APPEARANCES
| For the Appellant |
MR RICHARD POWELL
(Of Counsel)
Instructed by:
Messrs DLA Solicitors
Fountain Precinct
Balm Green
Sheffield
South Yorkshire
S1 1RZ |
| For the Respondent |
THE RESPONDENT BEING NEITHER PRESENT NOR REPRESENTED |
SUMMARY
Application of Burchell and Hitt. Did it substitute its decision for test of the employers.
HIS HONOUR JUDGE ANSELL
- This is an appeal from a decision of the Employment Tribunal sitting at Newcastle upon Tyne when following a hearing held in November and December 2003 they unanimously decided that the Respondent, Mr Naylor was unfairly dismissed and they made a basic award of £5,070.00 and a compensatory award of £39,411.00. Extended Reasons were sent to the parties on 20 January 2004 and leave for a preliminary hearing was given on 15 June 2004 presided over by His Honour Judge Birtles.
- The core of the appeal is a complaint that in applying the well-known test set out in British Home Stores Limited -v- Burchell [1980] ICR 303, the Tribunal had substituted their own views as to what was reasonable rather than considering whether the employers' actions fell within the band of reasonable responses. There are also complaints that the Tribunal failed to make proper findings regarding a Polkey deduction and contributory conduct.
- The Respondent has not attended this hearing. In a letter sent to this Court on 27 June he indicated that he would:
"not be opposing the appeal"
And in a later form he indicated that he was not intending to be present or represented at the hearing and:
"will rely on written submissions"
We found his responses to be somewhat ambiguous and certainly not a clear indication that he was consenting to this appeal. Accordingly we proceeded to hear the full appeal, assuming that the Respondent would assert that the Tribunal's findings were correct.
- The Respondent was employed as an Administrator for the Applicants commencing employment on 13 October 1987 and was dismissed on 16 May 2003. At the time of his dismissal he was the Area Distribution Manager at the Appellants' Newton Aycliffe depot. The Appellants are the distribution arm of the Dixons and Currys electrical stores and in each region throughout England and Wales have a number of main distribution warehouses called "Hubs" from which deliveries are regularly made to the local distributions centres (LDCs) who then in turn serviced the local stores. One such LDC was at Newton Aycliffe and it was a subsidiary of the Northern Regional Hub at Doncaster where the Regional Manager was Mr Hilsely, the Respondent's Line Manager.
- There was a complex stock accounting system consisting of a paper trail from which it was supposedly possible to check the movements and whereabouts of stock. Deliveries were made each day to the local distribution centre from the Hub although it was generally only possible to do a detailed check as far as inwards stock was concerned once the final day's trailer had arrived together with the arrival of the branch invoice which would contain a description of each item delivered on the trailers on that day. There were particular problems at Newton Aycliffe due to shortage of space and in fact an empty trailer had been brought on to the site to assist with the warehousing. Transfers of goods between the Local Distribution Centre and the stores were recorded on transfer notes and there was an additional stock check system called perpetual inventory, which included a physical count of the stock in the warehouse at a particular time, and which formed the basis of reconciliation against the paper system.
- In general in January 2002 there was a stock deficiency recorded at the Newton Aycliffe site amounting to £162,000.00 and even more relevant there was a further audit done at the end of April 2003 resulting in a deficiency of some £406,000.00. However it was not suggested that any sizeable losses occurred through dishonesty and the Tribunal found that the overwhelming likelihood was that the stock loss was only a paper exercise in the sense of the stock remained somewhere within the system, either at the Hub, the LDC or the stores. One of the problems that arose in evidence was that Senior Managers had the power to accept stock back to a Hub from an LDC even if it was not accompanied by an appropriate transfer note. During the disciplinary hearing the Respondent raised two instances in the years 2002 – 2003 where in one case stock loss was allocated to him of about £114,000.00 and another case where he alleged that on Mr Hilsely's authority, a physical transfer of £144,000.00 worth of stock from Newton Aycliffe to the Hub was not accepted for recording purposes.
