Timothy James Consulting Ltd v Wilton

Harassment requires unwanted conduct related to a protected characteristic. The statutory words should be applied to the facts without adding a judicial gloss. A constructive dismissal may be caused by acts of harassment, but the dismissal itself is not a separate act of harassment under the Equality Act 2010.

An award for injury to feelings is exempt from income tax under the injury exception in the Income Tax (Earnings and Pensions) Act 2003. In a loss-of-chance claim dependent on third-party action, the claimant must establish a real and substantial chance. The tribunal must then assess its value. An appellate tribunal should not interfere with findings of fact that were reasonably open on the evidence.

The Employment Tribunal found that the respondent’s conduct constituted harassment related to sex, constructive unfair dismissal, victimisation and unlawful deduction of wages. The respondent appealed the harassment finding, the conclusion that the constructive dismissal was itself harassment, and the grossing-up of an injury-to-feelings award for tax.

The claimant appealed the refusal to award compensation for the alleged loss of a chance to acquire equity in the respondent company. The appeals concerned the meaning of harassment, the tax treatment of injury-to-feelings compensation, the law on loss of a chance, and the permissible scope of appellate review.

1. The respondent’s appeal against the finding of harassment was dismissed. Section 26 of the Equality Act 2010 required the tribunal to decide whether the conduct was related to sex on the facts. The phrase should not be replaced by a more restrictive judicial formula. The tribunal had found as fact that the relevant conduct was related to the claimant’s sex, including because she was a woman to whom jealousy was ascribed. Those findings were open to it on the evidence and were not perverse.

2. The appeal was allowed on the issue of constructive dismissal. Sections 39 and 40 of the Equality Act 2010 distinguish dismissal, including constructive dismissal, from the separate prohibition on harassment. Earlier acts of harassment may cause a constructive dismissal, and the respondent accepted that they caused the claimant’s resignation. However, the constructive dismissal itself did not fall within the statutory meaning of harassment.

3. The appeal concerning tax was allowed and the injury-to-feelings award was reduced from £16,666 to £10,000. Section 406(b) of the Income Tax (Earnings and Pensions) Act 2003 excluded payments made on account of injury to an employee. The word injury was not confined to physical injury and could include injury to feelings. Orthet Ltd v Vince-Cain was persuasive and was preferred to the contrary reasoning in Moorthy. The observations in Horner v Hasted concerned disability and were, at most, obiter on injury.

4. The claimant’s appeal on loss of a chance was dismissed. Where loss depends on hypothetical third-party action, the claimant must show a real and substantial chance rather than a merely speculative or negligible one. The Employment Tribunal correctly treated the existence of that chance as a causation question preceding valuation. It was entitled to conclude that the necessary contingencies, particularly a sale or flotation of the company, were not supported by credible evidence. Expert valuation evidence was therefore immaterial to the outcome.

5. The final orders were that the harassment finding remained, the constructive dismissal was declared not to be harassment, the injury-to-feelings award was reduced to £10,000, and the claimant’s remedy appeal was dismissed.

• Employment Appeal Tribunal: The respondent’s appeal against the Liability Judgment was dismissed on the harassment grounds but allowed on the constructive-dismissal ground. Its appeal against the Remedy Judgment was allowed and the injury-to-feelings award reduced. The claimant’s appeal against the Remedy Judgment was dismissed.
• Employment Tribunal at Bristol: Found constructive unfair dismissal, harassment, victimisation and unlawful deduction of wages. It awarded compensation, including £10,000 for injury to feelings grossed up for tax, and rejected the loss-of-equity claim.