Scottish & Newcastle Retail Ltd v Stanton & Ors [1997] UKEAT 1126_96_0606

EAT
Scottish & Newcastle Retail Ltd v Stanton & Ors
[1997] UKEAT 1126_96_0606 · 1997-06-06
MR JUSTICE KIRKWOOD : This is an appeal by an employer from a decision of an Industrial Tribunal at Bury St Edmunds promulgated on 20th August 1996. The employer is Scottish & Newcastle Retail Ltd; the employees are Mr and Mrs Stanton and Mr and Mrs Durrant. By its decision the Industrial Tribunal found that all four had been unfairly dismissed, although in Mr Stanton's case, he contributed to his own dismissal to the extent of 25%. The Industrial Tribunal found no contribution in the case of the other three.Initially the employer brought appeals in respect of all four employees. We give leave to withdraw the appeal in respect of Mr Stanton. The appeal proceeds against the finding of unfair dismissal in the case of Mrs Stanton and Mrs Durrant; and on questions of contribution in respect of those two ladies and Mr Durrant.In respect of the contribution appeals, there was no basis on the facts as found by the tribunal for any finding of contribution. Those appeals have not been pursued with any vigour. They are all without merit, and will be dismissed.We turn to decide the appeals in the cases of Mrs Stanton and Mrs Durrant.There is no need for us to go in detail into the employment history. Each couple was employed as joint-licensees and managers of Public Houses owned by the appellant. Mr and Mrs Stanton were at "The Peterboat Public House" in Leigh-on-Sea; Mr and Mrs Durrant at "The Haystack Public House" at Canvey Island.We do not need to go into great detail as to the terms of the contracts of employment. Though there is some mention to be made of them. The Industrial Tribunal gave an outline of the contractual terms in paragraph 3.1 of its extended reasons in these terms:
"3.1 Both couples had written contracts of employment. In the case of Mr and Mrs Stanton there was specific provision that the termination of employment of either would automatically terminate the employment of both. Although this provision did not appear in terms in Mr and Mrs Durrant's contract, they were again specifically employed as a "management couple" and there was provision that if the employer had reason to believe that either of them had committed an act which was in breach of the written terms of employment, there was a power to suspend either or both of them pending further investigation. These contracts were with Chef & Brewer (UK) from whom the employer acquired the undertaking of which the premises managed by the applicant formed part in October 1993. ..."
The contracts provided that an act of misconduct by one may entitle the employer to terminate the contract of the other. By reference to the House Managers' Handbook, at least in the case of Mr and Mrs Stanton, was this provision:
"(d) in the case of joint contracts the termination of the employment of either of the couple will automatically terminate the employment of both."
Although these were joint co-terminous contracts, husband and wife each acquired contractual and statutory employment rights under them. Each of husband and wife, for example, was entitled to join the employer's pension, life assurance and medical schemes.It was the employer's allegation that on an occasion in February 1995, there was a series of events that led Mr Stanton to threaten violence to an Area Business Manager, Mr Burns. It was also alleged that Mr Durrant was in some way involved in that. There followed disciplinary proceedings, as a result of which both were summarily dismissed. The Industrial Tribunal found that in respect of each man the disciplinary and appeal hearings were fatally flawed by unfairness, and that the dismissal of each was unfair. No appeal against those findings is pursued. Indeed, in respect of Mr Durrant, the Industrial Tribunal found at paragraph 9:
"... it follows from our findings of fact that, beyond some possible knowledge after the event that there had been an argument between Mr Stanton and Mr Burns, he [ Mr Durrant ] did not by his conduct contribute to his dismissal ..."
In its extended reasons given following a later remedy hearing, the Industrial Tribunal found in respect of Mr Stanton at paragraph 8:
"... We think it probable that an investigation properly carried out by the employers would have resulted in all witnesses relevant to credibility being interviewed. Had that taken place it is our view that, on a balance of probabilities, neither the male applications would have been dismissed. We reach this view in the case of Mr Stanton because we consider that no reasonable employer, in view of the undoubted provocation offered to him coupled with his long service with the respondent and its predecessors, would have thought dismissal appropriate for merely upbraiding his area manager. So far as Mr Durrant is concerned, a proper investigation would have revealed the probability was that he had not been directly involved in the incident in any culpable sense so that the question of dismissal would not have arisen. It then follows that neither Mrs Stanton nor Mrs Durrant would have been the subject of disciplinary proceedings which were dependent upon their husbands' dismissals."
