United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR DANIEL BARNETT (of Counsel) Instructed by: Employment Relations Solicitors Yewgate Barn Old Road Elham Canterbury CT4 6UH
For the Respondent	MR DAVID GRAY-JONES (Solicitor/Advocate) Messrs Thomas Mansfield LLP Solicitors Tokenhouse 11-12 Tokenhouse Yard London EC2R 7AS


 


SUMMARY

VICTIMISATION DISCRIMINATION: Protected disclosure

The claimant, who had less than one year's continuous employment fell out with his fellow directors and equal shareholders. He was removed as a director. His solicitors wrote on his behalf stating that they had given advice to their client as a shareholder, director and employee. The Employment Tribunal erred in holding that the letter contained a protected disclosure within the meaning of the Employment Rights Act 1996 Section 43. As can be seen from Section 43L(3) the ERA recognises a distinction between an allegation and information. It set out a statement of position in the context of known difficulties between the parties. The letter did not contain a protected disclosure within the meaning of the ERA. Accordingly the Employment Tribunal erred in holding that the Claimant could bring a claim for unfair dismissal although he had less than one year's qualifying employment and that his dismissal because of the letter was automatically unfair. The decision of the Employment Tribunal was set aside.


 


THE HONOURABLE MRS JUSTICE SLADE

Introduction

1. This is an appeal by Cavendish Munro Professional Risks Management Limited ("the company") from the judgment of an Employment Tribunal of 18 March 2009 in which the Employment Tribunal held that Mr Geduld, who had less than 12 months qualifying employment with the company at the date of his dismissal, had been dismissed because he had made a protected disclosure. Accordingly, the Employment Tribunal went on to hold that he had been unfairly dismissed. At a Remedies Hearing, he was awarded compensation of £36,300.
2. The Notice of Appeal sets out a number of grounds of appeal. At our suggestion with which, on behalf of the appellant company, Mr Barnett, and Mr Gray-Jones, on behalf of Mr Geduld, agreed we have heard one ground of appeal which, if it were to succeed, would be determinative of the appeal. It is contended on behalf of the company that the Employment Tribunal erred in holding that a letter from Mr Geduld's solicitor dated 4 February 2008 to two directors of the company amounted to a protected disclosure within the meaning of the Employment Rights Act 1996 ("ERA"), Section 43B(1). We would, if this ground of appeal were not to succeed, hear the further grounds of appeal.

The Facts

3. Mr Geduld became a director and employee of the company, who are insurance brokers, in 2007. His employment commenced on 26 March 2007. There were three directors of the company, each holding 26.6 per cent of the shares. Mr Geduld and one of the other directors had worked together in the professional indemnity section of a large insurance broker.
4. From early in Mr Geduld's employment, there were tensions between him and his two fellow directors. In late 2007, matters came to a head and there was a meeting in October 2007 when there was some discussion about a buyout of Mr Geduld's shareholding. In November or December 2007, Mr Geduld signed a shareholder agreement.
5. On 3 January 2008, a meeting took place at a Starbucks coffee shop between the remaining two directors and Mr Geduld. There were discussions about the future of the company and the buying out of Mr Geduld's shareholding in view of his removal as a director. One of the directors followed up the discussions with an email setting out three options, as he saw them, for Mr Geduld in these circumstances. Those options were set out in the Tribunal judgment at paragraph 50:

"Mr Burn followed up the discussions on 3 January 2008 with an email in which he set out three potential options for the Claimant. These were to resign the directorship and involvement in day-to-day company matters with a reduction in the Claimant's shareholding and remaining as an employee; to resign the directorship and maintain the same shareholding and to have only a basic contract of employment; or to agree an exit from the company, i.e. with the Claimant no longer to remain an employee."

Soon after this, he was removed as a director of the company.

