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	United Kingdom Employment Appeal Tribunal
You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Petrofac Offshore Management Ltd v Olley & Ors [2005] UKEAT 0031_05_2110 (21 October 2005) URL: http://www.bailii.org/uk/cases/UKEAT/2005/0031_05_2110.html Cite as: [2005] UKEAT 0031_05_2110, [2005] UKEAT 31_5_2110

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APPEARANCES

 

For the Appellant/Respondent	Mr I D Truscott Queen's Counsel Instructed by: Messrs Simpson & Marwick Solicitors 4 Carden Terrace ABERDEEN AB10 1US
For the Respondent/Appellant	Christine P McCrossan Solicitor OILC 49 Carmelite Street ABERDEEN AB11 6NQ

SUMMARY

The claimants were employed to work in the North Sea. They were dismissed by their employers, a Jersey registered company, when the oil installation operator required a company with which the employers had contracted to provide personnel to the operator, to remove them from their installation. The tribunal found that they were unfairly dismissed but that the unfairness was purely procedural and it was highly likely that the claimants would have been dismissed in any event. They held that compensation should, accordingly, be reduced by 90%. The tribunal also found that the employers were in breach of s.19 of the Employment Relations Act 1999 in respect that they had failed to allow the claimants' union representative to attend meetings at which they were dismissed and appeal hearings. They rejected a claim under the Trade Union and Labour Relations (Consolidation) Act 1992 that the claimants had suffered a detriment contrary to s.146(1) of that Act on the ground that although there was detriment it was not directed to the claimants as individuals. The Employment Appeal Tribunal held that the tribunal had erred in failing to take account of matters which indicated that the unfairness of the dismissals was not purely procedural in nature and in taking account of matters in respect of which no findings had been made. Further they held that they had erred in failing to consider whether the claimants had suffered detriment for a purpose prohibited by s.146 (1) of the 1992 Act. An order was pronounced remitting the issue of whether or not the claimants' compensation fell to be reduced and whether or not they had suffered a detriment in contravention of the provisions of s.146 of the 1992 Act and if so, what remedy should be afforded therefore, to a freshly constituted tribunal.


 


THE HONOURABLE LADY SMITH

1. This case concerns claims for unfair dismissal, breach of s.10 of the Employment Relations Act 1999 and breach of s.146(1)( c) of the Trade Union and Labour Relations (Consolidation) Act 1992 ('TULRA'), by three claimants who were employed in the North Sea.
2. This judgment represents the views of all three members.
3. We will refer to parties throughout as claimants and respondents.

Introduction

4. This judgment is in respect of cross appeals against a decision of the Employment Tribunal sitting at Aberdeen, Chairman Mr N Hosie, registered with Extended Reasons on 14 February 2005. The claimants were represented there and before us by Miss C P McCrossan, solicitor and the respondents were represented there by Mr D M Burnside, solicitor and before us by Mr Truscott QC.
5. The claimants presented claims in which unfair dismissal was alleged and the respondents contended that their dismissals were fair in respect that they were dismissals for a substantial reason and they had, in the circumstances, no alternative than to terminate their contracts of employment.

The Issues:

6. The essential issues as defined by the tribunal were whether the claimants were dismissed for a substantial reason of a kind such as to justify dismissal, if so whether the dismissals were fair and, in the event that they were unfair, what was to be fixed as appropriate compensation in the circumstances. There was also an issue which remains relevant as to whether or not the respondents were in breach of s.146(1) (c) of the TULRA. The claim under s.10 of the Employment Rights Act, which was found to have been established, was not challenged in the appeal.

The Judgment of the Employment Tribunal

7. The Employment Tribunal decided that the claimants had been unfairly dismissed but that any award of compensation should be reduced by 90% in respect that the unfairness of the dismissals was procedural and it was highly probable that the claimants would still have been dismissed. They rejected the claim under s.146(1)( c) of TULRA.

