Khan v Stripestar Ltd UKEATS/0022/15/SM
Appeal against the dismissal of the Claimant's claim of unfair dismissal. Appeal dismissed.
The decision of the ET was that the Respondent's dismissal of the Claimant was fair. The issue that arose in this appeal was whether, in light of adverse credibility findings by the ET in respect of the Respondent's employee who carried out the initial disciplinary hearing, the Tribunal then fell into error in separating the subsequent internal appeal process and deciding that it was fair or whether the whole process was vitiated by the bad faith of the said employee.
The EAT dismissed the appeal. Following the guidance in Taylor v OCS Group Limited  ICR 1602 the process was still capable of being fair overall where the subsequent appeal process was thorough and reasonably conducted against a background of sufficient evidence of gross misconduct. There are no limitations on the nature and extent of the deficiencies in a first stage disciplinary procedure that can be cured by a thorough and effective appeal.
Appeal No. UKEATS/0022/15/SM
EMPLOYMENT APPEAL TRIBUNAL**
52 MELVILLE STREET, EDINBURGH, EH3 7HF
At the Tribunal
On 10 May 2016
THE HONOURABLE LADY WISE
STRIPESTAR LTD (RESPONDENT)
For the Appellant Mr C Edward (Advocate) Instructed by: Ramsay Employment Law Suite 128 St James Business Centre Linwood Road Paisley PA3 3AT
For the Respondent Mr J Newman (of Counsel) Instructed by: Eversheds LLP 1 Royal Standard Place Nottingham NG1 6FZ******
UNFAIR DISMISSAL : Reasonableness of Dismissal**
The Employment Judge was correct in concluding that a lack of credibility on the part of a witness who had conducted a disciplinary hearing that was disregarded as procedurally and substantively unfair did not inevitably render the whole dismissal unfair. Following the guidance in Taylor v OCS Group Limited  ICR 1602 **the process was still capable of being fair overall where the subsequent appeal process was thorough and reasonably conducted against a background of sufficient evidence of gross misconduct. There are no limitations on the nature and extent of the deficiencies in a first stage disciplinary procedure that can be cured by a thorough and effective appeal.
A distinction can be drawn between an employer's bad faith in issuing a warning that leads to dismissal, as in [Way v Spectrum Property Care Limited ]() EWCA Civ 381**, and bad faith within a deficient disciplinary process not ultimately relied on in assessing whether the dismissal was fair.**THE HONOURABLE LADY WISE******
- The case came before me for a full hearing at which Mr Darren Khan appealed against a decision of the Employment Tribunal ("ET") sitting in Glasgow on 4 February 2015 in which the judgment was sent to parties on 4 March 2015. The ET comprised Employment Judge Lucy Wiseman, ("EJ") sitting alone. Mr C Edward, advocate appeared on behalf of the claimant at the Employment Tribunal and also before me at the Employment Appeal Tribunal. The respondent Stripestar Limited was represented by Ms Conn, solicitor before the Employment Tribunal and before me by Mr Newman, barrister.
- I shall refer to the parties as claimant and respondent as they were in the Tribunal below. The decision of the ET was that the respondent's dismissal of the claimant was fair. The issue that arises in this appeal is whether, in light of adverse credibility findings by the ET in respect of the respondent's employee, who carried out the initial disciplinary hearing, Mr James Abercrombie, the Tribunal then fell into error in separating the subsequent internal appeal process and deciding that it was fair or whether the whole process was vitiated by the bad faith of the said Mr Abercrombie.
- The ET heard evidence from the claimant, from James Abercrombie and from a Mr Graeme McCallum, a regional after sales development leader within the respondent's business who heard the internal appeal. The judge made a number of significant findings of fact, all of which were accepted as being properly made in the hearing before me. I will summarise those briefly for the purposes of this appeal. The claimant commenced employment with the respondents on 1 February 1999. He was responsible for running the workshop where repairs to vehicles are carried out, the respondent being in the business of selling and repairing new and used cars. He was responsible for allocating work to the five technicians in the workshop. The claimant reported to Mr James Abercrombie, after sales leader, who in turn reported to Mr Gordon Naismith, dealer principal, who was responsible for the whole site. A few weeks prior to the claimant's dismissal in August 2014, a customer of the respondent, having decided not to proceed with the repairs to his vehicle, which would have been expensive, received a request from the claimant to purchase it. The claimant then paid £300 to the customer for the car, a Ford Mondeo. He made up a job card for the vehicle, a document used to authorise and record work done to repair a vehicle and time spent thereon. The claimant inserted the name of the original owner on the job card and instructed technicians within the workshop to start dismantling the engine. The Ford Mondeo remained in the workshop for several weeks after which Mr Abercrombie instructed the technicians to remove it from the ramps. The claimant then had the vehicle removed from the respondent's premises.
