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United Kingdom Employment Appeal Tribunal
You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Noble Raredon Plc v Heaton [1992] UKEAT 278_92_2205 (22 May 1992)
URL: http://www.bailii.org/uk/cases/UKEAT/1992/278_92_2205.html
Cite as: [1992] UKEAT 278_92_2205
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At the Tribunal
Before
THE HONOURABLE MR JUSTICE WOOD MC (P)
MR A D SCOTT
MR J D DALY
Transcript of Proceedings
JUDGMENT
Revised
APPEARANCES
For the Appellants MR JULIAN HEMMING
(Solicitor)
Messrs Nicholson Graham & Jones
Solicitors
25-31 Moorgate
London
EC2R 6AR
For the Respondent MR VINCE WILLIAMS
(Of Counsel)
Messrs Edge & Ellison Calow Easton
Solicitors
18-19 Southampton Place
London
WC1A 2AJ
MR JUSTICE WOOD (PRESIDENT): This is an appeal by Noble Raredon plc who were the Respondents before an Industrial Tribunal sitting in London (South) under the Chairmanship of Mrs Stella Hollis.
By an Originating Application dated 25th July 1991 Mr Heaton alleged that he had been unfairly dismissed. He had been summarily dismissed on the 7th June 1991. He alleged that that was unfair in that it was given without notice and without any payment in lieu of notice.
The learned Chairman was asked by the respondent Company to stay the proceedings in the Industrial Court pending the hearing and decision in the High Court of proceedings between the same parties. She decided in her Written Decision in the following terms and I read from paragraph 2:
"The claim in each jurisdiction so far as the facts are concerned is virtually identical. The Notice of Appearance and the Defence to the High Court claim are also virtually identical. The issue that whoever hears this case will have to decide is whether or not the applicant was acting contrary to instructions after March 1991. If he was it is conceded on behalf of the applicant that he was in breach of a fiduciary relationship. The negotiations for the management buy-out were between the applicant and the vendor namely the respondents. This involved third parties in financial enquiries. If the applicant was acting contrary to instructions of the respondents then the decision to dismiss would not be wrongful or unfair."
That was the issue as it appeared to the learned Chairman.
It is necessary in order to understand the problems to look at the history. But we must bear in mind throughout that this was the exercise of a discretion and a wide discretion by the learned Chairman and it is not for us to substitute our view for that of the Chairman. We can only interfere with it if in fact it errs in law in legal principle or applying the Wednesbury approach, something was taken into account that should not have been taken into account, that she failed to take something into account that she should have taken into account, or the Decision was just plainly wrong.
The history, shortly stated is as follows. In January 1988, Mr Heaton was appointed Group Finance Director. From the 15th November 1990 he was the Managing Director of a subsidiary Company within the group "Elite Optics Limited". There came a time when the main Board decided that Elite Optics Limited should be sold. A valuation of approximately £21/2m. were placed upon that Company. The Applicant, Mr Heaton, with presumably a team, approached the Board on a management buy-out basis and offered £1m. The situation that arose was such that in January 1991 Mr Heaton resigned from the main Board because there was a conflict of interest. On the 26th March 1991 an important letter was written by the Chairman of the holding Company and also of Elite Optics Limited. It is important to note that that letter was not before the learned Chairman. In that letter from Mrs Nevzat, Chairman of Noble Raredon plc and Elite Optics Limited, passages which are relevant read as follows:
"I am writing to you in my capacity as Executive Chairman of both Noble Raredon plc and Elite Optics Limited.
I understand that you spoke to National Westminster Bank yesterday and I understand that you discussed the financial position of the Group. Whatever your intention, you gave the Bank the impression that we would be unable to pay the salaries at the end of this month without approaching the Bank for a further facility.
You will appreciate that the negotiations with the Bank are very delicate and you are well aware that we have more than enough assets to meet our liabilities provided that we receive the continued support of the Bank. Your decision to talk to the Bank was, to say the least, unhelpful, although I hope I am right in believing that it was not part of an attempt by you to promote your own plans for a management buy-out of Elite at the expense of the rest of the Group.
