United Kingdom Employment Appeal Tribunal

Appeal No. UKEAT/0236/10/JOJ

 

 

EMPLOYMENT APPEAL TRIBUNAL

FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON, EC4Y 8JX

 

 

  At the Tribunal

On 27 September & 7 October 2011

Judgment handed down on 18 July 2012

 

 

Before

HIS HONOUR JUDGE PUGSLEY

MR C EDWARDS

MR D SMITH

 

 

 

 

MR N RENTON APPELLANT

 

 

 

 

 

 

CANTOR FITZGERALD EUROPE RESPONDENT

 

 

Transcript of Proceedings

 

JUDGMENT

 

 

 

 

 

 

 

 

 

APPEARANCES

 

 

 

 

 

For the Appellant	MR PETER OLDHAM (One of Her Majesty’s Counsel) Instructed by: Messrs Levenes Solicitors Cromwell House 14 Fulwood Place London WC1V 6HZ
For the Respondent	MR PAUL GOULDING (One of Her Majesty’s Counsel) Instructed by: Cantor Fitzgerald Europe Legal Services 1 Churchill Place London E14 5RD

 

 

SUMMARY

UNFAIR DISMISSAL

UNLAWFUL DEDUCTION FROM WAGES

VICTIMISATION DISCRIMINATION - Whistleblowing

 

In this case the claim that the dismissal was due to a protected disclosure failed but the Claimant succeeded in his claim for unfair dismissal under section 98 and 98A of the Employment Rights Act 1996.  The Appellant’s argument as to the adequacy of the reasons was really an argument as to facts and the decision was upheld in the light of the gloss put upon Meek v Birmingham City Council [1987] IRLR 250 by English v Emery Reimbold & Strick [2002] 1 WLR 2409.  A without prejudice letter intimating a claim in the High Court could not be construed as a grievance for the purpose of an employment tribunal action for unlawful deductions.

 

 

 

 

 

HIS HONOUR JUDGE PUGSLEY

 

1.            This is an appeal from the Employment Tribunal sitting in London Central. The unanimous decision of the Tribunal was that the claim for unfair dismissal contrary to section 98 and 98A of the Employment Rights Act is well founded; that the complaint of unfair dismissal  contrary to section 103A is dismissed; any compensatory award for unfair dismissal is to be increased under section 31(3) of the Employment Act 2002 by 50%; any basic award and compensatory award is to be reduced by reason of the Claimant’s conduct by 25% and that the Tribunal does not have jurisdiction to consider the complaint of unlawful deduction from wages.

 

2.            The Employment Tribunal received substantial skeleton arguments at the start of the case; it heard evidence in a nine day hearing; it heard evidence from 16 witnesses; after the conclusion of the hearing it received 330 pages of written submissions (initial and reply submissions) and spent two days in chambers considering their decision.

 

3.            In paragraph 14 of the decision the Tribunal defined the issues which were to be decided by the Tribunal as follows:

a) Did Mr Renton make a protected disclosure within the meaning of section 43 B and/or F of the ERA with regard to the Respondent’s compliance with the USA regulatory requirements in respect of retail clients resident in the USA?

 

b) What was the reason or the principal reason for the dismissal.  In particular, was this because Mr Renton had made a protected disclosure. Was this for a potentially fair reason within the meaning of section 98 of the ERA?

 

c) Did the Respondent act reasonably within the meaning of section 98 of the ERA in treating their reason as a reason for dismissing Mr Renton?

 

d) Was the dismissal automatically unfair under section 98A of the ERA by reason of any failure on the Respondent’s part to follow the statutory disciplinary and dismissal procedure?

 

e) In the event that the dismissal was found to be unfair by reason of a failure by the Respondent to follow a procedure would the outcome have been the same if the procedure had been followed and/or what were the prospects that the outcome would have been the same if the procedure had been followed?

 

f) Was there conduct on Mr Renton’s part that should be taken into account in respect of the basic award under section 122(2) and in respect of the compensatory award under section 123(6) of the ERA?

 

g) Did the parties comply with the statutory disciplinary and dismissal procedure and if not should that be reflected under section 31 of the Employment Act 2002?

 

4.            In respect of the complaint of unlawful deduction from wages the parties had set out a number of factual and legal issues which the Tribunal was required to determine.  However as the Tribunal made clear in paragraph 15 the only issue that the Tribunal was required to determine was the jurisdictional issue of whether the Tribunal could adjudicate upon the matter by reason of the requirement that there had to be a written grievance for the purpose of the statutory grievance procedure.

