United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MR P J M HAWTHORNE (Solicitor) Messrs Witham Weld Solicitors 70 St George's Square London SW1V 3RD
For the Respondent	THE RESPONDENT NEITHER PRESENT NOR REPRESENTED


 


MR JUSTICE LINDSAY: We have before us as a full hearing an appeal by the erstwhile employer, London Swimming Pool Ltd, in the matter Mr R C Garner v London Swimming Pool Ltd. There is, at any rate on paper, a cross-appeal by the former employee, Mr R C Garner.

The facts as found by the Industrial Tribunal are as follows. The employer is a very small Company. The Industrial Tribunal describes it as "a one man band". It appears to be owned and run by Mr Line. In April 1994 Mr Garner was taken on as an employee of that small company. He also had and retained his own private clients as well as dealing with the company's clients. He never had any form of written contract but he travelled all over Greater London both in his private work and in his work for the Company. He submitted to the Company claims for expenses and they were met fortnightly. Mr Line reimbursed him by cheque after looking at the particular expenses claimed. Mr Line began to worry about Mr Garner's expenses in the Summer of 1996. Later, Mr Line wrote three letters to Mr Garner in December 1996, and, so far as those letter concerned expenses, the expenses with which Mr Line was then concerned were telephone expenses, particularly in relation to a mobile telephone, in the sense that it was being used for Mr Garner's private business rather than simply the Company's business and was perhaps being used overmuch in any case. Mr Garner answered those letters of December 1996. Then difficulties broke out again and on 18th February 1997 Mr Line wrote another letter on the subject of mobile phone calls and the bills for them. There was also then a question about Mr Garner's claims as to the use of his motorbike. Mr Line did not want him to use his motorbike on Company business. Another question then raised concerned Mr Garner's claim for petrol, petrol used whilst on holiday. Mr Garner apologised for having submitted a claim by mistake.

Coming to the most important event, on 5th March 1997 Mr Line wrote to Mr Garner. He referred to having checked some of the recent expenses which Mr Garner had claimed. He said:

"... Before I look into your earlier expenses claims I should like you to have the opportunity of answering my concerns, which are simply that you appear to be trying to charge London Swimming Pools for fuel, phones and some of the goods which you have purchased which are not all being used for the Company's business. Take petrol, enclosed is my hand-written note of the claims you have put in for petrol over the past few days. ..."

Mr Line then sets out an analysis relating to a claim made on 20th February 1997 and refers also to a claim on 14th February 1997. Later on the letter refers to motorcycle chain lubricant, a 22" tool box, bungee elastic, and again, the subject goes back to mobile telephone calls. The letter said:

"... I shall be conducting the meeting upon a disciplinary basis. ... I will be re-stating my concerns about these matters to you and looking to you for explanations, which I hope will be sufficient to maintain confidence and trust in you as an important employee of the Company. ..."

It was made clear to Mr Garner that the meeting on 7th March which was then convened would be "upon a disciplinary basis". The letter warned him that in the absence of totally satisfactory explanations, disciplinary action might be taken "including immediate dismissal for any false claim".

The meeting did take place. The Industrial Tribunal dealt with it in their paragraphs 11 and 12:

"11. At the meeting on 7 March 1997 Mr Line asked the Applicant to explain and comment on the matters mentioned in the letter of 5 March 1997 and the Applicant dealt with various matters. Mr Line expressed concern with receipt for fuel on various dates, most of which had not been mentioned in the letter of 5 March and three of which dated from the latter part of 1996. At the end of the meeting Mr Line informed the Applicant that a decision would be made later and that meanwhile the Applicant would be suspended on full pay for up to a week.

12. By letter dated 10 March, Mr Line told the Applicant that he was dismissing him immediately and without notice for gross mis-conduct, namely that he had charged to the Respondent company's account goods and fuel which he was not entitled so to charge."

The Industrial Tribunal directed itself, by reference to familiar cases, including British Homes Stores v Burchell, Boys and Girls Welfare Society v McDonald and the Iceland Frozen Foods Ltd v Jones cases, and they found that the reason shown by the employer for the dismissal was conduct. What they say at paragraph 18 of their decision is this:

"18. The Tribunal decides that the reason for the dismissal of the Applicant was the Respondent's belief that the Applicant had, deliberately in some cases and perhaps inadvertently in others, claimed reimbursement from the Respondent for expenses for which he was not entitled to claim. The Tribunal finds that that was a reason relating to conduct and a potentially fair reason for dismissal within section 98(2) of the Act."

