United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MR N MOORE (of Counsel) Messrs Stephen & Scown Solicitors 25 – 28 Southernhay East Exeter Devon EX1 1RS
For the Respondents	MISS SARAH MOOR (of Counsel) on behalf of 1st Respondent Messrs Russell Jones & Walker Solicitors Swinton House 324 Gray's Inn Road London WC1X 8DH
	MISS ANYA PROOPS (of Counsel) on behalf of 4th Respondents Ashurst Morris Crisp Solicitors Broadwalk House 5 Appold Street London


 


MR JUSTICE NELSON

1. This is an Interlocutory Appeal against the decision of the London North Employment Tribunal striking out paragraphs 3, 11 and 12 of the First to Fifth Appellants notice of appearance on the grounds that those paragraphs were scandalous or vexatious.
2. The matter arises out of an application by Mr Varsani to the Employment Tribunal alleging unfair dismissal, race discrimination and breach of contract against the Appellants (Multisecure) and Orbis plc the Fourth Respondent. In the paragraphs which have been struck out in the Notice of Appearance, Multisecure allege that Mr Varsani was unable to demonstrate that he had been continuously employed for a sufficient period to enjoy the right to claim unfair dismissal because his contract with his then employer, Orbis Dormant Ltd, a subsidiary of Orbis plc, was tainted by illegality. The illegality alleged was a fraud on the Inland Revenue by the agreement of Orbis Dormant to supply Mr Varsani with the employer's products to him in lieu of benefits. Those benefits were taxable but it is alleged, were not declared and no taxes paid in respect of them. If that allegation is right the contract was illegal at least in so far as the period when it was tainted by illegality, with the consequence, that if the allegations were true, such period of illegality would not count towards continuous employment.
3. These allegations are plainly relevant to Mr Varsani's claim as they could, if proved, defeat part of it. The Fourth Respondent to this appeal, supported by the First Respondent, Mr Varsani, contend, as they did in their written submissions to the Tribunal, that the allegations are scandalous, frivolous or vexatious. The Fourth Respondents, Orbis plc, are no longer parties to the litigation, the application against them having been withdrawn with the consequence that the allegations of fraudulent conduct will be made against one of their subsidiary companies in their absence. The subsidiary itself has never been a party. If such allegations are aired at a public hearing it is submitted that they could well have a damaging effect upon the Orbis reputation, even though those allegations may prove to be quite unfounded. There is therefore a genuine interest in Orbis, even though they are no longer a party, in seeking to have the allegations struck out and continuing to do so at this appeal.
4. It is not submitted that there is no evidence as to the allegations but that there is insufficient evidence as Multisecure's case rests solely upon the evidence and admissions of the Applicant himself, Mr Varsani. No documents or other evidence is available or relied upon and Mr Varsani's evidence consists solely of the admissions that he made either in a letter of the 6th July 2000 or at the Disciplinary Hearing or the subsequent appeals. He is recorded in the notes of the hearings, prepared by his representatives, as saying that it had always been the practice for him to be allowed the odd item in lieu of additional time and effort, and that the custom and practice had been in place for some 14 years or so during the time of various named employees. Most if not all senior and line managers enjoyed such benefits but there was no dishonesty as Mr Varsani understood that VAT would be raised at the point of invoice, and he had not yet been provided with a P11D.
5. Such evidence, coming as it does from a man whom himself has dishonesty alleged against him, cannot be described as sufficient, Orbis plc contend. Where there is insufficient evidence there cannot be a relevant allegation and hence any scandalous allegation supported by insufficient evidence should be struck out especially where it is of a grave kind alleging criminal conduct, where the person against whom it is being alleged cannot appear by counsel to contest it, nor apply for costs, nor appeal. If a decision is made against such a company as Orbis in circumstances such as these it will be a decision that they acted fraudulently on the record which they were not adequately able to defend. It is accepted that such a decision would not be binding upon them but contended that it could have a serious adverse effect.
6. The business of Orbis Dormant was sold to Multisecure on the 17th May 2000 in circumstances in which the sale was a relevant transfer for the purposes of TUPE. Mr Varsani's application against Orbis plc was withdrawn, but Orbis were permitted to make their application to strike out the paragraphs in which fraud was alleged against them and Mr Varsani before a formal decision that a case against them be dismissed was made.
7. The application by Mr Varsani commences before the Employment Tribunal next Monday the 18th June 2001. In these circumstances the parties have asked that the EAT delivers its decision in time for them to know where they stand before the Tribunal hearing commences. In the circumstances we state the reasons for our decision briefly without reciting all the arguments set out in the skeleton arguments and rehearsed before us. We have of course considered them all in detail. The Appellant's case was put on three bases in argument; firstly the Tribunal should not have entertained the application at all as Orbis plc was not a party to the proceedings at that stage. A person who is no longer a party cannot seek to strike out on behalf of another person (Orbis Dormant) who has never been a party. Secondly the Tribunal applied the wrong test, concluding that the paragraphs complained of were scandalous or vexatious because insufficient evidence had been put forward and because Orbis plc would not be a party to the proceedings and matters dealt with at a public hearing might damage them. The test which should have been applied was that the allegations must be scandalous in the sense of both outrageous and irrelevant or vexatious in the sense of obviously unsustainable or bound to fail; thirdly the Tribunal considered irrelevant factors in applying the test to whether the allegations were scandalous or vexatious by considering in that context the fact that Orbis plc would no longer be a party.

