MS K HADDAD v 1) SALFORD CITY COUNCIL 2) MR M SMITH 3) MR L JONES 4) MS I NEWTON 5) MS P KARNE 6) MS U SOSSALLA-IRDALE [2003] UKEAT 0522_03

EMPLOYMENT APPEAL TRIBUNAL

BAILII case number: [2003] UKEAT 0522_03 & EAT_2208

Case No Appeal No. EAT/0522/03 & EAT/0523/03

Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

Between

MS K HADDADAPPELLANT

1) SALFORD CITY COUNCIL 2) MR M SMITH 3) MR L JONES 4) MS I NEWTON 5) MS P KARNE 6) MS U SOSSALLA-IRDALERESPONDENTS

Before

His Honour Judge D Serota

Date 22 August 2003

[1]APPEARANCES For the Appellant MR C LIBURD (A Friend) For the Respondent MR A WARD (Of Counsel) Instructed by: Salford City Legal Services Civic Centre Chorley Road Swinton Salford M27 5AD JUDGE SEROTA QC I have before me two appeals from a decision of an Employment Tribunal at Manchester chaired by Mr Leahy (sitting alone). The first was promulgated on 13 May 2003 when he refused to order that the Respondents' Notice of Appearance be struck out but did order that the Respondents should pay costs on an indemnity basis that had been incurred since 13 December 2002 in relation to the Applicant pursuing disclosure of documents. The second appeal relates to Mr Leahy's decision given on 20 May 2003 when he refused to review his earlier decision. The matter came on as a preliminary hearing before Mr Justice Burton on 11 July who ordered the matter should go to a full hearing.

[2]I will now explain the background to these proceedings. The Applicant is of black Arab ethnicity. She was employed by Salford City Council, which I shall refer to as the Respondent, at its social work department as a community development worker with ethnic minorities. There is no doubt that she complained of inappropriate and discriminatory conduct on the part of her fellow employees and that this caused long periods of absence from work, stress and nervous breakdown. Indeed, so far as I am aware she has not worked since 17 May 2000

[3]On 1 March 2002 she resigned from her post in circumstances she asserts, no doubt, amounted to constructive dismissal and she also makes claims of discrimination on the grounds of race. She has suffered two nervous breakdowns and she suffers from stress. She attributes her condition to the conduct of the Respondents. On 28 May 2002 she presented her Originating Application. I note in passing that this document is somewhat unparticularised and it is by no means clear why a number of additional Respondents were added. The Respondent sought an extension of time, which was granted, for entering its Notice of Appearance, which was served on 21 June in which discrimination and unfair dismissal were denied. On 16 July 2002 the Employment Tribunal made an Order for directions requiring a joint bundle of documents to be lodged by 23 August. If there was no agreement as to the content of the bundle the bundle was to be prepared by the Respondent.

[4]The Tribunal Order made clear and I quote:

"Failure to comply may lead to the Tribunal making further orders and/or considering the question of costs."

Matters did not proceed smoothly so far as disclosure was concerned and on 21 August a Directions Hearing was fixed for 5 October in relation to disclosure. This was adjourned at the Applicant's request until 13 December. On 13 December Mr Leahy gave directions. In particular he directed under Rule 4 that six documents or categories of documents should be disclosed by the Respondent within forty-two days of 13 December. According to the extended reasons the Chairman referred to the fact that a Mrs Ebizie, a solicitor in the employ of the Respondent attended the hearing. She was not the person in authority who had conduct of the case. She was concerned as to how long it might take for these documents to be disclosed and effectively negotiated a forty-two as opposed to twenty-eight day period for compliance.

