APPEARANCES
| For the Appellant |
MR D E GRANT
(of Counsel)
Instructed by:
Messrs Hammonds LLP Solicitors
Trinity Court
16 Dalton Street
Manchester M60 8HS |
| For the Respondent |
MR O GOODMAN
(Representative)
|
SUMMARY
PRACTICE AND PROCEDURE:
Appearance/response
Costs
Appellant failed to put in a response. Default judgment entered. Appellant applied for review. Respondent had been employed for less than 12 months but claimed to have been dismissed for "health and safety" reasons. Appellant asserted the Respondent was dismissed for redundancy. Employment Tribunal refused to set aside judgment and held there was no application to extend time for the response with the consequence Appellant could not be heard at the remedies hearing. Held: default judgment to stand but response to be accepted out of time so Appellant could participate in the remedies hearing.
HIS HONOUR JUDGE REID QC
- These are two appeals arising out of decisions at an Employment Tribunal held at Liverpool. The first is an appeal against a default judgment which was entered on 20 April 2007. The second is an appeal against a decision on an application to review and that decision, following a hearing on 30 May 2007, was entered on the register on 15 June.
- The background to the case is this. Mr Prince, the Claimant, was employed by the Respondent, American E-Z Self Storage Ltd. His employment commenced in March 2006 and was originally for a period of three months. His employment ended on 19 January 2007. He was therefore employed for less than one year.
- Following his dismissal he sought to institute two sets of proceedings in the Employment Tribunal, the first alleging unfair dismissal in which he asserted that the reason for his dismissal related to health and safety, which would of course have the effect that he would not be affected by the lack of 12 months' service. The second related to an allegation of sex discrimination. The first of those claims was accepted by the Tribunal. The second of the claims was rejected because he had failed to go through the necessary statutory hoops. Having gone through those hoops he then reissued his claim. No response was forthcoming from the employer in relation to the unfair dismissal claim but a response was put in in relation to the sex discrimination claim, i.e. the second attempt to issue a sex discrimination claim, on the last available day. Because no response had been put in in relation to the unfair dismissal claim, a judgment was entered in default on 19 April, as I have indicated. When that judgment was received by the Respondent an application was made for review. This was an application made by Mr Harrison on behalf of the employer and was very much a layman's application. Included with it was a response. In essence, the excuses made for the failure to respond to the unfair dismissal claim in time were, first, that there was a confusion because it had received two separate sets of proceedings, i.e. the unfair dismissal claim and the second of the sex discrimination claims, and had assumed that the second sex discrimination claim subsumed the unfair dismissal claim; and second, because it thought that ACAS had become involved and nothing need be done, in effect, until ACAS had dealt with the matter. The response that was put in asserted that the company took health and safety seriously. Although it had only four employees, it did in fact have a health and safety policy when it did not need to. The reason for the dismissal was redundancy.
- The review hearing was conducted by Mr Homfray-Davies and he dismissed the application to set aside the default judgment. He appears to have thought that the review application did not include in it any application for an extension of time to put in a response. The effect of that, of course, would be that if no response was permitted the employer would be unable to make representations at, or take any part in, the remedies hearing.
- The judgment that was given was in these terms:
"1. The respondent's application for a review of a default judgment, in respect of the claim for unfair dismissal, sent to the parties on 20 April 2007 is refused.
2. On or before 21 June 2007 the Claimant shall inform the tribunal of his intentions in respect of the claim of sex discrimination."
I pause there to say he did, and he indicated that he was not pursuing that claim further.
"3. Remedy is adjourned to a date to be fixed. The tribunal will have to consider whether the Claimant was dismissed for a health and safety reason."
That last sentence makes it clear that the Chairman was alive to the fact that if a health and safety reason were not made out, Mr Prince would not be entitled to compensation. (The fact that it might emerge that he was not dismissed for a health and safety reason would not have deprived the Tribunal of jurisdiction, see Leicester University Students' Union v Mahomed [1995] ICR 270. It would, of course, have deprived him of any compensation).
- As a matter of history, I am told that a compensation hearing has taken place and an award of compensation of a fairly substantial amount has in fact been made.