Following a unanimous resolution by the directors of Noble Raredon plc this afternoon, I am writing to instruct you not to have any further discussions or communications with National Westminster Bank or any other of the Group's bankers or any other source or potential source of financial facilities without the prior approval of myself as Chairman of Noble Raredon plc and Elite Optics Limited. Any failure to observe this instruction will be treated as gross misconduct entitling us to terminate your employment without notice.
I should also say that it appears to the Board of Noble Raredon plc that your efforts to put together a management buy-out are having a detrimental effect on the performance of your duties. Accordingly, the Board has decided that it will not consider any further offers from you or from any consortium in which you are involved for the purchase of Elite Optics Limited or its business. You are requested with immediate effect to devote the whole of you working time and attention to the job of managing the day to day business of Elite."
A number of factors appear from that letter. First of all that Mr Heaton had been in touch with the Bank and had been communicating with them in such a way as possibly to endanger the whole group. Secondly, that he is not to continue with his efforts to put together a management buy-out. Thirdly, that that effort is having a detrimental performance on his duties. Finally, that he is therefore required to give his full working time and attention to the job of managing the day-to-day business of Elite. It is perhaps important to note that there are those various aspects to that particular letter.
Since that date Mr Heaton, as is conceded, has been involved in activities of putting together a possible "management buy-out package", if that is a permissible phrase.
The proceedings were initiated, as we have said, by an Originating Application dated the 25th July 1991. On the same day a Writ was issued by Mr Heaton in the High Court claiming damages for wrongful dismissal. In those proceedings Directions were given on the 6th February 1992 which merely dealt with Discovery and Inspection. Mr Heaton has the handling of that action. It is interesting to see the way in which the pleadings are drafted. The claim is for damages for wrongful dismissal and the details of the damage are set out; salary; loss of use of a "Mercedes" car; benefit of BUPA membership; pension contributions and loss of contractual incentive bonus. So that there are complicated matters which will need discovery and calculation and possibly even accountancy advice on the figures.
The Defence sets up two defences, first of all that there is a breach of the fiduciary position of Mr Heaton as the Managing Director and a failure to use his best endeavours to promote the interest of the Company and then in the alternative there is the specific allegation that he continued with the assembly of a management buy-out after the letter of the 26th March 1991.
The facts behind this case have been clarified today before us with the help of both Mr Hemming and in particular Mr Williams, to whom we are extremely grateful. The position is this that there will need to be a reply in the High Court action because the case for Mr Heaton now, as we appreciate it, is this. Albeit that the letter of the 26th March was written, but within two days, and it may be the 28th March, it may not be precise we do not rely particularly on that date, but within a very short time, although there had been a unanimous resolution of the Board of the main Company nevertheless these instructions were countermanded. In the alternative, because it was pleaded that a member of the Board, probably the Chairman, Mrs Nevzat, approached Mr Heaton in connection with a figure for the management buy-out, there is implied authority thereafter to continue with the arrangement for the management package and further alternative, I imagine, it is not specifically so stated, that there might very well be a plea, if the facts so substantiate it, that the Company were estopped from denying that leave had been given for negotiations to continue because of the way they acted.
There are therefore those issues in connection with the question of countermanding the clear instruction in the letter of the 26th March. There are however the subsidiary issues of the other matters which were raised in that letter and in particular as to the fiduciary position and whether or not that despite the fact that negotiations will continue, Mr Heaton was in breach of his fiduciary position in failing to give his full time efforts to the Company. Although not yet formulated, it may be ultimately, if the Company is sold that the value of the Company, as a result of the alleged activities, will have been reduced, in which case one can envisage that there may well be a counter claim.
