Appeal No. UKEAT/0529/03/SM

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 17 February 2004
Judgment delivered on 8 March 2004

Before
HIS HONOUR JUDGE J R REID QC
MR P M SMITH
MR R N STRAKER

MR E WALKER	APPELLANT

MR S BARNES	RESPONDENT

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR E WALKER
(the Appellant in Person)	
For the Respondent	MR S BARNES
(the Respondent in Person)	

HIS HONOUR JUDGE J R REID QC

1.	This is an appeal by Mr and Mrs Walker (trading as Walkers Windows) (“Walkers”) against the decision of an Employment Tribunal held at Shrewsbury on 16 and 17 April 2003 and 29 April 2003, the extended reasons being sent to the parties on 23 May 2003.  On 29 April and 16 June 2003 the Tribunal held a remedies hearing.  The decision on that hearing was sent to the parties on 7 August 2003.  By those decisions the Tribunal held (1) that Walkers owed Mr Barnes £4,891.00 unpaid commission, (2) Walkers unfairly dismissed Mr Barnes, (3) Mr Barnes contributed to his dismissal to the extent of 30 per cent, (4) compensation for unfair dismissal should be paid in the sum of £10,254.66, and (5) the recoupment regulations did not apply.  In addition to the appeal there was before us an application by Walkers for leave to adduce fresh evidence, which we allowed at the commencement of the appeal.  There had been an application to adduce the same fresh evidence at a review hearing, that application being made at the same time as the application to the EAT.  The application on the review hearing was dealt with before this appeal and insofar as necessary we treated the application before us as an appeal against the refusal on the review hearing to admit that evidence.

2.	Mr Walker represented Walkers and Mr Barnes represented himself.

3.	Mr Walker did not in the event challenge the decision in relation to unpaid commission, but explained that he had not paid the award because he was keeping it against any further claims he might discover Walkers had against Mr Barnes.  We told Mr Walker this was not a good reason for not paying.

4.	The background to the case was as follows: Mr Barnes was employed by Walkers as a salesman.  Walkers is a long-established firm specialising in the supply and fitting of PVC and other windows and doors, and the erection of conservatories.  Walkers also undertakes building work, not only the small building work which is ancillary to the fitting of windows, but some more major tasks.  Mr Walker himself is a Member of the Federation of House Builders.  However the principal work is the supply and fitting of windows, doors and the erection of conservatories.  Mr Barnes’ job was to convert sales leads into actual sales.  That was how he operated throughout his employment with Walkers from October 1996 until his dismissal for gross misconduct on 13 March 2002.  He had had hopes that he would be more than just a salesman within Walkers and would acquire a share in the business.  It was only in year 2001 or at the beginning of 2002 that he realized that this hope was not to be fulfilled and that his role was purely that of a salesman.  If anyone was to have an interest in the business it was to be Mr Walker's son John, whose wife Sandra Walker had a major involvement in the administration and accounts of the business. 

5.	There is a standard form “Walkers Windows” contract which had been developed and refined over the 30-odd years that Walkers have been trading.  Amongst other things there was a full list of contractual clauses on the back of the standard contract and a tick list for the sizing of windows, etc. to ensure that windows ordered are of the precise correct size to the nearest 5 mm.  The Tribunal held that a proper and formal ordering and measuring process is important to Walkers.

6.	The relationship between the applicant, Mr Barnes and Mr Ted Walker had been previously a very good and trusting one.  One of the difficulties confronting the Employment Tribunal was that although Mr Barnes was is in law an employee, both sides had regarded Mr Barnes him as self-employed, and indeed his status had had to be decided by a preliminary decision of the Employment Tribunal given on 20 November 2002 following a hearing on 30 October 2002.  However, whatever the relationship between the two had previously been, Mr Barnes was not allowed under the terms of that relationship to make private profits for himself out of work which could otherwise be of profit to Walkers.  Whenever he did make profits for himself he would only make them in a way which did not compete with Walkers’ trading interests. 

