ROTHSCHILD ASSET MANAGEMENT LIMITED v MS KATE AKO [2002] EWCA Civ 236

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM MR JUSTICE LINDSAY
(PRESIDENT)
EMPLOYMENT APPEAL TRIBUNAL
[2002] EWCA Civ 236Case No Case No: A1/2001/0928Venue Royal Courts of Justice, Strand,, London, WC2A 2LL, Friday 1st March 2002
Between
ROTHSCHILD ASSET MANAGEMENT LIMITEDAppellantMS KATE AKORespondent
Before
Lord Justice MummeryLord Justice Jonathan ParkerLord Justice DysonMr Deshpal Panesar (instructed by Messrs Eversheds) for the AppellantMiss Karon Monaghan (instructed by Commission for Racial Equality for the RespondentDate 1 March 2002

Lord Justice Mummery :

Introduction

[1]The principle of cause of action estoppel has presented problems for Employment Tribunals in cases in which the initial originating application is withdrawn before a full hearing on the merits and the complainant subsequently attempts to pursue fresh proceedings based on substantially the same facts against the same party. It is desirable for the law to strike a sensible balance between(a) the application of the principle of finality in legal proceedings and(b) the public interest in full and fair public hearings of grievances in the relatively informal setting of tribunal procedures. The facts of this case shine a spotlight on the glaring injustices which could arise from the mechanical application of cause of action estoppel to all cases in which proceedings are withdrawn from the tribunal. The Background[2]Ms Kate Ako, who is black and of African origin, was employed by Rothschild Asset Management Limited (Rothschild) as a secretary in the Settlement Department and in the Institutional Sales Department from July 1993. She was dismissed on 11 May 1999 in circumstances which led her to present to the Employment Tribunal on 17 June 1999 a complaint of unfair dismissal and a complaint of race discrimination throughout her employment (the First Application).[3]On 28 June 1999 she wrote to the Employment Tribunal at Stratford "to withdraw her application against Rothschild."[4]On 2 July 1999 the Chairman of the Tribunal signed a decision, which was sent to the parties and entered on the Register on 6 July 1999. The document bearing the case number is headed "Decision" and simply states "The application is dismissed on withdrawal by the applicant."[5]The Chairman heard no evidence or argument. He was not even sitting in the open tribunal room when he made the order. The order was made by the Chairman in exercise of his discretion under Regulation 13 (2) (a) of the Employment Tribunals (Constitution etc) Regulations 1993,which were then in force. They have since been replaced by the Employment Tribunals Regulations 2001, which contain a similar provision.[6]Within less than a week Ms Ako presented a fresh application dated 8 July 1999 to the Employment Tribunal (the Second Application) repeating the same allegations against Rothschild. She also made allegations against Mellon Bank, in the belief that it was the transferee of the undertaking of the Institutional Sales Department. She claimed unfair dismissal by reason of the transfer and of race discrimination. Mellon Bank was later struck out and Boston Safe Deposit & Trust Company, a subsidiary of Mellon and said to be the actual transferee, was substituted as second respondent. It has not taken any part in this aspect of the proceedings.[7]Rothschild's response in its Grounds of Resistance on 5 August 1999 was that Ms Ako was " barred by the principles of estoppel and res judicata from bringing the Second Application .."[8]Rothschild applied for the application to be struck out, relying on the decision of this court in Barber v. Staffordshire County Council [1996] ICR 379 (Barber). The Employment Tribunal[9]The Employment Tribunal hearing the matter as a preliminary issue unanimously decided in Extended Reasons sent to the parties on 20 October 1999 that Ms Ako's claim against Rothschild had already been disposed of judicially and that cause of action estoppel prevented the claim from being pursued.[10]The Tribunal made important findings of fact about the circumstances in which the order was made. At the time of the First Application Ms Ako sought assistance from the Commission for Racial Equality (the CRE). She sent them a copy of her Originating Application. At an interview with an employee of the CRE she was advised to name Mellon Bank as a respondent in addition to Rothschild and to send a letter to the Employment Tribunal withdrawing the Originating Application. Shortly after the interview Ms Ako telephoned the Tribunal and inquired whether Rothschild had put in a Notice of Appearance. On being told that it had not she said that she would withdraw her application and would confirm that in writing. The tribunal found that "The Applicant never intended not to proceed against Rothschild Asset Management Ltd. It was at all material times her intention to replace the Originating Application which she had withdrawn with one which named both Rothschild Asset Management and the present Second Respondent."[11]Before writing to withdraw the Application she checked with colleagues that it was all right to do so. She also checked the legal position in a book on Employment Law in the library of the college where she was studying law. The book, which was published in 1980, was out of date. It indicated that a second application could be made after the withdrawal of an application, provided that it was presented in time, citing the unreported case of Sidney v. Watts Countrymade Foods (EAT 453/78).[12]The Tribunal concluded that, although Ms Ako intended to withdraw the Application against Rothschild, she " did not intend, understand or know that she would not be permitted to pursue those claims further and she would not have asked for the application to be withdrawn had she known that."[13]While expressing considerable regret for the position in which Ms Ako found herself, the Employment Tribunal held that, on the binding authority of Barber, the decision of the Chairman was a judicial act; and that the claim against Rothschild having been dismissed by that decision, each of her claims against Rothschild was res judicata. It was not open to the Tribunal to find that the "confused advice" or the out of date text book on which she relied were special or exceptional circumstances which would enable the Tribunal to exercise a discretion.