[5]The six categories of documents includes the report by the Play Development Group about the Applicant's treatment, a response compiled by the Play Development Group, both of these documents are said to be referred to in a letter of 21 October 1998. Thirdly reports concerning the Applicant which we were provided in accordance with Clauses 6.6 and 6.9 of the Dignity at Work Procedure. Fourth, the Respondents' report as to the number of complaints made under the Dignity at Work Policy which that policy provides should be published periodically covering the period of the last three years of the Applicant's employment. Fifthly A copy of the report which has to be prepared by virtue of Clause 2.1 of the Sickness Procedure together with copies of all notes, reports and records made by any managers involved in implementation of the Sickness Procedure in respect of the Applicant's stages 1, 2 and 3 and sixth, the Applicant's personal file. The Order provided by paragraph 2.6 as follows:

"2.6 By virtue of Rule 4(8), failure by any party to fulfil the above Requirement will render that party liable to an order in respect of costs and/or to having the whole or any part of their Originating Application, respectively Notice of Appearance struck out."

[6]Witness statements were to be served by the Applicant by 31 March and by the Respondents by 30 April. The Order was not complied with. The Applicant made complaint to the Employment Tribunal and on 27 February the Employment Tribunal gave notice to the Respondents to show cause why its Notice of Appearance should not be struck out under Rule 4(8). The letter from the Tribunal made clear that if no acceptable reason were given the Chairman:

"proposes to strike out the notice of appearance."

I note that by this stage a hearing had been fixed for 11 March and further there was to be a preliminary issue as to whether the Originating Application had been issued out of time. On 24 March the Respondent responded to the Employment Tribunal. This was late. It was outside the fourteen days. In the letter of 24 March Mr Tony Hatton, Principal Solicitor wrote on behalf of the Head of Law and Administration to the effect that:

"copies of all relevant documentation have now been obtained from the various Local Authority Departments, the same being available for Mrs Haddad and/or her representative to examine and take copies of at her convenience as per the enclosed letter."

[7]The matter as I have said came before the Employment Tribunal on 2 May. It is right to say that Mr Liburd put his case extremely high and made a number of allegations against the Council including a submission:

"It is outrageously shameful, and evidence of continued high-handed attempts to harass the Applicant where the Respondents included statements in their Notice of Appearance they knew to be blatantly false."

There are references to "a shameful claim" and references to dishonesty. I do not consider that putting the case in this way has necessarily contributed to its fair resolution. The decision of the Employment Tribunal was given on 2 May. By this time the Council had asserted that of the six documents or classes of documents they had agreed to supply only one existed. Mr Liburd was submitting that not only had the Council failed to comply with an Order so that sanctions could be imposed under Rule 4(8) but also that their conduct of the proceedings had been frivolous or vexatious under Rule 15. The Chairman referred to the Respondent as a very large Local Authority with the resource of a substantial legal department populated by a number of qualified lawyers.

[8]In relation to the six documents or classes of documents, the Chairman notes that at no time was it suggested there was any obstruction in the way of those being disclosed. It was common ground that disclosure was not made and had still not been made. The Chairman notes that notwithstanding the letter of 27 February in which he invited the Council to show cause within fourteen days as to why its Notice of Appearance should not be struck out, it did not reply until 24 March and furthermore the letter to which I have referred shows no cause why there should not be a striking out. It did not offer an explanation of any cogency as to the reason for the default other than stating that copies of relevant documentation had now been obtained. I have already referred to this passage.

[9]The Chairman records Mr Ward who appeared on that occasion as before me today accepting there had been inexcusable default which was ascribed to the cumbersome nature of the Respondents' organisation. The burden of Mr Ward's submissions was that a fair trial of the application was still possible. The Chairman had this to say, " De Keyser [and that is the case of De Keyser v Wilson

[2001] IRLR 324

] is persuasive force for the argument that the crucial question, when contemplating a striking out, is whether or not in the circumstances, whatever default or misconduct there has been on the part of a party, a fair trial or the possibility of a fair trial has been so severely prejudiced as to be in great difficulties, if not possible." He referred to the fact that the case was listed for hearing in November with four days allowed. He also referred to the fact that a preliminary hearing dated 12 May had been prejudiced because of the delay in providing disclosure. He went on to say this:

"I am further concerned to be told today, as the applicant has been, that the first five of the six documents which are the subject of the 13 December Order for disclosure do not exist after all. This, then gives the lie to the statement made to the Tribunal by the respondent in its own defence against a striking out, in the passage quoted above from a letter of 24 March. I am appalled that a respondent authority with such resources should treat the Tribunal in this way and write letters to us which are demonstrably untrue. However, I remind myself that a striking out is not to be a reflection of any anger, dismay, annoyance, disappointment or other emotion which the Tribunal and its Chairman may feel, nor is it to be seen as a penalty for having caused the other party in the case particular difficulties, prejudice or embarrassment. The crucial issue is whether or not this matter can still proceed to a hearing and the answer to that is that it can."

