Kenny v Clean Factory & Office Services Ltd [1998] UKEAT 223_97_2001

EAT

Kenny v Clean Factory & Office Services Ltd

[1998] UKEAT 223_97_2001 · 1998-01-20

JUDGE C SMITH QC :

This is an appeal by Mr Kenny, the Appellant before the Industrial Tribunal, against the decision of an Industrial Tribunal held at London (North) on 20 November 1996 and 4 December 1996, when the Industrial Tribunal held that an unauthorised deduction had been made from the Appellant's wages and that consequently he had been constructively dismissed when he resigned, that the dismissal was unfair, but that the Appellant had contributed to the extent of 75% to his dismissal.

We have had the benefit of hearing a very well argued submission by Mr Thacker, on behalf of the Appellant, who has represented the Appellant throughout this matter, that the Industrial Tribunal erred in holding that there should be a contribution of 75 per cent and asking us in the special circumstances of this case, since all the relevant facts are before us in the light of the findings of the Industrial Tribunal, to exercise our own discretion in accordance with the well known three-stage test adumbrated by Brandon LJ (as he then was) in Nelson v British Broadcasting Corporation (No 2)

[1980] ICR 110

at page 121, and to hold that there should be no deduction under Section 123(6) of the Employment Rights Act 1996 and a fortiori under Section 122 of the Employment Rights Act 1996 .

We should place on record that, for whatever reason, the Respondent employers, Clean Factory & Office Services Ltd, failed to enter an Answer to the Notice of Appeal, despite their then representatives being notified formally by the Registrar of the need to do so and accordingly, although Mr Staines, a Director of the Company who gave evidence before the Industrial Tribunal has been present, he is here as an observer, on behalf of the Respondents, and we have heard no submissions from him.

The Appellant was employed by the Respondents as a general foreman and had been in their employment for some 14 years, until his dismissal in early April 1995, as appears from the findings of the Industrial Tribunals.

As appears from the findings of the Industrial Tribunal, particularly in paragraphs 3 and 4 of their decision, the system of work put into effect by the Respondents was, putting it very shortly, that the individual contracts were managed by the foreman, including the Appellant. The foreman would be allocated a labour-cost budget. From that he would allocate what he, himself, was to be paid and what his operatives were to be paid, contract by contract. The foreman would make the necessary return and the Wages Department would then calculate, from the gross wages, the net wage and work out the individual pay slips. No money was ever actually in the foreman's hands - it was all done on paper.

In November 1994, an audit of the budgeted amounts allocated to the Appellant showed an over-allocation of £500 against dockets for work done. The Industrial Tribunal made what we regard as very important findings about this in paragraph 4 viz:

"The Applicant accepted, and agreed in the evidence which he gave before us, that there had been this overpayment. Mr Palmer said in evidence that he saw the Applicant and told the Applicant that the Respondents wanted the money back. The Applicant agreed that he would repay by March 1995. The conversation with Mr Palmer occurred in November 1994."

What happened thereafter was that, as a result of a wage save or wage saves on another contract or contracts, the amount of the misallocated money was reduced to £200 ie £300 had been repaid into the pool. In March 1995, without the agreement of the Appellant, the Respondents unilaterally deducted the remaining £200 from his wages at which point the Appellant resigned.

The Industrial Tribunal went on to consider whether that was an unlawful deduction from his wages and for reasons which are clearly set out in the decision and which we have no need to go into in detail for the purposes of this appeal, they decided that this was an unlawful deduction contrary to the Wages Act. They found, in particular, that the misallocated £200, which the Respondents had deducted from the Appellant's wages, was not, in fact, wages itself, but rather an overpayment of the pool of money allocated to the Appellant and his operatives, which pool of money was not wages.

The Industrial Tribunal then had to consider the Appellant's claim based on constructive dismissal. They held, in paragraph 9 of the decision, that the unlawful deduction was in fundamental breach of the contract, entitling the Appellant to resign. They then considered whether the dismissal was unfair and they held that it was. They expressed themselves in this way, in paragraph 9:

"Our view is that it was unfair. The employers certainly had carried out investigations from which they could come to the conclusion that the Applicant had attempted to increase the pool allocated to him and his operatives by £500. They never attempted to consider the matter with the Applicant, except at a somewhat hasty meeting with Mr Palmer in November, or to sit down in March and consider properly with the Applicant what ought to be done about his failure to repay. Our view therefore is that for these reasons the dismissal is unfair."

