Mrs H Hambly-Smith v Mr S De Pury and Dr M De Pury: 2202688/2020

EMPLOYMENT TRIBUNALS

Case No 2202688/2020

Between

Mrs H Hambly-SmithClaimant

Mr S De Pury and Dr M De PuryRespondent

Before

Employment Judge P Klimov, sitting alone

Date 7 June 2021

JUDGMENT

[1]In respect of the claims brought by the Claimant against the First Respondent in these proceedings the Second Respondent was not the Claimant’s employer at any relevant time.

[2]In these proceedings the Claimant brings no claims against the Second Respondent.

[3]Therefore, the Second Respondent is not and may not be liable for any remedy claimed by the Claimant in these proceedings. Case Number: 2202688/2020 (V) JUDGMENT having been sent to the parties on 4 May 2021 and written reasons having been requested by the First Respondent on 5 May 2021, in accordance with Rule 62(3) of the Rules of Procedure 2013, the following reasons are provided:

REASONS

[1]By a claim form presented on 07 May 2020 the Claimant brought complaints against the First Respondent of unfair dismissal, wrongful dismissal, and unlawful deduction from wages in respect of unpaid salary from 1 November 2019 to 13 January 2020 and unpaid commission from 1 February 2013. In these proceedings the Claimant makes no claims against the Second Respondent. The First Respondent presented a response resisting all claims.

[2]On 7 August 2020, the First Respondent made an application to the tribunal to add the Second Respondent as a second respondent to the proceedings on the grounds that she was the Claimant’s joint personal employer under the terms of the Claimant’s employment contract of 17 January 2013.

[3]On 11 August 2020, the Second Respondent’s solicitors wrote to the tribunal objecting to the First Respondent’s application on the grounds that at the relevant time for all the Claimant’s claims, namely from November 2019 to January 2020, the Second Respondent was not the Claimant’s employer, having ceased to be her employer from 1 March 2019, at the latest, and that the Claimant’s dismissal by the First Respondent had been carried out without the Second Respondent involvement.

[4]On 16 August 2020, the Claimant’s solicitors wrote to the tribunal objecting to the First Respondent’s application essentially on the same grounds as the Second Respondent and confirming that the Claimant had not brought any claims against the Second Respondent “precisely because [the Second Respondent] ceased to be [the Claimant’s] employer in around March 2019”. They also confirmed that the Claimant was not advancing any claims against the Second Respondent or sought any remedy from her.

[5]On 15 September 2020, there was a telephone case management preliminary hearing before Employment Judge Wisby. At the hearing, the First Respondent’s application to add the Second Respondent to the proceedings was considered. The First Respondent and the Claimant were represented by counsels. The Second Respondent was not present. However, the Second Respondent’s solicitors’ letter of 11 August 2020 was considered by the judge.

[6]EJ Wisby granted the First Respondent’s application (the “EJ Wisby order”). She gave the following reasons: “The respondent’s representative submitted at the hearing that the respondent’s primary case is that at the time of the claimant’s dismissal the respondent and Michaela de Pury were joint employers and that the respondent was not the claimant’s sole employer. This is disputed by Michaela de Pury. This gives rise to a factual dispute in respect of when and if Michaela de Pury ceased to be the claimant’s joint employer that it is not possible nor appropriate to make findings on today. ………….. It is the Tribunal’s view that it is in the interests of justice that the issue of who the claimant’s employer was is established. Adding Michaela de Pury as a second respondent will not delay the final hearing nor increase cost in a way that is disproportionate to the issues”.

[7]On 29 September 2020, the Second Respondent made an application to the tribunal:(i) to reconsider the EJ Wisby order to add the Second Respondent as a second respondent under Rule 70 of the Employment Tribunals Rules of Procedure 2013 (“ET Rules”), or

(ii) to remove the Second Respondent as a respondent under Rule 34 of the ET Rules, and/or

(iii) to hold a preliminary hearing to determine the issue who the Claimant’s employer was at the time of her dismissal. The Second Respondent contended that the First Respondent had misled the tribunal at the preliminary hearing by claiming that the Second Respondent had been a joint employer of the Claimant because that was contrary to the First Respondent’s position in separate matrimonial proceedings between them, and by failing to disclose to the tribunal relevant documents showing that the Claimant had resigned from the Second Respondent’s employment in March 2019. The First Respondent objected to the Second Respondent’s applications. The parties sent further correspondence to the tribunal in relation to the Second Respondent’s applications.

[8]On 11 November 2020, having considered the parties correspondence, Employment Judge Stout made the following orders: 1. There is no basis for reviewing the Case Management Order of EJ Wisby with regard to the addition of the Second Respondent as even in the light of the information now provided by the Second Respondent it is apparent that, to use the terms of Rule 32, “there are issues between [the Second Respondent] and … the existing parties falling within the jurisdiction of the Tribunal which it is in the interests of justice have determined in the proceedings”. For the avoidance of doubt, this was a case management order, not a judgment, and so cannot be the subject of an application for reconsideration under Rule 70. 2. However, it would be appropriate in the circumstances to list an Open Preliminary Hearing to determine the question of whether the Second Respondent was the Claimant’s employer at any relevant time and, in particular, whether she is or may be liable for any remedy claimed by the Claimant in these proceedings, whether under the claims for wrongful or unfair dismissal or unlawful deduction from wages.

[9]At the open preliminary hearing Mr Brochwicz-Lewinski appeared from the Claimant, Mr Algazy QC for the First Respondent, and Mr Cohen QC for the Second Respondent. I am grateful to them all for their cogent submissions and assistance to the tribunal.

