United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MR JAMES STUART (of Counsel) Instructed by: Messrs Pitmans Solicitors The Anchorage 34 Bridge Street Reading RG1 2LU
For the Respondent	MS JANE CALLAN (of Counsel) Instructed by: Messrs Thompsons Solicitors St Nicholas Building St Nicholas Street Newcastle Upon Tyne Tyne and Wear NE1 1TH


 


SUMMARY

PRACTICE AND PROCEDURE: Striking-out/dismissal

The Employment Judge through the Tribunal Office wrongly informed the second, third and fourth Respondents that they could not take any action in the proceedings other to seek a review. When striking out the responses under the Employment Tribunals (Constitution & Rules of Procedure) Regulations 2004 Schedule I Rule 18(7) he erred in proceeding as if Rule 9 applied. Those Respondents were deprived of the opportunity of making representations at the hearing. Judgment on liability of the Second, Third and Fourth Respondents was set aside and the case against them remitted to a differently constituted Employment Tribunal. Judgment on liability of the First Respondent remains in place. The case against the First Respondent is remitted to a differently constituted Employment Tribunal to determine remedy.


 


THE HONOURABLE MRS JUSTICE SLADE

1. This is an appeal by Ironopolis Film Company Limited ('the Company') and three individuals, Mr McCarthy, Mr Stalker and Mr Stangoe, from the Decision of a Newcastle Employment Tribunal sitting on 3 April 2008, entered into the register on 23 April 2008 on a claim brought by Ms Fox against all Respondents arising from her employment by the Company.
2. The appeal is before us for a full hearing on a number of grounds. It was agreed by Mr Stuart, who appears for all four Appellants, that if he succeeds on ground 1B of the Notice of Appeal that will be determinative of the appeal at this stage. He recognises that the likely consequence of success on that ground will be a remission to an Employment Tribunal for rehearing of certain issues.
3. We set out in summary form the grounds of appeal which have been permitted to go forward to this full hearing. Ground 1 is a complaint that there was substantial procedural irregularity and injustice in the proceedings of the Employment Tribunal. In ground 1A it is contended that notices and documents were not sent to Mr Stangoe at his address. A witness statement from him was placed before us.
4. So far as ground 1B is concerned, it is contended that the Employment Tribunal erroneously stated to Mr McCarthy, by letter of 28 March 2008, that he was debarred from defending the claim. Similarly by letter dated 1 April 2008 the Company, Mr McCarthy and Mr Stalker were informed by the Employment Tribunal that by order of 11 December 2007 they had no entitlement to take action other than to seek a review. Mr Stuart contended that in fact these Respondents were not debarred from further participation in the proceedings. It is said that Mr McCarthy failed to attend the hearing on 3 April 2008 believing that he was not entitled to participate in the proceedings.
5. Under ground 1C it is contended that the Respondents were not given the required 14 days notice of the hearing on 3 April 2008. Notice was only sent out on 28 March 2008 for a hearing on 3 April 2008.
6. Other grounds were not argued before us in the circumstances that we have outlined. By ground 4 it is contended that the Employment Tribunal erred in their approach to the personal liability of the individual Respondents. It is contended that they misdirected themselves in applying sections 41 and 42 of the Sex Discrimination Act 1975 in considering the claim under that Act. Secondly, that the individual Respondents were not personally liable for contractual claims for deduction from wages because they were not Miss Fox's employer.
7. By ground 5 of the Notice of Appeal it is contended that the Employment Tribunal erred in holding that the individual Respondents were acting as a partnership on the basis of a pre-incorporation partnership. That is a point, it was said, not raised in the ET1 and in any event decided in error of law. Under ground 6 it is contended that the individual Respondents should not have been held liable for holiday pay since they were not Miss Fox's employers. Further, it said, that no claim for holiday pay was made in the ET1.
8. The facts of this sad case, briefly summarised, are as follows. The Claimant is a young person who at the time of these events was aged 20. She had been a student at Teesside University with a great interest in film. She obtained a work placement for work experience with the Company. She was there for five weeks and was given an opportunity to stay on on a permanent basis. She did so with effect from 9 January 2006 and she left her academic course to do so. When she joined the company on 9 January she was paid in cash.
9. Miss Fox became pregnant. The Employment Tribunal judgment catalogues some very unfortunate treatment of Miss Fox. She tried to obtain maternity leave and pay from the Company. She was unsuccessful in her attempts to be paid maternity pay. By the end of 2006 she treated her employment as terminated. She brought claims for sex discrimination and other claims including one of deduction from wages.

