Veitch Penny LLP - Exeter | Crediton, Devon

Case

Panama v London Borough of Hackney - Court of Appeal - (17 February 2003)

Issues

(1) Unfair dismissal
(2) Reason for dismissal - reasonableness
(3) Investigations

Facts

The Appellant, Felicia Panama, was employed by the Respondent Council in its housing department. In addition, she was training to be a solicitor, and the Respondent gave her permission to work for a firm of solicitors, namely Bhardwaj & Co.

In May 1998, whilst the Appellant was on maternity leave, Bhardwaj & Co wrote to the housing department on behalf of a Mrs Daramola. The letters referred to Mrs Daramola’s sons being brain damaged. Whilst the letters contained the initials “FP” and dealt with matters within the Appellant’s expertise, another employee had dealt with them in her absence.

When the Appellant returned from maternity leave in June 1999, she was suspended whilst the matter was looked into. The Respondent believed that the Appellant had advised the client and had created a conflict of interest between her respective employments. The Appellant denied writing the letters. The suspension was lifted when it was decided that the conduct did not constitute gross misconduct.

A disciplinary hearing was arranged. However, before the hearing took place, a report was received from an investigator who had met Mrs Daramola. Mrs Daramola had alleged that her sons were not brain damaged, but (an unnamed) solicitor had advised her to say that they were in the correspondence to the Respondent. Later that day, the Appellant was dismissed and the disciplinary hearing did not take place.

The Employment Tribunal found that the Appellant had been unfairly dismissed. The Respondent had acted unfairly in dismissing her before the hearing had taken place. However, the Tribunal also found that, in all probability, even if the hearing had taken place she would have been found guilty of gross misconduct. She would have been summarily dismissed in any event. During the tribunal hearing, the Respondent alleged the Appellant was guilty of fraud conduct by suggesting the false claim to the client. The Appellant claimed she had not written the letters, but the Tribunal, who felt she had been part of the attempt to defraud the Respondent, did not accept this. As a result, the Tribunal found that she was not entitled to any compensatory award.

The Appellant made an appeal to the Employment Appeal Tribunal against the decision not to award compensation. The appeal was dismissed. The Appellant then appealed to the Court of Appeal submitting that due to the lack of direct evidence to demonstrate that the Applicant had written the letter and the lack of notice the Tribunal had erred.

Decision

The Appellant’s appeal was allowed.

The Court of Appeal found that the Employment Tribunal had been incorrect to find that although the Respondent had acted unfairly prior to the hearing, she was not entitled to compensation because she would probably had been summarily dismissed.

The Court of Appeal found that the Tribunal, when asking itself about the result of the disciplinary hearing, should have asked itself:

(1) What would have been the finding of the disciplinary hearing? and
(2) Was the dismissal fair or unfair, with regard to section 98 of the Employment Rights Act 1996, and the three-part test set out in British Home Stores –v- Burchell?

In this case, the dismissal was not fair. The Tribunal acknowledged that the Respondent could be treated as having believed in the guilt of the Applicant (thereby meeting the first part of the Burchell test). However, the second and third components were not complied with i.e. that they had reasonable grounds for the belief and had carried out as much investigation as was reasonable in the circumstances of the case. The Respondent should have sought further evidence in support of the fraud allegation. It was clear that many relevant questions were not asked and even if the disciplinary had continued, there was no reason to think they would have been asked. In any event, given that the issue of fraudulent conduct did not arise until the Appellant’s cross-examination at the Tribunal hearing, it was unlikely that she had had a fair hearing in this regard. In the interests of fairness, following Hotson –v- Wisbech Conservative Club, serious allegations of dishonesty must be put at an early stage, and with sufficient formality to allow for a full response.

Comments

This is a useful decision from the Court of Appeal. It serves to highlight that even if, after Sainsbury’s Supermarkets Ltd –v- Hitt [2003] (which stated that the band of reasonableness applies to whether an investigation was reasonable in the circumstances), the investigation must still fall within that band. This case suggests that there is still an objective yardstick against which the quality of the employer’s investigation can be measured, and reaffirms that it is the tests set out in British Home Stores –v- Burchell [1978].