United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MR C FREEDMAN (of Counsel) Messrs Simmons & Simmons Solicitors 21 Wilson Street London EC2M 2TX
For the Respondent	MISS J EADY (of Counsel) Messrs Thompsons Solicitors Congress House Great Russell Street London WC1B 3LN


 


JUDGE PETER CLARK: This is an appeal by the employer, Refuge Assurance PLC ["Refuge"], against a majority decision of the Cardiff Industrial Tribunal that the respondent, Mr Leonard, had been unfairly dismissed. The hearing before the Industrial Tribunal occupied three days and extended reasons for that decision are dated 26th April 1996. Further, Refuge appeal against a decision of the Chairman alone dated 15th May 1996, refusing its application for a review of the tribunal's substantive decision.

The respondent was employed by Refuge as an area representative based at the Merthyr Tydfil branch. He was enthusiastic, highly regarded by his colleagues and a valuable member of the sales force.

Refuge, in common with other providers of financial products was regulated, in the interests of the public to whom those products are sold, originally by LAUTRO, and after July 1994 by its successor the Personal Investment Authority ["PIA"]. Both operated under the provisions of the Financial Services Act 1986. The regulatory body must and does insist on the highest standards amongst sales forces. Its powers are draconian. It can close down businesses for non-compliance.

External rules provide that each employee selling financial products must achieve a set level of competence. If not, he or she will be stopped from selling for a period of 12 months.

Originally, oral testing of the sales force was the method by which Refuge ensured that its sales people met the necessary level of competence. However, following a LAUTRO competence audit carried out in November/December 1993, Refuge were told that oral testing would no longer be acceptable.

A system of written testing was introduced. Each sales person was allowed to take the test three times. If he or she failed after three attempts, de-authorisation would follow under the LAUTRO rules.

Despite extensive support and training, as the Industrial Tribunal unanimously found took place, the respondent failed three successive written tests between April and September 1994. That stark fact masks a human tragedy. His daughter was very ill. He became anxious at his failure to pass the tests set. It was urged on his behalf by his trade union that he be allowed to make a fourth attempt. Refuge acceded to that request. Unhappily, he again failed.

The position was clear. Without passing the test the respondent was prevented, under the external rules of the regulatory body, from selling. He was off the road.

In these circumstances he attended an interview with Mr Readman, the Employee Relations Manager on 2nd February 1995. In a letter written on the following day, Mr Readman, not unkindly but bluntly summed up the situation in one telling phrase; "you are a salesman who is unable to sell." However, instead of terminating the employment there and then, Mr Readman offered the respondent alternative employment on a temporary basis, filling in for the clerk cashier at the Merthyr branch who was on maternity leave. The respondent accepted that temporary assignment, on the understanding that his employment could not be guaranteed beyond April.

That was not the end of the matter. Mr Jeary, the Regional Officer of the respondent's trade union, MSF, lodged notice of appeal against Mr Readman's decision to terminate the respondent's employment as an area representative by letter dated 20th February 1995. That appeal came before Mr Stokes, the Human Resources Manager, on 6th March 1995.

Before considering the course which that appeal took it is instructive to bear in mind at this stage certain unanimous findings of the tribunal, expressed at paragraphs 30 and 31 of their reasons in this way:

"30 However, the Tribunal are unanimous in their findings that the respondents had had imposed upon it indirectly a regime of testing by a third party and that they genuinely and reasonably believed that LAUTRO would be satisfied only with a written examination. This was because of the discussions held between the representatives of LAUTRO and the respondents and the respondents' belief of the unacceptability of the discredited oral test formally [sic] in place. Further, the Tribunal unanimously agreed that the tests which were drawn up were reasonable in content, applied uniformly and fairly. Further, when any employee failed then he or she was given the utmost support, training and guidance. This was not an inflexible system applied in individual cases; a discretion was available and exercised, especially in the case of the applicant on the issue of personal circumstances, for example, in allowing the fourth test and being prepared to consider the allowing of a fifth test.

31 Further, the Tribunal were unanimous that the respondents were entitled to reject arguments against any selective consideration of the fourth test being adopted in order to ensure success and to also reject the contention that the inexperience or nervousness of the applicant was a matter which demanded the exercise of further discretion. This was because the respondents were entitled to consider the application of the examinations in a uniform way and approach."

