EAST LANCASHIRE COACHBUILDERS v MR P HILTON [2006] UKEAT 0054_06_2408

EMPLOYMENT APPEAL TRIBUNAL

BAILII case number: [2006] UKEAT 0054_06_2408

Case No Appeal No. UKEAT/0054/06

Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

Between

EAST LANCASHIRE COACHBUILDERSAPPELLANT

MR P HILTONRESPONDENT

Before

His Honour Judge Serota

Date 24 August 2006

[1]APPEARANCES For the Appellant MR BEN COOPER (Of Counsel) Instructed by: Messrs Brachers Solicitors Medway House 81 London road Maidstone Kent ME16 0DU For the Respondent MR PAUL GILROY (Of Counsel) Instructed by: Messrs Roscoes Solicitors 8-10 Waltons Parade Preston Lancashire PR1 3JX SUMMARY The Claimant, a director of the Respondent, was dismissed for gross misconduct. There were grounds upon which the Respondent could reasonably have treated his conduct as justifying immediate dismissal for a fair reason within the meaning of section 98 of the Employment Rights Act 1996 . However the ET found that the true reason for dismissal was not the Claimant's misconduct but that the Respondent's other directors wanted him dismissed for reasons not related to his misconduct. In the circumstances the dismissal was unfair because the Respondent had not shown the dismissal was for a fair reason. ASLEF v Brady UKEAT/0057, and 0130/06 applied. HIS HONOUR JUDGE SEROTA QC Introduction We have concluded that the Employment Tribunal (ET) was correct in finding that the dismissal in this case was unfair because the Respondent had not demonstrated a fair reason for dismissal within the meaning of section 98 of the Employment Rights Act 1996 . Further, the grounds for dismissal relied upon were not the principal reason for the dismissal.

[2]This is an appeal from a decision of the ET at Manchester promulgated on 24 November 2005 (M Coles Esq. Chairman) after a four day hearing. The ET found that the Claimant had been unfairly dismissed. The appeal was referred to a preliminary hearing by HHJ Reid QC on 10 January 2006 and at the hearing of the preliminary appeal, the Employment Appeal Tribunal presided over by HHJ Burke QC on 3 March 2006, directed that the appeal should go to a full hearing. Background and chronology

[3]The Respondent is an old established company engaged in the manufacture of buses and coaches. We were told that its turnover is some £23 million per year and that it has some 300 employees.

[4]The Claimant joined the defendant as an apprentice in about 1960 and worked his way up "through the ranks" so as to speak. He became a Director in 1989 and in 1999 he became the Deputy Managing Director. In August 2002 he became the Joint Managing Director with a Mr Kilroy, on the death of the former Managing Director, Mr Chris Clark. The Claimant had a high profile and was highly respected within the industry. Indeed, he was known in the trade as "Mr East Lancs" and received an MBE in 2003 for his services to the bus industry.

[5]At the material time, in 2004, and early 2005, the shareholding in the Respondent was held by a Mr Dawson Williams who was resident in Cyprus. He took little part in the day to day management of the Respondent. The Claimant and three others were Directors, Mr Kilroy, the Joint Managing director, Mr Powell, the Chairman, and a Mr Horn.

[6]Relations between the Claimant and his fellow Directors were far from perfect. The three other Directors were in the process of negotiating to acquire 50% of the shares in the Respondent which would, in effect, give them de facto control. The Claimant was not part of their plans. Although they had no plans to dismiss the Claimant as such, they certainly wished him to step down as Joint Managing Director and become Development Director only. The Claimant was on a three year rolling contract and the cost of an agreed termination was considerably more than the other three Directors wished to pay.

