Appeal No. UKEAT/0586/10/DM

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

		At the Tribunal
		On 19 July 2012

Before
HIS HONOUR JUDGE PETER CLARK
MR B BEYNON
MR D SMITH

MR N J GALLOP	APPELLANT

NEWPORT CITY COUNCIL	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MS LAURA PRINCE
(of Counsel)
Bar Pro Bono Unit

For the Respondent	MS DEBBIE GRENNAN
(of Counsel)
Instructed by:
Newport City Council
Legal Department
Civic Centre
Newport
NP20 4UR

SUMMARY
PRACTICE AND PROCEDURE – Admissibility of evidence
CONTRACT OF EMPLOYMENT – Notice and pay in lieu
DISABILITY DISCRIMINATION
Disability related discrimination
Direct disability discrimination
Reasonable adjustments

Without prejudice negotiations, not leading to a compromise agreement, revealed in evidence through questioning by an Employment Tribunal lay member.  Subsequently, unfair dismissal compensation reduced by 50 per cent for the chance that a compromise agreement would have been reached but for the dismissal.  That reduction set aside.  No waiver of privilege.  ET’s must not investigate without prejudice discussions absent clear waiver by both parties.

ET awarded both loss of earnings from EDT and pay in lieu of notice.  Double recovery.  Award reduced accordingly.

ET permissibly found that Respondent did not have necessary knowledge, actual or imputed, to found complaints of direct, disability-related (not pursued below) and failure to make reasonable adjustments.

HIS HONOUR JUDGE PETER CLARK
Introduction
1.	This case has been proceeding in the Cardiff Employment Tribunal.  The parties are Mr Gallop, Claimant, and Newport City Council, Respondent.  We have before us for full hearing an appeal by the Claimant and cross‑appeal by the Respondent against the Judgment of an Employment Tribunal chaired by Employment Judge Beard promulgated with Reasons on 14 September 2010.  The appeal first came on for hearing before this division on 23 November 2011.  Having heard submissions by counsel we formed the view that the case could not properly be disposed of without further information from the Employment Tribunal necessary to resolve certain issues between the parties arising out of the proceedings below.  In these circumstances, with the assistance of counsel, we formulated certain questions for the Tribunal under the Burns/Barke procedure.  Those questions had been answered by the Employment Judge.  The appeal hearing having resumed and having received further submissions from counsel, we now give our Judgment in these appeals.

Background
2.	The Claimant commenced employment with the Respondent as a horticulture training officer on 21 April 1997.  Thereafter he was employed as a countrywide warden, grounds technician and from 1 February 2004 he was promoted to the post of technical officer.  From May 2004 he complained to the Respondent of stress manifesting itself in the form of significant symptoms including lack of sleep, nausea, lack of appetite, irritability, headaches, eye strain, bouts of comfort eating, an inability to concentrate, an inability to cope with simple tasks and tearfulness.  He considered that there was a problem with his job description.

3.	The Respondent referred him to their external occupational health (OH) advisors.  On 1 August 2005 he was signed off sick, and on 6 September 2005 OH, having seen the Claimant, advised the Respondent that he was suffering from “stress‑related illness” directly related to his work but was not suffering from a depressive illness.  In August 2006 he was again signed off sick, his general practitioner diagnosing him with depression, as he informed the Respondent in a letter of grievance dated 21 August.  He there raised a health and safety complaint; the Respondent denied his complaint.

4.	From October 2006 the Respondent asked OH to comment on the question of disability discrimination and its application to the Claimant.  In a report dated 4 December 2006 Dr Riley of OH expressed the view that the Disability Discrimination Act (DDA) did not apply to the Claimant.  Moving forward, Dr Crosby of OH expressed the same view in his letter of 25 July 2007, as he did again on 14 August and 14 October 2008.

