Appeal No. UKEAT/0228/12/ZT

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

	At the Tribunal
	On 15 October 2012

Before
HIS HONOUR JUDGE McMULLEN QC
DR B V FITZGERALD MBE LLD FRSA
MR P SMITH

ROYAL MAIL GROUP LTD	APPELLANT

MR O P LALL	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MR IAN HARTLEY
(Solicitor) 
Weightmans LLP
India Buildings
Water Street
Liverpool
L2 0GA	
For the Respondent	MR JESSE CROZIER
(of Counsel)
Instructed by:
Minster Law
Alexander House
Hospital Fields Road
York
YO10 4DZ

SUMMARY
UNFAIR DISMISSAL – Reasonableness of dismissal
PRACTICE AND PROCEDURE – Costs
The Claimant was dismissed from a post office following discovery of his wife’s fraud, of which he was unaware.  There was no basis for interfering with a Tribunal’s finding of unfair dismissal in a misconduct case where the management did not consider relevant factors in the internal hearings, especially integrity.  Fuller v Brent applied.  The appeal was misconceived since there was no challenge to the finding that relevant matters were not considered. Costs awarded.

HIS HONOUR JUDGE McMULLEN QC
Introduction
1.	This case is one of unfair dismissal for misconduct in the public sector, and so our attention has been drawn at the very outset of the submissions by Mr Crozier of counsel, who appears for the Claimant, to the majority Judgment of Mummery LJ in Fuller v London Borough of Brent [2011] ICR 806, who said the following:

“26. Unfair dismissal appeals to this court on the ground that the ET has not correctly applied s.98(4) can be quite unpredictable.  The application of the objective test to the dismissal reduces the scope for divergent views, but does not eliminate the possibility of differing outcomes at different levels of decision.  Sometimes there are even divergent views amongst EAT members and the members in the constitutions of this court.
27. The appellate body, whether the EAT or this court, must be on its guard against making the very same legal error as the ET stands accused of making.  An error will occur if the appellate body substitutes its own subjective response to the employee's conduct.  The appellate body will slip into a similar sort of error if it substitutes its own view of the reasonable employer's response for the view formed by the ET without committing error of law or reaching a perverse decision on that point.
28. Other danger zones are present in most appeals against ET decisions. As an appeal lies only on a question of law, the difference between legal questions and findings of fact and inferences is crucial.  Appellate bodies learn more from experience than from precept or instruction how to spot the difference between a real question of law and a challenge to primary findings of fact dressed up as law.
29. 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; focusing 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.  […]
46. Although this is an appeal from the decision of the EAT, we are primarily concerned with whether the employment tribunal which heard Mrs Fuller's claim for unfair dismissal erred in law in reaching its decision.  The Council has submitted that it did because in certain important respects it substituted its own findings of fact for those made by the disciplinary panel charged with investigating the matter on its behalf.
48. In paragraph 31 of its decision the tribunal directed itself that under section 98(4) of the Employment Rights Act 1996, as interpreted in the case of Burchell v British Home Stores [1978] IRLR. 379, it had to consider whether there was a genuine belief on the part of the employer that the employee was guilty of the alleged misconduct, whether that belief was reasonably founded (in the present case, whether it had carried out a reasonable investigation as the basis for its conclusions) and whether a reasonable employer could have dismissed for that misconduct.  It also reminded itself that it is not for the tribunal to substitute its own judgment for that of the employer.  None of that is controversial.”

2.	In the bundle before us there are some ten authorities dealing with misconduct in the public sector and some in the private sector, and broadly speaking the 15 or so Court of Appeal authorities are set out in our Judgment last week in Network Rail v Mockler UKEAT/0531/11. The legal principles to be applied in this case emerge from the cases which we have reflected upon with counsel.  They are most recently the Judgment of the Court of Appeal in Graham v The Secretary of State for Work and Pensions [2012] EWCA Civ 903 and the holding by Aikens LJ in the following terms:
 