The Legislation

8. The relevant provisions of the legislation are firstly, s.98(1) of the Employment Rights Act 1996 , which provides:

"98 General

(1) In determining for the purposes of this Part whether the dismissal of an employee is fair or unfair, it is for the employer to show –

(a) the reason (or, if more than one, the principal reason) for the dismissal, and

(b) that it is either a reason falling willing subsection (2) or some other substantial reason of a kind such as to justify the dismissal of an employee holding the position which the employee held",

and, secondly, s.146(1) ( c) of TULRA, which provides:

"146 Action short of dismissal on grounds related to union membership or activities

(1) An employee has the right not to [be subjected to any detriment as an individual by any act, or any deliberate failure to act, by his employer if the act or failure takes place] for the sole or main purpose of -

(c) compelling him to be or become a member of any trade union or of a particular trade union or or of one of a number of particular trade unions."

The Facts

9. The essential facts were as follows. The claimants had each been employed by the respondents or their predecessors since 1993. At the time of dismissal, they were all employed to work on oil installations in the North Sea which were owned and operated not by the respondents but by a company known as Kerr McGee. The means by which the claimants came to be working on Kerr McGee's structures were an inter-company contractual arrangement of a type which is common in the case of North Sea oil installations. As regards the claimants' own employment history, prior to December 2002 the claimants were all employed by a company within a group of companies which, at that date, was taken over by Petrofac. As from that date, their employment was transferred to the respondents, a Jersey registered company operating out of Sharjah, UAE, part of the Petrofac group of companies which is very large, with some 2,500 employees and had, by the time of the tribunal hearing, become an installation operator in its own right.
10. There was a contract between Kerr McGee and Petrofac Facilities Management Ltd ("PFM") whereby PFM undertook to provide Kerr McGee with personnel and managed services. Clause7.11 of the contract between them was in the following terms:

""COMPANY may instruct CONTRACTOR to remove from the WORKSITE at CONTRACTOR's sole cost and expense any of CONTRACTOR PERSONNEL who in the reasonable opinion of COMPANY are:

superfluous to the SERVICES and whose continued assignment has not been satisfactory justified to COMPANY; or

incompetent or negligent in the performance of their duties or are guilty of misconduct as so determined by COMPANY; or

engaged in activities which are contrary or detrimental to the interests of COMPANY" (the Tribunal's emphasis); or

not confirming with relevant procedures as required by COMPANY or persists in any conduct likely to be prejudicial to safety, health or the environment".

11. There was also a contract between PFM and the respondents whereby the respondents provided PFM with personnel to enable them to fulfil their contractual obligations to companies such as Kerr McGee. PFM and the respondents are in the same group of companies. The reason for structuring matters so that the respondents were, on the face of it, the claimants' employers rather than PFM was that the respondents' offshore status gave rise to financial benefits, particularly a saving in national insurance contributions. Clause 3.1 of the contract between the respondents and PFM was in the following terms.

""Service Provider shall select, recruit and employ suitably qualified personnel and shall address all matters pertaining to discipline, labour relations, welfare in compliance with all relevant laws and convention for all personnel so provided. Service Provider recognises Company right to request replacement of any personnel provided by Service Provider"" The Tribunal's emphasis).

