Industrial Tribunals Northern Ireland Decisions

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URL: http://www.bailii.org/nie/cases/NIIT/2008/09204.html
Cite as: [2008] NIIT 9204_3IT, [2008] NIIT 9204_03IT

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THE INDUSTRIAL TRIBUNALS

CASE REF: 9204/03

CLAIMANT: Daniel McAteer

RESPONDENT: Alta Systems (NI) Ltd

DECISION

The unanimous decision of the tribunal is that the claimant was unfairly dismissed. The award made is £1,036, made up of £208, in respect of the basic award, £424, in respect of the compensatory award and £404, in respect of notice pay.

Constitution of Tribunal:

Chairman: Mr Palmer

Members: Mrs Foster

Mr Wilkinson

Appearances:

The claimant appeared in person and represented himself.

The respondent was represented by Mr Colmer, Barrister-at-Law, instructed by Tughans, Solicitors.

The claimant’s claims

1. The claimant claims unfair dismissal and breach of contract. The breach of contract claim relates to notice pay and outstanding wages.

Costs

2. Both parties applied for costs in this, the substantive case. There are also cost issues outstanding in relation to interlocutory matters. It was agreed by the parties, and we so ordered, that all these applications be adjourned pending the issue of this decision. Further, it was agreed that in the event of a party pursuing an application in respect of costs this will be by way of written submission. The right is reserved for a party to request a hearing to clarify a submission or a response to a submission and we reserve the right to hold a hearing in respect of any matter that we should like clarified.

3. We set the following timetable, with the agreement of the parties:-

(A) Indication of intention to proceed to both the other party and to the Office of the Industrial Tribunals (the Office) - not later than 14 days from the date of issue of this decision to the parties.

(B) Written submissions to be filed with the Office not later than 28 days after the issue of this decision to the parties. A copy of the submission shall be forwarded to the other party immediately after it is filed with the Office.

(C) Responses to the submissions must be filed with the Office within 42 days from the date of issue of this decision to the parties. A copy of the response shall be forwarded to the other party immediately after it is filed with the Office.

The dismissal

4. It was accepted by the respondent that the claimant was dismissed.

Witnesses, documents and submissions

5. Prepared statements of evidence were read to us under oath. There were two statements by the claimant and one each, on behalf of the respondent, by Professor Frederick Valentine McBride (Professor McBride) and Mr Robert McLaughlin (Mr McLaughlin).

6. A number of documents were produced and of those we have taken account only of those referred to during the hearing of the case.

7. Written and oral submissions were made. We have taken these into account.

Unfair dismissal (legislative provisions)

8. By a combination of Articles 126(1) of the Employment Rights (Northern Ireland) Order 1996 (the Order) an employee, who has been continuously employed for a period of not less than one year, ending with the effective date of termination of the contract of employment, has the right not to be unfairly dismissed.

9. Article 130, paragraphs (1) and (2), of the Order provides:-

“(1) In determining for the purposes of this part 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 principle reason) for the dismissal, and

(b) that it is either a reason falling within paragraph (2) or some other substantial reason of a kind such as to justify the dismissal of an employee holding the position which the employee held.

A reason falls within this paragraph if it –

(a) related to the capability or qualifications of the employee for performing work of the kind which he was employed by the employer to do,

(b) relates to the conduct of the employee,

(d) is that the employee could not continue to work in the position which he held without contravention (either on his part or on that of his employer) of a duty or restriction imposed by or under a statutory provision.”

10. Paragraph (4) of Article 130 of the Order provides:-

“(4) Where the employer has fulfilled the requirements of paragraph (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 sufficient reason for dismissing the employee, and

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

11. The respondent, with regard to the reason for the dismissal, relies on “some other substantial reason of a kind such as to justify the dismissal of an employee holding the position which the employee held.” (see Article 130(1)(b) of the Order). The ‘substantial reason’ relied on by the respondent is that trust and confidence in the claimant was lost by the respondent.

12. Article 130, paragraphs (1), (2) and (4) requires us to engage in a two-stage process. The first stage is for us to determine whether the respondent has established the reason for the dismissal (loss of trust and confidence). The second stage, if it is reached, is to apply Article 130(4) of the Order, the ‘fairness’ provision.

13. With regard to the standard of proof required for the first stage we refer to Harvey on Industrial Relations and Employment Law (Harvey), paragraphs D1 821 and D1 822, which we follow and which we set out below:-

“[821]

As Cairns LJ said in Abernethy v Mott Hay and Anderson [1974] ICR 323:-

“A reason for the dismissal of an employee is a set of facts known to the employer, or it may be of beliefs held by him, which cause him to dismiss the employee.”

These words were approved by the House of Lords in W Devis & Sons Ltd v Atkins [1977] AC 931, [1977] 3 All ER 40.

[822]

As the quote of Cairns LJ indicates, the employer will sometimes be able to establish that he has dismissed for a reason which is at least capable of being fair provided he can show that he genuinely believes that he is dismissing for that reason. The fact that the belief may be mistaken is irrelevant. Of course, if the employer has not acted reasonably in relying upon his genuine belief the dismissal may still be unfair: see the decision of the Inner House of the Court of Session in Smith v City of Glasgow District Council [1985] IRLR 79. But the subjective belief of the employer at least enables him to jump the hurdle of establishing a prima facie fair reason for the dismissal. This is true at least for capability and misconduct dismissals. For example, a mistaken and even unjustified belief that the employee has committed a theft can constitute a reason relating to conduct, providing the belief is genuinely held (Trust Houses Forte Leisure Ltd v Aquilar [1976] IRLR 251 and Maintenance Co Ltd v Dormer [1982] IRLR 491).”

