United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR C BAYLIS (Of Counsel) Instructed by: Messrs Tinsdills Solicitors Chichester House 14 Broad Street Hanley Stoke on Trent ST1 4EU
For the Respondent	MR R LEIPER (Of Counsel) Instructed by: Messrs Reeves & Co Solicitors 27b The Mansions 252 Old Brompton Road London SW5 9HW


 


MR JUSTICE LINDSAY (PRESIDENT)

1. The Employment Appeal Tribunal has before it two applications in the matter Michael John King v TG Holdcroft (Holdings) Limited. That Company used to employ Mr King. On 13 December 1999 the Employment Tribunal at Shrewsbury held that Mr King had been constructively dismissed and unfairly dismissed and the question of remedy was adjourned and still has not been dealt with.
2. One of the two applications before us is the conventional Preliminary Hearing of an Appeal in this case by the Company, TG Holdcroft (Holdings) Limited to determine whether it discloses any arguable point of law appropriate to allow the matter to go to a full hearing and that, as is, again, conventional is listed to come on before a panel of three and the three of us are here.
3. The other is an adjourned application by the Company for leave to be granted to the Company to adduce further evidence; that was formally listed to come on before me alone but, as it seems to me, the two were so intermingled that it would be appropriate that all three of us should hear both and that has been the case.
4. The Company has been represented before us by Mr Baylis and Mr King by Mr Leiper. Mr M J King was, in early 1998, the group managing director of TG Holdcroft (Holdings) Limited. He resigned that position on 6 March 1998. Shortly before that date a number of incidents had taken place, largely because the Company's Chairman, Terence Holdcroft, had formed the belief that Mr King was intending to leave the Company, was intending to join his (Terence Holdcroft's) brother Kelvin and that Mr King and Kelvin together were to set up in business in competition with the Company.
5. The Tribunal held that Terence Holdcroft entertained an irrational fear – bordering on paranoia – that Mr King was conspiring against the Company. Perhaps it was because of that belief (certainly that belief is likely to have contributed to the events) that steps were taken by the Company which the Employment Tribunal described as outrageous and which the Tribunal held to have represented fundamental breaches of the contract between Mr King and the Company.
6. The Tribunal heard argument and evidence that whilst Mr King had had plans, he had not, in fact, taken any practical steps to set up in competition with the Company before his resignation. It is to be borne in mind that in the Employment Tribunal there is no automatic discovery or other form of disclosure. The Tribunal hold:

"We were satisfied that Kelvin Holdcroft and the applicant together conceived the intention to set up in business together in the motor trade once they had left the respondent. It seemed probable to us that the applicant and Mr Kelvin Holdcroft discussed that plan and its ultimate execution whilst the applicant was still employed by the respondent. There was no solid evidence before us that Mr Kelvin Holdcroft and the applicant did anything concrete towards setting up their business until after the applicant had resigned. The applicant had no written contract and was not bound by any terms restraining him from setting up in business after he left the respondent. We were not satisfied that merely to discuss his future business plans with Mr Kelvin Holdcroft was a breach of the applicant's fiduciary duties as a director of the respondent. Any employee is entitled to leave his position and is entitled to make plans for his future in anticipation of leaving his position. That is all the applicant did. That could not have given to a reasonable employer any reason sufficient to justify the dismissal of the applicant.

By reason of the conduct of the respondent, the applicant was entitled to treat himself as dismissed and to resign his position without notice. That is what he did."

That conclusion was against the background of some procedural attempts by the Company to find out what had been going on in relation to its suspicion that Mr King had been taking steps to set up in business in competition with the Company before his resignation. The subject was plainly one of some relevance to the Employment Tribunal; that they regarded it as such can be seen from the findings and from the comments which we have already cited.