- On noticing the removal of the vehicle Mr Naismith took it upon himself to make inquiries, and learned that the claimant had purchased the vehicle. A disciplinary hearing was subsequently held and conducted by Mr Abercrombie. The disciplinary hearing was both procedurally and substantively unfair. It lasted no longer than six minutes and the claimant was given no opportunity to make any representations or give information. Had he been allowed to do so, the claimant would have raised with Mr Abercrombie that he, Mr Abercrombie, had been informed of the purchase of the vehicle. The reasons for dismissal included unauthorised purchase of a customer's car, subsequent repairs carried out on the vehicle under the customer's name on the job card and the removal of the vehicle from the premises without the repairs being paid for. On being dismissed, the written decision for which was given to the claimant by letter of 20 August 2014, the claimant appealed.
- An appeal hearing took place on 5 September 2014 chaired by Graeme McCallum. Mr McCallum asked the claimant various questions and on receiving certain responses indicated he would require to make further inquiries. Mr McCallum then conducted a thorough investigation of the circumstances. He interviewed Gordon Naismith, Mr Abercrombie and three technicians from the workshop. Two of the technicians (Gary Carstairs and James Thomson) told Graeme McCallum that the claimant had told them not to "clock on to the job" when carrying out repairs on the Ford Mondeo. Having made further investigations Mr McCallum concluded that the claimant had exhibited gross misconduct having regard to the company's disciplinary procedures. In particular there had been falsification of the job card by failing to insert details of the car owner and the technicians had been told not to clock on to record the time for the job. He also considered that the claimant had brought the company into disrepute given the potential consequences had the customer discovered what had happened to the vehicle. The significant findings in fact in relation to Mr McCallum's conclusions are findings 35, 36 and 37 of the ET judgment. When Mr Abercrombie was interviewed by Graeme McCallum, he denied knowledge of the claimant's purchase of the vehicle.
- The ET considered the case of British Homes Stores Ltd v Burchell  ICR 303** which sets out the correct approach in a misconduct case. The issue was the nature of the investigations carried out by the respondent and the issue of reasonable belief. The EJ concluded that both the very limited investigation carried out by Mr Naismith and the disciplinary hearing conducted by Mr Abercrombie were inadequate and could not be relied on. In particular at finding in fact 78 she states:
"I concluded the disciplinary hearing before Mr Abercrombie was wholly inadequate and, subject to the comments below regarding the appeal process, would have rendered the dismissal procedurally and substantively unfair"**
In light of that conclusion, the EJ turned to give careful consideration to the appeal process to see whether it could cure the otherwise unfair dismissal. She had regard to the case of Taylor v OCS Group Limited  ICR 1602**. She considered the specific alleged misconduct identified by Mr McCallum having made detailed investigations. Ultimately the EJ was satisfied that Mr McCallum had carried out a thorough investigation and that he had reasonable grounds on which to sustain his belief that the claimant had purchased the vehicle contrary to the customer practice in place in the garage, that he had falsified the job card and instructed the technicians not to clock on/off the job. As far as Mr Abercrombie was concerned, the judge formed the distinct impression based on the evidence that he had been aware of the purchase and repair of the vehicle at the time. She went on to conclude, however, that Mr McCallum had no reason not to believe what he was told by Mr Abercrombie at the time. Mr McCallum was independent of Mr Naismith and Mr Abercrombie and held a responsible position within the respondent's organisation. The decision to believe Mr Abercrombie rather than the claimant on the issue of the former's knowledge fell within the band of reasonable responses required of someone in his position. Overall the appeal process was fair and cured the area of defects in the investigation and disciplinary hearing.
