The claimant was dismissed summarily following an investigation into his chairmanship of another company, in breach of his terms and conditions which included confidentiality and restraint clauses. He brought complaints of wrongful and unfair dismissal to the ET who upheld both claims, reducing the award by 75% for contributory fault but also decided that Polkey did not apply in this case. Further, they felt unable to say whether dismissal would have occurred fairly had a proper procedure been followed. The respondent appealed against the liability and remedy judgments.

The EAT rejected the appeal against the liability judgment in respect of the unfair dismissal; the ET had not erred by finding that the dismissal was procedurally as well as substantively unfair. However, the ET had failed to grapple with the Polkey question and this issue was remitted to the Tribunal for re-consideration. The wrongful dismissal decision was also remitted on the basis that the ET had failed to take into account the contractual term providing for summary dismissal for dishonesty whether or not it was connected with the claimant's employment. Dishonesty was in any event a breach of the implied term of trust and confidence, itself a repudiatory breach of a contract of employment.

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Appeal No. UKEAT/0187/11/RN

EMPLOYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 18 July 2011

Before

HIS HONOUR JUDGE PETER CLARK, MR D J JENKINS OBE, MRS M V McARTHUR BA FCIPD

COMPUTERS IN THE CITY LTD (APPELLANT)

A (RESPONDENT)

Transcript of Proceedings

JUDGMENT

**APPEARANCES**

For the Appellant
MR S PEARMAN (of Counsel)

Instructed by:
Computers in the City Ltd
50 Leadenhall Street
London
EC3A 2BJ

For the Respondent
No appearance or representation by or on behalf of Respondent

**SUMMARY**

UNFAIR DISMISSAL – Polkey deduction

CONTRACT OF EMPLOYMENT – Wrongful dismissal

Dismissal permissibly found to be unfair, but Employment Tribunal erred in its approach to the question of a Polkey deduction and in relation to the common law claim of wrongful dismissal. Appeal allowed in part and case remitted to same Employment Tribunal for reconsideration of Polkey and wrongful dismissal.

**HIS HONOUR JUDGE PETER CLARK****Introduction**

1. This is the full hearing of an appeal by Computers in the City Ltd, the Respondent before the London Central Employment Tribunal, against the Judgment of a full Tribunal chaired by Employment Judge Woffenden, promulgated with Reasons on 2 February 2011, upholding the Claimant's complaint of wrongful dismissal and unfair dismissal subject to a 75 per cent contribution finding, brought against the Respondent, his former employer. The Tribunal awarded the Claimant compensation totalling £3,767.44.

**The facts**

1. The Respondent is a small business employing some 14 staff, providing computer services to companies in the financial sector. The company's principal was Mr McHugh de Clare ("Mr McHugh"). The Claimant commenced his employment on 4 April 2005. His job title was Sales Manager (New Business Division); his salary was £35,000 per annum plus commission. His terms and conditions of employment were contained in a letter of appointment dated 1 April 2005, which he signed. They included a standard confidentiality clause, set out at paragraph 6.9 of the Reasons, and a restraint clause prohibiting his taking employment with any of the company's clients during his employment and for a period of nine months following termination (paragraph 6.10). The contractual notice period was one month on each side. The company's disciplinary rules provided for summary dismissal in the following circumstances:

"Any serious misconduct or a serious breach of the terms of your employment; or

The commission of any fraud or dishonesty, whether or not connected with your employment; or

The misuse or divulging of any confidential information."

1. In October 2009 the Claimant went on three weeks' holiday to Nigeria, returning to work on 27 October. Another employee, Mr Martin, was absent at the same time as the Claimant due to an eye infection. During their absence, concerned at the level of sales activity predicted by the Claimant was not coming to fruition, Mr McHugh, his wife and another employee, Simon Betts, carried out some research on the internet. They discovered the following: a company, Pi Global Partners Limited ("Pi Global") was incorporated in 2006. Its directors included Mr Charles Chukwedo, a housing officer. The Claimant was described as Chairman and CEO of the company, whose stated object was to provide local businesses with global investors. An introduction fee of £250 to such investors was mentioned. S, a former employee of the Respondent now believed to be working for a competitor, was described as a principal analyst, and Mr Martin as a business analyst for Pi Global.

