Hadee Engineering Co Ltd v Hannan [1997] UKEAT 1194_96_1806

EAT

Hadee Engineering Co Ltd v Hannan

[1997] UKEAT 1194_96_1806 · 1997-06-18

MR JUSTICE KIRKWOOD : Hadee Engineering Co Ltd ["the Company"] is an engineering company in Sheffield that has been in business for something over 25 years and employs about 70 people, many of them having long service with the company. Mr Anthony Hannan is a skilled man, a welder, who worked for the Company for some nine or ten years in the 70's and early 80's. He was then away from the Company for four years and returned to it in July 1988. On 25th March 1996 he was dismissed on the ground of misconduct.

Mr Hannan made an Originating Application to the Industrial Tribunal at Sheffield. He said he had been unfairly dismissed. The Company denied that, saying that they were justified in dismissing him. The Industrial Tribunal which heard the case on 29th July 1996 disagreed. It held that:

"8 ... In the circumstances of this case the decision to dismiss was "over the top" and beyond what any employer could reasonably do."

So it found that Mr Hannan had been unfairly dismissed. But the Industrial Tribunal also found that Mr Hannan contributed towards his dismissal by his own actions and they assessed his contribution at 25%. It calculated an award of compensation accordingly.

The Company appeals. It contends that the Industrial Tribunal's decision both as to dismissal and as to contribution was wrong in law.

It was quite common at the Company that, provided that he had first asked permission, an employee was invariably allowed to make some item or another for himself using the Company's scrap or surplus material and equipment. Pprovided that permission was asked, there would be no problem.

Over a short period of time prior to 25th March 1996, Mr Hannan had arranged for a couple of colleagues, one of whom was in fact his son, to carry out some preparatory work so as to enable him to make the head of a rake for his own use. When it came to light that Mr Hannan was in the process of making something for himself, the rake head, that was reported to Mr Sparrow, the General Manager, who in turn reported it to Mr Lowe, the Managing Director. Mr Lowe decided that Mr Hannan should be dismissed. The trouble was that Mr Hannan had not asked permission, and Mr Lowe later said that what Mr Hannan had done amounted to stealing.

The relevant legislation at the time was the Employment Protection (Consolidation) Act 1978 . The Employment Rights Act 1996 to which reference is made in the written argument, did not in fact come into force until 22nd August 1996. S.57 of the 1978 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 ... for the dismissal, and (b) that it was a reason falling within subsection (2) ..."

and subsection (2) sets out the kind of reasons and they include a reason related to conduct of the employee. Subsection (3) of s.57 provides:

"(3) Where the employer has fulfilled the requirements of subsection (1), then ... 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 in the circumstances ... 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."

The first ground of appeal, as we understand it from the Notice of Appeal and written and oral argument, is that the Industrial Tribunal misapplied the test enunciated in the well-known case British Home Stores Ltd v Burchell

[1980] ICR 303

. Reliance is placed on this passage at page 304:

"... What the tribunal have to decide every time is, broadly expressed, whether the employer who discharged the employee on the ground of the misconduct in question (usually, though not necessarily, dishonest conduct) entertained a reasonable suspicion amounting to a belief in the guilt of the employee of that misconduct at that time. That is really stating shortly and compendiously what is in fact more than one element. First of all, there must be established by the employer the fact of that belief; that the employer did believe it. Secondly, that the employer had in his mind reasonable grounds upon which to sustain that belief. And thirdly, we think, that the employer, at the stage at which he formed that belief on those grounds, at any rate at the final stage at which he formed that belief on those grounds, had carried out as much investigation into the matter as was reasonable in all the circumstances of the case. ..."

What is said on behalf of the appellant is that the Industrial Tribunal erred in that although it asked itself whether Mr Lowe believed that Mr Hannan had stolen material and found that he did, the tribunal did not go on to pose or answer the next question, namely, whether Mr Lowe was reasonable in holding that belief.

Although the appellant's Notice of Appeal and written and oral argument separates the various grounds and argues them as discrete points in order to build up a logical sequence to the conclusion the appellant seeks, it is not in our judgment appropriate to consider the main points in the appeal in isolation one from another.

From her first point, Miss Collier submits that either we should remit the case to another tribunal who will be bound to conclude on her argument that Mr Lowe did hold that belief reasonably; or that we should substitute our own conclusion to that effect.

Her argument proceeds that, given that genuine belief, reasonably held, the dishonest offence of stealing must have entitled the employer to dismiss. Dismissal must have been within the band of possible reasonable responses to that misconduct. Therefore, says Miss Collier, the Industrial Tribunal was plainly wrong in finding unfair dismissal.

Miss Collier argues that the Industrial Tribunal allowed itself to reach that wrong conclusion because it allowed itself to be distracted from the core issue of dishonesty and to look at what occurred as failure to ask permission; and because it allowed itself to consider material that Miss Collier says that it should not have considered in the circumstances of an act of dishonesty which can stand alone as a ground for summary dismissal, namely, whether there had been any prior warning and the details of Mr Hannan's past disciplinary record.