Two ET1s were lodged on behalf of the Claimant, Miss Fox against the Company and the individual respondents. The second ET1 was lodged out of an abundance of caution. It followed a further 28 days from lodging of a second grievance. The Company was the first respondent. The individual respondents worked for the Company.

10. Two Notices of Appearance were lodged in the name of the Company. Chris Stangoe was named as the contact in one ET3 and Mike McCarthy in the other. Attached to the first Notice of Appearance was a document signed or typed by Mr McCarthy for and on behalf of Ironopolis Film Company. The signature on the ET3 is said to be that of Mr McCarthy. The Second ET3 states at paragraph 1.3 that the Company is dormant. The Company claimed that Miss Fox was not an employee. The individual respondents did not lodge a response.
11. A case management discussion conducted by Employment Judge Mr Freer took place on 11 July 2007. The Company did not attend. The case management discussion was postponed. Upon representations from the representative of the Claimant, the Employment Judge ordered:

"A response having not been entered by the Second, Third and Fourth Respondents, Mr McCarthy, Mr Stalker and Mr Stangoe, those Respondents shall not be entitled to take any part in the proceedings in relation to both cases, save for the exception set out in Schedule 1, Rule 9, (a) to (d), of the Employment Tribunal's (Constitution and Rules of Procedure) Regulations 2004."

12. A telephone case management discussion conducted by Employment Judge, Mr Garnon, took place on 14 November 2007. Again, there was no appearance by the Respondents. Mr Garnon ordered that a Pre-Hearing Review take place on 11 December 2007. The issues to be determined at the Pre-Hearing Review were to be:

"(a) whether the response forms (and those are the responses which we have referred to), the first of which was signed on 22 May 2007 in respect of the Respondent which gave its name as Ironopolis Film Company, and/or the second of which was signed on 27 June 2007 and received by the Tribunal on 28 June 2007 in the name of Ironopolis Film Company, should be accepted as the responses of any Respondent other than the First Respondent.

(b) If so, should those responses be struck out on the grounds that they stand no reasonable prospect of success or should any of the Respondents be ordered to pay a deposit as a precondition of continuing with a defence on the grounds that their defence has little reasonable prospect of success.

(c) Should the responses of any of the Respondents be struck out on the ground of their unreasonable conduct of the proceedings."

13. Mr Garnon also ordered that on or before 30 November 2007 each Respondent, except Mr Stalker, and by 3 December 2007 Mr Stalker was to provide the Tribunal and the Claimant with certain additional information in writing.
14. Mr Garnon recorded at paragraph 10 of his reasons:

"On 8 June I directed the case management discussion to be held. It was listed for 11 July. It was conducted by Chairman Mr Freer. The Respondents did not appear. Mr Freer ordered the two claims to be combined for hearing and stated that in the case of the Second, Third and Fourth Respondents they were not entitled to take any part in the proceedings under the provisions of Rule 9 of the Employment Tribunal's Rules of Procedure 2004 because they had not entered the response."

15. The record of the telephone case management discussion at paragraph 18 notes that Ms Henning, representative of Miss Fox, informed Mr Garnon that she had spoken to Mr Stangoe. In the course of the conversation he had said that "He was a director and company Secretary of Ironopolis Engineering. This appears to be an associate company of the Company.
16. At paragraphs 20 and 21 Mr Garnon stated:

"20. I wish to make it absolutely clear to all of the Respondents that in the light of the above history I was in two minds whether to reject Miss Henning's application to me this morning to strike out the responses of all Respondents today based upon the Rule 19 notice given in Mr Freer's order of 11 July. However, I decided to give the Respondents a very last chance and adjourned this case to the very dates which, in his letter, Mr Stalker says would be most convenient to him, i.e. dates between 6 and 15 December."

21. Again unless all of the Respondents appear on that date and have all complied with the orders made against them, I can envisage no likely alternative to a strike out of all the responses."

