Lunt v Merseyside TEC Ltd [1998] UKEAT 951_97_1305

EAT
Lunt v Merseyside TEC Ltd
[1998] UKEAT 951_97_1305 · 1998-03-17
MR JUSTICE MORISON (PRESIDENT) : This is an appeal against a decision of an Industrial Tribunal which was held at Liverpool on 17th June 1997. The written decision of the tribunal was sent to the parties on 7th July 1997. It was a decision of a Chairman sitting on his own, Mr Homfray-Davies.We would like to pay tribute to the way in which this decision has been expressed, and for the obvious care which has gone into it.The learned Chairman was concerned to determine whether the complaints which the applicant wished to make were complaints which had been compromised as a result of a binding compromise agreement. If they had been, then obviously they should be dismissed without the need for an investigation of their merits. If on the other hand, the compromise agreement was not effective, then there was to be a determination of the merits of any such complaints.The IT1 in question set out the applicant's complaints as follows:
"1) Equal Pay. 2) Sexual discrimination. 3) Constructive dismissal. 4) Victimisation. 5) Breach of Contract."
That document is dated 10th March 1997 and was presented to the Industrial Tribunal shortly thereafter.It was the former employer's contention, that is Merseyside TEC Ltd, that it was not competent for the Industrial Tribunal to consider those complaints because of the compromise agreement which they said had been entered into and which was binding.The compromise agreement is dated 10th February 1997 and was signed on behalf of the parties and by the employee's solicitor. Broadly speaking, the relevant terms are these. The employers agreed to terminate the employment as from 11th December 1996 by reason of the employee's ill health; within seven days of the signing of the agreement they would pay to her salary for the month of July 1996 and a specified sum of money; by clause 3 the employers promised to use their best endeavours to procure that the employee would become entitled to the benefits of the employer's Permanent Health Insurance ["PHI"] scheme, and the employee for her part undertook to take such steps as might be necessary to achieve that entitlement (including agreeing to any medical examinations that may be required by the PHI Insurers); by paragraph 4, the employee acknowledged that the terms set out in the agreement were offered and accepted in full and final settlement of all claims that she might have, whether arising out of her employment, her contract of employment, or the termination of either, and whether against the employer or any associated company or any of its or their officers, servants or agents (including without limitation all and any claims which the Employee may have or make for unfair dismissal, constructive dismissal, notice pay, salary arrears, holiday pay, employment benefits, company pension contributions, statutory and contractual redundancy, or otherwise howsoever arising).In consideration of the payments referred to in the agreement, the employee agreed to refrain from instituting any complaint or proceeding before an Industrial Tribunal and any other legal proceeding against the employer. The employee confirmed that the agreement satisfied any claims that she might have for a redundancy payment and/or unfair dismissal arising out of the termination of her employment. It recorded the fact that she had received independent legal advice from a qualified solicitor namely, Mr J M Hunter, of Forster Dean & Co, (the address was given), as to the terms and effect of the agreement and in particular its effect upon the employee's ability to pursue her rights before an Industrial Tribunal. Then in paragraph 6.3 the employee and Mr Hunter warranted that there is in force, in respect of Mr Hunter when giving such advice, a policy of insurance covering the risk of a claim by an employee in respect of loss arising in consequence of his advice. It then said in paragraph 6.4:
"The conditions regulating Compromise Agreements and set out in Section 223(3) to (4) of the Employment Rights Act 1996 are satisfied."
In paragraph 6.5:
"The Employee confirms that she had entered into the terms of the Agreement fairly and voluntarily and that the payment referred to above extinguishes any and all of her statutory employment rights in respect of which an ACAS officer would have been empowered to act."
