[New search]
[View without highlighting]
[Printable RTF version]
[Buy ICLR report: [1998] 1 WLR 637]
[Help]
MINISTRY OF DEFENCE v. D.J WHEELER and MINISTRY OF DEFENCE v. S. DONALD and MINISTRY OF DEFENCE v. NIXON and MINISTRY OF DEFENCE v. J. JOSLYN [1997] EWCA Civ 2647 (5th November, 1997)
IN
THE SUPREME COURT OF JUDICATURE
EATRF
96/0735/B
COURT
OF APPEAL (CIVIL DIVISION)
EATRF
96/0736/B
ON
APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
EATRF
96/1103/B
EATRF
96/1104/B
Royal
Courts of Justice
Wednesday,
5th November 1997
Before:
LORD
JUSTICE HIRST
LORD
JUSTICE SWINTON THOMAS
LORD
JUSTICE MANTELL

      
MINISTRY
OF DEFENCE
Appellant
v
MRS.
D.J WHEELER
Respondent
and
MINISTRY
OF DEFENCE
Appellant
v
MRS.
S. DONALD
Respondent
and
MINISTRY
OF DEFENCE
Appellant
v
MRS.
NIXON
Respondent
and
MINISTRY
OF DEFENCE
Appellant
v
MRS.
J. JOSLYN
Respondent

      
(Transcript
of the Handed Down Judgment of Smith Bernal Reporting Limited, 180 Fleet
Street, London, EC4A 2HD. Telephone No: 0171421 4040. Shorthand Writers to
the Court.)

      
MR.
D. PANNICK Q.C. and MR. R. McMANUS
(instructed by the Treasury Solicitor) appeared on behalf of the Appellant
Ministry of Defence.
MISS
D. ROSE
(instructed by Messrs Fuglers, London, W1) appeared on behalf of the Respondent
Wheeler.
MISS
D. ROSE
(instructed by Messrs Tyndallwoods, Birmingham) appeared on behalf of the
Respondent Donald.
THE
RESPONDENT NIXON
did not appear and was not represented.
MR.
B. LANGSTAFF
(instructed by Messrs Glenisters, Middlesex) appeared on behalf of the
Respondent Joslyn.

      
J
U D G M E N T
(As
approved by the Court
)
Crown
Copyright
Lord
Justice Swinton Thomas.
These
appeals from the Employment Appeal Tribunal were heard together because they
raise two important points of principle in relation to the assessment of
damages for wrongful dismissal. In each case the Ministry of Defence appeals
against the decision of the Employment Appeal Tribunal. In the cases of Mrs.
Wheeler and Mrs. Donald there are cross appeals by them. The claims by the
Claimants against the Ministry of Defence arise from the admitted wrongful act
of the Ministry in discharging them from the Armed Forces as a result of
pregnancy.
Mrs.
Wheeler.
Mrs.
Wheeler was born on the 19th March, 1959. She joined the Womens Royal Army
Corps on the 6th April, 1976, on a 22 year engagement. In November, 1981, she
married her husband, also a soldier. In 1985 she became pregnant. She was
then an Acting Sergeant. She was discharged from the Army in 1985. She was
earning £9,752.80 per annum. In 1987 she gave birth to a second child.
In 1992 her husband completed his 22 year engagement in the Army, and Mrs.
Wheeler then obtained alternative employment as a civilian with the Ministry of
Defence.
The
Industrial Tribunal by its decision of the 8th December, 1994, found that the
chance that Mrs. Wheeler would return to the Army if she had been permitted to
do so following maternity leave after the birth of her first child was 100%.
The Tribunal assessed the chance of her returning to the Army following
maternity leave after the birth of her second child as 85%, and the chance that
she would have completed 22 years service at 20%. The Ministry of Defence
appealed to the E.A.T. raising a number of issues. On the 8th December, 1985,
the E.A.T. (Maurice Kay, J. Presiding) allowed the Ministry’s appeal by
which it was submitted that the Industrial Tribunal had adopted the wrong
approach to their calculation of cumulative percentage chances. The
Ministry’s appeal on the other grounds was dismissed, including their
appeal on the main issue that arises in these appeals, namely the correct
approach to the assessment of compensation in cases where the applicant has or
should have mitigated her loss by obtaining alternative employment.
Mrs.
Donald.
Mrs.
Donald was born on the 3rd July, 1956. She joined the Womens Royal Army Corps
on the 9th October, 1973, on a 22 year engagement. In 1977 she was promoted to
Corporal. In July, 1979, she found that she was pregnant and she married her
husband on the 18th of August of that year. On the 3rd October, 1979, she was
discharged. She gave birth to her child on the 5th February, 1980, and to a
second child on the 26th June, 1982. On the 10th April, 1995 the Industrial
Tribunal found that if she had not been unlawfully discharged from the Army
there was a 100% chance that she would have taken maternity leave, a 90% chance
that she would have returned to the Army if allowed to do so after her
maternity leave, a 50% chance that she would have taken maternity for the birth
of her second child, and 25% chance that she would have returned to the Army
after the birth of her second child. The Industrial Tribunal adopted the same
approach to the assessment of loss as in Mrs. Wheeler’s case. The
Ministry appealed to the E.A.T. and on the 8th December, 1995, the E.A.T.
