Whitbread Plc v Beattie & Anor [1995] UKEAT 372_94_1606

EAT
Whitbread Plc v Beattie & Anor
[1995] UKEAT 372_94_1606 · 1995-06-16

JUDGE HULL Q.C. :

This is an appeal to us by Whitbread Plc, the well known brewers and proprietors of public houses, against a decision of the Industrial Tribunal sitting at Bristol under the chairmanship of Mr Harper with two industrial members who sat on 3rd and 4th February 1994 to hear the complaint made by Mr and Mrs Beattie that they had been unfairly dismissed. Their decision was promulgated on 23rd February 1994 and I shall refer to it shortly. They found that Mr and Mrs Beattie had been unfairly dismissed.The facts, very shortly, were that Mr and Mrs Beattie began their employment as a husband and wife team with Whitbreads on 11th November 1987 in other houses than the one with which we are concerned. It appears that they were both capable and well respected, so far as the employers were concerned, and gave satisfaction to Whitbread Plc. In March 1992 they became managers of the Swan Inn at Yate near Bristol. It appears that that was a problem house. Matters did not go to the satisfaction of Whitbread, so Whitbread said. Certainly there were grounds if Whitbread were correct, for misgivings with regard to stock deficiencies, there were other matters too about which complaints were made, and eventually without any prior disciplinary steps being taken, on 22nd September 1992 a final written warning was given, after an interview, and then on 27th January 1993 there was another disciplinary meeting attended by Mr Beattie only and the decision was taken to dismiss. Mr and Mrs Beattie appealed, there was an appeal which was concluded on 16th February 1993 and the dismissal stood. So they made the complaints which I have referred to.To understand the matter one must of course look at the reasons given by the Industrial Tribunal. I should say before I go into those that there is another appeal relating to remedies which we shall come to if necessary. But at the moment we are concerned with the question of liability: has there been an unfair dismissal?There was an attempt in November 1994 to obtain the Chairman's Notes of Evidence, because the appellants wished to say, in respect of a substantial number of matters, either that there was no evidence to support the findings of the Tribunal or else that the findings of the Tribunal in important respects were contrary to the evidence which was given. That application was not acceded to, and on 5th June 1995 the solicitors for Whitbreads renewed the application and asked for the Notes of Evidence to be provided. On 8th June 1995 this Tribunal wrote, through its Registrar, saying:
"I refer to your letter dated 5 June 1995 which was placed before the President who has directed that:
(1) Chairman's Notes are not necessary and the application is refused.(2) The application for leave to amend the Notice of Appeal must be made at the hearing.

..."

With regard to the application for leave to amend the Notice of Appeal, Mr Bowers said that he would proceed on his original Notice of Appeal - very properly, in view of the fact that Mr Beattie is here in person, and Mrs Beattie is not here at all, and in those circumstances it might necessitate an adjournment so that Mr Beattie could consider the amendment. Mr Bowers began to make certain points with regard to perversity and we pointed out that we could not consider those points without the Notes of Evidence. When he referred to documents, we said we will look at the documents, but we must bear in mind that we do not know what was said about them in evidence. Of course, we know perfectly well, and Mr Bowers assured us, that he would not refer to any document which was later acknowledged to be mistaken or not sent, or anything of that sort.Mr Bowers complained to us about the situation in which he was without the Notes of Evidence, which left him unable to make a number of points. As to that, all we can say is that we should not be prepared to review the decision of our own President, given as recently as the beginning of this month, no doubt on excellent grounds, refusing the application; and if that is to be complained of, it must be by appeal. We were not prepared to reconsider that decision. It would of course have necessitated an adjournment, probably a substantial adjournment, and substantial extra costs. The Notes of Evidence would, if we had asked for them, have had to be provided. They would have had to have been considered by Mr Beattie and of course by Mr Bowers, and the appeal would then have been a very different affair. Points which could not possibly taken before us would have to be considered. We are without the Notes of Evidence, and we are not prepared to consider submissions concerning the evidence, what was said, what was not said, whether there was evidence to support this or that, or whether the findings were contrary to the evidence, without the Chairman's Notes of Evidence. And so the appeal continued on the limited basis that it could do without the Notes of Evidence.Now the other point which I should allude to, before we continue, is what is provided by the Act on a complaint of Unfair Dismissal. In Section 57 the Act provides:
"(1) In determining for the purposes of this Part whether the dismissal of an employee was fair or unfair, it shall be for the employer to show - (a) what was the reason (or, if there was more than one, the principal reason) for the dismissal, and (b) that it was a reason falling within subsection (2) or some other substantial reason of a kind such as to justify the dismissal of an employee holding the position which that employee held."
