Appeal No.	 EAT/385/00

EMPLOYMENT APPEAL TRIBUNAL
SITTING AT THE ROYAL COURTS OF JUSTICE
STRAND, LONDON, WC2A 2LL

	At the Tribunal
	On 10 September 2001
Judgment delivered on 21 November 2001

Before
MR RECORDER UNDERHILL QC
PROFESSOR P D WICKENS OBE
MR G H WRIGHT MBE

TESCO STORES LIMITED	APPELLANT

MR B OTHMAN-KHALID	RESPONDENT

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR RICHARD POWELL
(of Counsel)
Instructed By:
Messrs Dibb Lupton Allsop
Solicitors
Victoria Square House
Victoria Square
Birmingham
B2 4DL	
For the Respondent	MR PETER LOWNDS
(of Counsel)
Instructed By:
Messrs Saul Marine & Co
Solicitors
Trafalgar House
Grenville Place
Mill Hill
London NW7 3SA	

MR RECORDER UNDERHILL QC:
1.  This is an appeal against the decision of an Employment Tribunal at London North, sent to the parties on 12th October 1999, holding that the Respondent had been unfairly dismissed by the Appellants and awarding him compensation of £7,560.  The essential facts, as found by the Tribunal, can be summarised as follows: 
(1)	The Respondent was employed on the till at the Appellants’ petrol station at Brent Park in Neasden.  He worked a night shift without supervision.  He had been employed since May 1994.  He had received a final written warning in 1996 and a further first written warning in 1997:  these were however “spent” under the Appellants’ disciplinary procedure. 
(2)	On the morning of 3rd January 1999 a customer who believed that he might have left his mobile phone at the petrol station telephoned Mr Cushing, the General Manager.  Mr Cushing arranged for his Security Manager Mr Paul Smith, to view the security video.  The video apparently showed an unknown individual talking to the Respondent at 5.27am.  The customer was seen leaving his mobile phone on the counter at 5.32 am, and the individual who had previously been talking to the Respondent returned and took the phone.  Mr Smith spoke to the Respondent and the phone was returned within an hour. 
(3)	Mr Smith was asked by Mr Cushing to look at the video tapes covering the surrounding period in more detail to see if there was anything else of which the Appellants should be aware.  The Tribunal held that the Appellants reasonably believed that the video showed a number of other acts of misconduct:  we put it that way because the Tribunal itself (taking what was arguably an over-strict view of its role) refused to view the video.  The video apparently showed the Respondent serving himself, which was contrary to the Appellants’ rules;  playing video games when he should have been working;  and -most significantly - taking for himself a packet of ten cigarettes out of a bag of damaged stock which was due to be returned to the manufacturer.  (The contemporary documents refer to some additional matters but these are not referred to in the Reasons and we have disregarded them.)  The cigarettes are described in the Reasons as worth about £1.50.  It is unclear how this figure was arrived at:  there are no findings about the financial arrangements under which damaged stock was returned, but it seems clear that the cigarettes could not simply be treated as worthless or abandoned. 

(4)	The Respondent attended a disciplinary hearing before Mr Cushing on 15th January 1999.  Both the incident involving the mobile phone and the other matters subsequently discovered were discussed with him.  As regards the cigarettes, the Respondent told Mr Cushing that a customer had asked for a packet of ten cigarettes and that as there were none available he sold him the damaged pack.  This explanation, the Appellants found, was not borne out either by the video or by the “store scanner” (which we understand to be a reference to the till records).  The Tribunal, apparently picking up a phrase from Mr. Cushing’s witness statement, described the Respondent’s answers on this issue as “unsatisfactory”:  this is something of a euphemism, since if the explanation was untrue it can only have been a deliberate fiction. 

(5)	Following the disciplinary hearing the Appellant was dismissed. The formal record of the dismissal describes the reason as “misappropriation of company property, as shown in evidence on video tape and receipt till roles”.  (The phrase “misappropriation of company property” comes from the Appellants’ disciplinary procedure, where “misappropriation or theft of the Company’s property” is given as an example of gross misconduct justifying summary dismissal: the Tribunal used the terms “misappropriation” and “theft” interchangeably and we do not think that in the circumstances of this case there is any significant difference between them.)  Consistently with that record, the Tribunal found as a fact that the other incidents investigated - and specifically the mobile phone incident - did not form part of the Appellants’ reasons for dismissing the Respondent:  we return to this point at paragraph 11 below. 