17. On 11 December 2007 Mr Garnon, sitting alone made the following orders on a Pre-Hearing Review:

"(1) The response forms referred to in the orders made by me on 14 November are struck out in respect of all of the Respondents on the grounds that

(i) under Rule 18(7)(b) they stand no reasonable prospect of success, and

(ii) under Rule 18(7)(e) for non-compliance with an order of the Tribunal, and

(iii) under Rule 18(7)(c) because the manner in which the proceedings have been conducted by the Respondent has been unreasonable."

A finding was made that the Claimant was an employee as defined by the Sex Discrimination Act 1975 and the Employment Rights Act 1996.

18. In paragraph 4 of the Reasons the Employment Judge said this:

"In so far as those responses purported to be on behalf of any Respondent other than the Ironopolis Film Company I respectfully take the view that an order at a case management discussion which has the effect of determining the entitlement of the three individual Respondents to contest the proceedings should not be made. Such a determination under Rule 18(7)(a) is one which, in my judgment, should be made at a Pre-Hearing Review. It is for that reason that I gave all Respondents a final chance to defend which they have not taken. Therefore, I take the precaution of striking out the responses as the responses of all Respondents, not merely Ironopolis Film Company Limited."

19. Mr Garnon stated in paragraph 7 that there must be a full hearing to:

"[…] determine liability because although a Tribunal may issue a default judgment in the circumstances set out in Rule 8(2) those circumstances do not include a situation in which the responses have been struck out."

20. There is also reference in paragraph 9 to Mr Garnon's view that he sees:

"[…] a possibility that the named individuals were carrying on business together with a view to profit in partnership as a preliminary to incorporating a business as a limited company."

21. On 3 March 2008 a Pre-Hearing Review was conducted by Mr Garnon at which he reviewed his orders of 11 December 2007 and confirmed them. The hearing at Newcastle of the claim was set on that date to take place on 3 April 2008. He observed at paragraph 5:

"Had that been an attendance by Mr Stalker today, I might have been persuaded by him to vary the orders I made and, instead of striking out the responses, I may have made an order that, as a precondition of being allowed to continue with certain lines of defence, the Respondents each be ordered to pay a deposit. However, as he has not attended I have not gone down that route."

22. On 28 March 2008 the Employment Tribunal office wrote to Mr McCarthy informing him that his response had been struck out and that he was debarred from defending the claim. The letter included the following passage:

"You should note that although you may have left the employment of the Respondent company and although your response has been struck out, debarring you from defending the claim, you remain a Respondent in these proceedings until such time as you are dismissed as such by the Tribunal."

23. The Employment Tribunal office wrote to all the Respondents on 1 April 2008 referring to emails to the Tribunal office from Mr McCarthy dated 31 March and an email from Mr Stalker, also dated 31 March, informing them:

"The above correspondence has been referred to Employment Judge Rennie who states that the order of 11 December 2007 is clear and, the responses having been struck out, the Respondents have no entitlement to take action other than to seek a review."

The letter also stated that the file had been referred to Employment Judge Garnon who has refused Mr Stalker's request for a postponement of the hearing on 3 April.

24. The Employment Tribunal found that Miss Fox was an employee. The hearing of her claims took place on 3 April 2008. At that hearing the Tribunal held that:

"1 The claims of sex discrimination, unlawful deduction from wages and failure to pay compensation to pay for untaken annual leave are well founded against all the Respondents.

2 The Respondents, having failed to comply with the requirements of the statutory grievance procedure, there should be an uplift of all the awards of 50%."

Other orders were made, including orders for costs. The total of all sums ordered to be paid payable by the Respondents is £50,282.

