United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MR H BALLANTYNE (of Counsel) Mr W Mellor Head of Human Resources Thomas Pink Ltd 1 Havelock Terrace London SW8 4AF
For the Respondent	MR SAM NEAMAN (of Counsel) Messrs Blaser Mills Winter Taylors Solicitors 12 College Road Harrow Middx HA1 1JF


 


MR JUSTICE LINDSAY: We have before us by way of a full hearing of an appeal, the appeal of Thomas Pink Ltd in the matter Miss M. Fernandez against Thomas Pink Ltd. There was a hearing before the London (South) Tribunal, under the chairmanship of Mrs Gilbert on 12 June 1998, that led to a decision promulgated on 31 July 1998.

The unanimous decision of the Tribunal was that Miss Fernandez, the Applicant, had been unfairly dismissed. She had complained of constructive dismissal. Paragraph 1 of the Extended Reasons says:

"This is a complaint of constructive unfair dismissal by the Applicant, Maria Fernandez, against her former employers, Thomas Pink Ltd. She was employed as a sales associate at their shop in Terminal One, Heathrow Airport, from 10 October 1994 to 24 February 1997 when she left."

Today we have had argument on behalf of the Appellant, Thomas Pink Ltd, by Mr Henry Ballantyne and we have had Miss Fernandez's position defended by Mr Neaman. We have had drawn to our attention by Mr Neaman a number of authorities on the comparatively limited role that the EAT has in matters of this kind.

The Industrial Tribunal had directed itself on the subject of constructive dismissal by reference to the well known case Western Excavating (ECC) v Sharp [1978] ICR 221. It cannot be said, and Mr Ballantyne does not say, that that direction represented any error of law.

The particular form of fundamental breach asserted by Miss Fernandez was that there had been a breach by the employer of the implied term (as it is called) of trust and confidence and, as to that, the Industrial Tribunal directed itself by reference to the dicta of Neill LJ in Woods v W M Car Services (Peterborough) Ltd [1981] ICR 666 and again, it is impossible to see that to be, and Mr Ballantyne does not say that it is, any error of law.

The Industrial Tribunal held (I am looking at their paragraph 9):

"We find that the Respondents were in breach of the implied term of trust and confidence on the basis of the cumulative effect of their actions, from the Applicant's application for the supervisor's job in September 1996 up to the imposition of a final warning in February 1997."

And they went on to give reasons in that paragraph 9, at sub-paragraphs (a) to (f) inclusive, and they regarded that given in sub-paragraph (f) as the most serious. We will have to return to ground (f) in particular. They continued in their paragraph 10:

"All in all we find that, although taken individually, the Respondent's actions did not themselves constitute fundamental breaches of a contractual term, taken cumulatively they had the effect of undermining trust and confidence and so entitling the Applicant to resign and claim constructive dismissal. We find that the dismissal was unfair and the Applicant is entitled to compensation."

In the usual way, compensation was left over for a later hearing.

Before going to the Notice of Appeal a brief summary of the background and some comments en route, so to speak, is necessary if the rest of the case is to be understood. Miss Fernandez was employed selling clothing at the Airport branch, which we have referred to, and was a highly successful sales associate.

In September 1996 she sought promotion. Her own manager, as it seemed to her, encouraged her to do so; that was an encouragement from Jacky Reynolds, but the Area Manager, Kirsten Larder made remarks which Miss Fernandez considered were an unfair criticism of her performance. Her witness statement, which was relied upon at the Industrial Tribunal, said:

"At the meeting I was informed that I would not be considered for promotion to the Supervisor position and a number of unfair and unjustified criticisms were made of my performance which I found extremely hurtful, notably that I purportedly did not vary my shirts enough, my sales had dropped and I had recently lost my enthusiasm for the job. I totally reject these unwarranted and unfounded allegations and I believe this is evidence that my application for promotion was not treated at all seriously by the Company as it should have been. At the time I sought advice from my local Citizens Advice Bureau as I was naturally concerned about the way I had been treated.

