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House of Lords		 Session 1997-98
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Judgments - Tracy and Others v. Crosville Wales Ltd.

HOUSE OF LORDS

  Lord Goff of Chieveley   Lord Mackay of Clashfern   Lord Lloyd of Berwick
  Lord Nolan   Lord Clyde

OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT IN THE CAUSE

TRACY AND OTHERS
(RESPONDENTS)

v.

CROSVILLE WALES LTD.

ON 16 OCTOBER 1997



LORD GOFF OF CHIEVELEY


My Lords,

      I have had the advantage of reading a draft of the speech of my noble and learned friend, Lord Nolan. For the reasons he has given, I, too, would dismiss this appeal.



LORD MACKAY OF CLASHFERN


My Lords,

      I have had the advantage of reading a draft of the speech of my noble and learned friend, Lord Nolan. For the reasons he has given, I, too, would dismiss this appeal.



LORD LLOYD OF BERWICK


My Lords,

      I have had the advantage of reading a draft of the speech of my noble and learned friend, Lord Nolan. For the reasons he has given, I, too, would dismiss this appeal.



LORD NOLAN


My Lords,

      This appeal raises the difficult question of the relationship between the provisions of the Employment Protection (Consolidation) Act 1978 concerning the refusal of an employer to re-engage striking employees who have been dismissed, on the one hand, and the provisions under which the compensation payable to unfairly dismissed employees may be reduced by reason of their contributory fault on the other hand. The question is one to which different answers have been given by the Employment Appeal Tribunal in earlier cases. There can, however, be no dispute about the correctness of the view expressed by Mummery J., giving the judgment of the Employment Appeal Tribunal in the present case, when he said: "The points canvassed in this appeal impinge on a socially sensitive, politically controversial and legally uncertain area of industrial relations."

      Nor, since the decision of the industrial tribunal, has there been any dispute about the matters of fact which are relevant for the purposes of the appeal. They are admirably summarised in the judgment of Mummery J., and I shall follow the example of the Court of Appeal [1996] I.C.R. 237 in repeating this part of his judgment almost verbatim.

      Crosville Wales Ltd., the appellant, employed in its business 119 bus drivers, all members of the Transport & General Workers' Union. In June 1990 a wage review was due. In September 1990 an increase was agreed for the engineering staff, but not for the drivers. On 3 October 1990 the union decided to hold a secret ballot. The ballot held on 8 October 1990 resulted in a majority decision in favour of industrial action short of a strike or strike action.

      A union meeting was held on Monday, 23 October. It was decided to operate a ban on overtime working and working on rest days from midnight on Saturday, 27 October. This would have the effect of destroying the Sunday bus routes which were totally reliant on voluntary work from overtime and rest days.

      The Divisional Manager, Mr. Ellis-Jones, wrote a letter to all employees on 23 October expressing regret at the decision to implement an overtime ban from Saturday in support of the pay claims. He pointed out that the union representatives were aware of the company's grave financial position and that the company had made the best offer possible. He also stated that the proposed action was in breach of the agreed procedure and was taken before proper negotiations had been concluded. He added that he was particularly concerned about contract work, especially Sundays which, if disrupted, would be reallocated by the county council to the company's competitors. That would result in a loss of jobs at Wrexham, a weaker financial position at the depot and less money for wages. It was conceded by Mr. O'Leary, the union's full-time district officer, that the union had not followed the agreed procedure for the avoidance of disputes contained in Appendix E to the Drivers' Instruction Book. In the event of failure to come to an agreement at depot level, the agreed procedure provided for a meeting between the local representatives, the depot official and local union officer and, if there was failure at that level, provision was made for a meeting between a board member, the full time trade union official and the elected depot representative.

      On 25 October there was a joint meeting at Flint of staff and management attended by Mr. O'Leary and other representatives of the employees with representatives of the employers. No agreement was reached. On 27 October the ban on overtime and rest day working began, as threatened. The depot superintendent at Wrexham, Mr. Poole, posted a notice in the garage announcing that an "open forum" had been arranged in the depot canteen for Tuesday, 30 October.