1. The Claimant's involvement in Pi Global was first spotted by Mrs Haines, head of the Respondent's administration, when she received a letter from Regus, the well-known provider of office accommodation to business and a client of the Respondent, addressed to the Claimant at Pi Global using the Respondent's address. That letter contained a 'gold card' entitling Pi Global to the use of Regus' services, together with invoices directed to the Claimant at Pi Global. A search of the Claimant's computer revealed pictures of him with various expensive cars, some of them bearing his personalised number-plates. There was also a reference which he gave to a tenant and two emails to Mr Martin apparently unrelated to the Respondent's business but to that of Pi Global. In evidence to the Tribunal, the Claimant claimed that he told Mr McHugh at his initial interview that he was in the early stages of setting up a company, later to become Pi Global, as an intermediary for other companies seeking funding. Mr McHugh denied that any such conversation took place. The Tribunal accepted Mr McHugh's account (paragraph 6.6), the suggestion being raised by the Claimant for the first time late in the Tribunal proceedings. The Tribunal found that had the Claimant mentioned his plan it was inherently unlikely that Mr McHugh would have employed him, given his fear that the Respondent's confidential information might be disclosed.

1. Secondly, the Claimant's name was linked with a church in Croydon, the Holy Sabbath of Christ. That church's leader and Most Reverend Prophet was shown to be the Claimant. The church's days of worship included Fridays at 7.00pm to 9.00pm, and its web page stated that holy days started the day before from evening to evening, 4.00pm to 4.00pm. That appeared to be inconsistent with the arrangement that the Claimant had reached with Mr McHugh allowing him to leave early on Fridays in order to attend a synagogue in Stamford Hill, North London.

1. Armed with this information, Mr McHugh convened a meeting with the Claimant on his return to work on 27 October at 10.00am. The Claimant was not informed of the purpose of the meeting and was given no advance notice that it was a disciplinary meeting. We pause to observe that the disciplinary process followed by Mr McHugh would not have complied with the former statutory dismissal and disciplinary procedure. Mrs Haines attended as note-taker. An issue arose as to whether the Claimant was told that he could be accompanied at the meeting. The Tribunal accepted the Claimant's case that he was not (paragraph 6.18). We have read Mrs Haines' note of the meeting, broadly agreed by the Claimant and referred to, together with Mr McHugh's handwritten notes at paragraph 6.17 and 6.18 of the Reasons. The meeting ended with the Claimant's summary dismissal by Mr McHugh. He was not offered and did not ask for a right of appeal. Mr McHugh's reasons for dismissal are summarised at paragraph 6.19.

**The Tribunal liability decision**

1. The law relating to both wrongful and unfair dismissal is correctly set out at paragraphs 7 16 of the Reasons. In their conclusions, the Tribunal found that Mr McHugh's attitude to what he had discovered during the Claimant's absence in Nigeria was to, "shoot first and ask questions later." The Respondent's reasons for dismissal, summarised at paragraph 6.19 and relating to his conduct, were accepted by the Tribunal. However, the evidence fell short of amounting to a repudiatory breach of contract by the Claimant (paragraph 18) justifying summary dismissal. Accordingly, the complaint of wrongful dismissal succeeded. As to unfair dismissal, having found that the Respondent had established a potentially fair dismissal, conduct, the Tribunal concluded that the Respondent did not have reasonable grounds for their belief in the Claimant's misconduct, having failed to carry out a reasonable investigation. Further enquiry was warranted (paragraph 19). Further, the dismissal was procedurally unfair. Having regard to the ACAS Code of Practice in the respects identified, also at paragraph 19, the compensatory award was increased by 25 per cent to reflect those breaches of the Code.

