EMPLOYMENT APPEALS TRIBUNAL
CASE NO.
UD1077/2014
MN538/2014
CLAIM (S) OF:
Sean McHugh
against
AIB Group
under
UNFAIR DISMISSALS ACTS 1977 TO 2007
MINIMUM NOTICE AND TERMS OF EMPLOYMENT ACTS 1973 TO 2005
I certify that the Tribunal
(Division of Tribunal)
Chairman: Mr. C. Corcoran. B.L.
Members: Mr. A. O’Mara.
Mr. J. Dorney.
heard this case in Dublin on 13 October 2015, 8 December 2015, 16-17 December 2015, 21 December 2015, 10-12 February 2016 and 25 April 2016
Representation:
Claimant(s): Mr. Ercus Stewart S.C. and Mr. John Curran BL instructed by Mr. Brian O’Callaghan, Solicitor, c/o Denis Mc Sweeney, Solicitors, 16 Herbert Place, Dublin 2.
Respondent(s): Mr. Brian O’Moore S.C. and Ms. Mairead Mc Kenna BL instructed by Ms. Lynne Martin, AIB Group Limited, Block K4, Bank Centre, Ballsbridge, Dublin 4.
This is a case involving summary dismissal of the claimant, an experienced senior bank manager with the respondent, for alleged conflict of interest and related irregularities which emerged or were due to his activities and role in the Galway United Football Club, where it was alleged that he put himself in a situation where he had divided loyalties between his employer namely the respondent and the said club and in doing so his loyalty to the club outweighed his loyalty to the respondent, which placed his employer in serious jeopardy and as such warranted his summary dismissal. The main evidence in this case was tendered as follows:
REPORT OF SPECIAL INVESTIGATION UNIT MANAGER
In October 2010 following a Credit Review undertaken in AIB Eyre Square Branch, a number of irregularities were discovered, related to the claimant. As a result of this discovery an investigation was carried out and a detailed and comprehensive report of that investigation was issued by a manager in the Special Investigation Unit of the Respondent (SIU). The report confirmed several irregularities in a number of areas, involving the claimant. The areas of allegations, included 1/ Loans to third parties associated with the GUFC Ltd (Galway United Football Club Ltd), sanctioned or recommended by the claimant; 2/ Override of NAPS applications by the claimant; 3/ Management of excesses on the GUFC Ltd. Account; 4/ Debits drawn on GUFC Ltd. account, not drawn in accordance with mandate; 5/ Payment of interest on loans to third parties associated with GUFC Ltd; 6/ Payment to Revenue Commissioners in order to maintain the licence by GUFC, so that the club could continue to play in the various soccer club competitions; 7/ “Conversion” of cheques; 8/ a named Rent Account; 9/ Group Privacy and Data Protection; 10/ Other ancillary matters.
The striking feature of this report was that SIU, as investigator, not only reported but he also made (what was referred to in the report as), “Detailed Findings”, as well. Such findings were in the main adverse to the claimant and were not redacted before it was referred to RD, the Regional Director for the North-East Region. However this was disputed on the basis that SIU had to establish facts as part of his investigation which did not necessarily incur or apportion blame, and it was later acknowledged by RD the Decision Maker that he was free to overturn these alleged facts and that he did indeed overturn some of them. There were also allegations made by the claimant and his representatives that in carrying out this investigation certain key witnesses (which were possibly favourable to the claimant), in particular RD2, another Regional Director, and HBC, Head of the Business Centre, (who were both aware of the claimant’s involvement with G.U.F.C.) were not interviewed by SIU.
It was confirmed by the respondent that they were not alleging any personal gain attributable to the claimant from all of this.
HEARING AND DECISION OF RD
This matter was then referred to RD for a full oral and disciplinary hearing and possible sanction. He described his role as “Decision Maker” in these proceedings as follows:
“I wish to emphasise that my role is solely to consider the charges against you as specified in the letter of the 9th of May 2013, to decide whether to uphold these or not and, if I uphold the charges, to then determine the appropriate disciplinary action, if any.” P42 trsc.2.
The claimant was notified as follows:
“On Monday we are holding an oral disciplinary hearing pursuant to section 222 of the disciplinary policy. The purpose of this hearing is to give your client, Mr. Mc Hugh, an opportunity to respond to the charges against him. It is not my intention to call any witnesses to the oral hearing on Monday next. I see this hearing as your opportunity to answer the allegations in the charges letter”. Page 37 tr1.
While it is noteworthy that RD refers to his hearing as an “oral disciplinary hearing” nevertheless he did not call any witnesses to tender oral evidence relying almost totally on the documentary evidence from SIU’s report, and other documentation. The only oral evidence tendered was that offered by the claimant and his solicitor, together with detailed written submissions from the claimant, which were allowed by RD as part of the hearing. Another feature of this hearing was the fact that RD who was in effect the adjudicator in these proceedings with sweeping powers including that of summary dismissal had no formal training or qualification in any adjudication or arbitration skills although as he stated he was given “guidance“ on these matters.
