Appeal No.	 EAT/1043/96

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 23 January 1997

Before
THE HONOURABLE MR JUSTICE KIRKWOOD
MISS A MADDOCKS OBE
MR R N STRAKER

BANHAM PATENT LOCKS LTD	APPELLANTS

MR J WILLIAMS	RESPONDENT

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellants	MR C R JONES
Personnel Consultant
Professional Personnel 
Consultants Ltd 
Godwin House
George Street
Huntingdon
Cambs
PE18 6BU	
For the Respondent	MISS S MOOR 
(of Counsel)
Messrs Clarkson Wright & Jakes
Solicitors
Valiant House
12 Knoll Rise
Orpington
Kent
BR6 OPG

	MR JUSTICE KIRKWOOD:	This is an appeal from part of the decision of an Industrial Tribunal at London (South) and registered on 19 August 1996.  The Tribunal decided that Mr Williams had been unfairly dismissed by his employer, Banham Patent Locks Ltd.  It went on to consider the remedy.

	The employer contended that compensation should be limited to a six-week period from the date of dismissal, because by that time, and due to the planned reorganisation of the method of payment of wages, Mr Williams could and would have been fairly dismissed because of past misconduct of a fraudulent nature.  The two lay members of the Tribunal rejected that submission.  The Chairman accepted it.  The employer appeals against that majority decision.

	The background to the case of unfair dismissal puts this appeal into context and can be taken from the facts as found by the Industrial Tribunal in these terms:

“5.  ...  The Respondent manufactures security equipment.  It has 180 employees at its sales site and at its factory.  The Applicant, Mr Williams, was its factory manager and had been in post for nine years at the time of his dismissal.  There had been no significant complaints about him for eight of those nine years but at the beginning of 1995 his performance started to deteriorate.  The company observed a number of faults which are listed in detail in correspondence leading to this case which is in the bundle.”

	In its Full Reasons the Tribunal then summarised in 5(i) to (viii) various matters, which I need not repeat, and continued:

“6.  All these issues were raised with him and improvement was required, but his tendancy was to blame other people.  In particular he blamed management for failure to provide him with the necessary equipment.  Mr Ward pointed out at the Tribunal that no reasonable request was refused, albeit some were delayed and that since the Applicant had been dismissed, Mr Ward had taken over much of his job and had been able to make improvements without difficulty.  
7.  On 25 November 1995, there was a meeting where Mr Williams was told that there would have to be cooperation on his behalf or the consequences would be drastic.  He blamed other people for the faults.

8.  The Board then met and in the early part of 1996 decided to dismiss him.  On 17 January 1996 he was called to attend a meeting with Mr Ward and Mr Jones.  He was only given half an hours notice of that meeting.  He was told that the Board had decided that dismissal was the only option open to them and he was told of that decision.  He reacted angrily and said that he was going to see his solicitor.”

	It is on the basis of those facts that the Tribunal found that it was clear that dismissal was unfair and that there had been no attempt to follow any recognised industrial procedures.  

	After Mr Williams’ dismissal, the employers discovered, so they believe, that he had been putting cash of theirs in his pocket.  The facts on that aspect as found on the evidence were equally clearly set out in the Full Reasons in these terms:

“15.  Robert Davis had worked for the company from 1966 to 1988 as a Blacksmith when he retired from full-time work at the age of 65.  The company needed his services and at the beginning of January 1995 they took him on again on a part-time basis.  Because the level of his wages was below the amount of his personal allowances, they paid without deduction of tax.  Equally because he was over 65, no national insurance payments had to be made.  The company therefore saw no necessity to issue him with a wage slip and he did not complain about this.  The company decided to pay him £120 a week, in cash, in an envelope with his name on it and entrusted the Applicant, [Mr Williams] his line manager, to collect the weekly wages from the pay office and to distribute them, including Mr Davies’ money.  Mr Davies was told by the Applicant that he was to earn £75 per week, but the company was under the impression they had to pay him £120 per week.  Mr Ward blamed the Applicant for this saying that it was he who had suggested the £75 per week to Mr Davies and the £120 to the company so that he could perpetrate a fraud.  The system was that Mr Broadhurst, the Payroll Supervisor would put £120 cash into an envelope and write Mr Davies’ name on the outside.  This would be collected by Mr Williams each Friday morning and handed over to Mr Davies.  It was Mr Broadhurst’s evidence that he did this every week and handed it to Mr Williams.  He could not remember handing the money to anybody else but Mr Williams but was not sure whether it might have been done once or twice, particularly on the occasions when Mr Williams was in hospital in August 1995.  There were also occasions where Mr Williams was absent from the factory on the firm’s business on a Friday morning, the normal time for payment.  Mr Davies gave evidence that he expected his pay to be £75 a week because Mr Williams had told him that and that he could not remember collecting his pay from anybody but Mr Williams, although he could not entirely rule out being given it by somebody else on one or possibly more occasions.  Mr Davies told us that he received loose cash from Mr Williams amounting to £75 per week and hardly ever in an envelope.  Mr Williams had a deputy, a Mr Horsman, a Foreman, and when Mr Williams was absent Mr Horsman would distribute the wages to the four or five employees who were paid in cash.  He could not recall ever paying money to Mr Davies although he concedes it might be possible.  Mr Williams was adamant that he handed the sealed envelope and its contents to Mr Davies as he had picked it up from Mr Broadhurst.
16.  The matter was discovered on the next pay day after the dismissal of Mr Williams.  Mr Smith, another employee, handed over the pay and Mr Davies discovered it to be £120.  The first reports were that Mrs Davies had opened the unopened pay packet but this was later amended by Mr Davies to himself.  Mr Davies then went to his employers and told them they had paid him too much.  An inquiry was held and there was a meeting a few days later between all the parties concerned apart from Mr Williams who had by then been sacked.  The matter was investigated and it was concluded that Mr Williams had something to answer for.  A letter was sent asking him to attend to his solicitors to help with their enquiries but he declined to do so.  The employers made their own enquiries and concluded that Mr Williams had taken £45 from Mr Davies pay packet each week.  They were strengthened by the proof that in one period where Mr Williams had gone on holiday for two weeks, he had asked for two lots of money from Mr Broadhurst for Mr Davies and had been paid it in advance.  There was however, no evidence of how Mr Davies was paid during the two weeks.  Mr Williams was in hospital in August.”

	The decision of the majority on this aspect of the case was that they were not convinced that any reasonable employer would, having heard the evidence they had heard, have reasonably concluded that Mr Williams, rather than Mr Broadhurst or Mr Davies, stole the money and therefore, they could not have fairly dismissed him.  The majority said that because (1) there were two payments recorded at weekly intervals in August when the Applicant was in hospital and (2) there were three other dates when payments may have been made when the Applicant was not there.  The majority found that the company’s accounting system for cash had no checks by independent persons, and they found that the possibility that Mr Broadhurst had taken the money, could not be ruled out.  They concluded that, if the Applicant was sacked at the end of February for gross misconduct, namely the theft of monies, and his case came before them, they had little doubt that they would have upheld his complaint of unfair dismissal.

	By contrast, the decision of the minority, which was in fact the Chairman of the Tribunal, went the other way.  The Chairman’s conclusion is expressed in this way:

“22.  ...  To interfere with an employer company’s decision to believe its wages accountant and a worker rather the Applicant, is in my view to substitute the view of the Tribunal for that of the employer.  We cannot tell an employer who to believe.  He knows the people and particularly in this case, he has carried out a thorough enquiry.  So long as he had held a fair hearing it would be exceptional for us to interfere with that decision and this case does not justify such an exception.”

	The Chairman then went on to deal with the impact his decision would have had on questions of award and, in the course of that, he said:

“It was my view of the evidence that on the balance of probabilities the Applicant had taken this money.”