[7]The management buy-out (M.B.O.) was effected only after the Claimant's dismissal but before the hearing in the ET. The Claimant was purportedly dismissed for gross misconduct in connection with an expenses claim. The ET, at paragraphs 13 to 18, set out in some detail the manner in which the Claimant dealt with his expenses. We need not set out the detail, but it is sufficient to note that in essence, the Claimant would use a credit card for both personal and business expenditure and then mark the credit card statements with those items that represented personal expenditure and those which represented business expenditure. The statements would find their way to the Accounts department, which would reimburse the Claimant in respect of his business expenditure. Payment would be made by cheque to Mrs Hilton, who was also an employee. The explanation given for this was that it was "for tax reasons" whatever that may mean in this context. We agree with what the ET said at paragraph 19, that the system of expense management adopted by the Claimant was "highly unusual and fraught with the potential danger of mixing up personal with legitimate expenditure." Nonetheless, the ET pointed out that the system appeared to be open and transparent and had been operated for many years, although the Company Secretary, a Mr Kaufman, had made unsuccessful attempts over the years to tighten up the system.

[8]In November 2004, the Claimant travelled to Mexico with his wife. He agreed with Mr Powell, the Chairman, that his wife would accompany him, but as they would be travelling business class, he agreed to pay his wife's fare, £2033.10. He paid for the tickets in the usual way with his credit card, but on return from his trip he marked them as a business expense for reimbursement on his credit card statement, and in due course, a cheque which included the amount of Mrs Hilton's ticket, was paid to her. We feel we should set out what the ET had to say at paragraph 33:

"33. If, as was contended on behalf of the respondent during the hearing, the claim by the claimant for payment in respect of his wife's air fare amounted essentially to theft by the claimant of £2,033.10 from the respondent, then it was one of the most obvious and transparent thefts that one could imagine and one which would almost certainly have come to the knowledge of the Chairman and the claimant's co-directors, which of course it did."

[9]In December 2004, Mr Powell learnt that the Claimant had been reimbursed for his wife's fare and he was sufficiently concerned to treat this as being a disciplinary matter. However, notwithstanding on 16 December 2004 he had a meeting with Mr Hilton, when he asked Mr Hilton to step down as Joint Managing Director to become Development Director. Mr Powell was aware of the "theft" but made no mention of it at all in his meeting with the Claimant. On 17 December, the Claimant wrote to Mr Powell and set out his objections to the suggestion that he should step down as Joint Managing Director to become Development Director. On 23 December 2004, Mr Powell arranged for a letter to be sent to the Claimant, requiring him to attend the disciplinary hearing at Mr Powell's office on 7 January 2005. The letter set out the complaints against the Claimant and these were(a) unauthorised receipt of £2033.10 in respect of Mrs Hilton's air fare;

(b) refusal to submit expenses in the correct manner, and

[10]The letter was not handed to the Claimant until Mr Powell gave it to him on 4 January 2005. This led to the Claimant coming to Mr Powell's office in high dudgeon. He left the office and returned with a cheque to cover the fare. The disciplinary hearing took place on 7 January 2005. The Claimant had a prepared statement and maintained that by an "oversight" he had not handed the cheque to the Accounts department. Mr Powell conducted the hearing and concluded that the Claimant's statement that he always intended to repay the money was not credible, because he was unable to explain why he had claimed it in the first place. Mr Powell concluded that the Claimant's actions in seeking to obtain reimbursement for his wife's air fare amounted to gross misconduct and the only reasonable course of action was summary dismissal.

[11]We have been told by Mr Gilroy, who appeared for the Claimant, that after the dismissal and before his internal appeal, there was a significant amount of press publicity and press reports referred to the "dismissal" of the Claimant, although the Respondent's press release had been issued in rather more anodyne and diplomatic terms. It is unnecessary to go into these matters in further detail.

[12]On 12 January 2005, Mr Powell notified the Claimant of his preliminary view; a further meeting took place between them on 17 January 2005 and Mr Powell confirmed his earlier view that the Claimant was dismissed. An appeal was heard, we believe on 18 January 2005. The appeal was heard by Mr Kilroy. The Claimant had wanted it to be heard by Mr Dawson Williams and indeed offered to go to Cyprus. We were told that Mr Dawson Williams was unwilling to hear the appeal. The Claimant's solicitors had written to suggest that the appeal should be heard by someone other than a Director with a vested interest, not necessarily Mr Dawson Williams. The vested interest was, of course, participation in the proposed M.B.O. which excluded the Claimant.

