Thorn (UK) Ltd v Little [1996] UKEAT 455_95_0802

EAT

Thorn (UK) Ltd v Little

[1996] UKEAT 455_95_0802 · 1996-02-08

JUDGE C SMITH QC :

This is an appeal by the employers, Thorn (UK) Ltd, against the decision of an Industrial Tribunal sitting at Reading in February 1995, when the Industrial Tribunal held by a majority that the Applicant, Mr Little, had been unfairly dismissed.

It is necessary for us to set out the background to the matter to some extent but the full background to the matter is found in the extended reasons given by the Industrial Tribunal to which, of course, reference should be made, if it is necessary so to do, for the full history and background.

In summary only, the Respondent, Mr Little, had been employed by the Appellants since February 1973 until his summary dismissal in November 1993. The Respondent was employed as a field service engineer. Over the period of the Respondent's employment, the Appellants had traded under various names, namely, Radio Rentals, Focus, Easyview and, in the latter part of the Respondent's employment, as Rumbelows.

For the first 18 years of his employment, the Respondent was engaged exclusively on repair and service work for customers whose equipment was rented from Radio Rentals. In about 1991 or 1992, we were told today in April 1992, the Appellants' rental and retail divisions were merged so that field service engineers undertook repairs to equipment both rented by customers and also that purchased by them from the Appellants.

Usually, field service engineers would be told before their visits what type of customer they were dealing with and the method of payment to be made. If it was rental situation, there would be no payment. If it was a purchase situation, the money might be durectly chargeable to the customer or it may be that there was to be a claim under an extended warranty. In either of those two cases, the customer was to pay. Another alternative was that items were under the Appellants' own warranty, in which case no payment was due. Field service engineers knew that they had to check with the customer and satisfy themselves what the method of payment was.

It should be understood that the account that we have just given is not necessarily correct in every detail but that is the general nature of the type of business which the field service engineers were engaged to carry out.

By the Appellants' disciplinary code, "Private Trading" was an example of gross misconduct. "Private Trading" included an injunction in these terms:

"Neither must an employee actively participate in any other commercial enterprise trading in the (we construe it this way) [installation, repair, hiring or sale of any product in which the company trades] "

On 25 October 1993, the Respondent's list included a customer by the name of Miss Watson. He had been told that she was a rental customer, so no money would fall to be collected. When he got to her address she was not in, so he spoke to her brother, aged 17, and discovered that the video recorder, the subject matter of the call, was not on rental. The customer's brother could produce no documentation in respect of the item, so the Respondent, after examination of the item, said that it would have to go to the Appellants' workshops and would cost £60-£80 to repair.

When the young man expressed concern in relation to the cost, the Respondent fetched the business card of a Mr Faulkener, trading as "Homeview", from his car. The card apparently described Homeview as trading in television, video and audio services and repairs. He handed the card to the brother and left.

The matter was reported by the customer. Another field service engineer attended in due course, repaired the video recorder on site, and a warranty claim of some kind was made, from which the Appellants apparently received £48.

Disciplinary proceedings followed and on 23 November 1993, the Respondent was dismissed for gross misconduct, namely, "Private Trading". He appealed through the internal proceedings. There were three levels of appeal and his appeal was dismissed.

As is apparent from the extended reasons given by the Industrial Tribunal, the Industrial Tribunal concluded, having considered the well-known case of British Home Stores Ltd v Burchell

[1978] IRLR 379

, that the Respondent had been guilty of gross misconduct. That conclusion was reached in paragraph 12 of their reasons.

The Industrial Tribunal then had to consider the position as to penalty, ie., whether the Appellants had acted reasonably in imposing the sanction of dismissal. In our judgment and, indeed, it is really common ground, the Industrial Tribunal set out the correct test in paragraph 13 of their extended reasons by reference to the well-known Court of Appeal decision of British Leyland UK Ltd v Swift

[1981] IRLR 1991

and cited the relevant passage from the judgment of the Master of the Rolls, Lord Denning. It was in relation to this issue, that is to say whether the decision to dismiss fell outside the band of reasonable responses of an employer in all the circumstances that the Industrial Tribunal were unable to agree.

As is apparent from the extended reasons, the majority expressed its view that the decision was unreasonable, putting it in shorthand, in paragraph 14, whereas the minority expressed its view in paragraph 15, to the opposite effect.

