United Kingdom Employment Appeal Tribunal

APPEARANCES

For the Appellant

MR RICHARD SAMUEL (Of counsel) As instructed by: Messrs J R Jones Solicitors 58 Uxbridge Road Ealing London W5 2TA

For the Respondent

MR CASPAR GLYN (Of Counsel) As instructed by: Messrs Berwin Leighton Paisner Solicitors Adelaide House London Bridge London EC4R 9HA

SUMMARY

Public Interest Disclosure – Post-employment detriment

Protected disclosures – good faith – burden of proof – factual findings – causation – ordinary unfair dismissal – just and equitable compensation – contribution.


 


HIS HONOUR JUDGE PETER CLARK

1. This is an appeal brought by Mr Roman Bachnak against a reserved Judgment of the London (Central) Employment Tribunal, promulgated with Reasons on 15 March 2005 following an 11 day hearing, dismissing his complaint of automatic Unfair Dismissal under section 103(A) Employment Rights Act 1996 (ERA); upholding his complaint of 'ordinary' Unfair Dismissal, on the basis of procedural unfairness applying section 98(4) ERA, but awarding nil compensation. The Respondent here and below is his former employer, Emerging Markets Partnership (Europe) Ltd. We shall so describe the parties.

Background

2. The Respondent is part of the EMP Group, a leading infrastructure investment adviser in the private equity markets of emerging economies.
3. The Claimant, a Slovakian national, commenced employment with the Respondent on 1 November 1999 as an investment officer. He had only limited experience of venture capitalist projects; not all the entries in his CV were true, so the Tribunal found.

Telemach

4. Telemach was a Slovenian cable TV and telecom company identified by the Respondent as a potential investment vehicle. Mr Baudon, Chief Executive Officer of the Respondent, assigned Messrs Christou, Knorr and the Claimant to investigate this possible investment. What was contemplated was the acquisition of 14 percent of the shares in Telemach.
5. On 17 February 2000 the Claimant e-mailed Mr Christou with his valuation of Telemach, which he put at $20 million. Pausing there, for the purposes of his claims before the Employment Tribunal he relied on seven alleged protected disclosures (identified as Disclosures A – G). This e-mail was disclosure A. Mr Christou valued Telemach at $50 million. Mr Knorr, like the Claimant, also arrived at a valuation of $20 million, but for different reasons.
6. On 10 March the Claimant was taken off the Telemach project due to performance issues surrounding his work.
7. Disclosure B, said by the Claimant to have been contained in a telephone conversation with Mr Baudon on 4 August 2000, was rejected by the Tribunal as a matter of fact.
8. At a meeting with Mr Baudon, when the Claimant's employment was terminated on notice expiring on 23 October, the Claimant made Disclosure C, reporting his concern that Telemach was overvalued. The Tribunal found that the timing of that dismissal had nothing to do with Telemach.
9. On 15 October 2000 the Claimant wrote to Mr Taylor, a Managing Director and general counsel of the Respondent, raising questions over a due diligence report dated 18 April and noting that it was in the Respondent's possession 2 days before the Respondent entered into a share purchase agreement with Telemach. This was Disclosure D.
10. On 23 October 2000, the date on which the Claimant's notice expired, two agreements were entered into. The first was an advisory agreement made between the Claimant's recently incorporated company, Meyerowitz Bachnak (UK) Ltd and the Fund set up to invest in shares of infrastructure companies, mainly in central and eastern Europe, due to last until 24 February 2001; the second was a Fixed Term employment contract made between the Claimant and the Respondent, also due to expire on that date.
11. Also on 23 October the Claimant made what was said to be Disclosure E to Mr Taylor. It related to an agreement made by the Respondent with a Mr Thaler of Telemach whereby Mr Thaler was to repay to the Fund, on whose behalf the Respondent acted, a sum of $1.2 million which he had received out of monies paid by the Fund for Telemach shares.
12. On 27 October, without the knowledge of the Respondent until after his final dismissal, the Claimant incorporated another company called Emerging Markets Partners Ltd (EMP). Until about December 2000 the Claimant attempted to pass off that company as an adviser to the Fund, contacting a number of potential investors. The company note-paper gave an address, telephone and e-mail address of the Respondent. That company was operated by the Claimant in breach of the advisory agreement.
13. On 30 January 2001 the Claimant was called to a disciplinary interview conducted by Mr Taylor and attended by Ms Keane-Murphy of Human Resources. At that stage the Respondent was unaware, so the Tribunal found, that the Claimant had gained unauthorized access to documents stored on computer in relation to Telemach. He did so by using another's computer. The disciplinary hearing related to his unauthorized printing of a large number of documents unconnected with either Telemach or the projects on which he was then working, the Star One and Microlink Projects. He was asked to return copies which he had retained by 5pm the following day.
14. On 31 January Mr Taylor was given a memorandum prepared by the Claimant on his computer and found by Mr Bloch, chief technology officer, in which the Claimant enquired as to what material facts relating to Telemach and EON had been disclosed to investors, with particular reference to the due diligence report dated 18 April 2000 and the compromise agreement made between the Fund and Mr Thaler. The Claimant relied on this memorandum as Disclosure F. Mr Taylor then suspended the Claimant, who said that he would not be returning with the documents referred to at the disciplinary hearing by 5pm.
15. Mr Taylor then summoned the Claimant to attend a disciplinary hearing at 2.30pm on 1 February to deal with allegations that he had copied Telemach and other materials for his own purposes and without authority. On the morning of 1 February the Claimant attended the Respondent's offices; he told Ms Keane-Murphy that he would not hand over the documents which he had gathered, nor would he be attending the further disciplinary hearing fixed for that afternoon. The Claimant then wrote a long letter to Mr Taylor and Mr Baudon in which he alleged that material due diligence information regarding Telemach had been withheld from investors; that adverse material relating to Telemach had been available to the Respondent as early as mid-May 2000; that the settlement with Mr Thaler had been hidden from investors and further that the internal evaluation of Telemach, indicating that the investment ought not to be made, had not been shared with the investment committee. He also accused the Respondent of trying to bribe him with an advisory contract worth more than £100,000. That letter was relied on as Disclosure G.
16. Mr Taylor held the disciplinary hearing that afternoon, in the absence of the Claimant, and decided to terminate the agreement made with the Claimant with immediate effect. He was not informed of a right of appeal.
17. Shortly after the Claimant's dismissal Mr Bloch examined the Claimant's computer and paper files on Mr Taylor's instructions and discovered details of the company set up by the Claimant, EMP. He found that in November and December 2000 the Claimant had been writing on notepaper headed with his company's name to the Respondent's customers attempting to solicit business; the notepaper falsely claimed that the Claimant's company was the adviser to the Fund and he used a leaflet promoting his company taken from a marketing document produced by the Respondent.

