Rudd v Eagle Place Services Ltd [2009] UKEAT 0151_09_0207 (2 July 2009)

JUDGMENT © Copyright 2009 APPEARANCES For the Appellant MR WAYNE BEARD (of Counsel) Instructed by: Messrs Irwin Mitchell Solicitors Riverside East, 2 Millsands Sheffield Yorkshire S3 8DT For the Respondent MR AKHLAQ CHOUDHURY (of Counsel) Instructed by: Messrs Harbottle & Lewis Solicitors Hanover House 14 Hanover Square London W1S 1HP SUMMARY UNFAIR DISMISSAL: Compensation DISABILITY DISCRIMINATION: Loss/mitigation The Employment Tribunal had to decide whether the multiplier which it considered was the appropriate one under Table 9 of the Ogden Tables should be reduced by an appropriate discount pursuant to Table B in Section B of the explanatory notes to the Ogden Tables. The Employment Tribunal determined the appropriate discount pursuant to Table B without considering, in the particular context of the acts of the case, the likelihood of the Claimant having periods of unemployment or absence from work in the future as a result of ill health. THE HONOURABLE MR JUSTICE KEITH The Claimant, Nicholas Rudd, was employed by the Respondent, Eagle Place Services Ltd ("the Company"), from 18 October 1993 until he was dismissed with effect from 14 May 2007. The Company is the service company for a large firm of solicitors, and Mr Rudd worked for the firm as a solicitor specialising in personal injury litigation. Following his dismissal, he presented a claim to the Employment Tribunal complaining of unfair dismissal and disability- related discrimination. In its ET3, the Company acknowledged that Mr Rudd's dismissal had been unfair, but it denied the allegation of disability-related discrimination. The Employment Tribunal at Sheffield found that Mr Rudd had been subjected to disability-related discrimination. An appeal against that finding has been heard by the Employment Appeal Tribunal (Judge Serota QC presiding), but judgment on the appeal has yet to be given In the meantime, the Employment Tribunal proceeded to decide the level of Mr Rudd's compensation, compensation being the remedy which Mr Rudd sought. Following a second hearing, the Employment Tribunal awarded him compensation of £388,612.46. When that sum is added to the sum of £64,630.00 awarded to Mr Rudd as an interim award for compensation for his unfair dismissal, the total compensation awarded by the Employment Tribunal amounted to £453,242.46. Mr Rudd now appeals against that award, contending that it should have been larger. Both Mr Rudd and the Company have applied to the Employment Tribunal for a review of the assessment of the award. That review is due to take place on 28 July, and it will cover a number of topics to which the grounds of appeal in the present case do not relate. But one of the topics to be considered on the review goes to the heart of the assessment of the award. Mr Rudd's evidence in the Employment Tribunal was that there was little or no prospect of him obtaining work as a solicitor for the rest of his working life. The Employment Tribunal agreed with him to the extent of finding that he would not be able to find employment equivalent to the level of remuneration he had enjoyed before his dismissal, but there is now new evidence about Mr Rudd's prospects of working again as a solicitor. He was employed by Eversheds as a solicitor for 12 weeks from 17 January 2009 at a salary of £40,000.00 a year. Indeed, we have been told that his employment has now been made permanent, and that the benefits of his employment include membership of a pension scheme and private health insurance. These new facts could make a big difference to the ultimate assessment of the award, and it struck us that proceeding with this appeal could be said to be premature when the review could alter the way in which Mr Rudd's future losses are to be assessed. But now that the appeal is before us, and since it relates to three relatively discrete issues, we decided to permit the hearing of the appeal to continue. Those three issues are whether the Employment Tribunal erred in law (a) in its application of one feature of the Ogden Tables to the assessment of Mr Rudd's future losses, (b) in its assessment of Mr Rudd's loss for no longer benefiting from permanent health insurance, and (c) in its assessment of Mr Rudd's efforts to mitigate his loss. The Ogden Tables (which are currently in their 6th edition) are tables published by the Government's Actuary Department to assist courts in the calculation of future losses in personal injury and fatal accident cases. They are not often used in the calculation of future losses in employment cases because such losses are rarely likely to extend over the remainder of the employee's career. But as the Employment Appeal Tribunal (Underhill J presiding) said in Abbey National Plc v Chagger [2009] IRLR 86 at para. 113, where the Employment Tribunal is having to address future losses which extend for the entirety of the employee's career, there is no objection to using the appropriate table in the Ogden Tables "as a starting point". Mr Rudd's annual salary had been £70,000.00 prior to his dismissal, and it would have gone up to £74,000.00 by the time his compensation was being assessed by the Employment Tribunal. He had also been receiving various benefits including life insurance, private medical insurance, permanent health insurance and membership of the Company's pension scheme into which the Company contributed 10% of his gross salary. The Employment Tribunal found that had he made appropriate efforts to mitigate his loss, he would have secured alternative employment "as of November 2008" which paid him not less than £35,000.00 a year. The Employment Tribunal also thought that had he chosen to remain in the legal profession, his progression within the profession would have enabled him to earn not less than £50,000.00 a year within 7 years of obtaining employment at £35,000.00 a year. In these circumstances, the Employment Tribunal found that Mr Rudd would experience what it called a "career length loss" as a result of his unfair dismissal and his disability-related discrimination, on the basis that he would never be able to obtain employment equivalent to the level of his remuneration prior to his dismissal. It was against that background that the Employment Tribunal concluded that it was appropriate to use the Ogden Tables as "a starting point for the determination of the appropriate multiplier", which is the figure by which Mr Rudd's annual loss (known as the multiplicand) has to be multiplied to reflect the number of years during which that loss will last, discounted to allow for the fact that a lump sum is being paid now instead of by periodical payments over the years. There is no challenge on this appeal to the Employment Tribunal's use of the Ogden Tables as a starting point for the determination of the appropriate multiplier. The table in the Ogden Tables which the Employment Tribunal used was Table 9. It is not disputed that that was the correct table. It was the table suggested to the Employment Tribunal by Mr Wayne Beard who represented Mr Rudd in the Employment Tribunal as well as on this appeal. The table relates to the calculation of the multiplier for loss of earnings of men up to the age of 65. Mr Rudd was 42 years old at the date of the hearing. The percentage by which the appropriate multiplier is to be discounted to reflect the accelerated receipt of a lump sum in advance of the stream of future losses is set by the Lord Chancellor in exercise of his powers under section 1 of the Damages Act 1996 . That is currently 2.5%. Accordingly, the multiplier which the Employment Tribunal applied was 16.92. At one stage, Mr Beard was contending that the Employment Tribunal should have treated Mr Rudd's expected retirement age as 66, not 65, and adjusted the multiplier accordingly. The basis of that argument was that the state pension age calculator shows that Mr Rudd would be 66 years of age before he was entitled to a state pension. That argument is no longer pursued. We turn therefore to the next question which the Employment Tribunal had to address, which was to assess by how much the multiplier of 16.92 was to be discounted for any factors other than those taken into account in assessing the multiplier at 16.92, i.e. factors other than (a) the accelerated receipt of a capital sum which Mr Rudd would otherwise have received by periodic payments and (b) the possibility that he might die before retiring age (the mortality rates from the latest available population projections, taking account data following the last National Census, having already been built into Table 9). After all, there may well be many contingencies other than these two contingencies which would affect the multiplier. That was the point made by the Employment Appeal Tribunal in Chagger at para. 114: "Even in a case where it is appropriate to use the Ogden Tables, it will never be right to use the multiplier taken from the main tables without considering the contingencies which those tables do not reflect. For a claimant to be compensated in full (subject to accelerated receipt) for his assumed annual loss for every year and month of the rest of his career involves treating as a certainty the assumption that he would have continued for the rest of his career to receive his pre-dismissal earnings. But that cannot be a certainty. On the contrary, it is subject to a number of contingencies: he might have died or become too ill to work, or his employer might have gone out of business, or he might have been dismissed for some other good cause or have left voluntarily for any one of a number of reasons. The only one of those contingencies taken into account in the main Ogden Tables is the possibility of death (and even that may be inadequately represented if there is reason to believe that the claimant's risks are substantially worse than those of the general population from which the Ogden figures derive). Those other contingencies must be properly reflected in the ultimate multiplier used. There may be cases where a tribunal believes the contingencies in question are balanced by 'upside' contingencies not reflected in the multiplicand (e.g. promotion); but otherwise the multiplier will fall to be reduced." Although the Company made the point in the Employment Tribunal that there were many contingencies which should affect the multiplier, its primary case, which the Employment Tribunal was eventually to reject, was that the Ogden Tables were not appropriate at all, and that was what it concentrated on. It was Mr Beard in his closing submissions who referred the Employment Tribunal to the section in the explanatory notes to the Ogden Tables (section B) which deal with contingencies other than mortality. One of the contingencies referred to in that section of the explanatory notes is the fact that the person whose compensation is being assessed may have periods of non-employment and periods of absence from work because of ill-health. The explanatory notes include a number of tables designed to factor that contingency into the multiplier. The relevant tables are Tables A-D. Tables A and B are the ones for