United Kingdom Employment Appeal Tribunal

Appeal No. UKEAT/0202/13/DA

UKEAT/0057/16/DA

 

 

EMPLOYMENT APPEAL TRIBUNAL

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

 

 

                                                                                                             At the Tribunal

                                                                                                             On 2 December 2016

                                                                            Judgment handed down on 22 February 2017

 

 

 

Before

HER HONOUR JUDGE EADY QC

(SITTING ALONE)

 

 

 

 

 

 

MR M W C OSTENDORF                                                                            APPELLANT

 

 

 

 

 

BARCLAYS CAPITAL SERVICES LTD                                                  RESPONDENT

 

 

Transcript of Proceedings

 

JUDGMENT

 

 

 

 

 

 

 

 

 

APPEARANCES

 

 

 

 

 

For the Appellant	MR CHARLES CIUMEI (One of Her Majesty’s Counsel) Instructed by: Brahams Dutt Badrick French LLP 24 Monument Street London EC3R 8AJ
For the Respondent	MS DIYA SEN GUPTA (of Counsel) Instructed by: Allen & Overy LLP One Bishop’s Square London E1 6AD

 

SUMMARY

UNFAIR DISMISSAL - Reason for dismissal including substantial other reason

UNFAIR DISMISSAL - Reasonableness of dismissal

 

Unfair dismissal - reason for dismissal - reasonableness of consultation

The Claimant had ostensibly been dismissed by reason of redundancy.  He contended, however, that the real reason for his dismissal was because he had devised a particular financial transaction and his manager - who took the decision to dismiss - wanted to take the benefit for himself.  At the initial Full Merits Hearing, the ET rejected the Claimant’s contention, concluding he had been dismissed by reason of redundancy and, further, that the dismissal was fair.  Subsequently, the Claimant sought a reconsideration of that Judgment, relying on new evidence that he contended showed that the Respondent had later implemented his proposal, contrary to its case at the earlier hearing.  After a Reconsideration Hearing, at which the ET scrutinised the new material against the financial transaction he had proposed, the ET concluded that this did not in fact show that which the Claimant had contended: his proposal had not been considered commercially viable by the Respondent prior to his dismissal and had not impacted on the decision which had been made.

The Claimant appealed.

Held: dismissing the appeal.

The ET had properly considered the reason for the Claimant’s dismissal both at the time of the initial notification of his redundancy and also subsequently, throughout the consultation period and until the termination of his employment.  Having done so, it remained satisfied that this had not been informed by the financial transaction he had proposed.  That was a permissible conclusion.  Moreover, although one sub-paragraph of the reasoning included an agreed error, taken as a whole, it was apparent that the ET had a clear and detailed understanding of the financial transactions in question and had reached a legitimate conclusion that the Respondent had not implemented the Claimant’s proposal and had not seen it as commercially viable when making decisions about his future employment.  Furthermore, whilst the Claimant’s line manager had organised a redundancy consultation meeting with another employee who had sent a dismissive email about the Claimant (without that being disclosed to the Claimant at the time), the ET had been entitled to conclude that this was a judgment call, falling within the range of reasonable responses and did not render the consultation exercise - which was more extensive than that meeting in any event - a sham.

 

HER HONOUR JUDGE EADY QC

 

Introduction

1.               In this Judgment, I refer to the parties as the Claimant and Respondent, as below.  This is the hearing of the Claimant’s appeals from two Decisions of the East London Employment Tribunal (Employment Judge McMahon sitting alone; “the ET”).  The first relates to the ET’s Judgment, promulgated on 6 February 2013 after a three day hearing in December 2012, rejecting the Claimant’s claim of unfair dismissal (“the First Judgment”).  At that hearing, the Claimant was represented by counsel, although not by Mr Ciumei QC, the Respondent by Ms Sen Gupta, as it is has been throughout.  The second Decision in issue was sent out on 14 December 2015 and relates to the Claimant’s application for reconsideration of the First Judgment, in respect of which there was a further three day hearing in October 2015, when the Claimant represented himself (“the Reconsideration Judgment”).  The appeals were permitted to proceed after an Appellant-only Preliminary Hearing before The Honourable Mrs Justice Laing DBE on 26 May 2016.

 

The Background

2.               The key findings from the First Judgment are helpfully summarised at the outset of the Reconsideration Judgment as follows:

“1. Mr Ostendorf was employed by Barclays Capital Services Ltd (“the Bank”) in the position of Global Head of Funding Structuring.  His employment ran from 1 August 2003 until 5 November 2010.  Following the ending of his employment he made a claim of unfair dismissal.  I heard the claim in December 2012.

2. The Bank asserted that Mr Ostendorf had been fairly dismissed on the ground of redundancy.  A part of Mr Ostendorf’s claim was his view that redundancy was not the true reason for dismissal.  In short, he maintained that he had devised a particular financial transaction which had considerable financial potential for the Bank.  He claimed that his line manager, Mr Smailes, saw potential in the proposed transaction and made a decision to dismiss Mr Ostendorf so that he, Mr Smailes, and others, could take benefit from the proposed transaction.

3. Having heard all the evidence in December 2012 I reached the conclusion that Mr Smailes had not acted in the way asserted by Mr Ostendorf and that the decision by Mr Smailes to end the employment of Mr Ostendorf was taken fairly and on the genuine ground of redundancy.  Therefore the claim was dismissed.

4. In a letter dated 7 October 2013 Mr Ostendorf applied for the original decision to be reviewed/reconsidered on the ground that new evidence had become available since the conclusion of the hearing.  An important feature of Mr Ostendorf’s application for reconsideration was his belief that in 2012 the Bank did in fact enter into a transaction which was, in effect, the proposal he had put forward in 2010.  Mr Ostendorf’s position is that if it can be shown that the 2012 transaction was in fact the proposal he made in 2010 then that must throw considerable doubt on my judgment that he had been fairly dismissed.  The Bank’s position in that respect was to accept that the Bank had entered into a 2012 Transaction but that that transaction was not connected in any way with the proposal put by Mr Ostendorf in 2010.  I made an order that the original decision should be reconsidered.”

 

3.               In its First Judgment, the ET had accepted that, following the financial crisis of 2008, the Claimant’s role was not proving productive, something the Claimant had himself acknowledged, and, although he had proactively made various proposals (in late 2009 and into the first half of 2010) for new roles and responsibilities, none had attracted the support of senior management.  As the ET recorded, in February 2010, Mr Smailes had reported the Claimant’s dissatisfaction about his significantly reduced bonus (a graphic indication as to how his role was not working out in a productive fashion) and was finding it difficult to continue to justify the Claimant’s position.  By April 2010, Mr Smailes was describing this as a redundancy situation and held discussions with Human Resources about this in May.  At the end of June, Mr Smailes met with the Claimant to explain that he was not getting anywhere with senior management in terms of finding alternative roles and the attempt to do so was causing irritation.  On 5 July 2010 Mr Smailes formally placed the Claimant’s role “at risk” of redundancy; thereafter the Claimant was not expected to come into the office but there was a consultation period, during which he could ask questions and try to find an alternative role.  No alternative having been agreed, however, on 6 August 2010 the Claimant was given notice of the termination of his employment, which took effect on 5 November 2010.

