KRD Property Maintenance Limited v O'Donnell UKEATS/0016/10/BI
Appeal against finding of unfair dismissal where the ET found that the respondent had no genuine belief in the claimant's misconduct. Appeal allowed on perversity and remitted to a fresh tribunal.
The claimant had worked as a supervisor for a firm that provided cleaning for property and letting agents but not individuals. The respondent's MD had also invested in a separate business that provided cleaning services to individuals and asked employees to distribute leaflets for that business. The respondent was informed by two employees that the claimant was also working for individuals and paying his fellow employees to carry out the work. He was dismissed following a disciplinary meeting, despite claiming that the MD knew of this additional work. The ET, applying Burchell, found that the MD did not have a genuine belief that the claimant was guilty of misconduct at the time of the dismissal and that the real reason for dismissal was that the claimant was undertaking work that might have gone to the MD's other business. In arriving at their conclusions the ET had placed considerable weight on the authenticity of letters presented to the disciplinary hearing, though that serious issue was not raised in cross-examination. They had also discounted the evidence of a young employee.
In this judgment, Lady Smith reviews the tribunal's findings including a note from the judge about the evidence presented during the hearing. She concludes among other things that i) it was not open to the Tribunal to factor in reasons to conclude the MD had no genuine belief by rejecting his oral evidence that he had been told of the claimant's activities by two witnesses; ii) that the Tribunal had wrongly made assumptions about the credibility of one of the witnesses purely on the age of that witness; iii) following Aptuit, the judge should have alerted the parties about her concerns about the authenticity of the letters; and iv) there is no meaningful distinction between misconduct and "blameworthy conduct". The Tribunal's decision was therefore perverse and the matter was remitted to a fresh tribunal.
Appeal No. UKEATS/0016/10/BI
EMPLOYMENT APPEAL TRIBUNAL**
52 MELVILLE STREET, EDINBURGH, EH3 7HF
At the Tribunal
On 2 November 2010
THE HONOURABLE LADY SMITH**
MS J GASKELL**
MR M SMITH, JP, OBE**
KRD PROPERTY MAINTENANCE LTD (APPELLANT)
WILLIAM JAMES CASSIDY O'DONNELL (RESPONDENT)
Transcript of Proceedings
For the Appellant MR DAVID HAY (Advocate)
Instructed by: Mr Ian Kennedy The Work Ethic Limited Glebe End 23 Cramond Glebe Road Cramond Village Edinburgh EH4 6NT
For the Respondent MR V TOUGH (Representative) ELP Solicitors 99 Ferry Road Edinburgh EH6 4ET**
Reasonableness of dismissal
Unfair dismissal on grounds of misconduct. Tribunal's conclusion that Respondent had no genuine belief in the Claimant's misconduct not supportable on its findings in fact. Nor was it supportable on the Tribunal's reasoning. Perversity appeal allowed and case remitted to a freshly constituted Employment Tribunal.
THE HONOURABLE LADY SMITH
- This is an appeal from the judgment of an Employment Tribunal sitting at Edinburgh, Employment Judge Ms Susan O'Brien QC, registered on 2 March 2010. The Tribunal found that the Claimant had been unfairly dismissed and that finding is appealed against.
- We will continue referring to parties as Claimant and Respondent.
- The Claimant represented himself before the Tribunal and was represented by Mr V Tough, representative, before us. The Respondent was represented by Mr Moffat, solicitor, before the Tribunal and by Mr Hay, advocate, before us.
- The Respondent's business is that of providing cleaning and maintenance services for property factors and letting agents. They do not provide cleaning services for individuals. However, in January 2009, the Respondent's managing director, Mr Kevin Duff, invested a substantial sum of money in another company, Lothian Cleaning Services Ltd ("LCS"), whose business was to be that of providing high level window cleaning to individual clients. On the Tribunal's findings in fact, the Respondent's approach was to be supportive of LCS as is evident from their findings that Mr Duff instructed employees of the Respondent to distribute leaflets which advertised the services of LCS, from time to time and that he also facilitated the transfer of one of the Respondent's employees to LCS.
- The Claimant was employed by the Respondent from 2004 and was promoted to the role of supervisor in about January 2009.