(Maurice Kay, J. Presiding) dismissed the appeal on that issue. They allowed
the Ministry’s appeal in relation to the Industrial Tribunal’s
approach to cumulative chances and remitted the claim to the Industrial
Tribunal for reconsideration on that issue.
Mrs.
Nixon.
Mrs.
Nixon was born on the 2nd April, 1958. She enlisted in the Royal Navy on the
2nd April, 1975. By September, 1978, she had been promoted to Chief Wren. She
found she was pregnant in July, 1989, and her child was born on the 27th
January, 1990. She was discharged from the Navy on the 5th April, 1991, as a
result of her pregnancy. On the 9th May, 1995, the Industrial Tribunal found
that there was a 100% chance that she would have taken maternity leave if
available to her, a 60% chance of her returning to work after maternity leave,
and a 40% chance that she would have completed her engagement which would have
ended in 1999. The Ministry appealed to the E.A.T. raising the issue as to the
proper approach as to compensation and mitigation of loss, and on the 24th
June, 1996, the E.A.T. (Morison, J. Presiding) dismissed the appeal.
Mrs.
Joslyn.
Mrs.
Joslyn was born on the 16th August, 1958. On the 30th January, 1978, she
joined the W.R.A.C. on a 22 year engagement. In September, 1982, she was
promoted to Acting Sergeant. On the 12th May, 1984, she married and very
shortly thereafter she found that she was pregnant. On the 27th August, 1984,
she was discharged. On the 19th July, 1988, she gave birth to a second child.
On the 10th April, 1995, the Industrial Tribunal found that there was a 100%
chance that she would have taken maternity leave prior to the birth of her
first child, and an 80% chance of her returning to the Army after the birth of
the first child, a 60% chance that she would have taken maternity leave in
respect of the birth of the second child, a 40% chance that she would return to
the Services after the birth of the second child, and a 20% chance that she
would complete 22 years service.
The
Ministry appealed to the E.A.T. on the issue as to the proper approach to
assessment and mitigation of loss, and on the 24th June, 1996, the E.A.T.
(Morison, J. Presiding) dismissed the appeal. The cumulative chances point
also arose in Mrs. Joslyn’s case in that the Industrial Tribunal
approached that issue in the same way as in Mrs. Donald’s case, but the
Ministry did not appeal on that issue in Mrs. Joslyn’s case.
The
Ministry appeals to this Court in all four cases with leave. The Respondents,
Mrs. Wheeler and Mrs. Donald cross appeal on the cumulative chances issue.
The
First Issue
Each
of the Applicants obtained alternative employment for varying periods of time,
after their dismissal from the Armed Forces, but at lower rates of pay with the
result that they mitigated their loss. The point of principle that arises in
relation to the calculations relates to the proper approach to those
postservice earnings in the calculation of loss.
The
Ministry contends that the approach should be to take the total sum that the
Applicant would have earned had she remained in the Services for the period of
years as found by the Tribunal that she would have remained in the Forces, at
that point apply the percentage discount which is the percentage discount found
by the Tribunal to reflect the chance that the claimant would or would or not
have remained in the Armed Forces, and then deduct from that sum the total
amount that the claimant has or should have earned during that period. This is
described as Method 1.
The
Respondents contend that the proper approach is to take the sum that the
claimant would have earned in the Forces, deduct from that sum the amount that
she has, or should have, earned elsewhere, and then apply the percentage
discount to the net loss. This has been described as Method 2.
The
difference between the two approaches can be illustrated by a simple example.
The complainant was earning £10,000 per annum in the Services. She was
wrongfully dismissed on account of pregnancy. In the course of a particular
year she earned £5,000 in civilian life. The Tribunal finds that she had
a 50% chance of returning to Service life following the birth of her child.
Under Method 1, the formula adopted by the Ministry, the discount of 50% is
applied to the Service earnings of £10,000, leaving £5,000, and her
earnings of £5,000 then fall to be deducted in total, so that she has no
loss at all. Under Method 2, take the notional earnings in the Services of
£10,000 and apply the 50% discount, arriving at £5,000. Then take
the figure of £5,000 for actual earnings and discount that by 50% to
£2,500 to represent the finding by the Tribunal that the prospect of
earning £10,000 in the Forces or £5,000 in civilian life were both
50%. Thus the total loss leaving aside the mitigation is £7,500 and when
mitigated is £7,500 less the £5,000 earned, that is £2,500. Put
another way, looking into the future there was a 50% chance that the claimant
would earn £10,000 and a 50% chance that she would earn £5,000.
