United Kingdom Employment Appeal Tribunal

BAILII case number: [1996] UKEAT 872_95_1202

Appeal No. EAT/872/95

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 12 February 1996

THE HONOURABLE MR JUSTICE MUMMERY (P)

MR J R CROSBY

MR D A C LAMBERT

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SERCK MARSTON          APPELLANTS

MR S THOMSON          RESPONDENT

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Transcript of Proceedings

JUDGMENT

Revised


 


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APPEARANCES

For the Appellants MR B CARR

(Of Counsel)

MR N CHESTERFIELD

(Solicitor

EEF West Midlands

St James House

Frederick Road

Edgbaston

Birmingham

B15 1JJ

For the Respondent MR E COUNSELL

(Of Counsel)

Messrs Cornish & Co

Solicitors

Courtyard Chambers

46 Fore Street

Totnes

Devon

TQ9 5RP


 


MR JUSTICE MUMMERY (PRESIDENT): This is an appeal against a majority decision of the Industrial Tribunal held at Plymouth on 28, 29 March and 1 May 1995. The extended reasons for the decision were sent to the parties on 18 July. They set out why, in the view of the majority, Mr Stuart Thomson, the Applicant, had been unfairly dismissed by his former employers, Serck Marston. The two lay Members of the Tribunal were in the majority. The Chairman dissented. The claim for compensation was adjourned. Serck Marston appealed by their Notice of Appeal served on 17 August. At the hearing of the appeal today, Serck Marston were represented by Mr Carr. Mr Counsell, who represented Mr Thomson in the Tribunal, also represented him on this appeal.

The briefly stated issue in the initial skirmish of the IT1 and IT3, became a detailed dispute at the Industrial Tribunal. As appears from his Originating Application presented on 10 December 1993, Mr Thomson's case was that he had been unfairly dismissed from his job as a Branch Manager. He had been in the employment of Serck Marston from 1986 until his dismissal on 5 November 1993. His case was that he had been unfairly dismissed, in relation to allegations of falsifying documents and disregarding company procedures. It was unfair because that was an inappropriate course of action for his employers to take.

That was disputed by the employers. They said they had dismissed him because of falsification of expense claims and disregard of company cash sales procedures. In the IT3 the issue is clearly identified. The employers stated this:

"Having discovered irregularities in a number of procedures within the branch, Thomson was suspended, investigations commenced and subsequently a disciplinary meeting held. During that disciplinary hearing Thomson admitted to the following:

1) Falsifying expenses claims. While he claims the former Area Manager had previously authorised such claims we do have evidence to show that he was advised that such claims were unacceptable and not to submit similar again. In doing this he implicated one of the Branch's largest customers and other Company employees by naming them on the claims.

2) Disregarding Company Procedures. The incorrect procedures adopted by Thomson resulted in anomolies in cash collection, issue of credit notes and stock errors. Despite an indepth internal audit these anomolies/errors remain unresolved. In addition he used the Company's purchase ledger to buy a personal item in May 1993 which he had still not paid for at the time of his dismissal.

Thomson was fully aware of these procedures and adherence to these procedures is a fundamental responsibility of any branch manager, clearly Thomson failed to carry them out."

That was the essence of the case, dismissal for alleged misconduct.

The question for the Tribunal was whether misconduct was the reason for the dismissal and whether, in all the circumstances, it was fair and reasonable to dismiss Mr Thomson for that reason. The law is well settled by a line of cases since the decision of Mr Justice Arnold in British Home Stores v Burchell [1979] IRLR 379. A three-fold test should be applied in these cases: the employer should have an honest belief that the employee is guilty of misconduct; the employer should have reasonable grounds for that belief, and the employer, at the stage when he formed that belief on those grounds, should have carried out as much investigation into the matter as was reasonable in all the circumstances of the case.

The essential point in this case concerns the issue of investigation. The main point, taken at the Industrial Tribunal by Mr Thomson, was that he had been dismissed unfairly because there had not been a reasonable investigation into the allegations against him. The Tribunal were not unanimous. The reasoning of the majority was that there had not been a reasonable investigation into a number of matters. The Chairman dissented. He thought that there had been misconduct in view of what Mr Thomson had admitted, that that had not been condoned and that the decision to dismiss was within the band of responses available to a reasonable employer.

