Appeal No. UKEAT/0089/11/LA

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 26 October 2011

Before
THE HONOURABLE MR JUSTICE LANGSTAFF
MR P SMITH
MISS S M WILSON CBE

INCHCAPE RETAIL LTD	APPELLANT

MR M WHITING	RESPONDENT

Transcript of Proceedings

JUDGMENT

APPEARANCES

For the Appellant	MISS B SUNDERLAND
(Solicitor)
Crossland Employment Solicitors
99 Milton Park
Abington
Oxon
OX14 4RY

	
For the Respondent	Written Submissions	

SUMMARY
UNFAIR DISMISSAL – Reasonableness of dismissal

Though open to criticism in many matters of detail, an Employment Tribunal’s central conclusion that a dismissal was unfair because the employer had not carried out an investigation of the facts which was reasonable in the circumstances was one which was clear, unaffected by obvious error, not perverse, and one which it was entitled to reach. 

THE HONOURABLE MR JUSTICE LANGSTAFF
Introduction
1.	An Employment Tribunal sitting in Rhyl County Court and in Abergele decided in 2010 that the Claimant had been unfairly dismissed by the Respondent employer and ordered the Respondent employer to pay costs in respect of an abortive hearing that had occurred earlier.  This appeal, against those findings, centres upon the reasoning of the Tribunal as far as disclosed in its written Reasons of 28 September 2010.

2.	The background facts were these.  The Claimant was a manager in the motor trade.  He was paid by a combination of bonus and commission.  In 2009 facing financial stringency, the bonus scheme was changed.  Commission depended on a percentage of target achieved and, under the new, or revised scheme at any rate, a figure which was personal to the employee concerned, on what were known as On Target Earnings (OTE).  The higher that was, the greater could be the bonus.

3.	The OTE personal to the employee was sent to this Claimant by soft copy, that is, electronically attached to an email.  He received it on 3 March 2009.  It showed his maximum potential bonus as being £6,400.  That was less than he had hitherto enjoyed.  The same day he amended the figure on the personal pay plan he had received to £15,000.  That would have given him more by way of bonus than he had then been receiving.  He saved the change on the document and he saved it to the email in which it had come.  The consequence was that anyone looking at the email might conclude that the attachment was the original attachment and showed £15,000 rather than £6,400.

4.	In April 2009, toward the end of the month, the Claimant received his pay report.  That showed around half of what he would have expected to have received by way of bonus, if the bonus had truly been based on £15,000.  He complained about the level of bonus to his general manager, aptly named “Mr Proffitt”, and to finance staff.  He did not claim to Mr Proffitt that he had electronic evidence of the scheme showing that he had been underpaid, but he did mention this to Sarah Watkins, a parts manager, who told him that he should take the matter up with Mr Proffitt.  He took it up with both Mr Proffitt and with an accountant, Mr Perry.  He asked them to check the electronically saved pay plan.

5.	A few days later he was suspended.  He said he told the employer (Mr Perry and Mr Proffitt) that he did not remember altering the document.  The Tribunal found that he denied having done so.  An investigation by the IT Department showed the date of the alteration which had been made to the saved attachment.  He was then disciplined by his employer for falsifying a document and for altering a document to gain a higher rate of bonus.  Following the disciplinary meeting on 8 May 2009, he was dismissed.  He appealed.

6.	The appeal was heard by Mr Savage.  He adjourned the hearing because he wished to investigate what seemed to him to be a potentially acceptable reason or excuse given by the Claimant, but ultimately determined that the dismissal should stand.  

7.	The Tribunal faced a claim by the Claimant that he had not been dismissed for any reason which was within s.98 of the Employment Rights Act 1996.  He suggested that there were other reasons, which he specified, for his dismissal.  He maintained that there had been no fair dismissal.

8.	The approach which a Tribunal should take to any such case is well established and not in doubt.  However, because of the particular way in which this Tribunal decision is drafted, it justifies restatement.  First, a Tribunal has jurisdiction conferred by statute: except in those relatively few cases where the Tribunal is authorised by statute to look at the contractual relations between parties and whether there has been an actual breach of contract, it is constrained by the terms of the applicable statute.  Under s.98 of the 1996 Act, the employer must show the reason or, if more than one, the principal reason for the dismissal and that it is a reason which, in this case, related to conduct.

9.	S.98(4) provides:
“98
(4)	Where the employer has fulfilled the requirements of subsection (1), 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 unreasonably in treating it as a sufficient reason for dismissing the employee.”

