LEHMAN BROTHERS LTD v MR J SMITH [2005] UKEAT 0486_05_1310

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2005] UKEAT 0486_05_1310Case No Appeal No. UKEAT/0486/05Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
LEHMAN BROTHERS LTDAPPELLANTMR J SMITHRESPONDENT
Before
His Honour Judge Peter ClarkDate 13 October 2005
[1]APPEARANCES For the Appellant MR RICHARD COLEMAN (of Counsel) Instructed by: Messrs Clifford Chance LLP 10 Upper Bank Street London E14 5JJ For the Respondent MR JEREMY LEWIS (of Counsel) Instructed by: Messrs Tarlo Lyons Solicitors Watchmaker Court 33 St John's Lane London EC1M 4DB SUMMARY Practice & Procedure: Amendment Permission to amend claim form to add new claim. Whether permission may be given notwithstanding that new claim is out of time when application is made, or whether the balance of hardship/prejudice test is to be applied. HIS HONOUR JUDGE PETER CLARK This case is presently proceeding before the London (Central) Employment Tribunal. The parties are Mr J Smith, the Claimant and Lehman Brothers Limited, the Respondent; I shall so describe them in this judgment.[2]On 29 September 2005 I heard an appeal by the Respondent against a Case Management Order made by a Chairman, Ms V Cook, sitting alone on 19 May 2005, allowing the Claimant's application to amend his claim form, lodged with the Tribunal on 11 March 2005, came before me. I dismissed the appeal and reserved my reasons.[3]I shall deal first with a procedural point raised by the Respondent in correspondence in these appeal proceedings, but not then pursued by Mr Coleman in oral submissions. Following a preliminary hearing before HHJ Ansell, sitting alone on 12 September 2005, that judge allowed the appeal to proceed to a full hearing, to be listed before me and gave directions, sealed that day, for the future conduct of the appeal. In particular, at paragraph 3 he directed: "By no later than 14 September 2005 the Respondent must lodge with the Employment Appeal Tribunal and file an Answer, and if such Answer includes a cross-appeal shall forthwith apply to the Employment Appeal Tribunal on paper on notice to the Appellant for directions as to the hearing or disposal of such cross-appeal".[4]On 14 September, solicitors acting for the Claimant lodged the Claimant's Answer with the EAT by fax. Paragraph 4 of that Answer, in the prescribed EAT Form 3 stated: "The Respondent (Claimant) makes no cross-appeal".[5]Under paragraph 3 of the Answer the Claimant attached further grounds, on which he wished to rely, differing from the grounds relied upon by the Chairman for making her Order, in resisting the appeal.[6]The point raised by the Respondent was that in advancing a ground in support of the Chairman's order which involved an attack on one of her legal findings (the "series of deductions" point, to which I shall return) the Claimant was making a cross-appeal and consequently he is in breach of paragraph 3 of HHJ Ansell's directions in that no application has been made for the hearing or disposal of that cross-appeal.[7]In response, it was argued on behalf of the Claimant that in truth no cross-appeal is here raised. There is no appeal by the Claimant against the Chairman's order permitting the amendment sought; the Claimant challenges the Chairman's finding on the series of deduction point as a further ground for supporting the Chairman's conclusion that the amendment be permitted.[8]In my view that submission is correct and Mr Coleman was right to abandon the point. Rule 6 of the EAT Rules draws a distinction between a respondent to an appeal advancing different grounds to those relied on by the Employment Tribunal in supporting the Tribunal's decision (Rule 6(2)) and a respondent who cross-appeals against a decision of the Tribunal adverse to him (Rule 6(3)). Put another way, I am not satisfied that it was open for the Claimant to appeal the Chairman's order granting his application to amend in order to challenge an allegedly erroneous finding in law, forming part of her reasoning, leading to a decision in his favour.