We have to decide only one question is there an error of law in this decision? If we decide that there is not, the appeal will be dismissed. If we decide that there is, we have to determine whether we should substitute a different decision for that of the Industrial Tribunal, or whether we should remit the case for re-hearing by a different Industrial Tribunal. First, the facts found by the Tribunal. These are helpfully summarised in Mr Carr's Skeleton Argument. Mr Thomson started work for Serck Marston in July 1986. In March 1991 he was appointed as Branch Manager of the Plymouth Branch. Serck Marston carry on, from over a hundred branches, the business of supplying parts for motor vehicles, both trade and retail, specialising in radiators and heat exchangers. Until 1 September 1993 Mr Thomson's line manager was a Mr Richard Davies, Operations Manager, South West. On 1 September, Mr Davies was replaced by Mr Peter Vernon.

During 1993 there occurred a number of incidents, which have been examined in detail in the evidence before the Tribunal and on which they made certain findings of fact. These incidents formed five areas of fact-finding by the Tribunal. First, in May 1993, Mr Thomson ordered an exhaust for his father's Lada motor car. Later in May 1993, there was an internal transfer document raised by Serck Marston's St Austell branch, transferring a slab of Unifin to the Plymouth branch. The transfer document was not actioned at the Plymouth branch and the block was not taken into stock. (Unifin is a product used in the production of radiators.) In September 1993, Mr Thomson submitted a claim for expenses which he alleged had been incurred in Cornwall on a date when he was known not to have been in Cornwall. In relation to that claim, Mr Thomson was verbally warned by his new line manager, Mr Vernon. In the middle of October 1993, Mr Thomson issued a credit note in respect of a Range Rover radiator: the sales invoice was incomplete, the customer's name and address were not recorded, no receipt was completed. Also in October, Serck Marston learnt of Mr Thomson's failure to account for a cash sale of a number plate. On 26 October, Mr Thomson was interviewed by Mr Vernon about irregularities and discrepancies. A few days later, cash, in respect of the sale of a number plate, was found at the back of the cash box.

On 29 October 1993 Mr Thomson was suspended. A disciplinary interview was held with him on 3 November. On 5 November, Mr Vernon wrote a letter of dismissal with immediate effect from 3 November. The letter of dismissal has been referred to frequently in the course of the appeal. The crucial parts of it read as follows:

"Dear Stuart,

Following your meeting with Ron Dove, Louise Morris and myself (Richard Davies in attendance), I write to confirm the Company's decision to dismiss you with immediate effect (i.e. 3 November 1993) by reason of gross misconduct.

The reasons for discussion on these grounds are as follows:-

i) That you admitted to falsifying your expenses claims on numerous occasions using the names of other members of staff (namely Malcolm Burton and Graham Parkinson) who had not received the hospitality you claimed for on the dates/receipts attached. Similarly, a customer of the Branch (namely DML) who you admit would not be permitted to accept the hospitality for which your claimed.

ii) You disregarded Company procedure on cash sales by:-

- not raising invoices when required; and

- not entering sales into the day book.

iii) You admitted to using a Company order pad to purchase an exhaust from Partco Limited in May 1993, which you gave to a relative and had not reimbursed the Company (as of 3 November 1993). You did this without permission.

(iv) In the case of Credit notes, you again disregarded Company procedure, a procedure of which you were fully aware, and failed to complete, sign and attach credit note authorisation forms to the credit notes.

(v) You also admitted to incorrectly coding costs in your accounting procedures as a means of getting actual figures to meet planned targets. In falsifying these documents you have given an inaccurate picture of the status of the business at Plymouth.

Your dismissal is effective immediately...

You are instructed not to go into Plymouth or any other Serck Marston Branch.

As explained to you the Police have been contacted to investigate these matters further and they may wish to question you again."

He was informed of his right to appeal against that decision should he wish to do so. He did appeal. He lodged his appeal on 7 November. The appeal was heard on 14 November by the Management Development Manager, Mr David Green. On 6 December a further appeal meeting was taken by Mr Green. The decision taken was to dismiss the appeal. On 24 January 1994, Mr Thomson was allowed to pursue a further appeal to Mr Pritchard, the Managing Director. He confirmed the dismissal. We have in the bundle of documents the letter from Mr Green dated 7 December, which contained his findings in relation to the dismissal of the appeal. We also have the review of the case by Mr Pritchard.

