United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	THE APPELLANT IN PERSON
For the Respondent	MR C BAYLIS (of Counsel) Instructed by: BT Wholesale Legal & Business Services Post Point C3 0&D BT Centre 81 Newgate Street London EC1A 7AJ

SUMMARY
Unfair Dismissal Practice and Procedure

Employers not in breach of termination agreement to provide reference - compromise clause could be relied on - it did not comply with section 203


 


HIS HONOUR JUDGE ANSELL

1. This is an appeal from a Decision of a Southampton Employment Tribunal, following a hearing in February 2004, in a Decision sent to the parties on 19 March 2004, decided that the Applicant, Mr Byrnell, was prevented from bringing unfair dismissal and sex discrimination complaints, as a consequence of his having entered into a compromise agreement. Before us the Appellant, who appeared in person, argued two substantial grounds: first he contended that there had been a total failure of consideration of the Compromise Agreement by virtue of the Respondents' failure to supply him a reference, pursuant to the terms of the Agreement, and that constituted a situation whereby the Agreement had been repudiated by the Respondents, so that the Appellant could treat himself as discharged from all other obligations under it. Second, he argued that the wording of the Compromise Agreement was not effective to compromise the claims for unfair dismissal and sex discrimination, that he was now seeking to pursue
2. The backgrounds facts are that the Appellant had been employed by the Respondents from 16 March 1992 until 31 December 2001, and he had presented a claim for unfair dismissal on 27 March 2002. Because of the contents of his application, it was also treated as a claim for both sex and race discrimination, although he subsequently withdrew the claim in respect of race discrimination. The employment was terminated on 31 December 2001 when the Appellant left, pursuant to an early leavers scheme, and was paid in excess of £30,000 by way of a termination agreement. A compromise agreement dated 19 December 2001 was entered into, and this was signed on 11 January 2002. It was also signed on that date by Mr Stanbury, a solicitor advising the Appellant concerning the document who also gave evidence before the Tribunal.
3. The Tribunal found that prior to his departure, the Appellant had clearly contemplated an unfair dismissal claim and had considered that he was in a constructive dismissal situation. He had taken up issues of contention with the Respondents, before he left their employment. Although they found that he had not contemplated a sex discrimination claim as such, they found that such a claim was one which could reasonably have been in his contemplation, since the claim related back to matters occurring between spring 2000 and up to November 2001, and as appeared from the Originating Application, was very much bound up with the unfair dismissal claim.
4. The Compromise Agreement was in the usual form and contained, for example, acknowledgment by Appellant that the various statute provisions relating to such agreements, contained in the various employment and discrimination Acts, had been complied with and also confirmed that he had taken legal advice from a solicitor as to the terms of the proposed agreement and its effect, in particular the waiver of his statutory rights. Clause 4 of the Agreement provided:

"You accept that these terms are in full and final settlement of all claims, both contemplated and not contemplated, at the date hereof, that you have or may have against the Company and/or BT Plc Group Company or any officers or employees thereof, excluding any claim in respect of accrued pension rights as at the date of termination, or any claim for personal injury, and whether contractual, statutory or otherwise howsoever and wheresoever arising in connection with your employment and/or the termination thereof, including but without limiting the generality of the foregoing any claims for salary , bonus or other remuneration, payment in lieu of notice, redundancy pay of any form, unfair dismissal, sex, race or disability discrimination, any claim for a protective award made under Section 189 of the TULR (Consolidation) Act 1992 or any other remedy available to you on the termination of your employment"."

5. Also, the certificate signed by the solicitor confirmed that he had advised the Appellant in particular in relation to any claim that he may have for unfair dismissal, sex, race or disability discrimination, breach of contract or unlawful deductions, under part 2 of the Employment Rights Act 1996 and that he had advised the Appellant that the effect of his signing the Agreement was that he was barred from pursuing any such claims. The Agreement also contained the following provision:

"As an organisation, we commit to not making prejudicial remarks, as evidenced by provision of a non-prejudicial reference on request"

The Tribunal found that a draft pro forma reference had been supplied to the Appellant, who had given it to his solicitor, before the Compromise Agreement had been signed, although the form of reference was never part of the Compromise Agreement and was not attached to it, and does not at any stage ever appeared to have been approved by the Appellant. On 20 February 2002 a reference was supplied which, after setting out details of the Appellant's employment said this:

"It is not the policy of Syntegra to comment on an individual's suitability to undertake a new position"

6. The Tribunal found that they had no jurisdiction to entertain the Appellant's claim in relation to the reference. The Appellant had contended that the Respondents were in fundamental breach by failing to provide an adequate reference. In terms of an adequate reference, the Appellant relied on the words of Lord Scott in Rhys Harper -v- Relaxion Group [2003] IRLR 484, where at paragraph 188 he said this:

"A request for a reference is, in part, a request for an opinion about the individual in question and, in part, a request for a statement of known events concerning that individual".