 

4.               In order to comprehend how the Claimant put his case before the ET, it is necessary to have some understanding of the financial transactions which he claimed gave rise to the real reason for his dismissal; described by the ET in its Reconsideration Judgment, as follows:

“7.1. In 2007 the Bank entered into a transaction (“the First Transaction”) with an Italian financial institution which in these proceedings has been referred to as the Italian Bank.  In that transaction the Bank lent €750,000,000 to the Italian Bank.  By way of security for the loan the Italian Bank provided Italy CMS bonds of the same value to the Bank.

7.2. In 2008 the parties agreed changes to the first transaction by extending the maturity date of the loan and introducing an additional bond (“the Second Transaction”).

7.3. There was a further transaction entered into between the Bank and the Italian Bank (“the Credit Hedge Transaction”).  A dispute arose between the Bank and the Italian Bank in respect of the Credit Hedge Transaction.  That dispute eventually led to litigation.  But before that litigation took place the Bank made considerable efforts to try to find a solution which would remedy the differences between the Bank and the Italian Bank.

7.4. Mr Ostendorf became involved in trying to identify such a solution.  A first attempt by him led to nothing.  It was his second attempt which has become known in these proceedings as the “Second Solution”.  That Second Solution was set out in writing in an email dated Thursday 1 July 2010 sent by Mr Ostendorf to various persons within the Bank.  Those persons did not include Mr Smailes.  But, as is highlighted by Mr Ostendorf, one of the recipients was an employee (Mr Ali) who reported to Mr Smailes.  The email was also copied to a Mr Norfolk-Thompson.

7.5. On 5 July 2010 Mr Smailes told Mr Ostendorf that his then current role was to be made redundant and that he was at risk of redundancy unless an alternative role could be found.  An alternative role could not be found and on 6 August 2010 the Bank wrote to Mr Ostendorf to give notice that his employment would end on 5 November 2010.

7.6. In September 2010 the Bank carried out a review of a specific proposed financial transaction (“Screening Transaction Review - September 2010”).

7.7. In June 2012 the Bank entered into a number of connected transactions (“the 2012 Transaction”) with the Italian Bank which had the effect of “unwinding” the first transaction and the second transaction and of creating a revised financial arrangement/transaction between the two parties.”

 

For ease of reference, I continue to use the ET’s terminology in respect of these transactions.

 

5.               As stated above, it was the Claimant’s case before the ET that the true reason for his dismissal was not redundancy but because Mr Smailes had not wanted him to benefit from his Second Solution proposal.  The Claimant was saying Mr Smailes wanted to take the benefit for himself or others and had therefore disguised his real intention - and the real reason for the dismissal - both at the time of terminating the Claimant’s employment and in the ET proceedings; in particular by denying that the Second Solution had been taken forward.  At the heart of the Claimant’s reconsideration application was his assertion that the 2012 Transaction was the implementation of his Second Solution.  That was denied by the Respondent.

 

6.               To assist in its consideration of the parties’ respective cases in this regard, the ET allowed that evidence might be adduced from an expert (Mr Rule), chosen by the Claimant but provided with instructions from both parties.  It was Mr Rule’s opinion that email traffic showed the Respondent had taken the Claimant’s Second Solution seriously: it was priced by traders, senior managers were told about it and there was an off-desk meeting about it.  Further, he considered it had been a viable option subject to the agreement of the Italian Bank, internal approvals and completion of the appropriate legal documentation and to market conditions at the time.  He concluded that, in form and substance, the 2012 Transaction and the Second Solution were the same.

 

7.               The Respondent also called evidence at the Reconsideration Hearing, from Mr Ahlberg, a structurer involved in the 2012 Transaction, and Mr Colavito, who had joined the Respondent in 2010 as Head of Solutions for Italy (albeit that he no longer worked for the Respondent by the time of the Reconsideration Hearing) and who had been instrumental in the 2012 Transaction.  Mr Ahlberg considered Mr Rule’s assessment to be overly simplistic and naïve: it did not look at the context of the wider market conditions, the dispute between the Respondent and the Italian Bank and their wider relationship; none of the solutions discussed in 2010 had gone forward; the issue was not whether a transaction was “theoretically viable” but whether it was “a commercially viable and acceptable transaction that both parties wished to undertake”.  Mr Colavito essentially agreed, opining that the Second Solution was an overlay of the existing Second Transaction and Mr Rule had failed to recognise that the Respondent had not implemented the Second Solution because it would not enable it to fully revisit the Second Transaction, which it wanted to do for various reasons.  Moreover the Second Solution only benefited the Respondent and the Italian Bank would not have agreed to a trade that did not benefit it; by contrast the 2012 Transaction had created a profit for both and had totally unwound the Second Transaction and created a new one - even if an unwind had been proposed before 2012, it would not have worked because of market conditions at that time.

 

8.               Both the Claimant and Mr Rule, on the other hand, said it was obvious that the Second Solution would have led to an arrangement between the Respondent and the Italian Bank to share the profit created.  Significantly, the Second Solution and the 2012 Transaction shared the same unusual feature (the monetisation of the change in the price of Republic of Italy credit protection embedded in the First and Second Transactions).  As such, the Claimant argued, doubt was cast on the reliability of the Respondent’s evidence at the original ET hearing.

 

9.               Mr Smailes had also provided a further statement for the Reconsideration Hearing, observing that he was neither involved in devising nor implementing the 2012 Transaction.

 

The ET’s Reconsideration Decision

10.            Having considered the competing contentions in the parties’ evidence and submissions, the ET concluded the 2012 Transaction was not, in fact, the effective implementation of the Claimant’s Second Solution; specifically:

“66. …

(i) there was concern within the Bank as to the nature of the Second Transaction.  It was seen as founded on complex, and not fully reliable, documentation.  It was also seen as creating a risk for the Bank in that the Bank’s exposure to the Italian Bank (by lending money to the Italian Bank creating an exposure that was not covered by collateral).  If the Bank had a remedy for those concerns as early as July 2010 (in the form of the Second Solution) why was the remedy not applied earlier than June 2012?  Unless, from Mr Ostendorf’s perspective, the Bank was applying a very cunning delay to create distance between the Second Solution and the 2012 Transaction?

(ii) the relevant financial circumstances pertaining at July 2010 to November 2010 were very different to those at about June 2012.  The Italian sovereign debt crisis had taken place.  I accept the evidence of Mr Colavito that that peaked in December 2011.

(iii) whilst I take into account Mr Rule’s comments about substance and form I accept:

(a) there were very substantial differences in the documentation that supported, respectively, the Second Transaction and the 2012 Transaction.

