England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM EMPLOYMENT APPEAL TRIBUNAL

		Royal Courts of Justice Strand London WC2 Thursday, 7th March 2002

1. LORD JUSTICE BUXTON: I will ask my Lord, Lord Justice Latham, to give the first judgment.
2. LORD JUSTICE LATHAM: This is an application for permission to appeal a decision of the Employment Appeal Tribunal given on 18 December 2001. The Tribunal determined that the applicant's appeals from two decisions of an Employment Tribunal should be dismissed. The Tribunal refused permission to appeal, as did the single Lord Justice.
3. The two decisions in respect of which the Employment Appeal Tribunal gave its decision were, first, a decision of the Tribunal given on 13 September 2000 following a hearing on 4 September 2000; and, secondly, a decision of the same Tribunal after a hearing on 27 October 2000.
4. The significant background facts are as follows. The respondent, Mr Haddock, was an employee of the applicant company from 1983 until January 1999. The applicant company is part of a substantial international group with 22,000 employees worldwide. It has its own Human Resources Department and an in-house Legal Department.
5. By 1997, Mr Haddock had reached a position of significant responsibility within the company. At that stage, however, he had started to work for a Mr Aulagnon, a senior employer whose method of doing business was such as to subject him to greater pressures than he had previously been under. As a result, Mr Haddock suffered from stress which, sadly, led to a nervous breakdown in early 1998. He was diagnosed as suffering from a severe depressive illness and was off work from 20 January 1998 until 27 July 1998.
6. He then returned to work. The applicant assisted him by imposing a more relaxed regime, which enabled him to make reasonable progress in returning to his previous working capacity. Unfortunately, in January 1999, his manager was replaced by a Miss Philippa Davis, who considered that he could not remain in that job. She told him that he was to be moved. On 12 January 1999 she said that from then on he would work as a customer development manager, which was clearly a significantly less prestigious role and one for which he was over qualified. When he complained on that basis, he was told that he certainly could not continue in his current job because he was unable to cope and that the company was not prepared to continue to support him. As a result, the respondent suffered an immediate second nervous breakdown and has never been able to return to work with the applicant.
7. He consulted solicitors in April 1999 and presented an originating application to the Employment Tribunal complaining of disability discrimination. The applicants never entered a notice of appearance. It is clear from the correspondence that we have seen that Mr Haddock hoped that he would be able to receive compensation for his psychiatric illness out of a health scheme run by the applicant, of which he was a member. The hearing of his application to the Employment Tribunal was accordingly adjourned on a number of occasions until eventually it was restored in July 2000 when directions were given for the purposes of a hearing.
8. The applicant was fully aware of how the application was being dealt with, and at no stage has it sought to suggest that it was unaware of the fact that on 5 July 2000, a hearing date was set by the Employment Tribunal for 4 September. Despite that, Mr Bulmer and Miss Willis, who were employed by the applicant in the Human Resources Department, took no steps to enter a notice of appearance or to take any legal advice. However, they did attend at the Employment Tribunal on 4 September 2000. From the material before us, it would appear that they made no application to be heard by the Tribunal. It would also appear that the Chairman of the Tribunal indicated to them that, because there was no notice of appearance, they could play no part in the proceedings.
9. Thereafter, the hearing progressed with Mr Haddock giving evidence, supported by documentation, including a report from a Dr Davison dated August 2000. The Tribunal concluded that he had suffered detriment by way of discrimination because of his disability. Accordingly his complaint was upheld. The Tribunal then proceeded to award damages totalling £65,000 under three heads: (i) £35,000 compensation for psychiatric injury; (ii) £20,000 for injury to feelings; and (iii) what were described as aggravated damages in the sum of £10,000.
10. The applicant, belatedly, sought legal advice as a result of which solicitors made an application for a notice of appearance to be accepted out of time and an application for the decision to be set aside. Having heard argument, the Tribunal concluded in October 2000 that the application to extend time for the notice of appearance should be dismissed. Accordingly, the September decision stood. It was against those two decisions that the applicant appealed to the Employment Appeal Tribunal.
11. In the first instance, the Employment Appeal Tribunal dealt with the matter in a preliminary hearing by directing that both the "procedural appeal" and the "merits appeal" should proceed to a full hearing. At the latter the Employment Appeal Tribunal dismissed the applicant's appeal against the procedural appeal and held that it had no jurisdiction to deal with the merits appeal. It concluded in paragraph 46 of the decision:

"In view of our firm conclusion that the Employment Appeal Tribunal will not entertain a merits appeal where there is no valid Notice of Appearance below, this is a matter which we do not think need trouble the Court of Appeal."

