Appeal No. UKEAT/0378/09/JOJ

EMPLOYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 26 January 2010

Judgment handed down on 1 March 2010

Before

HIS HONOUR JUDGE REID QC

MS V BRANNEY

MRS M McARTHUR FCIPD

ANNODATA LIMITED (APPELLANT)

MR M JONES (RESPONDENT)

Transcript of Proceedings

JUDGMENT

For the Appellant
MR SAM NEAMAN (of Counsel)

Instructed by:
Messrs Cameron McKenna LLP Solicitors
Mitre House
160 Aldersgate Street
London EC1A 4DD

For the Respondent
MR TOM RICHARDS (of Counsel)

Instructed by:
Messrs Penman Johnson Solicitors
5 George Street
Watford
Herts
WD1 OSQ

PRACTICE AND PROCEDURE:

Appellate jurisdiction/reasons/Burns-Barke

Disposal of appeal including remission

UNFAIR DISMISSAL:

Contributory fault

Polkey deduction

Remission to Tribunal; adequacy of reasons; contributory fault; Polkey deduction.

The Appellant dismissed the Respondent in circumstances where the dismissal was procedurally unfair. The Tribunal also held, despite substantial evidence to the contrary, that the Respondent was not in fact guilty of the matters for which he was dismissed. It nonetheless held that had a fair procedure been followed he might still have been dismissed. It, without giving adequate reasons, apparently held that he had not, by the acts which were proved, contributed to his dismissal and that it was too speculative to determine what would have occurred if a fair procedure had been followed. The case was remitted to the same Tribunal further to consider the questions of contributory fault and Polkey deduction.

Introduction

1. The Appellant "Annodata" was the Respondent to a claim by Mr Jones "the Claimant" for unfair dismissal. Following a hearing lasting six days and a day's discussion an Employment Tribunal sitting at Bedford by a decision sent to the parties on 8 June 2009 found that Annodata unfairly dismissed the Claimant contrary to sections 98A and 98 of the Employment Rights Act 1996 ("ERA 1996").

1. Annodata does not appeal against the findings of unfair dismissal but appeals against the Tribunal's findings in relation to remedy. The Tribunal held that "having regard to sections 123(1) and 123(6) of the Act" Annodata had "not established that Claimant contributed to this dismissal" and that "it would not be just and equitable to reduce any Compensatory Award for the Claimant as to do so would be too speculative. Similarly, we find in respect of the basic award". It then adjourned the remedies hearing.

1. The basis of the appeal is that the Tribunal erred in law in its approach to the loss sustained in consequence of a dismissal, and failed to direct itself in accordance with the principles set out in Gover & Ors v Propertycare Ltd [2006] 1 ICR 1073 (CA), Thornett v Scope [2007] 1 ICR 236 (CA) and Software 2000 Ltd v Andrews & Ors [2007] 1 ICR 825 (EAT); and that it erred in its approach to the issue of reduction of compensation for contributory fault.

The Facts

1. The facts were hotly contested before the Tribunal but on the basis of the Tribunal's findings and the facts agreed between the parties the following matters are not now in dispute.

1. Until 2005 the Claimant, with a Mr Gerry Kilbane, owned and ran a company called Lobster Press Limited ("Lobster"). The Claimant and Mr Kilbane were described as "a double act", and "joined at the hip". In 2005 Lobster went into administration, and its business was acquired by Annodata. The employment of the Claimant, Mr Kilbane, and a Mr Andy Turnbull, was transferred to Annodata by virtue of the TUPE Regulations. The Claimant and Mr Kilbane were employed in sales.

1. By the middle of 2007 rumours were circulating that the Claimant and Mr Kilbane were intending to set up in business together again. Mr Kilbane resigned from Annodata on 31 July 2007. At about this time another Annodata employee, Clive Rawlings, told Annodata that in the last couple of weeks of July 2007 the Claimant had indicated that he could not wait to leave Annodata, and that he had some "things going on". Mr Rawlings also asserted that Mr Kilbane had subsequently approached him and told him that "they" (that is, the Claimant and Mr Kilbane) were looking to set up a competing enterprise in the Watford/Hemel Hempstead area. He made reference to a company which had been set up for "Lithographic" and there could be an opportunity to get into "Digital". Mr Kilbane suggested that Mr Rawlings give the Claimant his mobile number if he was interested in joining them.

1. As a result of this information Annodata suspended the Claimant on 3 August 2007, and took his company mobile telephone from him. It did not inform him of the reason for his suspension. He in fact immediately went on a pre-booked holiday. While the Claimant was suspended, so that calls to his mobile were not being received by him but by others at Annodata, Annodata received a call on his mobile telephone from Ms Nell Mailer of Time Communications about some new jobs.

1. Mr Riches of Annodata instructed another salesperson from Annodata to contact Ms Mailer to ask her to e-mail the jobs to him as the Claimant was on holiday. When they arrived they were addressed to the Claimant. However the company name and address below the Claimant's name was not Annodata's, but a company called Blue Rose in Hemel Hempstead. This tied in with the evidence from Mr Rawlings that the Claimant was involved in a competing business in that area, and the previous general rumours that the Claimant was intending to set up in competition.

