MS C BRODIE v NICOLA WARD T/A FIRST STEPS NURSERY [2007] UKEAT 0526_07_0702

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2007] UKEAT 0526_07_0702Case No Appeal No. UKEAT/0526/07Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
MS C BRODIEAPPELLANTNICOLA WARD T/A FIRST STEPS NURSERYRESPONDENT
Before
His Honour Judge Birtles Mrs R Chapman Mr B R GibbsDate 7 February 2007
[1]APPEARANCES For the Appellant MR MICHAEL REED (Representative) Free Representation Unit 6th Floor 289-293 High Holborn London WC1 7HZ For the Respondent MR CHRISTOPHER BRYDEN (of Counsel) Instructed by: Messrs Lyons Davidson Solicitors Park House 87 Burlington Road New Malden Surrey KT3 4QP SUMMARY Practice and Procedure – without prejudice letter The EAT held that the Employment Tribunal was correct in excluding a solicitor's without prejudice letter in other proceedings which the Appellant claimed was the "last straw" causing her to resign and claim constructive dismissal. The letter did not fall within any of the exceptions of the without prejudice rule. HIS HONOUR JUDGE BIRTLES Introduction This is an appeal from the Judgment and Reasons of an Employment Tribunal sitting at London (South) on 21 August 2007. The Chairman was Mr A M Snelson and the members were Ms H Smith and Mrs V Davidson.[2]The Tribunal decided that the contents of a letter dated 25 January 2007 from Messrs Alen-Buckley & Co, solicitors for the Respondent, to the Claimant were protected by privilege and the Claimant was precluded and prohibited from relying upon, or referring to, that letter in support of her claim for unfair dismissal. There were consequential orders which are not relevant to this appeal.[3]At the hearing of the appeal the Appellant was represented by Mr Michael Reed from the FRU and the Respondent by Mr Christopher Bryden of Counsel. As always we are grateful to the FRU and its representatives for their assistance to Appellants who might otherwise not have legal representation. History[4]The factual background is helpfully set out in paragraphs 1-3 of the Employment Tribunal Reasons and we gratefully adopt them. They are not in dispute.[5]The Claimant was continuously employed as a teacher and the deputy head of the First Steps Nursery School in East Horsley, Surrey, for just under 10 years ending with her resignation on 8 February 2007. The Respondent acquired the nursery in 2000 and the Appellant's employment passed to her then under the TUPE Regulations 1981 .[6]By a claim form presented on 11 May 2007 the Claimant brought a complaint of unfair constructive dismissal. Her pleaded case was that in the Autumn of 2006 she had been wrongfully denied contractual sick pay and that she had resigned when, by a letter dated 25 January 2007, Messrs Alen-Buckley & Co who were acting for the Respondent had written to propose a settlement of the sick pay claim (by then the subject of Employment Tribunal case 2306667/06) on terms that it would be fully satisfied in return for her resignation. This proposal was described by the Appellant as the "last straw" which had caused her to resign.[7]The claim was resisted in a response form presented on 25 June 2007 in which the Respondent denied repudiating the Appellant's contract of employment or that she had resigned in response to any breach which might be established, and accordingly contended that there had been no dismissal. In paragraph 12 of the grounds of resistance the Respondent admitted that the solicitor's letter (marked "without prejudice") had been sent and contended that it was protected by privilege.[8]The solicitor's letter is set out at EAT bundle page 101 and says this:
"Nikki Ward has instructed us with regard to employment issues. We note that you have made an application to The Employment Tribunal. This firm acted for our client when she purchased First Steps Nursery School. Specific enquiries were made of Claire Craddock as to whether staff had contracts of employment Mrs Craddock confirmed that no contracts had been issued, however, we understand that on the day of completion Mrs Craddock went ahead and issued a contract The contract purported to provide for an entitlement to six months full pay in the event of personal sickness, illness or injury. Our client played no part in agreeing employment terms and it is highly unlikely that an employer in such a small business would pay an employee six months full salary by way of sickness benefit. Our client suspects that Claire Craddock included sick pay provision that was not in force during any period of her ownership of the business. Our client would like to resolve this matter once and for all. She is willing to pay you £4,140 in full and final settlement, in return for which your employment will terminate as soon as possible. The payment will be made pursuant to the terms of a Compromise Agreement. The Compromise Agreement will include provision for you to take independent legal advice and our client will contribute the sum of £200 plus VAT towards your legal costs. The £4,140 will be free of tax. Please let us know within the next seven days whether you are prepared to accept the offer. We look forward to hearing from you."
