United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MR P McMASTER (of Counsel) Instructed By: Mr R Horbury Messrs Addleshaw Booth & Co Solicitors Sovereign House PO Box 8 Sovereign Street Leeds LS1 1HQ
For the Respondent	MR E J FITZPATRICK (of Counsel) Instructed By: Mr F Farrell Messrs Procaccini Farrell & Co Solicitors 213A Clapham Road London SW9 0QH


 


MR JUSTICE LINDSAY (PRESIDENT):

1. This is the appeal of Midland Bank plc in the matter of Mr J. Madden -v- Midland Bank plc. Mr Madden, a lending officer who had worked for the Bank from 1986, was dismissed by the Bank on the 24th October 1997 because the Bank, after an internal investigation and a disciplinary hearing, concluded that there had been gross misconduct on his part, namely that he had been involved in the misappropriation of three debit cards of customers of the Bank, which cards were subsequently fraudulently used, resulting in a loss to the Bank of £2,878.73.
2. On the 23rd January 1998 Mr Madden lodged his IT1 alleging unfair dismissal. There was a one day hearing before the Employment Tribunal at London (North) under the chairmanship of Mr N.S. Rabin on the 16th June 1998. The Extended Reasons of the Tribunal were sent to the parties on the 17th July 1998. The unanimous decision of the Tribunal was that Mr Madden had been unfairly dismissed and that he was entitled to a basic award of £1,470 and a compensatory award of £11,300.
3. The Bank's Notice of Appeal was dated the 25th August 1998. The appeal came before the Employment Appeal Tribunal, Morison J. President, on the 27th November 1998. The appeal was permitted to go forward to a full hearing on three points which Mr McMaster, for the Bank, neatly summarises as follows: firstly, that the Tribunal substituted its own view for that of the employer; secondly, that, in relation to the investigatory process that preceded Mr Madden's dismissal, the Tribunal applied too high a standard (a test of proof beyond reasonable doubt) and, thirdly, that the Tribunal had not correctly approached the question of whether the Bank had carried out a reasonable investigation.

A. BACKGROUND

4. The Tribunal found that Mr Madden (who appears before us by Mr Fitzpatrick) had been first employed by the Bank as a school leaver and that, over a period of 11 years, he had risen from being a trainee bank clerk to Chief Cashier, Foreign Clerk and, eventually, Lending Clerk. He had an unblemished record in his years at the Bank. He was regarded, so held the Tribunal, as a capable and trusted employee. He worked at the Palmers Green branch of the Bank but continued to work one Saturday in four at the Enfield Town branch.
5. In their paragraph 4 the Tribunal sets out the underlying facts in a manner that cannot be improved on and is not challenged. They say:-

"In June and July 1997 three debit cards were despatched to the Enfield and Palmers Green branches of the Bank to be collected by customers. For various reasons those cards were not collected by the customers but were fraudulently misappropriated, almost certainly by a bank employee. In addition, at various dates in July enquiries were made about the status of those three customers' accounts (which were domiciled at Enfield, Finsbury Park and Croydon respectively) through the Bank's internal Nixdorf Computer System. Those enquiries could be accessed by any bank employee without the need to log in a personal identification but there was no apparent good reason for the enquiries. However the enquiries did coincide with the fraudulent use of those cards at various retail stores in North London. A Mr Porter first discovered that his cards had been misused on the 14th July. He notified the Bank and at the Bank's request he reported the matter to the police. On the 15th July the Bank became aware of a misuse of the cards of another customer, a Mr Wood, and the Bank wrote to him, on the 15th July, advising him that transactions may have been debited to his account without his authority. As it happened, Mr Wood was abroad and took no action for the time being. The third customer, a Mr Clark, spoke to the Bank on the 18th July and from the information which they gave him, he realised that his card, too, had been used without his authority. A total of £2,878.73 had been charged to the three accounts and the Bank eventually reimbursed that amount to its customers.".

6. The cards had been used at toy and baby-wear shops as well as in other types of shops and supermarkets. The Tribunal go on to describe how the police, having had the matters reported to them, contacted the Bank's Police Liaison Officer, a Mr Barnet, and that Mr Barnet made some enquiries and informed the police of his conclusions. The Tribunal continues:-

"Unfortunately there is no evidence of what Mr Barnet told the police but based on his recommendations the police called at Mr Madden's home unannounced at 7.30 a.m. on the 1st September, searched his house and arrested him."

Mr Madden was interviewed by the Police. The Tribunal held that a tape had been made of the interview but that by the time Mr Madden had applied to the Police to use it in these proceedings it had already been destroyed. The search, it seems threw up no significant facts; there is no suggestion that anything that had been bought with the cards was found. Mr Madden was released without being charged then or later. He was called to the Bank's offices and was interviewed and was told that there had been a misappropriation of three debit cards on the given dates, that enquiries had been made through the Nixdorf System on certain dates and that, as he was told, on each of these occasions he and he alone had been present at the relevant branch of the Bank. Mr Madden denied any knowledge of the allegations but he was suspended on full pay pending the Bank's further investigations. The Bank's Area Manager, Mr Fielder, instructed the Bank's internal investigation branch to carry out an enquiry and make a report.