25. Mr Stuart contends that informing the Respondents that they could take no further part in the proceedings was an error of law. By order of 11 December 2007 the responses were struck out under Employment Tribunal Rule 18(7)(b). Striking out a response under Rule 18(7)(b) did not debar the Respondents from further participation in the proceedings. A Respondent may only be debarred where Rule 9 of the Employment Tribunal Rules applies. Rule 9 applies where no response has been filed. Under Rule 9, automatically and without order of an Employment Tribunal Judge a Respondent is debarred from further participation in the proceedings. The only course open to a party who has not filed a response is to apply for a review of certain decisions. Mr Stuart contended that the procedure adopted by the Employment Judge was to strike out the Respondents' responses under Rule 18(7). Therefore it was wrong for him, or the Tribunal service, to have sent out notices telling the Respondents that they were debarred from taking further part in the proceedings other than to seek a review. Further, it is contended by Mr Stuart, that no communications from the Employment Tribunal, including notices of hearing and the ET1s, had been sent to Mr Stangoe in his personal capacity because they were not sent to an appropriate address for him. He also contended that in breach of the ET Rules, 14 days notice in writing of the hearing on 3^rd April 2008 was not given to the Respondents.
26. Mrs Callan for Miss Fox contends that this was, in effect, a Rule 9 situation and therefore the Respondents had no right to further participate in the proceedings before the Employment Tribunal other than to apply for a review of the decision.
27. Mrs Callan states that the required 14 days notice of the hearing of 3 April 2008 was given in writing since the date of 3 April 2008 was set in the order made by the Employment Judge on 11 December 2007. Notification was appropriately sent to Mr Stangoe at the address for the Company.

Employment Tribunal's (Constitution and Rules) Regulations 2001

28. Schedule 1 Rule 9 provides as follows:

"A Respondent who has not presented a response to a claim, or whose response has not been accepted, shall not be entitled to take any part in the proceedings except to,

[…]

(b) make an application under Rule 35 (preliminary consideration of application for a review) in respect of Rule 34(3)(a), (b) or (e)."

29. This is an automatic provision so that a Respondent who has not presented a response to a claim, or whose response has not been accepted, is not entitled to take any part in the proceedings before the Employment Tribunal, save for the purpose of applying for a review.
30. Rules 18(7)(b), (c) and (d) provide as follows:

"Subject to paragraph six, a Chairman or Tribunal may make a Judgment or Order,

(a) as to the entitlement of any party to bring or contest particular proceedings,

(b) striking out or amending all or part of any claim or response on the grounds that it is scandalous of vexatious, or has no reasonable prospect of success,

(c) striking out any claim or response, or part of one, on the grounds that the manner in which the proceedings have been conducted by, or on behalf of, the Claimant or the Respondent, as the case may be, has been scandalous, unreasonable or vexatious,

[…]

and (e) striking out a claim or response, or part of one, for non-compliance with an order or practice direction."

31. Rule 34 of the Employment Tribunal Rules provides:

"Parties may apply to have certain judgments and decisions made by a Tribunal or Chairman reviewed under Rules 34 to 36."

32. It is not in contention between the parties that 14 days notice in writing is required to be given of a hearing. The Employment Tribunal Rules contain detailed provisions as to the giving of notice in Rule 61, but it has not been necessary to consider those for the purposes of this appeal.
33. A Respondent who has not entered a response is nonetheless entitled to appeal against a Tribunal decision: see Atos Origin IT Services UK Ltd v Haddock [2005] ICR 277 at paragraph 13. Further, a Respondent who has not entered a response is entitled to put forward to the Employment Tribunal a statement as to why no response was considered: see Practice Direction 16.2.

Discussion and Conclusions

34. At a case management discussion Mr Freer made the order declaring that:

"A response not having been entered by the Second, Third and Fourth Respondents, Mr McCarthy, Mr Stalker and Mr Stangoe, those Respondents shall not be entitled to take any part in the proceedings in relation to both cases 2506305/07 and 2507210/07, save for the exceptions set out in Schedule 1 Rule 9 (a) to (d) of the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004."

35. Whilst Employment Judge Freer treated the Respondents as having failed to serve a response and as being debarred from further participation by reason of Rule 9, the actions of Employment Judge Garnon thereafter, in our view, demonstrate that he regarded that step as inappropriate in the circumstances. He considered the matter under the strike out provisions of Rule 18, sub-rule 7. In our judgment, that he took this approach to the matter is apparent from his observations in the 11 December 2007 Pre-Hearing Review. At paragraph 4 he observed that he:

"[…] respectfully take the view that an order at a case management discussion which has the effect of determining the entitlement of the three individual Respondents to contest the proceedings should not be made."

