The claimants were found to have had drinks from the bar of the hotel where they worked without paying, and they were dismissed. Their dismissals were held to be procedurally unfair because i) the person who carried out the investigation was involved in the disciplinary hearing and ii) the person who took the decision to dismiss was not present at that hearing but relied on second hand information to do so. However, the ET did find that the internal appeal procedure could not be faulted. The ET applied a 100% Polkey reduction to the compensatory awards and a 75% reduction to the basic awards.

On appeal, the EAT found that the Tribunal's failure to find that the dismissals were substantively unfair was not perverse and, further, that they were entitled to make the Polkey reduction that was applied. The cross-appeal succeeded on the basis that the Tribunal had failed to have any regard to the appeal procedure which plainly cured the earlier procedural deficiency and they had erred in their application of the 'just and equitable' principle to the basic award. A 100% reduction was substituted.
________________

Appeal No. UKEATS/0054/10/BI

UKEATS/0055/10/BI

EMPLOYMENT APPEAL TRIBUNAL

52 MELVILLE STREET, EDINBURGH, EH3 7HF

At the Tribunal

On 10 May 2011

Before

THE HONOURABLE LADY SMITH, MR M SIBBALD, MR R THOMSON

MR JAMES SIDDONS (APPELLANT)

THE TONTINE HOTEL (RESPONDENT)

and

MR JOHN AITKEN (APPELLANT)

THE TONTINE HOTEL (RESPONDENT)

Transcript of Proceedings

JUDGMENT

**APPEARANCES**

For the Appellants
MR S BELL (Advocate)

Instructed by:
Messrs Bradley Campbell & Co. Solicitors
8 Brougham Street
Greenock
PA16 8AA

For the Respondent
MR G LINDHURST (Advocate)

Instructed by:
RBS Mentor Services
4th Floor, 100 West George Street
Glasgow
G2 1PP

**SUMMARY**

UNFAIR DISMISSAL

Compensation

**Polkey deduction**

Head chef and kitchen porter dismissed for gross misconduct in taking drinks from bar without paying for them. Dismissal found to be procedurally unfair because a) the person who carried out the investigation was involved in the disciplinary hearing, and b) that the person who took the decision to dismiss was not present at that hearing but relied on 'second hand information' to do so. Employees appealed and Employment Tribunal made no criticism of the appeal procedure afforded to them. Polkey reduction of 100%. Compensation reduced by 100% on grounds of contribution and basic award reduced by 75%. On appeal, held that Tribunal's failure to find that the dismissal was substantively unfair was not perverse and, further, that they were entitled to make the 100% Polkey deduction that was applied.

Cross appeal in relation to (a) failure to find that dismissals substantively fair, and (b) reduction of basic award upheld. The Tribunal had failed to have any regard to the appeal procedure which plainly cured the earlier procedural deficiency and had erred in their application of the 'just and equitable' principle to the basic award. 100% reduction substituted.

**THE HONOURABLE LADY SMITH** **Introduction**

1. These are the appeals of two employees and their employer's cross appeal from a judgment of the Employment Tribunal sitting at Glasgow, Employment Judge Lucy Wiseman, registered on 6 July 2010 in terms of which both employees were found to have been unfairly dismissed. Mr Siddons was found to be entitled to a basic award of £657 and Mr Aitken to a basic award of £60. No compensation was awarded.

1. We will refer to the employers as the Respondent and to the employees as Claimants.

1. The Respondent was represented by Mr Lindhurst, advocate, before the Tribunal and before us. Mr Siddons and Mr Aitken were both represented by Mr J O'Donnell, solicitor, before the Tribunal and by Mr Bell, advocate, before us.

**Background**

1. The Respondent is a hotel business. Mr Siddons was employed as head chef and Mr Aitken was employed as a kitchen porter.

1. It was a term of the Claimants' contract of employment that:

"..unless supplied and paid for by the manager or a customer, all drinks and goods belonging to the Company which are consumed or taken away by an employee must be paid for by the employee in advance."