[10]I paused for one moment to reflect upon the terms of the letter of 24 March. I do not think that the Chairman's reading of that letter was a fair reading. I do not believe that that letter was a representation that the documents existed and were available for inspection. It did no more than state that such documents in the relevant categories as were discoverable were now available. It was not a representation that the documents necessarily existed. However, it is quite clear that the Chairman directed himself that in any case of striking out, the crucial question was the availability of a fair trial and that the remedy of striking out was not to be regarded as a penalty.

[11]The Chairman declined to entertain paragraphs 18-24 of Mr Liburd's submissions because they touch exclusively on the merits of the evidence but he took on board what Mr Liburd had said and his opinion "infinite criticism could be made of the respondent's treatment of the applicant in its conduct of this particular case". The Chairman then referred to Regulation 10 and the overriding objective and said this:

"There must be powerful argument in this case that the respondent has abused its superior position, resources and power in causing the applicant untold difficulty in the preparation of her case."

However, in the circumstances while he was sympathetic to the Applicant's position the difficulties and distress which she must have been caused by the Respondent's default, he could not say that she was prevented from having a fair trial and accordingly:

"I cannot strike out the respondent's notice of appearance tempting though it is for other reasons to do so."

He went on to consider what other sanctions might be appropriate and made the Order as to costs to which I have already referred.

[12]On 3 May Mr Liburd sought a review of that decision. On 7 May an inspection of documents took place and Mr Liburd came across a note which was part of the category of documents that the Respondent had said did not exist. He sought to rely upon this in the review but the review which took on place on 20 May was refused. The Chairman was not persuaded it was an appropriate case for review and he advised the parties to avoid interlocutory skirmishing and to get on with the hearing.

[13]The principal issue I have to determine is whether or not the Chairman correctly directed himself. De Keyser is a not a case of breach of a Tribunal or Court Order. What had happened in De Keyser was that an Employment Consultant acting as the employer's representative had sent a letter of instruction to an occupational health specialist appointed by the employer which included details of her private life and asked that a critical examination of her GP's findings that her illness was entirely attributable to her employer's alleged actions be carried out. The Chairman of the Employment Tribunal took an extremely unfavourable view of the terms of that letter and in the purported exercise of his discretion ordered the Notice of Appearance to be struck out on the grounds of proceedings being conducted in a scandalous manner.

[14]The judgment of the Employment Tribunal was given by the President Mr Justice Lindsay. I draw attention to paragraphs 24 and 25:

"24 As for matters not taken into account which should have been, the tribunal nowhere in the course o their exercising their discretion asked themselves whether a fair trial of the issues was still possible. In a case usefully drawn to our attention by both sides' counsel, namely Arrow Nominees Inc v Blackledge [2000] 2 BCLC 167 , the Court of Appeal had before it a case where the judge below had more than once declined to strike out the proceedings on the basis that whilst one party had, in the course of discovery, disclosed forged documents and had lied about the forgeries during the trial, a fair trial was, in his view, still possible. We pause to reflect on the magnitude of the abuse there in comparison with Mr Pollard's and De Keyser's. Whilst in other respects the context of the Arrow Nominees case is very different, there are passages in the judgment in the Court of Appeal of relevance. Thus at p.184 there is a citation from Millett J's judgment in Logicrose v Southend United Football Club Ltd [1998] The Times 5 March 1998 as follows: 'But I do not think that it would be right to drive a litigant from the judgment seat without a determination of the issues as a punishment for his conduct, however deplorable, unless there was a real risk that that conduct would render the further conduct or proceedings unsatisfactory. The court must always guard itself against the temptation of allowing its indignation to lead to a miscarriage of justice.' In Arrow Nominees , Chadwick LJ adopted those observations in a passage which, although directed to discovery, is of more general application. Thus at p.138g-h one finds: 'But for my part I would allow that appeal on a second, and additional, ground. I adopt as a general principle, the observations of Millett J in Logicrose … that the object of the rules as to discovery is to secure the fair trial of the action in accordance with due process of the court; and that, accordingly, a party is not to be deprived of his right to a proper trial as a penalty for disobedience of those rules, even if such disobedience amounts to contempt for or defiance of the court, if that object is ultimately secured, by (for example) the late production of a document which has been withheld. But where a litigant's conduct puts the fairness of the trial in jeopardy, where it is such that any judgment in favour of the litigant would have to be regarded as unsafe, or where it amounts to such an abuse of the processes of the court as to render further proceedings unsatisfactory and to prevent the court from doing justice, the court is entitled, indeed, I would hold bound, to refuse to allow that litigant to take further part in the proceedings and (where appropriate) to determine the proceedings against him. The reason, as it seems to me, is that it is no part of the court's function to proceed to trial if to do so would give rise to a substantial risk of injustice. The function of the court is to do justice between the parties; not to allow its process to be used as a means of achieving justice. A litigant who has demonstrated that he is determined to pursue proceedings with the object of preventing a fair trial has forfeited his right to take part in a trial. His object is inimical to the process which he purports to invoke.' Later, Ward LJ, speaking of the risk of a fair trial not being possible, said at p.201: 'It undoubtedly is a factor of very considerable weight. It may often be determinative. If the court is satisfied that the failure to disclose a document or the effect of a tampered document can no longer corrupt the course of the trial, then it would be a factor of much less and perhaps even little weight in considering a strike-out. Where, in my judgment, Evans-Lombe J erred, was to treat the question of a fair trial as the only material factor. It was not; other matters have now to be put into the scales and weighed.' 25 We must keep in mind, too, that the case at hand is a case not involving disobedience to or failure to perform an order of Court; wilful, deliberate or contumelious disobedience was not in issue. Parts of those passages from Arrow Nominees and in particular the passage from Logicrose show the great importance, in relation to a discretion to strike out the whole of a case where there has been no such disobedience, of an inquiry into whether a fair trial is or is not still possible. Unfortunately, there is no sign whatever of that having been considered by the employment tribunal in the case before us. Whilst no one would suggest that it is incumbent upon a tribunal necessarily to set out every consideration which, in the exercise of its discretion, affects its mind one way or another, to leave out so crucial a factor as the question of whether a fair trial is still possible either indicates that the matter was not within the contemplation of the tribunal (thereby committing the error of law of leaving out of account of something which so obviously should have been taken into account) or, if the matter had truly been in the tribunal's mind but is omitted from express mention, leaves the tribunal open to argument that it has failed the Meek v City of Birmingham test."

[15]It is important to note, as Sir John Lindsay pointed out that De Keyser was not a case involving disobedience to or failure to perform an Order of the Tribunal. Wilful, deliberate or contamelious disobedience was not in issue. It is right to say that such conduct was in issue before the Chairman in this case. The Chairman might have benefited from a reference to the decision of the Court of Appeal in re Jokai Tea Holdings Ltd

[1992] 1 WLR 1196

Browne-Wilkinson LJ said:

"Two differing principles of law are applicable in this case, viz: 1. That a litigant is not to be deprived of a trial of his real case by the refusal of leave to amend unless such amendment will give rise to uncompensatable damage to the other party; 2. A litigant who fails to comply with a peremptory order of the court will not normally be permitted to continue to litigate either that or any other action based on the same claim or defence. The judge did not in terms refer to the first of those principles, nor does his approach suggest that he had it in mind. The question is how those two principles are to be reconciled in the present case. In Samuels v Linzi Ltd [1981] Q.B. 115 the court did not give any direct guidance as to the approach to the exercise of the court's discretion in cases where a claim or defence has been struck out by reason of a failure to comply with an "unless" order beyond saying that such a discretion should be exercised "cautiously"

