SUMMARY
UNFAIR DISMISSAL – Reasonableness of dismissal
The Employment Tribunal impermissibly substituted its own views
for those of the Respondent, rather than considering whether the Respondent’s
dismissal of the Claimant was within band of reasonable responses.
HIS HONOUR JUDGE SEROTA
QC
Introduction
1.
This is an appeal by the Respondent from a decision of the Employment
Tribunal at Manchester, Employment Judge Jones sitting with lay
members, that was promulgated on 13 October 2011. The Employment
Tribunal found in favour of the Claimant that he had been unfairly dismissed
but subject to a 40 per cent deduction: see Polkey v A E Dayton Services
Ltd [1987] IRLR 503. He was awarded compensation overall of
£13,014.98. The case was referred to a full hearing by
HHJ Peter Clark on 23 December 2011.
The factual background
2.
We take the factual background largely from the decision of the
Employment Tribunal. The Claimant was the manager of The Eagle Hotel public
house at Oldham Road in Rochdale. The Eagle Hotel (we are told it only
operated as a public house, not a hotel) is owned by the Respondent company,
which is a subsidiary of Samuel Smith’s Old Brewery (Tadcaster). The Eagle
Hotel is one of between 50 and 60 public houses in the north‑west owned
by the Respondent. Among its directors are Mr Humphrey Smith and
Mr Oliver Smith, who we believe are also main board directors. The
Eagle Hotel is not a tied house.
3.
The Claimant was the manager from 3 October 2005. Initially he ran
the public house together with his partner, but they separated in or around
June 2007. The Claimant was dismissed on 26 November 2010, and
the effective date of termination of his employment was 31 December 2010.
After the separation of the Claimant from his partner, the Respondent became
concerned and complained of a significant drop in revenue. What had been a
modest profit started to turn into, initially, a modest loss. The five months
to 3 October 2009 showed takings of £45,039; this compared with the
five months to 1 October 2005, when £63,511 had been taken. A number of
factors were put forward, but from the findings of the Employment Tribunal what
we shall call the adverse factors were all in place by December 2008.
There is no evidence of any further adverse trading factors after that date.
4.
There were some historical reasons for the poor performance. For
example, a number of businesses in the locality had closed, leading to fewer
customers, especially affected was the lunchtime trade. There was a wood‑yard
that had closed, and the MFI and Homebase stores had shut. A local engineering
firm, a number of whose employees used to frequent The Eagle, was put on three‑day
working. After the Claimant separated from his partner, The Eagle operated on
reduced hours. Further, and this may work in one of two ways, the Respondent
had a policy of not allowing entertainment in The Eagle; there was no
television there and there was no gaming. This may have been of particular
significance, for example, during the World Cup. Also, The Eagle did not have
any marked price advantage over other public houses, and of course it had to
compete with supermarkets. There were also national trends of a decline in the
pub trade. There was no pool table, because there was a disagreement between
the Respondent and the Claimant as to whether the Claimant might contribute on
half of the cost of re‑covering the table. These adverse factors,
however, as I have said, were all in place by December 2008, and
thereafter there were no further adverse factors.
5.
On 20 February 2009 the Claimant met his area manager,
Mr Daffern. Mr Daffern pointed out there had been a reduction in
turnover over a three‑year period of 28½ per cent, and the
Claimant needed to address this. Indeed, for the financial year there had been
a loss of £1,825. Mr Daffern advised the Claimant to take a most active
role in promoting games, which had previously been very successful, and he set
a target for the Claimant for the period of 1 March to 28 March 2009
that he should take £3,300 per week. The Claimant missed this target, although
by the comparatively modest figure of £44 a week. On 15 May 2009
Mr Daffern issued the Claimant with a verbal warning for poor trade
performance. The Claimant appealed, as he was entitled to under the
disciplinary process, but his appeal was unsuccessful.
6.
Shortly before 19 May 2009 Mr Humphrey Smith, who had replaced
Mr Daffern as the area manager, visited The Eagle, and he expressed his
concerns to the Claimant about the continuing fall in takings that had led to
the loss for the year of £1,204 as compared to the previous year’s net profit
of £6,965. The Claimant was told not to expect a salary increase, and he was
set targets of an increase in takings by 10 per cent over the
previous year. On 12 November 2009 Mr Humphrey Smith again visited The
Eagle. The Claimant had failed to meet the target of a 10 per cent
increase; he had achieved an increase of 4.1 per cent in June, but in
fact in July, August, September and October there had been a decrease in
takings compared with the previous year.
7.
The Claimant was called to a meeting on 3 December 2009. The
meeting was adjourned by reason of the Claimant’s holiday and then his
sickness; he suffered from stress and anxiety, and was off work from between
8 December 2009 until 6 May 2010. While the Claimant was
on sick leave a non‑residential relief manager was employed, and the
turnover continued to fall as compared to the previous period; it fell from
something like £2,470 a month to £1,813 per month, save for one month when
there was a modest increase. The Claimant put this down to the non‑residence
of the relief manager.
8.
When the Claimant returned to work, the disciplinary meeting was rearranged.