14. Although it states at paragraph D1 822 of Harvey that “This is true at least for capability and dismissals”, we consider that the same principles should apply to the case under consideration.

BACKGROUND FINDINGS

The claimant and the respondent

15. The claimant commenced employment with the respondent on 21 July 2000. On 6 August 2003, Mr McLaughlin, by agreement with Professor McBride, phoned the claimant and requested him to resign. The claimant refused to do so. We hold that he was dismissed on 13 August 2003. This is the date on which the claimant received an undated letter requesting his resignation as a director. In that letter the claimant was also asked to hand over, ‘files, accounts, bank statements etc at the earliest opportunity’, which illustrates to us that his contract of employment had come to an end when he received this letter.

16. The claimant was also appointed as a director of the respondent on 21 July 2000 and was, therefore, a director/employee. Approximately two months after he was dismissed as an employee, the claimant was removed as a director of the respondent. This, however, does not directly concern this tribunal: what we consider relevant are those matters concerning the claimant’s dismissal as an employee.

The respondent

17. The respondent was incorporated in January 2000. At the times relevant to these proceedings there were three directors of the respondent, namely, Mr McLaughlin (Chairman), Professor McBride (Managing Director) and the claimant (Financial Director).

18. The respondent is engaged in the Information Technology area of business. At the beginning, and for sometime afterwards, it was heavily involved in developing an idea researched by Professor McBride when he was employed by the Queen’s University of Belfast (Queens). Professor McBride’s research was in the area of computer-based assessments, which, it was considered, would, if developed further, be beneficial in the education field. It was important that the respondent obtain funds over and above those funds raised from the allocation of shares.

The claimant’s duties

19. When the claimant issued these proceedings, the respondent raised a jurisdictional issue, namely, whether the claimant had been an employee of the respondent. This matter was resolved in the claimant’s favour in a pre-hearing review.

20. The decision, on the pre-hearing review, was issued on 12 February 2007. At Paragraph numbered 8 of the decision the claimant’s areas of responsibility are set out as follows:-

“The claimant’s area of responsibility as finance director was defined as including the following:-

The financial aspects of project appraisal

Defining the financial needs of the company

Obtaining finance

Structuring the company

Management accounting

Tax co-ordination

Legal relations

Negotiating of deals

Co-ordination of accounting function

The claimant did not do all the accounting work himself, but after the groundwork by either his firm, or another external accountant, he would advise his fellow directors on the implications of the figures. The claimant was responsible for the financial information being available for the director’s meetings and on occasions he was subject to criticism when information was not provided in time.”

21. In coming to our conclusions we pay heed to the findings as to what were included in the claimant’s duties as an employee.

Qubis Ltd.

22. Qubis Ltd (Qubis) is a company established by Queens. It invests in cash and/or intellectual property rights in ventures that are spin-offs from the university’s research. It made an investment in the respondent company in the form of cash and intellectual property rights in return for shares. Qubis also acts as agent for the University Challenge Fund and as such makes recommendations to the Fund.

The University Challenge Fund

23. The University Challenge Fund (‘the UCF’) is owned by Queens and the University of Ulster. It is a venture capital organisation. It invests in start–up companies, where the company’s proposed product is based on university research at one of the two universities. In return for finance, UCF would be allotted a holding in the organisation assisted.

InvestNI

24. InvestNI (INI) is a governmental body that assists businesses in a number of ways, including the provision of financial assistance.

PCI Ltd

25. PCI Ltd (PCI) is a firm of consultants in which, at times relevant to these proceedings, the claimant had an interest.

Duddy, Mc Ateer & Co. (Duddy, Mc Ateer)

26. Duddy, Mc Ateer is a firm of accountants in which, at times relevant to these proceedings, the claimant, who is a qualified accountant, was a partner.

MATTERS RELATING TO THE REASON FOR THE DISMISSAL

27. Below we set out the catalogue of events put forward by Professor McBride and Mr McLaughlin, between them, that they say led to the loss of trust and confidence in the claimant by the respondent. They got together in August 2003 and decided that the claimant would have to leave the respondent.

The application for UCF funding

28. As a result of informal discussions held with Qubis prior to the respondent being incorporated, principally involving Professor McBride, Mr McLaughlin and Mr Cartin (Manager Director of Qubis), Professor McBride and Mr McLaughlin believed that an application for UCF funding would receive favourable consideration and that the amount of funding would be £100,000. An application was made by the respondent, through Qubis, for UCF funding of £100,000. The application was dealt with in Qubis by Mr Cartin and Mr Moore. The lead role in this application was undertaken by the claimant, on behalf of the respondent. Ultimate responsibility for the application process lay with him. The funding did not materialise. At a meeting held in or around February 2001 Mr Cartin informed the claimant and Mr McLaughlin that no funding would be forthcoming from UCF: it was too late to apply as the respondent was no longer a start-up company. Mr McLaughlin had attended the meeting expecting that funds would be made available. At that stage the respondent was not eligible for assistance as it was no longer a start-up company.