“45. At the heart of this appeal are the two opposing allegations that the two tribunals, first the ET and then EAT, wrongly substituted their own views of the facts, particularly in relation to what we have called Allegation One, instead of evaluating the facts as found by the dismissing officer of the employer.  That is the substance of Grounds 2 and 3 of the Grounds of Appeal, viz that the EAT retried the case on the facts and that a misleading document was introduce at the EAT stage to define “acquaintance” or “acquaintanceship” and Mr Gott’s argument that the EAT was entitled to do what it did because the ET had itself been guilty of “substitution”.  The decision of this court in London Ambulance Service NHS Trust v Small [2009] IRLR 563 (at [41]-[43]) restated the well-established rule that an ET is not entitled to substitute its own findings of fact for those of the employer or its investigating or dismissing officer, except in very exception circumstances, discussed in the Orr [v Milton Keynes Council [2011] EWCA Civ 62] case at [79]-[80].  Equally, the EAT is not entitled to substitute its own findings for those of the ET unless the latter are perverse.
46. In these circumstances, it seems to me that this court should start by asking the questions that should be asked when an employee is alleged to have committed misconduct and is dismissed for that reason.  ...  An ET that is considering whether the dismissal of an employee accused of misconduct was fair then has to ask itself three questions.  On the first - did the employer carry out reasonable investigation - ....  On the second - did the employer believe that the employee was guilty of the misconduct complained of ... .
47. So the key question that the ET had to consider is the third one: whether the employer had reasonable grounds for that belief.”

3.	As is plain from that Judgment a wealth of authorities lies behind it including Bowater v Northwest London Hospitals NHS Trust [2001] IRLR 331, Salford Royal NHS Foundation Trust v Roldan [2010] IRLR 721, per Elias LJ, Gayle v Sandwell & West Birmingham Hospitals NHS Trust [2011] EWCA Civ 924, per Mummery LJ, London Ambulance Service NHS Trust v Small [2009] IRLR 563, per Mummery LJ, Oso v Newham University NHS Trust [2011] EWCA Civ 1425 and Henderson v LB Hackney [2011] EWCA Civ 1518. The principles have been authoritatively rationalised in Arriva Trains v Conant UKEAT2011 0043/11 at paras 23-34, in Crawford v Suffolk Mental Health Trust by Elias LJ [2012] EWCA 138.

4.	The gist of all that learning is that decisions by Employment Tribunals in unfair dismissal for misconduct cases are unlikely to be disturbed on appeal when a Tribunal has directed itself correctly on the law and made firm findings of fact that are open to it, because what is left is simply the assessment of the wrongdoing by this employer against the standards of the reasonable employer.

5.	With those observations in mind, we recall that this is an appeal by the Respondent in those proceedings, Royal Mail, against the Judgment of an Employment Tribunal sitting at Havant under the chairmanship of Employment Judge J Simpson sent with reasons on 12 December 2011.  Mr Crozier was there, so was Mr Hartley, a solicitor representing the Respondent.  The Claimant claimed he was unfairly dismissed; the Respondent contended it dismissed him fairly having conducted a fair procedure, but if that were held against it, the Claimant contributed 100 per cent to his dismissal.  The Tribunal upheld the Claimant’s case.  The issue before the Employment Tribunal was fairness; being a misconduct case, the Tribunal was required to consider the directions in Burchell (above).  That case was decided at a time when the burden of proof was regulated by the legislation prior to 1980, but Mr Hartley expressly accepts that the direction given in this case on Burchell was correct. So was the direction standing back to look at whether the employer who conducted an investigation and formed a reasonable belief yet acted outside the bands of reasonable responses in the circumstances of the case in dismissing the Claimant for the conduct put against him.  With those helpful submissions of Mr Hartley in mind, the scope in this appeal is considerably narrowed, for he accepts paragraphs 4, 5 and 6 of the directions.

6.	The Tribunal held that there was really no difference between the parties on the facts except for one matter, which was found not pivotal to its own understanding and it did not actually make a decision about it; otherwise the unanimous findings of fact in paragraphs 3.1‑3.29 were findings that were open to it, and so the scope of attack is the Tribunal’s conclusions, which follow in paragraph 7.

The appeal
7.	The appeal of the Respondent, dissatisfied with the Judgment in favour of the Claimant and with a finding that he did not contribute to his dismissal, was before Langstaff P on the sift.  He made a comment about the length of the grounds of appeal and indicated that an additional skeleton was not necessary and sent this to a full hearing. The implication has to be that the case has reasonable prospects of success.  We say now that such prospect has eluded us.

