Mrs D Russell v Finance and Credit Corporation Ltd (in administration): 2200914/2018

EMPLOYMENT TRIBUNALS

Case No 2200914/2018

Between

Mrs D RussellClaimant

Finance and Credit Corporation Ltd (in administration)Respondent

Before

Employment Judge Baty

Mr C Parkin (instructed by counsel) for claimant

Mr A Sendall (instructed by counsel) for respondent

Date 27 September 2019

JUDGMENT

[1]The claimant’s complaints of unfair dismissal and breach of contract (notice pay) succeed.

[2]The claimant’s complaints of unlawful deduction from wages in respect of unpaid holiday pay and her unpaid September 2017 salary and under the Working Time Regulations 1998 in respect of unpaid holiday pay succeed. An award of £4,684.04 (net), payable by the respondent to the claimant, is made in respect of these successful complaints.

[3]The claimant’s complaint of unlawful deduction from wages in relation to the “Russells invoices” succeeds.

[4]The claimant’s complaint of breach of contract in relation to an alleged termination payment fails.

[5]The tribunal does not have jurisdiction to hear the respondent’s employer’s contract claim and that claim is struck out. Even if the tribunal did have jurisdiction to hear it, that claim would have failed. - 1 -

REASONS

The Complaints

[1]By a claim form presented to the employment tribunal on 19 February 2018, the claimant brought complaints of unfair dismissal, breach of contract (notice pay), for holiday pay and in respect of three different types of alleged unpaid payments. The respondent defended the complaints.

[2]The response form contained an employer’s contract claim. The claimant defended this claim.

[3]The respondent went into administration with effect from 11 April 2019. On 23 August 2019, the administrators gave their consent for these proceedings to continue.

The Issues

[4]At the start of the hearing, I spent time with the representatives agreeing (subject to the paragraphs in this section below the list of issues below) exactly what the heads of complaint were and the issues in relation to those complaints. Those agreed issues are set out below. In relation to the various complaints regarding alleged unpaid payments, it was not wholly clear to me from the claim form whether these were pleaded as complaints of, for example, unlawful deduction from wages or breach of contract or both; Mr Parkin clarified this as we went through the issues and the types of complaint are set out in the headings at the start of the issues relating to the complaints in question below.

[1]Did the respondent dismiss the claimant for a potentially fair reason? The respondent says that the reason was conduct and/or some other substantial reason (being a loss of trust and confidence in the claimant).

[2]Did the respondent have a genuine and reasonably held belief that the claimant committed the misconduct, following such investigation as was reasonable? Was the dismissal procedurally fair?

[4]Was the decision to dismiss within the reasonable range of responses open to a reasonable employer?

[5]If the dismissal was unfair, should there be any adjustments to compensation due to contributory conduct of the claimant or under the principles in Polkey v AE Dayton?

[6]Should there be any adjustments to compensation for any unreasonable failure by the claimant or the respondent to comply with the ACAS Code on Disciplinary and Grievance Procedures 2015 (the “ACAS Code”)? - 2 - Notice pay (breach of contract)

[7]Has the respondent proved that it was entitled to dismiss the claimant without notice? Holiday pay (unlawful deduction from wages, and Working Time Regulations 1998)

[8]The amount of holiday pay due to the claimant is agreed to have been £3,028.85 (gross). Was the respondent entitled to deduct that sum from the claimant’s wages? September 2017 salary (unlawful deduction from wages)

[9]The claimant was not paid her September 2017 salary which amounted to £3,432.69 (gross). Was the respondent entitled to deduct this from her wages? Termination payment (breach of contract)

[10]What were the relevant terms of the claimant’s termination payment? Did the claimant satisfy the conditions of that arrangement such that a payment was payable to her? If so, what was the amount of that payment? It is agreed that, if the termination payment was payable, the amount of that payment should have been £57,723.75 (gross). Russells Associates invoices for May - September 2017 (unlawful deduction from wages)

[11]The claimant claims that sums said to have been due to Russells Associates Ltd (“Russells”) of £1,637.50 per month for each of the five months from May - September 2017 are payable to her (a total of £8,187.50). Russells invoices were issued for each of May and June 2017 but no such invoices were issued for any of July, August or September 2017. Does the claimant have locus to pursue these sums as the invoices in question are Russells invoices? In other words, if such sums are due, are they due to Russells or to the claimant?

[12]If so, were such sums properly payable to the claimant?

[13]Furthermore, as Russells invoices were not issued for the three months from July - September 2017, is the claimant entitled to be paid in respect of only the two invoices issued or in respect of payments for each of the five months from May - September 2017.

[14]If so, was the respondent entitled to deduct these sums from the claimant’s wages?

[15]Did the claimant in breach of contract make a payment from the respondent to the claimant of £15,000 on 16 December 2016?

[16]Does the tribunal have jurisdiction to hear this complaint under the terms of the Employment Tribunals Act 1996 and the Employment Tribunals Extension of Jurisdiction (England and Wales) Order 1994 (the “1994 Order”)? 5. Although the substance of the issues was agreed at the start of the hearing, I asked the parties to liaise and try and agree the figures which are set out at paragraphs 8, 9, 10 and 11 of the issues above. They duly did so and provided these figures to me at the beginning of the third morning of the hearing. It was also agreed that the net figure in respect of the holiday pay and September 2017 salary complaints combined was £4,684.04 and that, if both of those complaints succeeded, that was the figure which would be payable to the claimant by the respondent. At this point, the issue set out at issue 13 above - 3 - was also identified and it was agreed that that should be added to the list of issues. The list of issues was therefore agreed and finalised at this point. 6. However, at the start of his submissions, Mr Parkin stated that the claimant was withdrawing the holiday pay complaint, the complaint in relation to the claimant’s September 2017 salary and the complaint in relation to the Russells invoices as breach of contract complaints. I therefore dismissed those complaints as breach of contract complaints. The complaints which they remain brought as, as set out in the list of issues above, represent the position following that withdrawal. The list of issues as set out above therefore reflects the position as at that point. 7. During submissions, Mr Sendall conceded that, for the purposes of section 27(2) of the Employment Rights Act 1996 (“ERA”), the £15,000 payment referred to above was not wages and that therefore the respondent was not entitled to deduct any wages properly payable to the claimant from that £15,000 payment. The effect of this was that he conceded that the complaints in relation to holiday pay and the claimant’s September 2017 salary were not contested by the respondent; and that, if I were to find that the payments in relation to the Russells invoices were payable to the claimant, the respondent could not argue that these payments could be deducted from the £15,000 payment. 8. Given the time constraints (see below) it was agreed at the start of the hearing that the hearing would be on liability only. However, it was also agreed that the issues in relation to contributory conduct, Polkey and the ACAS code should be determined by me at the liability stage. Application to amend 9. Whilst we were going through agreeing the issues, Mr Sendall raised a point in relation to the employer’s contract claim which resulted in an application to amend being made by him. He maintained that the alleged breach of contract by the claimant was not only the making of the £15,000 payment on 16 December 2016 but her failure to repay this sum on termination of her employment. 10. Following discussion between myself and the representatives, Mr Sendall acknowledged that this was not pleaded in the claim form and would require an amendment. No text of an amendment was available. I therefore asked Mr Sendall what the text of such amendment should be. He stated that it should be: “A breach of an implied term that any sums owing as of the termination date will be repaid to the respondent. The claimant failed to repay the £15,000 on termination of her employment.” 11. Mr Parkin took instructions. He informed me that the claimant opposed the application to amend. 12. I heard submissions from both representatives and adjourned briefly in order to make my decision, which I then gave orally at the hearing. - 4 - 13. The leading case on amendments is Selkent Bus Co v Moore

[1996] ICR 836

. In determining whether to grant an application to amend, the tribunal must always carry out a careful balancing exercise of all the relevant factors, having regard to the interests of justice and to the relative hardship that would be caused to the parties in granting or refusing the amendment. In Selkent, the then president of the EAT, Mr Justice Mummery, explained that relevant factors would include: the nature of the amendment; the applicability of time limits; and the timing and manner of the application. 14. I decided to refuse the application, applying the above principles, for the following reasons. 15. In terms of the nature of the amendment, it was accepted by both parties that dealing with the amended claim would not require more evidence; there would be no requirement to, for example, call further witnesses; that was a factor in favour of granting the amendment. 16. However, the application to amend was considerably out of time in that the employer’s contract claim should in accordance with the 1994 Order have been brought within six weeks of the respondent receiving the claimant’s claim form, which it did about 1½ years ago; no suggestion had been made to me that it was not reasonably practicable to have set this out in the employer’s contract claim when it was submitted or at least to have made this application a lot earlier and I, therefore, consider that it was reasonably practicable to have done so; that was a factor against granting an amendment.

[17]Furthermore, in terms of the timing and manner of the amendment, the application was made 1½ years after the claim been brought, on the first morning of the hearing, so it was extremely late (it was foisted upon the claimant right at the last minute without any opportunity to consider it in advance). The claimant had not only noted in her response to the employer’s contract claim that it was not properly particularised but had specifically on previous occasions requested further details of the employer’s contract claim, which the respondent had chosen not to provide. In addition, the matter was previously trial ready many months ago and was only postponed because of the absence of an employment judge to hear it, and yet no application to amend was made at that stage, when it could have been; this all pointed against granting an amendment.

[18]Although Mr Sendall maintained that I would have to determine the factual issue in relation to this for the purposes of any “set-off” argument, I gave little weight to that point because, as Mr Parkin submitted, the issue of set-off is a very different matter to determining whether or not there was a breach of contract by the claimant. Above all, the claimant, as Mr Parkin submitted, was faced with a last-minute application which, even as set out above, was not clear (for example the new suggestion that there was somehow an implied term in relation to paying back the £15,000 and the basis, as yet unknown, of asserting that there was such a term); this put the claimant at a considerable disadvantage and prejudice (which it would have been entirely within the respondent’s gift to have avoided simply by making the application a lot earlier). I appreciate there is prejudice to the respondent in the sense that it can’t bring this additional complaint but that is - 5 - effectively the position with any amendment application. The respondent still has the existing basis of the employer’s contract claim to rely on, which reduces the prejudice to it, and, most particularly, the prejudice to the claimant in granting the amendment outweighs the prejudice to the respondent in not doing so.

[19]I therefore refused to allow the amendment.

The Evidence

[20]Witness evidence was heard from the following: For the respondent: Mr Christopher Cooke, an HR professional who was engaged by the respondent to hear the disciplinary hearing in relation to the claimant and who took the decision to dismiss the claimant; and Mr Martyn Potter, an HR consultant who was engaged by the respondent to hear the claimant’s appeal against dismissal. For the claimant: The claimant herself (through two witness statements); Mr Kenneth McMaster, who was employed by the respondent as Business Development and Administration Manager from 2010 until August 2016; and Mr Matthew Anderson, who was a statutory and executive director of the respondent from 12 March 2008 to December 2015.

[21]An agreed bundle of documents numbered pages 1 - 452 was provided to the hearing. Various documents were added to this bundle by consent during the hearing. In addition, the claimant provided a supplemental bundle numbered pages 1 - 41; Mr Sendall said he had no objection to this being adduced as evidence.

[22]I read in advance the witness statements and any documents in the bundles to which they referred.

[23]A timetable for cross examination and submissions was agreed between the representatives and me at the start of the hearing. It was apparent that, even if the timetable was fully complied with, there would be no time in the five-day allocation to deal with remedy and it was therefore agreed that the hearing would be on liability only. The timetable was broadly complied with.

[24]Both representatives produced written submissions (which I read in advance of their oral submissions) and supplemented these with oral submissions. - 6 -

[25]As anticipated at the start of the hearing, my decision was reserved.

[26]In the light of that, at the end of the hearing a provisional date for a remedies hearing of Friday, 8 November 2019 was agreed between the representatives and me.

The Law

[27]The tribunal has to decide whether the employer had a reason for the dismissal which was one of the potentially fair reasons for dismissal within section 98(1) and (2) ERA and whether it had a genuine belief in that reason. The burden of proof here rests on the employer who must persuade the tribunal that it had a genuine belief that the employee committed the relevant misconduct and that belief was the reason for dismissal.