Further it would appear that on RD’s own initiative without a specific request from the legal representatives of either side, decided to allow additional evidence which was finally availed of by the respondent and responded to by the claimant, even though at an earlier stage the respondent objected to additional evidence being tendered. This was elucidated from RD under cross-examination by Mr. Stewart, S.C. as follows:
Answer “Yes there was a time-limit”. “And did Mr. O’Callaghan remind you of that time limit”. Answer: “Yes he did” -------------------------------------- “And it was a ten day time-limit” Answer: “Yeah”. ------------ And after one month of hearing Mr. O’Callaghan and Mr. Mc Hugh never asked you to allow them to make any further submissions: isn’t that right?” Answer “Correct”. “And then you wrote to the parties after about a month, you are saying you are deliberating and then a few days later you told or you invited both parties if they wished to bring any additional information? Answer: “Yes” “Now at the hearing in November 2013 do you remember the solicitor for the Bank objecting to additional information?” Answer: “I don’t particularly”. “Do you remember him objecting to fresh or new evidence?” Answer: “I have some recollection of it yeah.” “So now two months later you are allowing additional information; isn’t that correct? “Who did you expect the additional information from? Did you expect it from Mr. McHugh or the Bank?” Answer: “I had no expectation of either party supplying it.” “So why then did you write the letter?” “Surely you realise it was the Bank who was going to take you up on this invitation?” Answer: “No I didn’t realise” “Well is that what they actually did, they were the people who came back looking for an extension of time and they finally gave you a document on 17th January 2014?” Answer; “That’s what happened”. “But that’s not provided for in the process”? “Not strictly but it is not, it is not precluded either” ---------------------------------------------------------------------------------------------------
------------------------------------(the purpose) “was purely and simply to make sure that I was giving the topic the serious consideration that I thought it merited” -----------------
“But both parties were represented by solicitors at your hearing: isn’t that right? Answer “Yes” “Neither solicitor and neither party asked you for permission to give additional information?” Answer: “That’s correct” “And neither party from the 25th of November up to the 17th January said they wanted to until the solicitor for the Bank told you I think on the 14th or 17th January he wanted now to give more information; isn’t that right? Answer: “That’s correct” “And the Bank availed of that and gave quite a lengthy one which Mr. Mc Hugh responded to”? Answer: “Yes”p112,113,114.trsc2.
His function in this matter was described as the “Decision Maker”. It was pointed out to RD at this hearing that the claimant was very cooperative and produced a written document at the hearing and that was very helpful to RD in that he would have a written record of what the claimant was going to say. This was acknowledged generally by RD. He stated as follows:
“I was quite happy to accept this written deposition and I did regard it as supportive and useful in the hearing”,
although there appeared to be an objection by the claimant’s lawyer to it, at a much later stage. It was unclear as to what the objection was.
Having examined the various files pertaining to these matters and having listened to the submissions of the claimant and his solicitor, he confirmed most of the irregularities and the charges levelled at the claimant. These can be summarised as follows from the letter of the 9th of May 2013:
Charge Number 1/ “The Bank alleges that you did not declare a conflict of interest between your involvement with the Galway United and your role as Galway United Relationship Manager and Acting Head of the Galway Business Centre and you wrongly confirmed you had no such conflict of interest on several occasions.”
The claimant’s main response to that Charge was as follows:
“I fully refute the allegation that I had any conflict of interest as alleged.”
“I was not (or never was) a Director of Galway United Football Ltd. I was not involved in the day to day management of the club, including its financial affairs & was not party to any information of this kind. I had no personal interest in or benefit from my involvement with the club. My involvement was purely voluntary in nature. I held the titular role of Licensing Officer which involved acting as liaison with the FAI for licensing exercise.”
RD in response stated as follows”---------- his point was that, as he wasn’t benefiting financially directly from his involvement with the Galway United Club, that as a consequence he didn’t see that he had a conflict of interest.
Charge Number 2/ “In 13 cases, the Bank alleges that that you breached your lending to discretion in contravention of Bank policy by sanctioning loans to third parties associated with the Club.”
Charge Number 3/ “ Not upheld.”
Charge Number 4/ “Override of Naps Applications.” – claimant accepted that finding.
Charge Number 5/ “Management of Excesses” – on the GUFC account – that he repeatedly ran excesses on that account for amounts in excess of his lending discretion. His lending discretion at the time was 350K secured and 75K unsecured.
Charge Number 6/ “Failure to accord with the mandate in respect of debits on the Galway United Football bank accounts.”