1. The print instructions, relating to stationery for Kaim Todner, solicitors, against the heading "quoted price", stated "as quoted", but Annodata had not quoted for this work. An order without a quote would be unusual, and in this particular instance, the instruction was to use "new artwork". Time Communications were at this point a former client of Annodata who had taken their business elsewhere about a year previously, having fallen out with Annodata over quality issues.

1. When Mr Bingham of Annodata rang the given Blue Rose number to ask to whom at Blue Rose invoice queries should be directed. He spoke to Alicia Cox, the receptionist and herself a former Annodata employee (although Mr Bingham did not at this stage know her). He was told "Mark Jones" - ie the Claimant. Equally suspiciously from Annodata's point of view, given that Time Communications knew that the Claimant was currently on holiday, within the next few minutes, at least one "panic" phone call was received on the Claimant's mobile phone from Mr Barrett, the managing director of Time Communications, asking the Claimant to contact him urgently. Mr Barrett did not deny making the call although he said he could not recollect it.

1. The same pattern repeated itself with another client, Affinity, some five days later, on 8 August 2007. Mr Hughes, the new Annodata Business Development Manager, went up to see Affinity, who had sought from the Claimant numerous quotes for many thousands of pounds of work, but had never in fact appeared to follow this up with a single concrete order. Mr Hughes was fobbed off by Mr Evans of Affinity, saying that there was another company ahead of Annodata for the work, but at the same time Mr Evans was emailing the Claimant asking him to call.

1. Blue Rose was a company set up in April 2007 whose director was Pauline Coleman, Mr Kilbane's girlfriend, and whose company secretary was Marina Smith, the Claimant's sister. Ms Cox also told Annodata that the Claimant was, in the period leading up to this, frequently seen going into and out of the offices for meetings. The Hemel Hempstead office (Arabica House) was Blue Rose's registered office and was also the office of The Natural Coffee Company, a company run by Ms Coleman.

1. Blue Rose was known to Annodata before these issues arose. Ms Spiga, one of Annodata's employees, knew that it was a design business and that it had placed work with Annodata through Mr Kilbane.

1. Whilst the rest of Annodata's business flourished turnover for (previous) Lobster customers inexplicably fell by over £500,000 in the full first year of trading after the acquisition of Lobster. There was, however, a difference of view between Annodata and the Claimant as to whether the Claimant was generally underperforming.

1. In its investigation Annodata also interviewed Mr Turnbull, who had apparently revealed to Mr Rawlings a surprising amount of knowledge or interest about the plans of Mr Kilbane and the Claimant. At the interview Mr Turnbull was specifically instructed not to contact the Claimant. After the interview Annodata (who had the Claimant's mobile) received a text from Mr Turnbull to the Claimant telling him to call him and delete the text. A second text said that he was being made an "escape goat", that he had been "grilled" and told he was the ring leader. The text then has the shorthand passage: "th in kl am tom", which translates as "Tracey Hardy in Kings Langley in the morning tomorrow". The text concluded "job on line-delete this". As a result of this Mr Turnbull was in due course himself dismissed. In a much later e-mail to Mr Kilbane seeking help in his own claim (later abandoned) against Annodata, Mr Turnbull effectively warned him that he knew that Mr Kilbane and the Claimant (along with Tracey Hardy) were going into business together at this point, which "could make things sticky for all concerned".

1. On this evidence, and the lack of any innocent explanation for it which was sufficiently convincing to it, Annodata dismissed the Claimant after a disciplinary process which might be described as a textbook example of how not to conduct a disciplinary procedure.

1. The letter summoning the Claimant to the meeting which constituted the disciplinary hearing described the meeting as an investigation meeting, though it added that consideration might be given to whether action was necessary in accordance with the company's disciplinary procedures. The ambiguity in the letter was to some extent clarified when the meeting took place because Ms Donnelly, who performed the HR function for Annodata, informed the Claimant that the meeting was a disciplinary one which would take place in two stages, firstly an investigatory one, followed by a "remedy".

1. It set out six complaints, all variants on the theme that he was in serious breach of his obligations to Annodata through his Blue Rose activities.

1. Annodata did not give the Claimant a reasonable time to consider his response (it breached its own handbook as to the length of notice required). It prevented the Claimant from being accompanied by the representative of his choice or any representative.

1. It was apparent that the decision had been made before the disciplinary hearing took place. At the conclusion of the meeting the Claimant was summarily dismissed for four reasons. The note of the reasons is in these terms:

"1 You have been indirectly and/or directly involved in the setting up and running of Blue Rose Limited, whereby you have been working in direct competition to provide a gross conflict of interest by working on behalf of the Company, whereby we had made contact with Blue Rose to deal with an invoicing and payment issues, to be advised that "Mark Jones" was the person responsible for correspondence.

2. You have been working on behalf of Blue Rose Limited with the view to soliciting and transferring APS customers across to Blue Rose, which is evidenced to you in the form of a customer order from Time Communications, which was addressed to your name, however the company name and address showing clearly as Blue Rose under their registered offices in Hemel Hempstead.

3. You have failed to disclose your knowledge of Blue Rose. And personal associations with that particular business, which we believe was based upon the fact that you wished to conceal any association for the reasons that are outlined in points 1 and 3 above.

4. You have indirectly attempted to induce a fellow work colleague, namely Clive Rawlings, to leave our employment to set up a Digital business, whereby we believe that you have passed on information to Gerry Kilbane, to enable him to facilitate a further approach, as evidence in the statement provided to you."