[13]In any event, the Claimant was summarily dismissed on the grounds of gross misconduct and a letter to the Claimant confirming his dismissal referred to his conduct in obtaining for Mrs Hilton's air ticket as "dishonest". It was said to amount to gross misconduct and be a fundamental breach of his contract of employment. The case before the Employment Tribunal

[14]The Claimant's case before the ET was clear. His dismissal was a pretext and was designed to facilitate a "no cost departure" of a senior executive with a three year rolling contract at £90,000 a year, whose presence within the Respondent company would pose significant problems to the other Directors when the M.B.O. came to fruition. It is also right that we should note that both in his ET1 and in his evidence before the Tribunal, the Claimant maintained that he had always intended to repay the cost of Mrs Hilton's ticket, but he had "forgotten" to do so; see for example paragraph 8 of the witness statement (page 36). The Respondent's case was that this was a genuine dismissal for the reason given and a dismissal for gross misconduct, which was well within the band of reasonable responses from a reasonable employer. The decision of the Employment Tribunal

[15]The ET recite the facts which we have condensed. The ET was not uncritical of the Claimant. It found, for example, that he had a tendency to speak before engaging his brain. The ET in paragraph 38 was critical of his approach to expenses, as we have already said.

[16]In relation to the law, the ET directed itself correctly by reference to section 98(1) of the Employment Rights Act 1996 and to the well-known case of British Home Stores v Burchell

[1978] IRLR 379

. The ET also directed itself correctly as to the provisions of sections 123(1), 122(2) and 123(6) of the Employment Rights Act in relation to consideration of the compensatory award and to the decision of the House of Lords in Polkey v Dayton Services

[1988] ICR 142

[17]The ET concluded at paragraph 53:

"53. The Tribunal is satisfied on the evidence that the respondent did not genuinely believe that the claimant was a "thief" in the normal sense of the word. The Tribunal does not believe, for example, that the claimant would have dishonestly removed £2,000 from the company safe and it does not believe that the dismissing or appeal officer thought that either."

[18]Although the Claimant had adopted unorthodox financial procedures in relation to his expense claims, these were known to other directors. The ET concluded that the situation had almost been allowed to develop into one in which the Claimant, after so many years of "loyalty and control" within the Respondent organisation, "had almost allowed himself to believe that the respondent was 'his' company which he could run as he thought fit, including disregarding normal adherence to financial procedures and restrictions. Perhaps he regarded himself in reality as being his nickname, 'Mr East Lancs'."

[19]We also need to refer to the findings of the ET at paragraphs 56 to 60:

"56. The Tribunal is unanimously satisfied that, particularly having regard to the looming M.B.O. of which the claimant would not be part, the most convenient situation would be one in which the claimant left the company. Indeed ,the claimant himself had offered to do so in the past provided he received a satisfactory "payoff" but, particularly having regard to his three year rolling contract, the other directors did not feel that the company could afford to make a substantial severance payment to him. 57. The relationship between the claimant and the other directors had deteriorated. In fact Mr Powell stated that he would not have wished the claimant to join the MBO in any event because he "did not trust him". 58. The Tribunal unanimously believes that, had the relationship between the claimant and the other directors of the respondent been normal and trusting, when Mr Powell discovered that the claimant had claimed for his wife's air ticket he would have approached the claimant and asked him why he had made the expense claim, having agreed to pay for his wife's ticket. In that hypothetical situation, the claimant may well have tried to persuade Mr Powell that, in all the circumstances, the ticket should be paid for by the company, having regard to a lot of factors, including the belief that he had secured a lucrative contract for the company. Had Mr Powell insisted on payment, however, the claimant would, in the Tribunal's view, have paid up. 59. The Tribunal has not made a finding as to whether or not, had nothing been mentioned, the claimant would, as he asserted, have repaid the cost of the ticket as soon as he got round to it. The Tribunal accepts that the respondent genuinely believed that he did not intend to repay it but the decision to dismiss was based, in the Tribunal's view, on the fact that the claimant had claimed it in the first place, which was treated by the respondent as the act of gross misconduct. 60. In essence, therefore, the Tribunal is of the unanimous view that, had the other directors had a normal and positive relationship with the claimant, the claimant would not have been dismissed. The Tribunal finds that, having discovered facts which objectively could be justifiably interpreted as gross misconduct, it used those facts in order to justify his dismissal, when they would not have dismissed him in other circumstances."

