United Kingdom Employment Appeal Tribunal

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Cite as: [1993] UKEAT 924_92_2806

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BAILII case number: [1993] UKEAT 924_92_2806

Appeal No. EAT/924/92

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 28 June 1993

Before

THE HONOURABLE MR JUSTICE TUCKEY

MISS A MACKIE OBE

MRS P TURNER OBE

LONDON BOROUGH OF BRENT APPELLANTS

MR R GRAY RESPONDENT

Transcript of Proceedings

JUDGMENT

Revised

APPEARANCES

For the Appellants MR S DEVONSHIRE

(OF COUNSEL)

The Solicitor

London Borough of Brent

Brent Town Hall

Forty Lane

Wembley

Middx HA9 9HR

For the Respondent MR R SMITH

(Friend)

MR JUSTICE TUCKEY: This is an appeal by the London Borough of Barnet who I shall call `the Council' from the decision of the North London Industrial Tribunal given on 16 November 1992 who after a four day hearing unanimously concluded that the Council had unfairly dismissed the Respondent, Mr Gray. They also concluded that Mr Gray had contributed to some extent to his dismissal and adjourned the hearing to assess that contribution and compensation. We are told that that hearing is fixed for September of this year.

The principal complaint of the Council is that the Tribunal fell into what they characterise as "the classic trap" of substituting its own view on the merits of the dismissal for that of the Council's dismissing officers. The facts which we take from the Decision of the Tribunal are as follows.

Mr Gray was employed as the Manager of the Mandella Centre on the Chalk Hill Estate in the London Borough of Brent. This Centre was set up in 1987 to try to deal with many social problems on the estate and he had been chosen for the job because of the tenants' respect for him, his good relations with them and his proven ability of being able to cope with the problems.

During the period of his tenure of this job the Council underwent not only a change of political complexion but in the wake of, and perhaps because of that, considerable re-organisation and the Mandela Centre's activities came under the responsibility of different departments at different times during the course of Mr Gray's employment. At the material time in 1991 when the events giving rise to Mr Gray's dismissal are alleged to have occurred, it was under the responsibility of two departments, namely the Education Department and the Social Services Department. The relevant activities of the Centre included paying for outings for school children and pensioners and other activities which involved using funds which were in an imprest petty cash account. Such an account was apparently unique. It involved a credit balance being maintained in the account against vouchers showing expenditure from the account.

The other activity which involved the expenditure and receipt of money was the provision of lunches to pensioners at the Centre. Money paid towards the cost of those lunches was to be collected and paid into a Social Services Account, designated with one of apparently many financial codes, to demonstrate to those who had control over the account what its origins were.

The conclusions of the Tribunal as to these arrangements were as follows:

"It is apparent to us that the financial arrangements of the Council were so complicated and lax that it would need a meticulous and well trained person to maintain proper records. Each account had to have a special code and the many activities had different accounts and codes."

That conclusion from the short recital of the facts which we have given seems to be amply justified.

During the course of 1991 the petty cash account went into debit. Mr Gray's immediate superior, Mr Smith, who appeared before him both at the Industrial Tribunal and before us, attempted to redress the problem. This included putting money into the account and withdrawing Mr Gray's authority to draw on it. Unfortunately however, they did not take the obvious step of informing the Bank that this is what they had done. The result of that was that Mr Gray continued to draw on the account. Because the Council believed it had been closed, it was not replenished and by July 1991 about £3,700 had been expended from the account for which the Council believe that they had had no adequate explanation. Moreover, in the Social Services Department (where apparently no great expectation rested as to information being provided about the luncheon money) it was thought that the relevant account should have been credited with sums of money for luncheon receipts, which it was not.

That state of affairs resulted in Mr Gray being suspended on full pay on 1 August 1991 and a Mr Platt, being an internal auditor with the Council, being appointed to investigate what had happened to the money. We should say that during this period Mr Gray's daughter had been murdered in the United States. Mr Platt proceeded to investigate and the history of his investigation is set out in the Tribunal's Decision. They say:

"He assumed and accepted that £3,700 was missing and assumed it had been used, as suggested by the Applicant, to finance his visit to the USA to bring back his daughter. In fact that was shown not to be the case as the withdrawals had been made before 28 May. Mr Platt did not interview Mr Gray and ask for an explanation, nor did he interview Paulette Sutherland who was a co-signatory of the account and also made entries into the petty cash book. Nor did he remove and investigate all the financial records found at the Centre."

Towards the end of Mr Platt's investigation, the Council suddenly stopped paying the Applicant although he had previously been informed that he was on full pay. At this point Mr Smith came on the scene to help Mr Gray and as a result of his efforts, a disciplinary hearing took place in December 1991.

At that hearing, and indeed at the later appeal hearing which we will come to in a moment, Mr Gray, through Mr Smith, asked to see the petty cash book and other documents which were still at the Centre or with the Council to which Mr Gray of course did not have access. But for reasons best known to themselves the Council largely refused those requests on the basis that the documents were irrelevant. Mr Platt had apparently concluded that the petty cash book, which was regarded as a very important document by Mr Gray, was irrelevant as a result of something that someone else had told him about what it contained.

