Express Medicals Ltd v O'Donnell (Unfair Dismissal: Reasonableness of dismissal) [2016] UKEAT 0263_15_0902

EAT
Express Medicals Ltd v O'Donnell (Unfair Dismissal: Reasonableness of dismissal)
[2016] UKEAT 0263_15_0902 · 2016-02-09
[1]This is an appeal against a decision by Employment Judge Harris, sitting at London (South), Reasons for which were promulgated on 3 June 2015. He held that the complaint of unfair dismissal in the case before him was well founded. He found that the Claimant was dismissed on 5 September 2014 and that he was dismissed for some other substantial reason (“SOSR”) justifying dismissal. Those facts, initially in contention, are not appealed before me. At paragraph 62 he set out that the “substantial reason” was that the relationship of trust and confidence between the parties had broken down. In the last two sentences of that paragraph he said:
“62. … By 5 September 2014, it was evident that the employment relationship between the Claimant and the Respondent had seriously deteriorated and could not necessarily be considered to remain tenable. I therefore accept the Respondent’s proposition that the Claimant was dismissed for some other substantial reason, namely the loss of trust and confidence between employer and employee.”
[2]What complicated the case was that the Claimant and the controlling mind of the Respondent company (Dr. Hegarty) had been friends and colleagues for over 18 years immediately prior to dismissal; they co-founded the company; they socialised together. They were the sole directors, but a significant difference between their positions was that the Claimant had a one-third shareholding and Dr Hegarty had a two-thirds shareholding.[3]The breakdown emerged in respect of issues over a website redesign, which the Claimant thought he could achieve cheaply and effectively in contrast to the company’s Sales Manager at the time, whom he thought could not. This led to a reaction from the Sales Manager and that in turn to an inconclusive phone call between the Claimant and Dr Hegarty of 23 July. The next morning the two - the Claimant and Dr Hegarty - began an argument, which started when the Claimant swore at Dr Hegarty. Dr Hegarty told the Claimant he was a bully and should resign. The Claimant said he was happy to leave but he wanted some salary.[4]Over the six weeks that followed, prior to the dismissal, there were ongoing discussions by email, though not in person, and latterly through a solicitor at least on behalf of the Respondent, as to the terms upon which the two might separate. This was, understandably, complicated by the shareholding, since the company had increased substantially in value since it had originally been founded. At the time that the Judge decided that there had been a dismissal, he concluded that the termination was unilateral and that discussions had been ongoing. At paragraph 64 he said this:
“64. … the Claimant’s employment relationship continued to subsist after the events of 24 July 2014 and throughout August 2014. It continued until it was unilaterally terminated by the Respondent, as notified to the Claimant in the email from the Respondent’s solicitor of 5 September 2014. Up until this date there were discussions in relation to the termination of the Claimant’s employment, but they remained ongoing. It was not the reasonable actions of a reasonable employer for the Respondent to terminate the Claimant’s employment when it did and in the manner it carried this out. Therefore, having regards to the facts and circumstances of the case, I consider that the decision to dismiss the Claimant did not fall within the range of reasonable responses of a reasonable employer.”
[5]The paragraph is notable for what it does not say. It does not explain why the timing was unreasonable and why the way in which the dismissal was effected was unreasonable. It may be that the next two paragraphs explain what might otherwise have been thought missing from paragraph 64, though it is not entirely obvious that they do. At paragraph 65 the Judge noted that counsel, who appeared on both sides as they appear before me today - Mr Jupp for the Claimant; Ms McNair-Wilson for the Respondent - had not addressed the Tribunal on whether the ACAS Code of Practice applied. He thought whether it did in the context of an SOSR dismissal was uncertain. He added:
“65. … regardless of whether the ACAS Code applies, procedural fairness is still an important factor for the Tribunal to consider, as in all types of dismissal, since it goes to the reasonableness of the employer’s decision to dismiss. It also relates to issues of whether a Polkey [ vAE Dayton Services Ltd [1988] ICR 142 ] reduction should be made if there were to be a finding of unfair dismissal.”
