United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR MARTIN FODDER (of Counsel) Instructed by: Messrs Wansbroughs Solicitors Northgate House Devizes Wiltshire SN10 1JX
For the Respondent	MR RAD KOHANZAD (of Counsel) Instructed by: Messrs Thompsons Solicitors 18 Lawford Street Bristol BS2 0DZ


 


SUMMARY

PRACTICE AND PROCEDURE – Striking-out/dismissal

The Respondent brought unfair dismissal proceedings. The Appellant failed to serve a Response. A default judgement was entered and the Appellant applied to set it aside by a letter of 18 January 2010 in which it was said that "it would be justifiable on the grounds of reason and justice to… accept the [Appellant's] response".

The Employment Judge found (a) that the letter did not contain a request for an extension as required by rule 33(2) of the Employment Tribunal Rules Procedure 2004; and (b) the application to set aside the default judgment should be refused.

Held (Allowing the appeal):

1. The letter of 18 January 2011 contained an implied request for an extension of time for serving the Response;

2. An implied request would suffice and would comply with rule 33(2) of the Employment Tribunal Rules Procedure 2004;

3. The appropriate principles for considering whether the default judgment should be set aside are not merely those set out in rule 33(5) and (6) of the Employment Tribunal Rules Procedure 2004 but also those set out in Kwik Save Stores Ltd v Swain [1997] ICR 49, 54-55; and

4. The application of those principles meant that the default judgment should be set aside.


 


THE HONOURABLE MR JUSTICE SILBER

Introduction

1. Bournemouth Borough Council ("the Appellant") appeals against a decision of Employment Judge Warren made at the Southampton Employment Tribunal and which was sent to the parties on 4 August 2010 by which he dismissed an application to review or revoke a default judgment in favour of Mrs Nina Leadbeater ("the Respondent") against the Appellant.
2. On 2 August 2009, the Respondent had submitted an ET1 form claiming that she had been unfairly dismissed from her employment by the Appellant on 14 May 2009. In the form, the Respondent cited as her employer "Environment Health and Consumer Services Director, Bournemouth Borough Council, Town Hall, Bourne Avenue, Bournemouth BH2 6LL". By a letter dated 5 August 2009, the claim was sent to the Appellant at that address and at that postcode but the postcode was incorrect for the Bourne Avenue address because it related to the offices of the Appellant in St Stephen's Road Bournemouth.
3. The Appellant did not respond and on 12 November 2009, a default judgment was sent to the Appellant at the address to which all other correspondence in this case had been sent.
4. Subsequently two applications were made by the solicitors then acting for the Appellant applying for a review of that default judgment with one being dated 18 December 2009 and a further application dated 18 January 2010. The letter dated 18 December 2009 sent by the Appellant's solicitor applied for the default judgment to be "reviewed and revoked" on the basis of rule 34(3)(b) of the Employment Tribunal Rules of Procedure 2004 ("the 2004 Rules") contending that the Appellant had not received notice of the proceeding.
5. In response, the Employment Tribunal sent a letter dated 12 January 2010 to the Appellant's solicitors explaining the matter had been referred to Employment Judge Peters, who had directed that an application for review of a default judgment must be accompanied by the proposed response and reliance was placed on rule 33(2) of the 2004 Rules which states that:-

"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 (where it has not been received by the Employment Tribunal Office), an application for an extension of the time limit for presenting the response and an explanation why rules 4(1) and (4) were not complied with".

6. On 18 January 2010, the Appellant's solicitors responded indicating that the reason why they had made their request based on rule 34(3) (b) of the 2004 rules was because the Respondent had not received the notice of the proceedings leading to the decision to issue the default judgment; a copy of the Response on behalf of the Respondent was enclosed with that letter. It was pointed out that the Appellant had good reason for the response not being presented within the time limit because it had no knowledge of the claim being submitted. I will return in paragraph 14 below to consider whether that letter contained the mandatory request for an extension of time for presenting the Response. The hearing then took place before the Employment Tribunal.