 

5.            In the event the Tribunal reached the following conclusions:

1) The reason for the dismissal was for a potentially fair reason relating to the Claimant’s conduct under section 98(2)(b) of the ERA. There were two components in the decision to dismiss relating to conduct, namely the Respondent’s dissatisfaction and concerns about the Claimant’s part in the difficulties with the CFS and the American retail client business, and the Claimant’s response to an overpayment of a bonus (see paragraph 100).

 

2) The dismissal was unfair under section 98 of the ERA because the Respondent did not carry out a reasonable investigation and did not follow a fair procedure (see paragraph 101-102).

 

3) The dismissal was automatically unfair under section 98A ERA because the statutory procedure was not followed and it was just and equitable for an uplift of the maximum of 50% to be applied under section 31 of the EA (paragraphs 103-104, 108).

 

4) The Claimant did not make protected disclosures in the terms that he put forward and the dismissal was not unfair by reason of any protected disclosure (paragraphs 67-68).       

 

5) It could not be said that the Claimant would have been fairly dismissed had a fair procedure been followed (paragraph 106-107).

 

6) It was appropriate to make a reduction in both the basic and compensatory award of 25% on account of the Claimant’s dishonesty in relation to his receipt of an overpayment of a bonus and he should have raised the matter with the Respondent (paragraphs (109-111).

 

7) There had not been a written grievance relating to the complaint of unlawful deduction from wages and there was no jurisdiction to hear the complaint (paragraphs 112-118).

 

The appeal

6.            It is trite to say that this Tribunal only has jurisdiction to hear appeals on matters of law. Under rule 30(6) of the Employment Tribunal Rules of Procedure a tribunal is required to define the relevant issues, make relevant findings of fact about those issues, give a concise statement of the law and show how the relevant findings of fact and law have been applied to determine the issues. This decision is compliant with that rule. The issues are set out in paragraph 14, the findings of fact are set out in paragraphs 28 – 98, the statement of the law is set out in paragraphs 16-27 and how the findings of fact and issues of law have been applied is set out in paragraphs 99-118.

 

7.            A decision of an employment tribunal is not an academic treatise. It must contain an outline of the story which has given rise to the complaint and a summary of the tribunal’s basic factual conclusions and a statement of the reasons which have led the tribunal to reach the conclusion which it does. The parties are entitled to know why they have won or lost. There should be a sufficient account of the reasoning to enable the EAT to see whether any question of law arises: Meek v City of Birmingham DC [1987] IRLR 250.

 

8.            However an appeal is not an academic exercise.  In English v Emery Reimbold & Strick Ltd [2002] 1 WLR 2409 Lord Phillips MR at paragraph 118 cautioned that an unsuccessful party should not seek to upset a judgment on the ground of inadequacy of reasons unless, despite the advantage of considering the judgment with knowledge of the evidence given and submissions made at trial, that party is unable to understand why the tribunal has reached an adverse decision.  This is particularly relevant in the context of this case when not only were there lengthy submissions at the conclusion of the hearing but both parties prepared lengthy opening skeleton arguments.

 

9.            The mantra that the judge or tribunal had the opportunity of seeing and hearing the parties give evidence is often used by advocates seeking to uphold an appeal or by appellate courts in dismissing an appeal. It is not a tired platitude. As Lord Hoffmann observed in Piglowska v Piglowski [1999] 3 All ER 632 at 643 findings of fact even by the most meticulous judge are inherently an incomplete statement of the impression which was made on him by the primary evidence. A very similar view was expressed by Mummery LJ in Brent London Borough Council v Fuller [2011] ICR 806 at paragraph 30 when he stigmatised over analysis of the reasoning process, being hypercritical of the way in which the decision is written, focusing too much on a particular passage to the neglect of the decision read in the round as appellate weaknesses to avoid.

 

The factual findings of the Tribunal

10.         The Claimant was employed by the Respondent from August 2001 until August 2008 when he was dismissed by virtue of his contract not being renewed.  He had been the head of the Respondent’s foreign exchange desk.

 

11.         There were two issues which form the factual context of this case namely a bonus overpayment and the CFS business. The Tribunal commenced its findings of fact by making general comments about the credibility of the witnesses that had appeared before them. The Tribunal said of Mr Renton at paragraph 32 that he answered questions in a straightforward and apparently frank way. He was prepared to make concessions that certain of his decisions had been unwise. However the Tribunal found Mr Renton’s explanation for not informing the Respondent about the overpayment of a bonus incredible and noted that this cast a shadow over his credibility. The Tribunal were unimpressed by the witnesses called by the Respondent.  It is to be noted that in its decision the Tribunal gave very specific examples as to why it formed that view.