(b) the Second Solution intended to leave in place the Second Transaction and to overlay it.  However the 2012 Transaction was a complete unwind or removal of the Second Transaction and, in addition, it had significant features not present in the Second Solution.  Those were the use of the original bonds which were the security in the First Transaction and the profit generating features referred to in Ms Sen Gupta’s submission.

(iv) at the outset Mr Norfolk-Thompson thought, on 1 July 2010, that the Second Solution “works in principle”.  On 5 July 2010, in an email to other persons in the Bank (not including Mr Smailes), he identified what he saw as “the two most difficult aspects”.  Those were the need to buy EUR 750mm of a single issue [bond] and that the documentation “exactly mirrors the language on the existing repo and be 100% sure that the GMRA netting will work - probably with an external opinion”.

(v) I recognised that in my original judgment I described Mr Norfolk-Thompson as working in a sales capacity in the Bank.  Within the Reconsideration Hearing Mr Ostendorf maintained that he and Mr Norfolk-Thompson were leading authorities on the type of transaction contained in the Second Solution.  In my view the “difficult aspects” identified by Mr Norfolk-Thompson were very significant cautions to the Second Solution being commercially effective.  Those comments from Mr Norfolk-Thompson appear to me to be saying that the form of a transaction is, in fact, very important which is different, in my view, to Mr Rule’s opinion (page 10 of his report) that “Ultimately it is the net effect of the structure that is important and that the substance of the executed transaction takes priority over the form, i.e. it is important to look at the overall financial outcome of a transaction rather than its legal form”.  With respect to Mr Rule I have some difficulty with that comment because, surely, the wording and content of the underpinning documentation (ie its form) is likely to have considerable effect on what the transaction achieves overall (ie its financial outcome)?

(vi) there is no evidence that, as at July to November 2010, the Italian Bank agreed, or would have been likely to agree, that the Second Solution was commercially acceptable from the Italian Bank’s point of view.  In the absence of such agreement, it seems to me, the Second Solution would not have come into being.  Clearly, as at June 2012, the Italian Bank was prepared to enter into the 2012 Transaction.

(vii) Mr Rule himself accepted the viability of the Second Solution was subject to the agreement of the Italian Bank, the obtaining of necessary internal approvals and the completing of appropriate legal documentation.  Further that it depended on “market conditions at the time such as liquidity, size and maturity being favourable”.  There is little, if any, evidence that there were such favourable factors in place between July 2010 and November 2010 (i.e. the consultation period leading up to Mr Ostendorf’s dismissal).

(viii) Mr Rule has said, in effect that it would require a particular type of person to have the experience/ability to identify and propose a transaction in the nature of the Second Solution or 2012 Transaction.  The proposer would have to have had knowledge of the historical relationship with the Italian Bank including previous transactions and proposals and have a detailed understanding of complex structuring and repackaging (including product, pricing, regulatory, jurisdictional, tax and legal knowledge) in order to formulate an original bespoke idea or solution.  In addition the proposer would need to go through an internal approval process to obtain new structure sign off.  I am satisfied on the evidence that Mr Colavito would have had knowledge of the historical relationship and the type of understanding referred to by Mr Rule.

(ix) the evidence shows that persons in the industry would have been generally aware of the underlying factors which, in a theoretical sense, would make the Second Solution and the 2012 Transaction attractive for the Bank.  For example, the widening “spread”, that is the decrease in the market value of the Italian Government Bonds during the period in question and, further, that “monetisation” was an important factor to be taken into account when trying to structure a revised transaction between the Bank and the Italian Bank.

(x) it also seems to me that the evidence of Mr Colavito to the effect that it took him a long time to persuade senior managers to allow the 2012 Transaction to move forward is consistent more with the fact of increased caution within the banking industry (following the debt crisis 2008/2009) as to the nature and type of proposed financial transactions than with a strategy of deliberately creating a distance in time between the Second Solution and the 2012 Transaction.”

 

11.            The ET then returned to the questions raised by the reconsideration application.  First, it concluded that, although the Claimant’s Second Solution had been theoretically viable, it had not been seen as commercially viable by the Respondent at the time of the Screening Transaction Review - September 2010; it contained the basic structure of a possible transaction but did not face up to and identify remedies for the two most difficult aspects identified at the time and did not deal with the provisos identified by Mr Rule (the agreement of the Italian Bank, internal approvals, appropriate legal documentation and market conditions) and there was little reliable evidence that these were capable of resolution at the time of the redundancy process.  Although the transaction examined in the Screening Transaction Review was suggested or inspired by the Second Solution, that did not lead to its being taken forward.  Moreover, whilst the premise of the Second Solution might have been suggested to Mr Colavito at the end of 2010, he did not see it as forming a commercially viable transaction.  Crucially:

“77. … during the period of consultation relating to Mr Ostendorf’s redundancy … neither the Bank as an institution, or Mr Smailes as an individual, saw the Second Solution as a viable transaction.  It follows that the Second Solution was not in any way a motivating factor in the redundancy decision made by Mr Smailes.”

 

12.            Even if wrong as to whether the 2012 Transaction was effectively the implementation of the Second Solution, the ET was satisfied that:

“83. … at the time of putting Mr Ostendorf at risk of redundancy Mr Smailes was not aware of the Second Solution.  Even if he had known of the proposal it was … at that time simply at initial premise stage.  Even at that early stage Mr Norfolk-Thompson could see difficulties with it.”

 

13.            And, even if wrong about his knowledge of the Second Solution at the relevant time:

“84. … that solution was not in sufficient detail (when considering the surrounding practical issues that had to be overcome) so as to persuade Mr Smailes to see it as viable such that he would dismiss Mr Ostendorf on a pretext. …”

 

14.            In addition, the ET observed that the prospect of the Claimant’s redundancy had been under consideration by Mr Smailes since the beginning of 2010, months before he created the Second Solution.  Even if the Second Solution had (contrary to the ET’s finding) presented a commercially viable transaction, there was nothing to explain why the Respondent (if operating in an underhand manner towards the Claimant) would then have waited more than eighteen months before implementing the redundancy.  The ET was clear:

“86. … the Second Solution was not a factor which acted on the mind of Mr Smailes when he made the decision that Mr Ostendorf’s employment should be ended. … the true reason for dismissal was redundancy and … the decision was fair.”

 

The First Judgment

15.            Thus rejecting the reconsideration application, the ET upheld its original decision, to which it is now necessary to return; not least as there are additional grounds of appeal which relate to the ET’s findings as to how the Claimant’s dismissal was effected, in particular as to the question of consultation (something which overlaps with the points about the Second Solution) and (more specifically as raised by the first appeal) as to whether this was effectively a sham or rendered unfair by the involvement of Mr Azzolini, who was in charge of the Respondent’s Fixed Income Business.