10.	The case law, which is based squarely on those statutory provisions, sets out four questions of the answers to which the Tribunal must be satisfied before it may conclude that there has been a fair dismissal.  First, the employer must have had a genuine belief in the employee’s misconduct.  Second, that belief must be reached on reasonable grounds.  Thirdly, it must be reached after a reasonable investigation.  And fourthly, dismissal, assuming that is the sanction, must be within the range of reasonable responses for the employer.  It is common ground that that should be the approach which a Tribunal must take (see British Home Stores Ltd v Burchell [1998] IRLR 379) to the point where the case law need not be cited in Tribunals.  

11.	All those matters require the Tribunal to stand back from the facts and to ask not what it would have decided had it been the employer, but to focus upon whether the employer was entitled to come to the conclusions it did.  Therefore it is irrelevant, save in answering the four points, to come to any conclusion as to the underlying merits of the case against the employee on the one hand or, in his favour on the other.

12.	It is not for the Tribunal to substitute its own view of those underlying facts, although the Tribunal must necessarily evaluate the extent to which the employer was entitled to reach the view it did of those very same facts.  

13.	Next, and importantly, where a Tribunal is looking at an allegation that there has been unfair dismissal, it should in its Reasons make it clear what its decision is in respect of each of the four matters we have identified. That is best done by treating each distinctly, remembering always that it is the statute which has to be satisfied, and there may be cases where the test deriving from British Home Stores Ltd v Burchell, hallowed by time and other authority though it may be, may not necessarily give the answer.  That is not, however, the case here.

14.	If a Tribunal analyses the facts by dealing with each of the heads separately, it is unlikely to fall into significant error.  Separate questions may arise where there is an allegation that if a Tribunal should find a dismissal to have been unfair, the dismissal was contributed to by the blameworthy conduct of the employee.  That does require a decision by the Tribunal as to whether the conduct of the employee was blameworthy and did cause, or in part cause, his dismissal. It will require a finding of fact as to that which the employee did or did not do.  To that extent, it is relevant for a Tribunal to investigate the underlying facts and it will do so, not in substitution for the view which the employer reached, but to reach its own view but in order to determine that particular question which arises, in statute, under s.123(6) of the 1996 Act. 

15.	Here, the appeal is presented to us by Miss Sunderland who appeared for the employer below.  The Respondent employee has not attended, nor has he been represented.  He has told us that the cost of travel and of representation is too great but he has, and helpfully, submitted a written skeleton argument produced by counsel who appeared below.

The submissions
16.	The Notice of Appeal focuses upon the submission that the Tribunal substituted its own view for that of the employer.  In addition, it queries the finding which the Tribunal made that the Respondent here should have carried out further investigation and, in one small respect, complains that the Tribunal did not set out what it should have done about previous alleged misconduct of the employee.

17.	Essentially, however, the focus is upon substitution of view.  No central attack here is made upon the quality of expression of the reasoning by the Tribunal.  No suggestion is made that the decision was perverse.  Save in the respect we have mentioned briefly, there is no attack here on the basis that the Tribunal was in material misapprehension of fact.

18.	In order to understand the submissions, to which we shall return in greater detail below, it is necessary to set out how the Tribunal approached the matter in its decision.  Unfortunately, the decision is not a model of clarity.  Far from it.  It does not carefully analyse the matters which the statute requires to be addressed, separately and distinctly.  It is discursive.  It is, on occasions, difficult to disentangle what the Tribunal is reciting as having been a submission made to it, and what the Tribunal is concluding as its own considered view.  The confusion which can thereby be created may be responsible for having inspired this appeal.

19.	That said, how did the Tribunal approach the facts?  It set out the facts as it found them in paragraph 3.  Interspersed with those facts were comments.  At paragraph 3.17, Miss Sunderland complains there is evidence of substitution of view.  The relevant paragraph reads:

“3.17 Mr Perry held an investigation meeting with the Claimant on 28 April 2009.  The Claimant gave the explanation we heard.  He acknowledged that he had stated that he needed the money “as he had spent it”.  He was asked if he could remember being asked about altering the document and he could not remember.  We accepted the Claimant did deny this at the time […]”
	
20.	Thus far, it might be thought that there is no, or little, problem, but the Tribunal then go on to say:

“[…] But given that it was eight weeks since he had looked at the document it did not surprise us […]”

21.	Miss Sunderland says, with justification, that the Tribunal here was excusing the conduct of the Claimant when that was irrelevant to any task the Tribunal had to perform.  The Tribunal should have been focusing upon whether the employer’s view of the conduct was, or was not, justified, not what view it would have taken itself, had it been hearing the primary facts.  

