Appeal No. UKEAT/0548/06/RN

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 30 January 2007

Before
HIS HONOUR JUDGE BURKE QC
MR B R GIBBS
MS N SUTCLIFFE

MPI LIMITED	APPELLANT

MR G WOODLAND	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	Mr J Algazy
(of Counsel)
Instructed by:
Messrs Lawrence Graham Solicitors
190 Strand
London
WC2R 1JN	
For the Respondent	Mr G Woodland
(The Appellant in Person)	

SUMMARY
Unfair dismissal – Reason for dismissal including substantial other reason/ Reasonableness of dismissal
Contract of employment – Mutual trust and confidence / Wrongful dismissal
The employee was summarily dismissed for failure to manage his side of the business properly and for disobeying an instruction, in the light of a history of inadequate performance and misconduct.  The Employment Tribunal, by a majority, found that the reason for dismissal was capability, that it would have been fair to dismiss on notice but it was unfair to dismiss summarily: the employee was found to have been 75% contributory.  The majority gave no separate consideration to breach of contract – which was important because there was a contractual 12 month notice provision.  

Held that the majority decision on unfair dismissal was in error of law; their conclusion should not have been based on the lack of notice; and they failed to consider conduct as well as capability.  On the ET’s findings of fact, the dismissal was fair.  The Tribunal had not considered the breach of contract claim; if they had done they could only have concluded that dismissal was justified both on the basis of breaches of the express term of the contract of employment and on the basis of the implied term of trust and confidence which imposed obligations on both employee and employer alike.  Appeal allowed.

HIS HONOUR JUDGE BURKE QC

1.	This is the appeal of MPI Limited (“MPI”) against the decision of the Employment Tribunal sitting at Bedford, chaired by Mr Plenderleath and sent to the parties with written reasons on 21 August 2006.  By that decision the Tribunal, by a majority consisting of the two lay members, Mr Dibnah and Ms Cooke, found that the claims of the employee, Mr Woodland, that he had been unfairly dismissed and dismissed in breach of contract succeeded.  MPI challenge both aspects of the majority decision in this appeal.  At the Tribunal both parties were represented by counsel.  Before the EAT today MPI have been represented, as they were before the Tribunal, by Mr Algazy of counsel.  Counsel who appeared for Mr Woodland before the Tribunal, Mr McCombie, drafted Mr Woodland’s Answer to the Notice of Appeal and his skeleton argument; but two weeks ago the EAT was informed by Mr Woodland’s solicitors that they were no longer acting and that Mr Woodland would be acting in person.  Today Mr Woodland has appeared and put oral submissions before us to which we will refer later in the course of this judgment.  We are grateful to him and to Mr Algazy for the help that they have given us.

The facts
2.	The nature of the arguments before us has been such that the facts found by the Tribunal need to be set out in a little detail.  MPI carry on business as recruitment consultants operating or specialising in the engineering, electronic and aviation industries.  They have a number of branches in the UK; one of them was, originally, in Milton Keynes.  

3.	Mr Woodland was first employed as a trainee recruitment consultant at the Milton Keynes branch in 1987.  The branch relocated to Newport Pagnell in 1995.  Before that change, in about 1990, the branch manager of the Milton Keynes branch was Mr Payne.  He was establishing a rival business of his own, as the Tribunal found, and, with Mr Woodland’s knowledge, was diverting customers to his own new business.  It was Mr Woodland’s intention, when Mr Payne left MPI, to go with him; but in order to limit the damage MPI secured Mr Woodland’s continued employment by giving him a substantial pay rise and a car and by making him manager of the Milton Keynes branch.  Mr Woodland has told us today that he played no greater part in this episode than, as a junior, doing what he was told to do by Mr Payne.  The facts which we have set out are summarised from those found by the Tribunal at paragraph 6(1) of their reasons.

4.	In 1993 Mr Woodland’s responsibility for dealing with cash and signing cheques was removed from him when he was disciplined for stealing from his employers.  Mr Woodland has told us today that he did not do so, that he did not pay moneys back to his employers in respect of having done so and that there was no disciplinary hearing.  The Tribunal, at paragraph 10(4) however, found the facts as we have set them out.  The Tribunal, at paragraph 10(3), found that Mr Woodland’s evidence was unreliable in many instances and had on occasions been dishonest and that, where his evidence differed from that of MPI’s witnesses, they preferred the evidence of those witnesses.  

5.	In 1997 allegations of sexual harassment were made by a job applicant who had been interviewed by Mr Woodland.  The allegation, the Tribunal found at paragraph 6(3), was that Mr Woodland had offered her a job in return for sexual favours.  Mr Woodland denied the allegation.  The Tribunal made no finding as to whether it was or was not true.  