6. Negotiations continued through the rest of January 2008 and no agreement was reached. Mr Geduld consulted solicitors. They wrote a letter to the remaining two directors dated 4 February 2008 on his behalf. The letter was "without prejudice" but the Employment Tribunal decided, as a preliminary issue, that it was admissible in evidence. Mr Gray-Jones, for Mr Geduld, relies on two passages in the letter of 4 February 2008 as constituting a qualifying disclosure within the meaning of ERA section 43B(1). Those sections are as follows:

"We have been instructed by Michael Geduld in respect of the recent discussions that have taken place between the parties. We have given full advice to our client regarding his rights as a shareholder, director and employee. Such advice includes the purported agreement between the parties signed immediately before the Christmas break but 'back dated'. There are a number of issues regarding the validity of such an agreement and the unfair prejudice to our client, taking into account the events leading up to and immediately after the signature of the Agreement. Our client's position is fully reserved regarding his rights and claims in this regard and we have advised him that such arguments are significant and are very likely to be successful in Court."

and:

"Our client is putting forward this proposal as a means to bring a swift conclusion to the current position. If it is not accepted in its entirely then our client will take all steps that are necessary to protect his position including issues regarding the purported shareholders agreement; the actions of the company's accountant regarding the purported valuation and the various threats and circumstances surrounding the position our client finds himself in with the remaining two shareholders which has led to unfair prejudice upon our client as a shareholder by the company. Such unfair prejudice does raise the issue as to the future of the company."

7. By letter dated 5 February 2008, Mr Geduld was informed that he was dismissed with immediate effect.

The Judgment of the Employment Tribunal

8. At paragraph 56.1, the Employment Tribunal found that Mr Geduld:

"was informed by Mr Stables that he had been dismissed because of the solicitor's letter."

9. The Tribunal found as a fact that Mr Geduld had been dismissed because of the solicitor's letter of 4 February 2008. It set out its conclusions and the consequences of that finding in paragraphs 63 to 67 of the judgment:

"63. We have considered, firstly, whether the letter from the Claimant's solicitors, dated 4 February 2008, amounted to a qualifying disclosure.

64. The writer of the solicitor's letter does refer to legal obligations with which, they asset, Messrs Burn and Stables were failing to comply. They state, for example that:

'... the position our client finds himself in with the remaining two shareholders which has led to unfair prejudice upon our client as a shareholder by the company.'

The test of being likely to disclose is, therefore, met."

10. The Tribunal go on to deal with reasonable belief in the truth of the assertion made in the letter of likely failure to comply with any legal obligations and whether the alleged disclosure was the reason for Mr Geduld's dismissal.

"65. So far as reasonable belief in the truth of the likely failure to comply with any legal obligations is concerned, our findings of fact contain ample reasons for the Claimant's belief that he was going to be treated unfairly as a shareholder would be likely to take place. The relationship was under strain and he was in a minority. He had been removed as a Director, he felt bullied. Moreover, subsequent events show that his beliefs were well-founded, as even at the date of the hearing no agreement has been reached as to the value of the Claimant's shareholding. We were informed by his solicitor, without dissent from the Respondent's solicitor, that the issue may give rise to proceedings in the High Court. The statements from the Respondent's witnesses refer to the valuation not yet having been agreed.

66. So far as causation is concerned we conclude, for the reasons set out in our findings of fact above, that the reason or principal reason for the Claimant's dismissal was that the Claimant made a protected disclosure.

67. Accordingly the Claimant's claim for unfair dismissal succeeds."

11. The basis for the Tribunal's judgment that the letter of 4 February 2008 amounted to a qualifying disclosure within the meaning of the legislation, appears to be, as Mr Gray-Jones fairly points out, the passage from the solicitor's letter which is set out in paragraph 64. If there were additional reasons for the Tribunal's conclusion that the letter of 4 February 2008 contained a qualifying disclosure within the meaning of the legislation, with respect, these are not apparent.

The Relevant Law

12. We now refer to the relevant statutory provisions:

"103A. An employee who is dismissed shall be regarded for the purposes of this Part as unfairly dismissed if the reason (or, if more than one, the principal reason) for the dismissal is that the employee made a protected disclosure.

108. Qualifying period of employment

(1) Section 94 does not apply to the dismissal of an employee unless he has been continuously employed for a period of not less than one year ending with the effective date of termination.

(3) Subsection (1) does not apply if-

(ff) section 103A applies,"

13. Section 43A provides:

"In this Act, "a protected disclosure" means a qualifying disclosure (as defined by section 43B) which is made by a worker in accordance with any of sections 43C to 43H."

