United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR A R HALDEN (of Counsel) Instructed by: Charles Lucas & Marshall Solicitors 1 Wood Street Swindon Wiltshire SN1 4AN
For the Respondent	MISS J HEAL (of Counsel) Instructed by: Rothera Dowson Solicitors 2 Kayes Walk Stoney Street Lace Market Nottingham NG1 1PZ


 


MR COMMISSIONER HOWELL QC

1. In this appeal which is before us today for a full hearing pursuant to the directions of the Appeal Tribunal given earlier at the preliminary hearing on 9 May 2001, Klargester Environmental Ltd, who were the Respondents to the Tribunal proceedings below, seek to have set aside as erroneous in law the Decision of the Employment Tribunal Chairman sitting alone at Reading on 15 September 2000, set out in Extended Reasons sent to the parties on 6 October 2000 at pages 4 - 8 of the appeal file before us.
2. The proceedings before the Tribunal had been brought by Mr Roger Hugh Golding, a former employee of Klargester, by an Originating Application presented on 19 May 2000, complaining that he had been unfairly dismissed, allegedly for redundancy, but without proper consultation and without any prior warning of dismissal. He had been a Project Co-ordinator in telephone sales, working for Klargester from 6 August 1998 until the effective date of termination of his employment on 29 February 2000.
3. That Originating Application was sent to the Respondents by the Tribunal in the normal way, but for some four months, no response to it was received by the Tribunal from, or on behalf of, Klargester, which thereby was in default of the Tribunal Procedure Rules as it had failed to comply with the mandatory requirements as to entering a Notice of Appearance, if it wished to defend the proceedings.
4. Klargester also failed to respond to a Notice of the hearing of the proceedings, which had been sent to them on 28 July 2000. It was not until some two days before the date fixed for the full merits hearing of the proceedings themselves, which was 15 September 2000, that solicitors were instructed by Klargester and any effective action was taken at all.
5. On 13 September 2000, the solicitors wrote to the Tribunal, by letter of that date at pages 16 and 17 of the appeal file, saying they had been instructed on behalf of the Respondents, to represent them at the forthcoming hearing on 15 September, and stating that they wished to apply for an extension of time, pursuant to Rule 15 of the 1993 Tribunal Procedure Rules, which are the ones which govern the procedure so far as concerns the appeal before us. They requested that the applications should be placed before the Chairman for decision as soon as possible, and recorded that if permitted to enter the Notice of Appearance on behalf of the Respondents, they, the solicitors would be representing the Respondents at the forthcoming hearing on 15 September. Some details were given, explaining that the failure to take any effective action in response to the proceedings up until that date had been the fault of the manager of the company, who it was said had no experience of personnel matters or legal requirements. It was a genuine error on his part, although it was accepted that he had had the responsibility for taking what actions were needed on behalf of the Respondent.
6. When the matter came before the Tribunal, that application was renewed and considered by the Chairman. It was opposed by Mr Golding, the Applicant, who did so principally on the ground that, as he understood it, the application being made would have involved a deferment of his proceedings, and as he had come prepared to deal with the matter effectively that day, and did not wish any adjournment to take place, he was unwilling for the Tribunal to accede to the Respondents' application.
7. The Decision of the Tribunal Chairman, having considered what was said by the Respondents' solicitor, Ms Gale, and by Mr Golding, was that he would not grant an extension of time, with the consequence that he then proceeded to hear the case without taking account of the substance of the draft Notice of Appearance which had been put before him. He consequently found that the Respondent had not established the reason for the dismissal of Mr Golding for the purposes of section 98 Employment Rights Act 1996, and that, inevitably, led to his conclusion that the dismissal had been unfair, with the consequence that he made an award of a total of £17,600 compensation to Mr Golding for his unfair dismissal.
8. His reasons for rejecting the application that the Respondents should be allowed to submit a belated Notice of Appearance in defence of the proceedings appear from paragraphs 1  - 9 of his Extended Reasons It is not necessary to read all of them in full, but we should record that, as noted in paragraph 5 of those Reasons, the basis of the Applicant's claim had been that he was unfairly dismissed for purported redundancy: he disputed that there had been a redundancy situation and disputed that there had been adequate consultation. As the Chairman explained of:

"5. In the draft Notice of Appearance which Ms Gale submitted during the course of her application, the respondent asserted that there was a redundancy situation. They disputed the applicant's claims that there had been inadequate consultation and sought to argue that the dismissal was fair. She [that is Miss Gale] made the point that if the application were to proceed in its present form the respondent would be denied the opportunity of being heard."

The Chairman continued:

"6. Mr Golding opposed the application. He had come prepared to deal with the matter today and did not wish there to be an adjournment. He pointed out that he had had contact with ACAS in July/August. ACAS had tried to conciliate in the matter but reported to him that they had been unable to obtain any, or any satisfactory, response from the respondent. It also appeared to the Tribunal that the respondent had received the Notice of Appearance, which should have alerted them to the fact that a claim was pending. Miss Gale was asked why the matter was not investigated at that stage but was unable to provide any satisfactory explanation.

7. In deciding this application I have to have regard to the reasons for and the length of the delay, the apparent substance of the Notice of Appearance which is proposed to be lodged and have regard to the balance of prejudice in granting or refusing the application.

8. The respondent has, quite candidly, explained the reason for the delay and I accept what Ms Gale says on their behalf in that regard. It is due to the fault of a particular individual within their organisation. I have no reason to think that had he dealt with the matter as he should have done a Notice of Appearance would not have been entered. However, I have had regard to the fact that the respondent is a corporate body rather than an individual. They may have to suffer the consequences of a failure by one of their employees to act, as he should have done in the course of his employment. The delay is lengthy. I had wondered why the respondent had not caused enquiries to be made when they received approaches from ACAS and/or when they received notice of the hearing. Those events would have been sufficient to put them on enquiry but no steps were taken. I am satisfied that the proposed defence is not illusory. I cannot say if it would succeed or not but it certainly raises questions that would require careful consideration by the Tribunal. As to the balance of prejudice, it does not appear that the applicant has suffered any costs other than his travelling costs and loss of productive time, which could be compensated. He has not incurred legal expense. If the application is granted, however, there will be further delay until the matter is resolved. On the other hand, the respondent is a large organisation to whom the prospect of a finding of unfair dismissal and any order for compensation, whilst not insignificant, would be unlikely to prove disastrous.

9. I have come to the conclusion that, in the exercise of my discretion, this is an application, which ought not to be granted. Although it is not the only matter I take into consideration, I am concerned that the documents which accompanied the Originating Application when it was served made it clear that a Notice of Appearance was required if the claim was to be resisted and explained the consequences of failing to do so. Subsequent events ought to have alerted the respondent to the position in time to take action before this very late stage but nothing was done. There had been no satisfactory explanation for that failure. I refuse leave to file a Notice of Appearance."

