Appeal No. EAT/0126/02/TC

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 11 February 2003

Before
MR RECORDER PLENDER QC
MR S M SPRINGER MBE
MISS S M WILSON

HALIFAX PLC	APPELLANT

MR J DORIAN	RESPONDENT

Transcript of Proceedings

JUDGMENT

Revised 13 August 2003

	APPEARANCES

For the Appellant	MR JEREMY LEWIS
(Of Counsel)
Instructed by:
Messrs DLA
Solicitors
Princes Exchange
Princes Square
Leeds
LS1 4BY	
For the Respondent	MR JOHN FALKENSTEIN
(Of Counsel)
Instructed by:
Messrs Russell Jones & Walker
Solicitors
Swinton House
324 Gray’s Inn Road
London
WC1X 8DH	

MR RECORDER PLENDER QC

1.	In this case Halifax Financial Services Ltd appeals against the decision of the Newcastle Employment Tribunal dated 11 December 2001 holding, by a majority, that Joseph Dorian was unfairly dismissed from his employment by Halifax.  Mr Dorian has lodged a Notice of Cross Appeal against what is termed the decision of the Employment Tribunal minority.

2.	The facts of the case so far as relevant are as follows.  Mr Dorian was born in August 1969.  He was employed by Halifax from July 1987, aged 18, until July 2000.  At the date of his dismissal he had been employed as a financial services manager in the Tyne Tees area and had been based in the Sunderland office.  He had been responsible for the supervision and management of several personal financial advisers.  He was in turn answerable to his regional manager Mr Cowper who was answerable to one Mr Abram.

3.	On or about 1 September 1999 a personal financial adviser named Mrs Docherty resigned her position.  She later complained in an interview, conducted in October 1999 by Miss Sam Marsay of Halifax’s staff, of the management style of her manager who was Mr Dorian.  She complained that it was inadequate; that he was not motivational; and that she had no career prospects.

4.	On the same day another exit interview was conducted by Miss Marsay in respect of another of Halifax’s employees who had also worked with Mr Dorian and had also resigned.  The Tribunal found that he made complaints against Mr Dorian but did not wish them to be taken further.  Miss Marsay reported the outcome of these interviews to Mr Urwin, the Personnel Manager.  He contacted Mrs Docherty and she made further allegations to him, Mr Urwin.  The Tribunal records her allegations as follows:

“Mrs Docherty says that there had been a significant number of requests for Saturday appointments and that ignoring these would have meant losing business.  Her previous line manager had allowed her time off to compensate.  When Mr Dorian took over Mrs Docherty asked if the previous arrangement could continue.  Mr Dorian indicated that he was not asking her to work Saturday and she would therefore not be allowed time off.  She complained that she had not been put on a quality support programme because of her file quality which had not been up to standard.  After supervision she had been operating at a high pass rate of 90% but supervision still continued.  She complained of lack of progress in getting promotion.  She had asked that she or Mr Dorian could be moved but had been told that it was not possible.  She had previously worked for Halifax Estate Agents Limited and it had been made known to her by Mr Jeffrey, the area manager, that he did not like employees of that part of the Respondent’s company.  She raised complaints made by others.  Finally Mrs Docherty complained of management attitude and style.”

5.	Mrs Docherty supported her complaints by sending Mr Urwin a letter dated 11 December 1999 giving details of her complaints which she indicated were compiled from her diary.  It was common ground both before the Employment Tribunal and before this Tribunal that Mr Urwin did not ask to see the diary on the basis on which Mrs Docherty supported her complaints.  With the assistance of her union, Mrs Docherty made a complaint of constructive dismissal.  This was compromised by payment of a sum of money to Mrs Docherty without admission of liability on the part of Halifax.  She was then reinstated although she later resigned her appointment once more.  

