UD1673/2013

EMPLOYMENT APPEALS TRIBUNAL

CASE NO.

UD1673/2013

CLAIM OF:

Philip Smith

- Claimant

against

RSA Insurance Ireland Limited

- Respondent

under

UNFAIR DISMISSALS ACTS 1977 TO 2007

I certify that the Tribunal

(Division of Tribunal)

Chairman: Ms N. O'Carroll-Kelly BL

Members: Mr R. Murphy

Mr M. O'Reilly

heard this claim at Dublin on 21st January 2015

and 9th March 2015

and 10th March 2015

and 11th March 2015

and 12th March 2015

and 13th March 2015

and 11th May 2015

Representation:

Claimant: Mr. Ciaran O'Mara, O'Mara Geraghty McCourt, Solicitors, 51 Northumberland Road, Dublin 4

Respondent: A & L Goodbody, Solicitors, IFSC, North Wall Quay, Dublin 1

Determination

i. Introduction

The claimant alleges he was constructively dismissed from his employment with the respondent on the 27th November, 2013. He bases the constructive dismissal primarily, but not exclusively, on the three events. First the public way in which he was suspended, second the content of the draft report sent to the Central Bank/ Regulator which said content, he alleges, was outside the terms of reference of the investigation and a personal character assassination and third the coupling of the motor claims, difficulty with the large claims reserves issue. It is his case, that those events lead him to form the view that his fate was pre-decided and furthermore, the consequences were so personally catastrophic that they not only sealed his fate with the respondent but with the insurance industry in general.

The Respondent alleges that the Applicant was the author of his own demise and resigned his position to avoid engaging in the investigation process in relation to serious concerns the respondent had about the process of setting and the actual setting of the large claims reserves. It is further alleged that those serious concerns went unreported for a prolonged period of time due to the regime of fear, bullying and aggression visited on the claimant’s fellow employees by the claimant.

ii) Factual Background Summary

(The Tribunal relies on the transcripts for the purpose of the determination but summaries the evidence as follows:)

a. The claimant.

The claimant commenced his employment with the respondent on the 1st January, 2006. He was known to many in the respondent company and in particular LB, Chairman of the Board, with whom he had worked for a third party in the past. He came to the respondent as a well-liked and respected individual with an excellent track record. He joined the company as operations director, was promoted to the CEO position of the Irish Group in June 2007 having turned down the CEO position for Asia/ Middle East in March, 2007. In September, 2008 he was asked if he would consider the position of Chief Operations Officer for the UK Company which would have elevated him to no. 2 in the UK Company. He declined this for family reasons. In September, 2011 he was asked to consider the CEO position of the Scandinavian section and in May 2013 was asked to consider moving to the Group Executive of the Group underwriting and claims department. He declined that position on two grounds, family and his non desire to move to the technical area of the business. His past background and preferred future role was in general management. In 2013 his role as CEO was expanded to give him accountability for the business in Northern Ireland and in September, 2013 it was announced he was to join the Group Executive. The Respondent during the claimant’s tenure acquired six different businesses in Ireland which served to almost double the company’s market share from 9% to 17% in 2013. That had the result of elevating it from fifth to the largest general insurer in the Country. Profits were strong. In 2008 the Irish branch was domesticated and the Irish company then became a regulated entity. From 2009 onwards prudential regulation of the company came under the control of the Central Bank (the financial services regulatory authority). A local Board of Management was established and appointed to that board were three independent non- executives.

The company was subjected to group internal audits regularly and all (save for the 123.ie) were rated as satisfactory. All audit recommendations were adhered to and there were never any overdue audit actions during the claimant’s tenure.

The company was subjected to external audits also. All of those audits were satisfactory. No material issues were ever identified either by internal or external audit.

The Irish regulatory risk and compliance team enjoyed strong oversight and direction from the Group regulatory risk and compliance team and periodic reviews were undertaken and those reviews were favourable.

There was a strong link between all sections of the Group. Ireland was no different. Ireland enjoyed strong governance and oversight and direction from Group. Ireland replicated Group policy, Group direction and Group controls. The company had a matrix reporting system in place. The claimant reported to the International CEO, SL until 2011 and thereafter to AB. They, SL and AB reported to their matrix superiors. Most matrix superiors held positions at Group, UK or international level. Everyone was subject to the matrix reporting system. Annually, all CEO’s from each Country were obliged to attend a performance review.

The reserving practise in Ireland very much mirrored those within the industry generally. There were also funds set aside to cover any shortfall in the reserves which were known as the IBRN. Then there was a category called “risk or reserve margin”. That margin was the difference between the reserves held by the business over and above the actuarial best estimate. Essentially it was an aggregate of all potential losses both current and future. Between 2007 and 2011 under Group direction Ireland released over €250,000,000.00 in prior year reserves to support group results and to offset underperformance in other jurisdictions. As a result of this practise the Irish reserves were depleted and there were ‘no acorns left for the rainy day”.

In October, 2013 an issue was identified by an internal audit. Up to 2011 there was an informal process in place to review a small number of large claims and their reserves. That process involved the CEO, CFO, CD and a number of other directors in the business. Meetings were informal, no agendas set, no scheduled times and no minutes were taken. At the end of 2011 a more formal process was put in place, “Gateway 50”. The claimant was not involved in this process. He did still hear about cases from discussions with his colleagues from time to time. The regional CEO, SL had cases referred to him from time to time. There were times when reserves less than the amount recommended were posted and this was usually done when some additional information on the file was pending. It was never an issue within the company and in any event the CRO (responsible for regulatory risk and compliance attended the meetings periodically and the CA (chief actuary) attended the meetings periodically and no “red flag” was ever raised. Any concerns could have been raised with any of their matrix bosses or brought to the attention of the CEO at Group level. The Gateway 50 team had a meeting on the 14th November, 2011. In attendance were, Claims Director, Personal Underwriting Director, CRO, CF Commercial Underwriting Director and two claims managers. There are three sets of minutes for this meeting and they are all different.

The claims function, finance function and actuarial function were all subjected to group internal audits. All received a satisfactory rating save for the last audit prior to the claimant’s resignation. Annual external audits were carried out by Deloittes. Those audit results were also rated satisfactory. Between 2011 and 2013 over 30 audits were carried out and no material issues arose. In the spring of 2013 the board engaged Ernst & Young to complete a review of the adequacy of the claims reserves, including IBNR. A “deep dive” into specific large claims was done. The report concluded that for all the traded classes RSA were operating in (motor, home, liability) the best estimate of outstanding claims was out by €1,000,000.00 of an approximate figure of € 400,000,000.00 /€500,000,000.00. a 0.3% difference only.

Professional indemnity was a growing area of concern at that time. A high degree of uncertainty existed in this area and the report suggested a strengthening in the area of approximately €9,000,000.00. The board agreed on €6,000,000.00 only. The Central Bank carried out a review in October, 2013. “Overall this review found that the claims case reserving evidenced in the selective claims data was satisfactory”. There were a number of remedial actions required as set out in the report.

