Appeal No. UKEAT/0008/12/RN

EMPLOYMENT APPEAL TRIBUNAL
FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON EC4Y 8JX

		At the Tribunal
		On 22 May 2012

Before
HIS HONOUR JUDGE SEROTA QC
MR A HARRIS
MR T MOTTURE

R & M GASKARTH	APPELLANT

MR S CAMPBELL	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MR NICHOLAS SIDDALL
(of Counsel)
Instructed by:
Cobbetts LLP Solicitors
58 Mosley Street
Manchester
M2 3HZ
	
For the Respondent	MR B CULSHAW
(Solicitor)
Rochdale Law Centre
15 Drake Street
Rochdale
OL16 1RE	

SUMMARY
UNFAIR DISMISSAL – Reasonableness of dismissal

The Employment Tribunal impermissibly substituted its own views for those of the Respondent, rather than considering whether the Respondent’s dismissal of the Claimant was within band of reasonable responses.

HIS HONOUR JUDGE SEROTA QC
Introduction
1.	This is an appeal by the Respondent from a decision of the Employment Tribunal at Manchester, Employment Judge Jones sitting with lay members, that was promulgated on 13 October 2011.  The Employment Tribunal found in favour of the Claimant that he had been unfairly dismissed but subject to a 40 per cent deduction: see Polkey v A E Dayton Services Ltd [1987] IRLR 503.  He was awarded compensation overall of £13,014.98.  The case was referred to a full hearing by HHJ Peter Clark on 23 December 2011.

The factual background
2.	We take the factual background largely from the decision of the Employment Tribunal.  The Claimant was the manager of The Eagle Hotel public house at Oldham Road in Rochdale.  The Eagle Hotel (we are told it only operated as a public house, not a hotel) is owned by the Respondent company, which is a subsidiary of Samuel Smith’s Old Brewery (Tadcaster).  The Eagle Hotel is one of between 50 and 60 public houses in the north‑west owned by the Respondent.  Among its directors are Mr Humphrey Smith and Mr Oliver Smith, who we believe are also main board directors.  The Eagle Hotel is not a tied house.

3.	The Claimant was the manager from 3 October 2005.  Initially he ran the public house together with his partner, but they separated in or around June 2007.  The Claimant was dismissed on 26 November 2010, and the effective date of termination of his employment was 31 December 2010.  After the separation of the Claimant from his partner, the Respondent became concerned and complained of a significant drop in revenue.  What had been a modest profit started to turn into, initially, a modest loss.  The five months to 3 October 2009 showed takings of £45,039; this compared with the five months to 1 October 2005, when £63,511 had been taken.  A number of factors were put forward, but from the findings of the Employment Tribunal what we shall call the adverse factors were all in place by December 2008.  There is no evidence of any further adverse trading factors after that date.

4.	There were some historical reasons for the poor performance.  For example, a number of businesses in the locality had closed, leading to fewer customers, especially affected was the lunchtime trade.  There was a wood‑yard that had closed, and the MFI and Homebase stores had shut.  A local engineering firm, a number of whose employees used to frequent The Eagle, was put on three‑day working.  After the Claimant separated from his partner, The Eagle operated on reduced hours.  Further, and this may work in one of two ways, the Respondent had a policy of not allowing entertainment in The Eagle; there was no television there and there was no gaming.  This may have been of particular significance, for example, during the World Cup.  Also, The Eagle did not have any marked price advantage over other public houses, and of course it had to compete with supermarkets.  There were also national trends of a decline in the pub trade.  There was no pool table, because there was a disagreement between the Respondent and the Claimant as to whether the Claimant might contribute on half of the cost of re‑covering the table.  These adverse factors, however, as I have said, were all in place by December 2008, and thereafter there were no further adverse factors.

5.	On 20 February 2009 the Claimant met his area manager, Mr Daffern.  Mr Daffern pointed out there had been a reduction in turnover over a three‑year period of 28½ per cent, and the Claimant needed to address this.  Indeed, for the financial year there had been a loss of £1,825.  Mr Daffern advised the Claimant to take a most active role in promoting games, which had previously been very successful, and he set a target for the Claimant for the period of 1 March to 28 March 2009 that he should take £3,300 per week.  The Claimant missed this target, although by the comparatively modest figure of £44 a week.  On 15 May 2009 Mr Daffern issued the Claimant with a verbal warning for poor trade performance.  The Claimant appealed, as he was entitled to under the disciplinary process, but his appeal was unsuccessful.

6.	Shortly before 19 May 2009 Mr Humphrey Smith, who had replaced Mr Daffern as the area manager, visited The Eagle, and he expressed his concerns to the Claimant about the continuing fall in takings that had led to the loss for the year of £1,204 as compared to the previous year’s net profit of £6,965.  The Claimant was told not to expect a salary increase, and he was set targets of an increase in takings by 10 per cent over the previous year.  On 12 November 2009 Mr Humphrey Smith again visited The Eagle.  The Claimant had failed to meet the target of a 10 per cent increase; he had achieved an increase of 4.1 per cent in June, but in fact in July, August, September and October there had been a decrease in takings compared with the previous year.

