P Lavery v BGC Bidco Ltd [now called Tiger Feet Ltd] and K Makofka: 2406179/2023
EMPLOYMENT TRIBUNALS
Case No 2406179/2023
Between
P LaveryClaimant1. BGC Bidco Limited 2. Kyle MakofkaRespondent
Before
Employment Judge BattenDate 3 February 2025
JUDGMENT
The judgment of the Tribunal is that: 1. the complaint of unfair dismissal is well-founded and succeeds; 2. the complaint of age discrimination fails and is dismissed; 3. a remedy hearing shall take place on Wednesday 4 June 2025. JUDGMENT having been sent to the parties on 18 February 2025 and written reasons having been requested in accordance with Rule 60(3) of the Employment Tribunals Rules of Procedure 2024, the following reasons are provided:
REASONS
[1]By a claim form presented on 26 May 2023, the claimant has pursued complaints of unfair dismissal and age discrimination. The first respondent is the claimant’s employer. The second respondent is the Chief Executive Officer of Ardenton Capital Investments Limited (“Ardenton”), a company which acquired a majority stake in the first respondent on 5 March 2019. The respondents presented a joint response on 28 July 2023. A case management preliminary hearing took place on 28 September 2023 when a list of issues was drawn up. Since then, the list of issues has been amended and is set out below.[2]This final hearing had originally been listed to take place over 3 days, on 13-15 May 2024, but after addressing a number of outstanding disclosure issues between the parties, on the second hearing day it was decided, by consent, that the final hearing should be adjourned and re-listed over 6 days in JanuaryFebruary 2025. Thereafter, both the claimant and the second respondent produced supplemental witness statements on further matters arising from the additional disclosure.[3]There has been a delay in producing these reasons, for which the Tribunal apologises to the parties. At the beginning of April 2025, the Manchester Employment Tribunal building was shut down, without notice, due to an issue with the masonry. Staff were unable to gain access for approximately 6 weeks. The Judge’s papers, bundles and witness statements were in the building at the time and so could not be checked in order to finalise these reasons until the building reopened.
Evidence
[4]The Tribunal was provided with an agreed bundle of documents in a lever-arch file running to 486 pages. A number of additional documents were added to the bundle by the parties, in the course of the hearing.[5]The claimant relied upon a primary witness statement and a supplemental witness statement. In support, the claimant called Mike Spencer, who had been the General Manager of the first respondent until May 2020, to give evidence together with Sarah Hartley, the first respondent’s Studio Manager until 15 September 2023.[6]The second respondent, Kyle Makofka, is a director of the first respondent and also CEO of Ardenton. He tendered a primary and a supplemental witness statement, as the claimant did. The respondents also called the following witnesses to give evidence on their behalf: Mike Bradbury, director of the first respondent and Chief Financial Officer of Ardenton; Stephen Oldham, former director of the first respondent and Group Financial Controller until November 2022; Annette Silcock, former Commercial Financial Director of the first respondent, who left in February 2022; and Alan Dunn, a former director of the first respondent until his agreed exit on 2 December 2022. The Tribunal was also given a witness statement from Damien Hughes, the first respondent’s managing director of Ireland. Mr Hughes did not attend the hearing to give oral evidence and so the Tribunal has given little weight has been given to his witness statement even though I appreciate it has been referred to in cross examination.[7]All the parties’ witnesses gave oral evidence by reference to a written witness statement and were each subject to cross examination.[8]In addition, the Tribunal was provided with an agreed cast list and a chronology incorporating the claimant’s comments.[9]The first hearing day was a reading day for the Tribunal. At the start of day 2, Counsel for the respondents produced an opening note in which it was conceded that the claimant was not taken through a formal disciplinary process for breach of confidentiality.[10]At the conclusion of evidence, Counsel for the respondents produced a 29-page outline of her submissions. Both Counsel made oral submissions to the Tribunal.
The issues
[11]At the start of the hearing, the Tribunal discussed with the parties the list of issues that appears in the bundle at pages 484-486, and which the parties had agreed should be determined. The agreed list of issues on liability is as follows: 1. UNFAIR DISMISSAL1.1 Was the Claimant unfairly dismissed contrary to section 94 of the Employment Rights Act 1996 (“ERA”)?1.2 What was the principal reason for the dismissal? The dismissal letters of 4 and 5 January 2023 confirm the First Respondent’s reason as being conduct due to an alleged breach of confidence on 4 January 2023.1.3 In determining whether the dismissal of the Claimant was fair or unfair, has the Respondent shown:1.3.1 the reason (or is more than one, the principal reason) for the dismissal, and1.3.2 that it is either a reason falling within subsection (2) of section 98 ERA or some other reason of a kind such as to justify the dismissal of an employee holding the position which the employee held?1.4 A reason falls within subsection (2) of section 98 ERA if it: - 1.4.1. relates to the capability or qualifications of the employee for performing work of the kind which he was employed by the employer to do; 1.4.2 relates to the conduct of the employee.1.5 Where the Respondent has fulfilled the requirements of subsection (1), the determination of the question whether the dismissal is fair or unfair (having regard to the reason shown by the respondent) –1.5.1 depends on whether in the circumstances (including the size and administrative resources of the Respondent’s undertaking) the Respondent acted reasonable or unreasonably in treating it as a sufficient reason for dismissing the Claimant, and1.5.2 shall be determined in accordance with equity and the substantial merits of the case.1.5.3 The Respondent maintains that in the circumstances it acted reasonably in treating the breach of confidentiality as sufficient reason for dismissal and if the Tribunal finds that the Claimant was unfairly dismissed, the Respondent says that he would have been fairly dismissed in any event had a full investigation and disciplinary process been conducted which was not appropriate in the circumstances of the Claimant.1.5.4 The Claimant maintains that the principal reason for dismissal was the Respondent’s desire to orchestrate a situation where they could cause the Claimant to be anything but a ‘good leaver’ for the purposes of his shareholding and to avoid paying his loan notes. [2. REMEDY] 3. DISCRIMINATION – AGE3.1 Direct discrimination3.1.1 The Claimant relies on a hypothetical comparator under the age of 55 years old.3.1.2 Was the Claimant treated less favourably than the comparator was or would have been? Namely: a) The Respondent’s beratement of the Claimant about the business performance in meetings in October 2022 and mid-December 2022; b) The Claimant’s dismissal and replacement by