1. By a letter dated 24 August 2007 Annodata confirmed the decision and notified him of his right of appeal. The reasons for his dismissal were set out in these terms:

"a) Fundamentally violated the Company's Code of Ethics, as set out in s.10 of the Employee Handbook.

b) Fundamental breaches to s.21, of your Contract of Employment relating to "Restrictive Covenants" with direct solicitation of customers and participation to indirectly induce a fellow colleague.

c) Fundamental breaches to s.25, of your Contract of Employment relating to Conflicts of Interests, based upon your failure to devote all your working time and attention to the Company failure to promote general interests of the business; failure to promote general interests of the business; and failure to disclose your knowledge concerning your involvement and relationships where you have been working for a direct competitor business."

1. The Claimant took up his right of appeal. The appeal was to be conducted by a Mr Stafford, who wrote to the Claimant saying he would need time to "review the issues, conduct my investigations and respond to you accordingly". Specifically Mr Stafford said he would need to speak to Annodata's directors. Following this, at the Claimant's instance, Mr Barrett of Time Communications provided a statement seeking to explain Ms Mailer's order and e-mail. He asserted she had been altering an existing template for an old order to a different supplier and had changed the name of the person at the new supplier, but left the name and address of the old supplier unchanged. In fact Mr Stafford never conducted any investigations and told the Employment Tribunal he never had any intention of doing so. Indeed Mr Stafford never determined the appeal. The Claimant was accordingly never notified of the outcome in writing or at all.

The Employment Tribunal Decision

1. Before the Employment Tribunal the Claimant denied he was guilty of the misconduct alleged and argued that the true reason for his dismissal was that he had made protected disclosures. He said he had raised issues in respect of monies received in respect of work done by Lobster which Annodata should have paid over to the Administrators of Lobster (some of which might then have been payable by the Administrators to the Claimant and Mr. Kilbane). The Tribunal found that he had made such disclosures but they were not the reason for his dismissal.

1. Annodata resisted the claim on the basis that the Claimant had been dismissed for gross misconduct, that it had reasonable grounds for believing him guilty and that the dismissal was otherwise fair. It invited the Tribunal to find that the Claimant was in fact guilty of the gross misconduct alleged.

1. Inevitably the Tribunal found the dismissal to have been automatically unfair, holding that Annodata did not provide the Claimant with a reasonable opportunity to consider his response to the disciplinary charge and did not provide him with written notification of the outcome of the appeal. It also found the dismissal to have been substantively unfair by reason of there having been "no reasonable investigation", and procedurally unfair for various reasons.

1. The Tribunal held that the investigation undertaken by Annodata was unreasonable vis à vis the seriousness of the allegations. The standard of the investigation was outside the range of reasonableness for Annodata given the nature and size of the company. Mr Riches should not have been both the investigating officer and the person conducting the disciplinary hearing. Annodata had failed to take steps to investigate the ownership of Blue Rose; it relied on County Court judgments "against Blue Rose" which were nothing of the sort; it had no proper basis for believing, as opposed to having suspicions, that the Claimant was involved in the ownership of Blue Rose. It failed to pursue investigations with Time Communications and had no proper basis for a belief (as opposed to a suspicion) that the Claimant or Mr Kilbane had solicited Mr Rawlings.

1. The Tribunal concluded that Annodata had "not established that Claimant contributed to his dismissal" and that it would not be just and equitable to reduce either the compensatory or the basic award. Its reasoning was set out in paragraph 80 of the Judgment in these terms:

"During the disciplinary proceedings, the Claimant always maintained that he was not involved with Blue Rose and provided a statement from the Managing Director/Owner of Time Communications regarding his lack of involvement with Blue Rose. In addition, we note that there was no hesitation in Nel Mailer of Time Communications sending the order for Kaim Todner to Annodata knowing that was to whom it would go. Mr Riches in discussions with the Claimant referred to the print industry as being incestuous. It appears to the Tribunal from all we have heard that, unsurprisingly, people who work in the industry know each other. It is always difficult for an employee to prove a negative and we are satisfied that the Claimant did what he could do (albeit that was not a significant amount) to do so. We find that if the Respondent had carried out a fair procedure the situation may not have been the same. Having regard to Sections 123(1) and 123(6) of the Act, we find that the Respondent has not established that Claimant contributed to this dismissal. We had regard to the substantial deficiencies in the Respondent's procedures in respect of the disciplinary matters and the apparent foregone conclusion that the Claimant was to be dismissed. …. It would not be just and equitable to reduce any Compensatory Award for the Claimant as to do so would be too speculative. Similarly, we find in respect of the Basic Award."

The Appeal

1. Annodata's appeal was limited to an appeal against the Tribunal's decision in respect of remedy which was set out at paragraph 80 of the Judgment. Specifically it was said, (i) the Tribunal erred in law in its approach to the loss sustained in consequence of a dismissal, and failed to direct itself in accordance with the principles of law settled by Gover & Ors v Propertycare Ltd [2006] 1 ICR 1073 (CA), Thornett v Scope [2007] 1 ICR 236 (CA) and Software 2000 Ltd v Andrews & Ors [2007] 1 ICR 825 (EAT); and (ii) the ET erred in its approach to the issue of reduction of compensation for contributory fault.