men. Tables C and D are the ones for women. Table A is for non-disabled men. Table B is for disabled men. Having selected the appropriate table, the calculation of the discount to the multiplier to reflect the possibility of periods of unemployment or absence from work through ill-health takes two other considerations into account: whether the employee is in employment at the date of assessment and the level of his education. Although the Employment Tribunal was referred by Mr Beard to the explanatory notes in which Tables A and B appear, the Employment Tribunal was not addressed at all on how any of the tables within the explanatory notes were to be applied so as to reduce the multiplier. The Employment Tribunal was in effect left to its own devices on the topic. What the Employment Tribunal in fact did was to treat Mr Rudd as in employment at the date of the assessment on the basis that he was not in long-term unemployment. As a qualified solicitor, the Employment Tribunal treated him as having attained the highest educational level recognised by the Tables, and it regarded Table B rather than Table A as the appropriate table on the footing that Mr Rudd should be treated as disabled. The appropriate discount in Table B for a man aged between 40 and 44 with the highest educational level and treated as being in employment is 0.57. The Employment Tribunal adopted that figure, and therefore reduced the multiplier from 16.92 to 9.64, i.e. 16.92 x 0.57. The core criticism of the Employment Tribunal in the Notice of Appeal was that the Employment Tribunal should not have used Table B at all, and that it should have used Table A. That argument is no longer being advanced. Instead, it is said that although it was appropriate for the Employment Tribunal to use Table B, and to take the figure of 0.57 by which the multiplier was to be discounted as its starting point, the Employment Tribunal should then have gone on to consider whether there were factors in this case which suggested that it was unrealistic to cut the multiplier by almost a half to reflect the risk that Mr Rudd may experience periods of unemployment or absence from work as a result of ill-health. The criticism of the Employment Tribunal is that it regarded the figure of 0.57 as the end of the process rather than as the beginning. Indeed, that was what section B of the explanatory notes requires those conducting the assessment to do: "32. The suggestions which follow are intended as a `ready reckoner' which provides an initial adjustment to the multipliers according to the employment status, disability status and educational attainment of the claimant when calculating awards for loss of earnings and for any mitigation of this loss in respect of potential future post-injury earnings. Such a ready reckoner cannot take into account all circumstances and it may be appropriate to argue for higher or lower adjustments in particular cases." Two problems are said to face Mr Rudd's reliance on this argument. First, no submissions were advanced to the Employment Tribunal about the way Table B should be applied, and therefore it is too late now for Mr Rudd to criticise the Employment Tribunal for the way it used Table B. We do not regard that as a problem for Mr Rudd. It could not have been anticipated that the Employment Tribunal would use Table B otherwise than as a "ready reckoner" to plot where on the grid in Table B their assessment of the appropriate discount to the multiplier should begin. Secondly, this argument was not advanced in Mr Rudd's Notice of Appeal. Mr Beard says it was. We disagree. However, it was an argument which was readily apparent to us when we read the papers before the hearing, and we do not think that the Company has been put at a disadvantage by not having had prior notice of it. Mr Akhlaq Choudhury for the Company has advanced the arguments on the topic with his usual persuasiveness. Mr Choudbury's real point was that the evidence before the Employment Tribunal was such that the Employment Tribunal was perfectly entitled to conclude that the figure of 0.57 did not need to be revised. He pointed to (a) the adjustments which had to be made to Mr Rudd's working conditions to take account of his disability, namely that he was allowed to work less hours a day than other fee earners in the firm, and that he was permitted to work at home two days a week, (b) the lengthy periods of absence which Mr Rudd had had from work because of his disability, and (c) Mr Rudd's concern that his disability, which related to a serious eye condition, could one day result in him going blind. All these are highly relevant factors to be taken into account in determining whether the figure of 0.57 really did need to be revised. The trouble is that when we look at how the Employment Tribunal dealt with what the appropriate figure ought to be in para. 13.8 of its decision, it is plain that the Employment Tribunal regarded the figure of 0.57 as the end of the process, and it did not go on to consider whether the circumstances of the case required that figure to be adjusted. It may be that the Employment Tribunal would have decided that it did not need to be adjusted, but it did not embark on that exercise. There are two other criticisms which are made of the Employment Tribunal's decision to discount the multiplier by the figure of 0.57 in Table B. First, the multiplicand was calculated by estimating the sums which he would have continued to earn from the Company had he not been dismissed, less the sums he would have earned in other jobs. The first element of the multiplicand