But the Industrial Tribunal went on to hold that the Company did not act reasonably in dismissing Mr Garner. That seems to have been for three reasons. Firstly, they found, in paragraph 19, that:

"The Applicant was given no more than two days notice of the disciplinary hearing, the possible consequence of which was set out only in the letter of 5 March 1997."

So the first point was that too short a notice was given. Secondly, still in paragraph 19:

"At the hearing on 7 March Mr Line raised a number of matters which no specific details or warnings had been given to the Applicant;"

That was the second ground; no prior warning. The third ground, still in paragraph 19 and related, perhaps, to the second one:

"... in particular, Mr Line dealt with three items of fuel expenses dated between October and December 1996."

In other words, what was being dealt with were stale items or items that perhaps had been waived in the course of the earlier correspondence that had been passing between the parties. Accordingly, the Industrial Tribunal, in the absence of any potential curative disciplinary appeal machinery, held that Mr Garner had been unfairly dismissed.

Matters did not go entirely Mr Garner's way because the Industrial Tribunal continued at paragraph 21:

"The Tribunal considers that the behaviour of the Applicant in failing to deal with the obvious concerns of Mr Line about telephone bills, motoring expenses and client concerns, and the inappropriate comments made to his employer in his letter of 23 December 1996 about Mrs Jenkins taking over Mr Line's position as head of the company ("a highly inappropriate state of affairs"), contributed to his dismissal and makes it just and equitable to reduce the amounts of basic compensatory awards by 50%."

But then, finally, the Industrial Tribunal held that there should be no Polkey reduction, if we can call it that, the figure for a reduction which reflects the likelihood, especially appropriate in procedural cases, of the chances of the employee having been dismissed rightly later by way of the use of correct procedural machinery. On that, the tribunal said this in the last sentence of its paragraph 21:

"The Tribunal considered the principles set out in Polkey -v- A E Dayton Services Ltd [1988] ICR and does not consider that any further reduction should be made to awards in this case in the light of those principles."

That is the background to the case and the matters which have generated the appeals.

First of all we can deal with Mr Garner's cross-appeal. Mr Garner appeared below by a union representative, Mr Hilton. The union has indicated that, in effect, the matter is too small to justify further representation and we have had neither Mr Garner nor any union representative before us and there has been communication with Mr Garner indicating to us that he had not intended to appear today. It is not a case where he has been delayed at the last minute or anything of that nature. So we have, first of all, his cross-appeal. He completed a form on 28th July 1998 indicating some form of cross-appeal. It is very short but very far from clear. It appears to adjust figures which he had given to the Industrial Tribunal for his net wages. It is relevant, if to anything, to the remedy hearing. There has already been a remedy hearing and it might have been relevant to that, but it first of all is not relevant to the appeal that is before us, and in any event would seem not to raise any point of law as opposed to a point of fact. So we dismiss Mr Garner's cross-appeal.

We come to the main matter that has engaged us. The Company's appeal. The Company has appeared by Mr Hawthorne.

The Company submits that the well-known three part test in Burchell has here been satisfied. They say, firstly, that the employer genuinely believed that there was misconduct in relation to charging expenses. Mr Hawthorne says, rightly in our view, that nothing in the Industrial Tribunal's decision suggests that Mr Line's belief in Mr Garner's misconduct was anything other than genuine.

Secondly, it is urged that there were reasonable grounds that existed for that belief. It is said that nothing in the Industrial Tribunal's decision seems to suggest otherwise. We see force in that argument.

Thirdly, then, it is said that there had here been an investigation which, in the particular circumstances, was reasonable. It has to be remembered, says Mr Hawthorne on behalf of the Company, that Mr Garner had admitted a number of shortcomings as to expenses and it has to be remembered, too, that the Industrial Tribunal were dealing, and we are dealing, with a very small company indeed, one described as "a one man band". It is pointed out, too, that the nature of investigations which are necessary in any particular case must be looked at in relation to the facts of that case, and where there are admissions by the employee, then the need to make further investigations is manifestly diminished. In particular, we have had the case of RSPB v Croucher [1984] IRLR 425 drawn to our attention. That is a case where the employee admitted dishonest conduct. This is not a case where dishonest conduct was as such admitted. Plainly Croucher is a case that we have to bear in mind, but it is only an analogy rather than a decision which is on all fours with the one with which the Industrial Tribunal was dealing.