9. Against that Decision, pursuant to the directions given by the Appeal Tribunal at the preliminary hearing, Klargester appeals before us on one ground, and one ground only. That is set out in paragraph 1(a) of the grounds of appeal, page 2 of the appeal file, and as amplified and put before us by Mr Halden, who appeared on Klargester's behalf at this hearing, it is this: that the Tribunal Chairman had erred in law in taking into account as a factor in the exercise of his discretion, a factor which it was improper for him so to take into account, and that was the fact that the Respondent was a large organisation, to whom the prospect of a finding of unfair dismissal and any Order for compensation made which might have been avoided if they had been able to put forward their defence of the claim on the merits, would be unlikely to prove disastrous to them in the financial sense. As it is put in paragraph 1(a) of the Notice of Appeal, that had the effect of penalising the Appellant on the basis of its economic success.
10. Miss Heal, on the other hand, submitted to us, on behalf of Mr Golding, that there had been no improper misdirection on the part of the Chairman, and that in accordance with well established authority, this was an exercise of discretion by the Chairman in the conduct of proceedings before the Employment Tribunal, with which the Appeal Tribunal would not interfere. The issue of the relative prejudice between the parties was a perfectly proper matter to be taken into account as one of the factors in the balancing exercise in determining how that discretion should be exercised, and there was no principle and no authority which dictated that the lack of severity of the financial consequences to the Respondent ought to be excluded from the Chairman's consideration as a matter of law.
11. We ought to add that also before us was an affidavit sworn by Mr David Drury, the Managing Director of Klargester, dated 20 December 2000, filed in accordance with the Practice Direction of the Appeal Tribunal on applications on appeals on issues of this nature, to explain the reasons why the Tribunal Procedure Rules had not been complied with. That makes it clear that the conduct of matters on behalf of Klargester had first of all been in the hands of an employee responsible for payroll and personnel matters, who had been ill. When that employee left in July 2000, the responsibility had passed to a Mr Derek Peverall who was the Internal Sales Manager, who had happened to have little knowledge of personnel or employment matters, and had not brought the matter to Mr Drury's attention, even after having been advised by an ACAS office, that the company would need to file a Notice of Appearance in order for Klargester to defend the case. Mr Peverall had been unable to explain his reasons for the failure to bring the forms to his attention, and Mr Drury's understanding was that it was Mr Peverall's concern for his own personal position within the company, and unwillingness to admit that there was a matter he was having difficulty in coping with. But however that may be, Mr Drury's evidence was that what had happened was that Mr Peverall had simply filed the matter away, in the hope that Mr Golding's application would not be pursued. Mr Drury accepts that it was a major error on his part, but says that it was in no way an attempt to mislead the Employment Tribunal. That, of course, is not disputed as a matter of fact, but it does remain the fact that Mr Peverall's part in the affair appears to have involved a deliberate decision not to do anything in response to the papers from the Tribunal, and the advice from ACAS, in order to comply with the Rules on behalf of Klargester.
12. Accordingly, although that evidence was not before the Tribunal, it seems to us that it does not add materially to what Miss Gale said to the Tribunal Chairman at the hearing on 15 September, and does not appear to us in any way to invalidate the conclusion expressed by the Tribunal Chairman in paragraph 6 of his Extended Reasons that when asked why the matter had not been investigated at an earlier stage, she had been unable, on behalf of Klargester, to provide any satisfactory explanation for the failure by those responsible at Klargester to comply with the Tribunal's Rules.
13. Under the Employment Tribunals Rules 1993, it is a requirement under Rule 3 that a respondent who wishes to defend the proceedings must submit a Notice of Appearance within 21 days of having received the Originating Application from the Tribunal. It is expressly provided by Rule 3(2) that a respondent who has not entered an appearance in that way shall not be entitled to take any part in the proceedings except for the very limited purposes specified in Rule 3(2), the principal one of which, of course, is to apply under Rule 15, for an extension of the time for entering an appearance, which is the application that was made on behalf of Klargester in this case, the day before the hearing itself.
14. In the context of a claim for unfair dismissal, such as this one, where under section 98(1) of the Employment Rights Act 1996 it is for the employer to establish the reason for dismissal, and affirmatively prove that the actual reason for dismissal falls within the categories of potentially fair reasons under section 98(2), it is an inevitable corollary of Rule 3(2) and of a failure to comply with the requirement as to lodging a Notice of Appearance in the proper way, that an employer respondent may well be debarred from putting forward what would otherwise be a good defence to a claim of unfair dismissal, and by his procedural failure, thereby lose a case he might have won, had he taken the opportunity afforded to him by the Rules and the procedure, of putting forward a case on the merits in the proper way.
15. That being the inevitable consequence of the Rules of Procedure, the question of an extension of time is a matter for discretion under Rule 15(1), and an extension of time is subject to the well established principles as to how discretions of that nature are to be exercised in the management of proceedings before the Employment Tribunal. It is a discretion: one to be exercised judicially, but provided that that discretion is exercised in a proper way, it is not for the Appeal Tribunal to interfere with the decisions taken by the Employment Tribunal or Chairman in exercise of their own judgment, unless that judgment is shown to have been reached on an improper basis in law, or otherwise exercised erroneously in law. It is only if those conditions are satisfied, that the jurisdiction under section 21 of the Employment Tribunals Act 1996 for this Appeal Tribunal to interfere, and set aside the result, arises. It is also well established that it is in a context such as this, a heavy burden for an appellant to discharge to demonstrate that there has been an improper exercise of discretion, on a matter which is normally to be left to the good sense and judgment of the Employment Tribunal or Chairman dealing with the case itself.
16. We were referred by both parties to the principles which are not open to dispute, and indeed are not in dispute so far as the argument in this case is concerned, which govern the approach of the Appeal Tribunal to issues of this nature. For present purposes, it is necessary only to refer to some passages from the judgment of Mr Justice Mummery, as he then was, in the Appeal Tribunal case of Kwik Save Stores -v- Swain [1997] ICR 49, beginning at page 54F, under the heading "Control of Procedure by industrial tribunals"