- Two separate grounds of appeal were advanced at the hearing before me. I will deal with each in turn. First, it was argued that the Tribunal erred in finding that the respondent's knowledge or state of mind was limited solely to that of its appeal manager; it failed to also attribute the knowledge of the dismissing manager to that of the respondent. On this ground, Mr Edward for the claimant argued that in the light of the findings of the Employment Tribunal in relation to Mr Abercrombie's credibility, it had to be accepted that Mr Abercrombie had no genuine belief in the misconduct of the claimant. In conducting the disciplinary hearing James Abercrombie was acting as agent of the employer and the respondent could therefore be regarded as knowing that there was no misconduct having regard to the Employment Tribunal's finding that Mr Abercrombie himself had knowledge of the purchase and repair of the car. The error was said to be in the ET considering only the knowledge of McCallum who conducted the internal appeal process. Reference was made to [Orr v Milton Keynes Council]()  EWCA Civ 62**. There the Court of Appeal had decided that where an employee had dissembled in evidence given to the senior manager conducting the disciplinary hearing and the claimant was dismissed as a result, it would be unreasonable to input to that senior manager knowledge of the dishonest witness's behaviour which he could not reasonably have acquired through the appropriate disciplinary procedure. Mr Edwards sought to distinguish a situation where the witness was dishonest in his evidence to a disciplinary hearing from one such as the present case where the disciplinary hearing itself was in bad faith. The entire disciplinary process required to be considered, not just the internal appellate stage in considering reasonableness. As the statutory test required consideration of whether the employer acted reasonably then Mr Abercrombie in this case as agent for the employer was as important a part of the process as Mr McCallum.
- In response to the first ground of appeal Mr Newman for the respondent relied heavily on the Court of Appeal decision in Taylor v OCS Group Limited. *The ratio in was submitted to be directly in point. There is no restriction to the nature of the defectiveness of the first instance stage. Anything can be cured by a proper appeal process. The Employment Judge in this case had been entirely correct to put the first stage decision to one side and look only at the appeal. The yardstick was reasonableness, nothing more. McCallum did everything he reasonably could have done. He made inquiries of all relevant parties and came to a decision. It was inappropriate to try to attribute Mr Abercrombie's knowledge to Mr McCallum. That would be impractical and not in keeping with the test in BHS v Burchell. In addressing whose state of mind is relevant for the purposes of section 98(4) the answer had to be Mr McCallum. The relevant person started as Mr Abercrombie but because his process was hopeless and had to be set aside, it was Mr McCallum's investigation, in line with the dicta in Taylor v OCS Group Ltd that required to be scrutinised. No proper distinction could be drawn between the situation that arose in Orr v Milton Keynes, and that which had arisen here. Given that it was a process conducted by Mr McCallum that the Employment Tribunal ultimately scrutinised in considering reasonableness, the situation was analogous with . A witness had been untruthful to the decision maker in *and here it seemed that Mr Abercrombie had been untruthful to Mr McCallum. The test was not whether Mr Abercrombie had in fact lied to Mr McCallum but whether Mr McCallum's ultimate decision that the dismissal was justified was a reasonable one. It had to be remembered that the reasonableness in question was that at the time of the decision. There was no dispute on the authorities that the whole process must be considered when considering whether a dismissal was fair or unfair. The Employment Judge had quite properly looked at stage 1 and stage 2 separately. Having put stage 1 to one side as procedurally and substantively unfair, the question was then whether the situation was remedied by the internal appeal process which was capable of rendering the whole dismissal fair.
- The second ground of appeal contends that the Tribunal reached a decision that no reasonable Tribunal could have reached on the basis of the findings in fact. Mr Edward argued that a reasonable Tribunal, having found as a matter of fact that the dismissing manager (Abercrombie) had knowledge that some of the alleged misconduct had not taken place in that he knew of the purchase of and repairs to the vehicle on the premises, could not have found that the respondent acted reasonably in treating the alleged misconduct as a reason to dismiss. Mr Abercrombie had acted employer when he sanctioned the repairs having been informed of the purchase. He then acted also as employer in dismissing the claimant for those same acts. While it was accepted that the Tribunal cannot substitute its own evaluation for that of the employer at the time, the employer's decision in this case could not be said to be within the band of reasonable responses available. In the circumstances as now proved, the respondent employer was itself in bad faith in this case and could not pray in aid that bad faith in dismissing the claimant. Reliance was placed on the case of Way v Spectrum Property Care Limited  EWCA Civ 381*. In that recent decision of the Court of Appeal the issue had arisen as to whether in a disciplinary process the employer was entitled to have regard to a previous final warning issued to the employee even if it turned out that warning had resulted from the bad faith of the employee's line manager. The Court of Appeal decided that a warning given in bad faith was not, in the circumstances of the case before it, to be taken into account in deciding whether there is or was sufficient reason for dismissing an employee. An employer would not be acting reasonably in taking into account such a warning when deciding whether the employee's conduct was sufficient reason for dismissing him. Mr Edward contended that by analogy in this case, the reasonable approach would have been the Employment Tribunal to realise that in light of Mr Abercrombie's bad faith, the disciplinary process could not be relied upon at all because the employer himself was in bad faith from the outset. That bad faith at stage 1 of the disciplinary process negated the otherwise properly conducted internal appeal process at round 2.