Disciplinary proceedings were taken against Mrs Stanton and Mrs Durrant. Correspondence shows how the appellant viewed and approached those proceedings.I refer to letters written to Mrs Stanton, though letters also went to Mrs Durrant in similar if not identical terms. On 14th March 1995 the appellant wrote to Mrs Stanton:
"I am writing to you in order to confirm that on Thursday, 16th March 1995 you are required to attend a disciplinary meeting with me at the Central Avenue, Gravesend at 10.00 am.
The purpose of the meeting is to discuss the Breach of Contract arising due to the dismissal of your husband from the Company on Friday, 10th March 1995.As the outcome of this meeting could result in your own dismissal you are advised that you have the right, if you so wish, to be represented either by a colleague currently employed by the Company or a NALHM [ Union ] representative. ..."The outcome of that hearing was addressed in a letter to Mrs Stanton of 21st March 1995:
"I write to confirm the outcome of the meeting held on Thursday 16th March 1995.
. ..The meeting was called to discuss your husband's dismissal from the company.Your employment is on a joint, co-terminus contract.I advised you that the dismissal of your husband breaches that contract and you were being dismissed for that breach.

. .."

Then to Mrs Stanton's appeal and a letter reciting the outcome of that was sent to her on 15th May 1995:
"I told you that the terms of the contract of employment under which you and your husband were employed were such that if either you or your husband leaves for whatever reason, the contract of the other is automatically terminated, in other words, the join contract is co-terminus. There fore, when Brian was dismissed this terminated the joint contract. In circumstances when a joint contract is terminated on such a breach the Company looks at the possibility of employing the other party on a single contract and has to consider a wide range of factors. In your case the circumstances would depend on the ultimate view taken about Brian's dismissal, so in effect if Brian was seen by the Company as being "guilty" of attempting to assault the Area Manager it would be impossible for the Company to keep you as a Single Manager with your husband living at the pub."
It is clear from those letters that the adjudication by the appellant upon the case of each of the two wives as to their continued employment or dismissal, turned on the employer's finding as to the guilt of the husband. That was the practicality of the case.The relevant statutory provisions at the time were those contained in ss.54 and 57 of the Employment Protection (Consolidation) Act 1978 . S.54(1) provides:
"(1) In every employment to which this section applies every employee shall have the right not to be unfairly dismissed by his employer."
S.57(1) 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 for 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."
Subsection (2)(b) is of relevance in the case of the two husbands, because in their cases there was a reason related to the conduct of the employee, but there is nothing in subsection (2) that covers the case of the two wives, whose case falls within subsection (1)(b) "some other substantial reason".Once the employer has established the reason, the question of fairness arises and subsection (3) provides:
"(3) ... the determination of the question whether the dismissal was fair or unfair, having regard to the reason shown by the employer, shall depend on whether the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissing the employee; and that question shall be determined in accordance with equity and the substantial merits of the case."
Before the Industrial Tribunal and before this Appeal Tribunal, the appellant has relied upon the decision of a constitution of the Employment Appeal Tribunal in Scotland, in the case of Kelman v Oram [1983] IRLR 432 . So far as we are concerned, that is persuasive but not binding authority. Mr Bowers for the appellant submits that the Industrial Tribunal was bound by it. In the Kelman case, Mr Kelman was employed as a bar manager in a Public House. Mrs Kelman was employed separately and without any direct contract of employment in connection with cleaning and other matters in the same Public House. Mr Kelman was dismissed. An Industrial Tribunal found that he had been unfairly dismissed. Mrs Kelman was also dismissed. The Industrial Tribunal held that her dismissal was not unfair. The Industrial Tribunal found in Mrs Kelman's case that once Mr Kelman had been dismissed, albeit unfairly, it was impracticable for Mrs Kelman, his wife, to continue to be employed. That was "some other substantial reason" in terms of s.57(1)(b) and the Industrial Tribunal found that the employer had acted reasonably. Mrs Kelman appealed. The Employment Appeal Tribunal dismissed her appeal. The ratio of that decision is in these terms:
"In our opinion once it is established , as it is here, that the reason for the dismissal was that it was impracticable for the employment to be continued and once it is accepted that this is a substantial reason within the meaning of section 57(1)(b) it is extremely difficult to conclude that it was unreasonable in terms of section 57(3) for an employer to dismiss on this account. Whilst the two dismissals are obviously closely interconnected the basic reason in each case is entirely different. In the case of the husband the basic reason was his conduct or capability related to the stock shortage. In the case of the appellant the reason for her dismissal was not simply that she was Mr Kelman's wife. It was that it was impracticable for her employment to continue after he had been dismissed. In considering the question of reasonableness under section 57(3) one is referred back to the reason for dismissal which has ex hypothesi been established in terms of section 57(2). In the case of the appellant this does not refer in any way to the fairness or otherwise of her husband's dismissal. It refers to the factual matter of whether or not it was practicable for her to continue in her employment. Having decided that it was not we are of the opinion that the Industrial Tribunal cannot be said to have reached a wrong conclusion in holding that the dismissal was fair."