5.	Meanwhile, attempts were made between the parties to reach a compromise agreement leading to the Claimant leaving the employment.  Those attempts failed and no agreement was reached.  Instead, the Respondent took disciplinary proceedings, described by the Tribunal as a “sham”, resulting in his dismissal for alleged gross misconduct on 23 May 2008.  The Claimant’s internal appeal against dismissal was finally dismissed following hearings culminating on 26 November 2008.

The claims
6.	In his forms ET1 the Claimant complained of unfair dismissal and both direct and disability‑related discrimination and a failure to make reasonable adjustments.  The Respondent put in issue whether he was disabled within the meaning of the DDA, and that issue was resolved in favour of the Claimant following a PHR held before a full Tribunal chaired by Employment Judge P Davies sitting on 14 July 2009.  By a Judgment with Reasons promulgated on 8 October 2009 that Tribunal found that he was disabled from July 2006 until his summary dismissal on 23 May 2008.

The Tribunal decision
7.	The Beard Tribunal found the Claimant’s dismissal to be unfair; the Respondent does not challenge that finding on appeal.  As to remedy, the Tribunal declined to make a Polkey v A E Dayton Services Ltd [1987] IRLR 503 deduction from the compensatory award; in particular, they found (paragraph 32.19) that had a redeployment exercise been carried out the Claimant would on the balance of probabilities have been redeployed into another role and thus retained his employment with the Respondent.  Material to the Claimant’s appeal is the Tribunal’s finding (paragraph 35) that had he not been unfairly dismissed there was a 50 per cent chance that he would have left the employment under the terms of a compromise agreement.  On that basis the Tribunal included loss of 50 per cent of a notional compromise agreement payment of £11,850, the sum offered by the Respondent (see paragraph 33) and reduced the awards for loss of earnings, pension loss and notice pay by 50 per cent.

8.	Material to the Respondent’s cross-appeal on unfair dismissal remedy, the loss of earnings calculation began on the effective date of termination, 23 May 2008, and the Tribunal separately awarded an additional 11 weeks’ notice pay, also starting on that date.  As to disability discrimination, the Tribunal Reasons make no mention of a disability‑related discrimination claim.  The direct discrimination claim was dismissed, as was the reasonable adjustments claim, on the basis that the Respondent did not have the necessary knowledge of the Claimant’s disability during the employment (paragraph 45.9).  Thus his claim succeeded on the basis of unfair dismissal only.

The appeals
9.	It is convenient to deal first with the Claimant’s appeal and the Respondent’s cross‑appeal on unfair dismissal remedy and then to consider the Claimant’s disability appeal.  

Remedy for unfair dismissal
(1) The compromise negotiations
10.	Parties to employment disputes are encouraged to resolve them by agreement.  However, unusually, if not uniquely, in civil litigation the Employment Rights Act 1996 prohibits agreements that have the effect of contracting out of statutory employment protection unless such agreement is reached through ACAS or by way of a compromise agreement.  A compromise agreement is subject to the requirements of section 203; in particular, the Claimant must have received advice from an independent adviser as there defined.  Once a valid compromise agreement is reached the Claimant will not be able to bring the relevant claims in the Tribunal.  Negotiations that do not result in agreement are privileged; they cannot be disclosed to the Tribunal unless privilege is waived by the parties.  That raises the question in the present case as to how the fact of the negotiations between these parties emerged in evidence.

11.	The answer to that question is provided by the Employment Judge’s response to the Burns/Barke questions which we posed following the last hearing.  It seems that when giving evidence in the liability part of the Tribunal hearing Mr Davison, the dismissing manager who was called to give evidence by the Respondent, was asked by one of the lay members of the Tribunal, Mrs Williams‑Edgar, about a document in the bundle that referred to “mutual termination”; we have been shown the relevant letter.  Mr Davison replied that a trade union representative had approached the Respondent to discuss a mutual termination agreement but that the Claimant had said that he had been unaware of this approach until a draft compromise agreement had been prepared.

