PIPECOIL TECHNOLOGY LTD v MR M HEATHCOTE [2012] UKEAT 0432_11_1805

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2012] UKEAT 0432_11_1805Case No Appeal No. UKEAT/0432/11
Between
PIPECOIL TECHNOLOGY LTDAPPELLANTMR M HEATHCOTERESPONDENT
Before
Mr Justice Supperstone Mr D J JenkinsDate 18 May 2012
[1]APPEARANCES For the Appellant MR S HEALY (of Counsel) Instructed by: Richmond Anderson Goudie Solicitors 1-2 Flake Cottages Cone Terrace Chester-le-Street DH3 3QH For the Respondent MR J ANDERSON (of Counsel) Instructed by: Evans & Co Solicitors 33 Cheapside Spennymoor DL16 6QF SUMMARY UNFAIR DISMISSAL Reasonableness of dismissal Mitigation of loss Polkey deduction Appeal against decision of unfair dismissal and compensatory award. Cross-appeal against the level of the compensatory award. Two grounds of appeal succeeded:(1) Employment Tribunal failed to deal with the Polkey issue that was clearly before it;(2) ET misapplied law on failure to mitigate – failed to have regard to ERA , section 123(4). Other six grounds, which included misapplication of Burchell test, failed. Cross-appeal that ET failed to increase award pursuant to TULR(C)A , section 207A failed. No obligation on ET to deal with point of their own motion. Case remitted to same ET to decide Polkey issue and mitigation of loss issue on basis of evidence that was before ET. THE HONOURABLE MR JUSTICE SUPPERSTONE Introduction This is an appeal against the decision of an Employment Tribunal sitting at Newcastle-upon-Tyne and sent to the parties on 27 April 2011 that the Claimant was unfairly dismissed and that the compensatory award to be paid to the Claimant should be £17,445. The Respondent cross-appeals against the level of the compensatory award. There is no appeal against the Tribunal's decision in respect of the disability discrimination claim that there had been a failure by the Respondent to make reasonable adjustments. The facts[2]The essential facts are that the Claimant was employed by the Respondent as a mechanical design engineer from 30 September 2008 until 16 April 2010. On 3 June 2009 he was involved in a serious road traffic collision. It appears that this was not his fault. As a result of the collision he sustained serious injuries, including a broken leg and an injury to his brain. His recovery was lengthy but steady; he returned to work on 24 August 2009 on a limited basis. After the Christmas break he returned to full-time employment. The Respondent was fully aware of the accident and the injuries he sustained.[3]In April 2010 the Respondent had concerns about the Claimant's timekeeping. It was not satisfied that the Claimant was correctly recording his hours of work. An investigation was carried out into his email usage; an examination showed that he spent on average 1.6 hours per day sending or receiving emails. On 16 April 2010, when the Claimant arrived at work after lunch, he was handed a letter by Mr Fiddes, the Managing Director of the Respondent, inviting him to a disciplinary hearing. The hearing took place very soon thereafter. The letter informed the Claimant that action was being considered in relation to the following: first, the standard of his work being considerably below a reasonably competent level; second, that he spent excessive time on personal email correspondence during normal working hours; and third, that he inaccurately recorded time. He was also told that the action may include dismissal. Following the meeting the Claimant was dismissed by reason of all three matters. This was confirmed in writing by Mr Fiddes, who gave the Claimant four weeks' pay in lieu of notice.[4]The Claimant appealed the decision to Mr Batchelor, the Operations Director of the Respondent; he indicated that he did not wish to be present at any meeting. Having received the Notice of Appeal, Mr Batchelor spoke to Mr Brendon Hayward, the Claimant's previous line manager, and Mr Fiddes, who at the time of the dismissal was his current line manager, about the Claimant's performance, timekeeping and email usage. The appeal hearing was held in the absence of the Claimant on 22 June 2010. The decision to dismiss was upheld. Mr Batchelor informed the Claimant that he considered the deliberate falsification of timesheets of itself was gross misconduct and justified dismissal. The Tribunal found the dismissal to be unfair, for reasons we shall explain. The appeal[5]On this appeal the Respondent was represented by Mr Sam Healy, who did not appear before the Tribunal; the Claimant is represented by Mr Jamie Anderson, who did appear before the Tribunal. We are grateful to both counsel for their written and oral submissions.