is said by Mr Beard not to have involved speculation at all. The Employment Tribunal found, so it is said, that Mr Rudd would have continued in secure employment at a salary of £74,000.00 a year until he reached retirement age. That cannot be said, so the argument goes, for the second element of the multiplicand which by its nature was highly speculative. Thus, it is said that if it was indeed appropriate to discount the multiplier by 0.57, that discount should only have been applied to the second element of the multiplicand. We disagree with the premise on which that argument is based. We have not seen any basis for saying that the Employment Tribunal found that Mr Rudd would have remained working for the Company until retirement age. What the Employment Tribunal actually said was: "… we do not think that there is any real likelihood that [Mr Rudd] would have left the employment voluntarily". That does not mean that he might not have had to leave his employment involuntarily as a result of his disability. Indeed, it was in part to cater for that possibility that the discount in Table B was to be applied. In any event, as Underhill J made clear in Chagger , you can never say for certain that someone would have remained in his job until he reached retirement age. The fact is that because of his disability there would have been a risk of Mr Rudd having to leave his job with the Company had he not been dismissed. Secondly, the Employment Tribunal is criticised for uncritically applying the appropriate discount in Table B based on Mr Rudd's educational attainments. Since he would have been secure in his employment with the Company had he not been dismissed, why should his chances of being unemployed or absent from work due to his disability be affected by the level of his education? Again, we disagree. If his employment had come to an end as a result of his disability, he would have stood a better chance of getting a reasonably well-remunerated job in the light of his educational attainments than someone without his education. Finally, since the multiplier has to be discounted further to reflect other factors not previously allowed for, the Employment Tribunal went on to consider other possible factors. The Employment Tribunal thought it unlikely that the firm of solicitors which Mr Rudd had been working for would go out of business. As we have seen, the Employment Tribunal did not think it likely that Mr Rudd would leave voluntarily. It is possible that he might have been dismissed for a fair reason other than redundancy, but the Employment Tribunal regarded that as too speculative a factor to take into consideration. But what the Employment Tribunal did regard as significant was that latterly Mr Rudd had been working for one client of the firm only, for whom he had been doing highly specialised work. The scheme under which that work was being done was being run down, and there was a risk, albeit only a slim one, that Mr Rudd might have been dismissed for redundancy, though against that the Employment Tribunal noted that it should not have been particularly difficult for alternative work within the firm to have been found for Mr Rudd. Having considered these factors, the Employment Tribunal reduced the multiplier from 9.64 to 9.00. It was at one stage being said that the Employment Tribunal had not explained why the multiplier had been further reduced in that way. That argument is no longer being advanced. It was also being said at one stage that the compensation schedule to the Employment Tribunal's decision showed that the multiplier which was in fact applied was 8.97, not 9.00: see the multiplier of 2.73 applied to the 7 years when Mr Rudd's losses will be £39,000.00 a year (i.e. £74,000.00 less £35,000.00), and the multiplier of 6.24 applied to the 15 years when Mr Rudd's losses will be £24,000.00 a year (i.e. £74,000.00 less £50,000.00). These two multipliers add up to 8.97. However, it is now plain, and Mr Beard accepts, that this was just a typographical 6.24 should have read 6.27. £24,000 x 6.27 (as opposed to 6.24) is £150,480.00, and that is the figure in the schedule. The real issue which arises, therefore, is not whether the Employment Tribunal was right to reduce the multiplier from 9.64 to 9.00, but whether it should have reduced the multiplier from 16.92 to 9.64 by virtue of Table B. Since the Employment Tribunal did not go on to consider whether the 0.57 discount was appropriate in the circumstances of this case, the case will have to go back to the Employment Tribunal for that issue to be addressed. That leads neatly to the second issue which the appeal raises. That relates to the Employment Tribunal's assessment of Mr Rudd's loss for no longer benefiting from permanent health insurance. One of Mr Rudd's benefits while employed by the Company was permanent health insurance. The Employment Tribunal did not identify in its decision what those benefits were, but the schedule of loss which was submitted to the Employment Tribunal tells us that if Mr Rudd became unable to work, he would be entitled to an income of two-thirds of his gross salary. The Tribunal found that in view of his disability Mr Rudd was extremely unlikely to be able to find alternative employment which offered permanent health insurance, or to obtain similar cover himself at a sensible and economic premium. The case advanced on Mr Rudd's behalf to the Employment Tribunal for the quantification of this loss is that there was a 5% chance of Mr Rudd becoming blind, and therefore being unable to work at all. In those circumstances, the multiplicand