6.	In 2001, despite his chequered history, Mr Woodland was made a director of MPI, it having been decided that the manager of each branch should be a director.  His contract of employment at the time of his dismissal specified that he was entitled to a notice period of 1 year.  The Tribunal found, at paragraph 6(4), that as branch manager and director Mr Woodland was responsible for increasing customer numbers but that, between 2001 and 2005, client numbers at the branch fell from about 140 to about 62 to 65.  The Tribunal found this to be partly due to the loss of a major customer; but the branch was the worst performing branch in the business and was declining at a time when MPI’s general turnover increased from 8.1 million in 2001 to 13.7 million in 2005, an increase which, making no allowance for inflation, amounts to one of about 66%.  

7.	In January 2004 Mr Woodland was given permission to leave the office early, at 3.30pm, on two occasions per week in response to his request that he should be able to pick up his daughter from school.  MPI subsequently concluded, and it was not in dispute before the Tribunal, that Mr Woodland had been using this extra time away from work or part of it to work as a part-time instructor at a local gym.  There was a disciplinary hearing in November 2004, the outcome of which was that Mr Woodland agreed that he would not work for the gym before 5pm on weekdays.  MPI regarded the letter setting out these arrangements as a formal warning.  Mr Woodland did not so regard it.  Mr Woodland told us that, since he had been given permission to leave early to pick up his daughter from school and did pick up his daughter from school, he took the view that he was then acting in his own time when, having done so, he then went off to work at the gym during a period in which, had he not been given the permission we have described, he would have been required to work for his employers.  Having delivered his daughter home, he tells us, he did not go back to work but instead went to work at the gym.

8.	In 2005 MPI introduced a new computer based system called Marsh@Work for the recording and authorising of holiday.  The Tribunal found, at paragraph 6(8), that Mr Woodland was aware that this system had been introduced and was aware of its purpose.  They found, at paragraph 10(10), that he was well aware that he was required to use that system in order to obtain authorisation for holidays.  

9.	In 2005 the performance of the branch did not improve.  Accordingly Mr Pearson, the managing director, wrote to Mr Woodland on 8 August 2005, calling him to a disciplinary meeting on 23 August 2005.  Mr Woodland was told in that letter that the branch losses were unsustainable, that he had failed to develop the business or improve its performance and that his employment was at risk.  Because he received no reply, Mr Pearson rang the branch on 15 August to speak to Mr Woodland, only to discover that Mr Woodland had been on holiday since 5 August, was not expected back until 22 or 23 August, was then, on 24 August, going away again and would not be back until 5 September.  It was not in dispute that Mr Woodland had not given any information about or sought any authorisation for those holidays, through the new system or otherwise.  Mr Pearson also learnt that Mr Woodland’s deputy in the branch was also on holiday, in her case with authorisation, at the same time and that the office had, therefore, been left staffed only by two comparatively junior employees.  Mr Woodland was told that these matters would also be dealt with at the forthcoming disciplinary hearing on 23 August.  

10.	At the conclusion of that hearing Mr Woodland was summarily dismissed for his failures of performance in relation to the branch and for taking unauthorised leave.  The former was said to be a serious and persistent breach of his contract; the latter was said to be gross misconduct and wilful neglect of his duties.  The dismissal letter was, no doubt, couched in those terms because of the provisions of Mr Woodland’s employment contract to which we will refer later.  Mr Woodland’s appeal against this decision was rejected. 

11.	Finally in this history the Tribunal referred to the fact that, on 27 March 2006, Mr Woodland circulated an email to most of MPI’s employees giving confidential details of the salary and pension arrangements of 36 of MPI’s workforce.  The Tribunal found that, contrary to Mr Woodland’s assertions, he had taken that step; he had decided to do so on the spur of the moment and while in a pub drinking; he had scanned a copy of a schedule of wages into the computer machinery at his new employer’s premises some two or three weeks earlier.  The information must have been taken by Mr Woodland, it is apparent, before he left MPI; and he has confirmed to us today that that is indeed what happened.

The issues
12.	The Tribunal identified, at paragraph 7 of their reasons, four issues which arose for determination.  They were:- 
(i)	What was the reason or, if more than one, the principal reason for the Claimant’s dismissal?
(ii)	Was it a potentially fair reason for dismissal within Section 98(2) of the Employment Rights Act 1996?
(iii)	Having in mind Section 98(4) of the Employment Rights Act 1997, was dismissal a reasonable response by the Respondent?
(iv)	If the dismissal was for conduct, did the Respondent have a genuine belief of the Claimant’s guilt, based on reasonable grounds after making reasonable enquiries?

It should be noted that this identification of the issues did not include any issue which arose under Mr Woodland’s contract of employment, namely whether the matters for which he was disciplined or, alternatively, those matters together with his past conduct, justified MPI in summarily dismissing him.  

