Appeal No. UKEAT/0753/04/RN

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 8 February 2005

Before
MR COMMISSIONER HOWELL QC
SIR A GRAHAM KBE
MS P TATLOW

CHANDLERS (FARM EQUIPMENT) LTD	APPELLANT

MRS C RAINTHORPE	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MR B MONK
REPRESENTATIVE
	
For the Respondent	MR E LEGARD
(Of Counsel)
Instructed by:
Messrs Bridge McFarland
Solicitors
3/9 Tentercroft Street
Lincoln
NE Lincolnshire
LN5 7DB

SUMMARY

Other substantial reason – whether immediate dismissal for fear of loss of confidential information reasonable in all the circumstances.

MR COMMISSIONER HOWELL QC

1.	This is an employer’s appeal by a firm called Chandlers (Farm Equipment) Ltd which is a firm of agricultural machinery suppliers operating over a sizeable area in Lincolnshire against the decision of the Lincoln Employment Tribunal set out in Extended Reasons issued to the parties on 13 July 2004 after a one day hearing on 14 June 2004.  

2.	The proceedings before the Tribunal were a complaint of unfair dismissal by a former longstanding employee of Chandlers’, Mrs Christine Rainthorpe who after some 22 years service had been dismissed with immediate effect on 23 January 2004 on the sole ground that her husband, who was a former but also longstanding employee of Chandlers, was proposing to go and work for a trade competitor who had recently acquired a franchise for certain equipment manufactured by a firm called Vaderstad, which franchise Chandlers themselves had recently been told they were losing.

3.	The Tribunal found that Mrs Rainthorpe’s dismissal in all the circumstances of the case had been unfair both substantially and procedurally and awarded her compensation consisting of a basic award of some £5,070.00, plus a relatively small compensatory award because fortunately she had managed to obtain other employment within a relatively short space of time.  The reason put forward by the employer for the dismissal was its apprehension that confidential information which might come into Mrs Rainthorpe’s possession in the course of her duties with Chandlers might accidentally be in some way passed on to her husband and thereby be made use of by the competitors for the purposes of their business.  The circumstances in which she came to be dismissed for that reason were explained by the Tribunal in their Extended Reasons as follows:
“3.7	   After the respondents learned that they had lost the Vaderstad franchise it came to their ears that Vaderstad and/or Lough Tractors [who were the trade competitors] were telling people in the industry not to worry about the loss of the franchise by the respondents because Louth Tractors had taken on a former Chandlers engineer who could continue to sport the Vaderstad products in the future.  The respondents suspected that person was Mr Rainthorpe.  As a result Mr Pell [who is the managing director of the Respondents] asked to see Mrs Rainthorpe on 20 January 2004.  He and his senior colleagues believed that the nature of her job, which involved typing and processing invoices, orders and demonstration appointments etc, gave her complete access to confidential data about their business.  She confirmed to Mr Pell that it was her husband who had been recruited by Louth Tractors.  The respondents were concerned about what they regarded as a real risk of disclosure domestically by her of confidential information to Mr Rainthorpe which could then be used by him with his new employers to, as it were, “steal” potential business from the respondent’s customers for their new range of products and also the continuing servicing and support of Vaderstad products which they had previously supplied.
3.8   As a result the respondents asked Mrs Rainthorpe to think about the position with her husband and to stay away from the depot in Lincoln while they did that.  Mr Pell very fairly made it clear that they were not suggesting there would be any intentional disclosure of confidential information by Mrs Rainthorpe but they were concerned about unintentional disclosure.  However, it should be said that she was already subject to a confidentiality clause in her contract of employment although that does not seem to have recalled or referred to by the respondents.  Mr Pell made it quite clear from the outset verbally, although this was never put in writing to Mrs Rainthorpe, that the likely outcome if Mr Rainthorpe took up his new job with Louth Tractors was that her position with the respondents would be terminated.  The Tribunal entirely accept what they were told by him and his colleagues that that was no reflection on her or her conduct and that she had been an exemplary employee for some twenty-two years against whom there were no disciplinary complaints or, any doubts her confidentiality hitherto.
3.9   There was, however, a fundamental misunderstanding by Mr Pell and his colleagues; they thought that this was not a “disciplinary” matter.”

4.	The Tribunal found that it was in fact a dismissal for disciplinary reasons and the provisions of any disciplinary code and the usual standards laid in the ACAS Code nevertheless had to be borne in mind and they were not.  They continued:
“3.10.	Mrs Rainthorpe and her husband did consider the position and came back to speak to Mr Pell and his colleagues on 23 January 2004.  The clear emphasis of that meeting was that Mr Pell and his colleagues wanted Mr Rainthorpe to give up his proposed employment with Louth Tractors in order that the dismissal of Mrs Rainthorpe could be avoided.  Apart from a suggestion that the Respondents might offer some employment to Mr Rainthorpe no positive offer was actually formulated or made to him.  As he told us he had resigned his previous job and if he had given up the Louth Tractors job he would have become unemployed which was unacceptable to him.
3.11.	No solution being forthcoming at that meeting Mr Pell terminated Mrs Rainthorpe’s employment forthwith although the Respondents paid her three months pay in lieu of notice and outstanding holiday pay.”

