United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR JEFFREY BACON (of Counsel) Messrs DLA Solicitors 3 Noble Street London EC2V 7EE
For the Respondent	NO APPEARANCE OR REPRESENTATION BY OR ON BEHALF OF THE RESPONDENT


 


MR JUSTICE LINDSAY (PRESIDENT)

1. I have before me an Interlocutory Appeal in the matter Mr M McCarthy v Sleepeezee Ltd, the Appellant here being Sleepeezee Ltd. Sleepeezee is represented by Mr Bacon. Mr Morgan McCarthy, the Respondent, has been represented, in a sense, in that Mr Damian McCarthy of Counsel has submitted a Respondent's skeleton argument but Mr Damian McCarthy has not attended. In any event, so far from there being dispute between Sleepeezee Ltd and Mr Morgan McCarthy so far as this Interlocutory Appeal is concerned, they are speaking with one voice.
2. The Application concerns whether for a full merits hearing due to begin on 16^th July - that is next week - there should instead be substituted a preliminary issue that will replace the full merits hearing. I have a skeleton not only from Mr Damian McCarthy, as I mentioned, but also a useful one from Mr Bacon.
3. The history of the matter is this. On 24^th January 2001 Mr Morgan McCarthy lodged an IT1 against Sleepeezee Ltd. It alleged both wrongful dismissal and unfair dismissal. It is important to keep in mind that breach of contract therefore was alleged in relation to wrongful dismissal. Mr McCarthy says that on 6^th November 2000 he was told that as from 1^st January 2001 he would no longer be the managing director of Sleepeezee Ltd and that as from 6^th November 2000 he was obliged to report to others who had previously merely been his equals. He felt that his authority was undermined and, indeed, he alleges that his authority was later still further restricted. On 14^th December he says that he resigned on the footing that it was a proper case for constructive dismissal. He concludes with a claim in both contract and for unfair dismissal. He says:

"I believe that I have been both unfairly and wrongly dismissed [I believe that should perhaps be" wrongfully"] and accordingly seek an award of compensation from the Tribunal."

4. That was met on 19^th February 2001 with an IT3 from Sleepeezee. It said that attempts had been made at a substantial reorganisation of the group within which Sleepeezee Ltd carries on business. A proposed new job description had been laid before Mr Morgan McCarthy in November 2000. There had been a meeting with him on the subject. Sleepeezee, the company, took the view that the new job description was appropriate for Mr Morgan McCarthy. Mr Morgan McCarthy disagreed, left and did not return, saying that he regarded himself as constructively dismissed. The company said, in fact, there had been no repudiatory breach by Sleepeezee Ltd and there had been no dismissal.
5. On 22^nd June 2001 the company's immediate holding company, Sleepeezee Holding plc, launched proceedings against, inter alios, Mr Morgan McCarthy. Those proceedings were launched in the Chancery Division. They contain no allegation of breach of duty owed to Sleepeezee simpliciter, the company which is Respondent in the Employment Tribunal proceedings, nor any breach of contract between Mr McCarthy and Sleepeezee Ltd. Also they contained some leaps of reasoning which might later need further investigation; paragraph 15, for example, says:

"The terms of the employment from time to time of Mr MacKenzie had been approved by representatives of Cauval and those of Mr Ford and Mr McCarthy approved by Mr MacKenzie following consultation with representatives of Cauval. Accordingly, each of them well understood that any changes in the terms of their employment had to be sanctioned by Cauval as well as approved by the Board of Directors of the Company."

Paragraph 17 urges that, inter alios, Mr McCarthy owed duties to the company, meaning, in that context, Sleepeezee Holding plc. Anyhow I do not need to go further, for the moment at any rate, into the Chancery proceedings, but it has to be borne in mind that they are brought not by the Sleepeezee company which is in the Employment Tribunal but by a different company, its immediate holding company.

