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	United Kingdom Employment Appeal Tribunal
You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> D36 Ltd v. Castro [2004] UKEAT 0853_03_1607 (16 July 2004) URL: http://www.bailii.org/uk/cases/UKEAT/2004/0853_03_1607.html Cite as: [2004] UKEAT 853_3_1607, [2004] UKEAT 0853_03_1607

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APPEARANCES

 

For the Appellant	MR DONALD BROATCH (of Counsel) Instructed by: Messrs Seymours Solicitors 75 Carter Lane London EC4V 5EP
For the Respondent	MR PAUL DANIELS (Solicitor) Messrs Russell, Jones & Walker Solicitors Swinton House 324 Gray's Inn Road London WC1X 8DH

SUMMARY

Transfer of Undertakings

The Employment Appeal Tribunal held there was no conflict between section 108 (1) of the Employment Rights Act 1996 and Regulation 5 of the Transfer of Undertaking (Protection of Employment) Regulations 1981. Both operate so to preserve contract of employment.


 


HIS HONOUR JUDGE BIRTLES

Introduction

1. These are conjoined appeals from two decisions of separate Employment Tribunals sitting at London (Central). The first Tribunal sat on 13 June 2003 and 31 July 2003 (in Chambers). The Chairman was Mr J P Coman and the members were Ms M Taylor and Mr S Roffe. We will refer to this decision as the "Coman Tribunal". That Tribunal unanimously decided that:

(i) the Respondent there, D36 Ltd was not prevented by any issue estoppel raised from disputing before the Tribunal that the Applicant lacked the necessary continuity of employment enabling him to bring a claim of unfair dismissal satisfying thereby the provisions of sections 98 and 108 (1) of the Employment Rights Act 1996; and

(ii) the Applicant had the necessary one year qualifying period to bring a claim for unfair dismissal, thus satisfying those statutory provisions.

2. That reserved decision was sent to the parties and entered in the Register on 4 September 2003.
3. The second Employment Tribunal decision was heard on 6 October 2003. It was the substantive hearing of the unfair dismissal claim. The Chairman was Mr P R K Menon and the members were Mr B J Isted and Ms A R Mitchell. The unanimous decision of the Tribunal was that:

(i) the Respondent was ordered to pay the Applicant the sum of £11,933.87 as compensation for his unfair dismissal; that sum being a total of the awards made in respect of the basic award (£250) and compensatory award (£11,683.87); and

(ii) the Respondent was ordered to pay the Applicant the sum of £2,937.50 in respect of the costs incurred by him in the proceedings because, in the opinion of the Tribunal, the Respondent has acted unreasonably in the conduct of these proceedings within the meaning of Rule 14 (1) of Schedule 1 of the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2001.

4. The Extended Reasons were sent to the parties and entered in the Register on 28 November 2003. We will refer to this decision as "the Menon Tribunal".

The Coman Tribunal

5. This was originally intended to be the complete hearing of the Respondent's claim for unfair dismissal. However, two preliminary issues were raised for determination at the hearing and they took the whole of the day set aside. That was the reason why there was a separate hearing before another Tribunal on the merits, once the preliminary issues had been decided in favour of the Respondent.
6. The Coman Tribunal identified the two preliminary issues. The Applicant argued that the Respondent was estopped from arguing the point about continuity of employment because of the determination of another case involving a Mrs McCrudden and the same employer heard at London (Central) on 19-20 May 2003. The Tribunal decided that point against the Applicant: decision paragraph 4. There is no appeal against that decision to the Employment Appeal Tribunal.
7. The second preliminary issue was that the Respondent argued that the Applicant did not have the proper continuity of employment to satisfy section 108 (1) of the Employment Rights Act 1996 because there had been no transfer of an undertaking requiring the period of service which had been built up by the Applicant with his original employer, McCann-Ericksson (2 April 2001 to 31 December 2001) to be aggregated with his service with D36 Ltd (1 January 2002 to 23 September 2002. The Employment Tribunal recorded the evidence it heard: decision paragraph 3 and found the following facts:

"(a) The Applicant, Mr Castro, entered the employment of McCann Erickson Windsor (McCann) on 2 April 2001 filling the full-time post of senior art worker. McCann is a large advertising agency with several offices in the United Kingdom. The Windsor office employed some 18 to 20 staff. Mr Castro worked in the creative department which was staffed by a creative director overseeing all creative work in the agency, someone described by Mr Castro as a "thinking man" who would come up with visual ideas and draw them up; two copywriters, who provided the written words; and two art workers, Mr Castro and Mrs McCrudden. The art work function undertaken by Mrs McCrudden and Mr Castro was a distinctive and discrete part of the overall creative process and Mrs McCrudden was the manager in charge. Their task was uniquely to create the design for the adverts on their computer screens, working the ideas into a form to present the public. It appears from Mr Owens' evidence that art work was not usually undertaken in house by McCann and to this extent the Windsor art work function was unique with regard to the creative process there.

(b) In October 2001, Mr Castro and the other staff at Windsor were informed that for financial reasons and because the company's lease of the building was due to end, that the Windsor office would be shutting down at the end of December 2001. Of the creative department all, except for the art work staff, Mrs McCrudden and Mr Castro, were transferred to various other parts of the McCann group in London. The Applicant and Mrs McCrudden were given the choice of transferring to London or taking three months' salary if they could not find alternative employment (A63). Mr Castro thought that any transfer to London would be to a McCann outlet. He therefore made no enquiries as he believed he would be working on the same job with the same clients. He and Mrs McCrudden decided to go forward with a transfer to London. Towards the end of December, he had a meeting with Mr R Wallis of Design 36 Limited which Mr Castro took to be part of the McCann group and which had accommodation at Herbrand Street in the same building occupied by McCann. In fact D36 Limited was an associate company of the K9 Group Limited, a separate organisation entirely from McCann. D36 Limited was solely concerned with undertaking art work for McCann on a sub-contract basis.

(c) On 18 December 2001, Mr Castro received a letter from Mr Owens (A66) confirming that from 1 January 2002 his employment with D36 Limited, described as a wholly owned subsidiary of the K9 Group Limited would start. The letter also stated that he would be given continuity of service from the existing McCann contract from 2 April 2001 and all statutory terms and conditions would continue to apply. The draft contract, which he subsequently signed up to on 5 January 2002, was enclosed. That contract had a commencement date for continuous employment of 2 April 2001. Mr Owens admitted that it was right for Mr Castro to expect his continuity of employment would run from that date but agreed that D36 Limited had not honoured the contract in that respect. Notwithstanding this, the Tribunal is quite aware that individuals cannot contract in and out of the legislation or regulations controlling continuity of employment.

(d) Mrs McCrudden also transferred with Mr Castro to D36 Limited at the same time with a contract which gave the commencement date of her employment as 26 July 1999, her start date with McCann. The art work studio was the only part of the creative department to transfer to D36 Limited. The remaining staff were found work within the McCann group. The whole of the art work studio was sent "lock, stock and barrel" - the words of Mr Owens - to D36 Limited. A complete transfer of staff and equipment took place. The move from McCann to D36 Limited was negotiated between the parties in December 2001. The deal appeared to be that if D36 Limited took on Mrs McCrudden and Mr Castro, the existing art work at Windsor would be passed over to D36 Limited as a sub-contractor which, as already indicated, undertook the art work emanating from the London office of McCann. The clients did not transfer but were managed by McCann in London. No payment was made to D36 Limited as part of the transfer. Future work was the promise which induced D36 Limited to take on the transfer in this case. Mrs McCrudden and Mr Castro packed and transferred to the new office in London all their equipment including computers, computer servers, software and other hardware along with the clients' work which had - been backed up. Everything to enable the two to be up and running at D36 Limited's art work studio was in place.