1. Annodata did not appeal against the finding of automatic unfairness. As to substantive unfair dismissal under ERA s.98(4): it did not appeal against the finding of substantive unfairness on the ground of procedural flaws (including those flaws which constituted the automatic unfairness), but challenged some specific aspects of the Tribunal's conclusions as to procedural unfairness for the purposes of its appeal, without contending that the challenges would disturb the overall finding of procedural unfairness. It did not accept the Tribunal's conclusion as to "no reasonable investigation", but accepted that as it was not appealing the finding on procedural unfairness and seeking to overturn the overall finding of s.98(4) unfair dismissal, it was pointless to appeal this aspect of the Tribunal's findings. However, Annodata challenged some aspects of the Tribunal's findings in relation to the investigation for the purposes of its appeal.

Annodata's Submissions

1. The Tribunal erred in law in failing to direct itself in accordance with the authorities.

1. The Tribunal was wrong to hold that the disciplinary process was flawed because Mr Riches was both the investigating officer and the person holding the disciplinary hearing. There is nothing intrinsically wrong with such a dual role. It was permissible for the same person to occupy both roles. In coming to its decision, the Tribunal stated that "the Respondent had two pieces of information, namely that from Alicia Cox and the Time Communications Order". That vastly understated the evidence against the Claimant. If the Tribunal considered the rest of the evidence set out in those paragraphs, but concluded (without recording this in its judgment) that this did not constitute evidence of misconduct (alternatively sufficient evidence to dismiss within the bands of reasonableness), this was a conclusion that no reasonable tribunal properly directing itself could have come to.

1. Alternatively if the Tribunal rejected some of this evidence, but did not record this in its judgment, the rejection of this unchallenged evidence was not a conclusion open to the Tribunal properly directing itself and was perverse and/or otherwise an error of law.

1. Further Annodata was left guessing whether or not this evidence was rejected, and (if so) which evidence and why, and why the Tribunal did not regard it as evidence of the employer being involved in and/or working for Blue Rose; and the Tribunal erred in law by not telling Annodata why it lost, so that the judgment does not comply with the rule in Meek v City of Birmingham District Council [1987] IRLR 250.

1. The Tribunal stated that: "We find that if the Respondent had carried out a fair procedure the situation may not have been the same". It followed that the result might have been the same. Having come to that conclusion the Tribunal was bound to carry out the exercise set out in the authorities set out above, but failed to do so. It had a large body of evidence which constituted "sufficient evidence for [it] to conclude that on any view there must have been some realistic chance" that the employee would have been dismissed if the employer had acted "differently and fairly". The Tribunal was obliged by law to make "some assessment …. of that risk when calculating the compensation even though it will be a difficult and to some extent speculative exercise" but it failed and refused to do so.

1. Paragraph 80 appears to show that the Tribunal took into account (a) the denials by the Claimant that he was involved in Blue Rose, (b) the apparent readiness of Nel Mailer of Time to email the order to Annodata, (c) a denial from Mr Barrett that the Claimant was involved in Blue Rose, and (d) that people in the print industry know each other.

1. The bare denials did not trump evidence which contradicts those denials. Ms Mailer's conduct is not cogent as the person to whom she emailed the order had clearly received the original phone message that Nel Mailer had sent to the Claimant, and told her that he was on holiday. In any event, the immediate "panicky" phone calls to the Claimant from Mr Barrett would suggest that Mr Barrett had realized that the Claimant had been "rumbled" and that Nel Mailer had inadvertently caused this. Although Mr Barrett could have been believed, it could well be said it was his or Nel Mailer's fault that Annodata had this piece of evidence linking the Claimant with Blue Rose. Mr Barrett would have known that the Claimant was still working for Annodata as well. It would not have been unreasonable to have concluded that Mr Barrett was simply trying to make amends.

1. Taking all those matters together it could not be said that, had the matter been heard by Annodata in the context of a fair investigation and process, it would have been outside the bands of reasonableness for Annodata to conclude that the Claimant was guilty. The Tribunal simply could not say that no reasonable employer could have come fairly to the conclusion (rightly or wrongly) that the Claimant was guilty of misconduct justifying dismissal.

1. The error in the Tribunal's approach is shown when, at in paragraph 80 it states that: "it is always difficult for an employee to prove a negative and we are satisfied that the Claimant did what he could do (albeit that was not a significant amount) to do so". This was an error of law. The Claimant did not have to "prove a negative", but to adduce sufficient evidence in rebuttal of the evidence against him so as to persuade Annodata that he was not guilty of the misconduct that this evidence strongly pointed to. The reasonableness of an employer's belief does not depend upon whether the employee "did all he could" to persuade the employer of his innocence. It depends on whether that belief was reasonable in light of what the employee did do.

1. Further, even though the Claimant was told (with five weeks' notice) to bring any evidence he wished to the appeal in order to rebut the findings against him, he still adduced no evidence (beyond his own bare denials and Mr Barrett's statement) to rebut all the evidence that it was his intention to set up in competition and that he was already competing. Notably the only evidence he did produce - in relation to the Time Communications Order -did not come from Ms Mailer who would have been the natural person to give that evidence, but came from someone who was not personally involved, and was unable to explain why or how Ms Mailer had made the error she did. Even at the Tribunal hearing, nearly two years later, no further evidence was adduced to bolster the Claimant's case. There was no explanation as to why the Claimant did not call as witnesses any of the close family and business colleagues to give the evidence that would have been so apparently easy to give - not least Ms Mailer; his own sister; Mr Kilbane's girlfriend, the owner of Blue Rose; and Mr Evans of Affinity.

