United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant

MR I WRIGHT (of Counsel) Instructed by: Messrs Clarkslegal LLP One Forbury Square The Forbury Reading Berkshire RG1 3EB

For the Respondent

MR G COPUS (The Respondent in Person)

SUMMARY

Practice and Procedure

Response served by Respondent out of time and judgment in default entered. Chairman found that pursuant to Rule 33 of the new Rules he had no discretion to review the default judgment and allow an extension of time if no good reason for the delay was put forward. If he had had a discretion, given the presence of merit in the response, he would have granted the extension. Held: that the principles laid down by Mummery P in Kwik Save v Swain [1997] ICR 49 still apply under the new Rules, namely that, although the reasons for delay must be considered and there must be shown to be merit in the proposed defence, the discretion is a broad just and equitable one.


 


THE HONOURABLE MR JUSTICE BURTON (President)

1. This has been the hearing of an appeal by CD Bramall Bradford, namely Pendragon plc, against the decision of the Chairman of the Employment Tribunal at Leeds, Mr Grazin, refusing the Respondent's application to review the default judgment entered in favour of the Claimant, Mr Gary Copus, in respect of his claims for unfair dismissal and breach of contract, dated 19 January 2005.
2. The circumstances, in which the default judgment arose, were that the Respondent was out of time in filing the notice of response. A notice of response was in fact, filed on 28 January 2005 in draft, together with an application to set aside the default judgment. In those days, prior to the decision subsequently reported in Moroak v Cromie [2005] IRLR 535, the Respondent company, had concluded that it was not in a position to apply for an extension of time, after the expiry of the original 28 day time limit, unless and until, a default judgment was issued. It is now clear from Moroak, which was a judgment given on 19 April 2005, that the Respondent could, and in future cases should, have applied for an extension of time earlier than it did. But, in the particular circumstances, the Chairman accepted that the Respondent had acted diligently and promptly, as soon as it had notice of the default judgment, in making the application, which on any basis it was entitled to make, to set aside the default judgment under, Rule 30(3) of the new Employment Tribunal Rules 2004, which replaced the 2001 Rules as from October 2004.
3. The Tribunal heard the reasons given by the Respondent for its delay in putting in a notice of response within the 28 days laid down by the new Rules, and it was not satisfied with that explanation. I do not need to set that explanation out; there was no question of any deliberate default, but it is clear that there was no satisfactory competent explanation given for the delay, in relation to the document being passed from hand to hand, before it finally was dealt with.
4. The Tribunal concluded, on a construction of rule 33, that unless it was satisfied that there was a good explanation for the delay, it had no discretion to grant an extension of time. The point has come up to me therefore, as an appeal on a point of law, in relation to that conclusion. The Tribunal Chairman, very sensibly, proceeded to consider the question, as to what he would have decided if he had concluded that he was wrong on the primary question and that he did have a discretion; and he indicated that he would then have exercised discretion in favour of the Respondent.
5. Success for the Respondent company, therefore, before me, would follow because there is then no need for me to send it back, as I otherwise might have had to have done, for the exercise of discretion by the Tribunal, because it has indicated what it would have decided had it exercised that discretion; and consequently the appeal depends wholly on the outcome of the point of law. If the Respondent is right that the Chairman did have the discretion, then it succeeds and the extension of time would be granted, and the default judgment set aside. If there is no basis in law to challenge the conclusion of the Chairman, then of course, the appeal is dismissed, the notice of response is out of time, and the default judgment remains standing.
6. Mr Copus, the Claimant below, has not only put in a respondent's answer, but has attended before me, and has put forward helpful arguments. But, inevitably, he is in the difficulty of facing an appeal which is on a point of law only. He, unquestionably, argues, with good sense, that the Respondent had its opportunity to put in a response in time, and that it did not do so, and that he should retain the lucky advantage, which he recognizes it is, of the default judgment. But, of course, the Tribunal has found in his favour in regard to there being no good reason for the delay, and the issue before me is whether as a matter of law, the Tribunal was right, that it had no discretion, which it otherwise would have exercised in favour of the Respondent to set aside that default judgment, notwithstanding the delay.
7. Rule 33 of the new Rules reads as follows:

Review of Default Judgments

"(1.) A party may apply to have a default judgment against, or in favour of him, reviewed. An application must be made in writing and presented to the Employment Tribunal office within 14 days of the date on which the default judgment was sent to the parties. The 14 day time limit may be extended by a Chairman if he considers that it is 'just and equitable to do so.

(2.) The application must state the reasons why the default judgment should be varied or revoked. When it is the respondent applying to have the default judgment reviewed, the application must include with it the respondent's proposed response to the claim, an application for an extension of the time limit for presenting the response, and an explanation of why rules 4(1) and 4, [which are the rules which relate to the 28 day time limit and the making of an application for an extension ordinarily before the expiry of that time limit], were not complied with.