(e) In the opening months Mr Castro was doing the same work as previously undertaken at Windsor. Such equipment as was brought from Windsor which was not needed by the two was distributed among the K9 Group. Most of the Windsor work went to D36 Limited. Mrs McCrudden continued with the Windsor clients who did come. Mr Castro's role, after a short while, became integrated into the main D36 studio and he only helped out Mrs McCrudden when she was busy. Whatever Windsor work did come with Mrs McCrudden and Mr Castro, we find that the intention was that the art work function at Windsor would be undertaken by the two of them at D36 Limited and that substantially was the case."

8. The Employment Tribunal then set out the parties' submissions: decision paragraph 5 (ii) (f). It then reached its conclusions: decision paragraph 5 (ii) (g) – (j). The Employment Tribunal said this:

"(g) In coming to our conclusion on the issue of the preservation of the continuity of employment in this case, we have considered that within the context of section 218 (2) of the 1996 Act, and the transfer regulations introduced in 1981 to implement the Acquired Rights Directive 77/187 and with the benefit of the guidelines from the EAT in Cheeseman and Others v R. Brewer Contracts Limited [2001] IRLR 144. We also, in determining the concept of a transfer of undertaking in this case, had in mind that the EAT in Farmer v Danzas (UK) Limited EAT 858/93, in determining whether there was a transfer of an undertaking within the meaning of what is now section 218 (2) had paid particular regard to the decisions of the ECJ on the scope of the Acquired Rights Directive and the transfer regulations on this issue. This Tribunal takes the view that the statutory provisions of section 218 (2) and the transfer regulations and the Acquired Rights Directive, should be treated as part of a single scheme for the protection of employees' rights and should be interpreted consistently with an identical interpretation of the concept of a transfer of undertaking in line with the ECJ decisions.

(h) As advised in the Cheeseman decision, we have looked at two questions –

(i) Was there an undertaking here capably of being transferred?

And

(ii) Has there in fact been a transfer?

We find on the facts found by us that the McCann Windsor Art Work Studio was a stable economic entity, with an organised grouping of staff and equipment which enabled their economic activity pursuing a specific objective to be carried on. It was sufficiently structured and autonomous and so separate and self contained a part of McCann Windsor as to be capable of being transferred to a new business as an undertaking in its own behalf. Its relevant assets in the computers and equipment referred to in paragraph (d) above were with the two members of the Art Work Studio transferred to D36 Limited. Though the clients did not transfer but remained with McCann, the art work needs associated with requirements of most of those clients were sub-contracted to D36 Limited to be undertaken by Mrs McCrudden and Mr Castro. It was an entity taking into account its workforce, its management, the organisation of its work, its operations methods, and the resources available to it. We are therefore satisfied that the Art Work studio at Windsor did amount to an undertaking in its own right, capable of being transferred. We would also have been prepared to find, had it been necessary, that the transferred Art Work studio could be separated from the creative department of McCann Windsor without destroying its essential identity and as such be described as a self contained part capable of being transferred as an undertaking.

(i) As to whether a transfer did take place, we find that the art work studio at Windsor as an entity did retain its identity following the change in the identity of the person responsible for its running. Its economic activity immediately after the moment of transfer was the same as it had been immediately before. In Farmer v Danzas (UK) Limited, the EAT identified that moment as being crucial. What happened some weeks into the transfer when Mr Castro was doing less Windsor work and more of the general work in D36 Limited's studio has not altered the position. Staff and assets of the Windsor Arts Studio had all transferred lock, stock and barrel. Further, there was a contractual link between McCann and D36 Limited whereby under an informal agreement the consideration for D36 Limited taking on the Windsor Art Work Studio work was the promise of future work from that transfer. We therefore find that there was a transfer of an undertaking which satisfied the provisions of section 218 (2) of the 1996 Act and Mr Castro's employment was continuous from 2 April 2001 to 23 September 2002, giving him the necessary continuous service to pursue a complaint of unfair dismissal under sections 94 and 108 (1) of the 1996 Act.

