United Kingdom Employment Appeal Tribunal

MR JUSTICE MAURICE KAY:

1. In 1993 the Appellant and her husband entered into an agreement with the Respondent. In essence, the contract related to the operation of a service station. The same service station was the subject of six further agreements. For reasons which have never been explained in evidence, the Appellant fell out of the express contractual picture between 1995 and 1997, when the agreements named only her husband. However, the final agreement, dated 1 August 1998, was between the Appellant and the Respondent. That final agreement was terminated on 31 March 1999. On 19 April 1999, the Appellant filed an application claiming unfair dismissal. She asserted that she had been employed as "manageress" of the service station since 1993. In due course, this gave rise to two preliminary issues, namely: (1) was the relationship between the Appellant and the Respondent one of employment, as she contended but the Respondent denied? If so, (2) did she have sufficient service to qualify for protection against unfair dismissal, such service being necessary to provide an Employment Tribunal with jurisdiction? The application was the subject of a number of interlocutory hearings which took place against the background of uncertainty in relation to the qualifying period caused by the Seymour-Smith litigation. However, on 17 February 2000 the two-year qualification period specified by statute at the time was finally validated by the House of Lords.
2. On 8 March 2000 the parties attended the Employment Tribunal in Birmingham for a three-day hearing. The subject-matter was to be, or to include, the two preliminary issues. In the event, the decision of the Employment Tribunal simply states:

"The unanimous decision of the Tribunal is that the application is dismissed upon withdrawal by the [Appellant]."

That "decision" was reached in the middle of the afternoon of the first scheduled day. It is necessary to examine the events which gave rise to it.

3. The hearing on 8 March 2000 related not only to the Appellant's case but also to the similar cases of three other service station operators. The Appellant represented herself and the other three. The Respondent was represented by Mr Andrew Hochhauser QC. Plainly the Respondent was anxious to obtain a ruling that persons in the position of the Appellant are self-employed franchisees and not employees. Although the Appellant knew from pervious interlocutory hearings that a final decision was awaited from the House of Lords in Seymour-Smith, she did not know until she attended the Tribunal on 8 March that the House of Lords had ruled some three weeks earlier. On the other hand, she did know that on 12 July 1999, another Shell Service Station operator, Miss Angela Griffiths, who had worked under an identical agreement, had lost her unfair dismissal case in an Employment Tribunal in Liverpool because she was held not to be an employee and had lost at a later hearing in December 1999 when she failed to establish that she was a "worker" in relation to a claim for unauthorised deduction from wages. Indeed, this had given rise to a letter to the Appellant from the Respondent's solicitor on 17 January 2000 which expressed the view that, in the light of Miss Griffiths' case, "you will be acting unreasonably if you do not now withdraw your claim". They referred to an application for costs in the event of the Appellant's claim being rejected by the Tribunal and advised the taking of independent legal advice. According to a letter which the Appellant wrote to the Employment Tribunal on 22 January 2000, she did indeed take legal advice at that stage.
4. When the parties assembled at the Tribunal on 8 March, Mr Hochhauser produced a skeleton argument which addressed the two preliminary issues. In relation to length of service, it contended that, the Appellant having fallen out of the contractual picture between 1995 and 1997, and having only re-emerged on 1 August 1998, she could not establish the Seymour-Smith validated qualifying service in respect of a relationship which had come to an end on 31 March 1999. Moreover, the Griffiths case had ruled that an identical contract was not one of employment and to seek to argue to the contrary was an abuse of process. The skeleton went on to argue the case on substantive grounds, without prejudice to the abuse of process contention, which was made by reference only to the nature of the contract and not to its duration.
5. As to what transpired in the five or so hours before the Appellant withdrew her application, the principal sources of information are a letter from the Chairman of the Tribunal dated 25 May 2000 and a lengthy contemporaneous attendance note compiled by the Respondent's solicitor. The note was proffered to us on the basis that it is an accurate representation of what transpired and, indeed, Mr Kelly, who has represented the Appellant before us, was content to accept it as accurate. The following description of events is taken from the attendance note.
6. Mr Hochhauser submitted to the Employment Tribunal that the Appellant's contract (and those of the other three applicants) was identical in form to the one in the Griffiths case and that, while res judicata was inapplicable in view of the change of parties, it was an abuse of process to "relitigate the self-employment issue", having regard to authorities which establish that the issue was to be resolved by a construction of the document and not by reference to the subsequent conduct of the parties (Carmichael v National Power [2000] IRLR 43). The skeleton argument also referred to other authorities on this point and on abuse of process. The Chairman asked the Appellant what the difference was between her case and the Griffiths case. The Appellant submitted that her evidence was stronger and referred to her tax and VAT arrangements and an Inland Revenue booklet. There was more discussion about the position of the four applicants. The Chairman referred to and explained Seymour-Smith. Mr Hochhauser referred to the documents evidencing the Appellant's contractual history. In answer to questions from the Chairman, the Appellant said that she and her husband had been in partnership and that the Respondent "had deemed it unnecessary" for her to sign the agreements because only one signature was necessary. Mr Hochhauser said that the Respondent did not dispute the partnership arrangement. He submitted that, even if (contrary to his primary submission) the Appellant had been an employee, her claim was bound to fail because she could not satisfy the qualifying period of two years and nor could two of the other applicants. He reverted to his abuse of process argument by reference to the Griffiths case and the need for certainty. It was "entirely wrong to permit this matter to go on, with the same arguments to be reconsidered". The Appellant submitted that the Tribunal was not bound by the Griffiths case. The Appellant and Mr Hochhauser made rival submissions about the contractual position by reference to documents. At 12:45 the Tribunal adjourned to consider the submissions. At 1:10 they returned and the relevant part of the attendance note reads:

"The Tribunal considered that, in relation to [the Appellant and two other applicants] there was considerable doubt as to whether they satisfied the two year requirement. Even on the best analysis of the position, there was considerable doubt.

This was without prejudice to the employment issue.

Even if the applicants were employees, there was a considerable hurdle with regard to whether they had two years' service. The Tribunal would not wish to deprive a party of the right to call evidence.

However, the applicants are at risk of a costs award if they persisted and the Tribunal found that they lacked two years' service."

It was suggested that the Appellant and her colleagues should take time to consider their position. The note continues:

"If the applicants could reach agreement with the Respondent with regard to the withdrawal of their claims without an order for costs, so be it.

If they wished the Tribunal to decide, they faced the risk of costs.

The Respondents had been put to considerable expense … .

Costs orders could be made in two ways. A Tribunal could make an order limited to £500. Alternatively, it could order the Respondent to have its costs taxed. The costs would then be assessed by the court and would not be limited to £500. … The applicant should therefore be in no doubt whatsoever that they are at risk of costs, which would not necessarily be limited to £500."

7. The Chairman indicated that the Tribunal would adjourn until 2:30 to allow the Appellant and her colleagues to consider their position. All this was said to apply also to the one applicant who could clearly surmount the two-year hurdle and in respect of whom the preliminary issue was confined to the question of employee status.
8. At 2:30 the Tribunal sought the Appellant's decision. She sought clarification. The note states:

"The Chairman said that whatever costs the Respondent incurred would undoubtedly include costs incurred today. The Tribunal would have to consider, first, whether a costs order should be made and, second, if a costs order should be made, on what scale. Should it be limited to £500, or should the Tribunal let another court sort it out."

The Appellant informed the Tribunal that she and her husband were both unemployed but that Mr Hochhauser had explained to her during the adjournment that an order for costs could be enforced by, for example, looking to her interest in her house. (We should add at this point that this had apparently been said in reply to a question from the Appellant and that there is no suggestion that Mr Hochhauser, his instructing solicitors or any representative of the Respondent acted improperly at any stage). Mr Hochhauser then indicated to the Tribunal that, in the event of withdrawal, no application for costs would be made but that an application would be made if the Respondent were to succeed after a full hearing. He said that the Respondent's costs ran into five figures. The Chairman then warned the Appellant and her colleagues that they were at risk as to costs. A little later he said:

" … if the applicants threw caution to the winds, [they] would be taking their chances. They might succeed, but they did face the risk of costs."

At this point the Appellant's three colleagues indicated withdrawal but she was given a further ten minutes to consider her position. The note reads:

"On returning, she said to the Tribunal that she felt very bitter that she had not been able to put her case to them. But faced with the threat of substantial costs, she could not go ahead any more. She said that she had lost everything. She could not afford to lose her house or anything else. So she had to withdraw. It was something that she did not do lightly."

The Chairman praised her for the wisdom of her decision and it was confirmed that there would be no application or order for costs.

