Appeal No. UKEATS/0019/11/BI

EMPLOYMENT APPEAL TRIBUNAL
52 MELVILLE STREET, EDINBURGH, EH3 7HF

	At the Tribunal
	On 22 July 2011

Before
THE HONOURABLE LADY SMITH
MISS S AYRE FIPM FBIM
MR M SMITH JP OBE

LONDON CLUBS MANAGEMENT LTD	APPELLANT

MR SCOTT ROONEY	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MR D CAMERON
(Advocate)
Instructed by:
Doyle Clayton Solicitors
Sovereign House
Vastern Road
Reading
Berkshire
RG1 8BT	
For the Respondent	MR I SMART
(Solicitor)
Ian S Smart & Co
Solicitors & Notaries
3 Annan House
Town Centre
Cumbernauld
G67 1DP	

SUMMARY
UNFAIR DISMISSAL – Reason for dismissal including substantial other reason

Unfair dismissal.  Employer’s appeal.  Employment Tribunal’s conclusion that Respondent had not established the reason for dismissal (redundancy) perverse.  Inadequate reasons for rejection of evidence of employer’s witnesses.  Failure to take account of relevant evidence.  Appeal upheld and case remitted to a fresh Tribunal for a rehearing.

THE HONOURABLE LADY SMITH 
Introduction
1.	Scott Rooney was employed as a casino gaming manager and was dismissed by his employers as redundant.  This is his employer’s appeal from a judgment of the Employment Tribunal sitting at Glasgow, Employment Judge P Cape, dated 18 February 2011, finding that the Claimant was unfairly dismissed.

2.	For convenience, we will continue referring to parties as Claimant and Respondent.

3.	The Respondent was represented by Ms Stobart, advocate, before the Tribunal and by Mr D Cameron, advocate, before us.  The Claimant represented himself before the Tribunal and was represented by Mr I Smart, solicitor, before us.

Background
4.	The Respondent operates a number of casinos in the UK under name ‘Alea’.  The Claimant was employed as one of two gaming managers at Alea in Glasgow from 31 July 2007 until 6 October 2008, when he was dismissed.  Alea opened for business in February 2008.

5.	The venue director at Alea, Glasgow, was Mr Rety.

6.	There were two claims before the Tribunal although this appeal concerned only Mr Rooney’s case. He claimed that he had been dismissed for having made a protected disclosure (as did his fellow gaming manager, who had less than one year’s service) and much of the Tribunal’s judgment is concerned with that issue.  The tribunal were not persuaded that that was the reason for either Claimants’ dismissal.

7.	The Respondent stated that the reason for the dismissals was that both the Claimant and the other gaming manager employed at Alea in Glasgow were redundant; the post of gaming manager was removed from the management structure at a time when substantial savings were necessitated by a large trading deficit.

8.	In 2008, Alea made a loss of £2m.  Its financial difficulties were apparent by the summer of 2008 and Mr Rety was instructed by his superiors to move the business into profitability; his reporting line was directly to Head Office and it was from there that he received those instructions.  The management structure on the gaming side of the business at that time was as follows: (i) Mr Rety, as venue director, was at its head, (ii) next in line was a senior gaming manager, (iii) next in line to (ii) were the two gaming managers, one of whom was the Claimant, (iv) immediately below the Claimant (and his fellow gaming manager) there were several “pit bosses”, (v) next down were a group of “inspectors”, and (vi) the lowest “gaming” post were the dealers.

9.	On 29 September 2008, Mr Rety telephoned the head of security, Mr Doherty, and:

“52. …informed him that his presence was required at Alea as Mr Rety was “going to make [the claimants] redundant.
…
54. Mr Doherty was informed that his presence was required so that he could “walk [the claimants] off the site” after the redundancy meeting.” (see: Tribunal’s judgment at paragraphs 52 and 54)

10.	The Claimant was not at the premises at that time; he was telephoned and asked to report to Mr Rety at 7pm.  He did so.  Mr Rety told him that he was at risk of redundancy and gave him a letter which invited him to a meeting on 2 October, referred to as “At Risk of Redundancy Meeting”.  He was not required to attend for duty in the meantime and was escorted from the premises by Mr Doherty.

