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You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> WBSL Realisation 1992 Ltd v Paul [1995] UKEAT 302_94_0105 (1 May 1995) URL: http://www.bailii.org/uk/cases/UKEAT/1995/302_94_0105.html Cite as: [1995] UKEAT 302_94_0105, [1995] UKEAT 302_94_105 |
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At the Tribunal
THE HONOURABLE MR JUSTICE MORISON
LORD GLADWIN OF CLEE CBE JP
MR K M YOUNG CBE
JUDGMENT
Revised
APPEARANCES
For the Appellants MR P ELIAS
(Of Counsel)
Dibb Lupton Broomhead
Fountain Precinct
Balm Green
Sheffield
S1 1RZ
For the Respondent MR M D RAPRELL
(Of Counsel)
Addleshaw Sons & Latham
Dennis House
Marsden Street
Manchester
M2 1JD
MR JUSTICE MORISON: The Appellants are a company which was engaged in the business of manufacturing building materials and building systems. We shall refer to them hereafter as "the Employers". Until his summary dismissal on 8 May 1992, the Respondent to this Appeal, whom we shall hereafter refer to as "the Employee", had been employed by them since September 1958. At the relevant time the Employee was also a Director of the Employers, who were part of a group of companies, their shares being wholly owned by the parent, which also owned the other companies within the group. Due to the recession, and no doubt over enthusiastic borrowing, the group had over extended itself financially and pressure was put on the parent board by the lenders. Meetings were held amongst the Directors of the parent and of the Employers, which was thought to be viable in itself, but had apparently given some cross-guarantee to support the group's borrowing. Questions arose as to whether it was possible to save the group, or raise money by selling the Employers' assets. As would be expected, there were many meetings and approaches made to potential "white knights". This was obviously a sensitive time for the Directors concerned, especially as one of the options briefly considered, was the possibility of a management buy-out. In such a situation, the Directors' duties may be clear in principle but not necessarily easy to keep in mind, as the events rapidly unfolded.
The Employee's brother was a Director of a company called Kingspan, which might have been interested in buying part of the businesses, including that of the Employers. Quite properly and in accordance with what was expected of him, the Employee contacted a Director of that company, in his brother's absence on holiday, and told the person concerned that he should contact the Chief Executive of the Employers group. After it had become clear on Friday 1 May (Bank Holiday weekend) that the parent's shares would have to be suspended, as the banks were withdrawing banking facilities that evening, the position was, as the Employee knew, that there was still a possibility that an entity (the Rugby Group) might be interested in buying parts of the businesses, including that of his Employers.
On Saturday 2 May 1992, whilst at home, the Employee received a telephone call from his brother, who had telephoned to wish him a Happy Birthday. The telephone conversation was unlawfully tapped and taped. A copy of the tape was provided to the Chairman of the Employers' parent later that afternoon. According to the Industrial Tribunal, the information which the Employee gave to his brother about the Employers and the group, included the following facts:
1. The group was about to go into administration
2. There were lines of banking arranged for the Employers, which could therefore continue in business
3. The subsidiary was going to refuse to provide cross guarantees to support the parent
4. The Rugby Group were about to, or had put in a bid for the assets
5. The likely value of the Rugby bid would be between £14m-£15m.
As the Industrial Tribunal put it, paragraph 18:
"... This resulted in giving knowledge as to what would be acceptable, the cost of re-structuring the group and the basic elements of the Rugby bid."
The following day, Sunday 3 May, a meeting was arranged. At that meeting, the tape was played. The Employee left, although asked to stay, and a decision was taken that he would be suspended and then dismissed. On Tuesday 5 May, the parent's shares were suspended and it went into administration; on 7 May the Employee received a letter of dismissal. The I.T. conclusions were:
1. That they were not satisfied that the Employee was guilty of gross misconduct, or indeed any misconduct:
"... He did what he thought best in the interests of the company of which he was a director..."
2. "... It is important that employers follow a fair dismissal procedure. The ignoring of a significant safeguard will render a dismissal unfair. In a case of misconduct it is necessary to investigate fully and fairly and to hear what an employee has to say by way of explanation or mitigation. Even though the applicant left the meeting on Sunday morning 3 May 1992 it was not sufficient to leave it at that. The dismissal was because of the contents of the tape, the applicant was not asked for an explanation despite the fact that he was a director with 34 years services [sic]. Even if we had been satisfied of misconduct under section 57(2)(b) we would not have been satisfied that the dismissal was fair within section 57(3) of the Act."
The Employers' appeal comes before us, after another constitution of the E.A.T. had considered the appeal at a Preliminary Hearing and permitted it to proceed. The grounds of appeal may be shortly stated:
1. The Industrial Tribunal applied the wrong test in determining what was the reason for the dismissal. They confused the issue as to whether the reason justified disciplinary action, with the question as to what was genuinely in the Employers' minds when they dismissed the Employee. By doing so, they substituted their own view of the facts for that of the Employer. They erred in law in holding that there was no misconduct because of the Employee's motives, when motive is not the test for misconduct or breach of contract. The fact that the Employee thought he was acting in the best interests of the Employers, cannot be relevant to the issue of the reason for the dismissal. Finally, the Industrial Tribunal misdirected themselves because they misunderstood the duty of confidentiality and good faith.
