Hartwell Commercial Group Ltd v Brand & Anor [1993] UKEAT 491_92_0907

EAT
Hartwell Commercial Group Ltd v Brand & Anor
[1993] UKEAT 491_92_0907 · 1993-07-09
MR JUSTICE KNOX : Two appeals are before us from decisions of the Industrial Tribunal sitting at Leicester initially on five days in February 1992 when there was a unanimous decision that the Applicants Steven Brand and Stuart Jones were dismissed by the Respondent Hartwell Commercial Group Ltd ("the Company") for redundancy. It was also decided that Mr Brand and Mr Jones were entitled to redundancy payments in particular sums but the appeals before us are not concerned with quantum. The Company appeals from that decision that the reason for the dismissals was redundancy. Mr Brand and Mr Jones in turn appeal from a later decision in the same matter of the Chairman sitting alone when he decided on the 5th June 1992 that the Applicants were not entitled to an order for costs under Rule 11 of the Industrial Tribunal (Rules of Procedure) Regulations 1985.There was a great deal of common ground before this Tribunal as to both the facts and the relevant law. The factual background was that both Mr Brand and Mr Jones were employed by Ford and Slater Group Ltd, at one stage a subsidiary of Unilever. Upon the sale in January 1988 by Unilever of the share capital in Ford & Slater Group Ltd to Mercantile Services Ltd, a subsidiary of a company owned by Barclays Bank plc, Unilever imposed a covenant intended to bind future purchasers that upon the dismissal for redundancy of former Unilever employees, those employees would receive enhanced redundancy payments. Later in August 1989 Mercantile Services Ltd sold the share capital in Ford & Slater Group Ltd to Hartwell plc the parent company of the Company and thereafter Hartwell plc itself was taken over by Oakhill Ltd on behalf of a Saudi Arabian company Abdul Latif Jameel Company Ltd.That latter takeover was launched in January 1990 and completed on 27th June 1990. A Mr Wei, the chief executive of the Company, answered to that Saudi Arabian company and was the central figure in these proceedings in that it was he and he alone who made the decision to dismiss Mr Brand and Mr Jones. The letters of dismissal by which they were dismissed were each signed by Mr Durrant, managing director of the Company's truck operations, but he was acting on the instructions of Mr Wei in sending those letters. They were dated 31st August 1990 and were letters of immediate dismissal for inadequate past performance or incapability, with no mention of redundancy.Mr Brand after the Hartwell plc take over in August 1989 was managing director of the Leyland-Daf operations of the Company of which Mr Durrant was group managing director. This involved Mr Brand's relinquishing the responsibility he had previously had for a commercial vehicle hiring business called Truckrent where it was found inadequate provision for vehicle maintenance costs had been made during Mr Brand's period in charge. Although no complaint was made to him of mismanagement some members of the Hartwell plc board had a poor opinion of him as a senior manager. The Hartwell plc board had reports made to it by Mr Durrant, one dealing with the Company's whole commercial vehicle group and recommending that the Head Office complement of Ford & Slater be cut by relocation or redundancy from 39 to 12, another concentrating on that part of the group relating to the Leyland-Daf operation of which Mr Brand was managing director and Mr Jones the divisional accountant. This report recommended their dismissal for redundancy.Mr Jones prior to August 1989 when the Hartwell plc takeover occurred was commercial manager responsible for business systems and all accounting within Ford & Slater. Mr Saunders the chief accountant offered him a job of depot accountant at the biggest Leyland-Daf depot in November 1989 when the finance director to whom Mr Jones reported was made redundant, but Mr Jones refused, asking whether he was redundant because his previous job as commercial manager was being abolished. As a compromise Mr Jones was offered and took on the job of divisional accountant to the Leyland-Daf operation with responsibility for introducing a new decentralised accounting system. There were considerable difficulties of a practical order on that introduction.Mr Wei was in charge of the businesses which were loss making after Hartwell plc