At the end of 2012 the Central Bank carried out an Annual Prism Review. The various risk categories were analysed. The report commented that RSA’s risk/reserve margin was low, 5% compared to a peer average of 11%. They requested a commitment from the board to build the reserves. The board in response commissioned the Ernst & Young review. Motor claims were very much an issue at this time. In August 2013 following various reviews the CEO was informed by the CFO that the motor claims reserves needed to be increased by €17,000,000.00 and a further assessment needed to be done. The CEO reported that to his boss AB. AB indicated that the actual amount required might be in the region of €20,000,000.00 - €40,000,000.00. Some concerns were expressed at this time that the regional actuary in Ireland had not identified this issue earlier. The “blame game” was starting. The expertise of the claims and actuarial teams in the UK were called in to try and establish what level of reserve strengthening was required. The project was overseen by AB. In October, 2013 the Q3 data was published. It showed further deterioration. In Q4 the internal audit manager, raised a “red flag” in relation to the process used to assess reserves for a small number of large claims. He raised that with his boss at UK and Western European level. He was also due to have a scheduled meeting with the Central Bank that week. It was questioned whether that meeting should take place having regard to the unfolding analysis of the motor claims reserve issue. He was keen to proceed so a decision was made to pre-brief the Central Bank prior to that issue. The Chief Risk Officer and his deputy the Compliance Officer went to the Central Bank on the Friday before. Following that meeting the Central Bank contacted the Board Chairman. A meeting was scheduled and at that meeting “Project White“ was set up. Project White was primarily to review the Large Claims process and secondarily to review the Motor Claims area. An Independent expert was to assist in the investigation. PWC were commissioned. The Project White team consisted of AB, PK, and LB. Things moved very quickly from this point onwards. On the 25th October, the CRO and the Claims Director informed the CEO that their licences had been revoked. On the 31st October the claimant was informed by letter that an investigation was taking place and was to be conducted by VE and DW from the London Office. The terms of reference indicated that the large claims issue and the broader reserving analysis were to be joined. The Claimant’s licence was temporarily revoked and his authorities were transferred to AB. He was asked to stay away from the business (albeit, not suspended) and was required to attend at a meeting at a Dublin Hotel, on the 5th of November, 2013. The claimant received this letter on the 3rd November, 2013 having returned from a week’s vacation. The claimant’s solicitor wrote to the respondent on the 7th November, 2013 requesting information in relation to the “serious issues” being investigated and how those “serious issues” pertained to him. A list of questions to be asked at the meeting was requested together with supporting documentation. The respondent responded stating that it would not provide a list of questions and documentation and that it had rescheduled the meeting for 11th November, 2013. The claimant’s solicitors in their reply dated the 8th November pointed out that the terms of reference furnished on the 7th November were different to those sent on the 30th October yet the terms of reference were approved by the board on the 25th October. Which version? On the 8th November the claimant was formally suspended, a precautionary and holding suspension. However his suspension was announced on the national RTE 6 o’ clock news. He was given only a few moments notice. He received messages from family members concerned for his wellbeing. He was given no time to warn them. In the letter of the 8th November, he was informed that the investigation was to be widened to include the Profin (professional indemnity) claims adjustments, the underwriting of non-referable premiums brought forward to which the business is not entitled; reversing pipeline premiums and claims reserves adjustments. These issues were the reason given for the suspension. An announcement was made to the London stock exchange. The reversing pipeline premiums and the underwriting of non-referable premiums brought forward to which the business is not entitled and the profin claims had nothing to do with the claimant. The claimant’s solicitor wrote to the respondent on the 11th November requesting information as to how the new issues set out in the letter of the 8th related to him. They further expressed continued concerns in relation to PK’s role on the investigation committee. On the 12th November that letter was replied to and by it the Claimant was informed that VE and DW were now investigating the respondent’s business accounts, as set out in the letter of the 8th. These issues were not in the original terms of reference, were not sanctioned by the board and no report in relation to the respondent’s business accounts was ever produced. The letter sets out that following completion of the draft report it was intended to recommend that the disciplinary procedure against the claimant be commenced. On the 13th the claimant received a copy of the draft report. It had been previously sent to the Central Bank. The claimant was “gutted” to see that the report contained statements from colleagues which he believed amounted to a character assassination. He stated that the content was massively at variance with how he had perceived his relationship with his colleagues was. There was never even a suggestion of any of this in the past. Nobody made a complaint. Nobody reported it formally or informally to their matrix boss. Nothing was ever said. Nobody behaved as if there was an issue. The claimant was not given an opportunity to comment on the report prior to it being sent to the Central Bank. The report accused the claimant of the following:

“1. That from 2008 – 2013 there was a practice of under reserving large losses which has the effect of artificially improving RSA Insurance Ireland’s business results.

2. That PS CEO Ireland allegedly created a culture of fear amongst his colleagues intimidating and humiliating individuals and overly controlling the communication and messages between RSA Insurance Ireland and other parts of the Group, resulting in people feeling unable to escalate issues and concerns.”

On the 21st November, the claimant was accused of manual adjustments of the OCR case reserves and implied link to CSI’s, expenses irregularities and salary advances, and of knowledge of regulator returns that were materially inaccurate. These issues were not to form part of the disciplinary process. In a separate letter dated the 21st November he is invited to a disciplinary meeting in relation to the “reserving issue”. The allegations against the claimant were:

- That between 2008 and 2012 you instructed employees not to process losses at the recommended reserve in breach of Company’s Claims Business Control policy and Reserving Control Policy. (Reserving issue).

- That the reserving issue had the effect of artificially improving the company’s business results which is in breach of regulatory compliance business control policy, the estimate philosophy policy and the risk appetite policy.

- That you failed to involve or inform the reserving committee in decisions related to the reserving issues as required by the reserving policy.

- That you directed PB on a number of occasions between 2008 and 2012 not to send you e-mails regarding the reserving issue which infers an understanding on your part that your actions in connection with the reserving issue were wrong and/or in breach of the company’s policies.

- That you failed to accept the full recommended reserve in cases where there was no justification to do so in breach of the claims policy.

- That you failed to clearly document referrals in accordance with the claims policy.

- That you took steps to cover up the reserving issue from your colleagues in Ireland and at RSA group level in that you authorised the creation and maintenance of a document to be shared with ROC and PB which was a list of actual recommended reserves for the cases referred to above in the reserving issue review cases list, also known as the NAMA list, in breach of the regulatory compliance business control policy, the estimation philosophy policy and the risk appetite statement.

- That you refused to authorise recommended reserves despite recommendation to do to so by your CFO and claims director, in breach of legislation and the claims policy.

- That you signed the company’s operating assurance statement every quarter since 2008 in the knowledge that certain of the assurances given by you were inaccurate including but not limited to the following assurances:

· Compliance with all RSAA11 policies and RSA group policies.

· That all material breaches of policy had been tabled for discussion at the risk committee meetings and notified to group risk.

· That the Irish group had failed to notify the head of group risk of any matters that the UK FSA might reasonably need to be aware of as the Group’s lead regulator.

- By your actions you have:

- Brought the company into disrepute

- Breached your duty of trust and confidence to the company

- Breached your contract of employment.

The claimant was not being disciplined for 3 out of the 4 matters set out in the letter of suspension. The claimant responded in detail to the allegations in a letter to AB dated the 27th November, 2013 and in that letter he tendered his resignation.

It transpired that the Irish business was strengthening by receiving a capital injection of €200,000,000.00. €10,000,000.00 of that was applied to the large claims issue, €40,000,000.00 to the Motor claims issue and €6,000,000.00 out of a recommended €9,000,000.00 to Professional indemnity. All together these totalled an exposure of €60,000,000.00. € 1.4 billion was raised to strengthen the Group capital position. The reserving issue was a general one within the group and was not an isolated Irish problem. Since then the majority of the executive management team both here and in the UK are “no longer with the company”. ROC was dismissed, PB was dismissed, CR left, BH left, PK left, MR left, AB left, RH left, CR left, SL left. No details on how they came to leave the company are known.

The claimant was in receipt of a basic salary of € 405,000 per annum. He was in receipt of an annual bonus of approximately €100,000.00. He received a car allowance of 14%, approximately €50,000.00 and an amount equally to 20% of his salary was paid into a defined benefit pension scheme for him , approximately € 80,000.00. He was also in receipt of share incentives. The total annual package amounted to € 635,000 p/a.

b. The Respondent.