1. At about 9.15pm, on 26 July 2009, after he had finished his shift, Mr Siddons went to the hotel bar to have some drinks before going home. He was with another chef, Stuart Saunderson. The barman was Sean Gaffney. Mr Saunderson ordered two pints of lager which Mr Gaffney supplied. He did not pay for them, nor did Mr Siddons. Mr Siddons subsequently ordered another two pints of lager. He put his hand in his pocket – on the Tribunal's findings, "as if to pay for the drinks" – Mr Gaffney gestured by raising his left hand and those drinks were also not paid for. There was no conversation between the two men about the matter. Mr Siddons assumed that Sean Gaffney was going to pay for them.

1. At about 10pm on 26 July, Mr Aitken arrived in the bar of the hotel and joined Mr Saunderson. He ordered a pint of lager which Sean Gaffney supplied to him. He did not pay for it.

1. The Respondent's stand-in duty manager, Laura Nelis, observed these events in the bar on the hotel CCTV. She noticed that no money changed hands in relation to the Claimants' drinks. She saw Mr Saunderson pay for one further drink, for himself, after Mr Siddons had left. It seemed to her that the Claimants had both looked towards the reception area when obtaining their drinks as if checking to see whether she was there. She asked Sean Gaffney, at the end of his shift, whether all drinks had been paid for. He said they had. She told him what she had observed and he maintained that Mr Saunderson had paid for all the drinks. She checked the till and found that only one pint of lager had been paid for. She reported her findings and observations to Mr Hutchison, the duty manager.

1. Mr Hutchison investigated. He watched the CCTV and concluded that none of the drinks had been paid for other than Mr Saunderson's last drink. He checked the till receipt. He spoke to the men involved. On 27 July he called Mr Siddons into his office and questioned him about the matter. The Tribunal found:

"Mr Siddons agreed he had had a pint for which Mr Gaffney would not take the money. Mr Siddons offered to pay for his drink, but was told by Mr Hutchison that it was too late now. Mr Hutchison told Mr Siddons the CCTV showed him having two pints: Mr Siddons did not dispute this, but explained that the first pint had been poured before he walked into the bar and he thought Mr Saunderson had paid for it. Mr Hutchison did not accept this explanation because the CCTV showed the two men arriving at the bar together." (paragraph 26)

1. Mr Hutchison also spoke to Mr Saunderson. He accepted that he had only paid for one pint the previous evening. He said that he had intended to pay for his other drinks that day, 27 July, out of his tips.

1. Mr Hutchison spoke to Mr Aitken. He agreed that he had had a pint and not paid for it. The Tribunal found:

"...Mr Aitken agreed he had had a pint and had not paid for it, but when asked why not, he told Mr Hutchison he did not want to grass on anyone." (paragraph 29)

1. Further, Mr Hutchison spoke to Mr Gaffney. The Tribunal found:

"Mr Gaffney agreed the others had not paid for their drinks because Mr Gaffney had been distracted and forgotten to charge them. Mr Gaffney thought the others should have reminded him to charge them." (paragraph 30)

1. Mr Gaffney did not remember serving a drink to Mr Aitken. Later the same day, Mr Gaffney left a message on Mr Hutchison's answering machine stating:

"…upon reflection, he thought Mr Saunderson and Mr Siddons' second round had been paid for." (paragraph 31)

Mr Hutchison reported everything he had discovered in the course of his investigation to Mr Nelis, a director of the Respondent.

1. The Claimants, Mr Saunderson, and Mr Gaffney were invited to disciplinary hearings to take place on 5 August 2009. By letter dated 2 August, Mr Gaffney resigned.

1. Mr Aitken wrote to Mr Hutchison prior to the disciplinary hearing. In that letter, he changed his account of events:

"…I feel I should let you and Mr Nelis know that ….I was 'offered' the lager shandy I had by the barman Sean Gaffney. I failed to bring this up in our previous meeting because Sean is a really good friend of mine and I simply did not want to get him into any more trouble than he was already in. However, Sean has since left the Tontine, so after discussing the situation with my mum we both feel there is no need to 'protect' Sean……..When I walked into the bar that night I asked Sean for a lager shandy. He poured it and said 'it's cool, this one's on me.' I replied 'thanks mate, are you sure?' He said 'yeah it's no bother'."

