Appeal No.UKEAT/0384/08/MAA

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 15 April 2009

Before
HIS HONOUR JUDGE McMULLEN QC
MR D NORMAN
MR T STANWORTH

MRS J H KNIGHT	APPELLANT

TREHERNE CARE & CONSULTANCY LTD	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MR P GREATOREX
(of Counsel)
Richard C Hall & Partners
Redhill House, Hope Street
Saltney
Chester 
Cheshire  CH4 8BU	
For the Respondent	MR G BEELEY
(Representative)
Peninsula Business Services Ltd
Advocacy & Litigation Department
Riverside, New Bailey Street
Manchester
Greater Manchester  M3 5PB.	

SUMMARY
UNFAIR DISMISSAL
The Employment Tribunal erred when it found the employee was not unfairly dismissed. There was no disciplinary hearing. In the light of London Ambulance Service NHS Trust v Small [2009] EWCA Civ 220 the Employment Tribunal concentrated wrongly on the conduct of the Claimant and not upon the conduct of the Respondent.  In the light of Strouthos v London Underground Limited [2004] IRLR 402 CA a charge of deliberate falsification or lying has to be put squarely. Remitted for rehearing.

HIS HONOUR JUDGE McMULLEN QC

1.	This case is about unfair dismissal of a Finance Director of a care home.  The Judgment represents the views of all three members.  We will refer to the parties as the Claimant and the Respondent. It is an appeal by the Claimant in those proceedings against a Judgment of an Employment Tribunal sitting over three days, plus a day in private following an exchange of written statements, registered with reasons on 16 April 2008 held at Shrewsbury under the chairmanship of Employment Judge Mrs Warren.  The Claimant was and is represented by Mr Paul Greatorex of Counsel; the Respondent was represented by Officers of Peninsula, today by Mr Beeley.

Procedure
2.	At the opening of the appeal an application has been made by Mr Beeley, said to be an oral renewed application to adduce as a record of the proceedings material adduced by the Respondent.  This has been the subject of detailed judicial consideration by respectively HHJ Peter Clark, HHJ Ansell at an oral hearing, HHJ Reid QC and members at a preliminary hearing and by the Registrar, who considered the order made by the Tribunal presided over by Judge Reid, at paragraph 5.

3.	In accordance with the Practice Direction, the EAT there set out the procedure for agreeing a record if it did not sufficiently clearly emerge from the Tribunal Judgment.  The parties have been unable to do that but neither of them has sought resolution of this matter by a call for the Employment Judge’s notes.  Thus, the Registrar was faced with a decision about whether to allow the Appellant’s or the Respondent’s material to be put before us.  She made a ruling on 18 March 2009, setting out the chronology which we respectfully adopt, that there was no further time available in the light of the impending hearing today.

4.	She then said, “The Respondent has liberty to apply within seven days,” and giving further directions.  No application was made.  Mr Greatorex rightly says that the Practice Direction has not been followed, nor has the Respondent taken the opportunity given in the Registrar’s letter to have the matter further determined

5.	The procedure set out by Judge Reid’s Tribunal fully corresponds to the Practice Direction.  Attempts have been made, and decisions have been made by the Registrar pursuant to those attempts, to produce an agreed record and to determine, in the absence of agreement, which record is to apply.  In those circumstances we see no reason to interfere with her case management.  The notes to be relied on will be the notes adduced by the Claimant. We have considered overall the fairness of this procedure but, as the Registrar made clear in her letter on 18 March 2009, time is of the essence and there has been no further application by Mr Beeley, who frankly accepts that he did not read the letter in the way which we hold it can only be read. 

6.	Mr Beeley tried to get round this, again, by inviting us to hear, as he put it, evidence upon which he would expose himself to cross-examination on oath since he himself attended the hearing.  We reminded him that that is not the way in which this court conducts appeals on questions of law - it being of no help to us.