[6]The Respondent challenges the decision of the Tribunal on eight grounds: grounds 1 and 2 are that the Tribunal failed to set out that issues that it had to determine; ground 3 is that it misapplied the test set out in British Home Stores Ltd v Burchell [1980] ICR 303 ; ground 4 is that the Tribunal failed to recognise that the band of reasonable responses is to be applied when considering the fairness of the procedure adopted by the Respondent; ground 5 is that the Tribunal failed to consider whether the procedure adopted at the appeal stage could correct earlier procedural errors and render the dismissal as a whole fair; ground 6 is that the Tribunal erred in failing to consider whether such procedural errors as were found were likely to have made any overall difference to the outcome, commonly referred to as the Polkey v A E Dayton Services Ltd [1987] IRLR 503 issue; ground 7 is that the Tribunal misapplied the law on failure to mitigate; and ground 8 is that the Tribunal made an incorrect finding of fact, namely that Mr Fiddes had predetermined the outcome of the disciplinary hearing.[7]In the cross-appeal the Claimant contends that the Tribunal erred in not increasing the compensatory award pursuant to section 207A of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULR(C)A).[8]Turning to the grounds of appeal, in relation to his submission on grounds 1 and 2 Mr Healy refers us to rule 30 of the Employment Tribunals (Constitution and Rules of Procedure) Regulations , and in particular rule 30(6)(a) and (b). They provide as follows:
"(6) Written reasons for a judgment shall include the following information— (a) the issues that the tribunal or employment judge has identified as being relevant to the claim, (b) if some identified issues were not determined, what those issues were and why they were not determined […]."
[9]In Balfour Beatty Power Networks Ltd v Wilcox [2007] IRLR 63 Buxton LJ said at paragraph 25:
"I do not doubt that in future Employment Tribunals would be well advised to recite the terms of Rule 30(6) and to indicate serially how their determination fulfils its requirements, if only to avoid unmeritorious appeals. But the rule is surely intended to be a guide and not a straitjacket. Provided it can be reasonably spelled out from the determination of the Employment Tribunal that what Rule 30(6) requires has been provided by that Tribunal, then no error of law will have been committed."
[10]There must, as this Tribunal made clear in Greenwood v NWF Retail Ltd [2011] ICR 896 at paragraph 56, be substantial compliance with the terms of the rule.[11]On 10 November 2010 there had been a case management discussion before Employment Judge Buchanan attended by representatives on behalf of the parties. At that discussion the issues in relation to the unfair dismissal application had been clearly identified. They were set out in paragraph 4 of the orders sent to the parties on 11 November 2010, which were before the Tribunal at the substantive hearing with which we are concerned. In their skeleton arguments before the Tribunal the parties identified the relevant issues in relation to the unfair dismissal claim. Mr Anderson did so at paragraph 4 of his skeleton argument, and Mr Goudie, whose skeleton argument for the Respondent Mr Barker, who appeared for the Respondent, relied upon, set out the three-stage test in Burchell at paragraph 21. At paragraph 6 of its decision the Tribunal expressly state that they had regard to the principles in Burchell . It would have been preferable for the Tribunal to have set out the three-stage test; however, their failure to do so in the circumstances we have described does not, in our judgment, amount to an error of law. We are satisfied that there was substantial compliance with the rules in relation to the Burchell issue. The Polkey issue, ground 6, is another matter, and we shall consider that separately.[12]In relation to ground 3 Mr Healy submits that, although the Tribunal considered the adequacy of the investigation into the Claimant's misconduct, it did not consider whether the Respondent had a genuine belief in the Claimant's misconduct, nor whether the Respondent had reasonable grounds for such a belief. We do not accept this submission. At paragraph 10.1 the Tribunal states that it did "have concerns about the manner in which the whole process was carried out, in particular in applying the principles of Burchell ." At paragraph 10.2.1 the Tribunal note that it "formed the view that Mr Fiddes, as the Managing Director, had made up his mind prior to hearing any explanation from the Claimant. In the main, this was because of his evidence, which was unsatisfactory on the point, and the failure to disclose