The Claimant was invited to this by a letter of 27 May 2010, and he
was told that there was no satisfactory explanation for continued poor
performance and it might result in a formal oral warning to be recorded on his
personnel file. The meeting took place on 8 June 2010. During the
course of this meeting Mr Humphrey Smith, who was conducting it,
pointed the Claimant to two other public houses owned by the Respondent in the
locality that were doing better. The Claimant’s response was to point to the
limitations on The Eagle as compared to other public houses that were near
estates that provided customers. The Claimant had tried to encourage custom by
setting up a darts team and a pool team. Mr Humphrey Smith suggested
that the Claimant, as the landlord, had a responsibility to create a proper
atmosphere that was welcoming, and he said that the Claimant had a negative
attitude. Mr Humphrey Smith decided to issue a written warning to
the Claimant. The Claimant took exception to this, because the letter inviting
him had only referred to the possibility of an oral warning. Again, the
Claimant appealed, but his appeal was unsuccessful.
9.
A new target was set for the period 8 June 2010 to 31 July
2010. The target required takings to remain at the current level until the end
of the World Cup. When the World Cup finished, the Claimant’s target was a
10 per cent increase. However, far from increasing, there was a
further reduction up to 11 July 2010 of 19 per cent, and
thereafter until the end of the month there was a modest increase of
3.2 per cent. The Claimant was invited to a further disciplinary
hearing on 8 September 2010. He rejected a comparison that was made
between The Eagle and other public houses because of the difficulties in the
locality; he again referred to the efforts he had made to increase trade, on
this occasion mentioning that he had established a fantasy football club.
10.
On 29 September 2010 Mr Humphrey Smith concluded
that the continued fall in takings was unsustainable. There had been a
12.2 per cent fall in takings from 8 June to 31 July as
compared with the previous year. On that occasion therefore he issued the
Claimant with a final written warning. Again, the Claimant appealed, but the
appeal was dismissed. A new target was set for the Claimant for September and
October of a 10 per cent increase, and the Claimant was warned that
if he did not meet this target, he could be dismissed. Far from there being an
increase, there was a 6 per cent decline. The Respondent says that even
after the termination of the World Cup, and the fact that the Claimant was
aware he was already subject to a final written warning and was threatened with
dismissal, there was still a significant fall. As the Respondent had also
stressed, the fall in takings continued even as compared to the beginning of
the period, when the trading disadvantages were already in place.
11.
On 15 November 2010 the Claimant was invited to a further
disciplinary meeting, which took place on 23 November 2010. The
Claimant was represented by his trade union representative, pointed out the
difficulties in managing successfully The Eagle Hotel that I have already
referred to, and also stressed the attempts made by the Claimant to drum up
custom. Mr Humphrey Smith, however, considered that the position
with The Eagle Hotel was untenable, and the Claimant was dismissed on five
weeks’ notice. He, again, appealed against his dismissal, but the appeal was
unsuccessful.
12.
The Respondent’s case has always been that it is for pub managers or
landlords to create successful trade, and in order to do this they will need to
create a pleasant and comfortable atmosphere. The Claimant had been assisted
by a freeze in beer prices effected by the Respondent, which had also provided
decent premises. So far as the Respondent was concerned, the Claimant seemed
unable to create the atmosphere, which they described as the “mein host”
atmosphere, they wanted, and had also evinced a negative attitude. It was
accepted at the Tribunal hearing that the Claimant had been dismissed by reason
of capability.
13.
After the Claimant had left The Eagle a couple were appointed as the new
managers, and the turnover increased. Initially, the same relief manager who
had managed the public house in the sickness absence of the Claimant had become
resident, and she had increased the turnover, but it increased significantly
after the new couple were appointed, by some 59.4 per cent. The
Employment Tribunal at paragraph 4.41 pointed to the fact that:
“Mr Smith relied heavily on the turnaround as vindication of his
view of the Claimant’s poor ability to run a public house. It is trite law
that we must consider the decision on the information which was available at
the time of the dismissal, and not on information which has subsequently come
to light. Nevertheless, we are mindful of the fact that Mr Smith has
spent his life working in the brewery and pub business and his evaluation of
what would and would not make a manager of adequate skills might rest upon a
degree of intuition borne out of years of experience. So we have considered
his suggestion that what has happened since proves his judgment to be well
founded.”
14.
The Employment Tribunal, we observe, was obviously correct not to rely
upon matters arising after the date of dismissal as being relevant to the
dismissal, although of course, as the Employment Tribunal did consider, they
might give some added support to evidence as to the position as at the time of
dismissal.
15.
The Employment Tribunal at paragraph 4.42 explained why a
comparison that the Respondent sought to make with other managers was false;
they had breached the Respondent’s policies by allowing entertainment and
discos, they served drinks later than 11.00pm, they had permitted poker
evenings, and that was probably one of the reasons for the significant increase
in takings. Further, the pub had been open for an extra 21 hours because,
having a couple managing the pub significantly increased the staffing level.
At paragraph 4.44 the Employment Tribunal concluded:
“[…] we are of the opinion that although the public house has
clearly survived and is performing better, the differences in takings are not
sufficient in themselves satisfactorily to conclude that the state of affairs
prior to the claimant’s departure was attributable solely to his performance.