[9]In any event, substantively the Respondent was put on notice of the argument to be advanced by the Claimant on the series of deduction point at this full hearing(a) from the Answer and(b) from the Skeleton Argument prepared by Mr Lewis and disclosed to the Respondent in advance of this hearing. Background[10]The Claimant was employed by the Respondent as a trader from about August 2002 until his summary dismissal on 14 December 2004. Following his dismissal he lodged a claim form on 11 March 2005, attached to which were detailed grounds of complaint. He complained of unfair dismissal, in different forms; action short of dismissal for making protected disclosures; failure to permit him to be accompanied at a disciplinary hearing and, material to the present appeal, "unlawful deduction of wages and/or breach of contract in relation to non-payment of bonus" (the bonus claims). The Bonus Claims[11]These claims, put in the alternative as an unlawful deductions claim under Part II of the Employment Rights Act 1996 ("the Wages Act claim") or breach of contract claim brought under the provisions of the Employment Tribunal (Extension of Jurisdiction Etc) Order 1994 , was set out in the original grounds of complaint at paragraphs 40 and following. It was accepted before the Chairman that these claims, as originally pleaded, related only to the non-payment of the 2004 bonus to the Claimant under the Respondent's discretionary bonus scheme. Nevertheless, the 2003 bonus payment made to the Claimant was referred to at paragraph 41 in these terms:
"Yet further in relation to 2003, when the Claimant received a bonus of £25,678, it was acknowledged that this was a low level for bonus"
. The Proposed Amendment[12]Following service of the Respondent's Form ET3 on 11 April 2005, the Claimant's solicitors served proposed amended Grounds of Complaint, adding to the existing Wages Act and breach of contract claims in relation to non-payment of the 2004 bonus, identical claims in relation to the 2003 bonus which was paid in January 2004. It was contended that the 2003 bonus paid was not a fair reflection of the Claimant's performance during that bonus year. The Employment Tribunal Reasoning[13]The Chairman gave full reasons for allowing the amendment, which was opposed by the Respondent. The main features may be summarised as follows:(i) This was an application to add to an existing claim; it was not a re-labelling exercise; it referred to existing cause of action where some primary facts had already been pleaded (Reasons paragraph 52);(ii) The balance of hardship came down in favour of granting the amendment (paragraph 56);(iii) Had the original claim included a complaint relating to both the 2003 and 2004 bonuses, these would have constituted a series of deductions for the purposes of section 23(3)(a) ERA; however, by seeking to add a new claim (the 2003 bonus claim) by amendment, that was out of time. There was no series of deductions (paragraphs 40-41);(iv) Alternatively, it was not reasonably practicable to bring the 2003 bonus claims within time. The Claimant did not know that the circumstances of the 2003 bonus payment would be in issue until receipt of the Respondent's Notice of Appearance, putting an issue the Claimant's performance and its effect on his 2003 bonus (paragraph 57). The Appeal[14]In the Respondent's appeal Mr Coleman takes two principal points:(i) That the Chairman wrongly applied the test of balance of prejudice/hardship in determining whether or not to allow the amendment. She ought to have focused on the application of time limits, particularly the test of reasonable practicability, the "escape clause" equally applicable to the Wages Act and breach of contract claims;(ii) The Chairman's finding that it was not reasonably practicable to bring either claim relating to the 2003 bonus in time was perverse, in that it was an illogical finding with no evidential basis.[15]Mr Lewis, as I have indicated, raises a challenge to the Chairman's conclusion on the series of deductions point. Amendment[16]In light of the full argument presented by Mr Coleman and responded to by Mr Lewis, I take this opportunity to review the development of the decided cases on granting or refusing permission to amend a claim form, as it now is, in Employment Tribunal proceedings. The Rules[17]The relevant provisions in the current Employment Tribunal Rules of Procedure 2004 are these: Rule 10(1) gives Employment Tribunal chairmen a general power to manage proceedings and to make orders including those set out by way of example in Rule 10(2); Rule 10(2)(q) refers to:
"Giving leave to amend a claim…."
