance of the law rather than from a deliberate disregard.  That is not to say that an award of 10% uplift would always be appropriate where an employer has failed through ignorance to comply with their statutory duties, and indeed as time passes from the introduction of the statutory rights such ignorance in an employer will be less and less easy to explain or for a Tribunal to accept.  However, also into the balance this Tribunal placed the fact that the Respondent had brought in an outside consultant in order to assist them to his expertise did not extend to a detailed knowledge of the law.  He relied upon the Respondent’s Human Resources Department in that regard; it seemed to the Tribunal that there was perhaps a mutual misunderstanding as between the members of that department and Mr van Veen as to the Company’s legal position and the consequences of their action.  Hence our award of an uplift of 10%.”

47.	Mr Whitehouse on behalf of Mr Lewis submits that, in increasing the award by only 10%, the Tribunal fell into error of law in three respects:-

(1)	The Tribunal should not have taken ignorance of the law into account; no distinction should be drawn between a case of failure to comply with the statutory procedures arising out of ignorance of those procedures and the case of deliberate disregard of those procedures; for otherwise an employer can shelter behind his own self induced ignorance and escape the consequences of failing to inform himself of the requirements imposed on him by the law.

(2)	The Tribunal failed to take into account (a) the wholesale nature of CEX failures to comply with the statutory procedures (b) the fact that CEX had simply failed to inform themselves of those procedures (c) the absence of any evidence that the relative newness of those procedures was the cause of CEX’s ignorance.

(3)	Perversity.

48.	It was common ground that there is, so far, no Appellate decision on the approach which Tribunals should take to the jurisdiction given to them by Section 31(2) and Section 31(3) of the 2002 Act.  Ms Stone informed us of one appeal to the EAT in which the issue was raised but was not, ultimately, the subject of decision.  Mr Woodhouse pressed us to give general guidance to help avoid the risk, which he told us is being seen in practice, of disparity; but we do not regard it as right to seek to set out general principles or to go beyond what is necessary for the resolution of this case on the facts of and arguments in one appeal only.  We turn, therefore, to the resolution of those arguments in this case.

49.	We are not persuaded that the Tribunal made any errors of law such as are contended for by Mr Whitehouse.  The structure of Section 31(2) and Section 31(3) is, leaving aside Section 31(4), that in our judgment the Tribunal has a broad discretion to decide to make a reduction or increase as appropriate in the relevant award of 10% or of more than 10%, up to a maximum of 50%, on the basis of what they regard as just and equitable in the circumstances of each individual case.  The Tribunal’s decision as to whether the adjustment should or should not be more that the basic minimum 10% and, if so, how much more is not confined by statute beyond the words “if it considers it just and equitable in all the circumstances to do so”.  Nor has the Tribunal’s discretion been confined by authority.  Parliament has not specified any particular consideration to which a Tribunal, making a decision as to the amount of any increase or decrease, must have regard.  The Tribunal must reach their decision on the facts of each case and on the basis of their assessment, judgment and discretion; and the decision thus reached should not rightly be subject to attack on appeal – as has been regularly held in other areas in which the Tribunal have the decision or power to decide what is just and equitable.  We agree with Ms Stone that there is a parallel – albeit not an exact parallel – between this jurisdiction and the Tribunal’s jurisdiction to find whether, in unfair dismissal, the employee has been guilty of contributory fault in which the Tribunal exercise a discretion with which an Appellate Court should be reluctant to interfere; see Hollier v Plysu [1983] IRLR 260 at paragraph 19.  There is a further parallel with the Tribunal’s discretion in considering a Polkey issue; see paragraph 42 above.

50.	There is no support either in the statute or in authority for Mr Woodhouse’s first criticism of the Tribunal’s exercise of their broad discretion in this case.  In considering whether it is just and equitable to adjust an award beyond the basic 10% or not it is, in our judgment, open to a Tribunal to regard the culpability of the party who has failed to comply with statutorily required procedural step as of relevance and, in assessing culpability differentiate between the case of a party who has deliberately flouted statutory requirements of which that party was aware and the case of a party which has fallen into default through ignorance of those requirements rather than deliberate disregard.  An employer who is unaware of those requirements will not escape the consequences of his ignorance; the dismissal will be held to have been automatically unfair; and, unless he can bring himself within Section 31(4), he will have to suffer an increase of at least 10% in the award to the employee.  While we accept the general principle that employers should inform themselves of the relevant law, it would, in our judgment, be wrong in principle to lay down a rule that no distinction could ever be made between an employer who errs out of ignorance and an employer who decides not to comply with the requirements of the law of which he is fully aware.

51.	As to the second submission, the Tribunal were in no doubt about the nature and scale of CEX’s failures to comply with the statutory procedures.  They said at paragraph 7.1 that CEX manifestly failed to comply with them and that the procedure was simply not invoked or embarked upon.  They made the same point in paragraph 8.2.  There was no reason for the Tribunal to repeat the point again in paragraph 8.4.1.  They found at paragraph 8.4.1 that ignorance of the law was not the only factor which affected what had occurred; there was, they felt, a misunderstanding between CEX’s HR Department and Mr van Veen; it was open to them to take that view of what had occurred.

52.	Mr Woodhouse submitted that the misunderstanding appeared to be one shared by as opposed to between Mr van Veen and CEX’s HR Department; but that detail, if correct, does not remove the potential validity of the point which the Tribunal were seeking to make that this was a case of muddle and confusion; and it was in our judgment open to them to take that into account.  If the sole reason for CEX’s procedural failures was ignorance of the law the Tribunal were entitled, as we have said above, to consider and weigh culpability; the view they took of culpability was a matter for them.  

53.	The comparative newness of the requirements of the statutory procedures to be followed was also, in our judgment, potentially relevant.  There may have been no express evidence as to why CEX were ignorant of those procedures; but the Tribunal would, no doubt, by the time they made their decision in this case, have had to consider other cases in which the statutory procedures had been raised and would, on the basis of their own experience, have been in a position to judge the extent or otherwise to which the newness of the statutory requirements, which came into effect only in October 2004, had been seen to be affecting employers and employees alike.

54.	As to perversity, in our judgment it has not been overwhelmingly demonstrated, as is required if the perversity argument is to succeed – see Yeboah v Crofton [2002] IRLR 634 - that the Tribunal reached a decision which no reasonable Tribunal could have reached.  We repeat that the Tribunal had a broad discretion; they were well aware of the size of CEX’s business; see paragraphs 4.2 and 4.9; they had set out in full the history of what had happened and explained their views as to the extent of CEX’s culpability in detail.  We are satisfied that the decision they reached was one which was open to them on material before them.

55.	Accordingly the cross appeal fails.

Conclusion
56.	The appeal is, accordingly, allowed.  Ms Stone invited us, if we were to allow the appeal, to remit the issue as to whether, pursuant to the Polkey principle, the award to Mr Lewis of compensation for unfair dismissal should be reduced to reflect the chance, up to a maximum of 50%, that Mr Lewis would not have retained his employment, to the same Tribunal which would decide that issue according to the law as set out in this judgment.  Mr Woodhouse did not disagree.  We so order.  There was no discussion before us as to whether further evidence should or could be adduced at the remitted hearing.  If either party wishes to adduce further evidence and there is no agreement as to that between the parties, the issue will have to be resolved by the Employment Tribunal.

57.	The cross appeal is dismissed.