Dunnachie (Respondent) v. Kingston-upon-Hull City Council (Appellants)
22. For all these reasons I would hold that the plain meaning of the word loss in section 123(1) excludes non-economic loss.
23. On this hypothesis I must now turn to the different ground of decision of Sedley LJ which counsel for the employee urged on the House. Counsel summarised the point as follows: The governing principle is expressed in the requirement in section 123(1) of the 1996 Act to award "such amount as the tribunal considers just and equitable in all the circumstances." In exercising its discretion, the EAT is to "have regard to" the "loss" sustained by the complainant which is attributable to the unfair dismissal, but this is not the only consideration which bears upon its determination of the compensatory award. The word loss does not limit what may be awarded under the controlling principle.
24. Sedley LJ concluded that the construction in Norton Tool "leaves the governing concept - compensation which is just and equitable - without a role": para 30. I would not accept this proposition. It will be recalled that in Norton Tool Sir John Donaldson explained that the claims with which tribunals are concerned are more often than not presented in person and informally, and that it is therefore not to be expected that precise and detailed proof of every item of loss will be presented. The phrase "just and equitable" gives the tribunal a degree of flexibility having regard to the informality of the procedures, and the fact that the maximum award is capped.
25. Sedley LJ relied on the decision of the House in W Devis & Sons v Atkins  IRLR 314. He held that Devis established that resultant loss is not the only element to which regard is to be had. The leading opinion in Devis was given by Viscount Dilhorne. He stated that (at 955G):
This reveals a decision to the effect that it is open to a tribunal to consider whether it is just and equitable in all the circumstances for the complainant to be awarded all or any of the loss attributable to the dismissal. It was not a ruling that a tribunal is free to award additional sums not amounting to loss.
26. In my view section 123(1) must be construed as a composite formula. The interpretation preferred by Sedley LJ splits up the formula in a way which, with great respect, is more than a little contrived. It unjustifiably relegates the criterion of loss to a subordinate role. Given the hypothesis that the legislature expressly provided for the recovery of economic loss, it fails to explain why the legislature did not also expressly provide for compensation for injury to feelings. It also fails to take full account of the context. For example, on this expansive interpretation there would as already mentioned be nothing on the face of the statute to exclude the award (subject to the cap which is now standing at £55,000) of aggravated or exemplary damages. This could not have been intended. The better view is that the provision was not intended, in the words of Brooke LJ, to provide for "palm tree" justice.
27. In his already cited note Professor Collins argued that Norton Tool reversed the grammar of the statute. He said that Norton Tool "elevated the sub-principle of causation of loss to the main principle, and then relegated the general standard of just and equitable compensation to the status of a minor limitation on the application of the principles of causation of economic loss": at 202. For substantially the same reasons as I have already given I find this argument unpersuasive.
28. I would hold that section 123(1) does not allow for the recovery of non-pecuniary loss.
29. For these reasons, as well as the additional reason given by my noble and learned friend Lord Rodger of Earlsferry, I would allow the appeal and restore the decision of the EAT.LORD HOFFMANN
30. I have had the advantage of reading in draft the speech of my noble and learned friend Lord Steyn. For the reasons he gives, with which I agree, I would allow this appeal.
LORD RODGER OF EARLSFERRY
31. I have had the privilege of studying the speech of my noble and learned friend, Lord Steyn, in draft. I agree with it and for the reasons he gives I too would allow the appeal.
32. The issue turns on the construction of section 123 of the Employment Rights Act 1996 which provides for the making of a compensatory award for unfair dismissal. Section 112 envisages that an award of compensation is to be made if no order for reinstatement or re-engagement is made under section 113. The implication is that the award of compensation is to be regarded broadly as a substitute for these other possible orders. Where an order for reinstatement is made, under section 114(2)(a) the tribunal must specify any amount payable by the employer in respect of any benefit (including arrears of pay) which the complainant might reasonably be expected to have had, but for the dismissal, for the period between the date of termination of employment and the date of reinstatement. Significantly, there is no provision for the tribunal to award compensation for any non-pecuniary loss that the employee may have suffered as a result of the unfair dismissal. The same applies in the case of an order for re-engagement under section 115(2)(d).
33. If, then, an employee for whom an order of reinstatement or re-engagement is made receives compensation for pecuniary losses but not for non-pecuniary losses, it would be surprising if an employee for whom a compensation order is made were entitled to recover compensation for non-pecuniary losses. Such a construction would introduce an inconsistency into the scheme of the legislation. The construction favoured by Lord Steyn avoids creating such an anomaly and is to be preferred for that reason also.
LORD BROWN OF EATON-UNDER-HEYWOOD