If, it is the case, as Miss Fernandez obviously did argue, that an accumulation of straws might ultimately break the camel's back, then it seems that that was the first straw in the load which was eventually placed upon her. That was September 1996.

In December 1996 she made an error on the till at Pinks of £44.67. What the Tribunal said about this was:

"In December 1996 the Applicant made a till error valued at £44.67. She was given an informal reprimand but no further action was taken. As far as the Applicant was concerned, that was the end of the matter."

Then in January 1997 Pinks held their first ever sale at that Terminal One branch. As to that the Tribunal said this:

"On 14 January a Japanese customer came into the shop in a hurry and bought four shirts and four ties at the discounted sale price. He left his receipt behind. After he left, the Applicant saw the receipt and noticed an error and that a greater discount had been given than should have been given. The Applicant said she thought it was a till error. She told her supervisor, Simon Weir. He told her not to worry. The Applicant told the Tribunal that Mr Weir then said, 'Jackie [a reference to Miss Reynolds] doesn't need to know'."

That is a finding of fact because that passage is paragraph 4 (c) and paragraph 4 begins "From the evidence we heard and the documents before us, the Tribunal finds as follows". So that is a finding of fact that Mr Weir did say not to worry and that Miss Reynolds did not need to know. Ten days after that incident with the till the company acted. As to that the Tribunal said this:

"Nothing happened until 24 January when there was a brief exchange of words between the Applicant and Miss Reynolds followed by a more thorough interview on 7 February."

An explanation for the delay was given and, although the Industrial Tribunal does not, in terms, exculpate the company, they do not appear to be critical of it on the score of that delay, although the company did accept that the delay "led to an escalation of feelings". The meeting of 7 February took place and the company asserted that it was not the till that was at fault in relation to the error of January 1997. Miss Fernandez though, said that it was not her fault. It was, she was saying, not an operator error. The company at that meeting revived mention of the December till error. The Tribunal said, in relation to this meeting:

"Miss Reynolds said that the amount, £34, would be stopped from her wages. In fact, this was the wrong amount and the correct amount would have been the amount by which the customer had been under-charged, which was £26.20. The Applicant felt that it was unfair of the Respondents to have assumed that it was her fault and that she had not been given the chance to put her case."

It is notable there that what was being then proposed was a deduction in wages. That was what was threatened. It does lead one to wonder whether the contract of employment authorised a deduction from wages. Later on, as will be seen, the suggestion is that the deduction should be made from a bonus and it does not look as if the Industrial Tribunal ever went into this. But there is some ground for believing that this first indication, that there should be a deduction from wages was, itself, not correct. So the position is that there is threat of deduction from wages and that the amount so threatened to be deducted is wrong and excessive; not a good start.

Then there was another meeting on 13 February 1997. Again, the company referred to the earlier error of December 1996. As to this the Tribunal said this:

"The Applicant was told that all discrepancies would be taken out of her year-end bonus and she was given a verbal warning. Before the Tribunal Miss Larder denied that the December discrepancy was to be deducted, but the note of the 13 February meeting referred to "all discrepancies" and we find in favour of the Applicant on this point, namely that the Respondents intended to deduct both shortages from her pay."

So now the deduction that is threatened is not out of wages, as had earlier been the case, but out of bonus. But there is no indication that the error in amount had been corrected. The deduction was going to include the December amount which had not led to any deduction at the time. That leads one to wonder whether the contract would have permitted the company to revert to an earlier incident, not having taken up the matter of deduction at the time. One does not know what the answer to that would have been.

Miss Fernandez's evidence was that at that meeting she was told not to argue back. What her note of evidence says:

"I was told not to argue back and that I was trying to put the blame on somebody else."

