MR I K PERKIN v ST GEORGE'S HEALTHCARE NHS TRUST [2004] UKEAT 0293_04_2907

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2004] UKEAT 0293_04_2907Case No Appeal No. UKEAT/0293/04Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
MR I K PERKINAPPELLANTST GEORGE'S HEALTHCARE NHS TRUSTRESPONDENT
Before
Mr Justice Mitting Mr D EvansDate 29 July 2004
[1]APPEARANCES For the Appellant MR BRIAN LANGSTAFF QC MR LACHLAN WILSON (Of Counsel) Instructed by: Messrs Lyons Davidson Oriel House 52-54 Coombe Road New Malden KT3 4QB For the Respondent MR JOHN CAVANAGH QC MR SIMON DEVONSHIRE (Of Counsel) Instructed by: Messrs Bevan Ashford Solicitors 4th Floor 1 Chancery Lane London WC2A 1LF SUMMARY Employment Tribunal entitled to find 100% Polkey deduction and 100% concerning fault when Senior Executive of Hospital Trust could not get on with colleague and have unfounded accusation of fraud and lying about them when dismissal was unfair for procedural reasons. THE HONOURABLE MR JUSTICE MITTING This is an appeal against the decision of the Employment Tribunal sitting at London South sent to the parties with Extended Reasons on 27 January 2004 to the following effect. The Appellant was unfairly dismissed but had a fair procedure been followed, it is certain that he would have been fairly dismissed and in any event he contributed as to 100% by his conduct to his dismissal. The Tribunal hearing took place over some 13 days in April and May 2003 was considered for 2 days in Chambers by the members of the Tribunal and the reasons extend to 66 pages.[2]It was a case involving many issues, not all of which are now live. For present purposes the facts can be stated relatively shortly. The Appellant was employed by the Respondent hospital trust from September 1986 until his employment was summarily terminated on 4 December 2002. His job was Director of Finance, evidently a responsible job that required him both to manage a group of employees underneath him and to co-operate with senior colleagues at the same level and above. The chief executive was Mr Hamilton and since October 1999 the Chairman was Ms McLoughlin. It was throughout clear that no criticism whatever could be made or was made of the Appellant's technical competence nor of his integrity. In a nutshell the difficulties that gave rise to the matters which led to his dismissal were those of personality and inter-relation with colleagues and of management style. Things came to a head in July 2002 when the Appellant was on holiday. On the day that he returned from holiday, Monday 29 July 2002, Ms McLoughlin held a meeting with KPMG during which it was noted that she informed KPMG that "she wanted an exit strategy in place for the Applicant by the end of July 2002". On the same day according to the findings of the Employment Tribunal which are not in dispute the Chief Executive Mr Hamilton summoned the Applicant to a meeting without prior warning and asked him to resign with immediate effect. He declined to do so. He responded by presenting a formal grievance under the Grievance Procedure on 5 August 2002. The Respondents set in motion their own disciplinary procedure. That required first of all an investigation that was initiated by Mr Hamilton who held an investigatory meeting on 8 August. The notes of that meeting were prepared by a Mr Watts, the Director of Human Resources. Notes were also prepared by the Appellant's solicitor Mr Quill. As the Tribunal was later to find the notes were in substantial agreement.[3]Following upon that investigatory meeting the Applicant was suspended on 9 August. During the meeting he had made an accusation about the Chief Executive's conduct to which reference was extensively made in both the disciplinary hearing to which we will refer in due course and in the Employment Tribunal itself. On 2 September 2002 as the Tribunal found the Applicant made an accusation against Mr Watts:
"On the 2 September 2002 the Applicant had accused Mr Watts of doctoring the notes of the investigatory hearing with regard to the proper recording of the events discussed at the investigatory hearing. The Tribunal finds no evidence to support that allegation. In our opinion the Respondent's notes of the investigation meeting were not doctored, they do not differ in substance from those notes taken by the Applicant's representative and compiled after consultation between the Applicant's representative and the Applicant. The Applicant persisted in making those allegations that Mr Watts had behaved in a dishonourable and fraudulent way throughout the hearing before the Employment Tribunal, and it remained the Applicant's case throughout. The allegations are unsustainable."