29. Some time later, in September 2001, Professor McBride met Mr Cartin by chance. They had a conversation. As a result Professor McBride believed that the claimant had told Qubis that UCF funding was not required. Professor McBride asked the claimant to forward to him copies of the Qubis application file. The claimant did so and also provided a letter, dated 21 September 2001, explaining his actions with regard to the application. As a result of considering the documentation, and what Mr Cartin had told him, Professor McBride concluded that the claimant had informed Qubis that the respondent did not wish to avail itself of funds from UCF. Amongst the correspondence provided to Professor McBride, by the claimant, was a letter from Mr Moore, dated 15 September 2000, to the claimant and addressed to him at his professional offices at Duddy, Mc Ateer. In the first paragraph of that letter, Mr Moore states that a recommendation would be made that Qubis invest in the respondent: the letter continued: “No UCF funding will be sought”. There was also a letter, dated 9 October 2000, from the claimant to Mr Moore in which the claimant set out the capital structure of the respondents as follows:-

“Ordinary Share Capital £100,000

Loan Capital £100,000”

30. The claimant suggested in his letter of 21 September 2001 that the ‘line’ in Mr Moore’s letter of 15 September 2000, namely, “No UCF funding will be sought” should have read, “”No UCF funding will be sought at this time”.

31. Professor McBride, after considering the matter, formed the view, on the information before him, that the claimant had told Qubis that the respondents did not wish to avail itself of funds from UCF and that in lieu of UCF funding the claimant would be introducing a loan of £100,000, which is the Loan Capital of £100,000 referred to above. Professor McBride had previously formed the view that the claimant wished to increase his holding in the respondent. This could only be done at the expense of the other shareholders, according to Professor McBride. The holdings of the other shareholders would have been diluted.

32. Professor McBride discussed the matter with Mr McLaughlin, who shared Professor McBride’s view. It was agreed that they would do nothing: the reason was that, should action be taken, it could be detrimental to the respondent’s business at that time because, inter alia, the claimant was engaged in important negotiations, with INI and the Council for the Curriculum, Examinations and Assessments (the CCEA), on behalf of the respondent. It was decided to be watchful of the claimant in future and the matter was left there.

Application for funding from INI

33. PCI was engaged to seek financial assistance from INI by way of Compete grant. As part of his duties for the respondent, the claimant was in the lead. It was believed by the other directors of the respondent that the claimant had experience in dealing with financial assistance applications to INI. Mr Canning, a consultant with PCI, assisted in providing parts of the application. Funds were offered by INI which the claimant thought was ‘a fine offer’, but Mr McLaughlin and Professor Mc Bride were dissatisfied with it. The minutes of a Board meeting held on 5 December 2002 record as follows:-

“Professor McBride and Mr McLaughlin expressed considerable disappointment at the offer [from INI] on a number of points –

The time it had taken to get to this point.

The amount of senior time spent in meetings and preparing documentation.

The low grant of 13.6% (against an expectation in excess of 30%).

The loss of R&D [Research and Development] tax rebate, which would have been more than the offered grant, should the grant be accepted.

The high dividend on the preference shares, viz 8% (against an expectation of 4%).

The requirement to set up a capital account to ring fence 33% per annum.

the requirement for an additional £100,000 investment from private sources.”

34. The claimant returned to INI to re-negotiate and it is recorded as follows, in the minute of a Board meeting held on 20 February 2003:-

“INI - Mr Mc Ateer reported on his discussions with David Maxwell re the Compete grant. INI has revised the offer with three major concessions –

Interest rate to be 7% instead of 8%.

An additional £10,000 of grant.

The call for further investment by current shareholders to be delayed until Jan 2004.

The Board was inclined to accept this offer and a meeting with staff investors was scheduled for after the board meeting.”

35. Mr McLaughlin thought that Mr Canning had made a mess of his (Mr Canning’s) contribution to the application for the grant. Both Mr McLaughlin and Professor Mc Bride were critical of the claimant’s overall handling of the application and were particularly critical of the amount of assistance offered by INI, which fell well below their expectations.

36. With regard to the minutes of 5 December 2002, the claimant, after he received his copy, wrote to Mr McLaughlin setting out the context in which he formed the view that the offer from INI was ‘a fine one’. The context was that:-

(a) the respondent needed a cash injection;

(b) at that time the sources of finance were limited;

(d) the claimant could see no reason why the government should, where possible, seek to recover some of its investment.

The claimant asked that the minutes be amended.

PricewaterhouseCoopers (PWC)

37. Mr McLaughlin and Professor McBride said that the claimant had engaged the consultants PWC without authority.

Management accounts

38. It was alleged that the claimant did not produce (or have produced) timely management accounts for Board purposes. During his time with the respondent the claimant produced only four timely management accounts. As a result both Mr McLaughlin and the Office Manager had to resort to keeping their own accounts by way of spreadsheets. Mr McLaughlin described to us the function of management accounts, which we accept. Their basic purpose is to show income and expenditure, the status of the company with regard to debtors and creditors and to ensure that the company is liquid.

Intact system

39. This is a system used, inter alia, for the measurement and costing of time spent by employees on tasks. The respondent alleges that the claimant introduced this system without the agreement of the Board.

The claimant’s behaviour at Board Meetings

40. Professor McBride in his prepared statement stated: “His [the claimant’s] fractious behaviour at its [the Board’s] meetings made it impossible for the Board to function coherently, and was endangering the proper management of the company. Issues which caused friction at Board meetings were the Chairman’s spreadsheets, which he prepared in the absence of management accounts, the claimant’s insistence that a business plan be drawn up, the claimant’s view that the company was under-funded, the issue of time-recording, the view held by the claimant that the respondent was under-funded and issues around the claimant’s view that the respondent was technically insolvent”.

