United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR DANIEL DOVAR (of Counsel) Instructed By: Messrs Bailey Gibson Solicitors 30 High Street High Wycombe Bucks HP11 2AG


 


JUDGE A WILKIE QC:

1. This is an appeal by Mr Jarvis against part of a decision made by an Employment Tribunal sitting at Reading on Monday, 20 February 2000.
2. The Tribunal concluded that he, the Applicant, had been unfairly dismissed by his then employer, M Vision Limited, the Respondent, because of procedural irregularities. That conclusion is not the subject of this appeal. However, he does appeal against the further findings, namely (i) that if the Respondent had undertaken a fair procedure in respect of his dismissal there would have been no difference to the outcome under the principles in Polkey v A.E. Dayton Services Ltd [1988] ICR 142, so that the compensatory award was limited to half a month's remuneration to reflect the time that proper procedures might have taken; and (ii) that the Applicant contributed to his dismissal by a proportion of 60% so that the award should be reduced by that proportion to reflect that contribution.
3. We have been greatly assisted in considering this appeal by the able submissions of Mr Dovar of Counsel, both in written form and in oral argument.
4. The Appellant was engaged by the Respondent and, in fact, held the position of Sales Director at the time when he was dismissed. The Tribunal found that the reason for dismissal was his alleged misconduct. The Tribunal concluded that the misconduct comprised the Applicant endeavouring to set up a rival company in competition to the Respondent. It set out various findings as to his conduct in that respect.
5. The conduct which had informed the initial decision to dismiss was his attending, along with the Technical Director of the company, at the UK Offices of a major supplier of product to the Respondent at which he had explored the possibility of that major supplier supplying product to a new company. It is right to say that the supplier did not have any exclusive obligation only to supply product to the Respondent.
6. Another piece of conduct upon which the Respondent relied was that the Applicant was looking at premises, the inference being that it was with a view at some point in the future to setting up in competition with the Respondent.
7. After the dismissal, which the Tribunal found was unfair on procedural grounds, the Respondent found on the computer which, by implication, was their computer at their premises but used during the course of his employment by the Applicant, having accessed it over the Applicant's password, a document stated to be a business plan which is described as a comprehensive document with a full customer list and had been subject to two drafts. The Tribunal concluded that the Applicant was taking care in preparing the document.
8. On the basis of that conduct and on their rejection as untrue of certain explanations given by the Applicant for that conduct, the Tribunal concluded that the Applicant was clearly endeavouring to set up a rival company in competition with the Respondent. They found that because of the breach of his duty as a Director, this was serious misconduct by him entitling the Respondent to dismiss and they also concluded that he had broken the implied term of trust and confidence that must reside between employer and employee by these potentially very damaging actions.
9. In essence Mr Dovar's argument that the Tribunal misdirected themselves in law hinges on his assertion that the conduct found by the Tribunal could not have constituted either a breach of his duty as a Director or a breach of the implied term of trust and confidence. As far as his duty as a Director is concerned, he seeks to draw comfort from the finding of the Tribunal that it was the Managing Director, Mr Cross, who effectively ran the company. From that finding he seeks to draw the inference that therefore the Applicant, although a Sales Director and therefore performing some executive functions, has lesser duties as a Director than were he to be the Managing Director. In our view that is simply legally unsustainable.
10. Each Director, particularly with some executive functions, owes the same duties as a fiduciary to the company of which he is Director. It may be that the precise content of that duty changes by reference to the area of responsibility but the underlying fiduciary duty is the same.
11. Mr Dovar, in respect of his client's position, whether as Director or as employee, has cited very helpfully for us two decisions, both of the Employment Appeal Tribunal on either side of the line. Laughton and Haweley v Bapp Industrial Supplies Ltd, [1986] IRLR 245, was a case which fell on the side of the line which favours the Appellant in this case. It records in the headnote, as the findings that:

"An employee does not breach the duty of loyalty merely by indicating his intention to set up in competition with his employer in the future. Whilst it is entirely understandable that an employer should be suspicious of an employee in such circumstances, unless the employer has reasonable grounds for believing the employee has done or is about to do some wrongful act, he is not justified in dismissing him."