Then, finally, the Industrial Tribunal came to consider the issue of contribution. Unfortunately, they did not allow the parties to address them at all on this issue. They expressed themselves as follows:

"We have however considered the question of contribution. It was quite clear from the evidence which we heard that the Applicant had been engaged in an attempt, which was only discovered after an audit, to swell unauthorisedly the pool of money available to pay his operatives and himself by the sum of £500, a fact which he did not attempt to deny when confronted with it in November by Mr Palmer. Equally, the Applicant, instead of attempting to discuss the deduction in a rational manner, proceeded to offer his resignation immediately whereas, in our view, it would have been far more sensible for him to have discussed the whole situation and to have attempted to resolve the matter without any conflict. The conduct of the Applicant appears to us to be unmeritorious and while we do not consider that this is a case that should be visited by an award of contributory fault of 100 per cent, we do find that the Applicant is very substantially to blame for what occurred and we reduce any compensation which he is to receive for unfair dismissal by 75 per cent."

Put very shortly, and it does not do justice to the points made in detail in the Skeleton Argument to which full reference should be made, the points taken on appeal are to the effect that the Industrial Tribunal's finding that the Appellant had attempted unauthorisedly to increase the pool money by £500, so as to increase the wages payable to him and his operatives, was wholly at odds with the Respondents' acceptance that the over-allocation of £500 by the Appellant was a mistake and was an impermissible finding in that there was no evidence to support the Industrial Tribunal's finding that the Appellant did not deny to Mr Palmer that this was the reason for the over-allocation of the £500.

Thus, it was submitted that there was no evidence to support the finding by the Industrial Tribunal in paragraph 9 of the decision that the Appellant had been engaged in an attempt to swell unauthorisedly the pool of money available to pay his operatives and himself by the sum of £500. Once that finding is set on one side, as Counsel for the Appellant submits it must be, it is submitted that given that there was, on the evidence, an agreement between the Appellant and the Respondent to pay the pool back the £500, a repayment to the pool of £300, and an acceptance by the Respondents that the over-allocation in the first place was a mistake, there was no sufficiently blameworthy or culpable conduct on the part of the Appellant to justify a reduction for contributory fault.

Further, or in the alternative, it is submitted that the delay between the original misallocation and the dismissal, together with the agreement to repay, the repayment of £300 and the acknowledgment by the Respondents that the misallocation was a mistake, broke any chain of causation which otherwise might have justified a reduction for contributory fault.

Next, it is submitted that in the light of the findings of the Industrial Tribunal that the Respondents were in fundamental breach in deducting the £200 from the Appellant's wages in March and that the Appellant was justified in resigning as a result, so that he was constructively and unfairly dismissed, it was illogical for the Industrial Tribunal to find that the Appellant had been guilty of contributory fault by failing to initiate conciliatory discussions to settle the dispute over the outstanding £200. In any event, on the evidence before the Industrial Tribunal, any such discussions, had they been held, would not have made any difference to the outcome. Finally, it was submitted that the Industrial Tribunal did not give the parties an opportunity to address them or make submissions on contributory fault.

This is no more than a summary of the submissions that were made to us and, we find in this particular case, the whole of the argument contained in the Skeleton Argument, as developed before us, to be a compelling one.

In our judgment, on a careful analysis of the decision relating to contribution, the arguments made by the Appellant are very formidable. Of course, the Respondents could, had they chosen to do so, have investigated the matter of the misallocation, perhaps through a disciplinary procedure, with a view to trying to establish that the Appellant had, in some way, been acting dishonestly. However, in our judgment, it is beyond argument on the findings of the Industrial Tribunal on the evidence before them that the Respondent employers did no such thing. Instead, they accepted, as their Notice of Appearance in answer to the Originating Application makes crystal clear, that the initial misallocation by the Appellant was a mistake and they dealt with the matter throughout on the basis that both sides accepted that a mistake had been made. That is, in effect, what the Industrial Tribunal found as a fact in paragraph 9 of their decision.