Akhtar Zahid in January 2023.3.1.3 If so, was the reason for the treatment the Claimant's age or perceived age?3.1.4 What was the aim underlying the reason for the treatment? The Respondents say the aim was to address and improve the economic performance of the First Respondent and the Claimant’s conduct issues – grounds of resistance paragraph 42. Counsel for the Respondent also said at the start of the hearing that the aim was “getting the best people for the job”.3.1.5 Was that aim legitimate?3.1.6 Was the treatment a proportionate means of achieving that aim or was there a less discriminatory way of achieving it?3.2 Indirect discrimination3.2.1 Did the Respondents apply a provision, condition or practice (a “PCP”) of requiring a young and dynamic chief executive officer?3.2.2 Did the PCP put people of the Claimant's age at a particular disadvantage in comparison to others?3.2.3 Was the Claimant disadvantaged by the PCP? The Claimant submits that the disadvantage was his dismissal.3.2.4 What was the reason for applying the PCP?3.2.5 Was the aim of the PCP legitimate?3.2.6 Was the PCP a proportionate means of achieving that aim or was there a less discriminatory way of achieving it?3.3 Harassment3.3.1 Was there unwanted conduct related to age? Namely: a) the “young and dynamic” comment made by Alan Dunn in November 2022; b) the reference to retirement/respectful exit in the Teams call and email of the second respondent on 3 January 2023 that his employment was ending and that he should retire “to effect a respectful exit from the business”.3.3.2 Did that conduct have the purpose or effect of:(a) violating the Claimant's dignity; or(b) creating an intimidating, hostile, degrading, humiliating or offensive environment for the Claimant? [4. REMEDY]
Findings of fact
[12]The Tribunal has made the following findings of fact on the basis of the evidence before it, taking into account contemporaneous documents where they exist, and the conduct of those concerned at the time. Where a conflict of evidence arose, such has been resolved on a balance of probabilities, largely in favour of the claimant whose evidence the Tribunal preferred because the Tribunal found him to be a more credible witness than the respondents’ witnesses.[13]Having made findings of primary fact, the Tribunal considered what inferences it should draw from them for the purpose of making further findings of fact. The Tribunal has not simply considered each particular allegation but has also stood back to look at the totality of the circumstances to consider whether, taken together, they may represent an ongoing regime of discrimination.[14]The findings of fact relevant to the issues to be determined are as follows.[15]In 1984, the claimant and his brother founded the first respondent, a budget greeting cards business, which was originally called ‘Budget Greeting Cards Limited’. The business changed its name to ‘BGC Bidco Limited’ when it was taken over, in 2019. The first respondent has since changed its name again and is now called ‘Tiger Feet Limited’. The claimant remains a 49% shareholder in the first respondent and was a director of the first respondent at the material time.[16]The claimant has continuous service from 8 March 1984, employed as the first respondent’s managing director, alongside his brother. They built a successful business, in a competitive market, developing a wide range of valuable contacts and experience. Many employees are long-serving, and the business enjoys a loyal base of customers and suppliers.[17]The second respondent is a director of the first respondent and also the Chief Executive Officer of Ardenton, an investment company which bought into the first respondent and holds a 51% shareholding in the company. In 2019, a sale brochure was prepared by Mazars, a firm of Accountants and management consultants. The brochure declared that the claimant and his brother would like to exit the business entirely, 100%. It was an invitation to treat.[18]In March 2019, a deal was struck whereby the claimant’s brother left and the claimant agreed to continue as the managing director of the first respondent. He was given a contract of employment, which appears in the bundle at pages 82 – 110. The first respondent’s Articles of Association contain an option for the claimant to leave the business, after 5 years, as a “good leaver” (bundle page 81), that is to say in March 2024.[19]The claimant’s contract refers to the company’s normal disciplinary and grievance procedures, which are in the bundle at pages 71 – 78. Clause 16.1 of the claimant’s contract provides that the normal disciplinary procedure applies to the claimant’s employment “with such modifications as the company may deem to be necessary to take account of the Executive’s seniority”. The Tribunal understood this provision to mean that fair procedures could not be dispensed with entirely.[20]The years 2020 and 2021 were very good trading years for the business. That was to some extent due to the changed behaviour of the general public in Britain, as a result of the Covid pandemic and the several national “lockdowns”. The claimant continued to lead the business whilst the Ardenton management recruited a number of new staff at a senior level. The claimant was not involved in this recruitment except to the extent of meeting candidates at the second interview stage. Although it was said that the claimant had a veto over any appointment, he did not exercise it; he said, in evidence, that he would not do so because he was determined to get on with people.[21]In October 2021, the first respondent decided to conduct an ‘employee engagement survey’. The claimant was not consulted. On 13 October 2021, Mr Bradbury sent an email to Mr Makofka about the claimant’s response upon hearing of the survey. The concept was new to the business and new to the claimant as well. In his email, Mr Bradbury described the claimant’s response as “apoplectic”. However, Mr Bradbury also said about not consulting the claimant, “- to be honest this was slightly tactical from our perspective” and went on to say, “whilst we continue to explore and build the body of evidence to hit the nuclear option of serving him notice; we do feel that an olive branch may now be required”. The Tribunal took the latter to mean that the first respondent’s management thought that they had gone too far.[22]The respondents’ case relied upon a number of things which apparently happened during at that time, including the fact that 3 female employees left the business around the beginning of 2022. The respondents suggested that this was the claimant’s fault. Ms Silcock did not get on with the claimant and said she had felt bullied and undermined by him. However, the first respondent invited her to resign, having asked her to put in a letter of concern, and she was paid off. Mr Oldham’s note in the bundle at page 361 describes Ms Silcock as “terminated because of purchasing”. The first respondent’s managers did not seek HR or legal advice on what to do. Nothing was done to investigate Ms Silcock’s concerns nor were her allegations put to the claimant despite that the respondents’ evidence that the episode was considered to be a serious matter which could have ended up in legal proceedings. The only action taken by the respondent at the time appears in the bundle at page 153, being a very brief email which Mr Bradbury sent to the claimant, on 12 January 2022, referring to “concerns have been raised over your behaviour and style of interaction [with Ms Silcock]” although it is unclear to what behaviour Mr Bradbury is referring. Mr Bradbury also wrote, “… we feel that this behaviour needs to cease immediately”. At the time this email was sent, the respondents were aware that Ms Silcock was likely to leave and there is no suggestion of any consequences of further behaviour.