ARRIVA NORTH WEST & WALES v MRS C COLEBOURN [2005] UKEAT 0439_05_1810

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2005] UKEAT 0439_05_1810Case No Appeal No. UKEAT/0439/05Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
ARRIVA NORTH WEST & WALESAPPELLANTMRS C COLEBOURNRESPONDENT
Before
Mr Justice Elias Mrs R ChapmanDate 18 October 2005
[1]APPEARANCES For the Appellant MR MICHAEL HUMPHREYS (of Counsel) Instructed by: Messrs Bramhalls Solicitors Coombe House Cumbers Drive Ness Cheshire CH64 4AU For the Respondent MR SIMON GORTON (of Counsel) Instructed by: Messrs John A Behn Twyford & Co Solicitors Number One Moorfields P O Box 19 Liverpool L69 2EJ SUMMARY Unfair Dismissal: Reasonableness of Dismissal Unfair dismissal. Obligation to have regard to evidence emerging on appeal. Tribunal said relevant only if a complete rehearing. Reasonableness of dismissal. THE HONOURABLE MR JUSTICE ELIAS On 3 May 2005, the Employment Tribunal at Liverpool unanimously held that the Claimant, the Respondent in this appeal, had been unfairly dismissed. The employer now appeals against that decision. The Background[2]The events leading to the dismissal occurred away from work, although Mrs Colebourn was an employee of the Appellant Company, being a supervisor. In the early morning of 26 September 2004, when she was off duty, she boarded a bus belonging to the company. She was violently ill and vomited in the bus. During the course of the journey, she fell from her seat and suffered certain injuries.[3]The company was concerned about her behaviour and wrote to her in connection with the incident. It was not a formal warning, but the company indicated that her behaviour had been inappropriate. She responded by saying that the reason she had fallen from the seat was not her intoxicated state, but the fact that the driver of the bus had braked too hard. She indicated that she was going to make a claim for personal injuries against the company. The company undertook an investigation into the circumstances of the incident. They took statements from a number of witnesses, including the driver of the bus, who denied that he had braked in the way alleged. The company took the provisional view that Mrs Colebourn was attempting fraud by making the claim against them.[4]A disciplinary hearing took place on 1 November 2004 before Mr Jones, who was the general manager at Runcorn. The Tribunal does not set out in any detail how the disciplinary hearing was conducted. Suffice it to say that at the end of the meeting Mrs Colebourn was summarily dismissed for gross misconduct. The dismissal letter itself did not identify fraud but the notice of the hearing indicated that the company was alleging attempted fraud, malicious falsehood and falsifying a company statement.[5]Mrs Colebourn appealed against that dismissal. At the first stage she was unsuccessful and there was a further appeal before Mr Rimmer. He was the Operations Director of the company. Initially, in fact, the second appeal had been before another person but it had been adjourned because Mrs Colebourn indicated that she wished to call further statements from two witnesses to the incident who supported her contentions about what had occurred. Mr Rimmer heard the adjourned hearing and considered the statements. In addition, he had a report from Mr Gibbs, who was the General Manager at the Bootle depot and who had carried out an investigation into these new witness statements. He had concluded in the light of, among other matters, CCTV evidence, that the two witnesses were never in fact on the bus at the relevant time. Mr Rimmer disbelieved the statements of the two witnesses and confirmed the summary dismissal. The employee was notified by letter dated 11 January 2005. Again, that letter did not in terms mention fraud, but it is plain that Mr Rimmer considered that she was making a fraudulent claim as he stated in terms in the witness statement which was put before the Tribunal as his evidence-in-chief.[6]The Tribunal concluded that the dismissal was unfair for this reason. In the course of cross-examination before the Tribunal, Mr Jones accepted that Mrs Colebourn may well, in her intoxicated state, have believed that what she was saying was true, even although he in fact did not believe that it was. The Tribunal therefore concluded that although he had ostensibly dismissed her for fraud, he had never in fact considered whether or not she had acted honestly and once that question had been put to him, he had concluded that she had been honest. The Tribunal, in our view quite rightly, concluded therefore that his decision was not sustainable because fraud was not compatible with her not having been dishonest.[7]The Tribunal went on to hold that the dismissal was unfair on the grounds that the employer had not satisfied itself that the conduct was dishonest. It dealt with the further material considered at the appellate stage, and the relevance of the appeal, in the following way at paragraph 25 of its Decision. "As we have mentioned, a two-stage appeal process was undertaken following dismissal but no evidence was led before us to establish that anyone else had addressed the particular question of Mrs Colebourn's genuine belief. In any event, those appeals did not appear to proceed by way of re-hearings and could not have cured any earlier defect." Accordingly, the Tribunal found the dismissal unfair and recommended re-instatement.[8]It is also relevant to note that the Tribunal considered, in the context of analysing whether or not there was any contributory fault, whether there was evidence that Mrs Colebourn had colluded to produce these untrue statements. It took the view that there was no evidence of any complicity on the part of Mrs Colebourn and that the production of the statements was consistent with a genuine, if incorrect, belief on the part of those making the statements that the bus had suddenly stopped in the way described. The Tribunal did not, however, consider whether a reasonable employer might have inferred in the circumstances that she was colluding in producing false statements.[9]We should add that, on 9 June 2005, there was a remedies hearing at which the Tribunal concluded that it was not practicable to comply with the Order of reinstatement made. In the course of giving that judgment, the Tribunal said this at paragraphs 3 and 4:
"3. We accepted evidence from Mr Rimmer that, in the light of all he had seen and heard, he had genuinely reached the view that Mrs Colebourn had conspired with two others (namely the purported witnesses to her injury) with a view to defrauding the Company. Indeed, we accepted that that was the general view held by the Company. 4. It is not a view we shared. However, in the light of the evidence and the submissions we heard at incident hearing, it was one that we felt the company was reasonably entitled to hold"
. That conclusion was, of course, reached with the advantage of hearing further evidence from Mr Rimmer and it focuses on the alleged collusion in providing new witness statements rather than the original fraud. The Grounds of Appeal[10]The principal ground of appeal is that the Tribunal failed to have regard to the evidence on appeal. It simply focused on the hearing at the first instance whereas, in fact, there had been the additional material produced before Mr Rimmer and he had taken the view in the light of all the material, including the fresh statements, that the claim was fraudulent. The employers submit that the Tribunal erred in law in failing to have regard to this evidence.[11]Secondly, it was submitted that the Tribunal was wrong to suggest that the evidence was inadmissible because there had not been a rehearing. It was contended that there had been no complaint about the procedures; that they were manifestly fair in all the circumstances and there was no reason to ignore this important evidence which had an impact on the assessment of Mr Rimmer. The Law[12]It is now very well established that in determining whether or not a dismissal is fair, an Employment Tribunal must, in an appropriate case, have regard to material that emerges during the course of the internal appeal process. This principle is established by the House of Lords case in West Midlands Co-operative Society Ltd – Tipton [1986] IRLR 112. In that case a tribunal had held that the dismissal of an employee for absenteeism was unfair because he was denied a contractual right to appeal. The EAT upheld that decision but it was overruled by the Court of Appeal and the House of Lords restored the decision of the EAT. The only reasoned judgment in the Court was given by Lord Bridge of Harwich. Lord Roskill, Lord Brandon of Oakbrook, Lord Brightman and Lord Mackay of Clashfern agreed with his speech. Lord Bridge said this in the course of his judgment:
"…I can see nothing in the language of the statute to exclude from consideration in answering question 3 'in accordance with equity and the substantial merits of the case' evidence relevant to show the strength or weakness for the real reason for dismissal which the employer had the opportunity to consider in the course of an appeal, pursuant to a disciplinary procedure which complies with the statutory code of practice"
. Then a little later in that paragraph, he said this:
"Thus, in so far as the original dismissal and the decision on the domestic appeal are governed by the same consideration, sc. the real reason for dismissal, there is no reason to treat the effective date of termination as a watershed which separates the one process from the other. But the original and the appellate decision by the employer, in any case where the contract of employment provides for an appeal and the right of appeal is invoked by the employee, are necessary elements in the overall process of terminating the contract of employment. To separate them and to consider only one half of the process in determining whether the employer acted reasonably or unreasonably in treating his real reason as sufficient is to introduce an unnecessary artificiality into proceedings on a claim of unfair dismissal calculated to defeat, rather than accord with the 'equity and substantial merits of case' and for which the language of the statute affords no warrant"
. Lord Bridge commented that this would have been his view, in the absence of any authorities. But, in fact, he then cited a number of cases from this Tribunal supporting his conclusion. We will just mention two. Firstly, National Heart and Chest Hospitals Board of Governors v Nambiar [1981] IRLR 196, Waterhouse J said this at page 202:
"In this context it is necessary to distinguish the case where an employee is dismissed for Reason A and evidence at an internal appeal invalidates Reason A but demonstrates that a different Reason B would justify dismissal. It is clear that in such circumstances the original dismissal ought not to stand and the employer must look at the matter afresh in order to decide whether a later dismissal on the new information is appropriate. In the more usual case, however, where the employer confirms the decision to dismiss for Reason A, following the appeal, we consider that it is right for an Industrial Tribunal to look at the information that came to light in the course of the appeal"
. Then in Greenall Whitley plc v Carr [1985] IRLR 289, Waite J said this at page 293:
"Approaching the matter first as one of principle apart from authority, we would be sorry to see the internal appeal hearing excluded from consideration. In practice, every employer who has signed (as most employers these days do) a procedure agreement which includes disciplinary and appeals procedures knows perfectly well that anything relevant to the appeal hearing must also be relevant to the dismissal itself. Such appeals have become a fundamental feature of good industrial relations practice; and any sensible and realistic appraisal of the reasonableness of an employer's decision to treat a particular reason as grounds for dismissal would, we think, require his state of mind and knowledge to be judged down to the conclusion of the internal procedure on the footing that such procedure itself forms an essential part of the dismissal process"