We turn now to the appeal hearing. During the course of his representations to Mr Stokes, Mr Jeary made this point, and we quote from the notes of the appeal hearing:

"Mr Jeary then said that the new PIA proposals for testing such as an open book or oral examination seemed to be more flexible and reasonable method than the ones currently adopted by Refuge which were harsh and inflexible."

Mr Readman, who attended the appeal hearing, was asked for a response. On this point:

"Mr Readman then said that the new PIA proposals were in fact only proposals which were not in force as yet."

In closing, Mr Jeary repeated his point:

"He finalised by saying that the company should use a sympathetic view and find a solution and that the company should look at the new PIA proposals with regard to flexible testing methods."

Having considered the matter Mr Stokes dismissed the appeal. The dismissal stood. The respondent presented his complaint of unfair dismissal to the Industrial Tribunal.

The Tribunal Decision

Despite the earlier unanimity in the tribunal's approach, the members parted company over the point raised by Mr Jeary at the appeal hearing.

We pause to observe that the tribunal found unanimously that the reason for dismissal was some other substantial reason, namely the respondent's inability to satisfy a test that Refuge reasonably thought was demanded by the external regulatory body.

The Chairman, in the minority, expressed his conclusions at paragraph 32 of the reasons. The majority lay members wrote their own judgment, which is to be found at paragraph 34.

The Appeal

Mr Freedman, on behalf of Refuge, sets out a number of grounds of appeal, further developed in his skeleton argument. He attacks the majority's findings that there were imminent changes about to be adopted to the testing system; he says that finding is unsupported by the evidence. He submits that the majority has inpermissibly substituted its own view for that of the employer; he seeks to challenge the Chairman's decision to dismiss the review application made by Refuge.

However, the principal point which concerns us is this. It is clear that in assessing whether the employer acted reasonably in treating the reason for dismissal (here, some other substantial reason as identified above) as a sufficient reason for dismissal, a tribunal is entitled to take into account information which emerges at the internal appeal stage. See West Midland Co-operative Society Ltd v Tipton [1986] ICR 192, explaining the principle in Devis v Atkins [1977] ICR 662. Accordingly, it was open to this tribunal, in considering the question of reasonableness, to look at the point raised by Mr Jeary at the appeal hearing before Mr Stokes. However, in considering that question the tribunal is governed by the approach set out by this appeal tribunal in Iceland Frozen Foods v Jones [1983] ICR 17. The Industrial Tribunal was specifically referred to that authority and was apparently directed by the Chairman in accordance with it. See paragraphs 26 and 27 of the reasons.

The first question of law, it seems to us, which we must decide in this appeal is whether the majority in fact applied that direction when reaching their conclusion that dismissal was unfair.

In the course of his judgment in that case, Browne-Wilkinson J cites a passage from the judgment of Lord Denning MR in British Leyland UK Ltd v Swift [1981] IRLR 91, 93. It bears repeating here:

"The first question that arises is whether the industrial tribunal applied the wrong test. We have had considerable argument about it. They said: '... a reasonable employer would, in our opinion, have considered that a lesser penalty was appropriate.' I do not think that that is the right test. The correct test is: Was it reasonable for the employers to dismiss him? If no reasonable employer would have dismissed him, then the dismissal was unfair. But if a reasonable employer might reasonably have dismissed him, then the dismissal was fair. It must be remembered that in all these cases there is band of reasonableness, within which one employer might reasonably take one view: another quite reasonably take a different view. One would quite reasonably dismiss the man. The other would quite reasonably keep him on. Both views may be quite reasonable. If it was quite reasonable to dismiss him, then the dismissal must be upheld as fair: even though some other employers may not have dismissed him."

Having reviewed that and other authorities Browne-Wilkinson J summarised the correct approach to section 57(3) of the Employment Protection (Consolidation) Act 1978 (now section 98(4) Employment Rights Act 1996) by reference to five well-known propositions at page 24G-25A.

With that approach in mind it is instructive to compare the self-directions which the minority Chairman and the majority lay members applied on the face of their reasons.