 

16.            In its First Judgment, the ET rejected any suggestion that Mr Smailes had, in bad faith, frozen the Claimant out from being able to state his position and seek to influence the Respondent’s decision.  Whilst the Respondent’s normal practice was to require any senior person facing redundancy to stay away from the workplace, it mitigated that approach for the Claimant, who was - with Mr Smailes’ assistance - able to have meetings with senior staff to explore opportunities of alternative positions (see the examples cited at paragraphs 68 and 70), which would be inconsistent with a fixed view that the Claimant must be dismissed. 

 

17.            More specifically, the Claimant contended it had been unfair of Mr Smailes not to disclose to him the fact that Mr Azzolini had demonstrated a closed mind as to his future.  Mr Azzolini had earlier made clear (in an email to the Claimant of 9 June 2010) his antipathy to a proposal made by the Claimant for a Secured Note Programme, which was to run through the trading desk in part of the business for which Mr Azzolini was responsible (see paragraph 35 First Judgment).  Subsequently, on 5 July 2010, shortly before the meeting with Mr Smailes at which he was told he was to be placed at risk of redundancy, the Claimant emailed Mr Azzonlini about two projects he had been pushing for, one of which was the Secured Note Programme (First Judgment, paragraph 47).  The following day, Mr Azzolini emailed Mr Smailes, referring to the Claimant, saying “Over my dead body he will have anything to do with me” (First Judgment, paragraph 54).  Accepting Mr Smailes did not tell the Claimant about this email, and he remained in the dark about it when he met with Mr Azzonlini and Mr Smailes on 12 July as part of the consultation process, the ET saw this as a judgment call: Mr Smailes wanted to avoid matters becoming personal; the opposition to the Claimant’s proposals was clear; disclosing the email would not have assisted matters (First Judgment, paragraph 85).

 

The Appeal

18.            The grounds of appeal largely relate to the Reconsideration Judgment; most (although not all) of those still “live” in respect of the First Judgment being subsumed within the reconsideration challenge.

 

19.            In permitting the appeal against the Reconsideration Judgment to proceed, Laing J allowed it was not possible to say what weight had been given by the ET to the various factors on which it had relied in concluding that the 2012 Transaction was not the implementation of the Second Solution; if there were arguable flaws in the reasoning leading to that conclusion, the Claimant would have identified an arguable ground of appeal.  Addressing the ET’s reasoning in detail, Laing J was prepared to accept this was the case in respect of the following:

(1)        At sub-paragraph 66(i) the ET described a risk for the Respondent as follows:

“by lending money to the Italian Bank creating an exposure that was not covered by collateral”

Neither party was, however, suggesting that the risk was not covered by collateral (it was the derivative position that was not collateralised, a less significant risk).

 

(2)        At sub-paragraph 66(ii) the ET had referred to the fact that the Italian sovereign debt crisis had taken place between November 2010 and June 2012.  The Claimant contended, however, that this would, if anything, point to market conditions having been more favourable in November 2010 than in June; thus this factor could not support the ET’s conclusion.

 

(3)        At sub-paragraph 66(iv) the ET had relied on two factors identified by Mr Norfolk-Thompson (in an email of July 2010) as the two “most difficult aspects” of the Claimant’s Second Solution.  The Claimant objected, however, that there had been no evidence from Mr Norfolk-Thompson (he had not been called as a witness), and the Respondent had not relied on these points; in truth, the points the ET had drawn from the email were not of any great significance.

 

(4)        Further, at sub-paragraphs 66(vi) and (vii) it was arguable that the ET had reversed the burden of proof.

 

20.            More generally, Laing J saw it as arguable that the ET had wrongly elided two separate issues at paragraph 66: (1) whether the Claimant’s Second Solution was viable during the Claimant’s notice period; and (2) whether it was effectively the same as the 2012 Transaction.

 

21.            Separately, Laing J allowed it was arguable that some of the ET’s conclusions on consultation were also potentially rendered unsafe: to an extent the reasoning about what Mr Smailes did and did not take into account was premised on the ET’s conclusions (i) there was no sufficient relationship between the Claimant’s Second Solution and the 2012 Transaction, and (ii) that the Second Solution was not seen as viable during the Claimant’s notice period.

 

22.            Laing J further permitted a challenge to the First Judgment, on the following basis:

“25. … the consultation was a sham because Mr Smailes knew that Mr Azzolini had said in an email that over his dead body would he have anything to do with the Claimant.  There are two points, really, that flow from this.  The first is: what was the point of having a meeting if that is what Mr Azzolini really thought?  But the second is … that Mr Smailes should have told Mr Bommensath and Human Resources about this once he knew about it because it was not fair to have Mr Azzolini involved in these consultations and discussions if he was taking a personal view about that.  It seems to me that it is arguable that … the [ET] has rather missed the point.”

 

23.            For its part, the Respondent resisted the Claimant’s appeals, relying on the reasoning provided by the ET in its First and Reconsideration Judgments.

 

The Relevant Legal Principles

24.            The ET was concerned with a claim of unfair dismissal, as provided by section 98 Employment Rights Act 1996 (“ERA”):

 

“98. General

(1) In determining for the purposes of this Part whether the dismissal of an employee is fair or unfair, it is for the employer to show -

(a) the reason (or, if more than one, the principal reason) for the dismissal, and

(b) that it is either a reason falling within subsection (2) or some other substantial reason of a kind such as to justify the dismissal of an employee holding the position which the employee held.

(2) A reason falls within this subsection if it -

…

(c) is that the employee was redundant, or

…

(4) [Where] the employer has fulfilled the requirements of subsection (1), the determination of the question whether the dismissal is fair or unfair (having regard to the reason shown by the employer) -

(a) depends on whether in the circumstances (including the size and administrative resources of the employer’s undertaking) the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissing the employee, and

(b) shall be determined in accordance with equity and the substantial merits of the case.

…”

 

25.            An ET’s decision making process under section 98 involves three stages: (i) establishing what was the reason for the dismissal; (ii) asking whether that was a reason capable of being fair for the purposes of section 98(1) and (2); and (iii) determining whether or not the dismissal of the employee for that reason was fair in all the circumstances of the case. 

 

26.            Save where an employee has insufficient service to pursue a standard unfair dismissal claim, the burden of proof at stages (i) and (ii) remains firmly on the employer; if the employer is unable to discharge that burden, the ET is bound to find the dismissal unfair (Maund v Penwith District Council [1984] ICR 143 CA, per Griffiths LJ at pp148E-H).  And it is not enough for the employer to demonstrate there were circumstances that might have provided it with a fair reason for dismissal if it cannot prove that was in fact its reason at the time (Timex Corporation v Thomson [1981] IRLR 522 EAT, paragraph 5; ASLEF v Brady [2006] IRLR 576 EAT, paragraphs 67 to 72).  To the extent an employee disputes the reason given by the employer, an evidential burden arises to cast some doubt upon the employer’s reason, but the employee does not thereby assume the legal burden (per Griffiths LJ in Maund, p149A-C); he or she merely has to demonstrate some evidential basis for questioning the employer’s reason, not to prove some other reason was in fact the real one (per Stephenson LJ in Maund, p157C). 

