JONATHAN READ v THE MOTIVATION BUSINESS LIMITED [2004] UKEAT 0719_03_0707

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2004] UKEAT 0719_03_0707Case No Appeal No. UKEAT/0719/03Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
JONATHAN READAPPELLANTTHE MOTIVATION BUSINESS LIMITEDRESPONDENT
Before
His Honour Judge Birtles Mr P M Smith Miss S M WilsonDate 7 July 2004
[1]APPEARANCES For the Appellant MR D CRAIG (of Counsel) Instructed by: Messrs Steven & Bolton Solicitors Guildford Surrey GU1 4YD For the Respondent MS R WEDDERSPOON (of Counsel) Instructed by: Messrs Laytons Solicitors 22 St John Street Manchester M3 4EB SUMMARY Unfair Dismissal Unfair dismissal and breach of contract in not paying sick pay and salary increase. The Employment Tribunal took all relevant considerations into account. There was no perversity. HIS HONOUR JUDGE BIRTLES Introduction This is an appeal from the decision of an Employment Tribunal sitting at London South on 2 and 3 June 2003. The Extended Reasons were sent to the parties and entered in the Register on 15 July 2003. The Chairman was Mr I M Macinnes, and the members were Ms L Myland and Mrs J C Saunders.[2]The unanimous decision of the Employment Tribunal was that:(i) the Applicant was not dismissed;(ii) the Respondent was not in breach of contract in not increasing the Applicant's salary after 31 July 2002, not paying him a bonus for the year ended 31 July 2002 and in not paying him company sick pay for the period 5 - 19 November 2002;(iii) the Applicant was in breach of contract under clause 7.1 of his contract of employment by negligently incurring expenses with seeking an authorisation from the client (Peoplesoft). The material facts[3]The Employment Tribunal made the following relevant findings of fact:
"8.1 The Respondent is a full service marketing and communications agency. It employs 33 staff. It provides a range of services in the field of marketing and communications, including video concepts and production, live event creation and management, logistics management, conference and road show production, and performance improvement and marketing support programmes; 8.2 Mr Kempson is the sole shareholder and director of the Respondent. 8.3 The Applicant was employed by the Respondent initially as senior conference producer with effect from 31 July 2000. He was promoted to head of production in early 2001. 8.4 The Applicant's contract of employment is at pages 21 -33 of the bundle. Clause 15.2 of the contract of employment incorporates the Respondent's disciplinary procedure which is at pages 34-39 of the bundle. Both these documents are in the possession of both parties and the Tribunal does not propose to recite them here. The relevant provisions for the purposes of this case are as follows:- (a) The contract of employment Clause 5 -which provides for the Applicant's salary to be reviewed annually. Clause 6 -which provides that the Applicant may be eligible to participate in the bonus scheme and that bonus payments are paid annually in arrear. Clause 7 -which provides that the Respondent has the right to recover losses suffered by the Respondent as a result of the Applicant's negligence or breach of company rules. Clause 12- which makes provision for payment of sick pay. Clause 15.2 -which incorporates the disciplinary procedure and which, at clause 15.2.1, provides that the Respondent may demote the Applicant by notice in writing. (b) The disciplinary procedure Paragraph 3 -which contains definitions of misconduct. Paragraph 4 -which contains definitions and examples of gross misconduct. Paragraph 9 -which makes' provision for the disciplinary hearing and the right of appeal. Paragraph 10 which describes the penalties which include "downgrading or demotion (in terms of status and/or remuneration package)"
. Paragraph 12 -which provides for appeals to be addressed in writing to the managing director. 8.5 In summer 2002 the Applicant represented the Respondent in dealing with a firm of solicitors called Olswang who were planning a launch event following their acquisition of the Reading office of Garetts from Arthur Anderson. In July 2002 the Applicant met with Olswang's senior marketing manager - Sophie Basic -to discuss the launch event. Ms Basic said that Olswang wished to consider a re-branding project. The Applicant said that the Respondent did not do this type of work and recommended that Olswang use a consultancy firm called CADA, the Respondent and CADA had worked on projects together in the past. The Applicant proposed that the Respondent shou1d participate in some of the remuneration for this project. 8.6 On 25 October Mr Kempson sent an e-mail to the Applicant [168] which stated as follows:- "It has come to my attention that during the Olswang event that we ran last week, you invited competitors of ours to attend from a company called CADA Design A person from CADA has since sent a letter to our client offering his company's design services. Can you please enlighten me as to why you are introducing TMB competitors to our clients. If you believe that Olswang require design work, why have you not introduced Andrew Peck to the client? I also understand that you refused to complete a tender document for providing conference production services to GSK. In doing so I understand that this involved personal and derogatory comments about me. Can you please let me know why you did not assist with this process. This kind of co-operation does nothing to encourage the efforts of the New Business Team in finding opportunities for the Production Department. I do consider the above to be very serious matters and unless I am satisfied with your response I may have to take disciplinary action." [The e-mail also referred to a matter involving GSK but as this was not proceeded with, we do not consider this to be relevant.] 