Put simply, he did not have the same opportunities as those who took over the
pub after he was dismissed.”
16.
We note the reference to the suggestion that the state of affairs prior
to the Claimant’s departure was attributed solely to his performance. We are
not sure, but that is the way that the case was put. On behalf of the
Respondent, we believe the case was put that this was the principal, major
cause but was taken with other factors; that is, an inability to play “mein host”
and his negative attitude.
The Employment Tribunal decision
17.
We turn to the decision of the Employment Tribunal. The Employment
Tribunal identified the issues it had to determine at paragraph 2, and at
paragraph 2.2 it directed itself in this way:
“If the respondent establishes a potentially fair reason,
whether dismissal for that reason was reasonable in all the circumstances of
the case; that includes consideration of the procedures which the respondent
adopted.”
18.
That of course is based upon the well‑known principle set out in
the case of British Home Stores Ltd v Burchell
[1978] IRLR 379. The Employment Tribunal then went on to set out the facts as
we have described them. We have already referred to its approach to takings at
the public house under new management after the dismissal of the Claimant
(paragraph 4.42), and we now turn to paragraph 4.44, again, to which
we have already referred. The Respondent says that it is significant that in
this paragraph of the Judgment, and we are minded to agree with the Respondent,
the Employment Tribunal did not ask whether the conclusions reached by the
Respondent as to the differences in takings was outside the band of reasonable
responses.
19.
The Employment Tribunal then turned to consider the law. It firstly
referred itself to sections 94 and 98 of the Employment Rights Act
(ERA). We need not set those out; they are well known and uncontroversial. At
paragraph 7 the Employment Tribunal again stated the Burchell
test as applicable:
“If an employer establishes a potentially fair reason for
dismissal, the determination as to whether or not that dismissal was fair
depends on whether dismissal for that reason was reasonable in all the
circumstances of the case having regard to the size and administrative
resources of the undertaking, equity and the substantial merits of the case
under section 98.4 of the ERA. That includes consideration of whether
reasonable procedures were undertaken by the employer in reaching the decision
to dismiss.”
20.
At paragraph 9 the Employment Tribunal said:
“We are satisfied that the reason for the dismissal related to
reasons of capability. Mr Smith believed the claimant did not have the
skills and aptitude for performing work as a publican. He formed this view over
a period of 18 months (during which time the claimant had been ill for 5
months). Nevertheless, in the nine months leading up to
1 January 2011, the Eagle had made net losses of £3.917. It is a
statement of the obvious that such a position was unsustainable and the
respondent had to do something.”
21.
The Employment Tribunal therefore, having been satisfied that there was
a potentially fair reason for dismissal, namely capability, had to consider
whether the reason was reasonable. The Employment Tribunal had this to say
(paragraphs 10‑13):
“10. […] We consider that it was not. In this case,
Mr Smith measured capability solely by reference to the level of takings
at the public house. Whilst such a measure might, all things being equal, be
an unacceptable evaluation of capability in some situations (albeit rather
simplistic) such is not the case when there are extraneous factors which might
explain the reduced takings. It is clear in this case that the closure of a
number of local businesses significantly affected the profitability of this
public house. The customers had moved away because of the closure of their
place of work. It was inevitable, therefore, that whoever managed the public
house would have to look for customers elsewhere. Measurement of takings was
too crude a measure of evaluating whether the claimant had the skill and
aptitude to do his job.
11. We do not think that Mr Smith could satisfactorily dismiss
the points put forward by the claimant in the various hearings by a simple
comparison to the public houses the Nelson and the Corporation. They had drawn
their business from different areas and had not been adversely affected by the
changed environment surrounding the Eagle. The claimant had made a series of
efforts to improve takings by introducing a series of activities including an
attempt to encourage the playing of pool which was not accommodated easily
given a disagreement about who should pay for a recovering [sic] of the table.
12. We accept the submissions of Mr Culshaw [for the
Claimant] that a greater analysis and investigation of the case was required.
This might have involved placing the claimant in another public house for a
period of time to analyse his performance there. It could have involved what
Mr Culshaw described as a mystery shopper, someone attending at the public
house anonymously to evaluate the claimant’s ‘mein host’ qualities. He
suggested another manager could have been appointed to monitor and advise the
claimant. Alternatively, Mr Smith could have offered additional support
by providing additional wages to cover the same opening hours his successors
operated from 11am to 11pm. A further assessment could then have been made of
the Claimant’s performance, which would have provided a reliable indicator of his
skills and aptitude.
13. These were proposals we agree would have assisted in
determining whether the claimant was simply not up to the job or was simply
struggling because of the declining economic circumstances not only nationally
but very particularly in the situation where this public house was to be
found.”
22.
Paragraph 14 is also a significant part of the Judgment:
“In other words, we are not satisfied that Mr Smith could
reasonably come to the conclusion he should dismiss the claimant because of the
fall in takings in the pub, having concluded that the claimant was simply not
capable. We are more than mindful that it is not for us to substitute our view
for that of the employer. We do, however find that the investigation and
decision on the strength of it, fell outside any reasonable band of responses.”