7. That investigation was conducted by Mr C.J. Murphy, an investigating officer with Midland Security. He drew up a report dated 7th October 1997 which was signed by him and Mr Overington, Deputy Head of Midland Security. Mr Fielder, on seeing the report, concluded that there should be a disciplinary hearing and that took place on the 24th October 1997. As we have mentioned, it was convened to consider "A breach of staff regulations ..... in that you have allegedly had involvement in the misappropriation of the three debit cards which were subsequently used fraudulently, resulting in a loss to the Bank of £2,878.73". Mr Fielder had already sent Mr Madden a copy of the investigation report of the 7th October and had reminded Mr Madden that the potential sanctions available included summary dismissal.
8. At the disciplinary hearing Mr Fielder went through the investigation report in detail and invited Mr Madden to comment. Mr Madden said that he had been "set up", possibly by other employees, although he was unable to indicate anyone whom he suspected of having a grudge against him. As the Tribunal found:-

"Evidence was given that Mr Madden's financial circumstances were satisfactory. He was married with no children. His wife had a good job at another bank and he appeared to have no money worries. His bank account did not indicate any sudden increase in wealth. A significant factor was that while all other employees of the two relevant branches of the bank were interviewed by Mr Murphy or one of his colleagues, the interviews were only of a routine nature and Mr Fielder could not say that any investigation was made as to the financial or personal affairs of any other employee. We conclude that no such enquiry was made".

Mr Fielder eventually reached a conclusion as follows, as the Tribunal finds:-

"Having considered all the facts, particularly the contents of the investigation report and your comments, I consider that I have reasonable belief that you have been involved in the misappropriation of these cards which were subsequently used fraudulently. As a consequence trust has irretrievably broken down between us. And therefore there is no alternative but to summary (sic) dismiss you from the employment of the bank with immediate effect. This will be without pay in lieu of notice".

9. Mr Madden was advised of his right to appeal and exercised that right. At the disciplinary hearing he had been represented by Ms Brenda Kelly of his Union, BIFU, but she was unable to represent him at the appeal hearing. Mr Madden, it seems, fell out with the Union Official who was to replace her and, as the Tribunal describe it, "In view of the things said to him by the Union Official, Mr Madden refused to proceed with the appeal which was rejected in his absence".
10. The Tribunal directed itself by reference to the well-known case of British Home Stores -v- Burchell (1978) IRLR 379. We shall return in more detail below to the three-part test which Burchell suggests to be appropriate in contested misconduct cases. The Tribunal, having set out the Burchell test continued:-

"If the Tribunal is satisfied that the Respondents met the above standards and that the dismissal was a fair sanction then regardless of the Tribunal's own views as to the Applicant's guilt, the dismissal ought to be found fair".

11. After setting out further submissions the Tribunal continued:-

"Having looked [at] all the evidence before us the Tribunal does not consider that a sufficient investigation was carried out by the Bank in all the circumstances".

It accordingly held the dismissal to be unfair and quantified the basic and compensatory awards as we have mentioned. There is no appeal as to the quantification. We now turn to the argument.

B. HADDON

12. A great deal of the argument in this case has been directed to the recent case of Haddon -v- Van den Bergh Foods Ltd [1999] IRLR 672, a decision of the EAT under Morison J, President. In the ordinary way we would not comment at length on another case at this level but, whilst we shall not attempt to collect all comments upon the case, Haddon has been described as "controversial" and as lighting "a bonfire of case law" - see [2000] IRLR p.1. "It breaks the taboo" - [1999] IRLR 669. It has been said to push unfair dismissal cases into the area of palm tree justice - The Employment Lawyer Issue 33 1999 p. 13. It has been described as challenging established guiding principles - Issue 34 p. 7. We have been informed by the Court of Appeal's listing office that an application for permission to appeal Haddon has been filed. If that permission is refused, that could be, perhaps, argued, as we shall show, to have been an endorsement only of the decision on its facts. If permission is granted then, given the pressure on the Court of Appeal, it could be some time before the substantive appeal is ruled on. In those circumstances and with the case being so often described as controversial in employment law circles, rather than leaving Tribunals devoid of any indication of how the case may be regarded ahead of the decision of the Court of Appeal, we have thought it best to set out our views at some length. Only when we have done that will we return to the particular case before us, a task with respect to which both sides have argued that a correct understanding of Haddon is necessary. We must look at the case with some care.
13. To take the facts of Haddon from the EAT decision, the applicant, it seems, had a job of a kind such that it was recognised as inappropriate for those engaged upon it to have taken alcohol. We say that because it was regarded as relevant to the case that his employer at the material time had a draft policy that "no alcohol would be provided at functions when employees are returning to work". On the day in question Mr Haddon was scheduled to work a 2 p.m. to 10 p.m. shift but was also required the very same evening to assemble for drinks at 5.15 p.m. and thereafter to attend a supper reception until, it was thought, 7.30 p.m. or so, a reception which was to be provided by the employer to celebrate Mr Haddon's 15 years of blameless service. He was told by the employer's Business Centre Manager a week before the reception that he could leave work early to change clothing and to collect his spouse but that he would be required to return to work after the ceremony. It does not appear whether the Business Centre Manager had appreciated that Mr Haddon would be provided with alcohol nor what the Manager's views were or would have been had he understood that the reception might go beyond 7.30 p.m. Mr Haddon later spoke to the Shifts Operations Controller who said it was not normal for people to return to duty because alcohol was provided before and during the meal. That observation, too, underlines that the nature of Mr Haddon's job was such that it was not appropriate to work after taking alcohol. The Shifts Operations Controller told Mr Haddon to take up with the Business Centre Manager the question of whether he had to return to work after the reception but Mr Haddon failed to do so. Mr Haddon went to the reception. The employer gave him a buffet supper and free drink. By the time the reception was over only 1½ hours of the shift was left. It must therefore have by then been 8.30 p.m. or so, later than had earlier been forecast. There is no mention of any finding that Mr Haddon had delayed; it looks as if the event had simply lasted longer than had been forecast. Mr Haddon did not return to work for the balance of the shift and was dismissed for disobedience.
14. The Employment Tribunal in Haddon, in their paragraph 16, began "We next had to consider whether the instruction to return was reasonable". They held that they could not say that it was unreasonable. However, the reason shown for the dismissal cannot have been merely the giving of a reasonable instruction but rather, surely, that a reasonable instruction had been given but had been disobeyed. Disobedience supposes, in this context, that the instruction had still persisted as a reasonable instruction some 7 days after it had been given. Mr Haddon had maintained that he had not taken seriously the request to return after the ceremony. A crucial question was thus whether Mr Haddon could reasonably take it that the instruction to return to work no longer persisted as a reasonable instruction in the circumstances as they were, some 7 days after it had been given. The new circumstances were these; although the company (as surely must have been taken to be the case) was aware both that he had earlier been told to work the balance of that evening shift and that his job was such that it was inappropriate that he should work after taking alcohol, it had nonetheless plied Mr Haddon with drink and had engaged him in a ceremony over a period of hours longer than had at first been thought probable. In such new circumstances, was it not the case that the instruction given 7 days before could have been taken to have been either revoked altogether or to have ceased to be a reasonable one? That question, so far as one can tell, was never addressed by the Employment Tribunal in Haddon and it is thus hardly surprising that the EAT allowed the appeal. The case may thus not have required a detailed survey of existing authority. However, that is seldom inappropriate and often salutary and so, in Haddon, the EAT then set about it.
15. Haddon, at paragraph 26 of the EAT's decision, having observed that the statute is clear and unambiguous, respectfully suggests that Tribunals should now "return to the task in hand, which is to apply the section without embellishment and without using mantras so favoured by lawyers in this field". That seems uncontroversial enough and so we, too, thus first look at the unadorned terms of the Employment Rights Act 1996.