	In support of the appeal against the finding on this aspect as to remedy Mr Jones supports the Chairman’s approach.  Further, he reminded this Tribunal of the decision of the Employment Appeal Tribunal in British Home Stores Ltd v Burchell [1978] IRLR 379, and particularly the passage from the judgment of Arnold J, at page 380:

“What the tribunal have to decide every time is, broadly expressed, whether the employer who discharged the employee on the ground of the misconduct in question (usually, though not necessarily, dishonest conduct) entertained a reasonable suspicion amounting to a belief in the guilt of the employee of that misconduct at that time.  That is really stating shortly and compendiously what is in fact more than one element.  First of all, there must be established by the employer the fact of that belief; that the employer did believe it.  Secondly, that the employer had in his mind reasonable grounds upon which to sustain that belief.  And thirdly, we think, that the employer, at the stage at which he formed that belief on those grounds, at any rate at the final stage at which he formed that belief on those grounds, had carried out as much investigation into the matter as was reasonable in all the circumstances of the case.  It is the employer who manages to discharge the onus of demonstrating those three matters, we think, who must not be examined further.  It is not relevant, as we think, that the Tribunal would itself have shared that view in those circumstances.  It is not relevant, as we think, for the Tribunal to examine the quality of the material which the employer had before him, for instance to see whether it was the sort of material, objectively considered, which would lead to a certain conclusion on the balance of probabilities, or whether it was the sort of material which would lead to the same conclusion only upon the basis of being ‘sure’ as it is now said more normally in a criminal context, or, to use the more old-fashioned term, such as to put the matter ‘beyond reasonable doubt’.  The test, and the test all the way through, is reasonablenes; and certainly, as it seems to us, a conclusion on the balance of probabilities will in any surmisable circumstance be a reasonable conclusion.
Now here the Tribunal has started off, as we think, entirely correctly by stating in an opening paragraph of their Reasons:  ‘In these proceedings we are not concerned with whether Miss Burchell was guilty of innocent of the offences charged against her but whether the respondents had reasonable grounds for believing that she had committed the offences when they dismissed her on 28.10.77’.  That is quite correct.  It is important always in these cases to bear in mind, as we bear in mind and choose to say, that on no view of the matter did the Industrial Tribunal, nor does this Tribunal, adjudicate upon the guilt or innocence of Miss Burchell.”

	Accordingly, it is submitted, that in considering remedy, just as in considering reasonableness on the question of dismissal, the Industrial Tribunal should have followed the Burchell approach.  The Tribunal should not have substituted its own view on the evidence it heard for the conclusion as to culpability reached by the employer on its full investigation into the alleged fraud.  We use the word ‘full’ because it is not contended that the employer’s investigation when these matters came to light, was other than a full one.  To the extent that it was not a complete and exhaustive one, that was due only to Mr Williams’ decision not to co-operate with it; not to take the opportunity he was given to put his case and assist in resolving the matters that had caused concern.

	The primary argument for the Respondent is that in applying the words of Section 73 and 74(1) of the Employment Protection (Consolidation) Act 1978, now Section 123 of the Employment Rights Act 1996, the Burchell approach is too narrow.  The words of the legislation are:

“  ...  the amount of the compensatory  award shall be such 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 in so far as that loss is attributable to action taken by the employer.”

	The submission is that the Industrial Tribunal was not limited to considering what course the employer might reasonably have taken, but to decide what it considered just and equitable in all the circumstances and I will return to that submission.

	The second submission draws on a short passage from the speech of Viscount Dilhorne in the decision of the House of Lords in W Devis & Sons Ltd v R A Atkins [1977] IRLR 314 and the passage relied upon is at page 320:

“Having considered these authorities and the statutory provisions it is in my opinion clear that in assessing compensation the Tribunal is entitled to have regard to subsequently discovered misconduct and, if they think fit, to award nominal or no compensation.
It is not therefore necessary to strain the language of para. 6(8) so as to avoid a result which Parliament cannot possibly have intended, namely, that a dishonest employee who has treated his employers and has successfuly concealed his defalcations up to the time of his dismissal, whose conduct, if known, would justify his summary dismissal, should in addition to the proceeds of his dishonesty, obtain ‘compensation’ from his employers.”

	And it is submitted that it is for the Industrial Tribunal to make its own findings of fact whether the conduct would in fact justify summary dismissal.