The way in which the Industrial Tribunal approached this case, in fact, is set out in full at pages 2 and 3 of the extended reasons, in paragraphs 6 and 7, and it is necessary that I read extensively from those passages.

"6. We are quite satisfied as a tribunal that the respondent has established a reason for dismissal and that the reason relates to conduct within the meaning of Section 57(2)(b) of the Employment Protection (Consolidation) Act 1978. Mr Lowe thought that Mr Hannan, in truth, had stolen materials from him.

7. The tribunal unanimously feel that the dismissal was unfair. Mr Lowe dismissed the applicant for what he described as stealing materials and engaging himself and two others in work at the company's expense and without permission. Mr Lowe emphasised that had he been asked for his permission there would not have been a problem. It was the fact that Mr Hannan had not asked for permission. Whilst the respondent produced document R2 a notice stating a rule which forbade the borrowing or purchase of equipment or materials without permission on pain of possible dismissal this was more perhaps a device to eliminate the risk of theft. ..."

I interpose there to go a little later on into paragraph 7 where the tribunal dealt with that in these terms:

"... However, we do not believe that the document at R2 was issued to the work force or displayed as was suggested by the respondent. We accept Mr Hannan's evidence as to this. Mr Lowe himself could not be certain that it was displayed and certainly had no idea where it was displayed if indeed it was."

Returning to the sequence of paragraph 7 the tribunal continued:

"Whilst Mr Lowe in one breath said that what the applicant had done "was stealing pure and simple" and therefore gross misconduct, in the next breath he said that Mr Hannan would not have been sacked for what he did had he not got his earlier track record. If that was the case, thought the tribunal, we should perhaps look at that track record and see what, if anything, the respondent had done about it in the past. ..."

The tribunal then looked at the so-called 'track record' in detail, and then concluded:

"... If therefore, Mr Lowe was indeed saying "I'd not have sacked Mr Hannan for the final matter alone but probably would have docked his pay and suspended him for three days and only sacked him because of his track record" then that should not have led to the applicant's dismissal. The "track record" itself, the manner in which it was related and the way the "warnings" were administered does not, in our view, bear too close examination. By no means should that track record have tipped the scales against Mr Hannan at the time of his dismissal. As far as the final incident was concerned we can readily accept that permission ought to have been sought and we believe that Mr Hannan and the work force as a whole knew that such should be the case. Mr Hannan himself admits as much. ... We do not believe that Mr Hannan acted surreptitiously if only because he secured the assistance of two others, albeit that one of those was his son. The applicant's evidence that he had asked Cyril, the programmer, to help in the presence of another employee was not contradicted. We do not think that Mr Hannan did what he did "on the sly" but certainly he should have sought and obtained permission. He should have asked and he knew it. That though, in the circumstances of the case, was not, in our view, a sacking offence in itself. Mr Lowe as much as said so himself and it was not sufficient to result in Mr Hannan's dismissal. ..."

In another part of the appeal the appellant seeks to argue that Mr Lowe did not say that this episode was not a sacking offence, and that the Industrial Tribunal's findings in that regard are perverse.

Miss Collier relied on three short passages from the Chairman's Notes of Evidence, they were these:

"Due to his past record we made a decision to dismiss him."

"I wasn't sacking him just for that - I'd have suspended him for three days.

"I'm sacking him for that, because he had been warned on a number of occasions."

It seems to us that those three short quotes must, for their full effect, be read in the wider context in which they appear in the Notes of Evidence.

So far as the first is concerned, the passage is this, Mr Lowe's evidence:

"I then discussed the position with Mr Sparrow and Martin Orvice (the shop representative). We discussed what action we thought necessary. I suggested I was going to sack Mr Hannan for stealing. I felt it was a clear case. Mr Orvice (the shop representative) was not privy to the earlier matters. He wasn't party to knowing anything of his past record. I gave Mr Orvice that information. His first thoughts were - it was bit hard to lose a job because of a rake. It seems so on that face of it, but if that's all it was, we'd not be here today. Due to his past record we made a decision to dismiss him. That was my decision. I then called Mr Hannan back in."

The second and third of the short quotes relied upon by Miss Collier form part of a passage in the Notes of Evidence which was in these terms:

"On 25 March 1996, I made a decision to dismiss after we'd had Mr Hannan in and looked at his past performance. It was a good twenty to thirty minutes later. Mr Orvice thought I was being a bit hard. I wasn't sacking just for that - I'd have suspended for three days. It was the final straw. I'm sacking for that, plus he had been warned on a number of occasions."

We bear in mind too, that the Industrial Tribunal saw and heard the witnesses. We find that the argument that the Industrial Tribunal made perverse findings of fact as to Mr Lowe's approach to the disciplinary sanction is unfounded.

All these matters had to be considered by the Industrial Tribunal against the background of the uncontroversial evidence from Mr Lowe of his approach to Mr Hannan at the time over the rake episode.