      The purpose of the forum was to make sure that everyone was aware of the seriousness of the situation and the possible consequences of continuing the industrial action. During the course of 30 October various events occurred before the meeting. Mr. Wooley, the union's branch secretary, and others went to see Mr. Poole and asked him if he would take down the compulsory Sunday rota which he had issued following the meeting held on 25 October. Mr. Poole refused. Later in the day Mr. Wooley was informed that he, along with others who had attended the earlier meeting with Mr. Poole, were suspended without pay. When the meeting took place in the canteen about 80 per cent. of the drivers were present and there was a mass walk out. On the following day there was a meeting, which lasted only three or four minutes, at which the union representatives asked for a written apology and a withdrawal of the suspensions.

      On 1 November Mr. Poole wrote to all employees advising them of the position relating to their decision not to work in accordance with their contracts of employment, and pointing out that each individual employee was in breach of contract and liable to dismissal. He contended that the ballot had not been correctly organised and was invalid and that, in view of the dire financial position of the depot, the company had no option but to require them to return to work by 3 November for normal duty or they would be deemed to have terminated their employment with the company.

      The men did not return to work. On 5 November the drivers were dismissed by letter from Mr. Poole. On 13 and 15 November there were further meetings at which the union representatives were told that the effects of the dispute meant that there was no question of taking all the drivers back. The best estimate was that 50/60 would now be required. The company rejected the union's proposal that all the drivers should be taken back and that a redundancy exercise should be carried out. The company then carried out a recruitment exercise for replacement staff by notices at the Wrexham depot, press and local radio announcements and advice to local jobcentres. All the applications were considered whether or not those applying had been involved in the strike action and had been dismissed. Every new employee was offered new terms and conditions of employment in line with the company's final pay offer to those employees who had been dismissed because of industrial action. All the strikers knew that the company was recruiting. They all had an opportunity of obtaining an application form, being interviewed and being considered for re-employment but offers of re-engagement were not made to all of the employees who took part in the industrial action. The final figures were that 25 of those who had been dismissed applied. Those were all offered jobs, but only 22 of them took up the offers.

      The strike effectively ended on 23 February 1991 when the Wrexham depot was closed. The drivers at Wrexham were relocated along with the routes at other depots. The company continued to make losses and the Wrexham depot was eventually sold in July 1991.

      In the meantime, complaints of unfair dismissal had been made by 73 of the drivers. A preliminary hearing was held on 28 and 29 August 1991 by an industrial tribunal under the chairmanship of Mr. Leo Blair in order to determine whether the tribunal had jurisdiction to hear the complaints.

      This procedure was necessary because of the terms of section 62 of the Employment Protection (Consolidation) Act 1978 as amended by the Employment Act 1982. These prohibitions have now been re-enacted in section 238 of the Trade Union and Labour Relations (Consolidation) Act 1992, but I shall refer to the Act of 1978 as amended because this was the statute in force at the time when the events which have given rise to the present case took place. Section 62 provides:

    "(1) The provisions of this section shall have effect in relation to an employee (the 'complainant') who claims that he has been unfairly dismissed by his employer where at the date of dismissal -

    (a) the employer was conducting or instituting a lock out, or

    (b) the complainant was taking part in a strike or other industrial action.

    "(2) In such a case an industrial tribunal shall not determine whether the dismissal was fair or unfair unless it is shown -

    (a) that one or more relevant employees of the same employer have not been dismissed, or

    (b) that any such employee has, before the expiry of the period of three months beginning with that employee's date of dismissal, been offered re-engagement and that the complainant has not been offered re-engagement.

    "(3) Where it is shown that the condition referred to in paragraph (b) of subsection (2) is fulfilled, the prohibitions of sections 57 to 60 shall have effect as if in those sections for any reference to the reason or principal reason for which the complainant was dismissed they were substituted a reference to the reason or principal reason of which he has not been offered re-engagement.

    "(4) In this section . . .

    (b) "relevant employees" means - . . .

     (ii) in relation to a strike or other industrial action, those employees at the establishment who were taking part in the action at the complainant's date of dismissal;

    'establishment' in sub-paragraph (ii), meaning that establishment of the employer at or from which the complainant works; and

    (c) any reference to an offer of re-engagement is a reference to an offer (made either by the original employer or by a successor of that employer or an associated employer) to re-engage an employee, either in the job which he held immediately before the date of dismissal or in a different job which would be reasonably suitable in his case."

