United Kingdom Employment Appeal Tribunal

BAILII case number: [1995] UKEAT 640_93_1801

Appeal No. EAT/640/93

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 18 January 1995

Before

THE HONOURABLE MRS JUSTICE SMITH

MRS E HART

MR J A SCOULLER

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MR A MEHDI          APPELLANT

LOGICAL COMPUTER SUPPLIES LTD          RESPONDENTS

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Transcript of Proceedings

JUDGMENT

Revised


 


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APPEARANCES

For the Appellant MR PAUL GILROY

(Of Counsel)

Teeman Levine

Aire House

Swinegate

Leeds

LS1 4AG

For the Respondents MR JEFFREY ADAMS

Director


 


MRS JUSTICE SMITH: This is an appeal from a decision of an Industrial Tribunal sitting at Leeds on 15 June 1993. The Industrial Tribunal found that the Appellant had been unfairly dismissed, but ordered that there should be a nil award of compensation.

The Appellant was employed as a telephone salesman by the Respondents who were suppliers of computer consumables. The Appellant was good at his job. In the summer of 1992, Mr Adams, the Respondents' Managing Director, became concerned that the Appellant's sales performance had declined. He asked the Appellant about it and the Appellant explained to him that he was going through a "lean time". At about this time also there were discussions between the Appellant and the Respondents in respect of the Appellant's remuneration package. He wanted to be treated as a self employed person but the Respondents refused that request. However, they did offer him an improved commission rate.

On 23 September 1992, Mr Adams the Managing Director, received a telephone call from the representative of one of the Respondents' product suppliers. That representative indicated that she had received a telephone call from the Appellant in which he had said that he wanted to arrange to see her with a view to setting up a credit account for himself. Mr Adams was shocked and concerned at this news because it appeared to him that the Applicant must have the intention of setting up in business on his own account. Accordingly, he went into the Appellant's office and removed all the company documents relating to customers and sales. He told the Tribunal that he had done that as a precaution against any decision that he may have to take on the following day. There was also before the Tribunal Mr Adams' affidavit, sworn in High Court proceedings in October 1992, in which he had explained his state of mind on the evening of 23 September. He said this:

"6. It became clear to me following that conversation with [the supplier] that the only reason the First Defendant would wish to set up a credit account would be if he was contemplating setting himself up in business. My immediate reaction was that this explained why his sales figures had reduced so dramatically over the preceding few months. I was fearful that instead of doing business on the Company's behalf he had been selling products to others on his own behalf".

As the Tribunal recorded, Mr Adams decided to tax the Appellant with the information that he had received about the telephone call to the supplier. The following morning, 24 September, he called the Appellant into his office and put to him his knowledge of the telephone call. The Tribunal record that the Applicant's response was negative. He gave no reason for the call. He gave no explanation. (We interpose to say that it is common ground between the parties before this appeal that the question about the telephone call was the only question which Mr Adams put to the Appellant). Faced with the lack of any explanation from the Appellant, Mr Adams concluded that he had no alternative but to dismiss the Appellant and he did so there and then.

It is clear to this Tribunal, although the Industrial Tribunal reasons do not spell it out, that Mr Adams felt that his suspicions were confirmed, namely that this Appellant had in fact been selling on his own account when he was employed by the Respondents. That was the reason for the dismissal. At paragraph 7, the Tribunal expressed themselves thus:

"The tribunal is satisfied that the reason for dismissal was the applicant's making a telephone call to a supplier of the respondents with a view to establishing a credit account with that company coupled with the applicant's falling sales record. This is a question of conduct. Conduct is potentially a fair reason for dismissal".

In other words, the Tribunal found that the Respondents believed that the Appellant had been in breach of his duty of fidelity. There was, in fact, an express term in the Appellant's contract of employment requiring that he should not arrange or undertake any work or activity which was in competition with or otherwise adversely affecting directly the interests of the company. Any such involvement, it was said, would be treated as gross misconduct.

That then was the basis upon which the Respondents advanced their case before the Tribunal. The Applicant below argued that the dismissal was unfair for two main reasons. First, because no adequate investigation of the alleged misconduct had taken place and second, that the disciplinary procedures which the Respondent company had specified, had not been carried out.

As to the first ground, the Tribunal rejected this submission. They said this:

"9 .... The tribunal is satisfied that on the evidence that the investigation carried out by the employers was an adequate investigation. The applicant was faced with the allegation and asked for an explanation and gave no explanation. The tribunal is satisfied therefore that the test propounded in the Burchell case is fulfilled and that the respondents did have a genuine belief formed on reasonable grounds after due investigation".

We have accepted the Appellant's submission that the Tribunal fell into error here. As we indicated earlier, it is accepted before this Appeal Tribunal that Mr Adams only asked the Appellant about the allegation that he had made a telephone call to a supplier, and that there had been no reply to that question. But the Appellant was not dismissed, nor could he have been properly dismissed simply for making that telephone call. If that allegation had stood alone, the making of the telephone call would not have been a breach of fidelity even though it may well have been coupled with an intention that the Appellant had to start his own business. That that is so, is supported by the decision of the Employment Appeal Tribunal presided over by Peter Gibson J., as he then was, in the case of Laughton & Bapp Industrial Supplies Ltd [1986] ICR 634.