The Employment Tribunal judgment and order[9]The case came before the Employment Tribunal on 24 August 2007 for a final hearing. Both parties and the Tribunal agreed that the Tribunal needed to begin by addressing of the dispute concerning the admissibility of the solicitor's letter. No evidence was called. The facts were not in dispute.[10]The Employment Tribunal held that the letter was privileged under the "without prejudice" rule and was not subject to any of the exceptions to that rule. The Employment Tribunal set out the relevant law in paragraphs 6-15, recorded the submissions and discussion in paragraphs 16-21 and concluded in paragraph 22 that the solicitor's letter was protected by privilege because none of the exceptions applied. The Notice of Appeal[11]The Notice of Appeal is at EAT bundle pages 10-13 and the Respondent's Answer is at EAT bundle pages 14-20. There is no cross-appeal. On appeal no issue arose as to whether or not the solicitor's letter fell within the "without prejudice" rule because it was conceded by the Appellant that this was so. The issues had narrowed so that the two issues which arose on the appeal were whether one of two exceptions to the "without prejudice" rule applied.[12]Before turning to the two grounds of appeal we think it helpful to set out some first principles. In Rush & Tompkins Ltd v Greater London Council and Another [1989] 1.A.C 1280 at 1299D-1300B Lord Griffiths said this:
"The "without prejudice" rule is a rule governing the admissibility of evidence and is founded upon the public policy of encouraging litigants to settle their differences rather than litigate them to a finish. It is nowhere more clearly expressed than in the judgment of Oliver L.J. in Cutts v. Head [1984] Ch 290 , 306: "
That the rule rests, at least in part, upon public policy is clear from many authorities, and the convenient starting point of the inquiry is the nature of the underlying policy. It is that parties should be encouraged so far as possible to settle their disputes without resort to litigation and should not be discouraged by the knowledge that anything that is said in the course of such negotiations (and that includes, of course, as much the failure to reply to an offer as an actual reply) may be used to their prejudice in the course of the proceedings. They should, as it was expressed by Clauson J. in Scott Paper Co. v. Drayton Paper Works Ltd. (1927) 44 R.P.C. 151, 156, be encouraged fully and frankly to put their cards on the table… The public policy justification, in truth, essentially rests on the desirability of preventing statements or offers made in the course of negotiations for settlement being brought before the court of trial as admissions on the question of liability." The rule applies to exclude all negotiations genuinely aimed at settlement whether oral or in writing from being given in evidence. A competent solicitor will always head any negotiating correspondence "without prejudice" to make clear beyond doubt that in the event of the negotiations being unsuccessful they are not to be referred to at the subsequent trial. However, the application of the rule is not dependent upon the use of the phrase "without prejudice" and if it is clear from the surrounding circumstances that the parties were seeking to compromise the action, evidence of the content of those negotiations will, as a general rule, not be admissible at the trial and cannot be used to establish an admission or partial admission. I cannot therefore agree with the Court of Appeal that the problem in the present case should be resolved by a linguistic approach to the meaning of the phrase "without prejudice." I believe that the question has to be looked at more broadly and resolved by balancing two different public interests namely the public interest in promoting settlements and the public interest in full discovery between parties to litigation."