8.7 On 30 October 2002 the Applicant responded [168] to the effect that he did not consider CADA to be a competitor. 8.8 A meeting took place between the Applicant and Mr Kempson on Thursday 31 October 2002, at which Mr Kempson's allegations regarding CADA were discussed. . 8.9 The Applicant did not come in to work on Friday 1 November and was off sick from the following Tuesday, 5 November, until he returned to work on Tuesday 19 November. 8.10 While the Applicant was off sick, Mr Kempson became aware of other problems concerning a client - Peoplesoft - and a supplier - Rhode Island Red (RIR) - when the Respondent received invoices from RIR. 8.11 Mr Kempson investigated the situation, which he found to be as follows:- (a) Peoplesoft had been identified by Ursula Dowd of the Respondent as a potential client. She was the account manager. (b) Peoplesoft is a very substantial US software company. It was planning an event in Paris on 21/22 October for the chief executive officers and chief information officers of a number of high-profile European companies. (c) A briefing meeting took place on 2 October at which Suzanne Barber of Peoplesoft briefed the Applicant on the event. No written brief was agreed or supplied, nor did Peoplesoft agree or provide any budget for the event. Ursula Dowd attended the meeting with the Applicant. It was agreed that the Applicant and Andrew Wright (a freelance production manager) should visit the venue in Paris. (d) The Applicant and Mr Wright visited the venue in Paris on Wednesday and Thursday, 9 and 10 October. They returned on 10 October. (e) Immediately on his return from Paris, the Applicant had a meeting with Mr Fogden, a set designer representing RIR, a set construction company, (f) On either Friday 11 October or early Saturday 12 October, the Applicant gave instructions to RIR to start ordering and assembling the products they would need for the set construction. He confirmed the order to carry out the building of the set on Monday 14 October. This timing was necessary if the set was to be constructed by Friday 18 October, which was the latest time for it to be delivered and erected at the venue in Paris in time for the start of the event on Monday 21 October. The Applicant did not inform or clear this instruction with Ms Barber or anyone else at Peoplesoft, nor did he try to do so. (g) Also on 14 October, the Applicant had a meeting with Ursula Dowd regarding the costings he had prepared for the event, Ms Dowd said they were far too high and if he went to Peoplesoft with them "it would be the last nail in the coffin", (h) On Wednesday 16 October the Applicant attended a meeting with Ms Barber to discuss the costings. Ms Barber expressed concern at the cost of £60,000 for the event and the Applicant managed to reduce them to £50,000. Ms Barber said she would have to get authorisation for this expenditure. On Thursday 17 October Ms Barber advised the Applicant that she cou1d not get authorisation for the costs and Peoplesoft would not therefore go ahead with the event. (i) Meanwhile, RIR had raised an invoice on Saturday 12 October for £12,637.13; which was received by the Respondent on Tuesday 15 October, for the set construction work. j) On 11 November -while the App1icant was on sick leave -Ms Kathy Honeywood-Howlett, the production co-ordinator, rang the Applicant at home to ask whether the RIR invoice should be processed. The Applicant said it should. The invoice was then referred to Mr Kempson and Ms Dowd, to whom it came as a complete surprise. 8.12 On his return from sick leave on Tuesday 19 November, the Applicant was suspended on full pay by Mr Kempson who gave him the letter at page 178 in the bundle, which read as follows:- . "It has come to my attention that there are a number of matters which lead me to suspect that there has been a breach of our Disciplinary Procedures. I have provided full details below. I propose to hold an investigatory meeting to consider the matters and to provide you with the opportunity to explain your position. In the meantime, I am placing you on suspension on full pay pending the outcome of the Disciplinary Procedures. Suspension is not to be treated as a Disciplinary sanction in itself and you should not treat it is as an indication of outcome of procedures. During the period of suspension, you should not attend at the Company's premises not should you contact any employees or customers. If you need any papers or wish to contact any person with regard to the Disciplinary Procedures, please contact me and I will make appropriate arrangements. The conduct which requires investigation is as follows: ~ In October 2002, you invited a competitor of the Company to present to Olswang, namely CADA. Since then, that company has sought further business from Olswang. Is established this would be performance falling below the required standard to a very serious extent (contrary to Rule 3 (ix)); You incurred expenditure of £12,000 in connection with the bui1ding of set on behalf of Peoplesoft, it would appear, without authorisation from the customer. This would amount to a serious breach of Rule 3(ix) and also a serious breach of Company Procedures (Rule 4(iv)) in that you have exceeded your authority; You instructed the Production Co-ordinator to pay the outstanding invoice due in respect of the set and that you gave the impression that you invoice Peoplesoft for the cost of it knowing the costs were irrecoverable. This would be a serious breach of the Company Procedures. I intend to hold an investigatory meeting which will take place at tmb on Friday 22nd November at 4.00 pm. I will post to you a copy of the Disciplinary Procedures and supporting documentation as soon as possible You are entitled to bring with you a colleague of your choice to assist you. You may call any witnesses you consider appropriate. I should advise you that the Company is treating these matters very seriously and considers them to be matters of gross misconduct. If established, therefore, one of the options would be dismissal. If you have any questions in the meantime, please do not hesitate to contact me". On 20 November Mr Kempson wrote to the Applicant [182] informing him that the meeting was to be an investigatory meeting, enquiring who the Applicant's representative would be and confirming the management wou1d be represented by himself, Ms Dowd and Jenny Angell, Mr Kempson's personal assistant, as note-taker. 