Protected Disclosures

18. The scheme of the statutory protection afforded to workers and employees (a distinction to which we shall return) by the ERA is multi-layered. For present purposes the following provisions are material:

(1) By section 47B(1) a worker has the right not to be subjected to any detriment by an act, or any deliberate failure to act, by his employer done on the ground that the worker has made a protected disclosure.

(2) By section 103A, an employee who is dismissed shall be regarded as unfairly dismissed if the reason or principal reason for the dismissal is that the employee made a protected disclosure.

(3) By section 43A a protected disclosure means, so far as is material, a qualifying disclosure (as defined by section 43B(1) which is made by a worker in accordance with section 43C or G.

(4) By section 43B(1) a 'qualifying disclosure' means any disclosure of information which, in the reasonable belief of the worker making the disclosure tends to show:

(b) that a person has failed, is failing or is likely to fail to comply with any legal obligation to which he is subject.

(5) By section 43C(1)(a) a qualifying disclosure is made in accordance with the section if the worker makes a disclosure in good faith to his employer. Section 43G deals with disclosure in other cases. The requirements of reasonable belief and good faith are also requirements of a section 43G qualifying disclosure, together with further conditions. The worker must not make the disclosure for purposes of personal gain (section 43G(1)(c)).

Issues

19. The following questions arose for determination by the Employment Tribunal:

(1) ought the Claimant to be permitted to amend his Originating Application:?

(2) was the Claimant an employee of the Respondent?

(3) in relation to each of Disclosures A-G

(a) was there a disclosure?

(b) if so, did the Claimant reasonably believe that the disclosure tended to show that the Respondent had failed, was failing or was likely to fail to comply with the legal obligation (reasonable belief)

(c) if so, was the disclosure made in good faith

(d) if it was a protected disclosure, was he subjected to a detriment on the ground that he had made that disclosure or was dismissal by reason of that disclosure?

(4) was the dismissal ordinarily unfair; if so to what remedy if any was he entitled?

The Tribunal's Conclusions

20. In relation to those issues the Tribunal concluded as follows:

(1) that the proposed amendments be allowed in part

(2) that the Claimant was continuously employed by the Respondent from 1 November 1999 until 1 February 2001. One of the reasons for the delay in determining this case was that the issue as to the Claimant's employment status went to the Court of Appeal and back. There is no cross appeal against this Tribunal's finding.

(3) Dealing with disclosures A-G:

(a) Disclosure B was not in fact made. There is no appeal against this finding.

(b) the Claimant did not have the necessary reasonable belief to render disclosures A, and C-G qualifying disclosures

(c) if he had the necessary reasonable belief, Disclosures D-G were not made in good faith

(d) assuming Disclosures A and C to have been made in good faith they were not causally linked to the detriment alleged or the eventual dismissal on 1 February 2001.

The reason or principal reason for the Claimant's dismissal was his misconduct.

(4) dismissal for that reason was procedurally unfair under section 98(4) ERA; however:

(a) the dismissal was substantively fair; the Claimant had contributed to his dismissal by his own conduct to the extent of 100 percent and

(b) it was not just and equitable to award him any compensation in light of his setting up and attempting to trade through his company EMP.