41. In general terms, according to Professor McBride, the Board had become ‘incoherent’: he found himself repeatedly refereeing arguments between Mr McLaughlin and the claimant. These disagreements were about how the respondent should be run as a business, as distinct from how it should conduct its technical development, which was the Professor’s responsibility. The Professor found himself with two colleagues, with a lot more business experience than he, arguing about the best way of running the business. He found himself in the position of arbiter. On numerous occasions he informed his colleagues on the Board that the situation was intolerable and unless they could agree a business plan one of them would have to go. Professor McBride said that, because of his lack of business experience, he was not in a position to make a judgement between the views of the claimant and Mr McLaughlin as to how the business should be conducted and developed. The arguments between Mr McLaughlin and the claimant had been going on for some significant period of time and came to a head in August 2003 when Professor McBride concluded that one of either Mr McLaughlin or the claimant would have to go. However, Professor McBride and Mr McLaughlin got together and decided that the claimant should be the one to go.

The Council for the Curriculum, Examinations and Assessment (the CCEA)

42. The claimant was tasked to negotiate with the CCEA on a possible joint venture between it and the respondent. Negotiations had been going on for some time when the CCEA concluded that to enter the joint venture envisaged would be beyond its powers. The negotiations then ceased. Professor McBride and Mr McLaughlin took the view that the claimant should have checked at an early stage whether the CCEA was empowered to enter the joint venture and by not doing so he had wasted a lot of time.

Court cases

43. The claimant was involved in a number of court cases. The figure was 17. Mr McLaughlin did not wish to be involved with a person who was involved in such a volume of litigation.

The claimant and Increased shareholding

44. Professor McBride and Mr McLaughlin held the suspicion for some time prior to the claimant’s dismissal that he was manoeuvring to increase his shareholding in the respondent, particularly at the expense of the Mr Mc Laughlin’s family’s holding. For example, the suspicion was that the claimant had told Qubis that no UCF funding was required because he had hoped that this would lead to him obtaining more control of the respondent. Professor McBride held the suspicion from approximately six months after the respondent’s incorporation because of the claimant’s ongoing espousal of increasing capitalising. This was despite the claimant’s knowledge that most of the shareholders were unwilling or unable, at that time, to find the required funding to increase capital.

The claimant’s attitude towards the respondent’s financial matters

45. The claimant’s attitude was that financial matters were his territory and no one should interfere in these. He considered that no director should interfere in the domain of another.

Technical insolvency

46. The claimant informed the Board on a number of occasions that the respondent was technically insolvent.

Discrediting Mr McLaughlin

47. It was alleged, by Mr McLaughlin, that the claimant attempted to discredit his competence with Professor McBride.

The dismissal and reasons for

48. The reason put forward for the dismissal was that, because of the conduct set out above, Professor McBride and Mr McLaughlin (and thus the respondent) lost trust and confidence in the claimant.

49. The respondent claimed that the loss of trust and confidence falls within Article 130(1)(b) of the Order: it would fall under, “some other substantial reason of a kind as to justify the dismissal of an employee holding the position which the employee held”. We agree. We accept, for present purposes, that Mr McLaughlin and Professor McBride believed that the conduct set out was true, or much of it was true. We also accept that it would have led the respondent to have lost trust and confidence in the claimant. That being so we are satisfied that the respondent has shown a potentially fair reason for the claimant’s dismissal. However, the matter does not end there. We now have to consider the provisions of Paragraph 4 of Article 130 of the Order, namely, the ‘fairness’ provision.

50. Before we consider the ‘fairness’ provision, we think that we should, at this stage, deal with the claimant’s contention, namely, that his dismissal was because of Mr McLaughlin’s reluctance to subscribe directly for further shares in the respondent. INI, as a condition of their financial assistance to the respondent, required a £100,000 investment from private sources. Mr McLaughlin thought that investment by him could be met by way of ‘salary sacrifice’, by which was meant that he would not draw his fees and this would go towards investment in the respondent. He raised this possibility with INI but, in the end, ‘salary sacrifice’ was unacceptable to them. We do not think that Mr McLaughlin’s proposition with regard to ‘salary sacrifice’ was an unreasonable one to investigate and we do not consider that it indicated that Mr McLaughlin had a reluctance to invest towards the £100,000. We do not accept the claimant’s contention. The claimant also contended that he was made a scapegoat for what he described as “the perilous financial state of the respondent”. We are not satisfied that this was so and reject the contention.

Paragraph (4) of Article 130 of the Order and whether the dismissal was fair or unfair

51. Prior to the claimant’s dismissal no investigation of any description was carried out into the matters that were concerning Professor McBride and Mr McLaughlin. The claimant was not afforded an opportunity to attend any type of hearing where he could put his defence.

52. Mr Colmer put forward the proposition that, as neither the claimant nor the respondent thought that the claimant was an employee, it would not be in accordance with equity to hold the dismissal unfair under the provision contained in Article 130(4) of the Order. For convenience, we again set out that provision and we do so below:-

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

53. We think that the word “it” in (4) (a) above refers back to “the reason shown by the employer”.

54. We do not accept Mr Colmer’s proposition for the following reasons:-

(1) The claimant was in law an employee, as found at the pre-hearing review. The respondent was the employer.

