Neutral Citation Number: [1996] EWCA Civ 561
Case No. EATRF 95/0262/B
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM EMPLOYMENT APPEAL TRIBUNAL

Royal Courts of Justice
Strand
London WC2

Date: Wednesday, 31st July 1996

B e f o r e:

LORD JUSTICE NEILL
LORD JUSTICE WARD
LORD JUSTICE POTTER

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LONDON BOROUGH OF HACKNEY
Respondents

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JACQUELINE BENN
Appellant

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(Computer Aided Transcript of the Palantype Notes of
Smith Bernal Reporting Limited, 180 Fleet Street,
London EC4A 2HD
Tel: 0171 831 3183
Official Shorthand Writers to the Court)
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MR J McMULLEN QC and MR J GAVAGHAN (Instructed by Johns & Saggar, NW5 2JU) appeared on behalf of the Appellant

MR I MacDONALD QC, MR S COTTLE and MR C HUTCHINSON (Instructed by Legal Department, London Borough of Hackney) appeared on behalf of the Respondents
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J U D G M E N T (As approved)

LORD JUSTICE NEILL:  The appellant in these proceedings is Ms. Jacqueline Benn.  Ms Benn was born in Trinidad and was educated in Trinidad and at the North London Collegiate School.  After leaving school she became a student at the Royal Academy of Music where she obtained a diploma.  After teaching music for a time and obtaining a further qualification she decided to take up a career in education.  She obtained a Master's degree in education at London University and also an Advanced Diploma in education.

In January 1989 Ms Benn accepted an offer from the London Borough of Hackney (the council) to become the assistant director of education (post schools).  She took up her appointment on 1 April 1989.

On 1 April 1990 the council took over responsibility for education in their area from the Inner London Education Authority under the provisions of the Education Reform Act 1988.  The council then appointed as their director of education Mr. Augustus John, who had formerly been the ILEA's deputy director of education.

Following the appointment of Mr. John, Ms Benn became a member of a senior management team consisting of the director of education, a deputy director, two assistant directors and a chief inspector.  Ms Benn herself was responsible for all the post-school educational facilities provided by the council, including adult education, the careers service, the youth service and the Cordwainers and Hackney Colleges.

It is clear that Ms Benn, in common with other managers in the council's education directorate, faced a formidable challenge in trying to carry into effect a number of fundamental changes in the provision of education in a deprived inner city area.  In addition Ms Benn faced an additional difficulty in that she had to work in a building, which she regarded as unsuitable, at a considerable distance from the other  members of the directorate.  However that may be, during the Autumn and Winter of 1990/91 the council became increasingly dissatisfied with the performance by Ms Benn of her duties.  At the same time, however, Ms Benn became dissatisfied with the way in which, as she saw it, she and other black members of the education directorate were treated by other senior officers.  She voiced her concerns in a memorandum dated 3 December 1990 to the chair of the education committee.  This memorandum was followed by later correspondence with which for the purpose of this appeal it is not necessary to deal.

On 18 February 1991 Mr. White, the council's chief executive, and Mr. John Foster, another senior officer of the Council, had a meeting with Ms Benn.  Mr. White told her of the concerns which had been expressed about her work by the director of education and by Mr. Yeboah, the Head of Personnel Services.  In addition there was some discussion at this meeting about the possible options for the future which included the possibility of agreeing a "severance package".

During the next few days Ms Benn consulted the Commission for Racial Equality and had a further meeting with Mr. White.  Some possible severance terms were sent to Ms Benn by a letter from Mr. Foster dated 4 March 1991, but after consideration Ms Benn felt unable to accept them.  Thereupon Mr. John, the director of education, decided to institute disciplinary proceedings against Ms Benn.  On 20 March 1991 he sent her a notice of complaint and suspended her from duty.  On the same day Mr. White, the chief executive, wrote to Ms Benn as follows:
"I have seen a copy of the letter you sent to John Foster dated 14 March 1991 in which I note you do not wish to proceed  any further with a possible severance package until other matters are resolved.

