United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR ANTONY SENDALL (of Counsel) Bar Pro Bono Unit
For the Respondent	MR SIMON DEVONSHIRE (of Counsel) Instructed by: Messrs Bates Wells & Braithwaite Solicitors Cheapside House 138 Cheapside London EC2V 6BB

SUMMARY

Practice and Procedure: Striking Out/Dismissal

Issue whether s203 ERA 1996 (a) applicable (b) breached, in relation to agreement settling case, signed by advocates on each side, during hearing of Applicant's claim at the ET. The agreement was enforceable.
 


HIS HONOUR JUDGE McMULLEN QC

1. This case is about employment tribunal procedure in dealing with attempts to compromise proceedings before it. The judgment presents the views of all three members who pre-read the relevant papers. We will refer to the parties as Applicant and Respondent.

Introduction

2. It is an appeal by the Applicant in those proceedings against the decision of an Employment Tribunal sitting in central London, Chairman Ms E Pontiac, registered with extended reasons on 11 December 2003. The Applicant was represented there and here by Mr Anthony Sendall of Counsel. The Respondent was represented there by Mr William Garnett, Solicitor, who today instruct Mr Simon Devonshire of Counsel.
3. The proceedings arose out of a decision of the same Employment Tribunal on 26^th July 2002 when the Applicant was represented by Mr John Horan of Counsel. All four of those lawyers are distinguished and highly experienced specialists in employment law. The Applicant claimed unfair dismissal and a range of other complaints were mentioned which superficially appeared to us to be outside the Employment Tribunal's jurisdiction. The Respondent contended that it dismissed the Applicant fairly and in accordance with her contract because of a breakdown in working relationships.

The issue

4. The essential issue as defined by the Employment Tribunal is whether an agreement to settle the claim was enforceable. That simple description belies the more complicated process behind this case. The Tribunal decided that the proceedings should be stayed for the Respondent to carry out the terms of an agreed settlement. Once the terms were carried out to the Tribunal's satisfaction the decision was made to strike out the Applicant's proceedings. The agreement was to provide £5,000 to the Applicant in settlement of her claims. The Applicant appeals against that decision. In short what she seeks is a full hearing of all claims she made in her originating application relating to her dismissal on 13 August 2001.

Directions

5. Directions sending this Appeal to a full hearing were given at a Preliminary Hearing by Burton P and Members. The basis was: whether there was no valid agreement because the agreement did not comply with Section 203 (3) of the Employment's Rights Act 1996. We will return to the other matters which were ventilated and, we hold, decided at the Preliminary Hearing.
6. During the course of our hearing, two Applications were made and we have had to give further directions. First, Mr Devonshire asked for permission to amend his Respondent's answer to include a submission that as a matter of contract the Applicant was not entitled to bring her claim before the Employment Tribunal. There had been acceptance by the Applicant through the payment in of a cheque offered again by the Respondent and that compromised her right to bring proceedings on appeal to the Employment Appeal Tribunal. That application was not opposed.
7. Secondly, Mr Sendall in reply sought permission to contend that the decision of the Tribunal was wrong in law for two further reasons. The Tribunal had failed to deal with matters in issue before it as advanced by the Applicant and its decision was perverse. That Application was opposed on the grounds that the confines of our full hearing had been made clear at the preliminary hearing and there was no scope to argue essentially factual issues.

The legislation

8. The relevant provision of the legislation is Section 203 of the Employment Rights Act 1996 which allows parties to compromise Employment Tribunal proceedings:

"203(3) For the purposes of subsection (2)(f) the conditions regulating compromise agreements under this Act are that :-

(a) the agreement must be in writing,

(b) the agreement must relate to the particular {proceedings},

(c) the employee or worker must have received [advice from a relevant independent adviser] as to the terms and effect of the proposed agreement and, in particular, its effect on his ability to pursue his rights before an [employment tribunal];

(d) there must be in force, when the adviser gives the advice, a [contract of insurance, or an indemnity provided for members of a professional body,] covering the risk of a claim by the employee or worker in respect of loss arising in consequence of the advice,

(e) the agreement must identify the adviser, and

(f) the agreement must state that the conditions regulating compromise agreements under this Act are satisfied."

