United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MISS L BONE (of Counsel) Instructed by: Croner Consulting Litigation Department Wolters Kluwer (UK) Ltd Croner House Wheatfield Way Hinckley Leicestershire LE10 1YG
For the Respondent	MR J WALTERS (of Counsel) Instructed by: Messrs Leo Abse & Cohen Solicitors 40 Churchill Way Cardiff CF10 2SS


 


SUMMARY

Unfair Dismissal – Contributory fault; Polkey deduction

Unfair dismissal – liability finding by Employment Tribunal disclosed no error of law but case remitted for consideration of Polkey deduction and contributory conduct.


 


THE HONOURABLE MR JUSTICE BEAN

1. This is an employer's appeal against two decisions of an Employment Tribunal sitting at Cardiff, under the Chairmanship of Miss C Collier, in the same litigation, one on liability, the other on remedies.
2. Mr Philippart, the Claimant, was employed by the Respondent, S A Brain & Co Ltd, as a licensed house manager, for over five years, until his dismissal on 27 June 2005. Until the events which gave rise to his dismissal and these proceedings, he was well-regarded by the Company. It is the largest brewer in South Wales; it retails through over 200 pubs in South Wales and the West Country and has 2,000 employers. Mr Philippart was the manager of a pub in Cardiff.
3. In December 2002, Mr Kirkland Davies was appointed retail development manager, and became the Claimant's line manager. They had known each other for 20 years in various capacities, were friends, and socialised outside work.
4. For the first six months, there were no problems between them, but at the beginning of August 2003, the Claimant was unsuccessful in applying for a post of retail associate and subsequently the relationship between Mr Davies and the Claimant deteriorated. Mr Philippart went on sick leave with stress and lodged a grievance against Mr Davies. The Company recognised the need to separate the two if the Claimant were to make a successful return to work. A pragmatic decision, as the Tribunal put it, was made to change the Claimant's line manager. At the beginning of May 2004, he returned to work. There were no problems with his working with the new line manager.
5. Later that year there was a major reorganisation in the Company's management, involving redundancies. As a result, the number of retail operations managers was reduced and Mr Davies once more became the Claimant's line manager. Trouble began between them almost immediately. It is not necessary to go into the details of that trouble.
6. Matters came to a head in June 2005. The Claimant was invited to attend a disciplinary hearing. He was dismissed. The letter of dismissal, of 24 June, which runs to several pages, is summarised in paragraph 14 of the Tribunal's judgment. As they record, the reasons given by the employer for the dismissal were misconduct of various kinds. They related to failure to promptly carry out reasonable and lawful instructions, including instructions to be "customer facing" at key business times; to address fellow employees by their first names; to insubordination and aggression in the tone of emails and communications; failure to accept constructive feedback; and failure to convey feedback in a positive way to members of his team. The conclusion of the letter should be quoted verbatim:

"On balance, your conduct in relation to items 3, 4, 5 and 9 constitutes serious misconduct which could constitute gross misconduct. However, I am conscious that there can be a fine divide between gross and ordinary misconduct. Nevertheless I have concluded that your conduct has caused a breakdown in the Company's trust and confidence in your suitability to fulfil your management role. I have also concluded that the extent of your resentment towards Kirkland and the Company leaves me to conclude that the situation is irretrievable. I have therefore no alternative but to conclude that your employment should be terminated."

7. The Employment Tribunal set out the Claimant's case and the Respondent's case. In setting out the Claimant's case, they commented at paragraph 17 that it was unclear to them what caused the relationship between Mr Davies and the Claimant to deteriorate but this was not, in their view, relevant to the issues they had to decide.
8. In setting out the Respondent's case, they said at paragraphs 20 and 21:

"20. The Claimant was regarded as a disappointed man after failing to get the post [that is, of retail associate] and this accounted for his inappropriate behaviour, while Mr Davies acted professionally throughout, even when subject to the Claimant's disdain and unreasonable behaviour. The breakdown of the relationship was entirely the Claimant's fault.

21. There was no option but to dismiss him because the misconduct reflected on his ability to do his job effectively and this accounted for the loss of trust and confidence in him as a manager and he had shown through disciplinary proceedings that he was not prepared to change."

