The questions at issue in this appeal were (i) whether a warning given in bad faith can be relied on for the purpose of determining whether there is sufficient reason to dismiss an employee; (ii) whether the Employment Tribunal ("ET") wrongly failed to consider that question and erred in deciding that the claimant, now the appellant, was not unfairly dismissed; and (iii) whether the Employment Appeal Tribunal ("EAT") erred in law in dismissing his appeal from the decision of the ET (read the EAT judgment here.

The Court of Appeal allowed the appeal. A warning given in bad faith is not, in circumstances such as these, 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; and it would not be in accordance with equity or the substantial merits of the case to do so.

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Case No: A2/2014/1523

Neutral Citation Number: [2015] EWCA Civ 381

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM EMPLOYMENT APPEAL TRIBUNAL

HIS HONOUR JUDGE SHANKS

UKEAT/0181/13/MC

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 22/04/2015

Before :

LADY JUSTICE HALLETT

LORD JUSTICE PATTEN

and

LORD JUSTICE CHRISTOPHER CLARKE

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Between :

Way (Appellant)

- and -

Spectrum Property Care Ltd (Respondent)

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Alex Ustych (Direct Access Pro Bono) for the Appellant

Graham Watson (instructed by Tozers LLP) for the Respondent

Hearing dates: 17th March 2015

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Judgment

Lord Justice Christopher Clarke:

1. The questions at issue in this appeal are (i) whether a warning given in bad faith can be relied on for the purpose of determining whether there is sufficient reason to dismiss an employee; (ii) whether the Employment Tribunal ("ET") wrongly failed to consider that question and erred in deciding that the claimant, now the appellant, was not unfairly dismissed; and (iii) whether the Employment Appeal Tribunal ("EAT") erred in law in dismissing his appeal from the decision of the ET.

The facts found

1. The facts found by the ET included the following. Mr Way ("Mr Way") commenced employment with Spectrum Property Care Ltd ("Spectrum") on 12 October 1998. He gained a series of promotions and eventually became an Electrical Contracts Manager. On 14 December 2011 he was dismissed for misconduct.

1. Spectrum has an equality and diversity policy which recites that it expects all employees to display a personal commitment to the objectives of the policy and to ensure that it is put into practice; and states that those employees who have managerial and supervisory roles will have wider and more specific responsibilities to ensure proper adherence to the objectives of the policy. It also has a computer usage policy which includes a provision that "Corporate email accounts, internet, IDs, and web pages should not be used for anything other than corporate sanctioned communications, for example no jokes, cartoons, chain letters are allowed".

1. On 27 July 2010 Mr Way sent an email to his line manager which recited a new telephone greeting. It was common ground that it was an inappropriate email to send.

The written warning in December 2010

1. Later in 2010 Mr Way was given a stage 3 final written warning and informed of his right of appeal. This related to what was said to be the inappropriate appointment of an individual by him in his capacity as recruitment manager, contrary to Spectrum's laid down procedures regarding fair recruitment and the disclosure of any relationships. A letter confirming the outcome of the hearing was sent to him on 7 December 2010 which stated that a copy of the warning would be kept on his HR file for a period of 12 months from 3 December 2010, the date of the disciplinary hearing. The letter stated that the conduct/performance improvement expected was for Mr Way to ensure that he was fully familiar with the Group Policies and Procedures as detailed in the Staff Handbook. These included Spectrum's computer usage policy.

1. On 8 December 2010 and 11 February 2011 Mr Way sent emails to his line manager which were inappropriate and not in accordance with Spectrum's laid down policies.

1. In around mid-2011 Spectrum became concerned that there may well have been instances of inappropriate email, texts and images being sent internally and externally. In consequence the Group HR Director Centre wrote a letter to all staff, including Mr Way, reminding them of the computer usage policy and of the various articles that had been sent over the last few months and of the need to adhere to the policy.

1. The letter indicated that the company was now aware of further instances of inappropriate emails, texts and images being sent both internally and externally and that the company had the ability and the right under its policies to examine emails and texts sent to and received by their employees. It also indicated that those that had been deleted were still available for retrieval from the archives. It stated that the company was carrying out an investigation in particular about sexually explicit still and moving images and the content which contravened its equality and diversity policies such as racially/sexually offensive jokes. It then stated;

"So we are taking an unprecedented step we wish all employees who have sent emails, text images which they think may be of an inappropriate nature to come forward and talk to us. Whilst we cannot make any promises about what action we may or may not take we will be treating it as powerful mitigation when considering any sanction to be applied."