The legislation
8.	Given the acceptance by Mr Hartley of the correct directions, the absence of an express reference to the statute is not important, although Tribunals do well to record the statute; it is section 98 of the Employment Rights Act 1996.  Conduct is a potentially fair reason, there is no dispute in this case that that was it as found by the Tribunal, and therefore the issue of fairness requires the following consideration (section 98(4)):

“ ... the determination of the question whether the dismissal is fair or unfair (having regard to the reason shown by the employer)—
(a) depends on whether in the circumstances (including the size and administrative resources of the employer’s undertaking) the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissing the employee, and
(b) shall be determined in accordance with equity and the substantial merits of the case.

The facts
9.	The Tribunal introduced the parties to us in the following way:

“3.1. The Claimant worked for the Post Office division of the Respondent for approximately 30 years.  Part of the time he worked under a contract for services as a sub‑postmaster and part of the time as a direct employee under a contract for service.
3.2. The Claimant operated as a sub‑postmaster at Worthing from 18th December 2004 until 25th October 2010 when his contract was terminated.  He was directly employed by the Respondent, performing the role of counter clerk at Shoreham Post Office, between 22nd February 2008 and 28th March 2011.
3.3. This claim relates to his dismissal from his employed position at Shoreham and the reasons for that dismissal were directly linked with what happened at Worthing, leading to termination of his sub‑postmastership.  The reason for dismissal was conduct.  The Respondent makes no complaint about the Claimant’s conduct in his employed capacity at Shoreham but says that the events which occurred at Worthing were so serious it could no longer contemplate employing the Claimant at Shoreham or, anywhere else within its organisation.”

10.	For many years the Claimant operated as a sub-postmaster, but then the burden of much of that work shifted when he took on the position full‑time as a counter clerk at Shoreham.  The Claimant left to his wife the duties at Worthing and she committed frauds that the Claimant told the Tribunal and his employers he did not know about. The Tribunal accepted that.  The reason for his dismissal was because of what happened at Worthing.  His past was unimpeachable at either location, but it was because of the termination of the relationship at Worthing when his wife’s wrongdoings came to light in an audit, that it was felt untenable that he should continue at Shoreham.  The charge put against him was this:

“3.16. In January 2011 the Claimant was called to a disciplinary meeting by Mrs Kingham (92) [charged with] with failing to meet the Respondent’s ‘conduct standards as a result of your breach of contract as sub-postmaster at West Worthing SPSO.  Your outside business contravened Post Office Ltd commercial interests and conflicts with your duty to Post Office Ltd which requires you to avoid any such activities that would compromise this and to ensure that such activities are not (sic) be properly influenced by personal considerations’.  This was alleged to be a breach of the Respondent’s code (27) aimed at protecting its business against outside business activities.”

11.	Mrs Kingham sadly was unable to give evidence at the Tribunal, but she upheld that charge.  Mr Hartley concedes that that is not an allegation of dishonesty against the Claimant.  The Claimant appealed to Mr Garnham.  Mr Garnham did give evidence before the Employment Tribunal; he appears to have conducted a rehearing of the matter and did some investigation himself.  The central criticism made of the Claimant was that his wife got hold of the official password because he shared his own password with her. He said he had been in touch with the helpline when something went wrong and gained the impression that he could in the circumstances share his password with his wife.  The Tribunal thought that was unlikely given the very high importance given to security and password security by the Respondent. That was the issue that it found was not pivotal to the understanding of the case, and it appears to have accepted the Claimant’s recollection of the circumstances.

12.	Mr Garnham’s evidence is recorded and the following account is given by the Employment Tribunal:

“7.13. The principal criticism the Tribunal has is that it infers Mr Garnham allowed himself to be improperly influenced by what he perceived to be the Claimant’s dishonesty or, at the very least, a strong suspicion such existed and that this impacted on his consideration of penalty.
7.14. The facts were that the Claimant had an exemplary record extending over approximately 30 years.  He had never been in disciplinary trouble before.  He admitted he shared his password with his wife.  She was the effective manager of the Worthing sub post office and a cogent reason was given why the password sharing occurred.  She lawfully had her own password and some of the miss‑sold [sic] policies were generated using her own password with the result that she did not depend on knowing the Claimant’s password to undertake her unlawful activities.  Disclosing such information to a trusted wife (even if it turns out later such trust was misplaced) is essentially different from disclosing the information to someone at arm’s length who would not otherwise have access to the system.  There is nothing in the notes prepared by Mr Garnham to show that he weighed these factors when deciding whether summary dismissal was the correct penalty.  It is clear from his note (163) that he attached considerable significance to his perception that the Claimant was implicated in his wife’s actions and that it was ‘inconceivable’ the Claimant was unaware of them and that lack of awareness of the cancellation letters was ‘somewhat unbelievable’.  He makes a finding that the Claimant’s ‘integrity has been brought into question’.
7.15. Mr Garnham accepts there was no evidence upon which to reach these conclusions.  The Tribunal infers that when deciding whether it was appropriate to impose summary dismissal and reject all other options Mr Garnham allowed himself to be influenced by improper factors and treated the Claimant as being someone who had flawed integrity.  Had there been evidence to support that conclusion then, having regard to the nature of the Respondent’s business, summary dismissal would have fallen within the band of reasonable responses and the decision to dismiss would have been unassailable.”