1. Mr Hutchison chaired the disciplinary hearings. Mr Aitken accepted that he had had a pint of lager which he had not paid for. The reason for that was, he said, that Mr Gaffney had told him "this one's on me". He had assumed that Mr Gaffney would pay for the drink. Mr Saunderson accepted that he had had three pints but paid for only one. He had intended to pay for the other two drinks the following day, out of his tips. He said that Mr Siddons had been going to pay for his drinks but when he had taken his money out he had been told to leave it; Mr Saunderson did not, however, think that Sean Gaffney was going to pay for their drinks. He did not know whether he was going to pay for Mr Aitken's drink.

1. Mr Siddons' answers to questions posed at his disciplinary hearing were confined to "no comment" apart from a) agreeing that he had ordered two pints from the bar under explanation that he had money in his hand which he had offered but was not accepted, and b) stating, in response to a question whether he thought it was acceptable to receive drinks from the bar for free: "aye, if it's offered".

1. Mr Hutchison's conclusions regarding Mr Siddons were that he had failed to co-operate with the hearing, which had been an opportunity for him to explain his position. He was concerned at what he said about accepting free drinks; he considered that to be dishonest. Whilst Mr Siddons subsequently denied having made that remark, the Tribunal appear to have accepted that he did make it (paragraph 41).

1. Mr Hutchison's conclusions regarding Mr Aitken were his account did not "add up" (Tribunal: paragraph 42) and he considered that if Mr Aitken thought that someone else was paying for his drink then he should have ensured that that happened.

1. Overall, Mr Hutchison felt the information provided via his investigation and at the disciplinary hearings was contradictory. He could not believe what was said and could no longer trust these employees. He believed that the Claimants knew their drinks had not been paid for. He reported what had happened at the hearings and his conclusions to Mr Nelis.

1. Mr Nelis decided, on the basis of Mr Hutchison's report, to dismiss the Claimants – a decision with which Mr Hutchison agreed - and wrote to them by letters dated 7 August 2009. Those letters stated they were being dismissed for "wilfully" taking and "consuming drinks at the Hotel knowing that they hadn't been paid for" and explained "taking drinks without paying is theft and your conduct amounts to a loss of trust and confidence."

1. The Claimants exercised their rights of appeal. There was no restriction placed on them regarding the matters which they could raise on appeal. Mr Siddons' appeal letter founded on his disagreement with some of the notes of the investigation and the disciplinary hearing, on the fact that he was not allowed the representative of his choice, the fact that the letter of dismissal had been written by someone who was not present at the disciplinary hearing and the fact that he had had money in his hand to pay for the drinks but Mr Gaffney had refused to take it. Mr Aitken's letter of appeal repeated his version of events that was to the effect that Mr Gaffney had told him "this one's on me".

1. The Claimants' appeals were heard by Mrs Nelis. Prior to the appeal hearings, she tried to investigate matters further by contacting Mr Gaffney but his father made it clear that he was not prepared to provide any further statement. As is evident from the notes of the appeal hearings, the various points raised in the appeal letters were addressed and discussed. At the close of each hearing, Mrs Nelis did not give an immediate decision. Rather, she took time for consideration. She stated that she would go over all the points discussed, check the CCTV again (she had viewed it prior to the hearings) and issue her decision in writing after she had done so. By letters dated 20 August 2009, Mrs Nelis refused the appeals and gave reasons for doing so, under reference to the various points raised.

1. Mrs Nelis rejected Mr Siddons' appeal "because she believed he had consumed drink knowing it would not be paid for" (Tribunal: paragraph 52). That decision was reached after considering afresh the relevant evidence. She rejected Mr Aitken's appeal because "after viewing the CCTV it was apparent that Mr Aitken had consumed alcohol without making payment for it." (Tribunal: paragraph 57). She so concluded because not only was that apparent from the CCTV but Mr Aitken had changed his story during the course of events and had not, as promised, produced a letter from Mr Gaffney saying that he told Mr Aitken that he would pay for his drink.