ROC stated that he started with the respondent in 2002 as a corporate accounting team manager. His role was to ensure the financial reporting team functioned effectively. In 2010 he was promoted to CFO. He was on the executive management team (EMT) along with approximately 11 others. The EMT reported to the CEO. His matrix line was into the UK. Initially, it was to CR the CFO international until 2012 and then to CR and then to DC. As CFO he had very regular contact with the claimant. None of these meetings and none of his functions were to do with fixing reserves. That was the role of the claims director PB. He, ROC didn’t have a licence to fix reserves. Having a licence was an RSA requirement. He did become involved in the large claims reserving process. He attended a number of meetings with the claimant, PB, and CR commercial underwriting director. Other underwriting directors attended from time to time depending on the discussions taking place. When he initially became CFO he was made aware that the process for assessing large losses was not being dealt with in the claims department but was being referred to the CEO. The claims director should have been the person processing those claims. On many occasions the CEO would not/ did not sign off on claims. The claimant and claims director PB did not get on. They had a difficult relationship. He wasn’t good at communicating bad news to the claimant. There was a skill one needed to do that. He didn’t have it. He was asked by the claimant to attend the large claims meetings. He believed he was there so that the claimant could understand the impact those claims would have on the finance. The claims were supposed to be reserved on the basis of the merits of the claims and not on the impact on finance. PB would often come with a list of claims and he, with and without PB would go to the claimant to request him to reserve the claims correctly. We called this list the NAMA list. (Everyone, Claimant, ROC, PB CR BH EMcG and DC all referred to it as the NAMA list.) Regularly the claimant ignored the advice of the claims director. The NAMA list was taken to the claimant about once a month. At any given time there was under reserving of about €10,000,000.00. The process was wrong and was in violation of policies. Everyone knew this. The claimant knew it was improper. It placed him and others under a lot of stress. So much so that he started attending a psychologist in 2010. He attempted to discuss the matter with the claimant on a few occasions and recommended it be disclosed to the group. The claimant refused to do so. He felt he had only three options, leave, whistle blow or manage the issue as best he could. Leaving was not an option as Ireland was in the middle of a recession. He didn’t feel he would get the support of his superiors in the UK as they had a good relationship with the claimant. He opted to manage it as best he could.

In 2013 the financial situation of the company began to deteriorate. Prior to that the capital and reserve margins were strong. In 2013 the chief actuary was flagging problems with the reserves. He had concerns about three things, the large loss claims, the reserving generally and claims savings initiatives which were introduced into the accounts. He had coffee with the claimant in July, 2013 and told the claimant that he was under too much pressure and that he felt he had no option but to reach out to Group. The claimant took time to consider it and then decided to bring in a consultant actuary to look at the numbers and to advise on a course of action. That did happen.

‘Gateway 50 process’. Process was too big a word for it. It was only one meeting and in any event the process of setting reserves never changed.

The claimant was an intimidating figure and he was scared of him. He could be emotional and aggressive, funny and charming at the same time. His dark side was very dark.

DW, based in the London office and is general counsel to RSA Group. He joined the group in 2010. He runs the legal and secretarial function of the group and is the company group secretary. He was an executive of the main group and had reporting responsibilities in that capacity. He had experience in investigations. He was fond of the claimant and looked forward to meetings with him. They got on very well. He stated that the claimant has a good reputation and was very well regarded within the group. He was a micro manager, a control freak in the nicest sense of the word.

In October, 2014 he received a phone call from AB stating there was an emerging issue and that he might need his help. He was shown a copy of the Central Bank letter dated October, 2013 but couldn’t remember the specific date. He received a second phone call from AB on the 15th. AB told DW that the claimant spoke with him and expressed concerns and AB also expressed concerns that there might be a regulatory problem. AB immediately sent DP, JJ and Cmc K over to Ireland. On the 17th there was a teleconference call. PD was due to have a meeting with the Central Bank on the Monday. AB wanted to get on top of the situation before then. PS wanted to be sure it was necessary to go to the Central Bank at all. Around 21st or 22nd it was agreed that Project White would be set up. They were all supportive of the claimant at that point. They hoped it could all be cleared up quickly without damage being done. The claimant was one of the Groups greatest performers and he was liked by DW personally. On the 23rd there was a meeting. DW, VE and the claimant were in attendance. The independent non-executive directors were due to meet with the Central Bank later that day and wanted certain questions answered by the claimant. The questions were sent to me by AB. He recorded the answers in handwriting and later typed them up. On the 24th He and VE were invited to investigate the emerging matter. They travelled to Dublin and commenced the investigation. They consulted Solicitors in Ireland to familiarise themselves with the Irish law. They did not have a list of questions prepared. They worked within the terms of reference.

On the 30th of October a letter is written by VE to the claimant. It invited the claimant to an investigation meeting and dealt with the revoking of the claimant’s licence. He, DW, was fully aware of its content but VE drafted it.

He started interviewing people on the 31st. ROC was the first. The investigation moved along at an appropriate pace. Everyone was given an opportunity to say what they wished. The part of the investigation that came as a shock was the way in which people described the claimant. Neither he nor VE sought that information, it just came out. There were professional men weeping and crying, shaking with fear when they were talking about the reserving process and in particular the claimant’s role in that process. 21 people in total stated that there was an inappropriate process and that the claimant was the author of it. He was hoping to talk to the claimant to get his side of the story but that never happened despite several efforts to do so. The claimant put “roadblocks” in the way of the investigation. He employed solicitors and barristers who helped him put up those road blocks.

The meetings were all recorded in longhand and typed up later. DW and VE edited those notes. The unedited notes were not available anymore.

DW conceded that if there was evidence the PK had knowledge of the reserving issue he should not have been on the Project White committee. DC also stated that PK knew about it.

On the 7th November, VE wrote to the claimant. In that letter it was “proposed” that the claimant remain away from the office”. Neither DW nor VE were involved in the actual making of that decision. By letter dated the 8th November, 2013 AB wrote to the claimant and stated that arising out of information gained from the investigation so far further matters were to be investigated and the claimant was being suspended on full pay. It was a holding and precautionary suspension. When the claimant resigned on the 27th November, 2013the investigation ceased. On the 8th November the London Stock Exchange was informed that an €70,000,000.00 investment was being put into Ireland. The claimant’s suspension was announced on national television.

Neither DW nor VE was involved in the decision to send the draft report to the Central Bank. It was relatively common to send reports in draft form to the Central Bank.

In relation to the expenses “fraud” DW was of the opinion that it was probably AB who arranged to have an ex Scotland Yard fraud investigator, now an employee of RSA was briefed. He, AB, was calling the shots.

DW was aware that there were three sets of minutes of the one recorded Gateway 50 meeting. He said this was an integral part of their investigation. He came to the view that the minutes were altered to avoid a “crescendo of anger” from the claimant. PB told DW that the minutes that dealt with the two cases were the accurate ones. The set of minutes sent to London were fictional. He stated that that just went to show how much fear they were under. He didn’t independently check to see what was actually sent to London or if anything had actually been sent or who had received them. He didn’t look for proof of postage, email delivery receipts etc. He took what he was told at face value.

VE stated that she was completely independent and open minded and did not act under the influence of anyone. There was no time limit placed on the investigation. She did not make the decision to revoke the claimant’s licence. She did not make the decision to suspend the claimant. She did not make the decision to request the claimant to stay away from the business. AB made those decisions. She was happy the process was fair. She acted within the terms of reference and adopted a fair and honest approach. She didn’t converse with SL during the investigation and only spoke to CR as part of it. The minutes were reformatted into statements and did not contain the questions asked.

The second tier investigation was carried out by CR. Neither she nor DW was involved. Her evidence reflected DW’s in relation to the PK issue.

LB, Chairman of the Board. He knew the claimant from his work with a third party. He was MD of that third party. He hired the claimant to work for that third party. He performed very well and was well liked. He carried out his assessments and valuations satisfactorily. He became chairman of the Board of the respondent in 2011. On the 17th October 2013 he received a call from PK just prior to his meeting with ROC. He informed him that the meeting with ROC was cancelled and invited him to a meeting at 3.30pm to discuss a serious emerging issue. He asked him if they were in “fine” territory and he was told, yes. The Central Bank issue fines for breach of their regulations. At that meeting there was a discussion, which included the claimant, about the findings of PD. Both he and RK decided that a full internal and external investigation needed to be done. PWC were commissioned to carry out the external investigation. They also met with PK to discuss with him what he was going to tell the Central Bank. They had an obligation to inform the Central Bank. The Central Bank was notified by PK and DC on the 18th. The figure put to the Bank was €9,600,000.00 under-reserved. It was a small amount in the context of the business. However the Central Bank were very concerned as it was a breach of the prescribed control function of the respondent and was also in breach of “fitness and probity”. On Monday he, RK and FC got together and commenced the internal investigation. The following day Project White was set up. It consisted of LB, PK, DC, AB, PD. The Central Bank were asking what the board intended to do about PS and ROC. The Board decided to suspend PS’s licence. The non-executive directors met with the Central Bank the following day. It was felt that the respondent had a responsibility to its customers, shareholders and employees. By the 23rd the terms of reference were ready. The Central Bank had a part to play in their preparation. On the 24th the claimant was informed verbally that his licence was being revoked. On the 29th CR brought to the attention of the subcommittee the details in relation to balance sheet irregularities (non-refundable premium issue and reserving pipeline issue.) That investigation continued and the final report was published on the 6th December. PWC were involved. It became apparent that the revoking of the licence was not enough and that is why the decision was made to suspend the claimant. That decision was made by the Board. It was a board decision. He was suspended on the 8th. The Draft report was sent to the Central bank and the following day to the claimant. The report coupled the large claims reserves issue and the motor claims issue. Large claims issue amounted to €9.6m and the motor claims €40m.