The submission is made to us by Counsel on behalf of the Appellants that the reasoning of the majority shows that they misapplied the test which they had correctly set, that they misdirected themselves in relation to a number of matters, that they reached key findings based on no evidence and failed to take into account matters which they should have taken into account and, in effect, substituted their own view of the matter for that of the Appellants. The submission was made that had they directed themselves properly they would have been bound to conclude that the Appellants' decision to dismiss was within the band of reasonableness.

Reliance was placed inter alia on the decision of McGuire v Brawley Brothers Limited , and unreported decision of the Court of Session on 1 June 1993 and, in particular, a passage from page 9 of the transcript of the judgment of Lord Coulsfield, which indicates the importance of the fact that the misconduct in any given case amounts to a breach of trust, and upon the stress that is there laid that the fact of breach of trust is a more important fact than the fact that no personal gain has been made by the employee. Thus Lord Coulsfield, referring to the facts in that particular case, stated:

"The first factor is that the offence did not amount to jobbing, by which we take it the Industrial Tribunal mean that it did not involve personal gain, that it was relatively minor and that it was not out of line with the practice and custom of the industry. It seems to us there is substance in the criticism that the Industrial Tribunal have not applied their minds to the consideration that in a case of misconduct involving the misuse of the employer's property, even when that misuse cannot be characterized as theft for the employee's own purposes, what is significant is not so much the value of the property as the breach of trust, particular where, as in the present case, the nature of the employment requires that the employees must be allowed a fair measure of freedom from supervision in carrying out the work of the employer. The fact that there has been such a breach of trust does not automatically render a dismissal fair but it must always be a factor requiring to be seriously considered."

In addition, reliance was placed by the Counsel for the Appellants on the decision of AEI Cables Limited v Clay

[1980] IRLR 84

, in particular, the passage in the judgment of the Court of Session at paragraph 16 on page 87 when the Court of Sessions stated:

"The length of service of an employee is no doubt in many cases a relevant consideration but in our judgment it would be wholly unreasonable to expect an employer who has been deceived by an employee, in the way in which the respondent deceived the appellants, to have any further confidence in him and to continue him in his employ."

We were also reminded in the context of a citation of the case of Royal Life Estates (South) Limited v Mr D J Campbell , again an unreported decision of this Employment Appeal Tribunal dated 1 October 1993, of which we have been provided with a transcript, of the important dictum of Mr Justice Cumming Bruce, then President of this Appeal Tribunal, in the case of Vickers Ltd v Smith

[1977] IRLR 11

when he said that the Industrial Tribunal had failed to appreciate that:

"... not only was it necessary [in order to treat the employer's decision as unfair] to arrive at the conclusion that the decision of the management was wrong, but that it was necessary to go a stage further, if they thought that the management's decision was wrong, and to ask themselves the question whether it was so wrong, that no sensible or reasonable management could have arrived at the decision at which the management arrived ..."

It was submitted to us that it is only where an employer fails to take into account the relevant factors or takes into account irrelevant factors, or reaches a wholly unreasonable conclusion, that the Industrial Tribunal should be able properly to find that an employer's decision was unreasonable. It was also submitted to us that in relying on what was clearly a very important factor, in our judgment, in its reasoning, the majority of the Industrial Tribunal had reached a conclusion in the absence of a necessary finding of fact which was central to the reaching of such a conclusion. This was a reference to the majority's finding that the practice of passing over competitors' cards had the tacit approval of the Appellants and that no clear steps had been taken to outlaw it. That is an outline of the submissions that were made to us by Counsel for the Appellants.

Counsel for the Respondents, on the other hand, submitted that the Industrial Tribunal's decision by its majority should be upheld. He relied particularly on the fact that the Industrial Tribunal stated precisely the right test in paragraph 13 and expressly held that the decision to dismiss fell outside the band of reasonable responses in the first sentence of paragraph 14 of its decision. He submitted that it was very well established that the Employment Appeal Tribunal should be very slow to interfere with a conclusion reached by an Industrial Tribunal sitting as an industrial jury on such a matter. He submitted that there were here certainly factors which were particular and peculiar to this case, namely, the practice of passing competitors' cards which, when properly understood with regard to the way in which the Industrial Tribunal looked at the matter in paragraph 14, and when taken together with the Respondent's very long and unblemished service, together entitled the Industrial Tribunal to conclude that the Appellants' decision fell outside the band of reasonable responses.