7.	There were three incidents with which led to Mr Barnes dismissal.  Sometime in late January 2002 Mr Walker and his wife went to Portugal to attend a relative’s wedding.  They left behind them Mr John Walker, their son, to hold the fort.  Mr Barnes was asked to put in more hours in the showroom than he would normally have done.  This would not necessarily result in the loss of income to him because he could chase up extra leads by doing visits after that week was over.  When Mr Walker returned there was a conversation between the two men about a job being undertaken for Mrs Pender.  There was an order form in the system since September 2001 for some windows to be fitted but the work was not to be done until 2002.  This was an unusual sort of agreement and it aroused Mr Walker's suspicions, so he asked Mr Barnes about it.  Mr Barnes told him that the work had been done by other builders and also in the course of a heated interchange told Mr Walker that he had made a profit out of it.  The Tribunal held that it was Mr Barnes’s belief that the building work on the Pender contract was work that was lost to Walkers, because Mrs Pender had lost faith in Walkers as builders - not as window fitters, but as builders as a result of a previous job.  The original plan was that Mrs Pender was to organise her own builders.  She managed to find builders to do the necessary preparatory building work for the sum of £1,200.00, but was let down by those builders.  When Mr Barnes realised that, and that Walkers could not do the window work without that building work having been done, he made an arrangement himself to get that building work done anyway, and in doing this he generated a profit of £300.00 for himself, i.e. the builders were only paid £900.00 and he took £300.00.  Mr Barnes accepted in his evidence that he felt “a bit guilty about the profit made and, then again, not guilty.”

8.	Mr Walker was entitled, as the Employment Tribunal held, to feel deep suspicion at what had gone on.  His suspicions then became compounded when about a month later, on 12 March, Mr Walker became aware that an unorthodox order had been placed for aluminium windows.  This stood out to him because Walkers very seldom supply or fit aluminium windows.  The order as such was most unorthodox because it was done on rough sketchy drawings on a fax to the suppliers - Midland Glazing.  This is not a regular supplier because Walkers do not regularly use aluminium windows.  Mr Walker was most concerned about this because it was not on a Walkers Window standard form which would have covered Walkers properly in the event of the wrong windows being supplied.  Further, Mr Walker himself had not been asked to estimate this job.  He would usually estimate all the jobs and enter the precise measurements and take personal responsibility for the windows supplied being the right size.  He had not been involved in any of this.

9.	Mr Barnes accepted before the Employment Tribunal that the way in which this order was done was unorthodox and, against the background of previous ordering, it was unusual.  He said that Cavanagh Construction, who were to do building work in connection with which the windows were required, was a company whose business he was trying to cultivate on behalf of Walkers (though it appears he never mentioned this fact to Walkers).  Cavanagh Construction is a business with whom Walkers does not have a business relationship at all because its principal work is commercial, whereas Walkers’ principal work is domestic.  Mr Cheadle, who was a manager in Cavanagh Construction, was Mr Barnes’s next door neighbour.  Previously Walkers had supplied a conservatory for Mr Cheadle.  Mr Walker pointed out that for some time Mrs Sandra Walker had been trying to locate a proper file and contract for the aluminium window order but Mr Barnes had simply fobbed her off about it as if he did not want too much notice and attention drawn to the order.  The same evening Mr John Walker telephoned his father to mention that a customer, Mrs Sunderland, was having some building works done which Walkers were not carrying out.  Some of these building works were directly ancillary to the fitting of windows i.e. the opening of an aperture, others less so.

10.	This revelation about the Sunderland works prompted Mr Walker to re-check the Pender contract.  He contacted the builders, H&M, whom he knew had undertaken the building.  The builders informed him that Mr Barnes had paid them £900.00.  Mr Barnes declined to answer some questions about this amount and presumably H&M did not issue any receipt for the £900.00 received.  Mr Walker put the three incidents together and considered that Mr Barnes was systematically defrauding him and making a profit at his expense.  He thought he was siphoning work away from Walkers for his own benefit.

11.	The Employment Tribunal held that there was nothing at all untoward in what the applicant did on Mrs Sunderland's contract, in involving Cavanagh Construction.  It noted that perhaps if Mr Walker had not nipped that job in the bud that some profit might have been made by Mr Barnes but the fact was that Mr Walker intervened before the work had been paid for.  The Tribunal held no money at all has gone to Mr Barnes personally from that contract.  Mr Barnes’s account was that he had only passed the job on because he felt that Walkers would not be interested in it because of the amount of non-window involved and the need to employ sub-contractors.
12.	Mr Walker formed the view that the evidence he had disclosed that Mr Barnes was defrauding Walkers.  He arranged a meeting with Mr Barnes on 12 March 2002.  He followed no disciplinary procedure whatsoever and ultimately dismissed him on that day.  Indeed, he deliberately declined to tell Mr Barnes why he was being dismissed because he still had some investigations to do and he did not want to run the risk of Mr Barnes possibly tipping off customers or contractors.  Mr Walker did not take any advice on this because he assumed that Mr Barnes was not an employee.