6.	On 11 January 2000 Mr Dorian was suspended pending a disciplinary hearing.  Mr Urwin was authorised to conduct a full investigation.  Mr Urwin spoke to Mrs Docherty who told him of the treatment by Mr Dorian of one of her colleagues Miss Gray.  Mr Urwin spoke to Miss Gray who made allegations against Mr Dorian.  Mr Urwin made a full report in which he recommended that disciplinary proceedings should be instituted.  Halifax’s Fitness and Properness Committee decided that there was a prima facie case for Mr Dorian to answer and decided to institute a disciplinary hearing.  Mr Dorian was then supplied with a copy of Mr Urwin’s report.  He asked for sight of Mrs Docherty’s diaries.  He was told that these could not be produced because Mr Urwin had not asked to see them, relying instead on the account given by Mrs Docherty which he believed.  Mr Dorian asked for copies of the e-mails that had been sent to staff.  He was told that he could not have these because they had been deleted from Halifax’s computer system.  

7.	Following a hearing the Chairman, Ms Moore, spoke to Mrs Docherty and Mrs Gray in the absence of Mr Dorian or his representative but in the presence of a member of Halifax’s Personnel Department.  Ms Moore came to the conclusion that she had sufficient grounds summarily to dismiss Mr Dorian.  In essence she upheld the complaints made against him of mismanagement including harassment or bullying and abuse of power and lack of fitness to act as a manager in a regulated company.  Mr Dorian’s dismissal was confirmed by letter 12 July 2000.  Mr Dorian appealed.  His appeal was heard by Mr Abram who confirmed Ms Moore’s conclusion.

8.	The Employment Tribunal was as I have said divided.  The Chairman in his dissenting opinion stated that it was incumbent on Halifax to carry out a proper and thorough investigation.  He had concluded that Mr Urwin had produced a thorough report.  He was unable to conclude that the decision reached by Ms Moore was unreasonable.  I now quote him:

“It is not the duty of the Tribunal to rehear the disciplinary hearing.  The Tribunal can evaluate the written evidence and they can question the disciplinary officer, Ms Moore, as to how she came to her decision.  There is nothing that has been put before me in evidence which shows that Ms Moore was perverse in her decision when she preferred the evidence of the two complainants to that of the applicant.  She had the opportunity of hearing the applicant and also the two complainants.  This Tribunal has not.  It has not been shown to my satisfaction that Ms Moore came to any other conclusion other than a reasonable conclusion of mismanaging of the two complainants.  This was a serious matter as by his mismanaging the applicant was putting not only two individual complainants in some jeopardy at work and requiring targets that were unachievable, but, also possibly subjecting the respondents to complaints by the Financial Services Agency and more particularly, causing a possibility of customers not being advised properly.”

9.	His conclusion was in short that Mr Dorian had been dismissed for conduct; that was a potentially fair reason and the decision of the dismissing officer was not perverse.  The two lay members of the Tribunal came to the opposite conclusion.  They stated:

“Although the respondents conducted a full investigation into the complaint of Mrs Docherty they appear to have ignored the evidence of their own findings.  Even with evidence to the contrary, it would seem that everything she said was taken as gospel and she was never questioned as to the veracity of her allegations.”

10.	The majority then made a series of criticisms of the Appellant’s appraisal of the evidence.  I shall turn to consider those criticisms in a few a moments.  I turn first to the law.  Section 98 of the Employment Rights Act 1996 reads so far is material as follows:

“(1)	  In determining for the purposes of this Part whether the dismissal of an employee is fair or unfair, it is for the employer to show –
(a)	the reason (or, if more than one, the principal reason) for the dismissal, and 
(b)	that it is either 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 the employee held.
(2)	A reason falls within this subsection if it –
(b)	relates to the conduct of the employee,”

Subsection (4) provides where the employer has fulfilled the requirements of subsection (1), the determination of the question whether the dismissal is fair or unfair depends upon whether in the circumstances the employer acted reasonably or unreasonably.