23.
The Employment Tribunal went on to make a Polkey deduction
of 40 per cent; the Respondent has criticised this as being too
little; we need say no more about it, because, as a result of communicating to
the parties before submissions were made on Polkey that we had
upheld the appeal so far as the substitution ground was concerned, neither counsel
addressed us on Polkey. The Employment Tribunal also went on to
deal with mitigation, and, although the Respondent criticised this finding,
again, this was a matter that was not pursued, so we need not go into that.
The Respondent’s submissions
24.
The Respondent had originally four broad grounds in its Notice of
Appeal: firstly, that there had been an incorrect approach to the burden of
proof; secondly, that the Employment Tribunal had substituted its views in
relation to the circumstances of the dismissal for those of the Respondent
(alternatively, it was submitted, the Employment Tribunal’s conclusion was perverse);
thirdly, there was the criticism of the Polkey deduction; and
fourthly, there was criticism of the Employment Tribunal’s treatment of the
Respondent’s argument that the Claimant had failed to mitigate his loss.
25.
At the beginning of the hearing we informed counsel that, while we had
an open mind, our provisional views were that the burden of proof argument was
unsustainable, as were the grounds of appeal relating to the Polkey
deduction and failure to mitigate. Mr Siddall, having taken instructions,
decided he would not pursue submissions in relation to the burden of proof or
mitigation but would persevere with his submissions in relation to Polkey.
In the event, as we have mentioned, it was not necessary for him to do so.
26.
In the circumstances, we say nothing further about the burden of proof.
The real nub of this appeal is the submission by the Respondent that the
Employment Tribunal substituted its views for those of the Respondent; we shall
come on to this in more detail shortly. Generally, it was submitted, the
Employment Tribunal should not substitute its views as to the competence of an
employee for those of the employer, and reference was made to the case of Taylor v Alidair [1978] ICR 445. Further, weight
must be attached to an employer’s views as to the competence of an employee,
reference being made to Cook v Thomas Linnell & Sons
[1977] IRLR 132. Thirdly, and again, this is not controversial, any
investigation into capability must be within the band of reasonable responses,
and reference was made to the case of D B Schenker v Doolan
[2011] UKEATS/0053/09. Further, Mr Siddall referred to London
Ambulance Service v Small [2009] EWCA Civ 220. He suggested that the
Employment Tribunal appears to have been swayed by sympathy for the Claimant,
possibly because of the difficulty in which he was placed by the closure of
nearby businesses, but nonetheless it had allowed itself to be carried down the
so‑called “acquittal” mindset.
27.
It was also submitted to us by Mr Siddall, and this is, again, not
controversial, that an employer has no duty to redeploy an underperforming
employee; authority for that is to be found in the case of Bevan Harris v Gair
[1981] IRLR 520. If in the present case the Employment Tribunal considered
that the Respondent could only dismiss for capability if the fall in takings
was solely his responsibility, that was wrong and was contrary to authority; we
have already referred to paragraphs 11‑14 of the decision of the
Employment Tribunal. All that has to be proved in a case of unfair, as opposed
to wrongful, dismissal is that the employer’s belief in the failings of the
employee was within the band of reasonable responses.
28.
Mr Siddall submitted that the Employment Tribunal had in fact
failed to recognise that the Burchell guidelines were applicable
in cases relating to the adequacy of an investigation into capability. He
criticised the Employment Tribunal for having made its own findings of fact as
to the reasons for the success or failure of a public house, whereas it should
have concentrated on assessing the reasonableness of the Respondent’s views.
The Employment Tribunal also purported to reach its own findings on the method
of using the takings as the measure of the Claimant’s performance rather than
asking itself, as it should have done, whether the Respondent’s belief that
that was a proper and reasonable way to determine the Claimant’s capability was
one that was within the band of reasonable responses. The question of whether
it was proper to use takings as the principal measure of the Claimant’s
performance is perhaps the key point in this case. If the Respondent is
correct, and the Employment Tribunal was wrong and did substitute its decision
for that of the employer, that will determine the appeal.
29.
Mr Siddall criticised the Employment Tribunal’s approach in
reaching its own findings as to whether the Respondent could satisfactorily
assess performance by means of the simple comparison of takings, and because it
imposed its own standard of investigation on the Respondent without assessing
the reasonableness of any of the steps it suggested should have been taken.
Mr Siddall accepted that the Employment Tribunal, in the passage we have
already read, recognised the skills of Mr Humphrey Smith but then
discounted his skills in what he described as an improper assessment of the
correctness of the dismissal. Mr Siddall pointed out to us that the views
of Mr Smith as to the appropriateness of using takings as the touchstone
of the Claimant’s performance was not his alone; it was shared by another area
manager, Mr Daffern, and by another director also experienced in the
licenced trade, Mr Oliver Smith.
30.
Mr Siddall posed a question to us: can an experienced public house
manager, faced with the public house losing money when there are other reasons
that might explain this that have ceased to apply, reasonably conclude that the
fall in takings was the Claimant’s responsibility? Mr Siddall submitted
that the answer to that question must be an emphatic yes. Why is it unreasonable,
if one turns it around, in such circumstances to conclude by reference largely
or entirely to the fall in takings? Again, he submits, the answer is there is
no reason why it is unreasonable.