The Decision of the Employment Tribunal

7. At the subsequent hearing, Employment Judge Warren accepted the evidence of Ms De Vries who worked in the Human Resources Department of the Appellant, that it was the Appellant's normal practice that anything to do with ET1s would be forwarded on to that department to be dealt with. She explained that the claim of the Respondent was never received there with the result that the first they were aware of it was upon receipt of the default judgment. Her evidence was that she had made inquiries within the Environmental Health Department of the Appellant but that nobody "had admitted that any claim relating to the claimant had been received from the Tribunal".
8. The Employment Judge explained in his decision that at the hearing in front of him, he had pointed out and invited the Appellant's representative to address him on the fact that the application was deficient because it did not contain an application for an extension of time for presenting the Response. He said that the representative of the Appellant responded by drawing attention to the overriding objective and explaining that an application of an extension of time was implicit in the application. The Employment Judge recorded that he asked the representative of the Appellant to address the point on three occasions and that what he was attempting to do without putting words into the mouth of that representative was to invite an application to amend the application made on 18 January so that it came within the provisions of rule 33(2) of the 2004 Rules namely that it would include an application for an extension of time. The Employment Judge stated that the representative of the Appellant chose not to make that application.
9. The Employment Judge concluded first that the default judgment had been properly sent and second that although it was only on 15 December 2009 that the Appellant received a copy of the claim, it still took the Appellant over a month to file a response and to make its final application.
10. The Employment Judge then referred to rule 33(6) of the 2004 rules, which provides that:-

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

11. The Employment Judge then stated:-

"10. My first concern is that the application has not been made in accordance with the Rules and it does say must include an application for an extension of time. It did not. There has been no application to vary. I accept without question [the representative of the appellant's] evidence that the claim was not received in the HR Department but I am not satisfied on the evidence before me that it was not received in the Environmental Department of the [appellant], so I conclude that it was received at the appropriate time, and if not, I believe that the [appellant] delayed when it did receive a copy, it, having been faxed by the Tribunal in mid-December. It delayed a whole month before submitting the Response.

11. Taking all of those matters into account, I do not consider that it is appropriate to review or revoke the Default Judgment, which stands".

12. Mr Martin Fodder, counsel for the Appellant, contends that the appeal must be allowed so that the judgment of the Employment Judge and the default judgment be set aside. He contends first that in the letter of 18 January 2010 the Appellant's solicitors made expressly or impliedly an application for an extension of time and second that the Employment Judge failed to consider the relevant factors but if he had done so, he would have applied the principles explained by Mummery J in Kwik Save Stores Ltd v Swain [1997] ICR 49 54-55. This would have meant that the default judgment would have been set aside.
13. Mr Rad Kohanzad counsel for the Respondent supports the findings of the Employment Judge. He contends that the letter of 18 January 2010 did not contain a valid request for an extension of time and also that even if it did, the Employment Judge applied the correct principles which excluded those set out in the Kwik Save case with the consequence that the default judgment would not have been set aside.

Did the Letter from the Appellant's solicitors of 18 January 2010 contain an Application for an Extension of the Time Limit for Presenting the Response?

14. As I have explained, the Employment Tribunal held that this letter did not contain an application for an extension of time limit for presenting the Response, which was enclosed in that letter. Mr Fodder contends that it did contain such a request when it stated in its final paragraph (with emphasis added) that:-

"We believe that the [appellant] has a good reason for the Response not being presented within the time limit, specifically, that the [appellant] had no knowledge of the claim being submitted. We therefore believe it would be justifiable on the grounds of reason and justice to set aside the default Judgment and accept the [appellant]'s response. We also believe that the claimant will suffer no detriment as a result of the late submissions of this Response".

