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Cite as: [1992] UKEAT 308_90_2010

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BAILII case number: [1992] UKEAT 308_90_2010

Appeal No. EAT/308/90

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 20 October 1992

Judgment delivered on 15 February 1993

Before

HIS HONOUR JUDGE HULL QC

MR K M HACK JP

MRS P TURNER OBE

BASS BREWERS LTD APPELLANTS

(1) S PARKES & N CARMICHAEL

(2) G HANSON RESPONDENTS

Transcript of Proceedings

JUDGMENT

Revised

APPEARANCES

For the Appellants Mr John Stobart

(Of Counsel)

Instructed by Andersons

Queens Bench Chambers

42 The Ropewalk

Nottingham NG15 EJ

For the Respondents MR JEREMY McMULLEN

(Of Counsel)

Instructed by

Messrs Pattinson & Brewer

30 Great James Street

London WC1N 3HA

HIS HONOUR JUDGE HULL QC: This is the unanimous judgment of the Employment Appeal Tribunal.

The Respondent employees were employed by the Appellant at its Burton on Trent brewery, Mr Hanson being a chargehand, Mr Carmichael a forklift driver and Mr Parkes a palletising operator. At the material time they were engaged in moving kegs in the warehouse. These kegs are stacked high. On 19 June 1989, during a spell when no work was available, a manager, Mr Jenkins, walked down a narrow passage between the kegs until he came to a space among the kegs, invisible from outside: all three of the employees were there. On the floor was a pack of the Appellant's cans of lager: it had been broken into, each man was holding one of the cans, and it was apparent to Mr Jenkins that they were drinking or about to drink.

The pack, as the employees knew, had been taken improperly from another part of the site, but it was not suggested that they had taken it themselves.

Disciplinary procedures were instituted against the employees for theft of the lager. After careful enquiries and hearings the employees were summarily dismissed and internal appeals, also conducted with great care, were rejected. The employees complained to the Industrial Tribunal, sitting at Leicester, that they had been unfairly dismissed. The hearing took 5 days and the decision, on 4 May 1990, was that they had all been unfairly dismissed, but that they had contributed to their dismissal to the extent of 60%.

One member of the Industrial Tribunal was of opinion that the Appellant did not treat the disciplinary proceedings fairly, having made up its mind to dismiss the employees from the start. This view was not supported on the appeal to us.

The majority view was that the Appellant was not entitled to treat the employees' conduct as theft, because of confusion or ambiguity in the Disciplinary Rules. The Industrial Tribunal went so far as to say that the Appellant promoted this confusion. Had this confusion not been permitted by the Appellant the majority of the Industrial Tribunal would have regarded the dismissal as something which a reasonable employer could impose, and would thus have dismissed the applications.

To do justice to this conclusion we shall have to refer to substantial parts of the Industrial Tribunal's decision and to some of the documents.

Mr Stobart, for the Appellant, submitted to us that theft of an employer's property would in general always justify dismissal provided of course that the employer acted reasonably and justly in so treating it: it would always be an act that destroyed the confidence that should exist between employer and employee and a breach that went to the root of the contract of service. With this general proposition Mr McMullen, for the employees, did not disagree: but he relied on the reasoning and conclusions of the Industrial Tribunal.

It was not the primary case for the employees that the Disciplinary Rules did in fact permit summary dismissal in the circumstances (but that the Appellant had caused or permitted such confusion that it should not be allowed to rely on the Rules): Mr McMullen made it plain that his submission was that the Rules, on their true construction, did not permit such dismissal in the circumstances of the present case.

In the light of this primary submission we turn to the reasons given in the Industrial Tribunal's very full decision. The Tribunal observed that until 1975 the site was a "wet site" where drinking the company's beer was to some extent condoned: but that in the interests of health and safety both the Appellant and the unions wished to end this state of affairs. This policy was applied with increasing firmness.

The Company Rule Book was printed in 1985 and expressly incorporated an annual agreement which was negotiated between the union and the Appellant with regard to many matters including discipline. The relevant passages are set out in para 11 of the Industrial Tribunal's decision, and are to be found at pages 72 and 73 of the agreed bundle. The Rule Book provided:

"11 THEFT

...