31.
The Employment Tribunal recognised that Mr Smith in relation to the
question of the possibility of transferring the Claimant to another public
house stated that he had not earned the transfer. Notwithstanding this, the
Employment Tribunal appears to have imposed a requirement that he should be
transferred, but it never considered the reasonableness of Mr Smith’s
position. Mr Siddall again stressed that the negative factors had been in
place since December 2008, so the fall in takings thereafter had nothing
to do with those factors. Experienced managers such as Mr Oliver Smith,
Mr Humphrey Smith and Mr Daffern are entitled to conclude,
therefore, that it was the Claimant’s management of the public house itself
rather than outside factors that led to the decline. He stressed that the
proper approach was to ask whether in each stage of the disciplinary process
the Respondent had a reasonable belief in the correctness of what it did and
that its actions were within the range of reasonable responses.
Mr Siddall drew our attention to Taylor and to Cook;
we shall come to those shortly.
32.
Mr Siddall raised a sophisticated argument as to the linguistics of
the Judgment of the Employment Tribunal, and he suggested that simply by
looking at the language one could observe a substitution mindset. He put the
matter picturesquely: that the Employment Tribunal’s language was littered with
value judgements as to what the Respondent could, should or might have done.
He gave specific examples of the substitution of its own views for those of a
reasonable employer. At paragraph 10 of the decision of the Employment
Tribunal there was a value judgement as to what the Employment Tribunal would
have done rather than whether it was reasonable. It then gave its own views as
to the reasons for the fall in trade, and then it concluded that the
Respondent’s value judgement in relation to the significance of the fall in
takings was too crude; it should have specifically asked itself, “Was the
Respondent’s approach to the use of data showing a decline in turnover within
the band of reasonable responses?”
33.
He pointed then to paragraph 11 of the decision, where the Employment
Tribunal gave its views as to whether or not Mr Humphrey Smith was
correct in discounting the Claimant’s explanations for the decline in trade,
and again, Mr Siddall asked forensically, why was
Mr Humphrey Smith’s discounting of those explanations outside the
band of reasonable responses? Similarly, the conclusion of the Employment
Tribunal that, “We do not think Mr Smith could satisfactorily dismiss
these points”, was again evidence of a substitution mindset. He then pointed
to paragraph 12 of the decision of the Employment Tribunal and the conclusion
of the Employment Tribunal that a more detailed investigation was required.
The Employment Tribunal had simply failed to test any of the matters it had set
out against the band of reasonable responses. The Employment Tribunal never
said in terms that it was outside the range of reasonable responses for the
Respondent to fail to take steps, for example, to transfer the Claimant to
another public house, which Mr Smith said he had not earned, and of course
there was the authority of the case of Gair that it is not usual
to transfer underperforming employees. He asked forensically, why is this case
so special that the failure to transfer the Claimant to another public house
was outside the band of reasonable responses?
34.
Mr Siddall suggested it was difficult to think of a more paradigm
example of a substitution mindset than this. He submitted that any conclusion
that the Respondent’s approach was outside the band of reasonable responses was
perverse; similarly, it was perverse for there to be a finding that no
reasonable manager could form Mr Humphrey Smith’s views.
The Claimant’s submissions
35.
Mr Culshaw’s submissions were short and to the point. This was a
case in which Burchell applied and the Employment Tribunal was
well aware of this. It did not purport to determine the adequacy of the
investigation but it asked itself specifically whether the investigation was
that of a reasonable employer. The Employment Tribunal was entitled to
conclude that in the circumstances of this particular case it was unreasonable
for the Respondent to rely simply on evidence as to the takings of the public
house. That was a conclusion that the Employment Tribunal had reached after
specifically directing itself that it must not substitute its views for those
of the employer. The Employment Tribunal had directed itself to the
appropriate test set out in paragraph 2.2 of the Reasons and also at the other
passage to which we have referred at paragraph 7.
36.
Mr Culshaw agreed that the crucial question in this case was not
whether the Employment Tribunal’s self‑direction was correct but whether
the Employment Tribunal had in fact applied the test that it had correctly
directed to itself. He submitted to us that where an Employment Tribunal had
correctly directed itself a very clear case was required to show that it had
failed to follow its own guidance. He drew our attention to the decision in Fuller v The London Borough of Brent [2011] IRLR 414, to which we shall come, and
he suggested that to try to argue that there was a substitution by reason of
the use of language was inappropriate; the language of the Employment Tribunal
must be read in a fair and sensible way. He suggested that the Respondent was
seeking to say that it rather than the Tribunal should be the final arbiter in
the reasonableness of the decision.
37.
