United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR R THACKER (of Counsel) Messrs Lawford & Co Solicitors 102-104 Sheen Road Richmond Surrey TW9 1UF
For the Respondents	MR T SEWELL (of Counsel) Messrs Saunders & Co Solicitors 39 Dover Street London W1X 3RB


 


JUDGE PETER CLARK: This is an appeal by the applicant before the Manchester Industrial Tribunal, Mr Lodhi, against an order for costs made against him and in favour of the respondent employer, United Bank Ltd, by a full tribunal sitting under the Chairmanship of Mrs J Earnshaw on 3rd October 1997 ["the Earnshaw tribunal"]. Extended reasons for that order are dated 9th October 1997.

The background is as follows. The appellant was employed by the respondent from 1st May 1982 until his summary dismissal from him post as Assistant Manager at the Bank's Oldham Branch on 21st March 1997.

By an Originating Application presented on 17th June 1997 the appellant complained that his dismissal was unfair. The details of his complaint begin:

"The Bank accused the Applicant of having collaborated with his Manager in defrauding the Bank. When challenged by the Applicant to produce evidence of any collaboration, the Respondents failed to produce any tangible evidence whatsoever.

He was also charged with a number of procedural irregularities. The transactions to which the Respondents refer were the direct responsibility of his Manager."

He went on to complain further of procedural defects in the respondent's dismissal process.

By a Notice of Appearance served on 31st July 1997 the respondent admitted the dismissal and alleged that the reason for dismissal was gross misconduct on the part of the appellant, in that he was a party to a systematic fraud on the Bank involving members of staff at the Manchester and Oldham branches. It was said that the fraud had been uncovered following an internal investigation carried out by the Bank's internal auditor, Mr Hayat. It was contended that the dismissal was fair.

In a covering letter dated 31st July 1997 the respondent's solicitors asked for a preliminary hearing. That application, treated as an application for a Pre-hearing Review, was refused by an unidentified Chairman by letter dated 11th August 1997 on the grounds that:

"there are issues between the parties which can only be determined by a tribunal hearing oral evidence on both sides and making findings of fact."

A direction was given that the case would go forward to a full hearing.

The substantive hearing of the matter was listed to commence on 9th September 1997 before the Earnshaw tribunal. The first order of business that day was an application by Mr Thacker, Counsel for the appellant, to amend the Originating Application to add a claim for stigma damages based on the recent House of Lords decision in Malik v BCCI [1997] IRLR 462. That application was refused. The case then proceeded, with the respondent calling its first witness, Mr Hayat. Examination-in-chief was completed, but before Mr Thacker could complete his cross-examination time ran out and the hearing was adjourned. Three further hearing dates were fixed for 3rd and 7th October and 17th December 1997.

On 1st October the appellant's solicitors faxed the respondent's solicitors, seeking further discovery and advising that witness statements were in the course of preparation and that they had tapes of telephone conversation between Mr Hayat and a Mr Ayub, a trade union representative, taking place between June and September 1997 upon which the appellant intended to rely.

On receipt of that fax, the respondent's solicitors faxed the Industrial Tribunal, referring to that letter. They sought an adjournment of the October hearings on the grounds first, that the appellant had not served his witness statements, although these had been promised at the hearing held on 9th September within seven days, and secondly, in light of the tape recordings as to which they had received no prior warning. Further, they purportedly affected Mr Hayat, who was under cross-examination, and thus could not give instructions on those alleged conversations.

On the same day copies of the unsigned but approved statements of the appellant and Mr Ayub were forwarded by the appellant's solicitors to the respondent's solicitors.

On 2nd October the Chairman replied, directing that the case remain in the list for 3rd October, on which date consideration would be given to reasons for the introduction of new material at that stage in the proceedings; why the appellant had not provided witness statements; the application by the respondent for an adjournment; the question of costs; the possibility of re-listing the case before a freshly constituted tribunal, and any further consequential directions.

On 3rd October the Earnshaw tribunal granted the respondent's application for an adjournment; directed that the case be reheard by a differently constituted tribunal on 17th-21st November and order the appellant to pay the respondent's costs incurred in respect of the hearings held on 9th September and 3rd October, to be taxed on County Court Scale II. In addition, orders for discovery were made relating, inter alia, to the taped conversations between Mr Hayat and Mr Ayub.

The Appeal

It is common ground, and an unfortunate feature of this case, that the Earnshaw tribunal made the costs order without first hearing submissions from the parties, although it is right to say that the possibility of a costs order had been foreshadowed in the Chairman's letter of 2nd October. When this was pointed out the tribunal revoked their order, heard submissions, and then made the same order. Secondly, it is common ground that the tribunal carried out no enquiry into the appellant's means before finally making the costs order, although equally it must be said that Mr Thacker did not seek to call the appellant to give evidence as to his means, nor submit that such an enquiry ought to be carried out.

Against that background we look first at the tribunal's reasoning. It concluded that the new material, contained in Mr Ayub's statement and purportedly contained in the telephone tape recordings, introduced new issues for the first time; in particular, the suggestion that the appellant and other junior members of staff were being made scapegoats for people in higher management positions who were involved in fraud and corruption. They rejected the appellant's submission that this material went solely to Mr Hayat's credibility.

Having taken into account the Employment Appeal Tribunal decision in Hotson v Wisbech Conservative Club [1984] ICR 859 as to the need to give a party an opportunity to deal fully with new allegation raised during the course of a hearing, the tribunal concluded that the respondent's application for an adjournment should be granted.

It then directed itself in accordance with Rule 16 and 13(1) of the Industrial Tribunal Rules of Procedure that it had power to order a rehearing before a different tribunal and, having referred to Charman v Palmer's Scaffolding Ltd [1979] ICR 335, so directed "in order that the case may be fairly and appropriately dealt with."