[14]Ms Ako was refused a review of the decision of the Tribunal on 18 November 1999. On 8 May 2000 she made an out of time application for the review of the decision of the Chairman dated 2 July 1999. That was refused on 30 May 2000. The Appeals[15]Ms Ako appealed to the Employment Appeal Tribunal. On 8 February 2001 the Appeal Tribunal allowed her appeal, holding that Barber was distinguishable. The case was remitted to the Employment Tribunal for a hearing on the merits. Rothschild now appeals on the ground that there was no error of law in the decision of the Employment Tribunal and that the Appeal Tribunal should have dismissed the appeal. The Appellant's Submissions[16]Mr Panesar, on behalf of Rothschild, contended that Barber, which is binding on this court as well as on the tribunals below, is authority for the proposition that an order of an Employment Tribunal dismissing an Originating Application on withdrawal is a judicial act of a competent court giving rise to cause of action estoppel, regardless of the reason for the withdrawal of the application and regardless of the prejudice suffered by Ms Ako and the absence of any evidence of prejudice to Rothschild. In support of the strict and absolute nature of the principle he cited the recent decision of this court in Lennon v. Birmingham City Council [2001] IRLR 826 , in which Buxton LJ said "30. Secondly, it was argued that Barber is distinguishable from the present case because in that case the court knew the reasons for the withdrawal of the original claim. In this case, we do not know the reasons. That is, in my judgment, an incorrect argument. The doctrine turns not on the reason why the court's decision to dismiss the claim was consented to by the party making the claim, nor on the reason why the court made the order, but on the simple fact that the order was in fact made. It is for that reason that, in the case of issue estoppel, the court will not re-enter the merits or justice of allowing the proceedings to continue, whereas in the wider jurisdiction under Henderson v. Henderson, which turns on abuse of process and not simply on a comparison of one order or another, the court may do that."[17]Mantell and Pill LJJ agreed with the judgment of Buxton LJ.[18]In these circumstances, Mr Panesar submitted, it is not permissible to look behind the terms of the order. The matters raised in the Second Application were rightly held by the Employment Tribunal to be res judicata. The Authorities[19]A review of the recent authorities is required in order to ascertain the limits of the application of the doctrine to cases in the Employment Tribunals.[20]The principal authority is Barber, in which the complainant argued that no cause of action estoppel could arise from an order made by a chairman dismissing an application in the Employment Tribunal on withdrawal, because it was an administrative procedure and did not involve any reasoned judicial decision or determination on the facts or the law of the case. It was in the context of that submission that the Court of Appeal concluded that the order of the tribunal was a judicial decision, not a mere administrative act, holding that there was nothing " in the principles of cause of action or issue estoppel which stipulated that they could only apply in cases where the tribunal has given a reasoned decision on the issues of fact and law in the previous litigation": per Neill LJ at p. 397.[21]The Court of Appeal also rejected a subsidiary argument that there were exceptional circumstances which prevented the application of the ordinary rules of res judicata and cause of action estoppel. At p. 397 Neill LJ cited the following passage from the opinion of Lord Keith in Arnold v. National Westminster Bank Plc [1991] 2 AC 93,104 as demonstrating that that argument was bound to fail:
"Cause of action estoppel arises where the cause of action in the later proceedings is identical to that in the earlier proceedings, the latter having been between the same parties or their privies and having involved the same subject matter. In such a case the bar is absolute in relation to all points decided unless fraud or collusion is alleged, such as to justify setting aside the earlier judgment. The discovery of new factual matter which could not have been found out by reasonable diligence for use in the earlier proceedings does not, according to the law of England, permit the latter to be re-opened."
[22]Although the formulation of general legal principles of cause of action estoppel in Barber did not expressly refer to the relevance of the reason for the withdrawal of the complaint, it should be noted that in his account of the particular circumstances of that case Neill LJ said at p. 392 " The reason why Mrs Barber withdrew her claim was because without aggregation she could not satisfy the statutory conditions relating to the minimum hours of work per week required to support her claim."[23]That was a case in which the application was withdrawn because the applicant had decided to abandon a claim which she considered she could not successfully pursue.[24]That is to be contrasted with the circumstances of withdrawal in Sajid v. Sussex Muslim Society [2002] IRLR 113 . The Court of Appeal distinguished Barber and held that cause of action estoppel did not apply where on an application to the Employment Tribunal based on breach of contract the complainant made it clear that he would pursue that claim in the High Court rather than in the tribunal. The complainant had expressly reserved his right to bring proceedings for breach of contract other than in the tribunal; he withdrew his application because the tribunal did not have the jurisdiction to award the full amount of damages claimed by him. The dismissal of the proceedings on withdrawal was relied on by the defendant in the High Court as creating a cause of action estoppel. The Court of Appeal held that the order of the Employment Tribunal did not prevent him from pursuing the breach of contract claim in the High Court proceedings.