John Carr (Joinery Sales) Ltd v Ralph & Anor [1994] UKEAT 728_92_1605

EAT

John Carr (Joinery Sales) Ltd v Ralph & Anor

[1994] UKEAT 728_92_1605 · 1994-05-16

HIS HONOUR JUDGE J HULL QC: This is the decision of us all. The two Respondents here, Mr Ralph and Mr Yule, were both employed by the Appellants, whom I will call the employers. Mr Ralph was first employed in 1982 and in October 1990 he become Distribution and Administration Manager at the employers' depot in Corby. Mr Yule, who was first employed in 1983 was, at the material time in 1991, a Warehouse Supervisor and directly responsible to Mr Ralph.

Of this particular Company, which is one of a family of companies, Mr Ralph was the Senior Manager. Apparently he reported direct to the Directors of the holding Company, or the group headquarters, although there was another Company in the same family which shared the same premises and some of the same staff. We do not need to go into that, indeed it would be wrong for us to go into the facts in great detail because we do not have the Notes of Evidence and of course we do not have the great advantage which the Industrial Tribunal had of seeing all the witnesses.

What happened was this. In August 1991 there was an employee who was absent on holiday and, in some way or other, that employee's pay packet was duly made up, but could not of course be handed to the employee as he was not there. So the Wages Clerk, who was responsible to Mr Ralph, having made up the wages packet kept it overnight in a locked drawer. That obviously was not entirely satisfactory. Then the next day he gave it to Mr Ralph with a view to his keeping it in the safe. There was only one key to the safe apparently. The sum involved was not very large (£120 or £140). There is no finding with our papers that Mr Ralph did in fact put it in the safe though clearly he would have intended to. So it is possible that it might have gone missing before he put it in the safe. He then, apparently, went on holiday himself, or went away for a week at any rate; during that time the key to the safe would be in the hands of the Wages Clerk. There came a time when both Mr Ralph was back and so was the employee whose money it was, or was going to be when it was handed to him, and it was then found that the wages packet was not in the safe. There was a search and it could not be found. So there it was; on the face of it Mr Ralph was responsible, the money had been given to him to keep in the safe and it was up to him as Manager to say how he operated the system and the money had gone missing. One possibility, that would have occurred to some Managers, was that he should immediately make good the loss himself. But in any event it was, on the face of it, a fairly serious matter which should have been reported higher, that some money had gone missing. It might just have been carelessness, but it might have been something a good deal worse and management, on any view, should have looked into it. But, in fact, Mr Ralph did not do anything of that sort, instead what he did was to speak to Mr Yule about it. The employee whose wages had gone missing was employed in the warehouse under Mr Yule, and what was decided was this; first of all that the employee should be paid at once out of petty cash. That, on the face of it, was not an unreasonable, and certainly not a dishonest decision. The money no doubt had to be found quickly for the employee. The real question was of course what should be done about the actual loss which had been suffered, which since petty cash had made the actual payment, would involve, as a matter of mechanics, how to put the money back into petty cash. But somehow or other the loss had to be dealt with and of course not merely senior management but also the Accountants, in due course, would have to report to the Auditors who should be made aware that there had been a loss. It was not, so to speak, a terrific event but it was an event of some seriousness which should have been dealt with properly.

What was decided upon was this, that the loss to petty cash, the debit to petty cash, would be made good in the following way; that this person should be credited with entirely fictitious overtime, the necessary records of overtime should be drawn up and authorised by Mr Yule and that the employee would then be paid the overtime and would hand it back so that it would go into petty cash. As is pointed out there would be no question of any money going into the pockets of Mr Ralph and Mr Yule, but this was undoubtedly, must have been, intended to deceive somebody. The false documents were brought into existence for the purpose of deceiving somebody, perhaps only the Auditors, perhaps senior management; the matter was not reported, and Mr Ralph himself was thereby relieved, of course, of the possibility (to say the least of it) either that he might be criticised or that Management might say to him "this loss of money was either due to your blameworthy behaviour, or to a blameworthy lack of system in the way in which you handled your safe" and would have called on him to make good the loss. All this was concealed.

In due course, owing to an anonymous letter, it all came to the attention of senior management. There were enquiries and there was really no dispute about the facts. Management therefore, after conducting the necessary enquiries, had to make up its mind what to do about it. The decision was that both Mr Ralph, who was primarily responsible, and Mr Yule, who had fallen in with the scheme of manufacturing documents, were to be dismissed. That was the decision of Management in December 1991. Then there were appeals to the Company under the Company's mechanism for internal appeals, which were dismissed. In due course application was made, in January and February of the following year 1992, to the Tribunal and the Tribunal sat to hear the cases on the 27th July and 20th August 1992 at Leicester, under Mr Mellor as Chairman and with Mr Thompson and Mr Wootton, Industrial Members, with him.