Her witness statement was read without any relevant cross-examination on that point, so far as one can judge from the Chairman's notes, and it does excite some wonder as to what sort of disciplinary hearing it could be where the employee is instructed not to answer back. Importantly it is said that at that meeting a verbal warning was given (by which, I think, it must be taken that what was meant was that an oral warning was given). That led to Miss Fernandez being very upset and the next day she phoned Mr Mellor, the Human Resources Manager for Pinks, and so far as that conversation is concerned, the Industrial Tribunal held this:

"Mr Mellor tried to explain to the Applicant the need to investigate when a financial loss had occurred. He admitted saying that he could be considering the case where items could be given away free and gave an example that hypothetically she could have handed free ties to someone she knew. Although the Applicant took this as an accusation of theft, we accept Mr Mellor's evidence that he meant it only as an example of what might happen and was not actually accusing the Applicant of stealing. We note that in his evidence to the Tribunal he admitted that, with the benefit of hindsight he would not have mentioned theft."

The Chairman's notes on this subject (Mr Mellor's evidence) say this:

"I tried to explain why the company was investigating. I did say that we could be considering a case where someone was handing out free ties. I was trying to show why we had a duty to investigate. She took my comments as an accusation. With the benefit of hindsight I would not have mentioned theft."

If his evidence was as there noted by the Chairman (and, we add, that the Chairman's notes say nothing relevant in cross-examination or member's questions) - if he said, as is there recorded, "we could be considering a case where someone was handing out free ties" it is hard to expect the recipient of that message not to expect that what was being looked into, so far as the company regarded it, was an offence which at least might be an offence of dishonesty. In other words, it is exactly the sort of thing that needs to be handled extremely carefully and which, if not very carefully handled, can excite real distress in the recipient of the message.

What happened was that a fresh meeting was convened. On 20 February that fresh meeting took place. As to that the Industrial Tribunal said:

"On 20 February the reconvened meeting took place. Simon Weir said that he had told the Applicant he would have to tell Jackie about the error."

Mr Weir did not give evidence to the Industrial Tribunal and, as already pointed out, the Industrial Tribunal found as a fact that he had told Miss Fernandez, relative to the January 1997 till incident, that it was a matter she need not worry about and that Jackie did not need to know.

Then there was a disciplinary hearing on 24 February. As to that the Industrial Tribunal said this:

"On 24 February a disciplinary hearing was held between the Applicant and Philip Downer with Miss Larder taking notes. The Applicant was accompanied by a colleague. The incident was gone through yet again and the Applicant again denied the error was her fault. Mr Downer concluded that she had failed to accept responsibility, that she had tried to shift the blame to her supervisor, Mr Weir, and that the verbal warning would remain on her file for three months; but he also decided she would receive a final written warning which would remain for one year. She was told she could appeal to Mr Mellor. The Applicant then told Mr Downer that she had been unfairly treated and that she was constructively dismissing herself. She handed him a letter she had drafted before going into the meeting in which she said she considered she had been constructively dismissed."

It is difficult to see how Mr Downer, the Retail Operations Director, could have taken the view that she was trying to shift blame to Mr Weir. Blame for what, one has to ask? Blame, in that context, surely meant whose fault it was that too great a discount had been given to the customer in January 1997. But she had not, it seems, sought to inculpate Mr Weir in relation to that but had simply asserted, as in fact the Industrial Tribunal held to be the case, that he had told her that she need not worry and that Miss Reynolds did not need to be told. Importantly, a written warning was said to be given. We will have to return to that. It is also to be noted that an appeal to Mr Mellor was an appeal to a person who had said, "We could be considering a case where someone was handing out free ties".

Then, just to complete the relevant events, Pinks wrote a letter to Miss Fernandez on 25 February, justifying the written warning that they then gave. That is far from a complete summary of all the events, but that suffices at any rate, we hope, to make comprehensible the remaining parts of our judgment.

We now turn to Pink's skeleton argument. The Notice of Appeal perhaps differs from it - it is not entirely easy to tell - but we have not understood Mr Ballantyne, on Pink's behalf, to trespass outside the broad four points stated in the skeleton argument that was sent to the EAT on 20 April. The first two grounds, I think, could be taken together and the first is this:

"(i) Section (f) (page 6) of the conclusions contained in the Industrial Tribunal decision is misdirected in law in that the Tribunal failed to take account of the Respondent's behaviour during the disciplinary hearing. As this section is 'the most serious indication of the employer's undermining of mutual trust and confidence' it is in itself enough to demonstrate that the decision erred in law.

