Ministry of Defence v Wheeler (Ministry of Defence v Donald, Ministry of Defence v Joslyn, Ministry of Defence v Nixon)

Where a wrongfully dismissed employee has obtained, or could have obtained, lower-paid alternative employment, compensation must first reflect the net difference between the earnings lost and the alternative earnings. The appropriate percentage discount is then applied to that net loss. It is wrong to discount only the notional earnings from the original employment and deduct alternative earnings in full.

Where loss depends on successive contingencies, later percentage chances must be applied cumulatively. Tribunals may assess the chances in the round, but must make clear that their final figures reflect the cumulative approach.

Four conjoined appeals concerned former servicewomen who had been wrongfully discharged from the Armed Forces because of pregnancy. Each had obtained, or was expected to obtain, lower-paid alternative employment. The Ministry challenged the Employment Appeal Tribunal’s approach to compensation and mitigation. In Wheeler and Donald, the respondents cross-appealed on the calculation of successive chances of returning to and remaining in service.

The central issues were whether alternative earnings should be deducted before or after applying a percentage chance discount, and whether successive chances should be calculated cumulatively.

1. Disposition. Swinton Thomas LJ delivered the leading judgment. Mantell LJ agreed and added separate reasoning on the first issue. Hirst LJ agreed with both judgments. The appeals and cross appeals were dismissed. The cases of Wheeler and Donald were remitted to the Industrial Tribunal for reassessment.
2. Mitigation and alternative earnings. The correct approach was to assess the claimant’s net loss by comparing the earnings she would have received in service with the earnings obtained or reasonably obtainable in alternative employment. The resulting loss was then reduced by the percentage representing the chance that the loss would not have been suffered. The same chance assessment had to be reflected on both sides of the comparison. The Ministry’s approach, which discounted service earnings and then deducted alternative earnings in full, could produce the artificial result that a claimant had suffered no loss while earning materially less than she might have earned in service.
3. The court treated the loss as an existing loss, subject to proof and assessment, rather than a merely speculative loss. The approach was consistent with the principle that compensation should make good the loss actually sustained, recognised in Marshall v Southampton etc. Health Authority (No. 2) (1993) ICR 893, and with the treatment of loss of earning capacity in Smith v Manchester Corporation 17 K.I.R. 1. Davies v Taylor [1974] A.C. 207 and Hartle v Laceys (a firm) Unreported, transcript 28 February 1997 provided further support for discounting the net difference by the relevant chance.
4. Cumulative chances. Where there were successive contingencies, the chance applicable to a later period had to be calculated as a percentage of the chance surviving from the earlier period. Tribunals therefore had to apply the percentages cumulatively. They were not required to use a particular mathematical presentation, and could assess the chances in the round, provided they made clear that the final figures reflected cumulative percentages. The tribunal should not assume that the chance of remaining after an initial period must necessarily be lower than the chance of returning initially.
5. Orders. Wheeler and Donald were remitted to the Industrial Tribunal. The Ministry was ordered to pay the respondents’ costs, subject to legal aid taxation for Joslyn. The costs of the cross appeals were to be borne by Donald and Wheeler. Leave to appeal to the House of Lords was refused.

1. Court of Appeal (Civil Division): Appeals and cross appeals dismissed. The court upheld the net-loss approach to mitigation and the cumulative calculation of successive percentage chances, and remitted Wheeler and Donald for reassessment.
2. Employment Appeal Tribunal: The Ministry’s appeals on the compensation and mitigation issue were dismissed. In Wheeler and Donald, the EAT required cumulative calculations; Donald was remitted to the Industrial Tribunal, while Wheeler was initially treated as requiring only arithmetical adjustment.
3. Industrial Tribunals: The tribunals had assessed the respondents’ prospective returns to service, maternity leave and completion of engagements by percentage chances.