Johnson v Entertainment (UK) Ltd [1992] UKEAT 568_90_1210

EAT
Johnson v Entertainment (UK) Ltd
[1992] UKEAT 568_90_1210 · 1992-10-12

SIR DAVID CROOM-JOHNSON : Entertainment (UK) Ltd ("EUK") carry on business as wholesale distributors of compact discs, cassettes, records, videos and similar products. It was a subsidiary of Woolworths. Both EUK and Woolworths are now subsidiaries of Kingfisher plc. In June 1978 Mr Johnson became a sales representative of EUK. In November 1988 he was promoted to be senior area sales manager in the Liverpool area. EUK had about 200 sales outlets. Woolworths were a major customer, and had a store at Maghull. The manager of the Maghull store was a Mr Paul Howarth.

In October 1989 Woolworths reported to EUK's security manager, Mr Gray, that there was a stock shrinkage at Maghull over an 18 month period, amounting to a loss of about £120,000, that Mr Howarth was deeply involved and it was believed that Mr Johnson was involved to some extent. The allegation against Mr Johnson was that he had been putting quantities of stock into the Maghull store and had been obtaining goods for his own benefit in exchange, such arrangements being with the knowledge and approval of Mr Howarth. This was being asserted by members of the staff at Maghull.Woolworths reported the whole matter to the Police. Mr Gray took no action until a month later he received a report from the Police. Mr Gray and a Mr Bradfield then took statements from several Woolworths employees, one of whom was Nicola Cliffe. She said that over the years Mr Johnson had regularly brought in records, tapes and videos, which he swapped for other records and goods from other counters such as the toy department. He also took goods which were on a list given to Miss Cliffe by Mr Howarth. A statement was also taken from Jackie McDonnell, another Woolworths assistant, and from others.Mr Bradfield made a report to Mr Wenham, EUK's Head of Sales.On 20 November 1989, Mr Wenham held a meeting with Mr Johnson, together with Mr Gray and Mr Bradfield. Mr Johnson was accompanied by his representative, Mr Paul Betts. Mr Wenham put the allegations to Mr Johnson who denied any misconduct and gave explanations for what was alleged to have happened. He said Nicola Cliffe was trying to "fit him up" and that two of the other assistants were telling lies. The meeting was twice adjourned. Meanwhile, Mr Johnson was suspended.At the end of the meeting Mr Wenham decided that there were reasonable grounds for believing there was substance in the allegations and that, therefore, Mr Johnson's integrity was under question, which made his position as Area Manager untenable. He was consequently dismissed for "Gross Misconduct". Mr Wenham then wrote a letter to Mr Johnson, setting out the allegations, saying EUK had reasonable grounds for believing there was substance in them, that Mr Johnson's position was untenable, and dismissing him with immediate effect for gross misconduct. He was told of his right of appeal.Mr Johnson appealed. The appeal was heard by the Commercial Director, Mr Ash, on 4 December. In the meantime, Miss Karen Eldridge, the Field Sales Training Manager, received from Mr Wenham a memorandum saying "it is apparent that clear instructions regarding use of stocks needs to be restated." She did so on 24 November 1989 but did so in terms which indicated that the instructions, forbidding the swapping of products, were being issued for the first time rather than being "re-stated".At the hearing of the appeal by Mr Ash, Mr Johnson gave evidence and was questioned about his conduct at Maghull and also the closeness of his friendship with Paul Howarth.After the hearing, Mr Ash conducted further enquiries. He saw Jackie McDonnell, who sought to go back on her original statement implicating Mr Johnson. Mr Ash also interviewed Barry Rees, a Woolworths manager of sorts at Maghull, Nicola Cliffe (who repeated her original allegations), Julie White (stockroom assistant at Maghull) and Carol Bretherton (the record bar supervisor at another Woolworths store at Waterloo). Mr Johnson was not present at these further interviews, nor was he represented.On 11 December 1989, Mr Ash wrote to Mr Johnson as follows:
"You appealed against the decision of the disciplinary hearing, held on 24th November 1989, that you be dismissed for gross misconduct in accordance with the Company Disciplinary Procedure. The appeal hearing was held on 4th December 1989.
I am now writing to inform you that, following the above mentioned appeal interview, and further investigations into the matter, the decision to dismiss you stands. I have reflected on all the information very carefully, and consider that we have reasonable grounds for dismissal.You have now exercised your right of appeal under the Company Disciplinary Procedure, and this decision is final."Mr Johnson brought proceedings alleging unfair dismissal. The substance of his complaints was that it had not been made clear to him whether he was being dismissed for dishonesty or for breach of Company procedures relating to exchanging samples bought by staff or to samples received by staff. In effect what he was saying was that his own explanations for the incidents referred to in the allegations ought to have been accepted, and the disciplinary hearing had not been fairly conducted. EUK's answer was that having concluded that there were reasonable grounds for believing in the substance of the allegations they had lost their trust and confidence in him and that the conduct complained of amounted to gross misconduct warranting summary dismissal. The Industrial Tribunal unanimously found that he had been fairly dismissed. In a written decision twenty-three pages long they set out all the evidence in Mr Bradfield's report, the evidence given to Mr Wenham and to Mr Ash, and given at their own hearing, together with long legal submissions.The Tribunals ultimate decision, in paragraph 7, was as follows:
"....... We find that the reason for dismissal was not gross misconduct but conduct with regard to merchandise exchanged by the applicant at the Woolworth Maghull store which would lead to a genuine belief that the applicant was being dishonest and that this would bring the case within the category of some other substantial reason such as to justify dismissal. Section 57(1)(b) requires an Industrial Tribunal to consider the reason established by the employer and to decide whether it falls within the category of reasons which could justify the dismissal of an employee - not that employee but an employee - holding the position which that employee held. The particular position held by the applicant was such as to be most material to that consideration. In all the circumstances to dismiss was within the band of reasonable responses and as a result we are satisfied that whilst there were some procedural inconsistencies, they were not such as to justify an unfair dismissal finding, the circumstances being such that we find that the applicant was not unfairly dismissed and as a result dismiss this application."
In this appeal Mr Johnson has submitted by his counsel a number of points.First, the Industrial Tribunal substituted for "gross misconduct" (the reason given by Mr Wenham on 24 November) a different form of conduct amounting to a substantial reason for dismissal and so misdirected itself in law. But undoubtedly the reason for the dismissal was some kind of conduct and Mr Pratt conceded that "conduct" could be a "substantial reason" within section 57(1)(b) notwithstanding that in that subsection the reasons are expressed in the alternative.He also conceded that genuine belief in the existence of a course of conduct could amount to a substantial reason for dismissal, but in that event the Tribunal must examine the reasonableness of the genuine belief and explain the grounds upon which it was formed. That, he said, the Tribunal did not do. Moreover, once it had concluded that the dismissal could not have been for "gross misconduct" then the dismissal was flawed because it did not follow the guidelines set out in the Industrial Relations Code of Practice 1972 paragraph 10(h).The employers contended that in this case the words "gross misconduct" were no more than a label and did not affect the general facts on which both Mr Wenham and Mr Ash both formed their genuine beliefs. What Mr Johnson had done, it was submitted, was to behave in such a way that he was in breach of the mutual implied term in the contract of employment that he would not damage his employers' trust in him. He was in a position of seniority where he had to set an example to other employees below him. It is true the Tribunal did not made any finding of fact about Karen Eldridge's memorandum setting out what was to be done in the future about not swapping samples. Mr Wenham said that he did not correct the error because the memorandum was dealing with future behaviour and not with the past. In Mr Johnson's case it was only material to the question whether he had in the past behaved in such a way as to damage EUK's trust and confidence in him, and there was ample other evidence on which Mr Wenham could form his genuine belief. That lack of a finding of fact was not material to the Industrial Tribunal's decision. It was implicit in the decision that it accepted the genuineness of Mr Wenham's and Mr Ash's beliefs.In our view the Industrial Tribunal was entitled to come to the conclusion it reached save on one point. Mr Johnson was not brought in, in any way, to the further enquiries made by Mr Ash after the appeal hearing. Mr Ash's explanation was that he did not reconvene the appeal meeting because he felt that the evidence he had heard before he saw Mr Rees and Julie White and Carol Bretherton was sufficiently strong to allow him to reach a decision. He said that the new evidence led him to believe he had come to a correct conclusion. It only reinforced a decision he had already made. But he also said that he took it into account when he determined the appeal.This failure to let Mr Johnson challenge the new evidence was a clear breach of the rules of natural justice. It was taking evidence behind Mr Johnson's back. We have looked at the statements which were taken. They were strong evidence implicating him, and in the instance of Carol Bretherton it broke fresh ground because it dealt with Mr Johnson's behaviour at the Waterloo store. These failures cannot be dealt with by describing them as "some procedural inconsistencies" as the Industrial Tribunal did in the final sentence of their decision. The failure was not trivial. It was such as to invalidate the decision that there was no unfair dismissal. Without that opportunity to meet the allegations made against him, the dismissal of Mr Johnson was not fair. It is on that ground only that we think this appeal should be allowed.Accordingly, the proper course is that which Mr Pratt invited us to take, in accordance with the views approved by Lord Bridge in Polkey v Dayton Services Ltd [1988] ICR 142 at page 163. That is, to remit the case to the same Industrial Tribunal for remedy.