MR S AIKMAN v MR D STUBBS [2001] UKEAT 992_00_0309

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2001] UKEAT 992_00_0309Case No Appeal No. EAT/992/00Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
MR S AIKMANAPPELLANTMR D STUBBSRESPONDENT
Before
Mr Justice Douglas BrownLord Davies of CoityDate 3 September 2001
[1]APPEARANCES For the Appellant NO APPEARANCE OR REPRESENTATION BY OR ON BEHALF OF THE APPELLANT For the Respondent NO APPEARANCE OR REPRESENTATION BY OR ON BEHALF OF THE RESPONDENT MR JUSTICE DOUGLAS BROWN : This is an appeal from a decision of the Employment Tribunal at Leeds, (Chairman Mr J M Hepworth), the extended reasons being dated 28 June 2000. The matter was before the Employment Tribunal under the heading: Applicant: Mr D Stubbs Respondent: Mr S Aikman/Chairman. Mr Stubbs was represented by Mrs Oldroyd, a solicitor. Mr Aikman appeared in person.[2]The notice of appeal was entered by Employee Management Ltd, who are Human Resource Health & Safety Consultants. Mr Stubbs' answer was put in by himself as he was no longer legally represented.[3]On 3 July 2001 Employee Management Ltd, by letter, informed the Registrar that they no longer represented Mr Aikman:
"As we have been notified that he is in receivership"
. Although the Employment Appeal Tribunal has not been formally notified of this, it does appear that Mr Aikman has been the subject of a receiving order in bankruptcy. In response to the Registrar's enquiry, the Official Receiver indicated that he did not want to take any part in the appeal.[4]Neither Mr Aikman nor Mr Stubbs appeared on the date for hearing of the appeal, 11 July, and the Registrar's staff were unable to contact them.[5]We decided that nevertheless we should proceed to consider the appeal on written representations. On behalf of Mr Aikman we have his grounds of appeal settled by his representative, Mr Diamond, and also a skeleton argument prepared by Mr Diamond for the preliminary hearing held on 23 January 2001. For Mr Stubbs we have his answer in EAT Form 3 which runs to a page and a half of writing with a number of documentary enclosures.[6]Having considered all the material before us we have come to the conclusion that this appeal should be allowed. The decision under appeal was the decision of the Tribunal to refuse Mr Aikman's application for a review of the decision of a differently constituted Employment Tribunal (Chairman Mr P A Morris) the extended reasons being dated 3 September 1999. Having allowed the appeal our decision is that there should be a review of the first decision by an Employment Tribunal constituted differently so that neither Chairman we have mentioned nor either of the members will form part of that new constitution.[7]We set out the background history leading to these two decisions. Mr Stubbs made his application by an IT1 received on 14 May 1999. He claimed compensation in the shape of redundancy payments. In box 5 he put "Mr Steve Aikman/Chairman" and gave the address as:
"Global Sports Bars Ltd, PO Box 289 Harrogate"
. The application was dated 12 May 1999. Global Sports Bars Ltd was struck off the Companies Register on 4 May 1999 and dissolved by notice in the London Gazette dated 11 May 1999.[8]The originating application was served by letter sent to the former trading address of the company as it appeared in box 5.[9]In the details of Mr Stubbs' complaint he said: "My employment with Mr Aikman started on 1.9.93 on a salary of £26,000 per annum and one month in arrears. The company's name was at the time Aikman leisure Ltd. The company then changed to Aikman Management Ltd then once again to Global Sports Bars Ltd. My salary then increased to £40,300 plus a company car and a mobile phone".[10]It was entirely understandable that Mr Stubbs did not, in his originating application, draw a clear distinction between the limited company and its chairman.[11]It is more difficult to understand why the Employment Tribunal which first heard the matter, was not astute to see that there was a material and important difference between the two. However, unfortunately this was not the case.[12]The Employment Tribunal had before it Mr Stubbs in person and the identified respondent (Mr Steve Aikman/Chairman) is referred to in the terms: "Appearance not entered and did not attend".[13]The unanimous decision of the Tribunal was that Mr Stubbs succeeded in his claim for unlawful deduction of wages in respect of pay and holiday pay and the respondent was ordered to pay £4,650 in respect of wages and the same amount in respect of holiday pay. Mr Stubbs' complaint of wrongful dismissal was well founded and the respondent was ordered to pay in lieu of notice £3,875. Finally the Tribunal held that Mr Stubbs had been dismissed for redundancy and was entitle to a redundancy payment from the respondent in the sum of £1,320.[14]The first three paragraphs of the reasons are concerned with Mr Stubbs' employment and the history of that employment, Paragraphs 4 and 5 are concerned with Mr Stubbs' entitlement to unpaid wages, to holiday pay and redundancy payments and their calculation.[15]We set out in full paragraphs 1, 2 and 3:
"1. Mr Stubbs worked for the respondent company and it's predecessors in respect of name from 1 September 1993. 2. He was General Manager/Area Manager when there was an area and he reported to Mr Steve Aikman, Chairman. 3. Mr Stubbs was responsible for the day to day running of the organisation and the clubs. However, he was not a shareholder and Mr Aikman had the final control, indeed towards the end of Mr Stubbs' employment, at the back end of 1998 beginning of 1999, things were clearly not going right. Mr Aikman at a meeting indicated that the organisation was likely to go down and that their jobs were in jeopardy and indeed the applicant at that late stage in January was not getting paid properly, payments were irregular and sometimes not arriving at all. In consequence the applicant left his employment claiming that the respondent had breached his contract of employment and was entitled to leave because of the employers conduct and that in fact the real reason for the dismissal at that stage was that the company was failing, he was no longer needed, that it could no longer afford to pay him and that he was in effect redundant and as a result he left the company finally, the Tribunal is satisfied, on 25 February 1999 the day shown on his P45 which left him owed 6 weeks wages and clearly 5 weeks notice pay and possibly holiday pay which he claims is 6 weeks. "
[16]It is apparent on the face of those reasons that they were seriously flawed. No attempt was made to explain why an applicant found to have been working for and paid by a limited company was not employed by that company rather than its chairman personally. Accordingly there is no reason stated as to why Mr Aikman should be ordered to pay Mr Stubbs a total of £14,495.[17]Mr Aikman, in an affidavit sworn in accordance with paragraph 16 of the Employment Appeal Tribunal Practice Direction 1996, referred to the IT1 and the details of the complaint and said that on receipt of the IT1 he was advised that as the matter related to a company which no longer existed there was no need for him to take any action in relation to the matter. He did not believe that the action was against him as an individual because of the contents of the application and because he knew that he had personally never employed Mr Stubbs. For the same reason when he saw the notice of hearing he took no action in relation to it. When the decision and the extended reasons were served he again took no action. His reason appears from paragraph 5 of the affidavit:
"The decision at paragraph 1 of the reasons made it clear that the respondent was 'the respondent company', there was further reference to the company elsewhere in the reasons. There was no mention at all of any suggestion that I was personally held to be the respondent for any purpose"
. The affidavit continues to explain it was only when Mr Stubbs took enforcement proceedings in the County Court that he sought to clarify the position by writing to the Employment Tribunal the letter received on 25 January 2000. He believed that a simple correction was all that was required. That letter, written from his home address for the urgent attention of Mr Morris, the Employment Tribunal Chairman, was in these terms: "Regarding the judgment made against myself I wish to inform you that the judgment should be against Global Sports Bars Ltd, a separate legal entity of which I was merely the Chairman and I did not in my own right ever employ Mr David Stubbs. I was cited at the hearing as the Chairman of Global Sports Bars Ltd and not as an employer in my own right. At all times covered by Mr David Stubbs claim, limited liability companies employed him which were as follows in time[18]The reply to that came from the Regional Chairman by letter of 27 January in which he indicated he was proposing to substitute the name of the company for Mr Aikman's name unless there was any objection.[19]Mr Stubbs' solicitors did object on his behalf and accordingly the amendment was not made.[20]On 27 March 2000 Mr Aikman got in touch by fax with the Regional Office and on 28 March the Regional Secretary to the Tribunals wrote indicating that the Regional Chairman had directed that a review hearing would be held to determine whether or not Global Sports Bars Ltd should be substituted as the respondent. The Review Tribunal hearing would be arranged at a date mutually convenient to all the parties.[21]Clearly the Regional Chairman had second thoughts after discussions with the Chairman Mr Morris. That is apparent from the letter sent by the Regional Chairman, Mr Sneath, to both parties. That letter reads:
"Please accept my apologies for the delay in listing this case for a hearing. This has been in part due to the Chairman, Mr Morris and I taking different views of the procedural law in this case. Having spoken to the President of the Employment Tribunals (England and Wales) I am prepared to defer to Mr Morris' view this matter should be treated as an application for review and not as a free standing application under rule 17 of the Employment Tribunals (Constitution and Procedure) Regulations 1993"
. The Regional Chairman then directed that there should be a hearing to determine the following: (a) Whether the respondent's letter received in this office on 25 January 2000 asking Mr Morris urgently to review the decision can be treated as a notice of appearance. (b) If so, whether the time for entering a notice of appearance should be extended to 25 January 2000 so as to validate it. (c) If so, whether the Tribunal should extend the time for applying for a review beyond the period of 14 days stipulated in rule 11(4). (d) If so, whether the Tribunal should vary its position by substituting Global Sports Bars Ltd as respondent.[22]The Regional Chairman then directed that the matter should be heard by the same lay members who sat with Mr Morris, that Mr Morris should not sit and a Chairman would be chosen by the Listing Section.[23]The Employment Tribunal thus constituted, as we have said, refused the application for a review.