(2) Under Article 130(4) we have, it seems to us, to determine, in accordance with equity and the substantial merits of the case and having regard to the reasons put forward for the dismissal and the circumstances, including the respondent’s administrative resources, whether the employer acted reasonably or unreasonably in treating the reason shown as sufficient for dismissal. The reason for dismissal, in this case, is loss of trust and confidence. It is not that it was believed that the claimant’s position was something other than an employee, which, in any event, would not qualify as a “reason” under Article 130(1) and (2) of the Order, the provisions of which we have set out earlier. It seems to us, therefore, that a belief held by the parties they were not in an employer/employee relationship is not a matter to be taken into account of under Article 130(4), which is dealing with whether the employer acted reasonably or unreasonably in treating the reason shown as sufficient for dismissal.

55. Furthermore, if Mr Colmer is correct in his proposition, we would not apply it for the following reasons:-

(1) We are satisfied that matters (as set out in the pre-hearing review decision) should have alerted the respondent that there was at least a question mark with regard to the claimant’s position.

(2) Also, (a matter that does not appear to have been before the pre-hearing review) the respondent paid the claimant the national minimum wage, at the claimant’s instigation. This also should have been an indication of the possibility that the claimant was not simply a director, but one with employment status.

(3) We are also satisfied, although in correspondence in and around the time of dismissal he did not indicate that he was an employee, that the claimant believed that he was an employee.

Unfair dismissal

56. We have previously stated that there was no investigation into the claimant’s alleged conduct; nor was he given an opportunity to meet the allegations. In the circumstances, we find that the dismissal was unfair.

CONSIDERATION OF THE MATTERS PUT FORWARD THAT ALLEGEDLY RESULTED IN LOSS OF TRUST AND CONFIDENCE

UCF funding

57. Professor McBride based his final conclusion, that the claimant had told Qubis that UCF funding would not be sought, on the letter, dated 15 September 2000, from Mr Moore to the claimant in which it is stated: “No UCF funding will be sought”. The claimant stoutly denied that he had told Qubis that UCF funding would not be required.

58. It will be recalled that Professor McBride received a copy of Mr Moore’s letter in September 2001. In his letter, Mr Moore was summarising what had occurred at a meeting between Qubis and the claimant on the previous day. In the letter Mr Moore stated that a recommendation would be made that Qubis invest £10,000 plus intellectual property rights in return for a 7% shareholding and that no UCF funding would be sought. After receipt of this letter, and before he wrote back to Mr Moore, on 9 October 2000, the claimant reported to his fellow directors, according to the respondent’s evidence, that a Qubis investment of £10,000 plus the intellectual property rights would be made and that UCF funding could be drawn down when required. He did not refer to Mr Moore’s letter to the Board.

59. In his letter of 9 October 2000 to Mr Moore the claimant made no mention of a UCF investment: nor did he indicate to Mr Moore that he (Mr Moore) had been mistaken when he had stated that no UCF funding would be sought and that the true position was that UCF funding would not be required “at this time”. Where, in the letter of 9 October 2000, the claimant referred to the capital structure of the respondent he referred to the 100,000 £1 shares already issued and loan capital of £100,000, which was the amount UCF was expected to invest. The UCF investment would have been by way of a share issue and not a loan. This letter was not revealed to the Board and only came to light when Professor McBride called for the Qubis papers.

60. The claimant told us that UCF had requested particulars of the respondent’s income streams and that he could not provide these as the company was a start-up company. Indeed, there is a letter, dated 3 July 2000, to the claimant from the UCF, signed by Mr Cartin, stating:-

“We would be especially keen to hear from you when you have identified the revenue stream.”

61. It would appear to us that revenue streams were a matter of importance to the UCF. We accept that the claimant was unable to identify these: the company had not been incorporated at this stage and when incorporated research had to be carried out on its proposed product before putting it on the market. In his letter to Professor McBride the claimant referred to Mr Cartin’s letter (and also provided a copy of it.) and stated:-

“The correspondence dated 03-07-2000 frustrates the application for UCF money by referring to Revenue Streams. As you know it would have been impossible at that stage to define Revenue Streams from the project since this in fact was a new company. In other words, on one hand we have been informed that the UCF could only fund a new company situation and on the other we could not confirm Revenue Streams for a company that did not exist. These areas were covered at length by ourselves with Edward Carton (sic) [Cartin]. We find it extremely confusing that Edward now says that if we had made an application for University Challenge for money before the company was formed that this would have been successful. Clearly an application had been made in June 2000.”

62. The application for funding was made in June 2000, which was before the respondent was incorporated. We are satisfied that sometime later UCF sought what was referred to as a “LEDU type” application. By letter, dated 28 August 2001, to his fellow directors, and issued before Professor McBride met Mr Cartin by chance, the claimant wrote to Mr McLaughlin and Professor McBride referring to a meeting held with them on 2 August 2001 and stated:-

“UCF…as discussed with you Ed Cartin has had a business outline as far back as June 2000. As we understood it, the university challenge fund was to be made available at the beginning of the company’s life. We are genuinely confused with the idea that Ed has now requested a “LEDU” type business plan to move the UCF position forward. Again we believe that this process should be brought to an end immediately. It would be imperative for us to know whether or not these funds are to be made available to us as promised.”

63. There seems, to us, that there was some confusion with regard to UCF funding arising from the income streams difficulty, the “LEDU type” application required and what Mr Cartin said in February 2001, namely, that it was too late to apply for funding as the respondent was no longer a start-up company.