7.	An application has been made to appeal.  We take the approach of Maurice Kay LJ to interim appeals in Ezsias [2007] ICR 1126 CA, that is to subject it to the more exacting criterion of whether an important point of practice emerges from the exercise of discretion which we have ourselves adopted in respect of the application to adduce the notes.

8.	There is no compelling reason for this case to be taken to the Court of Appeal.  There is no reasonable prospect of the Court of Appeal interfering with the decision we have made in respect of the Registrar’s Order, nor is it in the interest of justice for Mrs Knight’s appeal, now being subjected to its fourth judicial consideration in the EAT, to be held up any longer by interim appeals.  Mr Beeley’s application is also misconceived in that it is not in the interests of justice that both sides’ notes of the Tribunal hearing be adduced, for that matter is covered squarely by Judge Reid’s Order and by the Practice Direction.  The application is refused.

Introduction

9.	The Claimant claimed unfair dismissal; the Respondent contended it dismissed her fairly for gross misconduct.  The essential issue as defined by the Employment Tribunal was to determine the fairness of the decision by the Respondent that the Claimant was guilty of gross misconduct and that the procedure followed prior to dismissal was itself unfair.

10.	The Tribunal decided in favour of the Respondent; the Claimant appeals.  Directions sending this appeal to a full hearing have taken a chequered course.  Judge Clark found under rule 3 that an appeal had no prospect of success.  At a hearing before Judge Ansell the matter was referred to a three-person preliminary hearing under Judge Reid, all three of whom decided that this case should be sent to a full hearing.  During the course of those three judicial treatments there have been three transmutations of the Claimant’s grounds of appeal and we are now dealing with what are described as the replacement grounds of appeal.

The legislation

11.	The relevant provisions of the legislation are contained in the Employment Rights Act 1996 as follows:
“98  General

	(1)		In determining  … whether the dismissal of an employee is fair or unfair, it is for the employer to show—

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

(b)	that it is either a reason falling within subsection (2) … 

	(2)		A reason falls within this subsection if it—
…
(b)	relates to the conduct of the employee,
…

	(4)		… the determination of the question whether the dismissal is fair or unfair (having regard to the reason shown by the employer)— 

(a)	depends on whether in the circumstances (including the size and administrative resources of the employer’s undertaking) the employer acted reasonably or unreasonab1y in treating it as a sufficient reason for dismissing the employee, and 

(b)	shall be determined in accordance with equity and the substantial merits of the case.

98A Procedural fairness
  (1)	An employee who is dismissed shall be regarded for the purposes of this Part as unfairly dismissed if -
(a)	one if the procedures set out in Part 1 of Schedule 2 to the Employment Act 2002 (dismissal and disciplinary procedures) applies in relation to the dismissal,
(b)	the procedure has not been completed, and
(c)	the non-completion of the procedure is wholly or mainly attributable to failure by the employer to comply with its requirements.”

12.	The Employment Tribunal directed itself by reference to the relevant provisions and to what are the essential authorities, BHS v Burchill [1978] IRLR 379 and Iceland Frozen Foods v Jones [1982] IRLR 439.  The Tribunal was, therefore, attuned to the need to make findings for ordinary unfair dismissal, procedural unfair dismissal and automatically unfair dismissal where the statutory disputes and dismissal procedure had not been followed.

The facts

13.	The Respondent is a care home organisation supplying care facilities.  The Claimant was employed as Financial Director in 2004.  The leading force behind the company is Mrs Treherne, who sadly died after the events in this case and before the hearing before the Tribunal.  She did, however, create a witness statement which was before the Tribunal.  The Claimant’s employment ceased on 15 March 2007 (and we will make that correction in paragraphs 6 and 40 of the Tribunal’s Judgment) by reason of a dismissal letter.

14.	On 12 February 2007 at a board meeting conducted under the chairmanship of Mr Peter Edwards, solicitor and legal adviser to the Respondent, who had previously acted as its Managing Director, issues arose as to a debt incurred by the Respondent to Gwynedd County Council.  Questions were raised about how the Respondent could be required to repay.  The Claimant needed to check the matter and a view was taken that she had not dealt straightforwardly with the Respondent’s managers.