[28]In conduct cases, the principles in British Home Stores v Burchell

[1978] IRLR 379

apply, namely that, in dismissing the employee, the employer must have a genuine and reasonably held belief that the relevant misconduct took place, following such investigation as was reasonable.

[29]The tribunal must then decide whether it is satisfied, in all the circumstances (including the size and administrative resources of the employer), that the employer acted reasonably in treating it as a sufficient reason to dismiss the employee. I refer myself here to s 98(4) of the ERA and direct myself that the burden of proof in respect of this matter is neutral and that I must determine it in accordance with equity and the substantial merits of the case. It is useful to regard this matter as consisting of two separate issues, namely: 1. Whether the employer adopted a fair procedure? This will include a reasonable investigation with, almost invariably, a hearing at which the employee, knowing in advance (so as to be able to come suitably prepared) the charges or problems which are to be dealt with, has the opportunity to put their case and to answer the evidence obtained by the employer; and 2. Whether dismissal was a reasonable sanction in the circumstances of the case. That is, whether the employer acted within the band of reasonable responses in imposing it. I am aware of the need to avoid substituting my own opinion as to how a business should be run for that of the employer. However, I sit to provide, partly from my own knowledge, an objective consideration of what is or is not reasonable in the circumstances, that is, what a reasonable employer could reasonably have done. This is likely to include having regard to matters from the employee’s point of view: on the facts of the case, has the employee objectively suffered an injustice? It is trite law that a reasonable employer will bear in mind, when making a decision, factors such as the employee’s length of service, previous disciplinary record, declared intentions in respect of reform and so on. - 7 -

[30]In respect of these issues, the tribunal must also bear in mind the provisions of the relevant ACAS Code of Practice 2015 on Disciplinary and Grievance Procedures (the “ACAS Code”) to take into account any relevant provision thereof. Failure to follow any provisions of the ACAS Code does not in itself render a dismissal unfair, but it is something the tribunal will take into account in respect of both liability and any compensation. If the claimant succeeds, the compensatory award may be increased by 0 - 25% for any unreasonable failures by the employer or decreased by 0 - 25% for any unreasonable failures on the employee’s part.

[31]The following provisions of the ACAS code are relevant in relation to this case: 2. Fairness and transparency are promoted by developing and using rules and procedures for handling disciplinary and grievance situations. These should be set down in writing, be specific and clear. Employees and, where appropriate, their representatives should be involved in the development of rules and procedures. It is also important to help employees and managers understand what the rules and procedures are, where they can be found and how they are to be used. 8. In cases where a period of suspension with pay is considered necessary, this period should be as brief as possible, should be kept under review and it should be made clear that this suspension is not considered a disciplinary action. 9. If it is decided that there is a disciplinary case to answer, the employee should be notified of this in writing. This notification should contain sufficient information about the alleged misconduct or poor performance and its possible consequences to enable the employee to prepare to answer the case at a Code of practice on disciplinary and grievance procedures disciplinary meeting. It would normally be appropriate to provide copies of any written evidence, which may include any witness statements, with the notification. 12. Employers and employees (and their companions) should make every effort to attend the meeting. At the meeting the employer should explain the complaint against the employee and go through the evidence that has been gathered. The employee should be allowed to set out their case and answer any allegations that have been made. The employee should also be given a reasonable opportunity to ask questions, present evidence and call relevant witnesses. They should also be given an opportunity to raise points about any information provided by witnesses. Where an employer or employee intends to call relevant witnesses they should give advance notice that they intend to do this. 26. Where an employee feels that disciplinary action taken against them is wrong or unjust they should appeal against the decision. Appeals should be heard without unreasonable delay and ideally at an agreed time and place. Employees should let employers know the grounds for their appeal in writing. 29. Employees should be informed in writing of the results of the appeal hearing as soon as possible. - 8 -

[32]Where there is a suggestion that the employee has by her conduct caused or contributed to her dismissal, further and different matters arise for consideration. In particular, the tribunal must be satisfied on the balance of probabilities that the employee did commit the act of misconduct relied upon by the employer. Thereafter issues as to the percentage of such contribution must be determined.

[33]Under the case of Polkey v AE Dayton

[1987] IRLR 503

HL, where the dismissal is unfair due to a procedural reason but the tribunal considers that an employee would still have been dismissed, even if a fair procedure had been followed, it may reduce the normal amount of compensation by a percentage representing the chance that the employee would still have lost her employment. Breach of contract (notice pay)

[34]Where the respondent claims that it was entitled to terminate the contract without notice, it is for the respondent to prove on the balance of probabilities that the circumstances existed, for example gross misconduct on the part of the claimant, which entitled it to do so.

[35]For these purposes, the respondent must establish that the claimant in fact acted in a manner sufficient to constitute a repudiatory breach of the employment contract. In addition, the tribunal must be positively satisfied that the asserted misconduct actually occurred. In relation to this, I was referred by Mr Parkin to the case of Adron v Sussex Partnership NHS Foundation Trust

[2018] EWHC 3157 (QB)

;

[2019] IRLR 233

as per Jacobs J (Mr Sendall also indicated that he relied on this passage): “Gross misconduct may include, but is not limited to, dishonesty or intentional wrongdoing, for example: conduct which is seriously inconsistent with the employee's duties to his employer; or conduct which is of such a grave and weighty character as to amount to a breach of the confidential relationship between employer and employee, such as would render the employee unfit for continuance in the employer's employment, and give the employer the right to discharge him. The focus is on the damage to the relationship between the parties. Dishonesty and other deliberate actions which poison the relationship will obviously fall into the gross misconduct category, but so in an appropriate case can an act of gross negligence. See Adesokan v Sainsbury's Supermarkets Ltd

[2017] EWCA Civ 22

[2017] IRLR 346

paras [21]–[23] (Elias LJ).” Of particular note in this case is the emphasis in the above passage that the focus is on the damage to the relationship between the parties. Unlawful deduction from wages

[36]The provisions relating to unlawful deduction from wages are set out in Part II of the ERA. The following are relevant: 13 Right not to suffer unauthorised deductions.(1) An employer shall not make a deduction from wages of a worker employed by him unless— (a) the deduction is required or authorised to be made by virtue of a statutory provision or a relevant provision of the worker’s contract, or - 9 - (b) the worker has previously signified in writing his agreement or consent to the making of the deduction. … (3) Where the total amount of wages paid on any occasion by an employer to a worker employed by him is less than the total amount of the wages properly payable by him to the worker on that occasion (after deductions), the amount of the deficiency shall be treated for the purposes of this Part as a deduction made by the employer from the worker’s wages on that occasion. 27 Meaning of “wages” etc. (1) In this Part “wages”, in relation to a worker, means any sums payable to the worker in connection with his employment, including— (a) any fee, bonus, commission, holiday pay or other emolument referable to his employment, whether payable under his contract or otherwise, … but excluding any payments within subsection (2).

(2) Those payments are— (a) any payment by way of an advance under an agreement for a loan or by way of an advance of wages (but without prejudice to the application of section 13 to any deduction made from the worker’s wages in respect of any such advance), (b) any payment in respect of expenses incurred by the worker in carrying out his employment, (c) any payment by way of a pension, allowance or gratuity in connection with the worker’s retirement or as compensation for loss of office, (d) any payment referable to the worker’s redundancy, and (e) any payment to the worker otherwise than in his capacity as a worker.

[37]Article 4 of the 1994 Order gives the tribunal jurisdiction to hear an employer’s contract claim in certain circumstances. One respect in which this jurisdiction is circumscribed is that it is limited to claims “to which section 131(2) of the [Employment Protection (Consolidation) Act 1978] applies and which a court in England and Wales would under the law for the time being in force have jurisdiction to hear and determine”. Although no longer in force, section 131(2) prior to its repeal provided: “(2) Subject to subsection (3), this section applies to any of the following claims, that is to say –(a) a claim for damages for breach of a contract of employment or any other contract connected with employment; - 10 -

(b) a claim for a sum due under such a contract;

(c) a claim for the recovery of a sum in pursuance of any enactment relating to the terms or performance of such a contract; being in each case a claim that such a court in England and Wales … would under the law for the time being in force have jurisdiction to hear and determine an action in respect of the claim.”

Findings of Fact

[38]I make the following findings of fact. In doing so, I do not repeat all of the evidence, even where it is disputed, but confine my findings to those necessary to determine the agreed issues. The claimant’s role at the respondent

[39]The respondent is a bridging loan company based in the city of London.

[40]The claimant is a qualified chartered accountant.

[41]The claimant was employed by the respondent from 1 November 2011 until she was summarily dismissed with effect from 25 September 2017.

[42]The claimant was (and, so far as I am aware, still is) also a director of Russells, a business which she runs with her husband and daughter and which provides tax and accountancy advice. She was a director of Russells prior to her becoming an employee of the respondent and remained so throughout her employment with the respondent and thereafter.

[43]The claimant was initially employed by the respondent, from 1 November 2011, as a Financial Accountant. The claimant had been unwilling to give up her ongoing part-time activities with Russells and initially proposed to the respondent that she should work on a consultancy basis; however, the respondent pushed for her to come on board as a full-time employee, which she duly did. However, she had explained the situation to the three directors of the respondent at the time (who were RN, NA and Mr Anderson). They were satisfied that there was no conflict of interest between the claimant’s proposed role with the respondent and her involvement with Russells. Consequently, she came to an agreement with them that she would join the respondent as a Financial Accountant but would have permission to continue her involvement with Russells, provided that it did not impact on her ability to carry out her role at the respondent. No written contractual terms in relation to the claimant’s employment with the respondent were put in place at this time.

[44]The claimant had no involvement with the “front office” work of the respondent, especially with the clients of the respondent, nor did she take any substantive decisions relating to the provision of loans, bad debts, etc, which were reserved solely for the respondent’s directors. - 11 -

[45]In March 2013, following the retirement of the respondent’s previous Financial Controller, the respondent asked the claimant to take over the role of Financial Controller, which she duly did. She discussed her ongoing involvement with Russells with the directors at the time and the directors agreed that there was no conflict of interest with her proposed new activities at the respondent and that the respondent was happy for her to continue her involvement with Russells whilst carrying out the role of Financial Controller at the respondent.

[46]Around the same time, the directors of the respondent approached the claimant and asked if Russells would be willing to complete the respondent’s statutory accounts and Companies House format of accounts and corporation tax computations and returns. The arrangements at the respondent were that the accounting team at the respondent prepared the accounts up to the “trial balance” stage, at which point they were handed over to an external party for completion of the “statutory accounts” and audit. Up until this point, these accounts were completed by Jeffreys Henry LLP (“JH LLP”), who also carried out audits for the respondent. However, in the 2013 financial year the respondent’s revenue dropped below HMRC’s mandated turnover threshold for audits to be required. As a result, with an audit no longer being required, the respondent decided that JH LLP were not the most efficient firm to carry out the remaining external tasks; furthermore, the respondent decided that, given the claimant’s knowledge of the respondent’s accounts and the fact that Russells possesses special software that allowed the creation of these accounts and tax computations, it would make sense for Russells to carry out these tasks.

[47]At the same time, the respondent also agreed that the claimant’s future salary increases (the respondent had a practice of providing all employees with a 5% pay increase per annum) should be paid to the claimant through invoices issued by Russells. This arrangement started from September 2013 and was maintained, with the invoices being paid without fail, until May 2017. By the time the claimant was subsequently suspended on 20 February 2017, about £20,000 out of her total salary of £76,965 per annum was being paid to Russells on receipt of invoices issued by Russells. Again, these arrangements were not documented at the time they were entered into in 2013. Neither the respondent nor the claimant considered that there was any conflict of interest in relation to the work carried out by the claimant as Financial Controller for the respondent and the work she did for which payments were made to Russells.