[18]I should also mention Rule 60(1) which provides:
"Subject to the provisions of these Rules and any Practice Directions, a Tribunal or Chairman may regulate its own procedure"
. CPR[19]In my view it is material to note the comparison between the wide discretion to grant or refuse an amendment in Employment Tribunal proceedings with the more tightly drawn provisions of the CPR. Section 35 of the Limitation Act 1980 provides that any new claim made in the course of an action shall, so far as is material, be deemed to have been commenced on the same date as the original action (S-S(1)). In order to deal with claims which are out of time at the date of amendment, but made retrospectively in time by dating back to the date of the original action, S-S(3) provides that, subject to the discretionary power to extend time in personal injury actions under section 33 of the Limitation Act , or rules of Court, the Court shall not allow a new claim which is out of time. However, the rules may provide for allowing a new claim which arises out of the same or substantially the same facts as are already in issue in any claim already made in the original action (S-S(4) and (5)).[20]The statutory test is to be found in Rule 17.4 (2) CPR. Thus, an amendment will not be permitted in the civil courts to permit a new claim which is out of time unless it arises out of the same or substantially the same facts as were relied on in the original claim. Pausing there, in a nutshell, Mr Coleman submits that precisely the same rule applies to amendments in Employment Tribunal proceedings. Is that proposition correct? The Earlier Cases[21]The starting point, chronologically, is the NIRC decision in Cocking v Sandhurst (Stationers) Ltd (1974) ICR 650 (Sir John Donaldson P presiding). The issue there was whether the Claimant ought to be permitted to amend his application to the Employment Tribunal to substitute the name of the parent company of the company originally named as respondent, notwithstanding that the time limit had expired. An Employment Tribunal permitted the amendment, but on the basis that the amendment took effect on its date, not the date of the original application. It was ruled out of time. On appeal by the Claimant, allowing the appeal, the NIRC set out a seven step approach to follow when considering applications to change the basis of claim or adding or substituting parties (656H-657C). In particular, at steps (3) and (4) it was made clear that if the new claim sought to be advanced was out of time at the date of the original application there was no discretion in the Employment Tribunal to allow the amendment. However, if it was then in time the Tribunal has a discretion to allow the amendment. In exercising that discretion, the Tribunal should in every case have regard to all the circumstances of the case and in particular any injustice or hardship which may be caused to any of the parties. Pausing here, that is the test advocated by Mr Lewis in the present case and the one which the Chairman applied in preference to that advanced on behalf of the Respondent.[22]Next, British Newspaper Printing Corporation (North) Ltd v Kelly [1989] IRLR 222 (CA). The leading judgment in that case was delivered by Lord Donaldson MR. Bingham and Mann LJJ agreed without adding reasons of their own. Reference was made in the judgment to the Master of the Rolls' earlier judgment in Cocking v Sandhurst .[23]In Kelly , the originating application, at paragraph 1 claimed only "redundancy" although reference was made elsewhere to unfair dismissal compensation. Following receipt of the Respondent's grounds of resistance, the claimant's advisers realised that they had a stronger case for unfair dismissal than redundancy and applied for permission to amend. The Employment Tribunal, by a majority, refused the application on the basis of delay in lodging the application in circumstances in which, they found, it would be reasonably practicable to have presented the unfair dismissal claim within time. The EAT allowed an appeal on the grounds that the Tribunal had misdirected themselves in placing too much emphasis on the time limit for presenting a complaint of unfair dismissal. The Court of Appeal dismissed the respondent's appeal.[24]The Master of the Rolls agreed with the EAT approach. As I read his reasoning at paragraphs 10-12, two points are made:(i) That although Parliament has laid down rules covering the lodging of Originating Applications to Employment Tribunals, it has not laid down rules for time limits in relation to amending applications which have already been made, and(ii) Following Cocking , it is necessary for tribunals to ask themselves what are the relevant hardships to the respective parties if the amendment is or is not allowed.[25]The next case is Selkent v Moore [1996] ICR 836 . Although a decision at EAT level, the judgment delivered by Mummery P has been widely followed since and has not been criticised at a higher level. There, a Chairman of Employment Tribunals granted the Claimant permission to amend his Originating Application to add, to an existing claim of "ordinary" unfair dismissal, an alternative claim based on an inadmissible reason for dismissal, namely the Claimant's trade union membership or activities. The case of Cocking is referred to in the judgment, but that of Kelly does not appear to have been cited, nor is it referred to in the judgment.[26]In giving guidance as to the correct approach to amendment applications (842F-844C) Mummery P said (843F): "(4) Whenever the discretion to grant an amendment is invoked, the Employment Tribunal should take into account all the circumstances and should balance the injustice and hardship of allowing the amendment against the injustice of refusing it".