United Kingdom Employment Appeal Tribunal

BAILII case number: [1991] UKEAT 532_89_0711

Appeal No. EAT/532/89

EMPOLYMENT APPEAL TRIBUNAL

4 ST. JAMES'S SQUARE, LONDON, SW1 4JU

At the Tribunal

On 7th November 1991

Before

THE HONOURABLE MR JUSTICE WOOD MC (P)

MR T S BATHO

MR J D DALY

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TITHEBARN LTD          APPELLANTS

MR S J HUBBARD          RESPONDENT

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Transcript of Proceedings

JUDGMENT

Revised


 


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APPEARANCES

For the Appellant MR I D PRINGLE

(Counsel)

Alsop Wilkinson

India Buildings

Liverpool

L2 ONH

For the Respondents MR M MEEKE

(Of Counsel)

Lee Barber Goodrich & Co

St John's Chambers

The Terrace

Torquay

Devon

TQ7 1BP


 


MR JUSTICE WOOD (PRESIDENT): This is an Appeal from a Decision of an Industrial Tribunal sitting at Exeter in May and July of 1989 under the Chairmanship of Mr Walton, on which occasion Mr Hubbard was alleging that he had been unfairly dismissed by his employers "Tithebarn Limited". The Tribunal so found and they directed that there should be a reduction of 25% from any compensation for contributory fault. The compensation hearing was adjourned, it has not yet been heard.

Looking at the Decision in the round the Tribunal were unanimous that procedurally it was flawed and therefore the dismissal was unfair. But when looking at the issue of conduct, the reason for the dismissal, they found by a majority that the Applicant had not been in breach of his Contract of Employment.

The Appeal before us by the Company is on that second issue. There is no appeal against the finding that the dismissal was procedurally unfair but it is said that the reason for the dismissal will be highly relevant in connection with any assessment of compensation.

There is a cross appeal on the finding of 25% contribution because it is said that if in fact there was no misconduct then there was no reason to reduce by the 25% for contributory fault.

It became apparent during submissions before us that at the Tribunal hearing at which, both present Counsel were also appearing, the issue of contributory fault had not been raised during submissions and prior to the reasons being given. It seems to us therefore that in any event the issue of compensation and contribution, whether it is under Section 74(6), the so called contributory negligence section, or under s.74(1) a just and equitable provision should be heard afresh and that neither side has had an opportunity of arguing that 25% reduction for contributory fault. In any event therefore this matter will need to be remitted for that hearing on compensation and we take the view that the contribution of 25% should be set aside so that the matter can be completely argued afresh.

The real point therefore is whether the activities of Mr Hubbard were such as to amount to misconduct. The case on each side could be put in this way, as indeed it was by the Industrial Tribunal. The Company were suggesting that Mr Stephen Hubbard was seeking to entice away other employees so as to sell products outside the Company and to leave the Company to set up in competition. That is set out in paragraph 2 of the Decision. The way it was put to us today by Mr Pringle was that he was enticing employees in his own team to come with him to set up business and he did so while still employed and in Company time. The case put forward by Mr Hubbard was to deny that he had ever so acted.

The respondent Company "Tithebarn Ltd", the appellants before us, manufacture and sell animal foodstuffs; it is a nationwide operation, Scotland, England and Wales, employing about 200 people of whom about 100 are in the sales force.

Mr Stephen Hubbard has two brothers. They in the past have been involved in the Company and they have in fact set up in competition as we understand it. Mr Stephen Hubbard was working with the Company from January 1980 until the mid-1980's and during that time his performance had been excellent, his commitment was unquestionable. Towards the beginning of that year, 1988, Stephen Hubbard became the National Sales Trainer. He had therefore a very considerable responsibility and influence on Area Sales Managers and others.

Mr Gillard, who was senior to him in management, noticed during 1988 that there was rather a change in Mr Hubbard's attitude, a somewhat casual appearance, he lost his drive and his enthusiasm and he was somewhat worried. A number of letters were written, some of which were not necessarily received, but it was apparent to Mr Gillard that not all was well. Mr Hubbard had been quite clear with Mr Gillard about his future intention and told him in November 1988 that he was likely to be leaving to set up on his own.

The situation was such that by January 1989 Mr Gillard was minded to have a serious talk with Mr Hubbard as he viewed the situation seriously. Shortly before the meeting arranged with Mr Hubbard, Mr Gillard received a telephone call from an Area Manager for South Wales, Mr Vowles, who reported that Mr Hubbard had approached a Mr Perrett suggesting that he might join Mr Hubbard in a venture which would be in competition with the business of "Tithebarn". There were other matters raised but they were rejected by the Tribunal. Mr Gillard went to the meeting with Mr Hubbard, he had a letter already typed out and he dismissed Mr Hubbard. It was found that the procedure was unfair on that occasion. The letter, it is right to note, took the view primarily that the objection was to Mr Hubbard setting up in competition, but it also did indicate that in recent weeks a number of reports had reached Mr Gillard of activity that was detrimental to the Company's interests, they were not specified.

