Weston v Automated Business Centres (East Anglia) Ltd & Anor [1993] UKEAT 118_92_1207

EAT

Weston v Automated Business Centres (East Anglia) Ltd & Anor

[1993] UKEAT 118_92_1207 · 1993-07-12

JUDGE HULL :

This is an appeal to us by Mr Weston against the decision of the Industrial Tribunal sitting at Bury St Edmunds on 17 December 1991, to whom Mr Weston had complained that he had been unfairly dismissed by his employers. He named two employers, one was Automated Business Centres (East Anglia) Ltd and the second was a wholly owned subsidiary of that Company - Automated Business Centres (Bury St Edmunds) Ltd.

The Bury St Edmunds Company had been owned by Mr Weston himself but there had been a takeover. He was retained as chief executive. The other two directors were brothers and they were apparently directors of both companies. In June 1991 there was a financial crisis in the affairs of the Bury St Edmunds company. Money was short and a Board Meeting was held to consider the matter. We have been shown the Minutes of that occasion. There were present the brothers (Messrs Parker) to whom I have referred and Mr Weston. The Parkers owned the majority interest and were in a position to make their wishes binding on the Company.

With a view to controlling the Company more closely the directors resolved as follows:

"It was agreed that cheques up to the value of £100 would be on FVH Weston's signature only but that all future cheques over £100 would need two signatures - one to be always that of Weston and the other signature to be either D J Parker, I R Parker or D V Evans" [that lady I think was the company secretary]

Mr Weston did actually object to this, but it was decided that new bank mandates would be given to the Midland Bank to set it in motion. There is a further paragraph (5) which may have some relevance:

"It was agreed that all company orders and any forward capital commitments to be sanctioned by Weston and/or D J Parker and I R Parker"

That was clear. In future any cheques for more than £100 were to be drawn on Mr Weston's signature but these would have to be with a second signature of one of the Parkers or of Miss Evans. It appears that Mr Weston quite deliberately set about ignoring the board's resolution. He drew cheques for a total value of nearly £9,000 in the ensuing three or four weeks and he obtained the signature of neither of his co-directors nor of Miss Evans. He told none of them.

In June, before this all came to light, he was visited by Miss Evans. He told her he had been too busy to get the mandate changed and she said, in evidence:

"Cheques drawn in defiance of the 8 June resolution.

I continually asked him if he was raising cheques - he said he was sticking to the resolution.

I warned him to do so would be in contravention of the resolution.

I suspected things were wrong."

and of course they were wrong and Mr Weston without telling his fellow directors was defying the resolution.

When it all came to light there was a confrontation and there was a letter of dismissal written as a result. That is to be found at page 45 of the further bundle of documents which were shown to us this morning. Mr D J Parker wrote:

"...you have flagrantly ignored these instructions and have issued a number of cheques with just your own signature and committed the company to on-going purchases without seeking the proper authority. Therefore your co-Directors have decided summarily to dismiss you forthwith as your actions show a lack of good faith and value of concern regarding your fiduciary duty to your fellow directors."

That was on the paper of the Bury St Edmunds company.

Mr Weston complained to the Industrial Tribunal and he named both companies as his employers and the companies put in separate responses on form IT3. So far as the East Anglia company was concerned they said "He has not been dismissed: we believe he is resigning: we have not yet received his letter".

The Bury St Edmunds company said "Yes he has been dismissed. It is true he did not have a contract of employment with us. He was left to run the company". They made various allegations against him but they were allegations of incompetence, not of misconduct.

At the hearing before the Tribunal the Respondents were jointly represented and the case against Mr Weston was the one which I have been referring to, namely that in flagrant disregard of the resolutions of the board on 8 June he had continued, despite many opportunities to put matters right, to draw cheques without having them signed by one of his fellow directors, had done that quite deliberately, and had concealed the fact from his fellow directors and from Miss Weston; and that they were therefore justified in dismissing him. They endeavoured, apparently, to introduce various other matters. The Chairman said that matters which arose and were discovered after the dismissal were not material to the decision of the Industrial Tribunal as to whether Mr Weston had been fairly or unfairly dismissed. That would appear to be a correct view.