 

27.            The reason for dismissal will be the set of facts known to, or beliefs held by, the employer, which cause it to dismiss the employee (per Cairns LJ in Abernethy v Mott Hay and Anderson [1974] ICR 323 CA); something to be determined by reference not only to the reason given at the time of giving notice (if relevant) but also to the reason existing when the dismissal takes effect (Parkinson v March Consulting Ltd [1998] ICR 276 CA).

 

28.            Assuming that a Respondent is able to establish a potentially fair reason for dismissal, at the third stage - determining whether or not the dismissal of the employee for that reason was fair - the burden of proof is neutral.  Where the reason for dismissal is redundancy, fairness is likely to involve consideration of consultation: other than in the exceptional case where the employer could reasonably have concluded that it would be utterly useless or futile, dismissal for redundancy without consultation will normally be unfair (see per Lord Bridge in Polkey v A E Dayton Services Ltd [1988] ICR 142 HL).  And fair consultation has been defined as requiring the following:

“(a) consultation when the proposals are still at a formative stage;

(b) adequate information on which to respond;

(c) adequate time in which to respond;

(d) conscientious consideration by an authority of the response to consultation.”

 

See Mugford v Midland Bank plc [1997] IRLR 208, at paragraph 27 (where the EAT referred to the formulation by Hodgson J in R v Gwent County Council, ex parte Bryant [1988] Crown Office Digest 19, approved in the employment context in Rowell v Hubbard Group Services Ltd [1995] IRLR 195 and King v Eaton Ltd [1996] IRLR 116).

 

29.            More recently, in the context of considering a potential Polkey reduction in compensation, in Grayson v Paycare UKEAT/0248/15 (5 July 2016, unreported), Kerr J considered that fair consultation would need to have been carried out in good faith and with an open mind, which would require an evaluation, based on evidence, of what alternatives to redundancy the employer would have considered if acting fairly.

 

30.            Looking at the issue of fairness more broadly, in Dobie v Burns International Security Services (UK) Ltd [1984] IRLR 329 CA, Sir John Donaldson MR identified the following matters as potentially relevant:

“14. … In deciding whether the employer acted reasonably or unreasonably, a very important factor of which he has to take account, on the facts known to him at that time, is whether there will or will not be injustice to the employee and the extent of that injustice.  For example, he will clearly have to take account of the length of time during which the employee has been employed by him, the satisfactoriness or otherwise of the employee’s service, the difficulties which may face the employee in obtaining other employment, and matters of that sort.  None of these is decisive, but they are all matters of which he has to take account and they are all matters which affect the justice or injustice to the employee of being dismissed.”

 

31.            As Sir John Donaldson continued in Dobie, however:

“17. … neither the EAT nor [the Court of Appeal] … can interfere on the basis that they would have reached a different conclusion on the issue of reasonableness, because that is an issue of fact.  All that this court or the EAT can do is to consider whether there has been an error of law.  They may reach the conclusion that there has been an error of law on one of two alternative bases.  The first … is that the Tribunal has given itself a direction on law and it is wrong … The alternative basis - which is almost a Wednesbury basis - is that no reasonable Tribunal could have reached that conclusion on the evidence …”

 

See to similar effect, Sir John Donaldson’s judgment in BT v Sheridan [1990] IRLR 27 CA, at paragraphs 34 and 35.

 

32.            The danger of the appellate court stepping into the shoes of the first instance ET or adopting an overly pernickety approach to ET judgments was also the subject of warning by the Court of Appeal in Brent LBC v Fuller [2011] ICR 806 CA see per Mummery LJ at paragraphs 28 to 30 (and also see, to similar effect, Bowater v Northwest London Hospitals NHS Trust [2011] ILR 331 CA, in particular per Longmore LJ at paragraph 19).  Each of these authorities highlights the very different functions of the ET and EAT.  That is, of course, all the more the case where the challenge is put as one of perversity, hence the high threshold such appeals will face, see Yeboah v Crofton [2002] IRLR 634 CA.

 

Submissions

The Claimant’s Case

33.            Mr Ciumei QC allowed that Laing J’s reasoned Judgment on the Preliminary Hearing set the agenda for the Full Hearing of the appeals; whilst the Claimant did not concede any grounds not fully encapsulated in Laing J’s reasons (but also not formally dismissed in her Order), it was accepted that these added little.  Before turning to the specific heads of appeal, the Claimant further observed that the ET’s obligation was to identify the issues, state its findings of fact, concisely identify the relevant law and state how that has been applied to those findings in order to decide the issues (ET Rules 2013 Rule 62(5)).  Whilst a Judgment might contain apparent inconsistencies (see paragraph 42 Secretary of State for Justice v Norridge UKEAT/0443/13) here the inconsistencies were real, not merely apparent.

 

 

Reversal of Burden of Proof

34.            The central issue for the ET in both Judgments was the reason for the Claimant’s dismissal.  Section 98 ERA makes clear it is the employer that bears the burden of establishing the reason for dismissal.  The ET neither set out the terms of section 98 nor (save in one reference in the First Judgment) remind itself of the burden of proof.  The reason for the dismissal had been put firmly in issue (in particular, given the alternative postulated by the Claimant); that remained so notwithstanding any finding of a background redundancy situation or other factor that might have justified dismissal but was not the actual reason why the Respondent dismissed the Claimant when it did (see Timex v Thomson and ASLEF v Brady).

 

35.            The ET’s failure to appreciate the burden of proof tainted its reasoning: it was not “highly relevant” that Mr Smailes had previously discussed the possibility that the Claimant’s role was redundant (paragraph 85, Reconsideration Judgment) - the ET had fallen into the trap of finding a redundancy situation and then presuming that was the actual reason for the decision to dismiss; this was of no relevance - at most it was a gateway into the investigation as to what was in the mind of the employer.  The ET erroneously inferred the reason postulated by the Claimant was not made out because there was “no”, or “little”, evidence (sub-paragraphs 66(vi) and (vii), paragraph 69 and the second part of paragraph 85) but, having agreed there should be a Reconsideration Hearing, the ET had accepted the Claimant had met the evidential burden and, having found there was little or no evidence, the ET ought to have held that the Respondent had failed to discharge the burden upon it.  That was all the more so given the Respondent had originally simply asserted that the Second Solution was not viable (so as to show Mr Smailes was not motivated as the Claimant suggested) but not distinguished between theoretical and commercial viability.  The ET failed to take account of this change in position.  Further, and in reply to the Respondent’s argument that the ET’s conclusion as to what had been in Mr Smailes’ mind was clear: the ET’s finding was that he was not aware of the Second Solution when he put the Claimant at risk of redundancy; there was no finding as to the position when he actually took the decision to dismiss, which must have been around 5 August 2010 (when the Claimant was given notice), when he did know of the Second Solution. 