. In view of these authorities, we consider that in so far as Mr Rimmer relied upon additional material to reach his conclusion that there had been fraud, he was fully entitled to have regard to it. Mr Gorton, for Mrs Colebourn, pointed out that this meant that she would, in this case, be worse off as a result of pursuing her appeal. That is so, but it is a risk that inevitably is involved in pursuing appeals where further evidence is adduced.[13]The Tribunal had, as we have indicated, considered it inappropriate to allow the material to be admitted because there was not a complete re-hearing. We think the Tribunal was in error in suggesting that additional material which emerges during the course of an appeal hearing can only be taken into account where there is a complete rehearing. There is no doubt that if a significant procedural defect occurs at an initial disciplinary hearing, then that can only be put right if there is a re-hearing on appeal and not simply a review. That seems to us to be the principle enunciated in the case of Whitbread v Mills [1988] ICR 776 and [1988] IRLR 501. But the reason for that is clear: if there is an unfairness in the way in which the initial hearing is conducted, then there is no safeguard for the employee if the further appeal simply reviews the original decision but does not provide the procedural safeguards that were lacking on the earlier occasion. It does not, however, follow that even where the initial hearing is procedurally fair, additional material can only be taken into account where there is a full re-hearing.[14]The question here ultimately is whether in all the circumstances, the procedures were fair. Of course, it will be important for an employee to have a full opportunity to deal with any fresh material that is relied upon at the appellate hearing, and a failure to do that will render the proceedings overall unfair, even if the initial disciplinary hearing was impeccable. In this case, however, there is no complaint about the way in which the employers carried out the disciplinary hearings or the appeal hearing. The Respondent was given the opportunity to be present with a representative at the appellate stage and she could make any observation she wished, both on the report of Mr Gibbs, which was shown to her in advance, and indeed on any other matters. Accordingly, we consider that the Tribunal ought to have considered this material which was before Mr Rimmer and ought to have assessed whether he had acted reasonably in the circumstances in taking the view that she had committed misconduct.[15]The Tribunal also concluded, as we have indicated, that there is no evidence that anyone had addressed the question whether Mrs Colebourn had been dishonest. Mr Gorton submits that this is a key finding of the Tribunal which it was entitled to make. He said that Mr Jones had shown that he thought that Mrs Colebourn might have been honest in making the claim that she had and that in the circumstances, if Mr Rimmer were to take a different view, then he should have given evidence plainly indicating that.[16]We do not think that that argument is sustainable. Mr Rimmer clearly considered that the employee had been fraudulent. It is true that Mr Jones had apparently also dismissed for fraud but when his understanding of that concept was explored, he seemed to think that he could embrace her being wrong, as opposed to dishonest. That, plainly, is not the proper meaning of the word. If an employer dismisses someone for fraud, then unless it is shown that the employer has misunderstood that term, as did Mr Jones, the only reasonable inference, it seems to us, is that the employer is alleging dishonesty. The possibility of a genuine but mistaken belief does not arise. Accordingly, we think the Tribunal was not entitled to say that Mr Rimmer had not addressed the question of whether the employee was dishonest. It was plain that he was asserting that she had been. We therefore think that in this crucial paragraph 25, the Tribunal erred in law, both in ignoring the material before Mr Rimmer on the grounds that the appeal had not taken the form of a complete rehearing, and in indicating that the employers had never addressed the question of whether the employee had been dishonest.[17]We are satisfied, therefore, that there have been errors of law by the Tribunal and that this decision cannot stand. The question is what we should do in the light of these conclusions. It was suggested by the employers that in view of the finding of the Tribunal in the remedies hearing we could properly conclude that there had been a genuine view taken by the employers on reasonable grounds of fraud and we should substitute our opinion for that of the Tribunal. We do not think that would be just to the employee in this case. As we have indicated, those observations were taken after hearing further evidence from Mr Rimmer and, in any event, they focus on the alleged collusion in producing further witness statements. Mr Gorton has indicated that if this case has to be reconsidered, he would wish to advance the argument that Mr Rimmer, in substance, dismissed for that reason and that this was a different reason from the fraud originally alleged. If that is correct, then in line with the principle in Monie v Coral Racing [1980] IRLR 464, which principle was referred to in the passage in the Nambiar case to which we have made reference, the employers could not rely upon the material adduced in the appeal as a justification for the dismissal.[18]We have also considered whether this matter might go back to the same Tribunal, but we consider that that would be unsatisfactory. There would need to be, it seems to us, further evidence from Mr Rimmer and there would be arguments, as we have said, about what the true reason for dismissal was. We think that it would be more satisfactory in this case for the matter to be remitted to a fresh Tribunal. Accordingly, this appeal succeeds and the matter is remitted to a different Tribunal to consider the claim afresh.

Cited in 1 later judgment