[20]The ET then observed that if the Claimant was dishonest enough or stupid enough to commit an act of gross misconduct, he could only blame himself if the Respondent decided to dismiss him, provided the offence was of sufficient gravity. The ET was, however, at pains to point out that it did not believe that the Claimant acted "dishonestly" in the same way as a thief is regarded as acting "dishonestly". The ET drew attention to the fact that there was no attempt by the Claimant to conceal his claim:

"… and he may well have thought that, even though the co-directors would most likely discover it, one way or another he would have either 'got away with it' or negotiated an agreement about it."

[21]The Tribunal found it significant that when Mr Powell was asked whether had he been asked in advance by the Claimant for the company's agreement to pay for Mrs Hilton's air fare, he said he would "probably" have agreed to it.

[22]The ET then, in a critical paragraph, 63, had this to say:

"63. In summary therefore, the Tribunal believes, had the relationship between the directors been normal, the claimant would not have been dismissed for this offence. It follows logically, therefore, that the principal reason for the claimant's dismissal was not the conduct complained of, even though it was the catalyst and immediate cause of the dismissal. To that extent, therefore, Mr Gilroy's submission that the claimant's conduct was a "pretext" is upheld by the Tribunal."

[23]In accordance with this conclusion, the Tribunal was satisfied that the Claimant's dismissal would not have occurred had it not been for the inter-director relationships to which we have referred, and accordingly, the Claimant's dismissal was substantively unfair having regard to the provisions of section 98(4). The ET also made clear that it did not find that the Respondent believed on reasonable grounds that the Claimant had acted "dishonestly" in the "theft" sense.

[24]The ET also found (paragraph 66) that the Respondent acted procedurally and substantively unfairly in not making arrangements for the Claimant's appeal to be heard by Mr Dawson Williams.

[25]The ET then went on to reject the Respondent's case that there should be a Polkey reduction, by reason of three matters said to have come to light after the dismissal.

[26]However, the Tribunal did consider there should be a 40% reduction from both the basic and compensatory awards by reasons of contributory conduct, notwithstanding the ET had concluded the principal reason for the Claimant's dismissal had not been his misconduct. The ET characterised the making of the expense claim in relation to Mrs Hilton's air fare when he had agreed to pay for it himself in this way;"70. The claimant, in making an expense claim in relation to his wife's air fare to Mexico, when he had agreed to pay for it himself, stupidly exposed himself to disciplinary action which resulted in his dismissal. It was an arrogant and improper act which he should not have done. If he felt that, after all, the company should pay for his wife's air fare, he should have consulted with Mr Powell and obtained the respondent's agreement to payment of all or part of that air fare. Just as, in the Tribunal's judgment, the claimant would not have been dismissed had it not been for the strained inter-director relationships, equally he would not have been dismissed had he not made the claim for payment of his wife's air fare, because the respondent, without that act, would not have had any potentially justifiable reason to dismiss him.

71. The claimant, therefore, in the Tribunal's judgment contributed to his dismissal b reason of his conduct, which was culpably and blameworthy. The Tribunal determined that the percentage of contribution should be high, but should not exceed 50% because the major blame for the claimant's dismissal lies with the respondent."

[27]Before turning to the grounds of appeal we would observe that the ET decision is not happily phrased or constructed. It would have been helpful had the ET been more precise as to the facts that it found in relation to the Claimant's intentions when claiming reimbursement for Mrs Hilton's air fare. The ET certainly does not say it accepted Mr Hilton's version of events as having forgotten to pay and having always intended to reimburse the Respondent and does not make a finding why he sought reimbursement from the Respondent in the first place.

[28]Further, the use by the ET of the concept of "dishonesty" in the "theft" sense is not altogether satisfactory. It might have been better for the ET to have considered the Claimant's conduct in the light of the fiduciary duties as Joint Managing Director he owed to the Respondent.