the email account." It does not appear to us that the Respondent did satisfy the Tribunal as to the first two stages of the Burchell test, and in particular as to the second stage. The observations of the Tribunal at paragraph 10.2, which indicate that the Tribunal was not satisfied that the Claimant's actions in relation to the timesheets was fraudulent, and paragraph 10.3, with regard to the failure to check the contents of the emails, Mr Anderson submits, go both to issues at stage 2 and stage 3 of the Burchell test. However, even if we are wrong about that, it is clear that the Tribunal was not satisfied as to the investigation carried out by the Respondent. At paragraph 10.1 the Tribunal says as much in express terms – "the Tribunal is not satisfied that the Respondents carried out a proper investigation into the matters alleged" – and at paragraph 10.3, to which we have referred, the Tribunal says:
"Further the Tribunal would criticise the Respondents in relation to the investigation of the email accounts themselves; the Tribunal thought it would have been prudent to check the contents of the emails, as they may well have provided additional evidence either to support the claimant or to support the respondent's view."
[13]Mr Healy acknowledges that the Tribunal criticised the adequacy of the investigation but submits, by reference to paragraph 10.3 as an example, that the Tribunal fell into the trap of considering whether in its own view the Respondent had done the right thing rather than apply the band of reasonable responses. Mr Healy suggests a further example of the Tribunal stumbling into the so-called substitution mindset is found at paragraph 10.2, where it deals with the allegation of inaccurate time recording and starts the last sentence with the words "It appears to the Tribunal".[14]In our judgment, the clear finding by the Tribunal, properly based on the evidence, that Mr Fiddes had made up his mind prior to hearing any explanation from the Claimant fully supports the Tribunal's conclusion that it was not satisfied that the Respondent had carried out a proper investigation into the matters alleged. We reject the suggestion that the language used by the Tribunal indicates it substituted its own decision for that of the Respondent. We consider, on the basis of the finding, which is not directly challenged, and we say that by reference to the submissions made in writing by Mr Healy on this ground and his oral submissions before us today, that Mr Fiddes had made up his mind prior to hearing any explanation from the Claimant. The conclusion of the Tribunal that the Respondent had not carried out a proper investigation was one that it was entitled to reach. On the facts of this case, we conclude that it was within the band of reasonable responses for the Tribunal to find that the failure to conduct a reasonable investigation resulted in the dismissal being unfair in all the circumstances.[15]We shall consider grounds 4 and 5 together. In relation to the appeal the Tribunal noted that Mr Batchelor had carried out a proper investigation but concluded, by reference to two "flaws" that were identified, that the appeal did not remedy the earlier findings. First, the Tribunal was concerned about Mr Batchelor's previous involvement in the case; second the Respondent's handbook clearly stated that the Managing Director will hear an appeal. That being so, there was a concern as to whether Mr Batchelor would overturn a decision of Mr Fiddes, the Managing Director. Having regard to both these matters, the Tribunal cannot be criticised, in our view, for concluding that the appeal hearing did not remedy the earlier findings. As for the first identified flaw, it was not just that Mr Batchelor was aware of the situation before he heard the appeal; he was the person who supplied the handbook to the Claimant prior to the disciplinary hearing. It was the giving of the handbook to the Claimant that the Tribunal had regard to in particular when finding that Mr Fiddes had made up his mind prior to the hearing. To the Tribunal, there was a clear indication that Mr Batchelor was fully aware of the situation. As for the second flaw, the Respondent was acting in breach of its own procedures. Applying Taylor v OCS Group Ltd [2006] IRLR 613 , we are satisfied that the Tribunal was entitled to find in all the circumstances that the Claimant was unfairly dismissed. Having regard to the finding by the Tribunal that Mr Fiddes had made up his mind prior to hearing any explanation from the Claimant and the flaws in the appeal procedure, we consider that the process as a whole was not fair and the Tribunal was entitled so to find.