(ii) Any person discovered in the act of unauthorised taking or consuming Company owned products will be subject to immediate dismissal without notice in accordance with the Company's disciplinary procedure. ...

12 DISCIPLINARY PROCEDURE

...

Notes for Operation

1No employee will be dismissed for a first breach of discipline except in the case of gross misconduct when the employee may be dismissed without contractual notice. In accordance with accepted industrial practice, the company reserves the right to decide what constitutes gross misconduct. These acts may include:-

(a) Damaging or destroying Company property.

(b) Unauthorised taking or consuming of Company owned products, cash or property. ..."

In 1986, after an employee had been summarily dismissed for consuming a "Company owned product", the union persuaded the Appellant to modify its disciplinary provision in regard to acts constituting gross misconduct. This is referred to in para 13 of the Industrial Tribunal's decision.

The Company Rules, as amended, are set out in a notice from the Personnel Director dated 15 August 1986 which is copied at page 84 of the agreed bundle. The director started his notice by saying:

"It has become necessary to remind employees to be aware of Company rules with regard to consumption of Company products whilst at work.

...

COMPANY RULES

CONSUMPTION OF ALCOHOL WHILST ON DUTY

Consumption of any alcoholic drinks or any Company product is not allowed on site working locations or messrooms.

Consumption of Company owned products, whilst on duty, other than when it is a normal duty requirement, is considered to be gross misconduct and may result in dismissal, in accordance with the Company's disciplinary procedure.

THEFT OF COMPANY PRODUCTS/MATERIALS

Any person discovered in the act of unauthorised taking of Company owned products will be subject to immediate dismissal without notice in accordance with the Company's disciplinary procedure. The matter may be referred to the police. ..."

The "Notes for Operation", which accompanied that Notice, are at page 85 of the bundle. The material parts are as follows:

1No employee will be dismissed for a first breach of discipline except in the case of gross misconduct when the employee may be dismissed without contractual notice. In accordance with accepted industrial practice, the Company reserves the right to decide what acts constitute gross misconduct. These acts may include:-

a)Damaging or destroying Company property

b)Unauthorised taking of Company owned products, cash or property.

...

2The first breach of consuming alcohol whilst on duty will result in suspension without pay. A second breach of this rule will result in dismissal.

...

These changes were, as the Industrial Tribunal found (para 14) intended to be incorporated in the 1985 Rule Book as a revision.

The union convenor, Mr Slater, who had negotiated the 1986 Agreement, considered the modification to the Disciplinary Code to be of great advantage to his men. So much so (he told the tribunal) that he thought it advisable to warn his shop stewards not to let it be generally known what it meant, namely that a man caught on a first occasion drinking Company beer would be disciplined but not dismissed (see para 15 of the decision).

As part of the annual agreement in 1988, the Notes for Operation were modified further. After setting out the continuing provision that an employee might be dismissed without notice for gross misconduct, and that the Appellant reserved the right to decide what acts constituted gross misconduct, which might include damaging or destroying Company property or unauthorised taking of Company owned products or property, a fresh paragraph was added which included:

"a formal written warning and/or suspension of up to 5 working days may be given for a single breach of discipline that may include drinking on duty...."

And the notes continued (as before)

"3The first breach of consuming alcohol whilst on duty will result in suspension without pay. A second breach of this rule will result in dismissal."

This document is copied at page 78 of the agreed bundle.

Earlier in 1989 five men were discovered, equipped with taps, broaching one of the Appellant's kegs of beer. All were summarily dismissed. The Appellant gave further publicity to its policy as set out in para 18 of the Industrial Tribunal's decision. A notice was pinned on all notice boards and remained there, in the following terms:

"THEFT AND CONSUMPTION OF ALCOHOL WHILST ON DUTY

Following the discovery in the packaging department of prohibited dispense equipment which could be used to broach casks or kegs it is considered expedient to remind employees that theft or consumption of any company owned product is a serious disciplinary offence.

Any employee found in possession of unauthorised dispense equipment, taking or consuming company owned products is liable to disciplinary action.

If proven this will include dismissal. Drink containing alcohol must not be brought on to the site."