(j) We also find that his continuity of employment was preserved as well following a relevant transfer under Transfer Regulation 3 and taking into account the provisions of Regulation 5 (1). We are on notice that there is no mention in the Regulations of continuity [of] employment on a relevant transfer nor any express provision that an employee's accrued period of employment is transferred along with his contract. Nor is continuity [of] employment a right preserved by Regulation 5 (2). Continuity [of] employment, as Mr Broatch reminded us, is merely a calculation of the length of an employee's service. However, Regulation 5 (1) does provide that the transferred contract shall have effect "as if originally made between the [employee] and the transferee", which supports the view that the continuity of employment of an employee is not broken by a transfer and that the Regulations alone are capable of preserving continuity .This argument appeared to be accepted by the Court of Appeal in Royal Ordinance Plc v Pilkington [1989] ICR 737 where Neill LJ, when giving the judgement in Court, observed in the remarks that were "obiter" that "the effect of Regulation 5 (1) of the Regulations of 1981 is to require a person whose employment has been transferred to be treated as though employed throughout by the transferee company." In Collino and Chiappero v Telecom Italia SpA [2000] IRLR 788, the ECJ found that transferred employees were entitled to have their length of service with the transferor counted for the purpose of service-based rights with the transferee. This Tribunal therefore considers that the Transfer Regulations are effective in themselves to preserve continuity. As the continuity provisions and the Regulations are part of an overall scheme to preserve employees' rights in a transfer as intended by the Acquired Rights Directive, they are preserved by Regulation 5 (1) and that in this case the continuity of Mr Castro's employment should be calculated in accordance with Chapter 1 of Part XIV of the 1996 Act."

9. As we have indicated, the Coman Tribunal, having found that Mr Castro had continuity of employment, ordered the case to go forward for a hearing on his complaint for unfair dismissal.

The Menon Tribunal

10. At the hearing of the substantive complaint of unfair dismissal on 6 October 2003 the Menon Tribunal recorded the following in paragraph 1 of its decision:

"On 20 December 2002, the Applicant presented his Originating Application (ET1) to the Tribunal naming "The K Nine Group" as the Respondent and his ex-employer. It has subsequently been established that D36 are the correct ex-employers and that the company is the Respondent in this case. In his Originating Application he alleged wrongful dismissal, unfair dismissal and breach of contract by the Respondent. The Applicant had been employed by the Respondent as a senior art worker and the period of his continuous employment with the Respondent began on 1 April 2001 and ended on 23 September 2002. It is not necessary to go into the full details of his complaint because at today's hearing, Mr Broatch, on the Respondent's behalf, has conceded that the Applicant's dismissal was unfair; unfair procedurally because the selection process for the purpose of redundancy was unfair. In the circumstances, the remaining task for the Tribunal is to determine the issue of remedies. The Tribunal gave the parties some time to negotiate a settlement on that issue but the parties were unable to do so because of the vast difference in their respective positions on that issue. There is also an application by the Applicant for costs.

11. The Menon Tribunal then summarised the submissions by the parties: decision paragraphs 2 and 3; recorded that it heard evidence from Mr Steven Edward Owens, the Respondent's Group Financial Director, and the Applicant: decision paragraph 4. However, it did not make any specific findings of fact at all. The Menon Tribunal then went on to record the closing submissions of the parties on (a) Polkey: decision paragraphs 5-6 and (b) costs: decision paragraph 7. The Tribunal then made the following conclusions:

"8. The Tribunal's unanimous decision is as follows:

(1) The Applicant's dismissal was not for a reason connected with a TUPE transfer.

(2) There was a redundancy situation in September 2002.

(3) It has been conceded that the Applicant was unfairly selected for redundancy. He was given no prior warning and there was no consultation, pool, fair selection etc.

