Ferodo Caernarfon Ltd v Owen [1997] UKEAT 262_96_1301

EAT
Ferodo Caernarfon Ltd v Owen
[1997] UKEAT 262_96_1301 · 1996-11-29

JUDGE PETER CLARK :

This is an appeal by the employer, Ferodo Caernarfon Ltd, against a decision of the Prestatyn Industrial Tribunal that the applicant, Mrs Owen, was unfairly dismissed. Extended reasons for that decision are dated 17th January 1996.

The Tribunal decision

The members of the tribunal differed in their reasoning, although not in the result. The applicant was a long-standing employee with 25 years service. She began her employment as a clerk/typist and by a series of promotions attained the position of secretary to the Managing Director.On 1st March 1994 Mr Kenneth Lambert was appointed Managing Director. He soon found fault with her work. On 20th June he held a meeting with her to go through matters of concern to him. She became extremely upset. He offered her the position of typist with telephone duties, or the possibility of voluntary redundancy. However the meeting ended without a resolution and the tribunal concluded that thereafter Mr Lambert did not want the applicant as his secretary.Negotiations then took place between management and the applicant's trade union representative, whilst the applicant herself went off work sick. Those negotiations culminated in the applicant accepting an offer of alternative employment as a telephonist/typist on 18th July.Subsequently, in the course of a redundancy exercise conducted by the employer, her new position as telephonist/typist was identified as being redundant. She was selected for redundancy and dismissed for that reason on 18th August.Pausing there, the minority member of the tribunal accepted the contention advanced on behalf of the applicant that at the time when she was offered the telephonist/typist position the employer knew that that position was about to be made redundant. The majority rejected that case; but all members concluded that had she left the employment at the time when she was offered the alternative position, instead of accepting it, then she would have been unfairly constructively dismissed.Having considered the issues of selection and consultation, the majority would have found that the applicant's dismissal by reason of redundancy on 18th August was fair. The minority member would have found the dismissal to be unfair at that stage.However, on one point all three members of the tribunal agreed.

(g) of the reasons in this way:

"g) After the positions that were to be made redundant were made known to the union discussions continued and the applicant was eventually told on 18 August 1995 [sic] that she was to be made redundant. That meeting was very short and the applicant was clearly distressed. The applicant appealed and before us today, although not at the actual appeal, Mr Leverton complained that Mr Lambert should not have chaired the appeal. He was in our view right. Mr Lambert maintained that he chaired the appeal because he felt the applicant was complaining about a selection for redundancy from the position of telephonist/secretary. However, from the note of the meeting produced to us it must have been clear to Mr Lambert that Mr Leverton was saying that the person that had been appointed as his secretary who had some 2½ years service should have been selected in place of the applicant. At that point should have declined to continue. It was clearly not beyond the resources of the respondent that someone else from T & N Plc Group to have heard the appeal. However, it was clear from the notes of the meeting and indeed it was clear to us from what we were told today that the applicant would not have accepted the position of managing director's secretary even if it had been offered to her at that point. Therefore, in our view even if there had been an appeal before another member of the respondent company the result would not have changed. The applicant simply did not want to return to work for the respondent and indeed she told us in evidence that she did not think that Mr Lambert deserved her trust and confidence."
On this basis the tribunal found the dismissal to be unfair. The matter was adjourned for a remedies hearing if the parties felt it necessary in the light of the indication given in paragraph 4(g), namely that had the applicant's appeal been heard by a member of management other than Mr Lambert the result would not have changed, that is to say, she would have been dismissed anyway.On 24th October 1996 a remedies hearing was held. The tribunal, with a new member sitting instead of one of the original lay members who was too ill to attend, referred back to the earlier decision and found that it would not be just and equitable to make a compensatory award, and award £50 costs against the applicant.There is no appeal before us today against the tribunal's order made on 24th October 1996, extended reasons for which were promulgated on 27th November 1996.