12. The respondents were unaware of the terms of the contract between Kerr McGee and PFM. In particular, they were unaware of the difference between clause 3.1 of their contract with PFM and clause 7.11 of Kerr McGee's contract with PFM.
13. On 2 February 2004, Kerr McGee wrote to PFM's Director of Operations, Mr Mallan, giving notice that they required PFM to remove certain personnel, including the claimants, from their installations. On 4 February 2004, PFM wrote to the respondents requiring the removal of those personnel. Mr Mallan also wrote that day to Kerr McGee asking for reasons for their removal, what issues they had with the personnel listed and whether they would consider further discussions or a review of their decision. Kerr McGee replied giving no details but simply stating that clause 7.11(iii) of their agreement was relevant. The respondents did not revert to Kerr McGee in writing. The request to them for details was repeated by Mr Mallan verbally at some subsequent meetings but was never responded to.
14. The respondents determined on a 30 day consultation period and the claimants were invited to attend a consultation meeting, which took place on 10^th February 2004. The letter inviting them to do so was dated 5^th February and included a reminder that they were entitled 'to be accompanied at this meeting by a work colleague or appropriate trade union representative'.
15. That statement was made in the context of the only union recognised by the respondents being Amicus. The claimants were not members of Amicus. They were members of another union, OILC. The minute of the meeting of 10^th February 2005 contained in document 4/7 opens by recording that the claimant Mr O'Donnell began by passing over a document from his trade union in response to which he was told that the respondents had already received it and if he had wanted to bring a trade union representative with him to the meeting, then the representative would have required to be from Amicus. The claimants were not, accordingly, represented at the consultation meeting by a trade union representative nor were they accompanied by a work colleague. Discussion at the meeting focussed on looking at ways in which the claimants might be redeployed. It is apparent from the minute that the respondents did not know why Kerr McGee had required that the claimants be removed.
16. The respondents extended the consultation period but eventually determined on and intimated to the claimants that they were dismissed, at meetings which took place on 29 March 2004 and at which, again, they were not allowed to have their own union representative in attendance. The respondents wrote confirming the dismissals in letters of 5 and 22 April 2004. Thereafter, having taken advice from their union representative, Mr Molloy, the claimants wrote intimating that they wished to invoke the respondents' grievance procedure. The respondents replied indicating that they did not consider that procedure appropriate but that they would treat the letters as appeals and that they would arrange for a hearing to take place as soon as possible. The reply letter indicated that the claimants could be accompanied at the appeal hearing by a work colleague or appropriate trade union representative and, as regards the latter, the details of the name and contact details of the relevant Amicus representative were given since, as we have already noted, Amicus were the only union recognised by the respondents.
17. In the foregoing circumstances the claimants decided that, since they would not be allowed to have Mr Molloy accompany them at the hearing, they would not proceed with the appeals. The respondents' general manager gave evidence that, had the appeals gone ahead, he would have gone back to Kerr McGee and made further representations on behalf of the claimants and Mr Molloy said that had he been allowed to attend the hearings, he would have been able to be more proactive regarding the matter of redeployment. That would have been in circumstances where there was no question of redundancies. Rather, numbers of employees on the installations increased after the claimants were removed and PFM had advertised for replacement employees during the consultation period.

The Tribunal's Findings

18. The tribunal made the following findings which are significant for the purposes of the present appeal:

"30. In all the circumstances, and having regard to, the claimants' lengths of service and excellent work records, the clear injustice being caused to them; the fact that POM was aware of the injustice; the fact that POM was aware that Mr Molloy was the claimants' chosen Trade Union representative and that he had been advising them throughout; the fact that there was no obvious reason why Mr Molloy should not be allowed to accompany them; the difficulty which the claimants would have arranging for a work colleague to accompany them at the Appeal Hearing; and the fact that they would not be entitled to representation at the Appeal Hearing by a Union of which they were not members, not to mention the obligations on POM in terms of Section 10 of the 1999 Act, we arrived at the view that POM's refusal to allow Mr Molloy to accompany the claimants at the Appeal Hearing, and indeed at the meetings when the claimants were advised that they were to be dismissed, were not the actings of a reasonable employer and rendered their dismissals procedurally unfair."

19. At paragraph 33, they refer to the procedural unfairness in the dismissals relating to the respondents' refusal to allow Mr Molloy to accompany the claimants to the proposed appeal hearings against a background of their 'understandable and reasonable refusal to attend the Appeal Hearings; and also the failure by (the respondents) to allow the claimants' chosen representative to accompany them to the meetings when the claimants were advised that they were to be dismissed.'(see: paragraph 33 of the tribunal's reasons).
20. The tribunal went on to consider the question of remedy on the basis that they regarded the nature of the unfairness in the dismissals as being procedural. They found that it was highly probable that the claimants would still have been dismissed and indicated that any award of compensation would, accordingly, be reduced by 90%, relying on Polkey v AE DaytonServices Ltd [1987] IRLR 503 and Fisher v California Cake & Cookie Ltd [1997] IRLR 212.
21. As regards the claimants' contention that there had been a breach of s.146(1)( c), a provision which deals with action by an action related to union membership falling short of dismissal, the tribunal found that although the claimants were subjected to a detriment, it was not directed against them as individuals and the claim under the subsection was, accordingly, rejected.