7.	The Claimant was called to a meeting on 3 December 2009.  The meeting was adjourned by reason of the Claimant’s holiday and then his sickness; he suffered from stress and anxiety, and was off work from between 8 December 2009 until 6 May 2010.  While the Claimant was on sick leave a non‑residential relief manager was employed, and the turnover continued to fall as compared to the previous period; it fell from something like £2,470 a month to £1,813 per month, save for one month when there was a modest increase.  The Claimant put this down to the non‑residence of the relief manager.

8.	When the Claimant returned to work, the disciplinary meeting was rearranged.  The Claimant was invited to this by a letter of 27 May 2010, and he was told that there was no satisfactory explanation for continued poor performance and it might result in a formal oral warning to be recorded on his personnel file.  The meeting took place on 8 June 2010.  During the course of this meeting Mr Humphrey Smith, who was conducting it, pointed the Claimant to two other public houses owned by the Respondent in the locality that were doing better.  The Claimant’s response was to point to the limitations on The Eagle as compared to other public houses that were near estates that provided customers.  The Claimant had tried to encourage custom by setting up a darts team and a pool team.  Mr Humphrey Smith suggested that the Claimant, as the landlord, had a responsibility to create a proper atmosphere that was welcoming, and he said that the Claimant had a negative attitude.  Mr Humphrey Smith decided to issue a written warning to the Claimant.  The Claimant took exception to this, because the letter inviting him had only referred to the possibility of an oral warning.  Again, the Claimant appealed, but his appeal was unsuccessful.

9.	A new target was set for the period 8 June 2010 to 31 July 2010.  The target required takings to remain at the current level until the end of the World Cup.  When the World Cup finished, the Claimant’s target was a 10 per cent increase.  However, far from increasing, there was a further reduction up to 11 July 2010 of 19 per cent, and thereafter until the end of the month there was a modest increase of 3.2 per cent.  The Claimant was invited to a further disciplinary hearing on 8 September 2010.  He rejected a comparison that was made between The Eagle and other public houses because of the difficulties in the locality; he again referred to the efforts he had made to increase trade, on this occasion mentioning that he had established a fantasy football club.

10.	On 29 September 2010 Mr Humphrey Smith concluded that the continued fall in takings was unsustainable.  There had been a 12.2 per cent fall in takings from 8 June to 31 July as compared with the previous year.  On that occasion therefore he issued the Claimant with a final written warning.  Again, the Claimant appealed, but the appeal was dismissed.  A new target was set for the Claimant for September and October of a 10 per cent increase, and the Claimant was warned that if he did not meet this target, he could be dismissed.  Far from there being an increase, there was a 6 per cent decline.  The Respondent says that even after the termination of the World Cup, and the fact that the Claimant was aware he was already subject to a final written warning and was threatened with dismissal, there was still a significant fall.  As the Respondent had also stressed, the fall in takings continued even as compared to the beginning of the period, when the trading disadvantages were already in place.

11.	On 15 November 2010 the Claimant was invited to a further disciplinary meeting, which took place on 23 November 2010.  The Claimant was represented by his trade union representative, pointed out the difficulties in managing successfully The Eagle Hotel that I have already referred to, and also stressed the attempts made by the Claimant to drum up custom.  Mr Humphrey Smith, however, considered that the position with The Eagle Hotel was untenable, and the Claimant was dismissed on five weeks’ notice.  He, again, appealed against his dismissal, but the appeal was unsuccessful.

12.	The Respondent’s case has always been that it is for pub managers or landlords to create successful trade, and in order to do this they will need to create a pleasant and comfortable atmosphere.  The Claimant had been assisted by a freeze in beer prices effected by the Respondent, which had also provided decent premises.  So far as the Respondent was concerned, the Claimant seemed unable to create the atmosphere, which they described as the “mein host” atmosphere, they wanted, and had also evinced a negative attitude.  It was accepted at the Tribunal hearing that the Claimant had been dismissed by reason of capability.

13.	After the Claimant had left The Eagle a couple were appointed as the new managers, and the turnover increased.  Initially, the same relief manager who had managed the public house in the sickness absence of the Claimant had become resident, and she had increased the turnover, but it increased significantly after the new couple were appointed, by some 59.4 per cent.  The Employment Tribunal at paragraph 4.41 pointed to the fact that:

“Mr Smith relied heavily on the turnaround as vindication of his view of the Claimant’s poor ability to run a public house.  It is trite law that we must consider the decision on the information which was available at the time of the dismissal, and not on information which has subsequently come to light.  Nevertheless, we are mindful of the fact that Mr Smith has spent his life working in the brewery and pub business and his evaluation of what would and would not make a manager of adequate skills might rest upon a degree of intuition borne out of years of experience.  So we have considered his suggestion that what has happened since proves his judgment to be well founded.”

14.	The Employment Tribunal, we observe, was obviously correct not to rely upon matters arising after the date of dismissal as being relevant to the dismissal, although of course, as the Employment Tribunal did consider, they might give some added support to evidence as to the position as at the time of dismissal.