Deduct one from the other and you arrive at a figure of £2,500. This, the
Respondents submit, represents the claimant’s true loss. In other words
there was an equal chance that had she not been dismissed she would have
remained in the Forces earning £10,000 or leaving the Forces and earning
£5,000.
There
has been a radical conflict, or difference of view, in Industrial Tribunals and
in the E.A.T. as to the correct approach to this problem. Method 1 was adopted
by the E.A.T. in
Clement
Clark International v. Manley
(1979) I.C.R. 74,
Derwent
Coaches v. Kirby
(1995) I.C.R. 48,
Ministry
of Defence v. Bristow
(1996) I.C.R. 554. It was also favoured in
Digital
Equipment Co. Ltd. v. Clements
(1996) I.C.R. 829. Method 2 was adopted by the cases presently under appeal
sub. nom.
Ministry
of Defence v. Hunt and ors.
(1996) I.C.R. 555 and
Ministry
of Defence v. Joslyn and ors.
(Transcript 24th June, 1996) and in
Digital
Equipment Co. Ltd. v. Clements No. 2
(1996) I.C.R. 829. In the two Digital Equipment cases apparently conflicting
conclusions were arrived at. The payment in issue in that case was a severance
payment and not money subsequently earned mitigating the loss, and different
considerations may apply to severance payments depending upon whether the
payment was made in lieu of earnings or as compensation in respect of an
overall loss.
The
parties agreed that the Court must approach this problem on the principle that
the complainants should, as far as possible, be placed in the same position as
they would have been in but for the unlawful act. In the field of unlawful
discrimination this principle is echoed by the European Court of Justice in
Marshall
v. Southampton etc. Health Authority (No. 2)
(1993) ICR 893 where the Court said at page 932 that compensation
“must be adequate in that it must enable the loss and damage actually
sustained as a result of the discriminating dismissal to be made good in full
in accordance with applicable national rules”. This principle is less
easy to apply in respect to future as opposed to past losses and less easy in
respect of percentage chances as opposed to ascertained facts. However the
Courts have had to grapple with these problems in other fields, for example in
relation to the percentage loss of a chance in litigation where the chance of
success has been lost as a result of the negligence of a professional adviser,
or in assessing the value of an injured plaintiff’s loss of earning
capacity which will not affect his actual earnings until some time in the
future. As Scarman, L.J. said in
Smith
v. Manchester Corporation
17 K.I.R. 1 at page 7, the loss of earning capacity is not “a possible
loss”, but is an “existing loss”. So in the case of wrongful
dismissal, subject to proof and assessment by the Tribunal, the loss sustained
by those wrongfully dismissed is not a speculative loss but is an existing loss.
Some,
although perhaps limited, assistance of a general nature can be found in the
authorities. In
Silliphant
v. Powell Duffryn Timber Ltd.
(1983) I.R.L.R. 91 BrowneWilkinson, J. said at page 96:
“There
is no need for an all or nothing decision. If the Industrial Tribunal thinks
that there is a doubt whether or not the employee would have been dismissed,
this element can be reflected by reducing the normal amount of compensation by
a percentage representing the chance that the employee would still have lost
his employment.”
This
statement was expressly approved by Lord Bridge of Harwich in
Polkey
v. O.E. Dayton Services Ltd.
(1988) ICR 142 at page 163. These dicta, as was pointed out by Maurice Kay,
J. In
Hunt
(supra) at page 566, tend to support the concept that the appropriate point to
make the deduction of the sums earned by way of mitigation of loss is at the
later stage (Method 2) rather than the earlier stage (Method 1).
Davies
v. Taylor
[1974] A.C. 207 was a case in which the Plaintiff was the widow of a man who
had been killed in an accident. The Plaintiff and the deceased had separated,
and the Court had to consider the percentage chances of a reconciliation and
the damages that would be recoverable in those circumstances. Lord Reid said
at page 212:
“In
each case the Tribunal would determine what its award would have been if the
spouses had been living together when the husband was killed, and then discount
it or scale it down to take account of the probability of her not returning to
him.”
The
circumstances of that case are different from the circumstances of the instant
cases, but, nonetheless, there is an indication in that statement that on those
facts the correct approach was first to assess the Plaintiffs loss and then to
award an appropriate percentage of that loss.
In
a powerful submission Mr. Pannick, Q.C., for the Ministry submitted that Method
1 was in accordance with the principle that the claimant should be placed in
the position she would have been in but for t he wrongful dismissal. He
submits that Method 2 results in over payment or an unwarranted windfall. In
order to achieve the objective of placing the claimant in the position that she
would have been in, he submits that it is necessary to identify the total loss
sustained as a result of the dismissal, (a percentage of her earnings in the
Forces with the appropriate multiplicand) and then deduct the total of the sums
actually earned. He then submits that Method 2 confuses total loss and
mitigation because that method involves the deduction of the sums earned in
mitigation before applying the percentage chance figure. The error, he
submits, is in applying the percentage chance figure both to the earnings in
the forces and to the sums earned in mitigation. In those circumstances, the
claimant is not giving full credit for the mitigation and in consequence
receives a windfall.
