United Kingdom Employment Appeal Tribunal

BAILII case number: [1994] UKEAT 230_93_1410

Appeal No. EAT/230/93


 


I N T E R N A L

EMPLOYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 14 October 1994

Before

HIS HONOUR JUDGE J HULL QC

MR D J JENKINS MBE

MRS R CHAPMAN

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(1) MR A REEVES

(2) MRS I REED          APPELLANTS

GREEN STREET GREEN SOCIAL CLUB          RESPONDENTS

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Transcript of Proceedings

JUDGMENT

Revised


 


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APPEARANCES

For the Appellants MARTIN YOUNG

(Of Counsel)

Messrs Spon-Smith & Co

82 Beckenham Lane

Shortlands

Bromley

Kent

BR2 ODW

For the Respondents SARAH MOOR

(Of Counsel)

Messrs Clarkson Wright & Jakes

Valiant House

12 Knoll Rise

Orpington

Kent

BR6 OPG


 


JUDGE HULL QC: This is an appeal to us from the Industrial Tribunal sitting at Ashford on 24 and 25 November 1992 under the chairmanship of Mr Davis. He had two industrial members with him. They spent two days considering the application and the Applicants [the Appellants to us] are Mr Reeves and Mrs Reed, who have been treated as and are living together as husband and wife at all material times. They were appointed steward and stewardess respectively at the Respondents' Green Street Green Social Club on 15 April 1989.

Mr Reeves had been a prominent member of the club himself. He had been the vice-president, I think, and had obviously played an active part in its affairs and knew a good deal about the club. Their main duties at the club were behind the bar. Indeed, the duties there were apparently so extensive that they could not be carried out without working very substantial overtime, for which apparently they were paid double time, and employing a number of casual staff, most of whom, if not all of whom, apparently, were friends or relations of Mr Reeves and Mrs Reed. The unhappy feature of this was that the club was losing money and was seriously in deficit and had been, apparently, for a considerable time. Mr Reeves at any rate, and no doubt Mrs Reed too, would have been expected to be familiar with that.

There was a series of adverse events. In June 1991, apparently owing to the financial state of the club, the committee and the club secretary resigned and there were various steps taken after that in an attempt to deal with the crisis, in which certain individuals were particularly asked to help and were prepared to help.

In July 1991, Mr Silk, who was a long-standing member of the club and who was one of those who was active in trying to rescue the situation, advised Mr Reeves to get another job or to pursue an application for another job. There was desperate trouble and a desperate need to cut down on expenditure.

There was a meeting of the club in July 1991 at which it was disclosed that £125,000 was owed to the brewers who supplied the club and to the bank, most of it, I think, to the bank. Eventually, after a number of matters which I will not describe for the moment, there was a crisis meeting on 31 October.

What had happened, as so often does happen, is that the VAT commissioners were owed money and their patience was exhausted. The club had hoped to stave off paying until just before Christmas, but it emerged that the VAT men were not prepared to wait so long. They said that they were coming in on the Monday following and they were going to sequestrate, that is to say execute against, all the goods of the club. They would seize the drink, the furniture and the other assets of the club so far as they could. That was the threat, so it was not surprising that there was a crisis meeting.

It had become apparent that not merely was the club seriously in debt but that the deficit was continuing to rise, week by week, something in the order of £500 a week apparently was being lost; and at that meeting the decision was taken to dismiss Mr Reeves and Mrs Reed forthwith and that was done. Mr Griffin, the secretary, went and told Mr Reeves the bad news and he said "I have been expecting this for some time" or words to that effect. Thereafter, the club was run on the basis of casual staff or volunteer staff.

The assessment by the committee on 31 October proved correct to a large extent. The economies they were able to make including, of course, the dismissal of Mr Reeves and Mrs Reed, and no doubt the services of all the volunteers, meant that the club was put back on its feet. The number of members coming in greatly increased, the trade increased. The losses were no longer being incurred and therefore it was possible to keep the debts down and pay them in a regular and sensible way. The bank, which had been returning cheques, was apparently mollified.