[16]As to ground 6, Mr Healy submits that both parties addressed the Tribunal on the Polkey issue. It is clear this is so, both from the written submissions and Mr Anderson's confirmation that there were oral submissions made by the parties on this issue. Regrettably, the Tribunal has not addressed this issue in its decision. Mr Healy, fairly in our view, observes that if the Tribunal had complied with rule 30(6) and set out the issues, it might have avoided this omission. Mr Anderson has referred us to the decision of this Tribunal in Bradford & Bingley PLC v McCarthy [2010] UKEAT/0458/09 and to the observations of HHJ Serota QC at paragraphs 24-26, where the Judge refers in that case to the failure of the Employment Tribunal to consider section 98A(2), says it is quite clear that the matter was raised and it needed to be considered by the Tribunal, and he continues, "It is most unfortunate than an error such as this was not immediately brought to the attention of the Employment Tribunal". Mr Anderson raises the question as to whether there is a need for this Tribunal to give further guidance on this issue. Whether there is a need to do so we leave for another day. In the present case the Polkey issue is one of a number of grounds of appeal, and we do not consider that this ground can be defended on the basis that the matter has not been referred back immediately to the Employment Tribunal for a review. In our judgment, as we have made clear, this is a matter that needs to be determined; it was an issue before the Tribunal, and it was not dealt with.[17]As to ground 7, Mr Healy submits that the Tribunal should have concluded that the Claimant would, if he had taken all reasonable steps, have secured re-employment within a matter of months of his dismissal. The Claimant was dismissed on 16 April 2010, the hearing took place between 16 and 18 March 2011, and he was awarded net loss of earnings to the date of the hearing of £14,915. The Tribunal expressed itself as satisfied that the Respondent was correct that there was work in the field and their competitors had advertised for mechanical design engineers since the Claimant's dismissal. However, the Tribunal did not go on to make any findings as to whether the Claimant properly mitigated his loss as, in our view, it should have done. At paragraph 11 of its decision the Tribunal said:
"The Tribunal also note that the claimant appears unsure as to where his future lies; whether it is with the army or in the medical profession. The Tribunal is not convinced that the claimant has made a concerted effort to find new employment, and this may be down to an attempt to obtain more money from his personal injury claim. Having said that the Tribunal is mindful that he was unfairly dismissed and is entitled to recover some of his lost earnings, the Tribunal does not consider it just and equitable to look to future loss."
[18]The Tribunal appears to have had regard to section 123(1) of the Employment Rights Act (ERA) but not to section 123(4). Section 123(1) of the ERA provides:
"Subject to the provisions of this section and sections 124, 124A and 126, the amount of the compensatory award should be such an amount as the tribunal considers just and equitable in all the circumstances, having regard to the loss sustained by the complainant in consequence of the dismissal and in so far as that loss is attributable to action taken by the employer."
[19]Section 123(4) states:
"In ascertaining the loss referred to in subsection (1), the tribunal shall apply the same rule concerning the duty of a person to mitigate his loss as applies to damages recoverable under the common law of England and Wales or (as the case may be) Scotland."
[20]The test on mitigation is as stated in Glasgow City Council v Rayton UKEATS/0005/07 by Lady Smith at paragraph 24, where, referring to the facts of the particular case, she says:
"It does seem that what the Tribunal have done is, rather than follow the step by step approach required, they have taken a broad brush view. Mr Legard suggested that their approach was justified because they had a general discretion to award 'just and equitable' compensation. That, however, comes very close to suggesting that an award can be reduced on a percentage basis where there has been a failure to mitigate loss, which would be wrong […] and whilst there is no specific statutory guidance as to how the deduction for failure to mitigate should be calculated, the deduction does require to have a logical and reasoned basis. We do not see that the deduction in this case has such a basis, and the reason for that appears to be that the Tribunal has failed to carry out the complete exercise required."