- In responding to the second ground of appeal Mr Newman referred to Morgan v Electrolux Limited 1991 ICR 369* as authority for the proposition that the Employment Tribunal cannot substitute its own evaluation of a witness for that of the employer unless on logical and substantial grounds. The grounds given as examples in included where the witness was a bare faced liar, where there was clear bias or where documents available at the time should have resulted in the employer acting reasonably and fairly at the time of the decision by reaching a different view. Mr Newman submitted that the ET findings that Abercrombie was an unreliable witness did not in any sense automatically render the dismissal unfair. Both Mr McCallum and the Employment Judge were faced with two competing accounts on a particular aspect of the investigation. While the Employment Judge doubted the credibility of Abercrombie's position there was no evidence before McCallum at the time that Abercrombie was a bare faced liar, biased or that documents available at the time clearly showed him to be giving a false account. The accusation by the claimant was before McCallum and it was dealt with. Absent anything that should have alerted Mr McCallum to Abercrombie's lack of credibility it was perfectly reasonable for Mr McCallum to have accepted his account. In any event, the evidence of the three technicians interviewed by Mr McCallum was unequivocal. A retrospective view of bad faith on the part of one witness is not determinative and the Tribunal was correct not to "wade in" and decide what evidence McCallum should have accepted. For the appellant to succeed under ground 2 the perversity test in Yeboah v Crofton  IRLR 634* would have to be satisfied. That case set down an extremely high threshold for perversity. It could not be said in this case that no reasonable Employment Judge would have reached the same decision. The Tribunal's decision was within the reasonable range of opinions that could have been reached. The relevant authorities were followed and a careful analysis of the stage 1 and stage 2 approach of the disciplinary process was scrutinised. In those circumstances, absent logical and substantial grounds indicating that McCallum was wrong at the time, the Employment Judge's impression of Abercrombie was in essence irrelevant.
- In my view the sharp issue focussed by the first ground of appeal is whether there are limits to the extent to which a second or subsequent process internal to the employer can remedy a defective first stage. The leading authority on the matter, Taylor v OCS Group Limited  ICR 1602* is clearly in point. While not, strictly speaking, binding on me, (contrary to the submission to the contrary made by Mr Newman at the hearing), this Court of Appeal decision is highly persuasive, setting out as it does the correct approach that Employment Tribunals should take where a defective first stage is followed by a second internal review or investigation howsoever that second stage is regarded. In *, Smith LJ (at paragraph 47) expresses the view that employment tribunals should:
"…consider the fairness of the whole of the disciplinary process. If they find that an early stage of the process was defective and unfair in some way, they will want to examine any subsequent proceeding with particular care. But their purpose in doing so will not be to determine whether it amounted to a rehearing or a review but to determine whether, due to the fairness or unfairness of the procedures adopted, the thoroughness or lack of it of the process and the open-mindedness (or not) of the decision maker, the overall process was fair, notwithstanding any deficiencies at the early stage".**
The Employment Tribunal in this case found that the first stage disciplinary process conducted by Mr Abercrombie was both procedurally and substantively unfair. Accordingly focus shifted to the process conducted by Mr McCallum. The issue is whether the whole process was capable of being cured by that properly conducted appeal or whether what Mr Abercrombie did was more than defective or unfair, rather it was vitiated by his disingenuity. I have reached the conclusion that the submissions of the respondent on this point are to be preferred. The test in Burchell v British Homes Stores* requires a genuine belief that there was misconduct, based on reasonable grounds following a reasonable investigation. Had the Employment Judge placed any weight on the process conducted by Mr Abercrombie, her decision might be open to criticism. However, having quite properly set aside that whole first stage given its fundamental deficiencies, it was open to the Employment Judge to hold that Mr McCallum had acted reasonably and fairly on the findings in fact made. He interviewed all relevant witnesses, considered material in relation to the company's disciplinary policy together with the behaviour that might amount to gross misconduct and made his decision in an independent and impartial manner. As a corporate body, the respondent necessarily delegated responsibility for the investigation first to Mr Abercrombie and then to Mr McCallum. While the relevant person at stage one was Mr Abercrombie, the ultimate decision maker so far as the Employment Tribunal was concerned was Mr McCallum given the unfair procedure at that first stage. Mr Abercrombie was not a party to the ultimate decision that was upheld by the Employment Tribunal. Mr McCallum had no basis to question the information given to him by Mr Abercrombie which, importantly, was consistent with the information given to him by the three technicians. As Moore-Bick LJ put it in Orr v Milton Keynes Council* (at paragraph 60):