[10]The Claimant, the First Respondent and the Second Respondent gave oral evidence and were cross-examined. I was referred to a bundle of documents of 361 pages the parties introduced in evidence. In advance of the hearing, I was sent counsels’ skeleton arguments and relevant authorities.

[11]At the start of the hearing Mr Cohen applied to set aside EJ Wisby order on the ground that the Second Respondent was not liable to any remedy claimed by the Claimant and therefore it was irrelevant to consider whether she was the Claimant’s employer.

[12]He submitted that the Claimant’s ET1 contained no claims against the Second Respondent and the tribunal had no jurisdiction to offer contribution remedies at the suit of one respondent against another.

[13]In support of his arguments that it was an error of law by EJ Wisby to make an order to add the Second Respondent to these proceedings, because the tribunal simply had no power to do so in the circumstances where no claims had been made against the Second Respondent, Mr Cohen referred me to the cases of Beresford v Sovereign House Estates

UKEAT/0405/11/SM

, Welsh v Bendel

UKEATS/0014/12/BI

and Sunderland City Council v Brennan

[2012] ICR 1183

[14]He argued that there could be no issues between the Second Respondent and the exiting parties to the proceedings falling within the jurisdiction of the tribunal within the meaning of Rule 34 of the ET Rules, where the Claimant had brought no claims against the Second Respondent and where the tribunal had no jurisdiction to determine contribution claims under the Civil Liability (Contribution) Act 1978, or otherwise.

[15]Therefore, Mr Cohen submitted, the First Respondent’s application to add the Second Respondent was hopelessly misconceived. The relevant case law was not drawn to the EJ Wisby’s attention when the joinder order was made. The tribunal had no power to do as it did. For these reasons, Mr Cohen sought the order of EJ Wisby to be set aside and the Second Respondent removed as a party to these proceedings.

[16]The First Respondent and the Claimant opposed the application on the grounds that it would be an error of law for me not to deal with the preliminary issue ordered by EJ Stout or set aside EJ Wisby order without there being a material change in the circumstances. Mr Algazy further submitted that if the Second Respondent thought that EJ Wisby had made an error of law in ordering the Second Respondent to be added as a party, the appropriate course of action for the Second Respondent was to appeal the order, and she had not done that.

[17]I refused the Second Respondent’s application for the following reasons. While Mr Cohen made a powerful argument that:(i) the tribunal had no jurisdiction to determine contribution claims,

(ii) any claims within the tribunal’s jurisdiction were not covered by the Civil Liability (Contribution) Act 1978, and

(iii) the tribunal could not make a judgment against the Second Respondent if the Claimant was not advancing any claim against the Second Respondent, nevertheless there was a factual dispute as to who the Claimant’s employer at any relevant time was.

[18]The First Respondent maintained that the Second Respondent remained the Claimant’s employer all the way to the Claimant’s dismissal. Therefore, in my judgment, it was necessary for this factual dispute to be resolved first.

[19]Although in these proceedings the Claimant was not bringing any claims against the Second Respondent, it is not uncommon for claimants to name a wrong party as their employer, and for such wrongly named party to apply to join what that party considers to be the correct claimant’s employer, or for the tribunal to do that on its own initiative. Therefore, I do not accept that the tribunal simply has no power to join a party as a second respondent at the suit of another respondent. Rule 34 of the ET Rules clearly gives such power to the tribunal.

[20]In Beresford, Brennan and Welsh the identity of the correct employers was not in dispute. There the employers were simply seeking to join its employees (and in Brennan – the trade union) as joint tortfeasors. In the present case, albeit accepting that he was the employer of the Claimant at the relevant time, the First Respondent avers that so was the Second Respondent, and that some of the Claimant’s claims relate to the Claimant’s employment with the Second Respondent and not him, or to their joint employment of the Claimant.

[21]Further, there were no material changes in the circumstances for me to interfere with EJ Wisby order. I accept that my decision on the factual dispute as to who the Claimant’s employer was at any relevant time may result in such change. This, however, only proves that the correct course of action for me is to determine the preliminary issue as ordered by EJ Stout.

[22]Finally, the Second Respondent’s application to be removed as a second respondent was considered and refused by EJ Stout. The Second Respondent did not appeal either the EJ Wisby order or the EJ Stout’s refusal. EJ Stout made an order identifying a preliminary issued that needed to be determined at the hearing. There was no proper legal basis for me to ignore the EJ Stout’s order and instead take a different approach without determining the preliminary issue set for the hearing.

Findings of Fact

[23]For the purposes of the preliminary hearing issues, I make the following findings of fact.

[24]The First Respondent and the Second Respondent were husband and wife. They divorced in March 2019. Until their separation they worked together in the high-value fine art dealing, curatorial and auction business.

[25]Initially, the First Respondent and the Second Respondent conducted their business through an incorporated entity De Pury & De Pury LLP (“the LLP”). In 2017 it was planned for the LLP’s business to be transferred to De Pury and De Pury Limited (“the Ltd”). It is not clear what exactly the transfer involved and whether the contemplated transaction was carried out. However, that is not relevant for the purposes of the preliminary issues I need to determine.

[26]From January 2013 the Claimant worked for both Respondents as their personal assistant attending on a variety of tasks and matters related to their business.

[27]The Claimant was paid her salary via the LLP. She did not have a written contract with the LLP. Her 17 January 2013 written contract of employment (it states 1 February 2013 as the commencement date, but the Claimant claims that the correct date should be 17/01/2013) names the First Respondent and the Second Respondent as her employer.