[48]It is accepted that, by paying the claimant through Russells, there was a tax saving for the respondent in that it did not pay employer national insurance contributions in relation to these amounts (which, if paid through the payroll to the claimant directly, would have attracted employer national insurance contributions). Similarly, no tax and employee national insurance contributions was deducted from these amounts (as would have been the case had these amounts been paid by way of salary through the payroll to the claimant); however, Russells accounted for all the amounts received and paid any tax due accordingly.

[49]The claimant’s evidence to the tribunal was that at the time when these arrangements were entered into, neither she nor the respondent considered that - 12 - there was anything illegal about these arrangements in terms of the way tax was accounted for; and that, as of today, the claimant still did not consider that there was anything illegal about these arrangements.

[50]Whilst the claimant was initially unclear in her evidence about the nature of these payments, she eventually accepted that the monthly invoices were referable to work that she did as an employee of the respondent, rather than separate services rendered by Russells.

[51]The following financial year, the respondent’s turnover rose back again over the threshold that mandated its accounts being audited. JH LLP was therefore re-engaged to resume the performance of that task. Despite that, the respondent informed the claimant that it had decided that it was more efficient and cheaper for Russells to continue preparing their statutory accounts, given the firm’s expertise and resources. JH LLP, in their role as the respondent auditors, were made aware of this arrangement and did not raise any issues with it.

[52]Nobody raised any issues about these arrangements prior to the claimant’s suspension on 20 February 2017. This included the period after the three original directors left the respondent (NA and Mr Anderson left in December 2015 and RN left in May 2016), when a new (sole) director, Mr EA (“EA”) was in post (from May 2016 onwards). EA continued with the existing arrangements and continued to sign off and approve the payment of the Russells invoices.

[53]Although the role of Financial Controller had additional responsibilities, the claimant did not gain any additional authority to make decisions relating to the loans or the provision of bad debts, which still remained with the directors; her role was still to implement the instructions provided to her by the directors.

[54]Due to concerns raised by one of the respondent’s key shareholders, RN asked his son MN to carry out a full review of the respondent and its loan book. The claimant liaised closely with MN during this review to provide him with the financial information which he required. He produced a new five-year plan. At no point during this detailed review was any issue raised with the way or manner in which the claimant carried out her role or with the nature of her payment arrangements. MN’s involvement ended in 2014.

[55]Subsequent to this, the respondent brought in a number of accountants and consultants to review the company’s accounts and debtor ledgers to advise on strategy and on potential recoverability for shareholders. Two separate firms (“NLP” and then subsequently “Q LLP”) came in to do this. The claimant was not involved in appointing or instructing these third parties but was asked to provide a lot of information to them relating to the respondent’s accounts. No concerns were ever raised to her about the financial processes that were in place at the respondent or her handling of the accounts.

[56]With the exception of 2013 (as already referred to), the respondent’s accounts were audited by JH LLP on an annual basis. No issues were raised by JH LLP about the provision of bad debts or the processes that were in place or about the claimant’s remuneration arrangements. - 13 -

[57]In addition to the sums paid to Russells as set out in the arrangements detailed above, further payments were from time to time made by the respondent to Russells for pieces of work such as preparing accounts and corporation tax computations for various companies within the respondent group; an example is an invoice for £10,000 dated 9 November 2016. These payments were also agreed to and authorised by the relevant director or directors of the respondent at the time.

[58]As noted, NA and Mr Anderson resigned as directors in December 2015, with the third director (RN) leaving in May 2016. In May 2016, EA became the sole director of the respondent. EA had previously been working as an understudy underwriter to the directors since late 2015. EA had previously been involved with the respondent through his personal company “MWM” in an arrangement whereby MWM introduced potential loans to the respondent in the form of joint ventures. He was therefore known to both the claimant and Mr McMaster before he became a director. Before he was recruited, the claimant had a conversation with him and informed him of the issues that the respondent was facing, including its debt situation. The claimant’s contract of employment

[59]During the period from October 2015 to June 2016, the respondent was facing serious financial issues and there was a lot of unrest within it. As a result of the financial issues, the majority of the employees of the respondent were made redundant by March 2016; indeed, by the end of 2016, there were only three employees remaining at the respondent: EA, the claimant, and Ms “SH” (a more junior member of the accounts department at the respondent).

[60]Prior to these redundancies, in January 2016, the claimant was approached by “JR”, a director of the respondent’s majority shareholder. JR confirmed to the claimant that it had been agreed that the respondent was to be wound down so that the investors could reclaim their investment and then it would ultimately either be sold or dissolved. A letter of 24 February 2016, from the respondent’s solicitors, also references that “an orderly realisation of [the respondent’s] assets has been agreed in principle between the parties” and references a “winding down” of the respondent’s affairs. I therefore find as a fact that it was the intention of the respondent as at January/February 2016 that there should be an orderly wind down of its affairs.

[61]JR told the claimant that the respondent needed her help in order to assist EA to carry out an orderly wind down and he therefore requested that the claimant commit to stay with the respondent through to the end of April 2017, when it was planned to wind down the respondent. He told her that they were happy to agree a substantial further compensation payment to her if she was prepared to commit to this. After some negotiation, the claimant agreed with JR that, in return for committing herself to working for this period, the respondent would pay her £57,723.75 as compensation for loss of employment upon the respondent being wound down and her position being made redundant. She was under the impression that the wind down was a certainty and it was only on that - 14 - basis that she agreed to the arrangement. She had initially requested to be made redundant and then to be treated as a consultant instead of an employee for her remaining work but was told that the respondent was not prepared to accept that arrangement.

[62]In July 2016, Mr McMaster was asked by the respondent to draw up a contract that would put into effect the agreement that was reached as set out above. Mr McMaster is not a lawyer, but had on previous occasions been tasked with putting together employment related documents in relation to certain of the respondent’s employees. Mr McMaster’s evidence to the tribunal was that it was fully expected at that point that the respondent would be wound down by 30 April 2017.

[63]The agreement produced is the only written set of terms and conditions that there has been at any point relating to the claimant’s employment. However, the only reason that the document was produced was to detail the termination payment set out above; without that, the respondent would not have produced a contract for the claimant. Furthermore, the claimant gave evidence to me that, without the agreement in relation to this severance payment, she would not have stayed at the respondent; I have no reason to doubt this and therefore accept it.

[64]The remuneration clause in the contract states: “the salary for the role is currently £76,965 per annum.…”. There is no mention of how that salary will be taxed or that part of that salary would be paid to Russells as against invoices issued by Russells (which, as noted above, in practice it was).

[65]The relevant clause relating to the termination payment states: “Severance Pay Agreement: When the final wind down accounts have been audited and approved and your position becomes redundant it is agreed that you will receive a payment of not less than £57,723.75 in compensation for loss of employment. Such payment will be made as directed by you to ensure you obtain the maximum tax free lump sum as part payment and that you are able to make use of any other tax efficiency that may be available at that time.”

[66]The contract also states: “Notice of termination by the employer: The position is subject to three calendar months notice by either party and no notice by either party may be given prior to the 31st December 2016.”

[67]The contract also states: “Any changes or amendments to this statement will be notified and require agreement in writing by both employee and employer.”

[68]The contract makes reference to disciplinary and grievance procedures being detailed in the respondent’s Handbook. However, whilst Mr McMaster had been tasked with drafting a handbook and disciplinary procedures by the respondent, the respondent had not issued these to employees previously and did not do so at any point prior to the termination of the claimant’s employment. A copy of a disciplinary procedure did, however, remain on file. - 15 -

[69]The contract was signed on 15 July 2016 by the claimant and by JAR (JR’s son) on behalf of the respondent. There is no dispute between the parties as to whether JAR had authority to enter the contract on behalf of the respondent. The contract was therefore a legally binding document.

[70]The claimant’s daughter was made redundant by the respondent on 15 July 2016 and was informed that this was due to the winding down of the respondent’s business.

[71]Mr McMaster was made redundant in August 2016.

[72]As noted, prior to 20 February 2017, when the claimant was suspended, EA, the then sole director of the respondent, never expressed any concern to the claimant about the financial processes in place at the respondent or how she was carrying out her role.

[73]In December 2016, a forensic accountant (Mr “RU”) was appointed by the respondent to carry out a review of the respondent’s business and review the files. At the time, the claimant considered this to be a very similar process to that which had been carried out by third-party consultants previously. During the course of this process, the claimant spoke to RU on three occasions in person and also via email; however, RU asked relatively few questions of her, particularly in comparison to the third parties who had carried out reviews of the respondent’s business and accounts previously. RU obtained most of his information from EA. EA had only been at the respondent for a relatively short time and had very little knowledge of its accountancy processes. £15,000 payment

[74]As noted, EA owned a personal company called MWM. In September 2015, in her capacity as a director of Russells, the claimant introduced EA, acting on behalf of his personal company MWM (not on behalf of the respondent) to a company called “A Ltd”, which was an existing client of Russells (Russells provided tax and accountancy services to A Ltd).

[75]MWM obtained a loan of £50,000 from A Ltd to fund an onward loan to its client “Mr P”. A loan agreement was duly entered into. In due course, the claimant was informed through her client A Ltd that MWM had not met its repayment obligations to A Ltd under the terms of the loan agreement. By September 2016, A Ltd were pushing for the capital and interest to be repaid and, as Russells were their professional advisers and had made the original introduction, asked Russells to arrange for the repayment to be made. As A Ltd was an existing client of Russells, its increasing annoyance at not being repaid was concerning to the claimant as it had the potential to affect her reputation and Russells’ future business. The claimant therefore approached EA to try and broker a compromise.

[76]During these discussions, EA stated that Mr P had not repaid the loan to MWM and he was in the process of taking legal action against Mr P to recover it and that he/MWM was not, therefore, in a position to repay the capital. Although - 16 - she had no legal obligation to A Ltd, the claimant felt a moral obligation for the reasons set out above and, after discussions, it was agreed that Russells would advance an amount equal to the loan capital to A Ltd on MWM’s behalf, protecting Russells’ relationship with A Ltd; EA would then pursue the legal action against Mr P and, upon receipt of the funds, the capital would be repaid.

[77]Unfortunately, however, Russells at this time did not have enough available capital to make this repayment. Russells took out a £25,000 loan from a third party to cover part of it; however, it was still £15,000 short. In order to obtain the required amount, the claimant requested that the respondent provide an “advance” to her. She agreed with EA that this £15,000 would be made as an advance on the termination payment which she expected that she would receive in due course upon being made redundant; the idea was that, once the termination payment was paid to her upon the winding up of the respondent, the £15,000 would be set off against it. These arrangements, as has been noted by several of the witnesses to these proceedings, were “unusual”; on any reading of them, there was a considerable blurring of obligations and responsibilities as between the claimant and the respondent and third-party arrangements involving Russells, MWM, EA and others.

[78]EA needed to obtain permission from the respondent’s shareholders in order to authorise this £15,000 payment to the claimant. He duly obtained permission from the shareholders and the payment was authorised by them and by EA. It is not known precisely what he told (or didn’t tell) the shareholders (EA was not called by the respondent to give evidence at this tribunal and no reason was given by the respondent for not calling him). However, I accept that, as the claimant maintains, the situation was likely to be a very embarrassing one for EA (given the intrusion of these entirely separate personal arrangements on the respondent’s affairs) and that it is unlikely that EA told the shareholders the full background story.

[79]Furthermore, the claimant was particularly animated when she gave her evidence in relation to these arrangements. I accept, as she maintains, that EA’s behaviour put her in an embarrassing position with her client, A Ltd, and that the discussions between EA and the claimant at that point in late 2016 were, as she maintains, argumentative and acrimonious.