9. Standing back for a moment, the picture that emerges is one in which the Respondent was seeking to persuade the Tribunal to dismiss the Appellant's application in limine; the Tribunal declined to accede to that submission; but, on its own initiative, the Tribunal was saying to the Appellant that, if she proceeded with an application which at that point of time was not considered by the Tribunal to be abusive of its powers or otherwise summarily dismissible, she might end up with an order for costs against her and, upon assessment (if that were ordered), the amount might be very substantial indeed. We attribute this to the Tribunal "on its own initiative" because it is plain that, at the point when the warning as to costs was first articulated by the Chairman, no reference to costs had been made by Mr Hochhauser in his submissions. The only previous reference had been in correspondence in January and that had been in the exclusive context of the Griffiths point and related to an application following a full hearing. The other matter that seems to us to emerge from the attendance notes and the Chairman's subsequent comments on the proceedings is that, whilst the submissions on behalf of the Respondent had related to both the Seymour-Smith point and the contractual status of the Appellant, the fact which caused the Tribunal the greater concern was the Seymour-Smith point (even though this did not arise in relation to one of the applicants).
10. The present appeal to the Employment Appeal Tribunal is argued on the basis that the Employment Tribunal put the Appellant under unfair and inappropriate pressure to withdraw and that her eventual withdrawal should not now bind her. The case for the Respondent is that the Tribunal acted with propriety and the Appellant proceeded to agree to withdraw in the knowledge that the Respondent would not seek an order for costs if she did but would if she did not and was unsuccessful after a full hearing. It is common ground that, within the present context of civil litigation, in the Employment Tribunals just as in the courts, it is incumbent upon a tribunal or court to be proactive in the management of cases with regard to overriding objectives as set out in the Civil Procedure Rules but that there is a line to be drawn. On one side of that line lies robust, effective and fair case management. On the other side lies inappropriate pressure and unfairness. This appeal is ultimately about upon which side of the line the proceedings in the Employment Tribunal fell. In answering that question we remind ourselves that we should hesitate to interfere with the managerial and procedural judgment of an experienced and specialist Employment Tribunal. (see X v Z Ltd [1998] ICR 43, 54, per Waite LJ). It is only if what transpired was outside the range of approaches available to a reasonable Tribunal that the appeal would succeed.
11. Mr Hochhauser submits that, although it was the Chairman who set the costs ball rolling at the hearing, in the end the Appellant and the Respondent reached an agreement on the basis of withdrawal with no order for costs; that that was an agreement into which the Appellant freely entered after being given time to consider her position on two occasions; that she should now be held to that agreement and the order of the Tribunal to which it gave rise; and that the fact that the Appellant was acting in person is of no consequence. (See Divine-Bortey v Brent London Borough Council [1998] ICR 886). This is not a case of economic duress (as to the meaning of which, see Hennessy v Craigmyle & Co Ltd [1986] ICR 461, 468-469, per Sir John Donaldson MR) emanating from the Respondent or a third party.
12. If this were a case in which the only elements related to the parties and their representatives (or even a non-party not before the Tribunal as with the position of the conciliation officer in Hennessy), Mr Hochhauser's submissions would be very persuasive. This, however, is a case in which the entirely proper behaviour of the Respondent and its representatives has to be placed in the context of the approach of the Employment Tribunal. We of course accept that the Tribunal acted at all times in good faith – the contrary is not suggested. However, what we have to consider is whether its approach, viewed objectively, was in fact unfair and oppressive, falling on the wrong side of the line to which we have referred. Even though the Respondent and its representatives behaved with propriety and did not coerce the Appellant, if the reality is that her withdrawal was caused and conditioned by an unfair and oppressive approach by the Tribunal, the Employment Appeal Tribunal is entitled to relieve her from the consequences of that unfairness and oppression. There is no other way of ensuring that such things do not have unjust results.
13. In our judgment, the Employment Tribunal in this case was wrong to issue the "costs warning" in the forms in which it did, in circumstances in which it had decided not to accede to the Respondent's application for summary disposal. In effect, the Appellant was being told that, whilst her case was not abusive and, at one point, that she "might succeed", the price of eventual failure might be a costs order which could be very substantial indeed. Moreover, all this occurred in a jurisdiction in which unsuccessful litigants are only exceptionally subjected to costs orders and in which the statutory mechanism for discouraging applicants who have a case which is considered at an early stage to have no reasonable prospect of success is the requirement of a modest deposit under Rule 7. Regrettably, we have come to the conclusion that the approach of the Tribunal in this case was unfair and oppressive and left the Appellant with no other alternative but to withdraw. Mr Hochhauser submits that, if the Tribunal had said nothing about costs, he would have made an application upon the Tribunal dismissing the Appellant's case after a full hearing and that, in the circumstances, it was not unreasonable of the Tribunal to give the Appellant an early warning of that scenario. However, it is far from certain that the Tribunal would have acceded to such an application at that stage, particularly in view of their omission to accede to Mr Hochhauser's preliminary submissions. In the end, however, that is not the point. If, as we consider established, the Tribunal did cross the line to which we have referred, that, in our judgment, calls for correction by this Appeal Tribunal.
14. At the hearing before us, we invited submissions about our powers on the hypothesis that we concluded that the Employment Tribunal had fallen into legal error but that we took the view that the Appellant's case would have been found to fail in any event. Mr Hochhauser referred us to the statutory provisions and authorities which, he submits, would enable us to allow the appeal but to substitute our own decision dismissing the Appellant's application.
15. What this jurisprudence failed to disclose was any case in which the EAT substituted its own decision, dismissing the Appellant's application, where there has never been a full substantive hearing. Although we have seen no material which disposes us to the view that the Appellant is likely to succeed, we do not think that it would be right for us to dismiss her application in the present circumstances. No evidence has been heard and we have not had the benefit of full argument on the documents. Accordingly, we shall allow the appeal and remit the case to a differently constituted Employment Tribunal, initially for directions.