[29]Although we are satisfied that the ET did find that the principal reason for the dismissal was that the Directors concerned took an opportunity to get rid of the Claimant, the language used in paragraph 70 is not as clear as it might have been. The grounds of appeal

[30]There are three grounds of appeal. The first is put in the Notice of Appeal as one of perversity. However, in submissions and the skeleton argument, the case was put more on the basis that the ET never really made a finding that the principal reason for the dismissal was the opportunistic decision to get rid of the Claimant, when, but for the poor and strained relations between the directors it would not have done so. The ET, it was said, in fact made out the case that the dismissal was for gross misconduct.

[31]Ground two as developed before the ET was to the effect that the ET failed to apply the reasonable band of responses test as to the appropriate sanction (summary dismissal) by substituting its own view as to what was reasonable.

[32]The third ground of appeal related to the finding that there had been procedural unfairness, as Mr Dawson Williams should have conducted the appeal.

[33]Mr Cooper, who appeared on behalf of the Respondent, recognised that grounds two and three would only arise if we upheld his first ground of appeal.

[34]In his submissions on ground one, Mr Cooper firstly submitted that the reason for dismissal was a set of facts known to the employer. There was a need therefore to examine the subjective state of mind of the employer; he referred to the well-known Judgment of Cairns L J in Abernethy v Mott, Hay and Anderson

[1974] IRLR 213

, subsequently approved by Viscount Dilhrone and the House of Lords in the case of Devis v Atkins

[1977] ICR 9620

"A reason for the dismissal of an employee is a set of facts known to the employer, or it may be of beliefs held by him, which cause him to dismiss the employee. If at the time of his dismissal, the employer gives a reason for it, that is no doubt evidence, at any rate as against him, as to the real reason, but it does not necessarily constitute the real reason he may knowingly giving a reason different from the real reason out of kindness…"

[35]This submission is not necessarily controversial. The matter was put in this way in the case of ASLEF v Brady EAT– 0057-06 by Elias J:

"So the question is: why did the employers dismiss him? If the principal reason was the act or acts of misconduct, then the requirements of section 98(1) are met. If, on the other hand, there was some other reason, they will not be."

[36]Mr Cooper points in particular to two paragraphs in the decision of the ET. In paragraph 63, he points to the fact the ET had found that "the principal reason" for Mr Hilton's dismissal was not the conduct complained of, because this followed "logically" from the finding that had the relationship between the Directors been normal, he would not have been dismissed for that offence. He also points to the finding in paragraph 70 which appears to suggest that there were two equal reasons for his dismissal. He pointed to the absence of a finding in paragraph 59 as to whether or not the Claimant would in fact have repaid the monies and suggested that this was inconsistent with paragraph 62.

[37]Mr Cooper submitted the ET should have asked which was the principal reason for the dismissal operating on the mind of the mind of the employer, but it had not done so. He went so far as to submit that the ET's findings in fact made clear that the principal reason for dismissal was misconduct. He pointed to the findings of the Tribunal, that(a) the Respondent genuinely believed the Claimant did not intend to repay the monies (paragraph 59);

(b) this was treated by the Respondent as an act of gross misconduct (paragraph 59); and

(c) acts discovered by the Respondent could "objectively… be justifiably interpreted as gross misconduct…" (paragraph 60).

[38]Mr Cooper also drew our attention to the fact that there was no suggestion that the Respondent had any intention to dismiss the Claimant prior to the discovery of the issue as to Mrs Hilton's ticket and that the business plan for the M.B.O. provided for him to remain as a Director, albeit not Joint Managing Director.

[39]Mr Cooper sought to distinguish the decision in BSWv Brown [unreported EAT 0835/04]. In that case, a decision to dismiss was made before the acts relied upon justified dismissal. He also sought to distinguish the case of ASLEF v Brady to which we will come later.

[40]Mr Cooper was driven to accept that had the ET found explicitly that Mr Powell and Mr Kilroy had decided to dismiss the Claimant because of the poor relations between the Directors, such a finding would have been unassailable. However, he submitted that no such finding was made and the ET was obliged to determine which of the two reasons was determinative.