The Tribunal had accepted submissions from the Respondents' Counsel that the Appellant could not bring any breach of contract claim to the Tribunal in relation to the Compromise Agreement because of the provisions of Article 3 of the Employment Tribunals Extension of Jurisdiction (England and Wales) Order 1994, and in particular the provisions of Article 3, which provided that the claim had to arise or be outstanding upon the termination of the employees' employment and also because it had to relate to a claim for "damages or another sum". Since the Compromise Agreement was not signed until 11 January 2002, and the employment had terminated on 31 December 2001, the Tribunal held that the claim had not arisen or was outstanding upon the termination of employment and moreover did not appear to relate to a claim for damages, but rather to a claim either for specific performance or, alternatively, to argue that the agreement should be rescinded, although when we put that possibility to the Appellant in the course of argument and suggested to him that this might mean that the payments to him in excess of £30,000 might have to be returned, he did not agree that that would be a consequence of his suggestion. The Tribunal also relied on the authority of Miller Bros and F P Butler Ltd -v- Johnston [2002] IRLR 386 which held that a compromise agreement made after the effective date of termination could not fall within the Tribunal's jurisdiction.

7. Before us the Appellant put his arguments on this ground in two ways: he argued that the Tribunal, in allowing the Respondents to rely upon that part of the Compromise Agreement which had the effect of compromising his employment claims, were in effect allowing one party to rely before the Tribunal upon a contract that was entered into after the employment had terminated, and therefore it was unfair that he was not also not allowed to rely upon that agreement, or its breach. We found no substance in that argument, since the Respondents were not seeking to sustain a breach of contract claim based on the agreement, but simply to rely on it for the purposes of a particular statutory provision in the Employment Rights Act. Secondly, and perhaps of more interest, he argued that there was a fundamental breach of contract by reason of the Respondents' failure to provide a proper or adequate reference that he had accepted such repudiation by his act of seeking to commence proceedings before the Tribunal and that therefore it was clear that the Respondents could not rely thereafter upon clause 4 of the agreement.
8. Mr Baylis responded to this argument by submitting that the Tribunal were correct in coming to the view that they had no jurisdiction to deal with the issue of the reference; that Employment Tribunals, being creatures of statute, have no jurisdiction to determine any claim unless a statute specifically provides for it. The only issue that could be before the Tribunal was the validity of that part of the agreement which dealt with the compromise of employment claims, and specifically whether clause 4 complied with relevant sections, such as section 203 of the Employment Rights Act 1996. He argued that all other issues concerning the termination agreement were issues for either the County or High Court, and it is to that forum that the Appellant should have gone to seek whatever orders he required in relation to the reference. At the time that the issue had come before the Tribunal, the Appellant had not sought to commence any civil claims; had he done so, then the Tribunal could obviously have given consideration to staying their proceedings until such time as the Civil Court had reached a decision in relation to the validity of the agreement. In fact, he pointed out that the Tribunal did go on to reach a very firm view that there had not been a total failure of consideration by reason of the failure to supply a reference that satisfied him, particularly since he had been advised and had signed the agreement with his solicitor, who had already had sight of the draft reference.
9. We agree with Mr Baylis's submissions and the Decision of the Tribunal. They clearly had no jurisdiction to entertain claims in relation to the termination agreement as a whole; their task was merely to satisfy themselves that the relevant provisions of that agreement that dealt with the compromise of employment claims satisfied the various statutory requirements in terms of form and legal advice. At the time that the issue came before them, there was such an agreement whose validity had not been successfully challenged, or indeed challenged at all, before a Civil Court and there was no reason for the Tribunal to take any other course other than having satisfied themselves as to the content of the relevant clauses to then proceed to decide whether those clauses had compromised the claims that the Appellant was now seeking to commence.
10. The second issue before the Tribunal was whether clause 4 complied with the requirements of section 203 of the Employment Rights Act 1996 in relation to unfair dismissal and section 77 of the Sex Discrimination Act 1975 in respect of Sex Discrimination Act claims. Section 203(1) provides that:

"(1) Any provision in an agreement (whether a contract of employment or not) is void in so far as it purports -

(a) to exclude or limit the operation of any provision of this Act, or

(b) to preclude a person from bringing any proceedings under this Act before an employment tribunal"

However, by subsection (2)

"Subsection (1) does not apply ….…

(e) does not apply to any agreement to refrain from instituting or continuing any proceedings …."

therein are listed which include unfair dismissal proceedings. Subsection (3) sets out various conditions relating to compromise agreements under the Act, particularly in relation to advice, but in particular requires that the agreement must be in writing and by subparagraph 3(b):

"the agreement must relate to the particular proceedings".