[4]A disciplinary hearing was to be convened. For its purpose the Respondents prepared and submitted for the Applicant's consideration a statement of case dated 6 September 2002. As noted by the Tribunal its case in brief was: ""Serious concerns have arisen over the conduct and performance of Ian Perkin as the Director of Finance and as a consequent breakdown in confidence in his ability to carry out the requirements of his role to the satisfaction of myself as the Chief Executive and the Senior Executive team. The issues relate primarily to:(i) your management style and ability to represent an advise the Trust in a positive and supportive manner; and(ii) your ability to form the necessary quality of relationships with external advisors, stakeholders and other external agencies to ensure the Trust interests are best preserved and advanced""[5]The disciplinary hearing was initially convened on 12 September 2002. In fact it extended over four further days, 7 and 8 October and 4 and 5 November. It was chaired by Ms McLoughlin assisted by a Mrs Mark. Objection was taken to her chairing the meeting. The fact that she chaired it was in due course as we shall demonstrate to lead the Employment Tribunal to conclude that the disciplinary procedure was unfair. Evidence was presented on behalf of the Respondents to the disciplinary hearing including evidence from Ms Grant, the Director of Operations and Nursing whose evidence was to the effect that she had no confidence in being able to work with the Appellant as an Executive colleague. Evidence was given by Professor Jones, the Professor of Respiratory Medicine and the Medical Director of the Trust to the effect that the Appellant was intimidating during meetings, would refuse to discuss things, would adopt the attitude that "that is my position and I am not moving from it" and would refuse to discuss matters that the medical staff had problems with. Professor Jones reported that it was the general consensus among managers of Service Centre Chairs that the Appellant should leave. In a document Professor Jones summed up the concerns of himself and colleagues as follows:
"I have major concerns about the attitude of the Director of Finance within the Executive team. He appears to be aloof, stubborn and at times intimidating in his frank refusal to listen to other's, request. There is a continual sense of "wont do" as oppose to "
I am not sure but I'll see what can be done".[6]During the hearing the Applicant either personally or through his representative suggested that a fellow Finance Director of another Trust a Mr Esterman was lying. Of greater significance, he pursued the accusation about the Chief Executive that he had foreshadowed at the investigatory meeting. The Tribunal noted:
"The Chief Executive, Mr Hamilton was then questioned about his integrity and in particular his holding out that he held CIPFA membership on his application form for Chief Executive, when it was not true. The reality was that Mr Hamilton had the qualification but was no longer a member. The Applicant actually raised the matter with CIPFA who accepted that Mr Hamilton had not been dishonest"
[7]In his statement of case presented, we are told, after the first day of the disciplinary hearing but before the second he made the following statement:
"The Chief Executive is not a man of integrity, he is in fact a bully who is prepared to lie or bend the truth whenever it suits his purpose."
He went on to allege at the hearing as the Tribunal found that:
"these events (this was a reference to events at November 1999 concerning the reimbursement of payment of £540.00 to pay for dinner to mark the retirement from office of a former chairman) demonstrate that the Chief Executive is an individual of low integrity making him unfit to hold such a senior position and also shows "why he is seeking to remove me as Finance Director","
[8]In summary the Appellant responded to the accusations against him of being a difficult colleague with whom to work by launching an attack upon the honesty and integrity of his immediate superior. Ms McLoughlin with Mrs Mark's assistance took just under a month to reach and formulate their decision. By a letter dated 4 December 2002 they set out their conclusions which resulted in their decision that the Appellant should be dismissed from his post as Director of Finance with immediate effect but with pay in lieu of notice of six months. The reasons which they gave were as follows:
"We concluded from the evidence we heard … that you have failed to engage the Service Centre Chairs and other clinicians and this resulted in a loss of confidence in you as the Director of Finance for the Trust. We would expect you as the senior financial executive within the organisation to contribute constructively to finding a solution to the problem but instead your disabling and negative approach has led us to conclude that your relationship with the executive team has broken down."
It was noted that he was held in high regard by staff within his own department. It went on to state:
"In relation to your relationships with external advisers, stakeholders and other external agencies, we also found that you had failed to establish the quality of relationships necessary to preserve and advance the Trust's interests."