The Employment Tribunal go on to mention that the Respondent had given evidence to them of accusations by the Claimant against three of the retail operations managers of conspiring against him. As an alternative ground for dismissal the Respondent relied on "some other substantial reason".

9. In their findings of fact, the Tribunal noted that this was a sad and difficult case, given the previous long friendship between the Claimant and Mr Davies. They went on:

"24. We found the reason for the Claimant's misconduct (which went to inappropriate behaviour in carrying out his management duties) was the Respondent's action in making Mr Davies the Claimant's line manager again, in view of the history of the matter and the nature of the previous grievance lodged. We found as a result of this action the Claimant suffered a loss of trust and confidence in the Respondent. It was this manager's behaviour which had caused him to suffer with work related stress, a fact not disputed by the Respondent. A sensible solution had been found in early 2004 and yet only some 5 months later he was faced with the prospect of having the same person managing him again. We accepted it was not reasonable to expect the Respondent to work around one manager when undertaking a major reorganisation. However, we did not consider sufficient consideration had been given to the Claimant's difficulties with Mr Davies, or the risk to his health.

…

26. We found that an organisation of the size and resources of the Respondent should have been able to find, without too much difficulty, a solution in the reorganisation which meant that Mr Davies would not be the Claimant's line manager again. We consider insufficient consideration was given to managing the problem.

…

28. When dismissing an employee in such circumstances it is necessary to consider why he or she has adopted the attitudes or behaviours they have and we find in this case these were caused by the action of the Respondent in reappointing Mr Davies as the Claimant's line manager. To dismiss him because of conduct which was caused by the Respondent was therefore unfair ...Mock v Glamorgan Aluminium Co Ltd EAT 493/80). It was outside the reasonable range of responses of a reasonable employer, particularly as he was regarded as a good manager and had had a previously clean disciplinary record. A reasonable employer would have given the Claimant a different line manager and warned him that his behaviour would have to change and if it did not then he was in danger of being dismissed. We noted that he had not previously had such problems with any other manager before so the prospects of his improving seemed to us reasonably good. He would then have had an opportunity to retain his employment.

29. We rejected the Respondent's argument that it was not possible to accommodate him because of the soured relationships and lack of trust amongst those involved in the investigation and disciplinary process – the key was to find him a different line manager and had he had that opportunity his attitude about the other managers may well have changed. In this regard we refer to our finding in paragraph 26 above. We therefore found there was no 'other substantial reason' justifying dismissal.

30. We found no evidence of a conspiracy against the Claimant, as he alleged. No doubt the allegation stemmed from the fact that he felt besieged on all sides as the investigation and disciplinary proceedings went on, combined with his continuing difficulties with Mr Davies.

31. We therefore make the following findings on the balance of probabilities:-

1. The principle reason for dismissal pursuant to Section 98(1)(a) of the 1996 Act was conduct;

2. This was a potentially fair reason for the purposes of Section

98(2)(b);

3. The dismissal was procedurally fair (this was not in dispute);

4. In the circumstances dismissal was not in the range of the responses of a reasonable employer pursuant to Section 98(4) ...Foley v Post Office, HSBC Bank plc v Madden CA 2000) and as there was an insufficient reason for dismissal, it was unfair."

10. On appeal to the Employment Appeal Tribunal, the Appellant Company was represented by Miss Bone, and the Respondent employee by Mr Walters, neither of whom appeared below.
11. Miss Bone's first ground of appeal is a simple one, and obviously a good point as far as it goes. In the opening paragraphs of their decision on liability, the Tribunal correctly set out the relevant parts of s98 of the 1996 Act. They then go on at paragraph 5 to say:

"The burden of proof was on the Respondent and the standard of proof was the balance of probabilities."

This is an unfortunate and elementary error. For many years now, the burden of proof in a case of direct unfair dismissal, such as this one, has been neutral. However, Mr Walters submits that this is the last reference to the burden of proof in the decision and there is nothing in the subsequent parts of the decision to suggest that this error was in any way critical to the Tribunal's conclusions. We agree. This was not a case about the burden of proof at all. The Claimant was dismissed for misconduct. It is not suggested that this was spurious, for example, to achieve what would otherwise have to have been achieved by redundancy, nor is the case anything to do with trade union activities. It is a case of dismissal for misconduct, in which the Employment Tribunal had to decide whether or not the employer acted reasonably in treating the misconduct as grounds for dismissal. This was an unfortunate error but, by itself, it does not vitiate the decision.