6. That was 22^nd June. On 25^th June the company, by which I mean Sleepeezee Ltd, wrote to the Employment Tribunal seeking to add to its IT3 and also making other proposals. DLA, Sleepeezee's solicitors wrote saying:

"In addition, the Respondent hereby applied to the Tribunal for an order:

(i) that the hearing of this Application listed for 16^th July 2001 be limited to a hearing of the preliminary issue which the Tribunal would in any event be required to address, namely whether the Applicant was dismissed for the purposes of Section 95(1) of the Employment Rights Act 1996, either as alleged in his Originating Application or at all; and

(ii) that, in the event that the Tribunal holds that he was so dismissed, all further consideration of the Applicant's complaints of breach of contract and unfair dismissal be stayed pending the outcome of the proceedings in the Chancery Division…."

Then there is a reference to the Chancery proceedings that I have already mentioned. Continuing with a quote from the letter:

"Such issue is appropriate to be heard as a preliminary issue as, if found in the Respondent's favour, it would cause both claims to be dismissed. If found in the Applicant's favour, then the Tribunal would inevitably need to consider the matters the subject of the High Court proceedings.

If such an order were made, we would still think it likely that the hearing will occupy most if not all of the three days allocated, the original time estimate having been made before the matters which are now the subject of the High Court proceedings were known."

On the next page they say:

"….it is plain that the matters raised in the High Court proceedings are of direct relevance to the matters before the Tribunal and indeed, in the case of the Applicant's breach of contract claim would be determinative thereof were he to establish that he was as alleged, constructively dismissed."

A little later:

"Clearly any finding of fact made by the Tribunal in relation to any of the matters the subject of the High Court proceedings could prove embarrassing, not least as they could give rise to an issue estoppel binding on the High Court in the case of the Applicant but not in the case of his fellow Defendants."

That is the fellow Defendants in the Chancery proceeding of whom there are five other than he.

7. On 27^th June the Employment Tribunal responded to that letter of 25^th June saying this:

"Your letter of 25^th June 2001 has been referred to a Chairman of the Tribunals, Mr R Peters, who has granted your request to amend the Notice of Appearance. Your letter is accepted as amending the Notice of Appearance.

The request as to the hearing commencing on 16^th July 2001 is refused. The request can be renewed at the hearing in which case the full tribunal will consider the matter with the benefit of a more detailed knowledge of the case and the benefit of submissions from both parties."

Pausing there, that latter paragraph's suggestion is a very impracticable solution because both parties would have to attend the hearing on 16^th July not knowing whether the business of the hearing would be all or only part of the whole possible business of a full merits and remedies hearing, and that would mean that matters would be either over prepared or, if a risk was taken, under prepared. It is not a practicable solution.

8. That was 27^th June. On 29^th June the company added to its IT3 saying:

"If, which is denied, the Respondent is held to have dismissed the Applicant, either as alleged or not at all, then the Respondent will contend that:

in relation to the Applicant's breach of contract claim, the various breaches of duty on the part of the Applicant set out more fully in the Particulars of Claim in claim no HC01C02710 in the Chancery Division of the High Court of Justice were such, had they been known to the Respondent at the time, as to justify the Applicant's summary dismissal on the grounds of his gross misconduct; and

in relation to the Applicant's unfair dismissal claim, in the light of such breaches of duty it would not be just and equitable to award the Applicant any compensation in the event of his being found to have been unfairly dismissed."

That is the amendment which has been authorised by the Employment Tribunal and which therefore now forms part of the Employment Tribunal proceedings.

9. Given that the company had not known of the alleged breaches at the time, that is a material factor in relation to unfair dismissal and, no doubt, as to compensation. Also one is going to have to bear in mind at some stage that the breaches alleged, as I have mentioned, in the Chancery proceedings are not breaches of duties owed to this company, Sleepeezee Ltd, and their effect on the Employment Tribunal proceedings is therefore far from clear. But that was the position as at the joinder of that new heading in the company's IT3.
10. On 29^th June the solicitors on the Applicant's side indicated that they supported the notion that only a limited part of the case should be heard on and after 16^th July on the three days allotted. They wrote to say:

"We have spoken to DLA. We support their Application that the hearing on 16^th July proceed by way of a preliminary hearing to address the issue of whether the Applicant was dismissed for the purposes of Section 95 of the ERA.