(1) No jurisdiction to entertain the application.

8. We are satisfied that the Employment Tribunal had jurisdiction to make the order it made. Rule 13(2)(d) of the Employment Tribunal Rules of Procedure 1993 provide the power to strike out scandalous, frivolous or vexatious matters. The Tribunal is entitled to strike out matters upon this basis on its own motion without any application being made. It would for example be entitled under this Rule to strike out an unwarranted allegation against a third party in respect of which there was no evidence at all if it was of a scandalous nature and irrelevant, even though no application were made to it.
9. Furthermore, Orbis plc was technically still a party at the time that the application was heard and decided upon as can be seen from the EAT bundle pages 16, 18 and 21.
10. The first ground therefore fails.

(2) The wrong test.

11. Allegations of dishonesty and outrageous conduct are not scandalous if they are relevant to the issue in the proceedings. Vexatious means obviously frivolous or vexatious or obviously unsustainable. (See notes to the CPR Order 18/19/15-16). It must be remembered that the jurisdiction to strike out cases on any part thereof, before they have been heard on the merits must be exercised sparingly and in clear cases. This is not to say that a matter can only be vexatious if there is no evidence at all to support the allegation; it may be that there will be cases where the evidence is so weak that the allegation falls within the category "obviously unsustainable". Nevertheless the jurisdiction is to be exercised only in clear cases.
12. At the heart of the submissions made on behalf of Orbis plc and Mr Varsani is the contention that a lawyer cannot plead fraud or other allegations of dishonest conduct without clear instructions and reasonably credible material establishing prima facie of wrong doing. (Medcalf -v- Mardell 2001 Lloyds Reports 146). In other words if applying this test the matter should never have been pleaded it is bound to be scandalous or vexatious.
13. There may, as we have indicated, be cases where there is some evidence but it is so weak that the allegation is obviously unsustainable. It may be that in such a case the allegation should never have been pleaded, but the test remains the same when considering whether a matter should be struck out. If the allegation is outrageous so as to be scandalous, is it relevant to the issue in the proceedings? If it is it should not be struck out. Is the allegation vexatious or frivolous in the sense that it is obviously unsustainable? If it is it should be struck out; if it is arguably sustainable it should not be struck out.
14. It appears from the face of their decision that the Tribunal did not remind itself of the correct tests in relation to a finding that allegations were scandalous or vexatious, but considered the matter solely upon the basis of whether there was insufficient evidence or not for the allegations to be justified. Looking at the submissions made to the Tribunal on behalf of Orbis at EAT page 100, paragraphs 15 and 16, and the Tribunal decision itself, it appears that the Tribunal did not have in mind the correct approach to striking out matters upon these grounds. The reference to "insufficient evidence" and the absence of any reference to relevance or obvious unsustainability, suggests that they did not. We conclude therefore that they did apply the wrong test.
15. In any event we are satisfied that the material relied upon by Multisecure does give rise to a prima facie case of wrong doing and as such is neither obviously unsustainable nor improperly pleaded. Where a senior manager admits to taking benefits in kind with the full agreement of his employers with no documents being prepared for the exercise and no tax on the face of it paid, inferences of wrong doing may be drawn. There may of course be explanations which when further examined demonstrate that there is no dishonest conduct whatsoever on the part of either Mr Varsani or his then employers but the material is sufficient to say, in view of its relevance to the response to Mr Varsani's application, that it should not be struck out on the grounds that it is either scandalous or vexatious. Whether or not there is any substance in the allegations will be a matter for the hearing before the Employment Tribunal.

(3) Irrelevant factors considered.

16. It is not clear from the face of the Tribunal's decision as to whether the second ground, namely the potential damage that a public hearing might cause to a company no longer a party to the proceedings, was a reason in itself for finding that the allegations were scandalous or vexatious or simply reinforcement of the finding already made that the matters should be struck out because they were scandalous and vexatious. The wording of this part of the decision does however lend support to the finding that the Tribunal does not appear to have had in mind the correct test for determining whether the allegations were scandalous or vexatious. Their second ground may only have been an additional factor but the fact that it was put forward as a reason for suggesting that the allegations were scandalous and vexatious suggests a lack of clarity in the manner in which the allegations were being assessed.

Conclusion.

17. The appeal must be allowed and the allegations in paragraphs 3, 11 and 12 re-instated. The Tribunal approached their decision with the wrong test in mind, namely whether there was insufficient evidence rather than asking themselves whether, even though the allegation may be outrageous, was it relevant and was it obviously unsustainable. In deciding that there was insufficient evidence the Tribunal took upon itself a decision which on the facts of this case should not have been made until the evidence had been heard, and thereby fell into error. In any event, upon any basis there is prima facie evidence of wrong doing so that the allegations cannot be described as obviously unsustainable. They are on their face, sustainable and relevant though whether there turns out to be any substance in them depends on the findings of the Tribunal after it has heard the evidence.