It will seen therefore that this was a compromise agreement which purported to cover all and any claims that might be made arising out of the termination of Mrs Lunt's employment.She had been employed for some years by the respondent company and had reached a senior position. The circumstances of her employment deteriorated towards its end. The matters giving rise to that are in dispute, but may be summarised in this way. Mrs Lunt became ill as a result of her employment with her employers. She attributed her stress-related illness to the way in which she was dealt with by her employers and by their failure to deal with certain specific issues which she raised with them, which she believed revealed that the employers were misusing public funds. The alternative view was that she was suffering stress and depression not as a result of any unfair treatment of her, but as a result of her undertaking a job which proved too much for her.She was in receipt of medical advice from two doctors, one of whom took one point of view, and another the other, together with a psychotherapist who was of the view that her stress and depression was caused by the way she had been treated at work rather than by the suggestion that she had been over-promoted.It is not necessary to say any more about the circumstances of her employment, but I refer to them because they are referred to in a letter of 11th June 1996 which she wrote to the Director of Human Resources. In that letter she says this:
"... I have been off work since February, undergoing a course of stress counselling, at the request of the company's Personnel Manager, Sue Wheeler. This has been overseen by both the company's and my own doctor.
I have now completed this course, and both the Stress Counsellor and my own doctor are of the opinion that I am now ready to return to work.However, arising from comments made by Sue Wheeler during a series of three meetings, and in particular things said by Drs. Monk and Bishop of MTL, which could have only come from Sue Wheeler, it is obvious that I will be unable to return to Merseyside TEC.The principal circumstances which have led me to this conclusion are based on what has been said to me, namely:-- I had been removed from post last summer because I had been promoted beyond my capabilities, and as a consequence could not cope with the work- This inability to cope was the cause of the stress, and subsequent clinical depression- The company have been actively exploring ways to have me declared medically unfit to return to work, so that I could be "pensioned off" on health grounds.Bearing in mind all that happened last summer in relation to Alpha/Instep [ that is an organisation which had been providing services to the TEC by whom she was employed and in respect of their charges she had raised a number of queries ], I can only construe this proposed course of action as unfair dismissal, harassment, victimisation and sexual discrimination.At the very least, they mean that I must re-evaluate everything which I though I had achieved over the past 4 years, and question my self confidence and professional competence.It is not my intention simply to resign, nor do I feel ready for the "knackers yard", since as a result of the counselling I have undertaken, I consider that Merseyside TEC was directly responsible for my previous medical condition, and my present inability to return to work.I am therefore looking to Merseyside TEC for a mutually agreeable settlement to this impasse.I look forward to hearing from you.

Yours sincerely ... [ and Mrs Lunt signed the letter. ]"

The compromise agreement, as I have indicated, was entered into on 10th February 1997. At or about the time of this agreement, the applicant made an agreement with her solicitor in which she said that she had received the following advice:
"a) Upon signing the agreement I will be prevented from making any claim whatsoever against my former employer before an industrial tribunal or any other court.
b) The agreement will satisfy any claim I may have for a redundancy payment and or a claim for unfair dismissal arising out of the determination of my employment.c) My employment with my former employer will terminate from 11th December 1996 due to my ill-health.d) My employer will pay me my salary for the month of July 1996 and the sum of [ then the figure is given ] within 7 days of signing this agreement.e) My employer will use its best endeavours to procure that I will become entitled to the benefits of the Permanent Health Insurance Scheme and I undertake to take any such steps as may be necessary to achieve that entitlement including any medical examinations that may be required by the PHI insurers.f) I accept that the terms set out in the agreement are in full and final settlement of all claims I may have arising from my employment and/or termination of employment.2. My solicitor has advised me not to sign the Compromise Agreement because it is likely that my termination of employment would be deemed unfair by an Industrial Tribunal and an Industrial Tribunal is likely to award me compensation in excess of what I will receive under this agreement.3. I confirm that I have understood and accepted this advice but I have nevertheless decided contrary to my solicitor's advice to sign the agreement.4. I confirm that I renounce the right to make any claim whatsoever against Messrs Forster Dean Solicitors in respect of any loss which may arise as a consequence of signing the agreement contrary to their advice."That document is signed by the applicant.Before turning to the Industrial Tribunal decision for its reasons. I turn to the relevant statutory provisions contained in s.203 of the Employment Rights Act 1996 . Subsection (1) provides:
"(1) Any provision in an agreement ... is void in so far as it purports- (a) to exclude or limit the operation of any provision of this Act, or (b) to preclude a person from bringing any proceedings under this Act before an industrial tribunal."