1. The Tribunal fell into error in failing to address the issue of what would have occurred had Annodata acted "differently and fairly", based on the evidence against the Claimant and the lack of evidence put forward by the Claimant. It was inevitable that if the Tribunal had done so, it would have found that there was at least some chance (indeed an overwhelming likelihood) that an employer behaving differently and fairly would nevertheless have fairly dismissed the employee.

1. The range of reasonable responses test (or, to put it another way, the need to apply the objective standards of the reasonable employer) applies as much to the question of whether an investigation into suspected misconduct was reasonable in all the circumstances as it does to other procedural and substantive aspects of the decision to dismiss a person from his employment for a conduct reason: see Sainsburys Supermarkets Ltd v Hitt [2003] IRLR 23 (CA). Accordingly, when it comes to assessing the chances of a fair dismissal had the employer carried out a fair investigation, the question must be judged on the basis of an investigation which met the minimum criteria of reasonableness. After a tribunal process lasting 16 months, a tribunal hearing lasting six days, and representation by counsel and solicitors throughout, it could safely be assumed that the Claimant had the chance to adduce all evidence that he would wish to on his behalf. In spite of that, he adduced no further evidence beyond that which he adduced at the appeal hearing (save that the evidence, from Mr Barrett, was given personally rather than by letter). It was therefore not open to him to say that any reasonable internal, non-legal investigation by Annodata would have uncovered more.

1. As to the Tribunal's treatment of the issue of contributory fault: this was dealt with in one sentence "Having regard to sections 123(1) and 123(6) of the Act, we find that the Respondent has not established that the Claimant contributed to his dismissal". There was no reasoning provided for this conclusion in its reasoning beyond mentioning the substantial deficiencies in Annodata's procedures and the apparently and the foregone conclusion that the Claimant was to be dismissed. This revealed the same error of law. Those matters were what rendered the dismissal unfair. The exercise that the Tribunal was obliged to embark upon was to assess whether the Claimant would have been dismissed if Annodata had acted fairly - ie if there had not been a foregone conclusion or procedural deficiencies. In the context of contributory fault, those two points were at best irrelevant. Neither is in fact evidence going to the issue of whether the Claimant was in fact guilty of the misconduct. If anything, it was evidence which corroborated the misconduct, because it is normally in clear cases where the employee has manifestly committed the act complained of that foregone conclusions are reached, and procedural shortcuts taken. In any event, any finding that there was no contributory fault could only come from a finding that the Claimant had not committed any act of misconduct, nor any other conduct (whether or not the misconduct for which he was dismissed) which was in some way culpable and contributed to his dismissal, but the evidence cumulatively was cogent evidence of such misconduct or culpable behaviour.

1. There was no contrary evidence adduced that would have entitled the Tribunal to find that the Claimant was not guilty and accordingly the Tribunal was obliged to find that the Claimant at least contributed to his own dismissal - if not caused it 100 per cent. Alternatively, by dealing with the issue of contributory fault in one sentence, which sentence is merely a statement that there was no such contributory fault, Annodata cannot know why it has lost, and the judgment is not Meek compliant.

The Claimant's submissions

1. The leading case on the requirement that judicial decisions should be reasoned is English v Emery Reimbold & Strick Ltd [2002] EWCA Civ 605. The key requirement is that "the terms of the judgment should enable the parties and any appellate tribunal readily to analyse the reasoning that was essential to the judge's decision": English at para 21. While the reasoning in para 80 of the Judgment is somewhat compressed, it is adequately clear. The Tribunal's reasons, as set out above, are adequate to satisfy the requirements of English and Meek, there is sufficient explanation for this Tribunal to analyse the decision, for the Claimant to know why he has won, and for Annodata to know why it has lost.

1. The requirements of rule 30 of the Employment Tribunal Rules were pretty much complied with in relation to the decision and anyway that rule is a guide and not a straightjacket: Balfour Beatty Power Networks Ltd v Wilcox [2006] EWCA Civ 1240 at para 25 per Buxton LJ.

1. In any event, if a party considers that there is a material omission in a tribunal's reasons, it is good practice for the party's advocate to seek clarification from the tribunal promptly: Bansi v Alpha Flight Services [2007] ICR 308 (EAT) at §22 per Judge Serota QC, Royle v Greater Manchester Police Authority [2007] ICR 281 (EAT) at §30 per Judge Burke QC. This is what Annodata should have done in the present case.

1. In relation to the issue of contributory fault, it is clear from para 80 that the Tribunal concluded (a) that Annodata had failed to persuade it that the Claimant was guilty of the misconduct alleged against him and (b) that the Claimant had done what he could at the time to seek to demonstrate his innocence.

1. Annodata had submitted that the Claimant was in fact guilty of misconduct and had asked it to make a reduction for contributory fault on that basis. It cannot reasonably contend that it is unable to understand what the Tribunal meant by saying that 'the Respondent has not established that Claimant contributed to his dismissal'.