We accept that the wrongful dismissal claim and also any remedies hearing cannot proceed until the completion of the High Court proceedings which have now been commenced by the Respondents against, inter alia the Applicant. As recognised by both parties, the issue as to whether the Applicant was dismissed can of course proceed without delay.

You have indicated that the Application made by the Respondents can be renewed at the outset of the hearing on 16^th July 2001. We believe this leaves such a degree of uncertainly in terms of preparation for the hearing as to make preparations virtually impossible. If the case is limited to a preliminary hearing, we believe it can be dealt with within the time estimate of three days. If the hearing does not proceed by way of preliminary hearing but instead by way of a substantive hearing covering all matters, then the issues relating to the pension which is the subject of the High Court proceedings now commenced by the Respondents, would have to be considered which would involve additional witnesses, additional facts, unrelated to the issue as to whether the Applicant was dismissed."

11. On 3^rd July Sleepeezee's solicitors renewed their application for a preliminary point only being dealt with on 16^th, 17^th and 18^th July. On 9^th July we have the final response by the Employment Tribunal which was as follows:

"The Chairman does not have sufficient insight into the case and the High Court proceedings to be able to grant the request and hence why the request has been refused."

On 9^th July, the same day, the Respondent's solicitors wrote to the Employment Appeal Tribunal with the support of the Applicant's solicitors and hence the matter comes before me by way of an Interlocutory Appeal brought on at some speed.

12. Given that the duties alleged in the Chancery action are said to be owed by Mr Morgan McCarthy not to Sleepeezee Ltd but to its immediate holding company and that no contract with Sleepeezee itself is in issue in the Chancery proceedings, it is, in my view, all too easy to exaggerate the interdependence of the Employment Tribunal proceedings and the Chancery proceedings. I am also not greatly impressed by the possibility of a Chancery Division Judge being embarrassed by findings of fact made by the Employment Tribunal, or by complications introduced by issue estoppel. However, given that wrongful as well as unfair dismissal is in issue and given that it must be at least theoretically possible for the contractual term of trust and confidence between Mr Morgan McCarthy and Sleepeezee (introduced by the usual implied term) to be broken by Mr McCarthy not only in relation to acts or omissions concerning Sleepeezee Ltd but acts or omissions concerning others, and, a fortiori, acts concerning the immediate holding company, I cannot be sure that the events concerned in the Chancery action will not be relevant to the Employment Tribunal proceedings. I foresee that evidence of those acts or omissions will be admissible in the Employment Tribunal proceedings. It would, as it seems to me, inevitably lengthen the hearing at the Employment Tribunal were they to be introduced.
13. In the Employment Tribunal, certainly so far as concerns unfair dismissal, Sleepeezee Ltd will be limited in its ability to make much of the events that are referred to in the Chancery action because it seems clear that Sleepeezee Ltd itself did not know of the acts by the time of the termination of Mr Morgan McCarthy's employment. But once one sees, as we have seen, that the McCarthy claim goes beyond unfair dismissal into wrongful dismissal, then that limitation is no great bar. What most impresses me is that the best estimate of the length of time that would be taken up with the preliminary issue, an estimate given by experienced and responsible professionals, is that the dismissal issue on its own will occupy the whole of the three days provisionally allotted at the moment to the whole of the IT1 and the IT3. Thus, to go over a passage I have already cited, it has been said by DLA that:

"If such an order were made [that is to say if the preliminary issue proceeded as they ask] we would still think it likely that the hearing will occupy most if not all of the 3 days allocated."

