Appeal No.	 EAT/919/01

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 29 August 2002
Judgment delivered on 16 October 2002 

Before
HIS HONOUR JUDGE J R REID QC
MR D CHADWICK
MS J DRAKE

MR B FLATLEY	APPELLANT

THE SOCIETY OF MOTOR MANUFACTURERS 
AND TRADERS LTD	RESPONDENT

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR ANGUS PIPER
(of Counsel)
Instructed By:
Messrs Kidd Rapinet
Solicitors
Western House
14 Rickfords Hill
Aylesbury
Bucks HP20 2RX	
For the Respondent	MR JASON N GALBRAITH-MARTEN
(of Counsel)
Instructed By:
The Society of Motor Manufacturers and Traders Ltd 
Forbes House
Halkin Street
London
SW1X 7DS	

JUDGE J R REID QC:

Introduction
1.	By a decision promulgated on 11 June 2001 an Employment Tribunal held at London South dismissed Mr Flatley’s claim for unfair dismissal but held he was entitled to £4,740 for pay in lieu of notice.  Both Mr Flatley and his former employer SMMT, appealed against this decision.

The Facts
2.	SMMT’s organisation consists of some one hundred or so employees.  There is a small international section of some seven people where Mr Flatley and Mr Bailey worked.  That section was principally concerned with the promotion of the interests of the British Motor Trade in foreign countries.  Mr Flatley joined SMMT in June 1995 and was summarily dismissed almost exactly five years later on 21 June 2000.  The events at the centre of the case arose from three international seminars which Mr Flatley had been responsible for organising in New Delhi, Bangalore and Calcutta in January 2000.  Mr Bailey, the Head of the International section, was concerned at some of the expenses set out in the expenses schedule submitted by Mr Flatley at the beginning of February 2000.  There was a lengthy exchange of correspondence, faxes, discussions and in due course finally, formal meetings between Mr Flatley and Mr Bailey.  The purpose of those meetings and in due course the disciplinary hearings were for the Applicant to clarify, explain and justify a number of items on the expenses which he had initially claimed.  In broad terms, the Tribunal accepted Mr Bailey’s evidence about his initial concern, and ultimate serious doubts, about Mr Flatley’s explanations in respect of a number of the particular expenses set out in the various documents submitted (or for that matter omitted to be submitted) by the Applicant over the period February to June 2000. 

3.	The Tribunal found there was a considerable body of evidence which entitled SMMT, in particular Mr Bailey and then Mr MacGowan who conducted the appeal hearing, to reach the conclusion that Mr Flatley had been guilty of a very irresponsible, negligent and unhelpful approach to the whole exercise of the expenses which he had in fact incurred on the SMMT’s behalf and the documentation which he provided both initially and throughout the course of the inquiry to justify those expenses.  A number of the expenses claimed were not initially supported by any kind of documentation.  When challenged he in due course provided further documentation.  It was by no means clear, either at the time or indeed before the Tribunal, whether he had obtained some or all of that documentation himself or whether he had relied solely upon another party involved, a Mr P Brown, for the provision of that documentation.  In his own explanations the extent to which Mr Brown was involved was never clear.  Initially Mr Brown’s involvement was said to be very peripheral but as inquiries progressed his involvement allegedly became more and more substantial.

4.	The Tribunal found Mr Bailey and Mr MacGowan were entitled to reach the conclusion that Mr Flatley adopted a very dilatory and surprisingly offhand attitude which SMMT was entitled to view as a matter of considerable concern bearing in mind the responsibility for large budgets which Mr Flatley had and the general context of such financial issues for a body such as SMMT which is very much in the public eye and liable to scrutiny by the DTI and other government bodies.  The fax documents and explanations placed before Mr Bailey during the course of his investigations and meetings, in the Tribunal’s view fully justified him in coming to the conclusion as he did that Mr Flatley had behaved seriously irresponsibly in relation to the initial spending of the monies on SMMT’s behalf and in his subsequent behaviour and that that in turn justified a serious penalty.  When considering the issue of sanction, Mr Bailey and, in due course, Mr MacGowan at the appeal stage (which took the form more of a review than a re-hearing of the facts) took into account the fact that Mr Flatley regularly travelled abroad organising such trips and seminars.  Mr Bailey took into account that there had been some occasions when he had been obliged to point out to the Applicant problems and deficiencies in expense accounting.  He decided that the Applicant’s generally good record and performance on this particular issue did not help him as to penalty since it reinforced the conclusion that the Applicant must have been aware that he was behaving irresponsibly in a variety of ways

5.	SMMT’s disciplinary code contained the following provision at clause 18.4: 

“If action is to be taken after investigation, you will receive a first and final warning in the case of serious misconduct or be summarily dismissed for gross misconduct.  SMMT reserves the right to vary the procedure as it deems appropriate and there may be occasions when serious misconduct warrants dismissal without notice.”  

The Tribunal's conclusions
6.	Since there was a claim for wrongful dismissal as well as a claim for unfair dismissal it was necessary for the Tribunal to reach its conclusions about the evidence from two different standpoints.  When considering the case of unfair dismissal, it approached the evidence from the classic stand point of the guidelines in the leading decision of British Homes Stores v Burchell [1980] ICR 303 and the subsequent decisions flowing from it.  The Tribunal held “Putting the matter in very brief shorthand, it is a feature of that approach that (to put the matter very simplistically) it is not for the Tribunal to substitute its own view of the facts for that of the ‘reasonable employer’.”  On the other hand, there was also a claim for notice pay, a common law right to damages for breach of the contractual notice period.  That claim, the Tribunal said, “we approach on the usual approach in civil courts of reaching our own conclusions on the evidence”.

7.	The Tribunal found that the penalty of dismissal was within the range of reasonable responses for this particular employer and that the investigation and procedure adopted by SMMT was “reasonable” within the meaning of section 98 Employment Rights Act 1996.  It concluded that the dismissal was fair and that it 

“… had little difficulty in agreeing with the Respondent’s perception that the Applicant had clearly fallen well short of professional standards in his managing of the expenses for the particular trip in question and had aggravated that in his subsequent attempts to justify his position on the one hand and his failures to provide satisfactory explanations and/or documentation on the other.  Some of the documentation produced by the Applicant was very unimpressive consisting for example of an apparently ordinary piece of hotel note paper in respect of an international chain of hotels.  We entirely agreed with the decision to dismiss the Applicant.”

8.	The Tribunal then went on to consider to whether, even if the dismissal was not unfair, there was a breach of contract in that in the circumstances Mr Flatley should not have been dismissed summarily.  The Tribunal considered the facts overall, including an affidavit of Mr Brown which had not been obtained by Mr Flatley at the time of the disciplinary hearing.  It found that the contents were expressed in very general and vague terms and certainly did not assist Mr Flatley on any of the central specific details.  The Tribunal said at para 15:  “We entirely agreed with the decision to dismiss the Applicant”.  It then went on to consider whether the conduct justifying dismissal could properly be classified as gross misconduct (as opposed to serious misconduct). It said at para 16 of its reasons:

“We came to the conclusion that for misconduct of this kind in relation to expenses, to amount to gross misconduct for a person of the Applicant’s seniority and budget, the Respondents would have to show in effect that there had been deliberate deception or dishonesty.  Whilst we accept that there was a degree of evasiveness and unsatisfactory explanation and approach by the Applicant, we were not persuaded that the Respondents had gone sufficiently far in their evidence to establish the level of mens rea to warrant a finding of gross misconduct, and we therefore concluded that the Applicant was entitled to his due notice pay.”

Mr Flatley's case

9.	Submissions on behalf of Mr Flatley were as follows.  Having identified a permissible reason for dismissal (namely, conduct), the Tribunal had to apply a qualitative judgment to the employer’s actions to determine whether the Respondent acted reasonably or unreasonably in the circumstances in treating the permissible reason as a sufficient reason for dismissing the employee see:  s.98(4)(a) of the Employment Rights Act 1996.  This question had to be determined in accordance with equity and the substantial merits of the case (s.98(4)(b)).  At both the stage of assessing evidence as to the employee’s guilt and at the stage of determining the sanction the Tribunal must not substitute its own views for those of the employer but simply decide whether the employer acted reasonably or not, bearing in mind that in many cases there will be a range of reasonable responses open to an employer.

10.	The Tribunal failed to adopt a straightforward application of Section 98(4) of the Employment Rights Act 1996.  At para 16 of its decision the Tribunal found as a fact that the Appellant’s conduct in relation to expenses did not amount to gross misconduct.  Therefore the Respondent had failed to establish gross misconduct - the very reason it gave for dismissing the Appellant.  Because the Respondent’s reason for dismissal was that the Appellant had committed gross misconduct, the Respondent did not (as it should have done) consider any sanction short of dismissal.  The Tribunal was wrong in that, having found that the Appellant’s conduct did not amount to gross misconduct and therefore did not justify the sanction of summary dismissal, the Tribunal did not (as it should have done) then go on to consider whether or not it was reasonable for the Respondent to have considered and/or applied a sanction short of dismissal such as a written warning as contemplated by the Respondent’s own written disciplinary procedure.  In particular the Respondent and the Tribunal did not adequately consider:  (1) the Appellant’s good work record; (2) the Appellant’s good disciplinary record (ie, the lack of any previous disciplinary offences); (3) the nature of the offence which did not cause the Respondent to be compromised, financially or otherwise; (4) the absence (as found by the Tribunal) of any evidence of deliberate deception or dishonesty; (5) and the fact that the matters complained of related, in whole or in part, to capability (poor record keeping) rather than conduct.

11.	No findings of fact are made as to these matters. The Tribunal failed therefore to meet the minimum requirements for a reasoned decision in accordance with the principles in Meek v. City of Birmingham District Council [1987] 1RLR 250 and its decision cannot safely stand.  Mr Flatley could not say with the necessary degree of confidence why it is that he has lost.

12.	As to his right to payment in lieu of notice, if an employer dismisses an employee summarily in circumstances which do not entitle it to treat his actions as repudiatory (or gross misconduct), it is in breach of contract.  The dismissal is wrongful and the employee is entitled to claim damages for the breach.  In determining whether the summary dismissal was justified and therefore lawful, the question is whether the breach or act of misconduct complained of is such as to show the employee to have wilfully disregarded the essential conditions of the contract of service which amounts to a repudiation of the contract by him:  Laws v. London Chronicle (Indicator Newspapers) Ltd [1959] 1 WLR 698, CA.  For the reasons given by the Tribunal, it was entitled to conclude that Mr Flatley was wrongfully dismissed.

SMMT's case
13.	Counsel for SMMT submitted that the Tribunal did apply the correct tests.  It is clear from paragraph 7 of the extended reasons that the Tribunal correctly set out the claims and the different approach to be applied to each.  In relation to the unfair dismissal claim, the Tribunal expressly refer to British Home Stores v. Burchell [1980] ICR 303 and correctly noted that it was not for them to substitute their view for that of the reasonable employer (see Post Office v. Foley, Midland Bank v. Madden [2000] IRLR 288, CA).  Clearly the Tribunal properly applied the relevant principles:  in paragraph 8 of its reasons it referred to the “considerable body of evidence” which entitled the Respondent to reach the conclusion that the Appellant had been guilty of very irresponsible, negligent and unhelpful conduct.  In paragraph 12 the Tribunal refer to the question of sanction and in particular refer to consideration of the Appellant’s “general good record and performance”.  The Tribunal conclude that “the penalty of dismissal was ... within the range of reasonable responses”.  The Tribunal found that “the investigation and procedure adopted by the Respondents was ‘reasonable’ within the meaning of section 98 Employment Rights Act 1996” and concluded that the dismissal was fair.  The reasoning of the Tribunal disclosed no error of law and so Mr Flatley’s appeal ought to be dismissed.

14.		As to SMMT's appeal, counsel submitted that at common law the general rule is that where one party is guilty of a repudiatory breach of contract, then that entitles the other (without prejudice to his right to claim damages for the breach) either to affirm the contract, notwithstanding the breach, or to elect to treat himself as thereby discharged from any other performance of his own contractual obligations.  In particular although it is common to speak of termination of the contract in this context, strictly speaking what is meant is that the innocent party, or sometimes both parties, are excused from further performance.  In general the same principles apply in the case of the contract of employment: see London Transport Executive v Clarke [1981] IRLR 166.  So long as the Tribunal directs itself properly in law, it is largely a question of fact whether a breach is sufficiently serious to be treated as repudiatory:  see Woods v W M Car Services (Peterborough) Ltd [1982] IRLR 413.  A single act of misconduct by a manager, even if not dishonest, can be sufficient to form the basis of a dismissal without notice:  see Jupiter General Insurance Co Ltd v Shroff [1938] 3 All ER 67.  Financial wrong-doing short of dishonesty can be a basis for summary dismissal:  Neary v Dean of Westminster [1999] IRLR 288.  The only direction on law contained in the extended reasons was contained in paragraph 16: “for misconduct of this kind in relation to expenses, to amount to gross misconduct for a person of the [Appellant’s] seniority and budget, the Respondents would have to show in effect that there had been deliberate deception or dishonesty”.  The clear implication of this is that only deliberate deception or dishonesty would amount to a sufficiently serious breach of contract to justify summary dismissal.  This amounts to a misdirection.  There is no warrant for restricting the sort of behaviour that could justify summary dismissal.

15.		The findings of the Tribunal showed that Mr Flatley was guilty of “a very irresponsible, negligent and unhelpful approach to the whole exercise of the expenses”; he had adopted a "very dilatory and surprisingly offhand attitude”; and had behaved “seriously irresponsibly in relation to the initial spending of the monies on the Respondent’s behalf and in his subsequent behaviour”.  It was submitted that this behaviour was capable of amounting to serious misconduct such as would justify summary termination.  Accordingly, it was submitted, the Employment Appeal Tribunal should allow SMMT's appeal and substitute a finding that Mr Flatley's conduct was sufficiently serious to justify his summary dismissal, or alternatively to remit the case to a freshly constituted Tribunal to consider whether it was or not.

Discussion
16.	The Tribunal was correct to differentiate between the approach to be adopted to the unfair dismissal claim and the breach of contract claim, and was correct in the way in which it did differentiate.

17.	So far as the unfair dismissal claim was concerned, the Tribunal formed the view on the facts that the employer did believe that Mr Flately had committed an act of misconduct.  The Tribunal also determined that the employer had in mind reasonable grounds for that belief and that it had carried out as much investigation as was reasonable in the circumstances.  In fact the only material which the employer had not gathered was from Mr Flatley’s contact, the shadowy Mr Brown, and when Mr Flatley did produce evidence from him to the Employment Tribunal it did not assist him.  The Tribunal's conclusions thus far cannot be faulted in law.

18.	On this limb of Mr Flatley’s appeal there remains only the suggestion that the conclusion which the employer reached as to the penalty was outside the reasonable band of responses.  This argument depends on the assumption that the employer either did not think that Mr Flatley was dishonest or did not have reasonable grounds for thinking that he was.  Neither assumption assists him.  SMMT were entitled to dismiss him summarily even if he was guilty only of serious, as opposed to gross, misconduct.  At best Mr Flatley could say that the employer had formed the view that his approach which was “well short of professional standards” and aggravated by his subsequent attempts to justify his position on the one hand and his failure to provide satisfactory explanations and/or documentation on the other did not demonstrate dishonesty.  The Tribunal however held that on this basis the employer’s reaction in dismissing him summarily was within the reasonable band of responses.  This cannot be said to be wrong in law.  Still less can the conclusion be said to be perverse.

19.	So far as the further ground of appeal is concerned, there is no substance in it.  The Tribunal found that Mr Bailey had taken into account Mr Flatley’s general good record and performance but nonetheless decided that dismissal was the proper penalty.  The Tribunal held that the penalty of dismissal was within the range of reasonable responses.  It is quite impossible to say on any fair reading of the decision that Mr Flatley would not know why he had lost or that the tribunal’s full and lucid decision fell foul of the requirements set out in Meek.

20.	So far as SMMT’s appeal is concerned, the Tribunal approached its task correctly. The question is whether on a proper reading of the opening sentence of para 16 the Tribunal was stating the law inaccurately.  The sentence has to be read in its context.  At first blush it could be thought to misstate the law.  It says:

"We came to the conclusion that for misconduct of this kind in relation to expenses, to amount to gross misconduct for a person of the Applicant’s seniority and budget, the Respondents would have to show in effect that there had been deliberate deception or dishonesty."

But this was in the context of a man with a very substantial budget whose misdemeanours related to comparatively small amounts of expenses.  It was not any statement of any general proposition of law:  it was specific to the circumstances of the particular case.  In the absence of dishonesty, in the view of the Tribunal, Mr Flatley was guilty of serious rather than gross misconduct.  It was also, in the view of the Tribunal, not of such gravity as to justify dismissal without notice.  The Tribunal no doubt had in mind that in the words of Lord Maugham in the Jupiter case at p73H “the immediate dismissal of an employee is a strong measure”.  The Tribunal did not think the case warranted it, though it accepted that it was within the employer’s range of reasonable responses.  In so deciding the Tribunal was deciding a question which was essentially one of fact.  The Tribunal’s decision cannot be said to have been perverse and it displays no error of law.

Conclusion
21.	This case demonstrates that different people can come to different conclusions on specific sets of fact, both of which are within the range of reasonable responses.  The employers took one view and dismissed Mr Flatley without notice.  The Tribunal rightly held that the dismissal was not unfair.  The Tribunal then concluded that “We entirely agreed with the decision to dismiss the Applicant” (see para 15 of the Reasons) but that he should have been given notice pay.  That was a conclusion which, though perhaps a merciful one, cannot be faulted in law.  The result is that both appeals are dismissed.