Appeal No. EAT/52/93

	EMPLOYMENT APPEAL TRIBUNAL
	58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

		At the Tribunal
		On 12 October 1994

	Before

	HIS HONOUR JUDGE J HULL QC

	MR W MORRIS

	MRS M E SUNDERLAND JP

LONDON BOROUGH OF TOWER HAMLETS	APPELLANT

MR W SULLIVAN	RESPONDENT

	Transcript of Proceedings

	JUDGMENT

Revised

	APPEARANCES

For the Appellants	MR P T ROSE
(Of Counsel)
Legal Department
London Borough of 
Tower Hamlets
Town Hall
	Patriot Square
	LONDON E2 9LN

For the Respondent	MISS A MORGAN
(Of Counsel)
Messrs Bruce Piper & Co.
1 Mabledon Place
LONDON WC1

	JUDGE HULL QC:  This is a case which would, I think, cause anybody a certain amount of anxiety, certainly it has to us, we have considered carefully what has been said to us.

	Mr Sullivan was a senior mechanical engineer in the Property Services Department of the London Borough of Tower Hamlets.  He is a gentleman who is now aged 40 years.  He was first employed by Tower Hamlets in 1986 and in that same year the borough happened to order 71 calorifier tubes, valuable tubes, which were not in the event used.  They would have been used in some application such as heat exchangers or something of that sort. At any rate, they were stored down in Mitcham.  And then in 1991, there was work to be done in refurbishing or replacing a calorifier in the York Hall Baths.  There appear to have been more than one contractor, there was a firm called Industrial Process Pumps (IPP) carrying out work there, and a firm called Thames Engineering and Maintenance Services was quoting for re-tubing the calorifier in December 1990.  One of their officers was called John Smith.  He knew about the tubes, he had been, apparently, the Managing Director of the firm which actually supplied the 71 calorifier tubes which from 1986 onwards had been gathering dust down in Mitcham.  

	So what is alleged to have happened was this;  that after Thames had quoted for the job, which included supplying the necessary copper tubes, a dishonest plan was conceived by 
Mr Sullivan.  It was this:  that Mr Sullivan, making use of his knowledge, would send the tubes which were stored at Mitcham and would use them instead of the tubes which were to be supplied by Thames.  He and Mr Smith (this was the plan, it was alleged) would divide the proceeds.  That was the allegation.  This came to light because Mr Smith actually told an officer of the London Borough about it, and so in due course enquiries were set on foot.

	Mr Smith had divulged all this information on the basis that, as he was told, it was off the record, or non-attributable or some such phrase; in other words it was considered essential to the case to conceal the identity of Mr Smith.  In those circumstances, of course the London Borough was presented with an obvious difficulty.  There was an internal enquiry by a Mr Kilminster, who was helped by Mr Hyatt from the Auditing Department.  There were two interviews at least.  Evidence was gathered.  Very shortly afterwards, on the 5th February 1991, the Applicant was suspended.  On the 15th February he was given notification of the  allegations and on the 7th March there was a Disciplinary Hearing conducted by a Mr S W Turner, who was the head of Support Services and Performance Review for the London Borough.  Mr Turner was aware of Mr Smith and his allegations but, as I say, those matters were not revealed to Mr Sullivan and that presented, as he later admitted, something of an embarrassment or difficulty for Mr Turner.  The charges are set out at page 8 of our bundle:

		".. on 15 February he was notified of the allegations against him in the following terms".

I will read the ones which were held to be substantiated.
		"1.	That you were wilfully negligent in that you knowingly left a considerable number of copper tubes (71 in total as per copy of original order) in store with a Contractor for four to five years and then only had part of the whole delivered to York Hall [that was the public baths] but furthermore you took action liable to defraud the Council in that you allowed the remainder of the delivery to be sent to Derby for some other unspecified use."

The tubes had actually been sent for from Mitcham by Mr Sullivan, some had been unloaded and the rest had been carried on, at any rate, for the night, to Derby.

		2.	That you knowingly intended to defraud the Council by placing an order for further copper tubes which were not needed in full knowledge of the existence of a number of similar suitable tubes which could have been used for the job at York Hall Baths.  The likely extend of this fraud being the cost of the new tubes (20 at say  £60 i.e. £1,200) plus the value of the tubes not taken off the contractors vehicle and sent to Derby."

Then there was an allegation of:

		"..a serious breach of Council Standing Order ....failing to be accountable for the safe custody and control of materials delivered to you by failing to count or sign for the collection of calorifier tubes or to ensure that all the goods were collected, unloaded and placed in the safekeeping store at York Hall."

That was not disputed apparently.  