[28]Under the terms of her contract the Claimant was entitled to a base salary, a bonus and commission based on her performance and contribution to the business. The Claimant claims that it was agreed that she would be paid commission of 5% on all fees that she negotiated and an additional 2% for any works that she consigned for sale at auction. The First Respondent denies that.

[29]The Claimant further avers that although her entitlement to commission arose when the First Respondent and the Second Respondent received their fees for the relevant transactions, with her agreement the commission payments were deferred until the First Respondent and the Second Respondent found a tax efficient structure to pay the Claimant her commission.

[30]On 6 October 2017, the Claimant was sent a letter informing her that on that date her employment transferred to from the LLP to the Ltd under the Transfer of Undertakings (Protection of Employment) Regulations 2006. The Claimant says she had no involvement in that transfer. She says it was designed for tax planning purposes and had no substance, as it made no difference to her dayto-day work and she continued to be paid via the LLP.

[31]When in 2017 personal relationship between the First Respondent and the Second Respondent started to deteriorate, the Claimant’s position working for both of them became difficult. In March 2018, the First Respondent and the Second Respondent started to negotiate a post-nuptial agreement, which was concluded in September 2018. In December 2018, the First Respondent issued divorce proceedings against the Second Respondent, which created further strain in their relationship and made the Claimant’s position as a personal assistant to both of them increasingly more difficult.

[32]In early January 2019, the Claimant was told by Natalie Dauriac, a financial adviser to the First Respondent and the Second Respondent appointed by them as a “mediator”, that she needed to choose whether she wanted to continue working for the First Respondent or the Second Respondent, because the First Respondent was not content with her working for both of them.

[33]The Claimant decided that she would continue working for the First Respondent. In January 2019, the Claimant and the First Respondent (acting via Ms Dauriac and his solicitors) commenced negotiating the Claimant’s new terms of employment. Various draft employment contracts were exchanged between them. However, a full written contract was never finalised and signed by the parties before the Claimant’s dismissal.

[34]In late January 2019, the Claimant told the Second Respondent that she would be finishing working for her. The Second Respondent tried to persuade the Claimant to stay with her, but the Claimant rejected her offer.

[35]On 7 February 2019, the Claimant sent to the First Respondent and the Second Respondent a letter of resignation from the LLP with effect from 7 March 2019. She continued to work for the First Respondent until her dismissal without interruption in her service.

[36]The Claimant claims that the commission deferral arrangement came to an end in November 2019, when at a meeting with Ms Dauriac (acting on behalf of the First Respondent) it was agreed that the necessary arrangement would be put in place for her to receive the outstanding commission.

[37]On 13 December 2019, the Claimant was notified by the First Respondent solicitors that her employment was terminated with effect from 13 January 2020 for the alleged fundamental breach of her contact of employment. The Law (emphasis added)

[38]Under section 94(1) of the Employment Rights Act 1996 (“ERA”) “An employee has the right not to be unfairly dismissed by his employer”.

[39]A claim for wrongful dismissal is a common law action based on breach of contract. Under s.3 of the Employment Tribunal Extension of Jurisdiction (England and Wales) Order 1994/1623 “Proceedings may be brought before an employment tribunal in respect of a claim of an employee for the recovery of damages …. if …. (c) the claim arises or is outstanding on the termination of the employee's employment.”

[40]Under s.13(1) ERA “An employer shall not make a deduction from wages of a worker employed by him unless—(a) the deduction is required or authorised to be made by virtue of a statutory provision or a relevant provision of the worker's contract, or

(b) the worker has previously signified in writing his agreement or consent to the making of the deduction.”

[41]S13(3) ERA defines “deduction” as follows: “Where the total amount of wages paid on any occasion by an employer to a worker employed by him is less than the total amount of the wages properly payable by him to the worker on that occasion (after deductions), the amount of the deficiency shall be treated … as a deduction made by the employer from the worker’s wages on that occasion.”

[42]Under s23(1) ERA: “A worker may present a complaint to an employment tribunal — (a) that his employer has made a deduction from his wages in contravention of section 13”.

[43]Under s24(1) ERA: “Where a tribunal finds a complaint under section 23 well-founded, it shall make a declaration to that effect and shall order the employer— (a) in the case of a complaint under section 23(1)(a), to pay to the worker the amount of any deduction made in contravention of section 13”.

[44]Rule 34 of the ET Rules states: “The Tribunal may on its own initiative, or on the application of a party or any other person wishing to become a party, add any person as a party, by way of substitution or otherwise, if it appears that there are issues between that person and any of the existing parties falling within the jurisdiction of the Tribunal which it is in the interests of justice to have determined in the proceedings; and may remove any party apparently wrongly included.”

[45]Rule 29 of the ET Rules states: “The Tribunal may at any stage of the proceedings, on its own initiative or on application, make a case management order. Subject to rule 30A(2) and (3) the particular powers identified in the following rules do not restrict that general power. A case management order may vary, suspend or set aside an earlier case management order where that is necessary in the interests of justice, and in particular where a party affected by the earlier order did not have a reasonable opportunity to make representations before it was made.”

[46]In Serco Ltd v Wells

[2016] ICR 768

, the EAT held that the expression “necessary in the interests of justice” in Rule 29 should be so interpreted and variation or revocation of an order or decision will be necessary in the interests of justice where there has been a material change of circumstances since the order was made or where the order has been based on either a misstatement and there may be other occasions, which it is unwise to attempt to define but these will be “rare … [and] … out of the ordinary”.