Charge Number 7/ “Payments to the Revenue in relation to the Football Club.”
Charge Number 8/ “Conversion of cheques- the failure to lodge the cheques in full into the account of the Football Club.”
Charge Number 9/ [this was left blank]
Charge Number 10/ “Group privacy and Data Protection” – this Charge was not upheld.
However despite the fact that he did not uphold some of the charges, or the circumstances giving rise to these charges, (circa 5 instances in total were identified), the misbehaviour was deemed by him to be that of gross misconduct, which attracted the penalty of summary dismissal. Subsequently the claimant received a letter confirming that he was summarily dismissed subject to his right of appeal.
In making his decision, RD appeared to be influenced almost predominately by the charge against the claimant of conflict of interest between the bank and the club, and he highlighted two aspects in relation to this namely, firstly the conflict of interest per se and the irregularities flowing from that, and secondly the fact that the claimant kept denying any conflict of interest right up to the end.
To quote RD as follows:
“So I guess it was to do with the fact that there was a clear conflict of interest, which he neither disclosed but in fact, denied right up to the point of my decision and that while that pertained, he engaged in a number of transactions which put the bank at risk and, as a consequence of that, I felt that the appropriate sanction was immediate dismissal.”
In fairness however to RD under examination and cross-examination, acknowledged that he had a certain sympathy for the claimant when he stated as follows:
“I could identify myself with Mr. Mc Hugh quite a lot because we had similar levels of service in AIB. I felt a lot of what he had gone through in his career and how he had progressed in his career was familiar to me and he was at a similar level of responsibility as me so in effect it could have been me in his position. So I took the matter of the report and the charges letter and the potential consequences for Mr. Mc Hugh very seriously.”p.trsc1 p. 41.
He was a “loyal bank manager, a loyal committed bank manager” and that in general he was “an honest man”. P.41trsc.1.
There were further allegations i.e. that the claimant did not receive the terms of reference until the appeal was imminent, including an extension of these terms of reference. –
“Okay. Now. I think you would accept that Mr. McHugh got on the 9th of May 2013 a huge report of many, many pages and 365 appendices, isn’t that right?” Answer: Are you referring to the O’Sullivan report?” Answer: “Yes” “-------- And do you accept that many of those documents he had never seen before?” Answer “Yes I think thats a fair statement.” “And he then tried to deal with those in his evidence before you; isn’t that right?” Answer; “Yes”----------------------------------------------------------------.
“Do you find strange it that important documents like that were not given to him in 2011, 2012, and 2013 before the report was delivered by courier to his home?” Answer: “No I don’t.” p71 transc bk2.
Despite these favourable sentiments as expressed his decision was one of summary dismissal for reasons as already stated.
He did confirm that he did not call any witnesses from the respondent to give oral evidence. But he also confirmed that he accepted the offer of the claimant and his solicitor to give oral evidence and make submission.
This matter was then appealed under the respondent’s disciplinary policy, to Mr. Mark Connaughton S.C.
MARK CONNAUGHTON S.C.
Mr. Connaughton S.C. was then called by Mr. O’Moore S.C., counsel for the respondent, who was appointed by the respondent to conduct the appeal hearing from the decision of RD to summarily dismiss the claimant, from his position of Senior Bank Manager with the respondent. He confirmed his qualifications, his wide and suitable experience and fitness for the task of conducting this hearing. He explained the mechanics of his appointment to this position. He then went on to explain how he intended to conduct the hearing, and at the outset he clarified two matters, 1/ Was there an agreed set of papers that he may review in advance of the hearing date? 2/ Did either party propose introducing any new evidence? It was clarified that this appeal was not a de novo hearing but rather a review conducted by Mr. Connaughton on an agreed set of documents, which in the main were SIU’s report and RD’s decision, including the code of conduct, conflict procedures and so on. He then outlined his plan on how he proposed to conduct this hearing as follows: 1/ He would make a brief opening statement concerning the parameters of the appeal and deal with any preliminary issues. Subsequently he would ask Mr. McHugh or his team to outline the specific grounds of appeal in detail; 2/ He indicated that while he may ask questions along the way from Mr. Mc Hugh or his representatives, it was his wish to allow an uninterrupted submission on his behalf for about an hour that would “put out the salient points”; 3/ He was going to allow the Bank to make a submission in reply and he estimated that this would take circa 60 minutes; 4/ Then he would allow a brief reply by the claimant’s side to the Bank. He confirmed generally that this was the manner in which the hearing evolved, with one exception. The exception was that the claimant had prepared without any notice to him, a detailed statement or lengthy submission setting out his position to this matter. He addressed RD’s findings together with general submissions. There were issues over the content of this statement/submissions, which were later resolved on an agreed basis. He then confirmed that after the exchange of submissions he would pose questions and he gave advance notice as to what these questions might be. He pointed out that he read the papers and background documentation and that he was thoroughly familiar with the file.
