HILTON UK HOTELS LTD v MRS CECILIA MCNAUGHTON [2005] UKEAT 0059_04_2009

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2005] UKEAT 0059_04_2009Case No Appeal No. UKEAT/0059/04Venue 52 MELVILLE STREET, EDINBURGH EH3 7HF
Between
HILTON UK HOTELS LTDAPPELLANTMRS CECILIA MCNAUGHTONRESPONDENT
Before
Lady Smith Mr J M Keenan Miss A MartinDate 20 September 2005
[1]APPEARANCES For the Appellant Mr D Walker, Solicitor Of- Messrs Dundas & Wilson Solicitors 191 West George Street GLASGOW G2 2LD For the Respondent Ms M Gribbon, Solicitor Of- Messrs Digby Brown Solicitors Employment Unit The Savoy Tower 77 Renfrew Street GLASGOW G2 3BZ SUMMARY EQUAL PAY ACT Damages/compensation The claimant instituted a claim on the ground that she had been excluded from the respondents' pension scheme during a period of part-time employment. The Employment Tribunal determined, as a preliminary issue, that a compromise agreement entered into between the parties did not have the effect of preventing the claimant from advancing her claim, considering the claimant's solicitor's lack of knowledge that the claimant had had a period of part-time employment as a key issue. The Employment Appeal Tribunal disagreed with the Employment Tribunal's assessment of the claimant's solicitor's knowledge as being a key issue but found that, properly interpreted, the compromise agreement did not exclude the claim being advanced. THE HONOURABLE LADY SMITH: Preliminaries This case concerns a claim for exclusion from the Respondents' pension scheme during a period of part-time employment that was instituted by the Claimant before the Employment Tribunal under reference to the terms of the Equal Pay Act 1970.[2]This judgment represents the view of the majority of the members of this Tribunal.[3]We will refer to the parties as Claimant and Respondents. Introduction[4]This is an appeal by the Respondents in those proceedings against a decision of an Employment Tribunal sitting at Glasgow, Chairman Ms F J Garvie, registered with Extended Reasons on 26 May 2004. The Claimant was represented there and before us by Ms M Gribbon, solicitor and the Respondents were represented there and before us by Mr D Walker, solicitor.[5]The decision was in relation to a preliminary issue (dealt with my way of a preliminary hearing) regarding the question of whether or not the terms of a compromise agreement that had previously been entered into by parties prevented the Claimant from advancing her claim.[6]The Claimant contended that she was not barred from advancing her claim and the Respondents contended, under reference to the compromise agreement, that she was. The Issues[7]The essential issue between the parties was whether the terms of the compromise agreement were such as to prevent the Claimant's claim being advanced, bearing in mind the relevant statutory provisions.[8]Under reference to correspondence which did not form part of the bundle before us, the Employment Tribunal identified the issue in the case before them as being whether, when advising the applicant her solicitor knew or should have known that the Claimant had a period of part-time employment with the Respondents. The Decision of the Employment Tribunal[9]The Tribunal decided that the Claimant was entitled to proceed with her claim notwithstanding her having signed the compromise agreement as her complaint was not one to which that agreement applied. The appeal[10]The Respondents appeal against that decision. Employment Appeal Tribunal Directions[11]Directions sending this appeal to a full hearing were given in chambers by Lord Johnston. The Legislation[12]The relevant provisions of the legislation are those contained in sections 77(3) and (4A) of the Sex Discrimination Act 1975. Section 77(3) states:- "A term in a contract which purports to exclude any provision of this Act or the Equal Pay Act 1970 is unenforceable by any person in whose favour the term would operate apart from this subsection.", section 77(4) states:- "Subsection (3) does not apply-(a) to a contract settling a complaint to which section 63(1) of this Act or section 2 of the Equal Pay Act I 970 applies where the contract is made with the assistance of a conciliation officer; [(aa) to a contract settling a complaint to which section 63(1) of