[47]An employment tribunal does not have jurisdiction to entertain a claim under the Civil Liability (Contribution) Act 1978 (Sunderland City Council v Brennan

[2012] ICR 1183

[48]The Civil Liability (Contribution) Act 1978 is concerned only with liabilities falling for determination in the High Court or county court and creates no right to contribution in relation to claims withing jurisdiction of and employment tribunal (Per curiam - Sunderland City Council v Brennan

[2012] ICR 1183

). Analysis and Conclusions

[49]The question I need to determine is whether the Second Respondent was the Claimant’s employer at any relevant time and, in particular, whether she is or may be liable for any remedy claimed by the Claimant in these proceedings, whether under the claims for wrongful or unfair dismissal or unlawful deduction from wages.

[50]In my judgment, “at any relevant time” must be determined by looking at the claims the Claimant brings in these proceedings, because that is what the tribunal will eventually be adjudicating on. She brings three claims: for unfair dismissal, for wrongful dismissal, and for unlawful deduction from wages.

[51]In relation to the first two claims, in my judgment, “any relevant time” is time when the act complaint of took place, that is the Claimant’s dismissal. She was notified of her dismissal on 13 December 2019. She was dismissed by the First Respondent. The First Respondent’s solicitors in their dismissal letter clearly stated that they are acting for the First Respondent and not instructed by the Second Respondent in relation to that matter.

[52]Therefore, as far as the Claimant’s complaints of unfair and wrongful dismissal are concerned, in my judgment, it is indisputable that the Second Respondent cannot be liable for the First Respondent dismissing the Claimant from her employment with him.

[53]That would be the case even if at the time of the First Respondent dismissing the Claimant, she maintained some parallel employment relationship with the Second Respondent. The Second Respondent never dismissed her from any such “parallel” employment, and the Claimant brings no claims against the Second Respondent in relation to her dismissal by the First Respondent.

[54]In any event, I find that at the time of her dismissal the Claimant was no longer employed by the Second Respondent. I reject the First Respondent’s submissions that because her new 2019 employment contract with the First Respondent was not signed that should mean that her employment with the Second Respondent continued under the 17 January 2013 contract she had signed with both of them as her employer.

[55]Mr Cohen and Mr Brochwicz-Lewinski made various submissions on this point to show that the Claimant’s employment relationship with the Second Respondent had ended not only by virtue of her resignation by the letter of 7 February 2019, but also by virtue of the dissolution of the partnership between the First Respondent and the Second Respondent. However, as her employment relationship with the First Respondent continued uninterrupted any ongoing liability changed from being joint and several between the First Respondent and the Second Respondent to the sole liability of the First Respondent.

[56]In my judgement, the simple fact of the matter is that the Claimant resigned from her employment with the Second Respondent. Even though her letter of resignation refers to her resigning from the LLP, in my mind, the reality of the situation is clear. She could no longer continue working for both of them, she needed to decide whether to stay with the First Respondent or the Second Respondent. She chose the First Respondent. She stopped working for the Second Respondent. She communicated her resignation to the Second Respondent both verbally and in writing. That, in my judgment, was sufficient for her to end her employment relationship with the Second Respondent and for the Second Respondent to cease being the Claimant’s employer.

[57]The fact that subsequently to her resignation the Claimant undertook some “wrapping up” activities for the Second Respondent, in my judgment, is insufficient to find that the employment relationship continued. Both the Claimant and the Second Respondent understood and accepted that their employment relationships were at an end.

[58]The First Respondent confirmed in his evidence that he too considered that from February-March 2019 the Claimant had been working for him alone. The fact that the Claimant’s written contract with the First Respondent did not have all “i’s dotted and all t’s crossed” is irrelevant.

[59]Equally, the fact that the Claimant’s commission claim includes transactions the First Respondent says he was not aware of and that it must be the Second Respondent, who instructed the Claimant to deal with those matters (which the Second Respondent denies), in light of a clear and unequivocal decision by the Claimant to end her employment with the Second Respondent, which she communicated to both of them, in my judgment, is not sufficient to show that the Claimant continue to be employed by the Second Respondent.

[60]It follows that I find that the Second Respondent ceased to be the Claimant’s employer from 7 March 2019 by reason of the Claimant’s resignation.

[61]Turning to the Claimant’s claim for unlawful deduction from wages. There are two elements to that claim. She claims(i) her salary from 1 November 2019 to 13 January 2020, and

(ii) commission from February 2013.

[62]With respect to her salary claim, it is obvious that the Second Respondent not being her employer in the period cannot be liable for her salary. Her claim is for the salary the First Respondent had agreed to pay her as part of her employment with him. She brings no claims for wages against the Second Respondent.

[63]With respect to the Claimant’s commission claim, although “occasions” (using the wording in s.13(3) ERA) when such commission payments should have been made and were not could be said to be the dates when relevant transactions attracting commission were made and commission became due (or the Claimant’s next payroll date), as I stated earlier, in my judgment, “any relevant time” must be determined by looking at the claims the Claimant brings in these proceedings.

[64]Her claim, and I am satisfied that it is her claim as pleaded in ET1 and further particularised in the interparty correspondence, is that there was an agreement to defer her commission payments until a tax efficient structure was set up for such payments. Her position is that although her entitlement to commission continued to accrue from February 2013, it was agreed that the Respondents’ liability to make payments in respect of her commission entitlement shall be deferred. Therefore her commission payments were not due or payable under a tax efficient structure was set up. She says that she ended that agreement in November 2019 by making a demand for commission payments, or alternatively the arrangement ended on 13 January 2020 with the termination of her employment by the First Respondent.

