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Cite as: [1994] UKEAT 375_92_1904

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BAILII case number: [1994] UKEAT 375_92_1904

Appeal No. EAT/375/92

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 19th April 1994

Before

HIS HONOUR JUDGE J HULL QC

MR G R CARTER

MR D G DAVIES

WESTERN LEISURE (A Firm) APPELLANT

(1) B J FLYNN

(2) J E M AMBRIDGE RESPONDENTS

Transcript of Proceedings

JUDGMENT

Revised

APPEARANCES

For the Appellant MR G JONES

(Of Counsel)

L C Thomas & Son

19 London Road

Neath

West Glamorgan

SA11 1LF

For the Respondents Mr Flynn & Mr Ambridge

(In Person)

JUDGE J HULL QC: This is an appeal to us by Western Leisure (a firm) against the decision of the Industrial Tribunal sitting at Cardiff on the 27th March 1992. That Tribunal promulgated its decision on the 6th May 1992.

The Respondents are Mr Flynn, a man of 46 years of age now; he joined Western Leisure as long ago as May 1967 when he began employment with them at their arcade, known as Ceasar's Palace at Barry Island. He started at first in a junior capacity but in 1974 he became Manager of the arcade and he has remained Manager ever since until his dismissal, in circumstances which we will come to, in 1991.

Mr Ambridge, who is 47 years of age, joined Western Leisure later. He joined as a Cashier in July 1985 and he became the Under Manager in 1987.

An unhappy situation arose at the arcade in which it was thought that money had been taken without authority from at least one of the machines. I do not need to go into the details. The Tribunal found that in September 1991 the employers took this matter up with Mr Flynn and he made an admission, which is recorded as an admission of theft. Mr Flynn says that what in fact he told the Tribunal, and what in fact he intended to admit, was that he took some money on the basis that he was merely borrowing it and intended, as he did indeed do, to repay the money in due course. But at any rate that on any view was not particularly creditable conduct and he admitted that in September 1991.

Then in October 1991 occurred the events which the Tribunal found caused the dismissal of Mr Flynn and Mr Ambridge.

They found that there had been equipment, computer equipment and metering equipment, which enabled the employers to form a clearer view about whether there was any cash shortage in relation to these various machines and they set out what I have already said:

"that money had been taken from them by someone having access,[to the machines] which meant, according to the shifts worked, either Mr Flynn or Mr Ambridge. The senior management also held keys, but naturally did not suspect themselves. There were other forms of leakage, exploited by the children who run to and fro hoping to scoop up what is shaken out by the random vibrations of this machine in particular, but we are satisfied that that can only be on a minor scale and that an experienced proprietor would not be misled by that into thinking that the playing area had been raided."

They say, and of course we have to accept the findings of fact:

"2. In September 1991 it is common ground that Mr Flynn admitted taking small amounts from the machines for `cigar money'. He was severely reprimanded but not dismissed in view of his long and generally valuable service, with a clear warning that nothing more must be taken. Mr Ambridge was seen at the same time. This was, in our view, a warning to both of them that any further peculation would incur dismissal, though nothing was put in writing: a formal warning is not in general a pre-condition of dismissal for stealing.

3. Towards the end of October Mr Richard Case, one of the proprietors, visiting the arcade, was struck by the small amount of coin on the playing area [of this machine of course] and spoke to Mr Flynn, who was then on duty. The hoppers were also very low, but Mr Flynn was not shown them. He was bound to agree that money was missing, and Mr Ambridge - who was off duty - was called in, saw the machines and agreed that they were very low. Neither Mr Flynn nor Mr Ambridge could give any explanation that satisfied Mr Case who - unfortunately, in our view - said that he would call in the police unless they left there and then. Mr Ambridge then threw his keys on the table and walked out. Mr Flynn remained for some time and continued to deny taking any money. Mr Case asked if he knew anything that the respondents ought to know. Mr Flynn then said that he had had enough and was leaving, but first Mr Case insisted that he stayed until they had checked the contents of the safe."

Mr Flynn has told us today that in fact it was he that insisted, I do not think that that matters, but the safe obviously was checked. Mr Flynn tells us there was a very large sum of money there for which he, Mr Flynn, was responsible.

"Then Mr Ambridge telephoned to enquire about his bonus. Mr Case invited him to come and discuss his employment and this incident, but he would not.