22.	At a later stage, when the Tribunal was setting out its conclusions, the Tribunal said this:

“8.	The start of this problem was when the Claimant received the document at page 24 which provided details of the new bonus scheme, it provided, amongst other things, detailed rules, the scheme was discretionary in nature, the franchise director had to approve the bonus.  It was addressed to the Claimant and showed his personal details, his basic salary and an OTE bonus.  No pay plan was attached at the time and although it was suggested the Respondent had provided the Claimant with details of the Derby meeting we did not accept this.  The Claimant then received a pay plan which showed the bonus, the Claimant altered it to what he considered to be the correct figure £15,000 as per the document at page 24.  He altered it and saved it to an original file.  The Respondents maintained the Claimant should have made a separate copy.  The Claimant relied on the original documentation that he received as setting out his entitlement, the Respondents say this was implausible, a plan hatched early on it was an elaborate plan from the beginning.  The Claimant was guilty of double bluff when he telephoned Mr Perry to check his computer and asking Sarah Watkins to check the position for him.  In other words if I was guilty why would I have done this. If the Claimant had never queried his bonus nothing would have been done by the Respondents.  Was it pre-planned, on the evidence we heard we could not say that this was the case.  The Claimant did not present as devious either before us or before the Respondents on the evidence.  The document in question that was the cause of the difficulties had come from a central source for employees to us (sic) as they wished.  They had been permitted to alter anything.  The Respondents could have prevented this if they had wished to.  The alteration the Claimant had made did not make any difference as it was the Respondents that had the information to enable them to calculate the bonus.  Mr Savage originally felt on the evidence that he had that the Respondent had made a mistake […]  The bonus paid to the Claimant was the correct one in accordance with information held by the Respondents.  We did not accept on the evidence that we heard that the Respondents could have paid the wrong bonus given that they had possession of all the relevant information to enable the bonus to be calculated.”
	
23.	That passage is open to the objection, submits Miss Sunderland with some force, that first, the Tribunal had reached a conclusion as to the details which the Claimant had received at a meeting in Derby about the bonus scheme, when it was in no position to do so, and that was a matter of knowledge for the employer.  Secondly, and more importantly, it came to a conclusion about the Claimant’s deviousness, or otherwise, which was a plain substitution of view.  It dealt with matters which were irrelevant, that the Respondent could have prevented a document being altered - when the issue was not whether the Respondent was at fault, but whether the Respondent thought the employee was.

24.	The last sentence was one which was, again, determining the facts as opposed to asking whether the Respondent was entitled to come to the conclusion that the employee had intended to persuade the employer on a false basis to give him a greater bonus.  She then took us back to paragraph 3.3.  That was dealing with an allegation, made by the employer, that the Claimant had been in trouble with the employer before, by reason of his conduct.  The employer produced documents, held on file, which showed the result of a disciplinary meeting and a written final warning which the employer said had been sent to the Claimant.

25.	The Tribunal said in respect of that:

“The letter of outcome was sent but the Claimant did not receive it and we accepted that this was the case.  If it was as serious as the Respondent felt it to be it surprised us that there was no other evidence.  We accepted that had the Claimant been aware of the outcome he would have appealed given the circumstances.”

The issue, of course, was not whether the Claimant had in fact received the warning, but whether the employer was entitled to think that he had.

26.	Although defects exist in this decision, we remind ourselves that we must look at the Tribunal decision as a whole.  Tribunal decisions are rarely the finest examples of the draughtsman’s art.  They sometimes are discursive, where being succinct might be better.  They are sometimes succinct, where being fuller might assist.  But a Tribunal does not have to cross every “t” nor dot every “i" if, by what is said, the reader may understand what the reasons are, or sufficiently understand them, so as to know why he has won or lost.  Here, the Tribunal decision contained much which is not of obvious relevance.  It sets out the submissions made by the Claimant, in what was described by Miss Sunderland as “enlarged shorthand”, of which another description might be “stream of consciousness”.

27.	Such an approach, inevitably, resulted in the inclusion of submissions which were of no direct relevance to the ultimate conclusion the Tribunal was to reach.  It is not necessary, when a Tribunal is setting out the submissions of any party, for it to set out submissions which are irrelevant to the decision it has to reach.  Only those which are relevant, or of obvious potential relevance, need be included.

