Mabey Hire Co Ltd v Richens [1992] UKEAT 207_90_0402

EAT
Mabey Hire Co Ltd v Richens
[1992] UKEAT 207_90_0402 · 1992-02-04
MR JUSTICE PILL: This is an appeal by Mabey Hire Co Ltd against Decisions of the Industrial Tribunal at Southampton made on the 20th February 1990 and the 19th December 1990. The Tribunal held that the Company had unfairly dismissed the Respondent to this appeal, Mr M J Richens. The Tribunal in two hearings subsequent to the hearing on that question determined the sum which should be payable to Mr Richens as a result of that dismissal. The appeal is first against the finding that the dismissal was unfair, second it is against the amount of the award and the point is taken that on the Tribunal's own finding a part of the award should not have been made.On the question of the fairness or otherwise of dismissal the employers' case before the Tribunal was that the applicant was involved in running a competing business which was in the name of his wife, and that he was in breach of Clause 13 of his Contract. Clause 13 under the heading "Conflict of Interest" provides that:
"Paramount amongst the duties which you owe to the company is the duty of faithful service. During the time of this contract you will not either alone or in partnership with any other person or persons, or as the servant or agent or officer of any person, firm or company, carry on or be in any way engaged, concerned or interested, in any business which conflicts with your duty of faithful service to the company."
Mr Richens was employed by the appellants as Southern Regional Manager. He had been an efficient manager and there was no complaint about the quality of his work or of the turnover and profit level in his Region.In about 1985 Mr Richens saw that there was room in the market for a particular commodity known as "rigid pipe stoppers". I will not set out fully and indeed do not have the information on which to do so, the full nature of the appellants' business which was, and is, on a substantial scale. The hire of pipe stoppers was a very small part of that business, it contributed only about 1% of turnover. In particular there was room in the market for the hire of rigid pipe stoppers.Mr Richens told the Tribunal that he had told the Company's Managing Director that he was considering setting his wife up in business to hire out pipe stoppers. Indeed, as the Tribunal found, his wife commenced such a business with a turnover of about £10,000 a year and a profit margin of about 15%.Mr Soffe, who is the depot Manager at Romsey, the depot at which Mr Richens was based as Regional Manager, became concerned about what was happening and Mr Richens was kept under observation.On the 23rd August 1989, Mr Richens was due to attend the Company's offices at Twyford in order to appeal against a verbal warning which he had been given on a subject entirely separate from the present one. However, at the hearing he was confronted with an allegation that he was assisting in the running of a business which was in competition with that of the appellants. He readily admitted that his wife did run a business hiring pipe stoppers and he made other admissions which are set out in the Tribunal's Decision. It was of course wrong that such an allegation should have been made against Mr Richens without notice and that fault is recognised on behalf of the appellants. It is not however material to the present issues.The appeal turned into a disciplinary hearing conducted by Mrs Gibson who is the appellants' Financial Director. Her finding was that she did not consider that Mr Richens' wife's business was in serious competition with the appellants. However, she went on to find that the applicant had used his time, the company car and telephone to assist his wife and Mr Richens was dismissed summarily for what she found amounted to fraud or theft in the misuse of Company's resources.He appealed against that decision and the Company Secretary of the parent or holding Company, Mr Brayshaw, conducted the appeal. A hearing was held on the 14th September 1989 and we have, though the Tribunal did not refer to them, the minutes of that hearing along with the letter which Mr Brayshaw subsequently sent to Mr Richens confirming the dismissal. It emerges from the minutes that the primary complaints of the employers were still those which Mrs Gibson had found to be important though there was also a reference at the hearing to Clause 13 of the Contract of Employment. Mr Brayshaw, in his letter, does emphasise the alleged breach of Clause 13.The Industrial Tribunal heard evidence from each of the Company representatives I have mentioned as well as Mr Daliday who was the Managing Director. Mr Richens also gave evidence. The Tribunal's findings of fact are set out