The Claimant had been dismissed, he submitted, by reference to the
takings, and the Employment Tribunal considered that dismissal solely by
reference to the takings was outside the band of reasonable responses of a
reasonable employer. He accepted the history of the Claimant failing to meet
targets, and he accepted that the Respondent was entitled to conclude that such
a position was unsustainable and that it had to do something. He stressed to
us that this was not a SOSA (some other special reason) case. The Employment
Tribunal, as he had said, concluded that the Respondent was not entitled to
rely on takings alone; to do so was outside the band of reasonable responses in
the circumstances of the case. He could not say that the Employment Tribunal
had, as was suggested by Mr Siddall, ignored Mr Humphrey Smith’s
expertise, it recognised that he was experienced in the licence trade; we have
already referred to paragraph 4.41.
38.
He pointed to paragraph 14, which we have already referred to on
more than one occasion, where the Employment Tribunal specifically reminded
itself it must not substitute its views for those of the employer; we should
assume that the Employment Tribunal followed its own guidance. He made
reference to the case of Cook, which, he suggested, supported the
Claimant’s rather than the Respondent’s case. The Employment Tribunal had not,
he repeated, discounted the opinion of Mr Humphrey Smith but found
that was not sufficient to satisfy the test of reasonableness. There had been
no investigation of other matters apart from takings, and, at the end of
paragraph 11 of the decision, the Employment Tribunal does not appear to
have found there to be any supporting evidence beyond the simple comparison and
what it considered to be the flawed comparison with the two other public houses
to which we have referred. Cook also reminded Employment
Tribunals of the importance of not impeding employers in efficient management;
an employee should not, however, be sacrificed in order to permit employers to
manage. We shall come to the case very shortly.
39.
Mr Culshaw strongly disagreed with the suggestion that the
Employment Tribunal’s Judgment was littered with value judgements as to what
the Respondent could, should or might have done. It did not simply say that an
employer in all circumstances could not rely on reduction in takings alone, but
it would be required if it was to rely upon takings to have regard to all the
other circumstances and apply the correct tests.
The law
40.
The band of reasonable responses test is well established; it is
referred to on a number of occasions by the Employment Tribunal, and we need
not set it out. In the case of Taylor that was cited to us, we
draw attention to what Denning LJ had to say at paragraph 451G:
“It is not necessary for the employer to prove that he was in
fact stealing. Whenever a man is dismissed for incapacity or incompetence, it
is sufficient that the employer honestly believes on reasonable grounds that
the man is incapable or incompetent. It is not necessary for the employer to
prove that he is in fact incapable. So I find myself in agreement with the
Employment Appeal Tribunal in saying the Industrial Tribunal did err in point
of law. The plain fact is that this company honestly believed on reasonable
grounds it was no longer right to have Captain Taylor as a pilot and they
properly and fairly dismissed him.”
41.
In Cook our attention had been drawn to paragraphs 6‑8 and 11
of the decision. The Employment Tribunal had to consider another case in which
an employee, the manager of a food depot, could be dismissed by reason of
capability on the basis there had been a significant fall‑off in takings:
“We are thus met with the essential question, was the fall‑off
in trade at the Norwich Value Centre due entirely or even principally to
Mr Cook’s lack of capability?”
42.
The Employment Appeal Tribunal, presided over by Phillips J,
considered that the Industrial Tribunal had posed in a very narrow form the
question to which it had to address itself:
“7. […] The decision seems to be stating the dismissal could
only be fair if it was established by the employers affirmatively the fall‑off
in trade was due entirely or principally to Mr Cook’s lack of capability.
This matter of stating the issue underlay the basis of Mr Tabachnik’s
attack upon the decision. Though he has other points, to which we shall refer,
his major point is that there was no evidence upon which the majority of the
Tribunal could have concluded that the fall‑off in trade was due to
Mr Cook’s lack of capability.
8. Mr Tabachnik advanced a formidable argument to make good
this central proposition and he examined in detail the evidence as recorded in
the Notes of Evidence […]. […] we find it unnecessary to go into these points
in detail, […] because we do not think that the formulation by the Industrial
Tribunal was the correct one. If it had been, and if the question was a narrow
one ‘Has it been affirmatively established by the employers that the fall‑off
in trade was due to Mr Cook’s incapability?’ we should be inclined to
think that there is something in what Mr Tabachnik said. As we have
suggested earlier, the true question might have been expressed in some way such
as this: was it reasonable for these employers in all the circumstances of the
case, having lost confidence in the ability of Mr Cook to manage the depot
in Norwich, to dismiss him, while at the same time offering a different post on
the terms summarised above? […]”
43.
At paragraph 11 the Employment Tribunal returns to Mr Tabachnik’s
submissions, and Phillips J said:
“When responsible employers have genuinely come to the conclusion
over a reasonable period of time that the manager is incompetent we think that
is some evidence that he is incompetent. When one is dealing with
routine operations which may be more precisely assessed there is no real
problem. It is more difficult when one is dealing with such imponderables as
the quality of management, which in the last resort can only be judged by those
competent in the field. In such cases as this there may be two extremes. At one
extreme is the case where it can be demonstrated, perhaps by reason of some
calamitous performance, that a manager is incompetent. The other extreme is a
case where no more can be said than that in the opinion of the employer the
manager is incompetent, that opinion being expressed for the first time shortly
before his dismissal. In between will be cases from the present where it can
be established that throughout the period of employment concerned the employers
had progressively growing doubts about the ability of the manager to perform
his task satisfactorily. If that can be shown, it is in our judgement some
evidence of his incapacity. It will then be necessary to look to see whether
there is any other supporting evidence.”
