Whitbread Plc (trading as Whitbread Medway Inns) v John Hall

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLADY JUSTICE HALE,LORD JUSTICE MANTELL,THE PRESIDENT
Judgment Date27 Feb 2001
Neutral Citation[2001] EWCA Civ 268
Docket NumberCase No: 2000/0149/A2

[2001] EWCA Civ 268

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

The President

Lord Justice Mantell and

Justice Hale

Case No: 2000/0149/A2

Whitbread Plc (trading As Whitbread Medway Inns)
Appellant
and
John Hall
Respondent

Mr Simon Gorton (instructed by Messrs Weightmans Solicitors) for the Appellant

Ms Jane Sinclair (instructed by Messrs Hill Taylor Dickinson) for the Respondent

LADY JUSTICE HALE
1

This is an employers' appeal against the decision of the Employment Appeal Tribunal dated 19 August 1999, dismissing their appeal from the decision of an Employment Tribunal dated 7 August 1998, finding that the employee had been unfairly dismissed.

2

The issue is whether, in a case where misconduct is admitted by the employee, the requirement of reasonableness in section 98(4) of the Employment Rights Act 1996 relates only to the outcome in terms of the penalty imposed by the employer, or whether it relates also to the process by which the employer arrived at that decision. Put another way, should the Employment Tribunal simply ask whether the outcome fell within the 'band of reasonable responses' test, laid down in Iceland Frozen Foods Ltd v Jones [1983] ICR 17 and recently reaffirmed by this Court in Foley v Post Office; HSBC Bank plc v Madden [2000] ICR 1283, or should it also apply that test to the procedure used in reaching that decision?

The Facts

3

The applicant, Mr Hall had been employed since 1985 as manager of the George Hotel in Southwark, a famous old Inn with a turnover of £1 million a year, and a flagship enterprise for the employers. He had been very successful. He had received many congratulatory letters and other internal awards from his employers. He had won the Evening Standard Pub of the Year Award in 1995. But there had also been stock control problems. He had received warnings, two oral and one written, which had expired some time ago. But after a disciplinary meeting on 21 May 1997 he was given a final written warning dated 27 May 1997 by his then Area Manager, Laura Sewell. At around this time, Ms Sewell's role was taken over by Miss Debbie Hayes. The Employment Tribunal found that Mr Hall and Miss Hayes did not see eye to eye.

4

Mr Hall's wife was suffering from terminal cancer and died on 13 June 1997. He took two weeks' compassionate leave. Despite this he was still doing well at the pub, which was profitable and successful, but he found Miss Hayes' attitude 'very negative and demotivating'. In October 1997 he asked for a transfer which she supported but nothing came of it.

5

The 1997 Christmas period was busy. Mr Hall went on his usual holiday to Scotland from 27 December 1997 to 19 January 1998. Miss Hayes received the profit and loss account for December in early January. The food margin was lower than she would have expected. She went to check and was told by the assistant manager that Mr Hall had estimated the food stock figures while he was away. She therefore arranged an audit which brought to light other matters which concerned her. She asked Mr Hall for an explanation on 19 January 1998. He admitted estimating the food stock count while he was away and was suspended. A disciplinary meeting was held on 28 January 1998, chaired by Miss Hayes. Mr Rumble who had carried out the audit and a note taker were also present.

6

Miss Hayes decided to dismiss Mr Hall for gross misconduct. Indeed, she accepted in evidence to the Employment Tribunal that she did not consider any other course. Her letter dated 29 January 1998 explained:

'The decision I came to was to dismiss you on the grounds of Gross Misconduct for falsification of Company documents: -

1. The W.R.B.D. [weekly return of business done] you admitted putting room hire money through as food to inflate wage allowance and food GP [gross profit].

2. You admitted filling out the end of month food summary from Scotland which meant the GP and closing stock figures were false and inaccurate.

There was also an issue over your honesty and integrity regarding the bounced cheque whereby your explanation did not fit with dates and events.

