England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM
THE EMPLOYMENT APPEAL TRIBUNAL
HHJ McMullen QC

		Royal Courts of Justice Strand, London, WC2A 2LL
		25/04/2012

LORD JUSTICE PILL :

1. This is an appeal against a decision of the Employment Appeal Tribunal ("EAT") dated 18 October 2011, following a hearing on 9 September 2011, whereby the EAT, His Honour Judge McMullen QC sitting alone, allowed an appeal from a decision of Employment Judge Etherington, sitting alone at an Employment Tribunal held at London Central on 15 July 2011, refusing to stay proceedings brought before that Tribunal by Mr Andrew John Halstead ("the appellant") against Paymentshield Group Holdings Ltd ("the respondents") for unfair dismissal, automatic unfair dismissal on the ground of making protected disclosures, and holiday pay under the Working Time Regulations. The claims were originally listed to be heard on 1 February 2011 and 10 days were allocated.
2. The stay was granted by the EAT because, on 7 December 2010, the appellant sent a letter before action and draft particulars of claim in relation to a prospective action by the appellant against the respondents in the High Court for breach of contract, rescission, debt and interest. High Court proceedings for breach of contract would not of course be governed by that cap upon Tribunal awards for unfair dismissal (though not automatic unfair dismissal on the whistleblowing ground alleged in the Tribunal) which applies to Tribunal claims.
3. The respondents applied for a stay on 21 December 2010 on the ground that there were likely to be concurrent proceedings. The appellant did not contest that application and the stay was granted by Employment Judge Lewzey 'pending the outcome of High Court proceedings'.
4. On 23 March 2011, the appellant applied to lift the stay on the Tribunal proceedings. The reason given was that the earlier consent had been based on the appellant's belief that his finances would permit him to pursue a High Court claim in advance of the Tribunal claim but that his financial circumstances had now changed. On behalf of the appellant, it was also stated that despite the appellant's best efforts, without prejudice negotiations in relation to the proposed High Court claim had proved unsuccessful. An undertaking was given, if the stay was lifted, 'not [to] pursue any High Court claim in tandem with Tribunal proceedings and that he will wait until Tribunal proceedings have concluded prior to issuing any High Court claims.'
5. On 23 May 2011, Employment Judge Lewzey lifted the stay on the ground that 'no High Court proceedings have been issued and in these circumstances it is not in accordance with the overriding objective for the stay to remain.' A further application for a stay was made to Employment Judge Etherington who dismissed the application for reasons given in a judgment dated 15 July 2011. The EAT allowed an appeal against that decision, ordering that 'the hearing at the Employment Tribunal be stayed pending the outcome of proceedings at the High Court, or further order of the Employment Tribunal or of the EAT.'
6. The employment arrangements were complex but, for present purposes, need be described only in outline. The appellant signed a contract with Cullum Capital Ventures ("CCV") on 5 July 2007 by which he was entitled to a salary of £175,000 per year with a guaranteed bonus of £350,000 per year. The contract was due to take effect on 8 July 2008 on which date the appellant was told that his "promised bonus of £350,000 required recalibration". The appellant was paid less than his contractual entitlement. There were prolonged attempts to renegotiate the remuneration package. On 2 July 2009 the appellant was presented with a new contract which he signed, he says under duress. Soon afterwards he was told that he was to be dismissed. His case is that he was required to leave the office on 27 October 2009. On 23 December 2009, he was informed by the respondents that he was dismissed. He claims that the repudiatory breach was not accepted until early in 2010. He sought reinstatement and worked for several days in the New Year.
7. In employment terms, the claims are for large sums of money. In his Tribunal claim, the appellant bases the claim on the new contract and in the schedule of loss a sum of about £400,000 is claimed, based on the whistleblowing claim. In draft particulars of claim in High Court proceedings, which have not been instituted, claims were advanced under both the original contract with CCV and the new contract. In that part of the proposed claim, rescission of the new contract, alternatively damages in lieu of rescission, is claimed. The schedule puts the proposed claim in excess of £1 million.
8. In refusing to stay the Tribunal claim, Employment Judge Etherington stated:

"Here, there are no contemporary proceedings; there may never be any contemporary proceedings especially given the Claimant's statement that he will commence High Court proceedings, if at all, only after the Tribunal proceedings have concluded; and there may never be such an action then.  I do not know of and have not been alerted to the existence of any power residing in any court enabling it to order the Claimant to commence or maintain an action before the High or other court.  By staying the action now it would in a rather roundabout way bring pressure on the Claimant to do so but in my view that would be a draconian exercise of power.  Though Mr Wynne's arguments are attractive I have decided on balance that the proper decision today is not to order a stay but to allow the proceedings to continue before the Tribunal.  Weighing the balance of prejudice as between the parties it is my view that staying the action before the Tribunal would have a greater prejudicial impact on the Claimant's case than allowing it to continue would have upon the Respondent's case.  The difficulties perceived as possibly arising from two sets of proceedings (whether contemporaneous, consecutive and acknowledging that in any event there is no certainty that the High Court proceedings would ever be lodged) are a much less likely source of prejudice and injustice than would be the forced abandonment of the Claimant's claim; or its forced presentation; and maintenance with him unrepresented."

9. In allowing the appeal, Judge McMullen QC stated that the Employment Judge had erred in law in failing to apply the principles stated in Mindimaxnox LLP v Gover (UKEAT/0225/10/DA7). In that case, Judge McMullen had considered five submissions of a party seeking a stay on Employment Tribunal proceedings when there were concurrent High Court proceedings; complex factual matters more appropriate for High Court, embarrassing the High Court, complex legal matters better decided in the High Court, considerable overlap, and small financial value. He concluded, at paragraph 45:

"In my judgment it is not in accordance with the overriding objective to have concurrent proceedings over exactly the same factual territory except for the unique tort of unfair dismissal in the Employment Tribunal. The factual territory and the legal principles relating to the dismissal, but not the unfairness of it, are the same or at least substantially similar. It cannot be right that there are two sets of proceedings on foot, each requiring teams of lawyers to be respectively in the London (Central) Employment Tribunal and the Queen's Bench Division on different days. Take this very case. In the Employment Tribunal there is to be a Case Management Discussion then a PHR on one of the issues, if not more, and then in the High Court there is a PHR on the confidentiality issue and then a trial. It cannot be in accordance with the overriding objective that duplicate proceedings are on foot."

10. In his judgment in the present case, the judge stated that there is an overlap of issues and embarrassment for a High Court Judge, if the claim in the Employment Tribunal is permitted to proceed. He added: "Any constraint on a High Court judge is a public issue". There was no difference in the principle to be applied, Judge McMullen held, "when High Court proceedings have been issued, and been the subject of a pre-action conduct letter and a draft particulars of claim." The judge continued:

"This is not a case where there just may be a glint in the Claimant's eye that he may seek in another forum from the Employment Tribunal to recover substantial amounts, say, for a bonus; that issue is not before me.  But it seems unlikely that a Respondent would succeed in keeping the Claimant out of the Employment Tribunal just because for six years he might possibly issue proceedings.  The principle applies where there has been issue and service of proceedings; see Mindimaxnox.  In my judgment it is correct to extend it on the facts of this case, where there has been a solicitor's letter in accordance with the CPR which, in practice, claimants have to issue lest there be consequences at some stage in costs.  It is certainly regarded as an important part of the procedures.  It is intended to get the parties to see what a case is and possibly avoid going to court, but it is an important and established part of the court's practice in Section C of the Civil Procedure. It involved legal costs in its preparation and service and legal costs for the Respondent in providing a response and substantive reply.  Here it was accompanied by draft particulars of claim so that the Respondent saw exactly what it is that is going to be claimed, and it had the effect of drawing from the Claimant a ready acceptance that his claim in the Tribunal must be stayed pending the outcome of this matter.  What was right for him on advice to do in December 2010 is unchanged by the change of heart he has had in wishing to go first in the Tribunal.  He did not have to utter the letter before action; he could have gone ahead with his Employment Tribunal case and the issues as to concurrence, and embarrassment of the High Court Judge, would not in my view have arisen, because it would simply be hypothetical.  However, we have to deal with the facts as they are, and this is a clear intention by the Claimant to claim the remedies and relief above.  The claim in the Employment Tribunal is now worth about £400,000 I am told."