11.	The Claimant attended the meeting on 2 October.  The Minute of the Meeting recorded that, in response to Mr Rety stating that the Respondent had gone through difficult times and that the Claimant’s role was not the only position under consideration of redundancy, that the Claimant said he understood the rationale behind the decision, that there was discussion about a number of matters, that Mr Rety said he was “comfortable having as many meetings to get through this consultation period”, that he referred to the decision about redundancies having come from head office, and that the Claimant reassured him that he would not speak to anyone in the meantime “as it would jeopardise any package we would receive if we are redundant.”

12.	That meeting was followed by a letter from Mr Rety to the Claimant also dated 2 October.  It summarised the matters discussed at the meeting and asked the Claimant to attend a further meeting on 6 October.  The Claimant attended that meeting.  Mr Rety read a prepared statement in which he advised him that the position of gaming manager in Glasgow was redundant, as of that date.  He was also advised that he would be paid 6 months notice, free of tax.  The Claimant was advised that he had a right of appeal.  He said he just wanted to sign on the dotted line.  He did not appeal.

13.	Once the effect of the six months’ notice payments to the Claimants had worked through, making the role of gaming manager redundant brought about a significant saving, even allowing for the fact that after the redundancies, certain employees had additional duties added to their roles and their salaries were increased as a result.  One of those employees was Ms McGowan whose role had previously been that of “House Manager”.  Her job title was changed so as to add “Gaming Manager” to it.  Another was Mr Datt, who also received a salary increase.  Also, two experienced pit bosses were rostered to undertake the Duty Manager role from time to time and received an associated salary increase.  The Tribunal state:

“13. The accounts of Mr Rety and Ms McGowan were at odds with the evidence of Mr Chaudhry as to the post- dismissal job title of Ms McGowan and her post-dismissal role and the role of Mr Datt.  Mr Rety were at odds as to the reason for awards of salary increases to Mr Chaudhry and others very shortly after the dismissals.”

14.	Mr Chaudhry had been a pit boss at Alea.

The Tribunal Judgment
15.	The Tribunal rejected the Respondent’s case that the reason for the Claimant’s dismissal was redundancy.  Their reasons for doing so are set out at paragraphs 96 and 97:

“96. The Tribunal has set out herein before its assessment of the reliability and credibility of the witnesses called on behalf of the respondent.  There are also these matters to take into account.  It would have been perfectly understandable in the circumstances posited by the witnesses called on behalf of the respondent for a decision to be taken to delete the posts held by the claimants and expand the roles of Mr Datt, Ms McGowan and two senior Pit Bosses so as to take up duties previously performed by the claimant.  In such circumstances, a change to Ms McGowan’s job title would be readily explicable as would a decision to award some increases in salary to those holding the expanded roles.  Taking the increases in salary that were awarded and comparing them with the savings made by deleting the claimants’ posts from the establishment, the respondent would have been able to show a significant cost saving resulting from the dismissal of the claimants.  There is nothing there that is inconsistent with fairness.
97. The respondent was placed in difficulty by its witnesses seeking to distance themselves from the variation in Ms McGowan’s job title, from the expansion of the roles of Mr Datt, Ms Mcgowan and the two senior Pit Bosses and in the explanation for the salary increases awarded to all the Pit Bosses.  In short the respondents’ witnesses were found to have given explanations lacking in credibility in respect of matters that need not have been troublesome in the respondents’ resistance to the claims.  If those witnesses could not give a straightforward account of matters that were not troublesome, they could not be relied upon to give a straightforward and truthful account at all.  The Tribunal concluded that in the absence of credible and reliable witnesses explaining the respondents’ actions and the reasons for those actions, the respondents’ case as to the reason for the dismissal could not be accepted as a matter of fact and, therefore, the respondent had failed to discharge the burden on it to show that the reason or principal reason for the dismissals was one of the potentially fair reasons set out in Section 98(2) or some other substantial reason.”