Subsection (2) provides:

"(2) Subsection (1)-

...(f) does not apply to any agreement to refrain from instituting or continuing before an industrial tribunal any proceedings within section 18(1)(d) (proceedings under this Act where conciliation available) of the Industrial Tribunals Act 1996 if the conditions regulating compromise agreements under this Act are satisfied in relation to the agreement."Subsection (3):
"(3) For the purposes of subsection (2)(f) the conditions regulating compromise agreements under this Act are that- (a) the agreement must be in writing, (b) the agreement must relate to the particular complaint, (c) the employee or worker must have received independent legal advice from a qualified lawyer as to the terms and effect of the proposed agreement and, in particular, its effect on his ability to pursue his rights before an industrial tribunal, (d) there must be in force, when the adviser gives the advice, a policy of insurance covering the risk of a claim by the employee or worker in respect of loss arising in consequence of the advice, (e) the agreement must identify the adviser, and (f) the agreement must state that the conditions regulating compromise agreements under this Act are satisfied."
Subsection 4 of s.203 provides a definition of the meaning of the word "independent" and "qualified lawyer".The Industrial Tribunal's decision may be summarised in this way. Having referred to the terms of the agreement itself, and to the provisions of s.203, at paragraph 7 the tribunal noted Mr Bradley's, of Counsel, submission on behalf of the employer, as to the meaning and effect of s.203(2)(f) of the Act. The tribunal noted his submission that since s.203(2)(f) says "does not apply to any agreement to refrain from instituting" any proceedings, it clearly follows that the particular complaint referred to in s.203(3)(b) may be a complaint which has not yet been formulated in an IT1. He submitted that a general construction of s.203 was to be preferred, contending that all present and future claims whether formulated or not, could be excluded by a compromise agreement. He submitted that a statement in Harvey on Industrial Relations , Vol. 4, s.T, para. [728] and [729] was wrong. To some extent the editors of Harvey were relying on a statement made by a government minister when introducing the provisions into the House of Lords. It was Counsel's submission at the Industrial Tribunal that it was not a permissible aid to construction to take into account the debate, because the circumstances giving rise to the right to refer to Hansard , as indicated in the case of Pepper v Hart [1993] ICR 392 , had not arisen.Mr Bradley's alternative submission was that the letter, to which I have referred, plainly identifies as particular complaints at least the complaint of unfair dismissal. Counsel further submitted to the Industrial Tribunal that a compromise agreement did not have to fulfil any statutory requirements in so far as it was providing accord and satisfaction for any complaint of breach of contract. The reason why that is so, is because s.203(1) renders void agreements which preclude people from bringing proceedings under the Act, whereas claims for breach of contract are proceedings which are brought under the provisions, curiously, of the Industrial Tribunals Act 1996 . It was Counsel's submission, therefore, that provided that the agreement was otherwise enforceable, then it was open to the applicant to compromise her contractual claims without further formality.The applicant at the Industrial Tribunal was to some extent slightly taken by surprise by two events that occurred. The first was that on arrival at the Industrial Tribunal Counsel for the respondent approached Mrs Lunt's representative, who is her husband with no legal qualifications, and, in effect, asked him if he could borrow, so as to copy, the bundle of documents which Mr Lunt had prepared for the purposes of the hearing. The letter of 11th June to which I have referred, was included within that bundle and Mr Lunt was of the view that it rather rankled with him that having given Counsel this facility, he should find that the letter was being relied on so as to defeat his wife's claim.The second unfortunate matter related to a communication between the Chairman of the Industrial Tribunal and Mr Lunt. The effect of the interchange between the two of them was to leave Mr Lunt with the impression that he was not entitled to set the scene for the letter which had been written on 11th June. That arose because the Chairman of the Industrial Tribunal had indicated, in our view quite rightly, that he would find no assistance in receiving evidence from Mrs Lunt as to what she intended to be conveyed by the letter. Since the issue before him was how the letter should properly be construed, the subjective intention of the writer was not likely to be of assistance to him. But as a result of that interchange Mr Lunt felt slightly daunted and did not feel that he had the opportunity to present to the Chairman everything about the background to that letter which he would have wished to have said.We gave Mr Lunt that opportunity. I think it can fairly be said that he has had a full chance to put forward his point of view on this issue. It seems to us, that nothing that was said by him did other than to reinforce the decision which was arrived at by the Industrial Tribunal Chairman on this particular issue.The Chairman concluded in paragraph 9.4 that:
"The proper construction of the applicant's letter dated 11 June 1996, taken as a whole, can only mean that she was threatening to pursue the named complaints in a Tribunal, if "a mutually agreement settlement" could not be agreed."