11. Exercising a discretion afresh, Judge McMullen ordered a stay. He did not accept that the appellant would be stultified by the decision. On the basis that he was earning £100,000 a year, he could afford to go to the High Court. We have not been referred to a case in which the distinction between extant proceedings and prospective proceedings has been considered in this context.
12. In seeking to uphold the EAT's decision, Mr Duggan submitted that the Employment Tribunal proceedings are inextricably dependent on the allegations in the proposed High Court claim. There is a very considerable overlap between the two and a considerable risk of differences in factual and legal findings. The position is complicated by the presence in the High Court draft particulars of a claim for rescission of the new contract and the inconsistency between the Tribunal claim and parts of the proposed High Court claim.
13. Further, it is more appropriate for complex factual matters such as those in the present case to be decided in the High Court. The High Court Judge should not be placed in the embarrassing position of having to consider matters on which the Tribunal had made findings. While the appellant declined to provide details of his income, the evidence entitled the EAT to hold that it was substantial and that the appellant was capable of bringing a claim in the High Court. Reliance was placed on the judgment of Judge Ansell in GFI Holdings Ltd v Camm (UKEAT/0321/08/DA), at paragraph 24:

"It follows, therefore, that I agree with the submissions advanced by Mr Choudhury that there is an overlap of issues in the two main areas that I have highlighted. If the Tribunal proceedings were to precede the High Court proceedings, it follows that the High Court might find itself bound by findings made by the Tribunal as to the nature of the termination and the reasons for that termination, thereby limiting the High Court's freedom to make findings in respect of the same factual issues; and I therefore conclude that the Tribunal have made some clear and fundamental errors in their determination."

14. The parties differ about the effect of their conduct and of events between December 2010, when the stay was granted, and the application to lift the stay in March 2011. The respondents understandably rely on the absence of objection to the application for a stay in December 2010. They submitted that the appellant's letter before action which enclosed draft particulars of claim in December 2010 indicated a clear intention to bring High Court proceedings. In January 2011, the appellant's solicitors threatened to issue High Court proceedings without further notice. They had not claimed that negotiations were the reason for the stay or that in fact there were negotiations. The EAT was correct to approach the issue on the same basis as if there were concurrent proceedings. It was further submitted that the December to March events are in any event to some extent a "red herring" because the question is whether a correct decision was made once the application to remove the stay was made. The appellant's motivation during that period was irrelevant.
15. For the appellant, it was submitted that the contemporaneous evidence demonstrates a serious attempt by the appellant to have the entire dispute mediated in advance of the Employment Tribunal hearing already listed for 1 February 2011. By email of 9 December 2010, it was stated that the appellant:

"is therefore agreeable to discussing with you the idea of utilising a private mediator . . . our view [is] that any mediation ought to take place prior to Christmas . . .".