There were names given of people that could be contacted and it was a requirement of this semi-amnesty that the disclosures should be no later than Friday 22 July.

1. A senior Executive Management Team went through the emails and graded them into 3 categories: gold – which meant that they were sufficiently serious to initiate the gross misconduct disciplinary process; red – which meant that they were regarded as slightly less serious and warranted final warnings; and amber – which meant that letters of concern would be sent to the offending member of staff.

1. Six members of staff had issued emails deemed to be of the gold standard, and were the subject of gross misconduct proceedings; of whom 3 were summarily dismissed and 3 were given final written warnings. In respect of the red standard 15 individuals were offered, and accepted, the opportunity to accept a final warning without the right of appeal which they accepted. 7 members of staff in the amber category were issued with letters of concern.

1. In respect of Mr Way the internal investigation uncovered the 27 July 2010 **email, which was considered to be within the red standard, meriting a final warning. However because he was already subject to a final written warning it was determined that he should be the subject of disciplinary process.

1. On 22 July 2011 (the deadline for disclosing inappropriate emails) Mr Way telephoned Mrs Weaver, the HR Manager, advising her that he had sent jokey emails. What he was recorded as saying included "We normally do send pictures of naked women and Christ knows what else…and naked men come to that, so you know we are just covering our bums alright".

1. On 15 August 2011 Mr Way sent another inappropriate email to his line manager.

1. On 16 August 2011, in consequence of the trawling which had been undertaken by the executive panel, Mr Way was invited by letter to a disciplinary hearing to consider allegations that he had sent offensive emails in breach of the computer usage policy. Details were enclosed in the letter of the first email dated 22 July 2010. He was told that if the allegations were proven, the panel would take into account the stage 3 final written warning received on 3 December 2010.

1. On 1 September 2011 a disciplinary hearing took place. It lasted about 45 minutes. Catherine Price and Barbara Baker, the divisional director of HR, were there for the company. Mr Way said that he had sent the July 2010 email before he received his final warning in December 2010 and that there was no risk of another incident; and it was argued by his union representative that the incident was a one off one and was not going to happen again. The meeting was adjourned to ensure the attendance of Mr Mark Batchelor, a divisional director of Spectrum.

1. Spectrum then carried out further inquiries to see whether there were any other emails. It found the emails other than that of July 2010 to which I have referred. Mrs Baker sent these to Mr Way under cover of a letter of 2 September together with a CD containing a recording of his telephone conversation with Mrs Weaver on 22 July "which clarifies your reference to nudity in the hearing". (There hade been some dispute as to whether Mr Way had told Mrs Weaver that he had sent nude emails).

1. A reconvened hearing; took place on 21 September which addressed the emails of (i) 8 December 2010; (ii) 11 February 2011; and (iii) 15 August 2011 together with the CD of the conversation. It was urged on behalf of Mr Way that these emails should have been picked up earlier and that a final warning should be given to him. He indicated that this had been a big learning curve and that he would not take part in any more inappropriate emails. He said that he understood about his final written warning and had tried to move on.

1. At the conclusion of the hearing and after an adjournment it was determined that, whilst the first email had been sent prior to a final written warning, and should be discounted, the additional emails were sufficiently serious, and that, having regard to the impression conveyed by Mr Way to the panel that he had not appreciated the seriousness of these emails in the context of the company's policies, he should be dismissed. He was informed of the outcome of the hearing by a letter of 22 September 2011, and dismissed with effect from 14 December 2011.

1. Mr Way appealed. The appeal hearing took place before Mr Morris, the Group Chief Executive. The appeal was dismissed. Mr Morris did not give oral evidence to the ET.

The Employment Tribunal

1. As to the merits of the application the Employment Judge Kolanko expressed himself satisfied that Spectrum had undertaken a reasonable investigation. Emails had been placed in three categories, and there had been consistency of approach. Mr Way had been the subject of a disciplinary process; the panel members had had no dealing or involvement in the earlier investigation. Mr Batchelor was in attendance to ensure consistency of approach between Mr Way and others who were subject to a disciplinary process. The process was fair and reasonable. The panel reasonably found breaches of the disciplinary process which in their view warranted a final written warning. The fact that there was a "live" final written warning, even though for a different type of offence, which warned Mr Way that any further misconduct during the operative part of the warning could lead to dismissal entitled the panel to decide that, in the light of it, he should be dismissed and this was within the band of reasonable responses.