Their opponents acting for Mr McCarthy say:

"If the case is limited to a preliminary hearing we believe it can be dealt with within the time estimate of three days."

And they add:

"However we understand that the evidence involved in the pensions proceedings and which would have to be presented to the Employment Tribunal if the case did not proceed by way of a preliminary hearing only would be extensive and with a likely time estimate of well over one week."

The point is rammed home, so to speak, in the submissions made by the Appellant's solicitors in their application to the Employment Appeal Tribunal where they say:

"If the hearing commencing on 16^th July 2001 is to be limited to the preliminary issue …….. then it is likely to occupy the Tribunal for the three days for which the hearing is listed."

And Russell Jones & Walker, acting for Mr McCarthy say, a propos that:

"We wish to confirm our support for the Order being sought by the Respondent's solicitors as set out in the first paragraph of their letter."

14. If all that is right, and I have no reason to think that it is wrong, then if the whole case were to proceed to a hearing over the three days beginning 16^th July, then there would bound to be some unfinished part of that whole case that would need to be adjourned to be completed at some later date. The parties would have had the expense of preparing the whole case for hearing but would find that not the whole case had in fact been heard. It is not suggested that the Tribunal could offer the parties the ability to continue after 18^th July, and indeed, the ordinary system of listing at the Employment Tribunal is likely to make that quite impossible. So the technique, if the whole case has to be prepared for, and then, later on, part of it has to be re-prepared for the adjourned hearing, is inescapably wasteful of time and hence of money. If an adjournment is inevitable it is surely preferable that the first hearing on 16^th, 17^th, and 18^th July should be a hearing of business which is, from the start, defined by reference to what can be achieved within those three days. Doing that avoids the parties preparing twice over for those parts of the case which, had there been no limitation, would have had to be prepared twice over and yet it has the advantage that it does not waste any Tribunal time because the three days are likely to be taken up even with the limited issue that is sought to be made the business of the day. Nor, I think, would it be right to put out of mind at least the possibility that a conclusion on the issue of dismissal may either rule out the need for any further hearing or might increase the chances of compromise between the parties, which itself might avoid the need for a further hearing.
15. Of course, I cannot simply overturn the view of the Employment Tribunal on the footing that I think it is less convenient than might have been ordered. The letter from the Employment Tribunal of 9^th July – apart from its rather curious grammar - I do find the word 'why' hard to follow in its context – itself asserts an inadequacy in the Employment Tribunal's understanding both of the Employment Tribunal case and of the Chancery Division proceedings. There is, as it seems to me, no presumption in law that a hearing, not sought to be adjourned and estimated by responsible professionals to be likely to be taken up in full in any event, has to be a hearing of all the issues appropriate to the whole substantive merits hearing, including issues of remedy going beyond issues of liability. There is no such presumption in law. It is therefore not a proper reason in law for refusing a request that the Court or Tribunal has not sufficient understanding to be able to grant it; rather the Court or Tribunal should see that it is put into a position in which it has sufficient understanding properly to rule whether it is more appropriate to grant or to refuse the request. Accordingly I see the Employment Tribunal's refusal of 9^th July to be an error of law. Its only reason given does not support its only conclusion arrived at.
16. Accordingly I allow the appeal. I set aside the refusal to have a preliminary issue and I direct that the hearing on 16^th, 17^th, and 18^th July is to deal and deal only, as a preliminary issue, with the question raised as a proposed preliminary issue in DLA's letter of 25^th June, namely:

"… whether the Applicant was dismissed for the purposes of Section 95(1) of the Employment Rights Act 1996, either as alleged in his Originating Application or at all…"

but that is to include (because this, it seems, is ground that is common to the parties in their understanding) the issue of whether, if Mr McCarthy was dismissed, he was unfairly dismissed within the meaning of Section 98 of the same Act.

I think unless there are further directions that are sought relative to the hearing to begin on

16^th July, that there is nothing further I need do. Is that right Mr Bacon?

That is right sir.