Mr.
Pannick, and Mr. Langstaff, Q.C. and Miss Rose for the Respondents, adopted
mathematical formulae to illustrate their respective submissions.
X
equals the earnings the claimant would have received had she remained in the
Armed Forces and had not been wrongfully dismissed.
Y
equals the earnings earned or which could or should have been earned in
alternative employment.
Z
equals the percentage reduction to reflect the chance that she would not have
remained in the Armed Forces with higher wages than in civilian life. (If her
wages are higher in civilian life then there is no loss under this head of
claim).
Under
Method 1 the compensation is X x Z %  Y.
Under
Method 2 the compensation is X  Y x Z %.
Mr.
Pannick submits that X x Z % represents the total figure for loss of future
earnings, and the employee must, after that calculation has been carried out,
give credit for the total sum earned in alternative employment. However in my
judgment X x Z% does not represent the total figure for loss of earnings. It
represents the amount that the claimant would have earned in the Armed Forces
but discounted for the chance that she might not have earned it. That figure
disregards the fact that if she had remained in the Forces she would not have
earned a lesser sum, or any sum, in civilian employment. Accordingly, in the
example given at the outset of this judgment, if there was a 50% chance of
earning £10,000 in the Army, there was equally a 50% chance that she would
not earn only £5,000 in civilian employment, and to arrive at a true
figure of actual loss the latter must be put into the equation as well as the
former. Mr. Pannick’s equation ignores the real, existing loss in a
comparison between the £5,000 actually earned, and the £10,000 which
the Applicant had a 50% chance of earning. It is impossible, in my judgment,
to say that a woman who is earning £5,000 per annum following her
dismissal has suffered no loss when she had a 50% chance of earning twice that
amount, £10,000.
Mr.
Pannick gave an example which is similar to the example given at the outset of
this judgment.
(1)
An employee earns £10,000 a year. She is dismissed by reason of her
pregnancy.
(2)
The Industrial Tribunal finds that there was a 50% chance that the employee
would have gone back to work for one year after confinement and no chance that
she would have worked thereafter.
(3)
The Industrial Tribunal also finds that in the year of loss, the employee did
not earn any money by way of mitigation and could not earn any such money.
(4)
Under Method 1 and under Method 2, the employee is entitled to £5,000
compensation from the employers.
(5)
Suppose however, that the Industrial Tribunal changes its mind before
delivering judgment, and decides to accept the employer’s evidence that
the employee did in fact earn £2,500 (or could have earned that sum) in
the relevant year.
(6)
It would be natural to think that instead of having to pay £5,000
compensation, the employer would only have to pay £5,000 minus £2,500
which equals £2,500. That is because the total loss of the employee was
reduced by the figure of £2,500. Thus applying Method 1:
X
= £10,000
Z
= 50%
X
x Z = £5,000

Y (£2,500) = £2,500.
(7)
But if Method 2 is applied a different result accrues.
Under
Method 2 the calculation is:
X
= £10,000
Y
= £2,500
X
 Y = £7,500
The
compensation is, accordingly, £7,000 x Z (50%) = £3,750.
Mr.
Pannick submits that Method 2 is unfair and results in a windfall. I do not
agree. The true calculation, in my judgment, is that the employee has earned
£2,500 and had a 50% chance of earning an extra £7,500, so that her
true loss is indeed £3,750.
At
first sight Mr. Pannick’s example, and the reasoning put forward to
support it, appears to be attractive and was certainly attractively put.
However it is, in my judgment, clearly flawed. As Mr. Langstaff submitted Mr.
Pannick’s equation, and his example, focus solely on the amount that the
Applicant would have earned in the Armed Forces instead of focusing on the
entire picture which is the amount she would have earned in the Armed Forces
and
the lesser amount that she has or would have earned in civilian life and
deducting one from the other. Thus it is clearly wrong to take, for example,
60% of the salary that she would have earned in the Armed Forces and deduct
from that 60%, 100% of the sums earned in civilian life. The same discount
must be applied to both sides of the equation to obtain a fair and just result
and an accurate calculation as to the amount that the claimant has actually
lost. (Accordingly to reach that result you take 60% of the potential
earnings, and 60% of the actual earnings and deduct one from the other).
Mr.
Langstaff applies that reasoning to Mr. Pannick’s example. He agrees, of
course, that if the Applicant would have had a 50% chance of earning
£10,000 in the Armed Forces and has no earnings and no earning capacity
then her loss is £5,000. Turning to the Applicant who has earned
£2,500 Mr. Langstaff’s equation is as follows:
Potential
Earnings
£X
(earnings in the Forces) x Z% (say 50%) + £Y (100  Z%) (say 50%)
Thus
the loss = Potential Earnings  Y.