The Employment Appeal Tribunal

1. The EAT considered the significance of the fact that the Employment Judge had not addressed Mr Way's allegation that the final written warning had been given in bad faith. It recorded that in his ET1 Mr Way had said:

" … the Applicant employed an electrician's mate in line with company procedure, policy, and ethos. The recruitment was sanctioned by Stuart Brookes. This can be evidenced.

…

In the ET3 the Respondent said this:

"In late 2010, the Respondent became aware that the Claimant had not disclosed a conflict of interest. The circumstances were that the Claimant had assisted J, the son of a friend and ex-partner, to obtain employment with the Respondent. The Claimant had himself completed an application form for J which J had signed. The Claimant incorrectly indicated on J's application form that J had no connection with any current employee of the Respondent, not mentioning his own involvement in J's application. He also failed to mention a medical condition from which J suffers. The Claimant also failed to declare his connection with J on his own account on a Declaration of Interest he made in November 2010. He advised J to apply for the job initially through an agency, which had the effect of hiding the Claimant's involvement. The Claimant then acted as recruitment manager, ensuring J's appointment. When challenged, the Claimant denied having completed J's application form until confronted with his own handwriting.

7. Following a full investigation and disciplinary process, the Claimant was not dismissed but was given a final written warning subject to the condition that he familiarise himself and comply with the Respondent's policies. The Claimant was warned that any further misconduct or breach of procedure would result in his dismissal. He chose not to appeal."

1. The EAT next recorded that the parties had reached agreement as follows:

"7 Before the hearing, the parties agreed on what the issues were. The first issue was agreed to be this:

"The claimant was given a final written warning in 2010. Were the circumstances of this such that the Respondent was entitled to rely on this final written warning when determining whether to dismiss the Claimant? The Tribunal may wish to consider the following in this respect:

a. the nature of the allegations and the documentary evidence available: and

b. the Claimant's failure to appeal and his reasons for this."

Statements were put in from the Claimant, from Mr Brookes, from the manager who dealt with the main disciplinary hearing, and from Mr Morris, who dealt with the appeal. There were also statements from Paul Bryan, the company Managing Director, and from Mr Batchelor, who investigated both matters."

1. Before the ET statements were put in, including one from Mr Way and one from Mr Morris. The EAT summarised the claimant's statement in these terms:

"8 The Claimant's statement made serious allegations against Mr Brookes, saying that he was dishonest, that he had started the disciplinary proceedings in late 2010 in order to cover up his own part in the appointment of J and the statement also said that Mr Brookes had indicated before the hearing which he chaired that the outcome would be a final warning. There is again complaint about the conflict of interest that Mr Brookes had in chairing the hearing because he himself had been involved in the recruitment of J. The statement says that, within 20 minutes of the completion of the disciplinary hearing on 3 December, the decision was announced and then that, after receiving a letter confirming the decision, the Claimant approached Mr Bryan, the company Managing Director about an appeal and was told not to appeal, as it was the intention of the company that, if an appeal was received, it could be escalated to dismissal. He was told that it would pay him to forget about the whole thing and move on, As a result of this conversation, the Claimant says he did not appeal the decision."

1. Mr Morris' statement had gone into considerable detail about the allegation, made for the first time on the appeal to him, that the warning had been given in bad faith. The EAT cited from it in this way:

""5 A lot of Mr Way's submissions related to the previous disciplinary meeting which had led to his final written warning. I did invite Mr Way to go through this if he felt it was pertinent, which he clearly did. I was therefore happy to spend time discussing it with him.

6 Mr Way made various assertions which had not been previously advanced by him, with a view to arguing his final written warning was unfair. Had he not been given the final written warning, he argued he would not now have been dismissed.

7 Mr Way argued that his line manager, Stuart Brookes, had specifically sanctioned his actions in relation to Joe Girardelli knowing about his relationship with him. There was no evidence of this whatsoever. We checked this with Mr Brookes, who was very clear in telling us that while he had approved the appointment in general terms, he had not agreed to proper process being waived. Mr Brookes had no idea that Mr Way had completed Joe's application form himself, withholding important information from it.

8 I asked Mr Way on a number of occasions about his relationship with Joe's mother. It was relatively clear that there had been a close relationship and Mr Way remained friends with her and wished to act to assist her and Joe. In my view, it was clear there was a sufficiently close relationship with Joe that this should have been declared.