Internal appeals and the question of reasonableness

In West Midlands Co-operative Society v Tipton [1986] IRLR 112 , the House of Lords explained that its earlier decision in Devis v Atkins [1977] ICR 662 , which restricted the question of reasonableness raised by section 57(3) of the Employment Protection (Consolidation Act 1978 (now section 98(4) of the Employment Rights Act 1996 ) to the reason for dismissal in the employer's mind at the time of dismissal, did not preclude an Industrial Tribunal from considering, in the overall assessment of reasonableness, an internal appeal procedure. Thus, if the employee is deprived of the opportunity to exercise a right of internal appeal that may render a dismissal unfair.Further, in Polkey vAE Dayton Services Ltd [1988] ICR 142 the House of Lords overruled the principle contained in the decision of this appeal tribunal in British Labour Pump Ltd v Byrne [1979] ICR 347 , that a dismissal may be fair, notwithstanding a procedural failing, if a fair procedure would have made no difference to the outcome.Lord Mackay LC said at p. 153D-F:
" ... The subject matter for the tribunal's consideration is the employer's action in treating the reason as a sufficient reason for dismissing the employee. It is that action and that action only that the tribunal is required to characterise as reasonable or unreasonable. That leaves no scope for the tribunal considering whether, if the employer had acted differently, he might have dismissed the employee. It is what the employer did that is to be judged, not what he might have done. On the other hand, in judging whether what the employer did was reasonable it is right to consider what a reasonable employer would have in mind at the time he decided to dismiss as the consequence of not consulting or not warning.
If the employer could reasonably have concluded in the light of the circumstances known to him at the time of dismissal that consultation or warning would be utterly useless he might well act reasonably even if he did not observe the provisions of the code. Failure to observe the requirement of the code relating to consultation or warning will not necessarily render a dismissal unfair. Whether in any particular case it did so is matter for the industrial tribunal to consider in the light of the circumstances known to the employer at the time he dismissed the employee."A question arose as to whether in Polkey the House of Lords were saying that for a dismissal to be fair on the ground that to have followed a proper procedure, for example, by way of consultation, would have served no useful purpose, it was necessary for the employer to have made a deliberate decision not to consult for that reason. The Court of Appeal held in Duffy v Yeoman & Partners Ltd [1994] IRLR 642 that it was unnecessary for the employer to do so. It is enough if the Industrial Tribunal could conclude that a reasonable employer would have reached that view.During the course of his judgment in Duffy , Balcombe LJ said this, at paragraph 14:
" ... I fear there is a grave danger that this area of the law is becoming over-sophisticated, and that there is an attempt to lay down as rules of law matters which are nor more than factors which an industrial tribunal should take into account in reaching its decision whether the employer acted reasonably in the circumstances of the particular case."
With that sentiment we respectfully agree.The two strands of authority to which we have referred came together, first in Post Office v Marney [1990] IRLR 170 , a decision of this appeal tribunal, Knox J presiding. There, an Industrial Tribunal found the original decision to dismiss fair. However, on appeal the appeals manager decided that she had no authority to consider whether dismissal was an appropriate penalty. She treated the offence, coming as it did in the operational period of a previous award of suspended dismissal for an earlier disciplinary offence, as one leading to automatic dismissal. The Industrial Tribunal found that approach to have deprived the employee of a contractual right to appeal and held the dismissal to be unfair.On appeal, the Industrial Tribunal's decision was reversed. At paragraph 23 of the report Knox J said this:
" So far we have been approaching the Industrial Tribunal's reason that the denial of Mr Marney's contractual right of appeal resulted in the dismissal being unfair. In our judgment that, by itself, is an over-simplification. It is not every denial of a contractual right that has that result. It is, in our judgment, only when the circumstances warrant that conclusion, in this type of case of a defective appellate stage there has to be a circumstance that renders the appellate process defective in the sense that it should or could have found and demonstrated a flaw in the decision at first instance in the internal procedures of the employer."
That approach has been criticised by commentators as re-introducing the " British Labour Pump " principle in relation to internal appeals. That is to say, if the defect in an appellate procedure made no difference to the result at the initial fair dismissal stage it could be disregarded for the purposes of determining overall fairness.Whether that is a fair reading of Knox J's judgment in Marney has been rendered academic by the decision of the Court of Appeal in Westminster City Council v Cabaj [1996] IRLR 399 . During the course of his judgment in that case, which concerned an improperly constituted internal appeal panel, Morritt LJ considered the Employment Appeal Tribunal decision in Marney at paragraph 29 of the report, where he said:
"The relevance to those questions of a failure of the employer to follow agreed disciplinary procedures is shown in the passages in West Midlands Co-operative v. Tipton and Polkey v. A E Dayton Services Ltd which I have quoted already. Thus, as pointed out by Lord Bridge of Harwich in the former, the relevance of the failure to entertain an appeal to which the employee is contractually entitled is whether the employee is 'thereby' denied the opportunity of demonstrating that the real reason for his dismissal was not sufficient. It is irrelevant to that question to consider whether the employer would have acted differently if he had followed the agreed procedure, for that is hypothetical. On the other hand, as pointed out by Lord Mackay of Clashfern LC and Lord Bridge of Harwich in the latter, it is relevant to consider whether the employer acted reasonably if he actually considered or a reasonable employer would have considered at the time of dismissal that to follow the agreed procedure would in the circumstances of the case be futile. For my part I would endorse the general approach of Knox J in Post Office v Marney . I put it that way because it has been suggested that the last sentence of the passage I have quoted is contrary to the decision of the House of Lords in Polkey vAE Dayton Services Ltd as requiring consideration of what would have happened if the proper procedure had been followed, rather than, as permitted by West Midlands Co-operative v Tipton , considering whether the defect denied the employee and opportunity of showing that the employer's real reason for dismissing him could not reasonably be treated as sufficient. I read it in the latter sense but if it is properly to be read in the former sense then that passage cannot be supported."