[25]The judgments in Sajid were given on 2 October 2001. The judgments of the Court of Appeal in Lennon given on 27 March 2001 were not cited and the court hearing Sajid was unaware of them. Mr Panesar contended that the reasoning in the judgments in Sajid was per incuriam and that in any event the decision was distinguishable, as there was an express reservation in the Originating Application and on the withdrawal, signifying that proceedings for breach of contract would be brought in the High Court. In those circumstances it was known to all that the withdrawal was not unequivocal. The appropriate order would have been a stay rather than a dismissal of proceedings. Conclusion[26]I start with Lennon in which cause of action estoppel was discussed in the context of refuting the argument that Barber was distinguishable, because in Barber the court knew the reasons for the withdrawal of the application, whereas in Lennon the reasons were not known. As Buxton LJ said, the doctrine "turns on the simple fact that the order was in fact made" and not on the reasons why the court's decision to dismiss was consented to by the party making the claim or the reason why the court made the order.[27]Although that part of the judgment of Buxton LJ, with which Mantell and Pill LJJ agreed, might appear to present a serious legal difficulty for Ms Ako, I find that, on a careful reading, it is not insuperable. Lennon is, of course, binding on this court. I do not doubt for a moment that it was correctly decided. I do not, however, agree with Mr Panesar that it has the determinative effect on this case for which he contends. Although Lennon highlights the importance of the fact that an order for dismissal has been made, the decision does not preclude the application of the general principle that a court may have regard to the factual circumstances surrounding a consensual legal act (the matrix of fact) in order to understand its meaning and effect: Investors Compensation Scheme Limited v. West Bromwich Building Society Limited [1998] 1 WLR 896 at 912F-913B. An order dismissing an action by consent operates in the same way as dismissal by adjudication: the cause of action expires with the dismissal and the fact of the order being made precludes fresh proceedings based upon the same or substantially the same grounds. However, in the event of a subsequent disagreement as to the extent of the disputes settled by a consent order, evidence of the objective background to the consent and to the making of the order would be admissible, even though direct evidence of the parties as to their subjective intentions would not be: see Foskett on The Law and Practice of Compromise (4 th Ed. 1996) at para 6-05. In my judgment, neither Barber nor Lennon is authority for the proposition that it is never permissible to have regard to the circumstances surrounding a consent order in order to determine the extent of the consent given to the making of the order and the extent of the estoppel arising from it.[28]In most cases in the ordinary courts of law no problem arises. The making of a consent order dismissing an action will bar further proceedings between the same parties for the same cause of action. The order is binding until it is set aside on appeal or in other proceedings brought for the purpose of having it set aside. The reasons for the consent of the parties will be irrelevant and it will not normally be necessary to look beyond the order itself in order to determine the application of cause of action estoppel.[29]There is, however, a procedural problem peculiar to the Employment Tribunals, which has not been mentioned in the authorities. Its importance only became apparent to me in the course of the excellent submissions of Ms Monaghan in support of this appeal. In the ordinary courts there is a significant distinction in the rules of procedure governing withdrawal of proceedings between(a) an order dismissing proceedings, which is capable creating cause of action estoppel, and(b) discontinuance of proceedings under CPR Part 38.7 (and previously, with the leave of the court, under RSC Order 21, rules 3 and 4), which does not operate as a release or extinction of a cause of action and as a bar to further proceedings: see The Ardanhu (1887) 12 App. Cas. 256 at p. 259 and Foskett on the Law and Practice of Compromise paras 15-24 and 15.25 The permission of the court is now required to make another claim against the same defendant when the claim arises out of facts, which are the same or substantially the same as those relating to a claim which has been discontinued after the defendant has filed a defence. The court would be very likely to give permission in a case such as the present. The procedural rules in the Employment Tribunal do not, however, make the same distinction or contain similar provisions. This omission may be a trap for the unwary, if the doctrine of cause of action estoppel is strictly applied. The only procedure for withdrawing an application is by an order dismissing the proceedings. There may, however, be cases in which a discontinuance of the tribunal proceedings, if that procedure were available, would be more appropriate than dismissal: Sajid is one such case, where the evident purpose of withdrawal was to put an end to the particular proceedings without releasing or discharging the cause of action on which those proceedings were based.[30]In my judgment, the reasoning in Barber and Lennon does not require that cause of action estoppel, as applied in the ordinary courts, should apply to Employment Tribunal cases where it is clear, on an examination of the surrounding circumstances, that the withdrawal of the application is in substance a discontinuance of the proceedings. Discontinuance does not release or discharge the cause of action. It preserves the right to establish an untried claim on the merits in other proceedings. If, as I have explained, this is so in ordinary courts, it does not make any sense that the position should be more strict in its application in the less formal setting of the Employment Tribunals. Unless and until the Regulations of the Employment Tribunals are amended to deal with this point, it would be advisable for Employment Tribunals, on being notified of the withdrawal of an Originating Application, to ask the applicant for a statement of the circumstances of the decision to withdraw before deciding whether to make an order dismissing the proceedings.[31]I do not find it necessary to express a concluded view on the imaginative submissions of Miss Monaghan based on the Human Rights Act 1998 and Article 6 of the Convention.[32]I would dismiss the appeal.