was taken over by the Jameel company on 27th June 1990. Mr Durrant soon after sent Mr Wei a copy of his report recommending the dismissal of Mr Brand and Mr Jones for redundancy. The report spelled out the cost of doing so in accordance with the terms Unilever had sought to improve by covenant at £125,000. Mr Durrant told Mr Wei these terms were enforceable but Mr Wei declined to dismiss them for redundancy.The Industrial Tribunal saw Mr Wei as a witness and formed an unfavourable view of him as a witness saying that he was selective with the truth and had made no mention of Mr Durrant's report recommending dismissal for redundancy of both Mr Brand and Mr Jones. There was a finding by the Industrial Tribunal that Mr Wei did not want to pay out the enhanced redundancy payments to them because of the Company's poor financial condition and was content to bide his time while they both had jobs to do. Mr Wei wished to meet and appraise Mr Brand. They did meet on 31 July 1990. The Industrial Tribunal said the meeting proved a disaster for Mr Brand. Mr Wei was profoundly dissatisfied with the debt-collection of the Leyland-Daf business and its credit control measures and demanded that £1 million out of the outstanding £1.8 million outstanding debt be collected in two weeks. Mr Wei was dissatisfied with Mr Brand's answer regarding the problems connected with the new de-centralised computer system. He asked Mr Brand to look at ways of cutting down overheads as well as collecting in outstanding debt.Mr Jones was the object of a critical memorandum by Mr Saunders the group accountant on 16th July 1990. Copies went to Mr Brand and to Mr Durrant as well as to Mr Jones who replied to it. Mr Saunders was content to wait until 21st August to review Mr Jones' progress before taking action. Mr Saunders had been dissatisfied with Mr Jones' performance since February 1990 but he did not tell Mr Wei this. He did however pass copies of the memoranda passing between him and Mr Jones to Mr Barratt the financial director who passed them on to Mr Wei later but before Mr Jones' dismissal. Mr Saunders duly saw Mr Jones again on 21st August, was satisfied with his progress and gave him another two months before deciding on his future. The new computing system was nearly completely introduced by then and once that was done the Industrial Tribunal found that the Company's business had no further use for Mr Jones.Mr Wei met Mr Brand on August 20th and took the view that Mr Brand's report at that stage was a step in the right direction but said that more savings were needed and that this was an exercise Mr Brand should have done earlier. Nothing was said of Mr Brand's dismissal which was only 10 days off.The decisions to dismiss were taken by Mr Wei and communicated to Mr Durrant on 28th August. Mr Wei drafted the letters and instructed Mr Durrant to send them. They were handed over by Mr Durrant at personal interviews on 31st August. At the interview with Mr Brand the Industrial Tribunal found that Mr Durrant was in effect telling Mr Brand that although he signed the dismissal letter he did not in fact subscribe to the reasons set out in the letter.After the dismissals Mr Brand's functions were taken over by Mr Durrant and Mr Jones' were taken over by Mr Saunders.The Industrial Tribunal identified two questions for it to answer. First, was there a redundancy situation within s.81(2) of the Employment Protection (Consolidation) Act 1978 ("the 1978 Act") and secondly was that in fact the cause of the Applicants' dismissal. They answered the first question in the affirmative and that is not challenged on behalf of the Company. What is challenged is the conclusion that redundancy was the sole or main reason for the dismissals. The Industrial Tribunal addressed the question whether the Applicants Mr Brand and Mr Jones had discharged the burden undertaken by them at the outset of showing on the balance of probabilities that redundancy was the sole or main reason for their dismissal. They recorded the four reasons Mr Wei had given in evidence for his decision to dismiss Mr Brand after 20 August 1990 as follows:
"(a)he was not "hands on"; (b)he did not co-operate with Mr Wei by giving him all the necessary information about the Leyland-Daf operation; (c)he was defensive and quick to blame his problems on other people; (d) he was not the sort of manager to promote the interests of the company."