15.	The Employment Tribunal at paragraph 4.42 explained why a comparison that the Respondent sought to make with other managers was false; they had breached the Respondent’s policies by allowing entertainment and discos, they served drinks later than 11.00pm, they had permitted poker evenings, and that was probably one of the reasons for the significant increase in takings.  Further, the pub had been open for an extra 21 hours because, having a couple managing the pub significantly increased the staffing level.  At paragraph 4.44 the Employment Tribunal concluded:

“[…] we are of the opinion that although the public house has clearly survived and is performing better, the differences in takings are not sufficient in themselves satisfactorily to conclude that the state of affairs prior to the claimant’s departure was attributable solely to his performance.  Put simply, he did not have the same opportunities as those who took over the pub after he was dismissed.”

16.	We note the reference to the suggestion that the state of affairs prior to the Claimant’s departure was attributed solely to his performance.  We are not sure, but that is the way that the case was put.  On behalf of the Respondent, we believe the case was put that this was the principal, major cause but was taken with other factors; that is, an inability to play “mein host” and his negative attitude.

The Employment Tribunal decision
17.	We turn to the decision of the Employment Tribunal.  The Employment Tribunal identified the issues it had to determine at paragraph 2, and at paragraph 2.2 it directed itself in this way:

“If the respondent establishes a potentially fair reason, whether dismissal for that reason was reasonable in all the circumstances of the case; that includes consideration of the procedures which the respondent adopted.”

18.	That of course is based upon the well‑known principle set out in the case of British Home Stores Ltd v Burchell [1978] IRLR 379.  The Employment Tribunal then went on to set out the facts as we have described them.  We have already referred to its approach to takings at the public house under new management after the dismissal of the Claimant (paragraph 4.42), and we now turn to paragraph 4.44, again, to which we have already referred.  The Respondent says that it is significant that in this paragraph of the Judgment, and we are minded to agree with the Respondent, the Employment Tribunal did not ask whether the conclusions reached by the Respondent as to the differences in takings was outside the band of reasonable responses.

19.	The Employment Tribunal then turned to consider the law.  It firstly referred itself to sections 94 and 98 of the Employment Rights Act (ERA).  We need not set those out; they are well known and uncontroversial.  At paragraph 7 the Employment Tribunal again stated the Burchell test as applicable:

“If an employer establishes a potentially fair reason for dismissal, the determination as to whether or not that dismissal was fair depends on whether dismissal for that reason was reasonable in all the circumstances of the case having regard to the size and administrative resources of the undertaking, equity and the substantial merits of the case under section 98.4 of the ERA.  That includes consideration of whether reasonable procedures were undertaken by the employer in reaching the decision to dismiss.”

20.	At paragraph 9 the Employment Tribunal said:

“We are satisfied that the reason for the dismissal related to reasons of capability.  Mr Smith believed the claimant did not have the skills and aptitude for performing work as a publican.  He formed this view over a period of 18 months (during which time the claimant had been ill for 5 months).  Nevertheless, in the nine months leading up to 1 January 2011, the Eagle had made net losses of £3.917.  It is a statement of the obvious that such a position was unsustainable and the respondent had to do something.”

21.	The Employment Tribunal therefore, having been satisfied that there was a potentially fair reason for dismissal, namely capability, had to consider whether the reason was reasonable.  The Employment Tribunal had this to say (paragraphs 10‑13):

“10. […] We consider that it was not.  In this case, Mr Smith measured capability solely by reference to the level of takings at the public house.  Whilst such a measure might, all things being equal, be an unacceptable evaluation of capability in some situations (albeit rather simplistic) such is not the case when there are extraneous factors which might explain the reduced takings.  It is clear in this case that the closure of a number of local businesses significantly affected the profitability of this public house.  The customers had moved away because of the closure of their place of work.  It was inevitable, therefore, that whoever managed the public house would have to look for customers elsewhere.  Measurement of takings was too crude a measure of evaluating whether the claimant had the skill and aptitude to do his job.
11. We do not think that Mr Smith could satisfactorily dismiss the points put forward by the claimant in the various hearings by a simple comparison to the public houses the Nelson and the Corporation.  They had drawn their business from different areas and had not been adversely affected by the changed environment surrounding the Eagle.  The claimant had made a series of efforts to improve takings by introducing a series of activities including an attempt to encourage the playing of pool which was not accommodated easily given a disagreement about who should pay for a recovering [sic] of the table.
12. We accept the submissions of Mr Culshaw [for the Claimant] that a greater analysis and investigation of the case was required.  This might have involved placing the claimant in another public house for a period of time to analyse his performance there.  It could have involved what Mr Culshaw described as a mystery shopper, someone attending at the public house anonymously to evaluate the claimant’s ‘mein host’ qualities.  He suggested another manager could have been appointed to monitor and advise the claimant.  Alternatively, Mr Smith could have offered additional support by providing additional wages to cover the same opening hours his successors operated from 11am to 11pm.  A further assessment could then have been made of the Claimant’s performance, which would have provided a reliable indicator of his skills and aptitude.
13. These were proposals we agree would have assisted in determining whether the claimant was simply not up to the job or was simply struggling because of the declining economic circumstances not only nationally but very particularly in the situation where this public house was to be found.”