[23]So far as the other female leavers relied upon, were concerned, the respondent little evidence of difficulties with or because of the claimant.[24]Jessica Moran left the first respondent on 19 January 2022. Her resignation email is in the bundle at page 154, wherein Ms Moran mentions “some issues” and that she felt “.. there was an underlying toxic culture at [the first respondent]”. However, the Tribunal was told that she was in fact leaving for a better opportunity. Importantly, Ms Moran makes no mention of the claimant nor any allegations about his behaviour.[25]Kim Potter had been involved in a website copyright breach, posting a competitor’s designs on the first respondent’ website, which was a very serious matter. She was instructed to remove them by Ms Hartley, but delayed doing so until the next day. The claimant understandably got very cross about it given the exposure of the first respondent to potentially expensive litigation. Ms Potter left as a result of this incident.[26]Cara Jarvis commented on the claimant’s behaviour in her exit interview on 7 October 2021 – see bundle pages 137-140 – and puts it down to the stress the claimant was under. There was no evidence that any matters raised were investigated by the first respondent or ever put to the claimant.[27]By April 2022, the claimant and Ardenton’s senior personnel (the second respondent and Mr Bradbury) were struggling to work together. In those circumstances, Mr Dunn, one of the directors, was tasked to speak to the claimant to discuss his potential exit from the business. It was hoped that Mr Dunn might seek a deal for an early exit with a reduction to 10% shareholding and some cash to step back. The proposed deal is set out in the bundle at page 174, in an email of 14 April 2022, from Mr Dunn to the second respondent, Mr Bradbury and Peter Crawford.[28]An agreement was reached in principle, but the claimant then heard nothing further. Mr Dunn’s evidence, which the Tribunal accepted, was that there was a downturn in the first respondent’s performance albeit that this came after 2 very good years which were attributable to the Covid pandemic lockdowns, so it was perhaps not unexpected. However, because of the downturn in financial performance, the respondents’ interest in the deal with the claimant waned.[29]As 2022 progressed, it became apparent that the first respondent was having a difficult trading year, with a downturn in turnover and therefore profit, partly because of the aftermath of the Covid pandemic but also because of increasing shipping and container costs and an issue with third party stock ordering. In addition, it came to light that there were difficulties with the previous administration and over-ordering by Ms Silcock, to the value of £3 million, combined with a failure of her team to post invoices promptly or at all which meant that the financial position of the respondent was not clear or accurate. Ms Silcock had left the first respondent in February 2022, and was paid a generous severance package. This was not mentioned to the claimant, at the time.[30]In June 2022, the first respondent breached its banking covenants. The claimant was very upset. This had never happened before and he was becoming frustrated with the first respondent’s financial performance, with difficulties arising that he had not encountered before, and with the changes made by Ardenton. The claimant’s evidence, which was unchallenged, was that he ran a very tight ship, on small margins, and that the business had watched every penny. The claimant cited a number of instances where money seemed to have been mislaid, or lost or wasted, and the claimant, understandably, became frustrated. The claimant remained a 49% shareholder, with a financial interest in the business and therefore he was reasonably concerned that things appeared to be going downhill.[31]In the Autumn of 2022, unbeknown to the claimant, the directors of the first respondent began to look for a replacement for the claimant. There was no mention of this to the claimant, who remained a director on the board, and the managing director of the business. The other directors started to manoeuvre behind the claimant’s back.[32]In October 2022, at a management meeting chaired by Mr Bradbury, concerns were raised about the first respondent and the claimant’s performance, without notice to the claimant who was upset to hear things. The claimant was understandably concerned to be kept out of management communications and having things bounced on him in meetings. A comment was made during the meeting about who is running the business, to which the claimant retorted, “Well, not me”.[33]The bundle contains a number of examples of emails between the directors, during this period, which do not include the claimant, particularly about day-today financial reports. Towards the end of 2022, the respondents’ directors emails were criticising the claimant for not taking responsibility when anything goes wrong, whilst the claimant, kept out of the loop and unaware of what was happening behind his back, nevertheless came to feel that he was no longer in control of the business despite being its managing director. Mr Dunn was a party to the directors’ emails and, in November 2022, Mr Dunn told the claimant that Ardenton was looking to recruit a “young and dynamic individual” to replace the claimant as managing director.[34]Shortly afterwards, on 2 December 2022, Mr Dunn agreed his own exit from the business. and, only then, did he openly warn the claimant, “They are coming for you”. He told the claimant that the respondents’ intention was to “get you out as a bad leaver”. At the time, the claimant did not believe what Mr Dunn said about the situation.[35]In fact, in November 2022, the first respondent’s directors were speaking to an individual called Akhtar Zahid, with a view to him replacing the claimant as managing director of the first respondent. They had obtained Mr Zahid’s CV in October or early November 2022, and they were actively discussing terms upon which he would join the first respondent and replace the claimant. By midDecember 2022, the negotiations were at an advanced stage with a proposed starting date for Mr Zahid of 2 January 2023.[36]In late December 2022, the first respondent’s senior leadership team were told to expect ‘significant changes’ in January 2023. They were not told what this meant, and the claimant was told nothing at all.