In the light of those admitted facts and that finding of fact in our judgment, with respect, it was impermissible for the Industrial Tribunal to reach the finding that "it was quite clear from the evidence which we heard that the Applicant had been engaged in an attempt, which was only discovered after an audit, to swell unauthorisedly the pool of money available to pay his operatives and himself by the sum of £500, a fact which he did not attempt to deny when confronted with it in November by Mr Palmer".

So that in our judgment, once this fundamental finding is undermined the first basis for making any finding of contribution was fatally undermined. Secondly, in our judgment, Mr Thacker is equally right in his submission that, in the light of the findings made by the Industrial Tribunal with regard to the Respondents' conduct in regard to the dismissal, namely that they had never attempted to consider the matter with the Appellant in November 1994, or to sit down with him in March 1995 to consider what ought to be done about the failure to repay, it was illogical and, frankly, unfair for the Industrial Tribunal to have found the Appellant liable to contribution for an alleged failure on his side to enter into discussions with the Respondents.

In our judgment, since the very essence of the finding that the dismissal was a constructive dismissal, was that the Appellant was entitled to treat the contract as at an end and since the very essence of the finding that the dismissal was unfair was because the Respondents had failed to discuss the matter with the Appellant, but had acted in a somewhat peremptory manner, there was no basis for a finding that the Appellant had contributed to his own dismissal by failure to discuss the matter with the Respondents.

In any event, we agree that discussion would have made no difference, having regard to the attitude struck at the time by the Respondents. Apart from these reasons for criticising the decision on contribution, we accept that 75 per cent was in any event, not a just and equitable proportion in the circumstances here of constructive dismissal. In addition, with respect to the Industrial Tribunal, there was a serious procedural irregularity in not allowing the parties to make representations on the issue of contribution. As a result no reference was made in the decision to the well known three-stage test laid down by Brandon LJ, in Nelson v BBC No.2 and no distinction was drawn between the differing statutory tests in Section 122(2) relating to basic awards on the one hand and the more stringent test in Section 123(6) relating to compensatory awards on the other.

In all the circumstances, we are unanimously of the view that on this issue of contribution the decision of the Industrial Tribunal was flawed for the reasons we have attempted to state, in accordance with the submissions made to us by Mr Thacker, and we agree that, unusually, in this particular appeal, we can and should consider the matter of contribution afresh in the light of the facts found by the Industrial Tribunal.

Thus, we approach the question of what contribution, if any, should the Appellant bear, applying the words of Section 123(6) relating to any compensatory award in the light of the principles laid down by Brandon LJ in Nelson . In our judgment, on the findings of the Industrial Tribunal and in the light of the submissions made to us by Mr Thacker, it cannot be said here that the Appellant was guilty of any "culpable" or "blameworthy" behaviour. The most that can be said is that he may have been acting unreasonably in not reallocating the £200 more promptly but that is entirely speculative. He was not being perverse or bloody-minded. The initial misallocation had been a mistake. He had agreed to repay and had, in fact, repaid over half of the money misallocated, when the Respondents stepped in and constructively dismissed him. Thus, in our judgment, there should be no order of contribution on that fundamental ground.

In addition, the misallocation which took place in November 1994 was, in our judgment, too remote from the dismissal in March 1995 and thus, the necessary causal link between the conduct and the dismissal was not present. Nor, applying the broader tests laid down in Section 122(2) relating to the basic award, in our judgment, was there any conduct of the Appellant which renders it just and equitable to reduce the amount of any basic award. Here again, we repeat our basic finding that there was no blameworthy or culpable conduct on the part of the Appellant, making it just that there should be any such reduction.

For those reasons the appeal is allowed and we remit this case to a fresh Industrial Tribunal to consider the question of remedy, on the basis that there is no finding of contribution, under either Section 123(6) or Section 122(2) of the Employment Rights Act 1996 .