Case Study: De Facto Director Recovers £33,000 Following Unfair Dismissal

Summary

How our Employment Law Team helped a de facto director, Steve, to recover over £33,000 from the business following dismissal from his employer.

The situation

Steve and his life-long friend John were directors of a small pub chain. As a result of the business facing financial difficulties, the company went into liquidation and its assets and goodwill were transferred to a new company – of which John became the sole Director in order to secure finance. John had promised Steve all along that once profits improved, Steve would be appointed as a Director of Pubs Ltd. Meanwhile, John assured Steve that he would continue to have all of the same functions and authority as before, and would be a Director in all but title. In law, Steve was a de facto director.

For a number of months Pubs Ltd ran well, with failing venues closing, and new prospects opening. John treated Steve very much as an equal.

Eventually, however, John decided that he no longer wanted a business partner and began to turn on his earlier promises to Steve. A complex commercial dispute arose between Steve and John and, although it began to look like they had identified a way forwards, negotiations broke down and John decided that he wanted Steve out of the business.

John made up and ‘investigated’ a series of complex allegations about Steve – including that Steve had exceeded his authority by holding himself out as a Director, had misappropriated company property, had harassed staff, and had caused a breakdown in trust and confidence. John also claimed to have suspended Steve during a meeting when the two business partners were trying to negotiate a way out of trouble.

A disciplinary meeting took place, following which John summarily dismissed Steve from Pubs Ltd. John then instructed the company solicitor to hear the appeal, which was also decided in the company’s favour. Steve was therefore left unemployed and without any money, Pubs Ltd. having also failed to pay his final instalments of wages.

What Martin Searle Solicitors did

Steve contacted our solicitors office in Eastbourne. Our Employment Law Team helped Steve to issue a claim against Pubs Ltd at the Employment Tribunal. We acted for Steve throughout the claim, dealing with everything from disclosure and inspection, through to the preparation of detailed Witness Statements and Schedules of Loss.

In addition, we helped Steve to challenge a decision by his legal expenses insurer that his claim had less than reasonable prospects of success. This resulted in the insurer changing its position and agreeing to meet Steve’s legal fees going forwards. This saved Steve over £13,000 in legal fees.

In advising and assisting Steve, our Employment Law Team assessed the dismissal procedure, the 900+ pages of documents, and the various defences that Pubs Ltd were raising. This helped us to assess the case fully and, above all, to undermine each of the employer’s arguments in order to show how and why Steve’s dismissal was unfair.

We also negotiated with Pubs Ltd.’s new solicitors, but advised Steve to reject their low offers and instead take his case to a full Hearing.

The result

Steve won his claim for Unfair Dismissal following a three-day Hearing at the Employment Tribunal, recovering almost £34,000 to include six months’ future loss of earnings.

The Employment Tribunal even increased Steve’s compensation by as much as 25%, because Pubs Ltd had unreasonably failed to comply with the principles of the ACAS Code of Practice.

Steve also recovered unpaid wages and outstanding holiday pay.

Costs

As the Tribunal’s findings were critical of Pubs Ltd.’s case, we helped Steve and his insurer to apply for costs against Pubs Ltd.

The Judgment should send out a clear message to employers that concocting allegations to manage-out business partners can be extremely dangerous and costly. The case should also serve as a warning of what can happen if solicitors take too “hands on” an approach in disciplinary matters.

To find out how we can help with with an unfair dismissal claim, contact us today on 01273 609911, or email info@ms-solicitors.co.uk.