2. The decision that procedural irregularities made the dismissal unfair, in any event, was perverse. The Industrial Tribunal never asked themselves the question whether dismissal was, in the circumstances, within the range of reasonable responses of any Employer. Insofar as they considered Section 57(3), they applied too stringent a test.
The Employee submits that the Industrial Tribunal approached the matter in a way which shows that they regarded what the Employee had done as in the company's best interests. Although making use of Section 57(2), they have effectively held that what the Employers did could not be within the range of reasonable responses of any reasonable Employer. Although they may have pitched the test too high, nonetheless, their finding on procedural impropriety cannot be faulted.
It seems to us quite clear that the Industrial Tribunal misdirected itself in law, as to the proper approach to the first question they must ask themselves, namely, what is the reason for the dismissal. A reason may not be a good one, and if it is not, it may well lead to a finding of unfair dismissal. Such a reason, if genuinely held, is nonetheless the reason established by the Employer. If no sensible Employer could have thought that the reason put forward by it was a reason for dismissal, that might provide good reason to doubt their bona fides in putting it forward as the reason. This is not such a case. It is clear from the passage which we have quoted that the Industrial Tribunal accepted that the Employers dismissed the Employee, because of what was contained in the tape of the telephone conversation, whether or not the conversation justified the dismissal. As the Industrial Tribunal put it in paragraph 24:
"... The dismissal was because of the contents of the tape..."
It was what he said to his brother that was the reason for the dismissal. The Employers genuinely believed that what he said was misconduct. Accordingly the Industrial Tribunal erred in law, in a material respect. Further, it seems to us, that no reasonable Tribunal could have concluded that what the Employee is recorded as having said and I refer to paragraph 22 of the Decision, was objectively justifiable as being in the best interests of the company of which he was a Director. What the Employee did was to provide a potential bidder with information about the amount of the only potential other rival bid and thus deprive the company, of which he was the Director, the Employers, of an opportunity to push the selling price up, or of the chance that Kingspan itself would place a much higher value on the company's business than had the Rugby Group.
As his Counsel, in an able submission to us accepted, what was said in that telephone conversation was prima facie in the absence of further explanation, indefensible and improper. It was submitted that with the explanation put forward by the Employer, either there was no breach of duty or any such breach in the light of such explanation, did not justify dismissal.
Finally, we consider that the Industrial Tribunal never asked itself the question, whether dismissal fell within the band of reasonable responses, nor did they properly consider the procedural questions, as submitted by Mr Elias on behalf of the Employers. What should we now do? We can either allow the appeal and substitute a finding of fair dismissal, or we could remit the matter back to the same Tribunal, with a direction that they apply themselves correctly to the proper questions in the light of their findings of fact, or we can allow the appeal and remit the matter back before a newly constituted Tribunal for fresh consideration of the merits of the dispute.
None of these courses is without difficulty. In the first place, we are not sufficiently confident as to the final result that would follow, if the right questions were asked and answered, to be able to substitute a finding of fair dismissal. For example, it may be that the Employee must have realised that when the tape was played, his job was, or might be, on the line and that he ought to face the music at that time and explain himself, otherwise he might be dismissed. In other words, he might have appreciated that this was his chance to remove the prima facie implication that he had acted improperly; that the Employers were entitled to dismiss him, without a hearing; or the Tribunal might consider that any hearing was a pure charade; as what he had done was manifestly a serious breach of his duties. Alternatively, a Tribunal might conclude that although there was a serious breach of contract, dismissal was not a reasonable response without a hearing, and any new Tribunal would wish to consider also the offer that was made of an appeal against the dismissal.
If we remitted the matter back before the same Tribunal, the Employers, who wish to challenge the findings made by the Industrial Tribunal in paragraph 22 of the Decision, might feel that any new decision by this Tribunal was based on flawed findings of fact; any such decision would be bound to lead to a further appeal, which might well succeed. In any event, the Industrial Tribunal have effectively tied their hands when it comes to questions of contributory fault, which might well play a large part in any new decision.
If we send the matter back for a hearing before a new Tribunal, then the parties will be put to great expense and face all the difficulties that flow from a long period of delay, between the date of the dismissal and the hearing before the Tribunal.
As we have said, no solution is entirely satisfactory. On balance, we have been persuaded to the view that there should be a further hearing before a new Tribunal. We hope that the parties will be able to concentrate on the real issues which centre on the telephone conversation and the Employee's explanations for it and arguments as to procedural unfairness and their effect, if any, on the fairness of the decision to dismiss.
We trust that the new Tribunal will not be presented with long legal arguments about the roles of shareholders and companies. The distinction drawn between a Director's duties to his company, in contrast to his relationship with the shareholders, was, we think, of no assistance to the Industrial Tribunal. We conclude by saying that we can see no good reason why the case before the new Tribunal should take as long as six days, provided that the parties focus on the questions at issue and we ask that the matter be listed for a new hearing as soon as is practicable.