Thus
in Mr. Pannick’s example the equation is:
£10,000
x 50% (£5,000) + £2,5000 x 50% (£1,250) = £6,250.
Loss
= £6,250  £2,500 = £3,750.
By
this method Mr. Langstaff submits credit is given in full for every pound
earned by way of mitigation. The equation is the same as would be achieved by
deducting the figure of £2,500 from £10,000 (£7,500), and then
applying the 50% discount.
To
illustrate his proposition Mr. Langstaff takes the example of a woman who is
employed at the rate of £8,000 per annum. She had the opportunity of
being promoted to a job earning £12,000 per annum but is wrongfully
deprived of the opportunity of doing so. The Court finds that her chances of
promotion to £12,000 per year were 50%. According to Mr. Pannick’s
formula the loss would be £6,000 (half of £12,000  £8,000,
current earnings) meaning that not only had she suffered no loss but was better
off. The proper equation is to say that her loss was £12,000 less
£8,000, namely £4,000 and then apply the 50% discount resulting in a
loss of £2,000 per annum. Mr. Langstaff submits that that example
illustrates the importance of not focusing solely on the proposed income which
has been lost but on the totality of the picture.
Miss
Rose gives an example which was adopted by Morison, J. in Joslyn. A woman was
earning £500 a week (X) in the Armed Forces and was unlawfully discharged
by reason of her pregnancy. She then takes civilian employment earning
£400 a week (Y). The Industrial Tribunal finds that, had she not been
unlawfully discharged, there was a 60% chance that she would have remained in
the Armed Forces earning £500 a week. Applying Method 1, the Ministry
approach, the Tribunal would take 60% of her potential earnings in the Armed
Forces, namely £300, and then subtract her actual earnings of £400
from that figure which would result in a conclusion that she is £100 a
week better off as a result of being dismissed although she is earning
substantially less than she could have earned had she remained in the Army.
According to Method 2, the approach adopted by the Respondent, £400 (Y),
the actual earnings, are deducted from £500 (X), the potential earnings,
to establish the net loss of £100 and then apply the 60% reduction. The
weekly loss is £500  £400 x 60% = £60 per week. She has lost a
60% chance of earning an extra £100 a week. Miss Rose submits that this
method produces the true loss and puts the claimant in the position that she
would have been in but for the wrongful dismissal and that the method by the
Ministry produces an absurd result. The correct approach is to assess the
claimant’s net loss and then to reduce that figure by the appropriate
percentage to reflect the chance if the loss might not have been suffered. The
error in the Ministry’s approach is that it fails to take any account of
the fact that, had the Applicant not been unlawfully discharged, she had a 100%
chance of earning at least what she is earning as a civilian and, in addition,
a 60% chance of earning an extra £100 per week if she had remained in the
Forces. Method 1 fails to take into account the fact that whether the
Applicant had been unlawfully discharged or not she would always have been able
to earn the sums that she is now able to earn in civilian life. This results
by reason of taking the civilian earnings into account only as a deduction from
losses and not as part of the sums that she would have been able to earn had
she not been unlawfully dismissed.
Miss
Rose illustrates the point that she makes in two of the cases under appeal.
Further,
take the example of the woman earning £10,000 per annum who is unlawfully
dismissed and is able to earn £5,000 per annum in civilian life. She had
a 50% chance of continuing to earn £10,000. Take a single period of 12
months. If Method 1 is adopted and it is said that there is no loss, then in
these circumstances, that is the equivalent of saying that she would not work
for 6 months of the year, or that she would earn for 6 months of the year
earning £5,000 and for the remainder of the year earning nothing, whereas
in truth she has lost the opportunity (assessed at 50%) of earning the
difference between the two figures for the whole year.
I
have no doubt that the submissions made by Mr. Langstaff and Miss Rose are
correct. The method of assessing loss adopted by the Ministry would not in a
case where post dismissal earnings have to be taken into account as mitigation
of loss put the claimant in the position she would have been in had she not
been unlawfully dismissed. The examples given illustrate that very clearly.
On the other hand, the method of calculation proposed by the Respondents does
give full value for the mitigation. This is so once it is recognised that it
is essential not only to consider the percentage chance of earning the greater
sum in the Armed Forces but, also, and counter balancing that chance, the
percentage chance that if she had not been unlawfully discharged she would not
have earned the sums that she has or will earn in civilian life.