That proposition it is said, is derived from the NIRC's decision in Harris and Russell Ltd v Slingsby, where it was said that:

"the court … would regard it as a wholly insufficient reason to dismiss a man that he was seeking employment with a competitor, unless it could be shown that there were reasonably solid grounds for supposing that he was doing so in order to abuse his confidential position or information with his present employers."

12. In that case the headnote goes on to say that the employee commits no breach of contract in setting up in competition on his own account, unless there is a specific term in his contract to that effect which does not fall foul of the doctrine against restraint of trade, or he is intending to use the confidential information of his employer other than for the benefit of the employer. The headnote continues:

"In general, an employer is not entitled to protect himself against competition on the part of a former employee."

In that case the Employment Appeal Tribunal recorded that:

"there were no solid grounds for the employer to suppose that the appellants intended to set up in competition in order to abuse their confidential information and position with him. Nor was there any suggestion that the appellants did not devote their working time or talents during that time to the employer's business. It had not been suggested that the letter to suppliers was written in the employers time and an employee is normally entitled to do what he likes in his spare time when he is not obliged to work for his employer, provided that it does not inflict great harm on his employer's business."

13. On the basis of that authority, Mr Dovar seeks to argue that the conduct found by this Tribunal amounts to no more than evidence that this Applicant was intending at some point in the future to set up in competition and was not using either confidential information or in any way abusing the trust and confidence owed by him to his employer.
14. On the other side of the line is the case of Marshall v Industrial Systems & Control Ltd [1992] IRLR 294. In that case the Applicant was a Managing Director. The Respondents in that case learnt that he and another Manager were intending to start another company to replace the Respondents as distributors for Boeing software and that they had already made approaches to Boeing to that end to try to induce another key employee to join them and Mr Marshall was consequently dismissed.
15. In argument before the Employment Tribunal the case of Laughton had been referred to them and it was urged that that was authority for the proposition that in that case there could be no proper reason for dismissing the Managing Director. The Employment Appeal Tribunal held that the Industrial Tribunal had not erred in holding that the Respondents had acted reasonably in dismissing the Appellant Managing Director after discovery that, with another Manager, he was planning to set up in competition and take away the business of their best client and that he had tried to induce another key employee to join them in that venture.
16. It was said that that case was entirely different from Laughton where it was held that an employee did not breach his duty of loyalty merely by indicating an intention to set up in competition with his employer in the future. It is one thing, as was decided in Laughton, to form an intention to set up in competition and another, as was held by the Industrial Tribunal in that case, for the Managing Director to form a plan or arrangement with another important Manager to try and persuade another to join them in order to deprive the company of their best client.
17. Mr Dovar submits that the distinction between the present case and that one is, amongst other things, that in that case the Managing Director was involved whereas in the present case Mr Jarvis was only a Sales Director. As we have indicated, we do not see that as an important measure of distinction.
18. It seems to us that this Employment Tribunal did not misdirect themselves. They took into account the entirety of his conduct, namely that he had involved a fellow-Director in a meeting in which he was posing to a major supplier the question whether they would be prepared to supply him with product in the future if he set up in competition; that he had also informed that fellow-Director of his approaches in respect of finding accommodation for his new venture and, perhaps most significantly, that they found on their computer at their premises, using a password which they could override, the clearest evidence that he was taking seriously in the form of a business plan setting up in competition and had listed a full list of their customer contacts. Whilst he may, according to the Laughton case, as an employee be entitled to do all that at home on his own equipment in his own time, in our judgment this Tribunal was perfectly entitled to conclude that, whether as an employee or as a Director owing an enhanced fiduciary duty to his company, he had misconducted himself by undertaking the cumulative actions involved, involving as they did one of his fellow-Directors, the use of the Respondents' own equipment at its own premises.
19. In those circumstances, we conclude that there is no arguable case that this Tribunal misdirected themselves in law in respect of their conclusion, applying Polkey as they were entitled to do, that two weeks' compensation was the maximum which they could award this Appellant and that in respect of both aspects of the award, he was subject to a 60% contribution as having been to that extent the author of his own misfortune.
20. Therefore, notwithstanding Mr Dovar's able submissions, we are constrained to dismiss this appeal at this preliminary stage.