Respondents' Case

22. The respondents' argument on appeal can be shortly stated. It was submitted that the tribunal were not entitled to take account of the failures in procedure, namely the exclusion of the claimants' chosen trade union representative from the appeal hearings, because they postdated the date of their dismissal. On the evidence, the claimants had not articulated their desire to have an OILC representative present prior to then. It only arose in the context of the appeals procedure and was, accordingly, irrelevant: Devis (W) & Sons Ltd v Atkins [1977] AC 931. Whilst the tribunal were correct to take account of Dobie v Burns International Security [1984] ICR 812, they had applied its principles over too wide a period of time. Further, even if the right to support from an OILC representative was an issue prior to dismissal, it was not possible to tell, on the tribunal's findings what difference the allowance of representation would that have made and there would, accordingly, require to be a remit.
23. Mr Truscott also submitted that the issue raised by the claimants regarding the rejection of the claim under s.146 of TULRA could not be disposed of without a remit.

The Claimants' Case

24. On behalf of the claimants it was submitted that the tribunal erred in finding that the unfairness of the claimants' dismissal was purely procedural. Rather, it went to matters of substance. There was a real concern about the readiness to talk in terms of the power of platform operators. There was substantial injustice in the present case. The claimants had worked offshore for the majority of their adult lives, and for Petrofac for a substantial period. One of the claimants, Mr O'Donnell, had carried out work for Kerr McGee via various contractors, for over 25 years. Two of the claimants were at home, on shore, when they were advised of Kerr McGee's decision and were not even allowed back on to the platform to collect their personal belongings. In the case of the claimant who was offshore at the time, his replacement was being flown on the helicopter which was sent to take him off the installation in a hasty removal. No reasons were ever given by Kerr McGee for their decision. The claimants were never told what the problem was. In the circumstances , the tribunal should have been stringent and loathe to find that the employer respondents acted reasonably where they would not, had the men actively worked directly for them, have had good grounds for dismissal.
25. Miss McCrossan referred to Grootcon ( UK) Ltd v Keld [1984] IRLR 302 and Dobie v Burns International Security Services The present case could be distinguished from the ultimatum situation considered in Grootcon since there was no ultimatum here. As regards Burns, it was authority for the proposition that the tribunal required, when considering whether a dismissal was fair or not, to take account of any injustice to the employee. That was a substantial matter, nor a procedural one. The tribunal here had at several points in their reasons stated that the claimants had suffered an injustice and in the light of that, their finding of unfairness should not have been characterised as solely procedural.
26. Further, the tribunal had erred in taking into account certain assumptions which had no basis in the evidence: that Kerr McGee had the power to dictate to PFM, that their requirement was legitimate, that the respondents were in a position to take the view that the requirement was legitimately made, that the respondents and PFM were necessarily in a weaker bargaining position than Kerr McGee. The tribunal were, further, inconsistent in finding, when considering remedy, that there was more that the respondents and PFM could have done both in terms of reverting to Kerr McGee and in terms of redeployment efforts but failing to find that these were matters that were relevant to their consideration of fairness. Finally, the tribunal had failed to take account of evidence given by Mr Molloy regarding the ability to take the issues raised by the claimants' dismissals to organisations such as UKOOA and OCA. Whilst the Chairman's notes had been obtained, they were sketchy and it was not clear exactly what was said by Mr Molloy but there was enough to show that he had given evidence on this topic.
27. In the circumstances, any reasonable tribunal would, it was submitted, have reached the view that the dismissals were substantively unfair, which left no room for a Polkey deduction. We were invited, in these circumstances, to substitute a finding that the dismissals were substantively unfair and that the compensation payable to the claimants should not, accordingly, suffer any deduction.
28. Separately, the tribunal had not, in any event, made any findings to justify the 90% deduction.
29. Regarding the claimants' case under reference to s.146 of TULRA, whilst there was, she said, sufficient in the tribunal's reasons to enable her to attack their finding that the claimants were not subjected to detriment as individuals, Miss McCrossan realised that that would not dispose of the issue because they had made no findings as the purpose of the detriment suffered, a pre-requisite to a finding of breach of the subsection. There would require to be a remit.