[41]In relation to ground two, Mr Cooper, as we have noted, conceded that this only needed to be considered if ground one was accepted. Mr Cooper submitted that the ET has, in effect, allowed its own assessment of the Claimant as a witness, and its own conclusions as to his honesty, to colour its conclusions as to what was and what was not reasonable for the Respondent to conclude. The finding by the ET, for example, that the Respondent did not genuinely believe the Claimant to be a "thief" in the normal sense of the word was inconsistent with findings at paragraph 60, that there were facts which could justifiably be interpreted as gross misconduct, and that the claim was an arrogant and improper act. Mr Cooper also urged upon us the fact that Mr Powell did not find the Claimant's assertions he intended to repay "credible", so he had a genuine belief of the Claimant's guilt.

[42]Further, the ET found at paragraph 63 that the Claimant might well have believed he could at least get away with it. Accordingly, there were reasonable grounds for the Respondent's belief. Indeed, the ET have found making the expense claim was an "arrogant and improper act" and justified a 40% deduction from his compensation. Although it was submitted the ET had found that the Claimant did not intend to "thieve", and the contradictions in his evidence did not undermine his credibility, the Respondent was reasonably entitled to take a different view. Further, the ET had taken too narrow a view of theft. The making of an unauthorised expense claim with the intention of getting away with it might reasonably be construed by a reasonable employer as tantamount to theft. The ET should have concentrated on whether it was reasonably open to the Respondent to come to the conclusions it did as to the Claimant's conduct rather than substituting its own views. The Respondent's findings and conduct were within the reasonable band of responses, as was the decision to dismiss.

[43]In relation to ground three, the Claimant submitted that the question of identifying someone to conduct the appeal fell within the reasonable band of responses; see Sainsbury's Supermarkets v Hitt

[2003] IRLR 23

. We agree with this submission. The ET, did not ask whether the decision that Mr Kilroy hear the appeal and not Mr Dawson Williams was within the reasonable band of responses. On the facts, Mr Dawson Williams took little or no part in the day to day business of the company. The ET found he probably did not wish to hear the appeal (we were told in fact by Counsel he did not wish to hear the appeal) and the appeal could be heard in the UK by Mr Kilroy without the expense of either the parties travelling to Cyprus, or bringing Mr Dawson Williams to England. The Claimant's submissions

[44]Before turning to the specific grounds of appeal, Mr Gilroy reminded us the questions of fact were for the ET, and not for us, and of the very high threshold required to succeed in a perversity appeal; see Yeboah v Crofton

[2002] IRLR 634

. In relation to ground one, the ET, submitted Mr Gilroy, was perfectly entitled to find that the dismissal was a "pretext" even though the acts complained of could have been objectively viewed as gross misconduct. The ET found that this is not the way the Respondent in fact regarded them; he drew our attention in this regard particularly in this regard to paragraphs 59 and 60. He further reminded us that the Claimant could not have been removed from his post of Managing Director without his consent, which would undoubtedly have required payment of compensation. He relied upon the decision in ASLEF v Brady , to which we shall come later. He submitted in the round that the findings by the ET as to the Respondent's conduct were justified by the evidence and his submission that the Respondent's "false case was flushed out".

[45]So far as ground two was concerned, the ET did not conclude that "dishonesty" in the "theft" sense was a prerequisite for a dismissal, to be within the reasonable band of responses. It was a rejection of the Respondent's case. The ET had simply rejected the case that the Claimant had acted dishonestly and that the Respondent genuinely believed he had acted dishonestly. What the Claimant may have got away with was not an act of dishonesty or any other act of gross misconduct. Mr Gilroy was concerned that the EAT should not make findings of serious breach of fiduciary duty against the Claimant. This was not a relevant issue, especially as there are civil proceedings between the Claimant and Respondent.