64. We accept that had the claimant wished to increase his holding in the respondent and that if UCF funding was not forthcoming it could have presented him with an opportunity to increase his holding. It could also have been an opportunity for others, for example, a venture capital organisation to make an investment. The claimant would not have had control as to how the gap in funding would be filled, or who would be invited to fill it.

65. When we consider the matters put before us on this issue we are not satisfied, on balance, that the claimant told Qubis that no UCF funding would be required.

66. During the course of the hearing a number of Qubis documents (copies) came to light. There is a “File Closed” copy document which states that circa November 2000 it is recorded that no UCF funding would be required. In another copy document headed “ALTA SYSTEMS LTD - INVESTMENT REVIEW” and which appears to have been created by Mr Cartin and Mr Moore it is stated, “Alta approached Qubis Ltd and the Challenge Fund in June 2000. Informal discussions had taken place in March 2000. Following discussions with Mr Daniel McAteer (Shareholder, Director, landlord and accountant for Alta), Qubis Ltd agreed to invest £10,000 for a 7% stake. It was made clear to us that an investment was not required from the Challenge Fund. This was a disappointment to us at the time but we accepted it. Indeed, we noted in writing to Mr Mc Ateer that further UCF funding was not required (David Moore’s letter is attached).” (Emphasis added).

67. We did not hear evidence from either Mr Moore or Mr Cartin and, therefore, the claimant did not get an opportunity to cross-examine anyone from Qubis on their documents: nor did we hear from anyone from Qubis to authenticate the documents. Also, we do not know whether there are other documents that put those disclosed into context. We, therefore, have not taken account of the above documents in coming to our conclusion.

InvestNI

68. It was considered by Mr McLaughlin and Professor McBride that the funding package offered by INI was a poor one: it fell below their expectations. Professor McBride considered that the claimant’s analysis had been misconceived and that the claimant’s negotiating techniques were offensive and belligerent: he based this latter belief on feed back received from officials from INI after the claimant’s dismissal. Mr McLaughlin, who attended some negotiations with the claimant, thought that the claimant’s attitude was abrasive. We consider that we have not heard sufficient evidence (and we have considered the assertions set out at paragraph numbered 8 of Professor McBride’s statement) to draw a conclusion that, on balance, the claimant’s analysis had been misconceived. In paragraph numbered 8 of his statement Professor McBride averred as follows:-

“The company did receive an offer of funding from INI. In my opinion [the words “In my opinion” were added by the Professor when he read his prepared statement to us] the offer was a poor one. We were offered 13.6% of costs against our expectation of c35%-the maximum is 40%. The claimant formulated our proposal and was our lead negotiator. His analysis was misconceived and his negotiation techniques were offensive and belligerent; this was not just my opinion, I also received feedback from INI. After the claimant’s departure and although reluctant to do so, in the end we accepted the offer as the process to receive same had taken almost 2 years, and it was not feasible for the Company to recommence the process again, as we needed the money much sooner than that would have allowed. The Chairman and other shareholders invested new money as required.”

69. It does not necessarily follow that if the assistance offered is less than expected that the claimant was at fault. We did not see any documents issued by INI with regard to the conditions for granting assistance and on limitations on amounts. Mr McLaughlin told us that INI have rules and regulations regulating the amount of grants etc. available. We consider that these would be in published form. We did not see any rules or regulations relating to INI assistance. We did not hear from any officials from INI, nor see any correspondence to suggest that the claimant had been offensive or belligerent. The claimant denied that he had been offensive and belligerent.

70. On the evidence before us, we do not accept that the claimant’s overall analysis was misconceived: nor do we accept the allegations made about the claimant’s negotiating techniques. However, we are satisfied that there was an error in the application in that it would have been more beneficial to have claimed tax credit from HM Revenue & Customs in relation to expenditure on Professor McBride, rather than through INI. We are also satisfied that the INI committee considering the application found the financial aspects of it confusing and that this would not have assisted the progress of the application.

Technical insolvency

71. There is an undated document, from the claimant to Professor McBride and Mr McLaughlin to which we were referred. The document, which was created after December 2002, is explaining the areas covered between Mr Richard Peden and the claimant with regard to the application for assistance from INI. Mr Peden is an accountant and on this occasion he was acting on behalf of INI. In the document the claimant states as follows:-

“Richard [Peden] pointed out that in the first two years of the plan [this is a financial plan issued in December 2002] the company was technically insolvent, ie the net balance sheet figure was negative. It was explained to him that in the earlier period this would only be the case if InvestNI delayed in providing funds for the company. In subsequent periods, it is as a result of none of the development work being capitalised. It was explained that under standing accounting practice (ssap 13) the company would be permitted to capitalise elements of the development work and this would have the effect of creating a ‘healthy’ balance sheet. He accepted this was the correct position and acknowledged that his comments were invalid in the circumstances.”

72. It appears to us that the claimant, as accountant, should have drawn to the respondent’s attention that, in accounts from the respondent’s incorporation, development work built up could, by applying good accounting practice, be capitalised.

73. The respondent’s balance sheet as at 31 December 2002 indicated to us that the respondent was solvent at this point.

74. The following appears in a minute of a Board meeting held on 19 December 2002:-

“It was noted that the projected net assets at the year end would be marginally in the red when depreciation for 2002 was included. The Board felt that outstanding grant monies would return the company to solvency.”