12.	The Claimant, who appeared in person below, confirmed what Mr Davison had said.  The Employment Judge indicates that the Claimant dealt with the (draft) compromise agreement in evidence‑in‑chief on 16 July 2010, the first day of the remedy hearing, but not earlier.  The effect of the Claimant’s evidence, on which he was cross‑examined by Ms Grennan, was that he was happy with the money offered (around £12,000) but his legal adviser brought in to advise him for the purposes of section 203 was not happy with it.  It is common ground that no compromise agreement was signed.  We also understand that negotiations resumed following dismissal, but again no settlement was reached.  Those negotiations were not before the Tribunal, and the Employment Judge has no note of any application by the Claimant to adduce that evidence.

13.	Finally, in answer to our direct question, the Employment Judge tells us that he did not give any advice on the issue of privilege.

14.	Ms Prince, now representing the Claimant on appeal, advanced the primary submission that it is manifestly unjust to use the fact that the Claimant did not enter a compromise agreement against him when assessing remedy for unfair dismissal.  In response, at our first hearing, Ms Grennan contended that the Claimant had led evidence as to the first draft compromise agreement following an offer made in about October 2007 at the liability stage of the hearing below without objection by the Respondent.  Since that account was disputed we asked the question of the Tribunal.  The Employment Judge’s response makes clear, contrary to Ms Grennan’s recollection, that it was not the Claimant who in effect voluntarily waived privilege without objection by the Respondent; the point only arose as a result of a no doubt innocent enquiry by one of the lay members of the Tribunal.

15.	Unfortunately, in our judgment, the Employment Judge did not then immediately intervene to cut off that wholly impermissible line of enquiry.  As a result, evidence was admitted that ultimately led to the Tribunal making its assessment of the chances (50 per cent) that a compromise agreement would have been reached.  As a result, the Claimant has seen his compensation for unfair dismissal significantly reduced.  As a matter of general principle, that is plainly wrong.  The Tribunal should not have admitted evidence as to compromise negotiations absent a clear waiver by the parties.  Having set this particular hare running the Tribunal ended up with a manifestly unjust award, to repeat Ms Prince’s phrase.

16.	The particular circumstances of this case are unique in our experience and we trust will remain so.  Employment Tribunals must not enquire into negotiations between the parties before them where no agreement is reached and where there has been no clear and unequivocal waiver of privilege by the parties.  As to whether privilege has been waived, we refer Tribunals to the helpful guidance provided by Elias P, as he then was, in Brennan v Sunderland City Council [2009] ICR 479.  It is pellucidly clear to us that privilege was not waived in this case, and no advice was given to the Claimant in person as to the principles of privilege.

17.	It follows, without more, that we shall allow the Claimant’s appeal against the 50 per cent reduction to certain heads of damage in the compensatory award.  We shall set out the revised calculation after considering the Respondent’s cross‑appeal on what is said to be double recovery by the Claimant.  Ms Prince accepts that the compromise agreement head of loss must be removed from the calculation.

(2) Pay in lieu of notice
18.	Ms Grennan submits that in awarding the Claimant loss of earnings from the effective date of termination and notice pay, being his entitlement to 11 weeks’ notice of dismissal, the Claimant’s loss for that 11‑week period has been double‑counted; he is entitled to one or the other but not both.  Ms Prince advanced a tenuous argument that there was no double recovery because the Claimant would have been entitled to notice or pay in lieu at the end of the three‑year loss period assessed by the Tribunal; see Reasons, paragraph 48.  We reject that submission; plainly, Ms Grennan is right.  The relevant period of loss covered by both awards is the 11 weeks from 23 May 2008; we shall therefore allow the Respondent’s cross‑appeal.