[46]So far as ground three was concerned, the issue was not so much whether the appeal should have been heard by Mr Dawson Williams, but by someone other than a Director involved in the M.B.O. Mr Gilroy pointed out that in the Claimant's solicitor's letter to which we have referred, the suggestion was that the appeal be heard by someone other than an involved Director, possibly Mr Dawson Williams. The size and resources of the Respondent were such that if Mr Dawson Williams did not agree it was possible to get some independent person to hear the appeal, was fundamental to the ET's findings in relation to the M.B.O. that Mr Gilroy should not have heard the appeal. The ET correctly directed itself by reference to Burchell as applying to the reasonableness of the investigation, and process, including the appeal. The ET, therefore, had directed itself to the reasonable band of responses and had not substituted its own views for those of the Respondent. The finding of the ET that it was unfair that Mr Kilroy heard the appeal was simply another reason why the dismissal remained unfair. The Claimant was successful either in relation to his case on the principal reason for his dismissal, or in relation to the nature of the investigation. Discussion and conclusions

[47]We start by considering the law. It is not controversial that the Respondent must show the reason for dismissal, and if it is to succeed in demonstrating the dismissal was fair, the reason for dismissal must be a fair reason within the meaning of section 98 of the Employment Rights Acts 1996 . We do not need to repeat the passage we have cited from Abernethy . We have been greatly assisted by reference to the as yet unreported decision of ASLEF v Brady , to which the President kindly referred us, and which we made available to the parties. Elias J had this to say:

"72. In our judgment the submissions of Mr Brady on this aspect of the case are correct. There was no obligation on the Tribunal to analyse the evidence in the formalistic manner suggested by the Union. It is entirely a matter for them how they reach their conclusions. There were not obliged to reach a view about whether the conduct was in principle capable of amounting to a dismissible offence, nor whether the Union had in fact formed that view. It was open to the Tribunal to find that whether or not the conduct, in principle, could amount to gross misconduct, nevertheless in the circumstances of this case the union had not satisfied them – the onus being firmly on the Union – that it was the real reason. The Tribunal did not in fact have to go on to determine what the real reason was, although they did choose to do so here. The only question is whether there is a proper evidential basis for their decision. For reasons we develop in relation to the second ground, we think that there was."

[48]In paragraph 73, Elias J, obviously referring back to what he had said at paragraph 52, which we have cited earlier, had this to say:

"73. … there is no reason in principle why the dismissal cannot be unfair even where misconduct has been committed. The question is whether the misconduct was the real reason, and it is for the employer to prove that."

[49]Elias J was at pains to point out that it is not incumbent on the Tribunal to make any findings as to the actual reason for dismissal at all:

"76. It was sufficient for them to say that the Union had not satisfied them that the real reason was a statutory reason…"

[50]We should also draw attention to what he said at paragraphs 78 to 80:

"78. We would agree that in principle there is indeed a difference between a reason for the dismissal and the enthusiasm with which the employer adopts that reason. (Mr Hendy in fact drew a distinction between reason and motive, but we do not think that the analysis in this case is assisted by referring to the elusive concept of motive.) An employer may have a good reason for dismissing whilst welcoming the opportunity to dismiss which that reason affords. For example, it may be that someone perceived by management to be a difficult Union official is perfectly properly dismissed for drunkenness. The fact that the employers are glad to see the back of him does not render the dismissal unfair. What causes the dismissal is still the misconduct; but for that, the employee would not have been dismissed. 79. It does not follow, however, that whenever there is misconduct which could justify the dismissal a Tribunal is bound to find that this is indeed the operative reason. The Thomson case shows that even a potentially fair reason may be the pretext for a dismissal for other reasons. To take an obvious example, if the employer makes the misconduct an excuse to dismiss an employee in circumstances where he would not have treated others in a similar way, then in our view the reason for dismissal – the operative cause – will not be the misconduct at all. On this analysis, that is not what has brought about the dismissal. The reason why the employer then dismisses is not the misconduct itself. Even if that in fact merited dismissal, if the employee is treated differently to the way others would have been treated, being dismissed when they would not have been, then in our judgement a Tribunal would be fully entitled to conclude that the misconduct is not the true reason or cause of the dismissal. The true reason is then the antipathy which the employer displays towards the employee. 80. But it is not only where there is evidence that the employee has been treated differently to the way others would be treated that a finding of unfairness can be made. As we have said, once the employee has put in issue with proper evidence a basis for contending that the employer has dismissed out of pique or antagonism, it is for the employer to rebut this by showing that the principal reason is a statutory reason. If the Tribunal is left in doubt, he will not have done so. Evidence that others would not have been dismissed in similar circumstances would be powerful evidence against the employer, but it is open to the Tribunal to find the dismissal unfair even in the absence of such strong evidence. In a case of mixed motives such as malice and misconduct, the principal reason may be malice even although the misconduct would have justified the dismissal had it been the principal reason."

