Appeal No. EAT/897/93

	EMPLOYMENT APPEAL TRIBUNAL
	58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

		At the Tribunal
		On 21 March 1994

	Before

	THE HONOURABLE MR JUSTICE MUMMERY (P)

	MR A FERRY MBE

	MR K M HACK JP

ALEXANDER MICHAEL ACCOUNTANTS	APPELLANTS

IVAN POVEY	RESPONDENT

	Transcript of Proceedings

	JUDGMENT

	Internal Preliminary Hearing

Revised

	APPEARANCES

For the Appellants	MR ALEXANDER LEITCH
(OF COUNSEL)
Messrs McCartneys
Solicitors
27 High Street
Maidenhead
Berks SR6 1JG

For the Respondent	NO APPEARANCE BY OR
 	ON BEHALF OF
	RESPONDENT

	MR JUSTICE MUMMERY (PRESIDENT):      This is an appeal by Mr Michael Whitbread, trading as Alexander Michael Accountants, against a decision of the Industrial Tribunal held at Reading on the 21 September 1993.  

	The Tribunal decided, for reasons notified to the parties on the 6 October 1993, that the dismissal of Mr Ivan Povey, a former employee of the Appellant, was unfair and made a basic and compensatory award in his favour.  Mr Whitbread, who argued the case in person before the Industrial Tribunal, was dissatisfied with the decision and gave notice of appeal on the 4 November 1993.

	This is a preliminary hearing of the appeal to determine whether any of the grounds relied on by Mr Whitbread show an arguable error of law on the part of the Tribunal in reaching the decision.  This Tribunal only has jurisdiction to hear appeals on points of law.  If no point of law is raised in the appeal, or if any point raised is not arguable, then the appeal will be dismissed at this stage without a need for a full hearing at which the Respondent is represented.

	With those comments we turn to the background to the case.  The proceedings were commenced by Mr Povey when he presented his complaint on the 18 March 1993 for unfair dismissal.  Mr Povey complained that, having been employed as an Audit Manager by Mr Whitbread and the predecessor firms since November 1982, he was dismissed on the 8 January 1993.  He alleged that at a meeting with Mr Whitbread on the 4 January he was offered redundancy.  He was asked for an immediate decision.  He requested time to consider the offer.  On the 5 January he confirmed with Mr Whitbread his acceptance of the offer, but on the 8 January he received a letter dismissing him without compensation.  In those circumstances he complained that he had been treated unreasonably and unfairly.  

	Mr Whitbread did not put in a completed Notice of Appearance on the form IT 3.  Instead he wrote a lengthy letter to the Industrial Tribunal setting out the grounds on which he contested the claim, attaching to it the relevant correspondence and other documents.  The essence of the defence to the claim for unfair dismissal is in the last paragraph and in a letter of the 7 January, attached to the letter referred to.

	Mr Whitbread stated that Mr Povey wanted redundancy.  Mr Whitbread told him it was not a redundancy situation.  He dismissed him as per the letter of the 7 January.  He said that it was he as the employer who had been treated unfairly and reasonably, finding that someone he trusted and relied upon was allegedly cheating him whilst in his employment.  It is necessary to refer to the letter of the 7 January, in order to amplify that statement.  The relevant parts of the letter read as follows:

		"Further to our meeting on Monday the 4 January 1992 concerning your employment as Audit Manager with Alexander Michael.  As you know the meeting again concerned your time-keeping, attitude and of a more serious matter, AM software, stationery masters etc, copied for personal use to assist you in offering an Accountancy Service to your own clientele".

	The letter went on to refer to details of earlier meetings, to Mr Povey's time sheets, and half way through the next page says this:

		"The most upsetting factor for me was to discover that you had used AM software and stationery for the A and I Accountancy Services that you have set up with Alexis.  Whilst I accept that you only have a few clients, as far as I am concerned and certainly your position as Audit Manager is concerned at AM this is a flagrant breach of contract and of grave concern to me.  It is with this in mind that I consulted my solicitor and he has advised me that I should issue you with an Injunction, firstly to ensure that you do not take or use any software that is licensed to this practice and secondly to stop you from approaching any AM clients.  On this I am still awaiting further advice".

	The next paragraph reads:

		"I now return to your employment with AM as I told you this matter is not a redundancy situation because I will have to replace you and it was obvious to me from your attitude that you did not realise the seriousness of your situation.  In accordance with the ACAS (Advisory, Conciliation, And Arbitration Service) Code of Practice, any of the above circumstances justify dismissal ie, falsifying time - sheets, lateness for work and of course the taking of company property for your own use".

	The letter continues that Mr Povey was not entitled to his wages because his conduct justified summary dismissal, but Mr Whitbread was prepared, on a without prejudice basis, to offer him one month's salary in lieu of notice.