- In or about June 2009, two employees of the Respondent told Mr Duff, on separate occasions, that the Claimant was carrying out cleaning work for individual customers, that he was using the Respondent's equipment to do so, that he was collecting money from them for the work carried out and that he asked other employees to do so. The findings on these matters are at paragraphs 11 and 12 of the Tribunal's judgment:
"11. In or about the end of June 2009, the new young employee told Mr Duff that the claimant had asked him to clean some windows for a single owner occupier in a development managed by the respondents for a factor. The employee, Mr Steven Ward, said that he had received £10 for this from the owner, and that he had passed it over to the claimant, who was his supervisor. He said that the claimant was collecting money for cleaning individual customers' windows or for (sic) asking his men to do so.
12. Mr Duff investigated further. He asked another employee, Mr Derek Gemell, about the matter. He said that the claimant was distributing business cards on his own behalf, and using the respondents' equipment to clean windows, in the employers' time."
- Mr Duff called the Claimant in to see him and told him the allegations set out in paragraphs 11 and 12 of the Tribunal's judgment (see paragraph 13 of the Tribunal's judgment). On 26 June 2009, after that meeting with the Claimant, Mr Duff suspended him. There was a disciplinary hearing on 29 June 2009, the outcome of which was that the Claimant was dismissed. In the course of the disciplinary hearing, he made certain admissions. He admitted that he had twice cleaned windows for his own benefit in company time. The first, he said, was when he was working alongside Mr Duff, Mr Duff had known about it, did not object and told him to use the money to buy pies. The second occasion was, he said, recent which indicates that the first occasion was not recent. There was no suggestion of Mr Duff having known of the recent occasion or of him having sanctioned it. Also, the Claimant admitted handing out his own business cards during the lunch hour. He said that was so that he and another employee, Mr Bowebank, could make money on Saturdays by cleaning windows.
- He appealed and the appeal was heard on 3 July. His appeal was unsuccessful.
The Tribunal's judgment and the Employment Judge's note of evidence
- The Tribunal accepted that the case of Burchell v British Home Stores  IRLR 379 applied and they, accordingly, considered whether or not Mr Duff had a genuine belief that the Claimant was guilty of misconduct at the time he decided to dismiss him.
- They concluded that he did not and found that the reason he dismissed the Claimant was that he was distributing business cards to attract business which might otherwise have gone to LCS, a company in which Mr Duff had made a substantial investment. The Tribunal found that that conduct on the part of the Claimant was "blameworthy conduct" but "not misconduct". The Tribunal's conclusion that Mr Duff had no genuine belief that the Claimant had been guilty of misconduct was an essential building block in their reasoning, as was their conclusion that what he had done was not misconduct.
- Documents which were said to be notes of the disciplinary and appeal hearings were referred to at the Tribunal hearing. The Tribunal made findings in fact that they were "not accurate" but they do not state in what respect they were not accurate nor do they explain on what basis they made that finding.
- Two letters were also referred to at the hearing. One was from Mr Ward and one was from Mr Gemmell, the two employees referred to by the Tribunal at paragraphs 11 and 12. They did not give evidence. The letters were to the same effect as the information provided orally by them to Mr Duff, as per paragraphs 11 and 12 of the judgment. Addresses where the Claimant was said to have been carrying out work for himself during working hours and time periods were, additionally, provided in the letters. The Tribunal concluded that both letters were "clearly not authentic" (paragraph 37).
- The reasons given by the Tribunal for their conclusion about the letters were first that they were not provided to the Claimant prior to the disciplinary or appeal hearings and secondly that:
"The language used is too legalistic and the layout is too professional." (paragraph 37)
particularly when they compared them to the witness statements produced by the Claimant from other persons.
- The Tribunal then placed considerable reliance on their conclusions regarding those two letters. At paragraph 43 of their judgment, they state that they did not accept that Mr Duff had a genuine belief that the Claimant had been guilty of misconduct when he decided to dismiss him; part of their explanation for that conclusion is given as being:
"…. It would have meant placing reliance on the statements of two witnesses, where the written statements were not authentic ….."
The reference to "statements" in paragraph 43 is, evidently, meant to refer to the two letters.