[51]Mr Cooper, during the course of his submissions, sought to persuade us that the Judgment of Elias J in the passages we have read out was obiter and that we should not follow it. We are unable to accept that submission and consider that we should follow that Judgment.

[52]In relation to the decision of the ET, we have already drawn attention to certain lack of clarity. However, we have no doubt that reading the Judgment as a whole, it is clear that the ET found the dismissal in this case to be an opportunistic dismissal and the principal ground was not the conduct of the Claimant, but his relationship with fellow directors. The ET, even if the Judgment may not always be drafted with great felicity, and even if there may be some tension between paragraphs 59 and 64, were quite clear that the principal reason for the dismissal was opportunistic and that there would not have been the sanction of dismissal, if indeed there would have been any disciplinary proceedings at all, but for the particular relationships between the Claimant and his fellow Directors at the time. There is ample evidence to support that conclusion. Even were we to be wrong as to this, then we are quite satisfied the ET did not accept (as again the evidence clearly entitled them to) that the dismissal was for a fair reason, i.e. gross misconduct. We do not need to investigate further the factual matters raised, although we would suggest that the Respondent is placing too much weight on the business plan. Even though this did not require the dismissal of the Claimant, it certainly required his demotion which could not have been achieved without his consent.

[53]In summary, as we have said, although it is unfortunate that the ET did not make clearer findings as to the matters we have raised, on a fair reading of its Judgment we are satisfied that the ET found that the principal reason for the dismissal was not in doubt.

[54]In the circumstances, so far as ground one is concerned, in our opinion the reasons given by the ET make the decision unassailable. There were ample facts that justified the decision, including the existence of the M.B.O. and the conduct of Mr Powell in asking the Claimant to step down at a time when he "had in his pocket" so as to speak, grounds relied upon subsequently for the disciplinary proceedings.

[55]So far as ground two is concerned, this does not arise in the light of our decision on ground one. It is correct that the ET dealt with this matter briefly, or economically, and this again is perhaps because of their findings as to the true reason for dismissal. We are, however, quite unpersuaded that the ET did substitute its views for those of the employer. It may well have been better for the ET to have considered the Claimant's conduct by reference to whether or not he was in breach of fiduciary duty. It is unnecessary for us to make any findings in this regard, especially as there may be litigation elsewhere.

[56]However, we do note the following:(a) the ET could have accepted the Claimant's version of events, but did not;

(b) the ET found that the Claimant's conduct could reasonably have been considered to be gross misconduct, although the ET did not in fact find it was, or was not;

(c) it is important to be bear in mind the circumstances justifying summary dismissal in terms of the law of contract are different to those that would justify summary dismissal as being "fair" within the meaning of section 98;

(d) we find it helpful to refer to the explanation of the duty of loyalty by Professor Robert C Clark in Corporate Law 1986, pages 34 and 141, approved by the Court of Appeal in Item Software (UK) Ltd v Fassihi [2004] IRLR, line 28:

"The most general formulation of corporate law's attempted solution to the problem of managerial accountability is the fiduciary duty of loyalty : the corporation's directors… owe a duty of undivided loyalty to their corporations, and they may not so use corporate assets, or deal with the corporation, as to benefit themselves at the expense of the corporation and its shareholders. …"

[emphasis in the original].

[57]We accept that it was open to the ET to find that there had been such a breach and that that was the reason for dismissal; the ET did not, however, make those findings.

[58]As far as ground three is concerned, this is not a matter we need to decide. However, we do accept Mr Gilroy's submissions. The ET was perfectly entitled to conclude that it was wholly unsatisfactory that a Director with a vested interest in the appeal should have been the Director responsible for dealing with it. The resources of the Respondent were such that it could easily have extended to the provision of an independent person to hear that appeal if Mr Dawson Williams was unwilling to do so. This is an additional reason why the dismissal was unfair.

[59]We conclude by thanking both Mr Cooper and Mr Gilroy for the great help they gave us both in their skeleton arguments and in their oral submissions.