[24]In its extended reasons the Tribunal set out the history without comment save that they did say "No explanation was given in the extended reasons why it was decided that the correct name of the respondent was to be accepted as Mr Steve Aikman/Chairman".[25]The Tribunal recorded Mr Aikman's evidence that he had never employed Mr Stubbs personally; he had always been employed by limited companies and finally by Global Sports Bars Ltd. He provided Mr Stubbs' P45 (which we note had also been shown to the first Tribunal) which showed Global Sports Bars Ltd as Mr Stubbs employer. Mr Aikman asked the Tribunal to correct the original decision by varying it on his application for review. The Tribunal did not sequentially follow the matters for determination directed to be heard by the Regional Chairman. They quoted the letter of 25 January 2000 and then commented: "The respondent informed the Tribunal that he had been advised on receiving the originating application that it was not necessary to enter an appearance because the application was against the company and the company no longer existed. The Tribunal did not accept the respondents evidence, however, that on receipt of the promulgated decision he still did not believe there was an order made against him personally and this was not clear to him until January 2000 when County Court proceedings would be taken against him".[26]The Tribunal did not answer question (a) posed by the Regional Chairman at this stage. The Tribunal went on to consider rule 3(2) of the Employment Tribunals (Constitution and Rule of Procedure) Regulations 1993 as amended. The parts of the rule quoted by the Tribunal are: "A respondent who has not entered an appearance shall not be entitled to take any part in the proceedings except (c) to make an application under rule 14(4) in respect of rule 11(1)(b)".[27]Rule 11(1)(b) provides: "subject to the provisions of this rule, the Tribunal shall have power on the application of a party or of its own motion, to review any decision on the grounds that (b) a party did not receive notice of the proceedings leading to the decision".[28]The Tribunal then pointed out that Mr Aikman agreed that he did receive notice of the proceedings and continued:
"Consequently, if there was no notice of appearance entered the conclusion of the Tribunal was that there was no right within the rules for it to consider the application for review"
. They continued in paragraph 9: "Consequently, the Tribunal considered point (a) on the Regional Chairman's letter and decided that the facts sent to the Employment Tribunal was not a notice of appearance".[29]We think that the Tribunal's reading of the regulations was rather selective. In the first place Rule 3(2) contained an exception not mentioned by the Tribunal namely(a) to apply under rule 15 for an extension of the time appointed by this rule for entering an appearance. Rule 11(1) gives a Tribunal power to review any decision, not only on the ground(b) that a party did not receive a notice of proceedings leading to the decision but on other grounds, the relevant ground in our view being (e): "The interests of justice require such a review".[30]The Employment Tribunal did refer to St Mungo Community Trust v Colleano 1980 ICR 254 which the Employment Appeal Tribunal in holding that a Tribunal had jurisdiction to consider an application for extension of time under rule 3(3) even after the Tribunal's decision and went on to state, that there must inevitably be a very heavy burden on a respondent who applies for an extension of time after the notice of proceedings and after the judgment to justify the application.[31]The Tribunal went on to state that even if the facts amounted to a notice of appearance within rule 3 it was not appropriate in the circumstances to allow this late application for entry of notice of appearance. They said that they were guided by the decision of the Employment Appeal Tribunal in Kwiksave Stores Ltd v Swain & Ors 1997 1 ICR 49 and they had taken into account the explanation for the delay the prejudice suffered by both parties and the merits of the defence. Although the Appeal Tribunal in that case was considering a case where leave to extend time was being sought before the substantive hearing we think that the observations of Mr Justice Mummery as to the exercise of discretion have equal application in a case such as this. How a Tribunal should approach the discretionary task is set out in page 54:
"The discretionary factors The explanation for the delay which has necessitated the application for an extension is always an important factor in the exercise of the discretion. An applicant for an extension of time should explain why he has not complied with the time limits. The Tribunal is entitled to take into account the nature of the explanation and to form a view about it. The Tribunal may form the view that it is a case of procedural abuse, questionable tactics, even, in some cases, intentional default. In other cases it may form the view that the delay is the result of a genuine misunderstanding or an accidental or understandable oversight. In each case it is for the Tribunal to decide what weight to give to this factor in the exercise of discretion. In general, the more serious the delay, the more important it is for an applicant for an extension of time to provide a satisfactory explanation which is full, as well as honest. In some cases, the explanation, or lack of it, may be a decisive factor in the exercise of the discretion, but it is important to note that it is not the only factor to be considered. The process of exercising a discretion involves taking into account all relevant factors, weighing and balancing