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	United Kingdom Employment Appeal Tribunal
You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Kraus v. Penna Plc & Anor [2003] UKEAT 0360_03_2011 (20 November 2003) URL: http://www.bailii.org/uk/cases/UKEAT/2003/0360_03_2011.html Cite as: [2003] UKEAT 360_3_2011, [2004] IRLR 260, [2003] UKEAT 0360_03_2011

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APPEARANCES

 

For the Appellant	THE APPELLANT IN PERSON
For the 1std Respondent For the 2nd Respondent	MR ROBERT THOMAS (of Counsel) Instructed by: Messrs Eversheds Solicitors Senator House 85 Queen Victoria Street London EC4V 4JL MR A NAWBATT (of Counsel) Instructed by: Messrs Addleshaw Goddard Solicitors PO Box 8 Sovereign Street Leeds LS1 1HQ


 


THE HONOURABLE MRS JUSTICE COX

1. In this case the Appellant, Mr. Kraus, appeals from the decision of an Employment Tribunal in Leeds, promulgated on 19^th November 2002, striking out his Originating Application pursuant to Rule 15(2)(c) of the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2001 (the Regulations), on the grounds that the claim is misconceived, having no reasonable prospect of success. The claim was brought pursuant to the provisions of section 48 Employment Rights Act 1996 (the Act). Mr. Kraus alleged that he had been subjected to a detriment contrary to section 47B of the Act in that, as a "worker," his contract was terminated by his "employer" on the ground that he had made a protected disclosure within the meaning of sections 43A to C.
2. Both Respondents resist the appeal, contending that the Tribunal were entitled to find that the claim was misconceived and to strike it out accordingly. The issue is therefore whether the Tribunal erred in law in arriving at that decision. Mr Kraus has represented himself throughout these proceedings and appeared in person again before us. The first Respondents were represented by Mr. Thomas of Eversheds, and Mr. Nawbatt of counsel appeared for the Second Respondents. We are grateful to all of them for the assistance they gave in this case.

The Relevant Facts

3. In his Originating Application lodged on 20^th August 2002 (erroneously dated 20^th May 2002, as is common ground) Mr. Kraus stated that, on 16^th May 2002, he was employed by the First Respondent (Penna), via a consultancy agreement, to provide professional, interim management services to the Second Respondents (Syltone) in connection with Syltone's reorganisation and redundancy programme. He had an initial meeting with Syltone on 16^th May and a further meeting took place on 21^st May. He was due to work again on 22^nd May, but was told by a director of Syltone on the evening of the 21^st that they were dispensing with his services. Mr. Kraus alleged in his application that:

"Earlier on 21/5/02 I had reason to inform said Director that a course of action proposed by the company to deliver the reorganisation was in contravention of the legal obligations under employment legislation".

He contended that he was a "worker" within the definition of the Act and named Syltone as his "employer" in addition to Penna, for the purposes of his claim.

4. Both Penna and Syltone resisted the claim. Penna denied that Mr. Kraus was a "worker" and that they were an "employer" as defined in the Act. They further denied that, in terminating his consultancy agreement, they had subjected Mr. Kraus to a detriment on the grounds that he had made a protected disclosure, since no disclosure had been made to them and they knew nothing about any disclosure to Syltone. Syltone denied both that Mr. Kraus had offered any advice at any stage on their legal obligations under employment law and that he had ever informed anyone that any course of action in connection with the reorganisation was in contravention of their legal obligations. They contended that his services had been dispensed with because, amongst other things, he was:

"less than professional in appearance and demeanour … had failed to create a good impression with the team with whom he was to work; and … lacked drive and enthusiasm for the project."

5. In response to Penna's request for further and better particulars as to the alleged contravention of Syltone's legal obligation Mr. Kraus provided further details of his complaint in a letter dated 8^th October 2002 as follows. He alleged that he was to provide "change management expertise" for Syltone in their restructuring exercise. He described being

"… faced with a proposal which was contrary to my understanding of the three stage statutory test of redundancy i.e. Mr. Bolton (of Syltone Plc) was proposing to dismiss employees beyond the efficiencies delivered by the restructuring to achieve short-term financial targets and not mainly or wholly because of the cessation or diminution to carry out work of a particular kind in that location. This was not in the best interests of 'the Client,' could lead to legal action being taken against them and was exactly the situation I was engaged to advise upon.

"This incident occurred at the meeting with managers on 21/5/02 prior to the workforce briefings. A discussion took place in which the number of redundancies likely to result from the restructuring was identified. Mr. Andrew Bolton made it clear that he intended to reduce the workforce significantly beyond the number identified and recruit back at a later date. He stated that the reason for doing so was because he had responsibility to achieve a specific financial target to reduce costs.

"It was in the course of this discussion that I advised Mr. Bolton that the company could breach employment legislation and would be vulnerable to claims for unfair dismissal in pursuing this course of action. Mr. Bolton's reaction was to quickly move the discussion on and I made a mental note to discuss this matter with him in private at a later date."

