England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
HER HONOUR JUDGE EADY QC

		Royal Courts of Justice Strand, London, WC2A 2LL
		01/08/2018

Lord Justice Bean :

1. On 3 November 2015 Ms Hughes issued a claim in the employment tribunal at Cardiff for unfair dismissal, sex discrimination, notice pay, holiday pay and arrears of pay against Office Equipment Systems Ltd ("the company"). The deadline for filing a response was 3 December 2015 but the company failed to meet that deadline. On 8 December 2015 the Tribunal wrote to the company as follows:
NO RESPONSE RECEIVED Employment Tribunals Rules of Procedure 2013

"You did not present a response to the claim. Under rule 21 of the above Rules because you have not entered a response a judgment may now be issued. You are entitled to receive notice of any hearing but you may only participate in any hearing to the extent permitted by the Employment Judge who hears the case".

2. Where no response has been presented in time rule 21 subparagraphs (2)-(3) provide:

"(2) An Employment Judge shall decide whether on the available material (which may include further information which the parties are required by a Judge to provide) a determination can properly be made of the claim, or part of it. To the extent that a determination can be made, the Judge shall issue a judgment accordingly. Otherwise a hearing shall be fixed before s Judge alone.

(3) The respondent shall be entitled to notice of any hearing and the decisions of the Tribunal but, unless and until an extension of time is granted, shall only be entitled to participate in any hearing to the extent permitted by the Judge."

3. On 22 December 2015 the company sought to lodge a form ET3 accompanied by draft detailed grounds of response and an application under Rule 20 of the ET rules for an extension of time and an order that the Rule 21 judgment be set aside. Their grounds for doing so was that their employee Mr Jackson, who was in a position to give instructions about the case, had been ill between 6 November and 7 December 2015.
4. On 11 January 2016 the parties were given notice of a Preliminary Hearing to consider these applications.
5. That hearing took place before Employment Judge Emery (sitting alone) on 12 February 2016. Ms Hughes was represented by a solicitor and the company by counsel. Reference was made to the decision of the EAT in Kwik Save Stores v Swain [1997] ICR 49. The company put forward Mr Jackson's ill health as a reason for the delayed response. On the merits of the proposed defence, counsel for the company submitted that "the defence had a knock-out blow that the claimant was not an employee"; and alternatively that there had been a repudiatory breach by the claimant.
6. EJ Emery concluded that there was no reasonable explanation for the delay in submitting the response and that on the documentation before the tribunal the defence of the company appeared to have little merit. He decided that the discretion to extend time should not be exercised in favour of the company and that its application under rule 20 should be dismissed. Written reasons were issued for that decision.
7. On 15 March 2016 Employment Judge Cadney issued a judgment in the following terms:-

"A decision having been made to reject the ET3 response form from the respondent, and there being sufficient material before me to enable a proper determination to be made, I uphold the following claims:

Unfair dismissal

Unpaid holiday pay

Unpaid wages

Sex discrimination

Breach of contract

This judgment applies to liability only.

The matter will now proceed to a hearing on remedy before an Employment Judge sitting alone.

I act in accordance with my powers under Rule 21 of the Employment Tribunal's Rules of Procedure 2013."

8. The company's solicitors wrote to the tribunal on 31 March indicating that they would be appealing "the decision made following the hearing on 12 February. They added:

"If despite this appeal the Tribunal still considers it appropriate to issue a judgment on remedy without the need for [a] hearing, the Respondent would like the Employment Judge to exercise his/her discretion to allow the Respondent to fully take part in the consideration of remedy and to take part in any hearing on remedy."

9. This request fell on deaf ears. On 14 April 2016 an email was sent from the tribunal to the solicitors for both parties in the following terms:

"An employment judge has considered the information received from the claimant and it appears there is sufficient material on which to make a determination on remedy without the need for a hearing. The respondent's request to participate at remedy stage is declined. The matter will be considered on paper and judgment issued in due course."