 

Perversity/No Evidence

36.            On the perversity challenges raised by the appeals (taken alongside the “no evidence” challenge), the Claimant focused his argument on specific examples.  At sub-paragraph 65(ii), the ET accepted Mr Rule’s conclusion that there was a unique element common to both the Second Solution and the 2012 Transaction, but went on to find the latter had features that the Second Solution did not in the use of original bonds (the security in the First Transaction) and in its profit generating features (paragraph 66(iii)(b) Reconsideration Judgment) but those profit generating features were predominately derived from the unique element the ET had accepted was part of the Second Solution; it thus used the same unique element to both support and undermine the Claimant’s case, which rendered the ET’s conclusion perverse. 

 

37.            Further, at sub-paragraph 66(i) of the Reconsideration Judgment (read together with paragraph 69), the ET had relied on what was stated to amount to problems with the Second Solution; specifically, that lending money to the Italian Bank created “an exposure that was not covered by collateral”.  That was simply wrong (and inconsistent with its earlier finding; see as summarised at paragraphs 7.1 and 7.2 of Reconsideration Judgment): the ET had erroneously thought there was a problem with absent collateral in 2010 when there never was.  As to the finding that there was concern as to the documentation (also sub-paragraph 66(i)), there was no evidence of any such view being held by anyone within the Respondent at the material time.

 

The Azzolini Email

38.            The ET’s conclusion in respect of this issue was set out at paragraph 85 of its First Judgment.  Seeing this as an attempt to “avoid matters becoming personal” was a misapplication of the law: fair consultation requires conscientious consideration that is open minded, not pre-determined, see Mugford v Midland Bank plc [1997] IRLR 208 at paragraphs 23 and 27.  Here Mr Smailes took a deliberate decision not to tell the Claimant about this email so he was unable to make representations about it, something that went to the justice of how he had been treated (Dobie v Burns [1984] IRLR 329, paragraphs 14 and 22).  He had not informed HR or the Claimant about the message but had arranged a meeting with Mr Azzolini; that rendered that consultation meeting futile (and it was one of only two meetings that took place) and yet ET had relied on this in finding the dismissal fair.  This went to more than just reasonableness: if consultation was a sham that was relevant to the determination of the genuineness of the Respondent’s case on the reason for the dismissal.

 

The Respondent’s Case

39.            For the Respondent it was said that the Appellant was really seeking to impermissibly challenge primary findings of fact.  Significantly, the ET had found that Mr Smailes had not been aware of the Second Solution until 9 July 2010 (so, after he had made the decision that the Claimant was to be dismissed); this had always been the main thrust of the Respondent’s case and was the answer to the “pretext” argument, which the ET had twice rejected.

 

The Azzolini Email

40.            Turning to the specific points raised by the appeal, addressing first the Azzolini email: the issue of consultation raised broader issues before the ET, which accepted the Respondent’s case that this was taking place before the Claimant was formally put at risk of redundancy (albeit not then a redundancy consultation).  It had further found that, upon being told his position was redundant, the Claimant had not been excluded from the premises (as would be normal), but was given the opportunity to comment and respond during the consultation period, which was not a sham but permitted alternatives to be put, keeping the decision under review until the Claimant’s dismissal (First Judgment paragraphs 80, 81 and 82).  The ET had then specifically engaged with the Claimant’s case on the Azzolini email (paragraph 84, read alongside the ET’s conclusions at paragraphs 68 and 69).

 

Perversity/No Evidence  

41.            The ET found the 2012 Transaction had significant features not present in the Second Solution, specifically (paragraph 66 (iii)(b) Reconsideration Judgment): (1) the use of original bonds which were the security in the First Transaction, and (2) the profit generating features referred to in Respondent’s submissions.  The Claimant relied on profit generating features that were “predominantly” derived from the unique element that was also part of the Second Solution but the Respondent’s submissions had included elements that went further (paragraph 121 of those submissions) and were accepted as establishing this point.  The ET had the relevant documentation before it and permissibly found that the Second Solution documentation was very different to 2012 Transaction documentation (sub-paragraph 66(iii)(a)).  It further relied on email documentation from Mr Norfolk-Thompson, which provided the foundation for its conclusions at sub-paragraphs 66(iv) and (v), and also supported sub-paragraphs 66(i) and (iii).  As for the Claimant’s “no evidence” objection to the ET’s finding as to the reliability of documentation (sub-paragraph 66(i)), that ignored the evidence from Mr Ahlberg (recorded by the ET at paragraph 32) who had worked for the Respondent at the material time, and that from Mr Colavito (accepting that this was expressing a view as at 2012).  That said, it was correct that the Second Transaction was collateralised, as the ET had found at paragraphs 7.1 and 7.2 (and was apparent from the parties’ instructions to Mr Rule and as the Employment Judge clearly understood: see paragraph 73 Reconsideration Judgment and the notes from the Reconsideration Hearing): sub-paragraph 66(i) contained an over-simplification of the point (“an exposure that was not covered by collateral”), but it was apparent the Employment Judge understood it was the derivative position that was not collateralised; the infelicity of description at sub-paragraph 66(i) did not undermine the conclusion.

 

Reversal of Burden of Proof

42.            The Respondent bore the burden of proving the reason for dismissal but not for every passing comment made by the ET (at worst, “infelicities of expression”, see paragraph 42 Norridge UKEAT/0443/13); at no stage did the ET place the burden of proof on the Claimant - it had ample evidence to conclude that the Respondent had discharged the burden upon it.  The real issue was what was in Mr Smailes’ mind and the ET had clearly found he did not know of the Second Solution.

 

Discussion and Conclusions

43.            Section 98 ERA requires the ET to determine the reason for the dismissal.  Where a preliminary view is taken (so, at the start of a consultation process) or where the decision is to dismiss on notice, the initial question will be what was the reason - the set of facts or beliefs - operative on the employer’s mind at that time?  The ET will, however, need to be satisfied that those facts or beliefs remained the reason or principal reason why the dismissal ultimately took effect, although the fact that circumstances change during a consultation or notice period will not necessarily mean the reason has changed (although a change in circumstances may impact upon the question of fairness even if the reason stays constant); indeed, in many instances there will be no issue, the reason operative on the employer’s mind will remain constant throughout.

44.            In the present case, the reason for dismissal was at the very heart of the Claimant’s case.  Effectively, he was saying that once he had come up with the Second Solution, his fate was sealed; others - specifically Mr Smailes - did not want him to benefit from his idea and were determined to see his employment brought to an end.  On the face of the ET’s Decisions (both the First Judgment and the Reconsideration Judgment), the Claimant has an insurmountable difficulty: the relevant decision taker was Mr Smailes and, as the ET twice found, he did not know of the Claimant’s Second Solution before (genuinely) reaching the view that the Claimant’s position was redundant.  In reaching that conclusion, the ET considered it relevant that Mr Smailes had previously raised the possibility that the Claimant might be redundant, which corroborated the reason he relied on for his decision.