[37]On 27 December 2022, the second respondent sent the claimant an email, which appears in the bundle at 269, titled ‘BGC review’ with financial figures in it. The email said, “We have been monitoring [the first respondent’s] performance closely … we can all agree that the performance is unacceptable. The current equity of the company is deeply underwater, and no significant efforts have been made to change the current financial trajectory. This means a change must be made. From the Ardenton side, I have removed Allan Dunn and am reviewing the file myself … From the BGC side, we will have to prepare a restructuring plan and evaluate each of the current management roles and management systems. … This starts at the top. I would like you to consider various options for yourself moving forward and arrange for a virtual meeting in the first week of January” – bundle page 269. The respondents’ evidence was that it should have been obvious to the claimant that his days were numbered. The claimant did not realise so.[38]On 3 January 2023, after the new year break, the claimant was called to a Teams meeting, online. The invite was headed “BGC Restructuring discussion”. However, the Tribunal found that the meeting was nothing of the sort. The title suggested restructuring of the business as a whole, but the meeting was only about the claimant and was an ambush.[39]In the course of the Teams meeting, the second respondent announced to the claimant that he was going to be leaving. The claimant was then presented with two options: the first, to retire as a “good leaver” with 12 months’ salary in lieu and £485,000 for his shares. This was around the subscription price, with no value added even though there had since been 2 very good trading years. In addition, the first respondent would pay off the claimant’s loan notes. The alternative was for the claimant to leave as a “bad leaver”, with 12 months’ salary in lieu, be paid £1 for his shares and with no loan notes paid.[40]In effect the claimant was told to resign and get some money, or be dismissed and get nothing. There was no explanation of where the figure of £485,000 for the claimant’s shares had come from nor why the shares should be valued at that price, beyond comments about the first respondent’s business being ‘underwater’. Indeed, the second respondent at one point suggested that the first respondent was on the brink of insolvency / administration. The Tribunal considered this to be entirely unsubstantiated and a throwaway comment. Indeed, no such insolvency has materialised.[41]The claimant was given 48 hours to accept one of the 2 options; that is, to make a decision by 5 January 2023. The claimant was also told that a new CEO was starting on 6 January 2023. In fact, Mr Zahid’s appointment was announced on LinkedIn at 16:15 on 4 January 2023. The claimant was not told that everything was confidential. The claimant understood and appreciated that business information and terms were confidential but not the fact of his departure. The claimant was in shock. He had never been in such a position before.[42]After the meeting, the claimant was clearly confused because, as shown in the bundle at page 269, he sent an email to the second respondent and Mr Bradbury, at 16:24, to say that he was confused, and he asked them to send him the proposals in writing before they speak again.[43]At 16:42, Mr Bradbury sent the second respondent a draft email to be sent to the claimant. The email having been pre-prepared, sometime earlier, and appears in the bundle at page 272. It contains a number of sentences in coloured font for consideration/amendment before despatch to the claimant. The second respondent tweaked the letter and added a few things himself and then, at 16:53, he sent it to the claimant.[44]The finalised email, as sent to the claimant, appears at pages 278 - 279 of the bundle. The last line of that email says, “It would be our preference for you to effect a respectful exit from the business and hence our proposal of retirement and the payment of your original equity investment.” At the end of the email it says, “Clearly these discussions should be treated as confidential until they have reached a conclusion”. The Tribunal considered that, whatever the respondent may have intended, the claimant had been given an instruction, to resign or be sacked. It was a Hobson’s choice and amounted to a dismissal, which the respondents had, in any event, decided upon, months beforehand.[45]The claimant was very upset. He did not do anything straight away. The following day, 4 January 2023, he phoned his solicitors. Later on, one of the managers asked him about booking a business trip in January, whereupon the claimant felt obliged to tell him not to book anything because he would not be going on the trip because he was leaving. Thereafter, the claimant told 7 of his closest, long-serving colleagues that he was leaving. He used the word “sacked” to some of them which reflected how he felt.[46]At 15:10 that day, Mr Bradbury found out that the claimant had told a few senior colleagues that he was leaving, and Mr Bradbury immediately reported to the second respondent. Mr Bradbury’s email appears in the bundle at page 281. In it, he asked the second respondent whether the claimant messaging the team meant “he defaults to option 2”. There is no suggestion of the claimant’s actions warranting immediate dismissal or gross misconduct. The respondents’ focus was entirely on the money and option 2, which meant obtaining the claimant’s shares for £1.[47]Around an hour later, the second respondent sent the claimant an email dismissing him, effective immediately. The email appears in the bundle at page 290. The second respondent said that the claimant had “… chosen to breach the confidentiality and trust I place in you with good faith. Your actions of informing staff of your termination prior to you and I coming to terms is simply unacceptable. For that reason, I am retracting the two options previously presented in our January 3rd meeting and writing this letter to inform you that you are terminated effectively immediately (sic) (January 04th, 2023) and to eliminate any further irrevocable damage to the company”. The claimant was also told, “You should have no further contact with BGC staff or customers. Documentation concerning your departure and subsequent settlement will be sent to you within 48 hours. This most certainly was not the outcome I was targeting but your actions have left me with no options”[48]Despite the suggestion that “irrevocable damage” had been suffered, the respondents had no evidence of such and had made no enquiries to establish whether there had been any damage as the second respondent alleged, or at all. The claimant had told only his closest and most trusted senior colleagues of his departure. They were shocked and understandably upset. The claimant gave evidence that he wanted to say goodbye, and that he wanted to tell these people himself, before an announcement. In the circumstances, the Tribunal considered this to be entirely understandable and reasonable.[49]On 5 January 2023, Mr Bradbury sent the claimant a letter which also confirmed the termination of his employment on 4 January 2023. The letter appears in the bundle at page 294. Despite the summary termination of the claimant’s employment, the first respondent continued to pay the claimant by monthly instalments for his 12 months’ notice period.[50]On 6 January 2023, Mr Zahid started work as the first respondent’s CEO and on 9 January 2023, the respondents issued an announcement that the claimant had left the business, and that the first respondent’s new CEO is Akhtar Zahid – see pages 298-299 of the bundle.[51]In April 2023, the claimant commenced proceedings in this Tribunal.