15. It is common ground that the requirements in rule 33 (2) of the 2004 Rules to request an extension of time for serving a Response are mandatory as is shown by the use of the word "must". I also agree with Mr Kohanzad, that the mere fact that an out-of-time review is made, does not mean that it includes implicitly an application to serve such a response. He contends that it is also noteworthy that a previous rule (namely rule 3(3) of Schedule 1 of the Industrial Tribunal (Constitution and Rules of Procedure) Regulations 1993 (SI1993-2687)) provided that a Notice of Appeal presented after the appointed time "shall be deemed to include an application.. for an extension of the time so appointed".
16. In so far as it is contended that an application to extend time must be made expressly and cannot be made impliedly, that submission must be rejected not merely because the appropriate rule does not state that the application has to be made expressly but also because of decided cases. Thus in American E-Z Self Storage Limited v Prince (UKEAT/0539/07 and UKEAT/0540/07), Judge Reid QC held contrary to the view of the Employment Tribunal below, a request after a default judgment had been entered constituted an application to allow the response to be accepted out of time when it stated:-

"We sincerely regret our error in misinterpreting the information we received and request you consider our application. We believe that if the Tribunal allows us to present our side to them the default judgment would not stand."

17. This Appeal Tribunal has also stressed in another case that "the authorities clearly show that tribunals are obliged to adopt as flexible approach as possible in order to mitigate the injustice that can be caused by these complex and rigid rules" (per Underhill J in Jarretts Motors Ltd v Wells (UKEAT/0327/08 [9]). In that case, the Employment Judge was held to have erred by rejecting a review application on the basis that it had been made under rule 33 rather than rule 34 and that instead she should have been prepared to ignore the erroneous label but to have looked at the substantive matter.
18. In my view the appropriate approach was that explained by Elias J in D & H Travel Ltd and Another v Foster [2006] ICR 1537 where he said that an application for a review under rule 34 is "sufficiently made out if grounds can be discerned from the application" [57]. Thus the task of an Employment Judge is to consider carefully what is said to be a request to extend the time for lodging a Response in order to ascertain if an application to extend time "can be discerned from the application".
19. In my view it is quite clear that such an application was made because in the passage in the letter of 18 January 2010 (which has been quoted in paragraph 14 above), the Appellant's solicitors specifically ask the Employment Judge to "accept the response" and to my mind that is clearly an application. Therefore it is not necessary to consider a further point made by Mr Fodder that the approach taken by Employment Judge Warren was illogical because he permitted the response on remedies to be heard and indeed made directions for them.

How Should the Application to Revoke the Default Judgment be dealt with?

20. As I have explained the Employment Judge did not consider that a valid application had been submitted and he therefore did not consider what factors would be relevant in granting the application and whether it should be granted. In particular he did not consider the provisions in rule 33 which are applicable namely that:-

"(5)… An Employment Judge 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 Employment Judge must have regard to whether there was a good reason for the response not having been presented within the applicable time limit".

21. In ordinary circumstances, as the Employment Judge had not considered the matter, the proper approach to be adopted by this Appeal Tribunal would probably be for the matter now to be remitted to the Employment Judge to consider these and any other matters relevant to whether the default judgment should be revoked. Both parties have very sensibly agreed that it would be much simpler for me to deal with these matters because I am in as good a position as the Employment Tribunal would be to determine them.
22. Mr Fodder contends that all the factors are in favour of setting aside the default judgment; he relies on the principle explained by Mummery J in Kwik Save Stores case in which he sets out the factors to which an employment tribunal ought to have regard in considering an application for an extension of time for entering a notice of appearance. He points out that the length of, and explanation for, the delay will always be an important factor and may be decisive (see pp54H-55C). But he also points out that it is not the only factor to be considered. He continues (at p55C) by stating that:-

"The process of exercising a discretion involves taking into account all relevant factors, weighing and balancing them one against the other and reaching a conclusion which is objectively justified on the grounds of reason and justice. An important part of exercising this discretion is to ask these questions: what prejudice will the applicant for an extension of time suffer if the extension is refused? What prejudice will the other party suffer if the extension is granted? If the likely prejudice to the applicant for an extension outweighs the likely prejudice to the other party, then that is a factor in favour in granting the extension of time, but it is not always decisive. There may be countervailing factors. It is this process of judgment that often renders the exercise of a discretion more difficult than the process of finding facts in dispute and applying to them a rule of law not tempered by discretion.