- Following the institution of the appeal, by order of this Tribunal, the Employment Judge was asked to provide a note of any evidence given or not given in respect of certain issues including their finding that the two letters were not authentic. The Employment Judge responded in a note dated 31 July 2010 in which the letters are referred to as R/16 and R/17 and which includes the following:
"page 6 (Duff) When asked who actually drafted the wording of Mr Gemmell's letter, he replied "The chaps drafted themselves"; when asked if the letter had been written and typed by Mr Gemmell he replied that he had said he could not dictate it. "He did it. He did use my office." (NB. The reply referring to chaps plural is accurately noted. The E J noted in margin. "Don't believe this" as the evidence was given.) With respect to R/17 by Steven Ward, letter dated 24 June, he said that the same thing had happened. Again he was asked "He wrote down these words and typed them on the computer in the office?" Mr Duff replied "Yes". (The Employment Judge noted in the margin "Ditto", ie she did not believe he was telling the truth at the time he was giving the evidence)."**
- Those notes show that it was not put to Mr Duff in cross examination that he was lying about the provenance of the two letters. Nor was he questioned by the Tribunal to that effect. It was not put to him at all that they were not authentic. Nor was it suggested that he colluded in any way with the two employees in the drafting of the letters or that the information contained in the letters did not accord with what he learnt from them.
- So far as any evidence given by the Claimant regarding the letters is concerned, the Judge's note states:
"(Claimant): Asked in cross examination whether he accepted that R/16 and R/17 were given to Mr Duff during the investigation. Said he had been told that Mr Duff had statements, but not the names of the people who had given them. He did not see them at the time. When asked if he accepted that Mr Duff had spoken to the actual witnesses, he said "Yes, but not that the notes are the whole truth." Page 45 (Claimant): "These notes could have been twisted and I think they have been twisted….I am saying Derek Gemmell and Steven Ward, they have got together with Kevin Duff to concoct this statement."
The Claimant did not, accordingly, suggest in his evidence that the letters were not authentic.
- Otherwise, the Tribunal's reasons for concluding that Mr Duff did not have a genuine belief in the Claimant's misconduct are to be found also in paragraph 43:
"43. On one approach the Tribunal could have accepted that, as at the time of dismissal, the employers had reasonable grounds for concluding that the claimant was guilty of gross misconduct. However, this would have meant accepting that the employer believed the word of a boy barely out of school against that of the claimant, who is a mature adult with a good job record……It would have meant accepting Mr Duff's oral evidence about what those witnesses had said before dismissal. The Tribunal did not accept his evidence."
- The reference to a "boy barely out of school" is evidently a reference to Steven Ward. The Tribunal did not see or hear from him; he was not called as a witness. They made only two findings in fact about him, at paragraph 6, where they state he was:
" …a young employee."
and that he was hired by Mr Duff a few weeks after November 2008. It follows from that that he had been in the employment of the Respondent for over six months by the time of the conversation referred to in paragraph 11 of their judgment, which is set out above.
- The Tribunal also found that there was procedural unfairness for three reasons. First, the Claimant should have been shown any statements from Mr Ward and Mr Gemmell, before he was dismissed and that failure was not cured by explaining the allegations to him; it was the Respondent's case that they were explained but the Tribunal did not accept that that had occurred. Secondly, the time between the Claimant's suspension and the disciplinary hearing was "scandalously short"; the Tribunal noted that the Respondent's disciplinary rules allowed for 48 hours notice of such a hearing to be given but did not accept that weekend days could count. At paragraph 48, they stated:
"This simply will not do. At the minimum, this should have been taken to mean 48 hours counted in working days."
Thirdly, they found that even although the Respondent was a small organisation, it was unacceptable that Mr Duff should have been responsible for investigation, the decision to dismiss and the decision to refuse the Claimant's appeal. The person who they suggested as an alternative was, however, someone with whom the Claimant did not see 'eye to eye' and was not an officer of the Respondent company.
- The Tribunal found that compensation should be reduced by 15%. They explain their approach at paragraph 51:
"51. The Tribunal ….had to ask itself whether the claimant had contributed to his own dismissal. It applied the approach of Nelson v BBC (No 2) 1979 IRLR 346 CA. There was blameworthy conduct, albeit not misconduct, namely the cleaning of windows on two occasions for personal gain, (once with the approval of Mr Duff), and the handing out business cards during the employers' time. The matters to which the complaint relates were contributed to by this conduct. It is just and equitable to reduce the claimant's loss for that reason. The Tribunal concluded that there was a contribution, but that it was very small and placed it at 15%."