them one against the other and reaching a conclusion which is objectively justified on the grounds of reason and justice. An important part of exercising this discretion is to ask these questions: what prejudice will the applicant for an extension of time suffer if the extension is refused? What prejudice will the other party suffer if the extension is granted? If the likely prejudice to the applicant for an extension outweighs the likely prejudice to the other party, then that is a factor in favour in granting the extension of time, but it is not always decisive. There may be countervailing factors. It is this process of judgment that often renders the exercise of a discretion more difficult than the process of finding facts in dispute and applying to them a rule of law not tempered by discretion. It is well established that another factor to be taken into account in deciding whether to grant an extension of time is what may be called the merits factor identified by Sir Thomas Bingham M.R. in Costellow v. Somerset County Council [1993] 1 W.L.R. 256, 263: "a plaintiff should not in the ordinary way be denied an adjudication of his claim on its merits because of procedural default, unless the default causes prejudice to his opponent for which an award of costs cannot compensate"
. Thus, if a defence is shown to have some merit in it, justice will often favour the granting of an extension of time, since otherwise there will never be a full hearing of the claim on the merits. If no extension of time is granted for entering a notice of appearance, the industrial Tribunal will only hear one side of the case. It will decide it without hearing the other side. The result may be that an applicant wins a case and obtains remedies to which he would not be entitled if the other side had been heard. The respondent may be held liable for a wrong which he has not committed. This does not mean that a party has a right to an extension of time on the basis that, if he is not granted one, he will be unjustly denied a hearing. The applicant for an extension has only a reasonable expectation that the discretion relating to extensions of time will be exercised in a fair, reasonable and principled manner. That will involve some consideration of the merits of his case."[32]Here, whilst in the words we have quoted, the Tribunal summarised the effect of Mr Justice Mummery's guidance they did not conduct any examination of the merits of Mr Aikman's case and did not demonstrate how they had carried out the balancing exercise identified by Mr Justice Mummery.[33]The Tribunal clearly formed an adverse view of Mr Aikman, rejecting his evidence that when he received the extended reasons he still did not believe there was an order made against him personally. We feel that the Tribunal fell into error at this point as they overlooked the way in which the extended reasons were expressed. Any layman, reading paragraph 1 of the extended reasons might be forgiven for thinking that the company was the respondent to the application:
"Mr Stubbs worked for the respondent company and its predecessors in respect of name from 1 September 1993"
. There was nothing in the remainder of the reasons to put Mr Aikman on notice that on any reasoned basis he was being held personally liable and not the company.[34]We are not sure whether the document we now refer to was before the Tribunal although we think it may have been. The document we referred to is one provided by Mr Stubbs to accompany his response to this appeal. It was a letter on the printed note paper of Aikman Leisure Ltd signed by Mr S J Aikman, Chairman and in its first sentence contains these words:
"I am pleased to confirm my offer of employment as Group Area Manager with Aikman Leisure Ltd commencing 1 September 1993"
. If the Tribunal had considered the merits they would have seen from the material before it and from the way in which the previous Tribunal found the facts that Mr Aikman could present a formidable case that he was not the employer.[35]In the result we are of the view that the decision of the Employment Tribunal cannot stand. The Tribunal took altogether too restrictive a view of rule 3(2) and failed to weigh in the balance the various factors involving the discretionary exercise.[36]In disposing of the appeal the Employment Appeal Tribunal may exercise any of the powers of an Employment Tribunal.[37]We have however, decided to remit the matter to a different Tribunal to consider the four issues for determination which came from the regional Chairman and to decide them against the background of the opinions expressed in this judgment.[38]We cannot and would not begin to suggest to the Tribunal how they should approach or decide these matters.[39]It will however, be obvious from this judgment that our view is that the case that Mr Aikman wishes to present, that it was the company who employed Mr Stubbs, is a compelling one on all the available material. As to whether there should be a review we draw attention again to 11(1)(e) as a relevant ground namely that the interests of justice require such a review.[40]It may be that the only way in the end to resolving this unhappy story is for there to be under 11(7) an order for fresh consideration on the merits before a differently constituted Tribunal but that we, of course, leave to the Tribunal.

order

1. Aikman Leisure Ltd 2. Aikman Management Ltd 3. Global Sports Bars Ltd Clearly on the notice of hearing I am referred to as Mr Steve Aikman/Chairman of Global Sports Bars Ltd, PO Box 289, Harrogate HG1 12F. I therefore ask you urgently to review the decision as it is clearly not right".