How then did the Industrial Tribunal approach the cases of Mrs Stanton and Mrs Durrant?It is necessary that I read out in their entirety the conclusions of the tribunal set out in their extended reasons."10. We turn now to consider the position of the two wives. There is no suggestion that either had done anything wrong and each has been dismissed solely on the basis of her husband's dismissal for gross misconduct. We have been referred to Kelman -v- Oram which is a decision of the Employment Appeal Tribunal in which the facts bear a similarity to the present case but where there are, in our view, important differences. In that case the appellant's husband was a bar manager, but not apparently the licensee, of a public house belonging to the respondent. The appellant had no direct contract of employment but the industrial tribunal found that she was also employed and did certain duties in connection with cleaning and other matters. The applications of her and her husband were heard together and the tribunal found that the reason for the husband's dismissal related to his conduct or capability with particular reference to stock deficiencies. In his case the tribunal found that the respondents had not acted reasonably in dismissing him for that reason but that he had contributed to his dismissal by failing to take adequate steps to investigate losses shown in the trading results. In the appellant's case the tribunal found that when he was dismissed, albeit unfairly, it was impracticable for her employment to continue, that this was "some other substantial reason" in terms of section 57(1)(b) of the Act, that the respondent had acted reasonably and that her dismissal was not unfair. It was argued on behalf of the appellant that the unfairness of the husband's dismissal could be separated from the dismissal of the appellant and, so far as contribution was concerned, that although the husband had contributed to his dismissal to the extent of 40% there could be no contribution on the part of the appellant. In rejecting these submissions and upholding her dismissal, Lord McDonald said: [ The tribunal set out the passage that I have just cited. ].11. The present case is different in certain important respects. First, each of the husband and wife were formally employed by the respondent under a written contract which inexorably linked the continued employment of each to the subsistence of the contract of employment whereas in Kelman the employment of the spouses was not made interdependent in this way. Secondly, it appears that in Kelman there were undisputed stock deficiencies but that, for reasons which was not apparent from the judgement, the Industrial Tribunal had come to the conclusion that those matters did not merit dismissal in the particular circumstances of the case.12. The Schedule to Mr and Mrs Durrant's contract describes them as "the management couple" and they jointly receive a basic annual salary which is nowhere apportioned between them. The couple are expressed to be responsible jointly to the Area Manager and they are "to conduct the business to the best possible advantage under the direction in all things of the" employer and "shall devote such time and attention to the said business as is required, and shall at all times faithfully and honestly discharge their duties". That is described as the working philosophy of the contract. They are both entitled to join the employer's pension, life assurance and medical insurance schemes. The justices' licence in their joint responsibility and the contract appears to envisage that it is held by them jointly. For the proper performance of their duties they are required to reside in the living accommodation of the licensed house. Stock and cash responsibility is joint. If the employer has "reason to believe that either of them have committed any act which is in breach of this Agreement or the Managers Handbook it shall be entitled to suspend either/or both parties from the performance of their duties with pay until such time as the complaint or breach of Agreement has been investigated." In the section dealing with Termination and Notice, summary dismissal by the employer may be effected "if the Management Couple commits any breach of the provisions of the agreement or any act of misconduct or by refusing or neglecting to observe the orders or directions of the Company". Later that section provides that "termination of the employment of either of the couple will automatically terminate the employment of both of them".13. Mr and Mrs Stanton's contract of employment is in a somewhat later form but the essential terms are similar to those of Mr and Mrs Durrant. ...14. We have come to the conclusion that the express terms of the contract clearly distinguish these cases from Kelman on the facts and it is noteworthy that the dismissal letters of each wife state in terms that they are being dismissed for their husband's breach of contract. It would be difficult to find a clearer expression of the nexus between the dismissals. If this were not sufficient, however, it also seems to us that the nature of the husbands' dismissals is also relevant and distinguishes these case from the Kelman principle. Given that each couple are jointly employed and that continuity of employment is contractually expressed to depend on that situation continuing to apply, it seems to us that under the implied duty of trust and confidence which exists between employer and employee as a mutual obligation, the