this Act or section 2 of the Equal Pay Act 1970 applies if the conditions regulating compromise contracts under this Act are satisfied in relation to the contract;]" and section 77(4A) states:- "The conditions regulating compromise contracts under this Act are that- (a) the contract must be in writing;(b) the contract must relate to the particular complaint;(c) the complainant must have received [advice from a relevant independent adviser] as to the terms and effect of the proposed contract and in particular its effect on his ability to pursue his complaint before an [employment tribunal];(d) there must be in force, when the adviser gives the advice, [a contract of insurance, or an indemnity provided for members of a professional body,] covering the risk of a claim by the complainant in respect of loss arising in consequence of the advice;(e) the contract must identify the adviser;(f) the contract must state that the conditions regulating compromise contracts under this Act are satisfied." The Compromise Agreement[13]The Claimant's employment with the Respondents terminated on 16 May 2003 and she entered into an agreement with them as to the terms on which she agreed to that termination, referred to by the Tribunal as 'the Compromise Agreement'. The Compromise Agreement comprised a letter dated 13 May 2003 from the Respondents to the Claimant which contained the details of those terms, and a declaration attached to the letter signed by both parties and by the Claimant's solicitor on 16 and 19 May 2003. Insofar as relevant for present purposes, the Compromise Agreement contained the following terms:
"The Settlement Sum exceeds your statutory and contractual entitlement, and is offered subject to the provisions below on condition that you accept these terms in full and final settlement of any claim which you have or may have against the Company as set out in the paragraph below……… Settlement and Waiver You agree to accept the arrangements contained in this letter and any sums paid under its terms in full and final settlement of any and all present and future claims, rights of action, remedies, costs and expenses whatsoever and howsoever arising which you have or may have in any jurisdiction against the Company …..arising from or in connection with your employment with the Company ………..or any other matter including any common law or statutory claims whatsoever whether under English law, European law, or any other applicable law such as (but not limited to) compensation for breach of contract, wrongful dismissal, and any and all of the Statutory Claims…………. ………………………………………….. DECLARATION 1. For the purpose of section 203(3) of the Employment Rights Act 1996. .I, Cecilia McNaughton hereby warrant and agree with Hilton Group plc ("the Company") that: (a)…. (b)…. (c) I have received independent legal advice as to the terms and effects of the Letter and the declaration, in particular as to its effect on my ability to pursue my rights before an Employment Tribunal or before any European Court or body of competent jurisdiction from Ms M Gribbon, Solicitor, of Digby Brown, Solicitors, a solicitor of the Supreme Court holding a current Practising Certificate; (d) the conditions relating to Compromise Agreements under the …..Sex Discrimination Act 1975 ……are satisfied. 2. I confirm that I have no further or other claims against the Company …..of any nature whatsoever as at today's date and I hereby waive any future claims that I may have, except as may arise out of the terms of the Letter and any claim …for personal injury …… 3.… 4. Interpretation …………………. The Statutory Claims referred to in this letter are the claims that you believe you have against the Company ……for breaches of the Employment Rights Act 1996, the Sex Discrimination Act 1975, the Race Relations Act 1976, the Disability Discrimination Act 1995, the Trade Union and Labour Relations (Consolidation) Act 1992, the Working Time Regulations 1998, the National Minimum Wage Act 1998, the Employment Tribunals Act 1996, the Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2000, the Employment Relations Act 1999 and the Equal Pay Act 1970 ……….all of which claims you have raised with the Company but which the Company and its officers, employees and agents dispute."