Lord Justice Dyson:

[33]I agree that this appeal should be dismissed for the reasons given by Mummery LJ. I only add a few words of my own because it might seem at first blush that the decisions in Barber and Lennon, and in particular the passage at paragraph 30 of the judgment of Buxton LJ in Lennon, which has already been quoted by Mummery LJ, present an insurmountable obstacle for Ms Ako. Buxton LJ said:
"the doctrine turns not on the reason why the court's decision to dismiss the claim was consented to by the party making the claim, nor on the reason why a court made the order, but on the simple fact that the order was made."
The argument advanced on behalf of Rothschild is quite simply that the reason why Ms Ako withdrew her application is irrelevant. Accordingly, the fact that she withdrew her application because she had been advised that it was necessary to take this step so as to enable her to make a properly constituted application, joining both companies as respondents, is irrelevant. Accordingly, the decision of the Tribunal dismissing the application is an absolute bar to the subsequent proceedings.[34]The passage in the judgment of Buxton LJ is capable of being misunderstood. A person may withdraw a claim or (in litigation) consent to judgment for many different reasons. He may do so because he has accepted advice that his claim will fail; or because he cannot afford to continue; or because he wants to defer proceedings until some other avenue of resolving the matter has been explored; or because he has decided that he is not yet in a position to proceed; or that he ought to proceed before a different tribunal (as in Sajid) or add another party (as in the present case). In some cases, the reasons will indicate that the party has decided to abandon the claim. In others not so. In relation to the question whether a dismissal following withdrawal (or a consent judgment) gives rise to a cause of action or issue estoppel, I consider that the reasons for the withdrawal or consent are not relevant, unless they shed light on the crucial issue of whether the person withdrawing the application or consenting to judgment intended thereby to abandon his claim or cause of action.[35]I do not believe that Buxton LJ was saying that the dismissal of an application following withdrawal gives rise to a cause of action or issue estoppel even if it is clear that the applicant did not intend to abandon his claim or cause of action. No authority was cited to us for such a proposition which is both so starkly far-reaching and capable of giving rise to serious injustice.[36]Two decisions of this court were cited to us which, I believe, do shed some light on the problem. In Khan v Golecha International Ltd [1980] 1 WLR 1482, the plaintiff conceded on appeal that the transaction was not one of moneylending within the meaning of the Moneylenders Act 1927 and the appeal was dismissed by consent. He then brought another action against the same defendant and alleged that the transaction was a loan to which the 1927 Act applied. It was held on appeal that he was estopped by his concessions in the previous proceedings from asserting that the transaction was a loan. At page 1490, Brightman LJ said:
"The judgment was given by consent and the consent was given because the company claimed, and the plaintiff accepted, that there was no lending of money. In my view, that admission by the plaintiff, given to the court and founding the judgment by consent, was just as efficacious for the purpose of issue estoppel as a judicial decision by the court after argument founding a similar judgment"
[37]And at page 1491, he said: "In this case, the plaintiff had the opportunity, in support of his appeal on the previous occasion, of establishing that money was lent. He chose not to establish that position. His counsel got up in court and deliberately abandoned it. So it seems to me that he loses his right of establishing that same position before another tribunal".[38]Similarly, at page 1493, Bridge LJ said:
"In the event what happened was that the plaintiff, through his counsel, quite specifically and categorically chose to withdraw that issue from the consideration of the court on the basis that, in relation to that issue, he was bound to accept defeat and acknowledge that the case against him was unanswerable."
[39]It is clear from these passages that the court was emphasising the fact that the plaintiff had expressly abandoned the claim that the transaction was a loan.[40]The second authority is SCF Finance Co Ptd v Masri and another (No 3) [1987] QB 1028. In that case, a wife decided not to proceed with her application to discharge a Mareva injunction that had been granted in relation to money standing in bank accounts on the basis that the money belonged to her husband. In not proceeding with her application and consenting to its dismissal, her counsel told the court that he did not concede that the money belonged to her husband. The plaintiff then applied for leave to serve a garnishee order on the wife. In the garnishee proceedings, she sought to argue that the money did not belong to her husband. This court decided that, since the wife had chosen not to take advantage of the opportunity to have the issue of the ownership of the money determined in the earlier proceedings, she was barred from raising that issue in the later proceedings even though she had previously purported not to concede the issue. It was argued on behalf of the wife that Khan could be distinguished because in that case it had been expressly stated that the wife did not concede that the money belonged to her husband. The court said at page 1048 that it was not possible to decide that such a reservation is to be given in all such cases some defined effect. The court was applying principles which were intended to treat an issue as laid to rest "where it would be unfair and unjust between the parties to treat it otherwise; and, in particular, the court is concerned to prevent abuse of the court's procedure by any party". The court then considered the facts in that case, and decided (page 1049) that to allow the statement by counsel for the wife that she did not concede the issue, which she declined to have tried, would be to permit the process of the court to be abused by her for her own advantage.[41]In my view, what emerges from these authorities is that there is no inflexible rule to the effect that a withdrawal or judgment by consent invariably gives rise to a cause of action or issue estoppel. If it is clear that the party withdrawing is not intending to abandon the claim or issue that is being withdrawn, then he or she will not be barred from raising the point in subsequent proceedings unless it would be an abuse of process to permit that to occur. On the facts of the present case, it is clear that Ms Ako did not intend to abandon her claim. Nor would it be unjust or unfair as between the parties to permit her to start again: no abuse of process is involved here.