3. The disregard of a management instruction to cease allowing forced tipping via service charging at 10%, could have caused serious problems for the Company and even affected its trading position.'

7

Mr Hall exercised his right of appeal, which was heard by Mr Jan Sowa, Operations Manager, on 25 February 1998. Mr Sowa's letter dated 27 February upheld the decision, although not for exactly the same reasons:

' … I have established the following points:

1. Following a detailed action plan agreed with Laura Sewell regarding stock management, you were issued with a Final Written Warning on 27th May 1997 for lack of control which led to a stock deficit. Despite this warning, you confirmed that you did not carry out keyline variances during December 1997 because you were "too busy", though that in hindsight you agreed you should have. The audit carried out on the 9th December 1997 showed a stock deficit of £585. 2. You estimated that on four or five occasions you disclosed Room Hire as Food Sales Income in order to falsely improve your wage percentage and food margin, which are two key measurements on your Profit & Loss account.

3. Your December 1997 month end food summary was completed while you were in Scotland and instead of determining your food margin via an accurate stock count and therefore closing stock, you guessed the food margin and worked backwards.'

All three of these were admitted by Mr Hall, although he had offered mitigating factors in relation to each. None of them involved personal gain on his part. Mr Sowa accepted Mr Hall's explanation for the cheque which had been returned unpaid. He continued:

'I have taken into consideration your 13 years of experience as a House Manager, the death of your wife in 1997 and your misgivings about your relationship with your Area Manager, Debbie Hayes.

Nonetheless, your failure to monitor your liquor stock following a Final Written Warning and the guesstimate of your food margin in a house with very substantial food sales, amount to negligence. Furthermore, your false documentation of room hire income as food sales was done to falsely improve your wage performance.'

The Tribunal decisions

8

The Employment Tribunal Chairman gave the decision orally on 15 July 1998. According to her later comments for the Employment Appeal Tribunal, she said then that the majority thought that dismissal was within the range of responses which was open to a reasonable employer, but that the Tribunal unanimously considered that the disciplinary process was so flawed as to render the dismissal unfair.

9

In their written decision dated 7 August 1998, the Tribunal stated the law thus at paragraphs 19 and 20, having set out the relevant terms of section 98(1), (2) and (4) of the Employment Rights Act 1996 (see below):

'19…. In cases of dismissal for misconduct, the tests in the Burchell case are a useful guide, but where there is no real conflict on the facts, Burchell may not be appropriate; the Tribunal must ask itself whether dismissal fell within the range of reasonable responses ( Boys and Girls Welfare Society v McDonald [1996] IRLR). The Tribunal must not substitute its own judgment for that of the employer, but must decide whether the employer's response fell within the range of responses [open] to a reasonable employer in the circumstances: Iceland Frozen Foods Ltd v Jones [1982] IRLR.

20

Where appropriate, the Tribunal should consider the effect on the dismissal of procedural failure, which may render it unfair (because unreasonable within s 98(4) of the Act). Consideration of what might have happened had the procedure been fair is relevant to assessment of any compensation for the Applicant but not, except in really extraordinary cases, to consideration of the fairness of the dismissal itself (Polkey v A.E. Dayton Services Ltd[1988] ICR).'

Mr Gorton, for the employer appellants in this case, does not quarrel with paragraph 19 but contends that paragraph 20 does not apply to admitted misconduct where dismissal is within the band of responses open to a reasonable employer.

10

The Tribunal concluded, at paragraph 21, that the employer's reason for dismissing the applicant related to his conduct, that Miss Hayes had reasonable grounds for her genuine belief in these matters, which had been admitted by the applicant throughout, and that the respondent therefore had a potentially fair reason for the dismissal. It did not repeat the observation about the range of responses open to a reasonable employer, but went on in paragraph 22 as follows:

'However, the Tribunal finds that the disciplinary inquiries were fatally flawed. The inquiries were not a sham, but in view of the fact that Miss Hayes was not only the Applicant's immediate senior officer but also the person who had initiated the investigation in respect of him that is the person who had complained it was not fair that she...

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