In his submissions, Mr Carr identified five principal factors which had led to the decision to dismiss:

(1) Falsification of expenses;

(2) Cash sale of number plate and failure to account for payment;

(3) Discrepancy relating to credit note for Range Rover radiator;

(4) Internal transfer of "Unifin";

(5) Lack of authorisation for purchase of Lada exhaust and failure to pay for such exhaust."

Mr Carr's overall submission was that the decision of the majority that there was an unfair dismissal, was flawed in a number of respects: it over-stated the requirements of a fair investigation; it involved a substitution of the view of the Members of the Tribunal for the view of the reasonable employer; it ignored a substantial part of the reasons for dismissal and it was perverse.

We do not find it necessary, for the purposes of deciding this appeal, to examine in detail all the five areas which Mr Carr has helpfully taken us through. The task is shortened because, during the course of the submissions of Mr Carr and later of Mr Counsell, it became clear that the area of dispute between them was narrower than the grounds of appeal and the grounds of resistance of the appeal at first indicated. The crucial part of the Tribunal's decision is in paragraph 14:

"The majority of the Tribunal consider that the only two matters that Mr Vernon should properly [have] taken into account when considering the conduct of the applicant are the travelling expense claims and the numberplate issue. The majority feels that falsification of the expense claim to the extent disclosed by the evidence did not merit the sanction of dismissal as it had not been shown that the applicant had made the profit out of the claim. Further, the majority considers that as the respondent allowed the £6.41 to be returned to the cash tin the respondent condoned the applicant's action in not properly accounting for it, and keeping the money for some days. The majority consider that these categories of misconduct did not attract the sanction of dismissal, and that dismissal was outside the band of responses available to a reasonable employer."...

That was the majority view. The dissenting Chairman said:

"... [He] disassociates himself with this view. He considers that falsification of the expense claims was blatant dishonesty. He does not consider that the respondent has in any way condoned the dishonesty of the applicant by allowing him to return the money received for the numberplate. He says that even if these two matters are taken in isolation from the rest they merit summary dismissal, and is firmly of the view that dismissal is within the band of responses available to the reasonable employer."

Those were the reasons why the majority of the Tribunal thought that the Applicant was unfairly dismissed and why the Chairman disagreed.

Some of the points on the appeal require little discussion in this judgment. It is accepted by Mr Counsell, that there are two areas on which the Tribunal made findings of fact, but which do not feature in any way in the decision that there was an unfair dismissal. First, the decision in relation to the Range Rover radiator. The Tribunal Members unanimously agreed at paragraph 10 of the decision that:

"Mr Vernon had made as full an investigation into the credit note as was possible, taking into account the fact that the omissions of the applicant in completing the invoice prevented any further investigation."

There was no further consideration of the alleged misconduct in relation to the Range Rover radiator when the Tribunal came to the decision in paragraph 14. There is a similar omission in relation to a second area of alleged misconduct, the purchase of the Lada exhaust. The Tribunal made findings of fact on that. The exhaust had been ordered in May 1993. No authorisation was obtained from Mr Thomson's line manager. He did not pay for it prior to his dismissal. The Tribunal were unanimous in considering that a full investigation had been carried out on that matter. Paragraph 14 does not deal with that point.

There are, therefore, errors in the reasoning of the Tribunal to this extent. They make findings of fact on two areas of alleged misconduct. They find that there had been full investigation. They find that there had been misconduct, but they do not deal with either of those matters in considering whether there is an unfair dismissal. That oversight is serious enough in itself. In a case of dismissal for misconduct, it is, in our view, important that the Tribunal should not only make findings of fact, but also state their conclusions as to whether that is misconduct for which it is fair and reasonable for an employer to dismiss the employee. There is a third matter on which we can also be brief. That relates to the way in which the Tribunal dealt with the cash for the number-plates. The Tribunal found that, on 25 October 1993, Serck Marston had received a report that Mr Thomson had received cash for a number-plate and not accounted for it; they found that paperwork for the sale had not been completed. The money in the till therefore tallied with cash sales properly recorded. Mr Thomson was questioned about this. He denied any recollection of the transaction. On 28 October, the cash tin was found to be out by an amount equal to the price of the number-plate. Mr Thomson claimed that he had found the money at the back of the money box.