In relation to PK’s role on Project White, the three INED were satisfied that he had no conflict despite him being on the “first line of defence” and despite him not identifying it and despite him not reporting it.

iii) Relevant Statutory Provisions

Section 1 of the Unfair Dismissal Act defines constructive dismissal as:

“the termination by the employee of his contract of employment with his employer whether prior notice of the termination was or was not given to the employer in the circumstances in which, because of the conduct of the employer the employee was or would have been entitled or it was or would have been reasonable for the employee to terminate the contract of employment without giving prior notice of the termination to the employer”

7.—(1) Where an employee is dismissed and the dismissal is an unfair dismissal, the employee shall be entitled to redress consisting of whichever of the following the rights commissioner, the Tribunal or the Circuit Court, as the case may be, considers appropriate having regard to all the circumstances:

(a) re-instatement by the employer of the employee in the position which he held immediately before his dismissal on the terms and conditions on which he was employed immediately before his dismissal together with a term that the re-instatement shall be deemed to have commenced on the day of the dismissal, or

(b) re-engagement by the employer of the employee either in the position which he held immediately before his dismissal or in a different position which would be reasonably suitable for him on such terms and conditions as are reasonable having regard to all the circumstances, or

(c) payment by the employer to the employee of such compensation (not exceeding in amount 104 weeks remuneration in respect of the employment from which he was dismissed calculated in accordance with regulations under section 17 of this Act) in respect of any financial loss incurred by him and attributable to the dismissal as is just and equitable having regard to all the circumstances.

Section 3, In this section “financial loss”, in relation to the dismissal of an employee, includes any actual loss and any estimated prospective loss of income attributable to the dismissal and the value of any loss or diminution, attributable to the dismissal, of the rights of the employee under the Redundancy Payments Acts, 1967 to 1973, or in relation to superannuation;

“remuneration” includes allowances in the nature of pay and benefits in lieu of or in addition to pay.

iv) Determination

The claim is one of constructive Dismissal pursuant to Section 1 of the Unfair Dismissal Act 1977. The burden of proof, which is a very high one, lies on the claimant. He must show that his resignation was not voluntary. As is set out in Western Excavating ECC Limited –v- Sharp, the legal test to be applied is “an and / or test”. Firstly, the Tribunal must look at the contract of employment and establish whether or not there has been a significant breach going to the root of the contract.

“if the employer is guilty of conduct which is a significant breach going to the root of the contract of employment, or which shows that the employer no longer intends to be bound by one or more of the essential terms of the contract, then the employee is entitled to treat himself as discharged from any further performance”

If the Tribunal is not satisfied that the “contract” test has been proven then it is obliged to consider the “reasonableness” test

“The employer conducts himself or his affairs so unreasonably that the employee cannot fairly be expected to put up with it any longer, then the employee is justified in leaving”

When assessing the reasonableness test all of the circumstances of the case must be considered to establish whether or not it was reasonable for the claimant to terminate his contract of employment.

The respondent states that in addition to the above the Tribunal should consider the test set out by Lord Denning MR in British Leyland UK Ltd V Smith [ 1981] IRLR 91.

“Was it reasonable for the employers to dismiss him? If no reasonable employer would have dismissed him, then the dismissal was unfair. But if a reasonable employer might reasonably have dismissed him, then the dismissal is fair. It must be remembered in all these cases there is a band of reasonableness, within which one employer might reasonably take one view, another quite reasonably take a different view.”

The Tribunal does not agree that the British Leyland case applies to constructive dismissal cases in this jurisdiction. The onus in relation to constructive dismissal cases lies with the claimant. The reasonableness of the claimant’s decision to resign can only be judged on the information the claimant had within his knowledge at the material time i.e. resignation. That can only be assessed by looking at the conduct of the employer and employee prior to the resignation. The employer’s and/or employee’s knowledge gained after the resignation which may or may not justify a dismissal at some stage in the future is not relevant. Where it might be relevant is in assessing compensation if the claimant were to success in his claim.

(a) Investigation process.

The Tribunal accepts the respondent’s submission that the process of executing procedures in relation to an investigation or a disciplinary matter does not have to be perfect. As was stated in Elstone V Coras Iompair Eireann

“The mere fact of some failing in due or agreed procedures is not a final and decisive matter for the Court on an appeal. It is clear from the provisions of Section 6(1) which states that regard must be had to all of the circumstances.

Section 1 of the Act is silent on “to all the circumstances” however it is now well established in common law that when assessing the reasonableness test one must consider all of the circumstances of the case. The Tribunal is also obliged to consider whether any failings in the process leads the claimant to form the view that he would be prejudiced if he moved forward with the process or if the failings lead him to conclude that the respondent was merely paying lip service to the process in order to disguise its predetermined result, i.e. Dismissal. In order for the claimant to succeed on that point the Tribunal must conclude that it was reasonable in all of the circumstances for the claimant to form that view.

The first indication that something was wrong was in or around August, 2013. The claimant returned from annual holidays and was approached by the CFO, ROC, who informed him that the motor claims reserves would have to be increased by €17,000,000.00. The claimant informed AB immediately. In Ireland in September, AB informed him that the Group Actuary, with responsibility for the overall actuarial function had assessed the data that the Irish and regional actuary had looked at and stated that the figure was more likely to be between €20,000,000.00 and €40,000,000.00. It turned out to be the latter. By October, 2013 Q3 data showed a further deterioration in the motor claims reserves. Around this time an internal audit into the claims function and into the large losses on the claims side was carried out. The internal auditor raised a red flag with regard to the large claims reserving process. The Central Bank had just concluded its report on the matter and deemed it to be “satisfactory”. The matter was escalated and reported to his matrix boss in the UK.

At a board meeting on the 21st October, “Project White” was established. The function of Project White at 2.2 was to:

“oversee the investigations into reserving points identified by the Group Internal Audit during its current claims reserving audit”.

At 2.4

“The Committee will also introduce a new claims reserving process and draft terms of reference for that committee to follow”

The Tribunal finds it most unusual that any new processes would be put in place prior to the Internal Audit being formally completed and prior to the Project White Committee even starting their review. It begs the question, did the respondent have much more information to hand at that time than was actually disclosed to the claimant, CFO or to the Claims Manager?

At 2.5

“To ensure the integrity of the governance and decision making process during the period of the project the Committee has revoked the licences of the CEO, CFO and Head of Claims.

This decision was not communicated to the claimant until the 30th October, 2013 despite him having had a meeting to discuss the issues with DW and VE in the UK on the 23rd. The respondent stated that he was verbally told on the 24th but the claimant denies this. Either way nothing turns on this.

The claimant received a call from AB in the UK, who requested the claimant to attend a meeting with DW on the 23rd October, 2013. The claimant was in the UK on that date. He did attend that meeting. The purpose of the meeting was to put certain questions to him to ensure that the INED’s didn’t make any misrepresentations to the Central Bank at their next scheduled meeting. This meeting was not part of an investigation, it was merely a fact finding exercise to prepare for the Central Bank meeting. The claimant states that he received the questions before hand. What was to be established was:

“why the Claimant did not reserve the full amounts on certain identified claims, four in 2013, one in 2010 and one in 2012 and all matter in relation to that”.

He was invited to attend an investigation meeting on the 5th November, 2013 in the Shelbourne Hotel which meeting was an extension of sorts, albeit now having the formal status of an Investigation, of the meeting in the UK on the 23rd.