The Tribunal’s decision
13.	The Tribunal found, at paragraph 10(3) of their reasons, that Mr Woodland’s evidence had been unreliable in many instances and on occasion dishonest, as we have earlier recorded.  They found that Mr Woodland’s conduct had been called into question on several occasions during the course of his employment.  They found as a fact that he had admitted stealing in 1993 and made recompense to MPI, that he had worked in the gym contrary to the terms of his contract of employment in 2004, but that the outcome of the disciplinary hearing about that matter was not a warning.  They found, in relation to the more recent matters, in paragraphs 10(8) to 10(13) of their reasons, as follows:-

“10.8	Between 2000 and 2005 the Claimant’s performance was unsatisfactory. The Newport Pagnell office for which he was responsible was not performing satisfactory and the Claimant made no efforts to improve the situation or if he did make any effort it was unsuccessful.
10.9	Throughout his time as manager the Claimant’s record of dealing with staff was unsatisfactory.  He failed to motivate staff and had a poor level of staff retention. In particular he would blame his staff for the unsatisfactory performance of the office and was unwilling to accept that the performance of the office was his responsibility.  His relation with Ms Barnes was particularly bad.
10.10	In 2005 the Respondent introduced a new system for obtaining authorisation for holidays, known as Marsh@Work.  The Claimant was well aware that he was required to use that system in order to obtain such authorisation.
10.11	The Claimant failed to obtain such authorisation for holidays between 5 and 19 August 2005 and 25 August to 2 September 2005.  This failure was a clear breach of a lawful instruction.
10.12	There was no procedural irregularity in the disciplinary process which was conducted in a fair and proper manner.
10.13	The Tribunal is satisfied that in any situation where the Claimant perceived that his interests conflicted with those of the Respondent, he would put his interests first.  By way of example we point to the Claimant’s failure to have proper regard to the company rules, in particular in relation to working hours and booking holidays and we find that it was an act of irresponsibility to leave Michelle Kempson in charge of the Newport Pagnell office while the Claimant and Ms Barnes were on holiday.  Such actions were not only irresponsible as far as the Respondent is concerned but was also unfair to the employee concerned.  A further example of the Claimant’s disregard for the Respondent’s interests is his failure to address and resolve problems with staff within the branch.”

The majority further found that it was clear to Mr Woodland what was required of him in his performance of his duties.  He had 15 years of experience in the post and, they said, was well aware of what was needed.  They rejected his argument that he did not have access to the relevant financial information and that he was not informed of targets.  Mr Woodland has repeated to us his case that no targets were set, that no strategy existed and there were no appraisals; but it is clear that the Tribunal, at paragraph 10(14), rejected the thrust of his case in that respect.  

14.	The majority said, at paragraph 10(14), that their view was that the reason for dismissal related to capability i.e. Mr Woodland’s inability to manage the branch successfully and produce the desired results.  They went on to say this, at paragraphs 10(16) to 10(18):-

“10.16	The majority of the Tribunal find however that applying the criteria in Section 98(4) of the 1996 Act dismissal was not a reasonable response by the Respondent. While reminding themselves that they should not substitute their views for those of the Respondent the majority view is that instant dismissal was not within the band of reasonable responses. Although a need to improve his performance had been brought to the Claimant’s attention, no formal warning had been given to him.  Dismissal on notice would have been a reasonable response.
10.17	The majority of the Tribunal are not satisfied that matters had reached the stage where the Respondent’s trust and confidence in the Claimant had vanished. There is no impression from notes of interviews, letters or any other document that this is the case. No witness for the Respondent raised trust and confidence as an issue.
10.18	Given these findings the majority view is that the dismissal was unfair but the Claimant’s conduct makes it is just and equitable to reduce the basic award by 75% and the Tribunal further finds that the Claimant’s actions caused or contributed to his dismissal and therefore his compensatory award should be reduced by the same percentage.”

15.	The Chairman, dissenting, said at paragraphs 10.19 to 10.21:-

“10.19	The minority judgment is that of the Chairman.  While I agree with the findings of fact set out above, I disagree with the majority conclusion that the reason for the dismissal was capability.
10.20	My view is that the Claimant’s conduct throughout his employment was sufficient to and did in fact finally destroy the Respondent’s trust and confidence in him.  In my view his taking unauthorised holiday and in particular leaving Michelle Kempson in charge of the office was the last straw.
10.21	In consequence I find that the reason for the Claimant’s dismissal was some other substantial reason within Section 98(2) of the 1996 Act and in consequence, instant dismissal was a reasonable response.  I find that the Claimant was not unfairly dismissed.”

The result was that the unfair dismissal claim succeeded but subject to a reduction of compensation of 75% for contributory fault.  