But Mr Reeves and Mrs Reed complained to the Industrial Tribunal that they had been unfairly dismissed. They made their complaints on 21 November 1991 and the Tribunal tried them something like a year later. The Tribunal had the advantage of being assisted by Counsel who have appeared before us today. They heard a good deal of evidence. I will refer briefly to that because the Chairman has furnished her notes of evidence, and they set out the facts at considerable length. I will not set them all out. I have referred to the main ones already but there are one or two that I should refer to.

They refer in paragraph 5(9) to the fact that "it was thought at the time the committee resigned that the club would have to close". They refer to Mr Silk, a long-standing member who was prepared to help and they refer to a large number of documents which they have seen including accounts and notes of meetings and other notes which were taken. In sub-paragraph 14 of this paragraph they say:

(14) "Mr Silk identified one of the main problems relating to expenditure as being the large amount of wages being paid out to casual bar staff. On 5 July 1991 Mr Silk spoke to Mr Reeves and explained that the club was in desperate trouble and had great need to cut down on expenditure. Mr Reeves was told that it was necessary to cut down on the money spent on bar staff. The casual bar staff were employed by Mr Reeves and many of the casual bar staff were related to him or Mrs Reed.

(15) Mr Silk was aware that Mr Reeves had applied for another job at a pub in the West County and Mr Silk told Mr Reeves that he hoped that for his sake the move went through. On 5 July Mr Silk did advise Mr Reeves that he ought to look for alternative employment".

Then they say that Mr Silk was authorised to act on the club's behalf by the club's officers.

"(17) Following the meeting on 5 July 1991 Mrs Reed made it known to Mr Silk that she would resist any attempt to reduce her wages. Mr Reeves also refused to have any further meeting with Mr Silk on the ground that, in Mr Reeves' opinion, Mr Silk was not a Committee member and had no authority to discuss Club matters with him".

That is an important finding.

Mrs Reed was refusing any attempt to reduce her wages and Mr Reeves was refusing to have a further meeting with Mr Silk on the very technical ground that although he might appear to be acting for the club and trying to help the club, he had no authority; a legalistic approach which, with great respect, was hardly appropriate or realistic in the desperate straits which the club was driven to. Then they set out the crisis which confronted the club, and they record one matter, a truly bizarre incident. On the night of 31 October 1991, the committee decided to carry out an emergency cash check and found there was a £120 deficit. This was caused by the fact that in this desperate situation Mr Reeves had thought it right to lend his son £120 to pay for a car repair out of the cash. There was no question of this being a criminal matter at all, because apparently it had been sanctioned.

It is a very good example of slackness perhaps, but here in this desperate strait, here was the club lending money to a relative of Mr Reeves. The Industrial Tribunal record that the committee were convinced that unless they took drastic action immediately, the stock and assets of the club would be sequestrated by the Customs and Excise and the club would certainly have to close.

At that meeting on 31 October, the committee decided that they had no alternative but to dismiss the steward and his wife and the cleaner.

Those were their findings of fact. I suppose it is legitimate to comment that Mr Reeves did not say: "look I have some suggestions to make" or "I'd like to discuss this. I think in one way or another we can help with what is happening. We would be prepared to make sacrifices" or anything of that sort. At the same time there is a legitimate comment which tells the other way. He was given precious little time, if any at all, because he was being told he was sacked.

Then the Tribunal set out the submissions made, which are very similar, so far as Mr Young is concerned, to those he has made to us today. He said this was a panic measure. There was no occasion for it; the money did not have to be found for the Customs and Excise until the Monday. But when looks at the reality of the situation, the crisis with the VAT might well be thought to be only one part of a long-standing crisis, of which the obvious manifestations were first the gigantic overdraft, the debt to the brewers and to the bank and secondly, a deficiency which was mounting, a loss which was mounting week by week.

That is the background against which one has to consider that submission. Of course the Industrial Tribunal could have acceded to that submission. It was for them to say whether that was a true and proper view of the facts. They make other findings. They record Miss Moor's submissions to them and they say this:

8. "We find that the applicants were dismissed ..... and the reason pursuant to section 57(1)(b) of the Employment Protection (Consolidation) Act 1978 was some other substantial reason ....".

