United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR C SPRATT (Of Counsel) Instructed by: Messrs Baily Gibson Solicitors 30 High Street High Wycombe Buckinghamshire HP11 2AG


 


JUDGE BURKE QC

1. This is the preliminary hearing of an appeal by Mr Ellis against the decision of the Employment Tribunal sitting at London Central, chaired by Mr Gordon and sent to the parties with extended reasons on 9 January 2002. By that decision the Tribunal concluded firstly that Mr Ellis' claim against his employers Currencies Direct Ltd that he had been unfairly dismissed failed, secondly, that his claim that the employers had failed to provide a written statement of reasons for his dismissal also failed and thirdly, that the employers' obligation to pay salary, or wages and remuneration to Mr Ellis ceased on 7 April 2000.
2. Mr Ellis now appeals against the unfair dismissal decision and against the decision that the obligation to pay remuneration ceased on 7 April. The Tribunal reached their decision after a hearing which lasted six days. They have set out their reasons in a lengthy and careful decision of over twenty pages and one hundred and twenty seven paragraphs.
3. For present purposes we will seek to set out the relevant history only in very brief and summary terms. The reason for the dismissal on which the employers relied was misconduct. They relied on dismissal as having occurred on 7 April 2000. Mr Ellis was employed by the employers from 1995; and he was their managing director. He was at the material time one of two directors until 11 April 2000 when a third director was appointed. The other of the two directors was Mr Patel who was also a working executive director. Mr Ellis was, the Tribunal found, as managing director responsible for day-to-day management of the company's business. That business was that of foreign currencies dealers, operating from premises in High Holborn in London. The company offered to provide currency exchange to customers at rates which were better, presumably better by a margin, than those which the customer could obtain direct from banks but with a profit margin for the company as compared with the rate at which the company had to pay the bank for the currency.
4. In order to guard against with the losses which might arise if a customer ordered currency at a particular rate and the rate then moved adversely to the customer before the currency had been secured from the bank the policy was to book with the bank as soon as the customer booked with the company. This, however, committed the company to the bank and caused risk to the company if the customer did not proceed. Therefore, there was a procedure which required a fax confirming the transaction to be received from the customer before booking with the bank took place.
5. This in itself created a problem, which it is unnecessary to describe, which gave rise to the possibility that, if positions were left open and rates moved adversely, the company could suffer losses. During the period between December 1998 and February 1999 Mr Ellis, as the Tribunal found, left positions open and left the company exposed in transactions as a result of which loss to the company in excess of £168,000 accumulated. Mr Ellis said that he left these transactions open in the hope that the rate would come back, as in most cases the Tribunal found it never did. Mr Ellis said that Mr Patel had done the same but was unable to point to any example that he had done so; and the Tribunal found that Mr Patel had not deliberately kept his positions open as had Mr Ellis. Mr Ellis also said that Mr Patel was aware of what Mr Ellis had done; but the Tribunal found that, to put it shortly, Mr Patel may have had some knowledge of what was going but certainly had not authorised it.
6. We should, in referring briefly to the misconduct alleged against Mr Ellis, point out the Tribunal for a number of reasons set out in their decision did not only consider whether the employers genuinely and reasonably believed in the misconduct alleged but also whether Mr Ellis had actually committed that misconduct. They found that he had committed the acts in relation to the open positions which we have described.
7. The second head of misconduct was Mr Ellis' persistently taking prohibited drugs during working hours at the company's premises. It is unnecessary to go into detail at this stage. The Tribunal rejected Mr Ellis' denials and accepted the evidence of Mr Patel which was supported by at least one other witness about the history of drug taking. The Tribunal found that Mr Ellis had taken drugs on the premises and that he had resisted Mr Patel's attempts to stop him from bringing drugs into the work place and had persisted in that conduct until his departure from the company. Not surprisingly they found that this was wholly unlawful and a serious breach of his duties and a very poor example to other employees.