1. There was evidence before the Tribunal, from Mr Nelis, who handed to Mr Aitken, the letter inviting him to a disciplinary hearing, that upon his doing so, Mr Aitken said he fully understood and "I shouldn't have done it". That was disputed by Mr Aitken and the Tribunal found as fact (paragraph 33) that no such statement was made. Mrs Nelis was aware of Mr Nelis' report of Mr Aitken having made the comment and had it in mind; she did not put it to him for his comment. However, the Tribunal explain, at paragraph 136:

"….we were entirely satisfied that reliance on this comment was not the reason for the appeal failing. The appeal failed because Mrs Nelis did not believe the claimant's explanation. We therefore decided the fact that Mrs Nelis relied on this comment did not impact on the fairness of the overall decision to dismiss."

**Relevant law**

1. The Tribunal required to and did have proper regard to s.98 of the Employment Rights Act 1996, British Home Stores Ltd v Burchell [1978] IRLR 379, and Sainsbury's Supermarkets Ltd v Hitt [2003] IRLR 23.

1. An issue in the appeal was that of whether or not the Tribunal should have specifically invited submissions in relation to the application of Polkey v AE Dayton Services Ltd [1988] ICR 142. As was common ground between parties, Polkey should be addressed by a Tribunal ex proprio motu, where the dismissal is unfair for procedural reasons, even if the point is not expressly raised. That is because, in such a case, it is inherent in the application of the provisions of section 123(1) of the 1996 Act given that any compensatory award made must be "such amount as the tribunal considers just and equitable in all the circumstances" (our emphasis) which may include, in a case of procedural unfairness, a chance that the employee would have been dismissed in any event. The question which arose here was a matter of practice and procedure. Reference was made by Mr Bell to the cases of Firth v BRC Barnsley [2004] UKEAT/0034/04 and Market Force (UK) Ltd v Hunt [2002] UKEAT/393/01 in support of the proposition that an employment tribunal is not entitled to determine a Polkey reduction unless it has specifically invited submissions on the matter. Those two authorities turn, however, on their own facts – the Tribunal hearings had been split between merits and remedies but Polkey deductions had been determined in the merits judgments i.e. without any evidence or submissions on remedy having been heard. It was not difficult for the Claimants in each case to demonstrate that they had not had the opportunity of a hearing on the matter. They could not reasonably have been expected to anticipate that, at that stage, the Tribunal would address the Polkey issue at all. Circumstances are liable to differ, however, where the evidence on both the merits and remedy has been led at a single hearing and the claimant contends that the dismissal was not procedurally fair. The relevant question will remain that of whether or not parties have had the opportunity to be heard on Polkey but answering it will depend very much on the facts and circumstances of the individual case.

1. The appeal before us was, in part, a perversity appeal. In addition to bearing in mind the well known passages in Yeboah v Crofton [2002] IRLR 634 to the effect that an appeal on perversity grounds has a high hurdle to surmount (see, in particular, paragraphs 12, 92, 93, 94 and 95), we were helpfully referred by Mr Lindhurst to certain passages in the speech of Lord Hoffman in Piglowska v Piglowski** [1999] 1 WLR 1360 at 1372 – 1373 where he sounded a note of caution - an appellate court must always bear in mind the advantage that the first instance judge had in seeing and hearing the parties and other witnesses and, in considering a first instance judgment, the starting point should be to assume that absent contrary indication, the judge in question has carried out his task correctly:

"This is well understood on questions of credibility and findings of primary fact. But it goes further than that. It applies also to the judge's evaluation of those facts. If I may quote what I said in Biogen Inc. v Medeva Plc [1997] RPC 1p, 45:

'The need for appellate caution in reversing the trial judge's evaluation of the facts is based upon much more solid grounds than professional courtesy. It is because specific findings of fact, even by the most meticulous judge, are inherently an incomplete statement of the impression which was made upon him by the primary evidence. His expressed findings are always surrounded by a penumbra of imprecision as to emphasis, relative weight, minor qualification and nuance…..of which time and language do not permit exact expression, but which may play an important part in the judge's overall evaluation.'