Conclusions

Unfair Dismissal

30. The tribunal found that the claimants' dismissal was for some substantial reason justifying dismissal. That does not seem in fact to have been a matter of dispute between parties. The issue was whether, that being so, the dismissals were fair. The tribunal appreciated that that was the question that they had to answer, thus avoiding the 'elephant trap' referred to by the Master of the Rolls in Dobie Although this was a case where the cause of the dismissals was a requirement made by a customer, they, correctly, avoided treating that fact of itself as rendering the dismissals fair. They confined themselves, though, to a finding that the dismissals were procedurally unfair. The procedural failures in the case related to refusals to allow the claimants to be accompanied by their trade union representative because they were not members of Amicus. They were members of a different union not recognised by the respondents.
31. We note, contrary to what was submitted by Mr Truscott, that the tribunal found that those procedural failures consisted not only in refusing the claimants union representation for the purposes of the appeal hearings that the respondents had fixed but also, as stated in the part of paragraph 33 of their reasons to which we have already referred, in failing to allow their chosen representative to accompany them to the meetings when they were advised that they were to be dismissed. Further, even without that finding, it can, we consider, be inferred from the minute of the meeting of 10 February 2004 that was relied on by Mr Truscott, that there was such a failure. The respondents' argument is, accordingly, without foundation and we reject it. We would, however, add that even if the procedural failures had been confined to the period after 29^th March when the dismissals were intimated, we would not have agreed that the tribunal erred in taking account of them in judging whether or not the dismissals were fair. It cannot be right that an employer is excused unfairness in the way in which an appeals procedure is made available simply because the initial dismissal is not tainted with procedural irregularity. We do not read anything said in the case of Devis as leading to that conclusion. Devis dealt with a different point, namely the exclusion from consideration of information which might justify a dismissal if it is information that only comes to light after a dismissal has taken place, namely information which the employer did not have at the time of dismissal. If we had had to do so, we would have had no difficulty in regarding the respondents' handling of the appeals procedure as a part of the dismissals that required to be considered in relation to the question of overall fairness.
32. Turning to the claimants' case, we are readily persuaded that the tribunal have fallen into error. Their characterisation of the unfairness of the dismissals as purely procedural is contradicted by their own findings that the factors indicative of unfairness included the claimants' lengths of service, the claimants' excellent work records, the 'clear' and 'grave' injustice that was being caused to the claimants and the fact that the respondents were aware of that injustice. These are not procedural matters. Further, their findings in the remedy section of their reasons that more could have been done to try and persuade Kerr McGee to change its mind and to try and effect redeployment that avoided dismissal appear to us, properly understood, to be matters which fell to be considered not just when looking at remedy but also when considering the fundamental question of the fairness of the dismissals. Again, these are not simply procedural matters but go, we agree, to the substance of the case.
33. Further, we find that the tribunal have taken account of matters which had no basis in the findings in fact made by them on the evidence before them. At paragraph 26 of their reasons they comment:

" …we were mindful of the very competitive nature of the industry in which Petrofac operates and we did have some sympathy for PFM as regards its bargaining position when it came to contracting with Kerr McGee, no doubt a valued customer which is in a position to wield considerable influence over it."

and at paragraph 34, they comment further :

"POM was faced with a stubborn, but nevertheless powerful client making a request which was being legitimately made in the contractual context."