The Chairman said this at paragraph 32:

"... That was the view of Mr Stokes in the light of all the facts and one which the minority view is unable to suggest was perverse or one that fell outside the band of reasonable responses of a reasonable employer. He could have allowed a further test but chose not to do so on what the minority view is [was] on reasonable grounds. The minority, even if it was in disagreement with Mr Stokes, would find it impermissible to substitute its own views for that of Mr Stokes given the circumstances in which he formed his views."

The majority's approach, at paragraph 34, is encapsulated in these words:

"... We judge whether what was a reasonable employer would have done was reasonable bearing in mind all the circumstances known to them at the time of the decision. We feel that a reasonable employer knowing the imminent changes about to be adopted particularly with regard to the oral testing factor being actively considered a medium of testing through which Mr Leonard had proved his competency and capability they would not have arrived at a decision to dismiss. These imminent changes were known to Mr Stokes at the time of the appeal."

The difficulty with the latter approach is that it does not deal with the question posed by section 57(3) as it was explained by Lord Denning MR in Swift and adopted by Browne-Wilkinson J in Jones. It is simply not enough that a reasonable employer might have taken a different course. The question is whether a reasonable employer could have dismissed in these circumstances. The band or range of reasonable responses open to an employer envisages that one reasonable employer may dismiss, whilst another equally reasonable employer may not. Both responses fall within the band. It is only if the decision to dismiss falls outside that band altogether that the dismissal can be characterised as unfair.

Miss Eady submits that paragraph 34 of the reasons ought not to be subjected to analysis with a fine tooth-comb; on appeal we are not required to construe the words of an Industrial Tribunal decision, here framed by the majority lay members, as if they were the words of a statute; it is clear that the lay members were properly directed as to the law as set out in Jones. Upon a fair reading we should conclude that the majority were asking themselves the correct question, namely, was dismissal in all the circumstances within the range of responses of a reasonable employer.

Despite Miss Eady's best endeavours we are unable to find that the majority reasoning can be supported as a matter of law. It is clear on the face of those reasons that the majority have asked themselves, not whether dismissal fell within the range of reasonable responses, but instead found that a reasonable employer would not have dismissed. That is the wrong question. Within the range of responses one reasonable employer may dismiss another might not. In those circumstances the dismissal is fair. We therefore conclude that in applying the law the majority has misdirected itself. See Conlin v United Distillers [1994] IRLR 169, paragraph 6 per Lord Ross. The decision cannot stand.

The question then arises as to what course we should take in this case. Mr Freedman invites us to reverse the majority finding of the Industrial Tribunal and substitute a declaration that the dismissal was fair. Miss Eady urges us to remit the case to a fresh Industrial Tribunal for rehearing.

In deciding this issue we have been assisted by submissions which we heard from both Counsel on the alternative ground of perversity on which Mr Freedman relied if he failed on the misdirection ground of appeal. In view of our finding that the majority did misdirect themselves in law it is strictly unnecessary to decide the perversity point. However, had we not found that there had been a patent misdirection on the face of the reasons we should all of us have concluded that the majority decision was perverse, bearing in mind the unanimous findings of the Industrial Tribunal at paragraphs 30 to 31 of the reasons. The factual grounds upon which the majority found the dismissal was unfair were that at the appeal hearing Mr Stokes ought to have reversed the decision to dismiss because changes in the regulatory rules were imminent, and those changes might have allowed the respondent to take a test in future which, on the evidence, would have consisted of part oral and part written testing. In our view it is quite impossible for an Industrial Tribunal, properly directing itself, to say that no reasonable employer would dismiss this respondent, who was unable to sell its products, because at some time in the future he may have a better chance of passing an, as yet, hypothetical test involving what may be a different format in part to the type of test which he had already failed on four occasions in the past.

Having reached that alternative view of the case, on the facts as found by the majority, as well as on the unanimous findings of the tribunal, it seems to us that the inevitable result of remitting this case to an Industrial Tribunal, properly directing itself, would be a finding of fair dismissal. See McLaren v National Coal Board [1988] ICR 370, 378D-G, per Sir John Donaldson MR. In reaching that conclusion we bear in mind the approach of the Court of Appeal in the later case of Westminster City Council v Cabaj [1996] IRLR 399. This is not a case in which it is necessary for an Industrial Tribunal on remission to consider further matters in our judgment.

Accordingly we shall allow the appeal and substitute a finding of fair dismissal.