	Now, clearly, if that was settled by a young Bar student in the examination, he would fail the examination.  It is apparent that the true situation, the true substance of what was being alleged here, was a conspiracy, a corrupt conspiracy to get money, by defrauding the Council in the way which I have described.   And this roundabout language and the thoroughly misleading charges were not the result of any incompetence by the Council; on the contrary, it was because of the need to protect the identity of Mr Smith.

	So there it was.  The two charges which I have mentioned were substantiated after the enquiry by Mr Turner who had, as I say, knowledge of the matters which was denied to 
Mr Sullivan.  There was then an internal appeal.  The internal appeal went to a Committee of Councillors, chaired by a budding lawyer, and they considered the matter and they dismissed the appeal.  And so Mr Sullivan was dismissed and he applied to the Industrial Tribunal, claiming that he had been unfairly dismissed.

	The Industrial Tribunal sat at London (North), under the chairmanship of Mr Bano, with two Industrial members, and devoted no less than four days on the 18th, 19th and 20th May and 27th July 1992 to hearing the case.  They produced a very long and very careful decision.  The reasons for their decision are set out at great length from page 4 onwards in our bundle.

	They set out the matter much more fully than I have.  They recorded, among other things, the history of the Enquiries.  They set out Mr Kilminster's report, recommending disciplinary action.  They set out the disciplinary proceedings before Mr Turner to which I have already referred and the letter which contained the charges. 	They then set out the way in which the disciplinary proceedings went.  They referred to Section 57 of the Act.  They referred to the Appeal Hearing before the members;  Mr Stokes, the trainee solicitor, told the Tribunal about that.  It is not clear that Mr Stokes or his Councillor colleagues knew about Mr Smith, and so the whole thing again was on an artificial basis.  The conclusion of the Tribunal, after they had considered all these matters, is set out from paragraph 28 onwards.  Mr Rose read that to us, I will read most of it again because it is necessary for our decision and the Industrial Tribunal's decision to be understood.  

		"Although we recognise the difficulties faced by the Respondents in this case, we have come to the conclusion that, in all the circumstances of this case, fairness required that the Applicant was made aware of Mr Smith's allegations if the case against him was to proceed.  In Linfood Cash and Carry Limited v Thomson [1989] IRLR 235 the Employment Appeal Tribunal drew attention to the need to maintain a balance to protect informants who are genuinely in fear, and providing a fair hearing for employees who are accused of misconduct.  Although it would not have been possible for the Respondents to conceal Mr Smith' identity in this case once they had made his allegations known, we consider that the Respondents ought to have tried to persuade him to allow them to disclose his evidence, or attempted to devise safeguards for his reassurance and protection.  If the Respondents were unable to persuade Mr Smith to appear as their witness at a disciplinary hearing, it would then have been necessary for them to consider whether to proceed with the disciplinary process in the light of the evidence as it stood at the time when the decision was taken." 

	Mr Rose says:  they might nonetheless have proceeded to dismiss Mr Sullivan, acting, so to speak, on information and without a disciplinary hearing, having made all reasonable enquiries that they could without a disciplinary hearing, and then have said: we are simply not going to hold a disciplinary hearing but we have reasons for thinking that you are dishonest, and we are going to dismiss you.  And then he said that that could safely found a defence in front of an Industrial Tribunal, if Mr Sullivan had complained.  

	It appears to us that that is a suggestion which cannot be supported.  If there could not be a proper disciplinary enquiry, there could not be a dismissal for dishonesty or for reasonable belief in dishonesty or anything of that sort. 

	I should have said earlier that Mr Sullivan learned of the identity of Mr Smith and the nature of the allegations made by Mr Smith at the outset of the hearing before the Industrial Tribunal.  Mr Rose, who appeared before the Industrial Tribunal, with a faultless sense of what was required for justice insisted that that should happen, and it did happen.  And so the Tribunal had the advantage of knowing exactly what the position was.  

	Then they go on in paragraph 29:

		"29.	We take the view that the case made against the Applicant was artificial in the absence of Mr Smith's allegations, in that it left unstated the manner in which the Applicant was supposed to benefit from the misconduct alleged.  That artificiality is reflected in the clumsiness of the allegations against the Applicant, as set out in the letter of 15 February 1991, in which accusations of breach of duty are combined with accusations of fraud.  The allegations made by Mr Smith provide the explanation for the conduct alleged by the Respondents and we consider that the Respondents' failure to put their real case to the Applicant, which was known only to them, made it impossible for the Applicant to conduct an effective defence."