	That was the issue that came before the Industrial Tribunal.  The Tribunal stated the relevant facts.  The date of Mr Povey's termination of employment was the 8 January.  Mr Povey had been employed as an Audit Manager.  It then traced the history of the firm, Mr Povey claimed continuous employment beginning in November 1982.  The Tribunal found in fact that there had been a succession of transfers of undertakings, by virtue of which Mr Povey possessed ten years of continuity of employment, going back to the time in November 1982 when he joined a Mr White who was starting up an accountancy practice.  Then the firm of Alexander Michael & Co was formed on 31 March 1992 by Mr White transferring his business and client list to a partnership, consisting of Mr Whitbread and Mr Bridgeman, Mr White taking the role of consultant.  That partnership lasted until the 22 May 1992.  The business was then transferred to Mr Whitbread.

	The Tribunal found that Mr Povey had got on well with Mr Whitbread until the end of the 1992.  There then occurred the events of the 4 January and the 7 January, which led to Mr Povey's dismissal.  The Tribunal referred to the letter of the 7 January, which I have already read in its material parts.  The Tribunal said this in a crucial part of the decision.  At the Tribunal Mr Povey agreed that he used these items, software and stationery, in offering an Accountancy Service to his own clients but added that his clients were only five in number.  Mr Whitbread testified that it was a misuse of the firm's time to which he objected, rather than the activity itself.

	The Tribunal said at paragraph 11:

		"It is for Mr Whitbread to show the Tribunal what was the reason for the dismissal.  He has done so.  The reasons are those referred to in his letter of the 7 January.  Redundancy was not the true reason:  the workload was increasing, Mr Whitbread is not an accountant and Mr Povey was the only member of the staff who had much experience in the accounting profession".

	The Tribunal stated the essence of its reasons for finding that the dismissal was unfair in paragraph 12:

		"The Tribunal considered the fairness or reasonableness of the decision to dismiss in accordance with the provisions of Section 57(3) of the Employment Protection (Consolidation) Act 1978, as amended.  The matters to which Mr Whitbread referred in this letter do not, with one exception, merit summary dismissal, or indeed dismissal at all, in the absence of a prior written warning.  The exception is the use of the firm's material for what some employers might regard as a competing business.  But Mr Whitbread did not put the matter in that way:  he complained principally about the use of the firm's time for that purpose.  There is a fine line between what he did not object to and what he did.  The matter should have been clearly defined by Mr Whitbread if it was to be treated as a disciplinary matter which he regarded as gross misconduct which would lead to dismissal. There was no formal disciplinary procedure".

	The Tribunal proceeded to assess compensation.  On the hearing of the appeal, we have heard submissions from Mr Leitch, on behalf of Mr Whitbread.  At Mr Whitbread's request we have heard a short submission from him in addition.   The case, as presented by Mr Leitch, was that there were two complaints by Mr Whitbread.  The first was his appeal against the decision of the Industrial Tribunal that Mr Povey had been unfairly dismissed, and the second was the refusal of the Tribunal on the 19 October 1993 to grant a review of its decision.

	Mr Whitbread asked for a review.  The Tribunal refused to grant a review, stating in the decision letter of the 19 October 1993 that the review on the grounds sought by Mr Whitbread had no reasonable chance of success.  The reason given for that decision was that the matters which Mr Whitbread sought to raise constituted an attempt to adduce fresh evidence which was not produced at the hearing and does not appear to be relevant to the subject matter of the application.

	Going first with the appeal against the decision, the grounds of appeal advanced by Mr Leitch are two.  The first is that Mr Povey had acted in breach of the implied duty of fidelity which is owed by all employees.  The Tribunal found that as a fact, but then held that the breach did not justify dismissal.  Mr Leitch submitted that breach of the duty of fidelity is capable in law of justifying dismissal.  For that proposition he referred to the well known case of Hivac Ltd v Park Royal Scientific Instruments Ltd 1946 1 All ER Reports 350.   He referred to page 352h that a duty of fidelity is owed by employees.  Breach of this may justify dismissal.  At page 354 e-h, Lord Greene the Master of the Rolls, referred to the earlier authorities which lay down the ordinary implied obligation existing between employer and employee that, during the continuance of his employment, an employee will act in his employers' interests and not use the time for which he is paid by the employers' in furthering his own interests.  A breach of that duty is a breach of the duty of fidelity.  

	The difficulty with the point raised by Mr Leitch is that this, as the Tribunal observed in its decision, was not the ground on which Mr Whitbread dismissed Mr Povey by the letter of the 7 January 1993.  The reasons given for the dismissal were as stated at the end of the second page which I have read, namely falsifying time sheets, lateness for work and taking of company property for his own use.  It is well established, as a matter of law, that in determining the principal reason for dismissal the Tribunal will look at the reason given for the dismissal, not to some other reason.  