The second point follows from the first. The exigencies of daily court room life are such that reasons for judgment will always be capable of having been better expressed. This is particularly true of an unreserved judgment …..but also of a reserved judgment based on notes…..These reasons should be read on the assumption that, unless he has demonstrated the contrary, the judge knew how he should perform his functions and which matters he should take into account."

1. Finally, an issue arose regarding the basic awards made to the Claimants. Provisions contained in section 122(2) of the 1996 Act are relevant:

"Where the tribunal considers that any conduct of the complainant before the dismissal…..was such that it would be just and equitable to reduce …the amount of the basic award to any extent, the tribunal shall reduce….that amount accordingly."

1. A tribunal has power, accordingly, to reduce the basic award on the basis of 'any' conduct of the employee, not only conduct which caused or contributed to the dismissal but can only reduce it if it considers that it would just and equitable so to do.

**The Tribunal's Judgment**

1. The Tribunal found that the dismissal was procedurally unfair because the person who chaired the disciplinary hearing (Mr Hutchison) had also carried out the investigation and because the person who took the decision to dismiss (Mr Nelis) had not been present at the hearing (see: Tribunal at paragraphs 141 -144). They made no criticism at all of the appeal part of the disciplinary process. They did not consider whether the appeal procedure cured the defects that they identified at the disciplinary hearing stage.

1. So far as substantive matters were concerned, the Tribunal applied the Burchell test and accepted that the Respondent was entitled to dismiss the Claimants. The only difficulty lay with the above procedural failing. Thus, when it came to considering whether or not they ought to make a Polkey deduction, they concluded:

"149. …..we were satisfied there was a 100% chance the claimants would still have been dismissed even if a fair procedure had been followed. We reached that conclusion after having taken into account the fact that Mr Nelis was briefed by Mr Hutchison about what had been said during the hearings, consulted about the outcome of the disciplinary hearings, and decided on the sanction of dismissal. We concluded therefore that had he attended the disciplinary hearings, he would still have decided to dismiss."

They, accordingly, determined that there should be a 100% reduction in compensation.

1. Turning to the matter of the basic award, they decided it would be just and equitable to make a reduction but did not reduce the awards by 100%. They made a lesser reduction of 75%. They explain their reasons for doing so at paragraphs 154 and 155:

"154…. We reached this decision having balanced on the one hand the fact that the employees did take the drinks without paying for them and, on the other hand, the explanation that they did so because Mr Gaffney told Mr Siddons it was "ok" and Mr Aitken that "this one's on me". We also put into the balance the fact the respondent's decision to reject that explanation fell within the band of reasonable responses.

155. We decided it would be just and equitable to reduce the basic award by 75% in these circumstances. This reflects the factors we put into the balance and also recognises there must be a percentage chance the claimants' explanation was correct."

**The appeal**

1. Mr Bell's submissions in support of the appeal fell, essentially, into three parts: (i) the Tribunal ought to have found that the dismissals were substantively unfair; (ii) the Tribunal were not entitled to apply a Polkey deduction; and (iii) the Tribunal ought not to have reduced the basic awards.

1. Regarding his first submission, Mr Bell referred to the Tribunal's conclusion that there was an adequate investigation and said that, on any view, it was a marginal decision. The only reason the Tribunal had given for finding that Mr Hutchison had carried out a reasonable investigation was that he had looked at the CCTV but it was inconclusive; it could have been seen as supporting Mr Siddons' position that he had put his hand in his pocket to pay for his drink. Further, the information from witnesses only raised the issue of whether or not the Claimants thought that the drinks required to be paid for and there was no investigation into whether or not the Claimants had received and consumed drinks knowing that they would not be paid for. Then, he submitted that it could not be said that Mr Nelis, who dismissed the Claimants, had a reasonable belief in the Claimants' guilt because he had not been directly involved in the investigation or in the disciplinary hearing. Finally, he submitted that Mrs Nelis was not entitled to decide to refuse Mr Aitken's appeal because she was relying on the statement said to have been made to Mr Nelis by him and the Tribunal had found that it was not made.