C. THE STATUTE

16. Section 94 (1) confirms upon many employees a right not to be unfairly dismissed. If such an employee wishes to assert a breach of that right, he can complain under section 111 (1) to an Employment Tribunal. The question then becomes whether the grounds of the complaint are well-founded - section 112 (1); that section is the gateway to various forms of relief which are available if and only if the Employment Tribunal finds that the grounds of the complaint are well-founded. The statute plainly requires a decision of the Employment Tribunal to that effect, (as opposed to one of the employer or of the employee). One thus reverts to section 98 of the Act, which is under the headings "Fairness" and "General", with an expectation that there one will find a formulation which the Employment Tribunal is to apply to the determination by it of whether the grounds of complaint are well-founded.
17. Thus it proves. Broadly, section 98 is concerned with two things; the reason (or principal reason) "shown" for the dismissal and the fairness or unfairness of such dismissal as a response to that shown reason. The two things are separate although it is often unnecessary closely to examine each. There are cases where, so long as the alleged reason is adequately shown, it is inescapable but that the dismissal was a reasonable response to it. Conversely there are cases where no reason is adequately shown or a wrong reason is alleged with the result that the dismissal can only have been unfair. Thus, for example, in Baxter -v-Limb Group of Companies [1994] IRLR 572 C.A. the majority view in the Court of Appeal was that whilst it was not disputed that the decision to dismiss was fair, the reason given for the decision was held to be wrong - see paras 35 and 40 - and the cross appeal, asserting that the Employment Tribunal's view was so demonstrably wrong that there was no point in directing a rehearing, was allowed. In a misconduct case such as the one before us the difference between the two things - the reason and the response to it - may be said to be loosely reminiscent, so far as concerns the Employment Tribunal, of the difference between an appeal against conviction and one against sentence and such separateness is best kept in mind.
18. The first thing that section 98 requires to be done is for there to be established what is the reason (or, if there is more than one, the principal reason) for the dismissal as "shown" by the employer. In many cases there is no dispute as to the reason and the onus on the employer to "show" it is a hurdle he can easily clear. In other cases the reason will be disputed especially, perhaps, in alleged misconduct cases where the matter complained of would, if found, involve dishonesty or where the nature of the misconduct depends on a debatable assessment such as that a worker was too drunk safely to operate his machine.
19. Suppose, for example, a case where an employee is accused of stealing spare parts worth £25 from a bin at the works. What is required by the word "shown" is not defined in the Act; it has been left for the Courts to ascertain its meaning. It would be too much to require the employer to show, in the case which we are supposing, that the employee accused had in fact stolen the parts. Even in a criminal trial a conviction would require only that, on the evidence adduced at the trial, the jury could properly feel sure that the person charged had stolen the parts. Total certainty would be too high a standard to require of an employer - see also W.Weddel & Co. -v- Tepper [1980] infra at p. 300 g-h. On the other hand, it would plainly be inadequate for it to suffice for the reasonableness to be "shown" that it should merely have been stated or pleaded or to have been given as the reason under section 92. That could lead to the dismissal not being judged by reference to a true reason for it but by reference to some untrue but stated reason. Equally, suppose it were to suffice merely that the employer truly believed the reason he had stated - that the employee had stolen the parts. That could lead to a situation in which an honest but totally mistaken and unreasonable employer who honestly believed in a reason which no reasonable person could have adopted would nonetheless have his actions adjudged by reference to his subjective but entirely unreasonable belief. Given that Parliament did not define what was required by the word "shown" it cannot have been wrong for the Court to suppose that nothing such had been intended by the legislature and it was thus open to the Courts to require, of the "showing" of the reason, some reference to a more objective standard. Accordingly, the familiar Burchell test, to which we shall return in more detail later, has long since required of the reason, in order for it to be shown within the meaning of the statute, that it should satisfy not merely a subjective test, in the sense of being honestly believed in by the employer, but that there is also an objective test, to which we shall return. In consequence, there are cases, such as Grootcon (UK) Ltd -v- Keld [1984] IRLR 302, a case in the EAT under Lord MacDonald, where it was held that "capability" on medical grounds was not established as the relevant reason because the employer had had no medical evidence before him. An alternative reason in that case, that a customer of the employer had required the employee's dismissal, was also rejected as there was insufficient evidence to justify a reasonable conclusion to such effect.
20. Thus the word "shown", in reference to the reason or principal reason for the dismissal, thus leads, at any rate in a disputed misconduct case, to a complex question (as to which the burden is on the employer) which embraces that the reason must have been disclosed or made apparent to the employee, that it must later have been made clear to the Employment Tribunal, that it should have been honestly believed by the employer to be the reason or the principal reason for the dismissal (at any rate by the time the employer acted upon the reason) and, at latest by the time the employer finally formed the belief and acted upon it, that by then the employer should also have had available to him what, objectively regarded, can be seen by the Tribunal to have been reasonable grounds for that belief. All that might rightly be regarded as a heavy freight to be borne by the simple word "shown" but such a requirement is not, in our view, in any pejorative sense a gloss upon or a departure from the statute but rather is a reasonable judicial working out of what meaning the undefined word must have been intended by the legislature to have had in its context. We make no further comments on section 98 (1) to (3).
21. When section 98 (4) is come to there emerge what at first sight are two apparently separate questions raised with respect to what, if any, reason or principal reason has been adequately "shown" within the meaning of the earlier sub-sections. The two questions are:-