5.	The Tribunal then continued with their own view of that factual background by saying:
“3.12	Whilst the Tribunal can understand the concern of the respondents we should also record, as we were told, that the plans of farmers for new equipment and servicing arrangements are common gossip within the industry and that the respondents themselves picked up information from various sources, including their own sales and service staff, about prospects which they naturally follow up.  We also bore in mind that Mr Rainthorpe was working in what is a small depot in Tuxford as a “greasy hands agricultural engineer” rather than in any managerial responsibility.  For the fears of the respondents to have been realised there would had to have been a chain of causation from Mrs Rainthorpe seeing some information which she then passed on unintentionally to her husband who would see the significance of it in terms of opportunities for action by his employers which he would have passed on to them and then followed up successfully by them in apparently beating the respondents in competition for a particular sale of equipment or service.  Given the nature of the industry and the size of the operations about which we are talking we do not consider that that was a reasonably held strong fear.  Even such a first disclosure would have been a breach of her confidentiality clause which could have led to disciplinary action and dismissal.  
3.13		There is no doubt in our minds that prior to the meeting on 23 January 2004 that the respondents had made up their minds that they were going to dismiss Mrs Rainthorpe if Mr Rainthorpe did not give up his new job whatever she might say.”

6.	Having found those to be the facts and having directed themselves as to the applicable law in terms which have not been criticised the Tribunal expressed their conclusions succinctly as follows:
“5.	The Tribunal has no difficulty in finding that the fear of the passing of confidential commercially sensitive information by an employee such as the Administration Supervisor is a substantial reason of a kind such as potentially to justify dismissal.  However, having regard to the matters which the Skyrail case has identified, we fin d that although Mrs Rainthorpe had complete access to commercial information which was important to the respondents there was nothing in her past conduct, or, indeed, that of Mr Rainthorpe, to lead the respondents to reasonably think that any such disclosure, even unintentional let alone unintentional, would take place bearing in mind also the good record and reputation they both had and the positions which they both held particularly in Mr Rainthorpe’s case of a hands on agricultural engineer and not in any management responsibility.  Accordingly we find that Mrs  Rainthorpe’s dismissal was outside the range of reasonable responses for this reason in all the circumstances of this case.
5.1	Moreover, we find that Mrs Rainthorpe’s dismissal was procedurally unfair.  There was, as we have identified, a misunderstanding of the nature of the matter on the part of the respondent’s senior management, the absence of any expression in writing of their concern against which she could respond, the effective making up of the respondents’ mind before they had had a proper discussion about the matter involving both Mrs and Mr Rainthorpe on 23 January 2004 and the absence of her being given the opportunity to appeal.”

7.	Accordingly the Tribunal found the dismissal to be both substantially and procedurally unfair and went on to consider the question of remedy.  Against that decision Mr Monk on behalf of the employers appeals on grounds set out at some length in a Notice of Appeal presented on 20 August 2004 and amplified by him in a skeleton argument which has been submitted to us.  The Notice of Appeal is not expressed in terms of succinctly analysed points of law on which it is suggested the Tribunal erred but the substance of it is that the conclusion reached by the Tribunal on the question of whether this was a reasonable dismissal or not was a perverse one and amounted to the Tribunal substituting its own view for that of the employer, on what was in Mr Monk’s submission really a question of commercial judgment and not something on which a Tribunal was entitled to replace the employer’s view with its own.  In effect therefore that is a submission, and Mr Monk did put it this highly, that the only reasonable conclusion that any Tribunal faced with the facts and evidence in this case, and on the basis of this Tribunal’s own findings, could have drawn was that this was a fair dismissal and the application ought to have been dismissed.
 
8.	In the Notice of Appeal there is no suggestion of a challenge to the Tribunal’s findings on the procedural aspects of the dismissal, but in Mr Monk’s skeleton argument at paragraph 11 the further argument is mounted that any procedural issues were in effect wrongly decided in favour of the Applicant because any amount of process would have been for practical purposes futile; in that in the circumstances urged by Mr Monk as they appeared to the employers, there could only have been one result however long the process of discussing the dismissal and of any appeal process would have taken, and therefore in substance there was no further unfairness on that ground.

9.	On the main issue we have not been persuaded by Mr Monk’s submissions that there was any error in law on the part of the Tribunal in reaching the conclusions that they did and expressed in their Extended Reasons having regard to their own factual findings.  It appears to us important to bear in mind that for the purposes of this as of any other unfair dismissal case under Section 98 of the Employment Rights Act 1996 there are two questions that have to be answered and they are separate questions.  The first under Section 98(1) is whether the employer has shown that the actual reason for the employee’s dismissal was within Section 98(1) as a potentially fair reason.  In other words a reason of a kind such as to justify dismissal.  In this case the reason put forward was “some other substantial reason”, namely the legitimate fear of the disclosure of confidential information if Mrs Rainthorpe should remain in her position at the same time as her husband was working for the competitor.