6. A directions hearing took place in the Tribunal on 3^rd October 2002, when it was decided that the case should be listed for a one day hearing because no benefit would be derived from dealing with any preliminary issues at an earlier date. On 10^th October a Notice of Hearing was sent to the parties, with the date of 16^th January 2003 fixed for the hearing. On the same day, however, a Notice of "Pre-Hearing Review/Strike Out Hearing" was sent to the parties pursuant to the 2001 Regulations, paragraph 1 of which informed the parties that, "the Tribunal has ordered a Strike Out/Pre-Hearing Review to consider the Originating Application/Notice of Appearance in this case," to take place on 8^th November. Guidance Notes were attached in the usual way explaining the procedure and the provisions of both Rule 7 (Pre-Hearing Review) and Rule 15(2)(c), relating to striking out a claim. This guidance stated, amongst other things, that, "the Tribunal may, at any stage of the proceedings, order to be struck out or amended any Originating Application or Notice of Appearance, or anything in such Application or Notice of Appearance, on the grounds that it is scandalous, misconceived or vexatious. Misconceived includes having no reasonable prospect of success." The document concluded with the following words in bold type:

"Thus the Tribunal will either: allow the case to proceed unconditionally, or
order the payment of a deposit, or
strike out all or part of the Originating Application or Notice of Appearance"

7. This hearing took place on 8^th November, when the Tribunal considered the Originating Application, both Notices of Appearance, the further and better particulars of 8^th October 2002, handwritten notes made by Mr. Kraus prior to his meeting with Penna on 22^nd May 2002 and notes written shortly after the meeting, notes made by Penna following a telephone conversation with Mr. Bolton of Syltone, the consultancy agreement between Mr. Kraus and Penna and the agreement to provide the services of an interim manager between Penna and Syltone. Mr. Kraus put forward some written submissions and amplified those with oral argument. Both Respondents were legally represented and made oral submissions to the Tribunal. In paragraph 2 of their extended reasons the Tribunal set out the material facts as follows:

"a) The Applicant entered into a consultancy agreement with the First Respondent on 16 May 2002 ("the Consultancy Agreement"). The main purpose was for him to provide services as a Human Resources professional to the Second Respondent in respect of a proposed restructuring in the organisation of their business and their workforce. There was a separate agreement dated 17 May 2002 between the two Respondents relating to the provision of the Applicant's services. The Applicant was to be paid on a daily basis when he was required. The Second Respondent paid the First Respondent a fee (which was not specified to us) for the Applicant's services. The Second Respondent could terminate the agreement with the First Respondent by one week's written notice. Under the Consultancy Agreement the Applicant was to receive a fee of £500 per day. During the first two months of the agreement which commenced on 16 May, either party could terminate with immediate effect by giving notice in writing.

b) The Applicant had an initial meeting with the directors of the Second Respondent on 16 May. The next time the Second Respondent required the Applicant's services was on 21 May when he attended several meetings with Directors and Senior Managers concerning the proposed restructuring exercise.

c) At 9.00pm on the evening of 21 May the Applicant received a telephone call from Mr Andrew Bolton, a Director of the Second Respondent to inform him that his services were no longer required. There was reference to the chemistry not being right between the Applicant and members of the management.

d) On the following day, 22 May, there was a telephone call between Mr Bolton and Mr Malcolm Brown of the First Respondent to advise the latter that the Applicant's services were no longer required. Later that morning there was a meeting between the Applicant and Mr. Brown to inform him that his services were not required by Syltone and he was informed of the reasons for such including the Applicant's appearance, dress, body language, and lack of constructive contribution. Again there was a reference to chemistry.

e) Subsequently the Applicant corresponded with both Respondents concerning the reasons for the termination of his services. He issues these proceedings on 20 August 2002.

8. The Tribunal accurately described Mr. Kraus's claim as being that he was "subjected to a detriment, i.e. the termination of the consultancy agreement, as the result of having made a protected disclosure." They set out his pleaded case in the Originating Application and further particulars, to which we have already referred. They stated at paragraph 4 that, in considering the prospects of success, they took into account only the statements in the pleadings provided, the two agreements and the notes of the meetings with which they had been provided. It is clear that, despite the extensive factual dispute between the parties, the Tribunal proceeded, for the purposes of this hearing, on the basis that Mr. Kraus's pleaded allegations were factually correct. We also proceed on that basis in this appeal and not on the basis of the rather different version of the meeting which took place on 21^st May 2002 now set out in Mr. Kraus's skeleton argument of 3^rd July 2003, at paragraphs 5.1(k) and (l).
9. Mr. Kraus told us that at this hearing the Tribunal also decided that he was a "worker", within the meaning of section 43K(1)(a) of the Act, and that both Penna and Syltone were his "employers" within the meaning of section 43K(2)(a). However, no findings as to the status of the parties appear in the Decision under consideration. Mr. Thomas submitted, and we accept, that the Tribunal only assumed these facts in Mr. Kraus's favour, in order to enable them to go on to consider his substantive complaints. They accepted that, if the case went forward, they would need to hear evidence as to status at the full hearing. We have therefore also proceeded on this basis.

The Tribunal's Decision

10. In paragraph 5 the Tribunal directed themselves that:

"5. … it is for the Applicant to establish that he has made a qualifying protected disclosure and as a result has been dismissed. Section 43(B)(1)(b) requires the Applicant to show:-

(1) That the Applicant has disclosed the information to his "employer" as defined under Section 43C.