I have indicated the general nature of the complaints made by the employer here; as was said and accepted at the hearing, it was partly capability and partly conduct which was complained of, and it would be impossible without very close analysis for anybody to say how much it was of one, and how much it was of the other. The Inn was not, said the employers, being run in a satisfactory way, and the burden of that was on them therefore to show by evidence, if they could, what the reason was for the dismissal.I now go to the decision of the Industrial Tribunal.They say, starting at paragraph 2:
" The applicants commenced employment with the respondent on 11 November 1987 as a husband and wife team managing various public houses. By an agreement dated 10 March 1992 the applicants were both employed specifically to manager and run The Swan Public House in Yate near Bristol. Both applicants had a previously good track record with the respondent in managing other Houses. They were therefore known to the respondents as being capable; they were interviewed for this particular House and at that interview both the respondent and the applicants knew that the House was a problem one. There was a history of drug use and dealing on or near the premises; the police were thought to be likely to object to the transfer or renewal of the licence; and customers expected to be allowed to drink after hours. The applicants were paid somewhat more than usual to reflect the problem nature of the House.
3 Upon arrival at the House the applicants found that:-(a) There was an existing stock deficit of some £1,100 from the previous manager;(b) A conservatory had been added by the respondent to encourage the consumption of food in an area, and in a recessionary climate, where there was little or no demand for such facility.4 The applicants commenced work at the Swan on 9 March 1992. They were a youngish couple with young children. The responsibility fell largely on Mr Beattie although considerable support was given to him by Mrs Beattie. They acknowledged their joint liability."Paragraph 5, (this is one of several paragraphs which the Tribunal referred to as containing particular grounds for their decision).:
"5 The respondent made much reference to page 44 of the Bundle R1 which was the stocktaking record. Twenty three days into the tenancy a stock check revealed a stock deficit of £189.00. The next stock check period of 43 days showed a stock deficit of £57.00. Although the deficit was accumulating the rate of increase appeared to show signs of slowing.
6 The applicants had completed a holiday request form almost immediately they arrived at the House for a holiday to be taken in August 1992. Mr Beattie began to train up a man called Darren Allway as a Relief Manager. Only about six weeks before the applicants were due to go on holiday the respondents switched Mr Allway from The Swan to another of their premises at a salary which could not be sustained at The Swan."Then they record how the applicants obtained another substitute and in paragraph 7 it is recorded that the applicants accepted that where they appointed a Relief Manager they were responsible for him or her in contrast to the position where the respondents, that is the brewery, appointed their own internal Relief Manager; the respondent were then responsible.
"8 The applicants trained Mr Halpern and left him with a staff rota. They went on holiday in August and upon their return found a dismal picture of stock loss and substantial overstaffing being used in their absence. Mr Halpern was dismissed. A stock check undertaken on 31 August for a period of 61 days (including the two weeks holiday) showed a deficit of £2,764.00 and an accumulated deficit of £3,233.00. The next stock check periods showed respectively deficits of £1,948.00, £140.00, £334.00, and then surpluses of £81.00 and £461.00 in January and February 1993. The accumulated deficit peaked at £6,003.00 but the last two stock checks began to reveal a more encouraging trend of surpluses coupled with the attainment of the total percentage GP of 60%.