4. Mr Flynn complains that he was not shown the hoppers and that his suggested explanations were not listened to. Mr Case had really made up his mind and merely announced his view, which he was not prepared to re-examine. Mr Ambridge's criticism is similar. Both were saying that strong pressure was put on them to resign and the company's accountant confirms that the expression used was that he could stand no more. The respondents [the employers] denied dismissal and can point out that this was not a case of `resign or be dismissed' but `resign or I will continue the enquiry with the aid of the police.'"

They then refer to another case and then go on to their findings:

"5. It is more a question of manner than matter. . ."

It seems to us that that is referring to what was said "resign or I shall call the police" rather than "resign or you will be dismissed".

". . . We accept the applicants' account that the interview was conducted in an excessively over-bearing way, rubbishing their suggestions and with the police mentioned in terrorem. [that means with the intention of frightening or terrifying Mr Flynn and Mr Ambridge]. Also they should have been shown the hoppers. For all that, we consider that the same result would have followed from a more reasonably conducted interview, and that the respondents could not be expected to identify the guilty party any more than we possibly can. They would thus have been entitled to dismiss both - after a different sort of hearing - whereas we cannot make a finding of contributory fault against either.

6. It follows that the applicants were unfairly dismissed, but that their expectation of continuing in the employment had fallen to nil. There can therefore be no compensatory award; but since we can make no finding of contributory fault, the basic awards of compensation are due in full. This seems to be the effect since Polkey's case of an unsatisfactory investigation where the applicants could not expect after all to survive in employment."

So, having said that there would be no compensatory award, the Tribunal went on to assess the basic awards - or calculate them because it is a precise business - and they concluded, making no deduction in respect of any matters, that Mr Flynn, with his long service, was entitled to £4,257.00 and that Mr Ambridge, with his much shorter service, was entitled to £1,163.04.

The employers appeal against that decision. Mr Flynn and Mr Ambridge, who have courteously attended here, have told us one or two matters which we are not strictly entitled to listen to, adding to the facts. They have said that basically they rely on the reasons given by the Industrial Tribunal.

We have, therefore, to say what we find with regard to Mr Jones' submissions, for which we are very much obliged, on behalf of the employers. Mr Jones points first and foremost to the finding here that there was an unfair dismissal, and he then points to the fact that the Tribunal found that even had the matter been conducted fairly the same result would have followed. Here, he says, the Tribunal have omitted a vital step. He refers us to the case of Polkey [1987] IRLR 503 and he points out that in that case Lord Mackay, with whom all the other Lords agreed in the House of Lords, said that in general, of course an employer was required to act fairly, and that is what the Statute requires the Industrial Tribunal to address their minds to. I had better not try to paraphrase - part of Lord Mackay's judgment was read to us, at paragraphs 4 and 5. He said:

"If the employer could reasonably have concluded in the light of the circumstances known to him at the time of dismissal that consultation or warning would be utterly useless he might well act reasonably even if he did not observe the provisions of the code. Failure to observe the requirement of the code relating to consultation or warning will not necessarily render a dismissal unfair. Whether in any particular case it did so is a matter for the industrial tribunal to consider in the light of the circumstances known to the employer at the time he dismissed the employee."

Now clearly, in general, if an employer suspects or believes that an employee is guilty of misconduct of a serious sort, it is his duty to make a proper enquiry so that he can reasonably satisfy himself of the facts. He must have reasonable grounds for any action which he takes. It is said, in the Notice of Appeal in this case, that the Tribunal should have considered that in the circumstances there was indeed no need for further enquiry or indeed any enquiry.

Before us, Mr Jones somewhat modifies that position and he argues that what is lacking here is any finding by the Industrial Tribunal as to whether, in the circumstances, there should have been an inquiry. He says that on the contrary the circumstances suggest that no inquiry was needed and he says, therefore, that the decision entirely elides that part, the Tribunal goes straight from the statement of facts to saying that this was unfair. There was unfair behaviour, Mr Case behaved in an excessively over-bearing way, rubbishing their suggestions, and with the Police mentioned purely in terrorem. They went straight to that without deciding the vital question whether this was a case in which no inquiry was in fact required, the facts spoke for themselves so plainly that it was like a "smoking gun"; it was a situation in which it would be simply ridiculous to conduct an inquiry.

