Appeal No.	 EAT/1038/01

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 23 January 2002

Before
THE HONOURABLE MR JUSTICE LINDSAY (PRESIDENT) 
MR J R CROSBY
MR S M SPRINGER MBE

DOGSTAR LEISURE LTD	APPELLANT

MR F J PEREZ	RESPONDENT

Transcript of Proceedings

JUDGMENT

PRELIMINARY HEARING EX PARTE

Revised

	APPEARANCES

For the Appellant	MR A J MERRETT
(Director of Appellant)	

THE HONOURABLE MR JUSTICE LINDSAY (PRESIDENT)

1	We have before us, as a Preliminary Hearing, the appeal of Dogstar Leisure Ltd in the matter Dogstar Leisure Ltd v Mr F J Perez.  Today, Dogstar, the Appellant, has been represented before us by Mr Merrett, one of its directors.

2	The history of the matter is this.  On 22 September 2001 Mr F J Perez, an employee of Dogstar, lodged an IT1 for unfair dismissal and breach of contract.  He said at paragraph 1:

“The Applicant was employed by the Respondents as a manager at the “Dogstar” public house/Nightclub and “Mass” Nightclub.”

Then at paragraph 3 he went on:

“On Thursday 22nd June 2000, Mr. Lawrence Merrett, the Respondent’s managing director, alleged that the Applicant had stolen cash in excess of £5,000 from the Respondent’s receipts for 15th June 2000.”

Then at paragraphs 8 and 9:

“At all material times between 22nd June and 17th July 2000, the Respondent:
(1)	Failed to inform the Applicant as to the details of any investigation taking place in respect of the allegation that he had stolen £5,000.
	(2)	By its management, refused to speak with the Applicant about the allegations made against him.
(3)	Failed to give the Applicant the reason for his suspension without pay since 22nd June 2000.
(4)	Refused to pay the Applicant for his employment to 22nd June 2000.
The treatment afforded to the Applicant by the Respondent as set out at paragraph 8 above amounted to breaches of fundamental terms of his contract of employment, including the term as to mutual trust and confidence.”

Then concluding at paragraphs 11 and 12 he said:

“The Applicant contends that he was constructively dismissed and that in all the circumstances that the dismissal was unfair.
Further and/or in addition, the Applicant claims damages for breach of contract.”

That was the nature, broadly speaking, of Mr Perez’s claim.

3	On 19 October Dogstar put in its IT3.  They said, amongst other things:

“We intend to resist the application on the grounds that the Applicant’s dismissal is wholly warranted by his
(a)	violating cash handling procedures resulting on TWO separate occasions when a total of some £5000 of cash takings went missing and
(b)	falsely exaggerating his hours worked”

and then at the close the company said:

“As to the complaints of the Applicant, these are wholly without substance.  Our records show he has been paid up until 22 June.  The length of the suspension could not be advised earlier to him since it depended on an ongoing police investigation of which he must have been perfectly aware since he was being extensively interviewed by the police.
The applicant had an opportunity to respond to these charges in a disciplinary meeting where he could have a 2nd member of staff present or a witness.  He has not responded to two requests for this.  Copy of letter attached.”

That gives some flavour of the sort of issues that were likely to go forward to the hearing.  

4	On 9 February 2001 there was a hearing at the Employment Tribunal.  It would seem that the decision was announced orally on 9 February 2001, the indication having been that Dogstar was, indeed, liable to Mr Perez.  That oral explanation or announcement led to a request by Dogstar for written reasons, full Extended Reasons, for that liability decision.  That was a request made on 22 March 2001.  In the meantime, the remedies hearing went ahead.  On 6 April 2001 there was a remedies hearing.  On 26 April 2001 Summary Reasons were given for the remedies conclusion.  The Tribunal unanimously concluded that Dogstar was required to pay, in respect of breach of contract, £2,118 to Mr Perez, and, in respect of unfair dismissal, £8,808.20.

5	It was not until 17 July 2001 that the Extended Reasons for the liability decision which had been requested were sent to the parties.  The unanimous decision of the Tribunal, which was sitting at London South under the Chairmanship of Mr A M Snelson, was as follows:

“The unanimous decision of the Tribunal is that:
	(1)	The Applicant’s complaints of unfair dismissal and breach of contract are well founded.
	(2)	The Applicant’s claim for compensation for unfair dismissal must be calculated on the basis that no deduction is to be applied to it under the principle in Polkey v AE Dayton Services Ltd 1988 ICR 142.
	(3)	The Applicant did not cause or contribute to his dismissal.
	(4)	Determination of the Applicant’s claims for remedy is adjourned to 6 April 2001 at 10.00am.”

As we have already said, that remedies hearing had taken place.