75. The grant monies referred to were funds from LEDU and would not have been received until the next accounting period. It may be, therefore, that the respondent could have been deemed to have been insolvent at 31 December 2002. However, if development work had been capitalised in the accounts it is likely, in our view, that a balance sheet for year ending 31 December 2002 would have shown the respondent as solvent.

76. We are not satisfied that the respondent was, in fact, technically insolvent as the capitalisation of research and development would have strengthened the balance sheet. Besides, the claimant had expressed a desire to purchase some of the McLaughlin family shares and we do not think that he would have indicated such a desire had the respondent been, in fact, technically insolvent. Also, we accept the view expressed by Mr McLaughlin, namely, that INI would not have assisted the respondent (which it did) if it had not been financially sound.

Intact system

77. The allegation was that this system was introduced without agreement. The claimant referred us to the minutes of a Board meeting that took place on 19 December 2002 where it is stated; “Mr McAteer indicated that he would be introducing a new system for accounts and charging in the new year.” There is no record of any objection to the new system being introduced. The system referred to in the minute, the claimant told us, was the INTACT system. We accept that this is so. It appears to us, therefore, that the system was openly introduced.

Management accounts

78. We are satisfied that it was part of the claimant’s duties to produce, or have produced, timely management accounts. We are also satisfied that only four sets of management accounts were produced in a timely way. We consider that management accounts contain very important information necessary to a Board in order properly to carry out its functions. That being so we consider that the claimant neglected a highly material aspect of his duties. We think that the non-provision of sufficient timely management accounts stems from the claimant’s attitude that directors should stick to their particular areas, which is referred to below under, ”The claimant’s Attitude towards Financial Matters”. We are satisfied that the lack of timely management accounts led to friction on the Board and, at times, confrontations. The claimant was contemptuous of Mr McLaughlin’s efforts, by way of spread-sheets, to compensate. We are also satisfied that the lack of management accounting information inhibited the proper operation of the Board.

PricewaterhouseCoopers

79. The claimant told us that he understood that the Board was content to engage PWC. He was unable to refer us to any Board minute showing Board consent. We think, taking account of the claimant’s attitude towards Professor McBride in relation to financial matters (See below under “claimant’s Attitude Towards Financial Matters), that it is probable that he did not seek, or obtain, Board approval to engage PWC.

The Council for the Curriculum, Examination and Assessment

80. This concerns the proposed joint venture between the CCEA and the respondent which turned out to be ultra vires, in the CCEA’s view. We consider that it was a harsh judgement to take the view that the claimant should have checked the vires point at an early stage in the negotiations. We think that it would have been reasonable for the claimant to assume that CCEA had the power to do what it was proposing to do.

The claimant’s attitude towards financial matters

Professor McBride told us:-

“When I complained to the claimant about the lack of financial information, I was met with variants of the rejoinder-‘I don’t tell you how to run the programming activities, so keep out of the financial activities and leave them to me.”

We accept Professor McBride’s evidence. We do not think that this was acceptable conduct. It is important that directors see financial information and have a say with regard to it, particularly in a company such as the respondent which was in the course of developing a product and income was meagre.

Court cases

82. Leaving aside any matters relating to the rights of a person to engage the courts and to defend proceedings, we are satisfied that the claimant’s activities in the courts did not disadvantage the respondent. We heard no evidence that they did.

The claimant’s behaviour at Board Meetings

83. We heard two completely different versions on this aspect. Mr McLaughlin told us that in 2002 meetings between him, Professor McBride and the claimant“[G]ot more fractious, because largely of his [the claimant’s] insistence that he [the claimant] should deal with all finance matters.” Professor McBride said that the claimant’s fractious behaviour at Board meetings made it impossible for the Board to function coherently and was endangering the proper functioning of the respondent. On the other hand, the claimant said that whilst there were differences on the Board there was no fractiousness, nor was there friction.

84. We are satisfied that, on the Board, there were frictions between Mr McLaughlin and the claimant. Mr McLaughlin believed that the claimant wished to get his hands on some of the McLaughlin family shares in the respondent and he was also concerned that management accounts were not being produced in a timely way and this resulted in him having to keep spreadsheets. Also, the claimant regarded finance/accounts as his sole territory. The claimant said that he got on well with Professor McBride and they did not have rows. He did not say that he got on well at Board meetings with Mr McLaughlin. The claimant’s view of Mr McLaughlin (not expressed to Professor McBride) was that Mr McLaughlin was contributing nothing to the respondent: at one stage of the proceedings he told us that he had difficulty in understanding what Mr McLaughlin’s role was with the respondent. It was clear to us that Mr McLaughlin made a positive contribution to the respondent’s business.

85. Professor McBride told us that he found himself repeatedly refereeing arguments between Mr McLaughlin and the claimant. On numerous occasions Professor McBride told Mr McLaughlin and the claimant that one of them would have to go. Matters came to a head in August 2003 when the Professor finally concluded that one of them would have to go. He discussed the matter with Mr McLaughlin, but not the claimant. It was decided that, of the two protagonists, the claimant would be the one to go.

86. From our observations of the claimant during the course of these proceedings, we saw that he could be volatile at times. We considered whether this could be put down to him operating on his own behalf in unfamiliar territory, but concluded that he is a person of considerable ability and confidence who would take appearing as a personal litigant more or less in his stride.

87. We are of the view that there were difficulties at Board meetings and we consider, on balance, that the claimant was to blame. In reaching this conclusion we again considered, inter alia, his attitude towards the financial aspects, which he considered his sole territory.