13.	The Tribunal therefore went on to consider the case when the challenge to integrity was stripped away and said this:

“7.16. When the element of lack of integrity is stripped away, what is left?  In the absence of a policy that all managers are summarily dismissed if an employee for whom they are responsible has acted dishonestly the only remaining issue is the sharing of a password.  In this case the Claimant shared his password with someone who already had her own password giving her legitimate access to the system and was not therefore being facilitated access which would otherwise have been denied.  The Claimant had good ground to repose trust n his wife with whom he shared his password.  The Claimant’s wife was in de facto control of the Worthing sub post office, albeit overseen by the Claimant.  Until the audit occurred the Claimant was unaware of his wife’s irregular acts with life policies and there was no evidence he knew of the matter or had been complicit in it.  By terminating his sub postmastership the Claimant had already been severely punished for sharing the password and falling short on his managerial responsibilities in not detecting the irregularities.  Taking into account these factors and if penalty is approached on the basis the Claimant has always acted with integrity, then, even allowing for the nature of the Respondent’s business, summary dismissal in the circumstances of this case falls well outside the band of reasonable responses.
7.17. In reaching this decision the Tribunal has been careful not to substitute its own preferred option but has asked whether any reasonable employer in a similar business to that of the Respondent, acting reasonably, in the circumstances of this case, could dismiss summarily and has concluded unanimously it could not.
7.18. The Tribunal is satisfied on the balance of probabilities that Mr Garnham failed to stand back and give adequate consideration to the appropriateness of penalty.  […]”

The arguments and our conclusions
14.	We will address the arguments of both sides at the same time as we consider our conclusions.  They all have to bear in mind the towering stack of Court of Appeal authorities enjoining appellate courts to respect the Judgments of Tribunals unless there are clear misdirections or the Judgment is perverse.  Very weak submissions were made by Mr Hartley on perversity.  He was right, because only an overwhelming case will succeed in showing a Tribunal’s Judgment to be perverse (see Yeboah v Crofton [2002] IRLR 634).  

15.	The principal contention is that the Tribunal adopted the mindset of substituting its Judgment for that of the employer, so roundly condemned by Mummery LJ in Small.  The two linguistic bases for this occur in paragraph 7.16, which we have cited; and paragraph 7.10, “The Tribunal asks itself what the Claimant did wrong […]”.  Although those are the specific examples, Mr Hartley invites us to look at the matter in the round.  He has to, because he concedes in writing that the two above conclusions are not necessarily evidence that the Tribunal adopted the substitution mindset.

16.	Mr Crozier deals with these on the merits.  As to the paragraph 7.10 criticism, he points out that the Tribunal asked a question but does not there decide the issue.  The issue was what the reason was for the Claimant’s dismissal, and we do not consider that the Tribunal has erred by sinking into the substitution mindset when it poses the question in paragraph 7.10.  We accept Mr Crozier’s submission that this is indeed a pernickety and hypercritical analysis of the Tribunal’s language.  The same goes for what is said in paragraph 7.16, the end of the sentence that begins with “Taking into account […]”.  There is, in our judgment, nothing in those two isolated phrases to condemn the Tribunal for engaging on the acquittal pathway, nor is there in the context of the Tribunal Judgment as a whole.

17.	The real problem for the Respondent’s submissions concerns the finding at paragraph 7.15 that Mr Garnham accepts there was no evidence to reach the conclusions that the Tribunal had summarised in paragraphs 7.13 and 7.14.  We thought there were about six factors in those conclusions, and Mr Hartley very fairly accepted that if an employer fails to consider six relevant factors, including an important factor of integrity, then there is likely to be an error.  The integrity issue was important here, because, as we indicated by reference to Strouthos [2004] IRLR 636 CA it is not fair to find someone guilty of dishonesty – in this case, he was disbelieved as to his integrity – without the point being put squarely to him.  It was not at the Kingham disciplinary, and the matter could not have got better at the Garnham appeal.