Section 43B(1) provides:

"In this Part, a "qualifying disclosure" means any disclosure of information which, in the reasonable belief of the worker making the disclosure, tends to show one or more of the following:

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

Section 43C provides:

"(1) A qualifying disclosure is made in accordance with this section if the worker makes the disclosure in good faith-

(a) to his employer, or

(b) where the worker reasonably believes that the relevant failure relates solely or mainly to-

(i) the conduct of a person other than his employer, or

(ii) any other matter for which a person other than his employer has legal responsibility,

to that other person."

Section 43F relates to disclosure to a prescribed person. The employer and the directors are not prescribed persons. However, Mr Gray-Jones referred to this provision, which we consider is of assistance in construing the meaning of disclosure of information.

"43F

(1) A qualifying disclosure is made in accordance with this section if the worker-

b) reasonably believes

(ii) that the information disclosed, and any allegation contained in it, are substantially true."

Section 43L(3), provides:

"Any reference in this Part to the disclosure of information shall have effect in relation to any case where the person receiving the information is already aware of it as a reference to bringing the information to his attention."

The Contentions of the Parties

14. Neither Counsel knew of any relevant authority on the meaning of disclosure of information within the meaning of section 43B(1). However, after enquiry, Parkins v Sodexho Ltd [2002] IRLR 109 was shown to us. However it is understandable that counsel did not refer to it initially as that case is not of assistance on the issues of the construction of disclosure and information within the meaning of ERA Section 43, which are material for consideration of this ground for appeal. They are not discussed or considered in Parkins v Sodexho.
15. Mr Barnett, for the company, contends that section 43 requires a disclosure of information in order to establish the existence of a protected or qualifying disclosure. Simply voicing a concern, raising an issue or setting out an objection is not the same as disclosing information. He contends that there is nothing in the letter of 4 February 2008 which discloses information as contrasted with making allegations, reserving rights or identifying issues. Also, Mr Barnett contends that the voicing of concerns or raising of issues is not something which tends to show that a legal obligation has been breached.
16. Finally, Mr Barnett contends that the Employment Tribunal erred in law in holding that there was a failure to comply with a legal obligation in the Companies Act 2006, section 994. He submits that that provision gives a right to an oppressed minority shareholder to apply to the court but does not confer the type of legal rights which are contemplated by ERA section 43A.
17. Mr Gray-Jones, on behalf of Mr Geduld contends that the Employment Tribunal did not err in law in concluding that the letter of 4 February 2008 constituted a protected disclosure. He submits that, first, disclosure can be making a statement of something of which the recipient is already aware. In this regard, he refers to ERA section 43L(3). Second, he contends that information can be constituted by reference to a general basis of an allegation without referring to specific facts. Third, that section 994 of the Companies Act gives rise to legal rights. Accordingly Mr Gray-Jones contends that statements in the letter of 4 February were disclosure within the meaning of ERA section 43A. Information was disclosed in the letter because there was reference to the shareholders' agreement and, in general terms, to acts of the two directors which, it was said, gave grounds for proceedings.

Discussion

18. Sections 43A to L of the Employment Rights Act 1996 were inserted by Section 1 of the Public Interest Disclosure Act 1998. Although we cannot use it as an aid to interpretation, it is instructive to note that the introductory note to that Act describes it as:

"... an act to protect individuals who make certain disclosures of information in the public interest; to allow such individuals to bring action in respect of victimisation; and for connected purposes."

19. To fall within section 43A, the act has to fall within the definition of a protected disclosure in section 43B of the Employment Rights Act 1996. We leave aside the question of whether the Companies Act, section 994, which gives a minority shareholder a right to apply to the court for relief, imposes a legal obligation. For the purposes of this judgment, we assume in favour of Mr Geduld that it does.