The Company urges that the Industrial Tribunal here failed to ask itself whether dismissal was within the band of reasonable responses open to the employer. In the skeleton argument Mr Hawthorne says:

"The employee having admitted to facts amounting to dishonesty, had the Industrial Tribunal asked themselves the question based on the "band of reasonableness" rather than what they, the Industrial Tribunal members, might have considered reasonable, the answer in such circumstances would have been bound to be that dismissal of the employee on the grounds of his gross misconduct was within the range of reasonableness."

But that overlooks, in our view, that the Industrial Tribunal did expressly address the question of whether there had been here a reasonable response. What the Industrial Tribunal hold, in the first sentence in paragraph 20 is:

"The Tribunal finds that in all the circumstances it was not a reasonable response for the Respondent to dismiss the Applicant."

And, whilst there is force in the point which Mr Hawthorne has made before us, in our view the Industrial Tribunal did not here take the three part Burchell test fully to be satisfied. It seems to us that, properly analysed, the Industrial Tribunal here thought that there had been a falling short on the procedural aspects of the Burchell test. What is a reasonable investigation by the employer carries with it not only whether the employer should look into this particular fact or that particular fact - and that is the way in which questions as to a reasonable investigation quite commonly are dealt with - but also whether there has been procedural regularity, whether the matter had been proceeded with in an acceptable way. Accordingly, it was the procedural shortcomings at which the Industrial Tribunal chiefly looked, namely, the three that we have mentioned, the inadequate notice of the hearing, the inadequate notice of what were the items with which Mr Garner would be charged and the possibility of there having been reliance upon stale or earlier forms of accusation which were no longer proper to be relied upon.

As to those three points, and dealing firstly, with inadequate notice. The parties have had correspondence on the subject of what Mr Garner had said in relation to a question put by a member at the Industrial Tribunal. It is admitted that the sense of his answer was this - and here the letter sets out what the Company's solicitor understood had been said at the Industrial Tribunal hearing - it says this:

"... Our recollection is that Mr Garner said in response to the member's questions that he needed no more time to prepare for the meeting and our note then reads:

"To prepare for the meeting I did nothing because I thought it would be a sit down conversation talk. I didn't prepare and didn't need to because I did not feel that I had done anything wrong."

That, as it seems to us, does not fully excuse short notice being given of the meeting of 7th March because the reason that Mr Garner did not prepare was that he thought it was going to be a sit down conversation talk on the specified matters, as to which he thought he had done no wrong. In other words, he thought he had answers to the matters raised in the letter of 5th March, and to that extent did not need further time. That answer alleviates the employer's shortcomings in relation to short notice but only to deepen its inadequacy on the second allegation, which was that Mr Garner was being asked to deal with matters with which he had not earlier been sufficiently warned.

We have already quoted part of the letter of 5th March that spoke of the investigation into recent expenses, and that told Mr Garner that:

"I will be re-stating my concerns about these matters to you ..."

and yet, ultimately, at the 7th March meeting it is quite plain from the note of the meeting that matters were raised which went outside the letter of 5th March and, in particular, as the Industrial Tribunal picked up, there were investigations as to fuel that went back to October and December 1996. This was not a case, like the Croucher case where those allegations were admitted. On the contrary, the note of the meeting indicates that Mr Garner emphatically denied that he had attempted to pass the receipts through for payment and said that they had been passed through by mistake. Mr Line took the view that they had not been passed by mistake but were "systematically being passed into the accounts system in order to obtain cash not used for the Company's benefit." To that extent, there was a plain reliance at the hearing of the 7th March on serious matters which had not been explained as being subject matters of any charge against Mr Garner.

In the skeleton argument, although perhaps not pressed before us, Mr Hawthorne takes the point that the Industrial Tribunal had too much relied upon the fact that here there had been no disciplinary appeal machinery. But that, we apprehend, is not a fair understanding of the Industrial Tribunal's conclusion. They do mention that there was no appeal's machinery in this case but they are not critical of that, and indeed, in such a small company it would be very difficult to devise an appeal machinery without expense and involving persons outside the Company. The only point, as we understand it, that the Industrial Tribunal was making about the absence of an appeal's machinery, was that here there was no possible curative effect, that one sometimes comes across, where an initially procedurally inadequate first hearing, is later replaced and cured, so to speak, by an adequate appeals machinery. As there was here no machinery for appeals there could be no curative effect, and the Industrial Tribunal, it seems to us, was saying nothing beyond that. It may be that the Industrial Tribunal were perhaps a little harder on the Company and its procedure than they might have been, but if we ask whether the decision to which they came was one to which no Industrial Tribunal properly instructing itself could have come, we feel unable so to conclude. On that first part of the appeal, namely, on the procedural aspect, we therefore would not allow the appeal.