[80]The £15,000 payment was duly made to the claimant on 16 December 2016. Accordingly, on the same day, Russells paid an amount equal to the loan capital of £50,000 to A Ltd. £10,000 Russells invoice

[81]On 14 December 2016, a Russells invoice, totalling £10,000, was paid to the claimant’s personal bank account rather than to the Russells account. There is no dispute that this invoice, which was for Russells’ preparation of the respondent’s statutory accounts was a genuine invoice from Russells which EA had authorised to be paid to Russells. The bank details printed on the invoice are Russells’ bank account details. It is common ground that the invoice should not have been paid into the claimant’s personal bank account. - 17 -

[82]The payment was processed by SH and not by the claimant personally. The claimant accepts that she did instruct SH to make the payment; however, it is in dispute as to what the instruction to SH was. The claimant’s evidence to the tribunal was that the making of the payment to her account was a mistake as the invoice clearly should have been paid to the Russells bank account; that in her opinion the mistake came about most likely because the respondent had a number of templates to make regular payments, so there was a template for both her personally (where her salary was paid) and for Russells (where the payment for invoices was made); and that when she instructed SH to pay the invoice, she did not state exactly which bank account to make it to as she thought it was clear from the invoice that it should be paid to Russells; and that it is likely that the wrong template was accidentally selected. The respondent’s submission at this tribunal, for reasons which I will come to, is that the claimant deliberately requested that SH “diverted” the payment to her own personal bank account. For the moment, it is worth recording only that there is a dispute between the parties in this respect as to what actually happened.

[83]On the side of the invoice in question, in manuscript, are written (in what appears to be and what I find on the balance of probabilities to be the same handwriting) the claimant’s personal account details and the words “D Russell” underneath them. This is not the claimant’s signature (I have seen an example of that elsewhere in the bundle). SH was not called to give evidence at the tribunal and no reason was given by the respondent as to why she was not called, so I was unable to ask her about this. The claimant denies that it is her handwriting and, on the basis of what SH herself says in her subsequent email of 7 September 2017, which I will refer to later, I find that the writing (of both the account details and the words “D Russell”) is SH’s.

[84]The claimant subsequently transferred the £10,000 from her own bank account to the Russells account on 19 December 2016. She maintains that she did this once she had become aware of the error. However, in the end, the money ended up in the account to which it should have been transferred in the first place only a few days later. The claimant did not personally gain in any way as a result nor did the respondent suffer any loss. Suspension

[85]On 20 February 2017, the claimant was called into a meeting with EA and provided, without any warning, with a letter suspending her on full pay “pending investigation into allegation of misconduct and/or potential negligence”. The letter set a time for a disciplinary hearing on 6 March 2017 and highlighted in only very general terms four allegations for that disciplinary hearing which, in summary, were to do with the claimant’s alleged handling of the debtor ledger and provisions for bad debts. No reference was made to her remuneration arrangements or any of the payments referred to in the paragraphs above. The letter stated that, if proven, these allegations could amount to gross negligence/gross misconduct and that the claimant’s employment with the respondent could therefore be at risk; and that the respondent would “continue to investigate the matter and may add or amend these allegations”. It added that - 18 - “When we have completed the investigation, we will write to confirm whether you will be required to attend a disciplinary hearing”.

[86]On 3 March 2017, the respondent cancelled the 6 March 2017 disciplinary hearing.

[87]The respondent’s lawyers, Shulmans LLP (“Shulmans”), then wrote to the claimant on 24 March 2017 reiterating the allegations in similar terms which were similarly unparticularised. Their letter also raised a potential concern about a “potential conflict of interest” between the claimant working as Financial Controller and providing services through Russells.

[88]The claimant heard nothing further. The claimant therefore instructed solicitors, who wrote to Shulmans on 7 April 2017. As well as stating that it was unfair to remove the claimant from the respondent’s business, the claimant’s solicitors made references to the ACAS Code, particularly in the context of how long the claimant had been suspended. The claimant confirmed in evidence that she had been made aware by her solicitors of the ACAS Code and its provisions. No response was received to this letter, either by the claimant or by her solicitors.

[89]Following the claimant’s suspension, the monthly Russells invoices which Russells continued to submit as usual continued to be paid. This was until the May 2017 invoice, which was not paid. The claimant phoned EA about this. EA eventually indicated to her that the respondent did not recognise the invoice as no services had been carried out by Russells in this period. In an email of 12 June 2017 to EA, the claimant stated: “OK. Just to be clear. As explained to you numerous times, this invoice has nothing to do with any services that Russells Associates Limited provides. The former Directors of Fincorp agreed that Russells Associates Ltd can bill for all the increases in salary given to me from 2013 onwards.… I agreed to this on the basis that the Directors felt that it was more cost effective for the Company. If you do not continue to honour this obligation then I am happy for this amount to be included in the payroll for deduction of tax and NI. Can you rectify this position without further delay as if you do not do this it will amount to an unlawful deduction.”

[90]Notwithstanding this, the respondent did not pay the May invoice, or the June invoice subsequently submitted by Russells. In light of the fact that its invoices were not being paid, Russells did not submit further invoices for July, August and September 2017.

[91]As it was now four months since she had originally been suspended, and having received no update on her suspension or the investigation that the respondent had said was taking place, the claimant filed a grievance with the respondent regarding her treatment, which was emailed to EA on 21 June 2017. As well as objecting to the length of the suspension, the claimant, amongst other things, also raised the issue of the unpaid May 2017 invoice in her grievance.

[92]Receipt of the grievance was acknowledged in a letter from Shulmans on 4 July 2017. - 19 -

[93]A further letter from Shulmans of 21 July 2017 invited the claimant to a grievance hearing on 3 August 2017, to be heard by an independent HR professional (Ms “TS”).

[94]The claimant requested to bring a friend to the grievance meeting who was an ex-employee of the respondent (by that stage, the respondent only had two other employees, EA and SH). Shulmans, on behalf of the respondent, denied this request on the basis that the individual was neither an employee or a trade union official. The claimant therefore attended the grievance meeting on 3 August 2017 alone.

[95]The claimant received the outcome letter to her grievance on 22 August 2017. She fundamentally disagreed with a number of the decisions that TS took and the reasons for reaching those decisions. She therefore decided to appeal the grievance outcome, which she did by letter to TS on 1 September 2017.

[96]At some point between the claimant’s suspension and the beginning of September 2017, RU had produced at least two “forensic accounting reports” in relation to the respondent. Disciplinary hearing

[97]Towards the end of August 2017, the respondent appointed Mr Cooke to hear a disciplinary meeting in relation to the claimant. Mr Cooke is an independent HR consultant with nearly 30 years’ experience. Prior to his appointment, he had no knowledge of the respondent or the claimant. The claimant has asserted that he was not independent. However, I have seen no evidence which suggests that he was not independent; the limited contact which he had with EA was necessary in terms of emails agreeing his appointment and a call further to the disciplinary hearing in which he conducted further relevant investigation prompted by what the claimant told him at the disciplinary hearing. The claimant points out that the respondent paid his fee; however, that would be the case with any external consultant. I do not, therefore, find that Mr Cooke was not independent.

[98]By letter of 1 September 2017 from Shulmans, the claimant was invited to a disciplinary hearing on 8 September 2017. The letter set out six allegations. The first four covered the debtor ledger/bad debt issues already referred to previously; the fifth referenced “a clear conflict of interest” between the claimant’s duties as an employee of the respondent and her position at Russells; the sixth stated that the claimant “misrepresented matters in respect of a payment to you which you have characterised as an “advance” on a redundancy payment you consider is owing to you” (although it is not specific, this must be a reference to the £15,000 payment referred to above).

[99]In addition, the letter attached “a copy of a forensic accountant’s report” and drew the claimant’s attention to various paragraphs set out in that report for “further specific details of the allegations against you”. It was not clear which of the reports was sent and, indeed, which Mr Cooke had in front of him at the hearing (Mr Cooke’s evidence was particularly confused in this respect). - 20 - However, given that the cross-references in the invitation letter correspond to the paragraphs in the document in the bundle entitled “Forensic Accounting Report 2 - Accounting Excerpt”, which was produced by RU, I find on the balance of probabilities that that was the document which both Mr Cooke had in front of him and which was sent to the claimant. In fact, the “Excerpt” includes only paragraphs 8 and 9 of what appears to have been a more extensive report and is not therefore a complete copy of whatever report was produced. Each of paragraphs 8 and 9 have numerous subparagraphs. In addition, there was in the bundle another accounting report produced by RU, although on the balance of probabilities I find that that was not before either Mr Cooke or the claimant in the disciplinary proceedings.

[100]In an email to the claimant of 4 September 2017, Mr Cooke informed the claim that he thought it appropriate to hear both her grievance appeal and the disciplinary hearing together. The claimant strongly disagreed with this as she viewed many of the issues in the grievance as being wholly separate to the disciplinary allegations. She informed Mr Cooke of this in an email of 4 September 2017 and, given that it was seven months since she had been suspended but that she had been given only one week to prepare for the hearing, she sought an extension. This was agreed to and the disciplinary hearing rearranged for 15 September 2017.

[101]On 6 September 2017, JW, a solicitor at Shulmans, emailed SH (copying in EA) regarding the £10,000 invoice which was paid into the claimant’s bank account on 14 December 2016. His email states: “Are you able to find information or evidence in respect of the payment of the Russell Associates Invoice being paid directly to DR’s personal/private account? The invoice appears to override payments to the usual account so we infer there is something by way of a paper trail. I infer that the instruction was given to pay to the personal account of DR, rather than Russell Associates. Do you recall when, by whom and what the instruction was. I infer you were asked to action this. It would be useful if you could provide a short paragraph on what you recall. Whether it was you or someone else, are you aware of any email in relation to the instruction to pay into DR’s personal account? I am thinking it might have been an email to you from DR, as an example.” This request to a junior employee, copied into her boss, is leading to say the least.

[102]SH replied by email of 7 September 2017: “… This was done on the verbal instruction of Donna, and I asked her for the bank details of where she wanted the payment to go, I then wrote these details on the invoice number INV 000129 and made the payment, that she countersigned as authoriser.”

[103]During the subsequent disciplinary proceedings, Mr Cooke had sight of this email; however, it was never given to the claimant, either at the disciplinary or the appeal stage of the internal proceedings and she first had sight of it during the disclosure process in relation to these employment tribunal proceedings. - 21 -

[104]The claimant attended the hearing on Friday, 15 September 2017 with Mr Cooke. Also present was a trainee solicitor from Shulmans as notetaker. The hearing lasted approximately three hours. The claimant was given the opportunity to set out what she wished in relation to the allegations. Much of the discussion was about the ledger/bad debts issues which formed the bulk of the allegations and the bulk of the detail in the excerpt from the forensic accounting report which the claimant had been provided with. However, the claimant also went through the other paragraphs of the report which the disciplinary invitation letter had drawn her attention to, setting out her position. This included her confirming that the directors of the respondent were aware of everything that was going on in relation to her remuneration arrangements and her roles as employee and for Russells; an explanation of the background behind the £15,000 payment; and stating that she couldn’t recall what happened with the £10,000 payment made on 14 December 2016, although she didn’t recall asking SH to send it to a different account, but that she could confirm that the payment was now in the correct account and she would look to see what happened.

[105]It was agreed that the claimant would send further documentation to Mr Cooke in relation to the payments.

[106]The last line of the notes of the hearing records that Mr Cooke explained that he would set out his conclusions by letter, “probably into next week”, and that he would send a copy of the notes of the meeting to all parties for comment.

[107]By email sent on Tuesday, 19 September 2017 to the claimant (copied to Mr Cooke), the notetaker from Shulmans attached the notes and requested the claimant, if there were any material inaccuracies or omissions, to let her know within five business days from the date of the email. The email added that Shulmans “look forward to receiving the documents requested on the final page of the attached note as soon as possible” (in other words, the documents relating to the payments which it had been agreed that the claimant would provide).

[108]On 22 September 2017, Mr Cooke had a telephone conversation with EA to put several questions to him which had arisen from the disciplinary hearing with the claimant. The same notetaker from Shulmans took a note of this call too. Amongst other things, EA gave a different account of the background to the £15,000 advance from that of the claimant; however, he confirmed that the £15,000 payment to the claimant was indeed something which the claimant requested as an advance on the termination payment and was indeed authorised by the respondent’s shareholders. In relation to the claimant’s remuneration arrangements, EA stated that he thought that it was “an unusual arrangement” but confirmed that his understanding was that it had been agreed with the previous directors (and that the shareholders had confirmed this to him) and that he took this arrangement as being in good faith. He also confirmed that JH LLP had not raised concerns or issues about the claimant.