11.	We have been referred by Counsel to numerous authorities on the principles to be applied in determining whether dismissal is fair or unfair.  It is necessary for present purposes to refer to only some of them.  In British Home Stores Ltd v Burchell [1978] IRLR 379 Arnold J set out the three stage test that is to be applied in this context.  He stated at pararaph 2 of the judgment:

“What the Tribunal have to decide every time is, broadly expressed, whether the employer who discharged the employee on the ground of his misconduct in question 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 matters as was reasonable in these circumstance of the case.”

12.	For the purposes of this appeal (though not the cross appeal) the focus is on the second of those tests.  The question is whether the grounds that the employer had in his mind for dismissing the Respondent were reasonable.  Those grounds are reasonable if the employer acted reasonably in assessing the quality and weight of the evidence and in reaching a conclusion which he could properly reach on the basis of the evidence before him.  In the words of Mummery LJ in Post Office v Foley and HSBC v Madden [2000] IRLR 829 paragraph 79, the Tribunal’s duty was to determine whether the employer had made reasonable investigation into the matter and whether it had acted within the range of responses of a reasonable employer.  The Tribunal is not to substitute its own judgment for that of the employer and if it is to decide that the employer could not reasonably have reached the conclusion that it had reached on the facts of the case, such a decision must be based upon logical and substantial grounds: good reasons.  I paraphrase the words of Wood J in Linfood Cash & Carry Limited v Thomson [1989] IRLR 235 paragraph 22.  In HSBC v Madden at paragraph 77 Mummery LJ, in a judgment with which Nourse and Rix LJs agreed, rejected the submission that the Tribunal ought to have started for considering what it would do in the circumstances and then consider objectively whether the decision to dismiss was reasonable.  He concluded that in the case before him the Tribunal had wrongly substituted its judgment for that of the bank.  At paragraphs 77-78 he stated as follows:

“I refer to the tribunal’s cumulative critical comments on the bank’s internal investigation by Mr Murphy, on the disciplinary hearing by Mr Fielder and on the probative value of the material on which Mr Fielder based the summary dismissal: that ‘there was no clear culprit for the misappropriation of the cards’; that there was ‘no firm evidence of the precise dates on which the cards were taken’; that there was no direct evidence that Mr Madden had accessed the Nixdorf system’; that there was no investigation of the ‘personal or financial affairs’of other members of staff; that no account was taken of the nature of the goods bought with the stolen cards; that Mr Fielder failed to take account of the fact that a man in Mr Madden’s financial and career position would not have jeopardised all for such a ‘relatively paltry theft’; that ‘the facts of the case should have produced more than reasonable doubt in Mr Fielder’s mind’; that the investigators had closed their minds to any possibility other than the guilt of Mr Madden; that Mr Fielder ‘came to a hasty conclusion that Mr Madden was probably guilty’ and was content to accept the report of the investigators too readily and uncritically; and that Mr Fielder’s decision to dismiss Mr Madden, who had a stainless record of 11 years’ service would effectively ruin his career and was not taken on reasonable grounds.”

He continued:

“In my judgment no reasonable tribunal, properly applying the approach in Burchell and Iceland Foods to the facts, could have concluded either (a) that the bank had failed to conduct such investigation into the matter as was reasonable in all the circumstances or (b) that dismissal for that reason was outside the range of reasonable responses.”

13.	It is the conclusion of the Employment Appeal Tribunal that the majority in the Employment Tribunal fell into a similar error in the present case.  At paragraph 41 the majority stated that although the respondents had conducted a full investigation they appear to have ignored the evidence of their own findings.  Had the majority made good that statement it would indeed have explained that it had reached a conclusion that the employer’s decision was beyond the range of responses reasonably opened to it.  It soon becomes clear however that this was not the reasoning that the majority applied at all.  Before I turn to the paragraphs of the majority’s decision upon which I base that conclusion I refer to the test set out by the whole of the Tribunal at paragraph 30.  At that paragraph the Tribunal as a whole sets out the legal principle applicable to the case.  One of the principles that it set out is the following:

“The Tribunal will be looking to see whether the respondent carried out a reasonable investigation and had reasonable grounds for holding an honest belief that the applicant was guilty of the conduct alleged.”