We covered a lot of ground at our meeting on 18 February 1991 which, I acknowledge, was held at your request.  Nevertheless, I think I made it clear to you that I was aware that your director had serious concerns about working relationships and faults.  He had indicated to me that he wished to pursue these through formal channels.  My objective for the meeting, apart from giving you the opportunity of letting me know what was on your mind, was to investigate alternatives which would have avoided the course of action which I knew your director was intending to pursue.

Clearly, as you do not wish to continue with discussing the options that have been put to you there is nothing more that I can do than to advise your director to take whatever action he sees fit in the circumstances.  For my part, I have registered your allegations concerning racist and sexist attitudes shown towards you and the colleagues you mentioned at our meeting and will be initiating the appropriate investigation."

By instituting disciplinary proceedings against Ms. Benn Mr. John invoked the council's Disciplinary Procedure.  I should refer to some of the paragraphs of the document containing this Procedure.  In paragraph 2.4 it was stated that the Disciplinary Procedure was designed to emphasise and encourage improvements in individual conduct and performance, but that it should not be viewed primarily as a means of imposing sanctions.  Paragraph 2.5 stated that the Disciplinary Process should be utilized to deal with poor performance, misconduct and gross misconduct.  Paragraph 2.6 was in these terms:
"Poor work performance may be due to negligence of duties, or a lack of capability to carry out those duties.  Negligence of duties falls under the category of misconduct and not incapability."

Paragraph 3 of the written Procedure set out the procedure to be adopted in cases of poor work performance, misconduct and gross misconduct.  It made provision for verbal warnings and written warnings and also for a Formal Disciplinary Procedure.  It was stated in paragraph 3.2.1 that this procedure might be activated in a number of circumstances including continued poor work performance following a written warning, misconduct of a sufficiently serious nature to warrant investigation under the formal procedure on the first occasion, and gross misconduct.

Paragraph 3 also contained provisions for the issuing of a notice of complaint and for the procedure to be adopted at the hearing of the complaint.  Paragraph 4 made provision for a system of appeals to the Personnel Appeals Committee of the council.  Appendix A to the Disciplinary Procedure set out standards of conduct and work performance.  I should refer to certain provisions in paragraphs 4 and 5 of Appendix A:
"4. The standards which the council would wish to see upheld by its employees are contained in the guidelines listed below.  The lists are not exclusive or exhaustive, since there are many additional situations which could occur and which may be regarded as breaches in discipline. ...

5. The great majority of breaches in discipline will not be sufficiently serious in nature to warrant dismissal on the first occasion.  Those situations constitute MISCONDUCT and are listed below."

In the following sub paragraphs a number of examples of misconduct were given.  These included:
"(c) Negligence in the performance of duties.
(e) Inadequate performance of the type of work which an employee is engaged to undertake."

Paragraph 7 of Appendix A set out a definition of gross misconduct:
"GROSS MISCONDUCT is defined as misconduct of such a serious nature that the council is justified in no longer tolerating the employee's continued presence at your place of work.  An allegation of gross misconduct will normally lead to immediate suspension from work in accordance with the agreed procedure pending investigation.  Where the allegations are substantiated, they may lead to dismissal without notice."

There were then set out a number of examples of gross misconduct which included serious acts of discrimination and various types of dishonest behaviour.

I can turn now to the Notice of Complaint which was sent to Ms Benn on 20 March 1991.  It was in these terms:
"Gross incompetence and mismanagement manifested through:

1. Gross negligence of duty in major areas of responsibility; i.e. leading on community college planning, LMC draft scheme, careers service.

2. Failure to manage the Divisional Budget making process as directed, e.g. failure to provide budget guidance documents to divisional management team, and to produce budget-building information by deadlines set.

3. Gross error of judgement in respect of budget information tabled to members at call-over of the Education Committee.

4. Failure to fill key posts.

The above constitutes GROSS MISCONDUCT."

The notice was accompanied by detailed statements from Mr. John and a substantial amount of supporting documentation.