The grounds of the appeal were then opened and they included the following –
1/ “That he was not guilty of misconduct; 2/ That his summary dismissal wasn’t warranted; 3/ That he had already been punished enough because he was suspended; 4/ That there was duplication and overlapping of the charge;. 5/ That the findings were inconsistent, contradictory, and made in error; 6/ That substantial evidence had been ignored; 7/ That he had not been afforded fair procedures during the inquiry; 8/ That the investigation was seriously flawed; 9/ That there weren’t fair or proper procedures in the disciplinary hearing before RD; 10/ The sanction was disproportionate, and he should be allowed to resume his post.”
He acknowledged that these points were urged on him some to a greater extent that others and he considered each of them. At the outset of the hearing two matters were raised by him 1/His role and his power in these proceedings and it was agreed that in relation to this matter that this was an appeal in which he was at large and capable of substituting any decision taken by RD. 2/ Statement of the claimant which was referred to earlier, which comprised circa 40 pages, and of which Mr. Connaughton had no notice of, which the claimant wished to introduce, into the hearing, and which the other side objected to. A compromise was reached whereby the parts which were objected to would be marked and submitted to him and it would be up to him to decide if they were relevant or not, and that if he was going to rely on any of those statements. He would give them notice of that and they would have an opportunity to make any further representations, the hearing proceeded accordingly which included dealing with the document. The Bank as originally planned made their presentation and the claimant was given a chance to reply. Mr. Stewart made closing submissions on behalf of the claimant and he also had an engagement with him.
It is noted that Mr. Connaughton sought information on the individuals who received personal loans but this was refused by the claimant for a number of reasons, and because these matters were transferred to other personnel the claimant and RD don’t know anything about these save with certain things that were set out. It is noted that Mr. Connaughton summed up this dispute and his attitude to it in the following manner:
“ --------- the focus of this appeal to cut to the chase was about the relationship that Mr. McHugh had with Galway United Football Club and whether the relationship the bank had through him with individual customers who were connected with Galway United Football Club was all in fact one part of one commercial dealing with Galway United Football Club and that was very much at the heart of what we were discussing during the course of the hearings and obviously the Bank was putting forward the position that there was an actual conflict of interest and we know what I found in the final analysis, that there was a conflict and that Mr. Mc Hugh put the Bank in jeopardy by the manner in which he dealt with them so I wanted to know where does the Bank stand with these customers.”
Mr. Connaughton then gives his views on SIU’s report. His view in general was that the objectives of the investigation were to establish the extent of the claimant’s involvement with and his role in Galway United Football Club and to ascertain whether in dealings with certain loan accounts the claimant had an actual or potential conflict of interest between his role as Senior Manager in the Galway Business branch and the said football club, and to a certain extent or at all relevant policies and procedures were breached in respect of the matters under investigation. He also set out RD’s responsibility as decision-maker. He then went on to deal with the “charges letter” issued to the claimant by the respondent, and then referred to the fact that they were very serious charges and that at this juncture we were at the final stages of the disciplinary procedure.
He then went on to state that in relation to considering whether to uphold the claimant’s appeal he did not confine himself slavishly to following RD’s findings, but he considered the underlying documentation and the Bank’s policies and procedures as identified within the documentation, subject to the claimant’s letter/submission there was no new evidence. He then deals with the findings the first one dealt with the conflict of interest and he confirmed that he dealt with it by returning to the evidence by reference to the allegations set out in the charges letter. He made two adverse findings against the claimant.
“Firstly that at the outset his relationships with Galway United Football Club he ought to have expressly considered with his superiors the conflict that undoubtedly arose, and even if they were minded to let matters rest at that juncture, it ought to have been revisited when the extraordinary lending arrangements to which I shall now refer to were entered into. The steps to deal with the situation ought to have been clearly documented so there could be no question of the preferring of any interests over those of the Bank”
The second adverse finding relates to the failure of the claimant
“To declare the conflict when expressly requested to do so by letter dated the 25th September 2009. It was patently not too late to deal with the matter. It was clear from the record that he continues to have dealings with the client post that date which have undoubtedly given rise to difficulties for the Bank”.
The claimant also sought to defend the position adopted in respect of the conflict of interest by emphasising the fact that he did not gain personally in his dealings with Galway United. Mr. Connaughton decided that this was “beside the point”.
He noted that neither HBC who was the claimant’s Direct Manager, and RD2 who appeared to be the next level above that had not been interviewed by RD. However he also noted that their assessment had an element of speculation and made a finding of conflict of interest.