(i) Did the employer act reasonably or unreasonably in treating that reason as a sufficient reason for dismissing the employee and

(ii) Was the dismissal fair or unfair having regard to that reason so shown.

22. Separate provisions are then made in relation to the two apparently separate questions. Thus the former question is to be answered by reference to "the circumstances (including the size and administrative resources of the employer's undertaking)". As to the second, it is to be determined "in accordance with equity and the substantial merits of the case". However, this apparent separateness is completely undone by the requirement that the answer to the second question is to "depend on" the answer to the first. The Act does not in terms say "depend and depend only on" but, were one to be able to arrive at decisions on the two questions which pointed in different directions, it would be difficult to see how the answer to the latter could then be said to have depended upon the answer to the former. If, for example, the answer to the former was that the employer had thus acted reasonably, could it be said that an answer to the latter, that the decision was unfair, had "depended" upon the former? In practice, therefore, the two apparently separate questions are required, or at least tend, to merge. But, in relation to all this, it is clear that what is required to be considered under section 98 (4), in both parts of the conjoined question, is the reason shown within the meaning of section 98 (1). To the extent that section 98 (4) examines reason and response - alleged cause and alleged effect - then in disputed misconduct cases, it is only the principal or only reason which has been adequately "shown" within section 98 (1), as we have explained that requirement, that is to be looked at and tested as the reason for the dismissal.
23. Having thus sought to explore the provisions of the statute, as Haddon has exhorted us to do, we next look to Haddon's more controversial components.

D. THE TRIBUNAL MUST NOT SUBSTITUTE ITS OWN DECISION?

24. The first controversial area is found in paragraph 24 of Haddon where the EAT speaks of "the mantra" that "the Tribunal must not substitute their own decision for that of the employer". Haddon does not purport to outlaw all use of that observation although it must be said that if it is recited only as a meaningless incantation it can only be undesirable. The observation is, in our view, of particular use in two differing areas.
25. The first is in relation to the determination, pursuant to the test in British Homes Stores -v- Burchell [1980] ICR 303 Note, of the nature of, the belief in and the objectively-judged adequacy of the principal or only reason alleged by the employer to have been "shown" within section 98 (1) and (2) of the Act. Burchell, looking at the showing of such a reason in a misconduct case says:-

"What the Tribunal have to decide every time is, broadly expressed, whether the employer who discharged the employee on the ground of the misconduct in question (usually, though not necessarily, dishonest conduct) entertained a reasonable suspicion amounting to a belief in the guilt of the employee of that misconduct at that time. That is really stating shortly and compendiously what is in fact more than one element. First of all, there must be established by the employer the fact of that belief; that the employer did believe it. Secondly, that the employer had in his mind reasonable grounds upon which to sustain that belief. And thirdly, we think, that the employer, at the stage at which he formed that belief on those grounds, at any rate at the final stage at which he formed that belief on those grounds, had carried out as much investigation into the matter as was reasonable in all the circumstances."

26. That test was described in W. Weddel & Co. -v- Tepper [1980] ICR 286 C.A. by Cumming-Bruce L.J. as most useful guidance - see p. 302 f-g. Stephenson L.J. found "great assistance" in it - p. 296 - and it has been employed countless times since. It does not require the Tribunal unquestioningly to accept the employer's alleged reason; on the contrary each of the three parts of the test requires an evaluation of the relevant evidence by the Tribunal and in each case that is an evaluation which can, on proper evidence, conclude contrary to the employer's assertions. In that sense a Tribunal addressing section 98 (1) and (2), is thus free to substitute its own views for those of the employer. When Arnold J. in British Homes Stores continued, at p. 304 e, immediately after the citation above,:-

"It is the employer who manages to discharge the onus of demonstrating those three matters, we think, who must not be examined further"

all that he had been thus far addressing was the nature, belief in and objectively-judged adequacy of the grounds for the reason alleged to be shown for the dismissal. It was, so to speak, a section 98 (1) and (2) question that was then being addressed. The topic upon which an employer, having satisfied Burchell, is not to be examined further is thus what was his reason for the dismissal and is not whether the employer acted reasonably in treating that reason as a sufficient reason for the dismissal; that latter is a section 98 (4) question which the part of Burchell cited above does not deal with. To suppose that the EAT under Arnold J. had regarded the passing of that 3-part test as equivalent to satisfying section 98 (4) as well as section 98 (1) and (2) would require one to assume that he and the members sitting with him had entirely overlooked the reference, in the Trade Union and Labour Relations Act 1974 Schedule 1 para 6 (8), to "equity and the substantial merits of the case" and to the fact, as then was the case, that the onus, in the then equivalent of section 98 (4), was on the employer. We suppose nothing of the kind.

