A1/2004/0906 
Neutral Citation Number [2004] EWCA Civ 1460
IN THE SUPREME COURT OF JUDICATURE 
IN THE COURT OF APPEAL (CIVIL DIVISION) 
ON APPEAL FROM THE HIGH COURT
Employment Appeal Tribunal
(His Honour Judge J Reid QC, Mr P Smith,
Mr R Straker)
Royal Courts of Justice 
Strand 
London, WC2 

Tuesday, 19 October 2004
 
B E F O R E:

LORD JUSTICE CARNWATH 
 
LORD JUSTICE NEUBERGER 
 
LORD JUSTICE MAURICE KAY 
 
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WALKER
Appellant/Claimant 
-v-
 
BARNES 
Respondent/Defendant 
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(Computer-Aided Transcript of the Stenograph Notes of
Smith Bernal Wordwave Limited
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- - - - - - - 
The Appellant appeared in person 
The Respondent appeared in person 
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J U D G M E N T
1.	LORD JUSTICE MAURICE KAY:  Mr Barnes worked for 	Walker's Windows as a salesman from October 1996 until he was dismissed for gross misconduct on 12 March 2002.  Throughout that period both parties considered him to be self-employed.  It turned out that they were wrong in that assumption.  Following a preliminary hearing on 20 November 2002 an Employment Tribunal held that in law the relationship had been pursuant to a contract of employment.
2.	The business of Walker's Windows, as its name implies, is supplying and fitting PVC windows and doors and the construction of conservatories together with ancillary services.  Mr Barnes' job was to convert sales leads into actual sales.  In the weeks leading up to the dismissal Mr Walker had been concerned about three contracts which he came to believe ought to have been offered to and carried out by Walker's Windows but which were, he believed, diverted to other concerns by Mr Barnes.  The first of these three concerned Mr and Mrs Pender.  They had been customers of Walker's Windows at an earlier stage, but, while they had been satisfied with the windows or goods supplied, they had been dissatisfied with some of the building work carried out by the firm.  They placed another order with Walker's Windows for windows but on the basis that this time they would arrange for another firm to do the ancillary building work.  In due course that firm let them down.  Mrs Pender approached Mr Barnes and he arranged for the work to be done by a third firm, known as H & N.  Mrs Pender eventually paid H & N £900 and Mr Barnes £300.
3.	The Employment Tribunal accepted that the job had been one that was already lost to Walker's Windows by the time Mr Barnes played the part that I have described.
4.	The second contract was an unusual one for Walker's Windows in that it involved an order being placed with Midland Glaziers for aluminium windows.  Walker's do not generally use aluminium windows.  It seems that Mr Barnes was acting as a kind of middleman between Midland Glaziers as suppliers and Cavanagh Construction, whose manager Mr Cheadle is a next door neighbour of Mr Barnes.  Walker's Windows had previously supplied a conservatory for Mr Cheadle's home.  The order for the aluminium windows was processed in a way which was unusual for Walker's. 
5.	In the event the Employment Tribunal found that Mr Barnes did not make a profit from the transaction and that there was "nothing particularly sinister" about it.
6.	The third matter concerned Mrs Sunderland.  Mr Walker found out that Cavanagh Construction were doing some work for her ancillary to the fitting of windows.  Mr Barnes had again been involved as an intermediary but had not profitted.
7.	The Employment Tribunal found nothing untoward.  It seems to have accepted Mr Barnes' evidence that he involved Cavanagh Construction because the nature of the work which necessitated the engagement of sub-contractors was not appropriate for Walker's Windows and that Mr Barnes was properly seeking to foster a closer business relationship between Walker's Windows and Cavanagh Construction.   
8.	Mr Walker's reaction on discovering all these events was to dismiss Mr Barnes on 12 March.  Of that, the Employment Tribunal said:
"Unfortunately Mr Walker jumped to conclusions.  He put the three incidents together and considered that the applicant was systematically defrauding him and making a profit at his expense.  He thought he was syphoning work away from Walker's Windows for his own benefit."
Later:
"Mr Walker took a grave view on 12 March.  He arranged a meeting with the applicant.  He followed no disciplinary procedure whatsoever and ultimately dismissed him on that day.  Indeed, he deliberately declined to tell the applicant why he was being dismissed because he still had some investigations to do and he did not want to run the risk of the applicant possibly tipping off customers or contractors.  That is why Mr Walker did not give the applicant any more details than he did.  Mr Walker  did not take any advice on this because he assumed that the applicant was not an employee.  He did not consider that he had done anything wrong.  He was perfectly bona fide about that at the time although  it appears he subsequently received advice that the position with the applicant's status may not have been as he thought."