34. Yet there is no indication of their having heard any evidence about the nature of the industry. Their view of PFM as having lesser bargaining power would seem to be in conflict with their findings regarding the size of the Petrofac business and regarding the fact that Petrofac had themselves become oil installation operators. Their comment about Kerr McGee being a valuable customer is, in the terms in which it is made, speculation or assumption on their part. The claimants were right, it seems, to draw attention to the fact that this was not a case where the customer had, on the evidence, laid down any ultimatum such as was referred to in the cases of Grootcon and Scott Packaging & Warehousing Ltd v Paterson [1978] IRLR 166.
35. Further, we consider that the assessment of the requirement made by Kerr McGee having been 'legitimately' made is one which was not open to the tribunal. The terms of clause 7.11 were not such as to confer on Kerr McGee an absolute right to require the removal of personnel provided by PFM. The contractual right to do so only arose in the presence of one of the specific circumstances set out in the clause, all of which related to the performance or conduct of the individual concerned. At no time did Kerr McGee indicate that any of those circumstances applied in the case of any of the claimants or in what way. Simply indicating that clause 7.11 applied did not, on any view, amount even to an attempt to provide the appropriate details. The tribunal were wrong to suggest that the requirement was legitimately made and it seems to us likely that that error may well have coloured their whole approach to the claimants' claims.
36. The question that then arises is whether we can accede to the claimants' motion or whether the matter requires to be remitted. It might seem obvious that since we are persuaded that, on the findings made, the tribunal should not have restrictively characterised the unfairness of the dismissals as being purely procedural, we ought to proceed now to characterise them as substantive. That would not, however, necessarily dispose of the issue of whether or not there should be a deduction from compensation. Whilst the possibility of deduction most commonly arises in cases where an employer has failed to comply with proper procedures in his dealings with the employee at and around the time of dismissal, we do not rule out the possibility of it arising in a case where the unfairness of a dismissal arises in whole or in part from some other failure by the employer to act as a reasonable employer would have acted in the circumstances. This matter was considered in the case of King & Ors v Eaton Ltd [1998] IRLR 686 where, at paragraph 19, Lord Prosser said:

"If there has been a 'merely' procedural lapse or omission, it may be relatively straightforward to envisage what the course of events would have been if procedures had stayed on track, rather than briefly leaving the track in this way. If, on the other hand, what went wrong was more fundamental, or 'substantive', and seems to have gone to the ' heart of the matter', it may well be difficult to envisage what track one would be on, in the hypothetical situation of the unfairness not having occurred. It seems to us the matter will be one of impression and judgment, so that a tribunal will have to decide whether the unfair departure from what should have happened was of a kind which makes it possible to say, with more or less confidence, that the failure made no difference, or whether the failure was such that one simply cannot sensibly reconstruct the world as it might have been."

37. We consider that, in the circumstances, whilst it is clear that the dismissals were not simply procedurally unfair, it would be premature for us to try and reach a view as to whether or not there should be any deduction from compensation.
38. Further, if we were of the view that some deduction was justified, we would next have to ask whether the tribunal were correct in fixing it, as they did, at 90%. We cannot, however, find any basis or justification for that or, indeed, any particular proportion in the tribunal's reasons. It seems, on the face of it, to have been picked out of the blue influenced, possibly, by the tribunal's erroneous view that Kerr McGee were, contractually, in a position of strength. In these circumstances, we consider that we have no alternative but to remit the issue of the nature and extent to which the unfairness of the dismissals went beyond matters of procedure so as to determine whether or not the compensation to which the claimants are entitled should be reduced in accordance with the principle laid down in Polkey v A E Dayton Services Ltd and if so, to what extent.
39. The issue of whether or not the respondents were in breach of s.146(1) of TULRA and, if so, what remedy should be granted also falls to be remitted, given the concessions made by both claimants and respondents. We agree that the tribunal have, unfortunately, failed to address an essential factor, namely that of whether or not the detriment identified by them was imposed for one of the purposes prohibited by the subsection. Thus, even if the claimants are correct in their submission that the tribunal were wrong to regard the detriment as having been directed towards them as individuals, that would not be determinative of the issue.
40. We further conclude that the issues we have identified should be remitted to a freshly constituted tribunal. Indeed, parties were agreed that that course should be followed in the event that we were persuaded that there should be a remit. The questions that arise in this case are liable to be of significance to others in the industry and the nature and extent of the tribunal's failures are, we feel, such as to make it appropriate that the matters we have identified be considered completely anew.