16.	We note that there were two witnesses for the Respondent, namely Mr Rety and Ms McGowan.  At paragraph 11, the Tribunal had stated that they:

“….did not regard the respondent’s witnesses as reliable or credible”

giving as their explanation for that conclusion that Mr Rety’s account of what he said to Mr Doherty about his reason for him being called in on 29 September did not have the ring of truth about it and nor did they find his reason for calling the Claimants in to work at 7pm that day convincing.  Regarding Ms McGowan, they considered that she gave an “unconvincing explanation” for the change in her job title after the Claimants were dismissed – they do not record what her explanation was.  Nor do they record what evidence was given by Mr Rety about the change in her job title or what evidence was given by either witness about the changes in the roles of Mr Datt and the two senior pit bosses or what evidence was given by them about the salary increases that occurred.

17.	In summary, therefore, the Tribunal did not accept that the Respondent had established that redundancy of the role of Gaming Manager was the reason for the Claimant’s dismissal and they state their reason for so concluding to be that they found the evidence of both of the Respondent’s witnesses to be wholly lacking in credibility and reliability.

Relevant law
18.	The issue for the Tribunal was what was the reason for the Claimant’s dismissal – was it a potentially fair reason?  Section 98(1) of the Employment Rights Act 1996 provides that it is for the employer to show that the reason fell within one of the categories in section 98(2) or that it was some other substantial reason.  One of the reasons specified in section 98(2) is redundancy.  If the employer’s case is that the reason why an employee was dismissed was that his role was redundant, that means that he must show that the reason came within the definition of redundancy contained in section 139 of the 1996 Act:

“139 (1) For the purposes of the Act an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to-
(a) the fact that his employer has ceased or intends to cease –
(i) to carry on business for the purposes of which the employee was employed by him, or
(ii) to carry on that business in the place where the employee was so employed,
or
(b) the  fact that the requirements of that business –
(i) for employees to carry out work of a particular kind, or 
(ii) for employees to carry out work of a particular kind in the place where the employee was employed by the employer,
have ceased or diminished or are expected to cease or diminish.” 

As to what was the reason for the dismissal in a particular case, as was observed in by Cairns LJ, Abernethy v Mott, Hay & Anderson [1974] ICR 321: 

“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.”

19.	Also, an employment tribunal must explain not only what facts they find to have been proved in relation to the issue of what was the reason for the dismissal but also why they conclude that a potentially fair reason has or has not been established.  As observed by Phillips J, sitting in the EAT, in the case of Elliott v University Computing Co [1977] ICR 148, at p.152:

“It seems to us that in all cases where there is allegation of dismissal for redundancy if the industrial tribunal finds it is made out – or even if they do not and are expressing their reasons for that conclusion – it is essential that they should specify the facts which they found as justifying the conclusion that the case either did or did not fall within section 1(2) of the Act.  It is no good just giving a review of the facts and saying “We are satisfied that there was a redundancy situation.”  It is essential to spell out the actual facts found which justify the conclusion in the terms of that section.  It is necessary for a number of reasons.  First of all, if they do not, they are likely to depart from the test prescribed by the Act.  Secondly, if they do not, the parties will not know why they have won or lost.  Thirdly, if there is an appeal, the appeal tribunal will not know precisely upon what basis the decision was arrived at.”

The appeal
20.	There were five grounds of appeal.

21.	First, it was submitted that the Tribunal had erred in rejecting the evidence of the Respondent’s witnesses in its entirety on the basis of matters that were not material to the issue of what was the reason for dismissal of the Claimant.  Mr Cameron sensibly recognised, however, that that was not his strongest point, given that it is open to a fact finder to have regard to a witness’ credibility and/ or reliability on a collateral matter when deciding whether or not to accept their evidence on a central issue.  It is not, in principle, an error of law to do so.

22.	Secondly, it was submitted that the Tribunal had provided inadequate reasons for their wholesale rejection of the evidence of the Respondent’s witnesses.  It did not obviously follow that their lack of credibility on the non-material issues referred to meant that they could not be relied upon to give a straightforward account at all; the matter called for an explanation but none was given.