23.The expression "blameworthy conduct" connotes conduct that involves wrongdoing and is worthy of censure. The Tribunal does not explain how they reach the conclusion that such conduct is not misconduct.
- As to whether there should be a deduction, the Tribunal concluded that even without the procedural flaws, the Claimant would still have been dismissed but that he could not have been dismissed fairly. Since the "blameworthy conduct" of handing out business cards for himself in his employer's time was not misconduct, dismissal for that activity would have been unfair.
- At the heart of the Respondent's case were the submissions that the Tribunal had erred in their application of the first stage of the test in British Home Stores v Burchell  IRLR 379, in that they had had regard to the quality of the material available to Mr Duff and that in all the circumstances, the Tribunal's decision was a perverse one. The latter submission was developed under reference not only to the Tribunal's approach to the Burchell test, but to there being a conflict between their findings in fact at paragraphs 11 and 12 and their conclusions at paragraph 43, to the Tribunal's approach in paragraph 43 involving a wholly ill-founded assumption as to Mr Ward's credibility, to the Tribunal having failed to draw the attention of the Respondent's solicitor to their being inclined to the view that the letters from Mr Ward and Mr Gemmell were not authentic, to the fact that since the proposition that the letters were not authentic amounted to a serious allegation, it ought to have been clearly put to Mr Duff (but was not), to the Tribunal having no proper basis for their approach to the 48 hour time period between suspension and disciplinary hearing, and when considering procedural fairness, to the Tribunal having no proper basis for their conclusion that the Claimant had not committed misconduct when considering reduction in compensation and the question of whether or not there should be a Polkey **reduction. When all these factors were taken into account, it could only be concluded that the decision was perverse one.
- In the course of his submissions, Mr Hay referred to the following authorities in addition to Burchell: Glasgow School of Art v Taylor unrepd UKEATS/0011/06 for the summary at paragraphs 33 and 34 of the limited circumstances in which an appeal on grounds of perversity will be upheld, and Aptuit (Edinburgh) Limited v Kennedy** unrepd UKEATS/0057/06 for the observations at paragraph 38 as to a Tribunal's obligations where a point of law appears to it to arise in the claimant's favour which had not been foreshadowed in the claimant's case prior thereto.
- Mr Hay invited us to uphold the appeal and remit the case to a freshly constituted Tribunal for a rehearing. He submitted that it would not be appropriate, in the circumstances, to remit to the same Tribunal. In particular, it was not appropriate because of the comments that had been made regarding the assumptions as to Mr Ward's credibility on the basis of him being a "boy barely out of school" and the indication from the note of evidence that a conclusion had been reached that Mr Duff was not telling the truth without the relevant point having been raised with him and prior to the conclusion of the evidence and submissions.
- For the Claimant, in a very brief submission, Mr Tough asked us to look at the judgment of the Employment Tribunal. The Tribunal had asked itself the correct questions in law. At paragraph 25, they had identified the reason for the dismissal. He could, he said, offer no further assistance.
- He agreed that any remit should be to a fresh Tribunal.
- This being a case where the employer's position was that the Claimant was dismissed for misconduct, the oft rehearsed guidance given by Arnold J in **British Home Stores v Burchell is relevant. In particular, we refer to the following passage at paragraph 2 of that judgment:
"What the Tribunal have to decide is…whether the employer who discharged the employee on the ground of the misconduct in question…..entertained a reasonable suspicion amounting to a belief in the guilt of the employee of that misconduct at that time. That really is stating shortly and compendiously what is in fact more than one element. First of all, there must be established by the employer the fact of that belief; that the employer did believe it. …"
- Later in that paragraph, Arnold J explains further:
"It is not relevant….for the Tribunal to examine the quality of the material which the employer had before him, for instance to see whether it was the sort of material, objectively considered, which would lead to a certain conclusion on a balance of probabilities, or whether it was the sort of material which would lead to the same conclusion on the basis of being 'sure'…"
It is not necessarily wrong for a Tribunal to fail to have regard to the guidance in Burchell in its approach to the application of section 98 of the Employment Rights Act 1996** in a particular case but this Tribunal did do so. Thus, at the first stage, their task was to decide simply whether or not the employer genuinely believed that the employee was guilty of whatever misconduct was alleged. It was not a matter of assessing the quality of the evidence on which he relied. Whilst that is a matter which arises subsequently, it is not relevant to the issue of whether or not the employer genuinely believed that the Claimant had committed misconduct.