[27]In considering what are "relevant circumstances", he considered, as part of a non-exhaustive list, the applicability of time limits (843H-844A). He said this: "If a new complaint or cause of action is proposed to be added by way of amendment, it is essential for the tribunal to consider whether that complaint is out of time and, if so, whether the time limit should be extended under the applicable statutory provisions, e.g. in the case of unfair dismissal, s67 of the Employment Protection (Consolidation) Act 1978 [now s111(2) ERA; including the reasonable practicability escape clause]".[28]He then went on to consider the timing and manner of the application to amend, pointing out (as may also be seen from Kelly ) that there is no time limit for making the application.[29]Both Counsel rely upon Selkent as supporting their respective propositions in this appeal. Mr Coleman points to the reference to the tribunal's essential consideration as to whether the new cause of action is out of time and if so whether time should be extended, as supporting his case that an amendment cannot be allowed where the application is made out of time and it is not shown by the Claimant that it was not reasonably practicable to present it within time. Mr Lewis, on the other hand, draws comfort from the observation that whenever the discretion to grant or refuse an amendment is invoked, the tribunal should take account of all the circumstances and carry out the balance of prejudice exercised. That exercise will be unnecessary, he submits, if the mere fact that the application fails at the limitation hurdle is decisive. I must return to these arguments when expressing my conclusions.[30]I considered the earlier cases in Fairhurst v Northumberland County Council (EAT 1333/96 19 June 1997. Unreported). At page 4G-5C, I said this: "We have been referred to the Court of Appeal judgment in British Newspaper Printing Corporation (North) Limited v Kelly [1989] IRLR 222 and Selkent Bus Co Ltd v Moore [1996] ICR 836 , both of which cases approve and follow the test laid down by the National Industrial Relations Court in Cocking v Sandhurst Ltd [1974] ICR 650, namely, in determining whether or not to grant leave to amend what are the relevant hardships to the parties if leave to amend is or is not granted. It is pointed out in the cases that there is no statutory time limit on leave to amend. Thus, the Industrial Tribunal may take into account, as one of the relevant circumstances, whether the proposed amendment raises a new cause of action out of time, and if so, whether time should be extended under the proviso (here, contained in s23(4) of the 1996 Act). The Chairman in this case considered that question and decided not to extend time. However, he does not appear to have gone further to weigh the relative hardship of refusing the amendment. In failing to carry out that exercise, he did, in our judgment, fall into error".[31]Mr Coleman fairly accepts that if our approach in that case is correct today, then this appeal fails. However, he submits that it is not. It is therefore necessary for me to consider whether later cases cause me to revise that approach.[32]Next in time is the Court of Appeal decision in The Housing Corporation v Bryant [1999] ICR 123 . There, the Claimant's Originating Application to the Tribunal alleged unfair dismissal and sex discrimination. A tribunal dismissed the complaint of sex discrimination on the basis that it was time barred. She then applied to amend her Originating Application to add a complaint of victimisation contrary to the Sex Discrimination Act 1975 . That application was refused by a Chairman on the basis that the original claim disclosed no grounds for a victimisation claim and it was out of time. The EAT allowed her appeal against that refusal; the Court of Appeal restored the Chairman's decision not to grant the amendment.[33]Although Kelly is referred to on two occasions in the leading judgment of Buxton LJ (127G; 131E) no observations are made as to the approach taken in that case, other than in relation to the power of an appellate tribunal to interfere with first instance decisions. In these circumstances I find nothing in Bryant which throws doubt on the reasoning of the Court of Appeal in Kelly .[34]Lindsay P, sitting in the EAT, did express doubts as to the reasoning in Kelly in Harvey v Port of Tilbury (London) Ltd [1999] ICR 1030. He described that case as "puzzling" (1037G); adding that the EAT had "grave doubts" about the case (1039H). However he added, as must self-evidently be the position, that it is not for the EAT to say that Kelly is wrong. I respectfully agree. That said, the EAT purported to distinguish Kelly , on the basis that Kelly was concerned with time limits under what is now ERA 1996 and its reasoning ought not to be adopted in relation to a discrimination claim sought to be brought, in Harvey , under the Disability Discrimination Act 1995 , where the test for extending time is the just and equitable test and not that of reasonable practicability.[35]In so far as that is the reasoning in Harvey , it is unnecessary for me to examine it since the present case is concerned with the reasonable practicability escape clause, as in the cases of Cocking and Kelly . This is particularly so when I come to consider the most recent Court of Appeal case of Ali v Office of National Statistics [2005] IRLR 201 .[36]That said, Mr Lewis has, in my view correctly, drawn attention to what appears to be a misreading of Cocking [1038F]. Cocking , as I read the seven step guidance, precludes an amendment which would have been out of time when the claim form was originally presented, but not when a new claim would then have been in time.[37]At all events, in so far as Harvey may be said to lay down the proposition that an amendment raising a new claim which is then out of time, notwithstanding the relevant escape clause cannot be allowed, I find myself unable to follow it in the light of Kelly which is, as Lindsay P acknowledged, binding on this EAT.[38]My attention has been drawn to an unreported decision of the EAT in Swiss Re Life & Health Limited v Kay (11 July 2002 EAT 0680/01, Mr Recorder Langstaff QC presiding). Having considered both Kelly and Harvey , the learned Recorder concluded (paragraph 26):