On the 7th November, 2013 the claimants solicitors requested that the “serious issues” be identified in advance of the meeting and a provisional list of questions and supporting documents be made available without delay in order that he prepare for the meeting. By reply of the 7th November, 2013 VE stated that “it is not appropriate to provide even an outline complaint against PS’s conduct as requested.” “PS is not under any suspicion of wrongdoing.” Interestingly the question asked of the claimant during his meeting with DW on the 23rd was “Why did PS not reserve the full amounts on certain claims identified ....” That question suggests two things. Firstly, that as a matter of fact, certain claims did not receive the correct reserve amounts. Secondly, PS was solely responsible for that. That question does lend itself to the conclusion that blame was being apportioned. The respondent may have been justified in doing so later in the process but not prior to any process /investigation even commencing.

The Tribunal is satisfied that the claimant was aware of the “serious issue” that was being investigated. If he didn’t know before the meeting of the 23rd he certainly did afterwards. Does that disentitle him from being formally put on notice of the serious issue and how it pertained to him?

The respondent states that the claimant is not entitled to the principles of natural justice at an investigation stage. In that regard they rely on O’Brien –v- Aon Insurance Mangers (Dublin) Ltd 2005 IEHC 3

“The principal ground relied upon by the company in respect of this aspect of the case is to contend that the investigation report and the process which led to it is part of a two phase process frequently engaged in disciplinary matters whereby an initial investigation is, if it discloses sufficient evidence, followed by more formal disciplinary proceedings. In those circumstances, it is contended, a party under investigation does not have the benefit of an entitlement to the rules of natural justice at the investigative stage. Such entitlement, it is contended, arises only and if and when the employer concerned moves to a formal disciplinary process.

In that regard, particular reliance is placed on Morgan v. Trinity College [2003] 3 I.R. 157. In that case the plaintiff Mr. Morgan complained that a suspension imposed upon him under the procedures of Trinity College had been imposed in circumstances where he had been denied fair procedures. As set out in some detail in the judgment of Kearns J. the appropriate procedures in Trinity College involved an enquiry by the Senior Dean which, in the absence of an agreement by the employee or officer concerned, could not give rise directly to disciplinary sanctions. Unless the employee or officer agreed with the recommendations of the Senior Dean such a sanction could only be imposed after a hearing before a disciplinary panel.

In those circumstances Kearns J. reached the following legal conclusions:-

"Crucially he retained the right of veto over any possible sanction which the second defendant might regard as appropriate. Nothing in his conclusion or recommendation therefore amounts to a sanction and I am satisfied that the panoply of rights identified in Re Haughey [1971] I.R. 217 do not arise in those circumstances."

It should also be noted that the Morgan case came before the court as an application for an interlocutory injunction. Thus it is clear that Kearns J. was satisfied that no fair issue arose to be tried in respect of the question as to whether the rights to fair procedures as identified in Haughey applied at the stage of an investigation which was to be preliminary to a possible full disciplinary hearing.

In those circumstances I am not satisfied that the plaintiff has made out a fair case to be tried in relation to the contention that proceeding further with the contemplated disciplinary process would be contrary to his legal entitlements.

Even if there are infirmities in the methodology of the investigators (and I express no view on that issue) and even if those infirmities may have affected the contents of their report the fact remains that the recommendations of the report do not, in the words of Kearns J. in Morgan "amount to a sanction" and therefore Haughey rights do not arise.

Minnock V Irish Casing Company Limited [ 2007] 18 ELR 229.

Justice Clarke granted an interlocutory injunction restraining the continuance of an investigation being conducted due to arguments that the process in place was not a “pure investigation” and was in essence being conducted in a flawed manner. Clarke J noted inter alia:

“I do not agree with the submission made on behalf of the plaintiff and repeated in much of the pre-litigation correspondence to the effect that there is an obligation on the defendants to agree with a person in the position such as the plaintiff as to what the procedure is and to the extent that the replying correspondence resisted that suggestion, I think the defendants are correct. The plaintiff is not entitled to be able to prevent an inquiry going ahead without his agreement on the procedures. That is not to say that the defendants do not have an obligation to set out the process that they intend to embark on and, in particular, when asked to do so to set out that in advance. It was only after the proceedings had commenced that the defendants set out in clear terms what the process was and stated that what was intended was that [the second defendant] would complete his inquiry and if it warranted a formal disciplinary process, a separate de novo disciplinary process would take place.”

Most recently Mr. Justice Noonan in The Governor and Company Of the Bank Of Ireland –v- James Reilly [2015] IEHC 241 stated:

“I cannot accept the proposition advanced by Counsel for the bank that Mr. O’ Reilly had no entitlement to natural justice or fair procedures in any shape or form at this stage of the proceedings.”

The Tribunal finds that the claimant was not entitled to all of the information he requested on the 7th November, 2013. However, he was, at the very least, entitled to know the precise nature of the matters being investigated and how they pertained to him. He was given a list of questions for the informal meeting with DW in the UK. At that stage of the process there was no obligation on the respondent to do so. Following the meeting on the 23rd at which the claimant was asked “Why did PS not reserve the full amounts on certain claims identified” He was justified in forming the opinion that not only was the large claim reserving issue being investigate but also his personal role in it. This was not a general and broad investigation being conducted by two UK employees. It was a specific investigation into very specific employee’s roles in the reserving of claims, being conducted by two UK employees but over seen by the White Committee (2.2 White Committee‘s terms of reference). By the 5th November, 2013 the claimants licence has been revoked and two days later he was requested to “remain away from the office”. Whilst VE stated that this was not formally a suspension it had all the characteristics of one. It is for these reasons that the claimant was entitled to at the very least the basic elements of natural justice i.e. the precise nature of the matters being investigated and how they pertained to him.

The final and complete version of the DW and VE report is dated the 28th November, 2013. However despite that, by letter dated the 21st November the claimant is invited to a disciplinary meeting. The allegations against the claimant were:

- That you failed to involve or inform the reserving committee of decisions related to the reserving issues as required by the reserving policy.

- That you failed to accept the full recommended reserves in cases where there was no justification to do so in breach of the claims policy.

- That you failed to clearly document referrals in accordance with the claims policy.

- That you took steps to cover up the reserving issue from your colleagues in Ireland and at RSA group level in that you authorised the creation and maintenance of a document to be shared with ROC and PB, which was a list of actual recommended reserves for the cases referred to above in the reserving issue review cases list also known as the NAMA list, in breach of the regulatory compliance business control policy, the estimation philosophy policy and the risk appetite statement.

- That you refused to authorise recommended reserves despite recommendation to do to so by your CFO and claims director in breach of legislation and the claims policy.

· Compliance with all RSAA11 policies and RSA group policies.

· That all material breaches of policy had been tabled for discussion at the risk committee meetings and notified to group risk.

· That the Irish group had notified the head of group risk of any matters that the UK FSA might reasonably need to be aware of as the Group’s lead regulator.

- By your actions you have:

- Brought the company into disrepute

- Breached your duty of trust and confidence to the company

- Breached your contract of employment.”

Despite extensive evidence and documentation being furnished it was not disclosed to the Tribunal what the “Reserving policy “was or even if there was one. All of the evidence was that there was an informal process in place despite the formation of Gateway 50. The Tribunal was not informed that there was a “Reserving Committee” or what their function was.

At the conclusion of the letter, findings of fact are made:

- Brought the company into disrepute

- Breached your duty of trust and confidence to the company

- Breached your contract of employment.

These are findings arising out of the allegations set out in 1-9 of the letter. One might expect to see such findings following the conclusion of the disciplinary process but most definitely not at the beginning of it and especially in circumstances when the final investigation report was not yet completed.

It is clear that another investigation was being carried out in the background because in addition to the letter of the 21st November, AB sent a second letter also dated the 21st requesting the claimant to attend an investigation meeting on the 28th November, 2013 to discuss

- Manual adjustments to OCR case reserves and implied link CSI’s

- Expenses irregularities and salary advances resulting in tax issues:

- Knowledge that regulator returns were materially inaccurate.

It is not clear who sanctioned that investigation or what the terms of reference were. It would seem that the respondent when on a trawling exercise and the above issues were what came up in their nets. Some of these issues went back as far as 2007. One wonders why they only came to light at this time. The timing of the discovery of these matters causes the Tribunal concern.

b) Large Claim Reserves.