The applicable law
[52]A concise statement of the applicable law is as follows. Unfair dismissal[53]Where an employee has been dismissed, section 98 ERA sets out a 2-stage test to determine whether an employee has been unfairly dismissed. First, the employer must show the reason for dismissal, or the principal reason, and that reason must be a potentially fair reason in law. The respondents contended in the response, paragraph 27 that the claimant was dismissed due to capability and conduct. At the final hearing, the respondents have advanced an alternative reason for dismissal, as ‘some other substantial reason’ [being a breakdown in relationships] which is also a potentially fair reason for dismissal under Section 98 (1) (b) ERA.[54]If the employer shows a potentially fair reason in law, the Tribunal must then consider the test under section 98(4) ERA, namely whether, in the circumstances, including the size and administrative resources of the respondent’s undertaking, the respondent acted reasonably or unreasonably in treating that reason, as a sufficient reason for dismissing the claimant and the question of whether the dismissal is fair or unfair shall be determined in accordance with equity and the substantial merits of the case.[55]The issue of the reasonableness of the dismissal must be looked at in terms of the set of facts known to the employer at the time of the claimant’s dismissal. The Tribunal must also consider whether the decision to dismiss fell within the band of reasonable responses open to a reasonable employer in the circumstances of the case: Iceland frozen Foods Ltd -v- Jones [1982] IRLR 439.[56]The ACAS Code of Practice on Disciplinary and Grievance Procedures contains guidance on the procedures to be undertaken in relation to a dismissal for conduct. Although compliance with the ACAS Code is not a statutory requirement, a failure to follow the Code should be taken into account by a Tribunal when determining the reasonableness of a dismissal.[57]In Polkey v A E Dayton Services [1987] IRLR 503 it was held that a dismissal which is unfair for procedural reasons only, may give rise to a percentage reduction in the compensatory award to reflect the likelihood that the employee would have been dismissed had fair procedures been followed.[58]If the Tribunal finds that the dismissal was actually caused or contributed to by culpable or blameworthy conduct of the employee, the Tribunal has a discretion to reduce the compensatory award proportionally as it thinks fit. The Tribunal can also reduce the basic award on a just and equitable basis for conduct before dismissal amounting to contributory fault. Age discrimination[59]The complaint of age discrimination was brought under the Equality Act 2010 (“EqA”). Age is a relevant protected characteristic as set out in section 5 of EqA.[60]Section 39(2) EqA prohibits discrimination against an employee by dismissing him or by subjecting him to any other detriment. By section 109(1) EqA an employer is liable for the actions of its employees in the course of employment.[61]The EqA provides for a shifting burden of proof. Section 136 so far as is material provides as follows: (2) If there are facts from which the Court could decide in the absence of any other explanation that a person (A) contravened the provision concerned, the Court must hold that the contravention occurred. (3) But subsection (2) does not apply if A shows that A did not contravene the provision.[62]Consequently, it is for a claimant to establish facts from which the Tribunal can reasonably conclude that there has been a contravention of the EqA. If the claimant establishes those facts, the burden shifts to the respondent to show that there has been no contravention by, for example, identifying a different reason for the treatment.[63]In Hewage v Grampian Health Board [2012] IRLR 870 the Supreme Court approved guidance previously given by the Court of Appeal on how the burden of proof provision should apply. That guidance appears in Igen Limited v Wong [2005] ICR 931 and was supplemented in Madarassy v Nomura International PLC [2007] ICR 867. Although the concept of the shifting burden of proof involves a two-stage process, that analysis should only be conducted once the Tribunal has heard all the evidence, including any explanation offered by the employer for the treatment in question. However, if in practice the Tribunal is able to make a firm finding as to the reason why a decision or action was taken, the burden of proof provision is unlikely to be material. Direct discrimination[64]Section 13 EqA provides that a person(a) (A) discriminates against another(b) (B) if, because of a protected characteristic, A treats B less favourably than A treats or would treat others. The relevant protected characteristics include age.[65]Section 23 EqA provides that on a comparison for the purposes of section 13 there must be no material difference between the circumstances relating to each case. The effect of section 23 EqA as a whole is to ensure that any comparison made must be between situations which are genuinely comparable. The case law, however, makes it clear that it is not necessary for a claimant to have an actual comparator to succeed. The comparison can be with a hypothetical person not of the claimant’s age/age group.[66]Further, the Employment Appeal Tribunal and appellate courts have emphasised in a number of cases, including Amnesty International v Ahmed [2009] IRLR 884, that in most cases where the conduct in question is not overtly related to the protected characteristic, the real question is the “reason why” the decision maker acted as he or she did. Answering that question involves consideration of the mental processes (whether conscious or subconscious) of the alleged discriminator, and it may be possible for the Tribunal to make a finding as to the reason why a person acted as he or she did without the need to concern itself with constructing a hypothetical comparator. If the protected characteristic (in this case, age) had any material influence on the decision, the treatment is “because of” that characteristic.[67]Very little direct discrimination is overt or even deliberate. In Anya v University of Oxford [2001] IRLR 377 CA guidance was given that Tribunals shall look for indicators from a time before or after the particular act which may demonstrate that an ostensibly fair-minded decision was or was not tainted by bias, in Anya racial bias. Discriminatory factors will, in general, emerge not from the act in question but from the surrounding circumstances and the previous history.[68]In cases of age discrimination, section 13(2) EqA additionally provides for a justification defence, if the respondent can show that its treatment of the claimant was a proportionate means of achieving a legitimate aim. Indirect discrimination[69]Section 19 EqA, so far as material, provides:(1) A person (A) discriminates against another (B) if A applies to B a provision, criterion or practice which is discriminatory in relation to a protected characteristic of B’s.(2) For the purposes of subsection (1), a provision, criterion or practice is discriminatory in relation to a relevant protected characteristic of B’s if – (a) A applies, or would apply, it to persons with whom B does not share the characteristic, (b) it puts, or would put, persons with whom B shares the characteristic at a particular disadvantage when compared with persons with whom B does not share it, (c) it puts, or would put, B at that disadvantage, and (d) A cannot show it to be a proportionate means of achieving a legitimate aim.