in their reasoned Decision and it was the unanimous Decision of the Tribunal that the dismissal of Mr Richens was unfair.It is submitted by Mr Fodder on behalf of the appellants that the Tribunal's Decision was either the result of a misdirection in law, or was perverse. He submits that where there is disloyalty in an employee by way of assisting a competitor the employer necessarily has a right to dismiss. He submits that the Tribunal did find that there had been conduct amounting to disloyalty and that being so the only decision which they could properly make was a decision that the dismissal was fair. Mr Fodder has referred us to the Decision of this Tribunal presided over by Mr Justice Browne-Wilkinson, as he then was, in Baxter v. Wreyfield EAT 9/82 Unreported, on the 15th March 1982 and the earlier Decision of this Tribunal presided over by Mr Justice Kilner Brown in Mansard Precision Engineering Co Ltd v. Taylor & Another [1978] ICR 44 at page 48G, Mr Justice Kilner Brown said this:
"Once it is recognised, as it must be, that there has to be mutual confidence and trust, the mere fact that it is breached at all seems to us to be a perfectly justifiable, reasonable and sufficient reason for the employer to say, `I no longer have trust in you, I no longer have confidence in you. You must go.' If this case had been approached on those lines it seems to us that any reasonable tribunal would have been bound to say `Here the employers have shown that they acted reasonably, they have shown that they behaved fairly, they have shown that they did everything which a reasonable employer could do, first to try to get at the truth of the matter, secondly to give the two employees an opportunity to put their case, and thirdly, at the of it all, to weigh it all up and say, `Is it so serious a matter that we have to dismiss?'' Quite frankly, if the tribunal had looked at it in this way, we have come to the conclusion that any reasonable tribunal would have said that this was a hopeless application with no justification for a finding in favour of either of the two employees. In the circumstances the appeal must be allowed and the order set aside."
For the factual basis of his submission Mr Fodder relies upon paragraph 15 of the Tribunal's Decision. That reads:
"The Tribunal finds that Mr Soffe exaggerated in his own belief the extent of the applicant's involvement in the wife's business. He told the Tribunal that one or two messages per day were being received at the depot for the applicant, but the Tribunal does not find that the majority of those were in respect of the wife's business. Mrs Richens' evidence that she only conducted one or two transactions per week was accepted by the Tribunal and was not challenged by the respondent. The Tribunal finds that there was in practice little overlap between Mrs Richens' business and the very small amount of business in the hire of pipe stoppers carried out by the respondent company. We find that the applicant's involvement in his wife's business was very small in company time and he did not use the company car to promote his wife's business, except for the occasional delivery of stoppers en route during company business. We had no evidence that the car telephone was being used for the purpose of his wife's business. The company paid up to £60 per quarter of the applicant's home telephone bill and as the account was always in excess of that, the applicant's wife's business calls were in no way charged to the respondent company."
While most of the findings of fact in that paragraph are in favour of Mr Richens, Mr Fodder says that two findings are implicit in that paragraph. First, that some messages were being received at the appellants' business in respect of Mr Richens' wife's business. Second, there were some deliveries of stoppers en route during Company business. Mr Fodder submits that the principle of law is necessarily brought into effect that where such events occur there is a right to dismiss and it is not open to a tribunal to find that a decision to dismiss following such events was unfair.The Tribunal saw it differently. In paragraph 19 the Tribunal find that there was a failure by the employers to investigate adequately the nature and extent of the wife's business, its possible conflict with the appellants' business and the level of the applicant's level of involvement in the running of that business.

They added:-

"We find that the respondents' [employers] belief that the applicant was guilty of misconduct was not based on reasonable grounds and the dismissal of the applicant, without proper investigation was not within the range of responses of a reasonable employer. It is the unanimous Decision of the Tribunal that the dismissal of the applicant was unfair."