The respondent is the largest insurance company in Ireland having moved up the ranks from fifth to first during the claimant’s tenure as CEO. As CEO he was paid a large salary with generous bonuses, which the respondent states reflects the level of responsibility he had. The respondent company was the subject of numerous internal, external and Central Bank audits during the claimant tenure. All of those audits save for one received a ranking of “satisfactory”.

In 2013 the chief actuary was flagging issues with the reserves. He had concerns about three things; the large loss claims, the reserving generally and claims savings initiatives that had been booked in the accounts. The claimant had a coffee meeting with him in July. Following him telling the claimant that he was under too much pressure and that he felt he had no option but to reach out to Group, the claimant decided to bring in a consultant actuary to look at the numbers and to advise on a course of action. That did happen.

In the spring of 2013 Ernst & Young were engaged by the Board to carry out a review of the adequacy of the claim reserves including IBNR. It was a “deep dive into specific large claims” according to the claimant’s evidence. The Ernst & Young report sets of the “scope of services at follows:

“The objective of this project is to provide RSA Ireland with a review of best estimate incurred but not reported reserves (IBNR). The work will cover the results produced in year end 2012 data and will include the cost of indemnity and liability settlements, including loss adjustments expenses.

We will work with you on a collaborative basis to ensure a successful outcome to this project. In practical terms this means:

· Initial meetings to discuss the RSA Ireland reserving philosophy, particular features of the RSA business, and any other assumptions used in the RSA year-end reserves.

· Review of reserving uncertainty, both an estimate of the likely range of best estimates from different actuaries and a wider range possible outcomes using bootstrapping.

The conclusion reached was:

“that the IBNR for RSA Ireland, as estimated by RSA Ireland’s actuaries is reasonable and lies within a reasonable range of best estimates”

As late as October, 2013 the Central Bank’s regulator carried out an audit specifically in relation to the Large Claims issue. The findings were:

“The findings of the review are set out in the Banks letter dated the 1st October, 2013. Overall, this review found the claims reserving evidenced in the selected claims data set to be satisfactory. A number of findings/observations and the required remedial actions are attached in the Appendix”.

The Appendix:

“There was an inconsistent standard of recording of who attended the meetings and the nature of the discussion and the issues considered. There was in some cases very limited information on file in respect of discussions which took place in advance of large reserves increases. It is important to record who attended key meetings and rationale adopted in considering reserve increases or decreases, and the strategy adopted by the handler and claims manager.

One can clearly see how the auditor came to that conclusion when one looks at the three sets of minutes produced of the November, 2011 meeting, that is if he saw all three, any or even one set of those minutes. However, it is difficult to understand how the auditors, including the Central Bank did not come to this conclusion before October 2013.

The claimant stated that Gateway 50 was set up in late 2011. Prior to that there was a very informal system in relation to setting reserves on the small number of large claims. Gateway 50 was established to formalise the process. The claimant was not involved in Gateway 50. That evidence was not contested. The regional CEO, SL also had cases referred to him from time to time. That evidence was not contested. It would seem from the only minutes produced and depending on which set you look at, that PB, BH, PK, ROC, CR and in one set of the minutes CL were involved in Gateway 50. Whilst DW insisted that Gateway 50 was not a formal process to deal with reserves on large claims it would seem from the minutes that, that is not correct. Even if DW is correct it is clear from the minutes that specific claims were discussed and their reserve amounts proving that each of the attendees were on notice of the “wholly inadequate” figures posted. Surprisingly, no reserve or quantum opinions from the Solicitors briefed in the matters were produced in evidence. It would seem from the evidence that the setting of reserves was done exclusively in house. Each ‘Gateway 50’ attendee was either a manager or a director, all experienced enough know that the figures posted were inadequate and all having matrix bosses with whom they could have discussed the matter. These individuals were all very experienced and all held high ranking posts with corresponding high salaries within the respondent company. It is nonsense to suggest that the claimant somehow bullied or scared all of these individuals into a state of perpetual silence. Both LB (who know the claimant the longest) and DW both stated they never witnessed anything of the sort.

It is also nonsense to suggest that nobody other than these individuals knew about this. The respondent’s suggestion that the reason it wasn’t picked up in the numerous audits were because the auditors were not put on notice of it is incredible. Isn’t the primary purpose of an audit to provide an objective independent examination of company’s financial reports/statements? This in turn serves to increase the value and credibility of the financial statements produced. To suggest that auditors only carry out audits on matters that have been disclosed to them is misguided, at best.

The Gateway minutes from November, 2011 are the only independent evidence in relation to what was involved in the process. No matter which set of minutes are relied on, it is clear that specific cases are discussed, the liability issue, ongoing enquires, quantum and estimates. The third set, DW established were entirely fictitious. This document was credited to a man whom DW accepted as a “man of integrity”. It is suggested that PB sent the third set to London because “of the fear he had if PS discovered he was discussing with London a problem claim” . The fact that there are three sets of minutes, all different, for the same meeting reeks of suspicion. The claimant had no hand, act or part in that. Neither DW nor VE made any independent enquires in relation to the sending of the minutes. They took PB’s word that the third set of minutes were the ones sent to London. They made no enquires to verify if that was correct, to whom they were sent, how they were sent or if they were received. PB was not asked why he sent them? Was he obliged to send them? Who directed that they be sent? The fact that a man, so fearful of PS, a man willing to compromise his integrity, sent any of these minutes to London leads the Tribunal to conclude that he was under an obligation to do so. The obligation, whatever it was, was not disclosed to the Tribunal and was not investigated by either DW or EV. That in turn leads the tribunal to conclude that the process was being monitor at Group level.

DW also stated in his evidence, in relation to the ‘treasure cave’, i.e. the large buffer Ireland held in reserves:

“when PS took over the Irish business he was given treasure in the caves of €200,000,000.00 and over a period of time we released €250,000,000.00. But margin is buffer, margin is buffer held by the group held by the group in relation to, you know, future unknown events. It is a matter of public record that RSA holds 5% margin across all of its businesses worldwide, it’s a matter of public record that we hold 5% margin.”

There are two interesting things about that statement. Firstly, at the end of 2012 the Central Bank carried out an Annual Prism Review. The various risk categories were analysed. The report commented that RSA’s risk/reserve margin was low, 5% compared to a peer average of 11%. They requested a commitment from the board to build the reserves. It is clear from the report that the 5% margin policy of RSA was below peer average and not acceptable in the eyes of the Central Bank. This 5% policy was a group policy and outside of the control of the CEO in this jurisdiction.

Secondly, The Central Bank review was carried out in 2012. The Group, between 2007 and 2011 used €250,000,000.00 of the Irish Reserves to prop up under performing areas of the group in other jurisdictions. One wonders had that €250,000,000.00 being left in the Irish business would this overall situation have occurred. Would the company have required such a large capital injection, of which, a very small portion was allocated to the large claims reserves? It transpired that the Irish business was strengthened by receiving a capital injection of €200,000,000.00. The large claims issue got €10,000,000.00 of that. The motor claims issue got €40,000,000.00 of that. Professional indemnity got €6,000,000.0 although €9,000,000.00 was recommended. Altogether, a total of €60,000,000.00. However, € 1.4 billion was raised to strengthen the Group capital position. Of that € 200,000,000.00 was apportioned to Ireland. Those figures suggest that the Group had a “capital” issue which was way in excess of the large claims reserving issue. Furthermore, had the €250,000,000.00 of Irish reserves not been utilised by the Group, Ireland would not have required any capital injection.

c) Objective Bias

PK was appointed to the Project White Subcommittee. The claimant alleges that he should not have been involved and as a result of his involvement the process was fundamentally flawed. The claimant’s solicitors by letter dated the 11th November, 2013 objected to the presence of PK on the committee.

“We must also mention that we find it extraordinary that PK, as Chief Risk Officer, continues to have a crucial role in conducting the company’s investigation while our client and his senior colleagues endure public ignominy. Mr. S bears no ill will to PK but it is inexplicable how his treatment differs from Mr. K”

By letter dated the 8th November the claimant’s solicitor stated:

“Mr. S believes that a significant conflict of interest exists in that the Chief Risk Officer is a member of the Project White Steering Committee and is chairing its reserve Gate Subcommittee whilst participating from time to time in the process which was audited and which is now being investigated and equally that he previously raised no red flag from a regulatory and/or compliance perspective”.

