Appeal No.UKEAT/0258/06/RN

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 6 October 2006

Before
THE HONOURABLE MR JUSTICE UNDERHILL
(SITTING ALONE)

MR N F LETHERBARROW	APPELLANT

KINDERGARTEN UK LTD	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	Mr D Bain
(Representative)
Messrs Morgan Cole Solicitors
Apex Plaza
Forbury Road
Reading
Berkshire RG1 1AX	
For the Respondent	Mr V Fullagar
(Solicitor)
Messrs Fullagar Brooks Solicitors
4 Cricklade Court
Cricklade Street
Swindon
Wiltshire SN1 3EY	

Summary
Practice and Procedure 
Striking-Out/dismissal
Chairman wrong to strike out unfair dismissal claim at pre-hearing review in view of issues of fact which he was not in a position to determine.

THE HONOURABLE MR JUSTICE UNDERHILL

1.	The Appellant and his wife were directors and co-owners of the Respondent company, which runs a group of nursery schools or out-of-school play groups in the Oxfordshire area.  Both were employees of the Respondent.  The Appellant’s wife, Mrs Letherbarrow, is the majority shareholder, and it may be - though this was not accepted before me and I need not decide the point - that she had the more prominent role in the management of the business.  They are now in the process of getting divorced.  According to Mrs Letherbarrow the Appellant was guilty of a number of acts of misconduct over the course of the summer of 2005, including the alleged sexual harassment of a member of staff, harassment and intimidation of herself and, finally, an incident on 7 September in which he is said to have taken several hundreds of pounds from the Respondent’s safe.  He was summarily dismissed by letter dated 10 September 2005 and a subsequent appeal was unsuccessful.  He brought proceedings in the Employment Tribunal, claiming relief under a variety of different heads, namely unfair dismissal, breach of contract in the form of non-payment of notice money (to which I will refer to as wrongful dismissal), sex discrimination, failure to pay a redundancy payment, unlawful deduction of wages and disability discrimination.  

2.	At a pre-hearing review on 18 January 2006 in the Reading Employment Tribunal, a Chairman sitting alone, Mr Richard Byrne, ordered the Appellant to pay a deposit of £500 as a condition of pursuing the claim for disability discrimination; stayed the claim for unpaid wages (and an associated counterclaim); and struck out all the remaining claims on the basis that they had no reasonable prospect of success.  

3.	This appeal is against the striking-out order as it relates to the unfair and wrongful dismissal claims and the claim for a redundancy payment.  The hearing at which the striking-out order was made was, I am told, listed for 90 minutes, although the parties are agreed that in the event it was somewhat shorter, taking between half an hour and an hour.  The Appellant was unrepresented: the Respondent was represented by a solicitor, Mr. Fullagar, who also appears before me today.  The standard-form letter giving notice of the hearing set out as one of the items on the agenda “to consider whether to strike out or amend all or part of the claim or response on the grounds that it has no reasonable prospect of success.”  It has however been helpfully confirmed to me by Mr Fullagar that the Respondent’s solicitors had not themselves notified the Appellant or the Tribunal in advance of any intention to make a striking-out application at the hearing.  There were no documents before the Chairman except for the pleadings (and one letter from solicitors acting for Mrs Letherbarrow in the matrimonial proceedings which was largely immaterial for the purpose of this appeal).  The Chairman proceeded, on the basis of the pleadings and what he describes as representations from both parties: these representations did not involve the Appellant or anyone else giving evidence, but they did, it seems, involve the Chairman asking the Appellant some questions.  

4.	The Chairman’s reasons for his decision were given in a single paragraph of his judgment in the following terms:- 

“In essence, these claims arise following the Claimant’s dismissal effective on 10 September 2005.  The stated reason for dismissal was gross misconduct.  The Claimant does not dispute that he took, without consent, from the Respondent’s safe, approximately £600 and that those monies were not repaid to the Respondent until sometime in October after the dismissal.  It seems to me that no reasonable Tribunal presented with those facts and the admission from the Claimant that he did that, would consider that the Respondent considered it as anything other than gross misconduct and further that in those circumstances dismissal was within a reasonable range of responses.”  

There then followed two sentences dealing with the sex discrimination claim, which I need not set out.  The paragraph then continues:- 

“The claim of entitlement to a redundancy payment appears doomed to failure in the light of what clearly seems to me a dismissal on the grounds of gross misconduct.  The breach of contract notice pay claim is argued on the basis that the dismissal for gross misconduct was unjustified and that any dismissal should have been on notice.  Accordingly I strike all those claims out, because in my view they have no reasonable prospect of success.”  

5.	There is plainly nothing wrong in principle in a Chairman who is holding a pre-hearing review casting a critical eye over a claimant’s case, indeed over both parties’ cases, and being prepared to strike out a claim which appears to have no reasonable prospect of success.  Nor is there anything wrong in principle in a Chairman asking questions of the parties designed to elicit what the real issues are and to get a better understanding of whether a particular claim has indeed a real prospect of success.  But any such exercise needs to be undertaken with caution, particularly perhaps where one or both parties are unrepresented; and particularly where there has been no prior notice, beyond the formal words in the standard-form letter, alerting the parties to the fact that striking out of part of their claim may be on the agenda - even parties who are represented do not always fully appreciate that what is billed as a pre-hearing review may in fact be an occasion on which they have to address the Tribunal on the substantive merits of their claim.  That is not necessarily a reason why a Chairman should not proceed with the critical examination to which I have referred, but he will need to be satisfied that he has, and that the parties have had a proper opportunity to present him with, the documents and the submissions that are necessary to a fair decision.  