It would have been, in the circumstances, open to Mr Weston, if he felt that he was ill-prepared for this encounter and that the matter was being dealt with on a basis quite different from that contained in the two forms IT3 which had been put before the Tribunal, to ask for an adjournment or to object to the way the matter was being dealt with; or to insist that it should be dealt with on the basis that he was alleged to be incompetent, as pleaded. He did not do those things - whether as a result of discussions or whether as a result of considering the matter and deciding that it would be better not to do so we do not know; but that was how the matter proceeded in front of the Industrial Tribunal.

There was also the question which would arise in the mind of any legally qualified Chairman - How was the matter to be dealt with so far as the parties were concerned? It seems inherently improbable that Mr Weston could be employed by both companies. A very common situation would be that he was employed by the parent company but sent to work at the subsidiary company. That would be a possible view. What appears to have been said in opening the case, though it is not quite clear who said it, was that Mr Weston was an employee of the second Respondent (that is the Bury St Edmunds company) and a director of both companies. He was dismissed as an employee of the second Respondent (Bury St Edmunds) and resigned as director of both.

It is true that in the course of his evidence he had something to say about it. He said:

"I had contracts with both respondents. I drew money from both companies as was possible...

I was the senior manager of the first Respondents"

So that the position so far as he was concerned seemed to remain that he was employed by both companies. But nonetheless these companies were jointly represented and the Tribunal was told that he was employed by the second Respondent, where he seemed to spend all his efforts. It had been his company. The Tribunal seems to have dealt with it entirely on the basis that he was the employee of the Bury St Edmunds company. No objection seems to have been taken to that point. No submissions were made to the Tribunal. No document was produced in evidence to contradict that, so far as we can see. In those circumstances the Industrial Tribunal had to decide how to proceed and as a pragmatic matter appears to have held that the reality was that Mr Weston was employed by the Bury St Edmunds company.

It was the resolution of the Bury St Edmunds company that was referred to and of which Mr Weston was said to be in defiance. It was the Bury St Edmunds company whose paper was used by Mr Parker when he wrote the letter of dismissal. The case having proceeded on that basis, we are now told today by Mr Sendall that there has been no finding at all (that is correct) against the first Respondents (the East Anglia company) and in those circumstances the proceedings are defective; the matter should have been considered against both Respondents. Mr Sendall pointed out to us that although they were jointly represented they were not the same company and there was a complaint against each of the companies.

That submission appears to us to be completely contrary to the reality of the situation. If this had been a matter of importance and if different considerations related to his employment by each company; if there was a contract of employment with each company with quite different duties; if as was the case the two Respondent companies had put in quite different grounds and if it had been desired that these should be investigated by the Tribunal, that would have been the subject of submissions on behalf of Mr Weston, who was represented by Mr Byford. On the contrary, it is perfectly apparent from looking at the Chairman's Notes and from looking at the Industrial Tribunal's Decision that the matter was dealt with on the basis that it was the Bury St Edmunds company with which everybody was concerned, which was the true employer of Mr Weston, and which had the grievance against him, the cause of action against him which led them to dismiss him. That was the way in which the hearing proceeded in front of the Industrial Tribunal and in which they were allowed to proceed in giving their decision.

It seems to us quite unreal and indeed quite unfair that this new and highly technical position should be taken on appeal when it was not advanced in front of the Industrial Tribunal, which is required by convention and many judicial dicta and indeed by legislation to consider these matters on a commonsense basis and in a way which makes laymen feel they can participate and come to tribunals without fear of legal technicality and that their cases will be tried in a reasonable, commonsensical and just way. We think that in this case the Tribunal was well justified, in the absence of any objection, in proceeding on the basis that the true employer was the Bury St Edmunds company and that they could for practical purposes neglect the East Anglia company and any contractual rights it might have.

Then they went on to consider the facts and they found the facts which I have already recited, namely that the cause of the dismissal was the conduct of Mr Weston in deliberately flouting the resolution which had been passed, against his wishes, by those with the majority voting power on the Board of Directors. So that at a time of financial stringency, when unusual steps were required to control finance, Mr Weston had continued for a period of over 3 weeks, until 3 July, to flout the resolution of the board of which he was a member. Indeed, if Miss Evans was correct, and it appears her evidence was accepted, he was prepared to deceive not only his fellow directors but Miss Evans when she made direct enquiry of him. He was disbursing the company's money, without authority, because he disapproved of the resolution. Apparently he had other reasons too - he thought that matters were being conducted against him, that he was being squeezed out, that this resolution was passed with a view to reducing or destroying his position in the company. All that was considered by the Tribunal, which heard evidence about a great many matters but pinned its attention on this as being the reason for the dismissal.