"Under their Rules of Procedure, industrial tribunals have many wide discretions. When they exercise them, the result should, in general, be accepted by the unsuccessful party and appeals to this appeal tribunal ought only to be brought when it is clear (or at the very least clearly arguable) that the industrial tribunal has exercised the discretion contrary to well established legal principles, such as failing to take any account of relevant factors, or taking into account irrelevant factors. The question of the weight to be given to various factors and of the balancing of them one against the other is for the industrial tribunal not for the appeal tribunal. Appeals to this appeal tribunal which seek a rehearing on the weighing or balancing exercise will be dismissed, usually with an order for costs on the basis that it is unreasonable to appeal against the exercise of a discretion, save in a case where it is clearly arguable that that exercise is flawed."

17. And then Lord Justice Mummery goes on to analyse the various discretionary factors which it is proper for an Employment Tribunal Chairman to take into account in an application of this nature, identifying in particular, the explanation for the delay itself, as (in his words) always an important factor in exercise of the discretion, and as he says:

"An applicant for an extension of time should explain why he has not complied with the time limits. The tribunal is entitled to take into account the nature of the explanation and to form a view about it"

And the length of the delay is also a relevant factor, referred to at page 55B

"In general, the more serious the delay, the more important it is for an applicant for an extension of time to provide a satisfactory explanation which is full, as well as honest.

In some cases, the explanation, or lack of it, may be a decisive factor in the exercise of the discretion, but it is important to note that it is not the only factor to be considered. The process of exercising a discretion involves taking into account all relevant factors, weighing and balancing them one against the other, and reaching a conclusion which is objectively justified on the grounds of reason and justice. An important part of exercising this discretion is to ask these questions: what prejudice will the applicant for an extension of time suffer if the extension is refused? What prejudice will the other party suffer if the discretion is granted?"

18. We interpose there that Lord Justice Mummery's reference to the balancing of prejudice suffered by one party or the other, is expressed in entirely unqualified terms; but as he then proceeds to show, one of the factors to be taken into account in that balance of prejudice, is whether the Respondent will be deprived of a defence which is shown to have some merit in it, if the application to extend time is not allowed. As he says at page 55F by reference to a dictum from Lord Bingham in Costellow v Somerset County Council [1993] IRLR 256, 263.

"….if a defence is shown to have some merit in it, justice will often favour the granting of an extension of time, since otherwise there will never be a full hearing of the claim on the merits."

And he then makes the point that a party does not have a right to an extension of time:

" on the basis that if he is not granted one, he will be unjustly denied a hearing."

and he then concludes, on that question:

"The applicant for an extension has only a reasonable expectation that the discretion relating to extensions of time will be exercised in a fair, reasonable and principled manner. That will involve some consideration of the merits of his case."