10. Although the email does not, as it should have done, identify the judge who made this decision, which is the one now under appeal to this court, we understand that it was in fact made by Employment Judge Sian Davies.
11. On 27 April 2016 the tribunal sent a letter to Ms Hughes' solicitors, copied to the company's solicitors, enclosing what were described as "draft findings in the remedy decision" made by EJ Beard (sitting alone) on 20 April 2016. Judge Beard had considered representations on behalf of the claimant made in writing and noted that the company was "debarred". The "draft" element of the decision appears to have been the need to calculate the tax due on the amount paid to the claimant in excess of the £30,000 threshold and also the fact that a calculation of interest had not been made. The draft figures were £51,466.16 for net past loss of earnings; £9,900 for injury to feelings; £10,397.34 for three months' future loss of earnings; a basic award of £2,375; £350 for loss of statutory rights and £50 for travel to interviews. The Claimant's solicitors were invited to respond on the tax and interest calculations. We were told that when the company gave notice of appeal this was put on hold, and that the judgment on remedy was never finalised.
12. The company had already given notice of appeal to the EAT against the decision on liability. On 26 May 2016 it lodged a second appeal: this was against the decision contained in the email of 14 April excluding it from participation at the remedy stage "and any subsequent determinations which were influenced by it". Judge Richardson considered the two appeals on the papers and directed that both should be set down for a full hearing. That hearing took place before Judge Eady QC on 22 December 2016. Each side was represented by counsel. On the liability appeal, Judge Eady considered that the employment tribunal had made an error of law in that it had failed to address the company's argument that Ms Hughes had committed a repudiatory breach of contract. Judge Eady therefore allowed the appeal on liability and remitted the case to the same employment tribunal (presumably Judge Emery) to address the question of the merits of that defence and its potential relevance to the company's application for an extension of time; she directed that such reconsideration was to be on the basis of the material which had already been presented to the Employment Tribunal. Neither party sought to appeal against that aspect of the decision and order of the EAT.
13. The remitted application for an extension of time was duly reviewed on the papers by EJ Emery who dismissed the application to review the refusal of an extension of time. The company appealed to the EAT but the appeal was rejected on the paper sift by His Honour Judge Peter Clark on 21 March 2018. An application was made for an oral hearing under EAT Rule 3(10) but before any hearing could be held the appeal was expressly withdrawn by letter and was formally dismissed on 14 June 2018. The liability judgment entered by Judge Cadney is now, therefore, final and conclusive.
14. However, to return to the EAT hearing of 22 December 2016: the company's appeal against Judge Davies' decision (contained in the employment tribunal's email of 14 April 2016) debarring it from making representations on remedy was dismissed. Judge Eady held:

"37. I turn then to the second appeal. Although I have allowed the first appeal, given the limitations on the scope of that appeal it seems sensible that I should proceed to consider the issues raised by the second in any event (albeit if the Emery ET reaches a different conclusion, having addressed the alternative defence point, then the subsequent decisions relevant to remedy are likely to fall away). In addressing the second appeal, I bear in mind that although the Respondent has said that the matters raised at the remedy stage were so complex that it was effectively perverse not to set the matter down for a hearing, no points have been raised before me as to the draft findings made by Employment Judge Beard; it has not been suggested that the calculations are wrong, that the ET proceeded on the basis of inaccurate information or that it proposed an injury to feelings award that was excessive or disproportionate.

38. Rather than taking any issue with the draft findings on remedy, the Respondent objects to the fact that it was not heard. That, however, was not because the ET denied it a fair hearing: if the Emery ET reached a permissible conclusion - which it did, subject to the one point raised on the first appeal (see above) - then it is not the ET that has denied the Respondent a fair hearing; the Respondent has itself failed to comply with the Rules of the ET such as to avail itself of that right.

39. What then follows in terms of the decisions made by Employment Judge Davies are case management decisions that the ET was required to make on the basis that the Respondent had lodged no response. Employment Judge Davies considered it was possible that the question of remedy might be resolved on the papers if further information was provided by the Claimant; can I say that was an impermissible exercise of the ET's case management discretion? I cannot see that I can. Relevant factors were taken into account; regard was not had to the irrelevant; the ET was entitled to exercise its case management discretion in accordance with the overriding objective, and, in so doing, it reached a permissible conclusion.

40. As for denying the Respondent the opportunity to make representations on remedy, given that the ET determined (on the basis of the information then provided by the Claimant) that a hearing was not required, there was no need for a separate determination to be made under Rule 21(3); that question simply did not arise. I can, further, see no basis for considering that Employment Judge Davies erred in taking the view that the Respondent was not to be permitted the opportunity to put in representations otherwise.

41. I further considered whether it might be said that Employment Judge Davies needed to give more reasons for the decision reached. I cannot see that it can. An ET is entitled to give reasons proportionate to the particular decision it is communicating. Here, a detailed Judgment and Reasons had been provided on the crucial question of whether the Respondent should be permitted to lodge a response out of time, with all that that would imply. Subject to the point raised by the first appeal, the ET had fully addressed the Respondent's arguments in that regard. Employment Judge Davies was not obliged to revisit those points. As for the specific issues raised at the remedy stage, very full particulars and evidence had been provided by the Claimant in response to the ET's request, and the Respondent had not raised any substantive queries that Employment Judge Davies could have addressed at that stage. Having taken the view that the information provided enabled the ET to determine remedy without a hearing, I cannot see that Employment Judge Davies was required to do more. The reason why the Respondent was not permitted to make representations was obvious: it had not entered a response to the claim in time and had been refused an extension of time. It had no right to make representations in the proceedings thereafter save to apply to an Employment Judge at any hearing to be heard. For those reasons, I therefore dismiss the second appeal."