Mr Fodder submits that the statement that the Appellants' belief that the Applicant was guilty of misconduct was not based on reasonable grounds involves a misdirection of law on their part because he submits, on the basis of the two findings of fact to which we referred, it was a necessary finding that there was misconduct such as entitled the employer to dismiss and to do so without an allegation that he was being unfair. We are unable to agree with that submission. First, we are unable to agree with the submission that there exists the rule of law for which Mr Fodder contends. Second, we are unable to agree with the submission that on the facts found by the Tribunal it was a perverse decision on their part to decide that the dismissal was unfair. We would adopt the statement of Mr Justice Kilner Brown in Mansard Precision Engineering Co Ltd v. Taylor & Another [1978] ICR44 that one of the questions which the employers must ask is:

"Is it so serious a matter that we have to dismiss?"

The Tribunal were entitled to look at the conduct which was established in the context as the evidence as a whole and to consider whether that question should or should not be answered in the affirmative.We are quite unable to say that the Tribunal were not entitled, on the basis of the evidence before them, to answer that question in the negative.The Tribunal emphasise in paragraph 19 that on the material before them they do not consider it right to make findings that the dismissal was justified. They were entitled to point out the limitations as they saw it of the evidence which the employers had placed before them. They were entitled to refer to what they regarded as a lack of proper investigation by the employers into the conduct of a senior and able employee. Further it is not without significance that Mrs Gibson, who initially decided upon the dismissal, did so not on the basis of serious competition as between Mr Richens' wife and the Appellants, but on the basis of alleged fraud or theft in the misuse of Company resources. It is difficult to say that the Tribunal's Decision was perverse when the Company's own Financial Director saw fit to dismiss, not on that ground, but on other grounds which are set out in that paragraph. The existence of the other allegations some of which the Tribunal held to be unfounded is confirmed by the contents of the minutes of the subsequent disciplinary appeal.It is right to say that a high standard is expected from employees, especially senior employees, in relation to loyalty to the Company and in not competing with it. We have no reason to doubt that the Tribunal had that consideration well in mind. There is nothing perverse about the Decision which they reached.The alternative submission of Mr Fodder was that, even if for procedural reasons we could not say that the dismissal was fair, on the findings of the Tribunal a 100% contribution should be ordered under Section 74(6) of the Employment Protection (Consolidation) Act 1978. It follows from our findings on his principal submission that we see no merit in that. He further submits that a very much higher contribution should have been ordered. The Tribunal ordered no contribution with respect to the conduct of Mr Richens immediately before the dismissal. They made an order for a contribution of 20% on the basis of his failure, very much earlier, to alert his employers to a gap which existed in the market and which, he says, he told his employers that his wife was going to fill. There is no cross appeal against that finding. For that conduct we consider the percentage to be a reasonable one and indeed it is not argued otherwise, but for reasons given we cannot hold that it was perverse on the facts before them for the Tribunal to have failed to make a Section 74(6) Order in relation to the matters which occurred during the currency of the wife's business.Having made that finding the Tribunal went on at later hearings to consider the award which should be made and their finding is set out in their Decision of the 19th December 1990. The total compensatory award came to £13,192. Because that was in excess of the statutory maximum, the award made was the statutory maximum of £8,925.Following his dismissal Mr Richens obtained other employment as the Plant Hire and Sales Representative with the Marwood Group. However, on the 21st February 1990 he was dismissed from that employment.It is clear from a judgment (18th June 1990) they gave following the first hearing upon quantum on the 8th June that on the basis of the evidence then before them, the Tribunal did not find it proved that Mr Richens was established in permanent employment with "Marwood" or that he was dismissed through his own fault. However, the present Appellants were given a further opportunity to submit evidence on that question and at the second hearing, on the 11th December 1990, the Tribunal heard evidence from Mr S J Keys, who has a senior position with "Marwood", indeed it is he who is the Plant Hire Sales Manager.The point at issue before this Tribunal is whether a deduction should have been made and if so, to what extent, for the loss suffered by the present Respondent during the period after he was dismissed by "Marwood". It is common ground that he should have the difference in pay between the salary from the Appellants and the salary from "Marwood", but the issue is whether he should have the balance of his loss, that is his loss of salary from the present Appellants, following his dismissal from "Marwood". The Tribunal's finding was that he should have one half of that loss. Mr Fodder, on behalf of the Appellants, submits that, save for the difference between the two salaries during the remaining period, there should have been no award for the period after the dismissal by "Marwood". He submits that any loss after that dismissal was not, in the terms of Section 74(1) of the 1978 Act, "attributable to action taken by the employer". On the Tribunal's findings, he submits, Mr Richens was dismissed by "Marwood" because of Mr Richens' failure to comply with the "Marwood" regulations and any loss thereafter, save as I have mentioned, could not be attributable to action by the Appellants.In paragraph 7 of their Decision, the Tribunal stated:
"The Tribunal finds that the applicant's employment with the Marwood Group was planned to be permanent employment, but in view of his failure to comply with the company regulations and the clash of personalities between the applicant and the depot manager at Southampton, the applicant was dismissed before he completed his six months probationary period and after serving only four months."