We think that that submission is misconceived. This Tribunal was dealing with the matter shortly, industrial tribunals are intended to act informally, and the facts in our view speak for themselves though in a very different sense from that which Mr Jones puts forward. It appears to us that here there was a case in which money was missing, or appeared to be missing, and there were a number of possibilities. One was that Mr Flynn had taken it. One was that Mr Ambridge had taken it. Another was that both had taken it. To elaborate; if Mr Flynn or Mr Ambridge had taken the money the other might well be a party to it or might not. There might be, conceivably, other explanations. If indeed Mr Flynn or Mr Ambridge had taken the money, there might be a number of explanations for that which should be considered by any fair minded employer. Of course, it does not stop there - Mr Case, himself, did not regard it as a situation in which there should be no inquiry, on the contrary, he demanded explanations and he was quite clearly right to do so. He demanded explanations and then treated them with contempt. He behaved say the Tribunal:

"in an excessively over-bearing way, rubbishing their suggestions and with the police mentioned purely in terrorem [to frighten these men]."

and the Tribunal found that that was an unfair way of conducting the inquiry and that therefore these men had been unfairly dismissed.

It seems to us that although grammatically speaking, logically speaking, there is an ellipsis in that the Tribunal do not expressly say, "we considered the question whether any inquiry at all was required and came to the conclusion that an inquiry was, in the circumstances of this case, required, and since it was conducted in the way that Mr Case conducted it that was obviously unfair"; one would think that the Tribunal was being, in the circumstances, pretty pedantic if it had gone into all that. It appears to us that the Tribunal was forced to the obvious conclusion, and could never have said that this was an unfair dismissal had they not reached the conclusion, that an inquiry was necessary and should have been conducted fairly and was not conducted fairly. It seems to us, with all due respect, that what is said by Mr Jones, though said with great courtesy and logic, is without foundation in fact. It is very difficult to imagine anyone who would not think that this was plainly a case where, when a shortage was discovered, an inquiry should be demanded. It appears to us that the Tribunal did plainly conclude that an inquiry was necessary and that that inquiry was mishandled and unfairly conducted by Mr Case; and therefore there was an unfair dismissal.

Next, Mr Jones goes on to the finding as to compensation. He points out that the Tribunal decided that if an inquiry had been fairly conducted it would inevitably have led to substantially the same conclusion, that is to say that both men would have been dismissed. Their expectation, says the Tribunal, in those circumstances of continuing in the employment had fallen to nil. There can therefore be no compensatory award. The Tribunal say in terms that the same result would have followed from a more reasonably conducted interview. They add that the Respondents could not be expected to identify the guilty party any more than the Tribunal itself can.

In our view, that is saying this: This was a case where, in the view of the Tribunal, a reasonable inquiry, such as was not conducted by Mr Case, would have meant that the employer would have been left with the conclusion, on balance of probabilities, that one or other of these men, or of course conceivably both, were involved in the theft or the improper taking of money. It might not amount to theft but it was an unauthorised taking of the money, perhaps a borrowing, and in those circumstances, say the Tribunal, we do not think that these men could reasonably expect to continue to be employed. If the inquiry had been conducted properly they would have been dismissed, and in those circumstances, say the Tribunal, they would not expect a compensatory award which looks to the future and says that they could have expected to continue to be employed for a time and so forth. Mr Jones says "look at the authorities" and he referred us to several authorities, including Royal Society for the Prevention of Cruelty to Animals v. Cruden [1986] IRLR 83 and G McFall & Co Ltd v. Curran [1981] IRLR 455; and those cases, says Mr Jones, are an indication that in general the same considerations should apply both with regard to reducing a compensatory award and with regard to the basic award and he has referred us to the language of each of those sections with regard to reduction.

First of all Section 73 (7B) of the Employment Protection (Consolidation) Act 1978 says:

"Where the tribunal considers that any conduct of the complainant before the dismissal (or, where the dismissal was with notice, before the notice was given) . . was such that it would be just and equitable to reduce or further reduce the amount of the basic award to any extent, the tribunal shall reduce or further reduce that amount accordingly."

and then, in Section 74(6) it is provided:

"Where the tribunal finds that the dismissal was to any extent caused or contributed to by any action of the complainant it shall reduce the amount of the compensatory award by such proportion as it considers just and equitable having regard to that finding."

There are of course differences in the wording but as the Courts in those cases to which we have referred have accepted, in general a reduction under Section 74(6) would inevitably lead to a reduction being considered and implemented under Section 73(7B).