 

45.            Although it is right that the existence of what might be called a redundancy situation, impacting upon the Claimant’s position, would not necessarily mean that his dismissal was for that reason, I disagree with Mr Ciumei that the history was of no relevance.  Whilst not determinative of the point, the ET was entitled to see the background as helpful in reaching its conclusion that Mr Smailes had, indeed, taken his decision because he believed the Claimant’s role was redundant; had there been no such history, the ET would have been entitled to see that as a relevant factor pointing the other way.  That said, I agree with the Claimant that this could not be assumed to be the end of the matter: in determining what was the reason why his employment was ultimately terminated, the ET had to remain satisfied that this was because of redundancy; specifically it had to remain satisfied that some ulterior motive relating to the Second Solution had not infected the Respondent’s decision taking.  Once focus is thus placed on the period post-dating the initial announcement of the decision to make the Claimant redundant, it becomes apparent that it is not enough to simply state that Mr Smailes did not know of the Second Solution on 5 July 2010; the question becomes whether it impacted upon the final decision taken to end the Claimant’s employment thereafter.

 

46.            If there was simply no evidence that the Second Solution was taken seriously within the Respondent at any time prior to the termination of the Claimant’s employment the ET might legitimately have considered that the Claimant had not been able to put forward any evidential basis to challenge the Respondent’s case as to the reason for his dismissal.  Certainly, in its First Judgment, the ET had not accepted that the evidence showed the Claimant’s Second Solution was being taken forward.  In listing this matter for a further Reconsideration Hearing, however, Mr Ciumei contends the ET must have accepted that the Claimant had discharged the evidential burden upon him, having adduced new evidence to show his Second Solution had in fact been taken forward in the form of the 2012 Transaction.  That may be putting the point too high - the ET considered the new evidence warranted reconsideration of its initial Decision but I do not automatically infer it was thereby making any finding on that new material, specifically as to whether it discharged an evidential burden on the Claimant - but the ET was still bound to approach its task on the basis that the legal burden remained on the Respondent to prove its reason for the Claimant’s dismissal, up to the effective date of termination.

 

47.            I turn then to the ET’s Reconsideration Judgment and the approach adopted to the burden of proof.  Mr Ciumei says it is apparent that the ET lost sight of where the burden lay when it relied on a lack of evidence as supporting the Respondent’s case when, in truth, it should have been seen as doing the opposite.  Specifically, he relies on the ET’s references to “no” or “little” evidence at paragraphs 66(vi), 66(vii), 69 and 85 of the Reconsideration Judgment.  I am, however, unpersuaded that these passages demonstrate any error in the ET’s approach to the burden of proof. 

48.            When saying that there was “no evidence” that between July to November 2010 (the crucial period for the decision making in relation to the Claimant) that “the Italian Bank agreed, or would have been likely to agree, that the Second Solution was commercially acceptable …”, the ET is simply stating its conclusion on the evidence before it: at that time, there was no agreement as to the commercial acceptability of the Second Solution.  Having so found, the ET was entitled to see that as supportive of the Respondent’s case.  It does not suggest that it was thereby putting any burden on the Claimant. 

 

49.            Similarly, when saying there was “little, if any, evidence” of favourable market conditions between July and November 2010, that was a statement of the ET’s finding of fact on the evidence before it; it was not thereby placing a burden on the Claimant.  The same is true of the ET’s finding at paragraph 69, that there was “no, or little, reliable evidence” that the “difficult aspects” (as the Respondent put it) or “provisos” (as Mr Rule had characterised the point) were capable of resolution during the critical July to November 2010 period. 

 

50.            As for paragraph 85, the ET here explains how it has tested what was the more probable: it was unable to see why the Respondent should have waited more than 18 months to implement the Claimant’s Second Solution if it provided a commercially viable transaction.  In determining what is likely to have happened, a tribunal of fact is entitled to ask, rhetorically, what seems most credible.  In the present case, the ET felt it was relevant that the Respondent’s explanation also made sense given that - on anyone’s case - the Second Solution was not implemented for more than 18 months: if it had in fact been seen as a viable solution to the problem the Respondent faced, the ET was entitled to expect to see some signs of its implementation without such a long period of delay; it had not and the ET legitimately weighed this in the balance as supportive of the Respondent’s case.

51.            The reality is that the ET had found the Respondent had established these aspects of its case, it could not do more than it had in proving the negatives it was relying on: it had established that there was no evidence of agreement as to the commercial acceptability of the Second Solution at the relevant time, that there was little if anything that could be pointed to as showing that favourable market conditions existed or that the provisos recognised by Mr Rule were then capable of resolution. 

 

52.            In developing the Claimant’s case on the appeal, Mr Ciumei submitted the ET was wrong to find that these factors tipped the balance in the Respondent’s favour; in particular, given that the Respondent’s case had shifted so as to focus on commercial rather than simply theoretical viability of the Second Solution.  It seems to me, however, that this exposes the Claimant’s true objection to the ET’s Reconsideration Judgment: having won the right to a Reconsideration Hearing that compared the Second Solution to the 2012 Transaction in detail, the Claimant cannot accept that the ET did not reach the same conclusion as he and his expert (Mr Rule) had.  I appreciate that Mr Ciumei did not appear below but it is apparent from a detailed consideration of the ET’s two Judgments that any difference in focus arises from the fact that the Reconsideration Hearing was charged with undertaking a particular comparison.  The point is made clear towards the end of the Reconsideration Judgment, when the ET considered whether it needed to amend the First Judgment so that “in fact viable” would read “commercially viable” (see paragraph 87, Reconsideration Judgment).  The ET concluded this was unnecessary: “it is implicit that any business that considers the viability of an action will, as part of the assessment, taken into account commercial as well as theoretical viability”.  The Reconsideration Hearing saw a more detailed consideration of the Second Solution in the light of the 2012 Transaction but its commercial viability had always been in issue.

 

53.            This brings me on to the broader “perversity” and “no evidence” challenges raised by the appeal.  Although the arguments before Laing J on these points were broad-ranging, in Mr Ciumei’s submissions greater focus has been given, with the points being grouped under more general headings. 

 

54.            One specific point said to demonstrate perversity is what is said to be an inconsistency in the ET’s reliance on profit generating features of the 2012 Transaction (sub-paragraph 66(iii)(b) of the Reconsideration Judgment), which the Claimant says “predominantly directly derived” from the “unique” element that had already been accepted to have been common between the 2012 Transaction and the Second Solution (paragraph 65(ii)).  The difficulty with this point is that, on the Claimant’s own case, the highest it is put is that the profit generating features “predominantly” derived from that element; it further fails to take into account the ET’s other findings relevant to its conclusion that the 2012 Transaction was not the same as the Second Solution.  At worst, the ET has failed to detail out all the profit generating features - referencing instead the Respondent’s submissions in this regard - but this does not (as the Claimant urges in his skeleton argument) raise a question as to whether the ET “really understood the evidence about the various transactions at all”, and it does not meet the high threshold for a perversity appeal.