22.	Paragraph 14 is also a significant part of the Judgment:

“In other words, we are not satisfied that Mr Smith could reasonably come to the conclusion he should dismiss the claimant because of the fall in takings in the pub, having concluded that the claimant was simply not capable.  We are more than mindful that it is not for us to substitute our view for that of the employer.  We do, however find that the investigation and decision on the strength of it, fell outside any reasonable band of responses.”

23.	The Employment Tribunal went on to make a Polkey deduction of 40 per cent; the Respondent has criticised this as being too little; we need say no more about it, because, as a result of communicating to the parties before submissions were made on Polkey that we had upheld the appeal so far as the substitution ground was concerned, neither counsel addressed us on Polkey.  The Employment Tribunal also went on to deal with mitigation, and, although the Respondent criticised this finding, again, this was a matter that was not pursued, so we need not go into that.

The Respondent’s submissions
24.	The Respondent had originally four broad grounds in its Notice of Appeal: firstly, that there had been an incorrect approach to the burden of proof; secondly, that the Employment Tribunal had substituted its views in relation to the circumstances of the dismissal for those of the Respondent (alternatively, it was submitted, the Employment Tribunal’s conclusion was perverse); thirdly, there was the criticism of the Polkey deduction; and fourthly, there was criticism of the Employment Tribunal’s treatment of the Respondent’s argument that the Claimant had failed to mitigate his loss.

25.	At the beginning of the hearing we informed counsel that, while we had an open mind, our provisional views were that the burden of proof argument was unsustainable, as were the grounds of appeal relating to the Polkey deduction and failure to mitigate.  Mr Siddall, having taken instructions, decided he would not pursue submissions in relation to the burden of proof or mitigation but would persevere with his submissions in relation to Polkey.  In the event, as we have mentioned, it was not necessary for him to do so.

26.	In the circumstances, we say nothing further about the burden of proof.  The real nub of this appeal is the submission by the Respondent that the Employment Tribunal substituted its views for those of the Respondent; we shall come on to this in more detail shortly.  Generally, it was submitted, the Employment Tribunal should not substitute its views as to the competence of an employee for those of the employer, and reference was made to the case of Taylor v Alidair [1978] ICR 445.  Further, weight must be attached to an employer’s views as to the competence of an employee, reference being made to Cook v Thomas Linnell & Sons [1977] IRLR 132.  Thirdly, and again, this is not controversial, any investigation into capability must be within the band of reasonable responses, and reference was made to the case of D B Schenker v Doolan [2011] UKEATS/0053/09.  Further, Mr Siddall referred to London Ambulance Service v Small [2009] EWCA Civ 220.  He suggested that the Employment Tribunal appears to have been swayed by sympathy for the Claimant, possibly because of the difficulty in which he was placed by the closure of nearby businesses, but nonetheless it had allowed itself to be carried down the so‑called “acquittal” mindset.

27.	It was also submitted to us by Mr Siddall, and this is, again, not controversial, that an employer has no duty to redeploy an underperforming employee; authority for that is to be found in the case of Bevan Harris v Gair [1981] IRLR 520.  If in the present case the Employment Tribunal considered that the Respondent could only dismiss for capability if the fall in takings was solely his responsibility, that was wrong and was contrary to authority; we have already referred to paragraphs 11‑14 of the decision of the Employment Tribunal.  All that has to be proved in a case of unfair, as opposed to wrongful, dismissal is that the employer’s belief in the failings of the employee was within the band of reasonable responses.

28.	Mr Siddall submitted that the Employment Tribunal had in fact failed to recognise that the Burchell guidelines were applicable in cases relating to the adequacy of an investigation into capability.  He criticised the Employment Tribunal for having made its own findings of fact as to the reasons for the success or failure of a public house, whereas it should have concentrated on assessing the reasonableness of the Respondent’s views.  The Employment Tribunal also purported to reach its own findings on the method of using the takings as the measure of the Claimant’s performance rather than asking itself, as it should have done, whether the Respondent’s belief that that was a proper and reasonable way to determine the Claimant’s capability was one that was within the band of reasonable responses.  The question of whether it was proper to use takings as the principal measure of the Claimant’s performance is perhaps the key point in this case.  If the Respondent is correct, and the Employment Tribunal was wrong and did substitute its decision for that of the employer, that will determine the appeal.

29.	Mr Siddall criticised the Employment Tribunal’s approach in reaching its own findings as to whether the Respondent could satisfactorily assess performance by means of the simple comparison of takings, and because it imposed its own standard of investigation on the Respondent without assessing the reasonableness of any of the steps it suggested should have been taken.  Mr Siddall accepted that the Employment Tribunal, in the passage we have already read, recognised the skills of Mr Humphrey Smith but then discounted his skills in what he described as an improper assessment of the correctness of the dismissal.  Mr Siddall pointed out to us that the views of Mr Smith as to the appropriateness of using takings as the touchstone of the Claimant’s performance was not his alone; it was shared by another area manager, Mr Daffern, and by another director also experienced in the licenced trade, Mr Oliver Smith.