On 29 April 1991 Ms Benn invoked the council's grievance procedure against  Mr. John and Mr. Silverstone, the Deputy Director of Education.  The council's grievance procedure was contained in a document which set out details of the procedure to be adopted if an employee of the council wished to pursue a grievance.  It was provided in paragraph 1.1 of the Grievance Procedure that if the grievance related directly to a Notice of Complaint taken out against the individual raising the grievance, then the grievance and the Notice of Complaint would be heard together at the same hearing.

The complaint against Ms Benn and her grievance against Mr. John were considered by the council's Policy Resources Disciplinary sub committee over ten days between 14 May and 30 July 1991.  The sub committee upheld all the complaints against Ms Benn and decided that she should be dismissed.  The committee also concluded that her grievance was unsubstantiated.  The appeal by Ms Benn to the Policy Resources Appeals sub committee was heard in November and December 1991 and was dismissed.  Ms Benn was informed of the result of her appeal by a letter from the council dated 8 January 1992.

Meanwhile on 18 June 1991 Ms Benn had presented a complaint to the Industrial Tribunal complaining that she had been subjected to racial and sex discrimination and had also been victimised by the council.  After her dismissal Ms Benn presented a second complaint.  In this second complaint she contended that her dismissal was unfair because, among other reasons, the actions of the council and its officers had been motivated by sexual and racial discrimination.

Ms Benn's complaints were heard by the Industrial Tribunal over ten days in November 1992.  By the decision sent to the parties on 6 May 1993 the Tribunal unanimously rejected the claims of racial and sex discrimination but upheld her claim of unfair dismissal.  Ms Benn did not appeal against the dismissal of her claims relating to discrimination, but the council appealed against the finding by the Industrial Tribunal that she had been unfairly dismissed.  The council's appeal was heard by the Employment Appeal Tribunal on 10 June 1994.  By the judgment delivered on 29 July 1994 the appeal was allowed on the ground that the Industrial Tribunal had erred in law in substituting its own assessment of the situation at the time of Ms Benn's dismissal instead of testing the council's assessment of the situation by reference to the range of responses of the reasonable employer.

The Appeal

Before turning to consider the arguments which were advanced in this court it is first necessary to set out the material parts of section 57 of the Employment Protection ( Consolidation) Act 1978 (the Act of 1978).  Section 57 provides:
"(1) In determining for the purposes of this Part whether the dismissal of an employee was fair or unfair, it shall be for the employer to show -

(a) what was the reason (or, if there was more than one, the principal reason) for the dismissal, and

(b) that it was a reason falling within subsection (2) or some other substantial reason of a kind such as to justify the dismissal of an employee holding the position which that employee held.

(2) In subsection (1)(b) the reference to a reason falling within this subsection is a reference to a reason which -

(a) related to the capability or qualifications of the employee for performing work of the kind which he was employed by the employer to do, or

(b) related to the conduct of the employee, or

(c) was that the employee was redundant, or

(d) ........

(3) Where the employer has fulfilled the requirements of subsection (1), then, .........., the determination of the question whether the dismissal was fair or unfair, having regard to the reason shown by the employer, shall depend on whether in the circumstances (including the size and administrative resources of the employer's undertaking) the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissing the employee; and that question shall be determined in accordance with equity and the substantial merits of the case.

(4) In this section, in relation to an employee, -

(a) `capability' means capability assessed by reference to skill, aptitude, health or any other physical or mental quality;

........."