It is well established that another factor to be taken into account in deciding whether to grant an extension of time is what may be called the merits factor identified by Sir Thomas Bingham M.R. in Costellow v. Somerset County Council [1993] 1 W.L.R. 256, 263:

a plaintiff should not in the ordinary way be denied an adjudication of his claim on its merits because of procedural default, unless the default causes prejudice to his opponent for which an award of costs cannot compensate.

Thus, if a defence is shown to have some merit in it, justice will often favour the granting of an extension of time, since otherwise there will never be a full hearing of the claim on the merits. If no extension of time is granted for entering a notice of appearance, the industrial tribunal will only hear one side of the case. It will decide it without hearing the other side. The result may be that an applicant wins a case and obtains remedies to which he would not be entitled if the other side had been heard. The respondent may be held liable for a wrong which he has not committed. This does not mean that a party has a right to an extension of time on the basis that, if he is not granted one, he will be unjustly denied a hearing. The applicant for an extension has only a reasonable expectation that the discretion relating to extensions of time will be exercised in a fair, reasonable and principled manner. That will involve some consideration of the merits of his case."

23. After that decision, the 2004 regulations came into force. In Moroak (trading as Blakes Envelopes) v Crombie [2005] ICR 1226, Burton J was concerned as to whether the test set out in Kwik Save remained after the introduction of the 2004 regulations. He explained in paragraph 28 of his judgment that it did continue to apply for applications under rule 33. He also pointed out that a Tribunal considering such an application has "to be satisfied that there is at least an arguable defence contained in the proposed response" [15].
24. The matter was considered further by Burton J in Pendragon plc (trading as CD Bramall Bradford) v Copus [2005] ICR 1671 in which an appeal was allowed against a decision of an Employment Tribunal that a default judgment should not be set aside if there was no satisfactory explanation for the response not to have been presented within a time limit. Burton J explained that rule 33(6) of the 2004 Rules might mean that the first matter that had to be considered was whether there was a good reason for the response not having been presented within the appropriate time but that it did not rule out consideration of other matters of discretion, including reasonable prospects of success. He stressed in conducting a review under rule 33 of the 2004 Rules, the Employment Tribunal had to take account of all relevant factors, including the explanation or lack of explanation for the delay, the merits of the defence as well as balancing the possible prejudice to each party before reaching a conclusion that was objectively justified on the grounds of reasons and justice.
25. The Respondent contend that this is an inappropriate approach and Mr Kohanzad explains in paragraphs 44 and 45 of his skeleton argument that:-

"By SI 2008/3240, Rule 8(1) was amended to make it mandatory rather than discretionary for an EJ to issue a default judgment. Therefore now the lottery of whether a respondent has to make an application under Rule 33 or 34 no longer exists and, it is contended, that the need to ignore the actual wording of the Rules has been vitiated. The requirement to take all of the factors into account, as suggested in Kwik Save, is not found in the wording of the Rules. Rule 33(6) simply requires the tribunal to have regard to whether there was a good reason for the response not being entered in time. And, Rule 33(5) provides that the tribunal may have regard to the respondent's chances of successfully defending the claim. Here the EJ clearly had regard to the former."

