Ipswich Borough Council v Hutchinson [1993] UKEAT 890_92_2406

EAT
Ipswich Borough Council v Hutchinson
[1993] UKEAT 890_92_2406 · 1993-06-24
HIS HONOUR JUDGE HAGUE QC Mr Hutchinson was formerly employed by the Ipswich Borough Council as a director of environmental health. His employment was terminated in November 1991 on the ground of redundancy and he received a redundancy payment of £17,472.15. Mr Hutchison alleged that the reason for the termination of his employment was not in reality redundancy, and he brought a claim for unfair dismissal under Part V, Employment Protection (Consolidation) Act 1978. He also made various other claims against the Council outside the Act.Mr Hutchison's unfair dismissal claim came on for hearing before an Industrial Tribunal sitting at Bury St Edmunds on 22nd June 1992. He was then represented by Mr Reason, an officer of his union, and the Council was represented by Mr Lynch of Counsel. The parties negotiated and reached an agreed settlement. The Tribunal then gave its Decision in an agreed form of Order which reads as follows:
"Upon terms agreed between the parties and upon the applicant withdrawing his Originating Application no.3574/92
IT IS ORDERED that Originating Application 3574/92 be adjourned generally until further order.Liberty to apply to the applicant within 28 days of any breach of any duty pursuant to the terms agreed to make any payment to or for the benefit of the applicant."(We interpose that in the actual Decision, the word "of" in the final part appears as "if". The parties were agreed that this was a misprint, and the common intention was that the 28-day period for an exercise of the liberty to apply should commence from a breach and not from the date of the Decision. As will be seen, in fact no time difficulty arose.)The phrase "the applicant withdrawing his Originating Application" at first blush appears inconsistent with the latter parts of the Decision which clearly proceed on the basis that the Originating Application remains in being. However, Mr Lynch rightly pointed out that a notice of withdrawal does not automatically terminate the proceedings, which technically remain alive until formally dismissed by a Tribunal under Rule 12(2)(b) in Schedule 1, Industrial Tribunal (Rules of Procedure) Regs 1985. Nevertheless, we think the phrase is a little unfortunate and potentially misleading, and we suggest that it would be preferable in similar cases if the first reference to the Originating Application is either omitted altogether (ie leaving only the words "Upon terms agreed between the parties") or reads "and upon the applicant agreeing that proceedings under his Originating Application be stayed", or words to that effect. We would also suggest that in the second part the word "stayed" should be substituted for "adjourned".Apart from those minor drafting points, the Order is in an appropriate and indeed necessary form. Under S.140(1) of the 1978 Act, subject to certain exceptions (including settlements promoted by a conciliation officer), any provision in an agreement is void in so far as it purports "(b) to preclude any person from presenting a complaint to, or bringing any proceedings under the Act before an Industrial Tribunal". It has been held that the section renders void an agreement to withdraw a claim already made to the Tribunal: see Naqvi v. Stephens Jewellers Ltd [1978] ICR 631. But it does not render void a consent order made by a tribunal: see Times Newspapers Ltd v. Fitt [1981] ICR 637, in which Browne-Wilkinson J. said at p.643D:
"... In very many cases which are compromised before industrial tribunals, the conciliation officer plays no part. Once a decision has been properly made by the industrial tribunal on the information before it at the time, in the absence of fraud or misrepresentation that should be the end of the matter. Section 140 is designed to protect employees from entering into perhaps misguided bargains before their claim is heard by the industrial tribunal. But once the case has come before the industrial tribunal and been disposed of, the purpose of section 140 is exhausted."
A little later, after referring to some dicta in Council of Engineering Institutions v. Maddison [1977] ICR 30 , Browne-Wilkinson J said at p.643H:
"These words plainly indicate that once a compromise has been incorporated into a decision of the industrial tribunal, it is final and no longer subject to the effects of section 140."