[109]The note of this call with EA was never disclosed to the claimant, either at the disciplinary or appeal stage of the internal proceedings. - 22 -

[110]On 25 September 2017, the claimant emailed to the notetaker at Shulmans her amendments to the notes of the disciplinary hearing, together with the further documentation which she had agreed at the disciplinary hearing to provide (with one further piece of information following the next day). This included bank statements showing the payment of £10,000 going into her account on 14 December 2016 but then a further payment of £10,000 going out of her account and into the Russells bank account on 19 December 2016. Furthermore, some of the claimant’s changes to the notes were material; for example, in relation to the £10,000 payment, some changes which she made make clear that she does not accept that she asked SH to “divert” the payment to her account in contrast to the original version of the notes which suggests that she did; these changes were subsequently accepted by Shulmans and therefore stand as the accepted record of what was actually said at the disciplinary hearing.

[111]However, before he received this documentation, Mr Cooke had already issued his outcome letter that same day, 25 September 2017. The outcome was that he was dismissing her for gross misconduct with immediate effect.

[112]The outcome letter is somewhat confused in terms of precisely which allegations Mr Cooke regarded as being gross misconduct for which he dismissed the claimant and which were not. It took some time in cross examination for him to clarify this. However, based on the combination of the letter and Mr Cooke’s evidence before us, the reasons for dismissal were as follows. Mr Cooke discounted the issues to do with the ledger/debt management as “issues of low competence rather than high negligence” (I should make clear that the claimant does not accept that there was a competence issue here; however, for the purposes of the issues of this claim, it is enough to note that these were not issues which Mr Cooke considered to be misconduct or for which he dismissed the claimant). What Mr Cooke considered to be gross misconduct, for which he dismissed the claimant, were the following issues: 1. The “diversion” of the £10,000 payment; 2. The £15,000 payment; 3. The income splitting with Russell’s associates; and 4. “Conflicts of interest”.

[113]Little analysis is set out in the decision letter. In addition, there are several statements in that letter of note. These include: 1. The conclusion that “You did, and this is not denied by you, divert a payment of £10,000 from Russells Associates to your own personal bank account”; the claimant did not accept that she diverted the payment, as is clear from the amended notes of the disciplinary hearing. - 23 - 2. In addition, Mr Cooke describes the £15,000 payment as “unusual”; even on his own wording, this is hardly the language of gross misconduct. 3. As to the split remuneration arrangements, Mr Cooke states that “I believe that this latter arrangement (whether authorised and agreed by former directors or not) constitutes a gross error of judgment on your part, appears to be a device to deprive HMRC of employers NI and of your PAYE taxation”; Mr Cooke does not conclude that the arrangement was indeed authorised (when all the evidence, including that of EA, indicates that it was); furthermore, even at this tribunal hearing, he was not prepared to assert that he considered that the arrangements were in fact illegal in terms of tax; furthermore, the conclusion that this appears to be a “device to deprive HMRC of employers NI and your tax” appears to be an inference by him and not based on any evidence as the claimant did not give evidence to that effect and Mr Cooke did not seek to contact the directors who agreed to the arrangements to see what their intention in putting the arrangements in place was nor did he investigate whether Russells accounted for tax correctly on the payments made to it.

[114]Much of Mr Cooke’s written evidence in his witness statement and his oral evidence at this hearing involved suggested justifications for these conclusions which were not set out in the outcome letter; in this context on several occasions he made statements which, when pressed, he admitted were purely speculation on his part rather than based on any evidence; on more than one occasion I had to warn him to be careful of doing so as there was a risk of his inadvertently misleading the tribunal.

[115]The respondent did not, and has not to this date, paid the claimant her September 2017 salary. Appeal

[116]By letter of 2 October 2017, the claimant appealed the decision to dismiss her. In that letter, she set out a great deal of detail addressing the various points in the dismissal letter which Mr Cooke confirmed to the tribunal were the reasons why he dismissed her.

[117]By letter of 10 October 2017, Shulmans informed the claimant that (notwithstanding that it had originally been stated by Mr Cooke that her grievance appeal would be dealt with at the disciplinary meeting) a combined appeal hearing in relation to the disciplinary and grievance outcomes would be held. They requested further information of the claimant within 10 business days, which she provided on 30 October 2017.

[118]The respondent appointed Mr Potter, an independent HR professional, to conduct the hearing. Whilst the claimant has asserted that Mr Potter was not independent, there is no compelling evidence other than assertion to support this. I do not, therefore, find that he was not independent. - 24 -

[119]By letter of 13 December 2017, Shulmans invited the claimant to a disciplinary hearing on 16 January 2018. This was subsequently postponed on the claimant’s request due to health issues and was ultimately held on 7 February 2018.

[120]In advance of the hearing, a signed statement by Dr “GG” of A Ltd was produced to the claimant, who provided it to Mr Potter; this statement essentially confirmed the account already given by the claimant of the background (in terms of A Ltd, MWM, EA and Mr P) to the £15,000 advance made to the claimant.

[121]In addition, a statement signed by Mr Anderson and NA was produced confirming that, at the time the relevant arrangements were entered into, the directors of the respondent were well aware of the existence of Russells and were happy that there was no conflict of interest in the claimant continuing her involvement with Russells, and that the split salary arrangements were agreed with them.

[122]By agreement, the appeal hearing was at Mr Potter’s suggestion digitally recorded. The claimant was given the opportunity to put forward at the appeal hearing whatever she wished to say.

[123]Mr Potter made clear in his evidence at this hearing that he was not conducting a rehearing of the original disciplinary hearing but that, rather, he was carrying out “a review of the fairness of the original decision in the light of the procedure that was followed and any new information that came to light”. He went through and addressed the grounds set out in the claimant’s appeal letter; he did not conduct a rehearing.

[124]Following the appeal hearing, an 8 February 2018, Mr Potter addressed some further questions to the respondent. These were not fully answered until 9 March 2018. On 16 March 2018, Mr Potter emailed the claimant to ask if she intended to comment on information sent to her by Shulmans on 12 March 2018 and she replied on 21 March 2018. Mr Potter kept the claimant informed of progress via various email update messages.

[125]Mr Potter set out his appeal hearing outcome by email to the claimant on 18 April 2018. The letter, which is 23 pages long, addresses the disciplinary appeal and the grievance appeal. In some respects, Mr Potter upheld some aspects of the appeal; however, he did not change the decision of Mr Cooke in relation to the grounds for gross misconduct and did not overturn the decision to dismiss. Administration

[126]Notwithstanding the expectations in 2016, the respondent was not wound down in April 2017 or at any stage thereafter. It carried on trading. No “final wind down accounts” in respect of the respondent have been produced or audited or approved. - 25 -

[127]The respondent went into administration on 11 April 2019. However, there is no evidence before me to suggest that it has been wound down and I, therefore, find on the balance of probabilities that it has not been wound down. I am not in position to make any findings as to whether or not the administrators intend to wind the respondent down in the future or not. Conclusions on

The Issues

[128]I make the following conclusions, applying the law to the facts found in relation to the agreed issues. EA

[129]The first submission which Mr Parkin makes is that, whilst Mr Cooke was ostensibly the decision maker in relation to the claimant’s dismissal, his reasoning was so infected by the information provided by EA and the control that EA exerted over the investigatory process that EA’s mind is the one to be examined for the operative reason for dismissal.

[130]He submits that there were at least two reasons why EA would want to dismiss the claimant: first, to avoid paying her the termination payment under her 2016 contract of employment; and secondly to remove her from the respondent’s business because of the acrimony that had developed around the loan arrangements concerning EA, the claimant, MWM, A Ltd and Russells. In this respect, he notes that it was EA who in December 2016 appointed RU (which resulted in the production of RU’s forensic accounting report which ultimately became the basis of the evidence against the claimant) and that EA suspended the claimant not long after that appointment, on 20 February 2017.

[131]I do not accept the first of these. EA was a director at the time the employment contract was agreed between the respondent and the claimant and it was only around five months after this that he engaged RU to produce the forensic reports; it is unlikely that at the point that he did so he was trying to avoid paying a payment the terms of which had under his directorship only recently been agreed with the claimant. Even more pertinently, the payment would not have been payable in any event if, as turned out to be the case, the respondent did not wind down; there was no need to dismiss the claimant to avoid paying this termination payment.

[132]I do, however, consider that EA’s reasons for putting in place the forensic accounting report and suspending the claimant are likely to have been and indeed were influenced by his altercations with the claimant in relation to the private financial matters involving MWM, A Ltd and Russells which ended up impinging on the respondent in the form of the £15,000 advance and were consequently embarrassing for EA, as well as being acrimonious as between EA and the claimant. EA was not called to give evidence and no reason was given for his not doing so, so he could have attended the tribunal to set out his reasons for taking these actions; however, he did not do so and it is not therefore possible - 26 - to test in evidence what his motivation was and I therefore draw an adverse inference from his non-attendance in this respect. The other relevant evidence is as follows: EA knew that the claimant’s involvement with both Russells and the respondent and her remuneration arrangements were long since known of and agreed to by the respondent and had not been questioned previously by him or by any number of external advisers; RU was instructed by EA around the time of the height of the acrimony between EA and the claimant in relation to the loan arrangements; EA suspended the claimant not long afterwards without having obtained the evidence to bring disciplinary proceedings against her (the only allegations set out in the suspension letter were in relation to bad debts/the debtor ledger, which were in due course duly dismissed by Mr Cooke as not even amounting to misconduct of any sort); and EA kept the claimant on suspension for seven months until disciplinary proceedings were eventually brought, all of which suggests that EA was looking for reasons to bring proceedings against the claimant. In the light of that, I find that on the balance of probabilities, EA was seeking to bring about the claimant’s dismissal and that, given the timing in relation to the loan arrangements, and the acrimony caused by them to the relationship between EA and the claimant, that that was his primary motivation for doing so.

[133]Furthermore, I also accept Mr Parkin’s submission that there was real scope for EA to have influenced the forensic report prepared by RU, as RU’s principal contact was with EA and he did not speak to any great extent with the claimant, who was the one who dealt with the accounts function. Having said that, RU is a professional and there is no evidence to suggest that, whatever EA may have told him, he did not exercise his professional judgment in reaching the conclusions set out in his report.

[134]Where I disagree with Mr Parkin is in relation to Mr Cooke. Mr Cooke is an HR consultant with 30 years’ experience; there is no evidence that he did not carry out his task as disciplinary officer independently and indeed his own evidence is that he did exactly that and was not pressured by EA to come to a particular decision. There are, as we shall come to, a number of areas in relation to which I am critical of the way Mr Cooke carried out that task; and his failure to provide the claimant with a copy of the notes of his conversation of 22 September 2017 with EA, which Mr Parkin cites in support of his argument, is one such criticism. However, I consider them to be failures in the process carried out by Mr Cooke; I do not consider that they provide evidence that he was motivated to carry out the process in a particular way because of what EA was allegedly telling him. Furthermore, there is no evidence that Mr Cooke knew from EA that there was any acrimony on EA’s part in relation to the loan arrangements or was aware of any desire on EA’s part to remove the claimant because of that or (although I have rejected this even as a motivation of EA) because of the termination payment arrangements.

[135]In short, I do not consider that Mr Cooke’s reasoning was infected by the information provided by EA or that his decision was anything other than his own. It is, therefore, Mr Cooke’s mind which needs to be examined for the operative reason for dismissal and not EA’s. - 27 - Reason for dismissal/genuine belief

[136]Mr Parkin accepts that, if I am satisfied that Mr Cooke is the relevant decision maker for present purposes, I should find that the reason for dismissal was gross misconduct and indeed I do. I find that overall Mr Cooke genuinely believed that the claimant committed gross misconduct and that this was the reason why he dismissed her.

[137]Similarly, I accept Mr Parkin’s submission that there is no evidentiary basis for me to conclude that Mr Cooke relied upon “some other substantial reason”. That much is clear from his dismissal letter and his evidence before this tribunal.