At para 19 of the Industrial Tribunal's reasons they say:

"As is apparent upon a close examination of the foregoing texts of the company's disciplinary code, the changes made to the clear-cut provisions of 1985 created the likelihood that company and union would divide over their meaning. The union was convinced that after 1986, an employee charged with a first time offence of consuming company owned product was liable to be disciplined but not summarily dismissed. The company on the other hand was satisfied that such an offence remained, as in the past, unauthorised taking of company owned product, constituting gross misconduct or theft and subject to dismissal without notice."

As is clear from reading the decision of the Industrial Tribunal and the documents included in the agreed bundle, the disciplinary proceedings conducted by the Appellant in the present case were concerned with the question of theft or "manifest dishonesty" and this was the reason for dismissal. The employees denied dishonesty and appealed. The appeals were heard by Mr Whitworth, the managing director, and were evidently conducted with scrupulous care and fairness. In his letters to the employees Mr Whitworth, dismissing their appeals, told each man that he was on the face of it guilty of theft of company property (page 33, and pages 51 and 64 (Mr King, chief engineer acting for Mr Whitworth)).

Despite this straightforward approach by the Appellant, the employees sought to contend that the true nature of their misconduct was merely consuming company beer while on duty, on which basis, of course, it was fairly arguable that they should not be dismissed on the occasion of a first offence, having regard to the disciplinary rules to which we have referred. As the Industrial Tribunal found at paragraph 32 of their decision, it was in the course of the successive appeal hearings that the Union more fully developed the argument, which became its dominant theme before the Industrial Tribunal, that the proper penalty for the men, in accordance with the company's own disciplinary code, was a suspension for unauthorised drinking, and not dismissal for theft. This theme was still "faint" at Mr Parkes' appeal and was not developed until the final appeal (Mr Carmichael). It was there stated that it was a question of construction of the company's Disciplinary Rules, to which submission we have of course referred above.

At the Industrial Tribunal hearing these submissions were developed by Mr Johnson, Union District Secretary, for Mr Carmichael and Mr Parkes; see paragraph 45 onwards.

At paragraph 65 of their decision the Industrial Tribunal concluded that the three men without authority and in breach of discipline helped themselves or were about to help themselves to a can of lager, the property of their employer"; but (paragraph 66) the question which was much more contentious was whether the Appellant could treat this as a sufficient reason to dismiss them for gross misconduct, having regard to the statutory criteria.

The Industrial Tribunal went on to say that the disciplinary rules were "less than clear" (paragraph 67) and gave reasons (with which we agree) for saying that the Industrial Tribunal must not substitute its own views of reasonableness for those of the Appellant.

The Industrial Tribunal then came (paragraph 70) to what it perceived (we think rightly) as the essence of its task, namely the construction of the 1988/89 Disciplinary Code, consisting of the documents to which we have referred above. In paragraph 72 they said

"We conclude that we must read Rules and Notes for Operation together and we remind ourselves that these formed an express element in the applicants' contracts of employment. It is therefore an issue not of what a reasonable employer might have understood by them nor of what the parties respectively believed to be the right interpretation of the Disciplinary Code but of what objectively, upon its proper construction, they meant."

We agree entirely with that observation, which was essentially the same as Mr McMullen's submission.

The Industrial Tribunal then made the following observations at paragraphs 73 to 78 -

"73. The altered Notes for Operation of 1986 introduced two modifications to the [Appellant's] code: (1) unauthorised taking or consuming of company owned products was taken out of the definition of gross misconduct and (ii) a first breach of the rule against consuming alcohol whilst on duty would be met by a five-day suspension without pay. On the other hand, the unauthorised taking of company owned products, cash or property remained as one of the instances of gross misconduct and was not redefined. There is no separate provision in the Notes of Operation for consuming of company owned product and the term "theft" does not appear.

74. Thus far, the meaning of the changes indicates an intention by the parties to take consuming of company owned products out of the gross misconduct category and to distinguish any such consuming of company owned product from taking it or theft.

75. Consequent upon these alterations, which were the product of the negotiated agreement between company and union in that year, the [Appellant] announced a modification to its rule 11 on theft (see paragraph 14 above). The modification was consistent with the change in the Notes for Operation in that it specifically removed unauthorised consuming of company owned products from the theft rule.

76. But the company also added a new rule under the heading of Consumption of Alcohol whilst on Duty and newly provided under it that:

"Consumption of company owned products ... is considered to be gross misconduct and may result in dismissal in accordance with the company's disciplinary procedure [our emphasis].