1. In relation to the issue of a Polkey reduction, the Tribunal's conclusion was that it was 'too speculative' an exercise to make any reduction to the award on that basis. This is the language of Software on which Annodata had relied before the Tribunal. It is no error of law that the Tribunal did not refer to the case by name. As Elias J pointed out in his fifth principle at para 54 "An appellate court must be wary about interfering with the tribunal's assessment that the exercise is

too speculative...".

1. The basis for its conclusion appears from para 80 and its context. The Tribunal had concluded that the dismissal and appeal procedure had been unfair, the investigation had been inadequate, and it had been a 'foregone conclusion' that Annodata would dismiss the Claimant. It concluded that the exercise of constructing an alternative reality in which Annodata followed a fair procedure and conducted a fair investigation was 'too speculative': it simply had too little to go on. In particular, Annodata's central submission was that Mr Riches would still have dismissed the Claimant. However, the Tribunal found (a) that Mr Riches had set out with an agenda to dismiss him and (b) that he should never have been involved in making the decision to dismiss. There was no reliable evidence as to what a dismissing officer acting fairly and with an open mind would have done. The Tribunal had no evidence of what would have happened on further investigation or on an internal appeal since Mr Stafford had failed to conduct any further investigation or to reach any decision on Mr Jones's appeal. The Tribunal's conclusion that there was insufficient evidence to speculate whether Mr Jones might have been dismissed if Annodata had acted fairly was reinforced by its finding that Annodata had no reasonable ground to believe in Mr Jones's misconduct and (b) its rejection of Annodata's case that Mr Jones was in fact guilty of misconduct.

1. The matter is one of impression and judgment, and an appellate court should tread very warily when it is being asked to substitute its own impression and judgment for that of the Tribunal: see Gover at para 22.

1. The submission that the Tribunal ignored the bulk of the evidence when it noted that Annodata had two pieces of information is premised on a misinterpretation of the judgment. The reference to Annodata having 'two pieces of information' (namely evidence from Alicia Cox, and an order from Time Communications) was made in the context of its considering whether Annodata "had grounds to support its belief that the Claimant had been indirectly or directly involved in the setting up and running of Blue Rose Ltd". This was the language of Annodata's first finding of misconduct against Mr Jones and these were indeed the only two sources specifically linking Mr Jones with Blue Rose.

1. More generally, in the course of the Judgment the Tribunal did address the great bulk of the evidence on which Annodata has sought to rely in the appeal. It did not set out every single piece of evidence and its thinking in relation to it, but it was not obliged to do so.

1. The bulk of Annodata's appeal was an attempt to attack the findings of fact. It was in truth a perversity appeal. Yeboah v Crofton [2002] EWCA Civ 794 (CA) makes plain that such a ground of appeal ought only to succeed where an overwhelming case is made out that the employment tribunal reached a decision which no reasonable tribunal, on a proper appreciation of the evidence and the law, would have reached. This is not such a case. There were substantial factual disputes between the parties and the Tribunal carefully considered all the evidence in Annodata's possession.

Discussion

1. The classic statement as to what a Tribunal's reasoning must contain is still that of Bingham LJ held in Meek [1987] IRLR 250 (CA) at para 8; a tribunal's judgment:

"is not required to be an elaborate formalistic product of refined legal draftsmanship, but it must contain an outline of the story which has given rise to the complaint and a summary of the Tribunal's basic factual conclusions and a statement of the reasons which have led them to reach the conclusion which they do on those basic facts. The parties are entitled to be told why they have won or lost. There should be sufficient account of the facts and of the reasoning to enable the EAT or, on further appeal, this court to see whether any question of law arises..."

1. English makes it clear that the key requirement is that:

"the terms of the judgment should enable the parties and any appellate tribunal readily to analyse the reasoning that was essential to the judge's decision.": see para 21.

1. But

"… it must be borne in mind that the extended reasons of an employment tribunal are directed towards parties who know in detail the arguments and issues in the case. The tribunal's reasons do not need to be spelt out in the detail required were they to be directed towards a stranger to this dispute:" see Derby Specialist Fabrication Ltd v Burton [2001] 2 All ER 840 (EAT) per Keene J at para 32. The question is whether the reasons are 'apparent'. An unsuccessful party should not seek to upset a judgment on the ground of inadequacy of reasons "unless, despite the advantage of considering the judgment with knowledge of the evidence given and submissions made at the trial, that party is unable to understand why it is that the judge has reached an adverse decision": see English at para 118.

1. A Tribunal may make a reduction to the basic award on just and equitable grounds where it is satisfied that a claimant's conduct justifies such a reduction, whether or not the conduct was actually contributory to the dismissal:

"Where the tribunal considers that any conduct of the complainant before the dismissal ... was such that it would be just and equitable to reduce or further reduce the amount of the basic award to any extent, the tribunal shall reduce or further reduce that amount accordingly." s.122(2) ERA 1996. **

1. By s.123(l) ERA 1996:

"The amount of the compensatory award shall be such amount as the tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal in so far as that loss is attributable to action taken by the employer."

1. S. 123(6) ERA 1996 provides:

"Where the tribunal finds that the dismissal was to any extent caused or contributed to by any action of the complainant, it shall reduce the amount of the compensatory award by such proportion as it considers just and equitable having regard to that finding."

This subsection is not engaged unless a tribunal is persuaded that a claimant is in fact guilty of culpable or blameworthy conduct that contributed to his dismissal: see Nelson v BBC (No. 2) [1980] ICR 110 at 121D-E per Brandon LJ.