(4) There is no evidence to show that had there been a fair selection procedure, the Applicant would have inevitably been selected for redundancy based on fair selection criteria. The Applicant came from Windsor. It appears that he was selected for that reason. That would not have been a fair criteria for selection. There is no evidence to show that he would have been inevitably selected for redundancy if he had been in a selection pool of seven or five.

(5) There is no evidence to show that the Applicant's employment would have ended in mid-January 2003. To make such a finding would be pure speculation.

(6) Any award of compensatory award in respect of loss of earnings should be limited to the period 23 September 2002 to 13 June 2003.

(7) As to costs, the Respondent acted unreasonably in the conduct of these proceedings in that the concession that the dismissal was unfair should have been made much earlier. The Applicant should be awarded half the costs incurred by him, i.e. £2,500.00 plus VAT = £437.50 £2937.40."

The Notice of Appeal

12. The Notice of Appeal deals with both decisions and we are grateful both to Mr Broatch and Mr Daniels for their Skeleton Arguments and cogent oral submissions to us. We propose to deal with the grounds of appeal in the order in which they were argued.

Ground 1: Jurisdiction Issue

13. This is an appeal from the Coman Tribunal decision. The Notice of Appeal, as amplified by Mr Broatch's Skeleton Argument and oral submissions, put forward the proposition that the Employment Tribunal erred in law in deciding that whether there had been a "transfer" within the meaning of section 218 (2) of the Employment Rights Act 1996. The Tribunal directed themselves as to whether there had been a "transfer" for the purpose of the Transfer of Undertaking (Protection of Employment) Regulations 1981 ("TUPE"). Mr Broatch submitted that the meaning of "transfer" in the 1996 Act and TUPE were separate and distinct concepts.
14. Second, Mr Broatch argued that the Employment Tribunal was in error in holding that TUPE, of itself, preserved statutory jurisdictional continuity for the purposes of enabling the Respondent to bring his unfair dismissal claim before the Employment Tribunal. He submitted that, properly construed, TUPE does not preserve statutory jurisdictional continuity of employment. In reaching this conclusion the Employment Tribunal misunderstood the case of Collino and Chiappero v Telecom Italia SpA [2000] IRLR 788.
15. Finally, Mr Broatch submitted that the Employment Tribunal were in error in taking the view that the provisions of section 218 (2) of the 1996 Act, TUPE and the Acquired Rights Directive 77/187/EEC "should be treated as part of a single scheme for the protection of employees' rights and should be interpreted consistently with an identical interpretation of the concept of a transfer of undertaking in line with ECJ decisions.": decision: paragraph 5 (g).
16. These grounds of appeal are set out in detail in Mr Broatch's admirable Skeleton Argument and his oral submissions. The Respondent resists each of the grounds of appeal. We are grateful to Mr Broatch and to Mr Daniels for the assistance they have given us. To the best of our knowledge this is the first time this issue has arisen in the Employment Appeal Tribunal for decision.

Employment Appeal Tribunal Decision

17. The relevant part of section 218 of the Employment Rights Act 1996 provides as follows:

"(1) Subject to the provisions of this section, this Chapter relates only to employment by the one employer.

(2) If a trade or business, or an undertaking (whether or not established by or under an Act), is transferred from one person to another –

(a) the period of employment of an employee in the trade or business or undertaking at the time of the transfer counts as a period of employment with the transferee, and

(b) the transfer does not break the continuity of the period of employment."

The remainder of section 218 is not relevant. We note that neither 218 itself, nor section 235 (the definition section) provide any assistance as to the meaning of "transfer" in section 218 (2).

18. Regulation 2 (1) of TUPE defines a "relevant transfer" as meaning "a transfer to which these Regulations apply and "transferor" and "transferee" shall be construed accordingly…". There is further assistance in Regulation 3:

"(1) Subject to the provisions of these Regulations, these Regulations apply to a transfer from one person to another of an undertaking situated immediately before the transfer in the United Kingdom or a part of one which is so situated.