(3.) A review of a default judgment shall be conducted by a chairman in public. Notice of a hearing and a copy of the application shall be sent by the Secretary to all other parties."

8. Subparagraph (4) deals with the various orders that may be made by the chairman and; (5) relates to the powers of a chairman to revoke the judgment in whole, or alternatively, in part. The second sentence of 33(5) and 33(6) read:

"(5.) A chairman may revoke or vary all or part of a default judgment if the respondent has a reasonable prospect of successfully responding to the claim or part of it.

(6.) In considering the application for a review of a default judgment, the chairman must have regard to whether there was good reason for the response not having been presented within the applicable time limit."

9. The Chairman here concluded that subparagraph 33(6) was paramount. He refers to it in paragraph 14 of the judgment; and to Mr Wright's submissions, which were, that, on a proper interpretation of the Rules, the Chairman could, and should, consider not only the factors which were clearly set out in rules 33(5) and 33(6), (which I have set out above), but for an example, the lack of prejudice to the claimant, if the application for review were allowed. He also argued, that the Chairman could take account of the absence of delay after the default judgment had been issued; and he then submitted to the Chairman that the Claimant was not able to point to any other prejudice he would suffer if the judgment were revoked - that is apart from the loss of the advantage referred to - and he further contended that there would be no material saving of time or cost, because in any event the Respondent would wish to argue the issue of contribution on the remedy hearing, which would inevitably take some time, and would involve very much the same issues as would be involved on a full hearing of the claim for unfair dismissal.
10. Mr Grazing noted, at the end of paragraph 14, that there is no reference to any of those three factors; that is length of delay after the default judgment issued, prejudice and no material saving of time for costs, in the Rules, nor any reference to "in all of the circumstances", or anything similar. He decided, in paragraph 15, as follows:

"I consider that, if there is no good reason for the Response not having been presented within the applicable time limit, then the effect of Rule 33(6) is that almost all cases"-

and he does not define what that residual discretion relates to-

"…the Chairman should properly exercise the discretion under Rule 33(5) in favour of the Claimant and against the Respondent. I reach that view because the draftsman has deliberately used the word "may" in Rule 33(5) and the word "must" in Rule 33(6). I hold, therefore, that Rule 33(6) has priority. I am reinforced in that view by the manner in which the relevant rule has been summarised in Harvey on Industrial Relations and Employment Law. At paragraph T[351] the Editors summarise the rule as follows:-

Where the application for a review is made by the Respondent, the rules stipulate that the Chairman must have regard to whether there was good reason for the response not having been presented within the time limit, (Rule 33(6)) and provide that he may revoke or vary all or part of the default judgment if the Respondent has a reasonable prospect of successfully responding to the claim or part of it (Rule 33(5)).

That reading of the rule accords with my own view. Further, as a matter of law, I do not accept that I can properly take into account the three other factors, to which Mr Wright referred me. I do, however, deal with them in the alternative below. "

11. The decision of the Chairman was given after a hearing on 4 March 2005, in a judgment handed down on 15 March. Moroak was decided, as I have mentioned above, in the Employment Appeals Tribunal on 19 April 2005. In that case, I decided that it was open to an employment tribunal to review a decision to debar a respondent, whose notice of response was out of time and, who had not made an application under Rule 4(4) prior to the expiry of the 28 day period. The starting point, therefore in Moroak for the particular respondent was a step behind the Respondent in this case, because no default judgment had been entered and, it was clear that there was a power to review a default judgment under Rule 33, while prior to my judgment in Moroak it was thought that there was no such power to review a decision to debar.
12. I concluded that there was a power to review a decision to debar for failure to put in a response in time, without there having been an application to extend prior to the expiry of the period, and that it should be exercised on the same principles as govern the undoubted power exercised or, at any rate, addressed by the Chairman in this case to decide whether to review a default judgment. I, further concluded, that this test, both in the newly enunciated jurisdiction to review a decision to debar, and in the existing jurisdiction to review a judgment in default, was by reference to the well-established judgment of Mummery P, in Kwik Save Stores Ltd v Swain [1997] ICR 49. I said, as follows in Moroak:-

"26 What is the basis for an exercise of the discretion in the circumstance, which I have now decided can and does, on the facts of this case, arise, namely on an application for review of a decision not to accept a response by a respondent which was out of time, and if so advised, the reviewing of an order that that respondent should not be entitled to take part, and an order that the response will be accepted? It is clear to me that the test must be the same as under an application under rule 4(4) for an extension of time, or an application under rule 33 for a review of a default judgment, save of course that in practice it will be likely to be easier for an applicant to obtain an extension in advance of the expiry for two reasons:

(i) because if the reason is good, at least credit will be given for the application being timorously made by the respondent; and

(ii) because the respondent will not in those circumstances, have to exhibit any merit in relation to the response, whereas if the time limit has expired, in my judgment, not only expressly by virtue of rule 33(2), but inevitably by analogy, on any application for review under rule 34(1)(a), there must be consideration of the merit of a response for which a discretion is being exercised. The Chairman should properly exercise the discretion under rule 33(5) in favour of the claimant and against the respondent.