- The first appeal is against the entry of the default judgment. Counsel on behalf of the employer points out that Rule 8 of the Employment Tribunal Rules of Procedures at Rule 8(1) provides:
"In any proceedings, if the relevant time limit for presenting a response has passed, a Chairman may, [my emphasis] in the circumstances listed in paragraph 20, issue a default judgment to determine the claim without a hearing if he considers it appropriate to do so."
Again, I emphasise that last phrase.
- What was said was that, in exercising that discretion, the Tribunal Chairman ought to have had regard to the principles set out in cases such as Kwik Save Stores Ltd v Swain [1997] ICR 49, and Pendragon Plc v Copus [2005] IRLR 1671, which indicate that the Tribunal has broad jurisdiction to extend time to enter a Notice of Appearance. Then it is said that the Tribunal's decision to enter a default judgment was perverse because by that time the Tribunal had already accepted the second sex discrimination claim issued by the Claimant. The Tribunal therefore was perverse in issuing a default judgment in one claim when there was another claim between the same parties in relation to essentially the same subject matter in existence. Thirdly, it is said that the Tribunal failed to have regard to the overriding objective to deal with the case justly and that, in effect, it meant that the employer would be unable to have its day in court.
- In my judgment, there is nothing in any of those points. The entry of a judgment in default of response is little more than a ministerial act. There was, at that stage, no indication from the employer that the employer intended to respond to either claim. So far as the Tribunal was concerned, there was simply a set of proceedings to which the employer had made no response.
- So far as the suggestion because there were other proceedings between the same parties the Tribunal should have decided not to enter a default judgment, that seems to me to be fanciful. It is not for the Tribunal to hunt through its records to see whether there may be other proceedings between the same parties. Each of these claims was a free-standing action. In any event there was no reason why the Tribunal should have considered what might happen in relation to the other proceedings.
- So far as the third of those grounds is concerned, that seems to me to fall with the other two. The employer had its opportunity to put in a response and so far as the Tribunal could see, it had simply chosen to ignore the proceedings. That appeal, it seems to me, is hopeless.
- There is then the appeal against the dismissal of the application to review. The Chairman treated the application to review as simply being an application to set aside the default
judgment. That much is clear from the last paragraph of his judgment where he says:
"no extension of time was sought"
- This, of course, was an application being made by a representative of the company, an employee of the company, and the evidence suggests this was a small company with no more than seven employees and directors in all at the time. It was an application which was accompanied by a draft response. The terms of the application end as follows:
"The first we were aware of the need to still send the first response form in was when the ACAS conciliator made her first call to us on 23 April 2007, the same date we received the default judgment order. We then called the Employment Tribunal and spoke with a lady named Sandra, who advised us to write this request for a review with explanation and to complete and return the response form from the first notice of claim.
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."
It seems to me that that, contrary to the view of the Chairman, is clearly an application (a) to set aside the default judgment and (b) to allow the response to be put in out of time.
- The Chairman therefore got off on the wrong foot, so to speak, in considering the application. When he did consider the application he heard evidence both from Mr Prince and from Mr Harrison, the employee who turned up on behalf of the employer. Mr Harrison was evidently an unimpressive witness. His evidence that he was seduced, to use the Chairman's expression, by the phraseology of the letter from ACAS into thinking that ACAS would take control of the timetable of the case was not accepted. It was specifically rejected. It was said that the explanation was not warranted by the contents of paragraph 5 of the letter and was quite contrary to the matter cited in paragraphs 2 and 3 and it was also contrary to commonsense.
- The Chairman pointed out that the terms of the ET2, that is the letter sent by the Tribunal to the Respondents, are in clear terms and the relevant time limits are set out in bold type. The Chairman also pointed out that the suggestion that Mr Harrison made that the Respondent had thought that the second sex discrimination claim had subsumed the first was without merit. It is true that he refers to there being no reference to unfair dismissal in the second claim when there is a passing reference at paragraph 5 under the heading "Unfair or constructive dismissal". There is an entry which says:
"I was discriminated against (see section 6)."