[70]Section 23 EqA provides that on a comparison for the purposes of establishing less favourable treatment between B and others in an indirect discrimination claim, there must be no material difference between the circumstances of B’s case and those of the comparator(s). Harassment[71]Section 26 EqA provides that: (1) A person (A) harasses another (B) if- (a) A engages in unwanted conduct related to the relevant protected characteristic, and (b) the conduct has the purpose or effect of - (i) violating B’s dignity, or (ii) creating an intimidating, hostile, degrading, humiliating or offensive environment for B. … (4) In deciding whether conduct has the effect referred to in subsection (1) (b), each of the following must be taken into account- (a) the perception of B (b) the other circumstances of the case (c) whether it is reasonable for the conduct to have that effect.[72]The concept of harassment under the previous equality legislation was the subject of judicial interpretation and guidance by Mr. Justice Underhill in Richmond Pharmacology and Dhaliwal [2009] IRLR 336. The Tribunal has applied that guidance, namely: “There are three elements of liability(i) whether the employer engaged in unwanted conduct;(ii) whether the conduct either had (a) the purpose or (b) the effect of either violating the claimant's dignity or creating an adverse environment for her; and(iii) whether the conduct was on the grounds of the claimant's [protected characteristic].”[73]In the course of submissions, the Tribunal was referred to a number of cases by the parties, as follows: Rainey v Greater Glasgow Health Board [1987] ICR 129 Qureshi v London Borough of Newham [1991] IRLR 264 Rao v Civil Aviation Authority [1994] ICR 495 Zafar v Glasgow City Council [1998] IRLR 36 De Freitas v Permanent Secretary of MAFLH [1999] 1 AC 69 London Underground Ltd v Edwards (No. 2) [1999] ICR 494 Barry v Midland Bank plc [1999] ICR 859 Optikinetics v Whooley [1999] ICR 984 Nagarajan v London Regional Transport [1999] IRLR 572 O’Donoghue v Redcar BC [2001] IRLR 615 Chief Constable of West Yorkshire v Khan [2001] ICR 1065 Yeboah v Crofton [2002] IRLR 634 Martin v Lancehawk Ltd t/as European Telcom Solutions [2003] UKEAT/0525/03 Bahl v Law Society [2004] IRLR 799 Cadman v HSE [2004] IRLR 971 Hardys & Hansons plc v Lax [2005] ICR 1565 R (Elias) v Secretary of State for Defence [2006] 1 WLR 3213 Thornett v Scope [2007] ICR 236 Grundy v British Airways plc [2008] IRLR 74 ABN AMRO Management Services Ltd v Hogben [2009] EAT 20.11.09 unreported Kraft Foods UK Ltd v Hastie [2010] ICR 1355 R (on the application of E) v Governing Body of JFS [2010] IRLR 136 Brent LBC v Fuller [2011] ICR 806 Dziedziak v Future Electronics Ltd UKEAT/0271/11 Fuchs v Land Hessen [2012] ICR 93 Chief Constable of West Yorkshire v Homer [2012] ICR 704 Seldon v Clarkson Wright & Jakes [2012] ICR 716 HM Land Registry v Benson [2012] IRLR 373 Davies v Sandwell MBC [2013] IRLR 374 Kids City Ltd v Mr C Gayle [2013] UKEAT/-106/13 Leeds Teaching Hospital NHS Trust v Blake [2014] UKEAT/0430/14 Reynolds v CLFIS (UK) Ltd [2015] ICR 1010 Games v University of Kent [2015] IRLR 202 Onu v Akwiwu [2016] ICR 756 BAE Systems (Operations) Ltd v McDowell [2018] ICR 214 Ayodele v City Link Ltd [2018] ICR 748 Lord Chancellor v McLoud [2019] ICR 1489 Jagex Ltd v McCambridge [2019] UKEAT/0041/19 Page v Lord Chancellor [2021] ICR 912 Dobson v North Cumbria Integrated Care NHS FT [2021] ICR 1699 The Tribunal took these cases as guidance but not in substitution for the statutory provisions. Submissions[74]Counsel for the claimant made a number of detailed oral submissions which the Tribunal has considered with care but do not rehearse in full here. In essence it was asserted that:- the claimant’s dismissal was not just procedurally but also substantively unfair; it offended all principles of natural justice and the ACAS code of practice; the respondents’ reason for dismissal had shifted as the case went on and was confused; the respondents had at all times aimed to remove the claimant before he could leave as a ‘good leaver’ and thereby avoid paying the claimant for his shares or for their true value; from August 2022, evidence showed that the respondents were actively looking for a younger replacement for the claimant, behind his back and without his knowledge; on 3 January 2023, the claimant was ambushed and given no option but to “retire” or be dismissed and to decide within 48 hours; the respondents failed to consider any alternative methods for the claimant to exit the business; the respondents replaced the claimant with a younger managing director; and that the claimant’s dismissal was because of age, couched in terms of a retirement albeit that it was not so.[75]Counsel for the respondent tendered outline written submissions and also made a number of detailed oral submissions which the Tribunal has considered with care but do not rehearse in full here. In essence it was asserted that:- events overtook the respondents in that, although they had already decided on termination, this was brought forward by the claimant’s breach of confidentiality which became the operative reason for dismissal; that the claimant’s shares were worth nothing and so an offer of the subscription price was generous; that the claimant’s exit had always been envisaged by both parties; that the departure of the managing director was obviously a confidential matter even though it had not been expressly stated to be confidential at the time; that any alternative to instant dismissal would have made no difference; there was a breakdown in relations against a background of the claimant’s performance and conduct issues such that going through any process would be futile; that the respondent was removing a roadblock to growth in the business; that the direct discrimination complaint should be rejected because the claimant’s dismissal was nothing to do with his age; for the indirect discrimination complaint, the claimant had not established a PCP; and there was no harassment – references to the claimant’s retirement amounted to a ‘pat on the back’ for a long career. Conclusions (including where appropriate any additional findings of fact)[76]The Tribunal has applied its relevant findings of fact and the applicable law to determine the issues in the following way. Unfair dismissal[77]The Tribunal has found that the reason that the respondents summarily dismissed the claimant on 4 January 2023, was in reliance upon the allegation of breach of confidentiality. However, the decision to dismiss had been taken by the directors some months beforehand and led to the meeting on 3 January 2023 when the claimant was told that he was in effect dismissed but not given any reason. As a result, the Tribunal found that the respondents’ witnesses were entirely confused about what was in fact the reason for dismissal. The evidence swung between allegations about the claimant’s conduct towards female staff around a year previously, to allegations about his capability and performance resulting in a downturn in the first respondent’s business regardless of any effects of the Covid pandemic or changes in customer habits and market conditions. The Tribunal noted that the grounds of resistance, paragraph 27, at page 53 of the bundle, pleads both capability and conduct as the reason for dismissal.[78]When challenged over allegations about the claimant’s performance, certain of the respondents’ witnesses were unaware of specifics but were at pains to mention everything possible that was wrong, in effect to pin it all on the claimant. The Tribunal was told about the day-to-day running of all aspects including the state of the roof. The Tribunal considered that it would not have been possible for one person to deal with all such matters singlehandedly; the claimant had reasonably delegated many matters to other people and that holding him personally responsible smacked of desperation and was unreasonable.