8.13 At the investigatory meeting on 22 November the Applicant was accompanied by Mr Nik Moore. The notes of the meeting are at pages 185 - 191 of the bundle. The agenda included another item concerning Daewoo [184]. Liz Quick, the account manager responsible for Olswang, attended and gave her version of the events concerning the CADA/Olswang issue. The Applicant was given the opportunity and did question her. Ms Dowd gave her version of her knowledge of events regarding the Peoplesoft issue and again the Applicant was given the opportunity and did question her. All the issues were fully ventilated. The Daewoo issue was discussed. 8.14 Following the meeting on 22 November, Mr Kempson contacted RIR for their account of the matter, and Mr Simon Ireland of RIR wrote to Mr Kempson on 25 November [192] setting out their version of events. 8.15 On 26 November [194] the Applicant was asked to attend a disciplinary meeting on 28 November. Details of the disciplinary charges were sent to the Applicant by Mr Kempson on 27 November [197/198] as follows:- "Following our meeting at Milton Heath House on 22nd November 2002 I have considered the explanations that you gave regarding the points in our letter to you of the 19th November 2002. It is felt that the information given in response to the allegations does not excuse your actions and I feel that a further meeting is required to discuss the disciplinary implications of these actions. I have further inspected the CADA design website and I am satisfied that they are a competitor of TMB. I am also satisfied that CADA shou1d not have attended the Olswang event and the invitation to CADA came from you. Your performance has fallen substantially below what I would expect of you. With regards to the commissioning of the set build I am satisfied that this is a case of gross misconduct negligence on your part and a deliberate failure to comply with procedures. I am also of the opinion that you have bought the company name into disrepute with a number of suppliers, over the PeopleSoft event where we are unable to pay due to the fact that the client did not commission us to run the project. Finally, I am satisfied that you instructed Kathy Honey-Howlett to pay Road Island Red and Wrightway Communications even though you were aware that we could not recoup the costs, exposing the company to losses in excess of £13,000. I would request that you attend a meeting at our offices this afternoon at 3.00 pm at which point I would ask that you present any further information which may explain your actions and any mitigation you wish us to consider. Following this meeting further explanations will be considered and a decision will be made as to what action, if any will be taken in line with the company disciplinary procedures. As mentioned in my letter of 19 November the company takes these matters very seriously and considers that they amount to gross misconduct. Therefore, I will be considering the full range of options open to me under the disciplinary policy (including dismissal if appropriate). You are of course entitled to request Nik Moore's attendance at this meeting, please do let me know if you would like to make him available for the meeting." The charges made no reference to Daewoo. 8.16 The disciplinary hearing took place on 28 November. The Applicant was accompanied by Nik Moore. The Applicant was given the letter from RIR [192]. Mr Kempson chaired the meeting. Ursula Dowd. was also present. The issues were fully aired. Mr Kempson accepted that CADA had worked for the Respondent on projects for William Grant Whisky and that the Applicant had negotiated a fee for the Respondent in relation to the Olswang proposal. 8.17 After the meeting, Mr Kempson considered what to do. Mr Kempson considered that his investigation in the meeting showed that the Applicant had:- (a) introduced a client, Olswang, to CADA, which he decided was a competitor of the Respondent, (b) authorised expenditure on the Peoplesoft event without Peoplesoft's authorisation and without seeking to obtain that authorisation, thus exposing the Respondent to potentially irrecoverable costs, and . (c) exceeded his authority which he considered was limited to £3,000 by "signing off' the RIR invoice which was in excess of £12,000. 8.18 Mr Kempson decided that the Applicant had committed acts of misconduct as described in rules 3(ix) and 4(vi) of the disciplinary procedure. He decided that the appropriate disciplinary sanction would be to demote the Applicant as he felt that he "cannot be trusted to carry out the duties of head of production and that you do not seem to continue to carry out the role of a producer without supervision. This decision has been , based on the nature of ,the allegations made against you." Mr Kempson wrote to the Applicant accordingly on 2 December [213]. The demotion involved a reduction in the Applicant's salary of £18,000 pa from £50,000 pa which was the appropriate salary for the level of management below the Head of Production. ; 8.19 The Applicant attended for work on the morning of 2 December when Mr Kempson handed him the letter of 2 December [213]. 