- Two other matters of law arise in this case. The first concerns the approach that a Tribunal should adopt if it becomes apparent that a significant issue has arisen that it considers should be addressed but the matter has not been foreshadowed by either party. Although the comments of this Tribunal as to the proper approach in the case of Aptuit v Kennedy** concerned circumstances where the new issue was one of law, we consider that the observations contained in paragraph 38 are as applicable to a case where the new point is a question of fact. Accordingly, in short, if the Tribunal decides that the point is one which should become an issue in the case – that is, if they consider it possible that they may make a finding in fact about it, particularly if it has potential to favour one party – they must be mindful of the need to avoid acting as advocate for a party who is unrepresented and:
"..in the interests of achieving fairness as between parties, the represented party must be advised about the issue he thinks he has spotted at the earliest possible opportunity."
- In the context of a question of fact, that means that the Tribunal has a responsibility to put the point, whatever it is, clearly and plainly to the relevant witness so that it is clear that they consider it an issue which has to be addressed. In this case that was a matter of putting clearly and plainly to Mr Duff the suggestion that the two letters were not the work of Mr Ward and Mr Gemmell but were in fact fabricated, which is what the Tribunal's findings that the letters were not authentic amounts to.
- Finally, where an appeal is on grounds of perversity, it needs to be borne in mind that the test is a high one and should only be upheld in circumstances where it can properly be concluded that the Tribunal's conclusion can be characterised in the manner set out in cases such as Stewart v Cleveland Guest (Engineering) Ltd  IRLR 440, for example, that it is irrational, offends reason, is plainly wrong, is not a permissible option, or flies in the face of properly informed logic.
Discussion and Decision
- We are persuaded that this appeal is well founded.
- First, there is a fundamental conflict in the Tribunal's reasoning. At paragraphs 11 and 12, they find as fact that Mr Ward and Mr Gemmell reported to Mr Duff that the Claimant had been conducting himself in the manner there described. That being so, it was not open to the Tribunal to factor into the reasons why they were not prepared to accept that Mr Duff genuinely believed that the Claimant was guilty of the conduct complained of, that they did not accept his evidence that he was told about it by those two men. That, however, is what, at paragraph 43, they did as is evident from their observation:
" ..It would have meant accepting Mr Duff's oral evidence about what those witnesses had said…"
when explaining that they were not prepared to accept it.
- Further, another significant step in the Tribunal's reasons for concluding that Mr Duff had no genuine belief in the Claimant's misconduct is that they were not prepared to accept that Mr Duff believed the "word of a boy barely out of school". By the ensuing comment about the Claimant being a mature adult with a good job record, they seem to indicate that a young person is to be regarded as inherently less credible and reliable than an older person who has been employed for longer and so, if there is a conflict in their evidence, the latter must, on that basis, be believed. That is, however, an inappropriate and unreasonable approach to the assessment of credibility and reliability. No assumptions can properly be made about that matter simply based on the age of a witness or the length of time for which he has been employed.
- We turn then to the way in which the Tribunal dealt with Mr Duff's evidence about the letters. The Employment Judge's note of evidence is referred to above. It shows that, having heard Mr Duff say, in evidence, that the letters were drafted by the two employees themselves, she, at that point, concluded that he could not be believed about that. He was not, however, given the opportunity to comment on the Employment Judge's view that the letters were not authentic. As her note of the Claimant's evidence shows, it was not his position that the letters were not authentic and he did not cross examine Mr Duff to that effect. The point arose only in her mind, it was clearly an important one so far as she was concerned, and it should, accordingly, have been put to him. It would then have given Mr Duff the opportunity to comment and would have alerted Mr Moffat, the Respondent's solicitor to the issue that had arisen in the mind of the Employment Judge. For the reasons explained in **, it is only fair that the Tribunal alerts parties to the point that has arisen in such circumstances. The matter is particularly acute in this case since the Tribunal's conclusion that the letters were not authentic was the basis of them stating that they had "real doubt about the good faith of Mr Duff" (paragraph 37). To question good faith is a very serious matter and the person whose integrity is being challenged in that way is entitled to have matters made quite clear to them.
