Bentwood Bros (Manchester) Ltd. v Shepherd

An employment tribunal may make a broad assessment of future loss, including pension loss. An appellate court should interfere only where the tribunal applied a wrong principle or reached a figure that no properly directed tribunal could have reached. A tribunal must account in principle for accelerated receipt of future compensation. An annual discount rate cannot be applied as a single deduction to losses covering different periods. Interest should compensate the employee for being kept out of money that would actually have been received, so it should be calculated on the net award after PAYE income tax and National Insurance deductions.

Mrs Shepherd succeeded before an Employment Tribunal in claims for unfair dismissal and sex discrimination after being selected for redundancy because she was pregnant. The Tribunal awarded compensation including two and a half years’ future loss of earnings and ten years’ future pension loss. It deducted 5% from future loss for accelerated payment and calculated interest on the gross compensation before tax and National Insurance deductions.

The Employment Appeal Tribunal dismissed the appeal subject to correction of an arithmetical error. The employer appealed on the duration of the pension-loss award, the discount for accelerated receipt and the basis for calculating interest.

1. Pension loss. The majority dismissed the challenge to ten years’ future pension loss. An employment tribunal may make a broad assessment based on the evidence, its industrial experience and its findings about the claimant. Appellate intervention is justified only where the tribunal adopted a wrong principle or reached an award so high or low that no properly directed tribunal could have reached it. Although the award caused some surprise, the claimant’s unchallenged evidence and the absence of contrary evidence provided a proper evidential basis. The award was not perverse (per Lord Justice Peter Gibson, para [13]; Mr Justice Blackburne agreed with Peter Gibson, para [29]). Lord Justice Carnwath stated that he agreed the appeal should be allowed on the first and second points, but gave no separate reasoning on the pension issue (para [26]).
2. Accelerated receipt. The tribunal was required in principle to recognise that immediate payment gives the claimant the benefit of investing money which would otherwise have been received over time. The approach in York Trailer Company Ltd v Sparkes [1973] ICR 518 was preferred to the contrary approach in Les Ambassadeurs Club v Bainda [1982] IRLR 5. A conventional 5% rate was understood as an annual investment rate and could not properly be applied as one deduction to future earnings and pension losses covering different periods. The question of the appropriate discount was remitted to the same Tribunal. The Tribunal could not reopen the ten-year assessment of pension loss (per Lord Justice Peter Gibson, paras [16]–[19]; Lord Justice Carnwath, para [26]).
3. Interest. By a majority, the appeal was allowed on the calculation of interest. The purpose of interest was to compensate for being kept out of money that should previously have been received. PAYE income tax and National Insurance contributions would have been deducted from remuneration, so interest could not logically be awarded on sums the employee would never have received (per Lord Justice Peter Gibson and Mr Justice Blackburne, paras [23]–[25], [29]–[31]). Lord Justice Carnwath was not convinced that the grossed-up award was wrong and would have declined to intervene, but accepted that he was in the minority (paras [27]–[28]).
4. The formal order was: appeal allowed; the employer was ordered to pay 50% of the appeal costs; permission to appeal to the House of Lords was refused (para [31]).

• Court of Appeal (Civil Division) — [2003] EWCA Civ 380: appeal allowed in part. The challenge to ten years’ future pension loss failed. The accelerated-receipt discount was remitted for reconsideration, and the interest calculation on the gross award was rejected.
• Employment Appeal Tribunal — appeal dismissed subject to correction of the compensation and interest figures.
• Employment Tribunal — found unfair dismissal and sex discrimination and awarded compensation including future earnings and pension loss.