30.	Mr Siddall posed a question to us: can an experienced public house manager, faced with the public house losing money when there are other reasons that might explain this that have ceased to apply, reasonably conclude that the fall in takings was the Claimant’s responsibility?  Mr Siddall submitted that the answer to that question must be an emphatic yes.  Why is it unreasonable, if one turns it around, in such circumstances to conclude by reference largely or entirely to the fall in takings?  Again, he submits, the answer is there is no reason why it is unreasonable.

31.	The Employment Tribunal recognised that Mr Smith in relation to the question of the possibility of transferring the Claimant to another public house stated that he had not earned the transfer.  Notwithstanding this, the Employment Tribunal appears to have imposed a requirement that he should be transferred, but it never considered the reasonableness of Mr Smith’s position.  Mr Siddall again stressed that the negative factors had been in place since December 2008, so the fall in takings thereafter had nothing to do with those factors.  Experienced managers such as Mr Oliver Smith, Mr Humphrey Smith and Mr Daffern are entitled to conclude, therefore, that it was the Claimant’s management of the public house itself rather than outside factors that led to the decline.  He stressed that the proper approach was to ask whether in each stage of the disciplinary process the Respondent had a reasonable belief in the correctness of what it did and that its actions were within the range of reasonable responses.  Mr Siddall drew our attention to Taylor and to Cook; we shall come to those shortly.

32.	Mr Siddall raised a sophisticated argument as to the linguistics of the Judgment of the Employment Tribunal, and he suggested that simply by looking at the language one could observe a substitution mindset.  He put the matter picturesquely: that the Employment Tribunal’s language was littered with value judgements as to what the Respondent could, should or might have done.  He gave specific examples of the substitution of its own views for those of a reasonable employer.  At paragraph 10 of the decision of the Employment Tribunal there was a value judgement as to what the Employment Tribunal would have done rather than whether it was reasonable.  It then gave its own views as to the reasons for the fall in trade, and then it concluded that the Respondent’s value judgement in relation to the significance of the fall in takings was too crude; it should have specifically asked itself, “Was the Respondent’s approach to the use of data showing a decline in turnover within the band of reasonable responses?”

33.	He pointed then to paragraph 11 of the decision, where the Employment Tribunal gave its views as to whether or not Mr Humphrey Smith was correct in discounting the Claimant’s explanations for the decline in trade, and again, Mr Siddall asked forensically, why was Mr Humphrey Smith’s discounting of those explanations outside the band of reasonable responses?  Similarly, the conclusion of the Employment Tribunal that, “We do not think Mr Smith could satisfactorily dismiss these points”, was again evidence of a substitution mindset.  He then pointed to paragraph 12 of the decision of the Employment Tribunal and the conclusion of the Employment Tribunal that a more detailed investigation was required.  The Employment Tribunal had simply failed to test any of the matters it had set out against the band of reasonable responses.  The Employment Tribunal never said in terms that it was outside the range of reasonable responses for the Respondent to fail to take steps, for example, to transfer the Claimant to another public house, which Mr Smith said he had not earned, and of course there was the authority of the case of Gair that it is not usual to transfer underperforming employees.  He asked forensically, why is this case so special that the failure to transfer the Claimant to another public house was outside the band of reasonable responses?

34.	Mr Siddall suggested it was difficult to think of a more paradigm example of a substitution mindset than this.  He submitted that any conclusion that the Respondent’s approach was outside the band of reasonable responses was perverse; similarly, it was perverse for there to be a finding that no reasonable manager could form Mr Humphrey Smith’s views.

The Claimant’s submissions
35.	Mr Culshaw’s submissions were short and to the point.  This was a case in which Burchell applied and the Employment Tribunal was well aware of this.  It did not purport to determine the adequacy of the investigation but it asked itself specifically whether the investigation was that of a reasonable employer.  The Employment Tribunal was entitled to conclude that in the circumstances of this particular case it was unreasonable for the Respondent to rely simply on evidence as to the takings of the public house.  That was a conclusion that the Employment Tribunal had reached after specifically directing itself that it must not substitute its views for those of the employer.  The Employment Tribunal had directed itself to the appropriate test set out in paragraph 2.2 of the Reasons and also at the other passage to which we have referred at paragraph 7.

36.	Mr Culshaw agreed that the crucial question in this case was not whether the Employment Tribunal’s self‑direction was correct but whether the Employment Tribunal had in fact applied the test that it had correctly directed to itself.  He submitted to us that where an Employment Tribunal had correctly directed itself a very clear case was required to show that it had failed to follow its own guidance.  He drew our attention to the decision in Fuller v The London Borough of Brent [2011] IRLR 414, to which we shall come, and he suggested that to try to argue that there was a substitution by reason of the use of language was inappropriate; the language of the Employment Tribunal must be read in a fair and sensible way.  He suggested that the Respondent was seeking to say that it rather than the Tribunal should be the final arbiter in the reasonableness of the decision.