44.
At paragraph 13 the Employment Appeal Tribunal noted that the
Employment Tribunal in that case had quickly and genuinely formed the
impression that the Claimant in that case was not measuring up to it:
“We have no doubt, without going into the details of the
evidence and the documents, that they brought this opinion formally to his
attention. His performance did not lead them to change their views in this
respect. The fall‑off in the trade was alarming, and, despite suggestions
for improvement, was continuing. While it could not be positively established
the fall‑off was directly attributable to Mr Cook’s incapacity, it seems
to us it must be reasonable for employers who have no confidence in the manager,
where the fall‑off in trade is of genuine concern and continuing, to come
to the conclusion he shares some responsibility for it. After all, a manager
is in a position where he can expect to get the credit for success and the
blame for failure.”
45.
But it went on to find that the employer’s view of the capability of the
claimant was not formed merely by the fall‑off in trade; it was a view
formed initially from monitoring of his performance independently of the fall‑off
in trade but confirmed by the fall‑off. At paragraph 14
Phillips J observed:
“It is important that the operation of the legislation in
relation to unfair dismissal should not impede employers unreasonably in the
efficient management of their business, which must be in the interest of all.
Certainly, employees must not be sacrificed for this need; and employers must
act reasonably when removing from a particular post an employee whom they consider
to be unsatisfactory.”
46.
We then turn to the decision in Fuller. At
paragraph 4 Mummery LJ observed:
“The ET held that the council had a genuine belief in serious
misconduct by Mrs Fuller. The ET was less clear on the issue whether,
before it decided to dismiss her, the council conducted a reasonable
investigation into Mrs Fuller’s conduct. The ET was critical of some
aspects of the investigation, although full of praise for other aspects. It
did not specifically answer the question expressly posed to it in
paragraph 33: ‘Was this belief founded on reasonable investigation in all
[the] circumstances?’ The council says that, on a fair reading of its
judgment, the ET found that the investigation was reasonable. As aspects of
the ET’s reasoning on the investigation point are relevant to the overall issue
of the reasonableness of the dismissal. I shall postpone detailed discussion
to later in this judgment.”
47.
At paragraph 31 Mummery LJ observed:
“Another teaching of experience is that, as with other tribunals
and courts, there are occasions when a correct self‑direction of law is
stated by the ET, but then overlooked or misapplied at the point of decision.
The ET judgment must be read carefully to see if it has in fact correctly
applied the law which it said was applicable. The reading of an ET decision
must not, however, be so fussy that it produces pernickety critiques. Over‑analysis
of the reasoning process; being hypercritical of the way in which the decision
is written; focussing too much on particular passages or turns of phrase to the
neglect of the decision read in the round: those are all appellate weaknesses
to avoid.”
48.
Finally, at paragraph 35, he observed:
“In my judgment, the way in which this point has been argued is
a good illustration of the dangers identified in the general observations above
about appeals. When the relevant passages in the ET judgment at
paragraphs 33‑35A are read in a fair, reasonable and sensitive way,
in their proper context and in the round, the substance of the ET’s reasoning
becomes clear.”
49.
It is important to note that appeals to linguistic infelicities are not
the basis of a successful appeal against a decision of an Employment Tribunal.
Its words are to be read in a fair, reasonable and sensible way in their proper
context and in the round.
50.
We also refer to the decision in Small, in which
Mummery LJ had this to say at paragraph 43:
“It is all too easy, even for an experienced ET, to slip into
the substitution mindset. In conduct cases the claimant often comes to the ET
with more evidence and with an understandable determination to clear his name
and to prove to the ET that he is innocent of the charges made against him by
his employer. He has lost his job in circumstances that may make it difficult
for him to get another job. He may well gain the sympathy of the ET so that it
is carried along the acquittal route and away from the real question- whether
the employer acted fairly and reasonably in all the circumstances at the time
of the dismissal.”
51.
We would finally draw attention to the decision of the Supreme Court in
the case of MA (Somalia) v Secretary of State for
the Home Department [2010] UKSC 49:
“43. Before we examine these two criticisms, we need to make
some general points about the proper role of the Court of Appeal in relation to
appeals from specialist tribunals to it on the grounds of error of law.
Although this is not virgin territory, the present case illustrates the need to
reinforce what has been said on other occasions. The court should always bear
in mind the remarks of Baroness Hale of Richmond in AH (Sudan) v Secretary of State for the Home Department [2007] UKHL 49, [2008] 1 AC 678 at para 30:
‘This is an expert Tribunal charged with administering a
complex area of law in challenging circumstances […] the ordinary courts should
approach appeals from them with an appropriate degree of caution; it is
probable that in understanding and applying the law in their specialised field
the Tribunal will have got it right. […] They and they alone are judges of
the facts. […] Their decisions should be respected unless it is quite clear
that they have misdirected themselves in law. Appellate courts should not rush
to find such misdirections simply because they might have reached a different
conclusion on the facts or expressed themselves differently.’