9. It is common ground that the provision was complied with. In short this provides a procedure for compromises to be reached by legal advisers, and by the intervention of ACAS officers. It is a very effective means by which parties, without troubling an Employment Tribunal, can resolve their disputes between themselves. It is a comparatively modern development in addition to the narrow opportunity to have cases compromised through ACAS. The parties can make their own agreements provided the provisions are met.
10. The Employment Tribunal directed itself by reference to that, and to relevant provisions of the Employment Tribunal rules dealing with operating a stay and striking out, none of which is contentious before us.

The facts

11. We state the facts tentatively for there has been no hearing of the substantive issues in the case. We were assisted without objection from Counsel today by a broader description of the work done by the Applicant and the operation of the Respondent. As we understand it the Respondent is a charity providing support through a helpline to teachers. The Applicant is a qualified teacher of mathematics and was employed by the Respondent for some 2½ years where the Respondent made use of her skills in mathematics. She was engaged until the relationship ended in August 2001.
12. The proceedings which she launched by way of a handmade but carefully drafted claim to the Employment Tribunal were answered by the Respondent. In due course a hearing. As was conducted before the Employment Tribunal. The proceedings began as one would expect with the calling of witnesses for the Respondent on the first day. On the second day, an agreement was reached between the parties. The terms of this agreement provide as follows:

"1) The Respondent do pay the Applicant £5,000 (five thousand pounds) in 14 (fourteen) days in full and final settlement of all claims arising from her employment and termination thereof excluding any accrued rights in respect of pension entitlement and personal injury, claims of which she is not aware.

2) The parties agree that they shall not make any comments that are in any way damaging to the good reputation of the other party.

3) The terms and existence of this agreement shall remain confidential as between the parties and the Respondent's Chief Executive.

4) Upon reaching this agreement, the Applicant withdraws her complaint in case No.2203552/2001,

Signed by Counsel for Applicant – 26^th July 2002

Signed by Solicitor for Respondent"

13. The vehicle for the implementation of that Agreement was an order of the Tribunal.

"1) The Tribunal stays this application until 26^th August 2002.

2) In default of further application on the 26^th August 2002, these proceedings are dismissed as withdrawn."

14. The Agreement and the Order were written by the Applicant's Counsel in her presence and in the presence of the Respondent's solicitor. The Applicant had second thoughts and sought to be released from the agreement. The Tribunal order would have come into effect but for the application of the Applicant for rescission. The Applicant did not bank the cheque paid by the Respondent pursuant to the order but returned it to the Respondent.
15. The first response of the Tribunal was to allow it, but on an application for review, a hearing took place before the same Tribunal on 8 December 2003. The hearing considered the witness statements of both the Applicant and Mr Garnett, which had been directed to be produced by the Regional Chairman. There appears to have been no cross examination on matters which were obviously in contention. The Tribunal acknowledged that there was a list of issues for it to determine. It recorded faithfully, we hold, the submissions of the representatives.
16. So far as is relevant to our proceedings, the representative of the Respondent made the following submission:

"11 (iii)

The undisputed purpose of the stay was to ensure that the Respondent made payment in accordance with the agreement, and allow it time to do so, as is common practice when settling a claim. That is why the dates of the Order, for payment, and for any "further application" are linked, and that is why it was agreed that, "Upon reaching this agreement, "the Applicant withdrew her complaint. The Respondent made payment within the deadline."

17. That seemed to have been the basis upon which the Tribunal made the following finding:

"The application by the Applicant to lift the stay is refused. The Order was not predicated on a valid compromise agreement, but was made by consent of the parties, and was predicated on the parties@ agreement to end the proceedings unless the Respondent failed to comply with the terms set out in the signed agreement. The Respondent fully complied with those terms."

"The parties could not have contemplated that the Applicant could reinstate the proceedings on the basis only that she changed her mind about the agreement after the Respondent had complied."

18. The submission was plainly based upon the unchallenged witness evidence of Mr Garnett who gave this account:

"The purpose of the Agreement and the Order, was to stay the proceedings so that the Agreement could come into effect i.e. the Applicant would withdraw her claim, and the Respondent would make payment. Accordingly, the Tribunal should construe the Order in that way, and thus should not permit the Applicant to continue with these proceedings."

"Upon the Applicant's return, I asked Mr Horan whether or not it was being contended that there were any documents that were in dispute. He said that it was no longer being contended that this was the case. Mr Horan, Counsel for the Applicant, approached me to say that his client wished to settle the proceedings. The figure of £5,000 was agreed after a little negotiation, with a further term being that the terms of settlement would remain confidential. There was absolutely no question but that this was intended to be a binding settlement to come into effect immediately. Understandably, the Applicant wished to ensure that she received her cheque before going through the formality of withdrawing the proceedings. Mr Horan drafted the Agreement in the presence of the Applicant, Mr Horan's trainee and myself. We discussed it and agreed the terms. Having signed the Agreement, we appeared in front of the Tribunal with a copy, to explain that we had in fact settled the case and that we were happy to provide the Tribunal with the terms of settlement."