27. The reason why an employer who, as to his alleged reason for dismissal, has survived the Burchell test, is not to be questioned further is that to do so, in relation to that reason would be likely to lead to an Employment Tribunal ruling, not, as is required by the Act, on whether the shown reason represented a sufficient reason for the dismissal but on whether such a different reason as might have emerged from the further questioning was a sufficient reason. Nothing in Haddon precludes the ability of an Employment Tribunal to remind itself, in such cases, that it is not part of its job to assess what it would have thought was the reason for the dismissal once the reason alleged has survived the three-part Burchell test as the sole or principal reason shown for the purposes of section 98 (1) and (2). If, to flesh out that notion in less abstract terms, an employer's given reason for the complainant's dismissal is his belief, at the time of the dismissal and on the evidence by then adduced, that the complainant had stolen parts worth £25 from a bin at the works, then, if that belief survives the Burchell test, it matters not that the Employment Tribunal members themselves would not, on that evidence, have believed that the complainant had so stolen the parts or would have thought they were worth only £2 or were worth £100. It has always been, and continues to be, appropriate for an Employment Tribunal to remind itself that in relation to a reason so shown it is not to substitute its own view for that of the employer and, as we have said, we do not take Haddon to say otherwise.
28. The other case where such a reminder can be appropriate is the common case in which things appear very different, by the time they are addressed at the Employment Tribunal, to their appearance at earlier investigation and disciplinary stages. By that later Tribunal stage further enquiries may have been made and fresh resources applied to the questions arising and fresh advisers and advocates will often have addressed the questions arising in connection with the dismissal. Events post-dismissal are likely to be spoken to in the evidence at the Tribunal. There may be other factors which a Tribunal, dealing with a matter months after the dismissal, may, but for the reminder in question, inadvertently take into account. For example, that the police, after studying the facts, have elected not to prosecute or that there have later emerged reasons to believe that the misconduct in question was by someone other than the complainant. Other examples would be where a witness whose evidence was regarded as crucial at the disciplinary stage later declines to give, and has not been required to give, evidence to the Tribunal or where a witness, uncompellable at the disciplinary stage, is compelled to give evidence to the Tribunal. In all such cases the observation that the Tribunal is not to substitute its own view of the reason which has passed the Burchell test for that of the employer can be salutary.
29. However, this is far from saying that the observation that the Tribunal must not substitute its views for those of the employer is in any way appropriate when the Tribunal turns to section 98 (4) and thus turns to look not at the nature of the reason shown but rather to the reasonableness of the employer's response to it. The view of an employer, however honestly believed in, that he acted reasonably in treating the shown reason as a sufficient reason for dismissing the employee is not determinative of the questions arising under section 98 (4) and does not in any way preclude a holding by the Employment Tribunal either that the employer acted unreasonably in treating that shown reason as a sufficient reason for the dismissal or the dependent issue of whether the dismissal was unfair. We do not understand any authority to say otherwise in relation to the questions arising under s. 98 (4) and it is in our view impossible to quarrel with Haddon's conclusion, in its paragraph 24, that, so far as concerns that subsection and the Employment Tribunal:-

"Providing they apply the test of reasonableness, it is their duty both to determine their own judgment and to substitute where appropriate".

30. Equally we can agree with the judgment in the EAT in Wilson -v- Ethicon [2000] IRLR 4 where, in relation to section 98 (4), Lord Johnston, approving Haddon, says:-

"What, in our opinion, the tribunal in question has to do is to stand back from the decision of the employer and assess, in the knowledge of what was known to him at the time, whether or not the dismissal was in the circumstances reasonable."

The EAT was there examining a case in which the Tribunal below had looked into the reason shown by the employer - the section 98 (1) and (2) question - and, in particular, the third limb of the Burchell test - but had failed "properly to address the whole question of reasonableness, as opposed to reasonable investigation". In other words, the Employment Tribunal in Wilson had never turned to section 98 (4).

31. Although section 98 (1) and (2) and the concern as to the shown reason for the dismissal is logically separable from section 98 (4) rather as is the propriety of a criminal conviction separable from the appropriateness of the sentence or as are cause and effect, we would have to concede they often fail to be separated. It is desirable that they should be kept separate but it can, in disputed misconduct cases, often be of no significance to the practical outcome of a case by an Employment Tribunal if they are not. An objective consideration of reasonableness by the Tribunal plays a part, as we have shown, in the second and third stages of the Burchell test for the purposes of considering the shown reason under section 98 (1) and (2) as well as in the later section 98 (4) questions. It will, for example, often be of no importance to the outcome to know whether the employer failed at the section 98 (1) and (2) stage for want, in the Tribunal's judgment, of, say, reasonableness in the grounds for the employer's belief in the alleged misconduct or failed for want, again in the Tribunal's judgment, of the reasonableness of dismissal as a response to that reason at the section 98 (4) stage. That the outcome may not be affected by running the two together no doubt explains the frequent failure to separate, so to speak, cause and effect, conviction and sentence. However, in disputed misconduct cases, so long as a Tribunal is careful not to enquire further into the alleged reason shown once, as to that reason, the Burchell test has been satisfied, so far from disapproving of an objective consideration of reasonableness in the course of which a Tribunal may substitute its views for those of the employer, we would wish such consideration to have occurred not once but twice over, at the two stages, preferably kept separate, which we have described.

