United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MR R B WRIGLEY (Solicitor) Messrs Norrie Waite & Co Solicitors 11/12 East Parade Sheffield S1 2ET
For the Respondents	MR P NICHOLLS (of Counsel) Instructed by: Messrs Beachcroft Wansboroughs Solicitors 241 Glossop Road Sheffield S10 2GZ


 


MR JUSTICE BURTON: This is an appeal by a Mr Pilley and 35 others against a decision of the Employment Tribunal at the instance of the Respondents, British Steel Engineering (UK) Ltd, made on 18th November 1998 that the Tribunal did not have jurisdiction to hear the claimants' cases.

1. The jurisdiction of the Tribunal is limited under the Employment Tribunals Act 1996 section 3 and the Industrial Tribunals Extension of Jurisdiction Order 1994 to a claim for damages for breach of a contract of employment or other contracts connected with employment and then additionally, not relevant to us, a claim for a sum due under such a contract and a claim for the recovery of a sum in pursuance of any enactment relating to the terms or performance of such a contract.
2. The claims by these Appellants arise out of events in 1996, when it was proposed that there be redundancies at the Respondents' site at Lea Bright Bar Sheffield and such negotiations took place between the Respondents, the workforce and the recognised trade unions representing various of the Respondents' employees. A redundancy agreement was eventually entered into as a result of which sums were paid to a substantial number of employees, including these 36 Appellants.
3. In general terms, the case on behalf of the Appellants which underlies these applications is that, at a stage in the negotiations, representatives of the Respondents led these Appellants directly or indirectly to believe that the terms that were being or were to be offered by way of redundancy were to be no less than terms offered to employees at another site of the Respondents, namely at Cable Street Mill. The statement of case that was served on 8th May 1998 made allegations of the making of such statements; that the Appellants believed them to be true; that the Appellants entered into an agreement of 2nd September 1996; that the Appellants were paid a redundancy payment in accordance with that agreement; that the agreement entered into was alleged to be less favourable than that offered to the Respondents' employees at Cable Street Mill; and that the Appellants were entitled to the difference between the sum received pursuant to the agreement of 2nd September 1996 and the sum due under the terms and conditions offered to Cable Street Mill employees.
4. In their Notice of Appearance the Respondents contended that these claims amounted to claims for misrepresentation and, consequently, were without the jurisdiction of the Employment Tribunal.
5. A directions hearing was held by the Employment Tribunal, as a result of which there was an order for the hearing of a preliminary issue on jurisdiction. It is that which led to the decision of the Employment Tribunal of 18th November 1998, the subject of this appeal.
6. The case that was made by the Appellants and by Mr Wrigley who represented them at all material times, was that there was jurisdiction, and the basis upon which he argued the case was either that a claim for damages for misrepresentation was a claim for breach of contract or should be so treated, or alternatively, that by virtue of certain authorities which he drew the Tribunal's attention and which I assume are the same as those to which he drew our attention, there are circumstances in which a prior representation or misrepresentation can be incorporated into the terms of a contract. Thus, misrepresentation is, in those circumstances, also a breach.
7. In a concise decision the Chairman of the Employment Tribunal, Mr Record, concluded that there was no jurisdiction. In paragraphs 5 and 6 of his decision he said:

"5. … reading the Statement of Case, it is clear to us that what is alleged in short is that statements were made to the applicants and that believing the statements to be true and relying upon them, the applicants agreed to terms and conditions of redundancy as set out in the memoranda of 2 September 1996 and were paid out accordingly. …

6. In making his submission to the Tribunal, Mr Wrigley brought to our attention a number of authorities which are in favour of the proposition that in certain cases a statement or representation can be incorporated in the terms of a contract. However, taking the case as pleaded, we have no hesitation in saying that that is simply not what has been alleged here. Quite clearly, what is alleged is that a representation was made and that in reliance on that representation the applicants made a contract disadvantageous to them. Even if that be true however, this is not a complaint of breach of contract but is one of misrepresentation. The legislation to which we have referred defines the jurisdiction of this Tribunal in very precise terms. It may well be that the applicants may wish to pursue the matter of an alleged misrepresentation in another place. That is a matter for them and those advising them, but certainly the legislation does not confer jurisdiction on this Tribunal."