[6]At paragraph 66:
“66. In this case, there was no particular procedure that was followed in advance of the Claimant’s dismissal on 5 September 2014. However, the parties clearly understood the issues in question and they were the subject of an ongoing discussion and dialogue between them. …”
Pausing there, the Judge here appeared to be saying that there had been a discussion and dialogue that had been taking place. The paragraph goes on:
“66. … Accordingly, it is open to question what procedure the Claimant has in mind that the Respondent ought to have adopted in the circumstances and what that would have been expected to achieve. At the same time, there is no reasonable basis on which this Tribunal might conclude that, had a procedure been followed, the Claimant would have been dismissed in any event.”
[7]Then, at paragraph 67:
“67. The conclusion of the Tribunal, having considered all of the evidence placed before it and the parties’ submissions is that the Claimant was unfairly dismissed by the Respondent and therefore his complaint of unfair dismissal is well founded.”
[8]A first difficulty for the Appeal Tribunal is understanding precisely what the Tribunal was saying constituted the unfairness that it had identified. It is, to my mind, the better reading of these paragraphs that it did not say anything to explain why it reached the decision that the timing of the dismissal was wrong, though it might be thought by those words to envisage that a dismissal probably would have taken place at some time, but that what was wrong about the manner of the dismissal was that there was a lack of “a procedure”. The difficulty with that is that it is unclear what procedure the Judge had in mind. The parties have not identified one, the ACAS Code had nothing clear to say, the Claimant had nothing in particular in mind, there had been discussions in any event, but the Judge might be thought to be saying in paragraph 66 some procedure ought to have been adopted but none was. The Appeal[9]Arising out of those paragraphs and the facts - which I have only summarised in brief - are two grounds of appeal, although the first in the Notice of Appeal is itself subdivided into two parts. As put in the Notice of Appeal, they were in effect: first, that it was perverse of the Judge to hold that a dismissal for some other substantial reason in this case was unfair; second, that there was nothing to suggest that some procedure could or might achieve anything, and it was unclear what purpose such a procedure would serve.[10]This therefore fell foul of the observations of this Tribunal in the case of Jefferson (Commercial) LLP v Westgate UKEAT/0128/12, 19 July 2012. That was a case in which the Tribunal had asserted that without a further meeting and further discussion there could not be a fair dismissal and in so doing appeared to be stating a proposition of law. At paragraph 24 it was noted that that was an erroneous approach because section 98(4) did not require a given or any procedure, though that was not to say that in most contexts a decision would not be unfair if there were no such meetings and that it was plain that what was reasonable or unreasonable might often depend upon such a meeting or meetings: it was however wrong to assert that a particular approach was necessary to the point that it amounted to a requirement of statute. At paragraph 25 the EAT said:
“25. … Here, it was requisite that the Tribunal should have considered what purpose in fairness such a further meeting would have had. … The Judgment is to the effect that there had been a mutual and irreparable breakdown of confidence. To have a further meeting to restate that position, which on the findings of fact would be all it could achieve, would be to require the parties to go through a meaningless charade simply for the sake of it. It is no part of a fair procedure to be conducted for the sake of it if the procedure is truly pointless.”