employer must be required to act fairly and reasonably in treating the conduct of one of the couple as grounds for the dismissal of both and that if the employer fails to behave fairly and reasonably to one, so that the dismissal of one is unfair, it must follow that the consequential dismissal of the other must equally be unreasonable and unfair as arising from that breach of the duty owed to him or her. In this case we have found that the husbands were unfairly dismissed by reason of the failure of the respondent to carry out a proper investigation into the facts. The carrying out of such an investigation was peculiarly within the province of the respondent and their failure to do so is as prejudicial to the wives as it was to the husbands.15. For all these reasons we have come to the view that the principle of Kelman -v- Oram has no application to the applications made by Mrs Stanton and Mrs Durrant, that the fairness of their dismissal is directly dependent upon the fairness of the dismissal of their husbands and that, on the facts, they were also unfairly dismissed. In their cases, there is no contributory conduct on their part by virtue of which the awards to which they are entitled should be reduced."In arguing this appeal, Mr Bowers contends that the Industrial Tribunal was wrong to distinguish Kelman's case. Both the distinction drawn as to the nature of the contracts and the distinction drawn about stock deficiencies were immaterial. For our part we have not fully followed the relevance of the stock deficiency point. The contract point is another matter.Mr Bowers continues to submit that there was a fundamental misdirection of itself as to the law in the Industrial Tribunal's words "if the employer fails to behave fairly and reasonably to one, so that the dismissal of one is unfair, it must follow that the consequential dismissal of the other must equally be unreasonable and unfair". It may be that the tribunal expressed that in wider and more general terms than was strictly necessary for their decision, but the point they had in mind is clear.Mr Bowers argues that the Industrial Tribunal failed to follow the step by step process of(1) identifying the reason for dismissal;(2) whether that was a lawful reason; and(3) whether, in all the circumstances, the employer acted reasonably in dismissing for that reason. Mr Bowers submits that the Industrial Tribunal should have found (1) the reason for dismissal was "some other substantial reason", namely the impracticability point; (2) that it was lawful reason; and (3) that it was reasonable to dismiss for that reason because of the joint nature of employment, and in Mrs Durrant's case the additional point that she told the appeal hearing that she would not want to be left running "The Haystack Public House" on her own.We find that the Industrial Tribunal was right to distinguish Kelman's case on the contractual basis. In Kelman the basic reason for dismissal in each case was different. Lord McDonald made that clear. But in the case before us, the basic reason is the same. Namely, the alleged misconduct of the husband. Dismissal is the termination of a contract of employment. The wife's contract was liable to be terminated for the misconduct of the husband. If the wife is liable to loose her livelihood because of the husband's misconduct as the contract says, the employer has a duty to the wife to act fairly in establishing those facts. That in each case the employer manifestly failed to do. To describe the substantial reason in rather lose terms as "impracticability", is to cloud the contractual terms. The substantial reason was termination of the wife's contract because of dismissal for alleged misconduct by the husband. The Industrial Tribunal was then required to consider the question of reasonableness in accordance with equity and the substantial merits of the case.Mr Bowers argues that the Industrial Tribunal should have looked at the case of Mrs Stanton and Mrs Durrant separately from the case of their husbands. In our judgment, they did so. They said they did so, in paragraph 1 of the extended reasons. They dealt separately with the cases of the wives in the passages that I have cited at length. The thrust of Mr Bowers point is that the Industrial Tribunal should have looked at the cases of the wives in isolation from the circumstances of dismissal of the husbands, should, in other words, gone straight to the impracticability point. We disagree. To have done so would have been to ignore the realities of the case. Incidentally, also, by such limited approach the result for which the employer contends would have been to deny Mrs Stanton and Mrs Durrant their statutory rights.It is not our task to examine the fine detail of the extended reasons of the Industrial Tribunal line by line; nor the structure of it. We consider the decision of the Industrial Tribunal and the reasons for their decision. To succeed in an appeal, the appellant must satisfy us that the Industrial Tribunal has made a material misdirection of itself as to the law, or reached a decision on the facts that is perverse.A suggestion of perversity was made in the Notice of Appeal in Mrs Durrant's case. It is unsustainable.The appellant has wholly failed to satisfy us of any material misdirection as to the law. The Industrial Tribunal was entitled to distinguish Kelman's case, and entitled to find that the dismissal of Mrs Stanton and Mrs Durrant was unfair, and accordingly, the appeal will be dismissed.