(ii) The Tribunal's statement of law again fails to take account of the procedure which may be followed when the behaviour of an employee during the disciplinary procedure warrants more serious action."

That requires us to read out in full that paragraph (f). What it says is this:

"The final and, in the Tribunal's view, the most serious indication of the employer's undermining of trust and confidence was their failure to comply with their own disciplinary procedure. Under the heading 'Disciplinary Action - Stage 3 - Final Written Warning' it provides:

'For a serious offence which might justify summary dismissal for misconduct but where management decides that a lesser penalty is appropriate in the circumstances or for an unrelated offence after a first written warning has been given and is still in force, a final written warning will be given'.

In this case, there was no offence which was sufficiently serious to justify summary dismissal for misconduct and so for the Respondents to have issued a final warning there should have been a first written warning, which there was not."

Subject to a point taken by the Appellant which we will have to deal with shortly, that seems to us, with respect, a justified conclusion by the Industrial Tribunal or at any rate a decision that cannot be said to be unjustified.

Departing from its own disciplinary procedure, Pink had, in effect, branded Miss Fernandez as either having done something which prima facie justified summary dismissal (in other words, a serious offence) or, alternatively, having earlier merited such a written warning and yet nonetheless to have gone on to some unrelated offence.

It is very difficult to fault in law the Industrial Tribunal's conclusion that that was a serious indication of an undermining by the employer of the implied term as to trust and confidence. But what Pink urges, through Mr Ballantyne and their Notice of Appeal, is that behaviour during the disciplinary process could and should have been taken into account by the Industrial Tribunal and that, if it had been, then it would have been seen that the written warning was, indeed, appropriate.

We accept that it can be appropriate for events during a disciplinary hearing to be taken to have aggravated and inflated the original matter complained of into something more serious. Although Mr Ballantyne has not relied upon it in terms, the argument earlier put in front of us by the employer, Pinks, gave British Leyland (UK) Ltd v Swift [1981] IRLR 91 in the Court of Appeal as an example of such a case. What had happened there was that the employee had told blatant lies and repeated them in the course of the employer's enquiry. He had come out with what the Court of Appeal described as a "cock and bull story". He persisted in lies and that, not unnaturally, was taken to have been an indication to the employer that the man could not be trusted. But caution is required here. If aggravating events or matters are to be borne in mind by the employer, being events that arise during the disciplinary hearing, then it seems to us that the employee needs at least to be made aware, if it is not plain and obvious, he needs to be put on notice, however informally, and whether or not expressly, that these further events and matters are being considered and that they may, if found to exist, be taken to aggravate the basic complaint. It seems to us that the employee must be given opportunity to deal with those further events and matters. Unless those first two features are present then a situation could arise in which an employee is effectively sentenced yet where he or she has not understood the charges and has not been given sufficient opportunity to defend himself or herself. Moreover, if the further matters are to be relied on, as matters to be borne in mind against the employee and as an indication of aggravating conduct, the employer must surely believe them to have occurred and must, to adopt the well known test supplied in the Burchell case, have reasonable grounds for that belief, grounds which either are supported by or arrived at after such enquiry as in all the circumstances could be described as reasonable. It is hard to see why the test appropriate to the emerging events relied on by an employer, should be less onerous, so far as the employer is concerned, than those supplied by the Burchell case for the initial events.

If that is right then there is here a problem for the Appellant. What reasons did the employer give for the escalation and the aggravation? For that, one needs to look at Pinks letter of 25 February. They say this:

"To Miss Fernandez:

However, during the course of these further investigations you have consistently demonstrated a failure to take responsibility for your actions. Furthermore this has resulted in a number of allegations being made by yourself regarding the actions of a number of your fellow-employees and the operation of the company's till systems.