- We turn then to the Tribunal's findings regarding the procedure adopted. As above noted, they concluded that the period between the Claimant's suspension on Friday 26 June and the disciplinary hearing on Monday 29 June was "scandalously short". We observe that although the matter may have arisen in evidence, it does not appear to have been covered in the course of submissions; the Tribunal's reference to parties' submissions does not refer to it. It ought, however, to have been raised with parties by the Tribunal during submissions if it seemed to them to be significant. Dealing with the substance of the issue, we note that the Respondent's disciplinary procedure provided for there to be 48 hours between the two events. The Tribunal's reasoning appears to indicate that it can never be sufficient for an employer to allow only a 48 hour time lag between suspension and disciplinary hearing if it occurs over a weekend. There is, however, no rule to that effect and the Tribunal does not cite any authority in support of their conclusion. The Tribunal makes no findings in fact which indicate that the fact that the Claimant was given notice on the Friday that his disciplinary hearing would be the following Monday in fact caused him any difficulty.
- As to the Tribunal's approach to the question of whether or not there was procedural unfairness arising from the undisputed fact that the two letters were not shown to the Claimant prior to his dismissal, we accept that it is also flawed. Whilst the Tribunal recognised that there was no rule requiring employees to be provided with copies of statements, they did not accept the Respondent's case which was that the essence of the allegations in the letters had in fact been put to the Claimant thus satisfying the requirements of fair notice because of "the disputed accuracy of the disciplinary hearing notes." However, no account is taken by the Tribunal of the notice given in the letter of 26 June 2009 calling the Claimant to the disciplinary hearing and there is no explanation in the judgment of the nature of the inaccuracy of the notes of the disciplinary hearing. The Tribunal restrict themselves to stating, at paragraph 16, that the notes were "not accurate." No further clue is given as to how or why that is said to have been so.
- As regards the conclusion that the Claimant was not guilty of misconduct, there is an apparent conflict between it and the conclusion that it was blameworthy conduct. We do not see that there is any meaningful distinction to be drawn between the two characterisations. Further, we consider that the Tribunal's findings in fact could not support the conclusion that there was no misconduct. Even setting to one side the account given by Mr Ward and Mr Gemmell, the Tribunal found that the Claimant admitted having, on a recent occasion, carried out work on his own account during working hours, at Orrok Park and also admitted handing out business cards for the benefit of his personal business during his employer's time. Such an action cannot, we consider, be characterised as other than misconduct.
- We turn then to the Tribunal's approach of regarding the conduct as not serious because insofar as it amounted to competing business, it was in respect of competition between the Claimant and LCS, not competition between the Claimant and the Respondent, given that the latter did not carry out cleaning work for individual clients.
- The Tribunal's approach was a technical one; whilst Mr Duff had an investment in LCS, it was a different legal person from the Respondent. There was, accordingly, no threat to the Respondent's business. However, that approach failed to take account of their own findings in fact to the effect that the strategy of the Respondent was to support LCS, not to compete with it; Mr Duff had instructed his staff to distribute advertising leaflets for LCS from time to time and had provided one of his employees to LCS. These factors serve to reinforce our view that it was not open to the Tribunal, on the findings in fact it made, to find other than that the Claimant was guilty of misconduct.
- It follows from the above that the Tribunal's conclusion as to whether or not there ought to be a **deduction is also flawed, following as it does from their conclusion that the Claimant was not guilty of misconduct at all.
- In all the above circumstances, we have to conclude that the Tribunal's judgment was a perverse one and cannot stand.
- We will pronounce an order upholding the appeal and remitting the case to the Employment Tribunal for a rehearing.
- We accept that it would not be appropriate to remit to the same Tribunal for the reasons outlined by Mr Hay and the remit will be to a freshly constituted Employment Tribunal.
Published: 12/12/2010 19:51