8. In a skeleton argument which was prepared by the then Counsel for the Respondents and supplied to Mr Wrigley a couple of days before that hearing, as well as making the points that there was no jurisdiction, by virtue of the fact that the case as pleaded was a misrepresentation, and that there was no arguable case based upon alleged incorporation of any misrepresentation into the contract as an oral term, the Respondents, through Counsel, made the following point in paragraph 17:

"… The only way in which the Applicants can avoid the parol evidence rule is by alleging that there was a collateral contract which contained these representations. They have not done so."

That clear hint – or more than a hint, statement - was not taken up by Mr Wrigley, who did not seek to argue collateral contract before the Employment Tribunal and on the two grounds which he did argue he lost as I have recorded.

9. On the service of his Notice of Appeal on behalf of the Appellants Mr Wrigley was of course put through the hoop of a preliminary hearing, which came on before His Honour Judge Peter Clark and members on 6th May 1999. Whether of his own motion or because he saw it dealt with in the skeleton argument for the Respondents, Judge Peter Clark raised the question of a collateral contract. He gave leave to pursue the appeal but in addition he said as follows:

"It further occurred to us that the matter, as advanced on behalf of the Appellants, may bear a different or alternative legal label. It is well established in Contact Law that a representation made during negotiations leading to the formation of a contract, although not itself becoming a term of that contract, may give rise to a collateral contract where the representation induced one party to enter into the main contract. The consideration moving from the representee being his entering into the main contract. Shanklin Pier Ltd v Detel Products [1951] 2KB 854. If that is the true position here, then it seems to us arguable that such a contract, collateral to the Termination Agreement, is itself a contact connected with the employment within the meaning of Section 3(2) of the Act."

10. Mr Wrigley purported to take up Judge Peter Clark's point and an amended Notice of Appeal was served which by paragraph 6(a) and (b) brought in two additional arguments. He sought to deal with the point made by the Chairman of the Employment Tribunal that no case for incorporation for representations as a term of the contract had been adequately put before the Court, by incorporating into his Notice of Appeal a specific pleading or suggestion to that effect; and then in 6(b) he added a reliance on Judge Peter Clark's point about collateral contract.
11. That is how the matter stood at the outset of the hearing before us, in which it has to be said that there is not only a Statement of Case and an amended Notice of Appeal but requests for further and better particulars of the Statement of Case and fairly lengthy replies to that request for further and better particulars. Notwithstanding the amended Notice of Appeal at paragraph 6(b), no case was even then incorporated into the pleadings, or proposed to be so incorporated, setting out or indeed explaining the collateral contract case which rested where it lay in the words of Judge Peter Clark.
12. It appeared to this Employment Appeal Tribunal, and, notwithstanding the submissions by Mr Wrigley, we were not in any way persuaded to change our view, that the two ways in which Mr Wrigley argued the matter below, even with the attempted improvement of the second way of putting it by his amended Notice of Appeal, were unsupportable.
13. I deal shortly with them. First of all a claim for damages for misrepresentation is plainly not a claim for damages for breach of contract, and is on its face outside the statutory jurisdiction, whether a claim for misrepresentation is properly to be said tortious or contractual or self-standing or statutory, does not for these purposes matter. It is not a claim for damages for breach of contract.
14. Secondly, and in any event, we do not believe that this is the case which it would suit Mr Wrigley and his clients to put forward in any event, because a case in misrepresentation leads to the question as to what the Appellants would have done if a true statement had been made. That is the measure of damage, because the tortious measure of damage is applicable whatever the precise juridical basis of a misrepresentation is. Consequently, the only answers would be:

(1) that the Appellants, if they had known the true position, would still have entered into the main contract, hence no loss; or

(2) the Appellants would not have entered into the main contract, in which case the situation would have been wholly different, and evidence would be required to establish what would or might the have happened; or

(3) some different agreement would or might have been entered into, which is certainly not necessarily an agreement in the terms which the Appellants would have wished it to have been.

It is thus unsupportable to suggest that a case based upon misrepresentation could be pursued in the Employment Tribunal, or by way of the precise formulation that has been put forward of it in these pleadings.