15. The company applied for permission to appeal to this court. Permission was granted on the papers by Lewison LJ on 22 May 2017. He wrote:-

"1. Although on the facts rule 21(3) is not engaged (as the EAT held) there is still a broader question whether in exercising his power under rule 21(2) the EJ ought to have invited the employer to provide information, particularly bearing in mind that the original judgment stated that the case would proceed to a hearing.

2. It may be that the procedures in the ET legitimately differ from those in ordinary litigation in which a defendant was normally be entitled to contest quantum (see eg Lunnun v Singh [1999] CPLR 587, Workman v Forrester [2017] EWCA Civ 73) but the point is worthy of consideration by the full court."

Discussion

16. As I have noted, the liability judgment is now conclusive between the parties as to the issues it decides. But, subject to the effect of the debarring order to which I shall come in a moment, "the underlying principle is that on an assessment of damages all issues are open to a defendant save to the extent that they are inconsistent with the earlier determination of the issue of liability, whether such determination takes the form of a judgment following s full hearing on the facts or a default judgment" (per Jonathan Parker J in Lunnun v Singh, 1 July 1999, CA, unrep. but cited in Workman v Forrester [2017] EWCA Civ 73 at paragraph 34). That is the position in the civil courts, and I see no reason why it should not be the same in the employment tribunals.
17. In D & H Travel Ltd v Foster [2006] ICR 1537 the respondents to a sex discrimination claim failed to enter a response within the time limit prescribed by the rules and judgment in default with regard to liability was entered. The claim had been made against the employers and their senior manager, a Mr Henderson. The manager attended the subsequent remedies hearing and sought to take part in it but was not allowed to do so. The EAT, Elias J presiding, held that the chairman had been correct to decide that there had been no valid application to review the default judgment on liability but had been wrong to assume that unless the default judgment was set aside the respondents could play no further part in the proceedings. Given that the respondent manager was present at the hearing and could have cross-examined the claimant and made submissions it would have been proportionate and in accordance with the over-riding objective of dealing with cases justly, to have allowed him to participate in the remedies hearing. That would have involved no prejudice to the claimant whereas there was obvious prejudice to the respondents in denying them the right to participate. The EAT said at paragraph 61:

"We bear in mind the observations of Burton J in NSM Music Ltd v Leefe [2006] ICR 450 that it will sometimes be proportional to allow a party to participate in a remedies hearing albeit that liability has been determined against him. All of us consider that this is plainly such a case. Mr Henderson was present; he could have cross-examined the claimant and made submissions. Whereas the chairman understandably did not think it right to re-open liability, with all the delays thereby involved, that very fundamental concern did not apply to the more limited participation in the remedies hearing. Had Mr Henderson sought an adjournment to produce witnesses or further documents there would have been every good reason to refuse it. But that was not suggested. He wanted to be able to make observations and submissions with respect to remedies, even if he could not put his side of the story with respect to liability. To exclude him in the circumstances seems to us simply a punishment for failing to comply with the Rules."

18. I agree entirely with the approach taken by the EAT in the D&H Travel case, and although the 2013 Rules differ in some respects from the 2004 Rules which were then applicable I do not consider that this should lead to a different result.
19. There is no absolute rule that a respondent who has been debarred from defending an employment tribunal claim on liability is always entitled to participate in the determination of remedy. At the lower end of the scale of cases employment tribunals routinely deal with claims for small liquidated sums, such as under Part 2 of the Employment Rights Act 1996 (still commonly called the "Wages Act" jurisdiction) where liability and remedy are dealt with in a single hearing. In such a case, a respondent who has been debarred from defending under Rule 21 could have no legitimate complaint if the employment tribunal proceeds to hear the case on the scheduled date, determines liability and makes an award. Even in that type of case it would generally be wrong for the tribunal to refuse to read any written representations or submissions as regards remedy sent to it by the defaulting respondent in good time, but proportionality and the overriding objective do not entitle the respondent to a further hearing.
20. But in a case which is sufficiently substantial or complex to require the separate assessment of remedy after judgment has been given on liability, only an exceptional case would justify excluding the respondent from participating in any oral hearing; and it should be rarer still for a tribunal to refuse to allow the respondent to make written representations on remedy.
21. This was not an exceptional case, and the draft award of compensation was of just under £75,000 (indeed Ms Hughes' solicitors argued that it should be increased to a figure in the region of £100,000 after grossing-up for tax). There was no reason why the company should have been precluded from making submissions on the quantum of Ms Hughes' claim following the judgment on liability. An appropriate course would have been to invite the company to make such submissions by a specified date and for an employment judge then to consider whether an oral hearing was required. It is unfortunate that this was not done: with the result that, through no fault of Ms Hughes or her solicitors, the resolution of her case has now been held up for two years.
22. I would therefore allow the appeal, set aside the draft decision on remedy of EJ Beard and remit the case to EJ Beard (or such other judge as the Regional Employment Judge shall nominate) to consider the issue of remedy.