27 The discretion is expressly described as being one to do that which is just and equitable. It is not, therefore, the same discretion or power as is being exercised in respect of the time for lodgment of an originating application for unfair dismissal, where the test is one of reasonable practicability. Nor is it the same test as that which is operated for an appellant to put in a notice of appeal to the Employment Appeal Tribunal, where very restrictive rules apply, as has been so often canvassed, particularly in Untied Arab Emirates v Abdelghafar [1995] IRLR 243

28 In my judgment, given that the test is as to that which is just and equitable, the same principles will apply to an application under rule 33 or rule 34 (under rule 33 for an extension of time, and under rule 34 for an order that the response already served be permitted to stand and be accepted, albeit that it was out of time), as were fully analysed by the Employment Appeal Tribunal, per Mummery P, in Kwik Save Stores Ltd v Swain [1997] ICR 49. The passages in that judgment, under the heading 'The discretionary factors' at pp.54-56, are clear and persuasive, and indeed they fall to be contrasted, as I have indicated, with the very restrictive circumstances laid down by that same learned judge in Abdelghafar. The headnote helpfully summarises the position as follows, by reference of course to a respondent applying to an extension of time, whereas in the circumstances of this case it will be what applies to a respondent applying to review the non-acceptance of a response which was out of time:

'…it was incumbent on a respondent applying for an extension of tine for serving a notice of appearance…to put before the industrial tribunal all relevant documents and other factual material in order to explain…both the non-compliance and …the basis on which it was sought to defend the case on its merits; that an industrial tribunal chairman in exercising the discretion to grant an extension of time to enter a notice of appearance had to take account of all relevant factors, including the explanation or lack of explanation for the delay and the merits of the defence, weighing and balancing them one against the other, and to reach a conclusion which was objectively justified on the grounds of reason and justice; that it was it was important when doing so to balance the possible prejudice to each party…'…"

13. The decision in Moroak could not be put to the Tribunal for reasons that are obvious namely that it had not been given at the time of this hearing. However, there is no doubt that the decision in Kwik Save could have been, but was not, put before the Tribunal, and it might have been influential in the Chairman's conclusion. The only basis upon which it would not have been influential, indeed conclusive, at the Employment Tribunal level in the decision of the Chairman would have been if he had concluded that there was some reason to decide that, whereas the decision in Kwik Save, being a decision of the Employment Appeal Tribunal, was binding on the Employment Tribunal in relation to the construction of the old Rules, it was not binding in respect of construction of the new.
14. In Moroak, although there was appearance by counsel for the appellant, there was no appearance for the respondent, and in any event it was a case not directly on Rule 33, albeit that I founded my decision in relation to Rule 34 very much by reference to it insofar as concerned the exercise of the discretion, which was the second point in that appeal. To that extent, I have felt able, indeed obliged, to reconsider the point in this case. In Moroak I notice that I was in error in one respect; namely where I said, in paragraph 27, by reference to both Rule 4(4) and Rule 33, that the discretion is "expressly" described as being one to do that which is just and equitable. There is no doubt at all that Rule 4(4), which is the rule which relates to an extension of time application where the original period has not expired, the discretion is expressly said to be by reference to what is just and equitable. The only reference to what is 'just and equitable' in Rule 33 is in 33(1), with regard to the extension of the 14 day time limit for making the application to review a default judgment. There is no addressing of a general principle of justice and equity in the balance of that Rule. However, of course, the Overriding Objective, which is expressly incorporated in the new Rules by virtue of paragraph 3 of the Regulations, requires tribunal and chairman to deal with cases justly.
15. I turn to consider, whether there is any reason why the new Rules should not be applied in accordance with the decision in Kwik Save, just as the old Rules were. Mr Copus, in his helpful argument, to which I referred, made one point which is clearly relevant to the argument of law with which I am now dealing. He pointed out that the old Rules provided for a 14 day time limit, rather than the new 28 day time limit. The 1993 Rules are in fact cited in Kwik Save in relevant respect, and I adopt that citation here. The reference is to Rule 3:

"(1) A respondent shall, within 14 days of receiving the copy of the originating application, enter an appearance to the proceedings by presenting…a written notice of appearance… (3) A notice of appearance which is presented…after the time appointed by this rule for entering appearances shall be deemed to include an application under rule 15(1) (by the respondent who presented the notice) for an extension of the time so appointed…(5) A chairman shall not refuse such an application unless he has sent notice to the person wishing to enter an appearance giving that person an opportunity to show cause why an extension should be granted."