      The preliminary hearing of the industrial tribunal on 28 and 29 August 1991 was concerned, as I have said, with the question whether the tribunal had jurisdiction under section 62(2). The tribunal held that it did have jurisdiction, firstly because they found it difficult to accept that announcements on the radio, and advertisements in newspapers and Job Centres, which were open to all and not solely to the ex-employees of the respondent company, were offers of re-engagement which complied with subsection (4)(c) of section 62. Secondly, and in any event, the tribunal took the view that section 62(4)(c) was not satisfied because the conditions attached to the re-engagement would be inconsistent with it either being the same job as before, or being a reasonably suitable alternative.

      Crosville Wales appealed against this decision to the Employment Appeal Tribunal, under the chairmanship of Knox J. On 6 October 1992 the Employment Appeal Tribunal upheld the decision of the industrial tribunal on the first ground, that is on the ground that offers of re-engagement had not been made to the employees. The Employment Appeal Tribunal said:

    "What was in our view, on the facts found by the industrial tribunal, made available to the employees was the opportunity of having an offer made to them. . . . In a formal legal analysis what in our view happened when the press, radio and other general notices were issued, was that there was an offer to treat for re-engagement rather than an offer of re-engagement. . . ."

      The matter then returned to the industrial tribunal, this time under the chairmanship of Mr. D.P. Thompson, for a full four-day hearing which began on 19 April 1993. The purpose of this hearing was to give effect to the terms of section 62(3), that is to say to apply the provisions of sections 57 to 60 relating to unfair dismissals as if the references to the reason or principal reason for the dismissal were replaced by references to the reason or principal reason for which the employee had not been offered re-engagement. Before reciting these provisions as thus notionally amended I would refer to section 63. That section provides:

          "In determining, for the purposes of this Part any question as to the reason, or principal reason, for which an employee was dismissed or any question whether the reason or principal reason for which an employee was dismissed was a reason fulfilling the requirements of section 57(1)(b) or whether the employer acted reasonably in treating it as a sufficient reason for dismissing him, - (a) no account shall be taken of any pressure which, by calling, organising, procuring or financing a strike or other industrial action, or threatening to do so, was exercised on the employer to dismiss the employee, and (b) any such question shall be determined as if no such pressure had been exercised."

      Section 57 (as notionally reworded by section 62(3) in a case of discriminatory non-engagement and as amended by section 6 of the Employment Act 1980) reads:

          "(1) In determining for the purposes of this Part whether the dismissal of an employee was fair or unfair, it shall be for the employer to show - (a) what was the reason (or, if there was more than one, the principal reason) for [which the complainant was not offered re-engagement], and (b) that it was a reason falling within subsection (2) or some other substantial reason of a kind such as to justify the [non-offer of re-engagement to the employee concerned].

          "(2) In subsection (1)(b) the reference to a reason falling within this subsection is a reference to a reason which - (a) related to the capability or qualifications of the employee for performing work of the kind of which he was employed by the employer to do, or (b) related to the conduct of the employee, or (c) was that the employee was redundant. . . .(3) Where the employee has fulfilled the requirements of subsection (1), then, subject to sections 58 to 62, the determination of the question of whether the dismissal was fair or unfair, having regard to the reason shown by the employer [for not offering re-engagement to the complainant], shall depend on whether, in the circumstances (including the size and administrative resources of the employer's undertaking), the employer acted reasonably or unreasonably in treating it as a sufficient reason for [not offering the complainant re-engagement]; and that question shall be determined in accordance with equity and the substantial merits of the case."

      Having heard the evidence and considered the matter in the light of these criteria the industrial tribunal gave judgment on 7 June 1993 upholding the employees' complaints in principle and concluding that the failure of Crosville Wales to re-engage them was unfair.

In paragraph 77 of their judgment the industrial tribunal said:

    "The first question that we must ask is: 'What was the reason (or if there was more than one, the principal reason) for which the complainants were not offered re-engagement?' Frankly, that question has been very easy for the tribunal to answer. The reasons were given very clearly and openly by Mr. Rimmington and Mr. Poole when they gave their evidence. They said that the reason for their failure to offer re-engagement was that they thought that advertising through the media and the Job Centre was sufficient to constitute an offer for compliance with the legislation, and Mr. Poole was told by Mr. Rimmington not to have any contact with the men direct for fear of falling foul of the selective re-engagement provisions. Those were the sole and only reasons for the respondents' failure to offer re-engagement to the complainants."