"The Tribunal asked what mechanism we wished to use to implement settlement and we produced an order to the Tribunal."

19. No doubt with that material in mind, Burton P's Appeal Tribunal concluded at the preliminary hearing as follows:

"Not unusually, the terms of the agreement, which was for the payment of £5,000 in 14 days in full and final settlement, because the money was not to be paid over that day, or because, even if it had been paid over, any cheque would need to have been cleared, provided that there was a period of time in which to allow compliance with that agreement, and therefore there was a separate stay order until 26 August 2002. The Tribunal concluded, and we are entirely satisfied the Tribunal was right, that this was simply a mechanical stay in order to allow for performance of the compromise agreement. It did not incorporate in it any other circumstances in which the Applicant should be entitled not to withdraw the complaint which by virtue of the agreement, was intended to be withdrawn on such settlement".

20. He then went on to consider, in the light of that evidence, what should be available to the full hearing and decided as follows:

"We have read the evidence before us that Mrs Furness has put forward, which of course has not been answered by Counsel whom she instructed at the original hearing. And we are satisfied that no material case in fraud of misrepresentation, such as to begin to bring this case within those exceptional circumstances, has been put forward. Consequently, insofar as her appeal depends upon setting aside this agreement at common law, it must fail.

21. The reference to it not being answered by Counsel is in respect of a complaint made by the Applicant that she was pressurised by Mr Horan into accepting the agreement. We make it clear, as we have been told, that no complaint has been made about Mr Horan to the appropriate channels. He was acting through the Bar Pro Bono Unit as are Mr Sendall and before him, Mr Michel Kallipetis QC.
22. It will be clear from paragraphs 19-20 above that the Appeal Tribunal was rejecting the basis upon which the Applicant might otherwise have advanced the claim to be released from the agreement. Her witness statement contended that she had seen the agreement simply as an opportunity to reflect upon whether she should take the offer rather than it being an enforceable agreement at the time. That is what Mr Sendall described as the cooling off point. She was under the misapprehension that she would be liable, if she did not settle, for payment of the Respondent's and the Tribunal's costs. When she was alerted to the fact by the Tribunal that that was not the case, she sought to be released from the agreement.

The Applicant's case

23. The Applicant submitted that the Employment Tribunal had erred in law in that the agreement was unenforceable as it did not comply with Section 203(3). Indeed, it is common ground that the agreement did not so comply. The relationship between the parties was not exhausted by the Order made by the Tribunal for it simply provided a stay and an opportunity for the Applicant to resuscitate the matter and put an end to the stay on her application. The Tribunal was not entitled to resist the application for a stay, for the agreement upon which the Tribunal had based its decision was itself void. The agreement is part of the proceedings and the Applicant should not be shut out from having her case heard.
24. It was also contended, as we have indicated in dealing with Mr Sendall's application for permission to amend, that the Tribunal failed to deal with certain issues. It is common ground that the core of the case is whether there was a right to lift the stay in circumstances where the agreement upon which it was predicated did not comply with Section 203. The agreement, being void, was fatal to its implementation and the Tribunal had no choice but to lift the stay.
25. In response to the application by the Respondent to amend, it was also contended that no contract had come into effect to limit the opportunity to present an appeal to the Employment Appeal Tribunal. The terms do not include the EAT and, in any event, the appeal is part of the Tribunal proceedings which, if they are to be compromised outside a Tribunal proceeding, must conform to Section 203. It was contended that if leave were given for the additional point to be raised, paragraph 17 of the Tribunal's Judgment, which we have recited above, is perverse.

The Respondent's case

26. On behalf of the Respondent, it is contended that the Applicant, by paying into her account, accepting the money of the Respondent, had conducted herself in such a way as to imply contractual agreement. The terms to be implied were that the Applicant would not proceed by way of appeal to the Employment Appeal Tribunal and would accept the stay and eventual striking out of the proceedings.
27. As to the main points of the Applicant's appeal, it was contended by Mr Devonshire that the application of Section 203(3) was exhausted upon the appearance of the Applicant before the Tribunal, especially when, as here, she was professionally represented. The sole ground of appeal identified by Burton P was that Section 203(3) had not been complied with. Reliance was placed upon the finding by the Appeal Tribunal that all the Order required was a mechanism for implementation of the agreement. The Employment Tribunal had addressed the legal submissions, none of which included points put before us today relating to inadequacy of reasons or perversity. Reliance was placed on authority indicating that once proceedings were in front of the Tribunal, the limit of Section 203 was reached.