26. I am unable to accept this contention for a number of reasons.
27. First, there is nothing in rule 33 of the 2004 Rules or indeed any other rule which states factors which cannot be taken into account or indicates that the matters set out in rule 33 (5) and (6) of the 2004 rules are the sole matters be considered. Second, the overriding objectives set out in rule 3 of the 2004 Rules include the obligation of Employment Judges to deal "fairly and justly" when exercising any power under those Rules. To my mind, the Kwik Save principles are merely giving guidance to Employment Judges on how to deal with matters such as applications to set aside default judgments "fairly and justly". Those principles are therefore not only applicable but, in my opinion, have to be considered in every case as Mummery J showed.
28. Third, there is substantial judicial authority that Kwik Save is still good law after the 2008 amendment. Thus, this Appeal Tribunal in KLTC Construction Ltd v Swain (UKEAT/0527/09) [16] – [18] stated that the approach in Pendragon (supra), which applied Kwik Save, as I explained in paragraph 24 above, should be followed.
29. Finally, Parliament in making the amendment relied on by Mr Kohanzad in his written skeleton argument would have been well aware of the Kwik Save decision and could have limited or revoked it when the Rules were altered but instead significantly it chose not to do so. After I concluded that this was a relevant factor, I recalled that this was explained by Bennion on Statutory Interpretation (5^th edition) at page 711-section 235 in this way:-

"Parliament is normally presumed to legislate in the knowledge of, and having regard to, relevant judicial decisions. If therefore Parliament has a subsequent opportunity to alter the effect of the decision on the legal meaning of an enactment but refrains from doing so, the implication may be that Parliament approves of that decision and adopts it that is an aspect of what maybe called tacit legislation".

30. This principle has been applied regularly (see for example R v Williams [2010 EWCA Crim 2552 [33] per Thomas LJ). It supports my contention that the Kwik Save principle has not been overturned or reversed.
31. I therefore conclude that the Kwik Save rules apply but first I must apply rule 33(6) and have regard to whether there was a good reason for the response not having been presented within the appropriate time limit. The Employment Judge found that the response was received and that decision has not been challenged but I consider that the ET1 must have been mislaid. There is no suggestion that the Appellant intentionally failed to put in the Response in the time period.
32. The second matter which might lead to the revoking of the order is whether "the respondent has no reasonable prospect of responding to the claim or part of it". I have considered with care the Response which shows that the Appellant considered that the Respondent had deliberately falsified her time sheets to claim additional time off for which she was not entitled. The Appellant then carried out an investigation comparing the times that the Respondent put on her time sheet with the times when her swipe card was used to open the door of the Appellant's premises so that she could leave the building for the day. According to the Response, there was a clear disparity between those sets of times. A meeting took place which led to the decision to dismiss the Respondent on grounds of misconduct. There was then an appeal hearing at which the decision to dismiss the Respondent was upheld.
33. Obviously I cannot come to any conclusion on the merits of this case but nothing has been put forward by counsel for the Respondent to suggest that the Appellant does not have a reasonable prospect of successfully responding to the claim.
34. Turning now to the other matters set out as being relevant in Kwik Save, I consider that:-

a. The delay in putting in the response to set aside the default judgment was a genuine misunderstanding caused by an accidental oversight;

b. The prejudice that would be caused to the Appellant by a failure to revoke the default judgment would be considerable as they would lose the prospect of putting forward what might well be a reasonable defence to the claim; and

c. The prejudice caused to the Respondent by revoking the default judgment would be that she is deprived of a judgment to which she may not be entitled.

35. I therefore reach the conclusion that the default judgment should be set aside. For the purpose of completeness I should say that if the Kwik Save principles were not applicable, as the Respondent contends to be the position, I would still have revoked the default judgment for the reasons set out in paragraphs 31 and 32 above because the failure to lodge the ET1 was not intentional and the Appellant appears to have a reasonable defence to the Respondent's claim.
36. In those circumstances, the appeal must be allowed and the default judgment of 12 November 2009 be revoked. I order that time should be extended for the presentation of the Response to 14 days from today's date and that the case be remitted to the Employment Tribunal for the purpose of making directions for the continued prosecution of those proceedings but I consider that no further hearing should take place before Employment Judge Warren.