8.20 On the same day, the Applicant appealed to Mr Kempson against his decision [215] in accordance with the Respondent's disciplinary procedure. On 2 December the Applicant left the Respondent's premises never to return. 8.21 On 3 December Mr Kempson wrote to the Applicant [216] refusing to allow the appeal as there was no one suitable to hear the appeal who had not previously been involved in the disciplinary procedure. 8.22 On 5 December the Applicant's solicitor wrote to Mr Kempson [271 -272]. Their letter read as follows:- "We have been consulted by Jonathan Read. We are instructed that you conducted investigatory meting with our client on 22 November and a disciplinary meeting on 28 November. You had previously made two allegations against our client, firstly that he had introduced a client to a competitor of TMB and secondly that he had incurred certain expenditure without the authority of a client. As you are well aware, there was no substance in either of these allegations Despite this you wrote to our client on 2 December to say that you felt that there had been a case of misconduct. You did not say why and neither we nor our client have any idea why you reached that conclusion. You claimed that our client could not be trusted and needed to be supervised. You stated that our client would be demoted to the level of Account Manager/Producer with effect from the following day, that his salary and car allowance would be reduced and that he would cease to have healthcare cover . You had no contractual right or reason to do this. The effect of your conduct was to terminate our client's contract of employment with immediate effect. As a member of law that constituted a dismissal. It goes without saying that it was unfair. It was also in breach of contract. Our client was contractually entitled to 2 months notice of termination of his employment. As you have dismissed our client he will not be attending for work from now onwards. Our client made it clear in his letter to you of 2 December that he did not accept your offer to retain him in employment in the position of an Account Manager/Producer. He also appealed against the decision but you refused to consider his appeal. Prior to these events you had also acted in breach of contract (illegible) good faith with our client's annual salary review or his entitlement to be considered for a bonus. We have instructions to commence proceedings in the Employment Tribunal against TMB in relation to all of the above matters. 3 The Applicant's limit for authorisation of expenditure was originally £5,000 [44]. This was subsequently reduced to £3000. Mr Scott, to whom the Applicant reported, left the Respondent's employment in summer 2000. There was a conflict of evidence. It was the Applicant's evidence that at a meeting in September Mr Kempson raised his authorisation limit to £13,000. Mr Kempson denied that he did this. We have decided and prefer .the Applicant's evidence as during October a number of purchase orders in excess of £3,000 were authorised by the Applicant and never queried by the Respondent. 8.24 As we have found in paragraph 8.4 (a) above, the Applicant was eligible to participate in the Respondent's bonus scheme. It was agreed that the Respondent's financial performance in the year to 31 July 2000 was too poor to justify any bonus payment and none was made to any employee. However, in the year to 31 July 2001 the Respondent made a profit of some £110,000 of which some, £101,000 were attributab1e to the production department in which the Applicant worked. 8.25 As we have found at paragraph 8.4 (a) above, the Applicant was entitled to an annual salary review. Salaries were reviewed after 31 July each year - the Respondent's year-end. 8.26 The bonus was normally paid after the Respondent's accounts for the previous year had been put to bed but before they were formally signed off by the Respondent's accountants and board of directors. This meant that bonuses had been traditionally paid just before Christmas. 8.27 Mr Scott, the Applicant's line manager, had an informal approach to management. He did conduct regular monthly appraisals of the Applicant but these were often in the pub. No records of these "appraisals" were kept. Mr Kenyon had no knowledge of them. 8.28 It was Mr Scott's evidence that his recollection was that he recommended to Mr Kempson that his staff should receive a sa1ary increase of 5%. He was "fairly certain" that this recommendation included the Applicant. He was a1so "fairly certain" that he recommended to Mr Kempson that the Applicant receive a bonus of £5,000, He produced at the hearing what he said were jottings from his diary [274]. Mr Kempson's evidence was that Mr Scott recommended a small salary increase in order to encourage the Applicant to stay with the business as otherwise he would leave. Mr Kempson said he then informed Mr Scott that if no salary increase caused the Applicant to leave, that would be no bad thing as he regarded him as erratic and that he had to be "micro-managed" by Mr Scott. [Mr Scott agreed in his evidence that the Applicant did indeed have to be "micro-managed;']. Mr Kempson had no recollection of receiving any bonus recommendation from Mr Scott. We have decided to prefer Mr Kempson's evidence as Mr Scott's recollections were uncertain and we received no satisfactory explanation why a document so potentially important to the issues in this case as Mr Scott's diary entries purportedly recording his recommendations to Mr Kempson had been produced at such a very late stage. 8.29 The Applicant's direct reports, Mr Moore and Mr Salter, received salary increases of 5%. 