It will be remembered that in the Notice of Complaint sent by Mr. John to Ms Benn on 20 March 1991 it was said that the acts of gross incompetence and mismanagement set out in the Notice of Complaint constituted gross misconduct.  Accordingly the reason for dismissal put forward by the council was one which "related to the conduct of the employee" within section 57(2)(b).  It is clear, however, from paragraph 46 of the Reasons that the Industrial Tribunal regarded the true reason as being one related to Ms Benn's capability rather than her conduct.  Paragraph 46 was in these terms:
"We do not consider that the applicant's dismissal was rendered unfair because of the decision to charge her with `gross misconduct'.  Although the respondents' disciplinary procedure stipulates that the disciplinary process is to be used to deal with poor work performance, as well as misconduct and gross misconduct, the only specific instances in the procedure are `negligence in the performance of duties' and `inadequate performance of the type of work which an employee is engaged to undertake'.  Both are classified as `misconduct'.  Paragraphs 5 - 7 [of the Disciplinary Procedure] are stated to be `guidelines', and we see no reason why a very serious example of `misconduct' should not be treated as `gross misconduct'.  We do not accept that their disciplinary procedure prevents the respondents from dismissing an employee in a sufficiently serious case of lack of capability, provided that in such a case the respondents do not consider that they are bound to dismiss the employee if the allegation is proved.  We accept the evidence of Mr. Yeboah to the effect that he regarded the allegations against the applicant as sufficiently serious to justify a charge of gross misconduct, although we consider that, for the purposes of section 57(2) of the 1978 Act, the reason for the dismissal of the applicant in this case is properly to be regarded as a reason related to her capability.  We also accept the evidence of Councillor Shepherd, who was a member of the disciplinary committee, that the committee considered and rejected all alternatives to the dismissal."

Having classified the reason for dismissal as being related to capability the Industrial Tribunal then considered whether Ms Benn should have been warned before the disciplinary proceedings were instituted.  In paragraph 50 of the Reasons the Industrial Tribunal continued:
"We have, however, reached the conclusion that fairness required that the applicant should be given a warning that she was liable to dismissal in the circumstances of this particular case.  The complaint against her was not that she was inherently incapable, but that she had failed to carry out certain key tasks.  The applicant's very heavy work load necessarily required her to choose between competing priorities and to delegate many important duties.  .... We consider that this is a case in which the employee's performance might reasonably have been expected to improve if the respondents had made known to her the specific respects in which her performance was considered defective.  ......  We therefore consider that, although the allegations against the applicant were serious and were investigated fairly and properly, the decision to dismiss her was unfair."

The Tribunal then went on to consider how much longer Ms Benn would have continued to work for the council and whether any deduction should be made from her compensation in respect of contributory fault.  In paragraph 51 of the Reasons they said:
"Although we have reached the conclusion that the respondents did not act reasonably in treating their reason for dismissing the applicant as a sufficient reason for doing so, we have, however, also concluded that the applicant would inevitably have been dismissed even if the respondents had acted fairly.  Although the applicant gave evidence to the effect that she would have responded to criticism, we consider that it is clear that the applicant's main priority at the time of the institution of the proceedings against her was fast becoming her grievances against other members of the Directorate.  We take the view that the applicant's pursuit of those grievances would inevitably have led to a breakdown in working relationships and that, even if the respondents had acted fairly, the applicant would not have remained in their employment for more than a year longer than she did."

In the next paragraph the Industrial Tribunal stated that the council had not satisfied them that Ms Benn's failings were deliberate or culpable and that therefore they did not propose to make any deduction from her compensation in respect of contributory fault.

In this court counsel for Ms Benn submitted that the Industrial Tribunal were justified in taking the course that they did and that the Employment Appeal Tribunal were quite wrong to interfere.  Counsel developed his argument on the following lines:
(1) It is for the employer to show the reason for dismissal and that it is a reason falling within section 57(2) or some other substantial reason.
(2) In the present case the council put forward the reason of gross misconduct, which was a reason which could fall within section 57(2).
(3) The Industrial Tribunal, however, rejected this reason and held, as they were entitled to do, that the real reason was capability.
(4) It is for the Industrial Tribunal to make a finding as to the reason.  It then examines that reason to decide the question posed in section 57(3).
(5) Counsel drew our attention to the decision of the Court of Appeal in Abernethy v. Mott, Hay & Anderson [1974] ICR 323.  In that case the employer claimed that the employee had been dismissed on the ground of redundancy.  It was held that, though the employer had erred in law in telling the employee that his dismissal was by reason of redundancy, the wrong legal label did not matter so long as there was a set of facts made known to the employee before or when he was given notice which the tribunal could find was the principal reason for the dismissal.  At page 329D Lord Denning MR said:
"But I do not think that the reason has got to be correctly labelled at the time of dismissal.  It may be that the employer is wrong in law as labelling it as dismissal for redundancy.  In that case the wrong label can be set aside.  The employer can only rely on the reason in fact for which he dismissed the man, if the facts are sufficiently known or made known to the man.  The reason in this case was - on the facts - already known or sufficiently made known to Mr. Abernethy.  The wrong label of `redundancy' does not affect the point."