13.	Following the dismissal Mr Walker did take advice and organised an appeal hearing, on advice from the solicitors whom he was then consulting.  They evidently advised him that perhaps matters could be remedied if there was a full appeal hearing.  The Employment Tribunal, without going into any detail, held that the appeal hearing did not cure the defect, i.e. the total lack of procedure, in Mr Barnes's original dismissal.  The first hearing was the first notice that Mr Barnes had of what the precise charges against him were i.e. the three incidents: the Cavanagh Construction situation, the Sunderland contract and the Pender contract. Thereafter, the appeal process took place by correspondence after the hearing.

14.	The Employment Tribunal held that because there was not a root and branch reinvestigation and there “was not full communication of subsequent information to the applicant” the appeal was not “such as to make this a full free-standing process.”  It followed that the dismissal was unfair.  The Tribunal went on to consider whether Mr Barnes had contributed to his own dismissal and held:

“We as the Tribunal find that there was nothing intrinsically wrong with an unconventional and potentially risky way of doing business with Cavanagh Construction in order to gain their business in the hope that perhaps it might be more regularised once the business was secured.  There was nothing wrong in the Sunderland job because all the money has been accounted for. It cannot be shown that the applicant made or intended to make a private profit.  There was something untoward as the applicant himself conceded, in the Pender job.  On that basis we have settled on the figure of 30% to reflect the applicant's blameworthiness for his own downfall.”
15.	Mr Walker’s first point in the course of his appeal was to challenge the Tribunal’s finding that the appeal hearing did not cure the defects in the original dismissal. He suggested that the Tribunal should have found that the appeal procedure in which there was an initial hearing and then attempts to obtain further information and answers from Mr Barnes in writing was a proper investigation which cured any defects in the original dismissal process. He submitted that the Employment Tribunal had not dealt with the point properly.

16.	It is unfortunate that the Tribunal chose to treat this part of their decision so briefly.  The phrase it used, “to make the rest of the long story short”, before dealing with what was a central part of the case before it, gave Mr Walker the impression that it was not taking his case on this point seriously.  In our view that was a mistaken impression.  When a Tribunal gives its reasons it is doing so for parties who are fully familiar with what has been argued and the evidence before the Tribunal.  It can therefore properly do so in rather more succinct terms than would otherwise be the case.  It must, of course, set out its findings of fact and law so that the parties can tell why they have won or lost and so to enable the EAT or Court of Appeal see whether any question of law arises: see Meek v Birmingham City Council [1987] IRLR 250.

17.	In this case the Tribunal spelt out the factors which led them to the conclusion that the appeal process did not make good the deficiencies in the original dismissal process: (1) the hearing was the first notice Mr Barnes had of the precise charges against him; (2) there was not a root and branch reinvestigation; (3) there was not full communication of subsequent information.

18.	Mr Barnes was, not surprisingly, not prepared to deal with matters there and then at the hearing.  The Tribunal was well aware that Mr Barnes was then given the opportunity of dealing with the issues put to him in writing, and indeed when he gave his response was asked supplemental questions which he apparently failed to answer (though we have not been shown any copy of the letter setting out the supplemental questions or the follow up letter apparently sent to him).  It was also well aware from the notes of the disciplinary hearing put before it (and us) that the whole disciplinary hearing had lasted only 25 minutes.  The Tribunal was also aware that no attempt was made to re-convene the disciplinary hearing after Mr Barnes had had a chance to consider the charges against him.  In these circumstances the Tribunal was quite entitled to find that the appeal hearing was not adequate to remedy the complete absence of any proper disciplinary hearing before the dismissal.

19.	Mr Walker’s second point was that the Tribunal was perverse in not holding that Mr Barnes was entirely to blame for his dismissal and so there should have been a determination that he contributed to his dismissal 100 per cent.  This was a matter for the Tribunal to decide on the evidence before it.  It did so.  Whilst other Tribunals might have come to a different conclusion and a different percentage, it cannot be said that the decision that this Tribunal came to on the evidence before it was “obviously wrong” or any of the other descriptions that can be given to a decision which can properly be called perverse.