[138]As noted, Mr Cooke’s evidence was that he relied on four matters, namely: 1. The “diversion” of the £10,000 payment; 2. The £15,000 payment; 3. The income splitting with Russell’s associates; and 4. “Conflicts of interest”.

[139]I accept, however, Mr Parkin’s submission that in fact Mr Cooke did not hold any belief that the £15,000 payment in itself amounted to gross misconduct; that much is evident from his dismissal letter where the highest that he puts this at is that the payment was “unusual”, which is on any standard well below the language of gross misconduct. Reasonable belief based on a reasonable investigation

[140]As a general point, Mr Parkin has criticised Mr Cooke in relation to whether or not he conducted an investigation himself or not. However, what happened was that there was a form of investigation (in the sense that RU produced a forensic report which was the basis of the disciplinary allegations). Furthermore, Mr Cooke carried out further investigation following the disciplinary hearing, which is not unusual and, if the hearing leads to further lines of enquiry, entirely right and proper to do. The question is whether or not, in totality, the decision to dismiss was taken after such investigation as was reasonable had been carried out.

[141]I therefore turn to the four individual allegations in terms of whether there was a reasonable investigation and whether any belief that gross misconduct had taken place was reasonable. - 28 - £10,000 payment

[142]There is no dispute that the £10,000 payment made on 14 December 2016 was referable to a validly rendered invoice from Russells and should have been paid to Russells.

[143]As noted already, Mr Cooke claimed that it was not denied that the claimant had diverted payment of it; that was, however, not true, which he would have known had he (as he should have done) waited for the corrections to the notes of the disciplinary hearing. The claimant did not admit that she “diverted” the payment.

[144]The evidence before Mr Cooke was, therefore, that the payment was made into the wrong account and that this was remedied a few days later when it was transferred by the claimant to the Russells account.

[145]The only piece of evidence to suggest that the claimant might have “diverted” the payment was the evidence in the brief email of SH, which was prompted by the leading request from Shulmans. This was never put to the claimant. Given the weight given to it, that failure to put it to the claimant is a failure to complete a reasonable investigation in relation to this allegation. A belief in misconduct founded on that cannot have been a reasonable one.

[146]In fact, it was clear from the evidence of both Mr Cooke and Mr Potter that each of them speculated on the correct tax treatment or otherwise of this payment. However, it is not in dispute that the payment ended up in the correct place within a few days and that, had it been paid directly to the Russells account, no tax would have been deductible. Issues about tax in this respect were speculation on the part of Mr Cooke and were not relevant to the consideration of whether the claimant “diverted” the payment and whether doing so amounted to misconduct.

[147]Even if it had been reasonable to conclude that the claimant “diverted” the payment, she obtained no benefit from it and the respondent was not put to any detriment as a result of it; and the payment, a few days later, ended up in the right place. It cannot, therefore, have been reasonable to believe that, even if the claimant did “divert” the payment, this was something which (without further evidence) amounted to misconduct in terms of the claimant’s relationship with the respondent.

[148]For these reasons, there was no reasonable investigation or reasonable belief in the misconduct in relation to the £10,000 payment and any dismissal based on this allegation would therefore be unfair. £15,000 payment

[149]This payment was not even identified in Mr Cooke’s decision letter as a basis for gross misconduct. As I have already found, Mr Cooke did not even genuinely believe that this was “gross misconduct”; it was merely, as he described it, “unusual”. - 29 -

[150]That is hardly surprising because the clear evidence is that this payment was made with the full knowledge and authorisation of the respondent’s only director (EA) and its shareholders. I accept Mr Parkin submission that the authorising party cannot sensibly claim that the recipient of the payment has somehow violated their bargain and undermined their relationship to an unacceptable level. There was, therefore, no misconduct at all in this respect and no belief that what this amounted to was misconduct could be a reasonable one.

[151]Any dismissal based on this allegation would therefore be unfair. Split income

[152]There is no dispute that the claimant’s income arrangements were approved and agreed with the respondent. The basis of the suggestion that the claimant committed misconduct by participating in these arrangements comes down entirely to the views which Mr Cooke had in relation to the tax treatment of those arrangements.

[153]However, Mr Cooke accepted that, given that the remuneration arrangements were agreed to by the respondent, that if they were to amount to gross misconduct, he must at least be satisfied that they were illegal. Mr Cooke continually insisted that he was not a tax advisor or lawyer and that he was not comfortable making such a determination. I questioned him myself in relation his views but at no stage was he able to confirm that he could say that these arrangements were indeed illegal. His witness statement makes no reference to such a finding but just contains generalised suggestions about the likelihood of HMRC taking a particular view about the arrangement and speculation by him about the claimant’s motivations. It was clear from my questioning of him that Mr Cooke plainly had not turned his mind to the issue of whether it could be gross misconduct with or without actually determining the legality or otherwise of the arrangement. Furthermore, he didn’t take any advice from a tax expert before coming to his decision.

[154]First, that failure to take further advice from a tax expert on this crucial issue of whether or not the arrangements were in fact illegal is a clear and unreasonable failure in the investigation.

[155]Secondly, the failure to make a finding that what was happening was illegal means that any assumption that it was illegal and therefore misconduct was unreasonable.

[156]Thirdly, there was no finding that (even if it had been illegal) the claimant realised or considered that it was illegal, which must also be a constituent part of any reasonable belief that what the claimant did amounted to misconduct. There was no attempt to find out what the claimant’s view was in this respect; if that had been done, it is likely that the claimant would have given the same answer that she gave this tribunal, namely that she did not consider that the arrangements - 30 - were illegal either at the time or now. That failure to carry out that line of enquiry is a further failure in the investigation.

[157]Fourthly, even if there had been reasonable findings that the arrangements were illegal and that the claimant knew that they were illegal, I do not consider that in these circumstances that does amount to misconduct, nor could Mr Cooke have reasonably believed the same. What we are talking about is misconduct in relation to the relationship between employer and employee; and I accept Mr Parkin’s submission that a decision to find that the claimant engaged in gross misconduct in relation to that relationship through participating in an arrangement entered into consensually between her and her employer is incoherent, whatever spin is put on it. Given the consensual nature of these arrangements, there could be no reasonable belief that the claimant committed misconduct of any sort by participating in them, let alone gross misconduct.

[158]Any dismissal founded upon this allegation would therefore be unfair. “Conflicts of interest”

[159]Mr Cooke was aware from the information in front of him that the arrangements whereby the claimant prepared the accounts to trial balance as Financial Controller and that Russells prepared the statutory accounts and that JH LLP undertook the audit were in place; and that the auditors had no problems with the arrangement.

[160]Mr Cooke accepted that he did not try to speak to the auditors. That failure to do so, when concluding that the arrangements amounted to a conflict of interest, was an unreasonable failure in terms of the investigation, rendering the dismissal unfair.

[161]In his evidence, it became clear that Mr Cooke’s conclusions in this respect were based on speculation on his part (including suggestions that there were often relationships between companies and auditors where they became too close, which he then quickly withdrew from). There was no proper basis for him to conclude on the balance of probabilities that there was a conflict of interest in these arrangements. His belief that there was one was therefore unreasonable.

[162]Even if he did have such a reasonable belief, we come back to the question that runs throughout the respondent’s arguments in many of these allegations, namely the suggestion that arrangements agreed between employer and employee and participated in by them can amount to misconduct by the employee as against the employer. Again, I accept that it cannot be reasonable for Mr Cooke to have concluded that, even if these arrangements had amounted to a conflict of interest, the claimant had committed misconduct as against the respondent when the respondent was fully aware of these arrangements and had authorised them and put them in place with the claimant.

[163]There was, therefore, no reasonable investigation and no reasonable belief and any dismissal based on this allegation would therefore be unfair. - 31 -

[164]As the dismissal was based on the four allegations above, in respect of which such investigation as was reasonable had not taken place and in respect of which no reasonable belief that misconduct had taken place was held, the claimant’s dismissal was unfair and her unfair dismissal complaint succeeds.

[165]As a general observation in relation to Mr Cooke’s approach (which was tangled and confused both in terms of his dismissal letter and his evidence before this tribunal), I would add that he seems to have looked at the totality of the allegations and concluded, in the light of arrangements that were certainly unusual, that something wasn’t quite right here and that these various arrangements were suspect; and then made the leap to misconduct and gross misconduct without the necessary analysis or evidence to reach those conclusions. Procedural fairness

[166]Mr Parkin makes a number of allegations that the dismissal was procedurally unfair, which I address below.

[167]He maintains that the claimant was never provided with the respondent’s disciplinary procedure. However, as I have found, whilst one had been drafted, it had never been issued; the respondent did not, therefore, have a disciplinary procedure in place and the failure to provide the claimant with this draft was not in itself unfair. Having said that, it became clear that at least Mr Potter had a copy of the draft disciplinary procedure, which he referenced; for him to be using it and relying on it but without a copy being provided to the claimant was procedurally unfair.

[168]Mr Parkin criticises what he refers to as the inappropriate merging of the investigatory and disciplinary process. I consider that, given the range and complexity of the allegations against the claimant, it would have been far better had an investigation being carried out in which she was invited to participate prior to her being asked to a disciplinary hearing. I also reiterate the numerous failures in the investigation which I have highlighted above. However, I am not critical of the fact that Mr Cooke, who regarded the forensic report as the investigatory report, then went on to do further investigatory work himself following the disciplinary hearing, in particular his telephone conversation with EA; that is not an uncommon thing to happen and, if things are said in the disciplinary meeting which require further investigation, it is an entirely appropriate thing to do and indeed, if it were not done in those circumstances, would be unreasonable. I do not, therefore, find that there is a separate procedural failing in this respect.

[169]I do consider, however, that the fact that Mr Cooke made his decision before the claimant had the opportunity to comment on the attendance note of the disciplinary hearing and a reasonable opportunity to submit further documentation was a procedural step which renders the dismissal unfair. The corrections in that note were material, particularly in relation to the £10,000 payment, and indeed led to a conclusion on the “diversion” of that payment - 32 - which, because of Mr Cooke’s failure to wait, was based on inaccurate evidence. Whilst Mr Cooke had said at the end of the meeting that he would be producing his report “probably into next week”, this was clearly overridden by the subsequent email from Shulmans which gave the claimant a week from that email to provide the amendments to the notes (and, by implication, her additional documents); Mr Cooke unreasonably did not wait for these, which rendered the dismissal unfair.

[170]I accept that the suspension/investigation period was unreasonably long, being seven months between suspension and disciplinary hearing. Whilst the respondent maintains that this was so that the forensic reports could be completed, the period of time it took was entirely unreasonable; the fact that the claimant was driven to submit a grievance because she had waited so long and that the respondent chose not to start the disciplinary hearing before hearing the claimant’s grievance does not mitigate this.

[171]Matters were relied on to dismiss which were not sufficiently articulated as the subject of allegations, in particular the £10,000 payment. It was not set out in the disciplinary letter but merely buried in the forensic report. It is important, in a misconduct dismissal, to ensure that dismissal was for the matter charged. This is a procedural failing which renders the dismissal unfair.

[172]The claimant was at no stage provided with either the attendance note of the conversation with EA or the email from SH. These were crucial documents in the case against the respondent. The failure to provide them to the claimant was a particularly serious procedural failing which renders the dismissal unfair.

[173]The duration of the appeal period was long and the chronology behind that is set out in my findings of fact above. Having said that, as is apparent from the chronology, there were reasons why matters took as long as they did, including the number of points which Mr Potter had to deal with in relation to the disciplinary and grievance appeals and the extensive further information which he sought answers in respect of, together with the lengthy report that he produced. I do not consider, therefore, that, long though it was, this delay was so unreasonable as to render the dismissal unfair.

[174]In summary, however, the dismissal was, for the reasons above, also procedurally unfair. Was dismissal within the reasonable range of responses?

[175]I have already found that it was not even open to the respondent to find that the claimant had committed misconduct, let alone gross misconduct. In the absence of gross misconduct, there is no scope to argue that summary dismissal was within the reasonable range of responses and I find that it was not.