The legal principles

28. The legal principles appear to us to be as follow. An application for permission to amend to add additional grounds to a Notice of Appeal should be treated carefully by the Appeal Tribunal, particularly when it has gone through the filter of a preliminary hearing conducted, as here, by the President and Members. Attention should also be given to what the consequences of an application would be, particularly where reliance is placed on an allegation of perversity or inadequacy of reasons, without the full record of the proceedings being made available.
29. Turning to the substance of the principal appeal, Browne-Wilkinson P indicated in Times Newspapers Limited v Fitt [1981] ICR 637 that the correct approach to a decision in relation to a compromise is as follows:

"…In our view the same considerations apply to a consent decision made in the industrial tribunal as to any consent order. On analysis, the position seems to us to be this. Once an order has been made and perfected a party seeking to alter it must show that he has some right to have it altered. If the order was made by consent pursuant to an agreement, neither party can have such right so long as that agreement is valid and binding: hence the need to set aside the agreement. But it does not follow that because a consent order was made pursuant to a void agreement, the parties have an automatic right to have the order amended. In our judgment, when a consent decision has been made by an industrial tribunal with the consent of a party's solicitor, that party has no right to have that order altered. He is bound by the acts done by his agent within the ostensible authority of the agent and has no equity to have the consent decision amended.

To decide otherwise would be to strike at the roots of finality in these cases. In very many cases which are compromised before industrial tribunals, the conciliation officer plays no part. Once a decision has been properly made by the industrial tribunal on the information before it at the time, in the absence of fraud or misrepresentation that should be the end of the matter. Section [203] is designed to protect employees from entering into perhaps misguided bargains before their claim is heard by the industrial tribunal. But once the case has come before the industrial tribunal and been disposed of, the purpose of section [203] is exhausted".

30. That position was advanced further by the Employment Appeal Tribunal, HHJ Hague QC and Members in Ipswich Borough Council v Hutchinson EAT 890/92 [unreported], a case which we consider is helpful to our analysis on its facts, where there is this:

"…the agreed order gave the Tribunal a discretion whether or not to make a further order lifting the stay…It was not 'simply adjourned' with liberty for the applicant to restore if he desired. He could only apply if there had been a breach of the [section 203 non-compliant] Agreement, and then it would be a matter of discretion. In the normal way, the Courts seek to enforce settlement agreements and so bring finality to litigation and will only lift a stay in exceptional circumstances…and… the discretion to lift the stay should not be exercised if the other party has remedied his breach…

…the only matters of any substance which should be taken into account in deciding whether or not to lift the stay are whether the [other party] has been and remains in breach of the agreement…"

