Veitch Penny LLP - Exeter | Crediton, Devon

Case

East Lancashire Coachbuilders Ltd v Hilton
Employment Appeal Tribunal - (24 August 2006)

Issues

(1) Disciplinary proceedings;
(2) Reason for dismissal
(3) s. 98 Employment Rights Act 1996

Facts

Mr Hilton was a director and joint managing director of East Lancashire Coachbuilders, a company which manufactured buses and coaches. He had worked for the company for more than 40 years. The remaining directors were in the process of buying 50% of the shares in the company in a management buyout. Mr Hilton had a poor relationship with the other directors, who wanted him to cease as managing director and become development director instead.

An issue arose with an expense claim he had submitted. Mr Hilton would use a personal credit card for his business expenses and then marked the statements to show the items he claimed back. He had paid for flights for his wife who had accompanied him on business and he had subsequently claimed it as a business expense. His reimbursement cheque was paid to his wife who also worked at the company. Shortly afterwards he was asked to step down as managing director and take the role of development director. He refused. No mention of the expenses’ issue was made at that time, although the directors were aware of it.

A month later he was invited to a disciplinary meeting to discuss the irregularity with expenses, his alleged refusal to submit expenses in the correct manner and having his expenses claim countersigned by a subordinate. Mr Hilton was subsequently dismissed for gross misconduct. His internal appeal was unsuccessful.

At tribunal his claim was successful. The tribunal found that the dismissal was “opportunistic”. The principal reason for the dismissal had not been Mr Hilton’s conduct, but because the other directors did not want him to stay, and it would have been expensive for him to be dismissed without cause because he was on a three year rolling contract at a salary of £90,000 per year. The tribunal also found that there had been unfairness in the conduct of the appeal. The tribunal went on to make a deduction of 40% in both the basic and compensatory awards to take account of the fact that Mr Hilton had brought about the disciplinary by his own actions.

The company appealed.

Decision

The Employment Appeal Tribunal (EAT) upheld the tribunal’s decision. It found that there was evidence to suggest that the dismissal had been opportunistic and was designed to facilitate a “no cost departure” of a senior executive. It concluded that had the relationship between the directors been normal, then he would not have been dismissed. It was also wrong for a director to deal with the appeal when he had a vested interest in the outcome.

Comments

In order for a dismissal to be fair, an employer must be able to demonstrate that the reason for the dismissal is one of the potentially fair reasons under s.98(1) of the Employment Rights Act 1996. It emphasises the need for employers to look at a situation as a whole and to ensure any formal procedure is carried out fairly.

Rachel Billen – Associate Solicitor, Commercial Department at Veitch Penny.
Tel: 01392 278381, Fax: 01392 410247, Email: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

This Employment Law Update does not constitute legal or other professional advice and should not be relied on as such. You should take specific advice regarding your circumstances before taking any action based on the information contained within this Update.