      The industrial tribunal went on to find that these reasons did not comply with section 57(1)(b): they did not fall under any of this specific heads set out in section 57(2), nor did they constitute "some other substantial reason of a kind such as to justify the dismissal of an employee holding the position which that employee held." It was therefore unnecessary for the appeal tribunal to consider the meaning of the word "conduct" in section 57(2)(b) and it was also unnecessary for the tribunal to look at the merits of the industrial dispute under the provisions of section 57(3). For unless the employer had complied with the requirements of section 57(1)(b) which Crosville Wales had not, the provisions of section 57(3) relating to the equity and the substantial merits of the case do not come into play.

      There was no appeal against that part of the decision of the industrial tribunal. The concluding remarks of the tribunal on the subject of the conduct of the employee to which section 57(2)(b) refers and on the merits of the industrial dispute in relation to section 57(3) are, however, relevant to the issues which have been the subject of appeals to the Employment Appeal Tribunal, the Court of Appeal, and now your Lordships' House.

      These issues arise from the contention of Crosville Wales that the compensation to which the employees became entitled in consequence of the decision of the industrial tribunal fell to be reduced on the ground that the conduct of the employees had contributed to their dismissal. By virtue of section 72 of the Act this compensation consisted of a basic award to be calculated in accordance of section 73, and a compensatory award to be calculated in accordance with section 74. Under section 73(3) the basic award is related as a general rule to length of service, though the section also contains a large number of specific provisions governing particular cases such as redundancy. Subject again to specific provision for particular cases, the contributory award under section 74(1) is:

    "such amount as the tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal in so far as that loss is attributable to action taken by the employer."

      Both sections provide for the compensation to be reduced in the event of a finding of contributory fault on the part of the employee. Section 73(7B), as inserted by section 9 of the Employment Act 1980 and amended by section 4(2) of the Act of 1982 provides:

          "Where the tribunal considers that any conduct of the complainant before the dismissal . . . was such that it would be just and equitable to reduce or further reduce the amount of the basic award to any extent, the tribunal shall reduce or further reduce that amount accordingly."

Section 74(6) provides:

          "Where the tribunal finds that the dismissal was to any extent caused or contributed to by any action of the complainant it shall reduce the amount of compensatory award by such proportion as it considers just and equitable having regard to that finding."

Section 74, but not section 73, is qualified by the provisions of section 74(5) which echo those of section 63, and which reads:

          "In determining, for the purposes of subsection (1), how far any loss sustained by the complainant was attributable to action taken by the employer no account shall be taken of any pressure which, by calling, organising, procuring or financing a strike or other industrial action, or threatening to do so, was exercised on the employer to dismiss the employee, and that question shall be determined as if no such pressure had been exercised."

      My Lords, I have set out the main relevant statutory provisions in this laborious and painstaking manner because of their bearing upon the principal question raised by this appeal, which may be stated in the following terms:

    "When an industrial tribunal has jurisdiction to hear unfair dismissal claims by employees who have been dismissed for taking part in a strike or other industrial action, because some but not all have been offered re-engagement, can participation in the strike or other action in itself amount to 'conduct' or'action' within section 73(7B) and section 74(6) of the Act of 1978 respectively for the purpose of reducing any compensation which the industrial tribunal might award for unfair dismissal?"

      At the full hearing before the industrial tribunal in April 1993 Mr. McMullen had argued that the answer to the question was plainly "Yes." Participation in the industrial action plainly constituted both conduct and action on the part of the participators. At the same hearing he took his initial stand at an earlier point in the argument, contending on substantially the same grounds that the participation of the complainants in the industrial dispute was "conduct" within the meaning of section 57(2)(b) and in addition was relevant to the determination under section 57(3) of the question whether the employer had acted reasonably or unreasonably. As I have mentioned, however, this contention did not fall to be considered on its merits because of the industrial tribunal's decision that the reason for the complainants' dismissal was not a reason relating to their conduct, was not otherwise within section 57(1)(b) and therefore obviated the need for any inquiry under section 57(3) into the reasonableness of the employer's behaviour. Irrespective of the provisions of section 57(3), the dismissal of the complainants fell to be regarded as unfair because the employer's re-engagement of some but not all of them failed to satisfy the criteria laid down in section 57 and section 62(3). The entitlement of the complainants to compensation was thus established, and there remained the question of contribution. As the industrial tribunal observed in paragraph 82 of their decision "this is where the matter becomes somewhat complicated."