(6)	There was an appeal hearing before the Regional Manager on 3rd February 1999.  The Tribunal found that the Respondent “gave another unsatisfactory account concerning the damaged box of ten cigarettes”.  The decision to uphold the dismissal was upheld, as it was at a final stage three appeal. 

(7)	The Tribunal accepted the Appellants’ evidence that at all stages the Respondent’s previous written warnings were disregarded because they were spent. 

2.  On the basis of those findings, the Appellants had plainly established an admissible reason for dismissal within the terms of s. 98 (2) of the Employment Rights Act 1996; and the Tribunal so held.  However it held that dismissal for that reason was unfair.  It set out its reasons for that conclusion in paragraphs 13-14 of the Extended Reasons as follows: 

“13. Conclusion. The Tribunal was satisfied that the Respondent had carried out a reasonable investigation into the alleged misappropriation of the 10 cigarettes, worth about £1.50, and accepted that the belief was reasonable.  However the Tribunal found the dismissal to be unfair, the Tribunal was not satisfied that, in all the circumstances, the Respondent was actually justified in dismissing the Applicant for that reason.  Quite simply it was outside the band of reasonable responses for this particular Respondent. 
14.  The Tribunal does not suggest, for one moment, that theft from ones employer is not serious and it will almost invariably justify summary dismissal.  This does not mean, however, that all dismissals for theft are necessarily fair.  In this case the Tribunal did not accept that dismissal for theft of 10 cigarettes in a damaged box was a reasonable response from an employer of the size and administrative resources of this Respondent.  The Tribunal was of the opinion that insufficient account had been taken of the Applicant’s length of service.  Furthermore, far too much regard had been given to the relatively irrelevant surrounding circumstances of the theft of the 10 cigarettes, such as serving himself and playing computer games in the store.  Although in his statement Mr Cushing stated that he dismissed the Applicant for his, ‘...unsatisfactory responses and, specifically, the taking of the cigarettes and the mobile phone incident’, this was not the reality of this case.  It is quite clear from the ‘Record of Suspension’ ..., the ‘Record of Summary Dismissal’ ...and from the Respondent’s Notice of Appearance, that the real reason for the Applicant’s dismissal was the theft of the damaged packet of 10 cigarettes.  Mr Cushing’s evidence to the Tribunal made it clear that the dismissal was for the misappropriation of the cigarettes and not for anything else, he said in evidence, ‘The mobile phone incident played no part in my dismissing Bobby (the Applicant)’. 
14A  An Applicant is entitled to know why he is being dismissed.  In this case the Applicant was told, when he was dismissed and following his two appeals, that it was due to the misappropriation of the cigarettes.  Before the Tribunal the Respondent’s representative has attempted to amplify the mobile phone incident which, in the Tribunal’s opinion, had not been investigated as thoroughly as the damaged box of 10 cigarettes, and was not the reason for the dismissal.”

(In the Reasons as signed there are in fact two paragraphs numbered 14:  to avoid confusion, we have marked the second one 14A.)  The Tribunal went on to consider remedy.  It rejected a submission from the Appellant that this was a case in which the Respondent should receive no compensation at all and/or that there should be a deduction for “contributory conduct” of 100%:  it made a reduction of 10%. 

3.  The Appellant appeals against both the decision that the decision was unfair and - as a fallback – against the decision to reduce the award by no more than 10%. 

4.  A number of points are taken in the Grounds of Appeal.  It is convenient to start with ground 5, which is that the Tribunal’s decision that the theft of the cigarettes did not justify dismissal was perverse.  The Appellants submit that dismissal for such conduct, however small the value of the items, must inevitably be within the range of reasonable responses for an employer in their position.  They refer to the observation of Bristow J in Moore v C&A Modes [1981] IRLR 71 (a case where an employee had been dismissed for shoplifting in another store) that: 

“It seems to us to be quite unreal to expect any employer in the retail trade not to dismiss someone who has, for 20 years, been a trusted employee, who is reasonably believed to have been stealing just down the road although not from the employers themselves.”

That observation could be said to apply a fortiori to an employee who steals at his own place of work.  Alternatively, the Appellants submit that the Tribunal substituted its own view for the view of the employer:  that is substantially the same point.  Likewise, ground 3 - which recites various factual findings which it is said the Tribunal failed to consider - is essentially a contention that on the facts found the only possible decision was that the dismissal was fair. 

5.  In our judgment those grounds of appeal are well-founded.  It is the view of all three members of this Tribunal that dismissal of the Respondent was unquestionably within the range of reasonable options open to the Appellants, even approaching the matter on the basis that the only matter to be considered is the taking of the cigarettes.  It is true that the value of the cigarettes was extremely small and that they were not part of current stock because they were in the course of being returned to the manufacturer.  It may be that some employers might not have found it necessary to dismiss the Respondent.  But the question is not whether dismissal was inevitable but whether it was within the range of reasonable responses. We believe that the Tribunal was bound to hold that it was, essentially because of three features of the case. 

6.  First, however small the value of the cigarettes, the Respondent - on the basis of the Appellants’ investigation - took them dishonestly, as his attempts to invent an excuse showed.  While we do not take Bristow J’s observation in Moore v C&A Modes (above) as expressing any proposition of law, it seems to us plain common sense that an employer who has to leave an employee in sole charge of stock is entitled to take the view that any dishonest taking of goods is very serious. 

7.  Secondly, the Respondent lied to the Appellant more than once in the course of the disciplinary process.  He did not - as he might have - make a clean breast of it and say, for example, that he did not believe there was any harm in taking the box because he believed it was only going to be thrown away anyway.  It is clear from the Appellants’ evidence as recited in the Reasons that they regarded this as an important feature;  and we believe that they were fully entitled to do so.  On one reading of paragraph 14 of the Reasons the Tribunal took the view that it was not open to the Appellants to take into account these “unsatisfactory responses” on the part of the Respondent because the only reason for the dismissal was the theft itself.  If that was indeed its view, then it seems to us, with respect, plainly wrong;  and this self-misdirection may explain what is otherwise a surprising result.  Where an employee charged with substantive misconduct makes a dishonest attempt to exculpate himself, that is plainly one of the circumstances that fall to be considered in deciding whether it was reasonable for the Appellant to treat the misconduct as sufficiently serious to justify dismissal:  it does not have itself to be categorised as the, or indeed a, reason for the dismissal.  There may, depending on the circumstances, be a great difference between how it is reasonable to treat an employee who makes a full and frank confession and how it is reasonable to treat an employee who continues to deny the misconduct in question. 

8.  Thirdly, there were no significant mitigating personal circumstances.  The Tribunal appears to have thought that the Respondent’s length of service - about 4½ years - was an important mitigating circumstance:  we deal with this below. 

9.  In paragraph 14 of the Reasons the Tribunal started from the proposition - which we would endorse -that “theft from one’s employer .. will almost invariably justify summary dismissal”.  The question then is why it reached a different conclusion in this case.  It may have intended a distinction between “justifying” summary dismissal at common law and satisfying the “fairness” requirements of s. 98.  If so, the distinction is no doubt technically correct, though we doubt if it is a difference of substance in this case, where the only issue (having regard to the Tribunal’s other findings) was whether dismissal was a reasonable sanction.  One factor seems to have been the small value of the cigarettes:  we see the force of that consideration, but for the reasons given above we do not regard it as sufficient in this case to take dismissal out of the range of reasonable responses.  It is not clear whether the reference to the Appellants’ “size and administrative resources” means that the Tribunal thought that that factor was relevant to the reasonableness of the sanction (i.e. as opposed to the reasonableness of the investigation):  if so, we cannot agree.  Theft from a big employer is in principle no less serious than theft from a small employer.  The Tribunal then gives two particular reasons for its decision that dismissal was not, in the circumstances of this case, within the range of reasonable options.  As to those:- 

10.  First, it stated that “insufficient account had been taken of the Applicant’s length of service”.  We accept that four years may be quite a long period of service for the kind of work the Respondent was doing;  but we are bound to say that we cannot regard it as very powerful mitigation.  (There is a further point that length of service is generally only regarded as affording strong mitigation where the service has been, as it is often put, “faithful”.  The Respondent here had a poor disciplinary record.  Our provisional view is that even “spent” disciplinary offences can be taken into account in this context, even if they cannot be relied on as a primary justification for the dismissal;  but we did not hear argument on the point, which may not be straightforward.) 

11.  Secondly, the Tribunal held that “far too much regard” had been given to the “relatively irrelevant” other incidents.  It seems to us that, as submitted in the Appellants’ Ground 4, there is some confusion here (to which the Appellants may have contributed by the way in which they conducted the case).  It appears that the disciplinary hearing, and subsequent appeals, covered the whole range of matters revealed by the video.  However the contemporary record, as we have noted, gave “misappropriation of company property” - presumably, the theft of the cigarettes - as the only reason for the dismissal.  Mr Cushing in his witness statement apparently gave “the mobile phone incident” as a further reason.  However, in his oral evidence before the Tribunal he appears to have confirmed unequivocally that the Respondent was dismissed only for the misappropriation of the cigarettes:  the Tribunal records him as saying “the mobile phone incident played no part in my dismissing [the Respondent]”. 

12.  If the Tribunal accepted that evidence -and it appears both from paragraph 14 and from paragraph 14A that it did so - then it is hard to see how the Appellants can be criticised for giving too much regard to the other episodes of misconduct revealed by the video.  The real criticism is of their conduct in the proceedings -i.e. for attempting to extend after the event the matters on which they relied;  and indeed the Tribunal does appear to be making some such criticism in paragraph 14A of the Reasons.  But even if that criticism were justified it would have no impact on the question of the fairness of the dismissal. 

13.  It may be, however, that the Tribunal did in fact believe that the Appellants had had regard not simply to the theft of the cigarettes but to the whole range of misconduct apparently shown by the video;  and believed that it was unfair of them to do so, at least in relation to the mobile phone incident, because it thought that the Respondent’s suspicious conduct had not been properly investigated.  That appears to be the criticism made in paragraph 14A of the Reasons.  But even if that were so, it would not be in any way decisive on the question of fairness.  The question under s. 98 (4) is whether the employer’s action in dismissing the employee was, objectively, reasonable.  Thus if, to take the facts here, it was reasonable to dismiss the Respondent for the theft of the cigarettes it would not matter that the Appellants might, subjectively, have taken into account not only the relevant circumstances but another circumstance which the Tribunal believed to be irrelevant. 

14.  In short, we do not believe that the Tribunal gives any convincing reason for its decision that this was not a case in which the “almost invariably” justified sanction of dismissal could not reasonably have been applied.  For the reasons given above, we believe that the only finding open to the Tribunal on the facts as it found them was that dismissal was within the range of reasonable options.  We should make it plain that we are not deciding as a matter of law that dismissal will always be a fair sanction in any case where an employee working in a retail outlet is found to have dishonestly taken the employer’s property.  As a matter of common sense, such a conclusion would usually be inevitable; but each case turns on its own circumstances.  All that we are deciding is that in the circumstances of the present case, as summarised at paragraphs 6-8 above, dismissal was unquestionably within the range of reasonable options. 

15.  We have also noted that in paragraph 13 of the Reasons the Tribunal expresses its conclusion as being that it “was not satisfied that” dismissal was a reasonable sanction.  That way of putting it tends to suggest that the Tribunal wrongly believed that the burden of proof of reasonableness lay on the employer (a belief which would be consistent with its decision to stop the case at “half-time”:  see below).  But we would not wish to build too much on what may be a mere verbal inaccuracy.  We prefer to decide the case on the issue of substance. 

16.  We are of course aware that it is only in a plain case that this Tribunal should overturn the decision of an Employment Tribunal on a question of this kind, particularly where the Tribunal has, at least on the face of the decision, directed itself correctly in law - as it did here:  see paragraph 9 of the Reasons.  But we do so with less reluctance in this case because the conduct and reasoning of the Tribunal is open to criticism in other respects.  We have already drawn attention to some confusions in its reasoning;  and other criticisms are made in the remaining Grounds of Appeal.  We consider those remaining grounds briefly in case this matter goes further. 