[21]In our judgment, the Tribunal in the instant case have failed to carry out the exercise that was required.[22]Finally, ground 8: in our judgment, there is no basis for setting aside the Tribunal's finding at the conclusion of a three-day hearing, having heard all the evidence and considered the written documentation, that Mr Fiddes, as the Managing Director, had made up his mind prior to hearing any explanation from the Claimant. The Tribunal considered Mr Fiddes' evidence to be unsatisfactory and, in our view, made a finding that it was entitled on the evidence to make. As for the disclosure of the email account, that was an additional reason that led the Tribunal to form the view that it did. In any event, we do not understand Mr Healy to be suggesting that Mr Fiddes had provided the Claimant with a copy of the email account prior to the disciplinary hearing. The cross-appeal[23]Turning now to the cross-appeal, section 207A of the TULR(C)A 1992 provides in subsection (2) that:
"If, in the case of proceedings to which this section applies, it appears to the employment tribunal that— (a) the claim to which the proceedings relate concerns a matter to which a relevant code of practice applies, (b) the employer has failed to comply with that code in relation to that matter, and (c) that failure was unreasonable, the employment tribunal may, if it considers it just and equitable in all the circumstances to do so, increase any award that it makes to the employee by no more than 25%."
[24]In his closing outline submission Mr Anderson submitted that the Respondent had acted in breach of the ACAS Code of Practice Disciplinary and Grievance Procedures 2009 in various respects. This submission properly followed his cross-examination of the Respondent's witnesses, when he put it to them that there had been a dismissal in breach of the procedures and guidelines set out in the ACAS Code. Mr Anderson referred us to pages 90-92 of the bundle, where there are the notes of his cross-examination. Mr Anderson also referred to the ACAS Code in his closing oral submissions (page 97 of the bundle). He said that the ACAS Code relates to compensation, also relevant to liability. However, there was no claim before the Tribunal that the compensatory award should be increased pursuant to section 207A of the 1992 Act. By the use of the word "claim", we do not intend to convey that there needed to be a formal claim; the matter needed, however, to be raised expressly before the Tribunal, in our judgement. No submissions were made on the Claimant's behalf before the Tribunal that the compensation should be increased pursuant to section 207A. The Tribunal cannot be criticised in the circumstances for not dealing with the point of their own motion. In our judgment, it is too late for this claim to be made in this appeal.[25]Mr Anderson referred us in support of his submission to the case of Venniri v Autodex [2007] UKEAT/0436/07 and in particular to the observations of HHJ David Richardson, presiding in this Tribunal, where reference was made to the statutory procedures under the 2002 Act, and it was said:
"35. Now that the statutory procedures under the 2002 Act are becoming well known, it is to be hoped that in most cases an employer will have complied with them. Often, particularly where a Claimant is represented, a few moments of discussion at the beginning of a case will establish that it is conceded that the relevant procedure has been complied with by the employer, but in the absence of an informed concession on the question a Tribunal should regard s98(1) as an issue and deal with it in its reasons. 36. In this case the Tribunal should have identified s98(1) as an issue and dealt with the issue in its reasons. There is no concession by Mr Venniri; he had indeed actually included the relevant procedure in his bundle with a star against step 1. Moreover in his witness statement he expressly complained that he was given nothing in writing before the meeting on 29 August. 37. In these circumstances, we consider that it is open to Mr Venniri to raise the matter on appeal. He is not raising a fresh point of law to which the principles of Jones v Governing Body of Burdett Coutts School [ [1998] IRLR 521 ] could apply; he is complaining that the Tribunal has not dealt with an issue which it was duty-bound to address."
[26]We agree with the submission of Mr Healy that these observations of the Judge do not assist the Claimant in the present case; they do not apply to the new regime, where the statutory wording is different, and where the matter is now permissive and not mandatory. Conclusion[27]Accordingly, for the reasons we have given, we allow this appeal on two grounds, namely the Polkey and mitigation of loss issues, grounds 6 and 7 respectively. The appeal on the other grounds fails. We dismiss the cross-appeal. The two grounds on which we have allowed the appeal should be remitted to the same Tribunal for determination.