28.	However, it is plain to us that the Tribunal may be perhaps excused for having dealt with its own reaction to the primary facts, by the way in which the matter was addressed by counsel for the Claimant.  It is a pity, in our view, if the Tribunal’s Judgment is a faithful record of what was said, that the matter was left with the Tribunal as it appears to have been - see page 8, where it is recorded that counsel required the Tribunal to ask itself

“Are we satisfied that the Claimant deliberately set out to defraud.  Or suggesting that this was a mistake on his part? The fault lies in the lack of appropriate procedures.”

29.	Those are questions which have no part here, save insofar as the Tribunal had to go on to consider contributory fault which, in this part of the submissions, it does not appear counsel was addressing.  It may be that it was that which led to the Tribunal making an apparent substitution of view, to which Miss Sunderland draws our attention.

30.	We return to the way in which the Tribunal, taking its decision as a whole, answered the statutory questions.  It was very clear that the employer had a genuine belief that the Claimant was guilty of the alleged misconduct.  It is unclear to us what the Tribunal did decide as to whether that belief was based on reasonable grounds.  Some of the comments might suggest that it was.  Some might not.  On one view, the case for the employer was a powerful one.  On another view, however, the documentation (see page 65 of the bundle, the line manager’s pay plan) might cast a different light upon it, if it had contained the instruction to the Claimant that he would be forwarded a soft copy of the pay schedule which “will enable you to input numbers and model how the bonus will work, given different levels of performance during the year” which, depending on the evidence, might be open to the conclusion that changing the bonus figure, as he did, was doing exactly what he had been asked to do in the first place.

31.	All however, as it seems to us, turned upon whether the Respondent concluded on reasonable grounds, and after a reasonable investigation, that the Claimant’s state of mind, his intention, was as the Respondent genuinely thought it was, that is that he was attempting to defraud his employer of bonus to which he was not entitled.  As to that, on one of the four respects to which Burchell draws attention, the Tribunal’s view was clear at paragraph 9.

“9.	The importance of an investigation cannot be overstated particularly when the allegations are serious and will have a great impact on an individual’s career.  This was an allegation of fraud against someone in a managerial position.  Had the Respondents carried out an investigation such as was reasonable in all the circumstances when it formed the belief that the Claimant was guilty of the misconduct alleged.  In our view they did not in the circumstances.  They should have taken a full statement from Mr Proffitt the Claimant’s immediate line manager, from Jane Malcolm [her name was actually Malkin], Sarah Watkins and Mr Perry (even though he conducted the initial investigation).  In our view Mr Savage initially reached the right decision when he adjourned the appeal hearing.  The Respondents had not carried out as much investigation into this matter as was reasonable in the circumstances of this case.  The investigation was not one that fell within the range of reasonable responses that a reasonable employer might have adopted.”

32.	Miss Sunderland submits that, first, the Tribunal does not identify there what each of Proffitt, Malkin, Watkins and Perry could have offered to the investigation.  It is submitted that it is necessary to have some understanding of that, in the context of this decision, to understand the reasoning.  As to all except Proffitt, no complaint had been made by the employee either in his ET1 or in the submissions of counsel which, as we say are set out in full, so it appears, that any of them should have been spoken to or provided a statement, and that it was a failure of the employer not to take a statement from them.  However, it is plain to us that the Tribunal’s central focus here was on Mr Proffitt.  He, as it appears from their decision, was the immediate line manager of the Claimant.

33.	In reviewing the facts the Tribunal, at paragraph 3.19, said this:

“3.19 There was no statement from Mr Proffitt nor from Sarah Watkins.  Given Mr Proffitt’s involvement and given he was in charge of the Claimant and whilst at the same time noting that Mr Perry was present on some of the occasions, it surprised us that as part of the investigation a statement was not obtained from Mr Proffitt.  He could have addressed the following issues:
(a)	Whether the Claimant’s actions could have led to the Claimant receiving a higher bonus, particularly given what Mr Carr said about not knowing Mr Proffitt’s practices in these matters.
(b)	Whether if Mr Proffitt had authorised the payment would have got past head office.
(c)	What explanation had been provided by Mr Proffitt about the new bonus scheme to the Claimant given on the evidence of the Respondent and it was on the face of it a reduction on salary.
(d)	Whether the Claimant had received a hard copy of the matrix.”