Counsel also referred to a passage in the judgment of Cairns L.J. at 330 where he said:
"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 give a reason different from the real reason out of kindness or because he might have difficulty in proving the facts that actually led him to dismiss;  or he may describe his reasons wrongly through some mistake of language or of law.  In particular in these days, when the word `redundancy' has a specific statutory meaning, it is very easy for an employer to think that the facts which have led him to dismiss constitute a redundancy situation whereas in law they do not;  and in my opinion the industrial tribunal was entitled to take the view that that was what happened here;  the employers honestly thought that the facts constituted redundancy, but in law they did not."

(6) Counsel also referred us to the decision of the National Industrial Relations Court in  James v. Waltham Holy Cross UDC [1973] ICR 398.  In that case Sir John Donaldson stressed the importance of the duty of fairness.  At 404F Sir John Donaldson said:
".... Cases can arise in which the inadequacy of performance is so extreme that there must be an irredeemable incapability.  In such circumstances, exceptional though they no doubt are, a warning and opportunity for improvement are of no benefit to the  employee and may constitute an unfair burden on the business."

(7) The Industrial Tribunal had assessed the facts put forward on behalf of the council;  they had concluded that those facts related to capability rather than conduct;  that fairness required that Ms Benn should have been given a warning;  that on the proved facts the dismissal of Ms Benn, in the absence of any warning or a chance to improve her performance, was unfair.

(8) The Employment Appeal Tribunal erred in interfering with what were essentially findings of fact by the Industrial Tribunal.

This is a formidable argument, and it is to be noted that in paragraph 44 of the Reasons the Industrial Tribunal referred to and therefore had in mind the principle stated in British Home Stores v. Burchell  [1980] ICR 303 that it is not for the Industrial Tribunal to substitute its judgment for that of the employer.  I have come to the conclusion, however, that, perhaps because they attached a different label to the established facts, the Industrial Tribunal made a fundamental error in failing adequately to consider whether the dismissal of Ms Benn was within the range of reasonable responses of a reasonable employer in the light of the established facts.

I should say something more about the facts found by the Industrial Tribunal.

In paragraph 19 of the Reasons the Industrial Tribunal set out the terms of the Notice of Complaint.  In the previous paragraph they had referred to the evidence given by Mr. John as to the reason why he had issued the notice.  Paragraph 18 was in these terms:
"It was very evident, he said, that the applicant was failing to manage her division.  During the time that she had been corresponding with the Chief Executive, her service managers were calling on him to take the lead on issues which were her responsibility.  Mr. John continued `It seemed to me that if she had made a complaint to the Chief Executive and he had offered to broker a solution  between herself and myself and the senior management teams and she had rejected that option and all others put to her, and since she had not indicated to me that she intended to resign, I was not prepared to carry on with her non-performance and chaos that was causing in the service. ...  there were very clear failings of the sort that no Director or Chief Executive should expect from a second tier officer.  That situation was causing me enormous stress.  Individual section heads were getting distressed about lack of morale because of lack of leadership.  ... In my professional judgement, the council could not tolerate it any longer.'"