9 The respondents placed considerable emphasis on R1 page 60 which was said to be a comparison of The Swan with other comparable pubs in comparable locations and which were the responsibility of the same Area Manager. With regard to the net liquor sales in terms of cash taken The Swan compared favourably with the others both in the years 91/92 and 92/93. The respondents looked only at the percentages which showed a 20% reduction in liquor takings as against the mean for the sample group of a surplus of 7.6%. Only to look at the percentages ignored the fact that the applicants had the task of flushing out the existing undesirable clientele and replacing it with a better one which, no doubt, was a process of evolution not revolution. With regard to the net food sales the performance of The Swan, whilst not brilliant, was by no means the poorest of the sample group. The Swan was situated in an area of a young married persons housing estate whose inhabitants were substantially hit by the recession. The takings in 1992/93 were down on the previous year by 30.9% but several other Houses in the control group also showed decrease percentages or -36.1%, -43.8%, -44.3%, -30.39% and -19.1%. The food sales of the whole sample group had increased by 2.8% in 1992/93. With regard to the total profit in 1991/92 The Swan was, in terms of actual money, the second best performer of the control group and in 1992/93 the third best performer of the group. The respondents seem only to have been concerned with the percentage drop in profit of The Swan of -23.7% against the mean for the group of an increase of 11.7%.Those are the paragraph which the Tribunal say later they attach particular importance to. Mr Bowers says today that those paragraphs suggest very strongly indeed that the Tribunal were putting themselves in the shoes of the employers, and saying what they thought was right. It was not up to them, says Mr Bowers, to say whether the employers paid particular regard to the profits or to the turnover, or whether they paid sufficient regard to matters of mitigation. Mr Bowers said that those were matters for the employers. The employers' duty was to manage their own business. It was up to them to say what, if any, complaints they had against any employees. And if they had complaints which they considered justified disciplinary action it was for them to take disciplinary action in a way which they thought was fair. It was not for the Industrial Tribunal to say whether they thought that these were legitimate matters of complaint or whether the employers should have taken a different view about them.The substance of that submission, as a matter of law, is undeniable and the indications, as Mr Bowers says, are clear: that here the Industrial Tribunal were commenting freely on the conduct of the employers in the way that they formed their conclusions about the competence and conduct of Mr and Mrs Beattie, as though it was quite open to the Industrial Tribunal to do that - whereas what they were required to do was to consider whether those were genuine reasons being put forward by the employers and, secondly, whether in the view of the Tribunal they were dealt with fairly in dismissing Mr and Mrs Beattie. So those are the complaints made by Mr Bowers.The Tribunal refer to Mr Johnson's (the Area Manager's) concern, and they criticise Mr Johnson in certain ways for inconsistency. They record as follows in paragraph 11:
" After the applicants holiday in August 1992 Mr Johnson asked the applicant to attend a meeting which took place on 22 September 1992 as a result of which Mr Johnson wrote a "final written warning" stating that if the position did not improve by 28 November 1992 then their employment may be terminated. In fact this warning was never activated at that expiry date and it was not until 12 January 1993 or thereabouts when a further stock take had been done that further action was taken. The stock take showed a number of problems in the recording of sales as against stock used which may well have been as the result of either faulty buttons on the till, human fallibility, or pressure of business over the Christmas/New Year period. The respondent seems to allege that this stock check was "consistent with Mr Beattie having bought stock from elsewhere in order to try to create a surplus". The evidence did not substantiate such contention on a balance of probabilities."
They go on:"12 As a result of the accumulating stock deficit (as the respondent saw it) Mr Johnson telephoned Mr Beattie to arrange a meeting on 27 January 1993 at which he was told he could be represented. This meeting was arranged purely verbally and only with Mr Beattie since Mr Johnson expected Mr Beattie to tell his wife that she should also be there. Whatever such expectation Mrs Beattie was not told directly by Mr Johnson to be there and neither did either applicant have written confirmation of such meeting. Mr Beattie alone attended the meeting with Mr Johnson on 27 January 1993 when he was dismissed. Mrs Beattie was also dismissed at that meeting in her absence and without any representations having been considered from her by Mr Johnson. The notes of that meeting although reasonably thorough are messy and hard to read. That meeting was followed by a letter from Mr Johnson dated 1 February 1993 (R1 page 17-18) which included advising them of their right of appeal. The applicants did appeal. Page 58 of the handbook produced by the respondent (R4) provides that "the appeal should be heard as soon as possible and at least within ten days of the appeal request being lodged." In fact the appeal before Mr Parr the Operations Manager was held some 12 days later but then adjourned part way through from 8 February to 16 February 1993. Both applicants attended both parts of that appeal hearing and again the notes of the meeting are in scrappy note form and hard to follow; no typed version has been produced to the Tribunal. The appeal was dismissed by Mr Parr. He advised them of their right of appeal which the applicants have not pursued.Mr Bowers makes further complaints about this. Of course fairness or unfairness does not involve the question whether notes are taken which are convenient for the Tribunal. And it was perhaps out of place for them to criticise that, although one can understand if they had had difficulty construing the notes that they might say so.Then they go on to say as part of paragraph 13:
"... In this case there is no evidence of any prior problems with either applicant; no evidence of a recorded verbal warning and no evidence as such of a first written warning. The respondents went straight to a final written warning and then dismissal. They dismissed Mrs Beattie in her absence which is such a fundamental flaw that it was not capable of correction at the later appellate stage."