	For my part, I consider that Counsel for the Respondent reads more into that passage than is intended, or that it can reasonably hold.  

	Viscount Dilhorne was not addressing the question of the proper approach on the question of what is just and equitable in deciding compensation, but was dealing with the circumstance that subsequently discovered misconduct is not relevant to the question of reasonableness of dismissal, but may be relevant to the question of compensation that has to be decided thereafter.  Furthermore, it is important to take care to remember that the Industrial Tribunal is not in the business of deciding innocence or guilt; its concern is with fairness and reasonableness, justice and equity in the regulation of employer and employee relations and in compensation for unfair treatment of employees.

	For this Appeal Tribunal to seek to establish a general principle as to whether, in cases of past misconduct that has come to light after dismissal, the Industrial Tribunal should base its approach on the reasonable response to such misconduct by the employer, or should be free to make its own findings upon the facts regardless of any investigation by the employer, and then decide what is just and equitable, would be undesirable.  It would be undesirable because the course of human affairs is infinitely variable and it is important that Industrial Tribunals should in each case give to the words “just and equitable in all the circumstances” their ordinary natural meaning, having regard always to the purpose the Industrial Tribunal serves as I have already outlined.  

	The particular and unusual circumstances of this case include the fact that the employer did in fact carry out its own full investigation and was driven to the conclusion, on the balance of probabilites, that the defalcations must be the responsibility of Mr Williams.  That being so, the circumstances were such that Mr Williams could, and would have been fairly dismissed six weeks after he was unfairly dismissed.

	All three members of the Industrial Tribunal in fact approached the case by asking themselves questions about the reasonableness of the employer.  It is quite impossible for this Appeal Tribunal to hold that they were wrong to do so.  The difference in the conclusions reached by the majority and the minority respectively, seems to us to lie in the way they approached the answer to those questions.

	First, it is plain that the majority formed their own view on the evidence they in fact heard.  Secondly, even assuming that they were entitled to make that judgment, it was a judgment that the majority were obliged, as a matter of law, to make on the balance of probabilities.  That is a simple test.  Was it more probable than not?  The majority’s words that they were “not convinced” does not lie at all well with the standard of proof that is appropriate, nor does the majority’s finding that, “The possibility that Mr Broadhurst had taken the money could not be ruled out”.  It is commonplace for a finding on the balance of probabilities to be properly made without some other possibility being ruled out from speculative consideration.  

	It is clear to us from the way that the majority conclusion was expressed that they did not properly apply the appropriate standard of proof on the balance of probabilities, so that their approach to the questions they posed was wrong in law.

	It is a further matter of concern to us that the majority found that if the Applicant had been dismissed at the end of February for gross misconduct, they had little doubt that they would have held his dismissal to be unfair.  In reaching that conclusion, on the evidence they heard, and incidentally without hearing the full case, or having the long knowledge of the various persons involved that the employer had, the majority clearly indicated that they would have proceeded quite contrary to the Burchell approach to which I have already referred.

	Thirdly, it is clear to us that the majority, in purporting to apply the reasonableness of the employer test, applied the facts as they found them, not to this employer but to a hypothetical reasonable employer.  To do that is to fail to have full regard to all the circumstances.  The circumstances included the approach of this employer.  As the reasonableness of the employer was in issue, as the members in fact approached the case, it was the reasonableness of this employer in relation to this employee that was material.

	We are of the unanimous opinion that the Chairman’s approach was the correct one.  In the particular circumstances of this case, a full investigation had been carried out by the employer and a conclusion had been reached.  Having determined to approach the question of justice and equity by reference to the reasonableness of the employer’s conclusion that dismissal would have been fair, the majority was in error in seeking to substitute its own view; in error in its application of the balance of probabilities and in error in postulating the hypothetical reasonable employer, when in the circumstances no such hypothesis was necessary.

	Accordingly, on this aspect, the decision of the Industrial Tribunal cannot stand.  The case will be remitted to the same Industrial Tribunal to determine remedy on the basis that the minority decision is the correct one and that that is the one that prevails.