Conclusions

31. We reject the arguments of the Applicant and have decided that the appeal should be dismissed. In substance, we uphold the majority of the submissions of the Respondent. We will deal first with the two applications.
32. As to Mr Devonshire's, that this matter was effectively closed as a result of an agreement and that is to be inferred by the Applicant's decision to accept the money and abandon her appeal, we prefer the arguments of Mr Sendall. The proceedings before the Employment Appeal Tribunal, although regulated by a different statute, seem to us to be part and parcel of proceedings before an Employment Tribunal, for what is sought here is the compromise, by way of this suggested contract, of what would otherwise be a remission to the Tribunal. In other words, if this were an effective bar, it would prevent what the Applicant seeks today, which is a hearing on the merits of her full claim. It seems to us that the procedure for handling such matters is either a compromise under Section 203 or a procedure as set out in the practice direction of the Employment Appeal Tribunal for the withdrawal of appeals. However, as we say, this case had not reached the Employment Appeal Tribunal and was not within the scope of the Employment Appeal Tribunal's practice direction and we consider that the public policy in Section 203(3) of protecting applicants from making agreements without proper advice applies equally where the proceedings are still in a sense before the Employment Tribunal. As will be clear shortly, if Mr Devonshire is right the Applicant in this case was without the protection of Section 203 and without the protection of the supervising Tribunal.
33. Turning to Mr Sendall's application, in our judgment, it would be wrong to allow an amendment made at such a late stage. Allegations of perversity, although they rarely succeed, are required to be supported by very substantial evidence, including, if appropriate, agreement between the parties on the evidence presented and upon a range of issues. In this case, although we have the witness statements of the two protagonists, it would be wrong to go behind the Direction of the Employment Appeal Tribunal which narrowly circumscribed the issue to be decided here. It certainly was not the position of the Appeal Tribunal that there could be an appeal on grounds of perversity or that there could be an appeal on the ground of the decision being wanting in reasons. Mr Devonshire would be in no position to deal adequately with such an appeal today and we will refuse permission. If we are wrong about that exercise of our discretion, we would indicate that it seems hopeless in any event for there is adequate material evinced by the evidence before us upon which the Tribunal could make the decision which it did.
34. Turning then to the substance. The citations above give a clear answer to this case. Starting with the description by Burton P, the way in which in reality parties are able to give effect to agreements made during the course of legal proceedings is to allow for the kind of mechanism set out here. To take an obvious example, if the agreement of the parties were capable of being instantly put into effect, such as an apology by the alleged wrongdoer to the victim, then nothing would be necessary to be done except for the Tribunal to record in writing within its powers the agreement of the parties and to issue an Order, dismissing the proceedings or in whatever form the parties chose. Whereas here, something has to be done, for people rarely attend the Employment Tribunal with £5,000 upon them.
35. It is natural for there to be a mechanism as the President aptly describes it and that is what we hold to have occurred in this case following the evidence of Mr Garnett above and the holding by the Tribunal in paragraph 17. His description of what this agreement was about was accepted by the Employment Tribunal. The Applicant, despite her falling out with Mr Horam, had the advantage of being represented by him for a day and hearing the state of the evidence in respect of her case, for the Respondent went first. The public policy inherent in Section 203(3) is given effect by the fact that the Employment Tribunal was, to use the language of the Crown Court, put in charge of the Applicant's case. The Tribunal was not obliged to accept the agreement before it or to issue the Order which it was invited to make. Given that an employee before an Employment Tribunal may be represented by a lawyer, a union official, an employer's association representative or, indeed, anyone of their choice, it would seem to stand in the way of sensible agreements being made if Section 203 had to be complied with even while proceedings were on foot and the parties were present. For that reason, we follow the judgments in Ipswich Borough Council –v- Hutchinson and Times Newspapers v Fitt above and applying the rationale of both those judgments to our case, hold that the agreement was properly made and that the Applicant was not entitled, once the Respondent had complied with its terms, to demand that the stay be lifted. In any event, such an order would be ultimately a matter of discretion but it would be wrong for the Tribunal to exercise its discretion to lift the stay, given that the Respondent had complied with its terms.
36. We believe that the foregoing is the correct application of the law. We have also stood back and looked at the outcome. At the outset of the hearing today, we invited the parties to consider whether there was any scope for conciliation or compromise but through no fault of anyone's, formal instructions could not be taken. Our approach was on the basis that the Applicant had been advised by specialists in the field that her claim was small, she had since obtained new work and it might have been possible to draft a satisfactory form of words giving some comfort to both sides. We are heartened in this approach when we were told that at a hearing, when she had the distinct advantage to be represented by Mr Kallipetis QC, he, on her behalf, had suggested mediation. We are very much in favour of such alternative dispute resolution in employment law cases in the Employment Appeal Tribunal as well in appropriate situations.
37. As it happens, the effect of our judgment is that the Applicant retains the money which she paid into her bank account some six months ago. In other words, her former employers, three years after the relevant events, have paid the sum which we hold she agreed on advice to accept. She has not had a hearing of the matter as is now her wish. Having regard to the possible scenario of a hearing lasting five days four years later of matters occurring in 2000 and 2001, she ought to draw some satisfaction that she has achieved this result without having to go through that business for what she has already been advised would be a small sum in order to obtain if she won a finding in her favour. The caveat, if she won, is based upon the Tribunal's decision that the proceedings were struck out as having no prospect of success and thus, if that were carried into effect, the Applicant has achieved £5,000 out of these proceedings. We hope that she feels able now, with the help of her supporters who have been here today, and the advice she is given by Mr Sendall, to put these matters behind her. We are very grateful to both Mr Sendall, who, we recall, has given his services for nothing and to Mr Devonshire and Mr Garnett, on behalf of this charity, for the expeditious and pragmatic way in which they have helped us understand the issues in this case. The appeal is dismissed.