19. In Kwik Save itself, the decision of the Tribunal was to set aside the Tribunal Chairman's refusal to allow an extension for the single reason that the Chairman had erred in law in the exercise of his discretion by failing to take express account of the merits of the employer's case which was sought to be put forward, or of the prejudice they would suffer if he withheld the extensions, as against the prejudice the applicant would suffer if the extensions of time were granted. That is apparent from the Appeal Tribunal's conclusions as stated on page 57C.
20. It is also apparent from the passage which immediately follows that, that even if the result of refusing an extension may be to deprive an employer of a case which might have merit, if the full hearing went into the question of merits, that is not of itself a ground which militates in favour of granting such an extension. It is merely one of the factors to be taken into account, along with all the others. That appears from the next following passage:

"We make it clear, however, that we are not holding the chairman's exercise of discretion to be perverse. We cannot say that no reasonable tribunal, taking into account all the relevant discretionary factors, would inevitably have granted an extension. It is for the industrial tribunal to exercise the discretion."

And for that reason the decision in that case was remitted to the Employment Tribunal Chairman for the question of discretion to be considered afresh.

21. In this case, as we have said, the only issue for us to determine is whether it was improper for the Chairman to have taken into account, to the extent he did, the fact that, as recorded in the final sentence of paragraph 8 of his Extended Reasons:

"…..the respondent is a large organisation to whom the prospect of a finding of unfair dismissal and any order for compensation, whilst not insignificant, would be unlikely to prove disastrous."

We think it is implicit in the argument put forward by Mr Halden that the Tribunal Chairman thereby erred in having taken that into account as a factor at all, and not having made it a decisive factor in favour of the Respondents that, regardless of the size of their organisation, they were being deprived of the opportunity of a potentially good defence on the merits of the claim. It was not in dispute between Counsel on the argument before us that the Chairman would have been entitled to take into account as a factor in favour of an impecunious respondent, the severity of the financial consequences as regards that respondent, if an application to extend time for the filing of a Notice of Appearance was not admitted: for example in a case where the financial consequences for a small employer of not being able to defend an unmeritorious claim would be catastrophic. It is conceded, and we agree, that that would plainly be a proper factor for a Chairman to weigh in the balance, along with all the others.

22. We have not been persuaded that in this case, on a fair reading of what his Decision actually said, that this Employment Tribunal Chairman did more than consider and record that in this case there were no such severe adverse consequences, financially, for the Respondents, that would have militated in favour of allowing a Notice of Appearance to be entered long out of time, when other factors would have led him not to permit that course. Here, he appears to have simply recorded in a negative way that no such factors amounted to overriding reasons for displacing the other factors he did take into account. These included in particular, the factors that he referred to as of particular concern in paragraph 9 of his Extended Reasons, referring to the continued failure to comply with the Tribunal Rules despite clear indications that if a claim was to be resisted, action should have been taken on behalf of the Respondents, and the lack of any satisfactory explanation for that failure.
23. In our judgment, it was not improper for him to have indicated the reasons why he was not regarding the financial consequences for the Respondents of being disabled from defending the claim, so long out of time, as a factor to override the other indications he gave. We consider that he did conduct a fair and proper balancing exercise, extending to the issue of prejudice as well as to the lack of a proper explanation for why the Rules had not been complied with, and we have not been persuaded that there are grounds for saying that he erred in any way in law in the Decision he arrived at. For those reasons, we now unanimously dismiss the appeal.

[An application was made on behalf of the Respondent for costs]

24. We are not satisfied that this appeal has been pursued in such an unreasonable way, following the directions given on the preliminary hearing, that we ought to award costs in this case, and we therefore do not exercise our discretion under Rule 34 to make the award that Ms Heal asks for on behalf of the Respondent, following the dismissal of the appeal.