7. The Company's behaviour which was found to be outrageous might well have been seen to be less so if it could have been shown that Mr King had not only taken steps to compete but had lied about the subject to the Company or had taken steps to conceal whatever practical steps he was taking. The steps taken by the Company and regarded by the Employment Tribunal as fundamental breaches by it of its contract with Mr King might (and one needs to underline the word 'might') have been viewed differently if it could have been shown that they had been preceded by what could have been held to be gross breaches of fiduciary duty on behalf of the group managing director.
8. In such a case Terence Holdcroft's belief would have been seen not so much to be irrational but, indeed, to be justified. Thus the Company by its advisers before the hearing had sought particulars from Mr King on 20 August 1998 relating to the question of pre-resignation breaches by Mr King but, of course, that request was inept. They were in effect asking for particulars not of Mr King's claim but of their own hoped for defence and, not surprisingly therefore, Mr King's advisers refused the particulars, as did the Employment Tribunal. But the Employment Tribunal helpfully pointed out to the Company's adviser (who, I should add, was not legally qualified) the ability of the Employment Tribunal to require written questions to be answered under the Employment Tribunal Rule 4(3). Thus prompted, the Company by its adviser then raised a request for written questions to be administered.
9. By the letter of the Company's adviser of 25 September 1998 the Company's employment consultant wrote:

"The Respondents are aware that the Applicant is now working directly with Mr Kelvin Holdcroft and Mr Barry Davey in setting up a competitive business. From the evidence available we herewith attach a list of additional documents which we request are included within the Bundle of Documents.

We are of the belief that the Applicant was active in this venture, prior to his resignation from the Company on 1 March 1998, and believe that evidence is available to support these assertions. We believe that such information will have a bearing on the outcome of the Industrial Tribunal and would hereby make application under Regulation 4(3) of the Industrial Tribunal Rules for replies to the attached questions."

That is a letter to the Employment Tribunal.