In the course of a powerful submission on behalf of the Respondent, Counsel has referred us to that paragraph and in particular to the correct formulation.  The Tribunal will look in to see whether the employer had reasonable grounds for holding an honest belief that the Applicant was guilty of the misconduct alleged.  We are unable, however, to derive much assistance from that paragraph of this decision in the second step of the present case since it is a formula to which the minority as well as the majority subscribed.  It is perfectly possible that it may have been written by the chairman and subscribed to by the others but the chairman, we know, dissented on the basis of precisely that formula.  The fact therefore that the formula appears in the decision is not conclusive in the Respondent’s favour.  The majority of the Tribunal sets out repeatedly its own conclusion as to the true position in fact rather than the question whether it was open to the employer to reach the decision that it did.  For example at paragraph 42 it states:

“We believe the Tribunal are justified in taking account of certain comments by Paul Blewitt.”

At paragraph 48 we read:

“I believe that she gave her true reasons for her resignation.”

At paragraph 48 again the majority states:

“We do not believe that Ms Docherty had any intention of pursuing a claim to the Employment Appeal Tribunal until after her meeting with Rob Urwin.  This meeting, in our opinion, promised her to file her application.”

Again at paragraph 52 the Tribunal majority states:

“Although Mr Dorian’s file-keeping may be criticised, we believe that the above is clear evidence that everything was being down to support Ms Docherty.”

At paragraph 55 it writes:

“We believe that it is reasonable for the Tribunal to conclude that she was struggling with her job and this is the true and one and only reason for her double resignation.”

And at paragraph 58 the majority states:

“It is our belief that it is because Ms Gray harboured no grievance against the applicant and she was only prompted to raise one after her meeting with Mr Urwin.”
 
14.	In these passages, at least, the Tribunal majority sets out clearly and unambiguously its own conclusion as to the facts, replacing the findings of the employer.  These passages are by no means isolated.  At paragraph 42 the majority places reliance upon an email sent by Mr Blewitt to Mr Dorian.  It is common ground between Counsel for Appellant and Respondent, and indeed it appears to the Employment Appeal Tribunal, that the Employment Tribunal made no finding that the email in question was available to the employer decision-maker at the time when the employer decision-maker took the decision as to dismissal.  It appears that the majority in the Tribunal was saying that whether or not the email was before the dismissing officer it, the Tribunal, can take it into account.  The employers contest that the Tribunal took account of material which it conceded might not have been available to the decision-maker in determining whether the decision of the decision maker was fair.

15.	At paragraph 43 the Tribunal majority sets out complaints said to have been made of Mrs Docherty by others and says:

“On this evidence any reasonable employer should have been querying the statement made by Mrs Docherty.”

This had a certain resonance with the case of Madden as Counsel has observed.  The test is not whether the employer should have been querying the credibility of the statement of a particular witness.  The question is whether the employer could have come to the decision that it both preferred the evidence of one witness, or in this case two witnesses, to the evidence of the Respondent.  We found further evidence of the same error in paragraph 45 of the decision of the majority.  This does not set out the employer’s reaction to the matters then raised.  The evidence was that the employer had taken account of the factors there mentioned and had concluded that the behaviour of the Respondent was appropriate in the case of some further employer’s substitute director and not that of others.  What the Tribunal ought to have asked was whether the conclusion reached by the employer on that matter was within the range of responses reasonably open to it.  

16.	At paragraph 46 the Tribunal raises the question: why did not Mr Urwin demand Mrs Docherty’s diary?  What is omitted from that paragraph is consideration of the explanation given by Mr Urwin that he considered it not necessary since he had received extracts from Mrs Docherty.  The question that the majority ought to have been asking was whether it was reasonably open to the employer to reach the conclusion it did in the circumstances in which it did.