- The Group Security Manager had visited Newton Aycliffe at the end of October 2002 and as a result an Action Report was prepared which required that all discrepancies were to be "fully investigated before being raised, management team to conduct investigation record result for archive. Unaccountable stock loss to be reported to security." It was also recorded that stock had been found in inappropriate places. On 6 December following a visit by Mr Hilsely and the Security Manager to the site a number of recommendations were made which were:
(i) Hub stock to be checked against the documents when unloading the vehicle.
(ii) Every vehicle to be loaded must be checked on by at least a team leader.
(iii) Hub discrepancies to be investigated.
(iv) All vehicles must have a comprehensive debrief.
(v) All security issues to be in place just before Christmas 2002.
- Following the much larger stock deficiency disclosed at the beginning of May 2003 Mr Hilsely informed the Respondent that because this was an unacceptable audit loss he was going to put in an investigation team and that the Respondent would be suspended during the investigation on full pay. The reason for the suspension was:
"to investigate allegations of serious negligence, which had become evident through the results of Newton Aycliffe LDCs bi-annual audit, a loss of £405,153.00 at cost."
- Later on 12 May Mr Hilsely sent the Respondent a letter telling him that he was required to attend a disciplinary hearing on 16 May at Warrington to be chaired by himself. On 15 May the Respondent received a second letter indicating that Mr Priest, the Regional General Manager from the south each region, would now be chairing the meeting since there was a recognised potential conflict of interest had Mr Hilsely chaired the meeting. The Tribunal record that the information pack sent to the Respondent for the disciplinary hearing had some pages missing from it. They included some copy e-mails which pointed to Mr Hilsely's recognition that the previous year he had been aware of problems as a result of lack of storage space at the Newton Aycliffe warehouse and was anxious that it should not be repeated. Further omissions referred to the number and circumstances of damaged items at the LDC and the audit investigation summary which showed the losses at the depot. Mr Hilsely did not attend the hearing as a witness. During the hearing the Respondent had raised a number of issues and Mr Priest during the adjournment checked with both Mr Hilsely and Mr Robinson and reported back that neither confirmed the allegations made by the Respondent. The Respondent was summarily dismissed and the dismissal letter contained the following:
"You demonstrated a total lack of management control across the areas of the business for which you were responsible, specifically in stock management, administration controls and security of the stock on the site. As outlined at our meeting these factors have significantly contributed to the site stock loss of £406,000.00 identified at the recent audit. Due to the above I feel there is no confidence in you effectively undertaking your management role in the business and your summary dismissal from the company is effective from 16 May 2003."
- The Respondent appealed by letter dated 27 May 2003. With his appeal letter he enclosed some significant documents relating to the previous year's stock discrepancy and also the space pressures at the Newton Aycliffe site. The letter also complained that Mr Priest had not during the adjournment and the disciplinary hearing dealt with the issue of why previous audit had been altered by over £100,000.00 and the Respondent also queried why no consideration be given to the fact that important security issues had been turned down because of cost. Again Mr Hilsely was not present at that hearing. The appeal conducted by Mr Herbert confirmed the dismissal. Then the Respondent exercised a final right of appeal which was chaired by Mr Alexander, the Distribution Operations Director which took place on 10 July 2003 and there are comprehensive notes of that hearing. The Respondent's appeal letter had referred to previous issues and also to the transfer of stock onto to the Newton Aycliffe stock file from the Hub in the amount of £144,000.00, the alteration of the previous audit of over £100,000.00 and the failure to deal with security issues at the site. Mr Alexander confirmed the dismissal in the following terms:
"I believe that serious negligence and lack of management control had occurred. This includes non-checking of BIs from the Hub, which were a major contributor to the stock loss as was your overall lax Hub procedures. You admitted that the correct procedures, which you fully understood were not in place.
In terms of the £144,000.00 which was put on to your stock file during the adjournment I raised this with Bob Hilsely. He confirmed that the £144,000.00 went on to your stock file as there was evidence to support the fact that the stock had been returned to the Hub. This is further evidence of the lack of management control and non-attendance to procedures."