36. Although paragraph 4 of the Reasons given for the orders of the Pre-Hearing Review of 11 December 2007 are, with respect to the learned Employment Judge, not entirely clear, we conclude that the observation in the first part of paragraph 4 can only be a reference to the order made at the case management discussion by Mr Freer which determined the entitlement of the three individual Respondents to contest the proceedings. This was a step that Mr Garnon considered should not be taken at a case management discussion. He continued:

"Such a determination under Rule 18(7)(a) is one which in my judgment should be made at a Pre-Hearing Review."

37. Accordingly in our judgment Employment Judge Garnon dealt with the failure of the individual respondents to lodge responses under Employment Tribunal Rule 18. In accordance with that rule he made the strike out orders under Rule 18(7)(b), (c) and (e). The consequences of making those strike-out orders are very different from the consequence of an automatic bar under Rule 9. A party to proceedings whose response has been struck out under Rule 18 nonetheless has the right to attend proceedings and to make representations. For example, such person or party could apply to the Tribunal for leave to make representations on certain matters. Indeed, even without such application there may be an argument that there would, in any event, be a right to make submissions on matters which have not been raised in an ET1 and, therefore, had not been, or could not be, the subject of any resistance in an ET3.
38. Rule 9 does not require the action or an order of an Employment Tribunal Employment Judge. Debarring follows automatically from the absence of a response to a claim. By contrast, a striking out under Rule 18(7) can only occur if there has been a response to a claim otherwise there is nothing to strike out. However, matters are not entirely clear in that Employment Judge Garnon had identified, as an issue to be determined at a Pre-Hearing Review, whether the response forms that the Company served should be accepted as the responses of any Respondent other than the first Respondent. The Employment Judge, with respect to him, did not expressly deal with that particular issue. It is possible, although quite difficult to say, that inferentially from the wording of 11 December 2007 Reasons he must have taken the view that the responses should be taken as responses of other Respondents than the First Respondent because he says:

"I take the precaution of striking out all the responses as the responses of all Respondents, not merely Ironopolis Film Company."

39. Other directions and orders are also consistent with the treatment of the Company's responses as being also responses of the other individual Respondents. However, whether or not the Employment Tribunal Judge proceeded on that basis, in our judgment he did not treat the individual respondents as automatically barred from participation in the proceedings, pursuant to Rule 9 but considered whether to exercise his powers to strike out the responses – if the response of the Company was also to be treated as responses by Mr McCarthy, Mr Stalker and Mr Stangoe - under Rule 18(7). In our judgment, the Employment Judge proceeded on the basis that the responses of the Company were to be treated as also the responses of the three individual respondents. The responses were struck out under Rule 18.
40. Accordingly, in our judgment the Employment Judge, acting by the office of the Employment Tribunal was in error in informing the Respondents before the hearing of 3 April 2008 that they were not entitled to take any further part in the proceedings other than to seek a review.
41. In this case the grounds of appeal which have been permitted to proceed to full hearing challenge findings on issues which, it appears, were not raised in the ET1 but arose from the views of the Employment Judge himself or his members. These are the question of the personal liability of the individual Respondents under the Sex Discrimination Act 1975, the liability of individual Respondents by reason of there being a "pre-incorporation partnership", and finally the liability or otherwise of any of the Respondents to pay holiday pay and in particular the individual Respondents who contend that they were not the employers of Miss Fox.
42. If matters had proceeded appropriately in light of the procedure which the Employment Judge appears to have adopted, namely a strike out under Rule 18(7), it is possible that the individual Respondents may have appeared and applied to be allowed to make representations on these issues which we have outlined and which are the subject of the other grounds of appeal which have been permitted to go forward to a full hearing.
43. Accordingly, this appeal succeeds to the extent that we have outlined in this Judgment. The determinations of the Employment Tribunal as to the liability of the individual Respondents, Mr McCarthy, Mr Stalker and Mr Stangoe under the Sex Discrimination Act 1975 by reason of a pre-incorporation partnership and their liability of for holiday pay are set aside. There will necessarily have to be a remission to an Employment Tribunal for consideration of these matters and we invite submissions from the parties as to the appropriate order in this regard.
44. Further, we set aside the decision of the Employment Tribunal on remedy. Mr Stuart has not challenged the findings of liability against R1, Ironopolis Film Company Limited. The Decision on liability of the Company is to remain in place. The case is to be remitted to a differently constituted Employment Tribunal to determine remedy consequent to the findings of liability against the Company.