[79]The allegations of complaints by female staff were painted as a continuing problem of sex discrimination and harassment perpetrated by the claimant – see paragraphs 22-26 above. If the issue was as bad and as serious as the respondents sought to suggest, the Tribunal found no evidence that either respondent took any or any formal action on such complaints, not even to investigate but they nevertheless sought, at this hearing, to besmirch the claimant’s character with vague and unsubstantiated suggestions or allegations.[80]The second respondent’s email of 4 January 2023 to the claimant, on page 290 of the bundle, is clear that the claimant is dismissed with immediate effect for gross misconduct. The grounds of resistance, paragraph 28, plead that alternatives to dismissal were considered. However, the Tribunal concluded that this simply was not the case. Mr Bradbury’s evidence was that there were no alternatives, whilst the second respondent said that because the claimant was the managing director, it was not necessary to follow any procedure and so he did not consider any alternative action. As a result, the claimant’s dismissal was heavy-handed and the snap decision to summarily dismiss was disingenuous and a cynical move.[81]The Tribunal took into account the evidence that, as far back as October 2021, the respondents had decided that the claimant should leave before the 5 years provided for under the first respondent’s Articles. In April 2022, Mr Dunn had been despatched to negotiate the claimant’s exit on reasonable terms and an agreement in principle was reached. Whilst that agreement was never put into effect, the respondents became focussed on the claimant’s removal. By Autumn 2022, they were actively canvassing people to take his place and, with some hindsight, the claimant’s evidence was that he felt the October meetings were staged. The Tribunal heard evidence from the respondents about the claimant’s reaction to situations and witnesses suggested that things were done, or said, to provoke the claimant. Mr Dunn’s witness statement, paragraph 19, is clear, “Ardenton made a very low offer for [the claimant’s] shares which they knew would be inflammatory and given Paul’s history of not keeping matters confidential they knew he would breach the confidentiality.” Mr Dunn gave evidence that the respondents were prepared to take such action because they were adamant the business needed a change of management. The Tribunal was also mindful of the fact that, to avoid the provision in the Articles for a ‘good leaver’ after 5 years, the respondents had to have dismissed the claimant before March 2023 as a ‘bad leaver’ given that he was otherwise subject to 12 months’ notice. The claimant has submitted that, given the circumstances of his departure, this factor weighed heavily on the timing of the respondents’ actions.[82]The respondents’ case was that the claimant was a “risk to the business” and so had to be removed. It was also pleaded in the ground of resistance, paragraph 22, that the claimant made “attempts to disrupt the business”. In the circumstances of the case, the Tribunal did not find such contentions to be credible. Notwithstanding, the fact that many of the respondents’ allegations about the claimant’s conduct and performance were unsubstantiated, the fact was that the claimant had a 49% stake in the business together with an interest in another company which owned the property from which the business operated. If the business suffered a downturn and/or failed, the claimant’s stake would be worthless, and the property would produce no rent. In essence, the claimant had much invested in the success of the first respondent’s business.[83]The Tribunal accepted the contentions of the claimant, together with the evidence of Mr Dunn above, that there was an element of provocation in the way the respondents approached the claimant’s departure at the beginning of January 2023. The respondents needed the claimant to leave swiftly as Mr Zahid was already in position to take over. The Tribunal considered that, on the balance of probabilities, it was always likely that the claimant would speak to staff with whom he had worked for many years. He was upset. The issue is whether, in speaking to his closest senior colleagues, the claimant committed misconduct and/or a breach of confidentiality amounting to a breach of contract. The second respondent’s email of 4 January 2023 cites “irrevocable damage”, but the respondents have produced no evidence of such, and the respondents made no effort to ascertain if, in fact, any damage had or would result from the claimant speaking to his most trusted colleagues, none of whom said anything to anybody else. There was no evidence of any, or any irrevocable, damage. Nobody outside of the claimant’s closest colleagues knew anything; not suppliers or customers – there was no suggestion nor evidence that the fact of the claimant’s departure had gone any further. But the respondents never checked things out anyway. The respondents did not therefore have a genuine belief on reasonable grounds that the claimant was guilty of misconduct as alleged, or the breach of confidentiality. The latter was seized upon as an excuse to hasten the claimant’s departure and seek to secure his shares for a token sum. In those circumstances, the Tribunal considered that the claimant’s dismissal was substantively unfair.[84]In light of the above, the Tribunal considered that the respondent has not shown that the claimant was guilty of gross misconduct or any misconduct. During the meeting on 3 January 2023, at no time did the second respondent specify that everything, including the fact of the claimant’s departure, must be kept confidential, only the discussions which were ongoing. In paragraph 17 of the grounds of resistance, the respondents accept that there was no specific mention of the confidentiality of the conversation at the time. Rather, they rely upon the email sent by the second respondent, after the meeting, the final sentence of which says that the discussions should be treated as confidential until they have reached a conclusion. The claimant’s evidence, which the Tribunal accepted, was that he understood the terms of his departure, which were at best under discussion, to be confidential but not the fact of his departure, which he considered to have been already put into effect. It was not for discussion when the second respondent told him that he was leaving, and he was told that he must resign for a dignified exit or be dismissed and lose his shares and the value of the loan notes. In any event, the claimant told nobody outside of his most trusted and senior, long-serving colleagues. From the respondents’ own witness, Mr Dunn, the evidence was that the respondents expected the claimant to tell somebody something and that they would then seek to turn it to their advantage, which is precisely what happened.[85]In terms of procedures, the respondents have conceded it was an unfair dismissal. They did not follow the ACAS code of practice, or any form of disciplinary procedure which, according to the wording of the claimant’s contract, applies. The Tribunal did not consider it appropriate to dispense with such procedures entirely. Indeed, had the respondents paid any regard to fair procedures, they might have considered suspending the claimant or putting him on gardening leave, conducting an investigation to determine whether, in fact, any “irrevocable damage” had been occasioned by the claimant speaking to his colleagues, invited the claimant to and held a disciplinary hearing at which the claimant would be notified of the charge(s) against him and given the opportunity to explain/defend himself. However, the respondents knew full well what they were doing and the last thing the respondents were planning was a respectful exit.