      The first complication is that although the complainants' claims for compensation only came into existence because of the selective re-engagement carried out by Crosville Wales, this factor must be ignored in determining whether the compensation should be reduced under section 73(7B) or section 74(6). This was decided by the Employment Appeal Tribunal under the chairmanship of Browne-Wilkinson J. in Courtaulds Northern Spinning Ltd. v. Moosa [1984] I.C.R. 218. That decision was followed by the Employment Appeal Tribunal under the chairmanship of Wood J. In TNT Express (U.K.) Ltd. v. Downes [1994] I.C.R.1, and its correctness has not been challenged before your Lordships. The reason for the decision appears from the following passage in the judgment of Browne-Wilkinson J. in the Courtaulds case, at p. 223. After setting out the terms of section 74(6), and saying that exactly the same considerations applied to section 73(7B), he continued:

          "Mr. Sedley, for the applicant, submits that, on the true construction of the Act, where section 62(3) requires the industrial tribunal to have regard not to the reason for dismissal but to the reason for failure to re-engage, the contributory fault to be considered under section 74(6) must be conduct contributing to the failure to re-engage not conduct contributing to the original dismissal. Although we can appreciate that there would be much sense if Parliament had so provided, we cannot construe the words of the Act so as to reach that result. Section 62(3) only makes limited consequential amendments where there has been selective re-engagement. It makes no express amendment to the provisions of section 73 or section 74. Nor does it even amend the meaning of the word 'dismissal' itself for the purposes of sections 57 to 60: the only amendment relates to the reasons for dismissal.

          "In our judgment, when there is a case of selective re-engagement, the employee's complaint remains a complaint that he was unfairly dismissed: his complaint is not that he was unfairly refused re-engagement. The statutory right confirmed by section 54 is to complain of a dismissal as defined in section 55: these sections are not amended by section 62(3). The industrial tribunal's jurisdiction to entertain any claim is conferred by section 67(1) which refers only to a complaint of unfair dismissal. The statutory power to award compensation is contained in section 68(2) and depends upon a finding that a complaint under section 67 is justified, i.e. that the complainant has been unfairly dismissed. It therefore seems to us that, whether intentionally or not, in cases of selective re-engagement Parliament has continued to make the basis of the complaint the dismissal and not the failure to re-engage. Accordingly as a matter of construction we can see no reason to give section 74(6) anything but its ordinary meaning, i.e. that even in a case of selective re-engagement the relevant question is whether the employee has contributed to his dismissal: it is neither necessary nor proper to consider whether he has contributed to his failure to be re-engaged."

      My Lords, I find this reasoning compelling, and would adopt it even if it had not been accepted by both parties and by the Court of Appeal in the present case. At the same time, I have much sympathy with the industrial tribunal who said, in paragraph 85 of their judgment:

    "that we are in the somewhat ridiculous situation that we have to decide the primary cases on the basis of the respondent's failure to offer re-engagement, but we must decide the other issues, such as contributory fault, in relation to the act of dismissal and not to the failure to re-engage."

As it happens, the absurdity of the situation gave rise to no practical difficulties in the present case, because the employer's reasons for the selective re-engagement bore no relation to the conduct of the employees. But it is not difficult to imagine cases in which the two would be closely linked. In the search which your Lordships must make to discover the purpose which Parliament intend to serve by the enactment of section 73(7B) and section 74(6) it is discouraging to have to start from such an unsatisfactory premise.

      The second complication is that the question before your Lordships has been answered in opposite senses by two separate divisions of the Employment Appeal Tribunal, each under the chairmanship of a very experienced President, in the Courtaulds [1984] I.C.R. 218 and TNT [1994] I.C.R. 1 cases respectively. The relevant passages in the judgments in both cases are fully set out in the judgment of the Court of Appeal, and it is unnecessary for me to repeat them both in full. I must, however, refer to the passages revealing the point at which they part company, namely, the significance of section 62 of the Act. In the Courtaulds case Browne Wilkinson J. said, at pp. 224-225:

 
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