16.	Normally a breach of contract claim based on wrongful dismissal is rightly regarded by the Employment Tribunal and by the parties before the Tribunal as subsidiary to an unfair dismissal claim.  But where the employee has a much longer period of notice than is usual or where the compensation for unfair dismissal is reduced substantially for contributory fault, the breach of contract claim may be or may turn out to be substantially more important in money terms than the unfair dismissal claim.  This is, at least potentially, such a case.  Remedies have not yet finally been decided; the figures have not been established; but whether the Tribunal or the majority of the Tribunal appreciated that the 75% reduction for contributory fault could not apply to compensation for breach of contract is not at all clear from their decision.  

17.	After paragraph 10.18, in which the Tribunal addressed dismissal for capability, the majority made no reference at all to the breach of contract claim and the breach of contract claim is only referred to again in paragraph 11 of the reasons which reads as follows:-

“11.	In view of these findings the Tribunal finds that the Claimant was unfairly dismissed although75% to blame for his dismissal.  As the Respondent was not therefore entitled to terminate his contract without notice, his claim for breach of contract succeeds.”

The grounds of appeal
18.	Mr Algazy puts MPI’s appeal forward on six grounds, four relating to unfair dismissal and two relating to breach of contract.  The four grounds relating to unfair dismissal can be summarised as follows:-

1) The majority of the Tribunal erred in law in paragraph 10.16 of the reasons in finding the dismissal to be unfair on the basis that although it would have been fair to dismiss for incapability on notice, it was not fair to do so summarily - the “summary dismissal ground”. 
2) The majority failed to take into account Mr Woodland’s acts with regard to his unauthorised holiday - the “unauthorised holiday ground”.
3) The majority substituted their view for that of the employer - the “impermissible substitution ground”.
4) The majority’s conclusion that the dismissal was unfair was perverse - the “perversity ground”.

19.	The two grounds relating to breach of contract can be summarised as follows:-
1) The Tribunal erred by confusing unfair dismissal with breach of contract and failed to consider whether summary dismissal was justified under the contract of employment - the “erroneous approach ground”.
2) The majority conclusion was perverse - the “perversity ground”.

The summary dismissal ground
20.	It has long been an established principle of the law of unfair dismissal that whether the dismissal was summary or on notice is irrelevant to the issue of the fairness of the dismissal, save in so far as it may bear on the credibility of witnesses.  What the Tribunal have first to decide, in a straightforward unfair dismissal claim which does not involve any question of automatically unfair dismissal is what was the reason for the dismissal and, if a reason is identified, was that reason a reason which falls within section 98(1)(b) of the Employment Relations Act 1996.  If a reason is identified and the Tribunal conclude that that reason falls within section 98(1)(b), then the Tribunal must go on to consider whether it was reasonable to treat that reason as a sufficient reason for dismissing the employee, pursuant to section 98(4) of the Act.  If it was not reasonable to dismiss for that reason the dismissal was unfair.  If it was reasonable to dismiss for that reason the dismissal was fair.  Whether the dismissal was summary or on notice is not a consideration which enters into this framework of statutory consideration.  

21.	This principle was first authoritatively established early in the history of the unfair dismissal jurisdiction, before the establishment of the EAT and that of its predecessor the National Industrial Relations Court, by Mr Justice Phillips sitting in the High Court, to which appeals from Tribunal decisions at that time went, in Treganowan v Robert Knee & Co Ltd [1975] IRLR 247.  Miss Treganowan was summarily dismissed because of a clash of personalities with other women in the office.  The Tribunal rejected her complaint of unfair dismissal.  They found that dismissal was in the circumstances the only reasonable course open to the employer; but they also found that the employers had been wrong to dismiss her summarily and should have given her six weeks notice.  They said they had no power to award any sum by way of compensation but appeared to recommend that the employer should consider making some payment to Miss Treganowan.  (It should be remembered that at that time the Employment Tribunal had no contract jurisdiction).  On Miss Treganowan’s appeal the only ground of appeal which was pursued was that the Tribunal should not have found the dismissal to have been unfair because she was not given notice or wages in lieu of notice.  

22.	Phillips J described the issue thus raised as a point of some general importance.  He analysed the relevant statutory provisions, then to be found in paragraph 6 of schedule 1 of the Trade Union and Labour Relations Act 1974 which, for present purposes, was in the same terms as section 98 of the 1996 Act and concluded, at paragraph 14, as follows:-

“Mr Bennett first argued that the fact of dismissal without notice was itself a circumstance within sub-para. (8).  This cannot, I think, be right.  The circumstances are the background against which the dismissal must be judged and so cannot include the fact of the dismissal.  A better way of putting it, and that which he finally preferred, is that the words ‘for dismissing the employee’ are not limited to the bare fact of dismissal but include the nature of the dismissal.  So, he says, the Tribunal has, in a case such as the present, to determine whether the employer acted reasonably in treating ‘the reason’ as a sufficient reason for ‘dismissing the employee without notice’, not merely as a sufficient reason for ‘dismissing him’.”