(2) That a legal obligation arises on the facts of this case.

(3) That Mr Bolton or the Second Respondent is likely to fail to comply with a legal obligation."

They then set out their conclusions in paragraphs 6 to 9 as follows:

"6. Having considered the facts as set out by the Applicant, the Tribunal could not find any evidence that the Applicant had made any disclosure. All that had happened was he informed Mr Bolton of what he considered to be the legal position relating to redundancies and possible liabilities the company may incur. The Applicant did not speak to anyone else at the Second Respondent about this matter or about the statements later attributed to Mr Bolton. In particular, he did not speak to the other directors of the Second Respondent. He did not disclose this information to Penna the other party to the Consultancy Agreement and it was not disclosed elsewhere. Since the tenor of the legislation is that it is the reporting of the alleged failure to comply which leads to the dismissal or detriment, there is, in this case, a complete absence of any reporting and therefore disclosure by the Applicant.

7. The next matter considered by the Tribunal was that there was no evidence in the Applicant's statements that Mr Bolton and/or the Second Respondent were "likely to fail to comply with any legal obligation." A reaction by a person when receiving advice they find unpalatable does not automatically mean that they will in the future fail to comply with their legal obligations. However, the further particulars in the letter of 8 October 2002 given by the Applicant do not even go that far. He stated that after listening to the Applicant, Mr Bolton's reaction was to move the discussion to another topic.

8. During the hearing all parties spent some time making submissions as to whether in these circumstances there was a "legal obligation" on the Second Respondent. The Applicant was not able to point to any specific section in the legislation which created an obligation relating to the making of additional redundancies in the circumstances described by the Applicant. The Tribunal observed that there are areas in the legislation where a positive duty is imposed on employers; for example, Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 states:-

"Where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within the period of 90 days or less the employer shall consult about the dismissals …"

However, in this case all the Applicant could do was to adopt the suggestion from the Chairman that it might be possible to argue that since employees have a right not to be unfairly dismissed under Section 95 there was, therefore, the corresponding obligation on the employer. The point is somewhat specious because it is possible for an employer so to arrange matters that the employees dismissed are those who have less that 12 months continuous employment so they could not claim unfair dismissal. Alternatively, the employer could achieve the redundancies desired by seeking sufficient volunteers. Accordingly, on this preliminary examination, the Tribunal considers that the Applicant would have some difficulty establishing that, in the circumstances described by him, there was a legal obligation on the Second Respondent.

9. In addition the Applicant must show that the reason for his dismissal was that he had made the qualifying disclosure. There is a dispute between the parties concerning the reasons for the termination of the Applicant's services. The Tribunal thought it noteworthy that in the handwritten notes made by the Applicant and by Mr Brown of the First Respondent there was no mention by the Applicant that the real reason for his dismissal was that he had made such an unprotected disclosure. It appeared that the Applicant is likely to have some difficulty in establishing that the real reason for the termination of his services was the making of a qualifying disclosure (even assuming he could succeed on the points above) rather than the other reasons given by the Second Respondent."

Mr. Kraus subsequently applied for a review of the Decision, in the interests of justice, but the Tribunal dismissed that application in a Decision promulgated on 10^th December 2002, holding that their decision did not exceed the powers of the Tribunal, that Mr. Kraus had had every opportunity to argue his case and that, for the reasons previously stated, the application had no reasonable prospect of success and was therefore misconceived.

The Law

11. Section 43A of the Employment Rights Act 1996 defines a "protected disclosure" as,

"43A … a qualifying disclosure (as defined by section 43B) which is made by a worker in accordance with any of sections 43C to 43H."

So far as material section 43B provides:

"43B Disclosures qualifying for protection

(1) In this Part a 'qualifying disclosure' means any disclosure of information which, in the reasonable belief of the worker making the disclosure, tends to show one or more of the following-

(a) that a criminal offence has been committed, is being committed or is likely to be committed,

(b) that a person has failed, is failing or is likely to fail to comply with any legal obligation to which he is subject,

(c) that a miscarriage of justice has occurred, is occurring or is likely to occur,

(d) that the health or safety of any individual has been, is being or is likely to be endangered,

(e) that the environment has been, is being or is likely to be damaged, or

(f) that the information tending to show any matter falling within any one of the preceding paragraphs has been, or is likely to be deliberately concealed."

It is common ground that the only provision which is relevant in the present case is section 43B(1)(b).

12. Section 43C and section 43L(3) provide:

"43C Disclosure to employer or other responsible person

(1) A qualifying disclosure is made in accordance with this section if the worker makes the disclosure in good faith-

(a) to his employer, or

(b) where a worker reasonably believes that the relevant failure relates solely
or mainly to-

(i) the conduct of a person other than his employer, or

(ii) any other matter for which a person other than his employer has legal responsibility,
to that other person.

(2) a worker who, in accordance with a procedure whose use by him is authorised by his employer, makes a qualifying disclosure to a person other than his employer, is to be treated for the purposes of this Part as making the qualifying disclosure to his employer."