E. THE BAND OF REASONABLE RESPONSES

32. The next area of controversy in Haddon grows out of the comment in its paragraph 25 that:-

"The mantra "the band or range of reasonable responses" is not helpful because it has led Tribunals into applying what amounts to a perversity test .......".

As to that we make three initial observations. Firstly, no "mantra", as such, can be helpful. Nothing further need be said as to that. But, secondly, in the light of the doctrine of precedent, it is not, in our view, within the province of the EAT, but only of some higher court, to outlaw reference to the band. Indeed, when, at para 32, Haddon says:-

"To dismiss the man in these circumstances is clearly contrary to the actions of a reasonable employer."

it could be that the band test was even there being used as a guide. However, thirdly, it is plainly right to caution against the phrase leading to too stringent a test. We will develop these second and third points.

33. As to the use of the phrase, without our spending time on the archaeology of the law, it can be seen even from the cases cited in Haddon itself that reference to "a range of responses" or to "a range of reasonable responses" goes back at least as far as to the decision of the EAT under May J. in Rolls Royce -v- Walpole [1980] IRLR 343. Even earlier, in 1978, the EAT's judgment delivered by Phillips J. in N C Watling & Co -v- Richardson [1978] ICR 1049 at 1056 had said:

"It has to be recognised that there are circumstances where more than one course of action may be reasonable."

34. The notion was used again in 1981 in the Court of Appeal in British Leyland U.K. Ltd. -v-Swift [1981] IRLR 91 where, in paragraph 11 Lord Denning M.R. said:-

"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 a band of reasonableness within which one employer might reasonably take one view; another might 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".

Ackner L.J. spoke, at paragraph 16 in the same case, of there being, generally speaking, a number of options which an employer can reasonably take. There was, therefore, at least a majority in favour of a reference to a band of reasonable responses. Griffiths L.J. agreed with the reasoning of both Lord Denning and of Ackner L.J.; he said nothing by way of disapproval of reference to such a band. Then, in 1983, there was further endorsement of the band in Iceland Frozen Food Ltd -v- Jones [1983] ICR 17 when, in the course of an analysis frequently since adopted, the EAT under Browne-Wilkinson J. said:-

" (4) ...... In many , though not all, cases there is a band of reasonable responses to the employee's conduct within which one employer might reasonably take one view, another quite reasonably take another; (5) the function of the Industrial Tribunal, as an industrial jury, is to determine whether in the particular circumstances of each case the decision to dismiss the employee fell within the band of reasonable responses which a reasonable employer might have adopted. If the dismissal falls within the band the dismissal is fair; if the dismissal falls outside the band it is unfair".

35. In Haddon the conclusion reached in its paragraph 26, as a comment upon such an approach, was:-

"In our view the approach taken in Gilham -v- Kent County Council (No. 2) [1985] ICR 233 is to be followed.."

We accept that Gilham is to be followed but there is nothing, in our view, in Gilham, express or implied, which disapproves of reference, in an appropriate case, to a band of reasonable responses. In Gilham Griffiths L.J. held that:-

"A Tribunal in applying the section must not ask themselves what they would have done, but must ask themselves how a reasonable employer would have acted."

If the answer to that question is, as in some cases it can be, that a reasonable employer in the predicated circumstances and looking, as the section requires, to the circumstances (including the size and administrative resources of his undertaking) could, as a reasonable response to the "shown" reason, have responded in any one of a number of ways, one of which was the dismissal of the employee, there is nothing in Griffiths L.J.'s judgment which suggests that such a dismissal would not have had to be held to be fair. Equally, when, in the same case, Dillon L.J. described the appropriate question for the Employment Tribunal as:-

"In all the circumstances, did the employer act reasonably or unreasonably in treating the reason in the particular case as a sufficient reason for dismissing the employee"

that dictum does nothing to disapprove of reference to a band of reasonable responses. Indeed, as, by the time of Gilham in 1985, the reference to a band or range of reasonable responses was at least 5 years old, was in frequent use and had already been specifically mentioned in the Court of Appeal, one might reasonably expect that the Court of Appeal in Gilham, if meaning to disapprove of its use, would have said so in terms, which was not the case.

36. Further, in Neale -v- Hereford and Worcester C.C. [1986] ICR 471 C.A., in which Gilham was referred to, the reference by Employment Tribunals to a band of reasonable responses as Browne-Wilkinson J. had expressed it in Iceland (including the last sentence in our citation from it) was expressly approved by May L.J. at 481 C-D. Ralph Gibson L.J. agreed with May L.J.'s reasoning and his conclusion - p. 484 A. Stocker L.J., commenting at p. 488 that the Employment Tribunal below had there directed itself in terms virtually identical to those used by Browne-Wilkinson J. in Iceland, plainly did so by way of approval of those terms. Both he and May L.J. referred to Gilham but not in terms of there being any conflict between it and Iceland or British Leyland -v- Swift supra or between it and their judgments in Neale itself. We have to accept that Iceland was approved at Court of Appeal level and, with it, the dictum that if a dismissal falls within the band it is fair, if outside the band, it is unfair. The reason, we would suggest, why the Court of Appeal in Neale did not address the influence of Gilham upon Iceland (as is noted in Haddon to be the case) was that there was not seen to be any conflict between them.
37. No case in the Court of Appeal later than Neale was cited in Haddon or has been cited to us. After the hearing before us had ended, the argument and judgment in Smith -v-Siddall Hilton (Springs) Ltd in Court of Appeal transcript 25th April 1997 have both come to our notice. That was an application for leave to appeal. Although little weight is ordinarily to be attached to decisions of such a kind it is to be noted that the argument in support of leave being granted advanced by Mr Langstaff Q.C. included that the range of reasonable responses test was arguably wrong in law. Waite L.J., with whom Potter L.J. agreed, held that the cases came nowhere near establishing a conflict of judicial authority such as would cause difficulties to Employment Tribunals applying the section, nor was such as to require clarification in the Court of Appeal. Waite L.J. described the "reasonable responses formula" as "hallowed by daily use in Tribunals down the years".
38. Given this history we think it is not open to any Court short of the Court of Appeal to deny reference to "the band of reasonable responses", not only as a guide but, as it is expressed to be, as a determinative test.
39. That is not to say, though, that its use is free from risk. As already cited, as early as in Watling [1978] supra it was seen at p. 1056 that, although there was logical force in the raising of such a question as "Has the employer acted in a way in which no reasonable employer would have acted?", such a question .....