At paragraph 17 he said this:-

“The background of the Act of 1974, and of the Industrial Relations Act 1971, is of importance.  The concept of unfair dismissal, first introduced by the Act of 1971, is quite different from the common law action for wrongful dismissal.  The former in effect confers on the employee a quasi-property in his employment, whereas at common law, provided proper notice is given, an employee has no right to retain his employment or to be compensated if he is dismissed.  Accordingly the essential subject matter, so far as sub-para. (8) is concerned, is the fact of dismissal.  The question is: is it unfair, rather than is it wrong.”

And he continued at paragraph 19 in these terms:-

“If Mr Bennett is correct in his submissions, it would follow that an Industrial Tribunal would have jurisdiction in a case where the only ground on which a dismissal was said to be unfair was that the period of notice was too short.  In other words, in a simple case of dismissal with insufficient notice, the aggrieved party could choose whether to sue in the courts for damages or to apply to a Tribunal for compensation.  There is no reason in principle why an Industrial Tribunal should not have such jurisdiction conferred upon it.  The present case is a good example of the inconvenience resulting from the unfortunate fragmentation of remedies, and jurisdictions, which ensues from the creation of statutory tribunal with particular jurisdictions. That this difficulty was foreseen may be inferred from the terms of s.113 of the Industrial Relations Act, 1971, which empowered the Lord Chancellor to confer jurisdiction on Industrial Tribunals in respect of claims for damages for breach contract of employment: but this power has not been exercised and, when the Industrial Relations Act was repealed, this section was not re-enacted in the Trade Union and Labour Relations Act 1974 or, so far, elsewhere. Thus, whilst there might be a good deal to be said in favour of conferring general jurisdiction on Industrial Tribunals in respect of matters relating to employment, this has not yet been done. It is also pertinent to note that, following the decision of the National Industrial Relations Court in Norton Tool Co Ltd v Tewson (above) and in Everwear Candlewick Ltd v Isaac [1974] ICR 525, the basis upon which compensation for unfair dismissal is assessed by Industrial Tribunals is not the same as that upon which courts assess damages for wrongful dismissal, inasmuch as the former do not, while the latter do, give the old employer credit for money earned with other employers during the period of notice.  At the present, therefore, the body of law relating to unfair dismissal is distinct form, and is not to be confused with, that relating to wrongful dismissal.  In these circumstances I find nothing in the background of the Act to persuade me to give to sub-para. (4) a meaning (even if it were proper to do so) different from that which it appears to me to bear when read according to its tenor.  In my judgment, a Tribunal has to say to itself, ‘This man was dismissed in such-and-such circumstances.  The reason was so-and-so.  Have the employers satisfied us that they acted reasonably in treating that reason, in those circumstances, as a sufficient reason for dismissing him?’ If ‘No’: unfair dismissal, and the complaint succeeds.  If ‘Yes’: the complaint fails.  They are not concerned for this purpose with whether the dismissal was summary or whether the notice was long enough.  That would be relevant for a Court to consider in determining whether the dismissal, whether unfair or not, was wrongful.  Of course, the fact that the dismissal was summary, and the notice was short, may be a fact that the Tribunal would want to take into account in determining other questions of fact, for example what was the real reason for the dismissal, who is to be believed and so on.  In my judgment, the Tribunal directed themselves in accordance with the statute and committed no error of law.  Accordingly the appeal fails and must be dismissed.”

23.	In BSC Sports & Social Club v Morgan [1987] IRLR 391 Mr Morgan was instantly dismissed when, after repeated warnings, he failed in his capacity as club steward of the employer’s club to maintain an adequate standard of hygiene.  The Tribunal found that the employers were fully justified in dismissing him for misconduct but that the fact that his dismissal was summary rendered it unfair.  The EAT, presided over by Sir Ralph Kilner-Brown, allowed the employers appeal, following Treganowan.  At paragraph 6 the EAT said this:-
“It seems to us that the factor of summary dismissal can only be considered in the context of whether or not it was reasonable to dismiss at all.  In other words a summary dismissal may be evidence of a failure to show that the dismissal itself was a reasonable response.  No doubt there have been many occasions when Industrial Tribunals have relied on a summary dismissal as a material consideration when assessing the reasonableness of the act of dismissal.  If this Industrial Tribunal had approached the case in that way we should not have been able to interfere.  However, it seems to us that applying what was said in all three of the cases to which reference has been made it was an error in point of law to say that it was reasonable to terminate the employment and that the fact of instant dismissal made it unfair dismissal.  Once a decision to dismiss has been reached on reasonable grounds, it is for the employer to decide whether or not to dismiss with notice or summarily.  If he does so without notice the employer may be open to an action for wrongful dismissal.  It seems to us that in preserving the remedy of wrongful dismissal the legislature recognises that there are cases in which instant dismissal, though not unfair, is nevertheless wrongful.”