That is a somewhat detailed summary of the position, as we understand it to be, both from the documentation and from the helpful submissions made to us. It is a very different position from that presented to the learned Chairman. She was basing her decision on a very simple issue as we have already indicated in that paragraph 2 of the Written Decision. The position today is vastly expanded in detail and it must depend, in our judgment, on the documentation, the discovery and the proper inferences to be drawn from those matters and also possibly an examination of the overall picture in order to assess the fiduciary position in which Mr Heaton found himself over this period of time. As a result therefore, we are faced with a very different picture.
The principles to be applied have been set out by this Court recently in order to try to simplify the principle in many of these cases which appear before us. I refer to Bowater plc v. Charlwood [1991] ICR 798, this was a Decision which I was presiding with two very experienced Members, Mr A C Blyghton and Mrs M E Sunderland. We posed the issue at the end, having looked at all the authorities in this way, at p.804 at "D":
"`In which court is this action most conveniently and appropriately to be tried bearing in mind all the surrounding circumstances including the complexity of the issue, the amount involved, the technicality of the evidence, and the appropriateness of the procedures?'"
Applying that principle and bearing in mind also the problems which were before the Court of Appeal in O'Laoire v. Jackel International Ltd (No.2) a Division of the Court of Appeal presided over by the learned Vice Chancellor and now Lord Browne Wilkinson, it seems to us that there is a danger as there have been in the past, emphasised in an earlier Decision of Sir Ralph Kilner Brown in Automatic Switching Ltd v. Brunet [1986] ICR 542, that there would be findings of fact which might embarrass the High Court. Mr Williams has undertaken that his client, despite the difficulties in O'Laoire, will not seek to argue that any compensation ordered in the Industrial Division should not be set off in the High Court. However, it does seem to us that the following problems can arise in this case. First of all the issue here is a breach of an instruction which is now clear, a breach of a fiduciary duty, which may have to be carefully defined in all the circumstances. Secondly, the implied authority to continue to act in whichever way Mr Heaton in fact acted. The implied authority will depend upon the way in which he acted. Thirdly, the issue of estoppel. Discovery will be necessary, the documentation may be rather more than just a few documents and the interpretation of those documents against the oral evidence will be extremely important.
As the two Industrial lay Members sitting with me here point out, the issues in this case have very little to do with industrial relations, it is in fact a straightforward wrongful dismissal claim; the Industrial Tribunal has jurisdiction of course, but nevertheless the real basis here is a contractual basis and there is nothing that indicates that the experience of the Industrial Members will be of great weight and importance.
Taking into account all those matters we have reached the conclusion that looked at the facts today, the appropriate exercise of the discretion is to stay the proceedings in the Industrial Tribunal and to encourage Mr Heaton to press forward in the High Court. It is said that of course it will cost more for him to be in the High Court, that may be, but the issues are more suitably heard there and we feel that in any event, especially with the possibility of a counter claim, that the matter will have to be heard in the High Court in due course. Whereas a decision against the employers in the Industrial Tribunal may provide leverage for Mr Heaton it seems to us doubtful whether that leverage is necessarily to be encouraged because there are many other issues which will need to be decided. Are we entitled in that situation and on the facts that we have recited and of the authorities which we have recited to interfere with this Decision?
We bear in mind that we are interfering with a discretion. We bear in mind that we must not just substitute our view for the view of the Industrial Tribunal. We bear in mind the warnings given by the learned Master of the Rolls in Piggott Bros & Co Ltd v. Jackson & Others CA [1992] ICR 85, but in fact here the basis of fact for the Decision is really very different and therefore inevitably the learned Chairman was not able to take into account all those matters which now are quite clearly relevant. Therefore, without any disrespect to the opinion that she formed at that time, on those facts, which indeed it is likely that we might very well have taken ourselves, we feel that in the present circumstances with this new information in front of us and a completely different slant on the matter, the correct exercise of the discretion is as we have already indicated.
It follows therefore that this appeal is allowed and the Order will be drawn up as we have indicated.