Gover & Ors v Propertycare Ltd

The Court of Appeal dismissed the appeal. The court held that the Employment Tribunal was entitled to apply the Polkey principle when assessing compensatory awards under section 123(1) of the Employment Rights Act 1996 and to hypothesise what would have happened had a fair consultation and procedure been followed. The court rejected a novel contention that Polkey could not apply where the original dismissal would in any event have been substantively unfair, and it emphasised that reductions in compensation that reflect a chance that the employee would have lost employment are consistent with the statutory test in section 123(1).

The court also refused to permit a fresh legal point that had not been taken before the Employment Appeal Tribunal and emphasised the limits of the permission to appeal. On the facts the Tribunal's findings — that consultation would have taken about four months, that a different package could have been put to the employees and that many would still have refused leading to fair dismissals thereafter — were within the broad ambit available to a tribunal and not contrary to law.

Background and parties. The respondent sold lettings insurance; the claimants were sales agents who believed themselves to be self-employed. The Employment Tribunal found that the respondents had repudiated the contracts by unilaterally imposing changes to commission and that the claimants were employees of the respondent. The Tribunal found the dismissals unfair.

Procedural history. The issue of employment status was considered by an earlier Employment Tribunal; that decision was successfully appealed to the Employment Appeal Tribunal which in November 2003 remitted the issue to a different Employment Tribunal. The second Employment Tribunal confirmed employee status on 9 May 2004. A merits hearing in 2005 resulted in findings of unfair dismissal but a limitation of compensatory award by reference to the hypothetical outcome had fair consultation occurred. The claimants appealed to the Employment Appeal Tribunal and then to the Court of Appeal.

Nature of the claim / relief sought. The claimants sought awards for unfair dismissal. The key contested relief issue on appeal was whether the Tribunal was entitled to reduce compensation by reference to the chance that the claimants would in any event have lost their employment (the Polkey principle) and whether the Tribunal’s factual findings permitting such a reduction were speculative and unsupported.

Issues framed by the court.

• Whether the Polkey principle could be applied where, as the Tribunal had found, the terms originally proposed could never have been fair so that no subsequent fair dismissal could be based on them.
• Whether the Employment Tribunal had gone beyond permissible speculation in hypothesising what would have happened after proper consultation and so erred in law when limiting compensation.
• Whether the Court of Appeal could hear a fresh legal point not taken before the Employment Appeal Tribunal and not within the grant of permission to appeal to this court.

Reasoning and conclusions. The court held that (i) the first ground — that Polkey cannot apply where the original dismissal could never have been fair — was not open in this appeal because it had not been advanced before the Employment Appeal Tribunal and was not within the grant of permission; (ii) on the merits the law does not support the narrow limitation urged by the appellants: Polkey exemplifies the broader application of the statutory requirement in section 123(1) to assess loss attributable to dismissal and may support reductions even where the hypothesised fair dismissal might have been for somewhat different terms; (iii) on the facts the Tribunal was entitled to draw on its industrial experience and the evidence presented to construct a realistic hypothetical, and its conclusion that a period of consultation of four months plus notice would likely have preceded a legitimately achievable package (which many would still have refused) fell within the wide ambit permitted to tribunals. The court therefore dismissed the appeal.

The appeal was dismissed. The Court of Appeal held that the Employment Tribunal was entitled to apply the Polkey principle under section 123(1) of the Employment Rights Act 1996 to reduce compensation by reference to the chance the employees would have lost their employment after proper consultation; the court refused to admit a fresh legal point not taken before the Employment Appeal Tribunal and accepted that the Tribunal’s factual hypothesis and findings were within permissible bounds.

Employment Tribunal: original merits hearing found unfair dismissal (date not fully stated here). Employment Appeal Tribunal remitted the employment status issue in November 2003 to a different Employment Tribunal. Second Employment Tribunal confirmed employee status on 9 May 2004. Merits hearing in 2005 led to findings of unfair dismissal with a compensatory reduction under Polkey. Appeal progressed to the Employment Appeal Tribunal and thence to the Court of Appeal (this judgment: [2006] EWCA Civ 286) under section 37(1) of the Employment Tribunals Act 1996.