In approaching these submissions, considering the grounds of appeal, and examining the decision of the Industrial Tribunal, in our judgment it is important for us to look at the Industrial Tribunal's decision to see whether the conclusion principally relied upon by the Industrial Tribunal, along with the long service of the Respondent, as causing them to hold that the Appellant's decision to dismiss was outside the band of reasonableness, was a vlaid finding. That is, of course, their conclusion that:

"For the first 20 years of his service, the practice of passing over a competitor's card had the, at least, tacit approval of the respondents and no clear steps had been taken to outlaw this practice."

In order to assess the validity of this conclusion, in our judgment it is necessary to look at sub-paragraph 5(r) and paragraph 11 of the decision. Sub-paragraph 5(r) is a finding of fact, as is clear from the introduction to paragraph 5:

"We find the following facts proved or admitted:

...

(r) Prior to the amalgamation of the rental and retail divisions, it had been the practice, from time to time, for Field Service Engineers dealing with the rental customers to provide a customer with the business card of another firm who might be able to carry out repairs or service on a machine owned by the customer, as opposed to rented from the respondents and in respect of which the Field Service Engineer was unable to provide any service. This had never been permissible in relation to retail customers of the respondents, save up until approximately 1990 in relation to contractors approved by the respondents for the installation of television aerials. On the amalgamation of the retail and rental service divisions the respondents would no longer have countenanced the practice of handing out a competitor's card but took no steps specifically to prohibit the practice."

That was a finding of fact by the Industrial Tribunal.

It is then necessary to read paragraph 11: the Industrial Tribunal stated:

"During the course of the subsequent appeals, the applicant raised a point which he had not raised at the initial disciplinary enquiry or the interview when he was dismissed. The issue he raised was quite simply that it had been the custom and practice, or as he had described it, the culture, within the respondents' organisation certainly for the first 18 years of his service that competitor's business cards would be passed to customers if it transpired that the Service Engineer was unable to repair the equipment, for example, if, contrary to the engineer's initial understanding, the equipment turned out to be owned by the customer as opposed to rented from Radio Rentals. He contended that he did not intend to disadvantage his employer. He thought the family could not afford the price he quoted so he decided to do them a favour by giving them the name of another repairer. He did not see that other repairer as a competitor, but rather an alternative likely to prove cheaper to the family. This suggestion was rejected by the respondents at appeal, but the majority view of the Tribunal is that they prefer the applicant's evidence to the effect that this practice had existed certainly up to the time when the two divisions of the business were amalgamated. It is clear that following the amalgamation, no steps were taken by the respondents specifically to draw to the engineer's attention that this practice should cease."

In our judgment, it is clear that it was upon these findings in sub-paragraph 5(r) and paragraph 11 of their reasons that the majority of the Industrial Tribunal based their conclusion, as expressed in paragraph 14, to which we have referred above.

It is submitted on behalf of the Appellants that there was no finding in the decision by the Industrial Tribunal that the Appellants knew of the practice but, in our judgment, it is clear from paragraph 11 that the Industrial Tribunal were accepting the Respondent's evidence and rejecting the Appellants' evidence on this very issue. It is also plain, in our judgment, on a fair reading of subparagraph 5(r) that the Industrial Tribunal were implicitly, if not explicitly, finding that the Appellants were actually aware of the practice despite the evidence their witnesses had given before the Industrial Tribunal to the contrary.

In our judgment there was, accordingly, both evidence before the Industrial Tribunal which supported a finding that the Appellants knew of the practice and did not take any steps to stop it after the amalgamation in April 1992, and also, in sub-paragraph 5(r) and paragraph 11 of the decision, a clear finding by the majority that the Appellants knew of the practice and that they did do nothing to stop it.

In our judgment, once this is accepted and understood, then the majority of the Industrial Tribunal were entitled to put this matter in the very forefront of their reasoning as they did in paragraph 14. In our judgment they were entitled to reach their own view about this particular issue and were entitled to take into account the fact that the Appellants had not been prepared to accept during the appeal stage of the disciplinary hearings that any such practice existed.