Truckrent was not mentioned and the Industrial Tribunal found that the criticisms of Mr Brand's stewardship of Truckrent which figured largely in the dismissal letter given to Mr Brand was no more than a make-weight reason.The heart of the Industrial Tribunal's decision is contained in two paragraphs, one, numbered 30 dealing with Mr Jones and the other numbered 31 dealing with Mr Brand. They read as follows:
"30 As for Mr Jones, Mr Wei had never met him and was unaware of Mr Saunders' or Mr Durrant's dissatisfaction with his performance. Mr Wei only decided to dismiss Mr Jones after reading the exchange of memoranda which Mr Barratt had shown him probably as late as 28 August, by which time Mr Wei had decided to dismiss Mr Brand. His view of that exchange was that Mr Jones' approach was confrontational and that amounted to insubordination. It was not Mr Saunders' view, however, that what Mr Jones had said in his memorandum of 18 July 1990, amounted to insubordination. Indeed, had that been the case, Mr Saunders would no doubt have said so when they met on 21 August. Instead, Mr Saunders told Mr Jones that he was looking for continuing improvement in his performance and that he had severe doubts about his suitability for his post. Nevertheless, Mr Saunders was prepared for them to continue their working relationship for the time being. Although Mr Saunders had convinced himself that Mr Jones was not going to succeed, he was willing to give him another 2 months in order to prove him wrong. We consider therefore that in forming his view when he did and without consulting anyone, Mr Wei was not sincere.
31 As we have earlier indicated, uppermost in Mr Wei's mind from the moment he took over as chief executive was the cutting of costs and the turning round of the business from loss via break even to profit. He was aware of the potential cost of dismissing the applicants for redundancy. He wanted to avoid incurring that cost, particularly after he had met Mr Brand and decided that he was not the sort of senior manager which he wished to retain in the organisation. It is significant, nevertheless, that he did not dismiss Mr Brand immediately after their meeting on 31 July. Instead he put him to work, because no doubt there was nobody else with sufficient expertise to do the job immediately in hand. Whilst Mr Brand was doing that job, Mr Wei, on behalf of the Jameel family, was taking advice as to the enforceability of the Unilever deal terms. He did not want to pay out under them and, although some payments were made amongst the early redundees, a policy decision was taken not to pay out any more under those terms. Plainly, claims could be avoided if other reasons for dismissing these two applicants could be found. That they were found is evident from our analysis of the reasons set out in the dismissal letters. Furthermore, Mr Wei chose to use Mr Durrant, whose loyalty he was testing, to convey reasons for dismissal to which, at least in the case of Mr Brand, Mr Durrant did not subscribe. We find that Mr Wei was using Mr Durrant to reinforce what were, in fact, pretexts for the dismissals of these applicants. The reasons given in the dismissal letters were not the real reasons. We have already found that both applicants were redundant and we are satisfied on a balance of probability that their dismissals were mainly, if not wholly, attributable to redundancy."As indicated earlier there was a large measure of agreement upon the relevant law. Mr Bowers for the Company made the following submissions of relevant principles.1. The Applicants have to demonstrate not only that there was a redundancy situation (which is accepted) but that it caused the dismissals. Mr Supperstone for Mr Brand and Mr Jones accepted the causation test as appropriate. We need not in the circumstances examine the authorities cited for the proposition.2. The question (that is to say, what was the reason for dismissal) is not objective but rather what was in fact the principal reason which moved the employer (here in the person of Mr Wei) at the time when he took the decision to dismiss the employee. Mr Supperstone submitted the question was indeed an objective one. In our view this apparent difference is purely semantic. The law on the subject is clear and is to be found in Cairns LJ's judgment in Abernethy v Mott, Hay and Anderson [1974] IRLR 213 at 215 where he said:
"A reason for the dismissal of an employee is a set of facts known to the employer, or it may be of beliefs held by him which cause him to dismiss the employee. If at the time of his dismissal the employer gives a reason for it, that is no doubt evidence, at any rate as against him, as to the real reason, but it does not necessarily constitute the real reason. He may knowingly give a reason different from the real reason out of kindness or because he might have difficulty in proving the facts that actually led him to dismiss; or he may describe his reasons wrongly through some mistake of language or of law."