[65]Although the Claimant claims commission entitlement arising from transactions occurring also in the period when both Respondents were her employer, in these proceedings the Claimant brings no complaint that there were any unauthorised deductions made from her wages before November 2019.

[66]Further, in these proceedings she brings no claim for unlawful deduction from wages against the Second Respondent. Therefore, I do not see on what legal basis the Second Respondent could be liable for the Claimant’s unlawful deduction from wages claim against the First Respondent, where(a) the unlawful deduction complained of occurred after the Second Respondent had ceased to be the Claimant’s employer, and

(b) the Claimant makes no such claim against the Second Respondent.

[67]I do not accept Mr Algazy argument that because there are unresolved issues of fact and law, including in relation to the existence of the Claimant’s commission entitlement, its calculation, “trigger” points, whether the deferral was agreed, whether the Claimant made a demand for payment, whether the dismissal “crystalised” her entitlement, her terms of employment with the First Respondent, division of pre-divorce liabilities between the First Respondent and the Second Respondent post-divorce, whether the Claimant’s wages claim is in time, that should be taken as the Second Respondent being the Claimant’s employer at the relevant time or as may be liable for the Claimant’s claims in these proceedings.

[68]In my judgment, all these issues either lie outside the tribunal jurisdiction (such as division of liabilities between the Respondents), or the matters between the First Respondent and the Claimant to be explored at the final hearing. Just because the Claimant could have put her claim differently and against both the First Respondent and the Second Respondent, in my judgment, does not give the tribunal the power to change her claim in that way, when she does not wish to do so.

[69]In Beresford, Mr Justice Underhill (as he then was) said: “The Respondents cannot have the Appellant joined simply on the basis that he is liable too and that it is unfair that the Claimant should have singled them out rather than him. The only (potential) basis for joinder is that they themselves wish to pursue a claim in the Tribunal against the Appellant under the 1978 Act.”

[70]Shortly after that judgment, the EAT chaired by Mr Justice Underhill in Brennan said the 1978 Act was not such “potential basis”.

[71]I accept Mr Cohen submission that on the principles as stated in Beresford, Brennan and Welsh in these circumstances there is simply no power for the tribunal to make any judgment against the Second Respondent when the Claimant makes no claims against the Second Respondent or to apportion liability between the First and the Second Respondents.

[72]For these reasons, I find that the Second Respondent is not and may not be liable for any remedy claimed by the Claimant in these proceedings.

[73]Furthermore, it appears from the Brennan judgment that any issues that the tribunal will determine in these proceedings cannot be used as res judicata in any possible future civil court action by the First Respondent against the Second Respondent under the Civil Liability (Contribution) Act 1978.

[74]Having decided on the preliminary issue, I am satisfied that my decision is “a material change in the circumstances”. Mr Algazy in his closing submissions accepted that if I found against him, that could amount to such change.

[75]The next question is whether I should exercise my powers under Rule 29 and Rule 34 and set aside EJ Wisby order and remove the Second Respondent as a party to these proceedings. Although the EJ Wisby order was not appealed by the Second Respondent or the Claimant, that does not prevent me from setting it aside if there are grounds for me to do that. Rule 29 clearly gives me that power.

[76]Based on my findings and my decision on the preliminary issues, I am satisfied that there are no issues between the Second Respondent and the original parties falling within the jurisdiction of the tribunal which it is in the interests of justice to have determined in these proceedings. Therefore, I find that it is necessary in the interest of justice to set aside the EJ Wisby order and remove the Second Respondent as a party to these proceedings.

Findings of Fact

[1]The former Second Respondent’s application for a costs order fails and is dismissed.

[2]The Claimant’s application for a costs order fails and is dismissed.

Background

[1]The relevant background to this matter and my findings and conclusions on the issue I determined at the open preliminary hearing on 30 April 2021 (the “OPH”) are set out in the written reasons I prepared on 18 May 2021 (the “OPH Reasons”). In this judgment I will refer to relevant paragraphs in the OPH Reasons where necessary.

[2]At the end of the OPH, after I gave my judgment on the preliminary issue, the counsel for the Second Respondent and the counsel for the Claimant said that they had been instructed to make costs applications against the First Respondent in connection with the preliminary issue and the OPH.

[3]There was insufficient time to deal with the applications at the OPH and it was agreed that the applications would be submitted by 7 May 2021 and the First Respondent would make his submissions on the applications by 21 May 2021. The applications would then be decided on the papers.

[4]The former Second Respondent (“MDP”) seeks a costs order against the First Respondent (“SDP”) on the grounds that SDP:(i) unreasonably applied to join MDP to the claim;

(ii) unreasonably failed to draw the tribunal’s attention to (i) the decision in Beresford and the limits of the tribunal’s powers under Rule 34, and (ii) his correct factual case, when making the joinder application,

(iii) unreasonably opposed MDP application to be dismissed from this claim.

[5]MDP argues that SDP’s application to join her was misconceived because on the Beresford and Brennan line of authorities the tribunal cannot make any judgment against her in favour of the Claimant (“HHS”) when HHS makes no claim against her, and the tribunal cannot make any judgment against her for contribution. Furthermore, any tribunal award made against SDP in these proceedings cannot serve as a basis for any contribution claim by SDP against her in the civil courts. Therefore, there cannot be any issues between her and HHS and SDP following within the jurisdiction of the tribunal which it is in the interests of justice to have determined in the proceedings.