Employment Tribunal Directions[14]The Employment Tribunal directed itself by reference to the relevant statutory provisions to which we have referred and by reference to the terms of the Compromise Agreement. The Facts[15]The respondent is a well known hotel company. The Claimant was employed by them and their predecessors, Stakis plc, from April 1974 to May 2003. Between April 1974 and April 1981 she was a part-time, non-salaried member of staff and was excluded from her employers' pension scheme on account of that status throughout that period. As we have noted, when the Claimant's employment was terminated, she signed the Compromise Agreement. She sought the advice of her solicitor in respect of the Compromise Agreement, prior to signing it, in the course of twelve or so discussions which took place at meetings and on the telephone. She gave evidence at the Tribunal hearing, which was accepted, that she knew that the Equal Pay Act was referred to but she did not believe that she had any claim under it. Her position, which appears to have been accepted, was that she could not recollect precisely what was said to her about it by her solicitor. She was vague and uncertain as to whether there had been any specific discussion on the matter of rights under the Equal Pay Act. It was, apparently, only when she read a newspaper article in August 2003, after the Compromise Agreement had been signed, that she became aware that she might have a claim in respect of having been excluded from the pension scheme whilst working part-time. Respondents' case[16]The Respondents submitted that the Employment Tribunal had erred in law. They had identified, correctly it was submitted, that the issue in the case was not only that of whether the Claimant's solicitor knew that the Claimant had worked on a part- time basis but whether she should have known that fact. The Tribunal had not, however, proceeded to determine whether the Claimant's solicitor ought to have had that knowledge despite identifying it as a relevant issue. It was incumbent on a solicitor when advising in such circumstances to enquire as to length of the client's employment and the basis of her employment. The purpose of having an employee who is entering into a compromise agreement go to a solicitor, as the statutory provisions anticipated, was that the solicitor would do the relevant fact finding. In a case such as the present, that fact finding would be bound to include discovering that the employee had had a period of part-time employment and a claim under the Equal Pay Act. In these circumstances, the Compromise Agreement complied with the statutory requirements and excluded the present claim. Its terms were sufficient for that purpose. Reference was made to the case of Hinton v University of East London [2005] EWCA Civ 532 and the references there to it being sufficient for the requirements of s.203(3)(b) of the Employment Rights Act 1996 that the claim to be covered be identified either by a generic description or by reference to the section of the statute giving rise to the claim. In the case of the Equal Pay Act there was, it was submitted, no need to refer to the section since there was only one section under which a claim could be made.[17]The Respondents' case also involved a submission that the Tribunal erred in concluding that the express terms of the Compromise Agreement were overridden by the Claimant's contrary testimony at the Tribunal hearing. The terms of the Compromise Agreement were, it was submitted, clearly to the effect that it was agreed that the Claimant could not, in the future, make any claim under the Equal Pay Act. The Claimant's case:[18]It was submitted on behalf of the Claimant that the Tribunal found by inference that the Claimant's solicitor could not have been expected to know the material facts of the Claimant's part-time employment. Some inspecific reliance also seemed to be placed on the fact that the solicitor was only being paid £250 apiece for advising on Compromise Agreements such as that in the present case, a factor which we find wholly irrelevant to the issue that we have to determine. We would add that if that information was tendered by way of justification in the event that it was considered that an inadequate service had been afforded to the Claimant by her solicitor we cannot see that that fact would provide any justification at all.[19]On behalf of the Claimant it was also submitted that it was not a matter of the Tribunal finding that the express terms of the Compromise Agreement were overridden by the Claimant's evidence at the hearing before them. A party could not, as a matter of law, compromise a claim that they were not aware of: Lunt v MerseysideTAC Ltd [1999] IRLR 458 . The agreement did not have the effect of excluding the present claim. It did not do so in clear language: Royal National Orthopaedic Hospital Trust v Howard [2002] IRLR 849 . Conclusions[20]A majority of this Tribunal is of the view that the appeal falls to be dismissed. The relevant legal principles are as follows. Firstly, no compromise agreement can have the effect of excluding a future claim under the Equal Pay Act unless it complies with the requirements of the provisions of s.77 of the Sex Discrimination Act to which we have referred. Secondly, the statutory requirement that a compromise agreement 'must relate to the particular complaint' does not limit its cover to complaints that have already been presented to an Employment Tribunal ( Hinton ). Thirdly, a 'blanket agreement' simply signing away all an employee's Tribunal rights, will not do ( Lunt , a case which does not however determine, as was suggested by the Claimant, that as a matter of general law, a party can never contractually compromise a future claim of which he has no knowledge). The actual or potential claim must at least be identified by a generic description or a reference to the section of the statute giving rise to the claim ( Hinton ). Fourthly, whilst parties may agree that a compromise agreement is to cover future claims of which an employee does not and could not have had knowledge, to do so effectively, the terms of their agreement must be absolutely plain and unequivocal. As was said in the Royal National Orthopaedic Hospital Trust case:
"If the parties seek to achieve such an extravagant result that they release claims of which they have and can have no knowledge whether those claims have already come into existence or not, they must do so in language which is absolutely clear and leaves no room for doubt as to what it is they are contracting for. We can see no reason why as a matter of public policy a party should not contract out of some future cause of action. But we take the view that it would require extremely clear words for such an intention to be found."