37.	The Claimant had been dismissed, he submitted, by reference to the takings, and the Employment Tribunal considered that dismissal solely by reference to the takings was outside the band of reasonable responses of a reasonable employer.  He accepted the history of the Claimant failing to meet targets, and he accepted that the Respondent was entitled to conclude that such a position was unsustainable and that it had to do something.  He stressed to us that this was not a SOSA (some other special reason) case.  The Employment Tribunal, as he had said, concluded that the Respondent was not entitled to rely on takings alone; to do so was outside the band of reasonable responses in the circumstances of the case.  He could not say that the Employment Tribunal had, as was suggested by Mr Siddall, ignored Mr Humphrey Smith’s expertise, it recognised that he was experienced in the licence trade; we have already referred to paragraph 4.41.

38.	He pointed to paragraph 14, which we have already referred to on more than one occasion, where the Employment Tribunal specifically reminded itself it must not substitute its views for those of the employer; we should assume that the Employment Tribunal followed its own guidance.  He made reference to the case of Cook, which, he suggested, supported the Claimant’s rather than the Respondent’s case.  The Employment Tribunal had not, he repeated, discounted the opinion of Mr Humphrey Smith but found that was not sufficient to satisfy the test of reasonableness.  There had been no investigation of other matters apart from takings, and, at the end of paragraph 11 of the decision, the Employment Tribunal does not appear to have found there to be any supporting evidence beyond the simple comparison and what it considered to be the flawed comparison with the two other public houses to which we have referred.  Cook also reminded Employment Tribunals of the importance of not impeding employers in efficient management; an employee should not, however, be sacrificed in order to permit employers to manage.  We shall come to the case very shortly.
 
39.	Mr Culshaw strongly disagreed with the suggestion that the Employment Tribunal’s Judgment was littered with value judgements as to what the Respondent could, should or might have done.  It did not simply say that an employer in all circumstances could not rely on reduction in takings alone, but it would be required if it was to rely upon takings to have regard to all the other circumstances and apply the correct tests.

The law
40.	The band of reasonable responses test is well established; it is referred to on a number of occasions by the Employment Tribunal, and we need not set it out.  In the case of Taylor that was cited to us, we draw attention to what Denning LJ had to say at paragraph 451G:

“It is not necessary for the employer to prove that he was in fact stealing.  Whenever a man is dismissed for incapacity or incompetence, it is sufficient that the employer honestly believes on reasonable grounds that the man is incapable or incompetent.  It is not necessary for the employer to prove that he is in fact incapable.  So I find myself in agreement with the Employment Appeal Tribunal in saying the Industrial Tribunal did err in point of law.  The plain fact is that this company honestly believed on reasonable grounds it was no longer right to have Captain Taylor as a pilot and they properly and fairly dismissed him.”

41.	In Cook our attention had been drawn to paragraphs 6‑8 and 11 of the decision.  The Employment Tribunal had to consider another case in which an employee, the manager of a food depot, could be dismissed by reason of capability on the basis there had been a significant fall‑off in takings:

“We are thus met with the essential question, was the fall‑off in trade at the Norwich Value Centre due entirely or even principally to Mr Cook’s lack of capability?”

42.	The Employment Appeal Tribunal, presided over by Phillips J, considered that the Industrial Tribunal had posed in a very narrow form the question to which it had to address itself:

“7. […] The decision seems to be stating the dismissal could only be fair if it was established by the employers affirmatively the fall‑off in trade was due entirely or principally to Mr Cook’s lack of capability.  This matter of stating the issue underlay the basis of Mr Tabachnik’s attack upon the decision.  Though he has other points, to which we shall refer, his major point is that there was no evidence upon which the majority of the Tribunal could have concluded that the fall‑off in trade was due to Mr Cook’s lack of capability.
8. Mr Tabachnik advanced a formidable argument to make good this central proposition and he examined in detail the evidence as recorded in the Notes of Evidence […].  […] we find it unnecessary to go into these points in detail, […] because we do not think that the formulation by the Industrial Tribunal was the correct one.  If it had been, and if the question was a narrow one ‘Has it been affirmatively established by the employers that the fall‑off in trade was due to Mr Cook’s incapability?’ we should be inclined to think that there is something in what Mr Tabachnik said.  As we have suggested earlier, the true question might have been expressed in some way such as this: was it reasonable for these employers in all the circumstances of the case, having lost confidence in the ability of Mr Cook to manage the depot in Norwich, to dismiss him, while at the same time offering a different post on the terms summarised above? […]”

43.	At paragraph 11 the Employment Tribunal returns to Mr Tabachnik’s submissions, and Phillips J said:

“When responsible employers have genuinely come to the conclusion over a reasonable period of time that the manager is incompetent we think that is some evidence that he is incompetent.  When one is dealing with routine operations which may be more precisely assessed there is no real problem.  It is more difficult when one is dealing with such imponderables as the quality of management, which in the last resort can only be judged by those competent in the field.  In such cases as this there may be two extremes.  At one extreme is the case where it can be demonstrated, perhaps by reason of some calamitous performance, that a manager is incompetent.  The other extreme is a case where no more can be said than that in the opinion of the employer the manager is incompetent, that opinion being expressed for the first time shortly before his dismissal.  In between will be cases from the present where it can be established that throughout the period of employment concerned the employers had progressively growing doubts about the ability of the manager to perform his task satisfactorily.  If that can be shown, it is in our judgement some evidence of his incapacity.  It will then be necessary to look to see whether there is any other supporting evidence.”