. However, Roskill L.J. referred to the analogous case where the question is whether a plaintiff's claim should be struck out for want of prosecution to which the principles laid down in Birkett v James [1978] A.C. 297 apply. The first class of case considered in Birkett v James is where the plaintiff has been guilty of "intentional and contumelious conduct." Disobedience to a peremptory order is "generally" to be treated as contumelious conduct: Tolley v Morris

[1979] 1 WLR 592

, 603, per Lord Diplock. Where there has been such contumelious disobedience not only the plaintiff's original action but also any subsequent action brought by him based on the same cause of action will be struck out: Janov v Morris

[1981] 1 W.L.R 1389

. The basis of the principle is that orders o the court must be obeyed and that a litigant who deliberately and without proper excuse disobeys such an order is not allowed to proceed. The rationale of such penalty being that it is contumelious to flout the order of the court, if a party can explain convincingly that outside circumstances account for the failure to obey the peremptory order and that there was no deliberate flouting of the court's order, his conduct is not contumelious and therefore the consequences of contumely do not flow. In Janov v Morris a plaintiff whose first action had been struck out for failure to comply with an "unless" order brought a second action based on the same cause of action. The basis of the decision was that the failure to comply with the peremptory order was contumacious: see [1981] 1 W.l.R. 1389, 1395H, per Watkins L.J. It is clear that the court, in reaching the conclusion that the conduct was contumacious, placed much reliance on the fact that no explanation or excuse had been given by the plaintiff for his disobedience to the order. In my judgment, in cases in which the court has to decide what are the consequences of a failure to comply with an "unless" order, the relevant question is whether such failure is intentional and contumelious. The court should not be astute to find excuses for such failure since obedience to orders of the court is the foundation on which its authority is founded. But if a party can clearly demonstrate that there was no intention to ignore or flout the order and that the failure to obey was due to extraneous circumstances, such failure to obey is not to be treated as contumelious and therefore does not disentitle the litigant to rights which he would otherwise have enjoyed. The questions therefore which arise in the present case are whether , apart from the defendant's conduct in failing to comply with the "unless" order, leave to amend the defence should be given and, if so, whether such failure to comply was contumelious. The judge did not approach the case in that way and, in any judgment, erred in principle. We must therefore exercise the discretion ourselves."

[16]The principal ground of appeal is that the Chairman misdirected himself and failed to have regard to the fact that this was a case where there was an unexplained breach of the Tribunal's Order or at least a breach for which there was no satisfactory explanation. I am satisfied that the Chairman failed to properly direct himself by concentrating only on the issue as to whether or not a fair trial was possible. In my opinion the authorities suggest that where there has been a breach of a Court Order which can be regarded as contumelious or for which there has not been a satisfactory explanation, that is a significant factor to be taken into account in deciding whether or not powers to strike out should be exercised. It is only an important factor and is not necessarily decisive.

[17]The powers of the Employment Tribunal are to be found in Regulation 4 of the Employment Tribunals Constitution Regulations 2001 which of course had to be given effect to in order to have regard to the overriding objective set out in Regulation 10. Regulation 4(8) of Schedule 1 provides that if a requirement under paragraph 1 or 5 (and such a requirement was made by the Tribunal in this case) is not complied with, the Tribunal (a) may make an order in respect of costs under Rule 14(1)(a) or (b) before or at the hearing may strike out the whole or part of the Originating Application or as the case may be the Notice of Appearance and where appropriate direct that the Respondent be debarred from defending altogether.

[18]Such an Order of course should not be made until a party in breach had been given the opportunity to show cause why the Tribunal should not deploy sanctions. Regulation 15 empowers an Employment Tribunal to order that an Originating Application or Notice of Appearance be struck out "on the grounds that the manner in which the proceedings had been conducted by and on behalf of the Applicant or, as the case may be, the Respondent has been scandalous, unreasonable or vexatious."