That
this is clearly the correct approach can be further illustrated by an example
in the field of personal injuries where an employee has been injured, and the
employer and the employee have both been found partly to blame for the
accident. Mr. Pannick agreed that no distinction can be drawn between that
case and the issue that arises in these cases as to the appropriate approach to
percentage reductions. An employee earning £10,000 a year is injured in
an industrial accident. As a result of his injury he is no longer able to
carry on with his preaccident work but obtains alternative employment at the
rate of £5,000 a year. The Court finds that the employer was 50% to blame
for the accident and the employee likewise 50% to blame. On the basis of the
Ministry’s approach to the calculation of damage one takes the earnings
of £10,000, applies the 50% factor arriving at the figure of £5,000
and then deducts the post accident earnings with the result, so the Ministry
say, that there is no loss at all. Mr. Pannick submitted that if the Courts
adopted any other approach then it must be wrong. In my judgment, taking that
analogy, quite plainly the employee has suffered a continuing loss for which he
must be compensated. Not only would the Ministry’s approach fail to
compensate the employee on the basis of the Court’s findings but it is
wholly contrary to the approach to damages for personal injury taken by the
Courts which has been established for many years.
Direct
support can be found for the approach of the Respondents, in the recent case in
this Court of
Hartle
v. Laceys (a firm)
(Unreported. Transcript 28th February 1997). The issue that arose was the
evaluation of the chance of a more advantageous sale of property which was lost
as a result of the negligence of the Defendants. That chance was assessed at
60%. The Plaintiff had a 60% chance of selling the property at a figure of
£360,000 after deduction of the costs of sale. The property was later
sold for £150,000.
In
his judgment Ward, L.J., with whom Beldam, L.J. and Schiemann, L.J. agreed, said:
“When
I put my tentative views to the parties, I said, without giving it much thought
at all, that credit against the damages of £216,000 should be given for
the £150,000 actually received. That would mean judgment for
£66,000. But is that the right approach? Prompted by Mr. Davidson once
again so fairly sowing seeds of doubt about the correctness of that approach, I
have wrestled with the mathematics. If ‘a’ is the lost sale
proceeds and ‘b’ the actual proceeds, are the damages properly to
be awarded (a x 60%)  b or are they (a  b) x 60%. That can be further
reduced to either 0.6a  b or 0.6a  0.6b. On the figures, is it £216,000
 £150,000 i.e. £66,000 or is it 60% of the difference between
£360,000 and £150,000 i.e. £126,000.
Reducing
the formulae to appropriate language, is the measure of damages the difference
between the value of the opportunity to sell before 18th November 1988 and the
value of the opportunity to sell after that date or is it the difference
between the price he lost the chance of achieving and the actual selling price,
that difference being reduced by 40% to reflect the value of the chance? I
confess I have not found it easy to decide.
I
have come to the conclusion the latter approach is the correct one. Take
slightly different facts. Assume just for the sake of the argument that
Berkeleys were in Mr. Wyllys’ office with the banker’s draft for
£375,000 in one hand and pen poised in the other to sign contract and
conveyance when the Sloggets telephoned to say they had registered their
charge, so the deal was lost. One might well then say that Mr. Hartle had lost
a certain sale, or one as certain as certain can be. His damages would be a 
b with no discount because the chance is assessed at 100%. If the chance were
99%, one would make the 1% reduction. On the facts we have found a  b is to
be reduced by 40%. The unfairness of the former solution can be tested in this
way. Assume we had found an 80% chance of a sale. 80% of £375,000 is
£300,000. Assume the property was sold 12 months later for £300,000.
It cannot be right that the loss of such a high chance does not sound in
damages. If the 0.6a  0.6b formula is adopted, then the loss of the chance
always has a value.
Look
at it another way. When Miss Chaplin lost the opportunity to participate in
Mr. Hick’s beauty contest, there was nothing left for her. She had lost
the only chance she would ever have of winning the prize. Having lost the
chance, she was left with nothing. Mr. Hartle did not lose everything when he
lost this sale. He lost the chance of the sale but he did not lose the
property itself. He retained the chance to sell it at some indeterminate time
for some indeterminate price. He lost the chance of getting the excess of a
over b but his chance of getting a  b was only 60% and so he should only
recover 60% of it.
In
my judgment Mr. Hartle is entitled to damages of £126,000 under this head
of his claim.”
Mr.
Pannick was unable to distinguish that case from the present cases save to
submit that
Hartle
v. Laceys
related to a different type of problem. That is true but, in my judgment, the
principle to be applied is identical. Alternatively, Mr. Pannick submitted that
Hartle
v. Laceys
was wrongly decided. I do not agree, and it provides powerful support for the
submissions made by the Respondents on this issue.
For
those reasons I would dismiss the Respondent’s appeals on this issue.
Second
Issue.
The
second issue is to the proper approach by Industrial Tribunals to
“cumulative chances”. Making the assumption that the Applicant had
not been wrongfully dismissed, she would have varying prospects of remaining
the Armed Forces at different point in her career, and the Tribunal must make
an assessment of those chances. For example, in Mrs. Donald’s case the
Tribunal assessed the chance of her returning to the Army after the birth of
her first child at 90%, the chance that she would have taken maternity leave
for the birth of her second child as 50%, and the chance that she would have
returned to the Army after the birth of her second child at 25%.