[11]Those words echo the words adopted in the well known and seminal case of Polkey v AE Dayton Services Ltd [1988] ICR 142 HL at page 163, in which - as Mr Jupp points out at paragraph 14 of his skeleton argument - was said: “… If an employer has failed to take the appropriate procedural steps in any particular case, the one question the [employment] tribunal is not permitted to ask in applying the test of reasonableness posed by [now, section 98(4)] is the hypothetical question whether it would have made any difference to the outcome if the appropriate procedural steps had been taken. On the true construction of [now, section 98(4)] this question is simply irrelevant. It is quite a different matter if the tribunal is able to conclude that the employer himself, at the time of dismissal, acted reasonably in taking the view that, in the exceptional circumstances of the particular case, the procedural steps normally appropriate would have been futile, could not have altered the decision to dismiss and therefore could be dispensed with. In such a case the test of reasonableness under [now, section 98(4)] may be satisfied.” (Original emphasis; page 163A-C)[12]The Respondent submits that here there was a clear recognition by the Tribunal that the relationship had broken down irretrievably. It was totally unclear what procedure the Tribunal had in mind, but, if it were some form of discussion, then there was no point in it, since it was clear that the Claimant wished to leave, and the Respondent was happy for him to go, in the context of a relationship between the two that had fractured.[13]The second ground was that the Judge wrongly reached the conclusion he did in respect of Polkey . The effect of this was to render the starting point at a remedies hearing to determine compensation to be an assumption that the loss of earnings of the Claimant would have continued indefinitely. It was clear that the Judge was dealing with Polkey , because he was invited to reconsider his decision, which he declined to do in respect of Polkey in terms that made it quite clear that he thought that was what he had decided in paragraph 65. I am invited by Mr Jupp to interpret the findings in respect of Polkey as being that the Judge simply lacked any proper material upon which he could conclude there was any chance of there being a fair dismissal in the particular circumstances of this case.[14]In greater detail before me, elaborating on her skeleton argument, Ms McNair-Wilson avoided using the word “perversity” by submitting that there had been a substitution of view by the Employment Judge. Instead of asking whether the timing and manner of dismissal adopted by the employer were fair or unfair for the employer to adopt it held that in essence they were to be judged by what he, the Judge, would have done in such circumstances. She argued that the dismissal was manifestly reasonable. That was because, first, the Claimant self-evidently had an appetite to go from the time he told Dr Hegarty to “fuck off” on 24 July 2014, through describing himself as “too old for the new Express” on 3 August, and writing emails proposing terms for exit, to then declaring himself to have been dismissed at the end of August. The Judge himself recognised that his conduct clearly indicated that he was looking to agree a termination of the employment relationship and by 29/30 August was suggesting that his employment had in fact terminated. Not only had he an express desire to leave and negotiate terms to do so, but he had removed all of his furniture on 20 August 2014, he had not been at work throughout August, though he was paid for the month, the relationship was found as a fact to have seriously deteriorated, and therefore it could not sensibly be concluded that it had become anything other than fractured. Though she did not quite put it this way, she might have said that in a relatively small undertaking with the two directors having fallen out, such that one had to go, it would have to be the Claimant as the minority shareholder who went.[15]The argument depends to some extent upon the view the Tribunal actually took of the relationship between the parties. The Judge heard the witnesses. He was in the best place to evaluate them and their relationship. At paragraph 37 in his self-direction of law he observed, correctly, that:
“37. … Loss of trust and confidence between employer and employee, necessary for the employment relationship to function, can amount to some other substantive reason for dismissal. …”
[16]I was taken to both Perkins v St George’s Healthcare NHS Trust [2005] IRLR 934 and Ezsias v North Glamorgan NHS Trust [2011] IRLR 550 to support that proposition, and it was not in any dispute, but

the Judge went on to say in that paragraph:

“37. … The Employment Appeal Tribunal emphasised the importance of identifying why the employer considered it impossible to continue to employ the employee. Nevertheless, there may be cases where there has been an irreparable breakdown of the employment relationship, such that loss of trust and confidence between employer and employee will amount to some other substantial reason for dismissal.”