1. Turning to his second submission, Mr Bell submitted that the Tribunal was not entitled to make any Polkey deduction because it did not invite submissions on the issue and, on the instructions of his instructing solicitor, it was not raised in submission before the Tribunal, on behalf of the Respondent. He referred, in support of that submission to the cases of Firth and Market Force (UK) Ltd*,* as noted above.

1. Even if it was open to the Tribunal to apply Polkey, the 100% reduction was perverse. They could not be certain that if Mr Nelis had been present at the disciplinary hearing he would have disbelieved the Claimants. The Tribunal themselves had found both Claimants to be credible witnesses; they could not, therefore, have concluded that Mr Nelis would not believe them.

1. As to his third submission, Mr Bell submitted that, given that the Claimants had been found to be credible and reliable by the Tribunal, it could not be just and equitable to reduce their basic awards at all.

1. Mr Bell's motion was that we should remit the case to the Employment Tribunal for a remedies hearing, which failing to revisit the Polkey *issue.*

1. Mr Lindhurst's response to Mr Bell's first submission was that the Tribunal had made sufficient findings in fact to entitle them to conclude that, looking at matters from the substantive point of view, the dismissals were fair. Mr Hutchison knew that drink had been consumed by a number of individuals and not paid for – it was essentially a simple matter of employees having been drinking at their employer's bar and the drink not being paid for. There was no doubt about that and there was nothing in the findings in fact that did not point to him and, on his report, Mr Nelis (to whom everything was reported), being entitled to believe that the Claimants were guilty of the misconduct alleged. The Tribunal may have put matters shortly when they, at paragraph 113, explained that they considered the investigation was within the range of reasonable responses "because Mr Hutchison spoke to those involved including Ms Nelis, obtained the till receipt and viewed the CCTV" but, bearing in mind what was said by Lord Hoffman in the passage from Piglowska, to which we refer above, it was sufficient and their conclusion was not open to question. Similarly, it could not be said that they were not entitled to conclude that Mr Nelis had a proper basis for his belief in the Claimants' guilt; there were findings in fact that Mr Hutchison kept him fully informed from the start. As to the suggestion that Mrs Nelis' decision was open to question because of the matter relating to her husband's account of what Mr Aitken had said, the Appellants' submission had ignored the Tribunal clearly explaining that they were satisfied that it was not causative of her decision.

1. Regarding the Polkey issue, Mr Lindhurst advised us, on his professional responsibility, that he had referred to Polkey in the course of his submissions and invited a reduction of 100%. The Claimants' solicitor had had every opportunity to make any submissions that he wished to make on the matter but had not done so despite the fact that there was a gap of some two months between the initial part of the hearing and its last day. In respect that the Appellants' position was to dispute that the issue had been raised by him in submission, they had not sought an order for a note from the Tribunal to advise whether or not Polkey did feature in the submissions made for the Respondent. If they sought to press the point, they ought to have done so. In any event, the Tribunal had before it all the evidence that was relevant to the issue and it was, in all the circumstances, bearing in mind that it was not a split hearing but one prior to which both parties knew that remedy was also to be covered, entitled to deal with the matter. It would certainly not have been proportionate for them to have a further hearing on the Polkey issue once they had determined that the dismissal was procedurally unfair.

**The cross appeal**

1. Mr Lindhurst submitted that the Tribunal had erred in law in concluding that the dismissals were procedurally unfair. In reaching that conclusion they had failed to have any regard to the fact that there was an appeal procedure and the facts and circumstances surrounding it. They had made no criticism whatsoever of the appeal procedure. It was apt to cure any earlier deficiencies and the only conclusion open to the Tribunal was that, when the procedure adopted was looked at as a whole, the dismissals were procedurally fair. We should, accordingly, substitute for the judgment of the Tribunal a judgment that the dismissals were fair.