9.	It was only after that act of dismissal that Mr Walker took legal advice.  He then permitted an appeal hearing within the firm but of that the Employment Tribunal said:
"We do not consider that the appeal hearing cured the defect i.e. the total lack of procedure in Mr Barnes' original dismissal ..... There was not a root and branch re-investigation; there was not full communication of subsequent information to the applicant such as to make this a full freestanding process."
10.	The conclusions of the Employment Tribunal were that Mr Barnes had been unfairly dismissed but that his conduct  had contributed to his dismissal to the extent of 30  per cent.  The Tribunal stated:
"We as the Tribunal find that there was nothing intrinsically wrong with an unconventional and potentially risky way of doing business with Cavanagh Construction in order to gain their  business in the hope that perhaps it might be more regularised once the business was secured.  There was nothing wrong in the Sunderland job because all the money has been accounted for.  It cannot be shown that the applicant made or intended to make a private profit.  There was something untoward as the applicant himself conceded, in the Pender job.  On that basis we have settled on the figure of 30% to reflect the applicant's blameworthiness for his own downfall."
11.	At a later remedies hearing, which resulted in a decision  of the Employment Tribunal dated 7 August 2003, the Tribunal awarded Mr Barnes compensation of £10,254.66.  
12.	It is next necessary to re-trace some of the procedural history.  Between the liability hearing and the remedies hearing Walker's Windows applied for a review of the decision on liability principally under Rule 13 (1) (d) and (e) of the Employment Tribunals Rules of Procedure 2001.  Rule 13 (1) (d) relates to new evidence.  It provides:
"[If] new evidence has become available since the conclusion of the hearing to which the decision relates, provided that its existence could not have been reasonably known of or foreseen at the time of the hearing."
Rule 13 (1) (e) permits a review "in the interests of justice".
13.	The application was refused in a decision dated 4 August  2003.  That decision was of the chairman alone.  As to new evidence, he applied the principles in Ladd v Marshall [1954] 1 WLR 1489 as Employment Tribunals are enjoined by authority to do.  The so-called new evidence related to the Penders.  The chairman concluded that it added nothing significant to the evidence at the original hearing.  He said:
" ..... this evidence would definitely not have had an influence on the outcome of the case, let alone an important one."
14.	The application referring to the interests of justice also failed to impress the chairman because it was little more than an attempt to re-argue the case.  
15.	There followed two further applications for review which sought to raise issues of liability and remedy.  The chairman refused them in a decision dated 10 February 2004.  It is that decision which is most in issue in this appeal.  The material parts of the decision related to new evidence.  The chairman dealt with that in this lengthy section of his decision:
"Mr Walker contends that a garage conversion undertaken by Cavanagh Construction for Mr R Barnes (no relation) is a further example of the applicant's syphoning work away from Walker's Windows.  This is fresh evidence put forward by Mr Walker.  I have considered the full particulars under cover of his letter of 28 November ..... and the applicant's comments by letter dated 2 January .....  Clearly the majority of the price for this related to general building work rather than to windows.  It is very plain to me that this was work the applicant could reasonably have considered was not sufficiently profitable for Walker's Windows.  This is without taking into account the applicant's actual response to the allegation, which is that he actually showed the plans to Mr Walker who was not interested.  It is also notable that the client, Mr Barnes, understandably wanted the entire job overseen by one individual and not given to different specialist contractors. 
Had this evidence been before the Tribunal, the Tribunal would have certainly entertained it, as being potentially relevant.  I am also prepared to accept that its existence could not have been reasonably known or foreseen at the time of the hearing, but that it is credible ..... I accept that, in the nature of this evidence, it has fortuitously come to light after the event.  However, in the context of the long history of this case, I do not see it as any different, in kind, from the Sunderland contract in the main decision.  Nor do I find it remarkable that the applicant did not mention it or recall it earlier.  It was all carried out, invoiced, and indeed rectified by Cavanagh.  There is no evidence of any profit to the applicant, and it is entirely consistent with the applicant's hopes of fostering a mutually beneficial relationship with Cavanagh Construction ..... 