"The obligation to carry out a reasonable investigation as the basis of providing satisfactory grounds for thinking that there has been conduct justifying dismissal necessarily directs attention to the quality of the investigation and the resulting state of mind of the person who represents the employer for that purpose. If the investigation was as thorough as could reasonably be expected, it will support a reasonable belief in the findings, whether or not some piece of information has fallen through the net. There is no justification for imputing to that person knowledge that he did not have and which (ex hypothesi) he could not reasonably have obtained".**
Mr McCallum was clearly representing the employer in making the decision ultimately upheld as reasonable and fair. There are, in my view, no limitations on the nature and extent of the deficiencies in the first stage of the process that can be cured by a thorough and effective appeal. Where as here, an employee is summarily dismissed without proper investigation or inquiry, that dismissal will be unfair unless it can be shown that the subsequent procedure was sufficiently robust as to provide the overall fairness that the law requires. I note that in , at paragraph 48, Moore-Bick LJ suggests that a distinction may be drawn by employment tribunals between particularly serious misconduct, which may render a dismissal fair notwithstanding deficiencies in the process and that where the misconduct is of a less serious nature where procedural deficiencies may have a greater impact. The claimant in this case was on any view involved in dishonest conduct. The wholly defective first stage of the relevant disciplinary process did not prevent a fair dismissal at the second stage. In all the circumstances, I consider that the ET decision exhibits no error of approach in its examination of the whole disciplinary process.
- So far as the second ground of appeal is concerned the test for perversity, that no reasonable Employment Tribunal could have reached the decision made, is consistently described as a high hurdle to overcome. In Yeboah v Crofton  IRLR 634, the Court of Appeal emphasised that an appellate tribunal does not have the advantage of listening to the whole of the evidence, of seeing the witnesses and understanding the nuances of the evidence given. In my view, the conclusion of the Employment Judge that, notwithstanding his evidence, he had been aware of the purchase and repair of the vehicle by the claimant at the time should not be overstated in terms of its significance. Taken at its highest, her conclusion on this witness is that he lied on a single issue in the context of a fair stage two internal disciplinary process. As I have already indicated, he was not the employer or decision maker at stage two, he was a witness. Accordingly, the situation was rather different from that which arose for consideration in [Way v Spectrum Property Care Limited ]() EWCA Civ 381*. There a warning, used as part of an incremental process leading to ultimate dismissal, had been given in bad faith by the employer. In the present case, the claimant was found to have carried out a single course of dishonest conduct that constituted gross misconduct. The procedure in which Mr Abercrombie was a principal actor was at stage 1 of the disciplinary process which I have already found was cured by the thorough and reasonably conducted appeal process of Mr McCallum. Accordingly, unlike the situation in Way*, any bad faith on the part of Mr Abercrombie was not something that had, wrongly, been relied on in deciding whether the claimant's conduct was sufficient reason for dismissing him. Further, the accusation by the claimant that Mr McCallum had known of his purchase of the vehicle was not something that came to light after the disciplinary process had been concluded. Mr McCallum knew of that allegation and took it into account.
- In my opinion, the Employment Judge was correct in her analysis following her determination that Mr Abercrombie had not given credible evidence to her on a particular point. His lack of credibility did not render the whole process unfair. The decision to uphold the dismissal notwithstanding the lack of credibility of Mr Abercrombie is in no sense counter-intuitive when viewed against the background of the other now undisputed facts of the claimant's conduct. In this context the evidence of the three technicians who spoke to his dishonest behaviour is relevant.
- I am satisfied that the Employment Judge was entitled to make the decision that she did on the basis of the findings in fact made. Her conclusion was well within the reasonable range of decisions that could have been reached. For the reasons given the appeal fails and is dismissed.
Published: 12/07/2016 12:14