6	On 28 August 2001 the Employment Appeal Tribunal received a Notice of Appeal from Dogstar as to the liability hearing and the remedy hearing.  The Notice of Appeal alleges bias on the part of the Employment Tribunal; that is not by any means the only matter that is alleged, but that is alleged.  It is said that there were matters indicative of extreme bias displayed throughout the hearing, at which all the evidence from the Appellant was wholly discounted and any statement by the Applicant was believed, despite a total lack of supporting evidence.  Mr Merrett, on behalf of Dogstar, has put in an affidavit or statement on the issue of bias.  Although it is headed ‘affidavit’ it does not actually appear to be sworn but it is made nonetheless.  

7	Now, considered as an appeal against the remedy decision of 26 April, the Notice of Appeal of 28 August is, of course, thoroughly out of time.  It is also based only on Summary Reasons, which is contrary to our Rules.  Dogstar did not, it seems, apply for Extended Reasons of the remedy decision until comparatively recently.  Exactly when does not matter.  We will not hear the appeal against the remedy decision at this juncture.  We will await, first of all, the Employment Tribunal’s final reaction to Dogstar’s application for Extended Reasons.  The position brought bang up to date (I think the last letter was dated only yesterday) was that the Employment Tribunal was inviting Dogstar to put in whatever reasons it had for explaining away the delay.  If the Employment Tribunal declines to give Extended Reasons (perhaps because, for example, of the lateness of the Application) well then, Dogstar will need, no doubt, to take advice on that, but it can in principle then either ask the Employment Appeal Tribunal to proceed on the remedies decision even on merely Summary Reasons or (additionally or alternatively) can appeal against the Employment Tribunal’s refusal to give Extended Reasons on the remedy decision.  Of course, if there is to be an application to the Employment Appeal Tribunal it would be prudent for the Appellant to put in, in relation to the remedies decision and to the lodging of a Notice of Appeal relative to the remedies decision, as much information as it can as to why there was delay between 26 April and 28 August 2001.  All that is matter on which Dogstar will need to take advice and think before it proceeds.

8	What we have before us is, strictly speaking, a Preliminary Hearing of the issues in the appeal as to liability only and we rule upon nothing but that.  Looking then to this as a Notice of Appeal as to liability, we have in relation to that a Notice of Appeal, the so called affidavit of 15 November 2001 and a skeleton argument of 13 January 2002.  Some of the points made therein relate chiefly or only to the remedies decision and we emphasise we are not dealing with those.  We say nothing on whether there is or is not any arguable error of law in the remedies decision.  

9	Looking only at the liabilities decision, we make a number of points.  First of all, an important step in the Employment Tribunal’s reasoning is that even assuming in the employer’s favour that the employer had a genuine belief that Mr Perez had stolen large sums from the employer and assuming also that it was that genuine belief which caused the employer to suspend Mr Perez, nonetheless, say the Tribunal, for the employer to have suspended Mr Perez without pay before a disciplinary investigation and hearing had been completed represented a breach of contract so fundamental as to entitle Mr Perez to treat his contract of employment as repudiated there and then by the employer.

10	The Employment Tribunal repeatedly emphasis that the suspension had been without pay – see paragraphs 7(13), 9(1), 9(2) and 9(7).  They do not say that to suspend at all was either a breach of contract or a truly serious breach of contract.  It would be difficult for any finding to go that far.  To say that an employee genuinely believed by his employer to have stolen large sums from that employer cannot be suspended at all would arguably break fresh ground.  That, therefore, emphasises the great significance of the added words ‘without pay’.  If, in the events which happened, Mr Perez could without breach have been suspended, was there truly not only a breach but a fundamental one such as to entitle the employee to treat his contract as completely repudiated by the employer upon that suspension being without pay.  

11	We are far from saying that there was error of law in the Employment Tribunal’s reasoning here.  It may be that if there was a right to suspend at all it was only to suspend with a view to an immediate and effective disciplinary investigation, at any rate unless there was some good reason for that immediate and effective disciplinary investigation not to proceed.  That the company believed that there was in its view a good reason for not immediately so proceeding has become apparent because Mr Merrett understood the position to be that so long as the matter was in the hands of the police, it was not proper for the company, at possible risk of involving Mr Perez in self incrimination, to take the matter further.  We do see that in this part of the case there is an arguable case and we will call this part of the case ‘Area One’.

12	Another factor that causes concern is the repeated examination by the Employment Tribunal of whether Mr Perez had indeed stolen the money.  They said in paragraph 8 that they were satisfied that Mr Perez had not stolen it, adding that it was not a case merely of being that the employer had failed to establish Mr Perez’s guilt.  That suggests that the Employment Tribunal approached the matter on the basis, firstly, that Mr Perez’s guilt or innocence was truly relevant, and, secondly, that there was an onus put upon the employer to establish that guilt – see also the Employment Tribunal’s comments in paragraph 9(10), and in paragraph 8 as to the employer’s allegations being wholly unpersuasive.  Neither of those two bases which we have mentioned would be sound in law.  The well known Burchell test does not involve the employer in proving actual guilt.  The Employment Tribunal may arguably – and we want to underline the word arguably because at this stage all we are concerned about is arguable errors of law – the Employment Tribunal may arguably have misled itself in this area.  It could arguably also be that there was such a degree of contortion in the Employment Tribunal saying that it was willing to assume and did assume a genuine belief in the theft in the employer’s mind and the Employment Tribunal’s own firm conclusion that there was no theft, that truly the Employment Tribunal had not abided by its own stated assumption.  This part we will call ‘Area Two’.