6.	In the present case the Chairman was faced, so far as is relevant for the purpose of this appeal, primarily with a claim for unfair dismissal.  Such claims are of their nature fact-sensitive.  That does not mean that they are never suitable for summary determination, but it is less likely that they will be.  I was helpfully referred by Mr Bain, who appeared before me for the Appellant, to the recent decision of the President, Mr Justice Elias, in Ezsias v North Glamorgan National Health Service Trust 2006 UKEAT/0705/05/2507.  That, like this, was an unfair dismissal case where the Chairman had struck out the claim on the basis that it was bound to fail.  Mr. Bain referred me to the following passage:

“55.	The major contention is that the case raised issues of fact which could not properly be determined at the strike out stage.  

“56	Mr Pitt-Payne accepts that the test for striking out is still a very high one.  It is true that the power to strike out was amended in 2001 so as to be less rigorous.  It used to be necessary to establish that the claim was frivolous, vexatious or scandalous, whereas now a claim can also be struck out where there is no reasonable prospect of success, but this is still a significant hurdle for the Respondent to cross as the authorities demonstrate.  Mr Pitt-Payne emphasised, and I accept, that the test is not whether there is absolutely no chance of success - that was encompassed within the old test of scandalous proceedings (see Aldous LJ in Care First Partnership Ltd v Roffey [2001] IRLR 85 (CA) at paragraph 22) - but whether there is no real or reasonable chance of success.  As Ward LJ expressed it in Balamoody v United Kingdom Central Council for Nursing Midwifery and Health Visiting [2002] IRLR 289, at para 39, this means that they are not fanciful.  

“57.	The classic example where striking out may occur is where the Tribunal reaches a conclusion that even on the facts advanced by the claimant the case has no prospect of success as a matter of law.  In such a case one would expect a decision to set out the allegations of the claimant, analyse the relevant legal principles and indicate why the claim is bound to fail.

“58.	However, where the facts themselves are in issue, in my judgment it can only be in the most extreme case that the Chairman can say without any evidence being tested in cross examination that the disputed facts will inevitably or almost inevitably be resolved against a claimant.  Such a finding involves a ruling that the claimant is either dishonest or very fundamentally misguided.  The evidence suggesting that may sometimes be strong, but that is a far cry from justifying an inference from such facts as are revealed in the papers alone that the claimant’s case has no real merit.”

The President also said this, at paragraph 64: 

“Mr Pitt-Payne submits that it must in principle be possible for a tribunal in a clear case to make a finding that a claimant has no chance of establishing the facts alleged.  I would not discount the possibility that very exceptionally it might be.  But it seems to me that at the very least if such a step is going to be taken then the primary factual basis on which a tribunal infers that the dismissal must have been for the reason advanced by the employer, and not the countervailing reason advanced by the employee, must itself be undisputed.”  

7.	Against that background, Mr Bain submitted that the Chairman was not in a position to reach the decision that he did in the present case.  It was necessary as a matter of law that he should have been satisfied (a) that the reason for the dismissal was the reason to which he referred in his judgment, namely the taking of the cash from the Respondent’s safe (the burden of proving that that was the reason being on the Respondent) and (b) that it was reasonable for the Respondent to dismiss for that reason.  

8.	So far as (a) is concerned, he submitted that the Tribunal simply took that reason for granted, in circumstances where it was in fact clear that the Appellant disputed its genuineness, and that he should not have done so without hearing evidence.  In my judgment that is right.  The Appellant’s ET1 made it reasonably clear that the Appellant regarded all the allegations made against him as in effect a put-up job, designed to get him out of the company because of the breakdown in relations between himself and his wife.  (There is a further point, namely that the dismissal letter itself mentioned the ground relied on by the Chairman as only the last of a large number of reasons for the dismissal, to none of which is there any reference in the judgment: that might by itself call for an analysis of more than just the incident relied on by the Chairman.  That letter was not in fact before the Chairman, but the very fact that so central a document as the dismissal letter was not available illustrates the dangers of proceeding in the way that the Chairman did in the present case.  It might in theory be, though Mr Fullagar has not in fact so asserted, that the Chairman believed that he had elicited in his questions from the Appellant a concession that the reason for dismissal was indeed that which the Respondent alleged.  But if that had been the case, so important a point should unquestionably have been recorded in the judgment, since it would have been central to the Tribunal’s reasoning.) 