44. Those general observations were made in a
case where the Court of Appeal had allowed an appeal against a decision of the
AIT. The role of the court is to correct errors of law. Examples of such
errors include misinterpreting the ECHR (or in a refugee case, the Refugee
Convention or the Qualification Directive); misdirecting themselves by
propounding the wrong test on some legal question such as the burden or
standard of proof; procedural impropriety such as a breach of the rules of
natural justice; and the familiar errors of omitting a relevant factor or
taking into account an irrelevant factor or reaching a conclusion on the facts
which is irrational.
45. But the court should not be astute to
characterise as an error of law what, in truth, is no more than a disagreement
with the AIT's assessment of the facts. Moreover, where a relevant point is
not expressly mentioned by the tribunal, the court should be slow to infer that
it has not been taken into account.
46. We turn to the first of the Court of Appeal's
criticisms. In our view, the court was wrong to interpret paras 109 and 121 of
the determination as if the AIT were saying that they were dismissing the
appeal because MA's account was incredible. In the light of the clear and
impeccable self-direction set out only a few paragraphs earlier (at para 105),
and having regard to the need for restraint to which we have referred, the
court should surely have been very slow to reach the conclusion that it did.
It should only have interpreted these paragraphs in the way that it did if
there was no doubt that this is what they meant. It is often easy enough to
find some ambiguity or obscurity in a judgment or determination, particularly
in a field as difficult and complex as immigration, where the facts may be
difficult to unravel and the law difficult to apply. If, as occurred in this
case, a tribunal articulates a self-direction and does so correctly, the
reviewing court should be slow to find that it has failed to apply the
direction in accordance with its terms. All the more so where the effect of
the failure to apply the direction is that the tribunal will be found to have
done precisely the opposite of what it said it was going to do. The striking
feature of the present case is that the Court of Appeal was of the view that at
para 109, the AIT failed to apply the direction that they had set for
themselves only four paragraphs earlier.”
Discussion and conclusions
52.
We have the authorities we have just cited well in mind. We recognise
that this is a case in which the Employment Tribunal reminded itself on a
number of occasions as to the need to consider the Respondent’s conduct
throughout the procedures leading to his dismissal by reference to the band of
reasonable responses. We, however, have concluded that although the Employment
Tribunal did so direct itself, it failed to do so, and we recognise, having
regard to what was said by Sir John Dyson in the MA (Somalia) case, that we should approach this determination with an appropriate
degree of caution, and we have done so.
53.
We have already indicated our views that we have not been impressed with
the linguistic arguments that the language of the Employment Tribunal showed a
substitution mindset. We have looked at the Judgment as a whole and
holistically, and we are far more impressed by the arguments that have been made
as to the substance of the decision. This assessment was not over a short
period; it was over a period of over 18 months, from when the Claimant met the
area manager on 23 November 2010. The factors, which we have
described as the adverse factors, had already ceased as of December 2008.
We agree with Mr Siddall’s submission that it is extremely difficult to
say as an experienced manager in the licence trade faced with a public house
losing money when other reasons that could explain that had ceased to apply.
It seems in our opinion that one cannot say that the conclusion in those
circumstances that the fall in takings was the responsibility of the manager
was outside the range of reasonable responses. It cannot be said to have been
an unreasonable belief to have been formed by the Respondent. Why is it
unreasonable in such circumstances to conclude by reference largely or entirely
to the fall in takings? The answer must be that it cannot be.
54.
In any event, although the concern was principally based on takings, it
was also not a spur‑of‑the‑moment consideration but one that
had been going on, as we have said, for some considerable time – some 18 months
at least – and the decision was not solely based on takings. The Respondent
was also concerned with the inability of the Claimant to act as an effective
“mein host”, they were concerned at his negative attitude, and he performed
unfavourably compared to the performance of what they considered to be similar
establishments. Similarly, we agree with Mr Siddall that the Employment
Tribunal has not suggested why the failure to take the other steps it found
should have taken was outside the band of reasonable responses; for example,
the transfer to another public house. Why was it outside the range of reasonable
responses, having regard to the fact that generally one does not transfer an
underperforming employee? Why was it unreasonable for the Respondent not to
provide extra staff to increase the opening hours and to put more money into a
loss‑making public house to see if its views of the Claimant’s capability
were correct? Again, we find it very difficult to see why the Respondent’s
decision not to do this fell outside the band of reasonable responses.
55.
In the circumstances, it seems to us that the case made by the
Respondent that the Employment Tribunal has impermissibly substituted its views
for those of the employer is made out, and the appeal will therefore be
allowed.
56.
We now turn to consider what order we should make. Our provisional
view, and we mentioned this to the representatives so we can be addressed upon
it, is that it would not be appropriate for this matter to be remitted to the
same Employment Tribunal. We think it would be very hard for them, in the
light of the Judgment it has made, to bring a totally fresh mind to bear, and
it would be our view, therefore, that the matter should be remitted to a fresh
Tribunal; but we will of course consider any submissions that the
representatives may wish to make. We are very grateful to both representatives
for their very helpful submissions and for their economic use of time, which
has enabled us to conclude the case, including the Judgment, in a day.