The decision to dismiss was taken without holding a disciplinary enquiry and Mr Sendall, referring to many well known decisions, says that it is quite wrong for this company to have dismissed Mr Weston without giving him an opportunity to be heard, formulating the charges against him, making it quite clear what the grounds were, and hearing him.

There is no absolute rule of law that there should be a disciplinary enquiry and it is right to say that the majority of these decisions deal with employees in subordinate positions in substantial concerns. Quite clearly that is utterly different from the situation in which a director is also employed in an executive capacity and proceeds to defy a resolution of the board in which he has participated. What this Industrial Tribunal had to do on this occasion was to consider whether in those circumstances, there having been no formal or indeed informal disciplinary enquiry but simply a confrontation (as it was put) and such enquiries as Miss Evans had been able to make, whether in those circumstances it could be said that the employers had not only shown the reason for the dismissal but had acted fairly and reasonably in treating that as a reason for dismissal. They said:

"The manner of the carrying out of the dismissal was, to a certain degree, questionable. It is of course, in accordance with good industrial relations practice, important that people should have a chance to answer the complaint against them - possibly to be represented by a friend or colleague; to have the chance after the decision has been taken to appeal."

So they quite rightly set out that important consideration but they went on:

"But in this case we have regard to the small size of the respondents' undertaking and the fact that these were fellow directors and shareholders dealing between themselves. They were not people who needed anybody to assist them in this sort of situation and the tribunal feel that, though no doubt the meeting on 3 July was a confrontation, the second respondent acted in full possession of all the reasonably then known facts and that the applicant had no answer to the complaint made against him at that time - or indeed subsequently."

They had to decide whether these employers acted reasonably and justly in treating this as a reason for dismissal and bearing in mind the facts they were entitled in our view to hold that the employer acted reasonably notwithstanding the failure to hold a formal or informal disciplinary enquiry. It is not for us to say whether the Tribunal were correct in their decision, it is for us to say whether the Tribunal's decision on that matter reveals an error of law in that it was a decision at which no Tribunal properly directing itself and having regard to the evidence could properly have arrived. We do not say that. We think that this Tribunal was entitled on the facts of this case to form that conclusion and to say that the employers were in the circumstances reasonable in proceeding without such an enquiry.

Finally Mr Sendall makes an attack on the last paragraph of the Tribunal's decision:

"We are bound to say that we have heard a great deal of other evidence in this case; there is a great deal of documentation and all sorts of allegations have been made on both sides."

He says the Tribunal should have enquired into all those allegations.

We think that is a very sweeping contention. We think there is no indication at all that the Tribunal failed to enquire into anything which they should have enquired into. Mr Sendall says they should have enquired into motives. The Tribunal were required to enquire into the reason for the dismissal and they were quite right to say that motives are irrelevant when they have arrived at the reason. Of course if people act in bad faith and have in truth a different reason that is something quite different; but motives are not the subject of the Tribunal's enquiry and if they were all tribunals would have to hold very long enquiries indeed. So we find that that criticism is not made out.

The Tribunal go on to say:

"But in dealing with a case of unfair dismissal the tribunal must confine itself to its function of enquiring into the reason for the dismissal and whether that reason was a sufficient reason."

Mr Sendall says quite rightly that that is a misquotation from the statute and it suggests that the Tribunal is saying that that is a matter for them, not for the employer whereas their duty of course is to discover what the reason is, the employer must show that, and then to decide in accordance with justice and equity whether the employer acted fairly and reasonably in treating that as a sufficient reason for dismissal. But in fact if you look at paragraph 4, before the Tribunal embarks on its conclusions, they say:

"We must now apply the test in paragraph 3 of the same section [that is Section 57 of the Act] and enquire, having regard to the circumstances of the case and applying the test in that subsection, whether the employer acted reasonably or unreasonably in treating the reason for dismissal as a sufficient reason".

That is the correct test and it seems to us that all that has happened in paragraph 10 is that there has been an ellipsis. It seems to us that this Tribunal was very well aware of the proper test which they had to apply and that what they said in paragraph 10 is at best (from the point of view of the appeal) a slip of the tongue. We think that they applied the correct test and in our view this Tribunal was entitled to arrive at the decision which it did arrive at. It follows that the appeal is to be dismissed.