. .....................................9. The Tribunal finds that the applicant's employment with the Marwood Group was not a permanent employment for a sufficiently long period as would relieve the respondent of responsibility for the consequences of the applicant's subsequent dismissal. However, the Tribunal does find that the applicant, having accepted a lower position than that to which he was accustomed, failed to observe fully the company regulations and contributed to his dismissal by the Marwood Group. If he had complied with those regulations and established himself with the company, he would have had permanent employment and would probably have received promotion in due course."We have been referred to the Decisions in Ging v. Ellward (Lancs) Limited 13 ITR 265 and Courtaulds Northern Spinning v. Moosa [1984] ICR 218. The question whether the employment with "Marwood" was permanent or temporary has been canvassed because that is a question which has arisen in the cases and also in a subsequent Scottish decision to which we have been referred.It is right to say that Mr Richens was still serving a probationary period when he was dismissed. However, the position appears to be that but for a dismissal for specific reasons the Tribunal took the view that the employment was likely to be for a long term. There is no suggestion that "Marwood" was likely to go into liquidation, or that within the foreseeable future Mr Richens would have been made redundant. Our provisional view, and we put it that way for a reason we will mention in a moment, is that the question whether the "Marwood" employment should or should not be regarded as permanent, is not the critical issue.On behalf of Mr Richens, Mr Dineen submits, that, as he puts it: The chain of causation is not broken. On the evidence, loss which Mr Richens suffered did come within the statutory definition to which I have referred. It was also just and equitable in all the circumstances that he should be compensated to the extent found. No point is taken against him on the basis of the expression "just and equitable".Mr Fodder submits that once the Tribunal found as a fact the matter set out in the last sentence of paragraph 9 of their Decision, which we have read, then the chain of causation is necessarily broken. It was Mr Richens' failure to comply with his new employers' regulations that led to his dismissal. That being so, it cannot be said that his subsequent loss was attributable to action taken by the Appellants. Alternatively, though Mr Fodder did not himself rely on this point, Section 74(4) provides that:
"In ascertaining the said loss the tribunal shall apply the same rule concerning the duty of a person to mitigate his loss as applies to damages recoverable under the common law of England and Wales"
Having taken reasonable steps by taking a new job Mr Richens did not continue to discharge his duty to mitigate because he infringed the regulations of his new employers.We have seen the "Marwood" dismissal letter and Mr Keys' grounds for dismissing Mr Richens are set out in paragraph 3 of the Decision of the 19th December 1990. Mr Keys added orally before the Tribunal:
"that there was clearly a clash of personalities between the applicant and Mr Dodson, the depot manager at Southampton"
We have noted that the "clash of personalities" is mentioned in paragraph 7 of the Decision but not in paragraph 9. Paragraph 10 provides as follows:
"The Tribunal finds therefore that in assessing compensation for loss of earnings for the period after 21 February 1990, that compensation should be reduced by 50% because of the applicant's failure to mitigate his loss."