15.	She was suspended, confirmed by a letter the following day.  She was required to attend a disciplinary hearing on 15 February 2007 and allegations were set out.  The proceedings were conducted by Mr Austin, who is a Practice Development Consultant and has academic legal qualifications.  The allegations to be investigated and requiring the Claimant’s answer included the following:	

“Taking part in an activity that has caused us to lose faith in your integrity”
Namely.
It is alleged, that during the course of a board meeting on 12th February 2007 you deliberately and repeatedly gave incorrect and misleading information to the board of directors in regard to a £60,000 repayment.
This misleading information; about the repayment of monies which was made by you without consultation or authorisation with the board; is a failure to give notice of any pecuniary interest of which you were aware.
You also stated that you had passed the matter of the repayment of the £60,000 on to Hazelwood’s, the company’s accountants for attention last year.  This in fact has been denied by Hazelwood’s. 
You also stated that you had made a payment, sometime last year, of £2,000 to “buy us some time”.
When asked by Peter Edwards if you had made any other payments other than the £2,000 you categorically stated “no”.
When Peter Edwards produced the document received from Sheila Philips confirming that you had in fact agreed to pay £3,000 per month as from March 2006 and had in fact set up monthly direct debits which had gone out from the company account since that date you admitted that you had in fact deliberately misled the board.
The company alleges that this matter, if proven, represents a gross breach of trust in your position as Financial Director.”

16.	The first flowering of these allegations was at an adjourned hearing which began on 21 February 2007.  On 6 March 2007 a further allegation was raised with the Claimant relating to what was thought to be a similar defalcation in respect of HM Revenue & Customs in relation to PAYE due to the Revenue in the sum of about £100,000 - the Gwynedd matter being about £60,000.  The upshot was that the Claimant, without reference to the board, had acknowledged the debt and had facilitated repayment by instalments.  There were also issues to do with the reporting of the financial state of the company.  

17.	The hearing resumed on 7 March 2007.  Mr Austin gave what he described as a decision to the board in a lengthy letter dated 8 March 2007, which he himself typed.  This document records Mr Austin’s decision and acknowledges that the matters put against the Claimant were extremely serious and were proved to his satisfaction, in particular that the Claimant misled the board.

18.	The finding of the Tribunal was that shortly thereafter the board decided unanimously that the Claimant would be dismissed and a letter was caused to be sent on 15 March 2007.  It is said to be on behalf of Mr Austin, but he had no involvement after he sent the letter with his decision on 8 March 2007.  So although Mrs Treherne indicated that that was the decision of the board and that Mr Austin would be instructed to write the letter, he did not.  Nevertheless, the letter of 15 March terminated the Claimant’s employment for the reasons which it contained.

19.	Much criticism was made by Mr Greatorex of the provenance of this letter since the Respondent even today has not said who it was written by.  Nevertheless, it represents the human mind behind the corporate decision to dismiss the Claimant.  The central allegation is that the Claimant had deliberately and repeatedly given incorrect and misleading information to the board.  Elsewhere in the decision letter it is phrased as of knowingly or recklessly misrepresenting the company’s true trading position causing the board to lose confidence in the integrity and competence of the Claimant as its Finance Director. It can be seen there is a mixture of substantive criticisms of her conduct and of her performance.

20.	An appeal was launched.  Mr Ferraby, another solicitor, held the appeal hearing.  He had nothing to do with the earlier decision making.  His conduct of the appeal was held by the Employment Tribunal to be judicious and thorough.  No criticism is made about it except that Mr Ferraby was unaware of certain parts of the background, including what are now said to be criticisms of Mr Austin’s engagement.