I therefore do not consider that Mr Walker has a reasonable prospect of persuading the Tribunal that this evidence would have had an important influence on the outcome of the case ..... such that the original decision or the remedy decision should be reviewed.  Fresh evidence on review or appeal has to be not only relevant and probative but to pass a more stringent test of having an important influence on the outcome of the case."
16.	Mr Walker then appealed to the Employment Appeal Tribunal, comprising His Honour Judge J R Reid QC, Mr P M Smith and Mr R N Straker.  Although the Employment Appeal Tribunal rejected a number of Mr Walker's arguments, it concluded that the chairman of the Employment Tribunal had fallen into error in relation to the most recent new evidence.  It said this:
"In our view the reasoning behind the chairman's  decision is in law flawed.  He starts from the  proposition that the Employment Tribunal accepted Mr Barnes' evidence in relation to the Cavanagh Construction cases which were in evidence that he was trying to foster a relationship between Walker's and Cavanagh and that he was passing over jobs which  would not have been of interest to Walker's.  That argument is seeking to pull itself up by its own bootstraps.  The point of the new evidence is that the (undisclosed) additional case might cast real doubts on the explanation which the Tribunal had previously, on less evidence, accepted.  The likely  effect on the outcome of the new evidence cannot be dismissed merely by saying that it could be explained away on the same basis as the earlier Cavanagh Construction cases.  Furthermore, the evidence showed (if accepted) that Mr Barnes was trying to obtain a profit from the transaction, albeit he was thwarted.  In these circumstances it  seems to us to be perverse to discount the evidence on the basis that it did not show that Mr Barnes actually managed to make a profit.  We therefore take the view that the evidence does pass the stringent test of showing that it could have a very real influence on the outcome of the 'contribution' element in the Tribunal's decision."
17.	The Employment Appeal Tribunal remitted the case to a differently constituted Employment Tribunal on the sole  question as to the appropriate percentage deduction to be made from the award of compensation because of Mr Barnes' conduct.  It added that at the re-hearing Walker's could adduce evidence as to all the alleged instances then within their knowledge of Mr Barnes diverting work from Walker's and Mr Barnes could adduce such evidence as he thought appropriate to rebut those allegations.  
18.	Mr Barnes appeals to this court against that decision.  He does so with the permission of Lord Justice Sedley.  For the Employment Appeal Tribunal to interfere with a decision of an Employment Tribunal it must identify an error of law on the part of the Employment Tribunal.  The essence of the decision of the Employment Appeal Tribunal now under appeal is that it was perverse of the Employment Tribunal to refuse to review its decision on the basis of the new evidence, in particular, by concluding that the evidence would not have had an important influence on the outcome of the case in relation to the quantification of the 30 per cent contribution.  In his decision declining to review the original decision the chairman faithfully and fully set out the correct approach, that is to say the Ladd v Marshall tests.  He was in the best position to assess the potential impact of the new evidence on the issue of contribution.  His judgment was that it added nothing of substance to the evidence of the Sunderland transaction.  It was a little more of the same with no evidence of Mr Barnes having profitted from the contract between his namesake and Cavanagh Construction.  The chairman considered that it was consistent with Mr Barnes putting work in the direction of Cavanagh Construction in circumstances where the work was not ideal for Walker's Windows, and where to deal with it in that way was also consistent with the desire to develop a mutually advantageous relationship between Walker's Windows and Cavanagh Construction.
19.	In my judgment it cannot be said that the chairman's decision about the new evidence was perverse.  On this appeal there is no issue as to the rationality or lawfulness of the original decisions of the Employment Tribunal on liability and contribution.  It was open to the chairman to conclude that the new evidence would not have an important influence on the outcome of the case.
20.	In these circumstances I consider that the appeal must be allowed.  I also add this.  The Employment Appeal Tribunal took the view that having allowed the appeal the appropriate course was for the new evidence to be considered by a differently constituted Employment Tribunal.  Such a course would have necessitated the differently constituted Tribunal also re-hearing all the original witnesses whose evidence impacted on contribution.  In other words, everything except the unfairness of the dismissal would be opened up.  That is a very uninviting prospect and it is not called for by the    justice of this case.
21.	LORD JUSTICE NEUBERGER:  I agree, and I do not think there is anything I can usefully add.
22.	LORD JUSTICE CARNWATH:  I agree that this appeal must be allowed for the reasons given by Lord Justice Kay.
Order:  Appeal allowed with the costs of £280