That is entirely consistent with the view that we have formed having regard to what Mr and Mrs Lunt have told us at this appeal.It seems to us plain that this was a carefully drafted letter by Mrs Lunt, and it displays considerable ability, if we might say so. It is manifestly warning her employer that there was an impasse between the parties relating to her employment and its continuation. It was warning them that she was not prepared to go quietly; and it was a warning that if they were not prepared to enter into a compromise agreement which was satisfactory to her, they could anticipate Industrial Tribunal proceedings ranging from unfair dismissal through to allegations of sex discrimination; and by reason of the reference in the letter to the "Alpha/Instep" matter, she was plainly signalling to the employers that in any such proceedings it was likely that some dirty linen was inevitably going to be washed in public.Accordingly, on the first submission which Mr Lunt made to us that the tribunal was wrong to have prevented him from relating the background of the letter, we have to say that we do not think that the tribunal was either wrong or that it would have made any difference had he felt able to tell the Industrial Tribunal Chairman what he was able to tell us. We are quite satisfied, therefore, that if a narrow approach is taken to the proper interpretation of s.203(3)(b), that the requirement was satisfied on the facts of this case. It seems to us that there are no grounds for Mr Bradley's wider submission. It seems to us clear that Parliament was not intending to permit a blanket compromise agreement compromising claims which had never been indicated in the past. We adopt in this judgment, precisely what was said by the editors of Harvey at paragraph [729] as being an accurate statement of the law:
"A compromise agreement cannot, therefore, seek to exclude potential complaints that have not yet arisen on the off-chance that they might be raised; it cannot, in other words, be used to sign away all the employee's tribunal rights, as can be done in the case of a negotiated settlement drawn up with the assistance of a conciliation officer. However, where a number of different tribunal claims (such as unfair dismissal, race/sex discrimination, claims for unlawful deduction of wages, and so on) have been raised by the employee, whether in an originating application or in correspondence prior to the issue of proceedings, there does not seem to be any good reason why these should not all be disposed of in the one compromise agreement. Each matter would be a 'particular complaint' under the relevant statute. The alternative approach, that there should be a separate agreement for each and every complaint raised, would seem to be supererogatory in such circumstances."
Mr Lunt further submitted to us that the written agreement which was formally completed was giving effect to an earlier agreement made between the parties prior to the coming into force of the Employment Rights Act . It seems to us that as a matter of law any such earlier verbal agreement that was made between the parties was of no legal effect because it was the law then as it is now, that to have any legal effect any agreement must be in writing. It follows, therefore, that there needed to be a written agreement between the parties which they were willing to enter into and sign.Accordingly, we are not required to consider his interesting argument that would have arisen as to the proper interpretation of s.140 of the Employment Protection (Consolidation) Act 1978 , in so far as it was amended by the 1993 Act. That section which is the equivalent of s.203, disapplies subsection (1):
"to any agreement to refrain from instituting or continuing any proceedings specified in s.133(1) ... or 134(1) before an industrial tribunal ..."