[17]Therefore, submitted Ms McNair-Wilson, the Judge was saying that he was looking for an irreparable breakdown of the employment relationship for nothing else would satisfy the requirements of some other substantial reason. Having determined later in his Judgment that there was some other substantial reason here, in circumstances where he identified that the reason was the deteriorating relationship, the Judge was therefore saying that the breakdown was irreparable.[18]This, in my view, has to be seen in the light of what the Judge was trying to convey in the second to last sentence of paragraph 62 quoted above. He used words that were less absolute than “irreparable”. He said the relationship “could not necessarily be considered to remain tenable”. In my view, what he was expressing there was a question mark over whether the relationship had actually passed the point of no return. It was plainly in his eyes sufficient to amount to some other substantial reason, but it seems to me that he was saying, even if Ms McNair-Wilson is right and the point is consistent with what he had directed himself at paragraph 37, that it was not completely beyond repair.[19]The argument as to perversity or manifest unfairness has to grapple with the fourth sentence of paragraph 64. Though the Judge did not say what he thought was unreasonable about the timing of the dismissal and, as I have suggested, probably thought that it was wrong as to its manner because there had been an absence of a “procedure”, unspecified though it was, the context to this is that the parties had been negotiating their separation since 24 July. What I think the Tribunal was saying was that they were not necessarily going to separate for good if a way of living could have been arranged between them: the Tribunal had spoken about the parties substantially refashioning their relationship (paragraph 62). Any statement of the facts could not ignore that they had known each other on a close and friendly basis both in work and socially for some 20 years. The sense of paragraph 64 is that the timing of their separation was premature, though the Judge did not say so in terms. It may be, though I am less certain about this, that in terms of procedure the Judge was looking for further discussion of some sort between the parties even though he recognised there had been ongoing discussion and dialogue already (paragraph 66).[20]In the light of that, I cannot accept that a dismissal, albeit for some other substantial reason on the basis that relations had sunk to a very low ebb between the parties, might not have been unfair. Perversity is a very high hurdle. It is no less high because it is said that the finding the Tribunal should have made would have been manifestly fair or reasonable. I therefore do not accept the first way in which the first ground is advanced by Ms McNair-Wilson. Where parties are negotiating, where there is a breakdown of relationship that may be viewed as being the fault (if fault is the right word) of both parties, where that is the sad fact of the point to which they have come, then it may be thought that fairness behoves the taking of considerable effort to ensure that the conscious uncoupling of the parties is rendered smooth rather than there be the fait accomplis of dismissal.[21]However, the way in which I have read the Judgment is that the finding of unfairness was predicated not just upon its possible prematurity but upon some unspecified procedure that the Judge had in mind as making the difference between that which would have been fair and that which was unfair. I do not know what he had in mind. It is submitted to me by Mr Jupp that he might have had in mind a meeting or dialogue, that if the employer had had the mindset of calling a meeting, who could say what the outcome might not have been? Indeed, the focus had to be upon the employer’s actions in applying section 98(4) of the Employment Rights Act 1996 . What therefore would the employer’s frame of mind have been if he had had a fair procedure? The possibility that it might have made a difference, and the Judge finding himself unable to say it was futile so far as the employer was concerned, means that it was open to the Judge to say that it was unfair not to have some sort of procedure, possibly as Mr Jupp supposed. It had to be remembered that here the Claimant had a continuing role as a director. The Claimant and Respondent would need to work together at least to that extent. It was therefore open to the Judge to say what he did. Discussion[22]There is no ground advanced before me that the Judge did not sufficiently explain himself so as to fall foul of the principles set out in Meek v City of Birmingham District Council [1987] IRLR 250 . In my view, he did not give clear reasons but, as I have said, that is not a ground of appeal as such. However, the conclusion that an unspecified procedure, which, if Mr Jupp is right, might have been the holding of dialogue, when dialogue had already been held, required further explanation if the failure to hold it was to be a satisfactory reason for holding the dismissal to be unfair. The Judge needed to set out what it was about the absence of the procedure that he had in mind, whatever it might have been, that made what would on his analysis otherwise have been a fair dismissal something that was unfair. I do not need to go so far as Ms McNair-Wilson in suggesting that it would necessarily have been futile. It might have been, but it might not have been. The difficulty is knowing how the Judge analysed the position. The reasoning is inadequate to support the conclusion. I have therefore concluded that the first ground of appeal succeeds.[23]The reliance on an unspecified procedure is essentially at the heart of the next ground too. Without knowing precisely what the Judge had in mind should have been done, it is difficult to assess what the chances of a dismissal following that fair procedure would have been if this employer would have followed that procedure. That in essence is the question that is to be asked in determining Polkey .[24]In respect of the Polkey ground of appeal, I was addressed by reference to Scope v Thornett [2007] IRLR 155 , Andrews v Software 2000 Ltd [2007] IRLR 568 and the case of Contract Bottling Ltd v Cave [2015] ICR 146 .[25]In that latter case, the Appeal Tribunal sought to put what is conventionally called a Polkey reduction into its proper context: it is truly part, and part only, of the wider question arising when compensation for future loss is to be assessed. In paragraph 15 the EAT analysed the factors that might play in general terms upon a question whether an employee would have kept an existing job at the existing rate of pay. It noted that there were two principal matters likely to affect that:
“15. … It is impossible to be prescriptive of all the circumstances, but it may be said that the first factor is the general circumstances. These arise without the choice of either employer or employee. …”
The Judgment goes on to identify a number of factors that might exist in such a list, such as the choice of the employee as to whether the employee remains. That itself is subdivided in paragraph 16, but in paragraph 17 it turns to observe:
“17. … If not the employee’s choice, the choice might be that of the employer. This is likely to arise either because of the circumstances with which the employer is faced, or by reason of the decision of the employer to restructure, or to cease to use the services of the individual concerned for good reason. The question here is the prospect of there being a fair dismissal. The question of whether a deduction should be made, conventionally called a Polkey deduction, is limited to this last category. It is important to see its context as part, but part only, of the overall decision as to compensation.”