Finally, the tribunal dealt with the question of costs at paragraph 11 of the extended reasons in this way:

"11. Under Rule 12 of the 1993 Rules of Procedure the Tribunal may make an order for costs - under Rule 12(4) where it has on the application of a party postponed the hearing, and under Rule 12(1) where a party has acted unreasonably in conducting the proceedings. We unanimously find that in this case the applicant has acted unreasonably in raising matters when a case is part-heard which should properly have been raised at an earlier stage. At the hearing on 9 September Mr Thacker made an application to amend the IT1 to include stigma damages but made no mention of the matters now raised. Whilst there is no legal requirement to fill in an IT1 with any degree of particularity it is normal and proper practice to define the issues at the outset of the case. Because the new matters were not mentioned in the IT1 (or indeed at the start of the hearing) the respondent prepared and presented its case on the basis of the issues set out in the IT1. Mr Thacker argues that Mr Hayat might have mentioned the matters now sought to be introduced in his evidence and that having only received his statement on the day of the hearing it was not known what he would say. We reject this argument: Mr Hayat gave his evidence in accordance with the IT3, and in any case his statement was offered to the applicant on the basis of a mutual exchange on 5 September. Because the respondent has in effect "thrown away" the first two days, the Tribunal orders that the applicant pay to the respondent the costs incurred in respect of the hearing on 9 September and 3 October, to be taxed on Scale 2 of the County Court scales."

The adjournment order

We think that this must be approached in two stages.

First, was the tribunal entitled to adjourn the hearing on 3rd October? Mr Thacker accepts that the tribunal's power to adjourn proceedings is a wide one, although that power must be exercised judicially. Our powers on appeal are limited to correcting errors of law. Bastick v James Lane Turf Accountants Ltd [1979] ICR 778. We are unable to accept Mr Thacker's submission that the Earnshaw tribunal failed to identify the new material raising new issues such as to prejudice the respondent. It seems to us that the contents of Mr Ayub's statement, served very late in the day, together with the tape recordings which had not been fully transcribed by 3rd October, entitled the tribunal, in the exercise of its discretion, to grant the respondent's application for an adjournment so that it could properly deal with these new allegations.

However, the second question is whether the tribunal fell into error in directing that the case should begin afresh before a differently constituted tribunal. Mr Thacker so submits. He contends that whilst it is recognised that the tribunal has power to order a rehearing before a different tribunal it is a power which should be sparingly exercised and only for good reason. Charman 341A, per Talbot J. We think that the point was further emphasised by the learned Judge in the course of his judgment in Automobile Proprietary Ltd v Healy [1979] ICR 809.

Here, submits Mr Thacker, no good reason is given by the tribunal for taking such a step, which would have the effect of wasting the first day's hearing. It may be that this direction was given by the tribunal, chaired we are told by a part-time chairman, in the belief that it would assist the parties to return to a hearing on consecutive days before a full-time chairman. However, it was not a direction expressly sought by either party.

For the respondent, Mr Sewell submits that the tribunal's decision to adjourn the proceedings was a permissible option; having reached that conclusion the tribunal was equally entitled to order a rehearing de novo, given that on the first day the tribunal had heard only two hours of evidence from Mr Hayat, the earlier part of the day having been occupied with the appellant's unsuccessful application to amend the Originating Application.

Having considered the argument we have concluded that Mr Thacker is correct in submitting that no good reason has been demonstrated by the tribunal for ordering a rehearing before a different tribunal in circumstances where neither party sought such an order and the effect, so far as the appellant was concerned, was a resulting costs order. In so ordering, we are satisfied that the tribunal failed to exercise the power to order a rehearing judicially and thereby fell into error.

The Costs Order

Although referring to both Rule 12(1) and (4) in paragraph 11 of their reasons, we understand the basis of the costs order to lie solely under Rule 12(1) which provides:

"12.-(1) Where, in the opinion of the tribunal, a party has in bringing or conducting the proceedings acted frivolously, vexatiously, abusively, disruptively or otherwise unreasonably, the tribunal may make-

(a) an order containing an award against that party in respect of the costs incurred by another party;"

Mr Thacker submits that the tribunal erred in concluding that the appellant had acted unreasonably in raising matters when the case was part-heard which should properly have been raised at an earlier stage. He contends that in the absence of any formal order for discovery or the exchange of witness statements it is wrong to characterise as unreasonable the appellant's conduct in raising matters which only came to his attention, through Mr Ayub, between 9th September and 1st October 1997. An applicant cannot necessarily be expected to raise all matters in issue in the form IT1.

Mr Sewell submits that the question as to whether the appellant acted unreasonably in the context of Rule 12(1) is essentially a matter of judgment for the Industrial Tribunal with which this appeal tribunal ought not to interfere.

On this aspect of the case we again prefer the submissions of Mr Thacker. There is nothing unreasonable in the appellant raising a new matter which is relevant and which comes to light during the proceedings, here, between the first and second day of the hearing. In our view the tribunal's finding under Rule 12(1) is an impermissible option on the facts of this case.

In these circumstances we have concluded that the order for costs made in this case was fatally flawed and must be set aside. The appeal is allowed.

There have been further interlocutory proceedings before the Industrial Tribunal since the hearing on 3rd October. It follows from our decision that the review hearing fixed before the Earnshaw tribunal is now unnecessary. Further, the substantive hearing has now been listed to take place, following consolidation of this case with four other cases, over four weeks beginning on 2nd February 1998 before a different tribunal chaired by Mr D A Leahy. Despite our earlier observations about the Earnshaw tribunal's order that this case be heard by a different tribunal we can see no grounds for interfering with the new listing arrangements made at a directions hearing held before Mr Leahy on 30th October 1997.