should have been increased by 5% of the annual income which Mr Rudd would have received under the permanent health insurance scheme from such time as he was likely to have become unable to work. The schedule of loss calculated that sum to be £1,790.36 a year, though it did not suggest when that loss might arise, i.e. when it might be that Mr Rudd would lose his sight. The Employment Tribunal did not reject that approach in principle. That is not surprising. It is consistent with the premise which underpins Tables A-D in the explanatory notes published with the Ogden Tables. That premise is that there an actuarial basis for assessing the possibility that an employee may be at risk of periods of non-employment and absence from work through ill-health. Instead, the Employment Tribunal rejected the approach advanced on Mr Rudd's behalf, not as a matter of principle, but on the basis that there was no evidence of what the risk was of Mr Rudd not being able to work at all at some stage in the future. Since there was no percentage it could apply to the annual income which Mr Rudd would have received if he had been unable to work to reflect what the chance of that was, the Employment Tribunal proceeded instead to award him the rough and ready sum of £5,000.00 under this head, acknowledging that it was a fairly arbitrary amount. In our judgment, the Employment Tribunal's approach was flawed. If the multiplier was discounted by a substantial percentage by the application of Table B to reflect the possibility that Mr Rudd may have had periods of unemployment as a result of his disability, the chances of him being disadvantaged by no longer having the benefit of permanent health insurance were correspondingly increased. The effect on Mr Rudd's award of reducing the multiplier from 16.92 to 9.64 is far greater than the £5,000.00 awarded to him under this head of loss. Something has gone wrong somewhere. In the absence of any evidence of the albeit uneconomic premium Mr Rudd would have had to pay to obtain similar cover privately, or of evidence of what the risk of him not being able to work at all in the future was, the Employment Tribunal was left with little alternative but to award Mr Rudd a rough and ready sum. But £5,000.00 would have been far too low if the chances of his disability causing him to undergo periods of unemployment or absence from work were high, which is what underpins the reduction of the multiplier from 16.92 to 9.64. On the other hand, if on the remission of the case to the Employment Tribunal, the Employment Tribunal thinks that Mr Rudd's chances of his disability causing him to undergo periods of unemployment and absences from work are high, so that the multiplier should not have been reduced to 9.64, it may well be that only a nominal sum of £5,000.00 was appropriate for the loss of Mr Rudd's benefits under the permanent health insurance scheme. The third issue which the appeal raises relates to the Employment Tribunal's assessment of Mr Rudd's efforts to mitigate his loss. The Employment Tribunal said that while Mr Rudd "needed to be frank and open with prospective employers", he was "nevertheless likely to create an adverse impression by giving perhaps more detail than was required of his ongoing litigation and his former employer's stated reason for dismissal". The criticism of the Employment Tribunal is that these statements were inconsistent with each other, and to suggest that Mr Rudd should limit the information he gave to prospective employers was hardly sensible since he was seeking to enter a contractual relationship which was dependent on mutual trust and confidence. We do not agree with these criticisms of the Employment Tribunal. The statements which the Employment Tribunal made are entirely compatible with each other. When the Employment Tribunal spoke about the need for Mr Rudd to be open and frank with prospective employers, it was saying that what he should be frank and open about was the fact that he had "spent a considerable part of his earlier career in a niche area with the result that he was likely to appear over-specialised". The Employment Tribunal was not saying that Mr Rudd had to unburden himself about his dispute with the Company to prospective employers. Nor do we think that the Employment Tribunal was advocating that Mr Rudd should conceal from prospective employers information which they needed to know. All the Employment Tribunal was saying was that it was not necessary for him to tell prospective employers that he was pursuing a claim of unfair dismissal and disability-related discrimination against the firm, and that the firm was defending the proceedings on the basis that he had been non co-operative and dishonest. The Employment Tribunal's conclusion that Mr Rudd's excessive candour was hindering his efforts to find another job was one which the Employment Tribunal was entitled to reach. However, for the reasons we have given, this appeal must be allowed, and the case must be remitted to the Employment Tribunal for it to consider whether the figure of 0.57 needs to be revisited in the light of Mr Rudd's particular circumstances, and what impact that decision should have on the award to be made for the loss of the benefits payable under the permanent health insurance scheme. There is, in our judgment, though we have not heard argument on the point, no reason why those issues cannot be considered by the same Employment Tribunal, especially as it is already having to address a whole host of issues on the review. BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII