Appeal No. UKEAT/0294/08/ZT

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 3 April 2009

Before
HIS HONOUR JUDGE BURKE QC

MR M CLANCY 

MR M WORTHINGTON

ZIMMER LTD	APPELLANT

MR N BREZAN	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MR DANIEL OUDKERK
(The Appellant in Person)
(of Counsel) 
Instructed by:
Messrs Boyes Turner Solicitors
Abbots House Abbey Street 
Reading RG13BD	
For the Respondent	MR ROBIN WHITE
(of Counsel) 
Instructed by: 
Messrs Gorvins Solicitors 2-14 Millgate 
Stockport SK12NN	

SUMMARY
 1.  The employee put forward travel expenses claims for journeys for the purposes of his work but in his own car. On investigation the employers concluded that the details were false and the total claims exaggerated. The employee said that the details were false but the totals were correct. He was dismissed for gross misconduct. The Tribunal found that the dismissal was procedurally unfair and was substantively unfair because they did not reasonably believe that he had been dishonest. They found one-third contributory fault.

 2.  The Tribunal found, on the employees contract claim for unpaid expenses in respect of a subsequent period, that he had exaggerated his total claims, in respect of the earlier period, by 30%.

 3.  Held, on appeal, (i) that the Tribunal had erred in basing their conclusion as to reasonable belief on the absence of such belief in dishonesty on the part of the employee in overclaiming. The employer's case was that he had been dishonest, whether or not he had overclaimed, in basing his claims on details he knew to be false; and in any event gross misconduct could in the context be reasonably believed in without dishonesty; (ii) if the Tribunal had correctly understood the employers' case, they would inevitably have concluded that their reaction fell within the range of reasonable responses; (iii) in any event , having found for the purposes of the contract claim that the employee had overclaimed, the Tribunal had erred in excluding that finding from their consideration of the unfair dismissal claim; (iv) the appeal against the finding of procedural unfairness failed; (v) remitted to the Tribunal to reconsider contribution and compensation.

HIS HONOUR JUDGE BURKE QC

The History

1.       This is the second judgment in this appeal. In our first judgment, dated 24 October 2008, we described, at paragraphs 1 and 2, the issues to which the appeal gives rise; we adopt those paragraphs as part of this judgment. We went on to address and, eventually, to reject the argument of the Appellant, Zimmer Ltd ("ZL") that the Employment Tribunal had erred in law in concluding that the Respondent, Mr Brezan ("NB"), had been automatically unfairly dismissed under the provisions of s98A (1) of the Employment Rights Act 1996.

2.        We decided when this appeal first came before us that, before addressing ZL's appeal against the Employment Tribunal's conclusions that NB's dismissal was unfair pursuant to s98(4) of the 1996 Act, that he had been guilty of contributory conduct to the extent of one-third and that he should be awarded £1,573.21 as money due under his contract of employment, we needed to have answers from the Tribunal to questions which we sent to them pursuant to what is familiarly known as the Burns/Barke procedure - as to our use of which in this appeal there has been no dispute. The Tribunal replied to these questions in their final form (for there was a certain amount of correspondence about their precise terms) on 5 January 2009. Although we had hoped that a combination of our judgment of 24 October 2008 and the Tribunal's answers to the questions which we had posed might enable the parties to dispose of this appeal without a further hearing, that has not been possible; and we have therefore had new skeleton arguments and full oral arguments on the remaining issues. We will refer in more detail below to our questions and the Tribunal's answers.

The Facts

3. It is now necessary to go beyond the brief exposition of the facts contained in paragraph 4 of our earlier judgment. That paragraph sets out how Ms Wheale of ZL came to examine NB's mileage and expenses claims. The claims at which she looked in detail related to the period March to June 2006; but she also looked at the overall mileage claimed by NB for the period October 2005 to June 2006. She set out her concerns in a memorandum dated 1 November 2006. They were:

1.       In the 9 month period NB had claimed 44,000 business miles; but two other regional managers with, she said, an equal or bigger region claimed 38,000 and 42,000 miles respectively in a 12 month period including those 9 months; and a national manager had claimed 19,000 miles in six months (we have rounded the figures to the nearest 1,000).

2.       On 95 per cent of the journeys claimed by NB the claim was for a higher number of miles than that indicated by the AA for the relevant journey; as an example while the AA gave a figure of 32 miles from NB's home to his office, NB claimed 43 miles; on average his mileage claims were about 30 per cent in excess of the AA mileage.

3.       On 16 specified occasions in the March to June 2006 period the journey in respect of which mileage was claimed was inconsistent with the expenses claimed; for example on 5 May 2006 a claim was made supported by a receipt from a restaurant in Reading; but the mileage claim for that day was from NB's home in Thatcham (west of Reading) to Swindon (where ZL's offices are) and thence to Bath; on 4 and 12 April the expenses for the cost of lunch at the Nuffield Hospital in Oxford were claimed; but on both days the mileage claim was in respect of journeys which did not involve going to Oxford.

4.         On 7 November Ms Wheale met NB; the Tribunal found that there was little dispute as to the salient points which emerged from their meeting. NB explained that he sometimes submitted his expense claims when in arrear and that, rather than recording mileage for individual journeys during the relevant period, he worked out at the end of each month what his total mileage had been in the car which he used for work in that month, subtracted a notional 50 miles per month for personal mileage and claimed the resulting total figure. When he completed the forms he "made the miles fit" i.e. he claimed journeys which came to the total mileage figure which he said he had covered, whether the journeys were actually made or not and did so sometimes by cutting and pasting from the claim form for an earlier month. By this method, he explained, his monthly mileage claims were accurate in their total although the purported journeys in respect of which the claims were made were not.

5.         Ms Wheale referred the matter to Mr Lowther; as a result NB was asked to attend a meeting on 9 November; see paragraph 5 of our first judgment. At that meeting NB broadly repeated to Mr Lowther what he had told Ms Wheale on 7 November. At the end of the meeting Ms Wheale gave NB copies of his expense claims and receipts for the period October 2005 to June 2006 and asked him to validate them. As a response NB produced a document entitled "Mileage Validation October 2005 to June 2006" in which he said that the claims for the five months from November 2005 to March 2006 inclusive were "validated" i.e. contained no overall excess claim but that there were four errors, one in each of the remaining months, as a result of which he had claimed over 2,000 miles in excess of mileage actually covered. Two of those four errors were said to have been cut and paste errors and two arose from NB's wrongly claiming as business mileage mileage covered for personal purposes.

6.         On 15 November, at a further meeting, NB explained his case again; to Mr Lowther and Ms Wheale; Ms Wheale agreed to analyse NB's document after which there would be a further meeting. She did as asked; she produced a report entitled "Findings" which set out a number of detailed points about NB's claims which it is not necessary for present purposes to repeat in detail; they can fairly be summarised by saying that they asserted that the details put forward by NB were inaccurate and involved over-claiming. In particular Ms Wheale pointed out that NB was claiming 25,750 business miles between March and October when the relevant vehicle had from March to mid-November done only 20,320 miles, without any deduction for private miles.

7. These points were put by Ms Wheale to Mr Lowther but not put by either to NB. On 24 November at a further meeting NB was dismissed; Mr Lowther read to him a document which said:

"Final Disciplinary meeting Nico Brezan. Tony Lowther &, Helene Wheale. Friday 24" 'November 2006.

We are meeting today to conclude the ongoing disciplinary procedure that commenced on November 9th 2006.

We have fully reviewed the validation that you submitted in order to explain the anomalies on your original mileage and expense claims - and these are the conclusions.

You have stated that you calculate your business miles by taking the final odometer reading, deducting 50 private miles and the remaining are business miles that you then claim at the current rate of reimbursement. You stated that you then put in the visits that you know were correct and for the retraining miles you make these "fit" the odometer reading by cutting and pasting journeys you could or had made from previous expense claims.

The Company believes;

A.     Your explanation of how you calculate your business miles is untrue as illustrated by the following examples.

Al. On 2 occasions (Oct. 05, Apr. 06,) there were errors on the mileage sheets you completed which you identified as cut and paste errors. However these incorrect figures were then transferred to your expense sheet where you claimed revenue against them - despite them differing from your odometer reading. You also identified two further errors in May and June 06 where you had made personal trips and had not calculated them as personal miles. Again these incorrect figures were transferred to you expense sheet and you were paid against them. The total of over claimed miles for these 4 errors was 2,274.

A2. You provided information on the amount of miles you have completed in 2006 up to and including 31st October. When you were questioned about your current vehicle you explained that you had purchased it at the end of February and at that time it had 22,000 miles on  the odometer.  When  checked on   15th  November your current mileage was 42,320. This shows that your vehicle had completed 20,320 miles. According to the records you gave at the last meeting you have completed 25,780 business miles between March and October 2006. This illustrates 5,430 more business miles completed than the vehicle has actually driven. This is also not taking 'into account your private miles or the first two weeks in November.

B. That your mileage claims are not completed in a true and accurate manner and that you have knowingly falsified the distance of the business trips you have claimed, as illustrated by the following examples.

Bl. When your original miles claimed were checked via the AA web site they were found to be inflated by approximately 30%.

B2. Upon your validation, where you have not altered your journeys you have changed the miles claimed and in most cases this has been to claim significantly less miles than originally claimed.

B3. Where physical evidence of your whereabouts has been provided (parking tickets etc) in your validation you have inserted these locations. In some instances you have left the remaining locations the same, have inserted an additional location and claimed less miles than in the original claim (e.g. 13 June 2006).

The conclusion that the Company has reached is that these actions and behaviours are clear examples of Gross Misconduct according to the Zimmer Disciplinary policy. The company would draw your attention to the following points.

13- "Breach of Trust and Confidence"

14-"Falsification of record or documents"

21 - "Falsely claiming entitlement to the Company's property, assets or funds"

Therefore there is no alternative but to dismiss you from the company with immediate effect The Company will dismiss you with notice and will enforce your non compete agreement. You have the right to appeal to this decision and the appeal procedure is outlined in the policy which will be given to you at the end of the meeting. Please read it carefully.

Please leave your company mobile telephone and laptop computer here and a letter outlining this meeting will be sent to you directly. You must not have contact with any employee, customer -or supplier of Zimmer from this moment in time. Arrangements will be made with you to collect any other company property that you may have.

This concludes the meeting."

The Tribunal's Judgment

8.        The Tribunal addressed the unfair dismissal claim by considering first and identifying ZL's reason for dismissal, namely misconduct. They said, at paragraph 6,

"We deal first with the claim for unfair dismissal. We find that the Claimant was dismissed for having allegedly falsified his mileage records and claims. That is a reason relating to his conduct. It is a potentially fair reason within the framework of Section 98(2) of the Employment Rights Act. We consider fairness under Section 98(4), through the requirements of the statutory disciplinary procedure, and following the guidance in British Home Stores v Burchell [1978| IRLR 379."

They found at paragraph 7 that Mr Lowther genuinely believed that NB had committed the misconduct for which he was dismissed, namely "a form of financial dishonesty"; and, correctly, they then asked themselves whether that genuine belief was reasonably held, directing themselves expressly, at paragraph 8, to heed the principle that an employer's decision as to whether or not an employee should be dismissed in such circumstances can only be found to be unfair if that decision fell outside the range of reasonable responses; although they did not express themselves exactly in that way, it is plain that that is what they intended in the first part of paragraph 8 of their judgment. They continued in paragraph 8:

"Making all such allowances, we consider that in the following respects the Respondent had no reasonable basis for its belief that the Claimant was guilty of dishonesty. There was a failure to assess the potential significance of these factors, operating cumulatively, and to weigh them in the balance as evidence pointing strongly against dishonesty."

9.       The Tribunal gave reasons for that conclusion in paragraphs 8,1 - 8.10 of their judgment.

10.      The Tribunal then asked themselves, at paragraph 9, whether a fair procedure had been followed; and concluded for reasons set out at paragraphs 9.1 - 9.10 that it had not.

11.     The Tribunal at paragraphs 10 and 11 turned to contribution. They said:

"10. We now turn to the issue of contribution, bearing in mind the different wording of Section 122(2) and 123(6) of the Employment Rights Act 1996. On his own admission, the Claimant systematically submitted claim forms which were accurate only in one particular, namely the total amount claimed. In response to a question from the Tribunal, he admitted that a sample claim form (Rl, 174) might therefore contain 20 lines of text, including mileage claimed, every one of which was inaccurate. His carelessness was compounded by dilatoriness. We are sure that he realises now that had he submitted his claims within the Respondent's timetable, he would have completed the forms at a time when his recollection of matters was much clearer (we make this observation in the knowledge that the Respondent appears to have accepted this practice).

11. The Claimant was a relatively senior member of staff, who was allowed considerable professional autonomy. He was responsible for his own actions and for the accuracy of his own paperwork. He was at best cavalier and at worst incompetent in a matter which related to company resources, and was therefore of very considerable importance. His actions were blameworthy in this respect. We find that through his actions in this respect he contributed to his dismissal by one-third, and that that is the appropriate reduction to be made to both basic and compensatory award."

12. Finally, the Tribunal turned to the contract claim for unpaid expenses in respect of mileage claimed for a period after that covered by Ms Wheale's investigations but prior to the dismissal. The Tribunal did not have much evidential material about this claim; there had not been an analysis such as that carried out by Ms Wheale in respect of the earlier period. They recorded that the parties' representatives had asked them, as a matter of proportionality, to adjudicate upon this claim on such material as the Tribunal had. The Tribunal found that NB had travelled and worked for ZL on the days claimed and was therefore entitled to expenses in respect of mileage incurred. They said at paragraphs 12.4 and 12.5:

"12.4 For these purposes, and for these purposes only, and specifically not for the purposes of the unfair dismissal claim, we accept Ms Wheale's evidence which was that comparing the mileage claimed by the Claimant with that shown on the AA website for the same journeys, the Claimant's mileage claims were inflated by 30%;

12.5     It seems to us therefore in the interests of justice that the appropriate award is !0/13ths of the figure claimed, namely £1,572.31;"

13.      The Tribunal adjourned the issue of remedies. Subsequently they awarded to NB a maximum compensatory award, of £60,600 together with £1,183.50 as a basic award. The remedies hearing took place after this appeal was launched. ZL accepted that, on the basis of the Tribunal's conclusions, a compensatory award at the maximum level should be made; but that concession was expressly made subject to the outcome of this appeal.

14.      The Tribunal, in their judgment, described, at paragraphs 4.3 and 4.4, that ZL had a number of policies relating to car use which were amended from time to time but contained the same basic principles and that those policies repeatedly stressed the importance of accurate claiming and of timely submission of claims. They did not, however, refer to ZL's dismissal and disciplinary policy, which was in evidence before them. That policy provided that, in cases of gross misconduct, dismissal with or without notice was a potential sanction. Within an extensive list of what could be regarded as gross misconduct were included breach of trust and confidence, falsification of records or documents and falsely claiming entitlement to ZL's funds.

15.      The Tribunal found that NB understood ZL's policies and himself approved expense claims of employees who reported to him.

Our Questions

16.      In the Notice of Appeal and in their original skeleton argument ZL asserted that their case before the Tribunal had been that NB had been dismissed for falsification of records or making false expense claims and not for dishonesty and that the Tribunal, in treating the case before them as one of dishonesty or approaching it on the basis that falsification of records and dishonesty were the same and then deciding that ZL had unreasonably concluded that there had been dishonesty, had in effect recast and, indeed, miscast ZL's case.  NB, in contrast, asserted that ZL's case was based on dishonesty.

17. It seemed to us, when this appeal first came before us, that whether ZL's case before the Tribunal had or had not been that they reasonably believed NB to have been dishonest or only that they believed him to have been guilty of falsification of accounts was a distinction of some potential importance. We therefore sought by questions to the Tribunal a resolution of this apparent conflict between the parties. The original questions were modified for reasons we need not go into; in its final form our first question was:

"I. In the course of this appeal the Appellants assert that their ease was not put before the Tribunal on the basis that the Appellant believed the Respondent to have acted dishonestly (save in the limited respect set out in paragraph 25 of the ET3) but on the basis that they believed that he was guilty of falsification of documents in relation to:

(a)    mileage claims involving "making the miles fit" and "cutting and pasting" as discussed in paragraphs 5.3.3 and 5.3.4 of the Tribunal's Judgment

(b)    mileage claims in which journeys were claimed to have involved mileage on average 30% higher than they actually were as described in paragraph 5.2 of the Tribunal's Judgment

(c)    claims including the 4 errors identified at paragraph 5.9 of the Tribunal's Judgment

The Respondent asserts that, in relation to each of the above three matters, the Appellants case was put on the basis of a belief in dishonesty and that it was put to the Respondent in cross examination that he had been dishonest in those respects

The Tribunal are asked to state, by reference to their notes or otherwise, whether in each of those respects:

(i)    The Appellants case was put on the basis of

(a)    Dishonesty; or

(b)    only on the basis of falsification of documents; or

(c)    whether no distinction between the two was made"

We added a second question in these terms:

"2.   When considering the issue of reasonable belief in dishonesty in paragraph 8 of the Tribunal's judgment, did the Tribunal consider:

(a)    the excess claims identified in paragraph 5.2 (other than those specifically referred to in paragraph 8.8)

(b)    the 30% average variance between the miles claimed for journeys and the true mileage involved in these journeys referred to in paragraph 5.2

and in each case if so what conclusion did the Tribunal reach and for what reasons."

18. In their answer the Tribunal set out extracts from the Employment Judge's notes of the cross-examination of Mr Lowther, Ms Wheale and NB and of the closings submissions of Mr White on behalf of NB and Mr Farrier on behalf of ZL. The extract from Mr White's submissions reads as follows:

"Rl, 383 does not mention any charge, dishonesty, any items specifically ... C has not ducked and dived about being slapdash. The reason put forward was not just error, but dishonesty. R did not cross examine on intention to extract money. C should never have been given a proper opportunity to answer whether it was incompetent or dishonesty. Eg it was incompetent to leave in Good Friday ... Not put to him as dishonesty, not incompetence, other than generalised assumption that error shows dishonesty. ..."

The extract from Mr Farrier's submissions reads as follows:

"He is ordinarily meticulous. In the round, he cannot explain the excess of 4,000 miles, even on the journey from home to Newbury station.

R was entitled to ask for a general explanation and then to draw its own conclusions.

(The ET) cannot ignore the magnitude of over claim versus under claim, which he has not explained.

(the ET should) prefer the evidence of Ms Wheale. A genuine belief in falsifying expenses - he was somewhere on incomprehension, ignorant, dishonest. He may have been reckless. R was entitled to lose trust and confidence."

19.     In answer to question 2 the Tribunal said:

"We did consider the matters in paragraph 8 of the Judgment in the overall context of the Respondent's investigation.

Our view was that the Respondent had failed to carry out a reasonable objective analysis of all the material available to it. The totality of the material was that set out in paragraphs 4 and 5 of the Judgment, including the career history, and the circumstances in which the mileage matter had come to light.

Our view was that the Respondent had failed to analyse all the material before it in a reasonable manner. This task would include taking proper account of the material points in paragraph 8 of the Judgment. Mr White's helpful phrase in submission, that there had been a generalised assumption that error meant dishonesty, seemed to us to accord well with Mr Lowther's evidence that his view was, as stated above, that 'if the process ... was flawed, they [the mileage claims] were all flawed."

Unfair Dismissal

Submissions

20. ZL were represented before us by Mr Oudkerk of Counsel; NB was represented by Mr White of Counsel who had appeared for him before the Tribunal. We are grateful to both for the considerable help they gave us.

21.     Mr Oudkerk's submissions can be summarised, we hope, without disservice to him, as follows;

1.      (i)          ZL's primary case had been throughout that NB had deliberately based the relevant expense claims on journeys and mileages which he knew to be inaccurate. He had admitted that he had completed his mileage forms by putting in journeys or mileages for journeys which were not accurate and did not relate to the journeys he had actually driven upon the dates specified in the form. He had, as he said, "made the miles fit" and had sometimes done so by cutting and pasting from earlier claim forms.

(ii). The Tribunal found as fact, when considering at paragraph 10 the issue of contribution, that NB had systematically submitted claim forms which were accurate only in the total mileage figure claimed; the remainder of his claim forms was all false.

(iii) NB had admitted to ZL that that was what he had done; he did not suggest that he had done so by mistake; he could only be regarded as having acted as he did deliberately; or it was at least within the range of reasonable responses for ZL to believe that he had acted deliberately, albeit that there had been references to his having been slapdash.

(iv) ZL's primary case was, in these circumstances, that they reasonably believed that NB had deliberately falsified his claim forms whether or not he had claimed a total mileage higher than that which he had in truth covered and that he had as a result acted in breach of trust and confidence. The Tribunal did not need to and should not have based their conclusion on whether there was a reasonable belief in dishonesty.

(v)         In any event it was reasonable to regard NB's actions as dishonest in that he had deliberately put forward documentation intended to secure payment of expenses which he knew to be largely based on falsehood, whether the total mileage figure was or was not correct. Such dishonesty was different from the greater dishonesty which would have been present had the total mileage claim itself been deliberately overstated. The Tribunal had, however, failed to distinguish between these two different types or degrees of dishonesty and, as paragraph 8 of their judgment revealed, had reached their conclusion only on the basis that ZL did not have reasonable grounds for believing in the latter type of dishonesty and had failed to understand that NB could reasonably be seen by ZL as having been guilty of dishonesty of the former type.

(vi)        Authorities such as Sinclair v Neighbour [1967] 2 QB 279, Neary v Dean of Westminster [1999] IRLR 288, and Anglian Home Improvements v Kelly [2004] IRLR 793 demonstrated that gross misconduct of the nature relied upon by ZL could be established without a finding of dishonesty. (vii) Accordingly the Tribunal had erred in principle in their approach to the vital issue namely was ZL's belief that NB had been guilty of gross misconduct within the range of reasonable responses. Alternatively the Tribunal had substituted their own view of what a reasonable belief would be or had reached a perverse conclusion.

2. In any event the Tribunal found as fact at paragraph 12.4 that NB's mileage claims which Ms Wheale had examined were inflated by 30 per cent. On that basis they reduced NB's contract claim in respect of unpaid expenses for the period subsequent to that which was the subject of Ms Wheale's investigations by 30 per cent.

Although the Tribunal said that they made that finding only for the purposes of their determination of the contract claim and "specifically not for the purposes of the unfair dismissal case", that approach was wrong in law. The Tribunal were not entitled to make a finding of fact for the purposes of one of the issues before them and then to ignore or fail to take that finding into account, where it was relevant on other issues. It was very relevant to the substance of the unfair dismissal claim. Ms Wheale concluded that NB had overstated his claim by approximately 30 per cent; if she was correct in so concluding, inevitably ZL had a reasonable belief that he had done so and that his assertion that the total mileages claimed were correct (albeit the details in support of the claims wholly false) was untrue.

3. As to procedural unfairness, NB knew what he had done and admitted his submission of false expense claims; he did not need to be given greater detail. The Tribunal's error as to the nature of ZL's case coloured their approach to the fairness of the procedure adopted, as demonstrated by paragraph 9.8. It was not necessary for ZL specifically to allege fraud or dishonesty in the sense of seeking to obtain money to which NB was not entitled; the admitted facts disclosed gross misconduct in any event.

22.     Mr White's submissions can, again we hope without understating them, be summarised as follows;

1.       It was accepted that an employer can fairly dismiss for falsification of documents, as the authorities show; but in this case the employers expressly dismissed on the basis of dishonesty; and they could only have fairly dismissed if they reasonably believed in dishonesty. No other charge was levelled at NB and he could not be dismissed for any other conduct; see Strouthos v London Underground [2004] 1RLR 636.

2.       NB denied dishonesty and maintained that the total mileage figures claimed were correct; the Tribunal had permissibly and for reasons which they were entitled to give concluded on the facts that ZL did not have a reasonable basis for their belief in dishonesty. The Tribunal applied the correct test, made no error of law and reached a decision which was essentially one of fact with which we should not interfere in the absence of perversity.

3.       While it was open to an employer to regard falsification of an expense claim as dishonest the Tribunal on the facts of this case decided that the dishonesty upon which the employers were relying was dishonesty in the wider sense i.e. not merely falsifying the claim documents but deliberately claiming a greater mileage than that which he had actually covered; the Tribunal were entitled so to read the evidence. Once that was recognised, ZL's submissions were without substance.

4.       The very high threshold for the establishment of perversity had not been crossed.

5.       As to procedural unfairness the Tribunal's reasons were based on the evidential material before them; it was very important in the case of a senior employee charged with dishonesty that the charge should be clear and that a proper procedure should thereafter be followed; there was no error of law in the Tribunal's conclusions or reasons on this issue.

6.       As to paragraph 12.4, the Tribunal did not have any detailed evidence about the expense claims from July to October 2006. NB had said in evidence that he might have used different routes or gone to different places as compared with the details in those claims; but Ms Wheale had not investigated those claims. Therefore the parties had invited the Tribunal to use Ms Wheale's analysis of the earlier claims and to reach a sensible conclusion on the basis of that analysis as to the subsequent claims. If the Tribunal were correctly to reflect the task set by the parties they ought to have said "We were invited to use Ms Wheale's evidence" not "We accept Ms Wheale's evidence". Seen in that context the Tribunal should be regarded in paragraph 12.4 as having resolved to accept Ms Wheale's evidence only in the context of the contract claim and not as having made a finding which could have any effect on the unfair dismissal claim.

Conclusions 

Unfair Dismissal

23.      In our judgment the Employment Tribunal can be seen to have based their decision that the dismissal was substantively unfair on their conclusion that ZL had no reasonable basis for believing that NB had been dishonest in the wider sense i.e. that he had not only put false details into his expense claims but that he had deliberately over-claimed.

24.      The Tribunal's words in the second sentence of paragraph 6:

"We find that the Claimant was dismissed for having allegedly falsified his mileage records and claims."

could embrace both the narrower and wider forms of dishonesty or, indeed, embrace falsification without dishonesty. The first sentence of paragraph 7:

"We ask first whether the Respondent, in the person of Mr Lowther, genuinely believed that the Claimant had committed the act of misconduct for which he was dismissed, namely a form of financial dishonest."

is also ambiguous. The third sentence of paragraph 8

"Making all such allowances, we consider that in the following respects the Respondent had no reasonable basis for its belief that the Claimant was guilty of dishonesty."

would, if shorn of the words "in the following respects" be similarly ambiguous. Those words, however, require the reader to look at paragraphs 8.1 - 8.10; for they set out the reasons for the Tribunal's conclusion expressed in that sentence. A consideration of those set paragraphs reveals the true nature of the Tribunal's thinking. In paragraph 8.1 the Tribunal give, as the first such reason, NB's unblemished career and his selection for promotion and the effect of a dismissal for dishonesty upon his career. Those are factors which would be relevant to deciding whether NB had dishonestly over-claimed or, to be more accurate, whether ZL had a reasonable belief that he had done so; but they were not relevant factors in considering whether he had put forward false claims irrespective of the total mileage; for that was not in dispute. NB had admitted that his claim forms were based on false details, save for the total mileage claimed. The factors identified by the Tribunal in paragraph 8.1 could not, in our judgment, affect the reasonableness of ZL's belief in that misconduct.

25.      Sub-paragraphs 8.2 and 8.3, in our view, could not be reasons why ZL could not reasonably believe that NB had put forward falsified claims and had done so dishonestly, in the light of his admissions as to what he had done. The same applies to paragraph 8.4; the fact that NB had approved the claims of employees who reported to him without any issue arising did not bear at all on whether his claims were falsified and dishonestly falsified.

26.      All of the points set out in paragraphs 8.1 - 8.10 might have been relevant (although in relation to some of them we can see an argument that they might not be) to ZL's reasonable belief in the wider form of dishonesty - which was in dispute. They were classic examples of points put forward forensically in support of a defendant or employee whose case is that he did not act in the manner alleged against him; but they do not have any force, in our judgment, in respect of conduct which is admitted; and the same can be said about the remainder of paragraph 8.

27.      When the Tribunal's judgment is read as a whole, in the light of paragraph 8, it is, in our view apparent that the Tribunal considered and considered only whether ZL had a reasonable belief in NB's having dishonestly made mileage claims which were not only based on false details but involved deliberately inflated mileages.   The dishonesty referred to in the third sentence of paragraph 8 was the wider form of dishonesty.

28.     We have concluded that the Tribunal erred in law in deciding the issue of substantive unfair dismissal on that basis, for the following reasons:

1.       We are unable to accept that ZL put their case on that wider form of dishonesty alone. In the document read to NB by Mr Lowther informing him that he was being dismissed, Mr Lowther relied on all of NB's conduct in relation to the expense claims and relied upon three heads of gross misconduct as specified in the dismissal and disciplinary policy, namely breach of trust and confidence, falsification of records or documents and falsely claiming entitlement to the company's funds. It is arguable whether the last of those three heads of gross misconduct could have been the subject of reasonable belief without the over-inflation of the total mileage; but that element could not have been and was not in our judgment an essential pre-requisite to a reasonable belief in gross misconduct of the first two types. The extract from Mr Farrier's closing submission set out in the Tribunal's answer to our first question demonstrates, in our judgment, that ZL were not relying on dishonesty alone, still less the wider form of dishonesty alone.

2.       Accordingly if the Tribunal considered that ZL did not reasonably believe that NB was guilty of the wider dishonesty (which might, adopting a distinction to be found in the old Forgery Act, be described as involving an intent to defraud as opposed to an intent to deceive) they were, in our judgment, bound to consider as alternatives whether ZL reasonably believed that NB was guilty of dishonesty in the lesser sense i.e. of deliberately putting forward expense claims based on false details or was guilty of gross misconduct in the form of falsification of documents and breach of trust and confidence in acting as he admitted he did irrespective of dishonesty.

3. In Sinclair v Neighbour (citation above) the manager of a betting shop took £15 from the shop till for the purpose of gambling; he knew that he would not have been given permission to do so if he had asked. He put an IOU in the till and repaid the money next day. He was summarily dismissed. His claim for damages for wrongful dismissal succeeded in the county court, on the basis that his action had been improper and reprehensible but not dishonest. The Court of Appeal allowed the employer's appeal on the ground that, although the employer had pleaded dishonesty, it did not matter whether the conduct was labelled as dishonest or not; it was seriously inconsistent and incompatible with the employee's duty. Davies LJ at page 289 A-C said:

"With the greatest respect to the judge, I think that he fell into error in attaching too much weight to the label and not enough to the facts. The facts were established. The fact that the manager took the money from his employer's till behind his back knowing that the employer would not consent was established; and it seems to me that it does not really matter very much whether that justifies the label "dishonest" or not The judge ought to have gone on to consider whether even if falling short of dishonesty the manager's conduct was nevertheless conduct of such a grave and weighty character as to amount to a breach of the confidential relationship between master and servant, such as would render the servant unfit for continuance in the master's employment and give the master the right to discharge him immediately."

And Sachs LJ at page 290 A-B said:

"Here we have a case where the manager of a betting shop, responsible for the conduct of the shop and of the other employees there, quite deliberately takes out of the till money for his own personal purposes, in circumstances which he knew quite well his employer, if asked, would not permit.

To state those facts quite simply seems to me enough to make plain that here indeed there was beyond a peradventure misconduct of a type which justified instant dismissal; and I agree with the judge's view where he uses the adjectives "utterly reprehensible" and "improper" in regard to that conduct."

29. In Neary Lord Jauncey of Tullichettle, sitting as Special Commissioner appointed by Her Majesty the Queen as Visitor to Westminster Abbey, adopted and followed Sinclair and rejected the argument that, where financial wrongdoing was alleged, nothing short of deliberate dishonesty or deceit would constitute gross misconduct. At paragraph 22 of his judgment he said:

"What degree of misconduct justifies summary dismissal? I have already referred to the statement by Lord James of Hereford in Clouston & Co Ltd v Corry. That case was applied in Laws v London Chronicle (Indicator Newspapers) Ltd |1959| 1 WLR 698, where Lord Evershed MR, at p.700, said: 'It follows that the question must be -if summary dismissal is claimed to be justified - whether the conduct complained of is such as to show the servant to have disregarded the essential conditions of the contract of service.' In Sinclair v Neighbour, Sellers LJ, at p.287F, said: 'The whole question is whether that conduct was such a type that it was inconsistent, in a grave way incompatible - with the employment in which he had been engaged as a manager.' Sachs LJ referred to the 'well established law that a servant can be instantly dismissed when his conduct is such that it not only amounts to a wrongful act inconsistent with his duty towards his master but is also inconsistent with the continuance of confidence between them'. In Lewis v Motorworld Garages Ltd [1985] IRLR 465, Glidewcll LJ, at 469, 38, stated the question as whether the conduct of the employer 'constituted a breach of the implied obligation of trust and confidence of sufficient gravity to justify the employee in leaving his employment... and claiming that he had been dismissed.'  This test could equally be applied to a breach by an employee. There are no doubt many other cases which could be cited on the matter, but the above four cases demonstrate clearly that conduct amounting to gross misconduct justifying dismissal must be to undermine the trust and confidence which is inherent in the particular contract of employment that the master should no longer be required to retain the servant in his employment."

In Anglia Home improvements the employee was dismissed for gross misconduct consisting of failure to comply with the employer's procedures for banking and recording money received from customers. He produced records purporting to show that monies had been paid into the bank when they had not been. He had no fraudulent intention but was seeking to present a false picture of the branch's outstanding debt and achievement of targets. The majority of the Employment Tribunal found that he had been unfairly dismissed; he had not been fraudulent and his actions were no more than massaging figures and were not so serious as to warrant dismissal. That decision was upheld by the Employment Appeal Tribunal but was reversed by the Court of Appeal; the Court of Appeal concluded that there was an overwhelming case that an employer could reasonably regard the employee as having been guilty of gross misconduct. At paragraph 22 of his judgment Mummery LJ agreed with the employer's submission that the conduct complained of fell squarely within the definition of gross misconduct in the employer's disciplinary procedure; and at paragraph 31 he said:

"This was a case of gross misconduct. It was a case of conduct which was the subject of a memorandum of May 2001. 1 have taken into account a number of points made by Mr Kelly about how the consequences of dismissal were not spelt out to him, about the pressures that there were in relation to meeting targets, and about the occurrence of the practices to which he has admitted in other parts of the company. In my judgment, they do not begin to meet the point that he has brought an unfair dismissal case, in which he has admitted misconduct described in the disciplinary procedures which were part of his contract as 'gross misconduct' which could lead to summary dismissal. It seems to me that, on the facts found by the tribunal, the only conclusion that a reasonable tribunal could have come to in this case, applying the band of reasonable responses test, was that it was open to a reasonable employer summarily to dismiss an employee in the responsible position held by Mr Kelly for misconduct of the kind he had committed."

30. From those authorities we derive the principle that, in a case of this type, the tribunal should look at the conduct complained of and decide whether the employer's belief that it amounted to gross misconduct under any one of the heads set out in their disciplinary policy fell within the range of reasonable responses. It is not necessary for the employer to have reasonably believed that there was dishonesty even in a case where he has alleged dishonesty, if the conduct which the employer reasonably believes to have occurred amounts to gross misconduct or can reasonably be regarded as amounting to gross misconduct, particularly when that conduct falls within a category of gross misconduct specified in the employer's disciplinary procedure. The absence of a reasonable belief in dishonesty or a wider form of dishonesty, which the employer has relied upon, does not disable the employer from relying upon a lesser form of dishonesty or upon gross misconduct without dishonesty.

31. However the Tribunal did not approach this case in that way. They considered only whether ZL had a reasonable belief in the wider dishonesty - in effect that NB had committed fraud. Had they approached the case as in law they were bound to do, they should inevitably, in our judgment, have concluded that NB had, on his own admission and his own case, whether or not the total mileage claim was overstated, put forward a series of expense claims which contained details all of which purported to be true but which were all or substantially false save for the total mileage. It could not be reasonably suggested that NB had acted accidentally or carelessly in putting forward his claims on that basis; he had acted deliberately on any view. In a nutshell he did not have the true details to support his claims and therefore used a series of false details, which he knew to be false. Accordingly, if the Tribunal had asked themselves the correct questions, they would inevitably have concluded that ZL's belief that NB had committed gross misconduct at least by falsification of documents and acting in breach of trust and confidence was one which fell within the range of reasonable responses to what NB had admittedly done.

32.      We have considered the decision of the Court of Appeal in Strouthos, upon which Mr White put considerable weight; but in that case the charges against the employee did not include dishonesty; and it was therefore not open to the employer to rely on dishonesty. That situation is to be contrasted with that prevailing in this case in which, on any reading of the document read to NB by Mr Lowther when he was dismissing him, ZL were putting dishonesty forward but were entitled in relation to the self-same conduct to rely upon it as constituting gross misconduct absent dishonesty.

33.      For these reasons we have concluded that the Tribunal's conclusion in paragraph 8 of their judgment cannot stand and that the Tribunal could only properly have come to one conclusion, namely that the employer's belief that there had been gross misconduct was within the range of reasonable responses.

34.      It is now necessary for us to depart from the pattern of thinking which we have recorded in the previous paragraphs; on Mr Oudkerk's second argument the Tribunal found as fact in paragraph 12.4 that NB had deliberately inflated his total mileage.   It is common ground that the Tribunal did not have the benefit of a detailed analysis of NB's claims in respect of the period subsequent to that investigated by Ms Wheale; and it is not difficult to understand why that was so; the amount at stake in the contract claim was small; and it was sensible for the parties to ask the Tribunal to adjudicate upon it on the basis of the material which they had.

35.      However in order to do so, the Tribunal, as the parties must have been aware, were going to have to make objective findings of fact as to what had happened, as opposed to findings as to reasonable belief. There is no suggestion that the parties agreed that the Tribunal should be able to make for the purposes of the contract claim findings of fact which could not be taken as affecting the unfair dismissal claim; and we see no alternative but to accept Mr Oudkerk's argument that, the Tribunal having in paragraph 12.4 found as a fact that the mileage claims were inflated, that finding had to be considered by the Tribunal when they decided upon the unfair dismissal claim. It may well be that the Tribunal, when they reached their conclusion on the unfair dismissal claim, had not yet considered or reached factual conclusions on the contract claim; but as a matter of principle - and it has not been suggested that there is any authority to help us on this issue - in the absence of agreement between the parties it is not open to a tribunal to make a finding of fact upon one part of a claim before them and then ignore that finding of fact or to decide that, although it has very high potential relevance, it should be excluded from consideration in the context of another part of the employee's claim.

36.      The Tribunal had all the evidence together on all issues before them, any finding of fact which they made must, in our view, have had the effect that that fact was objectively established for all claims or issues in respect of which that fact was relevant.

37.     On this analysis, which we accept is one of principle and instinct, the Tribunal having found as fact that NB's mileage claims were inflated by 30 per cent as Ms Wheale had said they were, that finding had the effect that those claims had to be taken as having been inflated for the purposes of the unfair dismissal claim. While of course it was not necessary for ZL to prove the conduct that they complained of as opposed to their reasonable belief in that conduct, it could hardly be suggested , once the Tribunal had found that Ms Wheale's evidence was to be accepted and that NB had inflated his expense claims by 30 per cent, that ZL did not have a reasonable belief that he had done so.

38.      We recognise that there is an obvious conflict between the Tribunal's reasons set out in paragraph 8 of their judgment for deciding that ZL did not reasonably believe that the claims had been deliberately inflated and the finding in paragraph 12.4 that NB had so inflated his claims; but, as Mr White accepted, there has been no cross-appeal against the finding made by the Tribunal at paragraph 12.4. That finding stands; and, logically, whatever the Tribunal said in paragraph 8 - which they erroneously in law believed that they did not need to reconsider when they made the findings set out in paragraph 12.4 - that finding must have effect for the purposes of the unfair dismissal claim as well as for the purposes of the contract claim.

39.      We fully understand why Mr White submits that the Tribunal did not need to go so far as accepting Ms Wheale's evidence; but they did not express their judgment as Mr White would have preferred. Whether, if they had done so, the argument which Mr Oudkerk now puts forward could not have been mounted (which we doubt) is immaterial.

40.      Therefore, in our judgment, the finding in paragraph 12.4 constitutes a further reason why the Tribunal's decision as to substantive unfair dismissal cannot stand and there must be substituted for it a decision that ZL's belief that NB had committed gross misconduct fell within the range of reasonable responses.

41.      In these circumstances we do not need to address the alternative arguments that the Tribunal substituted their own view of what was reasonable or came to a perverse conclusion. We would, if we pursued the perversity issue, have to express some difficulty in seeing how, once Ms Wheale's analysis was accepted, a tribunal could come to any other conclusion than that ZL's belief fell within the range of reasonable responses; but in reality this is not and need not be seen as a perversity case or a substitution case; it is one in which the Tribunal have erred in principle in the respects we have set out above.

42.      Lastly in relation to unfair dismissal we turn, briefly, to the Tribunal's conclusion that the dismissal was procedurally unfair. We propose to say little on this issue, particularly in the light of the fact that ZL's appeal against the finding that there was no sufficient Step 1 letter has failed. We have concluded that the Tribunal, as the fact finding body, were entitled to decide that the email to NB, which did not inform him that gross misconduct was being considered, was inadequate and that it was not sufficient merely to send him the dismissal and disciplinary policy. That NB admitted the falsification of his claim, save for the total mileage figures, did not exempt ZL from the requirements of fairness in the disciplinary procedure which they adopted. The same reasoning applies, in our judgment, to the other criticisms of the procedure adapted by ZL set out in paragraph 9 of the Tribunal's judgment, save paragraph 9.10, which has to be read in the light of what we have said earlier. If paragraph 9.10 is less than persuasive when so read, that does not undermine our general conclusion that the Tribunal did not err in principle or in law in paragraph 9; they reached a conclusion which they were, in our judgment, entitled to reach.

Contribution

43.      On this issue it is not necessary to set out separately the parties' submissions. Mr Oudkerk submitted that,  if the finding of substantive unfair dismissal did not stand and in the light of the Tribunal's finding that NB had inflated his claims by 30 per cent in addition to deliberately supporting his claims by false documentation, only a 100 per cent contribution could have been appropriate. Mr White submitted that the Tribunal were entitled to reach the conclusions that they did and that, in the absence of any clear charge, ZL had been fortunate to obtain a decision that NB was at fault to the extent of 30 per cent.

44. In our judgment the finding of contributory fault in paragraph 11 was plainly based on NB having been "at best cavalier and at worst incompetent"; that finding, therefore, does not reflect the finding at paragraph 12.4. Furthermore the assessment of one-third contribution was made on the basis that ZL had not only procedurally but also substantively unfairly dismissed NB. It is at least a very real possibility that, had the Tribunal taken the finding in paragraph 12.4 into account and had made their assessment of contributory fault on the basis that ZL had not been guilty of substantively unfair dismissal and had reasonably believed NB to have been guilty of gross misconduct, their assessment of NB's contribution - which of course involved a weighing of the seriousness of ZL's unfair conduct against NV's misconduct - would have been different. We do not accept Mr Oudkerk's submission that the Tribunal could only, in such circumstances, have assessed NV's fault at 100 per cent. They may or may not have done so. We cannot be sure what reduction the Tribunal would have reached had they approached the contribution issue as, on the basis of our conclusions, it had to be approached. Therefore we must set aside the Tribunal's decision as to contribution and remit that issue to the Employment Tribunal for reconsideration in the light of this judgment. There will, in any event, have to be reconsideration of the assessment of compensation; for on the basis that they were guilty only of procedural unfairness ZL will in all probability wish to argue that the Polkey principle should apply to the assessment of the compensatory award.

The Contract Claim

45.      Only one point has been argued by Mr Oudkerk in respect of the contract claim; it is that, the Tribunal having found as they did in paragraph 12.4, it follows that NB had been overpaid in respect of his earlier mileage claims by a sum which would comfortably have exceeded the sum awarded by the Tribunal on his contract claim. In effect the argument is that the Tribunal should have set off earlier overpayments against the sum found to be due to NB in respect of the last month of his employ mem.

46.      The difficulty which ZL face in getting this argument home is that it was not put forward before the Tribunal. As Mr White correctly points out, there was no counterclaim; no set off was pleaded; the Tribunal were not invited to calculate past overpayments and set them off against any sum due to NB on his contract claim. That some such sum was due was not in dispute before the Tribunal; there was no suggestion that it might be extinguished by a set off or that NB's inflation of his claim barred him from recovery of whatever expenses he had in truth incurred; but the Tribunal were not asked to consider awarding less than that sum.

47.      Mr Oudkerk submits that ZL's entitlement to set off arises from the terms of the Tribunal's judgment and could not have been foreseen at the original hearing; in justice the extent of any set off should be decided by us on appeal now that the Tribunal's findings had been made and were clear. He relied on the decision of the EAT (HHJ Clark presiding) in Langston v Cranfield University [1998] IRLR 172; but that was a very different case in which the EAT held that it was incumbent upon the Tribunal in a redundancy unfair dismissal claim to consider issues such as unfair selection and lack of consultation and the present situation is not, in our judgment, analogous of that in Langston; there was no principle of law which obliged the Tribunal to consider the set off point when it had not been raised on behalf of ZL.

48.      Although Mr Oudkerk submitted that the essential facts had all been determined by the Tribunal and we could proceed to apply a set off on the basis of those facts, in our view we do not have findings as to all the relevant facts. We have, as Mr White pointed out, no determination or calculation of the amount to be set off; the point is not one of pure principle.

49.      In our view, applying the now familiar principles summarised and restated by the Employment Appeal Tribunal (HHJ McMullen QC, in Rance [2007] IRLR 665), ZL should not be permitted now to raise a new point which, if it was desired to pursue it, could and should have been raised before the Tribunal. Accordingly ZL's appeal against the award to NB made by the Tribunal under his contract claim must be dismissed.

Conclusions

50.        

1.      The appeal is allowed to the extent that (a) the Tribunal's finding that ZL's belief that NB had committed gross misconduct did not fall within the range of reasonable responses must be set aside and a finding that it did so fall must be substituted for it.

2.       The Tribunal's decision that NB was guilty of contributory fault to the extent of one-third must be set aside.

3.       The Tribunal's award of compensation cannot stand in the light of the above and must be set aside.

4.       The appeal against the award to NB upon his contract claim is dismissed.

51.      There will, unless the parties are able to reach agreement ~ as we earnestly hope they will- have to be a further hearing before the Employment Tribunal as to (a) contributory fault and (b) compensation, including any application of the Polkey principle which ZL wish to advance now that the dismissal of NB has been held to have been unfair on procedural grounds only; and we so order.

52. We believe that we did not hear argument as to whether any such remission should be to a new or to the same tribunal; our initial view is that the same tribunal can and should be expected loyally and fairly to apply our conclusions at any remitted hearing and to decide the outstanding issues before them upon that basis. We do not see any compelling reason why the remission should be to a new tribunal, which might have to receive evidence to a considerably greater extent than might be necessary before the same tribunal. We will give the parties 14 days from the handing down of this judgment to put before us any written submissions on this issue should they so wish. These will have to be cross-served. If such submissions are received, we will determine the point on paper without a hearing. It will be for the tribunal which hears the remitted issues to decide whether and to what extent the parties should adduce further evidence.