12. Miss Bone's next point is that the Tribunal erred in finding that there was no other substantial reason justifying dismissal. It is quite right to say that an irreconcilable personality clash, particularly in a small organisation, or where the employee is in a very senior capacity, may constitute "some other substantial reason", justifying dismissal. We were referred, for example, to the decision of the Court of Appeal in Perkin v St George's Health Care NHS Trust [2005] IRLR 934. Mr Perkin was the Respondent's director of finance and there was a finding by the Tribunal that his personality was such that he was unable to function as a member of a management team. In those circumstances, it is not surprising that his case for unfair dismissal failed. The Tribunal had found it to be a case where he had been unfairly dismissed but had, by his own conduct, contributed 100% to his dismissal. The Court of Appeal said that:

"A breakdown in confidence between an employer and a senior executive for which the latter is responsible and which actually or potentially damages the operation of the employer's organisation which renders it impossible for senior executives to work together as a team can amount to 'some other substantial reason' for dismissal."

They went on to say that there was material on which the Employment Tribunal could find that the Claimant could not work harmoniously with his colleagues, and therefore, while it would have been preferable if the Tribunal had analysed the case as falling within "some other substantial reason", rather than conduct, the Tribunal was entitled to conclude that the employers had a potentially fair reason to dismiss him.

13. Here Miss Bone's difficulty is that the Employment Tribunal found, at paragraph 26, that an organisation of the size and resources of the Respondent should have been able to find, without too much difficulty, a solution in the reorganisation which meant that Mr Davies would not be the Claimant's line manager again. This seems to us fatal to the defence of "some other substantial reason", and it was a finding of fact which was open to the Tribunal on the evidence. Whether we would have made the same finding ourselves is, of course, not for us to say.
14. We return then to the misconduct case. Miss Bone submits that the Employment Tribunal failed to make an important finding of fact as to the root cause of the breakdown in relationships between Mr Davies and the Claimant and that such a finding was an essential part of a decision on liability. As we have already noted, in paragraph 17, the Tribunal said it was unclear to them what had caused the relationship to deteriorate but that this was not relevant to the issues. As we see it, working backward from the dismissal, the Tribunal's findings on causation were as follows. The Claimant was dismissed for misconduct. The nature of the misconduct, as opposed to the reasons for it, was not in dispute and was set out in the dismissal letter. But the Tribunal found in para 24 of the Judgment that the reason for the Claimant's misconduct, which went to inappropriate behaviour in carrying out his management duties, was the Respondent's action in making Mr Davies the Claimant's line manager again, which they considered to be unreasonable in view of the history. They added that Mr Davies's behaviour had caused the Claimant to suffer with work-related stress and, as we have already recorded, that decision to make Mr Davies the Claimant's line manager again was unreasonable.
15. It is a step backwards again to ask why the relationship between Mr Davies and the Claimant had deteriorated and we agree with the Tribunal that it was not essential for them to make a finding about that in deciding whether the decision to dismiss was within the band of reasonable responses. It may be, as the Respondents were arguing, that the Claimant was a disappointed man after he had been denied promotion in August 2003 and that he was envious of his friend, who had got further, faster. We do not know, the Tribunal did not know, and it was not necessary for them to make such a finding.
16. The next ground of appeal is that the finding (paragraph 26) that a solution keeping Mr Davies and the Claimant apart should have been found was an impermissible substitution of the Tribunal's view for the view of management. We do not consider that a finding of this kind is one where a Tribunal is precluded from making its own finding. It does not, indeed, appear to have been argued, at least clearly, that it was impossible for such a solution to have been found. In an organisation with 200 pubs and 2,000 employees, it may very well have been possible for such a solution to have been found without difficulty, and that was certainly a finding of fact open to the Tribunal. Mr Philippart could, for example, have been told that if he was to remain the Respondent's employment, he would have to move to another job and that the choice was his. At all events, there is no error of law at paragraph 26.
17. Finally, on liability, it is submitted that the Tribunal erred in law in finding that the decision to dismiss was outside the band of reasonable responses and that in this respect also they were, albeit with the necessary legal wording, impermissibly substituting their own view for the employers. Again, we do not agree. The Tribunal found, in effect, that while the Claimant had behaved inappropriately, the employers ought to have taken into account that the situation in which he found himself was not entirely his fault. We note that the dismissal letter itself is ambiguous as to whether the misconduct which Mr Philippart had committed was, or was not, gross misconduct. As the writer of the letter, Mr Lounsbach, rightly said, "…there can be a fine divide between gross and ordinary misconduct." Neither the employer's dismissal letter nor the Tribunal's judgment finds the misconduct to have been gross, and even if there had been a finding that it was gross on an ordinary analysis, there still remains the question of whether the previous history involving Mr Davies was adequate mitigation. Once again, it is not for us to say whether we would have found the decision outside the band of reasonable responses that the Tribunal were entitled so to find.
18. Accordingly, the appeal against the liability finding is dismissed.
19. However, Miss Bone is on much stronger ground on remedies. The Tribunal, at a separate hearing, made compensatory and basic awards totalling £29,474.56. They found, at paras 1-4 of their reasons:

"1. The Tribunal found the Claimant did not adequately mitigate his loss and that it was reasonable to have expected him to have obtained alternative employment 12 weeks after his date of dismissal. Given his age and with his skills and experience he could have obtained a job in the licensing or hospitality sector in a supervisory capacity on a salary of about £17,000.00 gross per annum or £238.00 net per week. This would have been 50% of his earnings with the Respondent. We considered it just and equitable to reduce the claims for the performance bonus and loss of pension rights by the same amount, i.e. 50%.

2. In respect of future loss of earnings, it would have taken him some time to find a job at the same pay that he received from the Respondents and we therefore considered the period of 38 weeks from the date of the hearing to be appropriate.

3. The Tribunal did not consider it appropriate to make a reduction in respect of contributory conduct as the Tribunal had previously found that the conduct for which he was dismissed was caused by the Respondent.

4. The Tribunal did not consider it appropriate to make any 'Polkey' reduction as there had been no issue in the proceedings as to any procedural irregularity in the Respondent's disciplinary or dismissal procedures."

20. Miss Bone has two points. First, that the Tribunal erred in law in declining to consider any Polkey reduction, as there had been no issue of procedural irregularity in the dismissal. She submits that the Tribunal ought to have considered whether, had the Claimant not been dismissed when he was, the employment relationship would nevertheless have continued until the latest date in respect of which they awarded the compensation, that is, 38 weeks after the date of the hearing. She submits that, in the light of the Tribunal's finding at paragraph 28 of the liability Judgment, what should have happened was that the Claimant was given a different line manager and warned that, unless his behaviour changed, he was in danger of being dismissed. This is a real and not merely an academic point. The submission is well-founded in law in the light of the decision of the Court of the Appeal in Gover v Property Care Ltd [2006] ICR 1073, and we agree with Miss Bone that there is a real issue to be considered on the facts as well.
21. Turning to contributory conduct, the Tribunal simply said that it was inappropriate to make a reduction, as they had previously found that the conduct for which Mr Philippart was dismissed "was caused by the Respondent." The question on contributory conduct is, by s123(6) of the 1996 Act, whether

"…the dismissal was to any extent caused or contributed to by any action of the complainant…".

The Tribunal make no finding that the Claimant's conduct made no contribution to the dismissal. We bear in mind, as Mr Walters has reminded us, that by virtue of the decision of the Court of Appeal in Nelson v BBC (No. 2) [1979] IRLR 346 (not overruled in this respect, though it was in others, by the House of Lords in Murray v Foyle Meats Ltd), conduct is only relevant for the purposes of s123(6) if it is culpable or blameworthy. Neither the liability decision, nor the remedies decision, is very clear on whether the Tribunal consider Mr Philippart's conduct to have been in any respect culpable or blameworthy, but the wording of paragraph 28, to which we have already referred, suggests that this is at least a possibility.

22. We therefore allow the employer's appeal against the award of compensation of £29,474.56, and remit the case to the same Tribunal to re-consider compensation in the light of the two issues, first, whether there is any and, if so, what, percentage possibility that the employment relationship would have come to an end before the end of the period for which they awarded compensation; and secondly, whether a reduction should be made in the compensatory award, pursuant to s123(6) of the 1996 Act.