8. Thirdly, and we need only deal with this very briefly, misconduct was alleged on the basis that Mr Ellis had not properly managed the company's affairs but had acted in a high- handed, erratic and unreliable manner which was having a serious affect on the company and on its workforce. The Tribunal found that on 6 March 2000 Mr Ellis had simply absented himself from the office without warning or agreement and seemed simply to have abandoned his duties altogether. This was either on the day or on the day after Mr Patel had told him that he would have to repay to the company over £200,000 worth of loans, Mr Patel apparently believing that Mr Ellis had drawn loans to that extent from the company. Subsequently in High Court proceedings, confirmed in the Court of Appeal, it was established that Mr Ellis only owed £43,000 and not £200,000 plus. But, whatever the size of the loans, Mr Ellis when asked to repay the loan said, as the Tribunal found, that he "did not give a fuck anymore" and was "off". He did not return to work for another two weeks; by that time, as described in the Tribunal's findings and we need not go into detail, Mr Patel was taking steps to replace Mr Ellis and to distribute his duties to others and to seek to organise the company appropriately in a formal way. In fact after two weeks Mr Ellis did come back. On 7 April another incident occurred as a result of which Mr Patel together with another shareholder (for Mr Patel and Mr Ellis and this other shareholder, Mr Redcliffe between them held all the shares at that time) decided that Mr Ellis would have to go immediately and handed him a letter dismissing him with immediate effect.
9. The Tribunal concluded that Mr Ellis had been dismissed for misconduct and that he was guilty of gross misconduct under each of the three heads which we have briefly described.
10. It is important next to turn to what happened after Mr Ellis' return to work. At that date Mr Ellis and Mr Patel were the only directors and there were the three shareholders whom we have described. On 11 April Mr Cox was appointed as a third director. Mr Redcliffe started to investigate what had been going on when Mr Ellis disappeared early in March. Solicitors were instructed for Mr Ellis and for the company. Mr Redcliffe, after his investigation, came to the view, shared by Mr Patel, by the end of March or early April that Mr Ellis because of the conduct to which we have referred would have to go. After the further incident which we have also described he was dismissed.
11. On 11 April an EGM of the company was called. The Tribunal found that Mr Ellis accepted the validity of the meeting at which Mr Cox was appointed director on that day, that Mr Ellis was informed that he would not be permitted back in the premises and that his employment had terminated. On 30 May at a further EGM Mr Ellis was removed as a director and pursuant to the articles of the company was thereby dismissed as managing director, if he had not been dismissed previously.
12. The Tribunal concluded that the employer's genuinely believed that Mr Ellis was guilty of the misconduct alleged, that there had been a reasonable investigation and that, although there was no formal disciplinary process, in the circumstances it was nonetheless fair to dismiss him on the grounds of misconduct as they did. The Tribunal took the view that although the decision was made by Mr Patel in conjunction with Mr Redcliffe and not at a Board meeting, in a practical and pragmatic sense the contract of employment had come to an end on 7 April. We should also record that, having found the dismissal on that date to be fair, the Tribunal also found that, if the employers had waited until 11 April, the same result was highly likely to have occurred; and they also found that, in any event, had they found the dismissal unfair they would have found it just and equitable to have reduced Mr Ellis' award, basic and compensatory, by 100% because of the extent to which his own conduct had contributed to the dismissal.
13. Mr Spratt, on behalf of Mr Ellis, has put this preliminary hearing of his appeal before us with fairness, candour and conspicuous ability. He first of all attacks the decision that the contract of employment was terminated in the informal way in which it was on 7 April. While we express no view as to whether his contentions in that respect will succeed at a full hearing, we take the view on the basis of the reasons set out in Mr Spratt's skeleton argument that it is arguable that the dismissal on 7 April was invalid as regards the company and that because of Mr Ellis' position as managing director appointed by the Board in his case, while it may not have been so in the case of the more menial employee, that arguably meant that that dismissal was a nullity.
14. However, Mr Spratt accepts that he cannot so argue in relation to dismissal on 11 April or on 30 May. So far as 11 April is concerned, he submits (although we have to make the comment that it is not clear from his skeleton argument that this is the way in which the case was originally put on first thoughts) that the Tribunal's finding that there was a termination on 11 April or a confirmation of an earlier termination was perverse. But even if that does not work in the employer's favour, there was undoubtedly on any view a dismissal on 13 May; and Mr Spratt has realistically accepted that the finding that the dismissal was fair, if that stands and cannot be arguably criticised as based on findings of fact which are unsupportable in law, would have been made in any event on the dismissal on 11 April or on the dismissal on 30 May. And also there is the further difficulty standing in Mr Ellis' way that he was found to have been 100% contributory to his dismissal, which finding is not subject to an appeal.
