Mann Egerton & Co Ltd v Brown & Anor [1995] UKEAT 1073_94_0906

EAT
Mann Egerton & Co Ltd v Brown & Anor
[1995] UKEAT 1073_94_0906 · 1995-06-09
MR JUSTICE TUCKER : This is an employer's appeal against a decision of the Industrial Tribunal sitting at Bedford on 15th September 1994 on consolidated hearings of two applications which were that the two respondents to the present appeal, Gary Brown and Michael Puncheon had been unfairly dismissed. That was the decision which the Tribunal reached, and they ordered that the appellants, Mann Egerton & Co Ltd pay compensation to each of them.The appellants are a well-known company whose business is that of retailing motor vehicles and who also undertake body repairs of motor vehicles. They employ 3,500 workpeople. They have a workshop in St Albans. The respondents were employed there, Gary Brown, now aged 29 had been employed since 4th May 1989 as a body shop fitter. Michael Puncheon, now aged 41 had been employed there since 24th January 1972, as a panel beater. Both men were dismissed on the same date, 19th August 1993 because they carried out private work on cars on the appellants premises. The appellants submitted that that constituted a breach of their terms of employment. The respondents admitted that they had quite separately carried out such work for substantial financial reward. But they said that they had obtained the prior consent of the workshop manager, Mr Dixon, who prepared job cards relating to the work. The respondents say that they paid for the material used and made a contribution to the workshop expenses. They did not tell Mr Dixon what they would be paid. The two cars in question, were a Porsche, for which Mr Brown received payment of £550.00 and a Jaguar, for which Mr Puncheon received £900.00.The case turned on the appellants attitude to their employees carrying out private work on their premises, in particular, where such work was carried out for gain. The appellants based their decision to dismiss these two men, upon terms and conditions contained in their Employment Handbook. On page 10 appears this passage:

"PRIVATE BUSINESS

Employee shall not use the Company's premises, tools or equipment in pursuance of private work for gain. Similarly employees shall not sell or offer for sale any goods or services for private gain on Company premises without prior permission from the Manager."It was the appellants case that this clause imposed two separate obligations. Firstly, in the first sentence there was an absolute prohibition against using the Company's premises, tools or equipment for private work for gain. The second sentence created a qualified obligation not to sell for private gain without prior permission. These were the reasons for dismissal as appears from letters dated 31st August 1993 in reply to a request for reasons for dismissal:
"You was informed on the 18th August 1993 that you had been dismissed on the Grounds of Gross Misconduct, this resulted after investigations proved that you had carried out private work for substantial financial gain on company premises, which contravenes the Terms and Conditions of Employment of which you were given a copy."
The relevant rule is then cited.The Tribunal said that this was a substantial misinterpretation. They concluded that the clause should be taken as a whole and that the proviso in the second sentence related to the whole of the clause not merely to the second sentence alone. In other words, if the permission of a manager was obtained to carry out private work for gain, there was no breach of the terms.The Tribunal also referred to a memorandum, which the appellants sent out to all their staff on 5th October 1992, on the subject of "Abuse of Privilege", it was in these terms:
"As from the 5th October 1992 no work will be carried out on private individual cars within any of the workshop areas without a Job Sheet being raised. Authorization will need to be sort through the Department Manager concerned.

Staff terms will apply to all personnel."