Costs

23. The company applied for costs in this court. A schedule was served shortly before the hearing in this court claiming costs of £33,900 comprising solicitors' fees and expenses of £18,173, counsel's fees of £14,000 and court fees of £1,727. The response from Mr Mark Forman of the Claimant's solicitors, by email of 17 July 2018, was as follows:

"As you know, my client will not be in attendance at the appeal hearing tomorrow.

My client has not participated in the appeal process due to a lack of funds and has taken a neutral position simply seeking to rely upon the finding of the employment tribunal and employment appeal tribunal.

My client does not have the ability to pay costs amounting to some £33,000, nor should she have to pay such costs given the extended history of these proceedings and previous failed appeals of the appellant.

The court should exercise its discretion to award no costs whatsoever.

If costs were awarded against my client then the effect will be to stifle justice as employees with feel obliged to cave in to any appeals brought by an employer for fear of being made bankrupt due to penal costs awards.

The court is asked to proceed by way of CPR 52.19 and the notes in the White Book 2018 in respect of that rule and to exclude the appellant from recovering its costs.

I should be grateful if this note can be given to the judges on the issue of costs."

24. CPR 52.19, referred to in this letter, provides:-

"(1) Subject to rule 52.19A [Aarhus Convention claims], in any proceedings in which costs recovery is normally limited or excluded at first instance, an appeal court may make an order that the recoverable costs of an appeal will be limited to the extent which the court specifies.

(2) In making such an order the court will have regard to—

(a) the means of both parties;

(b) all the circumstances of the case; and

(c) the need to facilitate access to justice.

(3) If the appeal raises an issue of principle or practice upon which substantial sums may turn, it may not be appropriate to make an order under paragraph (1).

(4) An application for such an order must be made as soon as practicable and will be determined without a hearing unless the court orders otherwise."

25. It is important to note that subparagraph (4) of this Rule requires that an application for an order must be made as soon as practicable: see JJ Food Services Ltd v Zulhayir [2013] EWCA Civ 1304 paragraphs 5-6 (per Rimer LJ) and Kuznetsov v Royal Bank of Scotland plc (per Elias LJ). This was emphasised in the "Listing Window Notification Letter" sent by the Civil Appeals Office to the solicitors for each party on 27 May 2017 following the grant of permission to appeal five days earlier. Paragraph 5, headed "Order to limit the costs you may be ordered to pay", read:

"In the tribunals from which this is an appeal orders are not normally made for one party to pay the other's legal costs. Please note that in the Court of Appeal the position is different: usually the losing party is ordered to pay the costs of the successful party. However, the court can be asked by either party to make an order in advance that the recoverable costs of the appeal will be limited to such extent as the court specifies: see CPR 52.19. An application for such an order must made as soon as practicable, so if you wish to make one you should not delay. If the application is included in the appellant's notice or respondent's notice, no separate fee is charged; but otherwise it must be made by application notice (form N244) accompanied by a fee of £528 or a fee remission certificate. Any such application will be determined without a hearing unless the court orders otherwise. The application should specify what limit on the costs recoverable by either party is asked for and the reasons it is said such a limit should be imposed."

26. It is most unfortunate that an application was not made in this case as soon as Ms Hughes' solicitors received this letter. If such an application had been made at that stage I consider it highly probable that an order under CPR 52.19 would have been made which might have limited the recoverable costs to the court fees, or even directed that no costs were to be recoverable at all. But since the application was not made as soon as practicable CPR 52.19 is simply not available.
27. Nevertheless, this court does have a wide discretion in the award of costs. I bear in mind that this is a case in which all previous proceedings have taken place in the no costs jurisdictions of the employment tribunal and the EAT. It would be disproportionate to require Ms Hughes to pay the costs of instructing leading counsel; and an award of costs of £33,000 would in any event be disproportionate to the amount likely to be in dispute at the remitted hearing
28. We were asked to assess costs summarily. I would order Ms Hughes to pay £12,500 towards the company's legal costs in this court plus the court fee of £1,727, making a total of £14,227. Mr Reade QC accepted, after taking instructions, that it would be right for us to grant a stay on enforcement of the award for costs until the employment tribunal has assessed the amount of compensation payable to Ms Hughes and issued its determination of remedy; and I would so order.

Lord Justice Underhill:

29. I agree.