He referred to the extraordinary lending transactions whereby a number of key personnel in the club were given personal loans which in fact were lodged to the club account which was obviously in grave difficulty. It was noted that interest or some of the interest on those loans were paid by the club. He stated that he was sure that all of this was done with the intention of keeping the club afloat, and seriously exposed the respondent to risk. He reviewed the irregularities concerned mainly as already outlined and accepted the occurrence of most of them, to the detriment of the welfare and duty owed to the respondent.
In particular he identified three key points regarding conflict of interest or potential conflict: 1/ His dealing from the outset because he was so involved with the Club; 2/ Secondly, the conflict of interest was brought into sharper focus when he found himself in a situation involving dealings connected with providing funds to the club, and that he needed to consider again what the responsibilities were to the Bank as against assisting the customer; 3/Where he was reminded with the issue of conflict of interest again and afresh regarding the letter of September 2009.
In relation to calling senior personnel to give oral evidence i.e. HBC and RD2 he was surprised that RD did not take the opportunity to call RD2 in relation to some of the averments in his affidavit as independent decision maker. However he did take into account the written evidence of HBC and RD2.
He felt that if RD2 and HBC were of the view that there was no conflict of interest then those views did not accord with the Bank code.
Whether HBC was aware of his dealings with the club he felt, did not exculpate the claimant and made no difference.
He goes on to address the penalty appropriate to this case and he outlines a number of factors which he felt were pertinent in this case:
1/ Whether his adverse findings against the claimant constitute gross misconduct within the policy. He noted he did not have much discretion as the policy gives two examples, in an non-exhaustive list of instances, which are apposite in the instant case.
2/ There was also the claimant’s record to take in to account and the fact that however misjudged his actions, he neither sought or obtained any personal benefit for the manner in which he dealt with this customer relationship.
3/ There was nothing concealed in claimant’s actions at least as far as his then immediate superiors were concerned, but that was not the core problem, it was the conflict of interest issue:
To quote his view i.e. ---------- “I must add I was unimpressed with Mr. McHugh’s trenchant and regrettably unfounded reliance on the apparent righteousness of his actions. The suggestion that he would undertake whatever retraining might be necessary does not sit comfortably beside this expressed confidence that he has done no wrong.”
Then he goes on to state that taking all these circumstances into account he decided that the claimant should be summarily dismissed. Page 44/ tr 2
THE CLAIMANT
The Claimant was then called by Mr. Stewart S.C. On examination by Mr. Stewart he outlined his career and background to date. Briefly he joined the Bank when he was 17 years of age and he was now 56 years of age with circa 37 years’ experience and a clean record during that time. He served in several locations throughout the country. He was transferred from Ennis branch, then, in 2005, he was appointed branch manager to Galway Business Centre on the recommendation of the Area Director, AD, and RD2 who was Regional Director at the time, with the approval of the Area Manager of Area South. During that time and in the immediate years following this, the centre was very busy e.g. in 2006 it sanctioned €2 billion in facilities. It dealt with such areas as property sector, private banking, finance and leasing. It dealt with 9 branches and there were 6 relationship managers. The loans and accounts that they dealt with were spread across those branches. Effectively there were 54 sets of referral lists to be looked at each day and they had to be actioned each day before 10 o’clock in the morning. He was brought in as Senior Manager on the basis that he was to help HBC who was out of the office regularly to help garner business for the Bank.
He dealt with the charges and the alleged irregularities and his reaction to them. In relation to unauthorised sanctioning of loans, he outlined his working relationship with HBC i.e. when a loan proposal would come in, which was above his discretion and HBC was out of the office they would agree verbally on the sanction usually by phone and HBC would formally sanction it retrospectively, when he got back.
The claimant was of the view that this was generally the practice that was adopted by most branches on a daily basis. HBC had agreed that they would work off his unsecured loan discretion of €175,000. This worked well and there were never any complaints from commercial banking, quality control or anything like that. Galway Business did not have any accounts themselves. They were farmed out to the various different branches. In relation to lending discretion his lending discretion was €350,000, secured and €75,000 unsecured. There were no criteria in relation to loans until after a new system was introduced after 2011.
The individual loans to directors for the club were independent standalone loans and as such did not breach his discretion, and they were free to do whatever they wished with the borrowed funds. Around this time HBC was called to a meeting in Dublin, and he never came back from that meeting. It was later revealed to the Tribunal by Mr O’Moore S.C. that HBC was dismissed for gross misconduct after a disciplinary process ultimately officiated over by a senior counsel. He was phoned by RD2 and asked to take charge of Galway Business Centre on a temporary basis. He was formally appointed by RD2 as the Acting Head of Galway Business Centre. So he was in a position where he was Acting Head of Galway Business Centre and also relationship manager, from November 2009 to October 2010. After that MC was appointed.