The substance of the claim is set out under the heading "Discrimination" at section 6. I should say in passing that it is clear to me, notwithstanding the instructions that Mr Grant received, that the attached sheet that had gone with the ET1 relating to the second discrimination claim was only an attached sheet relating to a discrimination claim and did not also have with it a second attached sheet duplicating the unfair dismissal claim sheet which had been attached to the unfair dismissal claim. That incidentally had also attached to it the discrimination claim sheet as was made clear by the body of that original ET1. In my view, the Chairman was entirely justified in rejecting the suggestion that there was anything misleading in the two sets of proceedings such as would excuse the failure to put in a response to the unfair dismissal claim.
- The Chairman went on to consider the particulars given in the draft response. That was said to be generally unparticularised. It was pointed out that although it was asserted that the reason for dismissal was redundancy, no details were given of the dilution or cessation of work of the type carried out by the Claimant. There were insufficient details in relation to the defence to the health and safety allegation. Overall, the Chairman was sceptical about the merits of the defence saying that the response form did not contain sufficient detail for the Tribunal to assess the merits of the defence.
- The Chairman concluded his judgment in this way, he said:
"I considered Rule 33; I took into account the parties submissions. The application for review was made in time; no extension of time was sought;"
As I said, it seems to me that that is an incorrect and unduly restricted reading of the application.
"I do not accept the respondent had a good reason for the delay; the chronology indicates a lack of industry on the respondent's part and/or concern for the process viz. also the lack of particulars in the response; I did not accept Mr Harrison's evidence that he believed that ACAS would handle the case, or, in the light of the contents of the ET2 such a belief was reasonable; finally, the response forms should contain sufficient detail for the tribunal to assess the merits of the defence, it does not. In these circumstances the application for review is refused."
- That was attacked by Counsel for the employer, firstly, by reference to the well-known decision of Mummery J, as he then was, in Kwik Save Stores Ltd v Swain [1997] ICR beginning at 54(h) and carrying on through to 55(h). He pointed out that although that was under the old rules, Pendragon Plc v Copus [2005] IRLR 1671 made it clear that the same provisions still applied under the newer rules. He then referred to the reasons for the delay. With some reluctance he abandoned the belief that ACAS was dealing with the matter as he was obliged to do in view of the findings of fact. He sought to rely on the similarities between the unfair dismissal claim and the second sex discrimination claim. In part in that, I think, he was misled by the erroneous instructions that he had that the unfair dismissal particulars were next also to the second sex discrimination claim. He submitted that those were reasons which ought to have led the Tribunal to allow an extension of time and to set aside the default judgment. He submitted that so far as the merits were concerned the information given in the ET3, the proposed response, was adequate, particularly given that the original claim form was in pretty general terms and said little of any detail about the supposed health and safety issues involved. He pointed out that there was a specific alternative reason, i.e. redundancy, given for the dismissal. All in all, he says that there was a sufficient defence given. Then he turned to prejudice and he pointed out that the effect of the refusal of permission to extend time, the effect of failing to set aside the default judgment, was to, in effect, give Mr Prince a free run in respect of remedy in circumstances where it was clear that the Respondent was extremely anxious to be heard. Finally, he said that one of the matters which has to be taken into account on any proper judicial exercise of discretion in applications such as this is as to prejudice. When one looks at the Chairman's judgment there is nothing in it which indicates that he had taken prejudice into account.
- On behalf of the Respondent, his son said that it was clear that the Tribunal had carefully looked at all the facts, that there was no error of law involved and that so far as prejudice was concerned it is covered by the expression "I took into account in the parties' submissions". There had been, I was told, amongst the submissions in particular medical evidence on behalf of the Claimant showing that he suffered from a medical condition, chronic Crohn's disease, which is exacerbated by stress and that as a result of stress had major abdominal surgery earlier this year and had remained an inpatient for a long period. It was submitted that this clearly must have been something that was in the Chairman's mind in making his decision and that it would be wrong to suggest that he had not taken account of the prejudice that was going to be suffered by each side.
- In general terms, it seems to me that the Respondent's submissions on that are correct. The problem that I have with this case is the point raised by the amended Notice of Appeal which was the basis on which HHJ Serota, at a preliminary hearing, allowed this appeal to go to a full hearing. That additional ground is that the Employment Tribunal failed to consider whether it was proportionate to permit the Respondent to participate in the remedies hearing, albeit that liability had been determined against it and it should have permitted the Respondent to participate in the remedies hearing. That was a point which was not considered by the Chairman and one can see the reason why he did not consider it, namely that he had formed the erroneous view that there was no application for an extension of time to put in the response. Absent a response by virtue of Rule 9, the employer would not have been able to take any further part in the proceedings and was therefore unable to participate in the remedies hearing, although I am told that Mr Harrison did in fact attend the remedies hearing as an observer.