17.	At paragraph 49 the majority expresses the view that Mrs Docherty was obviously struggling in her job and seems to hold Mr Dorian responsible for her failings.  This appears to us to amount to speculation as to the motives of Mrs Docherty from whom the Employment Tribunal did not hear evidence.  Instead it ought to have been inquiring if the employer’s finding was within the range of responses reasonably open to it.

18.	Finally I refer to paragraphs 53 and 54 in which the majority states that there was no evidence that Mrs Docherty had been refused time off and no evidence that she was subjected to harassment.  It has been demonstrated to this Tribunal that there was indeed evidence presented as to Mrs Docherty being refused time off and Mrs Docherty being subjected to harassment.  We understand the majority therefore to be saying that there was no sufficient or cogent evidence which the Tribunal found to be persuasive.  But again the test that ought to have been applied would one of enquiring whether it was open to an employer reasonably to credit the allegations that had been made.

19.	I do not purport in the course of this judgment to have dealt exhaustively with each and every one of the passages in the part of the decision composed by the majority which leads us to the conclusion that it has applied the wrong test but trust that I have supplied sufficient examples to indicate the basis upon which we have reached that conclusion.

20.	Having so decided it is unnecessary for us to reach any conclusion as to whether the majority were perverse in the findings of fact which they reached.  Our attention has been drawn to numerous authorities in support of the well established proposition that an Employment Appeal Tribunal must be slow to find that an Employment Tribunal has been perverse in its finding of fact, particularly because we, unlike the Employment Tribunal, will not have had evidence at first hand.  I refer in particular to the judgment of May LJ in Neale v Hereford & Worcester County Council [1986] IRLR 168 at paragraph 43.

21.	I now turn to the cross appeal with which we may deal shortly.  It is contended on behalf of the Respondent that the Tribunal erred either in failing to reach a conclusion on the question whether Mr Dorian was dismissed for conduct or alternatively in concluding that he was dismissed for conduct.  We are satisfied that the Tribunal reached unanimously its conclusion that Mr Dorian was dismissed for conduct.  At paragraph 60 the majority states:

“We find that the applicant was dismissed for conduct for the same reasons as the Chairman.”

22.	We refer to the Chairman’s passage from the decision and he states at paragraph 39:

“I am satisfied that the applicant was dismissed for conduct.  The respondents have shown the reason or the principal reason for the dismissal.  That is a potentially a fair reason.”

And at paragraph 31 the record of the Tribunal sets out two factors to which an employer in the position of Halifax would attach importance when considering whether their staff are properly managed.  The first is a duty to ensure that their staff are managed correctly in view of the obligations owed under the financial services legislation and the second is the obligation of an employer to ensure in the interests of its own staff that they should be properly managed.

23.	In those circumstances it is clear to us that the Tribunal concluded that the reasons for the employer’s decision (which two members considered to be an incorrect decision) was that the employer considered that dismissal was appropriate on the basis of the Respondents’ conduct.  It is also clear from the account given of the facts by the Tribunal that it was open to the Tribunal to find that an employer did take that decision for that reason.  It follows from our conclusion on these two matters that the decision of the Employment Tribunal by a majority was wrong and that the matter must be remitted to an Employment Tribunal to reach a further decision properly directed as to the law.

24.	In concluding I have to add two postscripts.  The first is to note that this is an extempore decision reached at the end of a day’s argument but one in which the Tribunal are unanimous.  The second is to record our gratitude to both Counsel and to note in particular that the Respondent, who has been unsuccessful could not in our view have had the benefit of a more expert or strenuous assistance than he has had before us.  In a final sentence may I add that we have, as I have explained, reached our decision on the basis of the law and express no view upon the correctness of the employer’s decision: it is not for us to do so and we do not as a Tribunal make any criticism of the Respondent.