The majority reached the conclusion that the dismissals had been unfair. After setting out as common ground what I have mentioned above they made some criticism, although they did not found their judgment on this, of the employers for not taking some action against a Manager who had been informed about it. It was the Manager of the associated company who had been informed about this apparently, by Mr Ralph. They also referred to previous events in which something of the same sort had happened in respect of late or inaccurate payments of later expenses, or something of that sort, we have not got the details of that. They reached their conclusions as follows:

"For these reasons, the majority [the Industrial Members] of the Tribunal concluded that in imputing falsehood, dishonesty and subterfuge to the applicants' actions, the respondents had over-reacted, and that summary dismissal was not within the range of reasonable responses which a reasonable employer might have adopted."

The Chairman, on the other hand, took a different view and he said that in his view this was the same sort of behaviour as dishonesty, falsification of Company records, which were in the rule book, the Company's Disciplinary Handbook, said to be gross misconduct which would justify instant dismissal. The Chairman said that his colleagues were taking no account of the loss sustained by the employers. He pointed out that this other Manager of the associated company had neither set up the device was taken any part in its operation, so although he might be blameworthy his blameworthiness would be of quite a different sort. He said the Respondents', that is the employers', disciplinary procedures may not have been perfect but they were set out in the Staff Handbook clearly enough, with examples of gross misconduct which certainly included theft and fraud and may have been reasonably supposed to have included the negligent loss of Company property including cash and the falsification of Company records.

As we say, the majority took the view that the Company over-reacted in imputing falsehood, dishonesty and subterfuge, but what other words are appropriate to the deliberate manufacture of forged documents? It might not be for the benefit immediately of Mr Yule at any rate, although we have pointed out already that it certainly was for the benefit of Mr Ralph in that he avoided any awkward questions or discipline arising out of the loss of the money. Clearly these documents were false, dishonest in the sense that they must have been intended to deceive somebody. At the very least it must have been those responsible for the fair and accurate reporting of the state of accounts of the Company; and it also, of course, was intended to deprive senior management of the knowledge that there had been this possible theft and possible carelessness in the office. So to describe it as falsehood, dishonesty and subterfuge is not a misuse of language and the question in those circumstances of the seriousness to attach to it is not one for any tribunal or any court of law but of course for the employers themselves.

There can be no doubt that in general it is within the fair range of responses to dishonesty and a fortiori, one would have thought, forgery for an employer to dismiss, provided of course he acts fairly in doing so. It appears to us that in taking the view which they did the majority allowed themselves to overstep the mark and put themselves in the place of the employers, for they were saying that the employers had over-reacted. It seems to us that it is impossible to say that; it was for the employers to say how they would react to this discovery. It may very well be that some employers would take the view that with relatively small sums involved, although this was not a satisfactory way to behave, it was something which could properly be treated by a caution and a reminder of the nature of the duties of anybody in a managerial position in a company to make sure everything is conducted honestly and regularly; but many companies, in our view, would not be so lenient. However that may be, it is impossible to go on and say on that false basis, as it seems to us, that the Company was over-reacting and that summary dismissal was not within the range of reasonable responses which a reasonable employer might have adopted. Here was a loss of Company property and here were false documents being brought into existence so as to conceal the loss and prevent enquiries which senior management might very well, indeed almost certainly would, consider appropriate and necessary and to turn aside and avoid criticism which almost inevitably would arise of somebody or other. All that was undoubted fact. To say that the Company over-reacted seems to us to be impossible and to invalidate the view which was taken that summary dismissal was not within the range of reasonable responses which a reasonable employer might have adopted. Of course it does not matter that other employers might have taken a different view.

This conclusion of the majority was not one which was open to them and the only conclusion which was open to this Tribunal was that which was voiced by the Chairman, namely that dismissal was, in all the circumstances, within the range of responses which a reasonable employer might show, having found that a serious attempt had been made to deceive him by false documents in a situation in which Company money had been, at best, lost through carelessness, and at worst, stolen. In those circumstances we allow the appeal. Although we regret having to use the term, in the technical sense the decision is, in our view, perverse; that is to say is one that the majority were not entitled to reach for the reasons which we have endeavoured to indicate.