The
Ministry submits that the percentage chances must be applied cumulatively.
Miss Rose, on behalf of Mrs. Wheeler and Mrs. Donald, submitted that it was
open to the Tribunal to approach the task in the way submitted by the Ministry
but that, equally and alternatively, it was open to the Tribunal to consider
each period in the round and reach an overall conclusion which takes account of
the Applicant having left the Services prior to the commencement of the
relevant period. At the end of the argument, there was not a great deal
dividing the parties because Mr. Pannick agreed that the approach adopted by
Miss Rose was acceptable providing, and only providing, the Tribunal made it
crystal clear that they were adopting the correct approach.
In
the case of Mrs. Wheeler the Industrial Tribunal said at paragraph 37:
“Again,
looking at what Mrs. Wheeler did do, we assess that there was an 85% chance
that she would similarly have taken maternity leave for the second child and
returned to work thereafter. However, again, bearing in mind what Mrs. Wheeler
actually did after that, we assess that there was only a 20% chance that she
would have completed 22 years.”
In
Mr. Donald’s case the Industrial Tribunal said at paragraph 14:
“As
to the award we have when completing our calculations stood back and used a due
sense of proportion and we set out the award. This required the Tribunal to
deliberate at length at each stage of its percentage chance consideration and
to pay due regard to its findings of percentage chances at the preceding stage.
We appreciate that there is a school of thought that will calculate such
chances on a percentage of a percentage but if we had adopted such a method we
would not have reached a just and sensible award and would have had to
reappraise our chance findings.”
Accordingly
the Tribunal did not, in this case, adopt a cumulative chance approach. On the
contrary, they rejected the approach that the second percentage chance must be
a percentage of the first percentage chance and indicated that if they had
adopted that approach they would have reached a different result. Mr. Pannick
submits that that approach must be wrong in principle and the E.A.T so found.
In
Ministry
of Defence v. Hunt and ors.
(Supra) the E.A.T. said at page 561:
“The
three questions required to be asked by
Ministry
of Defence v. Cannock
[1994] I.C.R. 918 will usually result in the differential quantification of
chances. For example, an Industrial Tribunal on the evidence in a particular
case, may conclude that there was an 80% chance that a woman would have availed
herself of maternity leave before returning to Service but only a 40% chance
that she would have proceeded to complete the full period of her engagement
thereafter. In quantifying loss of earnings, this would require an Industrial
Tribunal to apply the 80% figure to the first period. However, for the
subsequent period the appropriate calculation would be cumulative, this is to
say 40% of the 80%, and not 40% of the original 100%.”
In
Mrs. Wheeler’s case the E.A.T. said at page 578:
“The
Industrial Tribunal sets out the principles to be applied to the calculation or
compensation of paragraph 46 of the decision. It refers to a period of 100% of
Army earnings, followed by the period of 85% of such earnings, and a subsequent
period of 20% of those earnings. Mr. McManus submits that this amounts to a
misdirection in law by failing to assess Mrs. Wheeler’s chance of
completion from 6 months after the birth of the second child to the end of 22
years by multiplying percentage chances cumulatively. He submits that the
Industrial Tribunal ought to have awarded Mrs. Wheeler 17% of her lost earnings
for that final period, viz. 85% of 20%. Miss Simler seeks to deal with this
submission by contending that there is no error of law or misdirection. She
submits that the Tribunal made an overall assessment of the relevant chances
and made findings of fact which justify the final figures of 85% and 20%. In
our judgment, it is clear from the wording of paragraph 46 that the Industrial
Tribunal was contemplating the application of different percentage figures at
different stages but to the same base earnings figures. There is nothing on
the face of the decision to suggest that the Tribunal was giving discounted
figures which took into account the effect of cumulative chances. In our
judgment, the submission on behalf of the Ministry of Defence on this issue is
correct and its appeal on this point will be allowed. The consequences are
purely arithmetical and do not necessitate a remission to the Industrial
Tribunal.”
In
Mrs. Donald’s case the E.A.T. said at page 584:
“On
behalf of the Ministry of Defence, Mr. McManus submitted that the Industrial
Tribunal carried out the calculation by applying the percentage chance at each
stage in isolation from the preceding stage. That, he submitted, is a
misdirection which leads to over compensation. The submission is that the
chance at each stage should be assessed by multiplying the percentages
cumulatively so that the figure applied at each stage is a percentage of a
percentage......
On
behalf of Mrs. Donald, Miss Rose submits that the Tribunal explained in that
passage that the percentages selected by it were selected on the basis that
they were not applied cumulatively. It is clear, she submits, that if the
Tribunal had applied cumulative percentages the percentages would have been
much larger. In our judgment, the proper approach is for the Tribunal first to
quantify the percentage chance or chances. It should do that before
considering the consequential arithmetic. Having arrived at differential
percentage chances, it is then incumbent on the Tribunal to make a cumulative
calculation on the basis of a percentage of a percentage. This the Tribunal
did not do in the present case.”