By the time the disciplinary hearing took place, Mr Gray faced no less than 25 disciplinary charges. Why it was necessary to formulate the charges in such detail is not at all clear to us but that is what happened. The most serious complaint being made against Mr Gray was that he had actually stolen the £3,700 and that he had failed properly to account for the luncheon monies: very serious allegations of dishonesty. The investigating officer and his colleagues at the disciplinary hearing concluded that the majority of the charges, including the allegation of stealing, had been made out. Not surprisingly in those circumstances they decided that Mr Gray should be dismissed and he was dismissed on 11 December 1991.

He lodged an appeal and for reasons which again are not fully explained, that appeal did not come on for hearing until July 1992. It had to take place in the evening because it was before councillors. The Chairman of the Appeal Committee gave evidence to the Tribunal and they record what he (Mr Duffin) told them as follows:

"Mr Duffin told us that he considered the evidence objectively and took no account of the Applicant's mental state and his personal circumstances when considering the appeal. They dismissed the charges relating to the misappropriation of the £3,700 and also the charges relating to the purchasing of the sports equipment. He informed us that he did not think that the Applicant was dishonest but only that he had not kept adequate financial records and could not account for the missing monies. The Applicant therefore was found guilty of the remaining charges which basically showed that the financial records were disorganised and therefore it was difficult to trace the money that had been spent.

The Appeal hearing had considered each and every charge and although none of the findings singly would have amounted to gross misconduct, they concluded that the findings collectively amounted to gross misconduct and therefore upheld the dismissal of the Applicant."

It will be apparent that by this stage the matter had undergone a substantial change. It was no longer the case that the Applicant was guilty of dishonesty; it was the Appeal Committee's view that it was a case of incompetence in the sense that he had not kept financial records from which it was possible to trace what had happened to this money.

By this time the proceedings before the Industrial Tribunal had been started. There is no doubt having regard to the time the case took that this was a very substantial hearing. A number of the council officials involved in the matter gave evidence which was carefully considered by the Tribunal. They made the following findings of primary fact:

"That the Applicant as the Manager of the Mandella Centre had not had any training in the financial management of the Centre but was chosen because of his ethnic origin and his social skills.

His line manager, Mr Smith, totally failed to supervise the Centre, and particularly did not supervise the financial records and affairs - If Mr Smith had carried out his duties adequately it is unlikely that this case would have arisen. [That was a reference not only to the failure to close the bank account but to the fact that Mr Smith admitted that he had not been down to check the Centre out at a time when he should have done].

The use of the imprest account was an unusual departure from the Council practices and the Applicant had not been adequately trained in how it should be used.

The Council structure was changing and the energies of the managers were directed to preparing the various departments for privatisation but also to imposing more stringent financial controls".

The subjects of the charges against the Applicant stemmed from the poor financial management of the Mandella Centre and arose because no-one had supervised the Applicant, nor the financial matters and particularly after the February incident when the imprest account was overdrawn. If Mr Smith or Mr Hamilton who was his superior, had taken the responsibility and closed the account as anticipated, or had notified the banks that Mr Gray's signature was no longer acceptable, then Mr Gray would not have been in a position to draw any money at all from the bank and these charges would not have arisen.

The charges that remained at the time of the Appeal Hearing, i.e., the poor keeping of financial records and the luncheon club's irregularities arose directly from this lack of supervision and mismanagement."

and finally and importantly

"The investigation carried out by Mr Platt was inadequate. He failed to interview all the proper people, similarly to make enquiries from the bank about the cheques and about the bank statements. He also failed to peruse the petty cash book which showed there had been some entries in the book relating to this account. He failed to trace the cheque numbers that were shown in the account and match them up with the cheque book and with the statements, and he failed to look for an explanation as to how the money had been spent. We assume that this was because his enquiry had started off with the premise that the Applicant had confessed to taking £3,700. He did not try to clarify this particular fact either with the Applicant, or with Mr Bradford."

Mr Bradford was a former council employee to whom it was alleged that the Applicant, Mr Gray, had confessed to stealing the money. However, he gave evidence to the Tribunal that the Applicant had not made any such confession. The reference to the cash book is that at the hearing before the Industrial Tribunal (at, as we understand it the insistence of the Tribunal), those documents were produced and the petty cash book in particular did support the assertions that had been made without the corroboration that that document could provide. These were that although entries in the cash book had not been made contemporaneously by Mr Gray, they had, on his instructions, been made, so far as the luncheon receipts and disbursements were concerned, by his co-signatory on the account, Paulette Sutherland. Not surprisingly the Tribunal attached considerable weight to this.

Having made those primary findings of fact the Tribunal went on to conclude their decision by saying:

"On these facts therefore, we find that the Applicant was unfairly dismissed but that he made a contribution to his dismissal to be assessed at the adjourned hearing."