21.	Mr Austin, it is said, was engaged prior to the events of 12 February 2007 and a reference has been made to notes taken of his examination at the Employment Tribunal.  We have to say this is inconclusive.  It does not indicate he was in collusion on 12 February to set the Claimant up in order to dismiss her. The Tribunal made no finding that Mr Austin had been.  Indeed, the events of this case came to a head on that date to the surprise of everybody, we think.

22.	Mr Ferraby concluded in slightly different terms that the Claimant’s appeal should fail and so the Claimant remained dismissed.  Mr Ferraby’s conclusion was that she actually misrepresented to the board the situation relating to the amount of money owed to Gwynedd on 12 February 2007 and only belatedly acknowledged the true position when presented with emails, although the emails have not been produced.  His conclusion was that the Respondent was justified in dismissing her.

23.	The Tribunal’s conclusion on this material apparently addressed the issues in BHS v Burchell in that it concluded that the Respondent had a genuine belief that she had lied to the board based on the evidence the board heard.  Lying is cited in the evidence of Mr Edwards, who attended the board meeting, and so we have evidence upon which the Tribunal could form that view.

24.	The Tribunal makes no findings on certain critical issues in this case.  A good deal of attention has been given to whether or not the board made a decision to dismiss her and whether the Claimant challenged this material.  We have no doubt that the board did decide to dismiss the Claimant after receipt of the Austin report and adapted the Austin report into the form of a letter of dismissal to the Claimant.  The appointment of Mr Austin was held to be fair by the Employment Tribunal in the light of the company’s response to employ somebody who was a reasonable choice.  It did, however, acknowledge that since Mr Austin was experienced and knowledgeable that itself could place the Claimant at a disadvantage, but there was no evidence to show that this was the case.  No evidence was called by the company at the investigation.

25.	Contrary to the submissions of both of the parties, the Tribunal held that there was no disciplinary hearing.  This was because the investigatory meetings were so styled by the Employment Tribunal.  If there was no disciplinary hearing, then the Claimant has lost out on the statutory disputes procedure and it is contended that it would be unfair.  Nevertheless, the Tribunal appears to mitigate the effect of its finding that there was no disciplinary hearing by indicating that, although that might have disadvantaged her, the implication is that it did not.  The Tribunal found that the material considered by Mr Ferraby was all that was before Mr Austin.

The Claimant’s Case

26.	On behalf of the Claimant, it is contended that the Employment Tribunal failed to make decisions on crucial issues, which were the deliberateness of the Claimant’s action as seen by the Respondent at the various stages at which the decision had to be made and including a consideration of all matters up and including the appeal. In the light of London Ambulance Service NHS Trust v Small [2009] EWCA Civ 220 the Employment Tribunal has concentrated wrongly on the conduct of the Claimant and not upon the conduct of the Respondent.  Further, the changing nature of the allegation and finding against the Claimant by respectively Mr Austin and Mr Ferraby should be seen in the light of Strouthos v London Underground Limited [2004] IRLR 402 CA: a charge of deliberate falsification or lying has to be put squarely and so found.  This is particularly the case in respect of the disadvantage the Claimant must have suffered by having added to her allegations the one about PAYE.

27.	In the light of the softening of the findings against the Claimant in the internal procedure it could not be said that the Respondent had genuinely believed after such investigation as was reasonable that the Claimant had deliberately misrepresented the position to the board.

The Respondent’s case

28.	On behalf of the Respondent, Mr Beeley contends that the Tribunal has gone sequentially through the BHS test.  Although there is no dispute that the issues before the Tribunal did not raise a challenge to the disciplinary hearing conducted by Mr Austin, nevertheless his procedure was fair, matching both the orthodoxy of unfair dismissal and the statutory requirements of the dispute procedure.  The Claimant was justifiably found to have misrepresented to the board the position about the debts to Gwynedd and to HM Revenue & Customs, and she had been dismissed fairly following a fair procedure which included independent elements.