S.134(1) applies to a complaint which has been presented to an Industrial Tribunal in relation to unfair dismissal. Accordingly, Mr Lunt argued before us that had the agreement been made prior to the coming into force of the Employment Rights Act 1996 it could not have excluded Mrs Lunt's right to present a complaint or institute a complaint of unfair dismissal because it was only permissible to exclude unfair dismissal in relation to a complaint of unfair dismissal which had by that stage been presented to an Industrial Tribunal.We are not required to reach a final conclusion on that submission, because the agreement concerned came into force after the passing of the 1996 Act, but we have to say that it seems to us that the words "to any agreement to refrain from instituting any proceedings specified in section 134(1)" would make Mr Lunt's argument incorrect. It seems to us that what Parliament contemplated by the reference to s.134(1), was the identity of the nature of the complaint rather than to the fact that the complaint had been instituted, otherwise the words "from instituting" would have no meaning.He further submitted to us that by virtue of the private agreement which had been entered into between his wife and the solicitor, she was effectively deprived of any remedy against her solicitor which meant that one of the purposes behind the provisions of s.203(3) had been subverted. That seems to us not to be a sustainable argument, even if, which we are prepared to assume for present purposes, the employers were aware that such an agreement had been entered into. It is quite apparent from the terms of the agreement between Mrs Lunt and her solicitor, that she was entering into the compromise agreement expressly against his advice. In those circumstances, there could be no question of her having a complaint or claim against the solicitor arising out of the fact that she had entered into the agreement. In those circumstances, it seems to us, the compromise agreement itself does not lose its legal effect. There may be many instances in which a person does not have the right to make a complaint against their solicitor. For example, the solicitor may have given advice to enter into an agreement which was wholly sensible and which nonetheless cause the client damage, that would not be recoverable. There may be circumstances, as here, where the employee enters into the agreement contrary to the legal advice. It seems to us that there is no requirement in the statute that an agreement can only be of binding effect where the employee has acted in accordance with the advice that has been received. The requirement of the legislation is that he or she must have received independent legal advice as was the case here. Accordingly, we reject that line of argument which was raised by Mr Lunt.The Industrial Tribunal Chairman continued in his decision as follows:
"The compromise agreement is a valid accord and satisfaction under the law of contract, in respect of all matters mentioned in paragraph 4 of the agreement."
We respectfully agree. The Chairman continued:
"Particular complaint in s.203(3) cannot be limited to complaints that have been presented to a Tribunal; ..."
We agree. The Chairman continues:
"Section 77 (4A)(b) of the Sex Discrimination Act 1975, cannot be construed any differently, otherwise the provisions as to compromise agreements in the two acts would be in conflict."
We agree. The Chairman continues:
"... the applicant has made a particular complaint within section 203 ERA 1996 and section 77(4A)(b) Sex Discrimination Act 1975. Obviously there is no need for a separate document to record each complaint. To hold otherwise could lead to absurd results, for example: If the applicant was entitled to proceed with her complaint before this Tribunal and she lost, the respondent would have no means of recovering the monies paid under the agreement.

I accept that the reference in the agreement to Section 223 was a typing error."

We respectfully agree with that approach. The Chairman continues:
"I reject the applicant's suggestion that I should refer to Hansard for guidance. The relevant statutory provisions are not "ambiguous or obscure, nor do they [or] lead[s] to an absurdity."
We agree with that, although as Mr Lunt urged us to do, we were quite happy in this case to look at Hansard , in the passage quoted in Harvey . The Chairman continues:
"The claim for breach of contract is made under the Industrial Tribunals Act 1996 section 3. The provisions of Section 203 ERA are of no effect."
We agree, provided it is understood that the words "of no effect" mean "do not apply". The tribunal Chairman then rejected Mr Bradley's contention that s.77(4A)(f) of the Sex Discrimination Act 1975 had been complied with, but concluded that the agreement was severable and that the defective part could be severed from it by virtue of the words in s.203(1) "in so far as it". Accordingly, he determined that the applicant was estopped or prevented from bringing her complaints for constructive dismissal, victimisation and breach of contract, and he dismissed those claims. He ordered a pre-hearing discussion to determine the relevant issues, in respect of the discrimination claims and the future conduct of those cases.As we said at the outset, it seems to us that the Industrial Tribunal Chairman has handled this case with conspicuous ability. We cannot improve on the decision which he has arrived at on the facts of this case. We also would like to add that we do not think he can be criticised for the lack of communication which there apparently was between himself and Mr Lunt as to the extent to which Mr Lunt was entitled to go into the background to the relevant letter. We prefer to consider that what has happened is that what he said may not have been received by Mr Lunt, who is also not to be blamed for the misunderstanding.In these circumstances, we have no hesitation in saying that the appeal has no merit and must be dismissed.