Lord Justice Jonathan Parker:

[42]I agree that this appeal should be dismissed, for the reasons which Mummery LJ has given. I also agree with the judgment of Dyson LJ (which I have had the advantage of reading in draft).[43]Had Ms Ako expressed an intention to abandon her claim, I would have had no difficulty in concluding that the doctrine of issue estoppel operated to bar her from subsequently seeking to revive it. However, as the Tribunal found, she:
" . never intended not to proceed against [the appellant]. It was at all material times her intention to replace the Originating Application which she had withdrawn with one which named both [the appellant] and [Boston Safe Deposit & Trust Co Ltd]."
[44]Nor, in my judgment, does the mere fact that she sought the withdrawal of the application say anything as to her intentions in this respect. In the context of the procedural rules applicable in the Employment Tribunal, to which Mummery LJ has referred, a withdrawal of proceedings is equivocal as between an intention to abandon, on the one hand, and an intention to continue with the claim in another form, on the other. Accordingly, the doctrine of issue estoppel is not brought into play, in my judgment.[45]Buxton LJ's observation, in paragraph 30 of his judgment in Lennon , that: " . the doctrine [of issue estoppel] turns not on the reason why the court's decision to dismiss the claim was consented to by the party making the claim, nor on the reason why a court made the order, but on the simple fact that the order was in fact made" was made in the context of a clear expression of an intention to abandon the claim. As Buxton LJ makes clear, where a party has expressed such an intention, the court is not concerned with the reasons which may have led him to do so. In the instant case that stage is not reached, because Ms Ako neither held nor expressed any such an intention.

Order

Appeal dismissed with the costs. Permission to appeal refused. (Order does not form part of the approved judgment)

Cited in 46 later judgments

and 37 more of the most senior