This appeal

By his Notice of Appeal and in argument before this appeal tribunal at a preliminary hearing held on 18th July 1996, Mr Grundy's primary submission, based on the approach of Knox J in Marney , was that the Industrial Tribunal had erred in failing to consider whether any defect in the appeal procedure due to Mr Lambert holding the appeal rendered the dismissal unfair in circumstances where there was no flaw in the initial decision to dismiss.On the hearing of the substantive appeal he abandoned that position in the light of the Court of Appeal judgment in Cabaj , and instead submitted that the Industrial Tribunal misdirected itself in law in failing to ask itself whether a reasonable employer would have considered that for Mr Lambert to stand down and be replaced by another member of management would have been a futile exercise in all the circumstances, thus rendering the dismissal fair. Alternatively, he submitted that the tribunal's decision was perverse, particularly where the applicant had indicated at the internal appeal hearing that she would not go back to work for Mr Lambert as his secretary, and the only alternative to redundancy was such a transfer back from her new position of telephonist/typist.In reply, Ms Whyte submitted that it was open to the Industrial Tribunal to conclude that the applicant had lost the opportunity to have a hearing before an objective appeals manager, and that that rendered the dismissal unfair. It is sufficient that such a finding is a permissible option open to the tribunal.

Conclusion

We repeat the observation of Balcombe LJ in Duffy v Yeomans . We shall resist the invitation by Mr Grundy to minutely dissect this Industrial Tribunal's reasoning and instead approach the appeal in this way.The reality of the tribunal's unanimous findings is that they concluded that Mr Lambert did not want to retain this long-standing employee as his secretary in circumstances which destroyed her trust in the employer such that had she quit the employment during the negotiations between management and her trade union representative, leading to the offer of alternative employment, she would have been unfairly constructively dismissed. Although her selection for redundancy from her new post as telephonist/typist was itself fairly conducted (in the view of the majority) nevertheless, when she appealed that decision to dismiss she found that the very person responsible for destroying her trust and confidence in her employer was to hear and determine her appeal. She was therefore deprived of the opportunity to have her appeal heard objectively; a reasonable employer would have appreciated that fact and, given the size and administrative resources of the employer, would have arranged for another member of management to hear the appeal. Failure to do so rendered the dismissal unfair.The tribunal went on to accept the employer's case that had a different appeal manager been appointed it would have made no difference to the outcome in the sense that the appeal would have failed, and the dismissal would then have been fair. That finding was clearly reflected in the award of nil compensation, but it is of itself irrelevant to the question of reasonableness on the actual facts of the case.It would have been open to the tribunal to characterise this as an exceptional case where a change of appeal manager would have been a futile exercise. It chose not to do so. In our view that was a permissible option open to the Industrial Tribunal. We would not ourselves regard an Industrial Tribunal as falling into error simply on the ground that having found that a proper procedure would have made no difference to the result, it did not then go on to state expressly "and we do not find that this is an exceptional case where changing the appeal manager would have been an utterly useless exercise." To do so would be tantamount to elevating the words of Lord Mackay LC in Polkey to those of the statute. We are sure that that was not the intention of Lord-Chancellor, who was merely observing that there may be such exceptional cases in future. This is not one of them.Accordingly we shall dismiss the appeal.