15. Thirdly, there is the fallback suggestion by Mr Wrigley that there was a representation made which was incorporated as a term of the contract, which Mr Record roundly rejected, but which Judge Peter Clark at least thought was arguable when he gave leave. It seems to us that this contention too, on the facts of this case or at all, is unarguable. The suggestion is, in some way or other, that there was a representation that it was the intention of the employers that they would pay to the Appellants the monies in accordance with the formula applicable to Cable Street Mill, which representation was a misrepresentation, whether negligent, fraudulent or innocent has not been made clear, but which representation was carried forward so as to be incorporated into the main contract. It seems clear to us that, subject always in any event to the fact that such representation has never been formulated in such a way that such a case could be understood, it would be impossible on the facts of this case to incorporate that representation as a term because it would be inconsistent with the term set out in the agreement. There would, in one and the same agreement, be a term saying that employees shall be paid in accordance with formula X, and an alleged term saying that they would be paid in accordance with a formula Y, or with a result Y, and that makes a nonsense of any contractual structure, quite apart from being inconsistent with the pleaded case by the Appellants that they were in fact paid 'in accordance with' the agreement of 2nd September 1996.
16. It appears to us that the only way that this case can be put, at any rate in the Employment Tribunal, is on the basis of a collateral warranty or collateral contract.
17. At the very outset of the hearing this morning, we gave the opportunity to Mr Wrigley, having indicated our provisional views to him, to put forward a pleading, which he had not previously done, setting out his case on collateral contract. The pleading he put forward was, and in our view rightly, criticised by Mr Nicholls for the Respondents as in effect perpetuating the claim for misrepresentation in another form, and after discussion between the Tribunal and Mr Wrigley, Mr Wrigley came up with a form of pleading with which Mr Nicholls was not any longer able to quarrel, he having participated in those circumstances, in the best traditions of the Bar, in the sharpening of his opponent's pleading – under pressure I should say from the Tribunal,
18. The outcome was a pleading which reads as follows:

"Further and in the alternative the Applicants and Respondents entered into a collateral contract on or about the 27 August 1996 when the Respondent's representatives (in particular Peter Gibbon, Peter Vickers and David Mabbutt) were asked by the Applicants' representatives (in particular Geoff Shepherd, Linda Watken, Joan Turner and Steve Ward) to confirm and demonstrate that the redundancy terms on offer were as good as or better than those offered to the Respondents' employees at Cable Street. The Respondents produced a matrix dated 27 August 1996 which purported to show that the LBB terms were indeed as good as or better than the Cable Street terms. In the premises the Respondents were warranting that the Applicants would receive under any agreement entered into no less than would be recoverable under the Cable Street terms. On the basis of that confirmation and warranty and in consideration for it the Applicants entered into and/or accepted the terms of the principal redundancy agreement which was then contained in a Memorandum of Agreement dated 2nd September 1996."

That will be a difficult task for the Applicants to prove. They will need to show not only that statements to the effect alleged were made, but that they must be held in the circumstances to have had contractual force, that they were not simply part of an ongoing negotiation process not intended to be a stopping point, that they were indeed the final results of that negotiation and that they indeed lead on to and were relied upon in respect of, and were consideration for, the entering into of the main agreement, and that in effect what occurred amounted to an agreement by the employers either that such agreement as was entered into would give the same terms as Cable Street, or, that if it did not the Respondents would make up the difference. But that is, as I understand it and as Mr Wrigley confirmed, the case which on his instructions is the case that he wishes and is entitled to put forward, and that is a case which falls within the jurisdiction of the Employment Tribunal, and that is a case which has only been put forward for the first time today.

19. The question then arose as to whether we should on that basis give leave to amend to allow the Applicants to pursue that case. A number of factors arise.

(1) The collateral contract point was not argued below. It only arose on the appeal for the first time having been foreshadowed by an amended Notice of Appeal not made good in any amended pleading and, even more significantly, it had not been argued below, notwithstanding that the point was flagged by the then Counsel for the Respondents in his skeleton argument served very shortly before the jurisdiction hearing.

(2) The amendment that is proposed is one which comes, quite apart from the fact that it comes before an Appeal Tribunal rather than an Employment Tribunal below, some two years on into these proceedings. It is obvious that on the face of it the cause of action is out of time. That is inevitable because it is an amendment way more than three months after the original events, but it does not amount to new set of facts, it is a cause of action pleaded based upon exactly the same set of facts which have always been in issue in the proceedings. Nevertheless it is a very late amendment. It comes after not only the implied abjuring of the taking of such a point below, but at the 23rd hour, because, for reasons that I have already indicated, but for its amendment there would have been no arguable case in the Employment Tribunal, this appeal would have been dismissed and this application would have fallen. It was only prepared on the day of the hearing and even then required some further tidying up in the course of submissions before it reached its final form.