Information

20. That the Employment Rights Act recognises a distinction between "information" and an "allegation" is illustrated by the reference to both of these terms in section 43F. Although that section does not apply directly in the context of this case, nonetheless it is included in the section of the Act with which we are concerned. It is instructive that those two terms are treated differently and can therefore be regarded as having been intended to have different meanings. Further, that "information" and "an allegation" are different is clear from the victimisation provisions in the Sex Discrimination Act 1975 and in the Race Relations Act 1976.
21. Sex Discrimination Act, section 4(1)(b) refers to victimisation where:

"4. (1) A person discriminates against another person, the person victimised, in any circumstances relevant for the purposes of any provision of this Act if he treats the person victimised less favourably than in those circumstances he treats or would treat other persons and does so by reason that the person victimised has

(b) given information in connection with proceedings ..." (emphasis added)

22. Then in a separate provision, section 4(1)(d), provides that there is a different way in which a person can assert victimisation namely that:

"... the person victimised has alleged that the discriminator has committed an act ..." (emphasis added)

23. It can be seen that the victimisation provisions of the discrimination legislation set out different ways in which an individual can assert victimisation. Giving "information" and making "an allegation" are treated differently in that legislation as well as in the Employment Rights Act.
24. Further, the ordinary meaning of giving "information" is conveying facts. In the course of the hearing before us, a hypothetical was advanced regarding communicating information about the state of a hospital. Communicating "information" would be "The wards have not been cleaned for the past two weeks. Yesterday, sharps were left lying around". Contrasted with that would be a statement that "you are not complying with Health and Safety requirements". In our view this would be an allegation not information.
25. In the employment context, an employee may be dissatisfied, as here, with the way he is being treated. He or his solicitor may complain to the employer that if they are not going to be treated better, they will resign and claim constructive dismissal. Assume that the employer, having received that outline of the employee's position from him or from his solicitor, then dismisses the employee. In our judgment, that dismissal does not follow from any disclosure of information. It follows a statement of the employee's position. In our judgment, that situation would not fall within the scope of the Employment Rights Act section 43.
26. The Tribunal based its conclusion that Mr Geduld was dismissed because, through his solicitor's letter of 4 February 2008, he made a protected disclosure. In our judgment the letter sets out a statement of the position of Mr Geduld. In order to fall within the statutory definition of protected disclosure there must be disclosure of information. In our judgment, the letter of 4 February 2008 does not convey information as contemplated by the legislation let alone disclose information. It is a statement of position quite naturally and properly communicated in the course of negotiations between the parties.

Disclosure

27. Even if we are wrong in our conclusion that the Employment Tribunal erred in holding that the letter of 4 February 2008 disclosed information within the meaning of the ERA, we consider whether the Employment Tribunal erred in considering whether the letter of 4 February 2008 amounted to or contained a disclosure within the meaning of the section. The natural meaning of the word "disclose" is to reveal something to someone who does not know it already. However section 43L(3) provides that "disclosure" for the purpose of section 43 has effect so that "bringing information to a person's attention" albeit that he is already aware of it is a disclosure of that information. There would no need for the extended definition of "disclosure" if it were intended by the legislature that "disclosure" should mean no more than "communication".
28. On the facts of this case, the solicitor's letter of 4 February 2008 was written as part of an ongoing unresolved dispute between the parties. It in effect was alleging that Mr Geduld was an oppressed minority shareholder and, in summary terms, stated the basis of that position. It did not disclose any facts; it merely summarised the basis of a position adopted by Mr Geduld.
29. It is not unusual that solicitors are asked to write on behalf of employees. If an employee is feeling badly treated, the solicitor may write to say that the employer is in breach of contract. There may be allegations over allocation of work or that the employee has been overlooked for a promotion. The solicitor may say, "If the situation does not improve, we have advised our client that he can resign and claim constructive dismissal". In those circumstances, in our judgment, no protected disclosure is made in such a letter. Similarly, if the individual met the employer without the intervention of the solicitor and made the same points, there would be no protected disclosure by that employee to the employer.

Conclusion

30. In our judgment, the Employment Tribunal erred in law in concluding that Mr Geduld had made a protected disclosure by his solicitor's letter of 4 February 2008. Accordingly, their decision that no qualifying period of employment was required by Mr Geduld to pursue a claim for unfair dismissal and that his dismissal was unfair are set aside as is the award of compensation.