9 Mr Way also said that, with the benefit of hindsight, he would have appealed against his final written warning. He said he had been told that if he did not appeal, he would keep his job. Again, there was no evidence of that."

Mr Morris goes on further in his statement:

"13 At the end of the hearing, I told Mr Way that we would need a bit of time to reflect on the detail he had given is. Later that day I asked questions of some of the individuals referred to in order to follow up points he had made. I concluded there was no real evidence to substantiate Mr Way's assertions and I noted that many of these had not been raised previously and that he had not appealed against the decision to give him a final written warning.

Then at paragraph 19 Mr Morris said this:

"It was clear that, even after the final written warning he had been given, where a key condition was to familiarise himself with our policies and procedures, that had not been done.

20 To my mind, sending the emails was a flagrant disregard of a policy we consider to be very important. Having reviewed the evidence, I was strongly of the view that his conduct in sending the emails constituted gross misconduct and justified summary dismissal, although Mr Way was in fact dismissed on notice for repeated misconduct.""

The material before the Employment Tribunal

1. The hearing before the Employment Tribunal was fixed for 20 July 2012. On 29 June 2012 the Respondent's solicitors sought an adjournment because Mr Morris had had a cancer operation and would not be available for the hearing. The claimant opposed the adjournment and his lay representative wrote to the Tribunal saying:

"Although Mr Way does not agree with the assertions made by the witness who is unable to attend, he does not see that his evidence is substantive to the issues that are to be brought before the hearing. In particular the parties have already agreed a statement of issues to narrow the scope of argument at a hearing, thus saving the Tribunal valuable time and the parties costs."

The adjournment was refused on paper.

1. By the time of the tribunal hearing the Employment Judge had seen the statements of Mr Way and Mr Morris which had dealt with the alleged impropriety of the final written warning of December 2013.

1. What exactly happened at the beginning of the Tribunal hearing was in dispute. The Employment Judge had described the position thus:

"The Tribunal enquired of the claimant as to whether in the light of the above matters, he was challenging the actions of Mr Morris in the conduct of the appeal, such that these proceedings, in view of the serious allegations raised during the appeal, would have to be postponed to facilitate Mr Morris's attendance before the Tribunal. It was pointed out that the tribunal would be addressing the issue of unfair dismissal, and would not wish to embark upon other irrelevant "satellite litigation." After further discussions and affording an opportunity to the claimant and his representative to consider matters in private, they returned, indicating that the claimant was not wishing to make criticism of the appeal or the conduct of Mr Morris, and was proposing to concentrate his complaint of unfairness on the basis of the process at the disciplinary hearing before Messrs Batchelor, Baker and Price. Mr Wright on behalf of the claimant appreciated that all the allegations advanced in the appeal hearing and the claimant's lengthy statement regarding misfeasance in relation to the respondent's managers in connection with the final written warning would not be raised for the purposes of alleging unfair dismissal, not least because such matters had not been raised during the course of the disciplinary hearing, and only surfaced as matters of complaint during the appeal before Mr Morris…"

[Bold added in this and later citations]

1. The EAT had before it affidavits from Mr Way and his representative, Mr Wright, and comments on them from the Employment Judge. The EAT judge - Judge Shanks - said that he proposed to proceed on the basis which (he said) the parties in effect agreed (a) that Mr Way accepted that he was making no criticism of the appeal before Mr Morris; but (b) that the Employment Judge refused to hear evidence about the background to the warning notwithstanding the claimant's objections to that course. Accordingly, as the EAT found, Mr Way gave no evidence about the background to the warning, as he was not allowed to do so, and Mr Brookes and Mr Bryan, although they were at the Employment Tribunal, were not asked to give evidence and were not cross examined.

1. I confess myself somewhat puzzled by this finding. The position as described by the Employment Tribunal is contained in a note which was said to have been made at the hearing. The words in bold in para 27 above were, according to the note, read out to the parties (with immaterial differences) and confirmed by Mr Wright. There is, however, no cross appeal from this aspect of the EAT's judgment and I say no more about it other than to point out that, in consequence, any contention that Mr Way abandoned his claims in relation to the warning or is prevented from raising them is not available to Spectrum.