As we have already said, the criticism is made that they fell into the classic trap of substituting their own view for that of the dismissing employer. The starting point for any consideration of this question is the relevant section of the legislation. There was no issue that the principal reason for Mr Gray's dismissal was gross misconduct and that that was a reason which fell within section 57(2) of the Employment Protection (Consolidation) Act 1978. The issue before the Tribunal therefore centred on the provisions of section 57(3) which provides that where the employer has fulfilled the requirements of sub-section (1) and so on (as they did) "the question whether the dismissal was fair or unfair having regard to the reasons shown by the employer, shall depend on whether in the circumstances the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissing the employee and that question shall be determined in accordance with equity and the substantial merits of the case".

That question was a question of fact for the Industrial Tribunal. Of course in answering the question they had to direct themselves properly. Both as a matter of construction of the sub-section and from the decision of the EAT in British Home Stores v Burchell [1979] IRLR 379 it is apparent that the Tribunal were not entitled to substitute their own view of what was reasonable. They had to consider whether it was reasonable for this employer in the circumstances, to treat this as a sufficient reason for dismissing Mr Gray and that question has been broken down for us by Mr Devonshire in his submissions on behalf of the Council as involving three subsidiary questions. He puts the matter in his Skeleton Argument as follows:

"..the IT guards against the risk of substituting its own view for the employer's, by asking the questions set out in paragraph 5(2) of the Notice of Appeal, i.e.:-

(i)Whether the employer had reasonable grounds for its belief at the time of dismissal; and

(ii)Whether that belief was formed after such investigation as was reasonable in all the circumstances of the case; and

(iii)Whether dismissal was a disciplinary sanction within the range of reasonable responses.

Again, as is self-evident, but is supported by the authority of ILEA v Gravett [1988] IRLR 497, the first and second of those questions are obviously inextricably entwined. What is submitted here is that the Tribunal did not go through this process. It is said that we can infer that they did not do that because they go from their primary findings of fact and simply say:

"therefore, we find that the Applicant was unfairly dismissed"

There is no analysis of the beliefs held by the Council, or the grounds for those beliefs and the investigation so far as it related to those beliefs and therefore we should infer, (and it was put as high as "it is inevitable that we should infer") that they did not apply the right test when considering the question under section 57(3).

The principles to be applied were not in dispute between the parties before the Industrial Tribunal. Counsel for the Appellant, Mr Devonshire, tells us that he stated what the principles were and invited the Tribunal to apply them and that Mr Smith on behalf of Mr Gray, accepted that they were the correct principles.

We are quite unable to infer that this Tribunal misdirected itself as to the proper approach to section 57(3). It may be that there should have been one or two sentences between the conclusion and their findings of primary fact to show that they had considered the matter from the Council's perspective rather than substituting their own view of the facts, but the fact that they did not do so does not lead us to infer that they failed to apply the right test. It is clear from the way that their Decision is framed and phrased and the steps by which they reached the conclusion that they were focusing on the question of whether the investigation which was carried out, was a reasonable investigation; in other words they were focusing on the second of Mr Devonshire's two questions. The history of the investigation is set out clearly and it is quite apparent that the Tribunal decided that it was not a reasonable investigation in all the circumstances. There was in our view ample evidence to justify such a conclusion. Indeed we would be surprised if they had reached any other conclusion.

The allegation of misconduct as it ended up, was that Mr Gray had failed adequately to account for the money which was the subject of the investigation. As the Decision makes clear, Mr Gray, and Mr Smith on his behalf, had been asking for documents which were in the Council's possession which would or might have enabled them to put forward the very explanation that the Council said they had failed to provide. Without those documents it is difficult to see how they could have provided the explanation required. It was only at the hearing before the Industrial Tribunal, when these documents were forthcoming, that they were able to do the very thing that Mr Gray had been dismissed for failing to be before.

We therefore conclude that the Tribunal approached the matter in the right way and that their conclusion that the Council had not carried out a reasonable investigation was fully justified.

Mr Devonshire sought to break the point down further by saying that the Tribunal's conclusion about the inadequacy of the investigation could be criticised because the points they lighted on did not relate to some parts of the reasons for dismissal, put another way sufficient reason for the dismissal stood to justify it despite the criticisms that were made of the investigation.

This submission presupposes that it is legitimate artificially to fragment the allegation of misconduct and then say some parts of the investigation were reasonable so as to justify some part of the fragmented allegation of misconduct. Obviously if an employer alleges completely discreet and separate allegations of misconduct such a conclusion may be justified. Merely because the investigation of one discreet allegation is inadequate it does not follow, if the investigation of the other was adequate and reasonable, that the dismissal cannot be justified. But that was not the case here. As the Tribunal make clear, what remained of the allegation against Mr Gray by the time of the appeal hearing was effectively the allegation of inadequate record keeping and it would have been quite artificial to try and fragment that in the way that Mr Devonshire suggested that the Tribunal should have done in order to justify the conclusion.

Mr Devonshire's criticism was focused specifically against the findings about Mr Platt's investigation and he developed those submissions by reference to the documents before the Tribunal and more detailed factual submissions. We are bound to say that the more we listened to those submissions, the less impressed we were by the point and the more it seemed to us that the appeal was straying into forbidden territory, that is to say an assault on the findings of fact which were for the Industrial Tribunal and not for this Appellate Tribunal.

For these reasons Mr Devonshire's criticisms are rejected and this appeal must be dismissed.