MR I SAGOO v WEATHERSEAL HOLDINGS LTD [2002] UKEAT 0742_01_2507

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2002] UKEAT 0742_01_2507Case No Appeal No. EAT/0742/01Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
MR I SAGOOAPPELLANTWEATHERSEAL HOLDINGS LTDRESPONDENT
Before
His Honour Judge Peter Clark Mr D J JenkinsDate 25 July 2002
[1]APPEARANCES For the Appellant MR S P QUANT (Representative) For the Respondent MR COLIN HENSON (Representative) Professional Personnel Consultants Ltd Enterprise House Great North Road Little Paxton Cambridgeshire PE19 6BP JUDGE PETER CLARK By an Originating Application presented to the Reading Employment Tribunal on 15 September 2000 the Applicant, Mr Sagoo, complained of unfair dismissal and racial discrimination on the part of the Respondent, Weatherseal Holdings Ltd, by whom he contended he had been employed from 4 June 1999 until 30 June 2000, that is, just over the 1 year qualifying period for ordinary unfair dismissal.[2]By their Notice of Appearance the Respondent contended first, that the Applicant was not an employee, he was a self employed sales agent; secondly, that if he was an employee then there was a break in service such that he had not completed 1 year's continuous service. The claim of racial discrimination was denied.[3]The unfair dismissal complaint came on for hearing before an Employment Tribunal chaired by Mr D M Simpson on 9 April 2001.[4]By a decision with Extended Written Reasons dated 3 May 2001 that Employment Tribunal concluded that the Applicant was employed by the Respondent from 4 June 1999 to 30 June 2000. He therefore qualified for statutory unfair dismissal protection. That finding is not challenged by the Respondent in this appeal.[5]As to the admitted summary dismissal by the Respondent on 30 June 2000, the Employment Tribunal found that it was unfair.[6]The relevant factual background to the dismissal, so the Employment Tribunal found was this. Initially, the Applicant was employed as a salesman at the Respondent's Watford branch. The sales manager was a Mr Malbert Sinclair, who later left the Respondent's employment.[7]In early January 2000 the Applicant loaned Mr Sinclair, who had by then parted company with the Respondent, the sum of £3000 to help him set up his own business, Seabird UK Ltd, which competed with the Respondent. The Applicant became a director of that Company but took no part in its management or control and received no remuneration from that Company so the Employment Tribunal found, although Mr Sinclair later repaid the loan.[8]On 15 June 2000 the Applicant was transferred to the Respondent's High Wycombe branch where he worked under the direction of Mr Zaman. Towards the end of June Mr Zaman was driving the Company motor car used by the Applicant. In that vehicle he found a Seabird purchase order on which was printed the Applicant's mobile telephone number. He reported that discovery to his seniors, Messrs Mounsey and Kennedy.[9]On 30 June, without prior warning, the Applicant was called to a meeting with Messrs Mounsey, Kennedy and Zaman. He had received no prior notice of the meeting or its purpose. He was asked to explain why his mobile number was printed on Seabird's purchase order. He could not then provide a satisfactory explanation and was summarily dismissed.[10]In these circumstances the Employment Tribunal had no doubt that the dismissal was procedurally unfair. Indeed, the contrary was not argued on behalf of the Respondent.[11]However, it was contended on behalf of the Respondent that the Applicant's association with Seabird amounted to a breach of the duty of good faith owed to the Respondent as employer, so that if a fair procedure had been followed he would still have been dismissed.[12]The Employment Tribunal accepted that submission they expressed their conclusion thus, at paragraph 7 of their reasons:
"We have, however, considered the substance of the respondent's complaint and are persuaded that in the absence of any explanation by the applicant of the appearance of his mobile telephone number on the purchase order of Seabird UK Ltd, the respondent's managers were entitled to find, as they did, that he was in breach of his fuduciary duty to the respondent and that dismissal was a reasonable response. Indeed, we consider that summary dismissal was appropriate as the apparent breach in working for a competitor could properly be regarded as gross misconduct."