1. Judge Shanks took the view [14] that:

"although this is a borderline case, I think the claimant had probably raised enough in his ET1 and, more particularly, his statement, to raise a case that the warning had not been given in good faith, though I do not think, on any basis it could be said that there were no grounds for the warning or that it was manifestly inappropriate. But there was certainly an attack on Mr Brookes' good faith".

1. Having made that finding he held [15] that, given that the parties had both identified the question of whether the Respondents could rely on the warning as an issue to be decided in the case, it seemed to him that, notwithstanding Mr Way's decision not to appeal against the warning, the Employment Judge ought to have allowed evidence and ought to have investigated the points being made by Mr Way. I agree.

1. He then said this [16]:

"That means that the question I have to address is whether it would have made any difference to outcome, namely the finding that the Claimant had been fairly dismissed. This is always a dangerous area for the Employment Appal Tribunal to get into. Only if I am convinced that the ET reached the right conclusion would it be right for me to dismiss the appeal on this basis, and I must proceed on the assumption that the claimant would have established bad faith on the part of Mr Brookes".

1. Proceeding on that assumption, Judge Shanks decided [18] that "in the circumstances" the employer was entitled to have regard to the warning even if in fact it had resulted from Mr Brookes' bad faith. He held that, given that warning, dismissal almost inevitably followed and its fairness could not be doubted.

1. The circumstances to which he referred [17] were:

i) that there was a final written warning valid on its face, which encouraged the claimant to read and abide by company policies;

ii) that there was no challenge raised to that warning at the disciplinary hearing of September 2011 and Mr Way indicated that he understood about it and said that he had tried to move on;

iii) there was an appeal to Mr Morris the conduct of which Mr Way agreed that he would not criticize;

iv) that the earlier warning was investigated by Mr Morris who rejected the points made about it by Mr Way, having investigated them, and having given him the opportunity to say whatever he wanted about the warning; and

v) that there was no suggestion that Mr Brookes had any role in the disciplinary proceedings or the appeal in relation to the emails.

Mr Way's contentions

1. Mr Alex Ustych on behalf of Mr Way contends that the EAT erred in law, firstly by concluding that a warning given in bad faith was nonetheless a valid warning which could be relied on.

1. The correct approach to reliance by an employer on final warnings has been considered in a number of authorities. In Davies v Sandwell Metropolitan Borough Council [2013] EWCA Civ 135 Mummery LJ said:

"20 As for the authorities cited on final warnings, Elias LJ observed, when granting permission to appeal, that the essential principle laid down in them is that it is legitimate for an employer to rely on a final warning, provided that it was issued in good faith, that there were at least prima facie grounds for imposing it and that it must not have been manifestly inappropriate to issue it.

I agree with that statement and add some comments."

37 In Wincanton Group PLC v Stone [2013] IRLR 178 Langstaff J gave specific guidance to tribunals at para 37 saying:

"If a tribunal is not satisfied that the first warning was issued for an oblique motive or was manifestly inappropriate or, put another way, was not issued in good faith nor with prima facie grounds for making it, then the earlier warning will be valid. If it is so satisfied, the earlier warning will not be valid and cannot and should not be relied upon subsequently."

38 Both of these cases were cited to the EAT in the present case. It held [13] that:

"When an Employment Tribunal is considering whether an employer has acted reasonably in dismissing an employee, the employer is entitled to rely upon an earlier warning unless that warning was issued in bad faith, with no grounds, or in circumstances which were manifestly inappropriate".

39 Mr Usych contends that this accurate expression of the legal position was then contradicted by the EAT's conclusion at [18] that "the employer was entitled to have regard to the warning even if in fact it had resulted from Mr Brookes' bad faith". He accepts that there may be circumstances in which a dismissal following a final warning may be fair, notwithstanding that the warning is invalid. Thus, if the employee was guilty of misconduct which itself justified dismissal, the fact that there was an invalid final warning would not invalidate the dismissal. But in the present case, the ET found that the penalty which the Respondents concluded would be warranted for the case was a final written warning [17] and its entitlement to determine that dismissal was a reasonable response having regard to the conduct and the final written warning [18].

40 The second ground of appeal is that, assuming that a warning issued in bad faith could be taken into account, the EAT reached a decision that the dismissal was fair when it should have remitted the case to the ET. On that footing it would be necessary to hear the evidence of the witnesses and to make findings of fact in relation to the bad faith evidence as to the nature and extent of the bad faith; and to reach a judgment on whether, in the light of it, it was reasonable to rely on a warning in respect of a totally different allegation so as to convert a red card/final warning transgression into one that justified dismissal. It was also accepted by Spectrum at the EAT that the claimant was told – incorrectly - that a higher sanction could result from an unsuccessful appeal, a circumstance which would require to be taken into account in any assessment of reasonableness.