13	A third point that we need to mention is this.  The Employment Tribunal held, in relation to the dealings of the police, that the police had said, firstly, that the security system at the Dogstar was seriously flawed – see paragraph 7(14) – and that DC Elfinstone (sic) had observed that Dogstar’s security procedures were badly deficient.  That fortified the Tribunal in its conclusion that Mr Perez had not stolen the money.  How it could point to the innocence of any one man is unclear but in any event there was no evidence given, so far as we can tell, either orally or in writing, at the liabilities hearing by the police itself.  The evidence, therefore, on which the Tribunal relied can only have been hearsay, presumably hearsay coming from a party, Mr Perez, interested to allege that the police had said as they were alleged by him to have said.  The Employment Tribunal obviously regarded the guilt or innocence of Mr Perez of the theft as highly material and took their understanding of the police’s view on the subject, as we have mentioned, as a fortifying factor.

14	An Employment Tribunal is not bound to exclude all hearsay.  What they choose to accept or not is generally entirely a matter for them, within relatively broad parameters.  However, when the hearsay is of real importance, or is regarded as such, where there is no obvious reason why the evidence is not capable of being given directly and where the other side has had no prior warning that the hearsay evidence would be given it could be an error of law for the Employment Tribunal to rely on the hearsay.  In the event, though, we raise this ground only to dismiss it because it is quite plain from paragraph 36 of Mr Perez’s witness statement that he was going to assert, as he did, as to what the police told him.  It is not as if this allegation came entirely out of the blue only in oral evidence, too late to be anticipated and too late to be corrected.  So although we look at this as a potential arguable error of law, we do not on examination find it to be an arguable one.  

15	As for the other allegations raised by Dogstar, either orally today or in its Notice of Appeal or in its affidavit or skeleton argument in relation to the liabilities hearing, we find no further arguable error of law.  The Dogstar witnesses plainly made a very poor impression indeed on the Employment Tribunal.  At several junctures the Employment Tribunal preferred the evidence that came from the Appellant’s side.  That is not an error of law.  That is simply the Employment Tribunal doing its job of finding the facts on the evidence put before it on the day. 

16	Only in the two parts that we have called ‘Area One’ and ‘Area Two’ is there, in our view, any arguable error of law.  We specifically reject the case in bias sought to be made against the Employment Tribunal relative to the liability hearing.  Indeed, Mr Merrett impliedly suggested that the case for bias was going to be stronger relative to the remedies hearing than it could be in relation to the liabilities hearing.  The Notice of Appeal, skeleton and affidavit, make, in our view, no arguable case as to bias at the liability hearing.  Only therefore in ‘Area One’ and ‘Area Two’ is the matter permitted to go forward to a Full Hearing.  The rest of the Dogstar Notice of Appeal is dismissed here and now.

17	As for the case in Areas One and Two, if Dogstar wishes to pursue them we will give Dogstar 14 days from the sending out to it of a transcript of this judgment in which it may, if it wishes, formulate and serve on the Employment Appeal Tribunal and on the other party an Amended Notice of Appeal limited to either or both of Areas One and Two.  Those are to be the only grounds to go forward.  If the Amended Notice of Appeal goes outside those grounds it will not be heard as to the extraneous parts at the Full Hearing, at all events unless the Employment Appeal Tribunal at the Full Hearing expressly so decides.  If no Amended Notice of Appeal is served within the 14 days that we have described then the Dogstar appeal will be dismissed thereafter without further notice.  

18	So far as concerns more general directions.  Skeleton arguments are to be exchanged not less than 14 days before the date fixed for the Full Hearing.  Our estimate of the case is that it should take 2 hours although it may be that the time estimate can be reviewed once not only Dogstar but Mr Perez and their respective advisors have come into the case.  It is to be marked Category B.  I emphasise that we have said nothing relative to the remedy appeal at all but I do ask the Employment Appeal Tribunal to note that the transcript of this judgment should be accelerated so that the 14 day period that we have spoken of can start as soon as practicable.

Mr Merrett is there anything else you want to say at this stage.  I have especially given you 14 days from the receipt of the transcript so that you will have a full account of our reasoning rather than having to take it and absorb it at dictation speed.

Quite sir, I am very grateful to you.  I would be most appreciative if that could be done.  May I ask, is there to be any ruling on this question of who is responsible for Mr Perez not being able to obtain employment – us or the police?

That is a remedy hearing point.  It does not go to liability, it goes to remedy.  You can take that up if it becomes appropriate.  We have not dealt with that at all.