1. They dealt with the Polkey v AE Dayton Services Ltd [1987] IRLR 503 HL argument raised on behalf of the Respondent shortly at paragraph 20. The Polkey exception, that a proper procedure would have been utterly futile, did not apply on the facts of this case. Further, they felt unable to say whether dismissal would have occurred (we interpose, fairly) had a proper procedure been followed. Consequently, no Polkey deduction was made.

1. Finally, they considered (paragraph 21) that the Claimant was guilty of conduct contributing to his dismissal in a number of respects. They assessed the level of contribution at 75 per cent. There is no challenge on appeal by either party to that assessment, nor to the calculation of compensation that is set out at paragraph 23.

**The appeal**

1. Mr Pearman advances four separate grounds of appeal on behalf of the Respondent. The Claimant has not attended this hearing before us, but we take into account his written submissions by way of skeleton argument lodged on 1 July 2011. Having considered those written submissions by the Claimant and the oral submissions of Mr Pearman, our conclusions are as follows.

**Wrongful dismissal**

1. We are satisfied that the Tribunal dealt with this aspect of the claim at paragraph 18. However, we agree with Mr Pearman that the Tribunal's reasoning was flawed, in that it failed to take into account the contractual term (paragraph 6.12) providing for summary dismissal for dishonesty whether or not connected with the Respondent's employment. The relationship between the Claimant and Pi Global went beyond the question of breach of confidence. It also raised questions of the Claimant's honesty, first in his dealings with the Respondent. We have been taken to the Respondent's notes of the meeting on 27 October 2009, not rejected as inaccurate by the Tribunal in this respect (paragraph 6.18), in which he denied that he was working for another company. He was: Pi Global. Secondly, the information given on Pi Global's website about the Claimant, his business experience and his personal wealth, was plainly dishonest and misleading to potential clients of that company. That some of the information was obtained post-dismissal is immaterial for the purposes of determining the wrongful dismissal, as opposed to unfair dismissal, claim (see Boston Deep Sea Fishing v Ansell [1988] LR 39 ChD 339).

1. Further, the Tribunal failed to take into account in this connection the reason given by the Claimant to Mr McHugh for having Friday afternoons off work, attending a synagogue in Stamford Hill, when he was described as the leader and Most Reverend Prophet of the Holy Sabbath of Christ church in Croydon. Since dishonesty is in any event a breach of the implied term of trust and confidence, itself a repudiatory breach of his contract of employment, this aspect of the case requires, in our judgment, reconsideration by the Employment Tribunal.

**Unfair dismissal**

1. Despite Mr Pearman's understandable focus on the dishonesty aspect of the case, we are not persuaded that the Tribunal fell into error at paragraph 19 in finding the dismissal unfair, both for the procedural failures there identified and on the substantive failure to carry out a reasonable investigation. Nor do we consider that the Tribunal were wrong in law in concluding that this case did not fall within the Polkey exception (see, for example, Spink v Express Foods [1990] IRLR 320). However, we agree also with Mr Pearman that in failing to grapple with the Polkey question as to whether a fair procedure including a reasonable investigation would have resulted in a fair dismissal, if not on 27 October then shortly thereafter, expressed as a percentage chance, the Tribunal fell into the error identified by the Court of Appeal in Thornett v SCOPE [2007] ICR 236 (see also Gover v Property Care Ltd [2006] ICR 1073 CA and Software 2000 Ltd v Andrews. This issue also, in our judgment, should be remitted to the Tribunal for reconsideration.

**Disposal**

1. It follows that this appeal is allowed in part. The issues of wrongful dismissal and the Polkey deduction are remitted to the same Tribunal, if practicable, for reconsideration. The fact that those issues are remitted is not a reason, contrary to the submissions of Mr Pearman, for us to remit also the unfair dismissal liability question in relation to which we have found no error of law made out.

1. Finally, the Tribunal is reminded that if a Polkey deduction is found to be appropriate, that deduction must first be made from the gross calculation of loss under the compensatory award, and the 75 per cent contribution finding must then be applied to the net post-Polkey deduction figure (see Digital Equipment Co Ltd v Clements (No 2).