The Tribunal found that, at the time of the dismissal, Mr Vernon had a transaction for which there was no paperwork, save a discarded document thrown away by Mr Thomson. He was also faced with the fact of the discovery of the money in the cash tin and the failure of Mr Johnson to recollect anything about the transaction. On this aspect of the case, the Tribunal were unanimous in finding that there had been a full investigation. The majority took the view that this was a matter that could be taken into account by Serck Marston, but then said that dismissal was too great a sanction. The Tribunal said in paragraph 14:

"... the majority considers that as the respondent allowed the £6.41 to be returned to the cash tin the respondent condoned the applicant's action in not properly accounting for it, and keeping the money for some days. The majority consider that these categories of misconduct did not attract the sanction of dismissal, and that dismissal was outside the band of responses available to a reasonable employer."...

On that matter, Mr Counsell, in our view rightly, conceded that the statement made by the majority that Serck Marston had condoned Mr Thomson's action in not properly accounting for the money and keeping it for some days, is impossible to justify or make sense of, in view of the findings of fact. That appears to be a third matter which the Tribunal have not adequately dealt with on the matters relied upon by the employer to justify the dismissal. They omitted to deal with the two points already mentioned. They have dealt with a third point in a way which everybody agrees makes no sense.

The fourth matter is the internal transfer of Unifin. The Tribunal found that, on 25 May 1993, an internal transfer document was raised by the St Austell branch transferring a quantity of Unifin to Plymouth, but the document had not been actioned at Plymouth. No Unifin was taken into stock. On 3 November 1993 Mr Vernon spoke to a Mr Figures from St Austell and told him that Unifin had been given to Mr Dobson at a public house Jamaica Inn. Mr Thomson denied all knowledge of the transfer, but later claimed it related to a profit-share arrangement which he had discussed with Mr Davies. On this point the majority thought that further investigation was required. Mr Figures, who had made a statement and been interviewed, should have been seen by Mr Vernon and allowed to be questioned by Mr Thomson. The majority took the view that, in those circumstances, Serck Marston should not be allowed to take that matter into account.

It is not worth spending much time on this point, though we have heard argument about it. It does appear from the documents relating to Mr Thomson's dismissal that much account of it was taken. It is a matter which has been investigated in some detail, but the attitude taken by the employers was recorded in the extended reasons for the decision. In Mr Pritchard's review of the decision, he said at paragraph 4 (xv)(d):

"Unifin: Although Mr Pritchard had some suspicions in regard to the handling of the unifin, he did not find that there was any case established that the applicant [Mr Thomson] had misconducted himself with regard to this."

We heard detailed submissions about it from Mr Carr, but, in view of what Mr Pritchard concluded about it, we do not think it is appropriate to say any more on that point. That leaves one point on which there has been a considerable amount of argument focused on the requirement in the Burchell case that there should be a reasonable investigation of alleged misconduct.

This question concerns the falsification of expenses. The Tribunal found that expense form claims had to be authorised, but Mr Davies, the previous line manager of Mr Thomson, did not do a thorough check. Mr Thomson wrongly categorised a number of claims and included fictitious names and falsified receipts. He claimed that he was justified in doing this, and that his behaviour had been condemned by Mr Davies. The Tribunal accepted that, at the time of the decision to dismiss, Mr Vernon was faced with Mr Thomson's admitted falsification of receipts and expense claims. The majority came to the view that the investigation was inadequate. Further investigation may have revealed a policy adopted by Mr Davies to safeguard future allocation of money by Head Office. They went on to find that Serck Marston were entitled to take into account the expense claims, but the dismissal was not merited, because it had not been proved that Mr Thomson had made a profit out of the claim. The Chairman disagreed. He said that, even if the practice of mis-categorisation of expenses was condemned, no reasonable employer would accept that this extended to deliberate falsification of dates and so on, that Mr Davies had, in any event, denied condonation and Mr Thomson had had a chance to challenge him at the disciplinary hearing. The position was that Mr Thomson had admitted dishonesty. Little was required by way of further investigation.