1. The second ground in the cross appeal related to the basic awards. The Tribunal had, Mr Lindhurst submitted, failed to take account of the fact that both Claimants changed their positions in the course of the investigation and that, in the case of Mr Siddons, he failed to co-operate at the disciplinary hearing where most of his answers were 'no comment'. Further, the Tribunal had erred by moving into the realms of speculation such as might have been appropriate when considering a Polkey deduction but were not appropriate in the case of a reduction under s.122(2) of the 1996 Act. Their observation, at paragraph 155 that there must be a percentage chance that the Claimants' explanation (which explanation?) was correct had no basis in any finding in fact and was irrelevant.

1. In response, Mr Bell accepted that, in general, an appeal procedure can cure defects at an earlier stage but whether or not it did so was a matter for the Tribunal. The Tribunal must, notwithstanding their failure to refer to the appeal procedure in the passages leading up to their conclusion at paragraph 144 that the dismissals were procedurally unfair, have had regard to it. Given that the procedural flaws were very serious, it followed that the appeal procedure could not have cured them – not that he was suggesting that there was any procedural flaw at appeal stage. It was, he submitted, a fair reading of the Tribunal's judgment that they considered matters in the round. Whilst initially he submitted that the question of whether or not an appeal procedure cures earlier deficiencies is a question of fact and therefore one for the Tribunal, Mr Bell modified his submission to state that it was an issue of mixed fact and law; his position remained, however, that it was pre-eminently one for the Tribunal and not open to interference in this case. He submitted that no reasonable tribunal could have concluded that there was a fair procedure overall.

1. Regarding the cross appeal in relation to the basic awards, Mr Bell referred back to his earlier submission in relation to them. He added that insofar as Mr Aitken had changed his position in the course of the investigation, that was because he was naïve (as found by the Tribunal at paragraph 127) and did not want to "grass on anyone". There was no reason to reduce his basic award on account of that.

**Discussion and Decision**

The Appeal

1. Dealing first with the submission that the Tribunal erred in failing to find that the dismissals were substantively unfair, we find it to be without merit. The Tribunal made findings in fact which entitled them to find that there was an adequate investigation. The misconduct alleged involved breach of a rule that all drinks consumed by an employee had to be paid for by the employee in advance. It was evident from the till receipt that only one of six drinks consumed by three employees had been paid for. The CCTV identified the Claimants as two of the employees who had failed to pay for their drinks. Whatever doubts there may have been about what it showed, it did not show money passing between the Claimants and the barman, Sean Gaffney. Both Mr Siddons and Mr Aitken admitted having had drinks and not paying for them. Although the Tribunal refer to Mr Hutchison's investigation as lacking depth, that observation really related to material that might have been relevant to mitigation – something which a reasonable employer is not necessarily obliged to investigate - not to the central point of whether or not the rule was breached by these employees. Thus, it is not at all surprising that the Tribunal concluded that the investigation carried out was a reasonable one.

1. We would observe that some confusion appears to have crept into the grounds of appeal and, to an extent, arose during submissions; it was that the Claimants' approach seemed to be that unless the Respondent could reasonably conclude that not only did they consume drinks without paying for them at the time but that they knew the drinks would not be paid for at some future point, they could not be found guilty of any misconduct. However, that approach conflates two separate stages, the first of which was to determine whether or not the Claimants had committed acts of misconduct, namely, whether they had breached the clear rule about paying for drinks before consuming them. That is the stage that is relevant when posing the three Burchell** questions. The second stage is to consider the appropriate sanction and it was only then that any questions as to their state of mind at the time – whether they thought someone else was going to pay for them at some future point or not – became relevant. Those considerations were not relevant to the question of whether or not the rule was breached. We note that the correct analysis was followed by the Respondent in the letters of dismissal which plainly identify the misconduct in question as "Consuming drinks at the Hotel knowing that they hadn't been paid for."

1. As to the suggestion that Mr Nelis' belief in the Claimant's guilt could not be found to have been a reasonable one, based as it was on full information having been provided to him by the duty manager with there being no suggestion that he was likely to do other than accurately report his findings, again, we cannot conclude that it was not open to the Tribunal to conclude that reasonable belief, for the purposes of the Burchell **test, existed. So far as Mrs Nelis' belief is concerned, given the Tribunal's clear finding that she did not base her conclusion regarding Mr Aitken on her husband's report of what he said, it cannot be said to have been tainted and the Tribunal were entitled to conclude that she too entertained a reasonable belief in the Claimants' guilt. We would add that we were not persuaded by Mr Bell's submission that the fact that the Tribunal found the Claimants to be credible witnesses before the Tribunal shows that they would necessarily have been believed by Mr Nelis. There is no necessary connection between the two.