And it is agreed between counsel that it was not redundancy, but it was said to be something very much akin to that and, indeed, of course it was. They say:

9. "We have to consider the fairness of the dismissal pursuant to section 57(3) of the Act. There is no doubt that the decision to dismiss was made very quickly and there had certainly been no prior consultation about dismissal with either of the applicants before the decision to dismiss was made on that day. It is a fact however, that prior to 31 October 1991 Mrs Reed had made it known that she would not accept any cut in her wages and it is also a fact that Mr Reeves himself refused to discuss cost cutting with Mr Silk. More importantly, however, the Committee were faced with a problem which had to be solved within hours and they could reasonably have concluded that any consultation with the applicants would have made no difference. Therefore, in view of the ultimatum by the Customs and Excise, we do not think that it was a reasonable option open to the respondents to have postponed the meeting to the following day.

10. Not every member of the Committee was present at the meeting on 31 October but we do not find this renders the dismissal unfair. We have to look at the situation through the eyes of the respondents on the evening of 31 October 1991 when they were faced with a desperate financial emergency and very exceptional circumstances which they believed could result in the closure of the club if immediate action was not taken. In view of the situation which confronted them, the persons present at the meeting on 31 October could reasonably have concluded that any consultation with the applicants or any meeting of the full Committee would have made no difference to their decision.

11. We find that the dismissal of the applicants on 31 October 1991 was a reasonable option which was open to the respondents and we find that, in the particular circumstances which faced them, the respondents acted fairly.

12. In the circumstances the applications are dismissed".

We will just say one thing. It is clearly only in exceptional circumstances that an employer can possibly be justified in dispensing with the requirement for consultation. For that there is of course the highest authority, with which we are all familiar.

Mr Young appealed and has furnished us with a most helpful skeleton argument. He says: "the respondents acted unreasonably in treating the crisis of 31 October 1991 as sufficient reason for

the dismissal".

And he says that they acted unreasonably too in dispensing with consultation and he puts before us the view of the facts which he pressed on the Tribunal. He invites our attention to the notes of evidence, although of course we pointed that those notes were only part of the evidence and that the witnesses throughout were referring to various documents which we have not seen and were explaining those documents, and putting them forward as justifying what they had to say. We have to remember that we are not the judges of fact and that any appeal to us must be on the basis that there has been an error of law; if a finding of fact is challenged, it must be challenged on the basis that there was no evidence to support it, or that it was wholly irrational as a matter of law. One does see, when one goes through those notes as we have, that there are a number of matters which the Tribunal did not refer to, which have perhaps affected their judgment. We see references to the enormous expense of the bar in relation to the club's finances, there is evidence that something like £800 was being spent on wages. "A colossal amount was being spent" said Mr Silk in his evidence "on casual staff". "That he had asked Mr Reeves", said Mr Silk, "to cut down on the casual staff. Most of them were his family and they did not like cutting them down". And Mr Silk also told the Tribunal that: "we've tried to reduce the opening hours in order to save on costs". The Reeves were in fact on a 38 hour week but they were paying themselves double time for overtime over 38 hours. This had apparently been allowed by the previous committee.

So that was part of the general picture. There were also references to Mrs Reed's refusal to consider any reduction in wages, a refusal to talk to Mr Silk. Mr Reeves was refusing to meet Mr Silk. There are references to that. There was evidence given that Mr Reeves knew very well that the club could not afford to pay him. There was the loan to his son and of course Mr Reeves and Mrs Reed said themselves in their applications: "that from May 1991 onwards they had been in an intolerable position". No tax had been paid for four years. Not only were the VAT demanding instant payment of a substantial sum but the DSS had been in, the Inland Revenue were making an investigation, and there was a book to pay casual staff in which only Christian names were used. One imagines that that would have caused the Revenue and perhaps the DSS a great deal of concern.

Those were the sort of background facts which were before the Tribunal. I mention those facts, most of which are unfavourable to Mr Reeves and Mrs Reed, because of their submission that there was no evidence to support the findings of this Industrial Tribunal, that their findings were irrational in ways which were pressed upon us by Mr Young. There is a great deal of other evidence. It goes on for more than 20 pages in which the situation of the club was described to the Tribunal. So we have to ask ourselves in the light of the argument which was addressed to us where it can be said that the Respondents acted unreasonably in treating the crisis and the committee members' view of that crisis as sufficient reason for dismissal.