Discrediting Mr McLaughlin with Professor McBride

88. On balance, we are not satisfied, on what we heard, that this occurred, namely, that the claimant attempted to discredit Mr McLaughlin’s competence in Professor McBride’s eyes. The claimant might well have been critical of Mr McLaughlin at Board meetings, but this is not something unusual in Board situations.

Claimant and increased shareholding

89. We are satisfied that the claimant wished to increase his interest in the respondent. However, based on the evidence that we heard and on balance, we are not satisfied that he used underhand methods to achieve this.

Loss of confidence

90. Based on the matters that we have accepted that occurred, we are satisfied that there was a justifiable build-up of dissatisfaction with the claimant that was sufficient to lead to a loss of trust and confidence in the claimant by the respondent.

Compensatory award

91. We consider that it would have taken 13 weeks to arrange an investigation, for the investigation to be carried out and for hearings to be held. The claimant would have been employed during this period. His gross earnings were £12,000. We consider that his nett earnings would have been £7,000 per annum, namely, £134.60 per week.

92. For this 13 week period we award 13 weeks at £134.60 per week, which is £1,749.80.

93. The claimant was free on 13 August 2003 (the date found to be the date of dismissal) to seek employment. The claimant is a qualified accountant and an experienced businessperson and thus we are satisfied that he would have had little difficulty, in 2003, in replacing the gross earnings of £12,000 per annum. In our view it would have taken him 16 weeks to do so. We, therefore, award him another three weeks at £134.60 per week, which is £403.80.

94. We also award £200 for loss of statutory rights.

95. The total compensatory award is £2,354.00.

96. We now consider whether there should be a Polkey deduction. Under Polkey we determine what the chances were of the claimant being dismissed had a proper investigation been carried out and a proper hearing held. We find the chances to be 40% and we make a deduction of that percentage, reducing this award to £1,412.40.

97. In respect of the compensatory award, Article 157 (6) of the Order provides:-

“(6) Where the tribunal finds that the dismissal was to any extent caused or contributed to by any action of the complainant [claimant], it shall reduce the amount of the compensatory award by such proportion as it considers just and equitable having regard to that finding.”

98. We further reduce this award, under the above provision, by 70% to £424.00.

99. The nett compensatory award is £424.00

Basic award

100. The claimant’s date of birth is 10 April 1965. For the purpose of this award, he was employed for three years. His salary was £12,000 per annum, which is £230.77 per week.

101. The award in respect of the basic award is £692.31, before any deduction.

102. In relation to reductions in the basic award, Article 156 (2) of the Order provides:-

“(2) Where the tribunal considers that any conduct of the complainant [claimant] before the dismissal (or, where the dismissal was with notice, before the notice was given) was such that it would be just and equitable to reduce or further reduce the amount of the basic award to any extent, the tribunal shall reduce or further reduce that amount accordingly.”

103. Applying Article 156 (2) above we reduce this award by the same percentage as the compensatory award, namely, by 70%.

104. The nett basic award is, therefore, £208.00.

Breach of contract

105. The tribunal also has jurisdiction to hear claims for breach of contract under the provisions of the Industrial Tribunals Extension of Jurisdiction Order (Northern Ireland) 1994 (the Order of 1994).

106. Article 3 (c) of the Order of 1994 provides:-

“Proceedings may be brought before an industrial tribunal in respect of a claim of an employee for the recovery of damages or any other sum (other than a claim for damages, or for a sum due, in respect of personal injuries if:-

(a) the claim arises or is outstanding on the termination of the employee’s employment.”

107. This part of the claimant’s claim falls under 2 heads, namely, unpaid wages and notice pay.

Unpaid wages

108. The claimant’s salary was £12,000 per annum. In return for his salary he agreed to attend one day per week. He also agreed that where one of the firms with which he was associated namely, Duddy, McAteer and PCI, carried out work for the respondent the charges for those parts of that work carried out personally by the claimant would count towards his salary of £12,000: in other words, that work was carried out as part of his duties as an employee and was part of the consideration for his salary.

109. The claimant was employed by the respondent for 37 months and, therefore, was due to be paid £37,000 for that period. Professor McBride’s evidence, which we prefer, was that the claimant received a total £43,228.67. This was made up of wages of £7,298.51, payments to Duddy, McAteer of £5,615.45 and payments to PCI Ltd of £30,314.71. The amounts of £5,615.45 and £30,314.71 referred to were in respect of work carried out, in those firms, for the respondent, personally by the claimant. We hold that the claimant has been paid in full in accordance with the arrangements entered into.

Notice pay

110. Under the provisions of Article 118 of the Order the claimant is entitled to three week’s nett pay, the claim being a breach of contract one. We, therefore award the claimant three times £134.60.

111. The award in respect of Notice Pay is £404.00

Total compensation

Compensatory Award: £424.00

Basic Award: £208.00

Notice Pay: £404.00

Total: £1,036.00

112. This is a relevant decision for the purposes of the Industrial Tribunals (Interest) Order (Northern Ireland) 1996.

Chairman:

Date and place of hearing: 15 - 17 October 2007,

5 - 6 November 2007,

21 November 2007,

18 - 19 February 2008,

28 February,

7 March 2008,

12 March 2008,

8 April 2008,

16 June 2008,

24 - 25 June 2008,

5 August 2008,

6 August 2008,

18 August 2008,

29 September 2008 and

22 October 2008, at Belfast

Date decision recorded in register and issued to parties:

22.