10. Looking back with the benefit of hindsight the questions were not the most apt to ask but answers to them would undoubtedly have thrown light on the issue and would have been likely to have led to later and more pointful enquiries. The Employment Tribunal's response was to say that the questions issue should be raised at the outset of the substantive hearing which was then expected to take place on 5 October 1998. That was not a very helpful response as the whole point of administration of such questions is that a party should know how they stand before the substantive hearing rather than so late as leaving the matters to be dealt with at the hearing itself.
11. However, that merits hearing thought then to have been due to start on 5 October 1998 went off because of an application by Mr King. It does not appear why the request for questions was not renewed, nor why no application was made for discovery, but it may be that the view was taken by the Company that if the Employment Tribunal had ruled that the questions issue was to be put off until the substantive hearing it had meant to put it off until the substantive hearing whenever that might be and, moreover, if the Employment Tribunal was adjourning the issue of questions, as it did, there was room for a view that probably the Employment Tribunal would equally have adjourned any question of disclosure.
12. In fact the substantive hearing did not begin until 17 May 1999. It does not appear from the papers or from anything we have been told whether the questions issue was raised again nor, if it was not, why it was not. The Employment Tribunal, as we have indicated, find Mr King to have been constructively and unfairly dismissed. The decision was sent to the parties on 13 December 1999 and on 18 January 2000 the Company lodged its Notice of Appeal. Before 12 October 2000 (we are not quite sure on what date before then but at some date before then) the Company had made application to the Employment Appeal Tribunal asking that it might have leave to adduce further evidence. On that day, 12 October 2000 that application and the original hearing of the Preliminary Hearing of the Appeal came before his Honour Judge Reid and his two colleagues at the Employment Appeal Tribunal. The matter came before them Ex Parte with only the Company present and it does not seem, I think, that Notice had been given to Mr King's side of any need to attend.
13. His Honour Judge Reid and the Employment Appeal Tribunal gave directions for the filing of evidence in support of the application that further evidence should be admitted and stood over the Preliminary Hearing. It was recognised that the two parts of the case were enmeshed in such a way that the decision in one could be affected by the decision in the other.
14. Since then a considerable body of evidence has been served. We must first emphasise that the view that we are about to express of the evidence is a provisional view based only upon a reading of it. We have not been able to test it in any other way and the view we express is emphatically not to colour the views of others who will need to assess it. Nonetheless, we have formed a view, based on the evidence of Mr Len Shelton, Miss Diana Patrick and Mr Kelvin Holdcroft and derived from their affidavits and the exhibits annexed to them. We find that those materials together make a prima facie case in support of the following averment namely, firstly, that Mr King had, well before March 1998, not only a plan to set up a business in competition with the companies but had taken substantial practical steps to that end over a period of several months. Secondly, that he had been at pains to conceal that from the Company. Thirdly that he had lied in relation to questions put to him on behalf of the Company, being questions which, truthfully answered, might have indicated that he was planning to take steps as aforesaid. Fourthly, that it is at lowest arguable that the evidence now sought to be adduced could not have been obtained even had due diligence being applied in time before the trial. We say that is arguable. We do not feel able to come to a fully informed view on the subject and we do feel that a fully informed view on that subject is likely to require the attendance of witnesses for oral examination even in relation to the establishment or not of the conventional test of the Ladd v Marshall case. Mr Kelvin Holdcroft's evidence could, as it seems to us, not reasonably have been regarded as other than likely to be hostile to the Company. He had given evidence against the Company at the hearing. It seems that he has changed side since. It is not at the moment adequately explained why the request for written questions to be put was not persisted in but it may not have been unreasonable for the Company to take the view that the Tribunal would not order them ahead of the merits hearing and that by then that it would be too late. It is not adequately explained, either, why disclosure was not sought but, again, the answer may well be as just described in relation to questions. We find, as a prima facie view based on the new evidence sought to be introduced, that Mr King was at some pains to conceal his plans and his activities and, if that is right, he would be likely also to have been at pains also to resist giving information and as far as possible to avoid or to obfuscate or to ignore questions put to him.
15. Fifthly, it seems to us that it is at lowest arguable that the new evidence, had he given it at the hearing at the Employment Tribunal, would probably have had an important influence on the result of the case, even if not being decisive. A Tribunal's view of the Company's response which the Tribunal held to be a gross breach of contract on behalf of the Company could have been viewed differently had it been seen to be a response to a breach of fiduciary duty. The Tribunal's response could have been different both at the liability hearing and in relation to any remedies conclusion. It seems also to us, finally, that it is at lowest arguable that the evidence sought to be introduced is apparently credible. It is at points supported, it would seem, by contemporary papers including, at some points, those of uninvolved third parties.
16. How then are we to react to such a situation as we have described? It seems to us that some analogy is to be found in the way in which Court of Appeal deals with cases where, on Appeal from the County Court, an Appellant seeks to adduce new evidence which at least arguably satisfies the Ladd v Marshall test but where the new evidence is disputed and hence where cross examination is likely to be required of it. The Court of Appeal very rarely hears the cross examination itself. Instead, if it feels that the Ladd v Marshall test is satisfied, it remits it to the County Court for a re hearing as the County Court is the more appropriate forum for the determination of fact. There is a note to such effect in the 1999 White Book dealing with the old rules at 59/19/17. A corresponding but by no means identical system is available at the Employment Tribunals. The Employment Tribunal has power to review any decision under Rule 11 and that Rule includes the possibility of a review where new evidence has become available, provided its existence could not have reasonably been known or foreseen at the time of the hearing; that is one ground for a review and another is where the interests of justice require such a review.