17.  Grounds 1 and 2 of the Grounds of Appeal concern the way in which the Tribunal conducted the hearing.  In accordance with the usual practice, the respondents (i.e. the Appellants before us) opened the case.  Lunch was taken at the conclusion of their evidence.  It is common ground that when the Tribunal returned from lunch the Chairman (who in the course of the morning had already given strong indications that he believed that the dismissal was unfair) announced that there was no need to hear any further evidence or submissions since all three members of the Tribunal had decided that the dismissal was unfair on the basis that dismissal for the misconduct in question was outside the range of reasonable options.  Mr Broughton, the solicitor conducting the case for the Appellants, protested at that course:  in the course of his protest he was able to make some substantive submissions on the merits.  When he had finished, it appears that the Tribunal may have conferred briefly, though only by “going into a huddle” and without leaving the room;  and the Chairman then indicated that their decision remained unchanged and that they would proceed to deal with the issue of remedy.  The applicant then gave evidence, though it does not appear whether the scope of his evidence was limited to loss or he was also cross-examined on issues relevant to “contributory conduct”.  (This account is derived from the witness statements of Mr Broughton and of the Respondent’s solicitor Mr Marine, as amplified at the hearing of the appeal: there were some differences of emphasis but the broad picture was not in dispute.  The Chairman’s notes were not sought until it was too late to obtain them.)

18.  In our view that was not a proper course for the Tribunal to take.  As this Tribunal made clear in Hackney London Borough Council v. Usher [1997] ICR 705, it will only be in the most exceptional case that it would be right for a Tribunal in an unfair dismissal claim to reach a decision on the issue of reasonableness (where the burden of proof is neutral) without hearing the evidence of both parties:  see in particular Judge Peter Clark’s observation at p. 713 C-D.  This does not seem to us to have been such a case.  But in any event it can never be right for such a decision to be reached without the party going first being given an opportunity to make submissions:  cf. Peter Simper & Co. Ltd. v. Cooke [1984] ICR 6.  Whatever precisely Mr Broughton was able to say in the course of the submissions which he made after the Chairman had announced his decision, it cannot have been fair for him to be obliged to make those submissions to a Tribunal which had already unequivocally announced its decision.  It follows that, even if we had not upheld the appeal on the ground of perversity, this case would have had to be remitted to another Tribunal for a full rehearing. 

19.  Finally, Ground 6 of the Grounds of Appeal challenges the Tribunal’s decision on “contributory conduct”.  The entirety of the Tribunal’s reasoning on this issue appears in para. 15 of the Reasons as follows: 

“The Respondent submitted that the Applicant should not be compensated at all in these circumstances and that the contributory fault should be 100%.  The Respondent’s [sic] relies heavily on the other matters such as the mobile phone and computer games for which he was not dismissed.  The Tribunal disagreed and felt that the contribution was properly assessed, taking all the factors of this case into account, at 10%.”

That is, with respect to the Tribunal, a quite inadequate way of dealing with what was - in the light of its prior decision on unfair dismissal - the most important remaining issue in the case.  We fully accept that the assessment of what percentage reduction to make under ss. 122 (2) and 123 (6) of the 1996 Act is not generally susceptible to elaborate explanation;  but the Tribunal must at least indicate what factors it has taken into account in making that assessment.  There is no such explanation here.  If the Tribunal accepted that the Appellant had indeed dishonestly taken the cigarettes and given a dishonest explanation when investigated, a decision to reduce the award by only 10% could not be justified.  If it did not believe that he had done so it would have had to give reasons for so finding.  There is also an issue - referred to but not dealt with by the Tribunal - as to whether the Tribunal was entitled to take into account the other misconduct which it had excluded from its consideration on the liability issue.  In truth, the decision on this point seems to have been made in haste without any consideration of the evidential and other issues to which it gave rise.  We should have had to remit the case on this issue at least irrespective of the other issues in the appeal.