12. The application to this court is for permission to appeal that decision on the basis, first, that the Tribunal was wrong to reject the procedural appeal and, secondly, to conclude that it had no jurisdiction to deal with the merits appeal. The application is for this court to determine whether or not on the merits appeal there were proper grounds for an appeal to be upheld on the basis of the grounds before the Employment Appeal Tribunal.
13. Dealing first with the procedural appeal, the basis upon which the applicant puts its case can be shortly stated. In the course of the extended reasons the Tribunal set out in paragraph 11 its conclusions as to the explanation put forward by the applicant for having failed to enter a notice of appearance. The affidavit of Mr Bulmer was to the effect that they had been lulled into a false sense of security by the fact that Mr Haddock was clearly of the view that if he could obtain money from the permanent health insurance policy then he would not be proceeding with his claim. The correspondence makes it clear that the solicitors acting on behalf of Mr Haddock, when making the claim, did so on the basis that they would be seeking other means of redress and that the application to the Employment Tribunal was made in order to preserve his position in the event that he was unable to obtain satisfactory compensation from that permanent health scheme.
14. Having looked at the documentation, the Tribunal concluded that it could find nothing which could support Mr Bulmer's professed belief. The Tribunal went on:

"We do not suggest that Mr Bulmer was not telling us the truth when he told us that that is what he believed at the time but it was a belief without any foundation in fact."

15. It is submitted by Mr Jeans QC, on behalf of the applicant, that that was a wholly unjustified and unwarranted conclusion, that there was ample evidence before the Tribunal to show that Mr Bulmer had indeed, maybe wrongly, been lulled into a false sense of security as to the way in which the claim to the Tribunal would progress. It is submitted that the conclusion infected the decision of the Tribunal when it came to carry out the balancing exercise, which Mr Jeans accepts was the task of the Tribunal, in determining whether or not to exercise its discretion in favour of the applicant.
16. When the Tribunal came to deal with the balancing exercise, in terms which indicate that the only conclusion relevant to the decision which it made arising out of the passage (to which I have referred) about which Mr Jeans complains, it said, in the middle of paragraph 17:

"We have to say that the explanation that the respondents put forward for the delay was one which bears them no credit. It demonstrates a startling degree of incompetence and complacency on their part."