"It seems to us, therefore, that we have to reject the submission that the only consideration to which the Tribunal should have had regard was the question of the time limits which would otherwise be appropriate. We are not unhappy to do so because if it were otherwise, those time limits would be conclusive and there would be no basis for providing, in any case, that an amendment might be made without those time limits being directly applicable. They will, of course, almost always be an important consideration"
. I respectfully agree with that analysis.[39]Finally, Ali . That case finally laid to rest a question as to what is a new claim or cause of action stemming back to the EAT decision in Quarcoopone v Sockshop Holdings Ltd [1995] IRLR 353, later doubted by a different division (Charles J presiding) in Smith v Zeneca (2000) ICR 800 . The point does not arise in the present case, where it is common ground that the proposed amendment to raise claims in relation to the 2003 bonus does raise a new claim.[40]What is of particular interest in Ali is that Kelly was not referred to in the judgment. Nevertheless, at paragraph 40 Waller LJ saw no distinction between the just and equitable test for extending time in a discrimination case (as was Ali ) and the "balance of hardship and justice test" referred to in Selkent , following Cocking .[41]Since, like Harvey , Ali was concerned with the more liberal limitation provisions in discrimination legislation than those contained in what is now ERA, applicable in Cocking , Kelly and the present case, I am not persuaded that Ali alters the principal set out in Cocking , Kelly and Selkent , the latter case being cited in Ali without disapproval.[42]It is thus convenient to return now to the difference between Counsel as to whether Selkent supports the proposition advanced by Mr Coleman in this appeal or that of Mr Lewis. In my judgment, it is the latter. Nothing in the cases after Fairhurst causes me to alter the approach which I took in that case. Whilst the question as to whether an amendment application seeking to add a new claim (as opposed to a minor amendment) is itself made out of time, is an important factor, it is not determinative of the question. The balance of hardship and justice as between the parties must always be considered in carrying out the exercise of discretion to grant or refuse the amendment.[43]Not only is that the correct approach on the whole of the authorities, but also reflects, in my judgment, the contrast between the current Employment Tribunal Rules and the CPR. Had Parliament wished to preclude amendments in Employment Tribunal proceedings which were out of time when made (but would not have been had they been contained in the original claim form) it would have limited the general wording in Rule 10(2)(q) of the Employment Tribunal Rules 2004 to amendments based on the same or substantially the same facts as were contained in the original claim form (cf CPR Rule R17.4(2)). The Present Case[44]Leaving aside Mr Coleman's very proper concession that if my approach in Fairhurst stands the test of time, then this appeal fails, my analysis of the instant case is as follows:(i) New Claims It is, as I have observed, common ground that the 2003 bonus claims are new claims, in the sense that the amendment adds new causes of action unconnected with the original claim (see the third category of amendment, applying the formulation set out in Harvey on Industrial Relations and Employment Law, volume 5, paragraph T311.03).(ii) Were the new claims time-barred at the time when the original claim form was lodged? The 2003 bonus claim was put in two ways; as a claim for breach of contract, alternatively as a Wages Act claim. As to the former, no claim for breach of contract could arise under the Extension of Jurisdiction Order 1994 until after the termination of the Claimant's employment on 14 December 2004 (Article 3(c). See also Capek v Lincolnshire County Council [2000] IRLR 590 (CA)). Thus the primary three month limitation period under the 1994 Order had not expired when the claim form was presented on 11 March 2005. As to the Wages Act claim, I agree with the Chairman (Reasons paragraph 40) that had both the 2003 and 2004 bonus claims been presented on 11 March (not April, as the Chairman mistakenly states in paragraph 40) 2005, they would have represented a series of deductions and hence been presented within the primary limitation period. See Group 4 Nightspeed Ltd v Gilbert [1997] IRLR 398.(iii) Balance of Hardship The Chairman found (Reasons paragraph 56) that the balance of hardship lay in favour of granting the amendment. There is no appeal against that finding if, as I have held, the Chairman applied the correct test.(iv) Reasonable Practicability It follows that it is unnecessary for me to rule on Mr Coleman's second point in the appeal, challenging the Chairman's alternative finding that it was not reasonably practicable for the Claimant to present the new claims within time.(v) Series of Deductions Equally, it is unnecessary for me to rule on Mr Lewis' alternative ground for supporting the Chairman's conclusion, challenging the Chairman's finding at paragraph 41 of her reasons, it being sufficient in my view that, as the Chairman found, had the 2003 bonus Wages Act claim formed part of the original claim that, together with the 2004 bonus claim, would have constituted a series of deductions rendering both within the primary limitation period. Conclusion[45]For these reasons the appeal is dismissed.