	As the Tribunal observed in its decision Mr Whitbread did not give as a reason for the dismissal of Mr Povey that he was in breach of the duty of fidelity by carrying on a competing business.  The complaint was about the use of the firm's time and the use of the firm's stationery.  In those circumstances we find there has been no error of law on the part of the Tribunal.  

	The second ground on which the appeal is put is that, as a matter of history, Mr Whitbread discovered, after the dismissal, evidence of alleged false accounting by Mr Povey.  He refers to investigations conducted by the Fraud Investigation Division of the Thames Valley Police, the Crown Prosecution Service and the Inland Revenue Investigation Division.  Mr Whitbread claims that there is now considerable evidence of false accounting and that as Audit Manager, Mr Povey during his employment allegedly falsified several sets of accounts without Mr Whitbread's knowledge, or without the clients' knowledge.

	The difficulty with this point is that it seeks to bring forward, under the guise of an error of law on the part of the Tribunal, matters which were not before the Tribunal and were not part of the material on which Mr Povey was dismissed by the letter of the 7 January.  In determining the principal reason for dismissal, a Tribunal must not normally take account of events which occurs subsequent to the dismissal, or even events which pre-date the dismissal if they were not known to the employer when he dismissed the employee.  An unfair dismissal is not rendered fair if the employer subsequently discovers grounds of misconduct which would have justified the dismissal had they been known.

	This is the position here.  Instead of suspending Mr Povey while further investigations were being conducted, instead of giving a formal warning to Mr Povey about the matters which were relied on, and then investigating the matter further while he was under warning, Mr Whitbread chose to dismiss Mr Povey for the reasons in the letter of the 7 January.  Fairness of dismissal must be judged by that.  There is no error of law in the decision of the Tribunal on this matter.   Mr Leitch sought to obtain leave to admit on this appeal a mass of further evidence relating to the alleged falsifications by Mr Povey.  We have refused leave, because we are unable to see how an of that material can be relevant to any appeal against the decision of the Tribunal on a point of law.

	Mr Leitch also sought to raise a further matter.  That is that the Tribunal should have given consideration to reducing the compensatory reward made to Mr Povey on the ground of contributory fault under Section 74 sub-section 6 of the 1978 Act.  Under that section the Tribunal may reduce compensation if it finds that the dismissal was to any extent caused or contributed to any action of the complainant.

	When we asked Mr Leitch whether this point was raised before the Tribunal he said, on instructions, that it was not.  In those circumstances it cannot be right to entertain that as a ground of appeal.  The Tribunal will not allow a point of law to be raised which could have been but was not raised before the Industrial Tribunal, and which forms no part of the Tribunal's reasoning.  They may be exceptions, but the Tribunal is reluctant to make exceptions if the new point would necessitate the case being remitted to the Tribunal for further evidence.  That is what would have to be done in this case.  As the question of the contributory fault was never raised by Mr Whitbread at the hearing there has been no relevant factual investigation.

	The final matter relied on by Mr Leitch was that there had been an error of law in the refusal of a review.  Mr Leitch submitted, on the basis of the case of Ladup Limited v Barnes 1982 IRLR 7, that a review should be ordered if the interests of justice require it.  Those interests do require it if an allegation of fraud would, if made out on the evidence, undermine the decision of the Tribunal.

	The difficulty with this submission is that we are unable to see how it could affect the correctness of the decision of the Industrial Tribunal.  The Industrial Tribunal decided that the dismissal was unfair because it was not justified substantively by the reasons given in the letter of the 7 January.  It was procedurally unfair because there was no formal warning and there was no disciplinary procedure.  The admission of the new evidence about the activities of Mr Povey, which have been discovered, would not entitle the Industrial Tribunal on a review to come to a different decision about the unfairness of the dismissal. 

	As already mentioned the unfairness of the dismissal is to be judged by the reason which was given at the date of dismissal, not by reference to allegations of misconduct, subsequently uncovered.

	For all those reasons there is no arguable point of law raised on the notice of appeal or in Mr Leitch's skeleton arguments.  There is no point in this matter proceeding to a full hearing.  The appeal will be dismissed.  As to the various matters which have been raised by Mr Leitch about the alleged activities of Mr Povey, in conjunction with Mr White and Mr Bridgeman, they may give rise to other forms of proceedings in other Courts.  They are not the concern of this Tribunal which can only hear appeals on points of law from the Industrial Tribunal.  

	Nothing we have said intends in any way to limit any rights that Mr Whitbread may have to pursue his complaints in other proceedings.  The appeal is dismissed.