Mr Bowers says various things about that. He says first of all that it is not correct to say that there was no previous trouble, and he refers us to a number of documents. I must say when I read that it appeared to me personally to be natural to say that that was referring to the earlier occasions with different public houses, where their performance had apparently been exemplary. But it seems to me now having heard argument and having heard what my colleagues have said about that, that that passage is correct if you regard this as a reference to disciplinary proceedings, which it plainly is. It follows a sentence at the bottom of the previous page which refers expressly to the procedure for discipline and this was the first formal disciplinary step. And it was right to say that there were no recorded verbal warnings in a disciplinary sense, and no evidence of a first written warning.Then they go an cite from two important dicta. First of all from Lord Denning MR in Alidair v Taylor [1978] ICR 445 ,:
"Whenever a man is dismissed for incapacity or incompetence it is sufficient that the employer honestly believes on reasonable grounds that the man is incapable or incompetent. It is not necessary for the employer to prove that he is in fact incapable or incompetent."
Lane LJ in the same case said the Court of Appeals test of a fair capability dismissal (aside from procedure) has two elements:-
"Does the employer honestly believe this employee is incompetent or unsuitable for the job?

Are his grounds for that belief reasonable?"

I have already read Section 57 of the Employment Protection (Consolidation) Act 1978 , providing that it is for the employer to show what the reason for dismissal is. And of course it is for him to form in good faith a conclusion about matters of managerial competence and it ill behoves an Industrial Tribunal and it also ill behoves us as a Tribunal concerned only with appeals on law, to say whether we think that somebody shows competence or incompetence or is satisfactory or unsatisfactory. It is for the employers to show what the reason for the dismissal is. Then the Tribunal goes on:
"The applicants had clearly worked very satisfactorily for the company since November 1987. The respondent in appointing the applicants to this pub clearly at that stage honestly believed that they were both competent and suitable and indeed paid them more than usual to run it knowing of the problems. The Tribunal does not find that the respondent had an honest belief that the applicants were incompetent or unsuitable for the job but for reasons best known to the respondents were wanting to make the applicants scapegoats. The Tribunal does not find that the grounds for the purported belief were reasonable for the reasons set out in paragraphs 5, 6, 8 and 9."
About that, Mr Bowers says a number of important things. First of all he says that it is wholly unjustified by the evidence which they heard. We have not had that evidence before us and can form no view on that matter whatever. The Tribunal heard the evidence of Mr Johnson and I think of Mr Parr. They heard such evidence as the employers chose to put before them. They did not believe it. And so the criticisms which Mr Bowers makes, of the matters contained in the paragraphs expressly referred to and other paragraphs too, as showing the Industrial Tribunal putting itself in the shoes of the employers, fall into place here. It is quite clear that they were doing no such thing, what they were doing was looking at what the employers had in front of them to decide whether the employers bona fide had the belief in the managerial incompetence of the applicants which they said that they did. That was evidence which went to the credit of the witnesses. For example, Mr Bowers complains, very rightly, given his premise, that the cause had been shown. He complains of reference to matters which occurred after the dismissal; in particular the stock check referred to which took place after the dismissal. Of course, if it had been shown what the reasons were and if the question was whether the employers had acted rationally or irrationally, reasonably or unreasonably, in treating the grounds as grounds for dismissal, it would be inappropriate to refer to matters which had occurred afterwards. But those matters might be highly relevant to the question of the credit to be given to the employers' witnesses. It is perfectly plain here that the Industrial Tribunal rejected the employers evidence root and branch and found that this was not a dismissal in good faith, on the contrary it was a dismissal which came about because these employees were to treated as scapegoats.Mr Bowers makes further complaints. He says first of all that they do not give their reasons for these conclusions. A Tribunal are not, if they disbelieve somebody, obliged to give their reasons for doing so. They may do. They may refer to inconsistencies, they may refer to changes of story, to an unreliable manner in giving evidence - all that sort of thing. But Mr Bowers has said they have given no reasons. It appears to us that they have given reasons in the paragraph which I have already read. There are serious comments appearing in those paragraphs which of course - given Mr Bowers' premise that they were putting themselves in the shoes of the employers - would be out of place. But in fact if they are looking at the truth of the situation and deciding whether the evidence is given in good faith and they should accept it, it is entirely appropriate for them to refer to those matters, and they did refer to those matters and made the comments which I have mentioned.As to what is meant by "scapegoats" they did not need to elaborate that in our judgment, but it is perfectly obvious what is meant. Here was Mr Johnson, responsible for this Public House, he put in these previously trusted and competent employees, and now they were cleaning up, as the Industrial Tribunal put it, getting rid of the unsatisfactory customers and getting in satisfactory customers; that would, in the view of the Tribunal, most likely have a very adverse effect on turnover or profits or both. And the Industrial Tribunal commented that that did not seem to have been properly taken into consideration. That was a comment they were entitled to make.They went on:
"15 The Tribunal unanimously find that the dismissal of the applicants was substantively unfair.