77. The introduction of this new rule, expressly against consumption of company owned products could only have had a purpose if the intention was to treat that offence as one distinct from theft. As a matter of construction we hold that the [Appellant's] disciplinary code, after the changes introduced in 1986, no longer classifies the consumption of company owned product as a taking or theft.

78. In addition, we find that the reintroduction to the Code of provision for dismissal in the event of such consumption, in the form of a new company rule, was tantamount to resiling from the company's 1986 agreement with the union on this subject and cannot stand with the remaining provisions of the Code. We note three matters: (i) nothing in the [Appellant's] rule concerning disciplinary procedure - rule 12 - provides for summary dismissal outside the Notes for Operation defining gross misconduct, (ii) nowhere else under the Rules has the [Appellant] introduced a definition of gross misconduct; they are otherwise all to be found in the Notes for Operation; and (iii) the introduction of this rule Definition of Gross Misconduct is at odds with the Notes for Operation as agreed with the Union."

We disagree with the Industrial Tribunal's construction of these provisions and with their approach to that task. The conduct of the Appellant cannot affect the construction of the documents concerned and as we noticed above the annual agreements with the Union were expressly incorporated in the Rules and were accepted as modifying them accordingly. The questions of which party introduced particular provisions, for agreement by the other, the view which each party took of their meaning, and the fact that there were different views, cannot affect this matter of construction.

We therefore turn to the construction of the provisions of the 1988 Agreement, which are referred to in paragraph 16 of the Industrial Tribunal's decision and are found at p.95 onwards of the Agreed Bundle. These are of course the provisions which were in force at the material time in 1989. As can be seen at p.95, this Agreement is a legal agreement between the Appellant and the Union, duly signed by their representatives at p.104. Paragraph 22 of the Agreement (p.103) incorporates Appendix 3 (p.108).

Appendix 3 sets out the disciplinary procedure, dealing for the most part with offences which are not of the most serious sort but referring in "Stage 4" to a single offence which is considered to be gross misconduct. "Notes of Operation" (p.110) are part of the Agreement.

By paragraph 1 of the Notes of Operation -

"No employee will be dismissed for a first breach of discipline except in the case of gross misconduct when the employee may be dismissed without contractual notice. In accordance with accepted industrial practice, the company reserves the right to decide what acts constitute gross misconduct. These acts may include:-

(a) damaging or destroying company property

(b) unauthorised taking of company owned products, cash or property."

Paragraph 3 provides:-

"The first breach of consuming alcohol whilst on duty will result in suspension without pay. A second breach of this rule will result in dismissal."

It appears to us that the dishonest consumption of the Appellant's beer on site must amount to both damaging or destroying company property and unauthorised taking of company owned products and property. If such consumption is not dishonest (it is easy to think of examples, and one at least was explained to us in detail) it may well be dealt with under paragraph 3. If the alcohol is not the Appellant's at the time of consumption, it will not fall under paragraph 1(a) and (b) at all. But apart from this it appears to us that merely because the form of the theft is the taking and consumption of the Appellant's beer, the Appellant is not obliged to deal with it under paragraph 3 rather than paragraph 1. Moreover, on the face of it paragraph 1(b) deals with taking and paragraph 3 with consumption. The mere fact that conduct may fall under both paragraph 1 and paragraph 3 cannot possibly prevent the Appellant proceeding under paragraph 1 if it chooses to do so. Indeed, since theft is not actually mentioned under paragraph 1, there is perhaps no need to make a choice; we do not see why the Appellant should not charge dishonesty as being gross misconduct, without referring to either of these paragraphs.

We regard the meaning of these provisions as clear, and the history of the matter referred to in paragraphs 73 to 78 of the Industrial Tribunal's decision, and the comments there made on it, appear to us (with respect) to be irrelevant.

In paragraphs 79 and 80 of their decision the Industrial Tribunal say:

"79. The steps agreed between the [Appellant] and the union in modifying the Notes of Operation (paragraph 13 above) had been clear. Without more, those changes would have led the three to be suspended or otherwise disciplined as on a first breach of the Rules. By its subsequent and unilateral alteration of the Rules in 1986 the [Appellant] created fault lines in its disciplinary code which cannot be cleared of inconsistency and which it appears to have been not unwilling to exploit for its own purposes. Similarly, we are driven to the conclusion that the [Appellant's] decision to dismiss the three for "apparent theft" was a determined demonstration of its belief that it could circumvent the 1986 agreement.