Exactly in line with this analysis is the decision of this Tribunal in The Maintenance Co Ltd v Dormer [1982] IRLR 491 when an Industrial Tribunal's decision that a dismissal was unfair, based on a finding that, although the employer genuinely believed the employee to have been guilty of dishonesty, that could not be treated as part of the reason for dismissal because it was not founded on reasonable grounds was reversed by this Tribunal. As Browne-Wilkinson J put it at p.493:
"The reason for dismissal which has to be shown is the reason which in fact led the employer to take the decision to dismiss."
How the reason came to be operative upon the employer's mind and whether the process involved was a reasonable one or an unreasonable one or even whether it was an honest and reputable one is neither here nor there. In that sense the process of identifying the reason is objective in that the Industrial Tribunal has to decide what it was from all the evidence and is clearly not bound to accept what the relevant witness subsequently says about it, or what he said or wrote about it at the time. The investigation involves an analysis of a mental process and in that sense can perhaps be described as subjective rather than objective but that is a semantic question with which we need not take time.3. Mr Bowers submitted that the motivation of Mr Wei in acting as he did was irrelevant. Mr Supperstone accepted that there is a significant difference between the motive for an action and the reason for an action. On that, there was no difference between the parties and here again we need not refer to the authority cited for the proposition. Mr Supperstone also submitted however and we accept that a motive may well go to the genuineness of an ostensible reason and in that regard it follows that motive is not irrelevant because it may have an impact on the question of the genuineness of reasons given whether at the time or later in evidence.4. Mr Bowers stated the central question as whether the assumptions of facts on the basis of which the employers decided to dismiss were known to the decision maker not to be true at the time and not whether those assumptions of fact were false after consideration by the Industrial Tribunal. We do not accept that formulation as accurate. It would be accurate in a case where the dismissal was indeed caused by assumptions of fact which were honestly believed in at the time but later turned out not to be well founded, as in the Maintenance Co Ltd v Dormer , supra. But where the question is what were the real beliefs which actuated the dismissal this formulation misses the point. In the present case under appeal the central question seems to us to be the simple one what was the real reason or principal reason for Mr Wei deciding to dismiss Mr Brand and Mr Jones. Was it redundancy or was it incapacity?5 & 6 were two submissions which Mr Supperstone accepted and can be shortly stated viz that the fact that a dismissal is unfair is irrelevant to the ascertainment of the reason for the dismissal and the fact that there was a redundancy situation in existence is irrelevant if the actual causative reason at the time of dismissal was ability or conduct. No issue arises regarding either of these propositions the latter of which is the obvious corollary of what has been said earlier.Finally, Mr Bowers submitted that the facts on which a decision to dismiss is based are those as made known to the employee at the time. We do not accept this. It is true that Lord Denning in Abernethy v Mott, Hay and Anderson , supra, at 214 said of the reason for dismissal:
"It must be the principal reason which operated on the employers' mind: see s.24(1)(a). It should, I think, be known to the man already before he is given notice, or he must be told it at the time."