The Appeal

21. The principal thrust of the appeal advanced by Mr Samuel on behalf of the Claimant is that the Tribunal was wrong to find that the Claimant did not have the necessary reasonable belief in respect of Disclosures A and C-G and this error in approach contaminated their subsequent findings that he did not act in good faith and that the Respondent's reason for dismissal related to his misconduct. He further argues that the bad faith finding was flawed in that the Tribunal failed properly to apply the burden of proof in deciding whether or not the Claimant acted in good faith. Finally, he raises separate arguments in relation to those parts of the amendment application which were refused by the Tribunal.
22. We reject the 'contamination' argument. In our judgment the Tribunal properly made alternative findings which were not infected by the earlier findings. We prefer the approach taken by Mr Glyn, who advanced his submissions on the assumption (whilst in no way conceding the point) that the necessary reasonable belief was made out. In these circumstances we turn now to the question of good faith.

Good Faith

23. The first question is where does the burden of proof lie? Is it for the Claimant to prove good faith or the Respondent to prove bad faith for the purposes of section 43C and 43G? At paragraph 10 of their Reasons the Tribunal observed that it was not clear from the statute or decided cases where the burden lay. They added:

"It is quite likely that the burden is a neutral one."

24. In this Tribunal there is a real issue between counsel as to where the burden lies. The leading case on good faith in the 'whistle-blowing' jurisdiction, Street v Derbyshire Unemployed Workers Centre [2004] IRLR 687 does not, in terms, deal with the point. As the Tribunal correctly directed themselves in the present case, Street is authority for the proposition that where an employee, in making a relevant disclosure, has mixed motives, good and bad, the disclosure will not necessarily have been made in bad faith. The statutory protection is afforded to those who make disclosures in the public interest; thus where the predominant purpose is the employee's personal interest, or in the case of Street, personal antagonism against a manager, the disclosure will not be made in good faith.
25. On the basis of other authorities to which we have been referred by counsel we accept Mr Samuel's submission that it is for the Respondent to show that the Claimant acted in bad faith. See Lucas v Chichester Diocesan Housing Association Ltd (UKEAT0713/04/DA. 7 February 2005. Unreported) paragraph 39, per HHJ McMullen QC; GMB v Fenton [2004] WL 2935807 (12 October 2004. Unreported) paragraph 69, per Burton P. It follows that we reject Mr Glyn's submission that the onus of showing good faith lies on the Claimant and, in common with both counsel, that the burden of proof is neutral as the Tribunal tentatively suggested. Does that necessarily mean that the Tribunal's findings on good faith must be set aside? We are not persuaded by Mr Samuel that it does.
26. The essential reasoning of the Tribunal is contained in paragraph 12(v) of their Reasons. They heard the witnesses and considered the documentary evidence over 11 days. Having done so they reached firm findings of fact which were in no way dependent on the burden of proof. The disclosures D and E were made primarily by the Claimant to strengthen his hand in negotiations for a new contract with the Respondent. Disclosure F was made after he was summoned to the meeting on 30 January 2001 for copying documents without permission; Disclosure G after his suspension but before dismissal. They were made to put pressure on the Respondent not to dismiss him. These were findings of fact as to the Claimant's motive which were open to the Tribunal and with which we shall not interfere. See Street. The Claimant was not acting in the public interest in making those disclosures but in his personal interest.

Causation

27. Under section 103A the question is whether the surviving disclosures A and C were the reason or principal reason for dismissal. Here the onus of showing that they were not lay on the Respondent, as the Tribunal correctly observed at paragraph 9 of their Reasons.
28. The Tribunal accepted the Respondent's case that the reason for dismissal on 1 February 2001 was unconnected with Disclosures A and C, both of which pre-dated the Claimant's re-engagement in October 2000; it was by reason of the Claimant's misconduct in copying and removing documents which he then did not return. Further, even if Disclosures G and F form part of the reason for dismissal, as Mr Samuel contends, those disclosures were not made in good faith and thus were not protected disclosures for the purposes of the automatically Unfair Dismissal provisions in section 103A.

Unfair Dismissal

29. The Tribunal did find the dismissal unfair under section 98(4). However, they went onto find that it would not be just and equitable to award compensation in the light of the Claimant's dishonest attempts to pass off his own business as that of the Respondent. That finding cannot be impugned on appeal. Further, they found 100 percent contribution based on his misconduct known at the time of the dismissal. Thus he was entitled to nil compensation in relation to both the basic and compensatory awards available for Unfair Dismissal.

Amendment

30. We do not have the Tribunal's written reasons for their ruling on the Claimant's amendment application, but the parties have agreed a note of the oral reasons given by the Chairman.
31. The proposed amendments disallowed alleged detriments suffered as a result of his making alleged Disclosures A-D. In view of the Tribunal's findings, first that Disclosure B was not made, secondly that Disclosure D was not made in good faith and thirdly that Disclosures A and C were not causally linked with any detriment, we accept Mr Glyn's submission that those proposed amendments are now rendered academic. In any event, we are not persuaded by Mr Samuel that the Tribunal erred in law either in their application of the principles in Housing Corporation v Bryant [1999] ICR 123, nor in their approach to the effect of section 48B(3)(a) ERA. It follows that we reject this ground of appeal also.

Conclusion

32. No error of law such as to vitiate the material conclusions of the Tribunal has, in our judgment, been made out. This appeal fails and is dismissed.