16. The new Rules give a period of 28 days rather than 14. Mr Wright submits that this means more opportunity is thus given to the respondent to give a proper answer and less leeway will be given by a tribunal, if any at all, to an inadequate response by the respondent, who has thus been given extra time to deal with the application. But he submits that the extension of the time from 14 days to 28 days does not automatically mean that that extended period is now made more difficult, if not impossible, to escape from; or that it is in some way accompanied by a rule which says that, unless a good reason is given for an extension, no extension will be granted, even if there is merit in the response, and, even, if there was no additional delay; and even if there was no additional prejudice to the claimant.
17. I have considered carefully whether there is anything in the new Rules which suggests that the new Rule should be dealt with, or construed, any differently, in this regard, from the way in which the old Rules were approached by tribunals, ever since the definitive judgment of Mummery P in Kwik Save. I am satisfied as to the following:

(i) there is no sign, in the new Rules, of elevating the duty of a respondent to deal with the time limits to the same level as that of a potential appellant to the Appeal Tribunal, where judgment on the merits has been given in favour of a judgment creditor below; nor to the 'reasonable practicability' test, in relation to unfair dismissal jurisdiction at the employment tribunal, where unless a claimant puts in a claim within the time limit, there is no jurisdiction in the tribunal to hear the case. In my judgment this is still a matter of case management so far as the tribunals are concerned, albeit one more stringently supervised by them; and not one of jurisdiction.

(ii) as Mr Wright submits, it would have been very easy to have constructed a Rule 33 so as to provide that which the Chairman here construed; namely that unless a tribunal is satisfied, on an application for an extension of time, that there is a good reason for the delay, then the application will be refused. This is not what the Rule says.

(iii) In any event, as I commented above, I note the caveat, which Mr Grazing himself put forward ["in almost all cases"], which makes any such argument difficult to accept. It is quite plain that the wording of Rule 33(6) is not as Mr Grazing concluded it was, one which renders the absence of a good reason determinative of an application. It simply makes it a matter which the tribunal considering an extension must have regard to. But, it does not in my judgment rule out consideration of all the other matters, which inevitably must be considered on a discretionary decision by the Tribunal, including, but not limited to, the reasonable prospect of success.

18. Mr Wright has submitted that it may well be that the new wording in Rule 33(6), which of course considerably expands the much shorter approach adopted in the old rules, owes its origin to the Civil Procedure Rules ("CPR"), which of course apply in all relevant civil jurisdictions, and are very material for consideration by employment tribunals and in the Employment Appeal Tribunal, particularly in the case of any uncertainty or ambiguity. The provision in rule 13.3 of the CPR, relating to an application to set aside, or vary a judgment, provides by 13.3(1) that a court may set aside or vary a judgment, if

"(a) the defendant has a real prospect of successfully defending the claim; or

(b) it appears to the court that there is some other good reason why:-

(i) the judgment should be set aside or varied, or

(ii) the defendant should be allowed to defend the claim."

That wording is plainly wider than the provision as expressly set out in Rule 33, but is by no means inconsistent with it. So far as rule 13.3(2) is concerned, that sets out the following:

"In considering whether to set aside or vary a judgment …the matters to which the court must have regard include whether the person seeking to set aside the judgment made an application to do promptly. "

19. The wording is different in the CPR to the extent of the use of the word "include", thus putting it beyond doubt that that is only one of the factors to which the court must have regard. But, I am entirely satisfied that the equivalent wording in rule 33(6), although not incorporating the word "include", only elevates, if elevates it does, the question of good reason for the response not having been presented within the applicable time limit into the first matter to be considered, and a matter which must always be considered, but in no way rules out consideration of other matters of discretion.
20. In those circumstances, I remain of the opinion which I expressed in Moroak that in applying the discretion, either under Rule 33 itself, with regard to setting aside a default judgment, or under Rule 34 and the Moroak jurisdiction, of considering an application to review a decision to debar a respondent who has failed to put in a response in time, the principles established by Mummery P in Kwik Save remain. Those principles were applied by Mr Grazing in the alternative in this case. There is no basis upon which I seek to differ from them, and indeed there is no cross appeal put forward by Mr Copus in that regard.
21. I, consequently, allow the Appeal in relation to Mr Grazing's primary decision in law, and, in the light of his alternative decision, I am satisfied that had he concluded, that he did have discretion, he would have, as he did, extended the time, and set aside the judgment. Consequently that is the order I make on allowing this Appeal.