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The facts in Daughters v Aqua Financial Solutions Ltd

Miss Daughters (“the Claimant”) was the founder of Aqua Financial Solutions Limited (“the Respondent”) and under the terms of her contract she had commenced employment with the Respondent on 22 June 2001. In June 2007 Miss Daughters sold her majority shareholding to Miss Bennett, a friend and client of Miss Daughters’.

On 22 January 2010 the Claimant called Miss Bennett and confessed that she had insulted a client of the Respondent’s that evening. Miss Bennett believed that the Claimant had been drinking and reprimanded the Claimant. The next morning the offended client contacted Miss Daughters and complained to her. Miss Daughters was extremely embarrassed by this. However, the Claimant apologised to the client and the client accepted the apology.

However, the client again met with the Claimant on 23 January 2010. It was clear to the client that the Claimant had again been drinking. The client was concerned about this and was also concerned about their confidentiality and being pressured into a fee agreement that evening by the Claimant. The client again complained to Miss Bennett.

The Claimant was subjected to a disciplinary for gross misconduct. Miss Bennett further believed that there had been an irrevocable breakdown in mutual trust and confidence between herself and the Claimant. The Claimant was dismissed for gross misconduct on 12 March 2010 after a disciplinary hearing on 10 March 2010. The Claimant subsequently complained to the Employment Tribunal on the grounds of unfair dismissal and wrongful dismissal. The Employment Tribunal rejected the Claimant’s claims and the Claimant appealed on the following grounds:

  1. That the Tribunal applied the incorrect test to determine fairness of dismissal by reason of misconduct
  2. That the Tribunal’s finding on genuine belief was perverse
  3. That the Tribunal had failed to give reasons for its finding of genuine belief
  4. That the Tribunal did not adequately consider the reasonableness of the dismissal
  5. That the Tribunal failed to identify how or why it considered that reasonable investigations had been undertaken
  6. That the Tribunal substituted its own view on fairness
  7. That the Tribunal failed to provide adequate reasons for why the Claimant’s conduct justified a finding of gross misconduct
  8. That the Tribunal had failed to adequately consider the issue of third-party pressure in unfair dismissal cases
  9. That the Tribunal had failed to give adequate reasons for its finding against the heading of wrongful dismissal

The law relating to Daughters v Aqua Financial Solutions Ltd (unfair dismissal)

Under the Employment Rights Act 1996 an employee has the right not to be unfairly dismissed. There are two “branches” of fairness in a dismissal:

  1. Substantive unfair dismissal
  2. Procedural unfair dismissal

In order for a dismissal to be substantively fair, a Respondent must:

  1. Conduct a reasonable investigation into the allegations made against the Claimant
  2. Have reasonable belief in the Claimant’s guilt as a result of the reasonable investigation
  3. Have a genuine belief in the Claimant’s guilt

A dismissal will be procedurally unfair if, for example, a Respondent treats the Claimant in an inconsistent manner or if there is a lack of a reasonable investigation or disciplinary procedure.

Substantive and procedural unfair dismissal therefore very much intertwine. However, the Claimant’s case in Daughters v Aqua Financial Solutions Ltd mainly focussed (as can be seen above) on the element of substantive fairness.

The Employment Appeal Tribunal’s decision in Daughters v Aqua Financial Solutions Ltd

The Employment Appeal Tribunal allowed the Claimant’s appeal. It found that the Employment Tribunal had failed to give adequate reasons on a number of the grounds of appeal, including that the disciplinary hearing and appeal did not address serious issues of fact that was in dispute, that the Tribunal had incorrectly discounted the pressure brought to bear by Miss Bennett on the disciplinary hearing, and that Employment Tribunal had not adequately considered the reasonableness of the Respondent’s genuine belief in the Claimant’s guilt. The case was therefore remitted to a fresh Employment Tribunal.

Our thoughts on Daughters v Aqua Financial Solutions Ltd

This case appears to be, prima facie, a situation where on the bare facts the Respondent may be justified in dismissing the Claimant as a result of his or her behaviour. However, it also highlights the problems that can arise if the disciplinary hearing is not competently carried out or there is undue pressure from a third party on the outcome of such a hearing. Employers should ensure that when a disciplinary hearing is conducted that impartial managers (if available) carry out a competent investigation and disciplinary and that there is no third party pressure which could jeopardise a (potentially) fair finding of misconduct.

About Chris Hadrill

Chris is a specialist employment lawyer at Redmans. He specialises in contentious and non-contentious employment matters, including breach of contract claims, compromise agreements and Employment Tribunal cases. He writes on employment law matters on a variety of websites, including Direct 2 Lawyers, Lawontheweb.co.uk, LegalVoice, the Justice Gap and his own blog. Contact Chris by emailing him at chadrill@redmans.co.uk

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