The Tribunal's finding was therefore not in accordance either with Mr Fodder's submission that on their finding of fact the loss should be nil or Mr Dineen's submission that the Tribunal were entitled to find and it was not perverse of them to find that the chain of causation had not been broken, in which case there should have been no reduction on that ground. Mr Dineen makes the point, that it may be that in reaching the conclusion they did, the Tribunal had in mind the "clash of personalities" as well as the failure to follow regulations.I regret that we are left in a state of mind of not understanding the Tribunal's reasoning on the question of damages. The word "mitigate" does appear in paragraph 10 of their Decision. We see the attractions too of a tribunal, no doubt in a spirit of compromise, coming to a decision that a reduction of 50% was appropriate in the circumstances. Having heard the submissions of Counsel we do find it difficult to see, first whether such a half-way-house, if I may call it that, is a finding which is permissible in accordance with Section 74 and second, even if it is, by what route the Tribunal came to that Decision. It is not clear what facts they had in mind and I refer to the difference in the statement of facts between paragraph 7 and paragraph 9 and it is not clear whether the Tribunal applied the test which they are required to apply, first in Section 74(1) and second in Section 74(4).Section 74(6) does of course provide that:
"Where the tribunal finds that the dismissal was to any extent caused or contribution to by any action of the complainant it shall reduce the amount of the compensatory award by such proportion as it considers just and equitable having regard to that finding."
That applies to the dismissal by the present Appellants. It may be that the Tribunal thought that they could apply the same approach to the dismissal by "Marwood". In the result we are not clear about the Tribunal's reasoning, we are not satisfied that they directed themselves correctly upon the evidence in reaching the decision they did. We reject the submission made on behalf of the Appellants that the only decision which the Tribunal, on their findings of fact, could make, was one in favour of the Appellants, and that is sufficiently plain for us to make a finding here and now in favour of the Appellants. We decline to do that. In our view, and we are unanimous on this point as on the others to which we have referred, the appropriate course is to remit the question of the assessment of compensation to the Tribunal. We are unanimously of the view that the remission should, if at all possible, be to the same Tribunal as has already considered the matter.Our Order is that on the question of the 50% deduction for failure to mitigate loss, as expressed in paragraph 11 of the Tribunal's Decision, we remit the case to the same Tribunal for a complete re-hearing on that point. We underline that the Tribunal's finding as to liability is not remitted. That is upheld and other matters of assessment are not remitted because that there is no issue between the parties upon them. We say before leaving the subject that, having regard to the fact that the award as set out was necessarily reduced to the statutory maximum, the difference between the parties is not very large and is something over £1,000, the award in any event being in excess of £7,000. However, if the parties are not able to settle the matter there will be a further hearing before the Industrial Tribunal.There remains a submission as to an Order for Costs made by the Tribunal against the Appellants. The Order was in the sum of £200. It arose out of the fact that there were two hearings on the issue of quantum. Evidence was called at the first hearing but as we have pointed out the Tribunal found at the first hearing that it was not proved that the Applicant was established in permanent employment or that he was dismissed, that is from the second employment through his own fault. The Tribunal offered the present Appellants an adjournment in order that they might call a witness from "Marwood". The Appellants elected to accept that offer and Mr Keys was called at the further hearing. Notice had been given of the first hearing. The Appellants knew that Mr Richens had been dismissed some months earlier from his employment with "Marwood". It was open to them to produce evidence on that question, including if appropriate, that of Mr Keys when the case was listed for hearing in June. In our unanimous judgment there was nothing perverse in the Tribunal deciding that, because a further hearing was necessary to allow the Appellants an opportunity to call a witness from "Marwood", they should pay to Mr Richens a sum of £200 by way of costs.In the result, save as to the remission which we have mentioned, the Appeal is dismissed.We cannot find that this case comes within the categories where an Order for costs before this Tribunal is appropriate and there will be no Order.