- The Tribunal having referred section 98 of the Employment Rights Act 1966 and various authorities particularly the Burchell case came to a conclusion that the dismissal was unfair. They did accept that there was a genuine belief in his conduct being the reason for dismissal although expressed particular concern at a document which had emerged during the Tribunal proceedings and which was a note that Mr Hilsely had prepared for Mr Priest just before the disciplinary hearing which the Tribunal described as a deliberate attempt to "nobble" the disciplinary investigation. However the Tribunal did conclude that they accepted "Mr Priest's evidence that the genuine reason for the applicant's dismissal was Mr Priest's perception of the applicant's competence.". However they then went on to find unfairness for the following reasons:
(i) The Respondent was never given any opportunity prior to the disciplinary hearing to have any input into the subsequent detailed audit.
(ii) The failure to disclose all the documents before the disciplinary hearing and which included documents that were helpful to his case and more importantly the audit investigation summary.
(iii) Mr Priest, having no personal knowledge of the situation pertaining within the northern region at LDCs and, having heard the Respondent's explanation, not conducting any proper further investigation to that explanation.
(iv) The Respondent not being shown the note Mr Hilsely had prepared for Mr Priest prior to the hearing and the inability to challenge its contents particularly since Mr Hilsely did not give evidence.
(v) The Respondent only receiving some of the documents three days before the disciplinary hearing and importance given to a comment made of Mr Hilsely as to the Respondent of having any explanation to give at the suspension meeting on 7 May when the Respondent had had no notice of what subject was going to be raised at that meeting.
(vi) A failure by Mr Priest to give proper attention to the space problems at the site and in particular that the Respondent had told Mr Priest that he had evidence in writing that the issue of account problems, in particular the reference to the lack of space at Newton Aycliffe had been raised at Managing Director level. Mr Priest was criticised by the Tribunal for never asking to see those documents. They added that it was an insufficient investigation for him merely to speak to Mr Robinson and Mr Hilsely during the 30 minute adjournment and not to give the Respondent the opportunity of challenging in particular Mr Hilsely directly particularly as Mr Hilsely who was a Line Manager the Tribunal's view was that he must have a high degree of responsibility for what took place if it took place with his knowledge.
(vii) Finally, they concluded that there was no proper investigation of the Respondent's explanations.
- The Tribunal then went on to consider the first appeal hearing conducted by Mr Herbert and pointed out that it was not a complete rehearing of the evidence although he had given the Respondent a further opportunity to give an explanation. The Tribunal found that Mr Herbert had not properly considered the significance of a number of issues that the Respondent had put forward or in particular what his explanation was and had made no attempt to make any further enquiries particularly of Mr Robinson or Mr Hislely and concluded that none of the defects in the procedure identified by the Tribunal in relation to Mr Priest's hearing were cured at Mr Herbert's hearing. The second appeal hearing conducted by Mr Alexander was described by the Tribunal was more akin to a rehearing and they acknowledged that Mr Alexander had considered the matter afresh. However, the main defect with that hearing was "the extent to which the Applicant had the opportunity to challenge Mr Hilsely as to the extent to which Mr Hilsely was aware of the space problems and took no steps to assist the applicant in that respect, thereby condoning what was in effect forced upon the applicant." The Tribunal found that the significant failure was not cured by the second appeal. The Tribunal's conclusions were set out in paragraph 9 of their decision as follows:
"9 We consider that fundamentally the procedure that was followed at all stages did not satisfy the test of being within the band of reasonable responses. There was no reasonable investigation including a reasonable opportunity for the applicant to present his case. We refer in particular to the absence of any opportunity to challenge or obtain confirmation from Mr Hilsely. We concluded in that respect the decision taken was procedurally unfair. However we also went on to reach a conclusion as to whether or not in all the circumstances a decision to dismiss fell within the band of reasonable responses. We conclude that it did not. We entertained serious doubts whether any reasonable employer would have concluded that what the applicant did amounted to gross misconduct justifying summary dismissal. It the principal reason for the applicant's dismissal was lack of management control, this was not a matter which should have been laid exclusively at the applicant's door in circumstances where he escalated the problems concerning lack of space, excessive stock delivery, inadequate warehouse facilities and lack of physical security to higher management as he explained during the disciplinary procedures. These assertions were not considered properly. The applicant's allegations were not unsupported by other evidence. He produced some of it at the appeal hearings."