Its conclusion was:
"In the circumstances, therefore, we have reached the view that your conduct and behaviour has been such that you are not able to discharge effectively the role of Financial Director with the Trust."
Ms McLoughlin went on to reject the submission that had been made at the disciplinary hearing that they were brought to penalise the Appellant for expressing his views about the Trust's financial affairs and the need to cancel operations in a previous year. The letter went on to note two further matters:
"First, at several points during the hearing you were asked if you had tape recorded conversation with Ian Hamilton and Simon Sharp and you refused to answer the question. We concluded that you did tape these conversations. To do so with an internal colleague is in our view highly questionable conduct, to do so with an external adviser (that was a reference to Mr Sharp of Price Waterhouse Cooper) is wholly unacceptable. Second, during the disciplinary process we became increasingly concerned about the effect your conduct during the hearing was having on your relationships with the Chief Executive and others. Whilst you are of course entitled to defend yourself against allegations made against you, to have done so by engaging in personal attacks, extending on occasions to abuse, against Ian Hamilton and other witnesses with whose evidence you disagreed has resulted in the situation where we do not see you could ever work together again. Even if, therefore, we had decided that the allegations had not been made out, your conduct would still have led us to the conclusion that you cannot return to a senior position within the Trust."
On a natural reading of that letter Ms McLoughlin and Mrs Mark were stating on behalf of the Respondents that the principal reason for dismissal was, to use neutral words, the events and difficulties in relationships before the disciplinary hearing; but that the Appellant's conduct at the disciplinary hearing would in any event have led to his dismissal.[9]Before the Employment Tribunal the Appellant's case was that he had been dismissed for making protected disclosures about some of the affairs of the Respondents and in particular about the financial probity and integrity of the Chief Executive, Mr Hamilton. The Tribunal rejected that contention and there is no appeal from its finding on that issue. It did so in trenchant terms in paragraph 33 of its decision:
"The Tribunal find that the Applicant had no reasonable belief that the "financial probity disclosure" made at the disciplinary hearing relating to Mr Hamilton's CV and the reference to having a CIPFA qualification, the Applicant's discussion with Mr Hamilton in November 1999 concerning the Trusts financial state and the Patient line dinner invitation of November 2000 revealed that the Chief Executive had failed or was failing or likely to fail in any legal obligation to which he was subject and were not made in good faith at the disciplinary hearing."
[10]In paragraph 36 of its decision the Tribunal concluded that they were: "not satisfied that the Applicant had succeeded in casting any doubt on the reason given by the Respondents for the dismissal, and the Tribunal accepts that the reasons given by the Trusts is set out in the letter of dismissal, that the reasons for dismissal was conduct some other substantial reason." (Clearly something has gone wrong in the transcription of the reasons given, both grammatically and by failing to interpose a dash or word between 'conduct and some other substantial reason.')[11]The Tribunal noted that both were potentially fair reasons. In paragraph 39 it expressed itself:
"We are satisfied that the Trust had a reasonable belief that the Applicant's style of management was such that it was seriously adversely affecting the proper running of the Trust and it was that belief that caused it to dismiss the Applicant, and that those beliefs were formed after a reasonable investigation at the disciplinary hearing."
[12]The Tribunal went on to find as we have noted that Ms McLoughlin was not the appropriate person to chair the disciplinary hearing because she had expressed views at the KPMG interview that an exit package strategy would be in place for the Appellant by the end of July. The Tribunal considered that she was not impartial and that the appointment of Mrs Mark to sit with her did not remedy the difficulty. For those reasons they concluded that the disciplinary hearing was procedurally unfair, a conclusion which inevitably led to the conclusion that the dismissal was unfair.[13]The Tribunal then went on to make the two findings against which the Appellant appeals. In paragraphs 45 and 46 it posed what has been referred to as the Polkey question:
"45 The Tribunal went on to consider whether or not had a fair procedure been adopted what is the percentage chance that the Applicant would not have been dismissed. 46. This Tribunal has been able to look at matters as an independent panel."