[6]MDP submits that when making his application and at the telephone case management preliminary hearing on 15 September 2020 (“PHCM”) SDP failed to give full and frank disclosure of material facts and law by not drawing the tribunal’s attention the relevant authorities and by advancing his application on the factual basis he did not believe to be true.

[7]Finally, MDP argues that it was unreasonable for SDP not to concede the preliminary issue identified by EJ Stout to be determined at the OPH in light of the facts he knew and the legal position with respect to the HHS’ claims against him in these proceedings.

[8]HHS seeks a costs order against SDP on the grounds that “in causing [MDP] to be added to the proceedings as a party, and thus requiring the hearing of 30 April 2021 to be held, the [SDP] acted unreasonably and/or advanced a claim that had no reasonable prospect of success. In so doing, he caused [HHS] to incur unnecessary costs which could and should have been avoided. [SDP] should, therefore, be ordered to pay those costs”.

[9]HHS largely relies on the argument that the factual basis used by SDP to join MDP was inconsistent with the facts known to him, his position in the matrimonial proceedings with MDP, and therefore he could not have reasonably believed that the advanced factual position was true and in fact did not believe that.

[10]SDP opposes both applications. He says that based on his state of knowledge as at the time Employment Judge Wisby made her order to join MDP as a second respondent (“the EJ Wisby Order”) and considering the stage that the litigation had reached, it was not unreasonable to apply to join MDP. Further, he argues that there are evidence suggesting that HHS continued to work for MDP after she had resigned in March 2019 from her joint employment with them. There was nothing inherently unreasonable to apply to join MDP in the early stages of the proceedings and the OPH was needed to determine the factual issues.

[11]SPD contends that the failure to draw to EJ Wisby’s attention at the PHCM the decision in Beresford cannot amount to unreasonable conduct because:(i) it was appropriate and reasonable for SDP to wish to have MDP joined based on the potential outcomes and scenarios that might be established at trial which had not been ruled out at that stage,

(ii) the application was not advanced on the basis of a contribution claim, but under Rule 34 of the Employment Tribunals’ Rules of Procedure 2013 (“ET Rules”) on the basis that there appeared to be issues between HHS and MDP falling with the jurisdiction of the tribunal,

(iii) MDP did not raise the Beresford argument in her solicitor’s letter of 11 August 2020, which was considered at the PHCM, and

(iv) Beresford was a decision under the old version of the employment tribunals’ rules of procedure, and Rule 34 of the ET Rules is arguably wider than the corresponding provision in the old rules.

[12]SDP also argues that it cannot be said that he did not present his correct factual case. It was set out in his grounds of resistance and there was no finding by the tribunal at the OPH that SDP had not been truthful at either PHCM or in his evidence at the OPH.

[13]SDP points out that MDP did not appeal the EJ Wisby Order. Instead, at the OPH, she sought to invoke Rule 34 to have herself removed as a second respondent. That resulted in some considerable time being spent at the OPH dealing with her application, which ultimately resulted in the Tribunal ruling that it was not an avenue open to MDP. On the other hand, SDP rightly and properly conceded that the determination of the preliminary issue in MDP’s favour would constitute a material change of circumstances for the purposes of the test in Serco v. Wells.

[14]With respect to the HHS’s costs application, SDP repeats the above submissions and further submits that contrary to the stance adopted by HHS at the OPH, at the PHCM her counsel did not object to MDP being joined as a second respondent and stated that it was a matter between the respondent and the Tribunal and acknowledged that HHS would not be prejudiced by MDP being added as a second respondent.

The Law

[15]Rule 76 provides: 76 (1) A Tribunal may make a costs order or a preparation time order, and shall consider whether to do so, where it considers that— (a) a party (or that party’s representative) has acted vexatiously, abusively, disruptively or otherwise unreasonably in either the bringing of the proceedings (or part) or the way that the proceedings (or part) have been conducted; or (b) any claim or response had no reasonable prospect of success.

[16]The following key propositions relevant to costs orders may be derived from the case law:

[17]There is a two-stage exercise to making a costs order. The first question is whether a paying party has acted unreasonably or has in some other way invoked the jurisdiction to make a costs order. The second question is whether the discretion should be exercised to make an order. Only if the tribunal decides to exercise its discretion to make an award of costs the question of the amount to be awarded comes to be considered (Haydar v Pennine Acute NHS Trust

UKEAT/0141/17

[18]While the threshold tests for making a costs order are the same whether or not a party is represented, in the application of the tests it is appropriate to take account of whether a litigant is professionally represented or not. Litigants in person should not be judged by the standards of a professional representative (AQ Ltd v Holden

[2012] IRLR 648

[19]For term “vexation” shall have the meaning given by by Lord Bingham LCJ in AG v Barker

[2000] 1 FLR 759

: “[T]he hallmark of a vexatious proceeding is … that it has little or no basis in law (or at least no discernible basis); that whatever the intention of the proceedings may be , its effect is to subject the defendant to inconvenience, harassment and expense out of all proportion to any gain likely to accrue to the claimant, and that it involves an abuse of the process of the court, meaning by that a use of the court process for a purpose or in a way which is significantly different from the ordinary and proper use of the court process.” (Scott v Russell

2013 EWCA Civ 1432

, CA)

[20]‘Unreasonable’ has its ordinary English meaning and is not to be interpreted as if it means something similar to ‘vexatious’ (Dyer v Secretary of State for Employment EAT 183/83).