- On behalf of the Appellant Mr Powell reminded us that it is not for the Tribunal to substitute their own views but rather to consider the reasonableness of the employers' beliefs and action. In British Home Stores Limited -v- Burchell [1980] ICR 303 Arnold J giving the judgment of the Court said thus:
"It is the employer who manages to discharge the onus of demonstrating those three matters, we think who must not be examined further. It is not relevant, as we think, that the tribunal would themselves have shared that view in those circumstances. It is not relevant, as we think, for the tribunal to examine the quality of the material which the employers had before them, for instance to see whether it was the sort of material, objectively considered, which would lead to a certain conclusion on the balance of probabilities, or whether it was the sort of material which would to the same conclusion only upon the basis of being "sure," as it is now said more normally in a criminal context, or, to use the more old-fashioned term, such as to put the matter "beyond reasonable doubt." The test, and the test all the way through, is reasonableness; and certainly, as it seems to us, a conclusion on the balance of probabilities will in any surmisable circumstances be a reasonable conclusion."
More recently the test was again considered in Post Office -v- Foley and HSBC Bank -v-Madden [2000] IRLR 827 where at paragraph 76 Mummery LJ said thus:
"76. It impermissibly substituted itself as employer in place of the bank in assessing the quality and weight of the evidence before Mr Fielder, principally in the form of the investigation officer's report. Instead it should have asked whether, by the standards of the reasonable employer, the bank had established reasonable grounds for its belief that Mr "Madden" was guilty of misconduct and whether the bank's investigation into the matter was reasonable in the circumstances.
77. The extent of the tribunal's substitution of itself as employer in place of the bank, rather than taking a view of the matter from the standpoint of the reasonable employer, is evident from the tenor of the views expressed by the tribunal on the quality and weight of the available evidence against Mr "Madden". I refer to the tribunal's cumulative critical comments on the bank's internal investigation by Mr Murphy, on the disciplinary hearing by Mr Fielder and on the probative value of the material on which Mr Fielder based the summary dismissal: that 'there was no clear culprit for the misappropriation of the cards'; that there was 'no firm evidence of the precise dates on which the cards were taken'; that there was 'no direct evidence that Mr "Madden" had accessed the Nixdorf system'; that there was no investigation of the 'personal or financial affairs'of other members of the staff; that no account was taken of the nature of the goods bought with the stolen cards; that Mr Fielder failed to take account of the fact that a man in Mr "Madden" 's financial and career position would not have jeopardised all for such a 'relatively paltry theft'; that 'the facts of the case should have produced more than reasonable doubt in Mr Fielder's mind'; that the investigators had closed their minds to any possibility other than the guilt of Mr "Madden"; that Mr Fielder 'came to a hasty conclusion that Mr "Madden" was probably guilty' and was content to accept the report of the investigators too readily and uncritically; and that Mr Fielder's decision to dismiss Mr "Madden", who had a stainless record of 11 years service, would effectively ruin his career and was not taken on reasonable grounds."
- Again in Grattan Plc -v- Kamran Hussain EAT/0802/02 His Honour Judge Burke QC giving judgment to this Court again repeated the correct approach:
"[24] We conclude, therefore that the Tribunal erred in their approach to Grattan's belief as to Mr Hussain's guilt by relying on their own analysis and conclusion as to whether there were reasonable grounds for that belief and by failing to consider whether a reasonable employer. on the material available, could reasonably have reached the conclusion as to Mr Hussain's guilt which Grattan reached in this case.