23.	Thirdly, the Tribunal accepted a number of facts which, as per the Abernethy dicta, were known to the Respondent and pointed to redundancy as being the reason for dismissal of the Claimant, yet ignored them when, at paragraphs 96 and 97, it came to deciding the section 98(2) question.  They did not consider s.139 of the 1996 Act.  The relevant test was not a high one: Gilham v Kent County Council No.2 [1985] ICR 233.  The Tribunal had not, for instance, found that the redundancy exercise which was undoubtedly gone through was a sham.  They did not find that the Respondent had an ulterior motive.  Further, from a reading of paragraph 96, it appeared that the Tribunal was considering questions of fairness but at that stage, they should have been confining their deliberations to the issue of whether the Respondent had shown that the reason for dismissal was redundancy.

24.	Fourthly, whilst the Tribunal, at paragraph 97, rejected the evidence of the Respondent’s witnesses in its entirety, they had, at an earlier stage, made findings in fact regarding the nature and set up of the Respondent’s business, the financial circumstances in 2008, the directions from Head Office, the handing over of the letter of 2 October 2008, the circumstances of the meetings of 2 and 6 October and the reorganisation of Ms McGowan’s, Mr Datt’s and the two pit bosses’ workload and salaries that could only have come from those witnesses.  It was perverse of the Tribunal to find, at the same time, that they were wholly lacking in credibility and reliability.

25.	Fifthly, the Tribunal had failed, when reaching their decision on the reason for dismissal, to have regard to significant documentary evidence which was referred to including the letter of 2 October, the letter of dismissal to the Claimant and the minutes of the meetings.  Those documents were not only accepted by the Tribunal as being authentic but, in some respects, their contents were relied on by the Tribunal.

26.	In all the circumstances, the judgment of the Tribunal should, he submitted, be set aside and the case remitted to a freshly constituted Tribunal for a rehearing.

27.	For the Claimant, Mr Smart accepted that the reference to unfairness in paragraph 96 was, unfortunately, not apt.  The Tribunal should have commented that there was nothing in those facts that was inconsistent with redundancy.  He also accepted that the Tribunal had made findings in fact which could only have come from the Respondent’s witnesses; that being so, paragraph 97 could, he said, have been better expressed.  There was, however, other evidence that entitled the Tribunal to conclude that redundancy was not what was going on such as the evidence that Mr Rety told Mr Doherty that he was to come into work on 29 September 2008 because he was going to make the Claimants redundant – as we observed in the course of submissions, in our view, that fact actually appears to be supportive of the Respondent’s case, not against it.  Essentially, Mr Smart submitted, the Respondent did not show what was the reason for the dismissal and that was an end of matters.  Their conclusion was not arbitrary.  No-one from Head Office had given evidence – not that he pressed that submission, given that the absence of such a witness was not relied on by the Tribunal as a reason for rejecting the Respondent’s witnesses’ evidence.

Discussion and Decision
28.	The Tribunal made a number of findings in fact which were relevant to the issue of whether or not the Respondent had established that the reason for the Claimant’s dismissal was redundancy.  In particular, they found that the requirement for employees to be employed as gaming managers at Alea in Glasgow ceased.  That role was removed altogether from the management structure.  The change occurred at a time when (a) the business was making substantial losses, (b) Mr Rety had been directed to move it into profit, and (c) the minute of the meeting of 2 October recorded that the decision to delete the gaming manager role was made by Head Office.  Further, Mr Rety told Mr Doherty that he was going to make the Claimant “redundant”, he gave him a letter headed “At Risk of Redundancy Meeting”, the Claimant himself stated at that meeting that he understood the rationale for making his role redundant, Mr Rety referred at the meeting to being comfortable with having as many meetings as required to get through the consultation period, Mr Rety wrote to the Claimant after the meeting on 2 October confirming that the risk of and reasons for the Claimant’s role being made redundant was discussed, a further “Redundancy Meeting” took place on 6 October, at that meeting the Claimant was advised that his position was redundant and that by letter dated 13 October, it was confirmed to him that his role had become redundant.  The Claimant was advised of his right of appeal but did not exercise it.  He never challenged the proposition that his role was redundant. The work formerly carried out by the Claimants was added to the tasks performed by other employees.  It is apparent that these findings in fact are all based on the evidence of Mr Rety and/or Ms McGowan.