80. Taking into account the provisions for company and union communication maintained throughout the year and the resources available to the [Appellant's] personnel management, it does not appear to the Tribunal that the [Appellant] acted as a reasonable employer in promoting the confusion inherent in its rule book. The evidence before us showed that its personnel director and personnel manager both were aware of the union's difference of viewpoint, and should not have been surprised that the workforce, including the applicants, would nourish the belief that they might drink company owned product, if not with impunity, then without the risk of ultimate sanctions on a first offence. The company notices and "briefs" did nothing to remove the source of the confusion. Legal advice was not taken. In the opinion of the Tribunal the [Appellant] should not in all the circumstances be allowed to rely on its own inconsistencies."

Again we regard these observations as misconceived. The Appellant was obliged to justify its conduct by reference to the agreement of 1988, not by reference to earlier rules and negotiations, and in any event we do not agree that there is any inconsistency between the conduct of the Appellant at any stage and the Agreements with the Union of 1986 and 1988. The Notices referred to in paragraphs 14 and 18 of the decision appear to us to be entirely consistent with the agreements to which we have referred, and in particular the Agreement of 1988 which we have construed. Whether or not they did remove any confusion in the minds of any employees, they do not justify the comments on them in paragraph 80 of the Industrial Tribunal's decision. They were intended to reinforce and clarify the intention of the Appellant to insist strictly on the agreed Rules and Notes for Operation. It appears to have been the Union, rather than the employers, which wished its members to remain in ignorance of the true meaning of the 1986 changes; see the observation of Mr Slater referred to in paragraph 15 of the decision.

In particular we can see no justification whatever for the conclusion of the Industrial Tribunal (para 85) that the Appellant was at fault in permitting serious confusion into its written disciplinary code. The 1988 Agreement is perfectly clear, and if it was not then the Union should not have agreed to it.

We can see no reason why the Appellant should not have proceeded (as it did) against the employees on the basis that they were guilty of dishonesty. It is true that the criminal offence with which the employees might have been charged in a court would probably have been dishonest handling rather than theft, in recognition of the fact that it was not suggested that they had themselves stolen the beer in the first place: but dishonest appropriation amounts to theft, even by a handler. By dealing with the matter as it did, the Appellant assumed a greater burden than it might have done: if it had not been satisfied that there was a case of dishonesty it would or might have had to deal with it on the different and less serious basis of consuming alcohol on duty. On the other hand, the Appellant might have dealt with the matter under para 1 as a case of destroying company property, or unauthorised taking of company owned products or property, notwithstanding that the Appellant was not satisfied of any dishonesty. A different penalty might well have been decided upon. Those are hypothetical considerations with which we are not concerned.

The severity of the decision, notwithstanding the long service of each of the employees, was a matter for the Appellant, provided that it acted fairly and reasonably: as we have mentioned, the majority of the Industrial Tribunal concluded that the dismissal was a penalty which the Appellant could, as reasonable employers, impose, apart from the "serious confusion" which they mentioned and which, in our view, certainly should not have existed and (if it did) was certainly not the fault of the Appellant.

We would add in passing that we could find no evidence, whether set out in the decision or in the Notes of Evidence or in the documents, for the serious charge against the Appellant that it promoted the confusion in its rule book. Since this followed an analysis of the true construction of the Appellant's Rules which was, in our view, wholly mistaken, and which discovered ambiguity and confusion where we could see none, we do not think that we need say any more about the matter.

Mr McMullen referred us to various pieces of evidence suggesting that members of the Appellant's management were aware that there was argument about the true meaning of the rules: there was also evidence that the Appellant's attempts to secure clarification had not succeeded. In view of our findings above, and Mr McMullen's primary submission that the question was the true construction of the rules, these appear to us to be matters into which we should not, and indeed cannot, go. The Industrial Tribunal's finding that there was confusion, and its consequent finding that the dismissals were unfair, appear to us to rest on a completely mistaken construction of the rules as agreed in 1988, that being a matter of law; so that on any view the Appeal must be allowed. The applications of the employees must be dismissed.