The real reason for the Appellant's dismissal was the conjunction in the mind of Mr Adams of the significance of the telephone call, and the significance of the falling sales. Mr Adams thought the two were connected and he thought that a breach of fidelity had already occurred. But Mr Adams did not ask the Appellant about the falling sales nor did he tell him that he suspected or believed him to be selling on his own account.

We consider that in order for there to be a reasonable investigation, an employer must put all the main allegations of misconduct which he is considering to the employee and must give the employee the chance to answer all of them. In this case, it appears to us, that that did not happen and we consider therefore, that the Tribunal have fallen into error when they held, as they did, that the investigation carried out by Mr Adams had been an adequate one.

As to the Appellant's second submission that there had been breaches of the disciplinary procedure, the Industrial Tribunal accepted that there had indeed been two such breaches. These were identified as a failure to tell the Appellant that the meeting on the morning of 24 September was to be a disciplinary meeting and a failure to invite the Appellant to bring a colleague with him to that meeting.

The Industrial Tribunal found that those two breaches were "sufficiently fundamental breaches of procedure as to render the dismissal unfair". They then continued as follows:

"11 .... However, following the reasoning in the case of Polkey v A E Dayton Services Ltd the tribunal is satisfied that if the appropriate procedural steps had been taken they would have still resulted in the dismissal in any event. Accordingly although the employee was unfairly dismissed he will recover no compensation as a result of the dismissal because the result would have been the same had the procedures been properly followed".

That passage is very brief and we have had some difficulty with it. We are not sure whether or not the Tribunal had in mind that the two breaches of procedure identified were such that the employer acted reasonably in dismissing the employee, notwithstanding the procedural defect.

That conclusion would have been open to them as envisaged by Lord Mckay, the Lord Chancellor in his speech in the House of Lords case of Polkey v A.E. Dayton Services Ltd [1988] ICR 142 to which we have already referred. At page 153(F) Lord Mckay 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".

Adapting that passage so that it applies to a case of misconduct rather than redundancy it appears to us that what is envisaged is that if the Tribunal decide that the employer could reasonably have concluded, in the light of the circumstances known to him at the time of dismissal, that compliance with the disciplinary procedures would have been pointless, it would be open to them to hold that the dismissal was not unfair.

However it appears to us that what this Tribunal has in fact done is to hold that the procedural defects rendered the dismissal unfair. They must then assess compensation by reference to Sections 73 and 74. In considering the compensatory award, they may apply their own view of whether the employee would have been dismissed in any event, if proper procedures had been followed. If they think he would have been, it is open to them to hold that it is not just and equitable for him to receive a compensatory award. If they think he would have had a chance of retaining his job, if procedures were properly followed, they may reduce the compensatory award they would otherwise have made to reflect that chance. They must also form their own view of the extent and gravity of the employee's misconduct in the light of all they know, if they are to consider whether to make any or any further reduction for contributory action under Section 74(6). In this case, the Tribunal have assessed the compensatory award at nil, on the `Polkey' principle, by which we understand them to mean that it was not just and equitable for the Appellant to receive an award, as the employer would have been entitled to dismiss him in the same way after carrying out the proper procedures.

In considering the basic award under Section 73, the Tribunal are not entitled to make a reduction simply on the ground that it would be just and equitable to do so. In this case they may only reduce it to take account of their view of the employee's conduct, pursuant to Section 73(7B). This Tribunal have not made any finding in relation to the employee's action or misconduct such as would found a reduction under Section 73(7B).

Quite apart from the error in respect of the basic award we have asked ourselves whether the Tribunal's decision on compensation can survive our conclusion that there were three procedural defects rather than the two which the Tribunal identified. We have come to the conclusion that it cannot. The failure of the employer to put both allegations of misconduct to the employee and to tell him that he believed that the employee had been selling on his own account, is a more important defect than those identified by the Industrial Tribunal. We agree that the dismissal was unfair as the Industrial Tribunal found, but in our view there was an additional reason for so finding. Taking that additional matter into account, it cannot be said that the Industrial Tribunal would have come to the same conclusion as they did come to on compensation.

Accordingly, we have come to the conclusion that this appeal must be allowed. The matter must be sent back for further consideration of remedies.

We have been urged by Mr Gilroy to remit the matter to a newly constituted Tribunal. The disadvantage of that course is plain. There would have to be a re-hearing of much of the evidence that was heard on the first occasion and a full consideration of the Appellant's conduct. Mr Gilroy complains that if this matter goes back to the same Tribunal they will have to re-open a conclusion that they have already made.

We have come to the conclusion that it is not unreasonable to ask them to do that. We think that the case should be remitted to the same Tribunal. They have their notes of evidence and the probability is that only further submissions will be required.

Accordingly, we direct that the appeal should be allowed and we remit the case to the same Tribunal to consider remedies in the light of this judgment.