[13]The Employment Tribunal went on to limit the compensatory award for unfair dismissal to one week's loss of earnings, representing the time which it would have taken to operate a fair procedure, together with a sum of £100 for loss of employment rights.[14]It is against the compensatory award that this appeal is brought by Mr Sagoo.[15]In support of the appeal Mr Quant submits that the Employment Tribunal fell into error as a matter of law by failing to consider, in accordance with the House of Lords guidance in Polkey v AE Dayton Ltd [1988] ICR 142 , what would have been the outcome of a proper investigation and disciplinary procedure carried out by this employer. He contends that had such a process been completed by the Respondent it would have concluded, based on the explanation which the Applicant would then have given, that he was not actively in competition with its interests through Seabird and that dismissal was a disproportionate response. A warning would suffice.[16]We must examine that proposition. As a matter of law we accept that under Polkey the Employment Tribunal is required to ask this hypothetical question, having found the dismissal to be procedurally unfair, would a fair procedure have made any difference? If not, then it may not be just and equitable to award any compensation by way of a compensatory award subject to compensating the Applicant for the period which a fair procedure would have taken thus putting back the date of dismissal. In this case the Employment Tribunal put that period at 1 week, a finding not challenged in the appeal. Alternatively, if there was a chance that following a fair procedure the employee might have retained his job that chance may be expressed as a percentage and compensation be reduced proportionately. It need not be an all or nothing finding.[17]We have derived further assistance from the approach of the Court of Appeal in O'Donoghue v Redcar & Cleveland Borough Council [2001] IRLR 615 .[18]From that case we see that two questions arise in considering the Polkey deduction, first, would this employer have dismissed the employee following a fair procedure; and secondly, if so, would that dismissal have been fair? Again, the Employment Tribunal's conclusion on those questions may or may not be as to an inevitable outcome.[19]Dealing with those 2 questions, it is first apparent from the Chairman's review decision reasons, promulgated on 11 June 2001, at paragraph 1, that evidence was given by the Respondent's witnesses and we infer was accepted by the Employment Tribunal, that they would have dismissed the Applicant in any event.[20]As to the second question, would such a dismissal be fair, we look at the state of the evidence called by and on behalf of the Applicant before the Employment Tribunal and the Tribunal's findings of fact.[21]They found(1) that the Applicant loaned Mr Sinclair £3000 to help set up the Seabird business, a sum later repaid by Mr Sinclair.(2) that the Applicant was a director of Seabird although he took no part in the management and control of that company.(3) that his mobile telephone number was printed on Seabird standard form purchase orders.[22]Mr Quant tells us, and we accept, that the evidence of the Applicant, supported by that of Mr Sinclair was to the effect that although he loaned money to Sinclair and was made a director of Seabird, he was not actively competing with the Respondent. His mobile telephone number was printed on the company's purchase orders without his prior consent, although it is accepted he was aware of that fact from reading the purchase order form found in his company car by Mr Zaman.[23]In these circumstances the hypothetical question for the Employment Tribunal, applying the Burchell test as approved by the Court of Appeal in Foley v Post Office [2000] ICR 1283 , was whether, following a proper investigation which revealed those facts by way of explanation from the Applicant, dismissal would have been fair.[24]The Employment Tribunal answered that question unequivocally in the affirmative. The employer was entitled to reject the Applicant's exculpatory explanation. In our judgment they were entitled to do so. The question at this stage is not whether the Employment Tribunal found as a fact that the Applicant was actively competing with the Respondent but whether the Respondent would have reasonable grounds for believing that he was, based on the explanation which the Applicant would have given had he been given a proper opportunity to do so. The Employment Tribunal, permissibly in our view, found that it would.[25]In these circumstances we can see no error of law in the Employment Tribunal's approach. We think that on such assumption dismissal fell within the range of reasonable responses open to the employer. It was not a case simply of the employee forming an intention to compete with the Respondent in the future, in the reasonable belief of the employer, but of actively competing during the employment. See Adamson v B & L Cleaning Services Ltd [1995] IRLR 193; cf Laughton & Hawley v Bapp Industrial Supplies Ltd [1986] IRLR 245.[26]Accordingly, we shall dismiss this appeal.