24.	Mr Algazy submits that in this case the majority of the Tribunal have, at paragraph 10.16, made precisely the error of law which was made by the Tribunal in BSC Sports and Social Club.  The skeleton argument put forward on behalf of Mr Woodland upon which Mr Woodland has relied in his submissions to us seeks to distinguish that decision and the decision in Treganowan from this case on the basis that the principle thus established applies to a case where it has been shown that the decision to dismiss has been reasonably reached and that, in the present case, MPI never put capability forward as a ground for dismissal and gave no formal warning to Mr Woodland in respect of his performance and that the Tribunal thus decided or must be taken to have decided that there were not reasonable grounds on which to dismiss or the majority must be taken so to have decided.  

25.	We do not accept these submissions.  The majority said, in paragraph 10.16, in the clearest possible terms “dismissal on notice would have been a reasonable response”; that is an express finding that there were reasonable grounds for the dismissal.  It is clear to us that the majority have indeed, as Mr Algazy submits, fallen into error, as did the Tribunal in BSC Sports and Social Club and as the Tribunal did not, but on appeal were criticised by the Appellant for failing to do, in Treganowan.  The principle established by those two decisions ought to have been applied; and the majority ought in law, having reached the conclusion that it was reasonable and fair to dismiss, to have found the dismissal to have been fair irrespective of the fact that they believed that the dismissal should have been on notice and not summary, and even though that would have been the conclusion of a chain of reasoning which differed from that of the Chairman.  

26.	For this reason alone, the finding of unfair dismissal cannot stand.  The factual conclusions of the Tribunal were such that the dismissal ought to have been unanimously held to have been fair.

The unauthorised holiday ground
27.	We do not need, in the light of our conclusion on the previous ground, to dwell on this ground at any length; but it is, in our judgment, important to deal with it and to point out that it is manifest, firstly, that the events relating to the unauthorised holiday were central to MPI’s case and, secondly, that they formed a major part of the subject matter of the disciplinary hearing on 23 August 2005 and constituted one of the two reasons given by MPI for the dismissal which followed those proceedings.  Those events could not, in our judgment, have come within the reason of capability.  

28.	The Tribunal were entitled, as they did in paragraph 10(14), to regard Mr Woodland’s inability to produce the desired results at the branch as going to incapability and dismissal for that inability as for a reason related to capability; but on the facts as found, that could not have been the only basis for the dismissal; the events relating to the unauthorised holiday must have related either to conduct or to some other substantial reason, that is to say the conduct and capability of Mr Woodland together with all of what had gone on in the course of his history.  It follows that the majority, when they reached conclusions as to the reasons for dismissal and the fairness of the dismissal, can be seen from their reasons to have failed to take the unauthorised holiday events into account.  It is said on behalf of Mr Woodland that those events are dealt with earlier in the judgment, for example at paragraph 4 and at paragraphs 10(1) to (12); but paragraph 4 is only a setting out of MPI’s case in summary form; and paragraphs 10(1) to(12) consist of findings of fact.  While of course we recognise that the decision must be read as a whole, it is clear, in our judgment, that when the Tribunal came to consider what was the reason for the dismissal and thereafter to take the next step of considering whether it was fair to dismiss for that reason, they appear to have left out of their consideration the episode relating to the unauthorised holiday.  It is true that, in paragraph 10(17), the majority said that they were not satisfied that matters had reached the stage at which MPI’s trust and confidence in Mr Woodland had vanished; but they were, in that paragraph, when read in the context of 10(14) to 10(18) as a whole, still only referring to what they saw as matters going to incapability and not to matters of misconduct.  Thus the majority, in this respect also, erred in law.  The question of trust and confidence arose because of the alternative way in which MPI put their case, namely that there was an accumulation of misconduct and incapability on Mr Woodland’s part which amounted to a breach of the implied term of trust and confidence and entitled MPI to treat the contract as repudiated and to dismiss.  

29.	Mr Algazy has, on a hint from us, not pursued the third and the fourth grounds under the unfair dismissal head.  It has not been necessary for him to do so in the light of the views which we have already expressed; and it is not necessary for us to consider them.
30.	We turn therefore, to the breach of contract claim having reached the conclusions on the unfair dismissal claim that the finding of unfair dismissal cannot stand and, in the light of the clearly expressed conclusions of the majority that dismissal on notice would have been a reasonable response, that the Tribunal ought, in law, to have found that the dismissal was fair.