41 Mr Ustych relies on Dobie v Burns [1984] IRLR 329 in which Lord Donaldson said [18]:

"Once the [EAT] detects that there has been a misdirection, and particularly that there has been an express misdirection of law, the next question to be asked is not whether the conclusion of [the ET] is plainly wrong, but whether it is plainly and unarguably right notwithstanding the misdirection. It is only if it is plainly and unarguably right notwithstanding the misdirection that the decision can stand. If the conclusion was wrong or might have been wrong, then it is for the appellate tribunal to remit the case to the only tribunal which is charged with making findings of fact."

42 That case was considered in Jafri v Lincoln College [2014] ICR 920 where Laws LJ made the following observations:

"21. I must confess with great respect to some difficulty with the "plainly and unarguably right" test elaborated in Dobie. It is not the task of the EAT to decide what result is "right" on the merits. That decision is for the ET, the industrial jury. The EAT's function is (and is only) to see that the ET's decisions are lawfully made. If therefore the EAT detects a legal error by the ET, it must send the case back unless (a) it concludes that the error cannot have affected the result, for in that case the error will have been immaterial and the result as lawful as if it had not been made; or (b) without the error the result would have been different, but the EAT is able to conclude what it must have been. In neither case is the EAT to make any factual assessment for itself, nor make any judgment of its own as to the merits of the case; the result must flow from findings made by the ET, supplemented (if at all) only by undisputed or indisputable facts. Otherwise, there must be a remittal.

43 Lord Justice Laws acknowledged [23] that *"if it is an open question how the [ET] would have decided the matter if it had directed itself correctly, the [EAT] can only remit the case for further consideration.*"

44 At para 45 Underhill LJ said:

"If, once the ET's error of law is corrected, more than one outcome is possible, the authorities are clear that it must be left to the ET to decide what that outcome should be, however well-placed the EAT may be to take the decision itself."

45 Mr Ustych contends that Judge Shanks' observation that it was only if he was convinced that the ET reached "the right conclusion" would it be right for him to dismiss the appeal on this basis, constituted, or appeared to constitute the EAT making a judgement of its own as to the merits of the case, which Laws LJ had indicated to be the wrong approach.

Spectrum's contentions

46 Spectrum submits that the EAT was entitled to reach the conclusion that it did. Mr Way's decision not to appeal the written warning appears to have been based on a preparedness to accept the disciplinary outcome as long as it did not affect his pay or bonus. His assertion that the original warning was unfair only arose when he had been dismissed for further misconduct. He had made his decision not to appeal (after he had been chased to say whether or not he would appeal) when he knew the basis for his bad faith claim. When he did raise the point, on appeal in 2011, the appeal officer, Mr Morris, investigated the points he made and rejected them. He had elected before the ET not to criticise that officer. These considerations (including the EAT's implicit findings that there were grounds for the warning and that it was not manifestly inappropriate) all went to the reasonableness of the employer's conduct and the employer should not be disentitled to rely on them because of an attack on the good faith of the warning. Para 18 of the judgement must be read as meaning that those aspects of the warning not under challenge (i.e. the existence of grounds and the lack of manifest appropriateness) and/or the decision not to appeal outweighed and superceded any challenge based on bad faith. To that extent the employers could rely on the final written warning even though bad faith was alleged.

47 As to the second ground, the EAT had addressed the question whether an investigation into the bad faith allegation would have made any difference to the outcome and found that it would not.

48 In the cases of Burrell v Micheldever Tyre Services Ltd [2014] ICR 835 Maurice Kaye LJ considered the observations of Elias LJ in the case of Tilson v Alstom Transport and the impact of Jafri and said:

"However, even within the confines of the conventional approach, the Employment Appeal Tribunal can contain its application in a number of ways. First, provided that it is intellectually honest, it can be robust rather than timorous in applying what I shall now call the Jafri approach."

49 Here, it is submitted, the EAT has been robust and intellectually honest in applying the Jafri **approach. It concluded that the error in failing to admit the evidence cannot have affected the result. It relied on facts which do not appear to have been in issue between the parties. It did not engage in a qualitative assessment of the evidence. The judge was entitled to find that there would have been no difference to the outcome if there had been an investigation of the bad faith allegation.