The Chairman regarded this as a case of fair dismissal, because there had been reasonable investigation of admitted misconduct. Mr Carr has persuaded us that there are errors in the reasoning of the majority. The errors are errors of law, because the conclusions reached by the majority involve an impermissible substitution of their views for those of the employer faced with the situation. The majority suggested a policy which was never seriously suggested by any party at the Industrial Tribunal. They made a speculation about what further investigation there might be, but failed to give any indication as to what they think that the employer should have done. He submitted that the suggestion that the employer must prove that Mr Thomson made a profit before it could dismiss him for falsification is perverse. We agree. Whether he makes a profit or not out of false documents, is not a necessary ingredient of a misconduct for which an employer is entitled to dismiss an employee.

The argument between Mr Carr and Mr Counsell focused on the question of investigation. So far as Mr Counsell is concerned the Tribunal made no error on this part of the case. The majority addressed the question whether there had been a reasonable investigation into the alleged misconduct under the falsification of expenses. They came to the view that there had not been a reasonable investigation into the role of Mr Davies as the previous line manager. Mr Davies's role was central to the justification advanced by Mr Thomson for his conduct. Mr Counsell submitted that the majority were right in holding that it was unreasonable for the employer not to investigate that. Mr Carr disagreed. He said that it was clear from the IT3 that the employer's case was that, whatever Mr Thomson said about the previous policy and authorisation from the former Area Manager, they had evidence to show that Mr Thomson was advised that the claims for expenses that he was making were unacceptable and that he was not to submit them again. But that is what he did. On this point Mr Carr's argument was that there was nothing to investigate. The basis upon which they were saying that Mr Thomson had misconducted himself was that he had submitted a claim form for expenses on 17 September 1993. Mr Vernon knew that was a false claim, because he knew that the claim incurred in Cornwall was untrue. He knew he was elsewhere. Mr Vernon warned him that he would not tolerate a repeat of a falsified expense claim, but authorised an amended claim. What happened then was that a false claim was submitted by Mr Thomson. Mr Vernon found entries for entertainment on DML personnel.

Mr Carr said there was nothing which required to be investigated, and there must be an error of law on the part of the Tribunal majority in saying that this dismissal was unfair, both on the basis of lack of reasonable investigation, as well as on the basis that the employer had not shown that Mr Thomson had made a profit out of the claim.

We accept Mr Carr's submissions. There are errors of law in this decision on four of the five heads. We put aside the Unifin one. On two of them they failed to consider the consequences of their findings of fact in relation to a decision of unfair dismissal. On one of them, which they did consider, they give a reason for finding unfair dismissal, which is conceded to make no sense. On the question of false expenses they give reasons which show they were addressing something irrelevant (that it had not been shown that Mr Thomson had made a profit out of the false expense claim). In coming to their conclusion, they have substituted their own decision impermissibly.

The question which has caused us some anxiety is to what we should do as a result of finding that there are errors of law in this decision. We are agreed that the appeal should be allowed. We have had to consider which of two courses we should take. The first course, which Mr Carr urged we should take, is to allow the appeal and to dismiss Mr Thomson's claim for unfair dismissal. He says that taking just the expenses claim alone, there was sufficient to find that this was a fair dismissal. But he did not confine himself to that. He said that, taking all the facts that were found in relation to the other heads, this was a case where the employer was justified in dismissing for misconduct. Against that, Mr Counsell said that, if we were to allow the appeal, the proper course would be to remit the case to another Industrial Tribunal.

We have decided to take the latter course. Our reason for taking that course is that we find that there are so many unsatisfactory features about this decision, stemming largely from the fact that it was a majority decision on no less than five different areas of complaint, that the only course open to us that would be fair to Mr Thomson, is that there should be a re-hearing of his claim. We find it difficult to be so confident on, the basis of this decision, that he was fairly dismissed, and that we should decide it ourselves. This course will not be popular with the employers. We appreciate the difficulties in going back to the Tribunal to go over the same ground again, bringing witnesses and so on and much longer after the events than at the previous hearing. For the reasons explained, this is a case where there should be a further hearing before a different tribunal. For those reasons we allow the appeal and remit the matter for re-hearing by a different tribunal.