11. `The Appellant argues that this particular condition could not be satisfied by clause 4, since the use of the phrase "both contemplated and not contemplated" is inconsistent with the requirement for the agreement to relate to "particular proceedings" when those proceedings if not contemplated could not be linked to any claims that had already been notified or intimated prior to the agreement being signed.
12. In Lunt -v- Merseyside TEC Ltd [1999] IRLR 458, Mrs Lunt, in June 1996 wrote a letter to her employers in which she stated that because of their conduct, which she described as amounting to unfair dismissal, harassment, victimisation and sex discrimination, she felt unable to return to work and was looking to the employers for a mutually agreeable settlement. A compromise agreement was signed on 10 February 1997 and in consideration of those payments Mrs Lunt agreed to refrain from instituting any complaint or proceeding before an Employment Tribunal. She subsequently presented an application alleging complaints relating to equal pay, sex discrimination, constructive dismissal, victimisation and breach of contract, and the employers contended that because of the compromise agreement the Tribunal did not have jurisdiction to consider the complaints. With regard to the complaints of constructive dismissal and victimisation, the Chairman accepted the employer's argument that the requirement in section 203(3)(b) of the ERA that the compromise agreement "must relate to the particular complaint" was not limited to complaints which had already been presented to a Tribunal, but in that case covered those complaints which, in her letter to the employers, Mrs Lunt had indicated that she would pursue if a settlement could not be reached. Morison J, President, giving the judgment of the EAT said this at paragraph 21:

"It seems to us clear that Parliament was not intending to permit a blanket compromise agreement compromising claims which had never been indicated in the past. We adopt in this judgment precisely what was said by the editors of Harvey at paragraph 729 as being an accurate statement of the law:

'A compromise agreement cannot, therefore, seek to exclude potential complaints that have not yet arisen on the off-chance that they might be raised; it cannot, in other words, be used to sign away all the employee's tribunal rights, as can be done in the case of a negotiated settlement drawn up with the assistance of a conciliation officer. However, where a number of different tribunal claims (such as unfair dismissal, race/sex discrimination, claims for unlawful deduction of wages, and so on) have been raised by the employee, whether in an originating application or in correspondence prior to the issue of proceedings, there does not seem to be any good reason why these should not be disposed of in the one compromise agreement. Each matter would be a "particular complaint" under the relevant statute. The alternative approach, that there should be a separate agreement for each and every complaint raised, would seem to be supererogatory in such circumstances' "

The Appellant's submission based on Lunt is that since there were no findings by the Tribunal that his claims, either for unfair dismissal or sex discrimination, had been intimated prior to the termination of his employment, the agreement had not related to particular proceedings, and therefore section 203 was not satisfied.

13. Mr Baylis argues that that submission could not be sustained in the light of the Tribunal's findings. He referred us to the Tribunal's Decision, and in particular paragraphs 9(i) to (m) as follows:

"(i) We do not find there to be an absence of clear language in paragraph 4 of the compromise agreement in this case which refers to all claims "both contemplated and not contemplated" at the date of the agreement. It also refers, inter alia, quite specifically to claims of unfair dismissal and sex discrimination.

G) The Applicant had clearly contemplated an unfair dismissal claim and admits this to be so. He had considered that he was in a constructive dismissa1 situation. He had taken up issues of contention with the Respondents before he left their employment. There were potential problems over the employment and the Applicant was targeted by the Respondents as a potential leaver. The reason for this was that the Respondents were not happy with his capability .and were proposing to address that capability issue: in a form-al manner which might have resulted in the Applicant's dismissal for that reason.

(k) The Applicant had not contemplated a sex discrimination claim as such but nevertheless he clearly knew what he was signing with this compromise agreement namely a compromise of claims both contemplated and not contemplated. The point made by the Applicant is a legal one namely that the compromise agreement is a violation of Section 203 (3)(b) but we find that the Applicant's evidence to us removes any doubt there might be as to clause 4 in the compromise agreement being unambiguous.

(I) The Applicant's solicitor advised hin in the manner expressly stated in his certificate on the agreement, amongst other things, specifically in relation

" to unfair dismissal and sex discrimination. We heard evidence from him and he had clearly advised the Applicant in some detail -for example he had signed each page of the compromise agreement and went through each page with the Applicant. The Applicant conceded that his solicitor raised the topic of sex and race discrimination and mentioned that this was what the agreement was referring to.

(m)The sex discrimination claim itself was in our view one which could reasonably have been in the Applicant's contemplation. We say this because the Originating Application to the Tribunal shows that this claim relates to matters as far back as Spring 2000 up until November 2001. Moreover the claim as set out in the Originating Application is very much bound up with the unfair dismissal claim. Indeed, it shown in the document as a segment of that claim."