8.30 The Applicant raised with Mr Kempson on a number of occasions his salary review and bonus. On 13 November Mr Kempson wrote to the Applicant [175] stating inter alia:- "Your salary has been reviewed as required by your contract of employment. We considered your position carefully, but having regard to a number of issues, including your performance as department manager, projected business for the Production Division for the coming financial year, and the financial position of the Company as a whole. It was decided that your salary would be maintained at its current level for the foreseeable future." 8.31 The Respondent's financial performance worsened during the period from 31 July 2002, such that it made losses in the months of August, October, November and December 2002. Mr Kempson decided that consequently the Respondent could not afford to pay bonuses to any employee and none were paid. 8.32 We have found at paragraph 84 (a) above, the Applicant's contractual right to sick pay. However, on 4 January 2002 Mr Kempson wrote to all staff as follows [45]:- "As of 1st January 2002 we will have a new policy with regards to sick pay allowances in order to uniform sickness payments across the company. Individuals will receive full pay on a maximum of 4 sick days per day only (ad hoc or consecutively), there after you will be entitled to SSP in accordance with government guidelines. Doctors certificates and self assessment forms should be proved in accordance with the terms of your contract. (As it stands the Company is not obliged to pay anything for the first 3 days of any sickness period) The Applicant did not object to this change and continued to work for the Respondent. Before the Applicant went off sick on 5 November, he had already taken four days' sick leave. He was not paid company sick pay for the period 5 November to 19 November. Ursula Dowd, who had two weeks off sick at about the same time, received her full salary for the period of her absence. Mr Kempson decided that the Applicant should not be paid further sick pay for his absence from 5 November to 19 November. His reason for coming to this decision was that he had already used his contractual sick pay and further sick pay was at his discretion. Mr Kempson took into account the fact that there were then a number of potential disciplinary matters which needed to be investigated, the Applicant did not appear to be particularly under stress at the meeting on 31 October. The Employment Tribunal Decision[4]The Employment Tribunal decision begins by setting out the nature of the claim: decision paragraphs 1 - 3, the Respondent's defence and counter-claim: decision paragraphs 4 - 6; it referred to the oral and written evidence: decision paragraph and then made substantial findings of fact (set out above): decision paragraph 8; set out the parties' submissions: decision paragraph 9; set out the relevant law; decision paragraph 10 and then reached its decision: decision paragraph 11.[5]The Employment Tribunal decision is relatively short and it is convenient to set 7 it out here. "11.1 It is the unanimous decision of the Tribunal that the Respondent did not act in breach of the Applicant's contract of employment by demoting him. The sanction of demotion was explicitly referred to in the contract itself and in the disciplinary procedure. We considered that In these circumstances Mr Craig's submission that the sanction of demotion could only be applied in addition to other sanctions was a matter of semantics. We were satisfied that Mr Kempson genuinely believed that the Applicant had committed the acts of misconduct of referring a client (Olswang) to a competitor (CADA) the Applicant had unnecessarily exposed the Respondent to the risk of being charged for work by RIR for which it could not charge Peoplesoft and that the Applicant had exceeded his limit of authority in doing so. We are further satisfied and find that Mr Kempson had reasonable grounds for holding those beliefs (other than the belief that the Applicant had exceeded his limit of authority), and that he had carried out as much investigation as was reasonable in all the circumstances into the facts of the Olswang/CADA situation and that CADA was a competitor, and into the Peoplesoft position, but that he had not carried out as much investigation as was reasonable into ascertaining whether or not the Applicant had exceeded his limit of authority. Notwithstanding that we have found that Mr Kempson did not have reasonable grounds for believing that the Applicant had exceeded his limit of authority and had not carried out as much investigation as was reasonable into that element of the allegations of misconduct, nevertheless we find that, taking everything together, the Respondent has established that the principal reason for the Applicant's disciplinary sanction of demotion was his misconduct and that in any event the two acts of misconduct where we find that Mr Kempson has satisfied the Burchell test were a sufficient reason for the Respondent reasonably to discipline the Applicant. We consider that the decision to demote the Applicant rather than dismiss him was well within the range of reasonable responses of a reasonable employer to the circumstances and were logical in the circumstances that it was his management capability that was put in question by the acts of misconduct. It is therefore our unanimous decision that the sanction imposed by the Respondent was a reasonable one and not out of proportion to the offence. It is therefore our unanimous decision that the decision to demote the Applicant was neither a breach of an express term of the contract nor a breach of the implied term of trust and confidence. It is therefore our unanimous decision that the Applicant was not dismissed by the -, Respondent. 11.2 As regards the Applicant's claims of breach of contract, we find that Mr Kempson did exercise his discretion reasonably and in good faith. There was only a requirement to review the salary, no requirement that the salary should result in an upward salary rise. Both Mr Scott (who was the Applicant's witness) and Mr Kempson agreed that the Applicant was difficult to manage and had to be "micro- managed". In these circumstances, we find that Mr Kempson acted reasonably in deciding not to award the App1icant a salary increase. 