The inappropriateness of PK presence on the committee was also raised by DC. Despite both the claimant’s objections and DC objections the respondent failed to take any action.

The issue of bias was set out by Finley CJ in O’Neill –v- Beaumont Hospital [1990 ILRM 419

“ The test is an objective test as to whether a person in the position of the Plaintiff who is a reasonable man might reasonably fear that the pre-judgement expressed by the Chairman would prevent a completely fair and independent hearing of the issues which arise.

Denham J in Dublin Well Woman –v- Ireland [1995 1 ILRM 408.

“The concept of bias developed through cases considering material interest. It also arose in cases on prejudgment, prior involvement, and personal attitudes and beliefs. There are two fundamental streams of thought within this wider concept. Firstly, that there should be no actual bias i.e. a subjective test. And secondly, that there should be no reasonable apprehension that there is bias, i.e. the objective test. Both of these streams of thought are equally important in the broad river of justice. The idea was expressed in Rv Sussex Justices ex parte McCarthy 1924 1 KB 256 at 259 Lord Hewart C.J. made his famous statement:

"…… a long line of cases shows that it is not merely of some importance but is of fundamental importance that justice should not only be done, but should manifestly and undoubtedly be seen to be done. The question therefore is not whether in this case the deputy clerk made any observation or offered any criticism which he might not properly have made or offered; the question is whether he was so related to the case in its civil aspect as to be unfit to act as clerk to the justices in the criminal matter. The answer to that question depends not upon what actually was done but upon what might appear to be done. Nothing is to be done which creates even a suspicion that there has been an improper interference with the course of justice."

Then in Ryan –v- The Law Society [2002] 4 IR, 21 Herbert J stated

“In my judgment, the test for anticipatory bias in the context of domestic disciplinary bodies such as the Disciplinary Tribunal of the respondent is an objective test derived from the following authorities:-

O'Neill v. Beaumont Hospital Board [1990] I.L.R.M. 419 at p. 439 per Finlay C.J.; Dublin Wellwoman Centre v. Ireland [1995] 1 I.L.R.M. 408 at p. 420 per Denham J.; Bane v. Garda Representative Association [1997] 2 I.R. 449 per Kelly J.; Carroll v. The Law Society [2000] 1 I.L.R.M. 161 at p. 183 per McGuinness J.

“In my judgment, the correct test to be applied is whether a reasonable person in the position of the applicant, who is neither over sensitive nor careless of his position, might reasonably fear that he would not get a fair and independent hearing and determination of the issues”

The most recent case on the issue is Kenny –v- Trinity College [2008] 2 IR 40 wherein Fennelly J. quoted Denham J from the Bula Ltd. v. Tara Mines Ltd. (No. 6) [2000] 4 I.R. 412.

“it is well established that the test to be applied is objective, it is whether a reasonable person in the circumstances would have a reasonable apprehension that the applicants would not have a fair hearing from an impartial judge on the issues. The test does not invoke the apprehension of the judge or judges. Nor does it invoke the apprehension of any party. It is an objective test - it invokes the apprehension of the reasonable person."

PK was the Chief Risk Officer, he was a member of the Gateway 50 committee, he was present at the November 2011 meeting resulting in three sets of substantially different minutes being produced; he was questioned by DW and VE in relation to reserving practices. It was wholly inappropriate that he be present on the any committee tasked with investigating/overseeing the investigation into even the most minor of issues in relation to reserving large claims. The question to be asked is, would a reasonable person in the circumstances have a reasonable apprehension that the claimant would not have a fair hearing on the issues? The answer based the facts set out before the Tribunal is, yes. PK had everything to gain from using PS to shield him from the issues that were being investigated. It is not relevant if he actually did so. It is only relevant that he could have. Nobody in that position should have been involved in the process.

He should never have been appointed in the first instance. He should have excused himself or should have been removed from the committee immediately following the claimant letter of the 7th November, 2013.

d) The coupling of the Motor Claims and Large Claims issues.

The claimant contends that once the motor claims issue was coupled with the large claims issue and the report sent to the central bank “he was finished”. His own evidence was that the purpose of Project White was to “to review the Large Claims process primarily and secondarily to that was to review the Motor Claims area”. His solicitors did not address any concerns he had in relation to the coupling of these two issue in their letters of the 7th November, 8th November, 11th November or 14th November 2013.

The Claimant in evidence stated:

“Further it is clear that what has been called the ‘reserving’ issue has been coupled with an entirely separate issue arising from actuarial concerns in the motor business. By coupling these two matters in communications with the Central Bank of Ireland, and in its formal and informal press statements the company has sought to somehow blame me for relatively large scale capital issues. It is clear having regard to how the company has dealt with this matter to date that I have no hope whatsoever of a fair hearing and a decision has already been made to terminate my employment. Whether this decision has been procured by the Central Bank remains to be seen”.

Originally the issue was one of non-regulatory compliance in relation to reserving a small number of large claims. The Motor claims are and were a totally separate concern. The claimant was first put on notice of that issue by ROC on his return from vacation. It is clear from the figures produced that there was an issue in that area; however it would seem from the evidence that the issue had its origins external to the company. How or why it was coupled with the large claims issue remains unknown. It was a separate issue and should have been isolated from the large claim issue. It is not for this Tribunal to speculate how the coupling of the two issues shaped the Central Bank’s opinion of the claimant save to say that the Central Bank were not the employer and ultimately should not have had any control over the claimant’s fate.

The Tribunal would have expected to see some correspondence from the claimant’s solicitors in relation to their concerns. The lack of correspondence leads the Tribunal to conclude that the concerns developed ex post facto.

e) Suspension.

As stated previously in this determination the claimant’s licence was temporarily revoked on the 30th October and a request was then made of him on the 7th November:

“to remain away from the offices and have no contact with the staff of RSA ( save for the investigation) pending the outcome of the current investigation. This is not a suspension and it is hoped that Mr. S is agreeable to this course of action”.

The respondent states that this was not a suspension despite having all the hallmarks of one. Regardless of what the respondent decided to call their request, it was for all intents and purposes, a suspension. The claimant’s response to the request was to stay away from the premises. There was no suggestion that he made attempts to talk to staff during that time. In those circumstances it is hard to fathom why any further course of action was necessary.

On the 8th November, 2013 less that 24hrs after the request to remain away from the premises the claimant received a letter from AB stating:

“It has now come to the Company’s attention that there are various issues in our Irish business accounts as a result for which, tonight at a Group level, we have had to announce to the London Stock Exchange that this will have a material impact on the operating result of the group and has required a significant injection into the Irish business.

These issues include profin claims adjustments, the unwinding of non-refundable premiums brought forward to which the business is not entitled, reversing pipeline premiums and claims reserves adjustments. As CEO of the Irish Business we will need to investigate your involvement (if any) in these issues.

In accordance with our Group obligations as a public company it will be announcing to the London Stock Exchange before 6.30 pm your suspension and that we have informed the Central Bank.”

DW and VE were to conduct the investigation into the additional matters. As was evident from their evidence, DW and VE did not conduct the investigation. CR did “a sort of balance sheet investigation.” It would seem DW believed that the investigation died with the claimant. That suggests that only the claimant was investigated for his role in these issues. VE stated that she believed DW was briefed but she didn’t know by whom. CR wasn’t called to give evidence. (It is important to note that CR did have involvement/ overseeing responsibilities in accounting side of the Irish business). LB stated that the matter was investigated and is contained in the PWC report. The report is commissioned by the board and its function is contained in the Project White terms of reference.

In any event this extension of the investigation was the reason given for the formal precautionary and holding suspension.

In the very recent decision of Bank of Ireland v Reilly [ unreported ][2015 IEHC 241 Noonan J stated:

The suspension of an employee, whether paid or unpaid, is an extremely serious measure which can cause irreparable damage to his or her reputation and standing. It is potentially capable of constituting a significant blemish on the employee’s employment record with consequences for his or her future. As noted by Kearns J in Morgan v Trinity College, there are two types of suspension, holding and punitive. However even a holding suspension can have consequences of the kind mentioned. Inevitably speculation will arise as to the reasons for the suspension on the premise of there being no smoke without fire.