In his evidence in chief, Mr Lowe said this about it:

"... I approached one of the reps and told him that I had a problem with Mr Hannan so could he come in to discuss it with me, Mr Hannan and Mr Sparrow, ie the four of us. Mr Hannan knew what it was about because Mr Sparrow told him. I asked Mr Hannan if that "rake" belonged to him. Was it his piece of equipment. He said "yes it is". I asked had he made any enquiries that he could do it. He said "no I am sorry I've not."

We have a rule that if anyone wants to borrow anything (everyone knows this) you can, if you bring it back - even a lorry or a trailer or equipment. As long as you ask and bring it back in good working condition - its alright. If you want to make something - a garden fence, if you ask the question wood, steel, old scraps - there's no problem, even reasonable steel which we get at cost with no VAT - we even deliver it. In the past Mr Hannan's done it. He's made things and asked first. In this case, he didn't ask. That's not what I call a normal piece of equipment. It's complicated. He said he made it. He was sorry he'd made it without asking. When I asked why, he said "well I was going to." He was working morning and afternoon and I suspect he would have made if after tea, when there was no supervisor. It was cut when no supervision. I asked "what was it doing at the back of the welding set." He said "well I was keeping it there." I then said "you do realise that we'll be taking disciplinary action against you." He said "yes I do. I am sorry if I've put you to this problem." He then went on to tell me about his marriage and things. If he lost his job he'd have problems at home. I said "we'd discuss this problem together with his past record with the people present at the meeting, ie the three of us who were left, ie without Mr Hannan."

Plainly, Mr Lowe was addressing in that disciplinary process the failure to get permission. He made no accusation of theft.

The meeting then, in Mr Hannan's absence, considered the disciplinary history. Mr Hannan was then dismissed. His dismissal was confirmed that day by a letter which referred simply to "industrial misconduct".

Six and a half weeks later in its form IT3 the appellant gave its grounds for resisting the application:

(a) his past disciplinary record; and

(b) the failure to ask permission.

There is not a word in any of that material about Mr Hannan being charged with theft. Whether or not Mr Lowe had dishonesty in the back or forefront of his mind at the time of dismissal, the disciplinary process was conducted on the basis of absence of permission and track record.

In the light of the extensive passage I have read out from the extended reasons of the tribunal, we are not in fact persuaded that the Industrial Tribunal failed to ask itself or answer the necessary relevant questions, but the passage in the extended reasons to which I referred goes fundamentally to the question of reasonableness in treating that misconduct as a sufficient reason to dismiss the employee.

Whilst Miss Collier's skilfully presented argument, presented to us here in Audit House, has the attraction of clarity and simplicity, it is far removed from the practicality of actual events in the work place. The employer approached this as a failure to ask permission. The Industrial Tribunal were surely entitled, indeed obliged, to consider the circumstances in the light of the employer's approach. The employer's response to the rake episode alone was in the region of three days suspension. It was moved from that to dismissal by consideration of the past disciplinary history. In those circumstances the Industrial Tribunal were surely entitled, indeed obliged, to look at that too, to see whether it was approached fairly and properly. I have read out how the Industrial Tribunal summarised its conclusions in that regard. No challenge is made in this appeal to the Industrial Tribunal's approach or findings about that. What is said is that the tribunal should not have considered it at all. We disagree.

The essence of the appellant's appeal is that the tribunal should have cut through what actually happened, disregarded the approach the employer in fact took, and merely held that a reasonable belief in dishonesty justified fair dismissal without consideration of any other matters. For the reasons we have given we reject that argument.

The remaining surviving ground in the main appeal is that the Industrial Tribunal wrongly took into account shortcomings it found in the disciplinary process. From the form of the extended reasons it seems to us that the tribunal reached its conclusion of unfairness before addressing disciplinary processes. However, to the extent that it attached weight to those matters, the tribunal was, we find in the circumstances of this case, entitled to take into account that there were no minutes and no right of representation. A perversity argument in that latter regard has been abandoned.

We do however have reservations as to whether the Industrial Tribunal was right in fact or in law as to the absence of an appeal procedure. But we do not find that that aspect made significant contribution to the decision that the Industrial Tribunal reached.

The second part of the appeal goes to the assessment of 25% contribution. The Industrial Tribunal had to approach that question in accordance with what it thought just and equitable having regard to its finding that Mr Hannan had by his action contributed to his dismissal. The range open to the tribunal was from nil to 100%.

In arguing for 100%, Miss Collier says that the tribunal should have asked itself whether Mr Hannan's failure to ask for permission was the sole or major cause of his dismissal. If it had, it would, she says, have concluded that it was the sole cause, pointing to a finding of 100%; or, the major cause, pointing to something greater than 25%.

Plainly the employee's action precipitated the disciplinary process. It seems to us that 25% may possibly have been on the low side. But we bear in mind particularly that the Industrial Tribunal saw and heard the witnesses and had the chance to get the feel of the case in a sense that we do not. We bear in mind too that we do not in any event find the assessment of 25% to be so far wrong that we should interfere with it, and for those reasons we do not intend to interfere with the assessment of contribution at 25%.

The appellant has failed to satisfy us that the decision of the Industrial Tribunal is flawed by a material error of law; or, by a relevant finding of fact capable of being impugned as perverse. In those circumstances this appeal is dismissed.