Dench v Flynn & Partners (A Firm)

Compensation for unfair dismissal is assessed by reference to loss that is caused by, and attributable to, the dismissal. Obtaining alternative employment does not automatically end that loss. The tribunal must consider the combined effect of the original dismissal and any subsequent termination, rather than treating the later event as necessarily the effective cause because it occurred later.

Rules concerning permanent alternative employment are guidance only. Under Employment Rights Act 1996, section 123, the tribunal must ultimately determine what loss and compensation are just and equitable in all the circumstances, applying the common-law duty to mitigate loss.

The claimant, an assistant solicitor, was dismissed for alleged redundancy and was later found to have been unfairly dismissed. Before the remedies hearing she obtained alternative employment with another firm, subject to a three-month probationary period. That employment ended after about two months.

The Industrial Tribunal limited compensation to the period before the alternative employment began. The Employment Appeal Tribunal held that this raised no question of law. The issue before the Court of Appeal was whether the tribunal had misdirected itself by treating the alternative employment as automatically ending the respondent’s responsibility for subsequent loss.

1. Appeal allowed and matter remitted. The Industrial Tribunal had misdirected itself in treating acceptance of the alternative employment as necessarily ending any loss attributable to the unfair dismissal.
2. Section 123(1) of the Employment Rights Act 1996 requires an award that is just and equitable in all the circumstances, having regard to loss sustained in consequence of the dismissal so far as attributable to the employer’s action. Section 123(4) requires the tribunal to apply the common-law rule concerning mitigation of loss.
3. The proposition in Whelan v Richardson that loss invariably ceases when permanent alternative employment at equivalent or higher earnings is obtained required qualification. Alternative employment will often end the loss, but not invariably. The tribunal must consider whether the unfair dismissal remains a continuing cause of later loss after the subsequent employment ends.
4. Causation is primarily factual, but the legal principle governing the sufficiency of the connection between dismissal and loss is a question of law. Causes may combine to produce the loss; the later termination should not automatically be treated as the effective cause merely because it is closest in time.
5. The tribunal was required to reassess the period and amount of loss, taking account of earnings received from the alternative employment and later temporary work. Sir Christopher Staughton agreed that the date of assessment is necessarily arbitrary and that the tribunal must apply an ordinary common-sense causation test followed by the just-and-equitable assessment.

The appeal was allowed with costs, and the matter was remitted to the Industrial Tribunal.

• Industrial Tribunal: found that there was no redundancy situation and that the dismissal was unfair. It limited compensation to the period before the claimant commenced alternative employment.
• Employment Appeal Tribunal: held that the Industrial Tribunal’s conclusion raised no question of law.
• Court of Appeal (Civil Division): allowed the appeal and remitted the assessment of compensation to the Industrial Tribunal.