In paragraph 41 of the Reasons the Industrial Tribunal stated their conclusion that by January 1991 the council had genuine and serious concerns about Ms Benn's performance.  Reference was made to her "serious failures" and to the fact that she "frequently failed to keep appointments or to go to meetings which she was expected to attend and that, when she did attend meetings, she took virtually no part, except to take copious notes."   In paragraph 42 of the Reasons the Industrial Tribunal referred again to Mr. John's evidence.  They said:
"We considered Mr. John to be an outstanding witness, and we accept his evidence on that matter [his reasons for the issue of the Notice of Complaint] without hesitation.  ...  We are satisfied that Mr. John issued the Notice of Complaint for the reasons stated in his evidence when it became known that the applicant did not intend to resign, and that the applicant's complaints of racism, sexism and victimisation played no part in his actions."

It is clear therefore that the Industrial Tribunal accepted Mr. John's evidence that he was not prepared to carry on with the "chaos" that Ms Benn was causing in the Directorate.  It is also to be noted that, in the passage in paragraph 46 of the Reasons  which I have already cited, the Industrial Tribunal accepted the evidence of Mr. Yeboah (the Deputy Director of Education) that he regarded the allegations against Ms Benn as sufficiently serious to justify a charge of gross misconduct.  But the tribunal, having accepted the evidence of Mr.John and Mr.Yeboah, then substituted their own assessment of the situation and, in effect, downgraded gross misconduct to capability.  Moreover, it seems to me that there was force in the submission put forward on behalf of the council that, when considering the fairness of the dismissal in paragraph 50 of the Reasons, the Industrial Tribunal looked at the matter largely from the viewpoint of Ms Benn rather than considering whether the response of the council was reasonable in the light of the facts known to them.

I accept that the label attached to the facts by an employer is not conclusive and that there may be cases where, as in Abernethy, the Industrial Tribunal will have to consider the fairness of a dismissal even though the employer has attached the wrong label to his reason.  But, where an employer has an established disciplinary procedure and the employer follows that procedure both in the classification of the matters to be investigated and the method of investigation, an Industrial Tribunal has to be very careful before it makes a reclassification.  A reclassification of the facts may make it difficult to see how a reasonable employer might reasonably respond to those facts.

I would endorse the guidance given by Browne-Wilkinson J in  Iceland Frozen Foods v. Jones [1983] ICR 17 where he said at 24G that the authorities established that in law the correct approach for an industrial tribunal to adopt in answering a question posed by section 57(3) of the Act of 1978 was as follows:
"(1) The starting point should always be the words of section 57(3) themselves;  

(2) In applying the section an industrial tribunal must consider the reasonableness of the employer's conduct, not simply whether they (the members of the industrial tribunal) consider the dismissal to be fair;

(3) In judging the reasonableness of the employer's conduct an industrial tribunal must not substitute its decision as to what was the right course to adopt for that of the employer; 

(4) In many, though not all, cases there is a band of reasonable responses to the employee's conduct within which one employer might reasonably take one view, another quite reasonably take another;

(5) The function of the industrial tribunal, as an industrial jury, is to determine whether in the particular circumstances of each case the decision to dismiss the employee fell within the band of reasonable responses which a reasonable employer might have adopted.  If the dismissal falls within the band the dismissal is fair:  if the dismissal falls outside the band it is unfair."

I would pay tribute to the care taken by the Industrial Tribunal in this case.  I have come to the conclusion, however, that they fell into error when in paragraph 46 they said that they considered that the reason for the dismissal of Ms Benn was properly to be regarded as related to her capability and in paragraph 50 went on to find that this reason did not merit her dismissal.  It was in these respects, as it seems to me, that they wrongly substituted their view of the underlying facts and their response to those facts instead of considering how those facts might have been viewed by a reasonable employer.

I would dismiss the appeal.