1. Turning to the Polkey issue, as will be seen from our decision in the cross appeal, it is now academic. Had we had to determine the matter we would, however, have had no reason to doubt Mr Lindhurst's recollection that he did refer to Polkey and sought reduction of 100%. The approach taken on behalf of the Claimants was to present a case that the dismissals were not only substantively unfair but also procedurally unfair – Polkey, accordingly, clearly arose and we are not persuaded that the Tribunal erred in failing to specifically invite submissions on it. As to the extent of the reduction, we consider that Mr Bell's submission was ill-founded. Whatever difficulties may have arisen from the fact that Mr Nelis did not participate in the disciplinary hearing, not only was he fully informed about matters by Mr Hutchison, there was an appeal process in which Mrs Nelis saw, heard and considered everything that the Claimants wanted to say in their own defence and concluded that dismissal was the appropriate sanction. In these circumstances, it was plainly open to the Tribunal to determine that the chance of dismissal in any event was 100%.

The Cross Appeal

1. As was accepted by Mr Bell, it is well established that an appeal is capable of curing earlier defects (Taylor v OCS Group Ltd. That is because the question for an employment tribunal is whether, in all the circumstances, the dismissal was fair or unfair (s.98(4) of the 1996 Act) and where procedural failing is at issue, the relevant circumstances include the disciplinary process as a whole, including the appeal stage.

1. In this case, the Tribunal had no criticisms to make of the appeal process. Nor was the appeal procedure criticised by or on behalf of the Claimants. Further, it is evident that the Claimants were free to advance whatever arguments they wished to make, they were given separate hearings, they were listened to, Mrs Nelis tried to further investigations via Mr Gaffney, and she did not rush to judgment. She took time to consider her decisions and issued them in writing with reasons. Manifestly this was a process to which the Tribunal required to have regard when considering the issue of overall fairness. Even allowing for the fact that, as Lord Hoffman puts it, it is fact of judicial life that reasons for judgment will always be capable of having been better expressed, from our reading of the Tribunal's judgment, we cannot conclude that it did have regard to the appeal process and the question of whether or not it cured the procedural deficiency at disciplinary hearing stage that they identified at paragraphs 138 – 142. They move straight from a consideration of the defects in the disciplinary hearing process to a conclusion that the dismissals were procedurally unfair without referring to the appeal stage at all. We can only conclude that, unfortunately, in what is otherwise in most respects a well reasoned judgment they overlooked the fact of the appeal procedure- perhaps because they had no criticism to make of it. Had they had regard to it, however, they were, we consider, bound to conclude that the appeal procedure in this case cured the earlier deficiency and that the dismissals were, accordingly, fair.

1. Turning to the matter of reduction of the basic awards, we agree with Mr Lindhurst that the Tribunal's speculation that the Claimants' explanation might have been correct was irrelevant. There requires to be some factual basis for a "just and equitable" reduction under s.122(2) of the 1996 Act and the only facts found by the Tribunal regarding the circumstances surrounding the consumption of drinks by the Claimants was that they did so knowing that they had not paid for them. No conclusions were reached regarding the explanations for that misconduct that were advanced. Further, s.122(2) requires a tribunal to have regard to all conduct, not just conduct causative of the dismissal and, accordingly, as Mr Lindhurst submitted, account ought also to have been taken of both Claimants having altered their stories as matters progressed and of Mr Siddons' attitude at the disciplinary hearing when he generally refused to respond to the questions that were asked of him. In all these circumstances, we agree that the reduction in the basic award should also have been 100%.

**Disposal**

1. We will, accordingly, pronounce an order refusing the appeal, upholding the cross appeal and substituting for the Tribunal's judgment, a judgment finding that the Claimants were fairly dismissed and dismissing their claims.