20.	Mr Walker also made the application to adduce fresh evidence, to which we have already referred and which, as we have indicated, we dealt with and allowed at the start of the appeal.  That evidence was concerned with a further instance which Mr Walker had discovered of Mr Barnes diverting a contract which, Mr Walker believed, might have gone to Walkers.  Again it was said to have been diverted to Mr Cheadle at Cavanagh Construction.  In summary the new evidence is from Mr R Barnes (no relation to the applicant), who has given a statement that not only had Mr Barnes diverted a contract to Cavanagh Construction after he had gone into Walkers and seen Mr Barnes there but also Mr Barnes had (a) asserted that the two businesses were merging and (b) had tried to collect £500 cash from him for laminate flooring for which Cavanagh Construction had later charged him £250.  It is not suggested that Walkers were aware of the evidence at the time of the previous hearing.  Walkers became aware of the potential evidence only in November 2003 after they had been approached about some “further” work by Mr R Barnes for whom they had not in fact previously done any work.  Mr Walker could not have become aware of the evidence by reasonable inquiry. Indeed Mr Barnes had asserted on oath in the Employment Tribunal that there was no other work which could have been relevant to the Tribunal.  We should record that Mr Barnes says that he has a good answer to this allegation, and it is not this place to seek to evaluate the strength of that answer.

21.	If matters had stopped there, we would have had no hesitation in saying that the new evidence was such that the case should be sent back to the same Employment Tribunal for them to hear the additional evidence and to consider whether it made any difference to the decision.  However the position is not that simple.  Mr Walker had already had an application for a review to the chairman of the Tribunal based, amongst other things, on the same evidence determined.  The chairman dismissed the application saying this:

“9.	Mr Walker contends that a garage conversion undertaken by Cavanagh Construction for Mr R Barnes (no relation) is a further example of the applicant's siphoning work away from Walkers Windows.  This is fresh evidence put forward by Mr Walker.  I have considered the full particulars under cover of his letter of 28 November 2003, and the applicant's comments by letter dated 2 January 2004.  Clearly the majority of the price for this related to general building work rather than to windows.  It is very plain to me that this was work the applicant could reasonably have considered was not sufficiently profitable for Walkers Windows.  This is without taking into account the applicant's actual response to the allegation, which is that he actually showed the plans to Mr Walker who was not interested.  It is also notable that the client, Mr Barnes, understandably wanted the entire job overseen by one individual and not given to different specialist contractors.

10.	Had this evidence been before the Tribunal, the Tribunal would have certainly entertained it, as being potentially relevant.  I am also prepared to accept that its existence could not have been reasonably known or foreseen at the time of the hearing, and that it is credible.  Further, I am prepared to extend time to consider this application under Rule 17.  I accept that, in the nature of this evidence, it has fortuitously come to light after the event.  However, in the context of the long history of this case, I do not see it as any different, in kind, from the Sunderland contract in the main Decision.  Nor do I find it remarkable that the applicant did not mention it or recall it earlier.  It was all carried out, invoiced, and indeed rectified by Cavanagh.  There is no evidence of any profit to the applicant, and it is entirely consistent with the applicant's hopes of fostering a mutually beneficial relationship with Cavanagh Construction...”

22.	In our view the reasoning behind the chairman’s decision is in law flawed.  He starts from the proposition that the Employment Tribunal accepted Mr Barnes’s evidence in relation to the Cavanagh Construction cases which were in evidence that he was trying to foster a relationship between Walkers and Cavanagh and that he was passing over jobs which would not have been of interest to Walkers.  That argument is seeking to pull itself up by its own bootstraps.  The point of the new evidence is that the (undisclosed) additional case might cast real doubt on the explanation which the Tribunal had previously, on less evidence, accepted.  The likely effect on the outcome of the new evidence cannot be dismissed merely by saying that it could be explained away on the same basis as the earlier Cavanagh Construction cases.  Furthermore, the evidence showed (if accepted) that Mr Barnes was trying to obtain a profit from the transaction, albeit he was thwarted.  In these circumstances it seems to us to be perverse to discount the evidence on the basis that it did not show that Mr Barnes actually managed to make a profit.  We therefore take the view that the evidence does pass the stringent test of showing that it could have a very real influence on the outcome of the “contribution” element in the Tribunal’s decision.

23.	Accordingly we hold that, notwithstanding the decision of the chairman on the review hearing, the case should be remitted for a rehearing on the sole question as to the appropriate percentage (if any) deduction should be made from the award of compensation because of Mr Barnes’s conduct.  At the re-hearing Walkers can adduce evidence as to all the alleged instances then within their knowledge of Mr Barnes diverting work from Walkers, and Mr Barnes can adduce such evidence as he thinks appropriate to rebut those allegations.  In the light of the views already expressed by the chairman on the likely outcome of the re-hearing, the new hearing will have to be before a differently-constituted panel of the Tribunal.