[21]In determining whether to make a costs order for unreasonable conduct, a tribunal should take into account the ‘nature, gravity and effect’ of a party’s unreasonable conduct — (McPherson v BNP Paribas (London Branch)

2004 ICR 1398

, CA)

[22]While a precise causal link between unreasonable conduct and specific costs is not required, it is not the case that causation is irrelevant. However, the tribunal must look at the entire matter in all its circumstances. Yerrakalva v Barnley MBC

[2012] ICR 420

Mummery LJ gave the following guidance on the correct approach: “41. The vital point in exercising the discretion to order costs is to look at the whole picture of what happened in the case and to ask whether there has been unreasonable conduct by the Claimant in bringing and conducting the case and, in doing so, to identify the conduct, what was unreasonable about it and what effects it had. The main thrust of the passages cited above from my judgment in McPherson's case was to reject as erroneous the submission to the court that, in deciding whether to make a costs order, the employment Tribunal had to determine whether or not there was a precise causal link between the unreasonable conduct in question and the specific costs being claimed. In rejecting that submission I had no intention of giving birth to erroneous notions, such as that causation was irrelevant or that the circumstances had to be separated into sections and each section to be analysed separately so as to lose sight of the totality of the relevant circumstances”.

Conclusions

[23]First, I shall briefly deal with the HHS’ application under Rule 76(1)(b), namely that SDP “advanced a claim that had no reasonable prospect of success”.

[24]SDP did not advance any claim against MDP. He applied to join her as a second respondent in relation to the HHS’ claims. In his application he did not make any separate claims against MDP or claimed contribution in relation to the HHS’ claims. He stated that as joint personal employers they “in principle have joint and several liability in respect of any claim established”. It was an application for a case management order and not a claim. In my judgment, Rule 76(1)(b) does not apply to applications for a case management order. In her application HHS did not refer me to any authority to the contrary.

[25]If, however, I am wrong, and “any claim” in Rule 76(1)(b) should be interpreted as to include an application for a case management order, of the kind made by SDP under Rule 34, his application did succeed at the PHCM and therefore cannot be said to have had no reasonable prospect of success.

[26]Turning to the ground of unreasonable conduct of the proceedings.

[27]MDP says that the SDP’s application was misconceived, the joinder was wrong in law and served no legitimate purpose and therefore it was demonstrably unreasonable for SDP to apply to join MDP.

[28]I do not accept that the SDP’s application was misconceived or wrong in law. It was made on the basis that there was a factual dispute as to whether MDP remained the HHS’s employer until her dismissal. Until that dispute was determined at the OPH, in my judgment, there appeared to be issues between MDP and the existing parties falling within the jurisdiction of the tribunal, and that was the basis for the EJ Wisby Order.

[29]If MDP considered the EJ Wisby Order was wrong in law, she should have appealed it. She chose not to do that. Instead, she applied to set it aside. Her application to set it aside was refused by EJ Stout on 11 November 2020, when she ordered the OPH to resolve the factual dispute. In doing so, she confirmed that “in the light of the information now provided by the Second Respondent it is apparent that, to use the terms of Rule 32, “there are issues between [the Second Respondent] and … the existing parties falling within the jurisdiction of the Tribunal which it is in the interests of justice have determined in the proceedings”.

[30]MDP did not appeal the EJ Stout order either. Furthermore, MDP herself, by her solicitors’ letter of 29 September 2020, sought, in the alternative, an order to hold a preliminary hearing to determine the issue who the HHS’s employer was at the time of her dismissal, and that application was granted.

[31]With respect to the argument that the SDP’s application was made on a false factual premise, namely that MDP continued to be the HHS’ employer up to the date of her dismissal. I find that, whilst based on the evidence I heard and the documents I was referred to at the OPH the position SDP adopted for the purposes of his joinder application in these proceedings appears to be inconsistent with his position in the matrimonial proceedings with MDP, his evidence at the OPH, which I accept, were that he thought that he was the sole employer of HHS until he had received details of her commission claim, which on the face of it suggest that HHS continued to work for MDP after her resignation in March 2019.

[32]Therefore, in my judgment, while at the OPH I found that MDP was not the HHS’ employer at any relevant time, until that finding of fact was made, it was not unreasonable for SDP to rely on the evidence he had to argue that MDP remained the HHS’ joint employer.

[33]I do not accept HHS’ contention that SDP could not have reasonably believed and did not in fact believe in the factual assertion he was advancing. Whilst his case on the facts was not the strongest, in my judgment, it was not unreasonable for him to seek to establish the disputed facts.

[34]He discovered that some of the HHS’ commission claim related to transactions initiated by MDP which postdate HHS’ resignation in March 2019. He also discovered that his written contract of employment with HHS had never been properly finalised and executed. The previous employment arrangement between HHS and SDP and MDP as joint employers were not clear, with their jointly controlled entities appear to have been interposed as the employer party.

[35]Further, at the time of the SDP’s application to join MDP on 7 August 2020, it appears the existing parties were still in correspondence seeking to understand how HHS was putting her commission claim. For example, on 24 August 2020, SDP’s solicitors made a request for additional information with respect to the HHS’s commission claim. HHS fully clarified her position on the commission claim only on 26 March 2021, and that was in the context of her resisting a threaten application to strike out her commission claim for it being time barred.

[36]Therefore, in those circumstances, I find that it was not unreasonable for SDP to advance his application on the factual basis as he did. In my judgment, it cannot be said that he could not have reasonably believed and in fact did not believe that the factual basis was properly arguable.

[37]In my view, SDP’s failure to draw to EJ Wisby’s attention the decision in Beresford does not amount to unreasonable conduct. The SDP’s joinder application was not advanced on the basis of contribution, and unlike in Beresford there was a dispute as to the correct identity of the HHS’ employer.