But one point remains. The Industrial Tribunal held, as we have mentioned, that there should be no Polkey reduction. It arranged that there should be a second hearing to deal with remedy. Mr Hawthorne, who also appeared below, tells us, and the Notice of Appeal takes the point, that the parties at the first hearing were not heard on the Polkey point. What the Notice of Appeal says on the subject is this:

"(v) The Tribunal hearing on 21st November 1997 was limited by the Industrial Tribunal solely to the issue of dismissal with a separate hearing being fixed for consideration of any remedies. Accordingly by deciding in paragraph 21 of its decision that the principles set out in Polkey ... should not apply, in advance of the remedies hearing and before being addressed by the employer's representative on those principles, the Industrial Tribunal erred in that the rules of natural justice, under which parties are entitled to be heard before adverse decision are taken, were breached thereby."

The Industrial Tribunal stated the issues as it saw them in their paragraph 3. What they said there was:

"3. This was a complaint of unfair dismissal and the issues were:

(a) the reason or principal reason for the dismissal of the Applicant and

(b) if a potentially fair reason, whether or not the dismissal was fair or unfair (section 98(4) of the Employment Rights Act 1996)."

Well, that statement of the issues is consistent with Mr Hawthorne's argument that Polkey was not regarded as an issue at that first hearing. Equally, Polkey is not mentioned in paragraphs 13 and 14, where the parties respective submissions are set out and it is not mentioned, either, in paragraphs 15 to 17, where the relevant law is set out. We have had nothing from Mr Garner to suggest that Polkey was raised at that first hearing. In the circumstances, we must conclude that the Polkey deduction was not the subject of any argument, concession or agreement at the initial first hearing, and that the Industrial Tribunal's conclusion that there should be no Polkey reduction was therefore premature. We therefore allow the appeal to the extent only of the last sentence in paragraph 21, which we have already cited and would overturn the decision simply as to that extent.

There is a complication, unfortunately. The remedies hearing has taken place and has come up with a figure - £1,347 - as payable to Mr Garner. At that remedies hearing, and consistently with their view in the first hearing that there should be no Polkey reduction, the Industrial Tribunal says in their paragraph 15 of the second decision:

"... The Tribunal did not consider that it should consider further any arguments about reduction of awards in the light of the Polkey case or other case law. ..."

The word "further" might be the subject of argument but it looks as if at the second hearing, the Industrial Tribunal simply took their first decision as correct and therefore did not listen to Polkey at the second hearing either. In other words, at neither hearing has Polkey been properly been put into play, argued and ruled upon.

Unfortunately, the position is that there has been no appeal lodged against the remedies hearing, which was promulgated on 12th March 1998. An appeal therefore is at the moment out of time. There is no appeal before us in relation to the second hearing. As we have mentioned, Mr Garner is not here. Had he been here and been represented, we might have been able to take a more flexible view, but the most we can do is, as it seems to us, is, as earlier indicated, set aside the last sentence of paragraph 21, the sentence that held there should be no Polkey reduction, and leave the Company to seek, out of time, leave to appeal against the second decision. They will then, if they are granted that leave, be able to argue that there should be further reduction to the £1,347 on Polkey principles. I should say that one of the matters that was argued before the second hearing of the matter, was that there should be an adjournment to await this appeal. Unfortunately, that application failed. We cannot, at this stage, grant leave to appeal the second decision out of time, because there has been no warning to the Garner side and we have not heard their views. So we will have to leave that application over to whatever body ultimately hears it.

We are now talking, of course, about really quite a small sum. The Polkey argument can relate only to a fraction of £1,347. Quite what fraction, if any, would be for some other body to determine. It might be hoped that our having set aside the decision that there should be no Polkey deduction will encourage both sides to take a practical view in relation to so small a sum and it might be, therefore, that the cumbersome system of an application out of time for leave to appeal followed, if appropriate, by an appeal simply on the Polkey point, could be avoided. But all we can do on that subject is to encourage a practical approach by the parties.

Returning to what we must do, save for the Polkey point, as to which we strike out the last sentence of paragraph 21 of the decision, we dismiss the Company's appeal.