[19]The rules do not give the Employment Tribunal power to make 'unless' orders but there is a clear jurisdiction to strike out for breach of an Order, such as made in this case. I am satisfied, as I have said, that the Chairman fell into error in failing to have regard to the fact that this was a "breach of order" case. He also fell into error in suggesting that striking out was not a penalty. It clearly may be in the case of contumelious conduct. Mr Liburd also submitted that the Chairman was wrong to exclude from consideration and from hearing, evidence in relation to a number of matters relating to the quality of the Respondent's evidence and case.

[20]These are the paragraphs 18-24 of the submissions Mr Liburd prepared. Mr Liburd was effectively seeking to persuade the Tribunal that the Council's conduct was vexatious because the quality of its evidence was very poor, contradictory and confused and that it was putting forward in its Notice of Appearance matters which it knew to be false. In my opinion the Chairman's view of this aspect of the case was correct. It is not appropriate to deal with questions relating to evidence and the quality of evidence on a strike out application as a general rule and the House of Lords in the case of Anyanwu v South Bank Students Union

[2001] IRLR 305

has made clear that it is only in the most obvious as clear cases involving discrimination that it might be appropriate to strike out a claim on the basis that it is unlikely to succeed on the facts. Discrimination cases were "generally facts sensitive and their proper determination is always vital in our pluralistic society. In this field perhaps more than any other that bias in favour of a claim being examined on the merits or demerits of the particular facts is a matter of high public interest." Those were the words of Lord Steyn. Mr Liburd also submits that the Chairman should have enquired and sought evidence as to whether the documents that Counsel asserted did in fact exist. There is no force in this criticism. It seems to me that where a party asserts that a document does not exist it is not appropriate in the course of an interlocutory hearing to go into great detail by calling evidence as to whether or not the document exists. That is a matter which can if necessary be left to the final hearing on the merits when witnesses can be called and cross examined about it. It is undesirable to encourage lengthy satellite litigation of this kind as a general rule.

[21]I have come to the conclusion that the decision of the Chairman was flawed in the sense that he misdirected himself as a matter of law. However, if he had exercised his discretion courteously he would have concluded that it would not be right for these proceedings to be struck out. This is a case in which a local authority has behaved with considerable incompetence. It failed without satisfactory explanation beyond incompetence to comply with the order for disclosure and its approach to disclosure has been muddled and contradictory. The Chairman would have taken those matters fully into account but equally he would have found there had been no prejudice caused to the Applicant that could not be met by an award of costs beyond the usual stresses that are inherent in any form of litigation. If it falls to me to exercise my own discretion I would have come to the same conclusion as the Chairman, namely that the application should go for hearing.

[22]A fair trial is still possible. Although the principle stated by Lord Steyn in Anyanwu is really directed to cases where there is an application to strike out on the merits so as to speak, rather than in relation to default, it is still generally desirable that cases involving discrimination on the grounds of race which are so sensitive should be determined on the merits in a public hearing rather than allowed to go by default so as to speak. I do not suggest that in appropriate cases where there has been default it is inappropriate to strike out claims or notices of appearance in cases involving discrimination on the grounds by race, but this is not one of them.

[23]Weighing up the incompetence of the Council on one hand, because I am satisfied that its conduct was incompetent rather than contumelious, against the fact that there is no prejudice and a fair trial is possible and indeed unaffected it seems to me that striking out would be a disproportionate penalty having regard to the nature of the local authority's default. I think it also should be said that although in one sense a local authority has substantial resources and doubtless a large legal department I take judicial notice of the fact that local authorities up and down the country are short of resources and staff in their legal departments, certainly all those I have come across, and are overworked and overstretched.

[24]Had I considered that the Council had deliberately flouted the Order made by the Chairman I might well have come to a different conclusion but in the circumstances for the reasons I have given I have come to the conclusion that the appeal should be dismissed. I do not consider that the Chairman's approach at the review was necessarily correct because he should have perhaps appreciated that he had misdirected himself as to the law. However, I have now dealt with the substantive appeal it is unnecessary for me to say anything further about the review.