What occurred was as follows. During a training session at which Mr Perrett had attended in November 1988 Mr Hubbard had indicated to Mr Perrett, who was a successful and important salesman, that he, Mr Hubbard was thinking of going on his own and saying that he would like Mr Perrett to go with him, and he should look after the areas in which he was now operating.

The next occasion upon which Mr Perrett had been approached was on a Sunday by telephone, early in January 1989, probably Sunday 15th January, when Mr Hubbard had `phoned again, asked him whether he would like to go across to East Allington to discuss future business. It was quite clear that he was offering some future employment. Mr Perrett was disturbed by this, he worried in his own mind, as he said in his evidence, whether he should be loyal to "Tithebarn" or go with Hubbard, and as he put it he was tormented "where did his loyalties lie" so he rang up Mr Vowles. That is the basic outline of what occurred.

The Tribunal had before them not only the documentation but the evidence of the various witnesses and as Mr Pringle has pointed out to us when looking at this whole picture, it is important first of all to examine the position held by Mr Hubbard. Mr Gillard is emphasising in his own evidence that Mr Hubbard had enormous influence, a direct input and he was a powerful man in a position to influence the sales force. He also emphasised to us that the Company knew that Mr Hubbard might be leaving in due course and that Mr Hubbard himself in evidence, at the beginning of his cross examination, had answered a question in this way; first of all it is clear that his influential, responsible position had been put to him, and then Mr Pringle put this question and it is noted as question and answer by the learned Chairman:

"Question: Somebody in your position trying to persuade salesmen to leave would need to be dismissed.

Answer: Yes, gross misconduct."

Mr Pringle also emphasises to us that the Applicant, Mr Hubbard was flatly denying that this ever took place.

There was therefore, evidence there upon which the possible view was that Mr Hubbard was enticing away or seeking to undermine the loyalty and the position of Mr Perrett. However, there was other evidence and it is quite clear that the Tribunal did not take that view. They examined the issues and deal with it in these ways, so far as the majority is concerned. In paragraph 25 they say this:

"The respondents concluded that he had indeed approached Mr Perrett. We are satisfied that there were some grounds for that conclusion, although it would have been better had more enquiries been made by Mr Gillard of Mr Perrett in person, rather than relying on second-hand information."

They say later on in paragraph 34:

"We have no disagreement over the facts. We accept that there was a conversation between Mr Hubbard and Mr Perrett, the Salesman in question. In the course of that conversation, Mr Hubbard told Mr Perrett that he was proposing to set up in business and, in practical terms, offered Mr Perrett a job in the future.

The two majority members took the view that there was nothing in the contract to prevent such a discussion taking place and that there had been no attempt to encourage breach of a contract. The dissenting member took a different view. In paragraph 38 this appears:

"The majority members understand that an employer might be disappointed to learn of such a discussion, but take the view that it is no breach of contract on the part of the employee in question."

Mr Pringle has submitted that there was a clear breach either of the implied term as to loyalty and fidelity or of the wider term of trust and confidence. There is no issue here, although we have been taken helpfully through the authorities that there is the implied term as to loyalty and fidelity and that if there had been an enticement, an attempt to persuade Mr Perrett to break his contract then there would have been a breach of that implied term but as Mr Meek put it to us this was not a question of inciting a breach of contract. There is no suggestion that Mr Perrett could not have given his notice in due course, this was a mere discussion about the future and that that is perfectly permissible.

The cases cited started with Laughton & Hawley v Bapp Industrial Supplies Ltd [1986] ICR 634, that was a case where two members of staff of a small company wrote inviting information from suppliers with an idea that they might set up in future, and it was held there that it was not a breach of the implied term.

This present case in our submission was one in which the Industrial Tribunal might have found the facts either way. We cannot say that upon the evidence they were not entitled to take the view that this was a mere discussion for the future, an intention by Mr Hubbard to set up in business and an invitation that in due course Mr Perrett might care to join him. That is not a breach of contract nor in our judgment is it a breach of the contract of trust and confidence. Therefore although we have been helped by being referred to various authorities, in the end in our judgment this is really an issue of fact. As we have said the Industrial Tribunal took one view, Mr Pringle and his clients were disappointed in that view, they pointed to certain passages in the evidence which might clearly have pointed to a contrary view but we are quite unable here to find that there was an error of law, the direction was clear on the implied terms, the Industrial Tribunal did not need any authority for that matter, and they found against the Company and in favour of Mr Hubbard.

It follows therefore that the Appeal will be dismissed and the cross appeal will be allowed but directing that the whole matter should be argued afresh at the compensation hearing.