[86]The Tribunal considered that there a number of things the respondents could have done rather than dismiss the claimant summarily, but none were even considered by them. If the respondents seriously wanted to protect the business, they could have invoked the covenants in the claimant’s contract of employment. They could have managed the transition to Mr Zahid better - the claimant could, for example, have eased out by working on a consultancy basis, part time, for a period, as a positive way to manage the exit of a key member of the first respondent’s personnel and to present a united front to customers, suppliers and to the market. But such would not have assisted the respondents’ sole aim, which was to remove the claimant swiftly, as a ‘bad leaver’, and to secure his shares for a token payment. The respondents were prepared to use any reason, to that end. Hence, Mr Bradbury’s email on 4 January 2023, is telling. Having heard of the claimant speaking to senior staff, he immediately raises the opportunity to effect ‘option B’. He does not mention dismissal, as that had already been determined, sometime beforehand, nor does he suggest gross misconduct. The respondents’ focus was entirely on the money and option 2, which meant obtaining the claimant’s shares for £1 – see paragraph 46 above.[87]The Tribunal has been asked to consider Polkey and contributory fault. First, the Tribunal did not accept that the respondents’ contention that the claimant would have been dismissed in any event. As explained above, the matters relied upon by the respondents to justify the claimant’s dismissal were largely unsubstantiated and lacking in evidence. Therefore, any exercise in reconstructing what might have been is riddled with uncertainty, to the extent that the Tribunal considered that no sensible prediction can be made. The respondent has not satisfied the Tribunal that, if a fair procedure had been followed, then on a balance of probabilities the claimant would have been dismissed in any event.[88]The issue arises as to whether the claimant’s conduct was culpable or blameworthy. The Tribunal took account of the fact that the respondents had decided to dispense with the claimant’s services around a year before his dismissal, and the circumstances surrounding the claimant’s dismissal, and the fact of the provocation that the respondents intended, and concluded that the claimant’s conduct was not culpable or blameworthy in all the circumstances of the case. The respondents had operated with closed minds. They had already dismissed the claimant in effect on 3 January 2023. They did not undertake any investigation to find out what senior staff had actually been told and there was no suggestion nor evidence that any information had gone any further. The disclosure of the claimant’s dismissal was to the most senior staff who could be trusted not to immediately ring up suppliers or customers and engage in gossip. Why would they do so? In this regard, the claimant has produced a number of messages from the staff in question, which show they too were in shock at what had happened.[89]In addition, the Tribunal did not conclude that the claimant caused or contributed to his dismissal. The Tribunal heard evidence of a “toxic culture” at the first respondent, which Ms Silcock referred to in evidence. The Tribunal has found that a number of key people at the top of the business were not getting on. From mid-2022, the directors, and Ardenton personnel, were working behind the claimant’s back with a view to his removal. The reasons for removal, as given to the Tribunal, lacked credible evidence. The Tribunal does not therefore place responsibility for this unfortunate state of affairs solely at the claimant’s door. The claimant’s only “fault” is that he told a handful of senior staff that he had been dismissed. The respondents expected him to tell somebody – see paragraphs 81 – 83 above – and when he did, they used it against him as, according to Mr Dunn, had been their hope/intention all along. Age Discrimination[90]The complaint of direct age discrimination relies upon 2 matters: first, the allegation that the respondents berated the claimant about the business’ performance in meetings in October 2022 to mid-December 2022; and the claimant’s dismissal and the replacement by Mr Zahid in January 2023.[91]The Tribunal has made findings that a difficult working relationship between the claimant and the senior personnel at Ardenton developed over the course of 2022, but the Tribunal did not find any evidence that this was because of age. The respondents decided to remove the claimant as managing director and embarked on a course of conduct to that end. They wanted to move the business in a news direction. On a balance of probabilities, the Tribunal considered that the respondents would have behaved in a similar manner to any senior executive, in similar circumstances, if they decided they wanted rid and regardless of their age. The Tribunal heard evidence of several examples of the respondents’ methods of removing senior personnel. Rather, the Tribunal considered that the treatment complained of was because the claimant was the managing director and a shareholder. Ultimately, the claimant was dismissed and replaced with Mr Zahid but that was the culmination of the respondents’ decision to remove him as managing director and not because of age or his age. The claim of less favourable treatment is not made out.[92]The indirect discrimination complaint requires the claimant to establish that there was a ‘PCP’ of requiring a young and dynamic Chief Executive Officer, or somebody under 55. The phrase “young and dynamic” arose from what the Tribunal considered to be a throwaway comment by Mr Dunn. There was no evidence to support a contention that either being young and dynamic or being under 55 were the criteria for the claimant’s replacement. In any event, in light of the dicta in Seldon v Clarkson Wright & Jakes the Tribunal considered that succession planning to replace a senior and long-serving executive will more likely result in the recruitment somebody younger, but that result does not find age discrimination without more.[93]The complaint of harassment relies upon the “young and dynamic” comment made by Mr Dunn, and the reference to retirement by the second respondent in the Teams meeting of 3 January 2023. The Tribunal considered that Mr Dunn’s comment was a private comment made to the claimant upon Mr Dunn’s departure, a word of warning attributable to Mr Dunn only. It was his personal opinion of what he thought the respondent was looking for in terms of a replacement for the claimant. The Tribunal did not attribute the comment to the respondent and in any event found that it did not have the discriminatory purpose or effect set out in EqA section 26(1)(b). In terms of the effect, the Tribunal considered that it was not reasonable, in the circumstances of the case, for the claimant to have perceived Mr Dunn’s comment as amounting to harassment because of age.[94]Likewise, the reference to a respectful exit and “retirement” was understood by the claimant to be a reference to his departure, in terms of retiring from the business. This was a position raised by the claimant and his brother at the time the business was sold. His retirement had always been envisaged by all parties. In those circumstances, the Tribunal found that the second respondent’s reference to retirement did not amount to unlawful harassment because of age. There was no evidence to suggest that the second respondent intended it to be harassment of the claimant, and the use of the word retirement did not have that effect. The Tribunal considered that it was not reasonable, in the circumstances of the case, for the claimant to have perceived the second respondent’s comment as amounting to harassment because of age and indeed found no evidence that the claimant thought so.[95]In light of the above conclusions, the age discrimination complaints fail and are dismissed.
Remedy
[96]The successful unfair dismissal complaint shall proceed to a remedy hearing..