As a result of this approach you have escalated what was initially a matter of simple error to an issue that I consider to be a great deal more serious.

You have alleged that one of your supervisors told you that the till error was not a problem and that the manager did not need to be told about it. However, his demonstrable actions of reporting the original error in the branch communications book and speaking to his manager the following day do not support this.

You have also stated that you were told by our Human Resources Manager that this was a matter of theft and would lead to your dismissal. Having discussed your original conversation with him at the time and again following yesterday's meeting I am satisfied that this is not true. Mr Mellor simply highlighted the questions that the company has to answer when dealing with an error that has resulted in a material loss."

That is a letter by Philip Downer, the Retail Operations Director. And going on, he said:

"On the basis of your unreasonable attitude and unfounded allegations I have therefore decided to issue you with a final written warning to remain on your file for a period of 12 months."

A number of points arise out of that. Could Miss Fernandez, for example, have reasonably have thought that her criticising the company's till system would aggravate her offence? There is no suggestion that she did criticise the till system other than out of an honest belief, be it mistaken or not, that it was a system that was worthy of criticism.

As a second point, had Miss Fernandez said, as was reported in that letter, namely that she had been told by Mr Mellor that "this was a matter of theft and would lead to your dismissal"? The witness statement she later put in only said that Mr Mellor had said that "it may be a case of theft" but nowhere is there mention of her saying that Mr Mellor had said that it would lead to her dismissal. What reasonable ground could Mr Downer have had, when he came to write that letter, for such a belief, namely that she had said that the Human Resources Manager had said that it would lead to her dismissal? How could Mr Weir's own later reporting of the discount incident to his supervisor suggest that Mr Weir had not earlier told her that it was alright and that Jackie Reynolds need not be told? One has to bear in mind also that the Industrial Tribunal did find that Mr Weir had said that it was alright and that Jackie Reynolds did not need to be told. But how could the later reporting by Mr Weir in any way disprove Mrs Fernandez's version? Mr Weir could well have changed his mind and have said firstly, as the Industrial Tribunal found, that the matter was not a matter for worry and need not be reported and later have changed his mind and have thought it appropriate to report. It is hard to see how Mr Downer could have said Mr Weir's "demonstrable actions of reporting the original error in this branch communications book and speaking to his manager the following day do not support this" if it was intended thereby to convey that that reporting by Mr Weir in any way suggested that Miss Fernandez's version of events was untrue.

What were the allegations that Miss Fernandez had made about a number of her fellow employees and which Mr Downer had in mind? The only ones that seem to be referred to in the evidence are, firstly, that concerning Mr Weir which we have just been talking about and, secondly, the conversation with Mr Mellor about the nature of the events which he thought he was having to investigate. Both of those events she was able, later, to explain. If there was anything else then it should have been explained to her just what it was.

These are relatively small points that occasion doubt about the letter of 25 February, but there is a more fundamental point. Reverting to our view that if exacerbating events taking place during the disciplinary process are to be relied on as misconduct, they must at least be believed by the manager that asserts them to represent misconduct, one does have to ask here, did Mr Downer truly believe what he was here writing to be the case? At the Tribunal he was asked and gave an answer which the Tribunal record in their paragraph 5:

"The Tribunal expressed their concern to Mr Downer as to the way in which a verbal warning had escalated into a final written warning. He said that the escalation was driven by the Applicant failing to accept that she had made a simple mistake. He felt it was her total failure to take responsibility that led to the written warning."

That, of course, is a very much more limited matter that is apparently believed by Mr Downer than he asserts in his letter that we have just been quoting from.

So, plainly there is a difficulty for the Appellant in this area. The written notice is sought to be justified by grounds far wider than it would seem from his evidence, as so recorded by the Tribunal, that Mr Downer truly believed in.

Accordingly, whilst we do not doubt that, in appropriate circumstances, the events during a disciplinary hearing can aggravate the offence and increase the possible sanction, this was not, as it seems to us, a case where that was shown to be appropriate. There was, in other words, no error of law on these first two points of the Notice of Appeal. The Industrial Tribunal plainly had in mind that the employer had asserted the events during the disciplinary process because that letter from Mr Downer was before it. We see no error in those first two points.