1. In Thornett Pill LJ said at paragraph 34:

"The employment tribunal's task when deciding what compensation is just and equitable for future loss of earnings will almost inevitably involve a consideration of uncertainties. There may be cases in which evidence to the contrary is so sparse that a tribunal should approach the question on the basis that loss of earnings in the employment would have continued indefinitely but, where there is evidence that it may not have been so, that evidence must be taken into account."

1. At paragraph 36 he continued:

"Any assessment of future loss, including one that the employment will continue indefinitely, is by way of prediction and inevitably involves a speculative element. Judges and tribunals are very familiar with making predictions based on the evidence they have heard. The tribunal's statutory duty may involve making such predictions and tribunals cannot be expected, or even allowed, to opt out of that duty because their task is a difficult one and may involve speculation."

1. In Software [2007] 1 ICR 825, the EAT (Elias P) reviewed the authorities, including Gover and Thornett. Both parties accepted his statement of the law as being accurate. At paragraphs 53 Elias J stated the test thus:

"53. The question is not whether the tribunal can predict with confidence all that would have occurred; rather it is whether it can make any assessment with sufficient confidence about what is likely to have happened, using its common sense, experience and sense of justice. It may not be able to complete the jigsaw but may have sufficient pieces for some conclusions to be drawn as to how the picture would have developed. For example, there may be insufficient evidence, or it may be too unreliable, to enable a tribunal to say with any precision whether an employee would, on the balance of probabilities, have been dismissed, and yet sufficient evidence for the tribunal to conclude that on any view there must have been some realistic chance that he would have been. Some assessment must be made of that risk when calculating the compensation even though it will be a difficult and to some extent speculative exercise."

1. He continued at paragraph 54 to set out a summary of the principles which emerged from the cases. Though the passage is lengthy it is worth quoting in full.

"54. The following principles emerge from these cases, (1) In assessing compensation the task of the tribunal is to assess the loss flowing from the dismissal, using its common sense, experience and sense of justice. In the normal case that requires it to assess for how long the employee would have been employed but for the dismissal. (2) If the employer seeks to contend that the employee would or might have ceased to be employed in any event had fair procedures been followed, or alternatively would not have continued in employment indefinitely, it is for him to adduce any relevant evidence on which he wishes to rely. However, the tribunal must have regard to all the evidence when making that assessment, including any evidence from the employee himself. (He might, for example, have given evidence that he had intended to retire in the near future.) (3) However, there will be circumstances where the nature of the evidence which the employer wishes to adduce, or on which he seeks to rely, is so unreliable that the tribunal may take the view that the whole exercise of seeking to reconstruct what might have been is so riddled with uncertainty that no sensible prediction based on that evidence can properly be made. (4) Whether that is the position is a matter of impression and judgment for the tribunal. But in reaching that decision the tribunal must direct itself properly. It must recognise that it should have regard to any material and reliable evidence which might assist it in fixing just compensation, even if there are limits to the extent to which it can confidently predict what might have been; and it must appreciate that a degree of uncertainty is an inevitable feature of the exercise. The mere fact that an element of speculation is involved is not a reason for refusing to have regard to the evidence. (5) An appellate court must be wary about interfering with the tribunal's assessment that the exercise is too speculative. However, it must interfere if the tribunal has not directed itself properly and has taken too narrow a view of its role. (6) The section 98A(2) and Polkey exercises run in parallel and will often involve consideration of the same evidence, but they must not be conflated. It follows that even if a tribunal considers that some of the evidence or potential evidence to be too speculative to form any sensible view as to whether dismissal would have occurred on the balance of probabilities, it must nevertheless take into account any evidence on which it considers it can properly rely and from which it could in principle conclude that the employment may have come to an end when it did, or alternatively would not have continued indefinitely. (7) Having considered the evidence, the tribunal may determine: (a) that if fair procedures had been complied with, the employer has satisfied it—the onus being firmly on the employer— that on the balance of probabilities the dismissal would have occurred when it did in any event: the dismissal is then fair by virtue of section 98A(2); (b) that there was a chance of dismissal but less than 50%, in which case compensation should be reduced accordingly; (c) that employment would have continued but only for a limited fixed period. The evidence demonstrating that may be wholly unrelated to the circumstances relating to the dismissal itself, as in O'Donoghue v Redcar and Cleveland Borough Council [2001] IRLR 615; (d) that employment would have continued indefinitely. However, this last finding should be reached only where the evidence that it might have been terminated earlier is so scant that it can effectively be ignored."

1. In the present case a substantial part of the appeal was addressed to asserting that the Tribunal should not have reached the conclusion which it did on the materials before it. That is an appeal on the grounds of perversity. Before such an appeal can succeed the appellant has to surmount a very high hurdle.

1. The Tribunal found "that [Annodata] has not established that [the] Claimant contributed to this dismissal". That was a finding that Annodata had not adduced sufficient relevant evidence —the onus being firmly on it—to satisfy the Tribunal that on the balance of probabilities the Claimant had been guilty of acts which contributed to his dismissal, and must necessarily include a finding that he was not shown to be guilty of the offences charged. It can be said that this conclusion reached by the Tribunal might seem a surprising one, but it was a conclusion reached after hearing a great volume of evidence and it was one which depended in large measure on the view the Tribunal took of the evidence given by the Claimant. While Annodata assembled a considerable number of pieces of evidence which pointed to the Claimant's guilt of the matters complained of, that collation was trumped, to use Annodata's word, by the apparent credibility of the Claimant in his denials.