17. In my judgment the evidence did show a startling degree of incompetence and complacency on the part of the applicant. In those circumstances, I do not consider that, even though the conclusion which the Tribunal came to earlier may have been harsh, when they carried out the balancing exercise (which is the nub of that decision) the Tribunal in any way misdirected itself, or otherwise erred so as to justify the conclusion that the exercise of discretion was flawed. Mr Jeans cannot point to any other matters in the Tribunal's determination which could arguably be said have been wrong in that regard. Accordingly, there is no basis for the conclusion that the decision of the Tribunal on the procedural issue is one which is flawed in a way which would justify this court granting permission to appeal.
18. Mr Jeans makes a further submission on the procedural aspect which does not concern the October 2000 decision, but relates to the decision on 4 September. He submits that, on the authority of Tull & Ors v Severin [1998] ICR 1037, the fact that Mr Bulmer and Miss Willis were present at the hearing on 4 September, should have resulted in the Chairman of the Tribunal at least asking whether or not the applicant wished to enter a notice of appearance out of time and to take part in the proceedings. Tull & Ors v Severin involved respondents who came before the Tribunal without having entered a notice of appearance. The Employment Appeal Tribunal held that the Tribunal Chairman should on that occasion have afforded them the opportunity to correct the procedural defect at that stage and not deprive them of the opportunity to be heard.
19. There is clearly much to be said for that approach. The Tribunal should not be so concerned with procedure that it loses sight of the need to exercise its jurisdiction justly in a way which enables the parties to have their dispute properly resolved. But, in my view, the decision should not be elevated to a principle which requires in every case the Tribunal to take that view.
20. In the present case Mr Bulmer and Miss Willis, on the face of it, were representatives of a substantial international company which must be taken to have experience of Employment Tribunals and of proceedings of this particular nature. In the absence of any application from either of them to be heard, I would not accept that that, of itself, would require the Tribunal Chairman to offer them the opportunity to make submissions in such a way that the decision was in some way to be impugned.
21. It is significant that in this case the Tribunal clearly considered whether or not the applicant should be entitled to an extension of time to enter a notice of appearance in October. It considered that because of the prejudice to Mr Haddock in that his application had already been subject to substantial delay (albeit not the responsibility of the applicant), his health was such that any further delay was likely to be significantly prejudicial to him. It might be tempting to say that, if the application had been made for the extension of time at the hearing of 4 September, the Tribunal would have come to the same decision. But, it might not be safe to make that assumption, bearing in mind the fact that by the time the application was made in October there was already a decision in favour of Mr Haddock. Allowing time for the notice of appearance would effectively result in setting aside that decision, which may be said to have been a matter which could have produced greater prejudice to Mr Haddock than if there had been an extension of time in September.
22. However, the Employment Tribunal would probably have dealt with the matter in such a way as to minimise the prejudice to Mr Haddock. The likelihood, therefore, is that it would have required the matter to proceed that day. There was no material before either the Employment Tribunal at the October hearing or before the Employment Appeal Tribunal, or before us, which suggests that Mr Bulmer and Miss Willis were in a position to put forward any material or arguments which could or would have been likely to have affected the end result.
23. For those reasons, in my judgment, there is no possible prospect of an appeal on the procedural aspect of this case being successful. I would dismiss the application for permission in so far as it relates to the procedural aspect of the case.
24. Turning to the way in which the Employment Appeal Tribunal dealt with the merits, it is clear, in my judgment, that it fell into error. The only rules which deal with the way in which a notice of appearance is to affect the ability of a respondent to take part in proceedings in the absence of a notice of appearance, are the Employment Tribunals (Constitution and Rules of Procedure) Regulations 1993, provide by rule 3(2):

"A respondent who has not entered an appearance shall not be entitled to take any part in the proceedings except-

....

(i) to apply under rule 13(1) for an extension of time."

25. The question of how that impacts on the ability of a respondent who has not entered an appearance to appeal was considered by the Employment Appeal Tribunal in Charlton v Charlton Thermosystems (Romsey) Ltd [1995] ICR 56. Giving the judgment of the Appeal Tribunal, Mummery J held at page 60 that this rule did not preclude the party in default from appealing. In other words, his conclusion was that the only restriction was the restriction expressly provided for in rule 3(2) and no more. He concluded in that case that a respondent was entitled to appeal to the Employment Appeal Tribunal, both in relation to any decision following an application for extension of time in relation to the notice of appearance and as to the merits. However, again at page 60, he set out what he considered should be the appropriate approach of the Appeal Tribunal. He made it clear that the Appeal Tribunal should consider any appeal at a preliminary stage to determine, in relation to the merits aspect, whether there was any reasonably arguable defence to the claim. If there was such a defence, then the matter could proceed to a full hearing. If there was not, then the implication of his judgment was that the appeal in relation to the merits should be dismissed.
26. I see no reason to doubt the correctness of Mummery J's approach in that case and the procedure which he considers is appropriate for dealing with an appeal in circumstances such as this is.
27. Accordingly, the question which arises is what we should do given that it is clear that the Employment Appeal Tribunal went wrong in declining to consider the appeal on its merits, even to the extent of giving any view as to whether or not the grounds of appeal provided any reasonable basis for an argument that the applicant had a defence, either in whole or in part, to the claim.
28. The right approach of this court now should be to look at those grounds and to determine the extent to which, had the Employment Appeal Tribunal applied its mind to those grounds, it would or would not have been likely to have allowed the appeal. The position has been helpfully identified by Mr Jeans as one which raises three questions in relation to the reasons given by the Tribunal on the merits of Mr Haddock's claim. He does not seek in any way to the challenge under this head the conclusion of the Tribunal as to discrimination. He submits however that each of the three heads under which damages were awarded can be properly the subject of challenge.
29. First, in relation to the award of damages of £35,000 for psychiatric injury, he submits that the Tribunal failed to understand the nature of the claim that was being made which could only be for an award of damages for the discrimination found proved. Even if the Tribunal concluded that the psychiatric damage from which Mr Haddock suffered was the result of the way in which he had been treated prior to any discriminatory act, it could not be right to award damages for that psychiatric injury; in other words, that which constituted the disability which underpinned his claim in respect of the events of January 1999.
30. In paragraph 14 of the Employment Tribunal's decision, the Tribunal concluded that the applicant had suffered psychiatric injury. It was put as follows:

"On the basis of the evidence that we have before us, we are satisfied that the applicant sustained a psychiatric injury and that it was caused by the actions of the respondent. We point to the excessive stress to which the applicant was subjected by Mr Aulagnon and, latterly, to the action of Ms Davies in suddenly withdrawing the support that the applicant had enjoyed for a number of months which was enabling him to rehabilitate himself successfully at work. We are satisfied that as a result of those actions, the applicant has suffered a severe psychiatric injury."

31. Mr Jeans' simple submission is that, in its description of the damage for which there was to be compensation, the Tribunal appears to have been providing for a period of stress to which Mr Haddock was subject when Mr Aulagnon was his manager. That was not the subject matter of the claim for discrimination, but was the reason for the stress which produced the disability which resulted in his ultimate treatment at the hands of Miss Davis. It was that discriminatory treatment about which complaint was made.
32. It follows that the £35,000 awarded must have included an element for the psychiatric effects of the treatment he received at the hands of Mr Aulagnon, even though that was not treatment about which he complained.
33. However, two matters must be borne in mind. First, in paragraph 10 of the Employment Tribunal's decision, it is quite plain that they were well aware of the fact that the background against which their decision had to be made was that Mr Haddock's first nervous breakdown was a problem from which he was recovering at the time of the ultimate action by Miss Davis. They made it clear that his condition was abating, but it did not entirely disappear.
34. There is no doubt, however, that the wording of the passage in paragraph 14 could mislead one into concluding that the Tribunal was taking into account material which it was not entitled to take into account. However, the damages which were awarded were for the psychiatric injury which was identified in the report from Dr Davison. The fact that his mental condition was such at the time of the actions by Miss Davis that he ultimately did suffer from the psychiatric injury, is merely the historical position which explains why he did ultimately suffer from that severe psychiatric injury. But what caused the psychiatric injury identified by Mr Davison was the action of Miss Davis. That was what the Tribunal had to compensate him for.
35. Accordingly, as far as that head of damage is concerned, I do not consider that there is any arguable prospect of persuading the Court of Appeal that the Employment Appeal Tribunal, had it considered the matter as it should have done, would have considered an appeal arguable in that respect.
36. It is however different as far as the two other heads of damage are concerned. In relation to the damages for injury to feelings, the Tribunal undoubtedly said that it was careful not to confuse the psychiatric consequences (the subject of the award of £35,000) and the injury to feelings. However, when one considers the amount of the award of £20,000, it seems to me that it is at least arguable that the Tribunal has not adequately provided reasons which identify why it considered that there was indeed injury to feelings beyond psychiatric injury which could justify such a substantial separate award.
37. Equally, as far as aggravated damages are concerned, the Tribunal, in awarding £10,000, appears, arguably, to have gone wrong. It identified two separate matters as the basis of the award. First, the way in which the applicant had dealt with Mr Haddock's application by making no effort to resolve the matter by any compromise and by causing him to have to go through a "very substantial ordeal" in relation to giving evidence in public. In my view that would have been a proper basis upon which to award aggravated damages on the authorities. However it went on to refer to the fact that Mr Haddock had been recovering from his psychiatric illness when Miss Davis acted as she did. The Tribunal described the withdrawal of support by the company as having had a "tremendous impact" on Mr Haddock. Again, it is, at the very least, arguable that the Tribunal fell into the error of double counting when it came to the conclusion that it could award aggravated damages of £10,000.