[38]It appears from the record of the PHCM that neither HHS’ counsel, who attended the PHCM, nor MDP’s solicitors in their written submission on the SDP’s application, relied on Beresford or otherwise made any submission on that issue.

[39]Further, in their application to set aside the EJ Wisby Order of 29 September 2020, MDP’s solicitors did not mention Beresford as the reason why the EJ Wisby Order should be set aside. Instead, they argued that the application had been made on the factually incorrect basis, which matter was ultimately decided at the OPH.

[40]Therefore, in those circumstances, I find that not drawing to EJ Wisby’s attention Beresford and other authorities, upon which MDP relied at the OPH (Brennan and Welsh), cannot be said to be unreasonable conduct.

[41]For the sake of completeness, I shall observe that while the decision in Brennan does appear to establish that the Civil Liability (Contribution) Act 1978 is concerned only with liabilities falling for determination in the civil courts and creates no right to contribution in relation to claims within jurisdiction of an employment tribunal, the EAT held that per curiam and indeed stated that they “do not regard this conclusion with any satisfaction”.

[42]Therefore, it appears that even on the basis of Beresford, it is arguable that Rule 34 gives the tribunal the power to join a party to the proceedings to determine issues for the purposes of “res judicata” in any parallel or pending civil proceedings. I also agree with SDP that the language in Rule 34 appears to be wider than in the old rule 10(2) considered in Beresford and Brennan.

[43]To be clear, I do not find that the Tribunal has such power. In my judgment on the preliminary issue (see paragraph 69 – 72 in the OPH Reasons) I decided that it did not. However, I find that the law on this issue is not as clear as to allow me to conclude that if SDP had indeed put his application on the basis of seeking a contribution from MDP it would have been unreasonable for him to do so. In any event, as I said earlier, the legal basis for his application was different.

[44]Concerning the issue of full and frank disclosure, I do not accept that the same standard of disclosure as required in ex parte applications in the civil courts equally applies to applications for a case management order to an employment tribunal, including under Rule 34. The ET Rules govern employment tribunals’ procedure. They do not contain the disclosure requirements of the equivalent standard, as set out in the White Book or in the case law upon which MDP relies (Ghafoor v Cliff

[2006] 1 WLR 3020

). These authorities concern civil courts procedure. In her application MDP does not refer me to any authority to demonstrate that the same duty applies when making an application to an employment tribunal to join a party under Rule 34. In my view, it would be wrong to apply the same duty in the context of employment tribunal proceedings, which are meant to be less formal and more tailored to accommodate litigants in person and lay representatives.

[45]In any event, MDP was put on notice about the SDP application, and her solicitors submitted written representations to the tribunal. She was not invited to attend the PHCM as at that time she was not a party to the proceedings. However, her solicitors in their letter opposing the application did not make any such request, which would have been open to them to do under Rule 29 of the ET Rules.

[46]For the same reasons as explained above, I find that it was not unreasonable for SDP to oppose the MDP’s application to be removed as a second respondent until the factual dispute was resolved at the OPH. SDP properly conceded that if I found against him on the preliminary issue this would be a material change in the circumstances, and that would allow me to make a new order under Rule 34 to remove MDP as a respondent, and that is how the matter was eventually decided.

[47]Furthermore, for the reasons I explained in my judgment on the preliminary issue (see paragraphs 11 – 22 in the OPH Reasons) it would have been wrong in law for me not to deal with the preliminary issue. Accordingly, I cannot see how SDP opposing the MDP’s application could be said to be unreasonable conduct until the preliminary issue was determined.

[48]I have already dealt with the issue as to whether SDP has acted unreasonably in presenting his factual case as the basis for his application (see paragraph 31- 36 above). While things moved on from when the SDP application had been made in August 2020, and in the correspondence between the parties MDP has clarified how she was advancing her commission claim, in my judgment, it was still not unreasonable for SDP not to concede that MDP was not the HHS’ employer at any relevant time and to seek to have that question determined by the tribunal at the OPH.

[49]There was still a factual dispute as to the nature of the ongoing relationship between MDP and HHS after March 2019 and how some of the HHS’ commission claim related to that. At the OPH, having heard oral evidence from SDP, MDP and HHS and having considered relevant documents in the hearing bundle, I concluded that MDP was not the HHS’ employer at any relevant time for the purposes of these proceedings. However, in my judgment, SDP’s case on the facts was not so hopeless as to consider that it was unreasonable for him to run it at the OPH.

[50]For these reasons, I find that by joining MDP to the proceedings on the factual basis advanced in his application, and/or by not drawing to EJ Wisby attention Beresford and Brennan line of authority, and/or by opposing MDP’s application to be removed as a second respondent to these proceedings, SDP did not act unreasonably.

[51]It follows, that MDP’s and HHS’ applications for a costs order against SDP fail and are dismissed.

Conclusions

[1]There is no reasonable prospect of the original decision being varied or revoked, because the matters the former Second Respondent raises in her application for reconsideration have been duly considered by the Tribunal in making the Judgment.

[2]The application does not disclose any new facts or circumstances, which would justify revisiting the original decision.

[3]The former Second Respondent appears to be attempting to re-argue her original costs application after it has been decided. In the reconsideration application she further develops arguments she ran in her original costs’ application. There are no apparent reasons why such further developed arguments could not have been included in the original costs’ application. In any event, they are not sufficient to outweigh the importance of maintaining finality of litigation.

[4]Therefore, the tribunal does not consider that it is necessary in the interest of justice to reconsider the Judgment.