He confirmed that he did override some of the NAPS recommendations. NAPS was an automated tape system for doing loan applications and it is automated to a system where there are demographics and the credit information is up-to date. If there are gaps or changes it can then become a manual system and it becomes dependant on manual input. In relation to increased risk because of withdrawal mandates not signed. He disputed this on the basis the real document that needs to be signed is the credit agreement, and that if that agreement was signed then there was no need for a withdrawal docket to be signed, or if either of them was signed then that would do. In relation to unsecured loans every loan under €30,000 was unsecured. In relation to loans to directors of the club there were six directors with loans totalling €180,000, and he sanctioned €160,000 euro of this total, to 4 directors, an average of €40,000 a piece. The remaining €20,000 was made up of €10,000 each and they were system approved. He indicated that references were made to possible difficulties in repayment capacity for these loans, and he disputed this on the basis that they were individual loans with the purpose of personal investments in whatever the individuals chose, which could include the club. He had to take into account that these customers had a guarantee signed for the company in the amount of €30,000 each. He stated as follows: “The customers were at all -------- they were lending personally to invest into the club, they knew that.”
Later on he indicated that the respondent produced a figure for those combined directors’ loans for €300,000, and that €120,000 was interest accrued charges. In January 2011 he was asked to hand over the managing of these accounts and he had no input to the follow up on those loans. The hearing investigation went on for over two years, which was an inordinate delay.
In relation to his involvement with the club he was a supporter. He had a season ticket. In relation to his position as licensing officer he was asked to take on the role of licensing officer by one of the directors who was a former AIB official. He was reluctant to do so. However it was made clear to him that all the practical work relating to it would be carried out by certain office personnel. They needed someone separate from the F.A.I. to take up the position and all he had to do was sign the application form. The payment was made in January 2010 and that was just after HBC had left and he had taken over as Acting Head of the Business Centre. He was asked by Credit Support Unit to process the application as it was easier for his system to do it. (This account was due to transfer to the Credit Support Unit, but the transfer had not yet taken place, so it was still on his system). The application was for €60,000 it was secured by a letter of guarantee by a prominent customer. And it was to pay Revenue in relation to renewal of the licence for the club. He processed that loan on the 7th of January. The loan had to be put in place by the 21st of January and the Credit Support Unit and SM the senior manager in charge knew this. He was contacted by SM to the effect that the loan was sanctioned. He confirmed this verbally. When the club was looking for the money they contacted him but unfortunately SM was gone on leave for a few days
“and he had forgotten physically to press the button to approve the loan”.
The club approached him as they did not know anyone in the Credit Support Unit. He stated that he could not do anything about it because he could not do anything in the company name. They had a guarantor ready to sign the guarantee so there was no doubt that the bank was going to be paid. He told them that the only thing he could do to get them over the difficulty was to give them two personal loans each up to his unsecured limit. That is what he did. (At the time they did not need the full amount, they needed circa €45,000). Before he got to finish off the applications, SM came back and
“he pressed the button to sanction the loan the loan was drawn the same day, and the €45,000 euro was refunded to the two directors.”
The claimant justified these matters on the basis that if Revenue were not paid, the licence would lapse and the club would be in very serious trouble, and they would have been foreclosed, they would not be able to have gates, collections, or games. He further stated that if he did not act as he did he believed that he would have been negligent in his duty to the bank because he would have let the club go and the Bank would have been at a loss.
He went on to outline that the bank encouraged employees to be involved with the GAA, Rugby, Soccer, and that as a manager in a new local area the first thing a manager or official would do is to “become part of the community”.
In Galway they had actually a template done to make sure all the clubs were covered. He was down as liaison person for Galway United and the Connaught Rugby.
In particular the bank encouraged involvement in the community and that there were plenty of examples of it in the Business Centre itself. The Bank paid the sub for a manager to join a club of his choice. One of the other officials was chairman of the local hurling club, and he would have sanctioned a loan for them of €250,000 to the trustees. There was a loan sanction to the golf club for €2 million. The official who did the application was also the treasurer of the club but there wasn’t a problem with that.
He went on to state that in its investigation the bank went back over his accounts for 13 years and despite that fact that he was a supporter for 20 years, he was only 6 years in Galway at the time, also his whole family’s accounts were investigated including his parents accounts (who were quite elderly at the time circa 87 years). Despite going over all these accounts –nothing was found. In one year alone they gave out tickets of €32,000 for the Galway Race, which were given as freebies to clients. The maximum sponsorship given to the club by the bank was €5,000 per year. Initially he did not know he was being investigated.