11.3 As regards the bonus, we have found as a fact that the Respondent, which is a small company, was suffering financial losses in the period from August to December 2002 and that this was the reason that Mr Kempson declined to award any employee a bonus. There was no question of the Applicant being singled out. Again, therefore, we find that the company's financial position was the reason for Mr Kempson's decision not to award a bonus and that this was a reasonable decision and not a decision taken capriciously or in bad faith. 11.4 As regards Mr Kempson's decision not to pay sick pay, his reason for not exercising his discretion to pay company sick pay to which the Applicant was not contractually entitled was the fact that the Applicant was undergoing disciplinary procedures. Again, we had regard to the small size and administrative resources of the company and we find that this was the reason that Mr Kempson declined to exercise his discretion in favour of the Applicant and that that was neither capricious nor in bad faith. 11.5 We then considered the Respondent's counterclaim. The Respondent's counterclaim was made under the provisions of clause 7.1 of the Applicant's contract of employment. We have found that the Applicant's authority had been increased to £13,000 and that therefore there is no question in our mind but that the Applicant was not in breach of company rules in authorising the expenditure on the RIR set construction. However, we do find that the Applicant acted negligently in authorising that expenditure without the approval of the client Peoplesoft. The Applicant was aware that there was no budget and no brief from Peoplesoft. We recognise that the Applicant was under pressure to ensure that the construction of the set would be carried out in time for it to be delivered to the venue in Paris for the start of the event on Monday 21 October. Had he tried and failed to contact Ms Barber or someone at Peoplesoft to inform them that he had to place the order in order for the set to be available by 21 October, then we recognise that the Applicant would have been put in the position of having to decide whether or not to take the risk that Peoplesoft would not go ahead with the event as planned. However, the Applicant chose not to take any steps to seek to contact Peoplesoft to advise them that he needed to order the set and to seek their clearance, to place the order with RIR in order to meet the deadline. It is our unanimous decision that the Applicant acted negligently in not doing that, and that consequently any losses suffered by the Respondent as a result of that are sums recoverable by the Respondent in breach of contract under the provisions of clause 7.1 of the contract of employment. To that extent, therefore, we find that the Applicant has been in breach of contract. 11.6 We would point out, however, that at the date of the hearing the evidence we heard was that the Respondent had suffered no loss, as it had not had to pay RIR. If at the remedy hearing fixed for 29 September 2003 the Respondent wishes to pursue its claim in breach of contract, the Tribunal will require to hear or see proper evidence to enable it to find as a fact (if that is the case) that it has actually suffered a loss and also to hear evidence as to what steps it has taken to mitigate its loss." The Notice of Appeal[6]The Notice of Appeal is supplemented by Mr Craig's Skeleton Argument and oral submissions and we are grateful to him and to Ms Rachel Wedderspoon for the clarity and cogency of their submissions. We will deal with the grounds of appeal in the order in which they were argued before us.[7]Before doing so, it is important to remember that an appeal to the Employment Appeal Tribunal lies only on a question of law. In British Telecommunications plc -v- Sheridan [1990] IRLR 27 the Court of Appeal made it clear that the Employment Appeal Tribunal can interfere with the decision of an Employment Tribunal if they are satisfied that the Tribunal have misdirected themselves as to applicable law, or if there is no evidence to support a particular finding of fact, since the absence of evidence to support a finding of fact has always been regarded as a pure question of law. The EAT can also interfere if the decision is perverse. The submission that there is an error of law if the Employment Tribunal misunderstood or misapplied the facts could not be accepted. Misunderstanding or misapplication of the facts is not a separate category of grounds upon which the Employment Appeal Tribunal can allow an appeal against the decision of an Employment Tribunal, since that would suggest that the Employment Appeal Tribunal are entitled to allow an appeal if they take a different view of the facts from that of the Employment Tribunal. Unfair dismissal Ground 1 : Failure to identify the conduct for which the Appellant was found guilty.