10.	On this the Tribunal expressly found in favour of the employers as the beginning part of paragraph 5 of their Extended Reasons makes clear.  They found that the fear of the passing of commercially sensitive information was such a reason.  It was a reason that potentially could justify the dismissal of an employee.  In that they appear to us to have been following, and to have decided entirely consistently with, the case of Skyrail Oceanic Ltd t/a Goodmoss Tour -v- Coleman [1980] IRLR 226 which was cited to them and also cited to us.  In that the Tribunal were in our judgment entirely justified and correct as a matter of law and no challenge has been mounted to that part of their decision in this appeal.

11.	The second question therefore which did found the basis of the Tribunal’s decision is whether given that the reason put forward by the employer was a potentially fair reason such as to potentially justify dismissal, whether under Section 98(4) the employer did in fact act reasonably in treating that reason as a sufficient reason for the actual dismissal of this particular employee in the circumstances that faced the employer.

12.	Like all questions under Section 98(4) that is a judgment of fact and degree which has to be made by the Tribunal hearing and seeing the evidence and applying the band of reasonableness test long established and more recently re-established as the applicable test for an Employment Tribunal to apply.  Here the Tribunal correctly and expressly directed themselves to the test they had to apply by reference to Iceland Frozen Foods Ltd -v- Jones [1982] IRLR 439, and equally clearly and expressly recorded their finding that applying that test the evidence before them did establish that in this dismissal the employer had acted outside the band of reasonableness.  They reached that conclusion based on their own findings and in our judgment that was an assessment and a judgment for the Tribunal to make on the facts.  We do not accept the submission by Mr Monk that there was anything wrong in the Tribunal making their own assessment of whether the employer’s apparent perception of the risk posed by the continuation in office of Mrs Rainsthorpe while her husband was working for a competitor was a reasonable one.  That was an assessment which it was for the Tribunal to make on the facts before them.  It is for the Employment Tribunal to determine whether its assessment shows the case to be one of a reasonable dismissal or otherwise and that is the kind of judgment with which the Employment Appeal Tribunal on longstanding and recent authority does not interfere.

13.	We do not for our part read the case of Skyrail cited to us as suggesting anything other than that such an assessment of the response to a risk on the facts of the individual case is for the Employment Tribunal to make.  The reason the Skyrail case was decided as it was by the Employment Appeal Tribunal, when substituting their own decision for that of the Employment Tribunal to the effect that the dismissal was fair, was that the Appeal Tribunal in that case took the view that the Employment Tribunal’s own findings of fact led and could lead to no other conclusion.  

14.	In the present case we do not consider the Employment Tribunal’s conclusions are in any way inconsistent with the findings which they recorded, and therefore we do not consider that the decision reached in Skyrail on the reasonableness question in any way binds us to reach a similar conclusion in relation to the findings of a different Tribunal on different facts. The question of reasonableness under what is now Section 98(4) is in all cases a matter for the individual Tribunal hearing and seeing the evidence to assess for itself applying the band of reasonableness test, as is made clear by the judgment of Slynn J (as he then was) in paragraph 14 of the Decision in Skyrail where he said expressly:
“ …We also think that in general terms they [that is the EmploymentTribunal] were right to pose the question as being ‘whether having regard to past conduct, the amount of access to confidential information, the importance of such information and the positions held by the two employees it is fair and reasonable within [the equivalent of Section 98(4)] to treat the risk as sufficiently great to justify dismissal’.”

That demonstrates in our respectful view that the judgment is always one of fact and degree to be made by the Employment Tribunal in the circumstances of the particular case so that there is nothing said, and nothing that can be divined from the actual result on the facts in Skyrail case in the Employment Appeal Tribunal, which could have a binding effect on the Employment Tribunal in the present case on the facts that it found.

15.	In addition the Employment Tribunal here appear to us to have been justified in finding the dismissal was procedurally unfair, and nothing that Mr Monk put before us was really able to displace the findings of the Employment Tribunal on that separate aspect of the matter; although in the event having regard to the way in which the loss was quantified there may not have been any substantial additional amount of compensation assessed by reference to that.

16.	For those reasons we have not at the end of the day been persuaded that this appeal amounted to more than an attempt to re-argue the factual conclusions properly reached by the Employment Tribunal.  It is irrelevant whether we would have reached similar factual conclusions on similar evidence had we been at the Tribunal hearing as the test is whether the Tribunal’s conclusions are so unreasonable that they cannot be allowed to stand.  By that test we do not think this Tribunal’s conclusion is open to attack.  For those reasons we dismiss the appeal.