Next, we have had to consider the submission made to us by the Counsel for the Appellants that the Industrial Tribunal did not take into account that the Respondent had been guilty of a breach of trust. We cannot accept that submission. In our judgment it is clear that the Industrial Tribunal's finding that the Respondent had, on this particular occasion on 25 October 1993, been guilty of "Private Trading" carried with it the inevitable corollary that the Industrial Tribunal appreciated fully that on this occasion he was guilty of a breach of trust. In our judgment, it is important to remember that the mere fact that there has been a breach of trust does not automatically render a dismissal fair, although it must always be seriously considered. Nor, in our judgment, can it be fairly said that the majority of the Industrial Tribunal in any way overlooked the fact that when he was very first asked about it the Respondent had denied having passed the card or that he admitted that it had been a foolish thing to do or a silly thing to do or, indeed, that he worked unsupervised.

The Industrial Tribunal had found the Respondent guilty of gross misconduct and had specifically noted at subparagraph 5(n) that he had initially denied passing the card. It was plain from their findings as to the nature of his duties that they knew quite well that he worked unsupervised. In our judgment, the majority of the Industrial Tribunal had material before them, justifying the conclusion(a) that there was a long-standing practice of passing cards to competitors of which the Appellants knew, and which they had not prohibited,

(b) that the Respondent had, on one occasion only, in circumstances where he had, in fact, gained nothing, passed a competitor's card to a customer and

In our judgment, upon a fair reading of paragraph 14 in the context of the whole decision, it is apparent that the majority weighed those matters to which we have just referred, against the fact that the Respondent had been guilty of a breach of trust on 23 October 1993 and concluded that, although this was of course serious, no reasonable employer would have imposed the ultimate sanction of dismissal in those very special circumstances. In our judgment it is important to remember in this field of employment law that every case is different and every case turns on its own special facts. In this particular case, on the findings of the Industrial Tribunal, there had grown up amongst field service engineers over many, many years, a culture and practice of passing over competitors' cards to customers if it transpired that the field service engineer was unable to service the equipment and the equipment turned out to be owned by the customer.

The Respondent had been employed throughout that very long period, servicing Radio Rental's customers, whilst that custom prevailed, on the findings of the Industrial Tribunal. Nothing had been done by the Appellants, despite, on the findings of the Industrial Tribunal, their knowledge of the practice, to put an end to it. In our judgment, the Industrial Tribunal was justified at looking at the isolated incident of breach of trust against that background and, when put in combination with an employee who had an unblemished record over 20 years, in reaching the conclusion that no reasonable employer would have dismissed him despite the fact that he initially denied doing it and admitted that it was a silly thing to do and despite the fact that he worked unsupervised.

In our judgment, it must always be a matter for the Industrial Tribunal, as an Industrial Jury, to decide which particular circumstances fall within the band of reasonableness and which do not. In our judgment, attaching labels does not necessarily provide a ready answer. To say that something is a breach of trust and, therefore, serious, and also to say that it is nonetheless serious, although no gain had been made from it, is no doubt generally true and helpful but it is the particular application of those principles which is vital. In our judgment, when they are placed alongside the fact that(a) the Appellants had not put a stop to a practice which they knew of and which was exactly what the Respondent did, and which amounted to gross misconduct,

(b) the fact that it was an isolated occasion when he did it and

(c) the fact that the employee concerned had a 20-year unblemished record, then the Industrial Tribunal could properly conclude that to dismiss in those circumstances was outside the range of the responses of a reasonable employer.

In our judgment, the majority of the Industrial Tribunal did not misdirect themselves in law or wrongly apply the tests they had set in British Leyland v Swift and did not reach a conclusion which was not properly based on fact or evidence and did not misunderstand or misapply the"Private Trading" rule. In our judgment, it is clear that they took into account that the Respondent was in breach of trust and that he had to work unsupervised in arriving at their conclusion that, because of the very special circumstances of this particular case, and despite those factors, the Appellants' decision was outside the band of reasonableness.

We may say that in arriving at our decision it has been the strongly held view of the experienced lay Members that the decision of the Industrial Tribunal was, in this case, a justifiable one in the special circumstances which prevailed. We cannot say, accordingly, that the Industrial Tribunal arrived at a wrong conclusion and, accordingly, the appeal is dismissed.

We would add that there was in the papers, by which we mean, of course, the pleadings, a cross-appeal by the Respondent based upon the proposition that the Industrial Tribunal erred in concluding that the Respondent had been guilty of gross misconduct. That cross-appeal has not been pursued in any way before us today by way of oral argument and, in the light of our findings, we do not see the need to make any further order in respect of it.