United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MR SWIFT (of Counsel) Messrs Hartley Linfoot & Whitlam Solicitors 3 St Peter's Close Sheffield S1 2EJ
For the Respondent	MR HAYES (of Counsel) Messrs Wosskow Brown Solicitors Banners Building 620 Attercliffe Road Sheffield S9 3QS


 


MR JUSTICE MAURICE KAY: This appeal was listed for hearing on 23rd October 1997. It is an appeal from the Industrial Tribunal at Sheffield in respect of a claim for breach of contract. When the appeal was called on we pointed out to the parties that because of the legislative lacuna which was later identified in Pendragon PLC v Jackson (5th November 1997, unreported), we had no jurisdiction to hear and decide the appeal. However, it was known at that time that there was likely to be an amendment which would reinstate our jurisdiction and, in order to save costs, the parties sensibly agreed to make their submissions on 23rd October on the basis that there would be no judgment in the case until the jurisdictional gap had been filled. Happily the gap has recently been filled and we are now in a position to give judgment.

Mr Thorpe was the Managing Director of Streetscene Holdings PLC. His employment ran from 1st March 1988 until 30th September 1996. On that date his employment was terminated by mutual consent. The parties entered into a Compromise Agreement dated 31st October 1996. Its terms provided for certain payments to be made to Mr Thorpe and imposed certain obligations upon him. Clause 11 of the Agreement head "Settlement" was in the following terms:

"Mr Thorpe accepts the consideration referred to above in full and final settlement of all and any claims which he has or may have against the Company and/or any director, officer or employee of the Company arising out of his employment by the Company or under the terms of his Service Agreement or its termination or otherwise including any claim that he may have that he had been unfairly dismissed by the Company."

In due course Mr Thorpe made a contractual claim against Streetscene for compensation in lieu of notice and accrued holiday pay. It was made clear, and the Industrial Tribunal accepted, that the claims were for breach of contract. The Company sought to resist the claims by reference to the Compromise Agreement.

In addition to the clause headed "Settlement" there were other clauses in the Agreement which were considered by the Industrial Tribunal. Clause 3, headed "Compensation" provided:

"The Company will pay to Mr Thorpe the sum of £13,000 as damages for and compensation arising out of the termination of his employment with the Company which sum includes a provision with reference to pension arrangements and Mr Thorpe's statutory redundancy entitlement. The payment will be made by the following instalments ..."

In a clause headed "Warranty", which came immediately after the "Settlement" clause, it was provided:

"For the purposes of Section 140 of the Employment Protection (Consolidation) Act 1978 (as amended) Mr Thorpe hereby warrants and agrees that:-

12.1 by entering into this Agreement he will refrain from presenting a complaint to an Industrial Tribunal that he has been unfairly dismissed by the Company and this Agreement is intended to relate to such a complaint."

The Industrial Tribunal came to the conclusion that it had jurisdiction to deal with Mr Thorpe's claim for breach of contract and it adjourned the matter for a substantive hearing. It is apparent from the text of the Decision that the hearing before the Tribunal was concerned to a considerable extent with the question whether s. 203 of the Employment Rights Act 1996 (which replaces, in amended form, s. 140 of the 1978 Act) applied to the present circumstances. S. 203 is headed "Restrictions on contracting out". It is apparent from a perusal of the section that its concern is with attempts to contract out of the statutory rights provided by the Act. The Tribunal came to the conclusion that, whereas the Compromise Agreement was effective to exclude Mr Thorpe's statutory right to claim unfair dismissal, it was not sufficiently clear to exclude the remedies which he was in fact seeking on the basis of breach of contract. Hence the decision that the Tribunal had jurisdiction to hear his claim.

The Notice of Appeal in this case seeks to take on the Decision on its own terms, namely by rearguing the application of s. 203 to the Compromise Agreement in the circumstances of this case. However, at the commencement of the hearing, Mr Swift on behalf of Streetscene sought to amend the Notice of Appeal by the addition of a new ground. Essentially the new ground is to the effect that s. 203 has no application to the compromise of a contractual claim brought before an Industrial Tribunal. If that is correct, it would follow that the Tribunal should have determined whether or not it had jurisdiction by reference to common law rather than by reference to s. 203. Since it is an important jurisdictional point, we granted leave to Streetscene to amend accordingly.

As a matter of law, in our judgment the amended ground of appeal is unanswerable. It is clear that s. 203 relates to contracting out of statutory rights and not to claims for breach of contract. It is a pity that no one saw this obvious distinction at the hearing before the Industrial Tribunal. When one turns to construe the Compromise Agreement according to common law, there can be no doubt that it is effective to embrace the claims which Mr Thorpe now seeks to pursue. Unfair dismissal was made the subject of detailed express provision because of the provisions of s. 203. However, in our judgment, there can be no doubt that the provisions of the clauses headed "Compensation" and "Settlement" were intended to and do have the effect of preventing Mr Thorpe from pursuing this claim for breach of contract. There can be no suggestion that the agreement was tainted by oppression at common law or anything else which might vitiate it. It was an arms' length agreement entered into by parties who were each receiving independent legal advice.

It follows from what we have said that this appeal must be allowed by reference to the amended ground put forward by Mr Swift. The Industrial Tribunal was in error when it approached the case in the way that it did and concluded that it had jurisdiction by reference to s.203. We should add that we also heard argument from both sides upon the construction of s.203 but, in the circumstances, it is neither necessary nor desirable that we should rule upon those alternative submissions. At the conclusion of submissions we asked the parties whether there were any ancillary matters upon which they might seek orders depending upon the outcome of the appeal. We understand that the only order to be sought is a Legal Aid taxation of Mr Thorpe's costs and we so order.