[26] We turn next to the Tribunal's conclusions in the issue of the adequacy of Grattan's investigaton. On this issue, in our judgment, the decision reveals that the Tribunal made the same error of approach as that which they made on the issue of Grattan's belief. The Tribunal criticised Grattan for failing to make sufficient enquiries as to who else might have been involved and for not following up sufficiently the points made by Mr Hussain as to dropping his brother off and as to working in a garage. However the Tribunal did not, in para 23 of their decision, analyse the information that was before Grattan, which we have set out in the first part of this judgment, … . The issue was not whether further investigation might reasonably have been carried out but whether the investigation which had been carried out could be regarded by a reasonable employer as adequate; the Tribunal, however, did not approach the case in that way."
- In relation to the Tribunal's frequent complaint about the absence of the opportunity for the Respondent to challenge Mr Hilsely prior to the disciplinary or the appeal hearings Mr Powell submits that the Tribunal misdirected themselves in law in this respect. He submits that there is no requirement on employers to carry out a quasi-judicial enquiry and nor has the ability to see and hear one's accuse or to be regarded as an essential part of a disciplinary hearing – see Ulsterbus Ltd v Henderson [1989] IRLR 251 and Santamera v Express Cargo Forwarding [2003] IRLR 273. In the Santamera case Wall J giving a decision of this Court set out the position thus:
"36
These considerations, we think, explain why, in the workplace investigation of misconduct, cross-examination of complainants by the employee whose conduct is in question (or even confrontations between them) are very much the exception. …Whilst, in order to be fair, it is incumbent on an employer conducting an investigation followed by a disciplinary hearing both to seek out and take into account information which is exculpatory as well as information which points towards guilt, it does not follow that an investigation is unfair overall because individual components of an investigation might have been dealt with differently, or were arguably unfair. Whilst of course an individual component, on the facts of a particular case, may vitiate the whole process, the question which a tribunal hearing a claim for unfair dismissal has to ask itself is: in all the circumstances, was the investigation as a whole fair?
38
Mr Horne accepted, as he was bound to, that there was no rule of law which rendered it incumbent on an employer, when dismissing an employee for misconduct, to arrange a hearing which gives the employee who is liable to be dismissed the opportunity to cross-examine the person making the complaint. He accepted that the law was accurately stated in paragraph 21 of Ulsterbus v Henderson, supra, where O'Donnell LJ stated:
'It is quite clear in this case that a careful investigation was carried out by Mr Campbell, an appal was heard by Mr Wilson, and a most meticulous review of all the evidence was carried out as is evidenced by Mr Heubeck's letter of 31.12.85. As I have indicated, in that letter Mr Heubeck meticulously reviewed all the evidence and considered whether there was any reasonable possibility, indeed any possibility, that a mistake had been made. What the tribunal appears to be suggesting is that in certain circumstances it is incumbent on a reasonable employer to carry out a quasi-judicial investigation with a confrontation of witnesses, and cross-examination of witnesses. While some employers might consider this to be necessary or desirable, to suggest, as the tribunal did, that an employer who failed to do so in a case such as this was acting unreasonably, or in the words of Lord Denning, acting outside: "…a band of reasonableness, within which one employer might reasonably take one view, another quite reasonably take a different view", is in my view insupportable.'"
- Mr Powell submits that the whole language of the Tribunal's conclusions in paragraph 6 is language of substitution rather than considering the reasonableness of the employer's approach, for example in paragraph 6(ii)(a):
"We consider that there was no reason …"
And again in paragraph 6(b):
"We can see no reason why he should why he should not ……."
In paragraph 6(d):
"We consider that this alone could in no way be described as fair or reasonable."
And again in paragraph 6(f):
"We conclude that a reasonable employer ……"
- Mr Powell further submits that the Tribunal's errors are compounded in that having attempted to conduct a thorough reconstruction of the process adopted by the dismissing officer Mr Priest there is no identification of a clear basis of the finding of facts made by him. Further, he submits that the Tribunal's criticism of the investigation relies entirely on their own analysis which at times he submits is incorrect and in any event by relying on their own analysis they failed to consider properly the actions of the employer in this case.