29.	In the above circumstances, we have no hesitation in accepting Mr Cameron’s submission that the Tribunal’s finding, at paragraph 97, that those two witnesses were not credible and reliable at all does not make sense.  It is perverse.  The Tribunal were evidently content to accept significant portions of their evidence.  That being so whilst, in principle, a fact finder may, as we have observed, have regard to a witness’ credibility/reliability on a collateral matter when deciding whether or not to accept their evidence on the central issue, that does not explain the Tribunal’s approach here; if their concern about the witnesses’ evidence on those matters which they refer to as not needing to have been troublesome justified their rejection of their evidence that the reason for dismissal was redundancy, logic dictates that they should also have rejected their evidence regarding those matters to which we have drawn attention above yet they did not do so.  Their conclusion as to the witnesses’ credibility and reliability is, accordingly, called into question.

30.	Regarding Mr Cameron’s submission that the Tribunal may have erroneously jumped ahead to considerations of overall fairness, given the last sentence of paragraph 96, we accept that there is force in his submission and note that Mr Smart also appeared to accept that there was.  Even if, however, that was not the thrust of their reasoning, they are plainly thinking in terms of not understanding why the witnesses would be worried that the decision to deal with the redundancy situation by dismissing the Claimant might have looked unfair.  That is, however, a quite different issue from the initial question of whether or not redundancy was the reason and it is not obvious that reluctance to make concessions that could make the decision to deal with the redundancy of the role by dismissing the Claimant seem unfair shows that a witness is lying when it is said that the reason was redundancy.

31.	We also accept that the Tribunal failed to provide an adequate explanation.  There is no indication at that part of their written reasons where they explain why they were not satisfied that the Respondent had not discharged the section 98(2) onus, that they have had regard to the factors which pointed to the reason being redundancy, as summarised above.  In particular, there is no explanation of how and why, notwithstanding them, they were not prepared to accept that the onus had been discharged.  Their explanation does not, we consider, amount to a proper explanation but, rather, as discussed by Phillips J, as he then was, in the Elliot case, is bound to leave parties wondering why, given those facts – and, we would add, the absence of any finding of sham or deceit or ulterior motive – the Tribunal was not prepared to accept that redundancy was the reason.

32.	We also accept that the Tribunal appear, for the most part, to have failed to regard to the relevant documents.  We have already referred to the letters and meeting notes and the constant theme of redundancy that appears in them.  It is difficult to resist the inference that if they had had regard to them, they could not have concluded as they did or, at least, not without explaining how and why they felt able to reach a conclusion that appeared to fly in the face of what the documents record, namely that there was a real redundancy and that that was why the Respondent dismissed the Claimant.

33.	We would add that we recognise that the main focus of the case before the Tribunal was the allegation that both Claimants had been dismissed for having made a protected disclosure and that may explain why matters went astray when it came to the redundancy issue but it remains the case that this is, in our view, a good appeal which has to be upheld.

Disposal
34.	In these circumstances, we will pronounce an order upholding the appeal and remitting the issues of whether or not the reason for the Claimant’s dismissal was redundancy, and, if so, whether or not he was unfairly dismissed, to a freshly constituted Employment Tribunal.  Mr Smart did not suggest that it would be appropriate to return the case to the same Tribunal and we are satisfied that, since the Tribunal’s errors relate to the matter of credibility and reliability of witnesses, it would not be appropriate to remit the case to them.

35.	That is not, of course, to say that the dismissal was either procedurally or substantively fair; that depends on the application of section 98(4).  All that the Tribunal had to consider at this stage was whether or not, on a balance of probabilities, the reason for the Claimant’s dismissal was redundancy.  That is an issue which will have to be considered by the freshly constituted Tribunal and if they are satisfied that redundancy was the reason, they will require to proceed to consider whether or not the dismissal was fair/unfair.  They may also, depending on the outcome of those considerations, require to consider whether or not they should make a Polkey deduction.

36.	For the avoidance of doubt, it will not be open to the freshly constituted Tribunal to consider the issue of whether or not the Claimant was dismissed for having made a protected disclosure; there was no cross- appeal in respect of that matter.