19.	In these circumstances, the Tribunal’s award of compensation for unfair dismissal is varied as follows (we are grateful to counsel for agreeing the calculation): (a) a basic award of £5,445; and (b) a compensatory award for loss of earnings £58,637.28, pension loss £11,378.25, and loss of statutory rights £300.  This makes a total of £70,315.53, less post‑dismissal earnings (Reasons, paragraph 50) of £11,389.55 and future loss of earnings of £4,310.16, a sub‑total of £15,699.71.  The compensatory award total is therefore £54,615.82.  The total of (a) and (b) is thus £60,060.82.

20.	Accordingly, the Tribunal’s total award for unfair dismissal is varied from £33,045.40 to £60,060.82.

Disability‑related discrimination
21.	Although pleaded in his form ET1, the Claimant raised no specific disability‑related claim in the further information provided and settled by his solicitors pursuant to a case management order made on 13 May 2009.  Further, in his response to the EAT Burns/Barke questions the Employment Judge, having referred to his notes, states that the Claimant did not pursue a disability‑related claim in evidence or submissions; that accords with the recollection of Ms Grennan, who appeared below, and the Judge makes clear that Ms Grennan did not address any disability‑related claim in her closing written submissions.

22.	In these circumstances, we shall not permit Ms Prince to raise the point on appeal (see East Hertfordshire NHS Trust v Mensah [1998] IRLR 531, paragraph 28, per Peter Gibson LJ).

23.	For completeness we should add that had we entertained the submission in relation to disability‑related discrimination the outcome would be dependent on our overturning the Tribunal’s finding that the Respondent did not have the necessary knowledge, actual or constructive, of the Claimant’s disability, a question to which we now turn.

Knowledge
24.	The relevant findings of the Tribunal as to whether the Respondent had actual or constructive knowledge of the Claimant’s disability are contained in paragraph 45 of their Reasons, leading to the conclusion that it did not.  In challenging that finding Ms Prince advances a number of arguments: first, that it is enough that the employer was aware of the constituent elements in the employee’s condition and the effect of the disability on him, and it is not necessary that they had knowledge that this amounted to a disability under the then DDA; secondly, the Tribunal failed to consider the knowledge imputed to them through their agents, the OH advisors; thirdly, they failed to properly consider the effect of the Respondent’s concession at the earlier PHR that the Claimant was disabled within the meaning of the DDA, albeit only from July 2007 (the PHR Judgment, as we have earlier indicated, found that he was disabled from July 2006 until the effective date of termination in May 2008); and finally, perversity.

25.	We have considered each of these submissions and reject them.  In our judgment, the Respondent was entitled to rely on the advice from OH on three or four separate occasions that despite his medical condition he was not disabled within the DDA.  Interestingly, as Ms Grennan pointed out, in commenting specifically on Dr Crosby’s report of 14 December 2007 in a letter to Mr Boyett of the Respondent dated 14 January 2008 the Claimant does not challenge Dr Crosby’s opinion that he is not disabled.  Secondly, the knowledge that is to be imputed to the Respondent through the OH service is that the Claimant is not disabled, not that he is.  Thirdly, the fact that long after the employment ended on the basis of subsequent medical evidence the Respondent conceded that the Claimant was disabled for part but not all of the period contended for and found by the PHR Tribunal in favour of the Claimant does not stop the Respondent from raising the issue of knowledge at the substantive hearing.  Finally, as to perversity, we are not persuaded that the Tribunal’s findings at paragraph 45 cross the high threshold for perversity appeals.  Their conclusion that the Respondent did not have the necessary knowledge was a permissible finding.

26.	It follows that the argued claims of direct disability discrimination and failure to make reasonable adjustments necessarily fail.  As indicated earlier, the same fate would have befallen the disability‑related discrimination claim had it been pursued.

Disposal
27.	It follows that the Claimant’s appeal against dismissal of his disability discrimination claims fails and is dismissed; his appeal and the Respondent’s cross‑appeal relating to unfair dismissal remedy both succeed and are allowed with the consequences we have earlier set out.