Discussion and conclusions

29.	The difficulty with the Tribunal’s finding about what Mr Austin did is this: at various stages it decides that Mr Austin conducted a disciplinary hearing, alternatively a disciplinary investigation.  It must be borne in mind that the two are substantially different.  In this case the same person did both.  We reject the criticisms on the material which we have seen that Mr Austin had been appointed prior to 12 February 2007, but the Tribunal should have made a specific finding about that since it was an issue in the case.  If he was appointed before then, that would lend strength to the Claimant’s case that there was collusion and, at least in respect of Mr Austin’s appointment, that he was not an appropriate person to conduct at the least a disciplinary hearing, possibly an investigation.

30.	In our judgment the Tribunal has made an important error in its decision about what Mr Austin was doing.  Since the Tribunal has held that there was no disciplinary hearing this offends both the statutory dispute procedure, where there must be a meeting when the proper basis can be put; and also the traditional principles of unfair dismissal in Bugden & Co v Thomas [1976] IRLR 174, where the failure to have a hearing with the person responsible for the dismissal was held to be unfair.

31.	The Tribunal further erred in taking this point when neither party had, but we are stuck with the finding that there was no disciplinary hearing.  It is difficult to avoid the submission that the absence of a disciplinary hearing was itself a procedural unfairness in this case contrary to the 2004 regulations and s.98(4) making this case apparently one which was unfair.

32.	Mr Austin’s involvement is an open question.  It cannot be said with confidence when he was appointed and it cannot be said that the reasons given by the Employment Tribunal for diluting the absence of a disciplinary procedure had been set out clearly.  When it looks at the disadvantage which it found the Claimant may have suffered as a result of missing out on a disciplinary hearing the Tribunal turns inexplicably to the issue to do with the Revenue.  This is not an answer.  If it were to be said that Mr Austin’s involvement, however it is put, whether at investigation or hearing was somehow fair, the Tribunal has not given a reason in paragraph 49 for coming to that conclusion.

33.	Further, although the procedure must be looked at as a whole, including Mr Ferraby’s involvement, it is not clear whether Mr Ferraby knew when Mr Austin was appointed, and whether he had distinguished what was happening with Mr Austin, on the one hand an investigation and on the other a disciplinary hearing.  He took it all from Mr Austin.  Mr Greatorex says with some force that although Mr Austin could have been appropriate to deal with an investigation, he should not have dealt with the full disciplinary hearing for he would not be impartial.  We do not know when he was appointed and so those criticisms earlier made of him by Mr Greatorex are unable to be answered. We do know that if he was involved as deeply as he was in what he described as an investigation then he was not the person who should independently have been put in charge of deciding the question of dismissal.

34.	It looks as though it was his decision.  It is described as a decision and the board, which formally made the decision, adopted it wholesale including very significant passages from what he decided.  Thus, we accept the proposition that Mr Austin was not the appropriate person to decide at a disciplinary hearing, if this was what it was.  If it was not, then there should have been a hearing before somebody else.

35.	The question for us is whether in the light of that legal error the Judgment was unarguably right.  We cannot reach that conclusion.  

Disposal

36.	We are asked by Mr Greatorex to substitute our decision for that of the Employment Tribunal and to make this an unfair dismissal.  We cannot do that for we do not have sufficient material. The central question was to examine in the light of London Ambulance v Small, decided after this case was heard, whether the Respondent’s conduct was unfair and, with respect, this Tribunal focused too much on the Claimant’s conduct.  That would be a matter for contribution or possibly for a reduction under the doctrine in Polkey [1988] ICR 142 HL.  Those will require further investigation.  The issue to be determined is a direction under Strouthos as to what whether it was fair to dismiss the Claimant for the reasons put against her.  We cannot on this material make a decision ourselves and, therefore, it will have to be remitted.

37.	Having canvassed submissions - we are told the Employment Judge has retired - neither party invites us to send this back to the same Tribunal.  This is not a case where exceptionally it would go back to the same Tribunal, and so, with some disappointment to the parties no doubt, this case will have to start again at a fresh Employment Tribunal.  The appeal is allowed.