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EAT Decisions sent 12.07.12

What constitutes a breach of trust?

EAT Decisions sent 12.07.12 – What constitutes a breach of trust?


Amongst the cases sent last Thursday 12th July from the Employment Appeals Tribunal includes the case of Mark Sargeant v Thyssenkrupp Elevator Ireland Limited, UD2304/10 whereby the Employment Appeals Tribunal concluded that the actions of the Claimant constituted a “serious breach of trust”.

The UK respondent in this case was engaged in the installation and maintenance of elevators and also had an Irish operation based in Dublin with approximately 35 staff. The claimant had worked in the UK for many years as was General Manager before he was appointed in early 2008 to Managing Director of the Irish operation.

The Claimant’s terms of employment entitled him to two flights home per annum and his family moved to Dublin with him. The Claimant’s predecessor had a company vehicle during his tenure which was a red Saab. Company cars were leased and fuel cards were provided to employees.

The Finance Department in the UK generally processed all invoices and queried some of the Claimant’s invoices and forwarded them to the previous Managing Director. Following a meeting whereby various issues with the claimant were discussed including visiting the UK quite often, the claimant and his wife refuelling both his car and his wife’s car using the company’s fuel card, an investigation was carried out.

On 5th August 2010 a meeting took place with the claimant in Dublin. The restructuring of the business was discussed along with various other matters. The claimant did not dispute the many ferry trips he availed of and contended that it had been difficult for him and for family reasons he had returned home a lot. The claimant initially when questioned about the red Saab said ‘what red saab’ and then admitted that his wife used the car more or less.

It became apparent that the claimant was authorising his own expenses. At the conclusion of that meeting the claimant was suspended with pay. A further investigation was carried out in relation to invoices raised in Dublin and paid by the company concerning invoices raised for car leasing and ferry trips and excessive amounts of fuel. It became apparent that two cars were being refuelled.

A subsequent meeting took place with the claimant again on 23rd August 2010. The claimant openly admitted that he was entitled to things not stated in his contract.He thought he had the responsibility to choose to authorise his own expenses.

The Claimant reported to the CEO who read the report and invited the Claimant to a disciplinary hearing on 31st August 2010. The CEO considered what the claimant had to say at that meeting but considered that there had been a breach of trust. The CEO concluded that the claimant’s behaviour amounted to an act of gross misconduct. He concluded that the relationship between employee and employer had been damaged and the claimant’s employment should be terminated with immediate effect. The claimant was offered a right of appeal but was ultimately unsuccessful.

The claimant contended that his actions in allowing his wife to use the company car were a mistake and also mistakenly thought he was entitled to four trips to the UK per annum instead of two trips. In addition the Claimant contended that his unblemished record and length of service should have been taken into account.

Determination:

In considering the evidence the Tribunal had regard to the claimant’s long service, excellent record and to the difficulties the Claimant had to face in managing the business in Ireland, with less support than he might have expected.

On the other hand the Tribunal finds that the claimant’s conduct in relation to the red Saab car which he gave his wife exclusive use for a long period (including the use of a company fuel card) amounted to a serious breach of trust and was “a substantial ground justifying the dismissal”.

The overuse of the claimant’s allowance for family trips back to the UK by itself would not be so serious if taken in isolation. However, taken in conjunction with the matters affecting the red Saab car, this adds to the totality of the case.

The claim under the Unfair Dismissals Acts, 1977 to 2007 fails.

Legal Commentary

“[A]s a matter of principle a contractual term of mutual trust and confidence…should be implied into each contract of employment in this jurisdiction by operation of law” (Per Laffoy J. in Cronin v Eircom Limited [2007] E.L.R. 84 at 103.

The implied duty of mutual fidelity, trust and confidence in the employment relationship has been the subject of much litigation in both the UK and Ireland in recent years. The judgements in Berber v Dunnes Stores [2007] E.L.R. 1 and Cronin v Eircom Limited [2007] E.L.R. 84 highlight some of the principles in relation to this innovative duty.

In the Berber decision Laffoy J. in relation to the breach of contract claim found that it was an implied term of the contract that the defendant would maintain mutual trust and confidence and that “the manner in which the defendant dealt with the plaintiff in the knowledge of the precarious nature of his physical and psychological health viewed objectively amounted to aggressive conduct. It was likely to seriously damage the employer/employee relationship and it did so. Accordingly, the defendant breached its obligation to maintain the plaintiff’s trust and confidence”.

The scope of the duty was further expanded upon in Cronin whereby Laffoy J confirmed that the mutual duty of trust and fidelity accepted in the UK decision of Mahmud and Malik v BCCI [1998] A.C. 20 forms part of Irish law.

It would appear that there is significantly more potential for this duty to be expanded upon in future years however what it is clear is that employers and employees alike must not only be mindful of the strict terms in the employment contract but also the vast implications of the duty of fidelity trust and confidence which both parties arguably owe to each other.