He stated that when the club initially got sponsorship from the bank they became an account-holder for the club, and asked for an overdraft. He passed the request to HBC and he agreed to it. He himself did the application for it. He also confirmed that he was already the licensing officer for the club when the account was opened. He denied that as Licensing Officer he had an interest in the club doing well, on the basis that the football club and the company behind were separate even though if the licence was not renewed then it could not continue to play or take part in any games. He confirmed that the licensing application would be signed by him, and that they had to have a person who had no other responsibilities. He also confirmed that the licensing officer’s responsibility was to ensure that that the licensing application was completed and sent away, and that was his job. However despite this he did not agree that the signing involved any responsibility on him because the CEO or someone else filled in the details.
He became aware he was being investigated in a letter of April 2012, but the first time he became aware of an issue was from MC on circa 6th of January 2011. He stated that a query had come up from quality control to the effect of potential conflict of interest following a visitation. He stated initially of his role in the club that if there was a conflict of interest that his view was that it was at the lower in of the scale. He knew that he was Licensing Officer in the club. In May of 2012 he was in effect demoted, there was a new structure introduced. A meeting was held in Galway chaired by MC. The claimant was not informed of the meeting, and not invited. As a result of these changes he was forced to report to a junior person. A further matter was raised regarding bullying and MC, but these were objected to on the basis that these were already dealt with by the High Court. He offered witnesses to RD on a number of occasions but it was not availed of.
He insisted that there was no conflict of interest, on the basis that he did not gain or potentially gain any benefit either personally or financially from his affairs with the club.
He was well qualified and he outlined his qualifications despite this and his vast experience it did not occur to him that he was in conflict of interest or potential conflict of interest. He stated as follows-“ --------- in the way I was brought up in the Bank and understood conflict of interest, there had to be some personal gain or benefit for you to be a conflict of interest”.
He stated that the code of 2006 gives no explanation at all about conflict of interest and that it only speaks of “personal interest” and that he had no “personal interest”. He agreed that he did sign the document of the 28/9/09, stating that he had no conflict of interest or potential conflict of interest. He stated that he waited two to three days before signing the document because there was a managers’ meeting on it. Regarding the letter warning of potential conflict this related to conflicts involving property and finance.
In relation the excesses on the club account he agreed that between February 2008 and November 2008 that the limit was €100,000 but excesses were paid up to €145,000, and that was not a desirable situation. The agreed sanction on the account between the 27th of November 2008 and February 2009 was €150,000 but that again there were excesses on the account rising to €179,000. He agreed with this. In February 2009 and June 2009 the limit was €100,000 but excesses of €186,000 were paid. Again limit on account between June 2009 and September 2009 was €186,000 euro and then excess to €192,000. He agrees that practically all overdrafts were exceeded. His response was that all of those overdraft limits were sanctioned by HBC or by Commercial Banking.
EVIDENCE OF RD2
The next witness called by Mr. Stewart, S.C. was RD2 who had 40 years experience in banking and who held the position of Regional Director in Galway before he retired in December 2009. He stated that HBC was head of Galway Business Centre. He knew the claimant. He had worked with him in Castlerea and in Athlone.
He stated that in 2009 due to the amount of business in Galway, HBC needed support and the claimant was highlighted as a suitable person to come in as number two. So he was appointed as number two to HBC.
He explained the working relationship between the two of them, where the claimant would be in situ when HBC was out and about garnering business. If a loan application exceeded his discretion, but was within HBC discretion, then they would debate it and sanction it and he would formally sign off on it the next day. The bank never took issue with this arrangement. He was aware of the claimant’s connection and involvement with Galway United Club and he welcomed that as it was another connection out into the business world and the Bank welcomed it. The Bank encouraged this type of involvement with voluntary sporting groups and for senior staff paid their membership fees to those bodies, and for staff in general paid half the membership fee. The Bank had sponsorship deals with the rugby club, GAA clubs and Galway United.
He met HBC regularly and the issue of conflict of interest never came up, and there never was an issue of conflict of interest. He still could not see how the claimant had a conflict of interest. He did recall a meeting where conflict of interest came up and the letter to all employees regarding conflict of interest. He did state that conflict of interest was not necessarily confined to financial benefit. It could include any benefit. It should be something that is obvious in some way and not hidden and that nobody understands. He stated that at briefing meeting on the letter of the 29th of September 2009, regarding conflict of interest that they were given to understand that it related to property deals and business investments. The letter and relevant parts of it were put to him-
“We are requesting to confirm in writing there are no actual or potential conflicts of interest between your position with the bank dealing with the affairs of the Bank and its customers and any business or personal interests of yours outside of the Bank.”
He stated that he didn’t have a perceived conflict of interest and that you don’t have any problem in signing the letter because you don’t believe you have. The next sentence was put to him:“We are particularly concerned to ensure that no issues arise in the context of any direct or indirect interest you may have in property”. He believed that that sentence probably encapsulated the summary received at area meetings as regards this letter.