16 The Tribunal unanimously find that the dismissal of the applicants was procedurally unfair particularly in relation to Mrs Beattie for the reasons set out in paragraphs 10, 11 and 12."Mr Bowers made some submissions to us which appeared to be well-founded about that, namely, that Mrs Beattie was jointly employed and that if she chose not to attend the disciplinary meeting that was a matter for her and it could not be said simply because she was represented by Mr Beattie, her husband, at that meeting that that was automatically unfair. If it could be said, after looking at all the facts, that it was unfair to Mrs Beattie the Tribunal should have gone on and considered in detail whether the appeal to Mr Parr had cured the unfairness. We think that there is a great deal in these submissions, but we do not have to consider them in all the circumstances.They say in 18:
" The Tribunal are therefore unanimous in finding that the dismissals of the applicants were unfair both substantively and procedurally."
So that was their decision.Mr Bowers has not only given us an exceedingly helpful skeleton argument but has expanded his arguments today. He made four submissions to us in opening. The three relating to the correct approach of a Tribunal appear to us to be impeccable and he says in his fourth submission (which we reject) that it should be possible to detect the reasons for finding for the employer or employee and that paragraph 14 is far too compressed. We think it adequately states their reasoning. He says, and as I said we have rejected this submission, that the Tribunal should say why they reject certain evidence. We think they have sufficiently done so, but we do not think in fact they are under any such duty. If their reason for dismissing an application is that they do not believe a witness or witnesses they can put it as shortly as that.Then he makes further submissions. He complains that they do not say what they mean by "scapegoats". And then he, having referred us to other matters, went on to say this:
"from beginning to end this decision is riddled with inaccuracies and misdirections, enough to give the Employment Appeal Tribunal grave doubts about whether the decision was reached on a substratum of evidence of facts, even if it is enough to say "we do not believe the witness. It is riddled with errors on its face and there is no proper evidence on which the decision is based."
And he referred us to several cases. The only one which we would refer to is Stewart v Cleveland Guest (Engineering) Ltd [1994] IRLR 440 , paragraph 33 at page 443 when the President, Mummery J, said:
"Whenever an appeal is based on the perversity ground, [ and Mr Bowers has made it plain that he was alleging perversity against this decision] this Tribunal must be extremely cautious not to conclude that the decision of the Industrial Tribunal is flawed because the Appeal Tribunal would have reached a different conclusion on the evidence or thinks that another Industrial Tribunal would have reached a different conclusion on the evidence. An appeal should not be allowed on this ground simply because the Employment Appeal Tribunal disagrees with the Industrial Tribunal as to the justice of the result, the merits of the case or the interpretation of the facts. This Tribunal should only interfere with the decision of the Industrial Tribunal where the conclusion of that Tribunal on the evidence before it is `irrational', `offends reason', `is certainly wrong' or `plainly wrong' or `is not a permissable option' or `is fundamentally wrong' or `is outrageous' or `makes absolutely no sense' or `flies in the face of properly informed logic'."
We ask ourselves in the light of that submission whether this decision fits into any of those descriptions. Mr Bowers says, putting all his criticisms together, they do show that this decision was founded on misdirections or was perverse. We have all read this decision to ourselves before the hearing and then with Mr Bowers' assistance we have all read it again. We cannot say that it falls in to any of those categories or is in the proper legal sense of the word irrational. It appears to us that this Tribunal were saying as plainly as they could that they did not accept that the employers had shown what the reason for the dismissal was and that since they did not accept the evidence of the employers' witnesses that was the end of the matter, as it had to be. The respondents in those circumstances had to fail and the applicants had to succeed. And we can find no error in law, no perversity, no irrationality in the decision, notwithstanding the great assistance which we received from Mr Bowers.So in those circumstances the appeal falls to be dismissed.

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Leave to appeal was requested, which was refused.The Appeal Tribunal gave a stay for fourteen days for the purpose for enabling the Appellant to apply to Mr Justice Mummery.