During the course of argument, the Order was referred to as, or analogous to, a Tomlin Order. That is incorrect. Under a Tomlin Order (so called by reason of a Practice Note at [1927] W.N.290 issued by Tomlin J.), all further proceedings on the claim are stayed on the terms set out in a Schedule to the Order, except for the purpose of carrying those terms into effect. The important point is that the claim is thus effectively dead, having been replaced for all purposes by the contractual terms set out in the Schedule. In normal litigation, the advantage of a Tomlin Order is that those contractual terms can be enforced simply by making an application to the court in the proceedings, rather than having to start a new fresh court action based on contract. However, despite a suggestion to the contrary in Harvey Vol 4, Part X, para. 203, we doubt if a Tomlin Order is appropriate in industrial tribunal cases, because a tribunal has no jurisdiction to consider contractual claims. By contrast, under an order such as the Order in the present case, the claim is not dead, but liable to be re-instated in the event of non-compliance by one party with the agreed terms of settlement. The redress of the other party is either to apply to have the stay removed so that he can continue with the original claim, or to enforce the terms of the settlement by a court action.Returning to the facts of the present case, the agreed terms were set out in a written Agreement dated 22nd June 1992 and signed by Mr Hutchison and an officer of the Council. The settlement was of all Mr Hutchison's claims connected with his employment or its termination, both under the 1978 Act and otherwise. Clause (1) of the Agreement provided as follows:
"(1) The Council will pay to Mr Hutchison the sum of £40,000 within 14 days of the date hereof, or will pay the said sum or part thereof in any greater period as should be requested by Mr Hutchison prior to the Council making the said payment of £40,000."
Clause (2) provides for payment by the Council of Mr Hutchison's costs. Clause (3) was a confidentiality clause, but excluding from its operation "the performance of legal duties (which duties include due reporting of the settlement by agents of the Council to those who are obliged to be informed of such settlements)".A dispute about the implementation of the Agreement arose shortly after its conclusion. The Council's payroll manager was advised by the Inland Revenue that PAYE at 25% should be deducted from the £40,000. (There was also a question as to a small amount of National Insurance contributions, but that was resolved in Mr Hutchison's favour a few days later and nothing turns on it.) Cheques totalling £30,000 were sent. Mr Hutchinson through his Solicitors claimed that under the Agreement he was entitled to £40,000 net, with the Council defraying any tax due on that sum, and returned the cheques. There followed discussion of this dispute between Solicitors, with the Inland Revenue being involved in attempts to solve it. Eventually (and this is jumping ahead in time somewhat) by a letter dated 13th November 1992 from its Solicitors, the Council agreed to pay the £40,000 in full and bear the tax. A cheque for £40,000 was sent a few days later. That cheque was also returned, in circumstances we shall return to.We think it is reasonably clear from the correspondence we have seen that it was intended that Mr Hutchison should bear the tax on the £40,000, but that it was assumed by all concerned in the negotiations that the full benefit of relief given by section 188, Income Tax Act 1988 on the first £30,000 would be available (so that only the top £10,000 would be liable to tax) and that the figure of £40,000 was negotiated upon that common assumption. Mr Hutchinson himself confirmed to us that he was not concerned about tax on only £10,000. Unfortunately, the fact that a large part of the relief would be swallowed up by the £17,472.15 redundancy payment previously made was overlooked. We should also say that we agree with Mr Lynch that the part of the clause (1) of the Agreement giving Mr Hutchison an option to delay the whole or part of the payment due was included on the premise that he would be liable for the tax. Its purpose was plainly to enable him to spread payment into different tax years if that would be tax-efficient. Mr Epstein sought to suggest other possible reasons for that part of clause (1), but we found those unconvincing.In the meantime, on 30th July 1992 Mr Hutchison had applied to the Tribunal for the hearing of his claim to be resumed. A letter in reply dated 14th August 1992 stated that the Chairman had instructed that a brief directions hearing should be held, that it would be unnecessary for witnesses to attend, that the hearing would take no more than half an hour, and that "the parties are reminded that it is not the Tribunal's job to interpret any `agreement' between the parties". The directions hearing was held before the Chairman on 16th October 1992. He reiterated the contents of the letter of 14th August 1992, and did not hear evidence about or consider in any way the terms of the Agreement. He said, in paragraph 8 of his Reasons, that"... the matter is simply adjourned and