- What then was the effect of that failure to consider the possibility of what might be described as the halfway house, that the default judgment should stand, but the response should be allowed to go in out of time so that the employer could be represented and participate in the remedies hearing? This is a possibility which was adverted to by the then President, Burton J, in NSM Music Ltd v Leefe [2006] ICR 450. It was again adverted to in D&H Travel Ltd v Foster [2006] ICR 1537, a decision of the current President, Elias J. In my judgment, what one is considering in cases where there has been a default judgment is what is proportional and what is just. I quote from paragraph 61 and 62 of D&H Travel:
"61. We bear in mind the observations of Burton J in NSM Music Limited v Leefe [2006] ICR 450 that it would sometimes be proportional to allow a party to participate in the remedies hearing albeit that liability has been determined against him. We all of us consider that this is plainly such a case. Mr Henderson [he was the employer's representative in that case] was present; he could have cross-examined the Claimant and made submissions. Whereas the chairman understandably did not think it right to reopen liability, with all the delays thereby involved, that very fundamental concern did not apply to the more limited participation in the remedies hearing. Had Mr Henderson sought an adjournment to produce witnesses or further documents, there would have been every good reason to refuse it. But that was not suggested. He wanted to be able to make observations and submissions with respect to remedies, even if he could not put his side of the story with respect to liability. To exclude him in the circumstances seems to us simply a punishment for failing to comply with the Rules.
62. Punishment is clearly not the purpose of these sanctions: see the observations of Chadwick LJ in Hussain v Birmingham City Council [2005] EWCA Civ 1570, at para 36, dealing with similar provisions in the Civil Procedure Rules. As Chadwick LJ there pointed out, ultimately all discretions should be exercised so as to achieve the overriding objective, which is to deal with cases justly. Moreover, as the judgment of Mummery J in Kwik Save [1997] ICR 49 shows, an important consideration will be the extent of any prejudice to the parties. In this case there would be no prejudice to the Claimant in allowing Mr Henderson to take part; by contrast, there was an obvious prejudice against the respondents in denying him that right."
The judgment then went on to say the appropriate course was to allow the remedies hearing to go through with participation and that would have of course meant that there would be a fresh remedies hearing there and the existing award for compensation could no longer stand.
- Mutatis mutandis it seems to me that the same applies here. The Chairman did not consider the question of whether the judgment should stand but the Respondent be allowed to participate in the remedies hearing because of his erroneous view that no application was made for an extension of time to put in the response. He envisaged that the Tribunal at the remedies hearing would have to consider anyway whether the Claimant was dismissed for a health and safety reason, because unless the Claimant made that good, he was not entitled to any compensation. The amount at stake here is not insubstantial: the total remedy awarded, I am told, was £16,608. Against that, one has of course to weigh the disadvantage, prejudice, to the Claimant in that he will suffer from ongoing stress. Beyond that stress, of course, he may, on a remedies hearing, be deprived of an award which it would appear in those circumstances he should never have had. If of course he succeeds again at a new remedies hearing he will get his award and he will simply have suffered the additional stress.
- Looking at the matter overall, it seems to me that the Decision of the Chairman ought not to stand because he has, for the reasons I have given, failed to consider the relevant possibility of participation by the Respondent, the employer, in the remedies hearing. I take the view that the appropriate course in those circumstances is, bearing in mind the overriding objective, for me to set aside the remedies award, to set aside the order of Mr Homfray-Davies, in so far as it implicitly refuses any application to put a response in out of time, to treat the response as having been delivered at the time when the application for review was made, and to remit the remedies hearing to a fresh Tribunal so that the Chairman can then assess remedy and determine whether or not the Claimant was dismissed for a health and safety reason in the light of evidence from both sides.
- The default judgment will remain standing. It follows that the first of these appeals is dismissed. The second of these appeals is allowed to the extent that I have indicated, that is by varying the order in the manner that I have laid out.