……..

(p) The Applicant has conceded that he knew what he was signing in relation to the compromise agreement and in relation to claims both contemplated and not contemplated. It would be quite inequitable and unjust for him to be able to continue with his claims having signed a document in clear and unambiguous wording which compromises those claims and in respect of which he had very clear legal advice. In fact he was told by his solicitor that if he was really looking for a reference like a testimonial then he was taking a risk in finalising the compromise agreement. The Applicant chose to take that risk, if it can be termed as such, and he took a substantial benefit under the agreement."

14. Mr Baylis went on to submit that the Lunt decision had to be reconsidered in the light of two more recent cases, BCCI -v- Ali [2002] 1 AC 251 and Royal National Orthopaedic Hospital Trust -v- Howard [2002] IRLR 849. Both cases concerned conciliation agreements made with the help of ACAS and drawn up on Form COT3. In BCCI the issue was whether claims for disadvantage on the labour market, so called "stigma claims" were caught by a compromise agreement. The House of Lords held that since neither party could realistically have supposed that a claim for damages in respect of disadvantage on the labour market was a possibility, the parties could not be held to have intended the releases to apply to such claims. At paragraph 8 Lord Bingham said this:

"8 To ascertain the intention of the parties the court reads the terms of the contract as a whole, giving the words used their natural and ordinary meaning in the context of the agreement, the parties' relationship and all the relevant facts surrounding the transaction so far as known to the parties. To ascertain the parties' intentions the court does not of course inquire into the parties' subjective states of mind but makes an objective judgment based on the materials already identified. The general principles summarised by Lord Hoffmann in Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896, 912-913 apply in a case such as this.

9 A party may, at any rate in a compromise agreement supported by valuable consideration, agree to release claims or rights of which he is unaware and of which he could not be aware, even claims which could not on the facts known to the parties have been imagined, if appropriate language is used to make plain that that is his intention."

15. Those sentiments were clearly taken up by a decision of the EAT in Royal National Orthopaedic Hospital Trust -v- Howard, where the compromise claim was expressed to be in settlement of "all claims which the Applicant has or may have against the Respondent". This agreement was entered into by the employee at the termination of her employment with a hospital after eighteen years. Some time later, a Consultant Surgeon had asked Mrs Howard to assist him for one day at an operation, which was to be performed privately at the same hospital. The hospital refused to allow her to do so and the issue was whether a claim of victimisation under the Sex Discrimination Act was caught by the terms of the compromise agreement. The EAT agreed with the Tribunal's view that the agreement did not operate to bar the claim. However, Judge Reid QC, giving the decision of this Court, said at paragraph 9:

"9 In our judgment, the law as to contracts for release is pretty straightforward. The law does not decline to allow parties to contract that all and any claims, whether known or not, shall be released. The question in each case is whether, objectively looking at the compromise agreement, that that was the intention of the parties, or whether in order to correspond with their intentions some restriction has to be placed on the scope of that release. If the parties seek to achieve such an extravagant result that they release claims of which they have and can have no knowledge, whether those claims have already come in existence or not, they must do so in language which is absolutely clear and leaves no room for doubt as to what it is they are contracting for. We can see no reason why as a matter of public policy a party should not contract out of some future cause of action. But we take the view that it would require extremely clear words for such an intention to be found."

16. We accept that both these decisions did not involve any consideration of the effect of the words used in the compromise agreements set against the requirements of section 203(3)(b), namely that the agreement "must relate to the particular proceedings". Mr Baylis made the point that if the Courts are prepared to allow future claims to be compromised within the COT3 procedure, when the employee may only have the benefit of ACAS advice, why should the same not apply to a compromise agreement under employment or discrimination legislation, where the employee has to have received advice from a relevant independent advisor?.
17. For the purposes of this case, there is no need for us to give a definite decision as to whether Lunt has to be reconsidered in the light of the later two cases. In view of the Tribunal's findings, as set out in paragraph 9(j) to (m) of their Decision, the possibility of claims both for unfair dismissal and sex discrimination were clearly in the contemplation of the Appellant, prior to the agreement being signed. As far as unfair dismissal was concerned, he had specifically raised the issues with his employers and the facts of the unfair dismissal were closely bound up with the sex discrimination allegations. The issues had also been raised by the Appellant with his solicitor, and he had received advice about them and that was accepted within the body of the agreement. We agree with the Tribunal's view that the agreement therefore did relate to complaints which had clearly already arisen in the contemplation of the Appellant and thus the Compromise Agreement contained in clause 4 related to those claims. For these reasons, this appeal is therefore dismissed.