"43L Other interpretative provisions …

(3) Any reference in this Part to the disclosure of information shall have effect, in relation to any case where the person receiving the information is already aware of it, as a reference to bringing the information to his attention."

Section 47B provides:

"47B Protected Disclosures

(1) A worker has the right not to be subjected to any detriment by any act, or any deliberate failure to act, by his employer done on the ground that the worker has made a protected disclosure.

(2) … this section does not apply where-

(a) the worker is an employee, and

(b) the detriment in question amounts to dismissal (within the meaning of [Part X]).

(3) For the purposes of this section, and of sections 48 and 49 so far as relating to this section, 'worker', 'worker's contract', 'employment' and 'employer' have the extended meaning given by section 43K."

Section 48(1A) provides,

"1(A) A worker may present a complaint to an employment tribunal that he has been subjected to a detriment in contravention of section 47B."

In relation to the Tribunal's powers, Schedule1 to the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2001 provides, so far as is relevant,

"15(1) Subject to the provisions of these rules, a Tribunal may regulate its own procedure.

(2) A Tribunal may –

… (c) Subject to paragraph (3), at any stage of the proceedings, order to be struck out or amended any Originating Application or Notice of Appearance, or anything in such Application or Notice of Appearance, on the grounds that it is scandalous, misconceived or vexatious;

… (3) Before making an order under sub-paragraph (c), (d) or (e) of paragraph (2) the Tribunal shall send notice to the party against whom it is proposed that the order should be made giving him an opportunity to show cause why the order should not be made; but this paragraph shall not be taken to require the Tribunal to send such notice to that party if the party has been given an opportunity to show cause orally why the order should not be made."

It is common ground that a case is misconceived if it has no reasonable prospect of success.

The Parties' Submissions and our Conclusions

13. Mr Kraus contends essentially that the Tribunal erred in law in that:

(i) They misdirected themselves (in paragraph 6) that because Mr. Kraus did not speak to anyone else at Syltone about this matter and, further, did not disclose this information to Penna, there was a complete absence of any reporting and therefore of disclosure by Mr. Kraus, so that he could not bring himself within the legislation. The disclosure to Mr. Bolton, as the "employer" or "other person" in section 43C is, Mr. Kraus contends, sufficient and it was not necessary for any further disclosures to others in the company in order for him to qualify for protection pursuant to the legislation.

(ii) They held (in paragraph 9) that Mr. Kraus was likely to have some difficulty in establishing that the real reason for the termination of his services was the making of a qualified disclosure; and they took that into account in deciding that the case had no reasonable prospects of success. Mr. Kraus contends that the real reason for the termination was a matter for evidence and could only be determined at a full hearing.

(iii) They held (in paragraph 7) that, on the accepted facts, Mr. Kraus could not demonstrate that Syltone were "likely to fail to comply" with any legal obligation: and they failed to have regard to his reasonable belief as to that matter in accordance with section 43B(1)(b).

(iv) In paragraphs 5 and 8 they failed to direct themselves correctly as to the provisions of section43B(1)(b); and in particular as to the requirement that it is the reasonable belief of the worker making the disclosure that is important when considering subsections (1)(a) to (f), not whether one or more of the events referred to in those sub-paragraphs is made out on the facts. In this case Mr. Kraus contends that on the accepted facts he had disclosed to Mr. Bolton information which, in his reasonable belief, tended to show that Syltone was likely to fail to comply with a legal obligation and that was sufficient to enable the case to proceed. The Tribunal erred in concluding that he would have some difficulty in establishing that there was a legal obligation on Syltone.

14. Mr Kraus further contends that he was not given a fair hearing on 8^th November, in accordance with natural justice, in that he had been misled by a member of the Tribunal staff as to the purpose of the hearing, he was interrupted during his submissions at the hearing and he was not permitted to adduce evidence in the way that he wished to. For all these reasons he submits that the Tribunal erred in law in deciding to strike out his claim as misconceived, having no reasonable prospects of success. We shall deal with his complaints in turn.

Disclosure

15. In relation to the first of these criticisms both Mr. Thomas and Mr. Nawbatt concede, and we agree, that the Tribunal erred in concluding, on the accepted facts, that there was no disclosure by Mr. Kraus within the meaning of the Act because it was insufficient to disclose the information he did only to Mr. Bolton. Either Syltone were his employers, as the Tribunal had apparently assumed for the purposes of this hearing, or the disclosure was to another person in the circumstances provided for in section 43C(1)(b). There was no suggestion of bad faith on the part of Mr. Kraus. In either event therefore the "disclosure" seems to us to fall within the provisions of section 43C(1). The Act does not require further disclosures of the kind referred to by the Tribunal in paragraph 6 of their Reasons, in order for Mr. Kraus to claim the protection of the legislation if the other requirements of a protected disclosure have been met.