The third matter relied on in the Notice of Appeal or in the skeleton argument was this:

"The Tribunal has clearly preferred their own opinions to the factual evidence presented relating to the reasons for issuing a final warning. They have clearly failed to take account of the range of reasonable responses based on evidence they have either dismissed or failed to recognise such as the importance of the Appellant's legal duty to the British Airport Authority and HM Customs and Excise."

The Chairman's notes were obtained and the Chairman in her last page says this:

"The Chairman would like to point out that no evidence was given and no submissions made on the issue of the legal duty towards the Airport Authority and any additional importance of errors resulting from that duty."

There is no hint that any point was developed as to the legal duty, whatever it might be, to the British Airports Authorities or to the Customs and Excise and still less that any such points had been put to Miss Fernandez during the disciplinary process. None is mentioned in Pink's letter of 25 February 1997 and Mr Ballantyne, indeed, accepts that the Industrial Tribunal did not hear evidence or argument as to any duty to the BAA or the Customs and Excise. So what it comes to here is that the Industrial Tribunal is being accused of not taking into account a matter which was not, in any event, laid before it. That cannot conceivably be an error of law.

The last matter of the four is this. During Mr Downer's evidence the Tribunal Chairman directed that no further evidence on till operating procedures be heard. This had two effects. It meant, says the Appellant that no further mention was made of the legal duty to the BAA and that the evidence concerning a second run-through of the till operating procedures could not be given and fully explained. Again, the Chairman's notes say something on the topic. She writes this:

"She has no note of evidence of the Applicant being take through the till procedure by an expert."

What Mr Ballantyne says took place here is that there was some indication by the Chairman during the hearing that she or the Tribunal as a whole did not wish further to hear evidence on the subject of the operation of the till. The complaint, of course, is a non sequitur, as developed or sought to be developed in the Notice of Appeal. There is no way in which a ruling, even if there had been one, that the Industrial Tribunal wished to hear no further evidence on the till operation would have stopped an argument as to the legal duty to the British Airports authority or the Customs and Excise.

We have to be guided here by the Chairman's notes. It seems there was no formal ruling that there was to be no further evidence or no evidence on the point. If a party is aggrieved that some particular topic that it truly believes is relevant is being refused to be heard, then, of course, its remedy is to ask for a ruling and if it feels that that ruling is unjust, it is able to take the matter to appeal. There is no indication that anything beyond the most light of indications was given that no further evidence on till operation was wished to be heard. Again, what the Notice of Appeal amounts to is the Industrial Tribunal being criticised for not having in mind that which was never laid in front of it.

We mention that the Industrial Tribunal gave its reasons in sub-paragraphs (a) to (f) of paragraph 9. We have, of course, looked at those reasons. We do not need to read them out. Miss Fernandez had first been told that she should suffer a deduction from pay; the reduction threatened included a reference to the by then stale events of December 1996, which she might reasonably have thought had been sufficiently dealt with at the time. The amount threatened to be deducted was excessive. What was being investigated was what the Industrial Tribunal held to be a matter as to which she had been told it was alright and that it did not need to be reported further. She is addressed by the Human Resources Manager in terms that are, at least, admitted to be ill-advised and in a manner which the Industrial Tribunal held would be likely to damage any goodwill between employer and employee. And then came the unjustified written warning branding Miss Fernandez in the manner that we have described.

We do not have to say that we would have decided the case as the Industrial Tribunal did and we certainly make no comment, one way or another on that subject. But they saw and heard the witnesses. They are, as is time after time said, the industrial jury. We cannot say that no Industrial Tribunal, properly directing itself, could have decided as this one did. Their conclusion was, to use an expression in one of the cases, a permissible option.

All in all, and notwithstanding Mr Ballantyne's argument, we find no error of law and the appeal is dismissed.