 

The overpayment of the bonus

12.         Mr Renton was on holiday in Australia in August 2007. The sum by way of bonus which was due was about £47,000 less tax which was in the order of £28,000. When Mr Renton withdrew some cash he noted that the balance was considerably larger than he expected to see even allowing for the payment of his bonus. What had happened was that he had been paid by mistake the sum of £94,235 rather than the sterling equivalent of $94,235. His evidence before the Tribunal was that he thought he had been paid the bonus gross rather than with tax deducted. He rang a tax adviser who said he would need to declare this when he submitted his accounts to the revenue. The Tribunal noted that although at this stage Mr Renton was in contact with his employer he took no steps to query the matter with the HR or accounts department. The Tribunal had reservations about Mr Renton’s account that when in Australia he had thought the larger bonus might be due to being paid gross rather then net. The Tribunal could not accept the Claimant’s explanation for what happened on his return to work namely that he did not look at his payslip on his return and took no steps to take the matter up with the Respondent.  Had he looked at the payslip it would have been obvious to the Claimant that the explanation was that his income in dollars had not been adjusted to being paid in sterling.

 

13.         The Tribunal was fortified in their conclusion that the Claimant had not been frank by the fact that in evidence he had said that he had done nothing with the money yet when challenged to produce his bank statements he had used a substantial part to purchase Australian dollars. The issue of the overpayment of the bonus did eventually come to light but by that time it had become intertwined with the issue of the CFS and the American retail customers business.

 

CFS and the American business

14.         Mr Renton was in charge of the foreign exchange desk and within his remit was the business of an investment which involved the trading of what in effect were options as to the relative movements of currencies against each other.  Such investments can be highly profitable but are inherently high risk. Although a margin is required it is minimal in relation to the transaction. If those who had undertaken to underwrite certain currencies were unable to meet their obligations the consequences would be dire. Federal law required that those whose assets were less than $10 million dollars were required to invest through a regulated body known as a futures commission merchant (FCM) who would be a counter party to the transaction.

 

15.         It is unnecessary to rehearse at length the Tribunal’s findings about the operation of this scheme. It was as the Tribunal found at paragraph 45 common ground that the Respondents were trading on behalf of individuals with less than the required assets and they were doing so with a medium other than an FCM as required by the regulatory authorities. Furthermore it became clear through the financial details of a Mr KC that the Respondents were trading on behalf of individuals with modest means and these were not clients that the Respondent wished to attract.

 

16.         The central issue of the case was whether the Claimant made disclosure about regulatory breaches that had occurred. The disclosure relied upon by the Claimant was not a statement to senior management about the need to ensure regulatory compliance in the future (the Respondents were hoping to expand into this market) but about breaches that had  already occurred.

 

17.         The Tribunal reviewed this evidence in meticulous detail. They examined the accounts given by the Claimant in the various pleadings and they recognised that there was a direct conflict between the Claimant and senior management in the form of Mr Lutnick and Mr Merkel and they in terms decided that the disclosure that the Claimant claims to have made was not made. Mr Oldham QC has complained in his grounds of appeal that the Tribunal did not make sufficient findings of fact about the nature of the conversation between the Claimant and the two members of management. We cannot accept that the decision read in the round merits that criticism.  In paragraph 67 the Tribunal sets out at length the basis for its conclusion. The Tribunal noted that the culture was such that in Mr Renton’s own words the bearer of bad news got shot. Moreover Mr Renton wanted to expand the business. Mr Lutnick was angry and abusive towards Mr Renton and wanted to close the business down.  The Tribunal found that there were incentives for Mr Renton not to reveal what had been happening and there was every prospect that the regulatory breaches would not come to light.

 

The dismissal

18.         The Tribunal set out their findings concerning the dismissal and found that the whole disciplinary procedures were inadequate and in effect were a sham in that the decision to dismiss had already been made. They concluded that a reduction should be made for contributory fault of 25% for the Claimant’s dishonesty in relation to the overpayment of a bonus. The Tribunal rejected the Respondent’s contention that the overpaid bonus was the sole reason for the dismissal (paragraph 99) and that there were two reasons for the dismissal namely the anger engendered because of the difficulties with the CFS business in America. This concerned not only the regulatory failures but the recruiting of clients such as Mr KC who was not a client who should be making such inherently risky investments as the one the Respondents were providing. In addition the Tribunal found that the bonus overpayment was a factor in the decision to dismiss (see paragraph 100).

 

The issue of unlawful deductions

19.         It is important to recognise that the Tribunal was only concerned with the issue of whether the Tribunal had jurisdiction to hear the case in view of the fact that there no written grievance. The Tribunal only dealt with that issue. Mr Goulding QC for the Respondent has argued that there are real issues whether the sums claimed for various benefits can be described as wages within the Act. We do not consider that we can consider the matter since the Tribunal was expressly concerned purely with the jurisdictional point. The Tribunal did not have before them a without prejudice letter from solicitors acting for the Claimant in which the question of a failure to pay costs is raised. It was put into the bundle and appears at page 495.