LORD JUSTICE WARD:  I agree and add, by way of summary of the main reasons which lead me to dismiss the appeal, the following:-

1.The reason for the dismissal, per Cairns L.J. in Abernethy v. Mott, Hay & Anderson [1974] ICR 323, 330 is the "set of facts known to the employer, or it may be of beliefs held by him, which cause him to dismiss the employee."  In a sentence, the reason was as Mr John, the Director of Education, "an outstanding witness", expressed it in his evidence, that, "I was not prepared to carry on with her non-performance" (of her duty to manage her division) “and chaos that was causing in the service."  The Tribunal was satisfied that these, elsewhere described as "genuine and serious concerns," were the reasons for Mr John’s issuing his Notice of Complaint.  The Tribunal "accept(ed) the evidence of Mr Yeboah" (the Head of Personnel Services) "to the effect that he regarded the allegations against the applicant as sufficiently serious to justify a charge of gross misconduct." They saw "no reason why a very serious example of 'misconduct' should not be treated as 'gross misconduct'".  That complaint was upheld by the council's Policy and Resources Disciplinary Sub-Committee after a 10 day hearing and the appellant's appeal to the Policy and Resources Appeals Sub-Committee was dismissed.  The Tribunal "also accept(ed) the evidence of Councillor Shepherd,  who was a member of the disciplinary committee, that the committee considered and rejected all alternatives to the dismissal."  It was common ground (see her Points of Claim) that the upholding of that complaint "led to her dismissal".  That, therefore, was the reason for her dismissal.

2.That reason, i.e. that set of facts, was found by the Tribunal to fall within subsection (2) of section 57 of the Act.

3.The Tribunal was, therefore, satisfied that the employer had established what section 57 required it to establish, viz. what the reason was and that it fell within subsection (2). 

4.Then the crucial question was the section 57(3) question: was the dismissal fair or unfair?  That determination is to be made "having regard to the reason shown by the employer". The determination depends "on whether in the circumstances...the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissing the employee".  The "it" is "the reason shown by the employer".  "The reason shown by the employer" is the set of facts which fell within subsection (2). Did the employer act reasonably or unreasonably when it treated that set of facts as a sufficient reason for dismissing its employee?  In answering that question the correct approach for the Tribunal is that suggested by Browne-Wilkinson J in Iceland Frozen Foods v. Jones [1983] ICR 17, 24G which I respectfully adopt:

"(3) In judging  the reasonableness of the employer's conduct an industrial tribunal must not substitute its decision as to what was the right course to adopt for that of the employer;

(4) In many, though not all, cases there is a band of reasonable responses to the employee’s conduct within which one employer might reasonably take one view, another quite reasonably take another;

(5) The function of the industrial tribunal, as an industrial jury, is to determine whether in the particular circumstances of each case the decision to dismiss the employee fell within the band of reasonable responses which a reasonable employer might  have adopted . If the dismissal falls within the band the dismissal is fair: if the dismissal falls outside the band it is unfair."

5.It seems to me applying that test that the only conclusions open to the Tribunal on the facts found were:-
(i)  This employer's response to the employee's conduct was to treat it as gross misconduct. 
(ii) Since the disciplinary proceedings upheld the charge of gross misconduct, so to treat it must fall within a band of reasonable responses. Indeed, as I have set out, the Tribunal itself saw no reason why a very serious example of misconduct should not be treated as gross misconduct.
(iii) Viewing it as gross misconduct, this employer decided that it was conduct which justified dismissal without warning. The disciplinary committee considered but rejected all alternatives to dismissal. The matter had gone beyond the stage where warnings were considered adequate to effect change. 
(iv) So viewed, the decision to dismiss fell within a band of reasonable responses.
(v) Accordingly the dismissal was fair.

6.  The Tribunal in fact found that the reason for dismissal shown by the employer related to the capability of the employee, not to her conduct. In my judgment, it was entitled so to find. What it was not entitled to find was that the employer ought to have approached the question of dismissal on that basis. In treating this as a capability case where a warning to improve was appropriate before dismissal, the Tribunal was guilty of substituting its classification of the reason for dismissal for the employer’s and substituting its decision as to the right course to adopt for that of the council. In so doing, it erred.

LORD JUSTICE POTTER:  I agree with both judgments.
Order: Appeal dismissed with costs; legal aid taxation of appellant's costs; leave to appeal refused.