Causation

16. In relation to the second criticism, namely causation, and the Tribunal's reasoning in paragraph 9, it was necessary in our judgment for the Tribunal to distinguish between the two Respondents on the accepted facts. Mr. Kraus has not at any stage alleged either that he made a protected disclosure to Penna or that Penna knew of any alleged disclosure by him to Syltone before Penna terminated his consultancy agreement. As the Tribunal found (paragraph 2(d)) quite different reasons were given by Syltone for dispensing with his services at the time and, as the Tribunal found at paragraph 6, Mr. Kraus "did not disclose this information to Penna the other party to the Consultancy Agreement and it was not disclosed elsewhere." Mr. Kraus has not previously argued, and nor has he argued before us, that his contract was terminated by Penna, assuming that they were his "employers", on the ground that he had made a protected disclosure as required by section 47B(1). We consider that, on the accepted facts and on the assumption that Penna were his employers, Mr. Kraus would be unable to show that he was subjected to a detriment by the act of his "employer" (the termination of his consultancy agreement) "done on the ground that [he] has made a protected disclosure". This would mean that the claim against Penna was misconceived, having no reasonable prospect of success.
17. As far as Syltone are concerned, Mr. Nawbatt accepts that this ground alone would not have been sufficient to justify striking out Mr. Kraus's claim at this preliminary stage, assuming that Syltone were Mr. Kraus's employers. He submits nevertheless that the Tribunal did not err in making the assessment they did on the information before them and taking into account the difficulty they considered Mr. Kraus was likely to have in establishing causation against Syltone. We do not agree. The reasons for dispensing with Mr. Kraus's services were the central factual dispute between the parties and, in our view, could only properly be resolved by the calling of evidence at a full hearing. It was not appropriate, in our view, for the Tribunal to make the observation they did in paragraph 9, on what was clearly only a partial assessment of the position so far as Syltone were concerned, without hearing the evidence.
18. We turn then to the other grounds which, the Tribunal considered, justified striking out Mr. Kraus's claim. These apply only to Syltone if we are right about Penna on the causation issue (see paragraph 16 above). If we are wrong about that, then what follows applies in respect of both Respondents.

"Likely to fail to comply"

19. The third criticism made by Mr. Kraus relates to the Tribunal's finding in paragraph 7, on the accepted facts, that there was no evidence in the applicant's statements that Mr. Bolton and/or Syltone were likely to fail to comply with any legal obligation within the meaning of section 43B(1)(b). It is common ground that Mr. Kraus could not show that Mr. Bolton had failed or was failing to comply and that the case therefore turns on the words, "likely to fail to comply," in the section. Mr. Kraus contends that, on the accepted facts, this requirement was fulfilled and that the Tribunal erred in finding to the contrary.
20. We disagree. The pleaded disclosure, in the fifth paragraph of Mr. Kraus's further and better particulars was that he:

"advised Mr. Bolton that the company could breach employment legislation and would be vulnerable to claims for unfair dismissal in pursuing this course of action. Mr. Bolton's reaction was to quickly move the discussion on and I made a mental note to discuss this matter with him in private at a later date."

This disclosure was made in the context of the first meeting with managers, when Mr. Kraus alleged that he was:

"faced with a proposal which was contrary to my understanding of the three stage statutory test of redundancy i.e. Mr. Bolton (of Syltone Plc) was proposing to dismiss employees beyond the efficiencies delivered by the restructuring to achieve short-term financial targets and not mainly or wholly because of the cessation or diminution to carry out work of a particular kind in that location."

What was being referred to was therefore merely a proposed course of conduct, in its preliminary stages, on which Mr. Kraus had been engaged specifically to advise.

21. Against this background Mr. Kraus has to show that he disclosed information which, at the time he disclosed it, he reasonably believed tended to show that Mr. Bolton was likely to fail to comply with a legal obligation to which he was subject. Leaving aside the question of legal obligation, which we shall return to below, on his own account the information disclosed to Mr. Bolton was only that the company "could" breach employment legislation and would be vulnerable to claims for unfair dismissal. At its highest therefore Mr. Kraus's belief was limited at this early stage to the possibility or the risk of a breach of employment legislation, depending on what eventually took place. In our judgment this did not meet the statutory test of "likely to fail to comply". On his own account Mr. Kraus's case was that, after Mr. Bolton moved the discussion on, he "made a mental note to discuss this matter with him in private at a later date." We bear in mind too that, as Mr. Kraus would know, consultation on the reorganisation/redundancy programme would have to take place, which could affect the numbers of employees to be made redundant. As the Tribunal recognised, in paragraph 8, there may have been sufficient volunteers for redundancy so as to avoid the need for, or reduce considerably, any compulsory redundancies. In our view, therefore, the Tribunal did not err in finding, on the accepted facts, that the information disclosed could not be said to tend to show that Syltone were likely to fail to comply with its legal obligations. Whilst we accept that they made no express reference to Mr. Kraus's reasonable belief, in considering this matter it was obvious on the accepted facts that the question of reasonableness did not arise. Mr. Kraus did not himself believe that the information he disclosed to Mr. Bolton tended to show that a failure to comply with a legal obligation was "likely", in the sense of "probable" or "more probable than not".
22. In construing the word "likely" in other legislation in the employment sphere the courts have equated it with "probable" on a number of occasions. For example in Bailey v Rolls Royce (1971) Ltd. [1984] ICR 688, the Court of Appeal were considering section 72(1) of the Factories Act 1961, which provided:

"A person shall not be employed to lift, carry or move any load so heavy as to be likely to cause injury to him."