[176]The dismissal was, therefore, unfair and the claimant’s complaint of unfair dismissal therefore succeeds. - 33 - Contributory conduct/Polkey

[177]I have found that there was no scope for the respondent having a reasonable belief that the claimant committed misconduct. Similarly, I find as a fact that the respondent has not proven, on the balance of probabilities, that the claimant committed misconduct; rather, I find that on the balance of probabilities that she did not. There is, therefore, no scope for any reduction in compensation on the basis of contributory conduct.

[178]Furthermore, there is no scope for a Polkey reduction as there is no scope for arguing that, had the process been carried out procedurally fairly, the dismissal would have been fair. By contrast, this is a case where the dismissal was substantively unfair because there was no basis for a reasonable belief that misconduct had taken place; had the procedure been otherwise perfect, that would not have changed this fact.

[179]It is also worth pointing out, in this context, that Mr Potter was clear that the purpose of his appeal was to carry out a review of the fairness of the original decision; he did not carry out a rehearing but merely addressed the points of appeal in the claimant’s appeal letter. There was, therefore, no scope for the appeal correcting any faults in the earlier disciplinary process save to the extent that they were points of the claimant’s appeal. The appeal certainly had no power to correct any substantive failures in the decision to dismiss. ACAS Code

[180]Mr Parkin set out in his submissions a number of areas where he maintains that there has been an unreasonable failure to follow a provision of the ACAS Code and I address these below. 1. Mr Parkin submits that the investigation and the disciplinary hearing were not carried out by different people (in breach of paragraph 6 of the ACAS Code). However, notwithstanding my findings above that the investigation was flawed in many respects, different people did carry out the investigation (RU) and the disciplinary hearing (Mr Cooke). There was therefore no breach of paragraph 6 of the ACAS Code. 2. Mr Parkin submits that the claimant was suspended longer than necessary and that there is no evidence that her suspension was kept under review, in breach of paragraph 8 of the ACAS Code. For the reasons already set out above, the seven month suspension was far longer than necessary. Furthermore, I accept that there is no evidence that the claimant’s suspension was at least properly kept under review; the claimant tried to communicate with the respondent on numerous occasions and frequently did not even get a reply, so much so that she was forced eventually to raise a grievance. There was, therefore, a breach of paragraph 8 of the ACAS Code, and a very serious one given the length of the suspension; there was no good reason for it and that breach was therefore unreasonable. - 34 - 3. Mr Parkin submits that the fact that the claimant was not told that she could bring witnesses to the disciplinary hearing was a breach of paragraph 12 of the ACAS Code. However, on the terms of paragraph 12, there are was no breach. That paragraph provides that employers should be given a reasonable opportunity to call relevant witnesses; the claimant was not prevented from doing so and the issue simply did not arise; there is no evidence that, had she wished to call witnesses, she could not have done so. 4. I accept that the claimant was not given a notification containing sufficient information about the alleged misconduct to enable her to prepare to answer the case at the disciplinary hearing, in particular in relation to the £10,000 payment. That is a breach of paragraph 9 of the ACAS code; there is no reason for not providing that information and I find that the breach was unreasonable. 5. Similarly, the claimant was not given written evidence which was relied upon either with the notification or subsequently; in particular she was not provided with the email from SH or with the notes of Mr Cooke’s discussion with EA, both of which were crucial documents. This remained the case at the appeal. Whilst both of these documents were generated after the claimant was notified of the disciplinary hearing, and the ACAS Code states that it would normally be appropriate to provide such documents with the notification, I consider that the scope of the provision is such that an employer cannot reasonably be allowed to evade it simply by producing relevant documents after the notification has been sent out and then not providing them to the employee; in other words, what the provision means is that, where such documents would normally be provided with the notification (as would be the case in a wellrun process where the documentation was produced before the employee was invited to the disciplinary hearing), if they were produced after the notification then they should be provided at that point. I do, therefore, consider that this failure was a breach of paragraph 9 of the ACAS Code; there was no justification at all for this failure and therefore this breach was unreasonable. 6. Similarly, the employer did not go through the evidence that had been gathered at the disciplinary hearing, including the evidence in the paragraph above; the SH email was available at the time of the disciplinary hearing so there was no justification for not going through that at the hearing. The note of the conversation of the call with EA was produced after the hearing but never given to the claimant and the claimant was never given the chance to go through this note at a reconvened disciplinary or at the appeal; that too was therefore a breach of paragraph 12 of the ACAS Code which had no justification and is therefore unreasonable. 7. There was a delay in hearing the claimant’s appeal. However, for the reasons already given, I do not consider that that delay, although it - 35 - was a long one, was unreasonable. There was no breach of paragraph 26 of the ACAS Code. 8. Similarly, I do not consider that, for the reasons already given, there was a breach of paragraph 29 of the ACAS Code in terms of the time it took for Mr Potter to inform the claimant in writing of his decision. 9. Finally, Mr Parkin submits that there was, in breach of paragraph 2 of the ACAS Code, inadequate work done to “help employees… understand what the rules and procedures are, where they can be found and how they are to be used”. As I found, the only disciplinary procedure was one drafted by Mr McMaster but which the respondent never even distributed to staff. The respondent did not therefore even have a disciplinary procedure for employees. It is therefore certainly the case that it did not help employees understand what the rules and procedures were, where they could be found and how they were to be used. This was therefore a substantial breach of paragraph 2 of the ACAS Code and one with no justification; it was therefore an unreasonable breach.

[181]There were therefore a number of breaches by the respondent of the ACAS Code which were unreasonable. I therefore consider it just and equitable to increase any award made and turn to the question of what percentage the increase should be.

[182]The respondent certainly did not ignore the ACAS Code completely; there was an investigation and a disciplinary and appeal process (notwithstanding the flaws they contained which I have identified); I do not, therefore, considered that the uplift should be at the top end of the 25% maximum.

[183]However, the unreasonable breaches outlined above are in many respects very serious, in particular those in relation to the length of the suspension and the failure to provide sufficient details of the charges against the claimant and the failure to provide her at any stage with crucial pieces of evidence which were taken into account as part of the decision against her.

[184]Given that level of seriousness, I consider that the appropriate increase to the award should be 15%. Breach of contract (notice pay)

[185]As set out in her 2016 contract, the claimant was entitled to 3 months’ notice of termination of employment. She was dismissed without notice. It is therefore for the respondent to prove that it was entitled summarily to dismiss her. The respondent must establish that the claimant in fact acted in a manner sufficient to constitute a repudiatory breach of contract. Gross misconduct in this context means a repudiation. The respondent must therefore prove that the misconduct took place and that it was sufficient to amount to a repudiation. This is more than, for the purposes of the unfair dismissal complaint, merely - 36 - establishing a reasonable belief that the misconduct took place (and, as I have found, the respondent has not even established that).

[186]I reiterate the findings that I have made in relation to my conclusions on the unfair dismissal complaint and find that the respondent has not established on the balance of probabilities either that the claimant committed misconduct or that that conduct was gross misconduct or a repudiation of her contract with the respondent.

[187]Mr Parkin has made extensive submissions on this issue. I do not repeat them all here but reiterate that, in relation to all four of the alleged instances of misconduct, one crucial issue which is in dispute between the representatives is as to whether an employee, participating in arrangements which are known about and authorised by her employer, can be said to have committed a repudiatory breach of the relationship between them. I remind myself that the principle set out in Adron is that “the focus is on the damage to the relationship between the parties”. In that context I accept Mr Parkin’s submission that it cannot be right, and it is not right in the circumstances of this case, that the claimant’s participation in arrangements known to and approved by the respondent can be said to be action which is damaging to the relationship between the claimant and the respondent or is conduct amounting to a repudiation.

[188]I would add one further point, in relation to the only one of the four allegations where there is a material dispute of fact (as opposed to the others where there is no material dispute of fact and the only issue is whether the agreed and authorised actions can amount to misconduct). That allegation is in relation to the £10,000 payment and concerns the evidence provided by SH. As I have already concluded, even if SH’s email was correct and the claimant did instruct her to make the payment to her personal bank account, I do not consider that that amounts to gross misconduct, given that the matter was rectified within a matter of days and there was no gain to the claimant and no detriment to the respondent. However, I do not even find on the balance of probabilities that SH’s evidence should be preferred to that of the claimant and therefore do not find that the respondent has proven on the balance of probabilities that the claimant did ask SH to transfer the payment to her personal account.

[189]The reason for this is as follows. The only evidence which is contrary to the claimant’s account is that of SH. SH was not called to give evidence at this hearing; neither Mr Cooke nor Mr Potter ever met SH; her evidence is therefore not been tested and I therefore give it less weight. Furthermore, it is quite possible, in the absence of SH being here to be asked about this, that there are, as Mr Parkin submits, a range of potential motivations for SH stating in her email that the claimant told her to remit the money to her personal account: she may misremember events; her version may be tainted by the extremely leading way that Shulmans phrased its question; she may have been asked to send a false or misleading email by EA; she may have made a mistake which she was now seeking to cover up; she may dislike the claimant; she may have had something to gain from the claimant losing her job; or she may have simply misunderstood something the claimant had said. Whilst I do not and cannot make a finding that - 37 - any of these are correct, all are possible explanations which might have been put to SH had the respondent called SH to give evidence. However, she was not called and I therefore give much less weight to her email, especially in the face of the claimant’s sworn evidence before the tribunal.

[190]The claimant’s complaint of breach of contract in respect of her notice pay therefore succeeds. As noted, the claimant’s notice entitlement was three months.

[191]It is hoped that the parties will be able to agree the amount of money due to the claimant in respect of this complaint; if not, it will be an issue for the remedies hearing. Holiday pay/September 2017 salary

[192]As noted, during submissions, Mr Sendall conceded that, for the purposes of section 27(2) of the ERA, the £15,000 payment referred to above was not wages and that therefore the respondent was not entitled to deduct any wages properly payable to the claimant from that £15,000 payment. He conceded that the complaints in relation to holiday pay and the claimant’s September 2017 salary were therefore not contested by the respondent.

[193]There is, therefore, no dispute that the sums agreed in respect of these payments were properly payable to the claimant and were not paid. The claimant’s complaints of unlawful deduction from wages and (in respect of the holiday pay issue) under the Working Time Regulations 1998 therefore succeed.

[194]It had been agreed that the amount in respect of holiday pay was £3,028.85 (gross) and the amount in respect of the September 2017 salary was £3,432.69 (gross). It had also been agreed that the net figure in respect of the holiday pay and September 2017 salary complaints combined was £4,684.04 (net) and that, if both of those complaints succeeded, that was the figure which would be payable to the claimant by the respondent.

[195]I therefore make an award of £4,684.04 (net), payable by the respondent to the claimant, in respect of these successful complaints. Russells invoices May - September 2017

[196]This complaint is brought as an unlawful deduction from wages complaint. Questions relevant to determination of it are whether or not the amounts under the Russells invoices are “wages” for the purposes of section 27 ERA and, if so, whether they are “properly payable” for the purposes of section 13(3) of the ERA.

[197]In terms of the relevant facts, from the start of her employment in 2011, the claimant was simply paid a salary; from 2013, by agreement with the respondent, part of the remuneration due to her was paid to her directly and part was paid to Russells; her 2016 employment contract, the only written document relating to her payment arrangements, records that her “salary for the role is - 38 - currently £76,965 per annum” and, whilst the contract does not record the two different types of payment, that sum comprises the amounts paid to her directly and the amounts paid to Russells; in her email of 12 June 2017 to EA, the claimant states that the money paid to Russells was nothing to do with services Russells provided but that it in fact represents her salary increases; whilst the claimant’s evidence before the tribunal was initially unclear, she accepted that the monthly invoices were referable to work that she did as an employee of the respondent, rather than separate services rendered by Russells. In the light of that evidence, I find on the balance of probabilities that the claimant’s salary was £76,965, that this was referable to the work that she herself did for the respondent, and that by agreement with the respondent, the respondent paid part of it to her directly and part of it to Russells on receipt of invoices.