The breach of contract claim
31.	We said earlier that the Tribunal, in their exposition of the issues at paragraph 7 of their reasons, did not refer to the breach of contract claim; and although they referred in passing to the one year period of notice in Mr Woodland’s contract of employment at paragraph 1 of their reasons where they set out Mr Woodland’s case that the allegations of misconduct were a pretext for getting rid of them, they do not anywhere refer to the express provisions of paragraphs 11(1)(a) and 11(1)(b) of Mr Woodland’s contract of employment, which provided as follows:-

“11(1)	This agreement may be terminated forthwith by the Company without prior notice if the director shall at any time:-
(a)	commit any serious or persistent breach of any of the provisions herein contained
(b)	be guilty of any grave misconduct or wilful neglect in the discharge of his duties hereunder”

32.	The Tribunal ought to have directed themselves to consider for the purpose of the contract claim, without having to have in mind the reasons specified in section 98(1) of the Employment Relations Act 1996, whether MPI had proved that Mr Woodland had been guilty of “any serious or persistent breach of the provisions herein contained” i.e. set out in his contract or of any grave misconduct or of wilful neglect of his duties.  Mr Woodland’s obligations under the contract of employment were, at least in so far as they were expressed, set out in paragraph 2.  They included the following:-

“2.	(b) he should comply with all resolutions regulations and directions given by the board
(c) he should devote substantially the whole of his time and attention during business hours to the discharge of his duties
(d) he should not be entitled to receive remuneration for work performed outside his normal hours
3.	Should not without the consent of the company be engaged or interested in any capacity at any other business other than the business of the company.”

Furthermore MPI argued before the Tribunal in relation to the contract claim, as they had done in relation to unfair dismissal, that Mr Woodland’s actions over the years amounted to an accumulation of conduct which broke the implied term of trust and confidence and that they were entitled to treat the contract of employment as repudiated.  

33.	While not historically (one knows not what may happen in the future) often argued on behalf of employers, it is established law that the implied term the existence of which was finally established in the case of Malik v Bank of Credit & Commerce International [1997] ICR 606 applies so as to impose obligations on the employee as much as it does on the employer.  In Malik Lord Steyn said at page 621(b):- 

“The employer’s primary case is based on a formulation of the implied term that had been applied at first instance in the Court of Appeal, it imposes reciprocal duties on the employer and employee.”  

He went on to define the term which had been recognised, but had been the subject of some debate, for many years beforehand in this way, using the definition in Woods v W M Car Services [1981] ICR 666:-

“The employer must not without reasonable and proper cause conduct itself in a manner calculated and likely to destroy or seriously damage the relationship of confidence and trust between employer and employee.”

34.	In the case of Mark Huggins v Micrel Semi-Conductor (UK) Limited EAT/0009/04 the EAT, presided over by HHJ McMullen QC, held that the concept of a cumulative breach of that implied term which may constitute a repudiation of a contract of employment applies to a case in which the employer has dismissed the employee and relies on such a repudiation and not only to the more familiar case in which the employee claims that, as a result of such repudiation on the part of the employer, he has been constructively dismissed.  In paragraph 31 of the EAT’s judgment in that case the EAT, having set out the implied term, said:-

“and of course the mirror image of that applies in respect of relations where it is breakdown caused by the employee.” 

and in paragraph 33 went on to say:-

“We reject as wrong in principle the submission that any conclusion based on some other substantial reason must be wholly out-with the issues of conduct.  It is probably simplistic but at least it does have some reality in our judgment for a decision to be based on a breakdown of trust and confidence caused by the conduct of the employee.”

(It was, incidentally, from that case that Mr Algazy derived the principle on which he relied in submitting that the reason for the dismissal in this case could be regarded as some other substantial reason.)  

35.	Although Mark Huggins was an unfair dismissal case, the legal principle involved applies equally in our judgment to a breach of contract claim.  The implied term set out at paragraph 31 of Huggins and derived from Malik applies to both employer and employee.  The Tribunal, therefore, had to consider, in addition to whether the matters for which Mr Woodland was brought before the disciplinary hearing in August 2005 of themselves justified a summary dismissal, whether those matters together with what went before them in Mr Woodlands history amounted to a repudiation of the implied term to which we have referred.  In our judgment, the Tribunal majority did not consider any of those matters.  We have already set out how the majority erred in concluding that the reason for dismissal was only that of incapability; in so doing they looked only at the failure of Mr Woodland to manage the branch successfully and failed to consider, in particular, the misconduct in relation to the holidays.  The Tribunal plainly regarded the events as the holidays as amounting to misconduct; for they said, at paragraph 10(11), that the failure to obtain authorisation for the holidays was a clear breach of a lawful instruction.  Yet when the majority in paragraph 10(14) to 10(16) turned to consider the reason for the dismissal they omitted this or any earlier misconduct and looked only at capability.  