At page 699C May LJ said:

"In my opinion, one has to approach the construction of this subsection and the meaning of its provision giving the words used their ordinary and natural English meaning. In my view, "likely" is the equivalent of "probable" or "more probable than not"; it is certainly more than merely "possible."

After examining the facts he concluded at F:

"There was clearly a risk that injury might occur, but I do not think that one can say that it was 'likely', or 'probable,' or 'more probable than not'.".

The other members of the Court agreed.

23. In Taplin v. C. Shippam Ltd. [1978] ICR 1068 the EAT (Slynn J. presiding) were concerned with the construction of section 78(5) of the Employment Protection Act 1978, now to be found in section 129(1) of the Employment Rights Act 1996:

"If on hearing an application under this section it appears to an industrial tribunal that it is likely that on determining the complaint to which the application relates the tribunal will find that the complainant was unfairly dismissed and that the reason for the dismissal or (if more than one, the principal reason) was a reason mentioned in subsection (1) above, the tribunal shall announce its findings and explain to both parties (if present) what powers the tribunal may exercise on an application under the section …"

At page 1072B-D the Appeal Tribunal referred to the Employment Tribunal's decision:

"In his decision the chairman of the industrial tribunal directed himself as to the meaning of "likely" in section 78 (5). He referred to a previous decision of the industrial tribunal of which he had been Chairman in Johnson v. Great Clowes Discount Warehouse Ltd. (unreported), November 5, 1976. In that case the industrial tribunal had drawn a distinction between "possible" (where the tribunal considered that there would be a less than 50 per cent. chance of success), "probable," which was regarded as being more likely than not, when the chance of success would be more than 50 per cent., and "likely," where the tribunal said that this meant "that the chances have to move a degree nearer certainty than would be the case if the word 'probable' had been used." They referred to the Shorter Oxford English Dictionary definition of "likely" as "seeming as if it would … prove to be as stated." They concluded that the word "likely" is a degree nearer certainty than would be the case if only the word "probable" had been used."

At page 1074C-G they held as follows:

"… we are not persuaded that there is a dichotomy between "probable" and "likely" as expressed by the chairman of the industrial tribunal. We find it difficult to envisage something which is likely but improbable or probable but unlikely and we observe that the Shorter Oxford English Dictionary definition does define "likely" as "probable." Nor do we think that it is right in a case of this kind to ask whether the applicant has proved his case on a balance of probabilities in the sense that he has established a 51 per cent. probability of succeeding in his application, as has at one stage been contended before us. Nor do we find Mr. Hand's alternative suggestion of a real possibility of success to be a satisfactory approach. This again can have different shades of emphasis. It seems to us that the section requires that the employee shall establish more clearly that he is likely to succeed than that phrase is capable of suggesting on one meaning. On the other hand it is clear that the tribunal does not have to be satisfied that the applicant will succeed at the trial. It may be undesirable to find a single synonym for the word "likely" but equally, we think it is wrong to assess the degree of proof which has to be established in terms of a percentage as we have been invited to do.

We think that the right approach is expressed in a colloquial phrase suggested by Mr. White. The industrial tribunal should ask themselves whether the applicant has established that he has a "pretty good" chance of succeeding in the final application to the tribunal.

Although the Chairman of the industrial tribunal expressed the burden of proof differently from the way which we have done we do not consider that there is any real difference of emphasis. He thought that "likely" meant more than "probable" and he regarded "probable" as being "51 per cent. or more." Accordingly we are not satisfied that he erred in law in his interpretation of the section."

In B.C.C.I. v. Ali (No. 2) (Ch.D.) [2000] ICR 1354 Lightman J. considered the decision of the House of Lords in Mahmud v. B.C.C.I.S.A. [1997] ICR 606 and the criteria there laid down for determining whether the agreed misconduct constituted a breach of the trust and confidence term. At page 1377D, expanding on these criteria, he observed:

"(4) The required conduct must be "likely" to "destroy or seriously damage" the relationship of trust and confidence with the claimant employee. The term "likely" requires a higher degree of certainty than a reasonable prospect or indeed a 51 per cent. probability ("not likely") and reflects what might colloquially be termed "a pretty good chance:" consider Taplin v. C. Shippam Ltd. [1978] ICR 1068, 1074A-G. A mere possibility of destruction or serious damage may not be sufficient, as may not the likelihood of any lesser adverse impact."