We doubt whether Lord Denning MR was saying that a reason not then communicated could not be a reason for dismissal. Rather we take him to be saying what ought to happen in a well regulated dismissal. See the contrast between "It must" and "It should, I think" in the two sentences. But if we are wrong about that what Lord Denning MR said was obiter and he was alone in saying it. More seriously, any absolute requirement that there should be communication of the real reason to the employee would in our view run counter to what Cairns LJ said in the passage quoted above which has repeatedly been quoted and indeed approved by the House of Lords by Lord Dilhorne in Devis Ltd v Atkins [1977] ICR 662 at 677-8 who in terms preferred what Cairns LJ said to the passage quoted from Lord Denning MR's judgment, which on this point clearly should no longer be relied upon.We return to the principal issue which is whether the Industrial Tribunal erred in law in finding that the sole or principal reason for dismissal was redundancy. We are unpersuaded that the Industrial Tribunal confused motive with reason for dismissal. We are of the opinion that the Industrial Tribunal came to the opinion that the reasons that Mr Wei gave both vicariously in the dismissal letters and in person before the Industrial Tribunal in evidence were not the real principal reason which was redundancy. There was material upon which the Industrial Tribunal could properly so find if they rejected Mr Wei's evidence. No doubt this was a case where there may very easily have been more than one reason but the statute makes allowance for that possibility. We accept therefore that there was equally material upon which Mr Wei could have decided that Mr Brand and Mr Jones were inadequate performers in their respective jobs but that is not enough for the Company's purpose. We are not satisfied that the Industrial Tribunal was obliged to find that the thought uppermost in Mr Wei's mind was insubordination in the case of Mr Jones and inability in the case of Mr Brand. It was open to them to find that the reasons actually given were pretexts as they did and by that we mean and we take the Industrial Tribunal to have meant, not genuine reasons.We therefore dismiss this appeal as regards Mr Brand's dismissal.As regards Mr Jones' dismissal there was an additional argument based on the use of the word "therefore" in the last sentence of paragraph 30 which need not be repeated. Mr Bowers submitted that the conclusion stated in that last sentence that Mr Wei was not sincere in forming his view about Mr Jones does not follow from the immediately preceding sentences which deal with what people other than Mr Wei thought and did about Mr Jones. Mr Supperstone conceded that the use of the word "therefore" was unfortunate because there was no causal link between the last and the penultimate sentences in the paragraph and we agree. But we think that it would be putting too much weight on one word to deduce that the Industrial Tribunal came to the conclusion that Mr Wei was not sincere because Mr Saunders was willing to give Mr Jones another two months to prove himself. We would rather regard the word "therefore" as meaning the equivalent of "in all the circumstances" and we are not persuaded that the Industrial Tribunal is thereby revealed to have confused questions of fair and unfair dismissal with the identification of the real reason for Mr Jones' dismissal.For those reasons we dismiss the appeal of the Company in relation to the dismissal of Mr Jones too.The appeal by Mr Brand and Mr Jones can be dealt with more shortly. The decision appealed was that they were not entitled to an order for costs. It was accepted by Mr Supperstone that the matter is one for the discretion of the Industrial Tribunal and that it is only exceptionally that an order for costs will be made in the Industrial Tribunal. The Rule in question, Rule 11 of the Industrial Tribunals (Rules of Procedure) Regulations 1985, opens with the general proposition that subject to exceptions, not here relevant, a tribunal shall not normally make an award in respect of the costs or expenses incurred by a party to the proceedings. There is a possible exception allowed for where a party has in conducting (which clearly includes defending) proceedings acted frivolously, vexatiously or otherwise unreasonably. In those circumstances there is jurisdiction to make an award against such a party. Clearly it is a discretionary power.Mr Supperstone relied in his appeal upon what was said by the Chairman in paragraph 8 in deciding against making an order for costs. This was as follows:
"In order to succeed, the applicants sought to prove that their dismissals were wholly or mainly attributable to redundancy. The respondent's case was that the applicants were dismissed because their performance as employees had been inadequate. At the end of the day, the full Tribunal applying the proper burden of proof found for the applicants. There is a danger, however, of judging the issue of the hopelessness or misconception of a case with hindsight and, in my judgement, the decision of the respondent to defend the applications on the issue of redundancy was reasonable both in terms of necessity and the prospect of success in one or both cases. For there was no material which would have told Mr Wei and his advisers that he would be disbelieved and the respondent lose."
It was submitted that this amounted to a finding that Mr Wei, if not his advisers, thought he could get away with telling untruths about the reason for dismissal. We agree that that would be an unsatisfactory basis on which to decide not to award costs. But we are not persuaded that the Industrial Tribunal took such an unfavourable view of Mr Wei's conduct of the proceedings as is involved in that analysis. We consider it at least possible that the Industrial Tribunal took the view that there was material upon which an honest view could be formed that there was an arguable case for saying that of two reasons for dismissal, redundancy and incapacity or insubordination, redundancy was not the principal one. True it is, Mr Wei's mind was the operative one and he was found to have been selective with the truth and much of his evidence was not accepted but we do not consider that the Industrial Tribunal went so far as to find that Mr Wei dishonestly trumped up the reasons he gave.We therefore dismiss this appeal too.