 	That is the plainest possible finding of unfairness.  Here was an enquiry being conducted on what one might call "Star Chamber" principles - we know more than you do, we are not going to tell you the exact nature of the allegations against you, but we have certain matters which we are going to ask about.  So they found that it was impossible for the Applicant to conduct an effective defence. 

		"30.	We consider also that Mr Turner's knowledge of Mr Smith's allegations made it impossible for him to conduct a fair hearing.  Since Mr Smith's allegations provided the explanation for the Applicant's alleged misconduct, it would have been almost impossible for Mr Turner not to have been influenced by that knowledge in reaching his decision.  Furthermore, it was crucial to the Applicant's defence that he had been reminded of the existence of the tubes as a result of a chance discovery of a letter, since, if that was not the case, there was no good reason why he should have brought the tubes to the site after writing an order.  Although the Applicant's case with regard to the letter was very weak, the issue was one of credit and we consider that Mr Turner must have been influenced by his knowledge that Mr Smith had stated that the Applicant had discussed the tubes with him prior to Christmas 1990.

		31	We therefore consider that the Respondents did not act reasonably in treating their reason for dismissing the Applicant as a sufficient reason for doing so.  Although the Appeal Hearing considered the case carefully and fairly, it did not address itself to the particular flaws in procedure in this case and did not conduct a rehearing.  We therefore hold that the Appeal Hearing did not remedy the unfairness of the original decision to dismiss, and that accordingly the decision to dismiss was unfair.

		32.	With regard to the issue of contributory conduct, we regard it as almost inconceivable that Mr Smith would have approached the Respondents with his account of his conversation with the Applicant unless the allegation were substantially true.  We considered Mr Smith to be a forthright, but straightforward, witness, and we find that in late 1990 the Applicant did seek to explore with Mr Smith the possibility of defrauding the Respondents by using the copper tubes which were in the Council's possession to fulfil an order which the Applicant was to place with Mr Smith for the supply and fixing of calorifier tubes at the York Hall baths.  However, Mr Kurtz believed that the Applicant had requested £500 from Mr Smith, and the uncertainty as to exactly what the Applicant did say to Mr Smith leads us to conclude that the Applicant's approach was rather tentative.  We accept Mr Smith's evidence to the effect that he reminded the Applicant on a number of occasions about the tubes, and we unhesitatingly reject the Applicant's evidence that he was reminded of the existence of the tubes because of the chance discovery of a letter. 

		33.	We are satisfied that the Applicant arranged for the tubes to be transported from Mitcham to York Hall baths in order to assess whether they were suitable for the work, with a view to carrying out the plan which he had suggested to Mr Smith.  However, Mr Smith raised technical difficulties and we are satisfied that the Applicant decided on his way home on 28th January not to proceed with the scheme.  The Applicant's evidence concerning the reasons why the remaining tubes were taken to Derby was corroborated, in particular, by Mr Roseman, and we are not satisfied that the mishap was the result of anything other than an oversight by the Applicant.

		34.	We entirely accept Mr Rose's submission that corruption of the kind contemplated by the Applicant is, perhaps, the most serious kind of misconduct which a local authority officer can commit.  If the Applicant had carried out his plan, only a reduction of 100% in basic and compensatory award would, in our view, have been appropriate.  However, the Applicant does not appear to us to have made any serious attempt to carry out the fraud after Mr Smith raised technical difficulties and, notwithstanding the seriousness of the Applicant's misconduct, we do not consider that it would be just and equitable to penalise the Applicant to the extend which would have been appropriate if he had not changed his mind.  The Applicant was also guilty of negligence in allowing the tubes to go to Derby and, in all the circumstances of the case, we consider it just and equitable to reduce by 75% the basic and compensatory award which we would otherwise have awarded." 

	Mr Rose, for the London Borough, has no complaints in general about the way in which this Industrial Tribunal conducted its long and complicated enquiry and the way in which it arrived at the facts.  But he complains of the finding that the Applicant was 75% to blame, [if I can use that as a shorthand];  he says this was a case where his dismissal was occasioned 100% by the Applicant's own conduct.  Notwithstanding all the unfairness that the Tribunal found, he was the sole cause of his dismissal and indeed to go further, it is not just and equitable under Section 74 (1) of the Employment Protection (Consolidation) Act 1978 that he should receive any compensation in respect of what has happened.