24. We accept Mr. Nawbatt's submission that we should interpret the word "likely" in section 43B(1)(b) (and indeed it appears throughout sub paragraphs (a) to (f) in that subsection) consistently with the interpretation it has previously received in the cases referred to and as requiring more than a possibility, or a risk, that an employer (or 'other person') might fail to comply with a relevant legal obligation. The information disclosed should, in the reasonable belief of the worker at the time it is disclosed, tend to show that it is probable or more probable than not that the employer will fail to comply with the relevant legal obligation. Mr. Kraus's advice to Mr. Bolton that Syltone "could" breach employment legislation cannot in our judgment be a qualifying disclosure within section 43B(1)(b). In the circumstances the Tribunal did not err in finding as they did in paragraph 7.
25. Before leaving this issue we wish to add our observations on one aspect of the recent decision of this Appeal Tribunal in Darnton v. University of Surrey [2003] IRLR 133, to which our attention was drawn by Mr. Nawbatt. This case also concerned the provisions of the Public Interest Disclosure Act, now in the Employment Rights Act 1996, with which we are concerned, although the facts were very different and the issues in that case do not bear directly on the issues in the appeal presently before us. Notwithstanding that, however, at paragraph 31 of the judgment the EAT observed that they had derived considerable assistance from,

"… Whistleblowing: the new law by John Bowers QC, Jeremy Lewis and Jack Mantell. The learned authors write, at p.19, under the heading 'Reasonable belief in truth':

'To achieve protection under any of the several parts of the Act, the worker must have a "reasonable belief" in the truth of the information as tending to show one or more of the six matters listed which he has disclosed, although that belief need not be correct (s.43B(1)). This had led some to criticise the statute as giving too much licence to employees to cause trouble, since it pays no regard to issues of confidentiality in this respect. Nor need the employee actually prove, even on the balance of probabilities, the truth of what he is disclosing. This is probably inevitable, because the whistleblower may have a good "hunch" that something is wrong without having the means to prove it beyond doubt or even on the balance of probabilities … The notion behind the legislation is that the employee should be encouraged to make known to a suitable person the basis of that hunch so that those with the ability and resources to investigate it can do so.

The control on abuse is that it must have been reasonable for the worker to believe that the information disclosed was true. This means, we think, that the following principles would apply under the Act:

(a) It would be a qualifying disclosure if the worker reasonably but mistakenly believed that a specific malpractice is or was occurring or may occur.

(b) Equally if some malpractice was occurring which did not fall within one of the listed categories, the disclosure would still qualify if the worker reasonably believed that it did amount to malpractice falling within one of those categories.

(c) There must be more than unsubstantiated rumours in order for there to be a qualifying disclosure. The whistleblower must exercise some judgment on his own part consistent with the evidence and the resources available to him. There must additionally be a reasonable belief and therefore some information which tends to show that the specified malpractice occurred …

(d) The reasonableness of the belief will depend in each case on the volume and quality of information available to the worker at the time the decision to disclose is made. Employment tribunals will have to guard against use of hindsight to assess the reasonableness of the belief in this respect in the same way as they are bound, in considering liability in unfair dismissal cases, to consider only what was known to the employer at the time of dismissal or appeal ' "

26. The Tribunal expressed the view, at paragraph 32, that these passages were, "helpful and are a correct statement of the law." However, in relation to paragraph (a) we respectfully disagree that the words "may occur" accurately reflect the statutory provisions in section 43B(1). The word "may", we consider connotes something different from "likely," used throughout the subsection, for the reasons we have set out above.

Legal Obligation

27. In examining Mr. Kraus's criticisms of the Tribunal's decision under this head and in particular of paragraphs 5 and 8 of their Reasons, the starting point and the problem for Mr. Kraus is the Tribunal's finding in paragraph 8 that "the Applicant was not able to point to any specific section in the legislation which created an obligation relating to the making of additional redundancies in the circumstances described by the Applicant." Mr. Kraus's case is that he made his disclosure to Mr. Bolton when faced with a proposal which was contrary to his "understanding of the three stage statutory test of redundancy." It is common ground that Mr. Kraus was referring to the provisions of section 139(1) of the Act and he confirmed this at the Tribunal hearing. This section provides:

"(1) For the purposes of this 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 the 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."

Plainly this section imposes no legal obligation on an employer or on any other person.

28. Further and in any event, as the lay-members of this Appeal Tribunal observed during argument, the fact that according to Mr. Kraus Mr. Bolton was proposing to restructure so as to achieve "short-term financial targets" would not necessarily mean that no redundancy situation existed. Employers are entitled to make business decisions in order to save costs and, if such decisions result in job losses, there may still be a genuine redundancy situation or at any rate some other substantial reason for dismissals which result, which would be an acceptable reason under the employment protection legislation. Such a decision does not, in that sense, involve any failure on the employer's part to comply with a legal obligation. There was no suggestion in this case, for example, that Syltone were intending not to comply with their legal obligations as to consultation, pursuant to section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992, to which the Tribunal refer in paragraph 8.
29. It is correct that the Tribunal make no reference to Mr. Kraus's "reasonable belief" in paragraphs 5 or 8 of their Reasons. However, we agree with the submissions of both Mr. Thomas and Mr. Nawbatt that the worker's reasonable belief in section 43B(1) relates to the information which he is disclosing and not to the existence of a legal obligation which does not actually exist. In other words if the employers are under no legal obligation, as a matter of law, a worker cannot claim the protection of this legislation by claiming that he reasonably believed that they were. His belief and the reasonableness of it in our view relates to the factual information in his possession, namely what he perceives to be the facts and the basis on which he considers it reasonable to rely upon them. This can only properly be tested against the background of the legal obligation, "to which [the employer or other person] is subject". If there is no obligation to which they actually are subject the worker's suggestion that he reasonably believed they were cannot render the disclosure a protected one within sections 43A and B. The Tribunal's failure to refer expressly to "reasonable belief" on the facts of this case therefore does not in our view constitute an error of law. It simply did not arise for consideration in this case.
30. We derive some support for our interpretation of the legislation on this point from the recent decisions in this Appeal Tribunal, namely Darnton v. The University of Surrey (above) and Parkins v. Sodexho [2002] IRLR 109. The issue did not arise expressly in those cases, where the facts were very different and it was not being suggested that no legal basis for the claims existed. Nevertheless in Darnton the EAT emphasised at paragraphs 28 and 29 that all circumstances must be considered in determining whether a worker holds a reasonable belief, which circumstances will, "… include his belief in the factual basis of the information disclosed as well as what those facts tend to show." In Parkins - v - Sodexho, where the disclosure in question related to the employer's alleged breach of the applicant's contract of employment, the EAT said at paragraph 15:

"It is obviously not sufficient under s.43B that there should simply be a breach of contract, but what has to be shown is first a breach of the employment contract as being a breach of a legal obligation under that contract. Secondly, there must be a reasonable belief that this has, is, or is likely to happen on the part of the worker. Thirdly, there must be a disclosure of that which is alleged to be the reason for dismissal. In other words, where it is a breach of the contract of employment, the worker is bound to make his case on the basis that the reason for dismissal is that he has complained that his employer has broken the contract of employment."

We agree with that approach.

31. It is common ground that at the hearing, during the argument on legal obligation and since Mr. Kraus had been unable to identify any legal obligation, Mr. Kraus adopted the Chairman's suggestion (see paragraph 8) that:

"it might be possible to argue that since employees have a right not be unfairly dismissed under Section 95 there was, therefore, the corresponding obligation on the employer. The point is somewhat specious because it is possible for an employer so to arrange matters that the employees dismissed are those who have less than 12 months continuous employment so they could not claim unfair dismissal. Alternatively, the employer could achieve the redundancies desired by seeking sufficient volunteers"

32. This raised the interesting question whether the statutory right not to be unfairly dismissed creates a corresponding legal obligation upon an employer not to unfairly dismiss any employee. We heard some, although by no means full, argument on this point, Mr. Nawbatt seeking to persuade us that no such corresponding obligation exists and Mr. Kraus doing his best to persuade us that it does.
33. However, in view of our conclusions on the other issues raised in this appeal, we consider that it is unnecessary for us to decide this point. Firstly, for the reasons they gave in the final sub-paragraph of paragraph 8, we are not persuaded that the Tribunal erred in law in concluding that, even on this alternative legal obligation postulated in argument by the Chairman, Mr. Kraus would have "some difficulty" in establishing that, in the circumstances described, there was a legal obligation on Syltone and in taking that into account in determining that his claim had no reasonable prospect of success. Secondly, on the accepted facts and for the reasons we have already addressed it simply could not be said that Mr. Kraus disclosed information which he believed reasonably tended to show that Syltone was likely to fail to comply with any obligation not to unfairly dismiss employees.
34. For these reasons, and despite errors which we have identified in some parts of the Tribunal's reasoning, we consider that they were entitled to arrive at the conclusion they did that Mr. Kraus's application had no reasonable prospect of success, was misconceived and that the claim should therefore be struck out.

Fair Hearing

35. Nor are we persuaded that Mr. Kraus did not receive a fair hearing in accordance with natural justice. Our reasons are these. Firstly, the Notice of Hearing for 8^th November, sent out to the parties, clearly indicated that the Tribunal may order to be struck out any Originating Application on the grounds that it was scandalous, misconceived, or vexatious. Further it stated that, "Misconceived includes having no reasonable prospect of success." We conclude that Mr. Kraus would or should have been well aware of the wide discretion that the Tribunal had to consider the case at this hearing. Secondly, Mr. Kraus now complains that he was misled in a telephone conversation with a member of staff at the Tribunal as to the nature and purpose of this hearing, which he was led to believe concerned his status as a worker within the meaning of the legislation. This point was not raised before the Tribunal on 8^th November, nor did Mr. Kraus raise it in his application for a review. For this reason alone we consider it inappropriate for us to be asked to consider this for the first time in this appeal. However, in the Tribunal's letter to Mr. Kraus dated 28^th August 2002, acknowledging the addition of Syltone as a respondent, the following sentence appears:

"Please bear in mind … that members of staff are not allowed to give advice about the conduct of your case."

We therefore consider that if Mr. Kraus did indeed receive misleading information from a member of the Tribunal staff he should have known that he could not rely upon it.

36. Further it seems clear in any event that, at the hearing, Mr. Kraus was given every opportunity to present his case on all issues and indeed that he took that opportunity. No doubt, if he had felt he was disadvantaged or that he needed more time or a further opportunity to obtain advice he could have requested an adjournment. He did not do so. He did, however, seek a review of the original decision and raised in his application the suggestion that he had not been given the opportunity to argue his case. At the review the Tribunal found (see paragraph 4 of the review decision):

"I am satisfied that you had every opportunity to argue your case. You submitted a four-page written submission to the Tribunal. In addition, you had every opportunity to argue orally the strength of you case."

37. For the reasons given above we therefore dismiss this appeal.