17. In fact here the company did apply to the Employment Tribunal for a review as long ago as 5 May 2000. On 8 June 2000 the Tribunal indicated that it would await the outcome of this Appeal to the Employment Appeal Tribunal or until directions had been given by the Employment Appeal Tribunal before proceeding further with that review, which was in effect adjourned generally. We must note that the shape of the new evidence as laid before the Employment Tribunal on 5 May 2000 was considerably less substantial, and less formal too, than it now is. We have no doubt but that the Employment Tribunal is the more appropriate body for the determination of facts than we are. They have experience of that and even the physical arrangements desirable for such a purpose are present at Employment Tribunal level. They, too, are better able to compare, if it becomes relevant, what was said in the past and what is said in the new evidence.
18. Accordingly we give the following procedural directions. We remit the question of whether or not new evidence should be introduced to a panel of three at the Employment Tribunal – namely the original panel that heard the case in May 1990 - to be considered by them as part of the Company's adjourned application for a review, which application is now to be restored to that panel of three, firstly, in order that it might give inter partes directions and, secondly, if it sees fit, to go on to a full hearing of that review application.
19. We must emphasise - and it is a point that Mr Leiper would very much want us to underline - that it will be a question for the Employment Tribunal at that directions hearing and, if appropriate, full hearing, to consider whether it is appropriate that the new evidence should be admitted and it would be open to the Employment Tribunal, if it feels that it cannot determine even that part of the case without cross examination, to direct cross examination. The Employment Tribunal is to give directions as to the conduct of the review hearing but only after it has taken with the opportunity to consider the affidavits of Shelton Patrick and Kelvin Holdcroft to which we have referred, and the exhibits thereto. It is of the nature of this type of application that the body considering whether the new evidence should be admitted is to have the new evidence before it because it could not decide whether it could have been obtained earlier without knowing what it is.
20. The directions which the Employment Tribunal may give include directions as to the filing of further evidence by way of affidavit or on witness statement as they direct. This is entirely a matter for the Tribunal but they are likely to want to know why procedural steps to obtain evidence, such as a written application for written questions to be administered or application for discovery, were not more fully pursued than they were. The directions that the Employment Tribunal may give can also, of course, include the requirement of the attendance of witnesses for their examination orally and their cross examination. But that will all be matter for the Employment Tribunal to decide. Both the company and Mr King, by their respective advisers, should, ahead of the directions hearing at the Employment Tribunal, seek to consider what further evidence they will wish to adduce and set about its preparation even ahead of the directions hearing and also will need to specify to the Employment Tribunal what relief it is that they respectively seek or oppose at the directions hearing so that when the directions hearing is heard the matter will already have been fairly comprehensively ventilated. The directions which the Employment Tribunal gives may include directions as to discovery and inspection particularly, perhaps, on the part of Mr King, but, again, whether the Employment Tribunal so directs will be entirely be a matter for it.
21. If either side is, at the directions hearing at the Employment Tribunal, to seek directions for discovery or inspection they should specify well ahead of the directions hearing what the relief is that they seek. If the Tribunal rules against there being a full hearing of the review application it would be prudent for it to give extended reasons Mr Leiper has already indicated that an appeal might be appropriate and therefore the Tribunal will need to have in mind that its extended reasons will need to satisfy the Meek v City of Birmingham test. If there is a full hearing of the review application, then, again, the Employment Tribunal will have in mind that it has open to it the courses specified in rule 11(7) and, again, will need to give extended reasons that satisfy the Meek v City of Birmingham test. We have referred in the course of the hearing to Hamilton v El Fayed in the Court of Appeal heard on 21 December 2000. We have only referred to it at a very outline level but it may be appropriate that Counsel should refer the Employment Tribunal to that case in a little more detail. It was dealing with a rather different situation but it is notable, at its paragraph 26, that it says that a new trial should be ordered when the interest of justice so require. The Court was dealing there with the kind of situation which, as I mentioned, was rather different than the one that was before or likely to be before the Employment Tribunal but the Court of Appeal goes on to make the point that if there is a real danger that some party's irregularity has affected the outcome of a trial then a re-trial should normally be ordered, but Mr Leiper will want to emphasise the differences between that case and this when the matter comes before the Employment Tribunal.
22. Accordingly, we give the directions that we have set out at some length remitting the matter so that the Employment Tribunal can proceed with the Review Application which it earlier adjourned. We have not truly come on to dealing with the Preliminary Hearing of the Company's appeal but it seems to us the only appropriate thing - although we will hear both Counsel on this if it is necessary - the only appropriate thing to do with the Company's Notice of Appeal and the Preliminary Hearing of that is to adjourn it generally until after the Employment Tribunal has concluded the Company's application for a review. As to that we can now hear Counsel if they think there is any other more convenient process. So far as concerns the Preliminary Hearing of the Company's appeal, we simply adjourn that generally to await the conclusion of the review application.