38. I would hold that the applicant has an arguable case in relation to those two heads of damages and should be given permission to appeal in respect of those two heads only. Accordingly, I would allow the application to that extent.
39. LORD JUSTICE BUXTON: I agree with everything which has fallen from my Lord. We have had the benefit of extremely helpful and careful submissions from Mr Jeans QC, and I am satisfied that everything that could be said in support of this application has been said.
40. The only aspect of the matter (other than the matter of the possible double counting in respect of the £20,000 and £10,000 awards) which has given me pause is the complaint that Mr Jeans made in respect of paragraph 14 of the Tribunal decision when, in addressing the matter of severe psychiatric injury, it mentions the stress to which the applicant was subjected by Mr Aulagnon as well as the action of Miss Davis. As my Lord has said, however, that observation on the Tribunal's part has to be read in the context of its careful analysis of the factual history that is to be found, in particular, in paragraphs 10 - 12 of their determination.
41. In my judgement, the Tribunal was quite clear that at Christmas of 1998, just before the arrival of Miss Davis, the applicant, although a disabled person, had not been subjected to unreasonable behaviour on the part of his employer. They found in terms in paragraph 12 of the decision that it was the treatment that he received after Christmas 1998 at the hands of Miss Davis which amounted to direct discrimination, and also that the failure to continue the reasonable adjustments that were taking place before that date was an additional breach of duty under section 6 of the Act.
42. I am therefore satisfied that, despite the language used in paragraph 14, to which objection can be taken, the Tribunal made no error of law in its determination as to the act of discrimination and the source of severe psychiatric injury.
43. Quite apart from that, and even if that were not so, as Lord has pointed out the award of £35,000 was made in respect of the findings of Dr Davison as he found Mr Haddock to be when he examined him in the year 2000. There is no question at all, however this decision is read, that Mr Haddock was not in that condition because of Miss Davis' actions and her discriminatory actions; so even if this matter were to be further examined I do not see that the Tribunal could arrive at any other view as to the nature of the psychiatric injury for which they awarded compensation.
44. As to the sum of £35,000 itself, the Tribunal sets out with some care the conclusions of Dr Davison and reaches £35,000 as the correct figure. It is relevant to observe that that figure falls at the lower end of the bracket for "severe psychiatric injury" as provided in the Judicial Studies Board Guidelines. It cannot be challenged in this context.
45. For those reasons, which are merely a footnote to what my Lord has said, I also would only grant this application to the extent that my Lord has indicated. We are therefore in the position that permission to appeal to this court has been granted only in respect of the sums of £20,000 and £10,000.
46. I think I speak also for my Lord in saying that we would think it most unfortunate, especially in an industrial relations matter, if those issues could only be resolved between the parties, in the light of this court's judgment, by the full measure of appeal to this court and then remission either to the Employment Appeal Tribunal or to the Employment Tribunal. This case, limited as it now is by our order to the items that we have indicated, is an obvious case in which the parties should engage in alternative dispute resolution, whether with the assistance of ACAS, or simply by direct action between themselves. We very strongly urge both of the parties, only one of whom is represented today, to give the most serious consideration to resolving this dispute, narrowly limited as it now is, other than by further formal litigation: which, at the end of the day, can only increase the costs and anxiety everyone is going to have to suffer.
47. We are certain that Mr Jeans will convey that message to his clients. We say nothing to him as to the advice he ought to give, but no doubt he will explain what we have said.
Order: Permission to appeal allowed limited to two grounds only.