[14]Its conclusion was set out in paragraphs 47-49 as follows:
"47 This Tribunal concludes that had the Applicant's disciplinary proceedings have been conducted by an independent person and that the evidence which was before Ms McLoughlin and Mrs Mark was before that independent panel that there is a 100% chance that the Applicant's employment would have been terminated, i.e. a nil percentage chance he would have remained in post. 48. Operating at the senior level at which the Applicant was and being a member of an Executive Team requires an individual to operate as an integral and effective part of that team. It is clear, for whatever reason that the Applicant was unable to function that way and it is clear that in the way in which he operated in the organisation the way in which he conducted himself at the disciplinary hearing which was illustrative of the concerns and complaints that had been raised by colleagues and others. Indeed at the hearing before the Tribunal the Applicant often made unfounded allegations against colleagues and others of fraud and lack of integrity which itself was conduct which on its own seriously adversely affects the Applicant's relationship working with those he unjustly criticises. Conduct which would distance the Applicant from others and prevent a positive working relationship. 49. The Applicant's conduct and his representative's conduct during the disciplinary process and especially his attacks on the Chief Executive and the HR Director, Mr Watts would have so seriously damaged the relationship between those three at that level that that too would have made it not possible for the Applicant to work as part of the team."
[15]In paragraph 50 on the second issue which gives rise to the appeal it stated simply:
"We also would find the Applicant by his conduct contributed to his dismissal to the extent of 100%."
[16]Mr Langstaff makes a number of criticisms of the Tribunal's reasoning on the first issue. First of all he submits that the Tribunal did not clearly find what was the reason or if more than one the principal reason for dismissal. He submits that its observation in paragraph 36 that the reason for dismissal was conduct/some other substantial reason indicates that it did not address and answer that question. In our view there is some limited force in that submission. It is and has for at least 30 years been settled law that the reason for dismissal is that stated by Cairns LJ in Abernethy v Mott, Hay and Anderson [1974] IRLR 213:
"'A reason for the dismissal of an employee is a set of facts known to the employer, or it may be beliefs held by him, which cause him to dismiss the employee.'"
[17]It would, we agree, have been better if the Tribunal had in terms identified as the reason for dismissal the set of facts known to the employer or the beliefs held by him which led to the dismissal and then to go on to decide into which category that reason fell. Mr Cavanagh submits that in fact such a process is unnecessary and that on the proper construction of Section.98 of the Employment Rights Act 1996 all that is necessary is that an affirmative answer should be given to the question whether or not the reason thus described falls within one or more of the reasons set out in Sub-section 2 or in Sub-section 1(b). We disagree. It is the duty of the Tribunal to identify the set of facts known to the employer or beliefs held by him if appropriate and then to go on to state into which single category that reason falls. If it falls within the category set out in Sub-section 2 then the Tribunal should say so. If unable to identify a relevant category within those in Sub-section 2 it should then go on to ask whether it amounts to "some other substantial reason of a kind such as to justify the dismissal of an employee holding the position which the employee held".[18]There are not uncommonly cases in which it is not possible to pigeon hole the employer's reason into one of the Sub-section 2 categories. In such eventuality it is necessary to look to some other substantial reason to see whether or not the reason is one which falls within Section.98. In this case the Tribunal did compendiously set out the reason or reasons why the Respondents had decided to dismiss the Appellant. They identified them in paragraph 36 as those set out in the letter of dismissal to which we have already referred. Any ordinary construction of the letter of dismissal as we have already indicated leads to the conclusion that it was the actions and in a non-technical sense behaviour and management style of the Appellant before the disciplinary proceedings which led to his dismissal.[19]Having thus identified the Respondents' reason for dismissal the Tribunal had then gone on to ask itself into which category that reason fell would in our view inevitably have come to the conclusion that it fell into the category of some other substantial reason. The fact that the Tribunal did not thus categorise the reason is not in our view fatal to its reasoning or to the safety of its decision. It is trite law that having reached the conclusion that the dismissal was unfair procedurally the Tribunal was entitled to go on to consider whether or not, notwithstanding that fact, the Respondent could have and would have dismissed the Appellant fairly had it followed a fair procedure. Mr Langstaff criticises the Tribunal for focussing upon the partiality of the chair person of the disciplinary Tribunal Ms McLoughlin and not of examining the disciplinary procedure up to but including that fact. In our view that criticism is misplaced. There is nothing in the decision of the Employment Tribunal to indicate that there was any other element of unfairness in the procedure apart from the lack of impartiality of Ms McLoughlin. The Tribunal were perfectly entitled to pose the question, 'Would the conduct of the disciplinary proceeding by an independent chair person have arrived at the same result by focussing simply upon that question?' The test was that approved by the House of Lords in Polkey v Dayton first propounded by Browne-Wilkinson J as he then was in Sillifant v Powell Duffryn Timber Ltd [1983] IRLR 91 in which he observed:
"Where, in the circumstances known at the time of dismissal, it was not reasonable for the employer to dismiss without giving an opportunity to explain but facts subsequently discovered or proved before the Industrial Tribunal showed that dismissal was in fact merited, compensation would be reduced to nil"
Lord MacKay adopted the longer passage from which a short extract was taken and Lord Bridge approved another passage at page 96 of Browne-Wilkinson J's judgment:
"There is no need for an 'all or nothing' decision. If the Industrial Tribunal thinks there is a doubt whether or not the employee would have been dismissed, this element can be reflected by reducing the normal amount of compensation by a percentage representing the chance that the employee would still have lost his employment."
[20]The reasoning of the Tribunal in this case is in our view adequately set out in paragraphs 47, 48 and 49 of its decision. The conclusion which the Tribunal reaches namely that the Applicant was unable to function in the way required by membership of the senior management team to permit that team to function effectively in our view is beyond criticism. It is clear that in paragraph 48 the Employment Tribunal treated the conduct of the Applicant before the disciplinary hearing as illustrative of the difficulties that his colleagues had experienced before that hearing for this purpose.[21]Mr Langstaff submits that given that on a proper analysis up to the disciplinary hearing this was not strictly defined a conduct case means that a different outcome might have been possible had the Appellant been treated differently. The answer to that proposition is as the Tribunal found to be given by his conduct at the disciplinary hearing. In essence he demonstrated by his conduct at the hearing that there was no possibility that if he had been given a chance he would have mended his ways because he either was incapable of recognising or unwilling to recognise that there was anything wrong in his own actions or anything that made it difficult for his colleagues to work as part of a team with him.[22]In reaching its judgment that a fair hearing would inevitably have produced the same result the Tribunal was in our view entitled to take into account what took place at the disciplinary hearing. Mr Langstaff submits that had the hearing been conducted by an impartial chairman then the Appellant might not have made the accusations that he did. The answer to that is two-fold. First, as regards the allegation of lack of integrity on the part of the Chief Executive he had already made it at the investigatory hearing and secondly he did not know that Ms McLoughlin had reached the view that an exit strategy was needed for him before the hearing. He made his accusations against the Chief Executive and for that matter others regardless. The Tribunal concluded, as in our view it was plainly entitled to, that his conduct during the disciplinary hearing would have so seriously damaged the relationship between the Appellant and Mr Hamilton and Mr Watts that it would not have been possible for him to work with them as part of the management team. It seems to us to be utterly self evident that that was so: for a Finance Director to accuse his Chief Executive of personal dishonesty and/or his fellow Human Resources Director of preparing false notes of a meeting which he has attended, in other words of lying, would make it impossible for them to work ever again with them.[23]The Tribunal were therefore, in our view, entitled to conclude that notwithstanding the lack of impartiality of the Chairman, his conduct at the hearing as well resulted in the conclusion that he would inevitably have been fairly dismissed. Those findings deal with the possibility of the making of a compensatory award but we must nonetheless go on to consider the Tribunal's final finding that the Appellant had contributed to his dismissal to the extent of 100%. The law here is not in doubt. It was settled by the Court of Appeal in Nelson v BBC (No 2) [1980] ICR 110 in which giving the judgment of the Court Brandon LJ said at page 120:
"With regard to the first question it is clear from the express terms of paragraph 19(3) (that is to say Schedule 1 to the 1974 Act) that two findings at least are necessary. The first finding which is necessary is a finding that the matters to which the complaint relates were to some extent caused or contributed to by some action of the complainant in connection with those matters. The expression "matters to which the complaint relates, which is used in paragraph 19(1) and (2) as well as (3), must, I think, mean the (unfair) dismissal itself, for that is the subject matter of the complaint … The second finding which is necessary is a finding that, having regard to the first finding, it is just and equitable to reduce the assessment of the complainant's loss to a specified extent."