".... so stated, without understanding the background, ... can, particularly to laymen, seems to suggest an inordinately high standard".

For our part, we find it difficult to distinguish in logic between that question and the question "Has the employer responded in a way outside the band of reasonable responses which a reasonable employer might have adopted?"

Watling was there commenting on an argument that the majority view in Vickers Ltd -v- Smith [1977] IRLR 11 had led to the proposition that no employee could succeed unless the Employment Tribunal in question was satisfied that no reasonable management could have arrived at the decision at which the management had in fact arrived. In Vickers the judgment delivered by Cumming-Bruce J. (as he then was) included, as the majority view that:-

"...... the first way in which we hold that the decision was unsatisfactory is that in our view the [Employment] Tribunal have fallen into error ... in failing to appreciate that not only was it necessary to arrive at the conclusion that the decision of the management [the selection of the Applicant for redundancy] was wrong but that it was necessary to go a stage further .... and to ask themselves the question whether it was so wrong, that no sensible or reasonable management could have arrived at the decision at which the management arrived ....".

Watling commented that Vickers, properly understood, did not justify the submissions often made in reliance upon it. In Iceland the EAT again cautioned against transmuting the band of reasonable responses into a perversity argument. At p. 25 Browne-Wilkinson J. said:-

"Although the statement of principle in Vickers is entirely accurate in law, for the reasons given in [Watling] we think Industrial Tribunals would do well not to direct themselves by reference to it. The statement in [Vickers] is capable of being misunderstood so as to require such a high degree of unreasonableness to be shown that nothing short of a perverse decision to dismiss can be held to be unfair within the section. That is how the Industrial Tribunal in the present case seems to have read [Vickers] . That is not the law.".

The EAT then continued in Iceland that:-

"The question in each case is whether the [Employment] Tribunal considers the employer's conduct to fall within the band of reasonable responses ....."

40. There is no reason to suppose that the approval given to Iceland by the Court of Appeal in Neale stopped short of approval of the warning against perversity. As it seems to us, there is a logical difficulty here. Unfortunately, neither Watling nor Iceland explains what is the mistake which is involved in seeing the band test as leading to a perversity argument. Nor does either explain how it could be that Vickers could be other than wrong in law if the test which it described is wrong. There could, of course, be a quibble as to the meaning of perversity; how far does "No reasonable management could have arrived at this decision" differ from, for example, a familiar description of perversity -"That decision offends reason"? - see also the collection of definitions of perversity in Stewart -v- Cleveland Guest (Engineering) Ltd [1996] ICR 535 at 542-543. For our part, we see it as inevitably to follow, if "the band of reasonable responses" test is, without further consideration and on its own, to be regarded as determinative, that the test would be likely to become one of perversity or something remarkably close to it.
41. Thus precedent may be argued simultaneously to suggest that Tribunals should refer to the band test as determinative and yet that Tribunals should decline to accept what is, in our view, its logical consequence, at all events if it is taken to be the only test. However, we remind ourselves that the seminal authority describing the band as determinative - Iceland - plainly did not intend that it should lead to a position in which nothing short of a perverse decision could be held to be unfair. We must notice, too, Watling's cautioning against too high a standard and Gilham's requirement that the Tribunal should ask in every case whether the employer acted reasonably or unreasonably in treating the reason in the particular case as a sufficient reason for dismissing the employee. Whatever the position in logic, one has to accept that this is not algebra and that words can have been intended to have an effect short of that which the strictest reading of them could lead to. Here the precedents plainly show that the band test has always been intended not to lead to one of perversity. We are not free, as we see it, to discard the band but until the Court of Appeal deals with the problem the least violence to precedent will be caused, and the circle most nearly squared, if the band continues to be used as a test but not as, of itself, invariably determinative. The unintended consequence of the test becoming one of perversity will be avoided if, whenever the logic of an argument which an Employment Tribunal receives as to the band of reasonable responses comes close to amounting to an assertion that no reasonable management could have held the dismissal to have been a fair or unfair response to the reason shown, and that that, of itself, suffices to make the dismissal fair or unfair, the Tribunal pauses to remind itself of the statute.
42. Under the Act the ultimate test is not whether the decision to dismiss was within or without the band or was or was not perverse (in the sense that no reasonable management could have arrived at it) but is the statutory one of whether, upon the broad approach enjoined by section 98 (4) (b) and in the circumstances referred to in section 98 (4) (a), the employer had acted unreasonably in treating the shown reason as a sufficient reason for dismissing the employee.