Both those two factors are heavy burdens for the Applicants to bear in seeking to throw themselves upon the discretion of this Court to allow:

(1) an amendment;

(2) a making of a point which was not run, and possibly even elected against, below.

20. We have nevertheless concluded that it is just to allow the amendment and to allow the point to be run. First, although there are authorities, which we have looked at – Kumchyk v Derby City Council [1978] ICR 1116, House v Emerson Electric Industrial Controls [1980] ICR 795 and Jones v Governing Body of Burdett Coutts School [1998] IRLR 521, which discuss the circumstances in which an Appeal Tribunal should allow a point to be argued which was not argued below. It is plain:

(a) that attitudes towards allowing such points to be taken have softened as the authorities have proceeded and the discretion has been allowed to be wider;

(b) the discretion is wider where question of jurisdiction arise, as in House where, if a point goes to the jurisdiction, as it seems to us either so as to found or exclude it, that could well be an exceptional reason for allowing it to be taken on appeal for the first time;

(c) fundamentally, as it seems to us, this is not a case in which the Appellants are, if they are not permitted to pursue the matter here, prevented from pursuing it elsewhere; or put in obverse and from the point of view of the Respondents, as is only just when one is looking at questions of prejudice, not a case where the Respondents, if freed from this claim, would be free from it being made against them anywhere else; because on any basis the Appellants will be able to bring this claim in the County Court, where they could also if they wished bring a claim based upon misrepresentation in the alternative;

(d) this amendment and running of new case does not involve the making of any new factual allegations; it all falls to be spelled out of the same series of facts, which were in any event in issue before and indeed were fully set out in the pleadings, albeit on the old basis.

21. We have borne in mind the strictures of Mummery P, as he then was, in Selkent Bus Co Ltd v Moore [1996] IRLR 661 about the allowing of late amendments, but it appears to us that an important distinction in this case from the Selkent case is that which I have just mentioned, namely that there are here no new facts which will require to be brought in; it will simply be a different way of assessing and looking at the same series of facts.
22. In those circumstances, we conclude that justice can and should be done by allowing the Appellants to pursue their claim, and that, although the Respondents will thus be faced with a claim in the Employment Tribunal rather than a County Court with the possible detriment to them so far as costs orders are concerned, that should not and does not weigh with us to the extent of not allowing a proper case to be brought, not least because we conclude that this is a case for which the most suitable forum, if there is jurisdiction as we conclude there now is, is an Employment Tribunal rather than a County Court.
23. However, it is clear to us that this exceptional course of allowing a new case to be run on appeal by way of amendment, notwithstanding the spurning of the opportunity to do so below, should not be done without a costs consequence. There are two ways in which this Employment Appeal Tribunal has the power to make costs orders by way of sanctions in respect of this change of direction.
24. As far as the Employment Appeal Tribunal Rules 1993 are concerned they are set out in Rule 34:

"34.-(1) Where it appears to the Appeal Tribunal that any proceedings were unnecessary, improper or vexatious or that there has been unreasonable delay or other unreasonable conduct in bringing or conducting the proceedings the Tribunal may order the party at fault to pay any other party the whole or such part as it thinks fit of the costs or expenses incurred by that other party in connection with the proceedings."

That enables the Employment Appeal Tribunal to look at the costs of any proceedings which must, and we are entirely satisfied Mr Nicholls is right, include not only the proceedings before us but also proceedings before the Employment Tribunal below. Secondly, and in any event, there are powers under the Employment Tribunal Rules which, if we were to look at the Employment Tribunal discretely, would have empowered such Tribunal under Rule 12(1):

"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 the party in respect of the costs incurred by another party…"