[8]Mr Craig submitted that the Employment Tribunal had failed properly to identify the misconduct for which the Appellant was disciplined by the Respondent: decision paragraph 11.1. They therefore approached the determination of the Burchell test on an erroneous basis. In our judgment, Mr Craig's submission was to substitute our view for that of the Tribunal which we cannot do: Foley -v- Post Office [2000] IRLR 827 . It is clear that the Employment Tribunal were well aware of the Burchell test: decision paragraph 11.1. They identified the Appellant's misconduct and the issues of misconduct which were to be investigated: decision paragraph 8.11; paragraph 8.12; paragraph 8.15 and paragraph 8.17. They considered the question of proportionality of the penalty for misconduct: decision paragraph 11.1. Having specifically been referred to and referring to British Broadcasting Corporation -v- Beckett [1983] IRLR 43 it is clear from the Tribunal's findings of fact that they did not find that the Respondent had grossly exaggerated the misconduct of which the Appellant was guilty. Ground 2 Errors of CADA misconduct[9]Mr Craig submitted that by reference to the detail of the evidence before the Tribunal they could not or should not have found that the Respondent had reasonable grounds for its belief that the Appellant had invited CADA to attend a party hosted by Olswang (CADA was a competitor of the Respondent company). Alternatively such a decision was perverse.[10]It is quite clear that the Employment Tribunal considered this issue in detail: decision paragraph 8.5 - 8.8; 8.12 - 8.13 (the disciplinary meeting on 22 November 2002); 8.15 - 8.16 (the disciplinary meeting on 28 November 2002; 8.18 (the Respondents' decision). The notes of relevant meetings were before the Employment Tribunal and are before us. The Employment Tribunal heard the Appellant and two witnesses called on his behalf. They heard Mr Robert Kempson, the owner and sole director of the Respondent. In our judgment it is clear that the Employment Tribunal preferred the evidence of Mr Kempson to that of the Appellant and were entitled to do so. This ground of appeal raises no issue of law. Ground 3 Errors in respect of Peoplesoft misconduct[11]Mr Craig submits that in holding that the Appellant was guilty of misconduct in exposing the Respondent to a risk of being charged for work by Rhode Island Red, for which it could not charge Peoplesoft, the Employment Tribunal failed to take into account a number of relevant considerations.[12]Again, it is clear that the Employment Tribunal considered the relevant evidence, having heard the witnesses referred to above: decision paragraph 8.10 - 8.12 (the Respondent's investigation); 8.13 (investigation meeting on 22 November 2002); 8.14 (further investigation by Mr Kempson with Rhode Island Red); 8.15 - 8.16 (disciplinary hearing on 28 November 2002); 8.18 (Respondent's decision). In fact the Tribunal found that in respect of the Peoplesoft position, Mr Kempson had not carried out as much investigation as was reasonable into finding out whether or not the Appellant had exceeded his limit of authority: (decision paragraph 11.1). In our judgment Mr Craig again seeks to persuade us to take a different view of the findings of fact by the Employment Tribunal. Ground 4 Errors in respect of penalty:[13]Mr Craig submitted that the Employment Tribunal was in error in finding that the decision to demote the Appellant with a consequential reduction in his salary of £18,000 per annum because they failed to take account of the circumstances of the case, and/or its decision was perverse and/or it failed to provide adequate reasons.[14]Once again, it is clear that the Employment Tribunal was fully appraised of the factual situation: decision paragraph 18.1(viii), referred to the relevant law contained in British Broadcasting Corporation v Beckett [1983] IRLR 43, cited to them by Mr Craig, and referred to his submissions: decision paragraph 9.2. Furthermore, the Employment Tribunal had specifically in mind that there was an express power in the contract of employment for "downgrading or demotion": decision paragraph 8.4(b). The contract of employment was in front of it. In those circumstances it seems to us that the Employment Tribunal were fully entitled to find that:
"We consider that the decision to demote the Applicant rather than dismiss him was well within the range of reasonable responses of a reasonable employer to the circumstances and were logical in the circumstances that it was his management capability that was put in question by the acts of misconduct. It is therefore our unanimous decision that the sanction imposed by the Respondent was a reasonable one and not out of proportion to the offence. It is therefore our unanimous decision that the decision to demote the Applicant was neither a breach of an express term of the contract nor a breach of the implied term of trust and confidence"
Decision, paragraph 11.1 Ground 5 Further errors:[15]Finally, under unfair dismissal, Mr Craig makes a number of specific submissions where he alleges that the Employment Tribunal made further errors either in taking account of irrelevant considerations or failing to take account of relevant considerations. They are fully set out in the Notice of Appeal and his Skeleton Argument. We do not need to refer to them in detail. Suffice it to say that in our judgment the Employment Tribunal considered all the matters he refers to there did not make any error of law. Ground 6 Respondent's counterclaim:[16]Mr Craig submits that the Employment Tribunal erred in law in holding that the Appellant was in breach of clause 7.1 of the Respondent's Standard Terms and Conditions, in respect of the matters set out in the Notice of Appeal and his Skeleton Argument.[17]This was an issue raised in the Respondent's Notice of Appearance at the Employment Tribunal, in the Notice of Appearance paragraphs 19-20 and the Tribunal were well aware of the claim because they refer to it in setting out the issues at the beginning of their decision: decision paragraph 6. They had the contract of employment in front of them and specifically referred to it in their findings of fact: decision paragraph 8.4(a). Clause 7.1 says this:
"Deductions 7.1 The Company has the right to recover any sums which you may owe the Company including, without limitation, any overpayments or loans made to you by the Company or losses suffered by the Company as a result of your negligence or breach of Company rules."