In response to further questioning he stated that his work would be different to the claimant’s work in that his work would be lending in a branch, but the claimant’s work would involve lending in a business centre which looked after a number of branches. There were eight to nine branches feeding into the centre. Further as an experienced banker of 40 years there was nothing that he heard while present at this hearing that surprised him from the point of view of conflict of interest. It was normal business as it went on in the Bank at the time.
He did not feel qualified to give an opinion on the NAPS situation. In his position of seniority in the Bank he did not feel that the claimant should have been dismissed for the allegations against him. He stated that he would have liked to sit down and discuss matters with RD or Mr. Connaughton. He would say that the conclusion that they reached of gross misconduct after all his time in the Bank he could not agree with. He thought it was totally wrong.
DETERMINATION
This was a difficult, complex and protracted case heard over several days. There were detailed documents and letters submitted including transcripts recording the different stages in this case. All of these were put before the Tribunal including oral evidence and submissions. Having heard the evidence as tendered by both sides under examination in chief, cross-examination and re-examination and having observed the demeanour of the various witnesses the Tribunal’s decision is as follows:
We are of the view that the claimant was unfairly dismissed in that the penalty imposed was disproportionate. In making our decision the following points are of note:
1/ The claimant was a senior bank manager with circa 37 years of services with a clean record over that period of time.
2/ The respondent knew or ought to have known of the claimant’s activities in the club from an earlier date and certainly his immediate superiors knew.
3/ The relevant code of conduct at the time in these circumstances does not confine us to a finding of gross misconduct.
4/ There appeared to be a serious problem in the bank at the time regarding senior personnel becoming involved in private property or business deals. The respondent was taking special measures in order to deal with this and to obviously clean up the image of banking. The respondent is to be lauded for this. However the claimant was not in that category.
5/ The respondent allowed matters to drag on and allowed overdrafts on the club to be increased over a period of time. The respondent should have intervened sooner with remedial action.
6/ The High Court matter regarding bullying is a separate matter and has already been dealt with comprehensively by that court.
7/ The claimant did not receive any identifiable financial or personal gain from his activities with the club and the respondent accepted this.
8/ The respondent bank encouraged its staff to become involved in voluntary bodies and sporting bodies in the community for business purposes and in many cases paid the annual membership fees to those bodies.
9/ The respondent bank paid yearly sponsorship to the club.
10/ The respondent bank did not tender or was not requested to tender oral evidence at the various hearings, conducted previous to this hearing.
Given his long, incident-free service to the respondent and the circumstances relating to this case, we do not think that he should have been summarily dismissed. A lesser penalty should have been considered and imposed, e.g. serious written warning or warnings, reprimand, demotion, loss of increments, temporary suspension without pay, a period of suitable re-training, anyone of those or combination of those would have been more appropriate. We feel that the action taken by the respondent in the circumstances against the claimant was disproportionate.
With regard to the claimant however we feel that there was a conflict of interest and that by his activities and extraordinary financial dealings he placed himself in a situation whereby there were divided loyalties between the club and the bank and that in doing so his loyalty to the club was put before his loyalty to the respondent. By doing so he exposed the respondent to a serious risk of damages and jeopardy.
That as an experienced senior manager with the respondent he knew or ought to have known that he was placing the respondent in serious danger. While we do accept that he did not gain or stand to gain any benefit from his activities nevertheless this did not lessen the danger to the respondent. The effect or the potential effect was the same. While the respondent encouraged staff to join voluntary bodies and sporting bodies in the community, in this case while he was doing this, his activities “crossed the line” and went further. The claimant was naïve, reckless, careless and displayed a serious lack of judgement on his part, but there was no malice. While the respondent was ultimately culpable, the claimant contributed to his own downfall.
In making our decision we are mindful of the sentiments expressed in the case of Noritake (Ireland) Ltd. v Kenna UD88/1983 where the following questions of principle, were highlighted in making its decision: “1/ Did the company believe that the respondent misconducted himself?
If so, 2/ Did the company have reasonable grounds to sustain that belief? If so, 3/ Was the penalty of dismissal proportionate to the alleged misconduct?”
The case of Snia Ireland Limited v Connelly UD 194/1983: “Misconduct must be measured in the context of the employee’s act, not just its consequences or potential consequences to the employer. The reasons for the act have to be evaluated and put into the context of his employment and responsibility. An act of an employee can cause damage or risk to the employer, but it need not be misconduct.”
Having regard to the particular circumstances of this case, we are of the view that compensation is the most appropriate remedy.
Accordingly we award €120,000 compensation to the claimant for unfair dismissal, under the Unfair Dismissals Acts 1977 to 2007, and €18,384 minimum notice due under the Minimum Notice and Terms of Employment Acts 1973 to 2005.
Sealed with the Seal of the
Employment Appeals Tribunal
This ________________________
(Sgd.) _______________________
(CHAIRMAN)