 

20.         The Tribunal concluded that indicating a claim for damages for loss of various benefits in the High Court could not be construed as a grievance for the purposes of bringing a case in the Employment Tribunal. The Tribunal noted that the claim was put at £71,500 and the limit of the Tribunal’s jurisdiction was £25,000.

 

The grounds of appeal and cross appeal

21.         The Appellant’s grounds of appeal in effect challenge the dismissal of the claim under section 103A ERA; setting contributory fault at 25% and the order that the Tribunal had no jurisdiction to hear the case because there had been no written grievance. There is a cross appeal by the Respondent that if the appeal against the dismissal of the claim under section 103A ERA succeeds then they claim that the 50% uplift under section 31(3) EA 2002 is too high.

 

22.         The central contention of the argument advanced by Mr Oldham QC was that the Tribunal were in fundamental error in that it misconstrued the Act as only applying to existing breaches and that there are passages in the judgment which suggest it would not be within the ambit of the section if the complaint was about future breaches. It was argued that the Tribunal’s use of the words in terms suggests that it was only a breach if the existing business was being or had been in breach of the regulatory regime whereas section 43B of the Act provides that a statement will be a disclosure if it tends to show a past or present or a likely future breach.  In paragraph 16 of its decision the Tribunal correctly set out the statutory definition.

 

23.         It is claimed that the Tribunal failed to make precise finding about what the Claimant did say and therefore because of a lack of reasons the Claimant cannot know whether the Tribunal erred in matters of law.

 

24.         We consider that this approach, however attractively argued, is to follow the path criticised by Mummery LJ in the Brent case.  We consider that it is wrenching out of context isolated passages of the judgment without looking at the decision in the round.

 

25.         The Tribunal was drawing a distinction between expressly saying what we are doing is in breach of regulations and a more generalised discussion about the need to ensure compliance with the regulations against a background of proposed plans for the future.  The Claimant’s case was that he had made express disclosures about the existing business. The Tribunal expressly rejected this.  The Tribunal gave clear and cogent reasons as to why they could not accept the Claimant’s evidence. The findings they made were in response to the case which was advanced.

 

26.         The further ground was that the Employment Tribunal in identifying the reasons for the dismissal said there were two reasons, namely that there was disaffection with the difficulties over the CFS and the American retail business and the bonus overpayment. It is true that the Tribunal mentions regulatory difficulties but it is a quantum leap to say that these concerns were as a result of any disclosure by the Mr Renton. The decision to dismiss was taken months after the alleged disclosures and by that stage there was concern about clients making inappropriate investments.  Mr Oldham QC cited the judgement of Mummery LJ in Kuzel v Roche Products Ltd [2008] IRLR 530 as assisting his argument.  However at paragraph 59 Mummery LJ pointed out that if an employer does not show the reason was what he asserted it was it was open for the tribunal to find that the reason was what the employee asserted it was. However as a matter of law or logic a Tribunal does not have to find that if the reason was not the reason asserted by the employer it must have been for the reason asserted by the employee. We consider that there is no irrationality in finding that Mr Renton did not make any disclosure of breaches of regulatory requirements in September and that being a factor in the decision to dismiss 7 months later.

 

27.         The argument that the Tribunal found two reasons for the dismissal in our view is misconceived. A Tribunal is entitled to look at the reason and find that there was more than one aspect of a conduct dismissal. As a matter of robust common sense we consider the duty of a Tribunal has to be to find what was the reason for the dismissal.  In this case the Tribunal found it was a reason relating to conduct. We do not consider it then has to subdivide the category into a hierarchy of culpable behaviour.

 

 

 

 

The contributory fault issue

28.         The Tribunal gave a balanced account of the nature of contributory fault and we can see no basis for saying an error of law arises.  The Tribunal noted that the bonus overpayment was only a part of the reason for dismissal and tailored its decision accordingly.

 

The issue of jurisdiction

29.         The Tribunal found that an intimation of a High Court action for a claim way in excess of an Employment Tribunal’s jurisdiction could not be a written grievance. We consider that is a view to which a Tribunal is entitled to come. The purpose of this section was to give the possibility of limiting employment tribunal applications when no opportunity was given to the employer to rectify the position. It concerns a grievance under the Act. We accept the Tribunal were right on the facts of this case to say that an intimation of such a claim in the High Court could not be a grievance for the purposes of an action in the employment tribunal.  In Mark Warner Ltd v Aspland [2006] IRLR 87 it was found that a solicitor’s letter could form the basis of a grievance. However that in our view does not extend to applying to a without prejudice letter written for the purpose of intimating the nature of a claim in the High Court.

 

30.         We therefore dismiss the appeal and it is not necessary for us to adjudicate upon the merits of the cross appeal.