44.	At paragraph 13 the Employment Appeal Tribunal noted that the Employment Tribunal in that case had quickly and genuinely formed the impression that the Claimant in that case was not measuring up to it:

“We have no doubt, without going into the details of the evidence and the documents, that they brought this opinion formally to his attention.  His performance did not lead them to change their views in this respect.  The fall‑off in the trade was alarming, and, despite suggestions for improvement, was continuing.  While it could not be positively established the fall‑off was directly attributable to Mr Cook’s incapacity, it seems to us it must be reasonable for employers who have no confidence in the manager, where the fall‑off in trade is of genuine concern and continuing, to come to the conclusion he shares some responsibility for it.  After all, a manager is in a position where he can expect to get the credit for success and the blame for failure.”

45.	But it went on to find that the employer’s view of the capability of the claimant was not formed merely by the fall‑off in trade; it was a view formed initially from monitoring of his performance independently of the fall‑off in trade but confirmed by the fall‑off.  At paragraph 14 Phillips J observed:

“It is important that the operation of the legislation in relation to unfair dismissal should not impede employers unreasonably in the efficient management of their business, which must be in the interest of all.  Certainly, employees must not be sacrificed for this need; and employers must act reasonably when removing from a particular post an employee whom they consider to be unsatisfactory.”

46.	We then turn to the decision in Fuller.  At paragraph 4 Mummery LJ observed:

“The ET held that the council had a genuine belief in serious misconduct by Mrs Fuller.  The ET was less clear on the issue whether, before it decided to dismiss her, the council conducted a reasonable investigation into Mrs Fuller’s conduct.  The ET was critical of some aspects of the investigation, although full of praise for other aspects.  It did not specifically answer the question expressly posed to it in paragraph 33: ‘Was this belief founded on reasonable investigation in all [the] circumstances?’  The council says that, on a fair reading of its judgment, the ET found that the investigation was reasonable.  As aspects of the ET’s reasoning on the investigation point are relevant to the overall issue of the reasonableness of the dismissal.  I shall postpone detailed discussion to later in this judgment.”

47.	At paragraph 31 Mummery LJ observed:

“Another teaching of experience is that, as with other tribunals and courts, there are occasions when a correct self‑direction of law is stated by the ET, but then overlooked or misapplied at the point of decision.  The ET judgment must be read carefully to see if it has in fact correctly applied the law which it said was applicable.  The reading of an ET decision must not, however, be so fussy that it produces pernickety critiques.  Over‑analysis of the reasoning process; being hypercritical of the way in which the decision is written; focussing too much on particular passages or turns of phrase to the neglect of the decision read in the round: those are all appellate weaknesses to avoid.”

48.	Finally, at paragraph 35, he observed:

“In my judgment, the way in which this point has been argued is a good illustration of the dangers identified in the general observations above about appeals.  When the relevant passages in the ET judgment at paragraphs 33‑35A are read in a fair, reasonable and sensitive way, in their proper context and in the round, the substance of the ET’s reasoning becomes clear.”

49.	It is important to note that appeals to linguistic infelicities are not the basis of a successful appeal against a decision of an Employment Tribunal.  Its words are to be read in a fair, reasonable and sensible way in their proper context and in the round.

50.	We also refer to the decision in Small, in which Mummery LJ had this to say at paragraph 43:

“It is all too easy, even for an experienced ET, to slip into the substitution mindset.  In conduct cases the claimant often comes to the ET with more evidence and with an understandable determination to clear his name and to prove to the ET that he is innocent of the charges made against him by his employer.  He has lost his job in circumstances that may make it difficult for him to get another job.  He may well gain the sympathy of the ET so that it is carried along the acquittal route and away from the real question- whether the employer acted fairly and reasonably in all the circumstances at the time of the dismissal.”

51.	We would finally draw attention to the decision of the Supreme Court in the case of MA (Somalia) v Secretary of State for the Home Department [2010] UKSC 49:

“43. Before we examine these two criticisms, we need to make some general points about the proper role of the Court of Appeal in relation to appeals from specialist tribunals to it on the grounds of error of law.  Although this is not virgin territory, the present case illustrates the need to reinforce what has been said on other occasions.  The court should always bear in mind the remarks of Baroness Hale of Richmond in AH (Sudan) v Secretary of State for the Home Department [2007] UKHL 49, [2008] 1 AC 678 at para 30:
‘This is an expert Tribunal charged with administering a complex area of law in challenging circumstances […] the ordinary courts should approach appeals from them with an appropriate degree of caution; it is probable that in understanding and applying the law in their specialised field the Tribunal will have got it right.  […]  They and they alone are judges of the facts.  […]  Their decisions should be respected unless it is quite clear that they have misdirected themselves in law.  Appellate courts should not rush to find such misdirections simply because they might have reached a different conclusion on the facts or expressed themselves differently.’
44. Those general observations were made in a case where the Court of Appeal had allowed an appeal against a decision of the AIT.  The role of the court is to correct errors of law. Examples of such errors include misinterpreting the ECHR (or in a refugee case, the Refugee Convention or the Qualification Directive); misdirecting themselves by propounding the wrong test on some legal question such as the burden or standard of proof; procedural impropriety such as a breach of the rules of natural justice; and the familiar errors of omitting a relevant factor or taking into account an irrelevant factor or reaching a conclusion on the facts which is irrational.
45. But the court should not be astute to characterise as an error of law what, in truth, is no more than a disagreement with the AIT's assessment of the facts.  Moreover, where a relevant point is not expressly mentioned by the tribunal, the court should be slow to infer that it has not been taken into account.
46. We turn to the first of the Court of Appeal's criticisms.  In our view, the court was wrong to interpret paras 109 and 121 of the determination as if the AIT were saying that they were dismissing the appeal because MA's account was incredible.  In the light of the clear and impeccable self-direction set out only a few paragraphs earlier (at para 105), and having regard to the need for restraint to which we have referred, the court should surely have been very slow to reach the conclusion that it did.  It should only have interpreted these paragraphs in the way that it did if there was no doubt that this is what they meant.  It is often easy enough to find some ambiguity or obscurity in a judgment or determination, particularly in a field as difficult and complex as immigration, where the facts may be difficult to unravel and the law difficult to apply.  If, as occurred in this case, a tribunal articulates a self-direction and does so correctly, the reviewing court should be slow to find that it has failed to apply the direction in accordance with its terms.  All the more so where the effect of the failure to apply the direction is that the tribunal will be found to have done precisely the opposite of what it said it was going to do.  The striking feature of the present case is that the Court of Appeal was of the view that at para 109, the AIT failed to apply the direction that they had set for themselves only four paragraphs earlier.”

Discussion and conclusions
52.	We have the authorities we have just cited well in mind.  We recognise that this is a case in which the Employment Tribunal reminded itself on a number of occasions as to the need to consider the Respondent’s conduct throughout the procedures leading to his dismissal by reference to the band of reasonable responses.  We, however, have concluded that although the Employment Tribunal did so direct itself, it failed to do so, and we recognise, having regard to what was said by Sir John Dyson in the MA (Somalia) case, that we should approach this determination with an appropriate degree of caution, and we have done so.

53.	We have already indicated our views that we have not been impressed with the linguistic arguments that the language of the Employment Tribunal showed a substitution mindset.  We have looked at the Judgment as a whole and holistically, and we are far more impressed by the arguments that have been made as to the substance of the decision.  This assessment was not over a short period; it was over a period of over 18 months, from when the Claimant met the area manager on 23 November 2010.  The factors, which we have described as the adverse factors, had already ceased as of December 2008.  We agree with Mr Siddall’s submission that it is extremely difficult to say as an experienced manager in the licence trade faced with a public house losing money when other reasons that could explain that had ceased to apply.  It seems in our opinion that one cannot say that the conclusion in those circumstances that the fall in takings was the responsibility of the manager was outside the range of reasonable responses.  It cannot be said to have been an unreasonable belief to have been formed by the Respondent.  Why is it unreasonable in such circumstances to conclude by reference largely or entirely to the fall in takings?  The answer must be that it cannot be.

54.	In any event, although the concern was principally based on takings, it was also not a spur‑of‑the‑moment consideration but one that had been going on, as we have said, for some considerable time – some 18 months at least – and the decision was not solely based on takings.  The Respondent was also concerned with the inability of the Claimant to act as an effective “mein host”, they were concerned at his negative attitude, and he performed unfavourably compared to the performance of what they considered to be similar establishments.  Similarly, we agree with Mr Siddall that the Employment Tribunal has not suggested why the failure to take the other steps it found should have taken was outside the band of reasonable responses; for example, the transfer to another public house.  Why was it outside the range of reasonable responses, having regard to the fact that generally one does not transfer an underperforming employee?  Why was it unreasonable for the Respondent not to provide extra staff to increase the opening hours and to put more money into a loss‑making public house to see if its views of the Claimant’s capability were correct?  Again, we find it very difficult to see why the Respondent’s decision not to do this fell outside the band of reasonable responses.

55.	In the circumstances, it seems to us that the case made by the Respondent that the Employment Tribunal has impermissibly substituted its views for those of the employer is made out, and the appeal will therefore be allowed.

56.	We now turn to consider what order we should make.  Our provisional view, and we mentioned this to the representatives so we can be addressed upon it, is that it would not be appropriate for this matter to be remitted to the same Employment Tribunal.  We think it would be very hard for them, in the light of the Judgment it has made, to bring a totally fresh mind to bear, and it would be our view, therefore, that the matter should be remitted to a fresh Tribunal; but we will of course consider any submissions that the representatives may wish to make.  We are very grateful to both representatives for their very helpful submissions and for their economic use of time, which has enabled us to conclude the case, including the Judgment, in a day.