if the applicant considered that that was a breach of any duty, pursuant to the terms agreed, to make any payment to or for his benefit then he could apply to revive the matter. The applicant has indeed applied to do just that because he thinks that there has been a breach of the agreement which has been reached".The Chairman then dealt with the question of time, on the footing that the 28-day period for applying commenced on 22nd June 1992 and had therefore expired (a point which, on the agreed substitutions of "of" for "if" referred to above, does not arise). He extended that time under Rule 12(2)(a) of the 1985 Regulations. Having done that, and having decided that claim had not been dismissed, the Chairman appears to have considered that it followed automatically that the hearing of the claim must be resumed.In our judgment, the Chairman erred in law in his decision. In our view it is clear, and it was rightly agreed by both Counsel, that the agreed Order gave the Tribunal a discretion whether or not to make a further order lifting the stay effected by the adjournment. It was not "simply adjourned" with liberty for the applicant to restore it if he desired. He could only apply if there had in fact been a breach of the Agreement, and then it would be a matter of discretion. In the normal way the Courts seek to enforce settlement agreements and so bring finality to litigation and will only lift a stay in exceptional circumstances (see e.g. Lambert v. Mainland Market Deliveries Ltd [1977] 1 WLR 825 ), and in our view the discretion to lift the stay should not be exercised if the other party has remedied his breach. It was therefore essential for the Chairman, in order to determine both whether Mr Hutchison was entitled to apply and whether he (the Chairman) should exercise his discretion to lift the stay, to consider the Agreement and the facts. Mr Epstein submitted that by implication the Chairman did exercise his discretion, but we cannot agree. His decision not to interpret the Agreement was erroneous, and he failed to exercise the discretion we have mentioned. His Decision is therefore flawed and must be set aside.Following the Decision, the Council by its Solicitors' letter of 13th November 1992 accepted liability for the full £40,000 and payment of the tax thereon and sent a cheque for £40,000, as we have mentioned. That cheque was returned by Mr Hutchison's Solicitors by a letter dated 20th November 1992. In that letter they allege that the Council was in breach of the Agreement, not only because the £40,000 was not paid in due time, but also because there had been publicity in the local press about the settlement for which the Council was responsible and so in breach of the confidentiality clause in the Agreement. That letter also states that Mr Hutchinson was under pressure for family reasons when he agreed the sum of £40,000, but that this pressure has been removed "and he is looking to the Council to put forward a substantially increased offer". Mr Hutchison, who dispensed with the services of Mr Epstein at a late stage of the hearing, told us that this did not represent his true position, that he had been particularly upset by the publicity which he said had been generated by the Council, and that what he now really wanted was the opportunity to air matters in public before the Industrial Tribunal.The Council firmly deny that it was responsible for the publicity or that it is in breach of the confidentiality clause. However, we agree with Mr Lynch that this is not a material matter, because the Order itself only contemplates a breach of the duty to pay money as triggering the liberty to apply and the possible removal of the stay. We further agree that both the removal of Mr Hutchison's family pressure and his desire to air the matter in public are irrelevant. It is important that agreed settlements should be adhered to and that there should be finality to litigation.In our view, the only matters of any substance which should be taken into account in deciding whether or not to lift the stay are whether the Council has been and remains in breach of the Agreement. Any tribunal would have to look at the position at the present time. In our view, whatever the position may have been previously, it is now clear from the Council's Solicitors' letter of 13th November 1992 that Mr Hutchison is better off than he would have been under the Agreement. Any possible detriment to him by reason of late payment (for which he is himself mainly responsible, having returned the various cheques) is more than compensated for the Council's acceptance of liability for all the tax.On that footing, we are of the opinion that the only possible way in which the discretion whether to lift the stay could now properly be exercised is by a refusal to do so. We therefore consider that it is unnecessary to remit the matter to be reconsidered and that we should substitute our own decision that Mr Hutchinson's application to remove the stay is refused. Only if there is a failure to comply with the terms of the letter of 13th November 1992 (or any obligation to pay costs under clause (2) of the Agreement) would there be any justification for a future application to lift the stay.