(2) Subject as aforesaid, these Regulations so apply whether the transfer is effected by sale or by some other disposition or by operation of law.

…

(4) It is hereby declared that a transfer of an undertaking or part of one -

(a) may be effected by a series of two or more transactions; and

(b) may take place whether or not any property is transferred to the transferee by the transferor."

Regulation 5 provides:

"(1) Except where objection is made under paragraph 4A below, a relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor in the undertaking or part transferred but any such contract which would otherwise have been terminated by the transfer shall have effect after the transfer as if originally made between the transfer so employed and the transferee.

(2) Without prejudice to paragraph (1) above, but subject to paragraph (4A) below, on the completion of a relevant transfer –

(a) all the transferor's rights, powers, duties and liabilities under or in connection with any such contract shall be transferred by virtue of this Regulation to the transferee; and

(b) anything done before the transfer is completed by or in relation to the transferor in respect of that contract or a person employed in that undertaking or part shall be deemed to have been done by or in relation to the transferee.

(3) Any reference in paragraph (1) or (2) above to a person employed in an undertaking or part or one transferred by a relevant transfer is a reference to a person so employed immediately before the transfer, including, where the transfer is effected by a series of two or more transactions, a person so employed immediately before any of those transactions."

Paragraph (4A) and the remainder of Regulation 5 are not relevant. We again note that there is no other definition of "transfer" in TUPE. Neither is there any further reference to the issue of continuity of employment.

19. In support of his submission there is a clear difference of approach and meaning between section 218 (2) of the 1996 Act and TUPE. Mr Broatch relies on Macer v Aberfast Ltd [1990] ICR 234 at 242E-G; 243H-244C per Wood J. In that case Wood J was rejecting the submission that the words "at the time of the transfer" in section 218 (2) (a) of the 1996 Act meant the same as "immediately before the transfer" in Regulation 5 (3) of TUPE. What Wood J said was clearly correct: a matter of simple construction of the English language. That case does not support Mr Broatch's submission that a TUPE transfer as such cannot be caught by section 218 (2) of the 1996 Act or that Regulation 5 (1) read with 5 (2) (a) of TUPE cannot permit continuity of employment.
20. Mr Broatch also relies upon Rossiter v Pendragon plc [2002] IRLR 483 and particularly the dicta of Peter Gibson LJ at paragraphs 27 and 33. In that case the Court of Appeal decided that the test of constructive dismissal set out in Western Excavating (ECC) Ltd v Sharp [1978] IRLR 27 applied to cases arising from a TUPE transfer. Regulation 5 (5) of TUPE was not intended to create a new right to claim constructive dismissal. Peter Gibson LJ specifically referred to the proper way to construe the Acquired Rights Directive, referring to the guidance given by the European Court of Justice in Rask v ISS Kantineservice A/S [1993] IRLR 133 at 136, paragraph 27.
21. We do not find this case supports Mr Broatch's submission. Indeed, as Peter Gibson LJ pointed out:

"The language of reg. 5(5) was plainly chosen so as to implement Article 4(2) of the Directive. It was also, in my judgment, intended to be consistent with s.95(1)(c) of the Act. Only conduct by the employer amounting to a repudiation of the contract would entitle the employee to terminate the contract 'without notice'.

[2002] IRLR 483 at 487, paragraph 33. What Peter Gibson LJ is there pointing to is that, so far as possible, English courts should interpret TUPE to accord with English employment legislation. We agree. It seems to us that the Employment Tribunal was right in seeking to avoid a conflict between section 218 (2) of the 1996 Act and TUPE in trying to give the same meaning of "transfer" to both.