Discussion

50 The decision of the EAT has a degree of illogicality. The judgment holds that "the employer is entitled *to rely upon an earlier warning unless that warning was issued in bad faith*" and then proceeds on an assumption that bad faith on the part of Mr Brookes is established and that the warning resulted from that bad faith: [16] and [18]. But it then concludes that in all the circumstances the employer was entitled to have regard to the warning, the principal circumstances being, firstly, that the warning was valid on its face and was not challenged on appeal; and secondly that there was an appeal in 2011 to Mr Morris in which he rejected the points made by the claimant about the warning.

51 The first point puts form over substance and could, no doubt be said of any written warning, which is unlikely to reveal bad faith on its face. The second point – if it means that Mr Morris rightly rejected the claimant's case - contradicts the assumption that the warning was in fact given in bad faith. If it means that he acted reasonably in rejecting it, it would appear to treat the assumption as immaterial, or at any rate insufficiently material.

52 The question for the Employment Tribunal was whether or not Spectrum had acted reasonably in treating the reason for Mr Way's dismissal as a sufficient reason for dismissing him, that question falling to be determined in accordance with equity and the substantial merits of the case: Employment Rights Act 1996, s 98 (4).

53 The warning related to a set of circumstances completely different from those that gave rise to the dismissal. The only connection that it had with the facts leading to the dismissal was that it included a requirement that the claimant familiarise himself with the policies and procedures of the company. That was not, however, it's only, or principal significance. The fact that Mr Way had been given a final warning meant that he had been found guilty of misconduct and told that, if he misconducted himself again, he was likely to be dismissed. The warning had, therefore taken him a step further down the disciplinary road to dismissal. That was highly relevant to the reasonableness or otherwise of any subsequent decision to dismiss him. On the findings of the Employment Tribunal it was the existence of the warning which made it reasonable for Spectrum to dismiss him rather than take a lesser course.

Conclusion

54 In my judgment a warning given in bad faith is not, in circumstances such as these, 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; and it would not be in accordance with equity or the substantial merits of the case to do so. To hold otherwise would be inconsistent with the decisions in Davies and Wincanton Group. In reality the judgment of the EAT proceeds on the basis that a warning given in bad faith may be relied upon to justify a dismissal which, absent the warning, would not have occurred. In so doing the EAT was in error.

55 When the point was first raised on appeal Mr Morris decided that there was no sound basis for the claimant's bad faith complaint. I do not regard the fairness of Mr Way's dismissal as turning on the reasonableness or otherwise of Mr Morris' decision. If, in truth, Spectrum issued Mr Way with a warning in bad faith, the fact that Mr Moore, its chief executive, erroneously thought that there was no bad faith does not entitle Spectrum to pray the bad faith warning in aid.

56 I would, therefore, allow the appeal and remit the case to a differently constituted Employment Tribunal in order to determine whether or not Mr Way was unfairly dismissed. For that purpose it will be necessary for the tribunal to decide whether the warning given was given in bad faith. I have considered whether we should impose some limitation on the matters that are to be decided by the ET (other than as expressed in [29] above), but I have, concluded that it is inappropriate to do so.

57 Had I taken the view that a warning given in bad faith could be taken into account, I would still have ordered that the case be remitted to the Employment Tribunal. It appears to me far from clear that, if the Employment Tribunal had found that there was bad faith in the giving of the warning, the dismissal would inevitably have been held to be fair. It was well open to question whether it was fair to dismiss - rather than finally to warn - someone who would not otherwise have been dismissed, because he was the subject of a final warning which was not given in good faith. The EAT was, in my judgment, not merely applying Jafri in a robust manner, but reaching for itself a decision which it was for the ET to make.

Postscript

58 This is another case where an understandable wish by the Employment Tribunal to limit the investigation to what was thought to be strictly relevant, and by the EAT to avoid the remission of the case, if it were possible properly so to do, has led to the taking of inappropriate short cuts, the ultimate result of which will have been considerably to lengthen the process of adjudicating on Mr Way's claim. The question of whether the warning was given in bad faith does not appear to me require extensive evidence. Had it been addressed at the Employment Tribunal, as the parties envisaged and where Mr Brookes, the chief witness for Spectrum on this topic, was actually present, much time and cost would have been saved.

Lord Justice Patten:

59 I agree.

Lady Justice Hallett:

60 I agree.