- Thus in paragraph 6(ii)(f) the Tribunal refer to photographs which were produced apparently showing the cluttered state of the warehouse and the Tribunal immediately conclude that a reasonable employer should have concluded that this was not caused by inefficiency on the part of the Respondent but by lack of space. Apart from applying their own judgment of photographs which Mr Powell tells us were taken in the year 2000, well over two years before the date of dismissal the Tribunal's conclusions, he submits, are an ambiguous substitution of the view of the Tribunal for the employer apparently ignoring that Mr Priest who conducted the enquiry was a full time manager of the Appellant's distribution network. Later in that paragraph they criticised Mr Priest for failing to visit the site and supposed to obtain information from Mr Robinson and Mr Hilsely. Again Mr Powell submits that this was to erroneously impose upon an employer a quasi-judicial/standard investigation. Also in that paragraph Mr Priest is criticised for failing to ask for documents relating to the space problems which had raised at managing director level. There is no finding that Mr Priest in conducting this enquiry had failed to give any proper weight to the argument that the Respondent was advancing.
- Further in relation to Mr Priest's investigation Mr Powell highlights the Tribunal's criticism that Mr Priest had no personal knowledge of the situation pertaining within the northern region LDCs and submits that the ACAS code does not require the person conducting the disciplinary to have personal knowledge of the precise circumstances within the work place although in the case of Mr Priest he was a full time manager of the Appellant's distribution network. There is considerable criticism from the Tribunal also in relation to the note that Mr Hilsely sent to Mr Priest before the disciplinary hearing but again the Tribunal failed to mention that neither of the appeal officers had sight of this letter.
- With regard to the first appeal Mr Powell criticises the Tribunal's findings that "there is no evidence that Mr Herbert properly considered what the Applicant was putting forward." It is quite clear from the facts found by the Tribunal that these issues were addressed to Mr Herbert thus the Tribunal appeared to be criticising the lack of weight that Mr Herbert attached to them. Again Mr Powell submits that this is an example of the Tribunal seeking to substitute their own views. As regards the second appeal for Mr Alexander the only criticism is the failure of opportunity to challenge Mr Hilsely. There again there is no finding that Mr Alexander failed to give weight to the issue of the space problems and the notes of that appeal hearing again indicate that all issues raised by the Respondent were considered by Mr Alexander and having checked the position with him there was no requirement for Mr Hilsely to be available at the appeal hearing – see Santamera.
- From the examples that Counsel has given we are quite satisfied that the Tribunal have indeed substituted their own views rather than considering the range of reasonable responses. The problems are compounded when one considers the conclusions in paragraph 9 where the Tribunal consider whether the misconduct alleged justified summary dismissal which again has to be judged on the basis of a reasonable band of responses. The Tribunal's conclusion was that "We entertained serious doubts whether any reasonable employer would have concluded that what the applicant did amounted to gross misconduct justifying summary dismissal." That in our view is not a conclusion for a Tribunal to make in this type of case. The test is not a question of entertaining "serious doubts" whether this particular employer was behaving unreasonably in treating the misconduct alleged as grounds for summary dismissal.
- Counsel then seeks to criticise the Tribunal's findings in failing to make out either a Polkey deduction or a finding of a contributory behaviour. On the issue of Polkey the only ground given by the Tribunal appears to be that they considered the Respondent to be a more convincing witness than Mr Hilsely before the Tribunal. Mr Powell submits that whether a different procedure would have led to a different decision should not be assessed solely on the basis of the Tribunal's assessment of a witness. Further the Tribunal having found that the Respondent's conduct was not entirely blameless still did not think it is just and equitable to reduce the compensatory award. We accept the Appellant's submissions that on the face of it both these findings are perverse and thus for all the reasons we have indicated we propose to allow this appeal and direct a rehearing before a different Tribunal.