Accordingly
the matter was remitted to the Industrial Tribunal for reconsideration.
Mr.
Pannick submits that as a matter of plain logic, if there are a series of
contingencies, the possibility of the second factor occurring is a percentage
of the first factor. The first question that must be asked is what is the
percentage chance that the Applicant would return to the Forces on the first
day that she could after the birth of her child. The second question is the
percentage chance that she would have remained in the Forces for 5 years. The
next question is whether she would have remained after the period of 5 years.
That question can only be answered logically as a further percentage chance of
the percentage chance on day 1.
In
my judgment, Mr. Pannick is correct in submitting and the E.A.T. were correct
in concluding that the percentage chances must be applied cumulatively. Miss
Rose was concerned that if Tribunals take this approach then there is a risk of
injustice to Applicants in that Tribunals are likely to assume that there is a
decreasing percentage chance that the claimant would remain in the Forces after
the conclusion of the first period. Thus, for example, if they find that there
is, say, a 50% chance that the Applicant would have returned for the Forces for
a period of 5 years, the natural inclination is to assume that the prospect of
remaining in the Forces for a further period is less than 50%. Miss Rose says
that in many cases, once it is found that there is a 50% chance that the
claimant would have returned initially there is then a more than 50% chance,
say a 70% chance, that she would have remained after the conclusion of the
first period. Thus the factor in such a case would be 50% x 70%, namely 35%
whereas the temptation is to reduce the first factor of 50% for the first
period to, say, 30% for the second period so arriving at 50% x 30% = 15%. I
understand this point, and no doubt Tribunals in making their assessments with
the assistance of the parties' representatives will be alive to it.
Accordingly,
in my judgment, the cumulative percentage approach must be adopted. However,
whereas this Court must decide questions of principle it does not tell
Tribunals how they should carry out their tasks. That is a matter for them.
As Mr. Pannick agreed, provided they make it clear that they have adopted the
correct approach, they are entitled then to approach their task in the way that
they find most satisfactory, although they may find it simplest to set out the
mathematical cumulative discount.
I
would dismiss both Mrs. Wheeler’s and Mrs. Donald’s appeals on the
question of principle on this second issue. Mrs. Donald’s case will, as
ordered by the E.A.T., be remitted to the Industrial Tribunal. In Mrs.
Wheeler’s case the E.A.T. held that the consequences of their finding
were purely arithmetical and so did not require a remission to the Industrial
Tribunal. That conclusion may be correct, but I am not wholly convinced that
it is. I have concluded that it is fairer to Mrs. Wheeler that her case should
also be remitted to the Industrial Tribunal for consideration in the light of
the judgments of the E.A.T. and this Court.
Lord
Justice Mantell.
I
agree that the appeals and cross appeals should be dismissed and that the cases
of Mrs Wheeler and Mrs Donald should be remitted to the Industrial Tribunal for
reassessment.
I
would only wish to add a few words on the point arising in the women's appeals.
Taking the famous example, a correct analysis would seem to be as follows: the
claimant has lost and is entitled to be compensated for a 50% chance of
recovering the difference between what she would have earned over a 12 month
period in the service and what she did earn or could have earned in alternative
employment. In the example, therefore, the claimant would be entitled to
recover 50% of the difference between £10,000 and £5,000, that is
£2,500. If, as I believe it to be, that analysis is correct nothing is
achieved by seeking to express the principle in terms of a mathematical formula
and looked at in that way it is immediately apparent that full weight has been
given to the money earned from alternative employment and that there is no
question of the claimant being over compensated. Similarly, in calculating the
´difference' and in an appropriate case full credit would have to be given
for any sum paid by way of compensation. The discount for contributory
negligence, if any, does not arise until that loss has been established when
one looks to see what proportion of the loss it is just and equitable for the
claimant to bear. It follows that the Employment Appeal Tribunal did not err
in its approach which unlike that of the Ministry of Defence produces a result
which is consistent with justice, commonsense and the decision of this court in
Hartle
v Laceys (A Firm)
(Unreported Transcript 28 February 1997).
Lord
Justice Hirst.
I
agree with both judgments.
Order:
Appeals and cross appeals dismissed; appellant to pay the respondents' costs;
legal aid taxation of the respondent Joslyn's costs; costs of the cross
appeals to be borne by the respondents Donald and Wheeler; application for
leave to appeal to the House of Lords refused.
Order
not part of the judgment of the court

      
© 1997 Crown Copyright
BAILII:
Copyright Policy 
Disclaimers 
Privacy Policy 
Feedback 
Donate to BAILII
URL: http://www.bailii.org/ew/cases/EWCA/Civ/1997/2647.html