Veitch Penny LLP - Exeter | Crediton, Devon

Case

Pacific Direct Ltd v Riaz
Employment Appeal Tribunal
(14 April 2003)

Issues

(1) Unfair dismissal
(2) Compensation
(3) Calculation

Facts

The Appellant company was a sales-based business supplying toiletries to hotels, cruise lines and airlines. From 3 August 1998, the Respondent was employed as a Senior Export Sales Executive. She was paid a basic salary together with commission, and worked from home. Following a review of the company’s operations, the Appellant wished to implement a new commission structure. The Respondent objected to the proposed structure. Consequently, she was dismissed with effect from 5 January 2001.

She made a complaint to the Employment Tribunal, who found that she had been unfairly dismissed and was entitled to her full losses resulting from the dismissal. When calculating the compensatory award to be made, the Tribunal heard that following her dismissal, the Respondent had set up her own business, working from home. From 5 January 2001 to the date of the hearing, namely 24 October 2001, the Respondent had generated a gross income of £10,300. Unfortunately, on 3 June 2001, the Respondent’s business records and equipment were destroyed in a fire at her home. The Respondent gave evidence that she had been unable to generate any income during the months of June, July and August, as she had to move out of her flat whilst it was being refurbished. Since September, she had been seeking paid employment without success. She had also continued to pursue her own career.

The Tribunal found that she was entitled to recover her lost earnings, based upon an income of £30,000 per annum, from the date of her dismissal until a date fifteen months hence, namely 5 April 2002. Deductions would then be made from that figure to take account of the money that the Respondent had earned and also the money she could reasonably be expected to earn by way of mitigation of her loss. The Tribunal concluded that she should be treated as having an earning capacity of £15,450 gross (less expenses) over the fifteen-month period.

The Appellant appealed against the decision. It argued that pursuant to the s. 123(1) of the Employment Rights Act 1996, the Tribunal should have found that the fire at the Respondent’s flat broke the chain of causation. As a result, no loss after that point was recoverable. The Appellant also argued that the Tribunal should have set off against the gross figure of £37,500 for the fifteen month period, £20,000 or more for the first year, and one quarter of £35,000 for the second year commencing January 2002 (namely £8,750).

Decision

The appeal would be dismissed.

The Tribunal had to consider the apparent effect of the unfair dismissal on a factual basis, i.e. whether the loss was caused by the unfair dismissal or not. In this case, there was no error of law in the way that the Tribunal had calculated the compensatory award, as this had been a factual exercise. The Tribunal was not bound to conclude that the attributable loss ended with the fire.

Comments

The Tribunal’s conclusion could not be reconsidered, as it had used the correct approach. It had found that despite all reasonable steps being taken, the Respondent could not achieve the earnings level she could have with her Appellant until April 2002.