	Mr Rose has to make that submission as a point of law.  He has to say that that should have been the inevitable conclusion of the Tribunal.  I think we should all agree that it is a conclusion at which the Tribunal might have arrived as a question of fact, and there might and indeed probably would have been not the slightest prospect of a successful appeal against that, as a matter of fact.   What we are asked to do is to say that the conclusion that Mr Sullivan is only 75% to blame is insupportable in logic and in law, so that it is an obvious error of law.  Mr Rose says there is no logical distinction between the position which would have existed if the Applicant had succeeded in carrying out his dishonest enterprise, had concealed the fact that he had installed these 1986 tubes in the calorifier and had then dishonestly received the money.  The fact that he repented, if that is the right phrase for it, when Mr Smith himself raised technical difficulties about the way in which the tubes might or might not do the job, cannot carry the matter any further.  Indeed it is fairly clear, he says, that it was only because of the technical difficulties raised by Mr Smith that Mr Sullivan did change his mind, and (if that is the right word) "repent" of it.

	So that is the first submission.  And then Mr Rose says that the Industrial Tribunal did not address their minds to the extent to which his conduct contributed to his dismissal.  If a proper procedure had been followed it would have made no difference to the outcome, says Mr Rose.  But we ask ourselves how that can be so.  

	First of all, with regard to the first submission, in everyday affairs (whether it is logical or not) the distinction between the preliminary stages of an offence and its carrying through to its conclusion is almost always treated as very important.  It may be said by a strict moralist, or even a strict logician, that there is no difference between a man who drives his car drunk and a man who drives his car drunk and kills somebody.  It may be said that there is no distinction morally between a burglar who has fetched the ladder or got his jemmy out and starts to break in and then sees a policeman arriving and desists, and a burglar who carries it through and makes off with thousands of pounds worth of jewels, his original intention.  In strict logic and strict morality, there is no difference, but nonetheless courts continually make the distinction.  Indeed it is in the public interest that they should make the distinction between the mere preliminary stages, an offence which does not in fact bear its full wicked fruit and one which is carried through unrepentantly to its conclusion.  So despite what Mr Rose says in his first submission, the Tribunal were well entitled to conclude that the matter was less serious because, for whatever reasons, Mr Sullivan in fact repented of it.  

	The second submission seems to us to be even less supportable.  It is of course possible and this is one of the many imponderables that the Tribunal had to consider, that it would have made no difference;  that if an impeccable procedure had been followed, the same result would have followed.  But that is by means not necessarily so.  One envisages that if at the outset Mr Sullivan had been told "We have caught you virtually redhanded, Mr Smith whom we know and trust has told us about this plan of yours to defraud the Council, we have the evidence which we need and now we want to see what you say about it,"  Mr Sullivan would have taken a very different line.  He might have said "I admit this".  He might have produced mitigating facts, he might have done all sorts of things.  Alternatively, of course, it may be that the authority, precisely as the Tribunal envisaged, would have said "We cannot go on with this, we are going to keep a very careful eye on this man, but we are not able to proceed at the moment."  How often in other spheres the police and other authorities have to say exactly that.  "We have got grave suspicions here, but nothing that will stand up in court.  We only have the informant's evidence, and it is vital to protect him.  We cannot proceed."  So we do not accept the logic of the second submission which is made to us.

	Finally, and very properly of course, Mr Rose refers us to what is said in Section 74.  Section 74 (6) reads:

		"Where the tribunal finds that the dismissal was to any extent caused or contributed to by any action of the complainant it shall reduce the amount of the compensatory award by such proportion as it considers just and equitable having regard to that finding."

Every word there breathes the criterion that these are questions of fact.  It is what the Tribunal finds about causation that matters. Mr Rose quite rightly invited us to look at the conduct, not of the authority, but of the Applicant.  Causation is a question of fact.  Contribution is a question of fact.  The Tribunal should reduce the amount of the compensatory award by such proportion as it considers just and equitable.  Again, pure fact as to what is just and equitable, as found by the Tribunal of fact which has heard the witnesses; and on this occasion spent four days doing exactly that, in considering these matters.  We simply cannot say here, any of us, that it appears to us that the finding is perverse.  

	Finally under Section 74 (1):

		"...the amount of the compensatory award shall be such amount as the tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal in so far as that loss is attributable to action taken by the employer."

	Again, it appears to us that that is requiring the Tribunal to reach a conclusion of fact.  Mr Rose suggests that nobody looking at this could say that it was just and equitable for Mr Sullivan, having attempted to defraud his employers in the way that has been described, to receive a penny.  That might be the view of certain persons.  It might even be the view of the majority of persons.  Our view of course does not matter.  What does matter is the view of the Tribunal.  And can it be said that their finding is perverse, in the sense of flying in the face of reason or clearly being erroneous in law?  We cannot say that it is.   

	We are unable to find that there is any point of law in this Appeal on which the Applicant could succeed.  In our view, what is complained of here are essentially findings of facts which the Industrial Tribunal were entitled to make.  The finding of 75% against Mr Sullivan is not one with which we feel entitled to interfere.