18.	In the light of there being no challenge on the grounds of perversity, or for any other reason, to the finding that Mr Garnham accepted there was no evidence of this, Mr Hartley’s submission cannot proceed any further.  In our judgment, Mr Garnham’s evidence was what was critical in the case. The Tribunal then stood back and looked at the whole of the facts that it had found relating both to Worthing and to Shoreham, the Claimant’s unblemished record over 30 years and the disengagement, by way of action and knowledge, from the fraudulent goings‑on of his wife. 

19.	A Tribunal properly directed could reach the conclusion that a reasonable employer faced with those circumstances would not have dismissed Mr Lall, and so that is all there is in the case.  Mr Hartley is most anxious on behalf of the Royal Mail to defend its position in relation to security and passwords, but in our judgment the Tribunal has not undermined that in any way.  The relationship of the Claimant with Royal Mail was terminated in respect of Worthing, but there is not necessarily a read‑across to his employment status at Shoreham. In the light of the findings about what happened at Worthing, the Tribunal had well in mind the high priority given by Royal Mail to security and password security when it made the decision that it did.

Conclusion
20.	We are grateful to both of the advocates before us today for their submissions.  This appeal is dismissed.

Costs
21.	An application has been made by Mr Crozier for costs in the appeal.  It is based upon rule 34A; that the appeal was misconceived or was unnecessary.  He contends that the only approach to this case that would work would be an overzealous hunt for linguistic wrongdoing by the Employment Tribunal, which is not the approach that is required.  The grounds of appeal were a lengthy essay.  As to that, he has the support of the President, Langstaff P, whose reasons we shared with the parties this morning; he said:

“The Notice of Appeal reads more like a skeleton Argument.  The Appellant should be reminded that less is often more, and would be in this case..”

22.	Mr Hartley took the point: no additional skeleton had burdened us today, but, as we pointed out to the advocates, the President did not give any reason for sending this case to a full hearing.  The best that could be said is that by implication the case has reasonable prospects.  This case does not have any merits.  There was no appeal against the Employment Tribunal’s finding that Mr Garnham paid no attention to six relevant matters. That was fatal to any appeal.
 
23.	It is not axiomatic that a case which gets to a full hearing should not attract costs (see Bean J’s Judgment in J O Sims Ltd v McKee UKEAT/0518/05).  Indeed, that would mean that no applications under rule 34A could be made, because there is no opportunity at a rule 3 and little opportunity at a preliminary hearing for such arguments to be made.  Proper consideration of the merits on a case such as this can only be done at a full hearing, and it is here that we see the scope of the appeal. The sum sought by Mr Crozier is £4,000 plus VAT.  He does not have a Schedule, but that could be supported in due course.  

24.	Mr Hartley has contended that this is not a case that is misconceived, for it got through the sift; we have given our view about that approach.  This is a case where costs should be awarded because the case was misconceived.  The parties have put before us 19 authorities, many of which occur in the long and excursive essay forming the basis of the grounds of appeal.  Most of these cases are against Mr Hartley’s proposition and would indicate to him how difficult it is to overturn a Judgment of an Employment Tribunal on a conduct issue where there are findings made and correct directions (see the list that we have given).  Quite apart from the Garnham issue, the Respondent could not hope to overturn the Judgment of the Tribunal without a detailed examination of many of the authorities in this bundle, as to which there has been none save for reliance by Mr Crozier on one, Fuller.

25.	So, in our judgment, it is correct for Mr Crozier to adopt the shorthand of a towering body of Court of Appeal authorities against the proposition that Mr Hartley on behalf of Royal Mail was seeking to advance.  This case was misconceived.  The very detailed response that the grounds of appeal demanded of and provided by the Claimant’s counsel must have made that clear. The opportunity should have been taken for a full examination of the case against the authorities that are in the bundle plus the ones that have occurred during the summer such as Graham v DWP [2012] EWCA Civ 903.  This is a proper case in which it can be said that the appeal was misconceived.

26.	As to “unnecessary”, we think there is some support for Mr Hartley’s position that “unnecessary” might indicate that there was another way of resolving the dispute between the parties or perhaps the sum was very small, but it is sufficient for us to say that this appeal was misconceived and to award costs.  There being no criticism of the figure of £4,000 plus VAT, that is what will be awarded.