Thus, even a holding suspension ought not to be undertaken lightly and only after full consideration of the necessity for it pending a full investigation of the conduct in question. It will normally be justified if seen as necessary to prevent a repetition of the conduct complained of, interference with evidence or perhaps to protect persons at risk from such conduct. It may perhaps be necessary to protect the employers own business and reputation which the conduct in issue is known by those doing business with the employer. In general it ought to be seen as a measure designed to facilitate the proper conduct of the investigation and any consequent disciplinary process.

Only three employees were suspended. CEO, CFO and CD. Nobody who had direct involvement with the additional matters set out in AB letter dated 8th November, was suspended. These three individuals were signalled out. In circumstances where the claimant had already had his licence revoked and was out of the office and abiding by the respondents request not to talk to the staff of RSA it is hard to understand why he was suspended when all of the possible risks were covered. He couldn’t carry out his functions as CEO with no licence and he couldn’t interfere with any evidence, investigation or individual as he was staying away from the office.

All efforts were being made by the respondent to get itself out of “ fine territory” as LB put it. The very public suspension of the CEO, CFO and Claims director was no doubt part of the mitigation process. It is not so much what the respondent did but how they did it that is most concerning.

Suspending the claimant on national television was the equivalent of taking a sledge hammer to his reputation, to his prospects of ever securing employment in this industry again in Ireland, inEurope and very possibly beyond and itsealed his fate with the respondent. There was no going back from that point. Even if the investigation turned up nothing, there was no way in which the respondent could have kept the claimant on in employment. The Tribunal are satisfied that to suspend the claimant in this very publically and damaging way was in fact a dismissal, disguised as a suspension. Even if the investigation did find fault, even serious fault on the part of the claimant, to destroy his reputation and future employment prospects in such a public way is never acceptable.

f) Furnishing of the Draft Report to the Central Bank.

Once DW and VE had completed their investigation the draft report containing all of the “management style issues” was furnished to the Central Bank. The claimant stated that this information therein was outside the scope of the investigation and was furnished without him having an opportunity to respond.

The tribunal will deal with these matters separately.

- “Outside the scope of the terms of reference”

2.2 White Project terms of reference states:

“ This committee has been established to oversee the investigation into reserving points identified by Group internal audit during its current claims reserving audit with is due to be finalised by the end of next week.

2.6 Accordingly with the purpose of assisting the Board in the discharge of its tasks the Board has charged the committee to oversee an investigation and report to the Board and the Central bank of Ireland on the following matters:

· How and why did any inappropriate reserving practices occur

The management style issues that were disclosed during the course of the interviews did form part of the “how” and “why”. The Tribunal is lead to believe that this information was proffered voluntarily and without prompting. The minutes taken of the interviews were not produced and the edited versions did not contain the questions asked of the interviewees. It would have been preferable to have those unedited minutes before the tribunal. DW stated that they had been destroyed so there was no prospect of getting them. That is quite unsatisfactory.

The Tribunal is satisfied that the management style information did come under the category of “how and why” but find the evidence that it all came about voluntarily and unprompted is not credible, remembering that the evidence given by DW and VE was that all of these individuals were “too scared to whistleblow”. Why all of those individuals would choose to disclose the information in a setting that provided them no protection from the law leaves more questions than answers. DW and VE did not carry out any additional investigations to establish the veracity of these statements or to establish, for example, was there was any collusion between the interviewees. If the information had been proffered voluntarily and had the veracity of those statements been tested then in those circumstances it would have been entirely proper to include them in the report.

- Furnishing the Report without the claimant knowledge of the management styles issues being included.

The claimant was entitled to be informed that such information had been furnished during the course of the investigation and should have been given an opportunity to defend himself against those allegations prior to it being sent to the Central Bank. However, it seems clear from the evidence that whilst the claimant himself was not engaging with the respondent, his solicitors were. It is not for the Tribunal or even the respondent to guess what the claimant would have done had the report been sent to him. It should have been sent. It was a flaw in the process and without the above stated additional enquires being made, was a serious flaw. As stated previously in this determination it is well established in common law that the process does not have to be perfect but it does have to be fair and objective. The sending of the report in the circumstances as set out above must have damaged the claimant’s reputation in the eyes of the Central Bank. That is a consequence, the Tribunal accepts. The respondent may not have addressed its mind to it prior to sending it but it is a consequence none the less. That said, the possible damaging of the claimant’s reputation with the Central Bank is not a matter for this tribunal.

g) The Claimant failed to exhaust the Company’s grievance procedure.

The respondent relies on the fact that the claimant did not utilize the internal grievance procedure in advance of his decision to resign.

Conway V Ulster Bank Limited (UD474/81.

In that case, the Tribunal came to the conclusion that it was unreasonable for an employee to resign, in circumstances where he had not fully pursued the bank’s grievance procedure. Whilst not bound by its own determinations, this Tribunal does generally accept that to be the case. However, each case must be assessed on its own facts.

The Tribunal must try and establish whether or not it was reasonable for the claimant not to engage in the Company’s grievance procedures and /or were there circumstances existing at the time the decision to resign was made that lead the claimant to form the opinion that his grievance would not receive a fair hearing. The relevant facts that existed at the material time were:

i) His concerns in relation to PK’s involvement on the White Project were ignored by the respondent.

ii) His request (reasonable or otherwise) for the details of serious issue being investigation and how it pertained to him was refused.

iii) His request for a list of questions to be furnished was refused.

iv) His request to be furnished with documentation was refused.

v) His licence was revoked.

vi) He was requested to remain away from the office

vii) He was requested not to communicate with the staff of the respondent.

viii) His suspension was announced on national television.

ix) The report of the investigation in draft form was sent to the Central Bank.

x) He believed the report contained personal information pertaining to him that was outside of the terms of reference.

xi) The large claims reserve issue had been coupled with the motor claims issue.

In those circumstances the claimant was justified in not engaging the respondent’s grievance procedure.

h) Conclusion

Having regard to all of the foregoing, this Tribunal is satisfied that from a very early stage in the investigation or perhaps even before it, the claimant’s fate was determined by the respondent. The respondent then went on a fact finding exercise to justify it’s predetermined decision. The decision was probably made to appease the concerns of third parties ie Shareholders and the Central Bank. Even if the Tribunal is wrong in concluding that, the events leading up to and the manner in which the claimant’s suspension was announced on national television, the catastrophic consequences for the claimant personally, the annihilation of his future employment prospects, coupled with the respondents refusal to inform him of the ‘serious issues’ and how they pertained to him, the sending of the draft report without first giving him an opportunity to refute the allegations against him, the secondary investigation for which there was no Board sanction or terms of reference, the commencement of a disciplinary hearing prior to the completion of the investigation and the involvement of PK in the process were all factors that lead the Tribunal to conclude that the claimant was justified in terminating his employment with the respondent.

i) Loss

The Tribunal accepts that as CEO the claimant did have responsibilities for the day to day running of the Irish business and had obligations not only to the Board of Management but also to the Shareholders and the Regulator. There is no doubt that not only the Irish business but the Group as a whole ran into ‘Capital’ problems in 2013. Those Group Capital problems were extraneous to the Irish CEO position. The potential breach of Central Bank regulations in relation to reserving practises within the Irish business was not. The Tribunal is satisfied that the claimant was aware of the practise, as were at least two dozen other employees most of which were in Ireland but some of which were in the UK group. The Tribunal is not satisfied that this practise was allowed to continue for so long due to a fear of the claimant. Whilst as CEO did have responsibility to ensure that practises which could attract Central Bank criticism did not develop or continue, this practise was one that was known, and known for a very protracted period of time, by too many high ranking company employees to lay the blame solely at the feet of the claimant.

As stated previously, suspending the claimant on national television was the equivalent of taking a sledge hammer to his reputation, to his prospects of ever securing employment in this industry again in Ireland, inEurope and very possibly beyond and itsealed his fate with the respondent forever. Accordingly, the Tribunal makes and award of €1,250,000.00 (€1.25m)

Sealed with the Seal of the

Employment Appeals Tribunal

This ________________________

(Sgd.) ________________________

(CHAIRMAN)