[198]I accept that, as others whom I have heard from or of in these proceedings have noted, these arrangements are “unusual”. However, I make no finding as to their legality or otherwise in terms of tax: I am not a tax expert; this is not a tax tribunal; the sums paid to Russells were accounted for and any tax due was paid; the claimant, who is a chartered accountant, gave evidence that in her opinion the arrangements were not illegal; and Mr Cooke, although part of the reason for his dismissing the claimant was the taxation of these arrangements, was not, even though I asked him specifically in questioning, prepared to state that in his view the arrangements were as a matter of fact illegal. In short, the question of the legality of these arrangements is a tax question for the claimant, the respondent and for HMRC.

[199]The primary obligation of the respondent in relation to the salary arrangements was to the claimant, albeit the claimant and the respondent decided in 2013 that part of her salary should be paid to Russells. This arrangement remained in place throughout the rest of the claimant’s employment and it was only after the claimant was suspended that the respondent ceased making payments to Russells. However, it cannot be correct that the respondent could unilaterally be entitled to make no payments of those amounts whatsoever going forwards and could evade its remuneration obligations in relation to the claimant in that way; it must be the case, if the respondent decides that it no longer wishes to make payments in respect of that part of the claimant’s remuneration to Russells, that it nonetheless still has an obligation to make them to the claimant and that the position reverts to the original pre-2013 position under which the entirety of the claimant’s remuneration was paid to her directly; the point is not of course addressed in the scant written documentation relating to the claimant’s employment; however, I find that such a term must be implied into their agreement in order to give effect to the intentions of the respondent and the claimant when they originally entered into these contractual arrangements; the arrangements were clearly not entered into in order to give the respondent the opportunity, at any point of its choosing, unilaterally to slash substantially the amount of remuneration paid in relation to the claimant’s employment.

[200]I therefore find, the respondent having decided to cease making the payments to Russells, that there remains an obligation to make those payments to the claimant (as the claimant herself references in her email to EA of 12 June 2017). - 39 -

[201]For the purposes of Part II of the ERA, therefore, the claimant’s entire salary, including the sums which had previously been paid under the Russells invoices, was “sums payable to the [claimant] in connection with [her] employment” and therefore “wages” for the purposes of section 27 ERA. None of the exceptions in section 27(2) ERA applies.

[202]Furthermore, these sums were “properly payable” in that they were sums payable by contractual agreement between the claimant and the respondent. For the reasons set out above, the fact that the claimant and the respondent agreed in 2013 that the payments should be split does not alter this.

[203]I consider that the fact that Russells supplied invoices for May and June 2017 only (and not for July, August and September 2017) is irrelevant to the analysis. I accept Mr Parkin’s submission that the issuing of the invoice was, strictly speaking, unnecessary, as the money was referable to the claimant’s work as an employee of the respondent. Furthermore, as I have found, once the respondent took the decision no longer to pay part of the claimant’s salary to Russells, its obligation reverted, as I have found, to being an obligation to pay the claimant. The fact that no work was done by the claimant in that period is similarly not relevant; no work was done by the claimant under her employment contract in general because she was suspended by the respondent on full pay; there is, unsurprisingly, no suggestion that for that reason the claimant should not be paid the rest of her salary for the period whilst she was on suspension and not working; nor should that be the case in relation to that part of her salary which was dealt with by way of the invoices. The claimant is therefore entitled to be paid in relation to all five months from May - September 2017 inclusive which were unpaid.

[204]Furthermore, as Mr Sendall conceded during his submissions, if I were to find that the payments in relation to the Russells invoices were payable to the claimant, the respondent could not argue that these payments could be deducted from the £15,000 payment. Having found that they were payable to the claimant, therefore, I accordingly find that these payments cannot be deducted from the £15,000 payment.

[205]The claimant’s complaint for unlawful deduction from wages in relation to the “Russells invoices” therefore succeeds.

[206]As noted, it is agreed between the parties that the total sum in question in respect of the five months from May - September 2017 inclusive is £8,187.50. However, I do not at this point set out the total amount due to the claimant. Mr Sendall has submitted that this sum should be subject to deduction of tax and national insurance; Mr Parkin did not address the point in his submissions. I would hope that this issue can be resolved between the parties without me having to determine the point; however, at the moment, it remains an undetermined point for a remedies hearing. - 40 - Termination payment

[207]I turn now to the question of whether or not the claimant is entitled to the termination payment set out in her 2016 employment contract and whether the respondent is in breach of contract by not paying her that payment.

[208]I turn first to the conditions precedent set out in that contract in relation to the payment. The relevant clause is quoted in full in my findings of fact above. However, under the terms of the termination payment clause, for the termination payment to be payable, the following conditions need to be satisfied: “final wind down accounts” must have been produced; those accounts must have been audited; those accounts must have been approved; and the claimant’s position must have become redundant. None of these conditions have been satisfied. In relation to the last of them, the claimant’s position has not become redundant because her employment was terminated on the grounds of conduct and, at the time of her dismissal, her position was not redundant. As none of these conditions have been satisfied, no termination payment is payable on the terms of the clause.

[209]In his submissions, Mr Parkin did not dispute that none of these conditions had been satisfied. Rather, he submitted that the basis of the claimant’s complaint of breach of contract in this respect was that there was implied into the contract of employment a term that the employer shall not act so as to prevent the claimant from obtaining the benefit of the termination payment. He referred to Chitty on Contracts at 14-015 in this respect, which refers to the statement in Stirling v Maitland (1864) 5 B & S 840 at 852: “… if a party enters into an arrangement which can only take effect by the continuance of a certain existing state of circumstances, there is an implied engagement on his part that he shall do nothing of his own motion to put an end to that state of circumstances under which alone the arrangement can become operative.”

[210]He notes that the purpose of putting in place the claimant’s employment contract was to document the claimant’s agreement with the respondent about the termination payment and that the claimant would not have stayed with the respondent but for the agreement in relation to that termination payment. He goes on to submit that the implication of a term in those circumstances is necessary to make the contract workable and would give effect to what he says was the obvious agreement of the parties to ensure that the claimant received her additional remuneration for remaining employed by the respondent. He submits that the relevant arrangement regarding the termination payment could only take effect by the continuing employment of the claimant and that, accordingly, the respondent was bound not to terminate the contract; that in dismissing the claimant the respondent prevented the claimant from carrying on the accounts to the stage where her position was to become redundant and that it is significant that the clause in the contract relating to the termination payment indicates that the entitlement crystallises “when” and not “if” the final wind down accounts are audited and approved and the claimant’s position becomes redundant. - 41 -

[211]However, I do not accept his submission. There was clearly an expectation on the part of both the claimant, Mr McMaster, and the respondent at the time the employment contract was entered into in 2016 that the respondent would be wound down and that expectation is indeed reflected by the use of the word “when” rather than “if”. However, the fact of the matter was that in the end it was not wound down and the first of the three conditions precedent identified above were not and have not yet been satisfied. To find that the termination payment was payable notwithstanding that these three conditions were not satisfied would be to go against the express terms of the clause, which is not permissible. For the termination payment to be payable, Mr Parkin would need to imply a term that the respondent was in fact obliged by now to have wound down and to have produced, had audited and approved the final wind down accounts; he is not, understandably, arguing that and I know of no authority suggesting that such a draconian and impracticable term should be implied into a contract to make the contract workable; there is no basis for the implication of such a term and I do not find that such a term is implied; furthermore, even if it was possible to imply such a term, it would be contradictory to the first three conditions precedent, which are express terms of that contract; and an implied term cannot override an express term. The simple fact is that the first three conditions precedent have not been satisfied and no termination payment is therefore payable. On that basis alone, that is the end of the matter.

[212]As to the submission regarding an implied term that the respondent should not terminate the claimant’s employment, I accept that, in line with the principle which Mr Parkin refers to in Maitland, such a term should be implied in circumstances where an employer, without another good reason for terminating employment, terminates the contract to avoid paying the termination payment. However, it cannot be the case that such a term could prevent an employer from terminating an employee’s employment due to gross misconduct.

[213]As to the reason for termination of employment, I have accepted that EA’s reasons for putting in place the forensic accounting report and suspending the claimant may well have been and were influenced by his altercations with the claimant in relation to the private financial matters involving MWM, A Ltd and Russells which ended up impinging on the respondent in the form of the £15,000 advance and were consequently embarrassing for EA. However, I declined to find that one of the reasons why EA did this was to avoid paying the termination payment, as that would not have been payable in any event if, as turned out to be the case, the respondent did not wind down. In any event, I have found that the reason why Mr Cooke chose to dismiss the claimant was that he genuinely considered that she had committed gross misconduct (there is no evidence at all that he was motivated either by a desire to avoid paying the termination payment or by the issues which were of embarrassment to EA). I do not, therefore, consider that there was a breach of that implied term.

[214]For all of these reasons, the respondent was not in breach of contract by not paying the claimant the termination payment. The claimant’s breach of contract complaint therefore fails. - 42 -

[215]This does not, of course, preclude the claimant in principle from arguing that the payment of the termination payment forms part of compensation that it would be just and equitable for her to receive as a result of her unfair dismissal. Having said that, however, there will inevitably be causation and remoteness of loss issues in relation to this argument, as it remains the case, two years after the claimant’s dismissal, that the first three conditions precedent to the termination payment being payable have not yet been satisfied.

[216]The respondent’s contract claim is that the claimant, in breach of contract, made the £15,000 payment from the respondent to the claimant. As Mr Parkin rightly submits, the respondent has never identified what contractual term the claimant is said to have breached in this respect. Two issues have been raised in submissions: the merits of the complaint itself and whether, in fact, I have jurisdiction to hear this complaint at all.

[217]I turn to the merits, which are dealt with very simply. No contractual term, express or implied, has been identified by the respondent which it maintains the claimant has breached. In the absence of that, there is no breach of contract. Furthermore, the £15,000 payment in question was authorised by the respondent and paid to the claimant. Whilst the claimant suggested that this payment should be made, EA spoke to the shareholders and obtained their authorisation and the payment was made to the claimant; in other words, the respondent agreed to it and then paid it. It is hard to see how the actions of the claimant in relation to this could ever amount to a breach of a contractual term. The complaint, therefore, fails on its merits.

[218]As to the jurisdictional argument, Mr Parkin referred me to the limited scope of the tribunal’s contractual jurisdiction, as set out in my summary of the law above. He submits that, particularly as no contractual term has been identified, what the respondent is really doing here is not alleging a breach of contract at all but is rather seeking restitution of the £15,000 payment (which, in the light of my conclusions in relation to the severance payment above, it (and I go no further than this) is possible it may be entitled to) but that this tribunal does not have jurisdiction to hear a claim for restitution, which should be brought in the County Court of the High Court.

[219]In the light of the failure to identify the contractual term said to have been breached, coupled with the obvious motivation that the respondent would have in seeking to recover the £15,000, I accept Mr Parkin’s submission that what is before me is not really a breach of contract complaint but is in effect disguising a claim for restitution. He is of course quite right that this tribunal does not have jurisdiction to hear a claim for restitution.

[220]What is before me is neither: a claim for damages for breach of a contract of employment or any other contract connected with employment; a claim for a sum due under such a contract; or a claim for the recovery of a sum in pursuance of any enactment relating to the terms or performance of such a contract. It is therefore outside the scope of the tribunal’s contractual jurisdiction. - 43 -

[221]The tribunal does not therefore have jurisdiction to hear the respondent’s “breach of contract” complaint and that complaint is therefore dismissed. Next steps

[222]At the end of the hearing, a date for a provisional remedies hearing was set for one day on Friday, 8 November 2019 starting at 10 AM, pending my decision. In the light of my decision, that remedies hearing will go ahead.

[223]The parties are ordered to liaise to identify and, if possible, agree in advance of that hearing the remaining issues to be determined at the remedies hearing.

[224]If, however, the parties manage to resolve any remaining remedies issues in the interim, they are requested to inform the tribunal as soon as possible so that that remedies hearing can be taken out of the tribunal’s list.