F. A SUMMARY AS TO MISCONDUCT CASES

43. It will have been seen that in our view, Haddon, represents no "bonfire of case law". To summarise our response to criticism of it in relation to disputed misconduct cases:-

(1) a Tribunal is, as Haddon suggests, free to substitute its own views for those of the employer in coming to a view on each of the 3 parts of the Burchell test - see para 26 above;

(2) a Tribunal is not free to substitute its views for those of the employer as to the reason shown by the employer for the dismissal once that reason has survived the Burchell test - para 27 above. Haddon does not suggest otherwise;

(3) it can be prudent for a Tribunal to remind itself not to substitute its owns views for those of the employer as a guard against its judging the situation by reference to a state of things unknown to the employer at the relevant dismissal stage - para 28 above. Again, Haddon does not suggest otherwise.

(4) a Tribunal is, as Haddon suggests, free to substitute its own views for those of the employer as to the reasonableness of dismissal as a response to the reason shown for it; - paras 29 to 31 above;

(5) No Court short of the Court of Appeal can discard the band of reasonable responses test as a determinative test - see paras 33 to 38 above - but Haddon is right, as have been earlier cases - paras 39 to 40 above - to point to the danger of the band test leading to one of perversity.

(6) Given that within the authorities which lead to the band test binding us is the clear requirement, whether strictly logical or not, that it should not become one of perversity, the least violence to existing precedent is caused if the test, although a determinative one, should, until the Court of Appeal rules on the problem, always be accompanied by a reminder, as Haddon suggests, of the terms of the questions which section 98 (4) poses - see paras 41 and 42 above.

G. THE TRIBUNAL'S DECISION

44. We return to Mr Madden's case. There are criticisms by the Tribunal of the Bank's investigation and disciplinary process in this case which we would not, for our part, have raised and to which Mr McMaster draws our attention. Thus the Tribunal complained that there had been no investigation as to the personal and financial affairs of members of staff other than Mr Madden. However, it is never easy for an employer to make such enquiries without their being regarded as offensive and prying and, in any event, it may be doubted whether such enquiries could have been even close to conclusive. The thief could be expected to have taken steps to have covered his or her tracks. It is important that Tribunals should recognise the difficulties which, even in substantial companies, surround disciplinary investigations and they should be careful not to set too high a standard for the implementation of the third limb of the Burchell test, the carrying out of as much investigation as was reasonable in all the circumstances.
45. Nor was the failure of the Bank to enquire into the nature of the goods bought with the stolen cards of any real significance, given that a thief of a card is likely, or at least able, to sell it on to a third party; the fact that the goods purchased were not of a kind either found at Mr Madden's house or such as he might have been expected to buy thus had little probative value.
46. The Tribunal heard oral evidence from Mr Fielder, the area manager who had received Mr Murphy's investigation report and who also chaired the disciplinary hearing. We do not have notes of Mr Fielder's evidence. The Tribunal was not satisfied that Mr Fielder took account of the fact that a man in Mr Madden's financial and career position would surely not have jeopardised all that "for such a relatively paltry theft". The point is in part illogical because if Mr Madden had been the thief and had sold the cards to a third party then whether the purchases were paltry or not would not, at first sight, have been a matter within his control. Moreover, the Tribunal's view that it had been apparent to Mr Fielder that Mr Madden "could not have been operating alone since the misconduct with which he was charged was that he had been involved in the misappropriation" is, in our view, a startling non sequitur. It is thus easy enough to pick holes in the detail of the Tribunal's criticism of the Bank's investigation but, despite that, there are clear findings by the Tribunal which heard the evidence that the whole tenor of Mr Murphy's investigation was to point to Mr Madden as the likely culprit, that Mr Fielder had been content to accept the investigation report uncritically, that the investigators had closed their minds to any possibility other than that of Mr Madden's guilt and that Mr Fielder had accepted the investigators' conclusion too readily. We have no material enabling us to hold that those conclusions represent any error of law.
47. In internal disciplinary investigations and hearings it is a very familiar and often inevitable feature that one does not have anything approaching the separation between persons and functions that is expected of the investigating detectives, prosecuting counsel, the Judge and the jury in a criminal case. But that makes it all the more important a requirement that those in the processes should at least approach their tasks with an open mind. To require that is not, in our view, to require too high a standard nor an impracticable one.
48. If, as we must, we accept the Tribunal's conclusion, after hearing the evidence, that the investigators had closed their minds to any possibility other than Mr Madden's guilt and that Mr Fielder had accepted their conclusion too readily then we see nothing powerful enough to displace the Tribunal's view that a sufficient investigation was not carried out. The third limb of the Burchell test, as to which the Tribunal had correctly directed itself, was thus not satisfied. The Tribunal's view that the investigation was inadequate represented, of course, a substitution of its view for the (presumed) view of the Bank that there had been a fully reasonable investigation. However, for the reasons given in our discussion of the Haddon case, we take the view that, on each of the limbs of the Burchell test, a Tribunal, when the evidence in a misconduct case so entitles it, may come to a conclusion different to that of the employer. We thus see no error of law in the substitution complained of.
49. Nor can it be said that the Tribunal's own language indicates that it set too high a standard for the reasonableness of the investigatory or disciplinary stages. The Tribunal said:-

"In our view the facts of the case should have produced more than reasonable doubt in Mr Fielder's mind and it was not reasonable for him to come to the conclusion which he did".

In context that did not show that the Tribunal set the test of reasonableness, on the facts of this case, too high but, rather, that, the test, in the Tribunal's view, was very obviously not satisfied.

H. CONCLUSION

50. By reason of the Burchell test being failed, there was no substantial reason shown for the dismissal within the intendment of section 98 (1) and (2). The Tribunal's conclusion that the dismissal was accordingly unfair involves, in our view, no error of law. We have now dealt, we believe, with all the principal points raised by the Bank. We must dismiss the appeal.