The matter has to be looked at in the round by the Industrial Tribunal. Parliament has said that they, as the industrial jury, are to be sole judges of fact. We have no jurisdiction to interfere with their findings of fact, even if we think that we would probably have reached a different conclusion. Here, it really carries it no further forward to say this, but it is quite clearly the type of case where a differently constituted Tribunal might have reached a different conclusion. We ourselves, if we tried it on paper, might reach a different conclusion; but this Tribunal, having heard all the evidence, reached the conclusion that it was reasonable to treat this crisis as a ground for instantly terminating the employment of the Applicants and we are quite unable to say that their decision was irrational, that there was no evidence to support it, or that it flies in the face of reason. All we can say is that it is apparently supported by a fair amount of evidence as a possible view which they were able to take.

Then we come to the absence of consultation. As I have already said, no Industrial Tribunal is going to overlook the absence of consultation. No division of this Employment Appeal Tribunal is going to. It is normally, in the great majority of cases, an essential requirement of fairness that there should be consultation. But here there were very, very particular factors. I have mentioned most of them. One notes particularly that Mr Reeves and Mrs Reed had been well aware for months of the true state of the club and they must have been aware of the continual increase of the debt, the losses that were being made. They were well aware that the situation was intolerable. They had found that they were in an intolerable situation themselves.

It could be said, that so far from being part of the solution they were part of the problem. No only were they working very substantial overtime, but Mrs Reed at any rate had announced that they would tolerate no reduction in her wages and their relations made up a large part of the casual staff. They were unwilling, according to the evidence, to reduce payments to casual staff and I have outlined the circumstances which surrounded that.

Those were all matters which the Tribunal could have considered and evidently did consider. In the crisis which was provoked by the demand by the VAT and the threat to come in on Monday, there were circumstances which would have made consultation futile and it is impossible to imagine what good purpose would have been served by consultation. That was a possible view. If it was a possible view, then as a matter of law and on the evidence, it was one which the Industrial Tribunal were entitled to come to and again, it is not one about which we are entitled to say, it is not a view which would have appealed to us or not a view which would have appealed to many Tribunals. That is entirely beside the point, and one has to remember in support of the Industrial Tribunal's view and the club's view, that in reality if a crisis is provoked by a bankruptcy petition, by a demand for payment with a threat of sequestration or other legal execution, so often that is only really the tip of the iceberg. It is not the disease, it is merely one symptom of the disease and a particularly acute one. The reality is that if one owes enormous sums to the bank and to one's creditors and if there are other creditors pressing, what has to be presented to the world, to all those who are seeking payment, is not the fact that one may be able to pay the VAT £1,200 on Monday; what is needed is to present all one's creditors with a realistic view, put forward in good faith on solid facts, that the difficulties are being tackled in a way which enables all creditors to have a reasonable belief that they will in due course be paid, so that there is no point in seeking execution or seeking judgments against the club, and it is in that context that one has to see the demand which was being made by the VAT, the threat and the true significance of that threat. If the furniture were taken, if the drink were taken, then the club would almost certainly, that was the view taken by the club, cease trading.

However that may be, it was in the first instance for the club, acting however irregularly by this ad hoc committee and the people who had been asked to help it, it was for them to say how they were going to react to the situation which was arisen. It was for them to say what in their view was the reasonable and proper thing to do.

It was then for the Tribunal to say whether it was within the band of responses open to a reasonable employer and whether in particular it was open as a matter of law to the club to omit consultation in the course of reaching their conclusion and taking the action to dismiss. And then at one stage further removed, it is for us to say whether we think there is an error of law shown by the deliberations of the Industrial Tribunal, either that they reached a conclusion which was simply irrational and not open to them on the facts, or that they misdirected themselves in law in some way. We are quite unable to say that. Whatever one says about this decision of the Tribunal, it does not appear to us to show any error of law in that sense or any irrationality in that sense; and indeed, it is quite clear that there was a patient, careful enquiry and a careful statement of their full reasons by this Industrial Tribunal. Having heard what has been said on behalf of the Appellants, and without hearing Miss Moor, we are unable to accede to this appeal and it must be dismissed.