16. By letter of 14 December 2010, the respondents referred to the suggestion of mediation of the issues "in front of the Employment Tribunal and in a proposed civil litigation as alleged in your client's letter before action". In stating that their initial thoughts were that the two actions were unlikely to be able to be mediated, the respondents gave as reasons the difficulty in preparing a case for mediation in advance of 1 February 2011 and also that "the allegations raised in the proposed civil litigation are separate and distinct from those before the Employment Tribunal." The respondents' email of 15 December included the statement: "it is too early to consider your request [regarding mediation] in this regard".
17. In an email of 22 December 2010, the appellant's solicitors asked the respondents' solicitors to confirm "whether the respondent is agreeable to discussing both claims on a without prejudice basis either directly or in the form of a mediation . . . it strikes us as being sensible to have any such discussion prior to issuing the High Court claim and before both parties inevitably start to incur considerable further costs". There was no substantive response by the respondents to the letter before action though, by letter of mid-February 2011, the respondents' solicitors, by reference to negotiation or mediation, stated that "once we have concluded our investigations, we will be happy to confirm what our client's position is and whether we wish to discuss matters with you on a without prejudice basis."
18. On behalf of the appellant, it was submitted that there was a genuine attempt to negotiate or mediate. It was sensible for the appellant to put his case as best he could, and to convey the full essence and potential scope of his claim, in advance of proceedings and with a view to encouraging a positive response from the respondents to the suggestion of negotiation or mediation. The situation was complex but it was appropriate to put the case forward fully, even if alternatives and inconsistencies were involved. To hide possible claims would not be conducive to negotiation. The steps were taken with a view to avoiding proceedings rather than to bringing them and that is consistent with aim of the pre-action protocol.
19. On the substance of the appeal, the further point is made, though not taken hitherto, that, amongst the appellant's claims, are claims to enforce EU protected rights and these are primarily for protection in the Employment Tribunal. The claim for holiday pay is in that category.
20. In my view, this appeal turns on basic principles. I acknowledge the complexity of the claims, including claims that are potentially inconsistent. In the High Court proceedings, the appellant is seeking, amongst other things, to rescind the new contract, which itself forms the basis of the claim in the Employment Tribunal. I acknowledge the overlap between the claims advanced. Further, if the case proceeds in the Tribunal, case management decisions, which may be difficult, will be necessary to decide the extent to which evidence relating to matters raised by the High Court claim but not by the Tribunal claim can be canvassed.
21. While making allowance for those considerations, it would, in my judgment, be wrong in principle to deprive the appellant of a remedy which statute has provided for him because he has chosen, without commencing proceedings in the High Court, to indicate lines of claim which may be available to him there. By ventilating the possibility of such a claim, and stating an intention to pursue it, he has not deprived himself of his statutory right to make a claim in the Employment Tribunal.
22. While I accept that it did not have the desired effect of producing serious negotiation, it was entirely consistent with a genuine intention to settle the whole matter by negotiation or mediation to put forward a claim or claims in the strongest way they could be put. What the respondents categorise as an imminent threat of High Court proceedings, the appellant can fairly categorise as an attempt to bring the respondents to the negotiating table. Putting the claim as strongly as possible, and threatening proceedings, was consistent with an intention to initiate mediation before the date fixed for the Employment Tribunal proceedings on 1 February.
23. I do not take it against the respondents that, in their letter of 14 December 2010, they twice claimed that the civil proceedings were "separate and distinct from those before the Employment Tribunal", an assertion from which the respondents have resiled. However, I do not consider it should be taken against the appellant that he once agreed to a stay. He was, in my judgment, entitled to seek to remove it when he assessed it to be preferable first to exercise his rights in the Employment Tribunal. Even if, and I make no finding about this, the claimed change in financial resources was not the true cause for the change of mind, he was entitled to change his mind and was not required to justify the change beyond relying on his entitlement to obtain access to the Employment Tribunal. (No case based on estoppel has been raised by the respondents.)
24. In the absence of concurrent proceedings, that, in my judgment, is fundamental. The factors identified by Judge McMullen in Mindimaxnox will have force when there are concurrent proceedings but are not determinative in their absence. The judge accepted that the appellant could have proceeded with his case in the Employment Tribunal but regarded the "uttering" of a letter before action, accompanied by draft particulars of claim, as decisive against him. I respectfully disagree. Correspondence short of proceedings did not deprive the appellant of his right to proceed in the Tribunal.
25. The appellant was confronted with a stay on Tribunal proceedings without limit of time and he was and is entitled to obtain its removal and pursue his case in the Employment Tribunal. He cannot be driven away from the Employment Tribunal by being required first to pursue a High Court claim and he has given an undertaking not to attempt to proceed with a High Court claim until the Tribunal claim has been resolved.
26. Employment Judge Etherington made a case management decision. The test to be applied in considering whether to overturn it was stated by Henry LJ, with whom Beldam LJ and Thorpe LJ agreed, in Noorani v Merseyside Tec Ltd [1989] IRLR 184, at paragraph 32:

"I am satisfied, contrary to what the Employment Appeal Tribunal found, the ET were here exercising the classic discretion of the trial judge in the issue of witness summonses and in like matters. Such examples of such a discretion lie not only in the issue of witness summonses but whether to grant an adjournment or whether to order the trial of a preliminary issue etc. These decisions are entrusted to the discretion of the court at first instance. Appellate courts must recognise that in such decisions different courts may disagree without either being wrong, far less having made a mistake in law. Such decisions are, essentially, challengeable only on what loosely may be called Wednesbury grounds, when the court at first instance exercised the discretion under a mistake of law, or disregard of principle, or under a misapprehension as to the facts, where they took into account irrelevant matters or failed to take into account relevant matters, or where the conclusion reached was "outside the generous ambit within which a reasonable disagreement is possible", see G v. G [1985] 1 WLR at 647. "

27. I agree with the approach of the Employment Judge and with the conclusion he reached. There was no error of law, disregard of principle or irrationality in his decision.
28. I do not consider that the appellant should be required, as a condition of proceeding in the Employment Tribunal, to give undertakings as to the way in which any future High Court claim may be conducted. That should not be a condition of his seeking a remedy in the Tribunal. I am confident that an Employment Tribunal will be able to manage the claims before it, which are claims of a kind in which it is likely to be experienced, efficiently as well as fairly. Case management decisions in any future High Court proceedings can await the event.
29. I would allow the appeal and remit the case to the Employment Tribunal for hearing.

Lord Justice Sullivan :

30. I agree that the appeal should be allowed for the reasons given by Pill LJ.

Sir Mark Waller :

31. I was troubled for a time as to whether it was right to allow the appellant to be asserting by his letter and draft particulars rescission of his contract of employment, and at the same time making a claim before the Employment Tribunal on the basis that that contract existed. This is a slightly different point to that on which Judge McMullen granted a stay, he simply applying the same principles to the situation in which there were concurrent proceedings, to that in which concurrent proceedings had been threatened by a letter before action but not issued.
32. I am quite clearly in agreement with Pill LJ that where there are not concurrent proceedings because as in this case the appellant has threatened them but then changed his mind and undertaken not to proceed pending the hearing of his Employment Tribunal claim, the appellant should as a general principle be allowed to continue with his claim before the Employment Tribunal.
33. It is a different question whether the appellant should be entitled to be making inconsistent assertions and a different question as to whether the court should take any steps to deal with that issue at this stage.
34. During his opening of the appeal Mr Selwyn Bloch QC for the appellant was inclined to concede that in reality if the appellant pursued a claim before the Employment Tribunal on a contract of employment with the respondents, he would not thereafter be able to bring proceedings in the High Court claiming to rescind that contract. If that was the reality, I at one time felt that the appellant should be put on terms that he would not claim in later High Court proceedings rescission of the contract on which he based his claim before the Employment Tribunal.
35. But ultimately it has seemed to me that Judge Etherington had this point in mind when he exercised the discretion he did, and that if reality is as indicated (as he obviously thought it likely to be), then it will be; but if in some way it is not, the appellant should not be precluded now from so arguing.
36. I too would allow the appeal.