36.	When they dealt with trust and confidence in paragraph 10(17) it is plain, as we have said before in relation to unfair dismissal, that they were also looking only at incapability, that is to say the lack of successful performance on Mr Woodland’s part in his role as manager of the branch.  There is nothing to suggest that the majority looked on any wider basis at the facts before they came to consider the breach of contract claim.  All they said about the breach of contract claim is to be found in the one sentence in paragraph 11 which we have already set out.  Thus they did not consider whether Mr Woodland’s inability to manage the Newport Pagnell branch successfully and produce the desired result amounted to wilful neglect of his duties under his contract, or to persistent breach or otherwise in the discharge of his duties, whether the holiday events amounted to grave misconduct or wilful neglect or whether the earlier history proved not only a breach of the express terms which we have identified but, together with the matters to which we have just referred, amounted to destruction of or serious damage to trust and confidence between employer and employee.  In failing to do so the majority, in our judgment, fell into error of law.  

37.	Mr Algazy went on to seek to argue that the majority conclusion was perverse.  The majority reached their conclusion on the basis of consideration of only part of MPI’s case.  They disabled themselves from reaching a conclusion which can stand in law.  Therefore to examine their decision in terms of perversity is strictly, in our view, not a useful exercise.  However, if the Tribunal had reached the conclusion that summary dismissal was unjustified having had all relevant matters in consideration, we would have regarded that conclusion as a judgment which no reasonable Tribunal could reach and as perverse.  

38.	We are of course only too well aware of the very high hurdle over which an Appellant must pass if he wishes successfully to argue perversity.  A case of perversity must be overwhelmingly demonstrated: see Yeboah v Crofton [2002] IRLR 634; and it is in current times rare indeed for the EAT to allow an appeal on the perversity ground.  However, in this case we have to ask ourselves, having concluded that the Tribunal’s decision on breach of contract was reached in error of law, what is the right step that we should now take.  We could remit the breach of contract claim to the same Tribunal to decide either on the facts as found and on the evidence as given or, if they wish, on further evidence, whether the summary dismissal was lawful or not; or we could take the rare course of deciding for ourselves that, on the Tribunal’s findings of fact, the breach of contract claim must have failed, if properly approached, at the hands of any reasonable Tribunal.  We could only take that approach – and that is why the perversity argument has resonance when we come to consider the effect of our decision that the Tribunal erred in law in approaching the breach of contract claim as they appear to have done - if it is plainly and unarguably the only permissible result, or to put it in another way, had the Tribunal directed themselves to the right questions and answered them only one answer could have been achieved and any answer in favour of Mr Woodland would have been perverse.  

39.	Despite that demanding and stringent test, we are unanimously and wholly clear that, on the facts as found, only one answer to the right questions could have been reached by a reasonable Tribunal, namely, first, that the immediate events which MPI put forward as the reasons for the dismissal amounted to breaches of contract sufficient to justify the dismissal and, secondly, that the conduct of Mr Woodland as a whole was such that those recent events could only be regarded as a last straw which entitled the employers to treat the contract of employment as repudiated and to dismiss Mr Woodland’s summarily.  

40.	We have been through the Tribunal’s findings of fact and do not propose or need to read them in detail.  They found in brief that Mr Woodland’s performance was unsatisfactory over a sustained period from 2000 to 2005.  They found that he made no efforts to improve the situation or, if he did, his efforts were unsuccessful; see paragraph 10(8).  They found at paragraph 10(9) that, throughout his time as manager his record of dealing with staff was unsatisfactory, he failed to motivate staff and had a poor level of staff retention; he would blame his staff for unsatisfactory performance and was unwilling to accept that performance of the office was his responsibility.  They found at paragraph 10(13) that, in any situation where he perceived that his interest conflicted with those of MPI he would put his interests first.  They found at paragraph 10(14) that he was well aware of what was needed in terms of the branches success and had access to what he required to manage successfully.  As to the holidays, they found at paragraph 10(10) that he was well aware that he was required to use the new system in order to obtain authorisation for holidays.  He was a board director and manager of the branch.  His failure to obtain authorisation for two periods of holiday which were in effect back to back and which amounted cumulatively to a lengthy period was a clear breach, they found, of a lawful instruction; and that it manifestly was.  Any Tribunal properly directed, in our judgment, could only come to the conclusion that the conduct which we have described was sufficient,  having regard to the express terms of the contract, to justify summary dismissal.  We take the same view about the accumulation of events so as to establish a breach of the implied term of trust and confidence.  

41.	For these reasons we come to the conclusion that, both in relation to unfair dismissal and in relation to breach of contract, the conclusion of the majority of the Tribunal cannot stand; this appeal must be allowed and a conclusion must be substituted that the dismissal was fair and that the dismissal was not unlawful or in breach of contract.