[26]Contract Bottling recognises a number of different situations in which an employment relationship might end. It might be said that this present case is an example of one in which the termination of employment might more naturally have arisen by a consensual termination than by either resignation on the one part or termination by dismissal on the other, but the question is essentially how long the employment would have lasted. If the Judgment in the present appeal is to be read as the Judge saying that there was no sufficient evidence to conclude that there could be any deduction for Polkey , he would, had that been the case, have been within his theoretical entitlement so to conclude. It is well accepted that the assessment of the chances of a fair dismissal must have some evidence at least to support it and that it may be impossible to recreate the world as one would wish it to have been, viewed in retrospect as it inevitably is by a Tribunal.[27]The problem, as it seems to me, with the Judgment here is that it concluded that there was to be no deduction for the chance that there would have been a fair dismissal in circumstances in which the Tribunal itself had previously said that (paragraph 63):
“63. … [The Claimant’s] conduct clearly indicated that he was looking to agree a termination of the employment relationship …”
[28]The Tribunal had identified a breakdown of trust and confidence between the Claimant and Dr Hegarty that was at least sufficient to justify the employer in dismissing the Claimant. It accepted evidence that the Claimant himself was looking to end it. The dialogue and email discussion between July and September was centrally focused upon the terms of leaving. To conclude, as in effect the Tribunal Judge was doing by saying what he did at the end of paragraph 66, that there was no reasonable basis upon which the Tribunal might conclude that had “a procedure” been followed the Claimant would have been dismissed in any event, he was saying that there was no realistic chance that he would have done anything other than remained in employment. In the light of the evidence in the case that decision is, in my view, a perverse one. If there were some prospect that the relationship might be saved, which is how the words in the second to last sentence of paragraph 62 might be read, that was some prospect; it was not every prospect, without exception, let alone the only prospect. It seems to me that there was ample evidence here from which the Judge was bound to make some assessment of the chances that if the relationship remained fractured there would have been a parting of the ways either by dismissal or consensually - or, for that matter, by resignation in the circumstances of this case - and to ask what the chances of a reconciliation, given the parties that he had seen and the evidence he had heard, might be. Put the two together and one has the material to make an assessment of the chance that the employment here would have continued without termination.[29]By way of observation, in looking at the question of Polkey the Judge was faithfully dealing with an issue that the parties had put before him. The issue of Polkey was no doubt addressed by the parties in the light of their cases before him, which in each case was that there had been a termination on 24 July 2014, the employer saying there had been a resignation, the employee saying that he had been dismissed. In those circumstances, it makes it very difficult for a Judge who concludes on the evidence, as he was entitled to do, that the dismissal was actually some six weeks later to then ask and answer sensibly the same question as might have been posed in respect of dismissals at the earlier date. A Judge can, if he thinks it appropriate, adjourn the question of Polkey to the hearing on remedies if it is just and convenient to do so. This is one case in which it might have been sensible to do that, but this is entirely a matter for the Tribunal. Viewing Polkey in isolation, as which, as pointed out in Cave , it is not strictly the way it should be seen, may be of assistance to the parties in negotiating figures at which to settle an award, but, viewed in isolation, it needs nonetheless to be a proper finding as to making which where there is some sufficient evidence, even if the evidence need not be anything more than that referred to in Thornett by Pill LJ at paragraph 36, when he pointed out that any assessment, including one that the employment will continue indefinitely:
“36. … is by way of prediction and inevitably involves a speculative element. … The tribunal’s statutory duty may involve making such predictions and tribunals cannot be expected, or even allowed, to opt out of that duty because their task is a difficult one and may involve speculation. Giving judgment in the leading case on loss of earning capacity, Moeliker v A Reyrolle & Co Ltd [1976] IRLR 120, an important head of damage in personal injury cases, Stephenson LJ when seeking words to define the correct approach to be followed stated, at p.144: ‘I avoid “speculation” because this head of damage can really be nothing else.’ ”
[30]I am satisfied that the Judge here could not safely have concluded that there was insufficient material upon which to assess the chances here that the employment would have terminated by dismissal or, as it may be here, by consensual termination or resignation and to establish in his best judgment when that might be.[31]It follows that the appeal must succeed on both of the grounds upon which it has been advanced. I have, however, held that it was open to a Tribunal to conclude that the dismissal for some other substantial reason in the circumstances of this case could have been an unfair one. I am not in a position, since I did not myself hear and assess the evidence, to be satisfied that I can say with any precision what the correct conclusion as to the Polkey deduction should have been. Both of those issues must therefore be remitted to a Tribunal. The Scope of the Remission[32]The Tribunal to which the issue is remitted will approach the issues on the basis that there was a dismissal made by the employer on 5 September 2014. It must accept that the dismissal was for some other substantial reason and that that has been shown by the employer. It will determine the question of whether it was, within the words of section 98(4), fair or unfair, having regard to the reason shown and determine that in all of the circumstances, including the size and administrative resources of the employer’s undertaking, and decide that question in accordance with equity and the substantial merits of the case. If it concludes that the dismissal was unfair, then, as part of its assessment - whether at the same hearing or, if it chooses, by deferring the issue to a later hearing on compensation - it must take into account what it thinks the chances would have been of a termination of the employment and, if so, what the balance of risks and chances suggest as to the time when that might occur.[33]The parties do not agree as to whether the matter should be remitted to the same or a different Judge for determination. In my view, this is a case in which, applying the principles set out in Sinclair Roche & Temperley v Heard and Anor [2004] IRLR 763 , Familiar Authority at the EAT, at paragraph 46, I take into account: the passage of time, which is not great, as appeals go, in this case; proportionality, in which I bear in mind that the case below was heard in the space of less than two days; and that although there is no suggestion here of bias or partiality and Tribunal professionalism would indicate that the same Judge reconsider his decision, I have in mind what is said both at paragraphs 46.4 and 46.5 and in particular in the circumstances of this case, as Ms McNair-Wilson urges me, that this was a case in which the Judge was invited in reasonable terms to reconsider his conclusion on Polkey , and declined to do so. In my view, it is right that the matter be heard by someone afresh, when the focus of the submissions will not simply be upon a mixture of that which is new in evidence and that which is old.[34]I have in mind in saying this that my impression from reading the Judgment is that some issues were not addressed at all or addressed as fully as they might have been, because of matters that were at the time in dispute between the parties which the Judge has resolved as I have indicated. If their attention is focused now on whether it was or was not fair to dismiss by reason of the breakdown, such as there had been, in trust and confidence between the Claimant and Dr Hegarty and, if the conclusion is that that be unfair, and what the chances would be of a fair parting of the ways thereafter, it will be able to make an unfettered and uninfluenced examination of the facts.[35]For those reasons, I allow the appeal and remit the issues of fairness and, if then arising, the extent of any Polkey deduction on compensation to a fresh Employment Tribunal.