25. There are two ways of looking at the question of costs. The first way is to look at this on the basis of a minute examination of the history of the case. The point which, and which alone, has succeeded, because, for the reasons given, the misrepresentation and incorporated term point have failed both above and below, only arose for the first time today and yet could and should have been raised from the beginning, if it was to be desired to ensure the jurisdiction of the Tribunal, or at least from the time when express consideration needed to be given to the point, once it was raised by the Respondents in their IT3, or, at the very least, when a jurisdiction hearing having been ordered, the collateral point was actually put under their nose two days before it began. On that basis it could be argued that the conduct of the Appellants was unreasonable or unnecessary from any one of those points in time, or, alternatively, as Mr Wrigley, as a fallback submission has submitted, from the time when Judge Peter Clark raised the point at the preliminary hearing and they jumped on the bandwagon in their Notice of Appeal.
26. The alternative way of looking at it is not to analyse the history in detail, but to look at it from a similar point of view as would be looked at in the High Court, where proceedings which have started on basis A, which were bound to fail, and did fail, were saved at the last minute by an amendment which put forward the case on a new basis. In such a circumstance the almost invariable order would be that the costs of the old hopeless proceedings, not being struck out but being saved solely by an amendment, would be paid as a term of the amendment, or, as Mr Wrigley would put it, at any rate the costs thrown away would be so paid
27. On that basis one can look at this in the round and say that of the expenditure of costs to date a substantial chunk has been wasted or thrown away by virtue of being expended on the question of jurisdiction, when. if this point had been taken from the outset or soon after the outset, not only would no time have been spent on jurisdiction, but we might have already dealt with the Appellants' cases substantively.
28. We have looked at the question of costs from both angles, and have endeavoured to bring to bear a very broad discretion that we have in looking at what we consider to have been unnecessary or unreasonable.
29. The Respondents have indicated to us, and adopting the more modern approach we have not sought, nor could we seek, to carry out a detailed assessment, or indeed look through timesheets or anything of that kind, that they have incurred since June or July 1998 a sum, exclusive of VAT, of some £8,500. That seems to us to be a perfectly understandable and reasonable figure, not raising any eyebrows at all, and which we are very ready to accept as being the sum which has in fact been incurred on the totality of these proceedings to date.
30. Mr Wrigley has been given the opportunity, not only of course of making comments on the submission on costs by the Respondents, but also of putting forward any particular circumstances which might arise in respect of the 36 Appellants, for whom he appears, any prejudice that they would suffer if any particular sum of costs were ordered to be paid and if quantified, as it is to be quantified, that will be paid or will fall to be paid within 14 days such that it will be a burden which will fall immediately on his clients well before the outcome of these eventual proceedings is known. Some of his clients are, he tells us, on benefit, many of them have not got jobs since the date when they received sums under these redundancy agreements, but only some of them would, he tells us, have qualified for Legal Aid if Legal Aid were appropriate, as it would be of course if these proceedings had continued in the County Court rather than here; but nothing he was able to say, very fairly, could possibly suggest that even £8,500 divided by 36 would amount to any kind of burden which would render it impossible for his clients to meet those sums or effectively drive them from the judgment seat.
31. On the basis of the findings that we have made, that the appeal was bound to fail, and would have failed but for this last minute amendment, that we have exercised a last minute discretion in favour of the Applicants salvaging a case that would otherwise have come to an end today, and that the jurisdiction point should have been dealt with much earlier, and could have been dealt with, had this point, as it should have been, been taken either from the outset or soon after, we take the view, even looking from the point of view of Mr Wrigley, at what costs were thrown away by this belated amendment, that a substantial sum, and more than he was submitting, had been so thrown away. On the hand, it is also clear that a good deal of what has been incurred to date will be of value in the ongoing proceedings: the consideration of the facts which has gone on, the answering of some of the pleadings and the gathering of knowledge on the part of solicitors and Counsel.
32. Doing the best we can, the order we propose is that the Applicants pay within 14 days in respect of the costs thrown away, pursuant to our powers to order costs under Rule 34(1) of the 1993 Rules, is £4,000. We shall also order a stay of the proceedings pending payment of that sum.

[Mr Wrigley, for the Applicants, and Mr Nicholls, for the Respondents, made further submissions concerning the case being sent back to a differently constituted Employment Tribunal.]

33. It was perfectly proper to make the application, but we conclude that this is now going to be a fresh matter. Jurisdiction is over, and whereas we are not saying that it should be heard by Mr Record, we are certainly not saying it should not be, and we do not want to prescribe which Chairman deals with the case.