22. The question we ask ourselves is whether there is anything in English case law relating to the proper interpretation of section 218 (2) of the 1996 Act which militates against using (where relevant) the definition of "transfer" in TUPE. Mr Broatch referred us to SI (Systems & Instruments) Ltd v Grist & Another [1983] IRLR 391, at paragraph 23. That is a case which is distinguishable upon the facts and also because there was no reference to TUPE at all. Mr Broatch also relied on Woodhouse & Another v Peter Brotherhood Ltd [1972] 2 QB 520. That was a case decided before TUPE became law in 1981. Similarly, Melon v Hector Powe Ltd [1981] ICR 43 was also decided before TUPE came into force on 14 December 1981. The judgment in that case was November 6 1980. It follows that in all three cases the courts concerned did not have the benefit of recent guidance from the ECJ on TUPE and the Acquired Rights Directive on the meaning of "undertaking".
23. The Court of Appeal has recently held that, where it has direct affect, the Acquired Rights Directive preserves continuity of employment upon a relevant transfer: Astley v Celtec [2002] IRLR 629. It would appear that the conclusion was reached with the agreement of the parties rather than by the Court of Appeal having heard argument from both sides. However, that conclusion is consistent with two recent decisions of the European Court of Justice: Sanchez Hidalgo v Asociacion de Servicios Aser [1999] IRLR 136 and Collino and Chiappero v Telecom Italia SpA [2000] IRLR 788.
24. Those cases all concern the preservation of continuity of employment in cases where the transfer is from one state authority to another provided that the transfer is the transfer of an undertaking or a part of an undertaking for the purposes of the Directive. We can see no difference in the case of a TUPE transfer. TUPE must be interpreted consistently with the Directive and the decisions of the ECJ on the equivalent provisions of the Directive. In our judgment there can be no logical difference between the preservation of continuity between state authorities under the Directive and the transfer of private undertakings covered by TUPE. If academic support for that proposition is needed we find it in Harvey on Industrial Relations and Employment Law Vol. 1, paragraph 472 (Issue 166).
25. It follows for these reasons that we reject Mr Broatch's submissions. In our judgment the Employment Tribunal was fully entitled to reach the conclusions that it did. There is no error of law.

Ground 2: Reasons

26. This ground of appeal arises from the decision of the Menon Tribunal. Mr Broatch attacks the reasons given by the Employment Tribunal in paragraph 8 of its decision and says they are unintelligible because there are no findings of fact by the Employment Tribunal. It will be recalled that all the Tribunal did by way of fact-finding is to record the names of the two witnesses it heard: decision paragraph 4. It did not recite any of the evidence it heard and did not make any findings of fact. It follows that the short reasons given by the Employment Tribunal cannot be understood. Mr Broatch relies on Meek v City of Birmingham District Council [1987] IRLR 250 at paragraph 8 per Bingham LJ; Tran v Greenwich Vietnam Community Project [2002] ICR 1101 at paragraph 17 per Sedley LJ; English v Emery Reimbold and Strick Limited [2002] 1 WLR 2409 at paragraph 9 per Lord Phillips MR.
27. In this case the Menon Tribunal decided that there should be no reduction on the basis of Polkey v A E Dayton Services Ltd [1988] ICR 142 and awarded the Respondent compensation on what may be described as a "full" basis. The Menon Tribunal thus differed significantly from the Tribunal hearing the case of Mrs McCrudden (the "Charlton Tribunal") which decided that Mrs Charlton should have a 50% Polkey reduction.
28. In Market Force UK Limited v Hunt [2002] IRLR 863 the Employment Appeal Tribunal (Mr Recorder Langstaff QC) held that where a Tribunal makes a Polkey reduction it must give sufficient reasons to enable the parties to have at least some understanding of the basis upon which the Tribunal has reached the conclusion that it has. In this case there was evidence from the Appellant and Mr Steven Edward Owens, the Appellant's Group Financial Director, as well as submissions by Mr Daniels and Mr Broatch. Some documentary material was put in front of the Tribunal.