[21]Fifthly, when interpreting a parties' contract, the terms of the parties' contract may be such that it is permissible to consider parole evidence as to the state of knowledge of the parties at the time that the contract was made (see e.g. Jacobs v Scott (1899) 2F (HL) 70 ).[22]We can readily accept Mr Walker's submission that the Tribunal failed to follow through the task that they set themselves and consider whether the Claimant's solicitor ought to have known of her period of part-time working. That would, however, only amount to an error on their part if it was something which was relevant as a matter of law. We confess to having had some difficulty in understanding why the Tribunal considered that the issue in the present case was that of whether the Claimant's solicitor knew or ought to have known of the Claimant's period of part-time employment. Such considerations would obviously have been relevant to a question of whether or not her solicitor was negligent in the advice she tendered, or rather failed to tender but that was not an issue under consideration. Mr Walker indicated that the relevance of the issue defined by the Tribunal arose in connection with consideration of whether the requirements of subparagraph (c) of s.77(4A) were satisfied. We do not, however, see how that can be so. Those provisions require that the employee must, as a matter of fact, have received advice from a relevant adviser as to the terms and effect of the proposed contract, particularly its effect on his ability to pursue the relevant complaint before an Employment Tribunal. That being so, notwithstanding that the policy behind the legislation may well have been to encourage the bringing about of a practice whereby employers do not ask employees to enter into compromise agreements unless they have received such advice, the key question is that of whether or not that advice has been given. It is, of course, possible for a compromise agreement to be drafted in such a way that the employee clearly acknowledges having received the relevant advice and if that happens, the agreement itself will be sufficient evidence that the requirements of paragraph (c) have been satisfied. However, the fundamental question is: what is it that the employee agreed?[23]The Tribunal considered that question albeit not expressly. They took account of the terms of the Compromise Agreement and the fact that, on the evidence heard by them, the Claimant had no knowledge, when she signed it, of having any claim under the Equal Pay Act and concluded that her claim was not excluded by the agreement. The majority of us are satisfied that they did not err in so concluding. We agree with their interpretation of the Compromise Agreement. The general reference to the exclusion of statutory claims in the 'Settlement and Waiver' paragraph is not, standing the principles to which we have referred above, enough. Nor, for the same reason, is the general reference to 'further or other claims' and 'future claims', in paragraph 2 of the Declaration. That leaves the second paragraph of the Interpretation section for consideration. We accept that the reference to the Equal Pay Act is sufficient to identify the type of claim referred to and no further detail of the nature of the claim would require to be given. That reference is, though, subject to the qualification that such a claim is only excluded if, as at 16 May 2003, the date of signature of the agreement by the Claimant, she believed she had such a claim and had raised it with the Respondents. The terms of that qualification are such as to make it permissible to take account of parole evidence as to the state of the Claimant's knowledge at that time, which is what the Tribunal did. The contract between the parties was, plainly, that if the Claimant did not have such a belief, then the claim was not waived. We do not know why the Respondents opted for the inclusion of this particular provision when an alternative wording might not have presented such a difficulty for them but opt for it they did and they must accordingly, in our majority view, accept the consequences of it, which are as the Tribunal determined them to be.[24]We should record the view of one of our members. It was that the question was a more general one of fairness and the intention of the parties which was that the agreement as a whole was meant to cover any future claim and that, given the reference to the Equal Pay Act and the Part-Time Workers (Prevention of Less Favourable Treatment) Regulations, it could not be said that this was an unforeseeable claim. It was a matter of concern that, in the wider sphere, the effectiveness of compromise agreements, which were an extremely useful tool for the benefit of both employer and employee, might be seen as weakened by our decision in this case. Disposal[25]In the circumstances, this appeal falls to be dismissed and we will pronounce an order to that effect and remit the case to the Employment Tribunal to proceed to consider the remaining issues in this case.

Cited in 1 later judgment