 

55.            More generally, the Claimant contends that the ET’s various findings were unsupported by evidence.  On one such point, there is agreement between the parties: to the extent that the ET’s finding at paragraph 66(i) reflected a view that the exposure in the Second Transaction was not collateralised, that would have been an error (and absent any evidential foundation).  As the Respondent accepts, both the First and Second Transactions were collateralised (something the ET recognised at paragraphs 7.1 and 7.2 of the Reconsideration Judgment); the question is whether the ET’s error in this regard can be said to be material to its conclusion - a point I return to below.  Other than this, however, I do not accept that the Claimant has made good his case.  The ET’s finding on market conditions (considered by Laing J at paragraph 41 of her Judgment) was supported by evidence from Mr Colavito, who attested to his perception of market conditions at the relevant time (paragraph 36 of the Reconsideration Judgment); that provided an evidential basis for the ET’s permissible conclusion in this regard.  Similarly, the ET legitimately placed reliance on the email from Mr Norfolk-Thompson.  The Claimant objects that Mr Norfolk-Thompson was not called as a witness, albeit he was still employed by the Respondent, but that was a matter for the ET; it does not provide a good basis of appeal.  As for the Claimant’s objection to the ET’s finding (paragraph 66(i)) that the Second Transaction was “seen as founded on complex, and not fully reliable, documentation”, Laing J previously observed that there “was apparently evidence before the [ET] that supported that conclusion in the witness statements of Mr Ahlberg and Mr Colavito.  So, there is nothing wrong with that conclusion” (paragraph 39 of her Judgment).  I agree.

 

56.            That brings me to the remaining point of challenge - the issue of Mr Azzolini’s email.  The ET was alive to the argument that the failure of Mr Smailes to disclose the “over my dead body” message to the Claimant rendered the consultation process unfair.  It rejected that argument, seeing this as a judgment call for Mr Smailes, who had wanted to avoid matters becoming personal.  In reading the ET’s conclusion in that regard (paragraph 85 of the First Judgment), I bear in mind that I must do so in the context of its earlier findings of fact, which included the finding that Mr Azzolini had already made clear (in a direct email to the Claimant on 9 June 2010) that he was “firmly resistant” to the Claimant’s proposal in respect of the secured note programme (First Judgment, paragraph 35).  The ET had also found that Mr Smailes had earlier warned the Claimant (on 1 July 2010) that “continued attempts to find a new role was [sic] causing irritation” (paragraph 42).  Notwithstanding those negative responses, the Claimant had continued to put his proposals, again emailing Mr Azzolini on 5 July 2010 about the secured note programme and a funding derivatives desk (paragraph 47).  As for the post-5 July 2010 consultation meeting, on 12 July, between Mr Smailes, Mr Azzolini and the Claimant, I note the ET’s finding that it was “clear that Mr Azzolini was not receptive” to the Claimant’s proposals (paragraph 59).  Seen in the round, I cannot see that it was perverse for the ET to conclude that the Claimant had been made aware of the Mr Azzolini’s negative response to his proposals and Mr Smailes reasonably felt it would not be helpful to over-personalise their discussions during the consultation period by disclosing the email.  It is right that Mr Smailes equally did not disclose the email to HR or seek others’ advice about it, but that was a matter of which the ET was aware and I cannot find it was perverse for it to conclude this did not render the dismissal unfair - the ET permissibly found that Mr Smailes’ judgment call did not fall outside the band of reasonable responses in these circumstances.

 

57.            In saying this, I do not wish to downplay the importance of consultation in a redundancy process: it should be a genuine attempt to find alternatives to dismissal, entered into with an open-mind.  That said, the process in the present case did not just involve Mr Azzolini.  The Claimant complains there were only two consultation meetings but there were also various other communications that the ET legitimately considered relevant (see paragraph 70).  Further, on the ET’s findings, this was not a process that had only started on 5 July 2010: the possibility of his redundancy had been the subject of earlier consideration and the Claimant had already proactively put forward a number of proposals, which would provide him with an alternative role.  In the particular circumstances, I agree with the Respondent that - whilst not strictly part of the redundancy consultation exercise - this was part of the relevant factual matrix.  Certainly for Mr Azzolini, the Claimant’s proposals were a continuation of a dialogue that had started before 5 July 2010 and it is not suggested that he had always held a closed mind, albeit he had previously made clear his resistance to the Claimant’s proposals. 

 

58.            Having considered the detail of the points raised by the appeal, I return to the broader question: did the ET err in the way it approached the determination of the Respondent’s reason for the dismissal?  Did it fail to have proper regard for what might have changed in Mr Smailes’ mindset after he had learned of the Second Solution on 9 July 2010; did his failure to disclose the “over my dead body” email evidence that fact?  Further, did the ET err in failing to properly assess the way in which the Second Solution was seen by the Respondent at the relevant time because it misunderstood the collateralisation issue?

 

59.            In addressing these questions, I have regard to the ET’s reasoning as explained in both Judgments.  Doing so, I note that in its First Judgment, the ET rejected any suggestion that Mr Smailes had engaged in a sham consultation exercise influenced by his desire to ensure the Claimant did not benefit from the implementation of the Second Solution (First Judgment, paragraphs 68 to 70); subsequently, the ET expressly considered whether the Second Solution had played any part in Mr Smailes’ reasoning during the consultation period (July to November 2010) and clearly concluded it had not (paragraph 77, Reconsideration Judgment).  I am satisfied that the ET properly scrutinised the Respondent’s reason for dismissing the Claimant not just as at 5 July 2010 but continuing thereafter, until the termination of his employment.  In forming that view, the ET was alive to the issue relating to Mr Azzolini’s email but permissibly concluded that Mr Smailes’ conduct in this regard did not evidence the fact that he was engaged on a sham consultation exercise.  It further scrutinised the Respondent’s response to the Second Solution - both at the initial hearing and at the reconsideration stage - and reached the legitimate conclusion that it was not seen as commercially viable at the relevant time and was not implemented in the form of the 2012 Transaction.  Whilst I was initially troubled by the ET’s apparent error at sub-paragraph 66(i) of the Reconsideration Judgment, ultimately I have been persuaded by the Respondent’s submissions: the error cannot reflect a substantive lack of comprehension on the ET’s part as it elsewhere made clear that it did understand the collateralisation issue (paragraphs 7.1, 7.2 and 73, Reconsideration Judgment).  Specifically, whilst sub-paragraph 66(i) is poorly worded on this point, the ET’s reasoning overall does not portray a lack of understanding as to the nature of the different financial transactions; on the contrary, the more detailed reasoning (for example at paragraph 73, Reconsideration Judgment) demonstrates the ET’s grip on the issues and cannot be faulted.  Having carried out that detailed scrutiny of the financial transactions in issue, the ET twice concluded that the Respondent had met the burden upon it and had established that the reason for the Claimant’s dismissal was redundancy, and no other.  It was further satisfied that the dismissal was fair.  Both were permissible findings and I am bound to dismiss the appeal.