But of course we are not concerned with the generality of cases but with this case. This was a case in which it is apparent from the Tribunal's finding that a fair investigation would have led to the sort of decision which was upheld in Monie v. Coral Racing Ltd

[1981] ICR 109 where it was held that an employer, who employs two or more people in a position of trust, and who finds after a reasonable and fair inquiry and after acting fairly in other ways that one or more of them must have been guilty of dishonesty but he cannot decide which, is entitled as a matter of fairness to dismiss all those concerned, if that is the just solution to it, not because dishonesty is proved against any one of them but because it is proved that one or more of them must be guilty of dishonesty; and because he is in justice required and entitled to protect his business. In those circumstances a dismissal which is made after taking those reasonable and fair steps, and in particular an enquiry, will justify the employer in acting in that way. Of course in those circumstances it can be said, as it was in this case, that there is not going to be a compensatory award, not because it is reduced under Section 74(6), but because if the employer had acted reasonably then neither of these men in this case, or none of the men when there is a case with more than two, could reasonably have expected to continue to be employed even if a fair inquiry had been conducted. But it does not follow from that that the Tribunal, without any other material to go on in the matters which we mentioned, can go on to say: Looking at Section 73(7B) we consider that any conduct of the complainant before dismissal was such that it would be just and equitable to reduce or further reduce the amount of the basic award to any extent.

We are told that this point was not argued at all before the Industrial Tribunal. Mr Morris, the solicitor, appeared and addressed the Tribunal on other matters and, in particular, the thrust of the employers' case there was that these men had not been dismissed at all, but had resigned. Mr Morris no doubt, as a wise advocate, decided that other matters were matters on which he would not address the Tribunal, or perhaps overlooked them, but at any rate he did not take this point. But the Tribunal said:

"but since we can make no finding of contributory fault, the basic awards of compensation are due in full."

How could the Tribunal, one asks, do otherwise. They could not without conducting a trial of their own decide whether this was a case of Mr Flynn appropriating money, or Mr Ambridge appropriating money, or whether one or the other had connived at or condoned the fault of the other; they could not decide whether perhaps money had been borrowed but in circumstances less serious than amounting to dishonesty. How could the employers, who had entirely lumped the two men together and taken no fair steps to decide those matters themselves, ask the Tribunal to embark on that inquiry?

It seems to us quite impossible to say that the Tribunal should have said, "we are satisfied that each of these men was guilty of taking money, or that one or the other connived at the other doing it and helped him, we therefore find their degree of blameworthiness to be such that we shall make a reduction of a particular amount in their basic awards."

The Tribunal went on to say:

"This seems to be the effect since Polkey's case of an unsatisfactory investigation where the applicants could not expect after all to survive in employment."

That may well be the case in some cases such as this. The employer is convicted of acting unfairly and the Tribunal may strongly suspect or believe that if the employer had carried out his duty, he would have discovered matters which could be laid before the Tribunal. But for the Tribunal in the circumstances of this case to embark on that exercise and to say that either Mr Flynn, or as the case might be Mr Ambridge, or as the case might be both of them, were guilty of conduct which was such that it would be just and equitable to reduce, or further reduce the amount of the basic award, seems to us to be impossible. The Tribunal might or might not have enough material, and quite plainly it did not here, the matter was not put to it.

The other matter, which was raised in fact by us and was adopted by Counsel, is this: that the Tribunal should have considered whether it should reduce the award because Mr Flynn had been given this serious warning a month before on the basis that he had taken money without authority, albeit only money to go and buy cigars he says. They might have done; Mr Jones says they were under a duty to; but the Tribunal might equally, amongst their many considerations, have said, well, that was water under the bridge. A serious warning was given, the employers decided to keep Mr Flynn and of course Mr Ambridge on, notwithstanding these matters, and we are going to consider, as matters which would have the effect of reducing the award, only what is proved against them in connection with this, and nothing has been proved.

It appears to us that on a just and fair reading of this award, the Tribunal having nothing before it to justify it in a finding of conduct under Section 73(7B), simply declined to find any such conduct.

Mr Jones says it was their duty to enquire even if the matter was not raised. One wonders what enquiry could have been made in the circumstances of this case which could have led to such a finding. Was the Tribunal, in effect, to constitute itself like an employer, make sure the charges were written down and made clear to these men, that they were warned about their rights and so forth? It seems to us it is going much too far. If the Tribunal were going to be urged by the employers to make a reduction under subsection (7B), they being represented, the very least they could do was to make submissions and so far as they could adduce evidence to try to point to fault on the part of each of these men. Instead what they got, and they got no doubt perfectly fairly from this Tribunal, was a finding that if they had conducted a proper inquiry it would have shown that here were two men of whom one, on the balance of probability at any rate, had been guilty of some impropriety but it would not have been possible, in the view of the Tribunal, for them to say which, and that being the likely result, the likely further result was that both would have been dismissed. That was not a finding which could have led the Tribunal to say that it could reduce the basic award of either man, because it would have left in the air precisely what the employer's inquiry would have left in the air, namely the question which of them was responsible or whether it was both of them. We therefore dismiss the appeal.