1. It can, in our judgment, properly be said that this conclusion is one the reasons for which Annodata cannot understand from the judgment. The Tribunal dealt with the point in a single sentence and appears to have had in mind only the unfairness of Annodata's procedures rather than the evidence which it was said showed actions by the Claimant which contributed to his dismissal. While it is apparent that the Tribunal was finding that he had not committed the offences for which he was dismissed, the Tribunal does not give any indication as to the reasoning behind the decision that what he was shown to have done did not contribute to his dismissal.

1. As to whether the conclusion as to his guilt can be overturned as being perverse, as the Court of Appeal held in Yeboah at para 93, such a ground of appeal "ought only to succeed where an overwhelming case is made out that the employment tribunal reached a decision which no reasonable tribunal, on a proper appreciation of the evidence and the law, would have reached. Even in cases where the Appeal Tribunal has "grave doubts" about the decision of the Employment Tribunal, it must proceed with "great care"; British Telecommunications plc v Sheridan [1990] IRLR 27 at paragraph 34." In our judgment whatever our doubts about the conclusion it cannot be said that a sufficiently overwhelming case has been made out to enable Annodata to have this decision set aside as being perverse, as opposed to having the matter remitted to a Tribunal for further consideration of the question whether he contributed to his dismissal.

1. That, however, is not the end of the matter. The Tribunal also found that "if [Annodata] had carried out a fair procedure the situation may not have been the same." This indicates that the Tribunal's view was that if a fair procedure had been carried out, the result might have been the same. The Tribunal however declined to reduce the compensatory award or the basic award (ie to make a Polkey reduction) on the ground that "to do so would be too speculative." It gave no reasons for this finding.

1. In our view this part of the reasoning is not "Meek compliant". Neither Annodata nor the Employment Appeal Tribunal was able to determine why the Tribunal felt that to do so would be too speculative. We take on board Elias J's statement that an appellate court must be wary about interfering with the tribunal's assessment that the exercise is too speculative, but approaching the point with all due wariness we cannot see why the Tribunal declined to consider the point.

1. We considered whether this was a case in which it would have been appropriate for Annodata to make a Bansi approach to the Tribunal. In our view whilst it is arguable that this was a case in which this might have been the appropriate course, the expansion of the reasons would not have obviated the appeal and in any event a failure to make such an application does not in any way invalidate the appeal.

1. The Tribunal was obliged to recognize that it should have regard to any material and reliable evidence which might assist it in fixing just compensation, even if there were limits to the extent to which it could confidently predict what might have been. It had to appreciate that a degree of uncertainty was an inevitable feature of the exercise. The mere fact that an element of speculation was involved was not a reason for refusing to have regard to the evidence. The evidence in question could not be regarded as being so riddled with uncertainty that no sensible prediction based on that evidence could properly be made: the parties were agreed as to what the evidence was, though not as to its effect.

1. It seems likely that what operated on the mind of the Tribunal was its view that Mr Riches was so set upon the dismissal of the Claimant that he could not conduct a fair disciplinary process. But that view misses the point. The Tribunal has to construct the world as it might have been (a phrase not to be taken too literally: see per Elias J in Software at para 52) if the disciplinary process had been conducted fairly. It then had a number of pieces of the jigsaw from which it could conclude how the picture might have developed. The mere fact that an element of speculation was involved was not a reason for refusing to have regard to the evidence. The Tribunal was not allowed to opt out of that duty because their task is a difficult one and may involve speculation.

1. It cannot be said that the Tribunal's view that the Claimant was not guilty of the matters charged concludes the point. The Claimant is to be compensated because he was unfairly dismissed. If there was there was a chance of dismissal following a fair procedure (albeit less than a 50 per cent chance) his compensation should be reduced accordingly. The Tribunal should therefore have considered whether there was a chance that following an adequate investigation and a fair disciplinary procedure the Claimant would still have been dismissed. Their finding "We find that if the Respondent had carried out a fair procedure the situation may not have been the same" appears to hold that there was a chance, but there is no indication of what that chance was. In our judgment the Tribunal erred in law in not determining that issue and a tribunal must now determine that question.

Disposal

1. Although Counsel for Annodata suggested somewhat faintly that the matter should be remitted to a different Tribunal, applying the criteria suggested by Sinclair Roche & Temperley v Heard [2004] IRLR 763 (EAT) we take the view that the appropriate course is to remit the case to the same Tribunal. It would be disproportionate, particularly in light of the history of the case and the maximum award payable to the Claimant, to require a different Tribunal to rehear effectively all the evidence which has already been adduced once. The original Tribunal is perfectly capable of a professional approach to dealing with the matter on remission. There was no suggestion whatever that the Tribunal was biased, had completely mishandled the case, or was incapable of properly applying an open mind to the issues. It has already conducted a full hearing of the facts over six days. It will be unnecessary for the Tribunal to hear further evidence on the issue of contributory fault or a Polkey reduction. The passage of time since the date of judgment (8 June 2009) is not particularly long and the Tribunal is due to hold a further hearing on the question of remedy at which it can reconsider the questions of contributory fault and a Polkey reduction in the light of this judgment.