34.	This, it seems to us, reading the Tribunal’s decision as a whole, shows what the Claimant had in mind would have been the purpose of taking a statement from Mr Proffitt.  We have to ask in the light of that whether the Tribunal was entitled, on the basis it set out at paragraph 3.19, to conclude that there should have been a full statement from Mr Proffitt and that, by reason of it not being taken, the investigation fell short of that which a reasonable employer in the circumstances would have conducted.

35.	It is not sufficient simply to assert that somebody could have been spoken to.  Miss Sunderland argues that on the matters in respect of which it is said Mr Proffitt could have assisted, he would not have assisted the Claimant but could only have assisted the employer’s case. Thus as to item (d), if his evidence had been that the Claimant had not received a hard copy of the matrix, that would have been no more favourable to the Claimant than the evidence already before the employer.  If however, his evidence had been otherwise, that he had received it, then the Claimant’s approach to his employer, relying upon an email copy, which he said he could not remember altering and then denied altering, would have been more difficult to characterise as innocent.  Thus, the failure to call Mr Proffitt to give that evidence could not have assisted the Claimant.

36.	We acknowledge that that point has some substance. However, Miss Sunderland’s arguments that each of the other three points lacked any potential assistance for the Claimant do not, we think, convince us.  As to the Claimant’s actions, (a), and to what they would have led, it seems to us that, given what was in issue was the Claimant’s own motive, if he had known that Mr Proffitt’s practice was always to check a request for bonus against what might loosely be described as official information, it might be argued he would realise that there was no point in relying upon a document which he himself had altered.  He would not succeed.

37.	The obvious point is that if someone knows they cannot succeed, it is less likely that they will intend to take a step in order to try to do so.  The same point arises in respect of (b), and as to (c), the explanation provided by Mr Proffitt about the bonus scheme could very well have been central, not only in favour of the employer, but in favour of the employee.  In short Mr Proffitt plainly, on the findings of fact, occupied what the Employment Tribunal was entitled to regard as a pivotal role.

38.	Accordingly, it seems to us, the Employment Tribunal here have come to a view for which they have provided sufficient and cogent reasons for concluding that the investigation was defective in not taking a “full” statement from Mr Proffitt.  It emerged during the course of submissions to us that, as it happens, no statement at all had been taken, let alone a full one, but, putting that to one side, the conclusion that followed from that as to that which a reasonable employer would have done was, short of perversity, one for the Tribunal itself to reach.  We cannot say that the Tribunal was perverse.  It was entitled to come to that view.

39.	Whatever the shortcomings, therefore, of the decision, to some of which we have drawn particular attention and upon which Ms Sunderland relies, what is clear is that upon well-reasoned acceptable conclusions of the Tribunal, it did not accept that the Burchell test had been fulfilled by the employer.  Accordingly, as it seems to us, that is sufficient to dispose of this appeal upon its central ground.

40.	We turn to the other two grounds, first that at paragraph 6(2) of the Notice of Appeal, which argues that the Tribunal failed to identify how the further investigation would have assisted the Appellant.  In our view, we have just dealt with that matter.  Second, as to 6(3), it is said the Tribunal was in error of law in discounting the clear documentary evidence of a final written warning being issued, preferring the uncorroborated oral evidence of the employee.

41.	This, it seems to us, is beside the point as to the fairness of the dismissal, if that dismissal is to be faulted upon the ground that no reasonable procedure was adopted to determine the misconduct of the employee.  Instead it relates, as it seems to us, principally to the question of sanction.  It did feature, we should note, in Miss Sunderland’s submissions that the evidence given on paper by Mr Carr, the first manager to have dismissed at the original disciplinary hearing, took into account his view that the employee had been guilty of deceptive conduct previously, in respect of his employer, and that this was a matter he could rely upon to characterise the employee’s conduct on this particular occasion.  That, however, does not assist the Appellant in this appeal.  If relevant, it goes to the question whether the employer had a reasonable belief in the Claimant’s guilt.  Since we have determined this appeal upon the basis, quite clearly set out in paragraph 9, that there was no reasonable investigation, it does not seem to us material to determine whether and to what extent there had been further reasons for concluding that the employee was guilty or that the further reasons for thinking that the employer had, as the Tribunal accepted the employer did, have a genuine belief in misconduct.

42.	Accordingly, despite the sustained and thoughtful presentation of Miss Sunderland, to which we are grateful, we have no alternative but to dismiss this appeal.