9.	So far as (b) is concerned, the Chairman decided the issue on the basis, in effect (though something seems to have gone wrong with the detailed language), that any reasonable Tribunal would have been bound to have found that the admitted taking of the cash from the safe “without consent” was gross misconduct justifying dismissal.  But, firstly, that overlooks the question whether the Appellant, who was after all a director of the company, needed the consent of his wife or any other person to take the money in question.  His case before me was that he did not: he had himself the necessary authority to take the money and did not require consent from anybody else.  That assertion was not expressly made in the pleadings and was therefore not in any of the documents before the Chairman, but that omission by itself would not justify a striking-out.  It might perhaps have been legitimate for the Chairman to explore this matter with the Appellant, subject to the caveats which I have indicated above; and, if he had obtained an unequivocal acknowledgment that such authority was needed and had not been obtained, that might, subject to the point which I go on to make, have been sufficient to justify his decision on this issue.  But the judgment does not say that any such concession was made by the Appellant and I think it very unlikely indeed that it was.  Secondly and in any event, even if the Appellant was indeed guilty of gross misconduct it does not necessarily follow that his dismissal was fair. The Chairman’s reasons simply do not address the question of procedural fairness at all.  That by itself is in my judgment fatal, but in any event there was sufficient material before the Chairman to put him on notice that there were issues as to the fairness of the procedure which required to be investigated.  It is sufficiently apparent from the ET1 read as a whole that the Claimant did not believe that the procedures which were nominally gone through were genuine; and that also clearly appears from the contemporary correspondence, which admittedly the Chairman did not see but which it was in my view necessary that any tribunal making a decision of this kind should have seen.  

10.	More generally, having made those particular points, it seems to me that this was a case which called for more careful investigation than would be possible in a summary procedure.  The matrimonial breakdown between Mr and Mrs Letherbarrow was plainly at the back of the dispute; and, even if facts which in other circumstances might have seemed to justify a fair dismissal were properly established, the circumstances were such that a Tribunal would have wanted to examine them critically before taking them at face value.  

11.	I therefore believe that the Chairman erred in law in striking out the unfair dismissal claim.  The same applies to the wrongful dismissal claim.  I do not believe that the Chairman was entitled to conclude on a summary basis that the Appellant had been guilty of gross misconduct justifying summary dismissal.  

12.	The position as regards the redundancy payment claim is different.  It is hard to see how on either party’s case this was a dismissal for redundancy; but it is, I suppose, not inconceivable that if the Tribunal were to reject the reasons for dismissal advanced by the Respondent it might find itself in a position where the presumption of redundancy in section 163(2) of the Employment Rights Act 1996 applied.  In any event this issue adds almost nothing to the matters that would have to be investigated at any hearing, and it is in the highest degree unlikely that the Chairman or the parties would have considered striking out this claim alone if all the other issues had remained live.  The sensible course would simply have been to leave it to be resolved at the hearing in the unlikely event that that proved necessary.  

13.	I accordingly allow this appeal in full and will remit the case to the Tribunal for a restored pre-hearing review at which directions can be given on the basis that this is a claim which should proceed to a full hearing (subject, I must add as a matter of caution, to any wholly distinct ground being advanced which might justify a striking out).  Both the pre-hearing review and the eventual hearing should be before a Chairman other than Mr Byrne.  

14.	I should record that Mr Bain had an alternative basis for attacking the judgment, namely that the reasons were inadequate applying the well known test most familiarly stated in the decision in the Court of Appeal in Meek v City Birmingham District Council [1987] IRLR 250.  In the circumstances of this case that submission largely overlapped with the substantive submission which I have already addressed, and I need not deal with it separately.  I would certainly not wish to discourage Chairmen in cases which are truly appropriate for summary determination from stating their reasons as succinctly as possible.  Usually, though not inevitably, the fact that a case is suitable for summary determination means that reasons can indeed properly be stated briefly.  

15.	It does not follow from what I have said that I have formed any view that the Claimant in fact has a strong case.  I express no view either way on that question beyond what I have already held; and it is indeed open to the Respondent should it choose, to try at the remitted hearing to persuade the Chairman to extend the order already made for a deposit, so that it applies to these claims as well as to the disability discrimination claim.  This judgment should not be taken as saying anything either way on that point.  

16.	I should also add this.  I rather suspect that the Chairman took the robust course that he did at least in part because he believed, as Mr Fullagar submitted to me and I dare say submitted to him, that these proceedings were being deployed by the Appellant as a weapon in the matrimonial war between him and his wife.  Whether or not that did indeed form part of the Chairman’s thinking, I accept that it may turn out to be the case that the Appellant is using the proceedings in that way - though it must in fairness be pointed out that he says that the various complaints made against him by the Respondent were themselves taken procured by his wife as steps in the matrimonial war and that in bringing these proceedings he was simply responding to an attack by her, as he needed to do in order to protect his position.  In either case, such conduct is to be deprecated.  I am sure that the parties’ advisers will ensure that their clients think very carefully about whether these proceedings are indeed a sensible use of their financial and emotional resources, at a time when there are, as I can safely assume, much more substantial matters at stake between them.  In any event, at this stage I do not see that it is possible to make a safe judgment as to whether either party, and if so which, is playing games of this kind.  If the case has eventually to proceed to a hearing, the Tribunal at the end of that hearing will be well placed to make any necessary judgment on that point and to make any appropriate order for costs.