[18]The Tribunal made extensive findings of fact: decision paragraph 8, heard submissions: decision paragraph 9 and reached their decision: decision 11.5. The Tribunal found that in the circumstances the Appellant had acted negligently in authorising the expenditure of £13,000 on advance work without the approval of the client, Peoplesoft. The Tribunal's decision in paragraph 11.5 clearly sets out all the material factors which it needed to be taken into account in reaching that decision. In the event it also found that the Respondent had suffered no loss because it had not had to pay Rhode Island Red. Whether the Respondent will actually incur any loss is a matter which was not known to the Tribunal, and is not known to us. In the circumstances we can find no error of law here. Ground 7: Pay rise -Appellant's breach of contract claims[19]Mr Craig submitted that the Tribunal were in error in holding that the Respondent was not in breach of contract in failing to furnish the Appellant with a pay rise in July 2002. In essence this is a further submission that on the material before the Employment Tribunal it should have decided the matter the other way, or alternatively, that its decision was perverse.[20]The Employment Tribunal identified the issue: decision paragraph 3(a); referred to the evidence: decision paragraph 8.4(a) (Clause 5 of the contract of employment); 8.25, 8.28 - 8.30. They then heard submissions from the Respondent: decision 9.1 and from Mr Craig for the Appellant: decision paragraph 9.2. The submission appears to be that Mr Kempson's evidence regarding the salary review was not credible. He referred the Tribunal to Clark v BET plc [1997] IRLR 348 and Clark v Nomura International plc [2000] IRLR 766 .[21]Having considered the evidence and the submissions the Employment Tribunal found that Mr Kempson did exercise his discretion reasonably and in good faith. They also referred to the contractual provision. This ground of appeal also raises issues of fact. There is no error of law here. Ground 8: Failure to award a bonus[22]Mr Craig made various submissions to the effect that the Employment Tribunal made an error of law in holding that the Respondent had a discretion not to award a bonus to the Appellant. In the alternative that it should have held that the Respondent had not exercised that discretion in good faith.[23]The Employment Tribunal was aware that there was a claim for a failure to pay the Appellant a bonus for the year ended 31 July 2002: Originating Application paragraph 18; decision paragraph 3(b). They considered the contractual provision: decision paragraph 8.4(a) and the evidence: decision 8.26 - 8.31. They considered the submissions of both parties: decision paragraph9.1 -9.2 and reached their decision - paragraph 11.3.[24]In our judgment the Employment Tribunal were fully justified on these facts in finding that the reason for not awarding any employee (including the Appellant) a bonus was the financial losses suffered by the Respondent in the period from August to December 2002. There was therefore no question of the Appellant being singled out. That finding of fact meant that this was a reasonable decision and not taken capriciously or in bad faith Clark v BET plc [1997] and Clark v Nomura International plc [supra]. Ground 9 Failure to pay sick pay[25]Finally, Mr Craig submitted that the Employment Tribunal erred in law in holding that Mr Kempson's decision not to pay sick pay at the Appellant's full salary level was exercised in bad faith and/or unreasonably. Again, it is important to note that the Employment Tribunal were fully appraised of the claim: Originating Application paragraph 20-21; decision paragraph 3(c). They considered the evidence, including the contract of employment: decision paragraph 8.4 and 8.32. They considered the submissions: decision paragraphs9.1 and9.2 and reached their decision in paragraph 11.4. In our judgment this is entirely an issue of fact as to which evidence the Employment Tribunal preferred. There is no error of law. Conclusion[26]For these reasons the appeal is dismissed.