Employment Appeal Tribunal Decision

29. We agree with Mr Broatch. In the absence of any recitation of the evidence heard by the Tribunal and in particular its complete failure to make any findings of fact at all, we ourselves are unable to understand the Tribunal's reasoning in paragraph 8 of its decision. We cannot understand how the parties would know the basis upon which the Employment Tribunal decided to make no Polkey deduction. In our decision this elementary failure by the Employment Tribunal means that there was an error of law which requires this ground of appeal to be allowed and the case will be remitted to a fresh Employment Tribunal to reconsider the issue of compensation.

Ground 3: Costs

30. This is the second appeal from the Menon Tribunal. In paragraph 8 (7) of its decision the Employment Tribunal said this about costs:

"…the Respondent acted unreasonably in the conduct of these proceedings in that the concession that the dismissal was unfair should have been made much earlier. The Applicant should be awarded half the costs incurred by him, i.e. £2,500.00 plus VAT £437.50 = £2937.40."

31. The power to award costs is contained in Rule 14 of Schedule 1 of the Employment Tribunals (Constitution etc.) Regulations 2001. Rule 14 (1) provides as follows:

"Where, in the opinion of the tribunal, a party has in bringing the proceedings, or a party or a party's representative has in conducting the proceedings, acted vexatiously, abusively, disruptively or otherwise unreasonably, or the bringing or conducting of the proceedings by a party has been misconceived , the tribunal shall consider making, and if it so decides, may make -

(a) an order containing an award against that party in respect of the costs incurred by the other party;

(b) [not relevant]."

Rule 14 (3) deals with quantum.

32. Mr Broatch submits that for several reasons the Menon Tribunal erred in law. First, a concession could not have been made before or at the Coman Tribunal as that resulted in a jurisdictional argument which led to a reserved decision. That decision was sent to the parties on 4 September 2003. The Menon Tribunal was to sit on 6 October 2003 and therefore the unreasonable conduct had to be a concession made in writing between those two dates. Second, the concession was a proper and reasonable one made on the morning at the hearing. Third, the decision is unreasonable in the light of Employment Tribunal practice. Fourth, only those additional costs incurred by the Respondents' solicitors as a result of the delay making the concession should have been awarded.
33. Mr Daniels submits that the Employment Tribunal approach the issue of costs in a straight forward clear way. There is no difficulty about understanding its reasoning and there is no substance in this ground of appeal.

Employment Appeal Tribunal Decision

34. In our judgment the correct approach for the Tribunal to adopt is to focus on the wording of Rule 14 (1) and decide whether the Appellant in this case has "in conducting the proceedings … acted otherwise unreasonably…". That is the issue which the Employment Tribunal must address and the difficulty in this case is that the Employment Tribunal need to identify when it finds that the Appellant behaved unreasonably and give reasons for identifying that date. It has not done so. We are left to speculate as to the date when the Employment Tribunal say that the Appellant conducted the proceedings unreasonably. Was it failure to make the concession on the Notice of Appearance (17 January 2003)?; was it before the hearing of the McCrudden case (19 May 2003)?; was it the date of the McCrudden decision (13 June 2003)?; was it before the Coman Tribunal sat (13 June 2003)?; was it before the date of the Coman decision (4 September 2003)?; was it before the beginning of the Menon Tribunal (6 October 2003)? We simply do not know.
35. Likewise, there is no explanation as to how the figure of £2,500 + VAT £437.50 costs were awarded. This is a separate and independent exercise of the Tribunal's discretion. There is no recitation of any evidence as to a schedule of costs and when such costs were incurred. It would appear that Mr Daniels told the Menon Tribunal in his opening submissions what his total costs were: decision paragraph 2 (4). How that was broken down we do not know. The Tribunal do not attempt to relate the figure to the date when the Appellant is said to have conducted the proceedings unreasonably. There is again therefore a failure in (a) fact-finding and (b) reasoning.

Conclusion

36. For these reasons we refuse the appeal against the Coman Tribunal decision and allow the appeal against the Menon Tribunal decision. The result is that this case will have to be remitted to a fresh Employment Tribunal to consider the question (a) remedy and (b) costs.