Basing themselves on these documents, the Tribunal said this in paragraph 3 of their decision:
"It is quite clear from that memorandum that the [ employers ] not only allowed their employees to carry out private work but also set out the procedures which would have to be followed when it was done."
The Tribunal went on to find that in paragraph 4:
"4. To carry out private work in therefore only a breach of terms and conditions in consent is not obtained from the manager and if the appropriate Job Card and other formalities are not attended to. ..."
The Tribunal went on to find that in this case consent was obtained from Mr Dixon, the Workshop Manager; that a Job Sheet was prepared in each case by him and that the workmen were charged for the materials which they used and for the use of the premises. The Tribunal therefore found that the respondents complied with the rules and that the appellants were wrong to view the situation as a breach of their Terms and Conditions. In other words, the Tribunal found, as a primary matter of construction, that the Employment Handbook rules permitted work for gain if it had been authorised by permission of a manager. Alternatively, if they were wrong about that, then the rules had been varied by the subsequent memorandum and by conduct or custom.The first question for us to consider is the construction of the rule on private business. Looking at the whole of the paragraph under the heading "Private Business", our interpretation of the rule is that the first sentence of it, is not only mandatory, but also absolute in its terms, and that it is not qualified by the proviso contained in the second sentence. It seems to us, that the first sentence refers to the use of the Company's property, its premises, tools or equipment, and inferentially to use of facilities, such as electric power and heating. The second sentence refers to the sale of any goods or services on the Company's premises. We think, that this is not intended to refer to goods owned by the Company, since that it is obvious that such goods could not be offered for sale, but to any other goods. Such a transaction would not involve use of the Company's property, and would be allowed provided that the prior permission of the manager was obtained. We see a clear distinction between these two rules, and the purpose and intention behind them. They do have similarities, hence the use of the word, in that they both refer to conduct of the Company's employees while on the Company's premises for the purposes of gain, but they also have the distinctions to which we refer. Accordingly, in our opinion, the Tribunal misdirected themselves in holding that the proviso contained in the second sentence applied to both parts of the clause.The second question is whether any variation of that rule took place by subsequent memorandum or by custom or conduct? We would observe that the point does not appear to have been made sufficiently clear to the Tribunal, and they do not therefore appear to have borne in mind, as to what is that purpose of the rule? It was to prohibit transactions for gain or, in the second sentence, private gain .The memorandum of 5th October 1992 does not, in our opinion, impinge upon that fundamental rule. It is to be observed that it makes no reference to work for gain, and that of itself does not, in our view, vary the fundamental rule about that. But was there any variation by conduct or custom so as to amount either to acquiescence on the part of the appellants to breaches of the rule, or so as to render it unfair to place subsequent reliance upon it?The Tribunal made a finding about this, a paragraph 3 in these terms:
"General rules can be varied from time to time to suit the circumstances. Such changes can be made by custom or by agreement and are not necessary recorded in a formal manner. It is clear from the evidence that we have heard today that on a number of occasions, private work was permitted within the respondents' workshops. The applicants were therefore not acting unusually."
Then they make reference to the memorandum to which we have already referred. And end in these words:
"It is quite clear from that memorandum that the respondents not only allowed their employees to carry out private work but also set out the procedures which would have to be followed when it is done."
The majority of this Appeal Tribunal would observe that no where in that paragraph nor as we have said in the memorandum, is there any mention of the words "for gain" or "private gain". And when the Tribunal make their final finding about it, saying that it is quite clear from that memorandum that the respondents not only allowed their employees to carry out private work etc. they did not expressly say that the respondents had allowed their employees to carry out private work for gain. We see a very material distinction between those two types of transaction.Was there anything in the evidence before the Tribunal which justified this finding that such work was permitted, and that the applicants were not acting unusually? As we have said, the Tribunal did not expressly find that private work for gain was permitted. The nearest in the view of the majority, that the Tribunal come to it, is a reference at the conclusion of paragraph 1 that although the respondents did not tell Mr Dixon what they would be paid, he expected that they would receive a financial reward. This is borne out by the notes of Mr Dixon's evidence, though it is clear that he would not have granted permission had he known now much was involved. There is in the opinion of the majority, no evidence upon which the Tribunal could have based any conclusion that the fundamental rule had been varied by acquiescence, so as to authorise the management to give permission for employees to use the Company's premises, tools or equipment for private work for gain. On the other hand, the dissenting member, takes a contrary view, on the question whether the contract was varied in practice. She finds that the Tribunal had sufficient evidence to reach the view that the contract was varied by custom and practice, it being clear from the evidence that the Tribunal heard that on a number of occasions private work was permitted within the respondents workshops. For instance, Mr Dixon the manager, had given evidence saying "I must have realised that you would make a profit." And he cites the fact that one of the workers had fixed Mr Dixon's wife's car. Moreover, although Mr Dixon said under cross-examination that he never knowingly gave consent for non-family use, the Tribunal had before it exhibits to show that Mr Dixon had given consent for non-family work and was aware that payments were made. The dissenting member also finds that the Tribunal had evidence to conclude as follows:
"It is quite clear from that memorandum [ that is to say the memorandum of 5th October 1992, which provided for the use of private work, if it were authorised by the department manager and that a job sheet was raised ] that the respondents not only allowed their employees to carry out private work but also set out the procedures which would have to be followed when it was done."
The Tribunal's findings as to whether or not a breach occurred, are somewhat confusing. In paragraph 7 there is a reference to Mr Dixon have authorised subordinates to breach the rules. Whereas in paragraph 8 the Tribunal find that there was no breach. We feel what the Tribunal meant to say is, that the action of the manager led the applicant to believe that they were not acting in breach of the rules, and that there was no breach of the rules in fact. As we made clear, the majority of the present Tribunal find that there was no variation of the rules, though the dissenting member, as we have said, takes the opposite view.Accordingly, the majority hold, that the respondents, the workmen in this case, did act in breach of the rules, in carrying out private work for gain. Even so, we go on to examine whether the remedy imposed by the Tribunal was fair. It is quite clear to us, that the Tribunal reminded itself of the provisions of Section 57(3) of the Employment Protection (Consolidation) Act 1978 . They make express reference to it in paragraph 9 of their reasons. It is equally clear that they pose the proper test for themselves, which was:
"We have to consider, as a matter of fairness, whether the sanction imposed by the respondents was within a reasonable range of responses to the situation that had occurred."
And it is equally clear to us that in going on to consider the question of remedies, the Tribunal also view them in the event that they may be wrong, as we have found them to have been wrong in the decision that they have reached on the construction of the rules.The Tribunal therefore posed for themselves the right test, and in our view, they ultimately came to a correct decision. They reviewed all the relevant factors, we set them out.:
"9 ... the respondents, both through Mr Hoad and Mr Newbury, on appeal failed to take any account of the fact that approval for everything that was done had been given by their Workshop Manager. That is a matter of some importance in the assessment of the seriousness of the breach. It is also a matter of some importance that the applicants acted openly throughout, did not hide what they were doing and were open and frank about what happened. They also paid all sums due from them to the respondents."
"10 As a similar part of the same issue, we note that whilst Mr Dixon was disciplined, he had only received a warning. It is quite clear on the facts that he was much involved in what was going on and the difference in sanction appears to us to be remarkable.
11 Finally we note that Mr Burdis, who was apparently involved with Mr Brown in carrying out the work on one of the cars and whose involvement was known to the respondents, was not questioned or disciplined for his part. It seems to us that the respondents have applied different sanctions to the various people involved in this matter and that cannot be fair. We believe that the appropriate sanction would have been a warning and that would have been sufficient in the circumstances."Now that must be related back, in our view, to the test which the Tribunal had previously formulated for themselves in accordance with Section 57(3) of the Act. The test being:
" ... whether the sanction imposed by the respondents was within the reasonable range of responses to the situation that had occurred."
We have had cited to us two authorities in particular on this matter. The appellants have cited the case British Railways Board v Jackson [1994] IRLR 235 CA , and in particular have called our attention to paragraphs 28 and 29 of the judgment of Waite LJ, in that case giving the judgment of the Court of Appeal, and calling attention to the question of a deterrent element, where a particular offence was prevalent. The respondent has called attention to the case of Conlin v United Distillers [1994] IRLR 169 , to both those decision we have had regard.In our opinion the Tribunal reviewed all the relevant factors in deciding what the remedy should be and in particular, as to whether this dismissal was fair or unfair. There is no need to repeat the factors which they took into account. Though, we would add as part of our consideration, what we regard as the lack of clarity in the written rules to which we have made reference, and to emphasise the failure by Mr Dixon to appreciate his responsibilities and ensure that the rules were adhered to. We would also have regard to the length of service of one, at any rate, of these respondents, who after all had been employed by this company, for over 21 years. In our opinion, therefore, the Tribunal though wrong in the construction of the rules, ultimately came to the correct decision on remedies, and we do not propose to interfere with their decision. In our opinion, the decision to dismiss these two men in all the circumstances amounted to unfair dismissal. For these reasons, because we uphold the decision which the Tribunal reached on their alternative hypothesis, we do not allow the appeal and there is no question of remitting this case to a Tribunal for further consideration.