On page 121 he analysed the matter further:
"I agree with the conclusion there reached (that is a reference to Morris v Folkestone Ltd [1973] ICR 482 ) that, on proper interpretation of paragraph 19(3), an award of compensation to a successful complainant can only be reduced on the ground that he contributed to his dismissal by his own conduct if the conduct on his part relied on for this purpose was culpable or blameworthy. This conclusion can be arrived at in various ways. First, it can be said that the epithet "culpable" or "blameworthy" should be implied before the word "action."
Or secondly, it can be said, that the expression "caused or contributed" impliedly incorporates the concept of culpability or blameworthiness. Or, thirdly, it can be said that, in any case, it could never be just or equitable to reduce a successful complainant's compensation unless the conduct on his part relied on as contributory was culpable or blameworthy. For my part I prefer the third way of arriving at the conclusion to either the first or second, and would approach the application of paragraph 19(3) on that basis. It is necessary, however, to consider what is included in the concept of culpability or blameworthiness in this connection. The concept does not, in my view, necessarily involve any conduct of the complainant amounting to a breach of contract or a tort. It includes, no doubt, conduct of that kind. But it also includes conduct which, while not amounting to a breach of contract or tort, is nevertheless perverse or foolish, or if I may use the colloquialism, bloody- minded it may also include action which, though meriting any of those more pejorative epithets, is nevertheless unreasonable in all the circumstances. I should not, however, go as far as to say that all unreasonable conduct is necessarily capable or blameworthy; it must depend on the degree of unreasonableness involved."[24]Mr Langstaff submits that it is not at all clear to what the Tribunal were referring in its short sentence by which it made it reach the conclusion that he had contributed to his dismissal to the extent of 100%. He draws attention to the fact as is self evident that the Tribunal has not gone through the process identified by Brandon LJ in Nelson at least expressly. Mr Cavanagh submits that the omission could be rectified by putting the words such as 'in the light of our conclusions above' or some similar in front of the sentence then sense can be made of it. That in our view is not a wholly sufficient answer. It is not in fact clear whether the Tribunal were referring to the totality of the behaviour of the Appellant before and including the disciplinary hearing or his conduct properly so described at the disciplinary hearing itself. Applying Brandon LJ's observations it would in our view be difficult to describe difficulty in getting on with colleagues or management style as conduct in the sense in which that word is used in Sections.123(6) and 122(2) of the 1996 Act. Conduct in that context means deliberate actions of a kind identified by Brandon LJ which would be capable of falling within the definition of conduct in Section 98(2).[25]In our view the only conduct to which that conclusion could properly have related was the conduct of the Applicant at the disciplinary hearing. That as we have indicated was undoubtedly conduct: to make as the Tribunal found an accusation of fraudulent conduct on the part of the Chief Executive otherwise than in good faith was clearly a deliberate action. It was conduct which as the Tribunal held would have made it impossible for the Applicant to work with Mr Hamilton again. Likewise the accusation against Mr Watts - found expressly by the Tribunal to be wholly unfounded - that he had produced false notes of the investigative meeting was likewise a deliberate action, properly categorised as conduct, which would have made it impossible for Mr Watts to work with the Appellant again.[26]If, therefore, the conclusion of the Tribunal that the Appellant by his conduct contributed to his dismissal to the extent of 100% had been confined to conduct at the disciplinary hearing it would have been a conclusion which it was undoubtedly entitled to reach. Indeed in our view any other conclusion would at least arguably have been perverse. If contrary to our view of what the Tribunal had in mind, it did have in mind the Appellant's behaviour before the disciplinary hearing then that would have amounted to an error of law but it is an error of the law for the reasons which we have given would be entirely immaterial. For those reasons the two aspects of the Employment Tribunal's decision which are criticised in this appeal are on proper analysis unjustly criticised and for the reasons which we have given this appeal is dismissed.