15. The position therefore appears to us to be this. On the question of the date on which the obligation of the company to pay remuneration to Mr Ellis, so far as that issue is concerned, there is an arguable case that the employment survived the attempt to terminate on 7 April and either came to a conclusion on 11 April or on 30 May. If the former be so, then Mr Ellis is presumably or arguably entitled to four days additional remuneration subject to any arguments about his having to fulfil a whole week or a whole month or some other period to be entitled to his remuneration, and likewise but more strongly, if the correct date of termination of the contract is 30 May. How much these arguments are worth to Mr Ellis? We do not know because we have not sought to calculate it; and it is not really material for us to consider; but we think that there is an arguable point of law which should go forward for a full hearing.
16. However, we take a different view about the unfair dismissal. We have already indicated Mr Spratt's acceptance that he has to attack the primary decision of the Tribunal that the dismissal was fair and that that means he has to attack the conclusion (a) that there was the misconduct or (b) the conclusion that there was a reasonable investigation. He accepts he cannot attack the conclusion that the employers genuinely believed that there was misconduct.
17. Mr Spratt has chosen to stand his ground on this on the Tribunal's findings as to the misconduct by Mr Ellis in relation to his use of drugs. Mr Spratt accepts that, if he does not succeed on the argument he has addressed to us on that issue, he is not going to succeed on any of the other arguments set out in his Notice of Appeal or in the Skeleton Argument; and indeed he has not addressed us on them and does not ask us to form any judgment upon them. That is a realistic and sensible approach by Mr Spratt; but it is not one which, when we come to examine the content of the submission, has persuaded us that there is an arguable case and that there is an error of law in the Tribunal's conclusions as to unfair dismissal.
18. Mr Spratt accepts, firstly, that the evidence of Mr Patel about drug taking was accepted by the Tribunal and, secondly, that the evidence of Mr Ellis about drug taking was rejected. That has the consequence that the Tribunal accepted the evidence that Mr Patel gave that drug taking on Mr Ellis' part was continuing up to the time of Mr Ellis' departure from the company. That was Mr Patel's evidence. Mr Spratt takes no issue with that up to 6 March when Mr Ellis abandoned the office. He submits that, after that, the only evidence came from Mr Patel who had said, no doubt enlarging on what it is in his witness statement, that Mr Ellis' mobile telephone would ring in particular on Fridays. He would go out and then come back. We would then go out into the lavatory and come out of the lavatory in an altered mood state. That in our judgment was persuasive evidence that Mr Ellis was continuing to take drugs on the premises, as he had admitted on several occasions to Mr Patel in the past that he had done; and we do not see how he could possibly be said that the Tribunal did not have any evidence before it on which he could reach the conclusions that it did about the drug taking of Mr Ellis or that the conclusion which it reached in that area of the case. Those conclusions were not perverse conclusions. Mr Spratt has pointed out that one might expect that if what Mr Patel was describing was actually going on, there would have been a fleet of witnesses from the company who would have spoken to the same effect and that Mr Patel's evidence, alone did not amount to enough.
19. But it was for the Tribunal to decide whether to accept Mr Patel's evidence, unsupported as it was by other evidence at least in the period which immediately preceded the dismissal, and the Tribunal were entitled and it is not arguable that they were not, in our judgment, to find as they did that the drug taking was continuing as they did. While the Tribunal expressed the drug taking to be a secondary reason Mr Spratt accepts that, had that stood alone, that would have been enough to have rendered the dismissal fair assuming that there was a proper investigation and a genuine belief in that misconduct.
20. We have considered what Mr Spratt has said about a genuine investigation. The investigation was carried out over some days by Mr Redcliffe; and it was contributed to, of course, by Mr Patel. Mr Patel was the one who had the actual knowledge about the drug taking; and one would be tempted to comment that it is difficult to know what more Mr Patel could have done since it was all within his own knowledge. But, putting our own comments on one side, we have no hesitation in concluding that the Tribunal was entitled to reach the decision that the investigation was a reasonable one as they did and for the reasons that they expressed in their decision.
21. For those reasons the unfair dismissal appeal is dismissed. The appeal in relation to salary however will go forward to a full hearing.