[13]In Unilever Plc v Procter and Gamble Co [2001] 1 All ER 783 the facts were that representatives of the Defendant company were said to have asserted, during an expressly "without prejudice" meeting, that the plaintiff's marketing of its product infringed the Defendant's patent and threatened to bring an action for infringement. The plaintiff, relying on the statements made at the meeting, brought proceedings against the Defendant under section 70 of the Patents Act 1977 for threatening the plaintiff with proceedings for infringement of the patent. The judge granted the Defendant's application to strike-out the action as an abuse of the process of the court. The Court of Appeal dismissed the plaintiff's appeal and held that the meeting was intended to be an occasion for both sides to speak freely; that there was nothing to suggest that the Defendant's representatives acted in anyway that was oppressive, dishonest or dishonourable; and that, therefore, it would be an abuse of process for the plaintiff to be allowed to plead anything that was said at the meeting either as a threat or a claim of right. See in particular the judgment of Robert Walker LJ at page 796c-g.[14]With those first principles in mind we turn to the two grounds of appeal. Ground 1: dishonest exception[15]Mr Reed submits that the Employment Tribunal lost the distinction between the evidence and the pleaded case in that the "without prejudice" rule cannot and should not be used to suppress evidence. That was the distinction it was being asked to make in this particular case. He submitted that if the Appellant could not give evidence about the solicitor's letter of 25 January 2007 other than the fact of it being sent and received by her and was prohibited from adducing its contents before the Employment Tribunal then effectively she would not be able to argue that the "last straw" rule applied in this case and therefore her case would be fatally damaged. The contents of the letter was evidence which she needed to adduce. He accepted that it involved stretching the definition of dishonesty beyond the existing case law. As a matter of fact the Appellant had not taken up the offer made in the solicitor's "without prejudice" letter and the matter went on to an Employment Tribunal hearing where she was successful in her claim for contractual sick pay.[16]Mr Bryden submitted that the "without prejudice" rule was not confined to admissions: see the Unilever case at page 796c-f. On the dishonesty exception he referred us to Independent Research Services v Catterall [1993] ICR 1 at 6B-7B where Knox J said this:
"As often happens in difficult cases two well established and valuable legal principles collide. One is that it is desirable that courts and tribunals should have all the available material before them with which to arrive at a just conclusion in accordance with law. The other is that it is desirable that parties should be in a position freely to negotiate a compromise of their disputes without having what they say in the course of those negotiations revealed subsequently and used against them in litigation or proceedings before a tribunal. There is inevitably going to be a contradiction or conflict where an admission, or a statement of present intention, is made which conflicts with the parties' pleaded case and we quite see that in the present circumstances there is going to be a difficult conflict between the proposition that the applicant's trust and confidence was destroyed in late April 1991 and remained destroyed to 13 May and on the other hand his willingness to continue as an employee if certain financial inducements were forthcoming. But the existence of the conflict is not of itself, in our view, sufficient to warrant our giving priority to the first of the two principles, namely, that the courts should have all available material before them, over the other, namely, protection for "without prejudice" correspondence. It seems to us, particularly having regard to the authorities that are collected in Mr. Foskett's book, that the yardstick that should be applied in this category of cases is whether the "without prejudice" material involves, if it is suppressed, something amounting to a dishonest case being prosecuted if the pleaded case continues. The nearest example amongst the quoted cases in Mr. Foskett's book, to which we were referred, is a decision of Mr. Anthony May Q.C., Hawick Jersey international Ltd. v. Caplan, The Times, 11 March 1988, and the account given of it is this: "
P claimed a repayment of a loan to D of £10,000 made by means of a cheque. D denied the transaction was a loan because he had supplied £10,000 cash. D secretly tape recorded a "without prejudice" meeting at which (a) P did not dispute and indeed accepted D's repeated assertions that the transaction was not a loan but one involving an exchange for £10,000 in cash and (b) P expressly or impliedly said that the proceedings were brought to persuade D to reach a fairer settlement or to settle other differences." and Mr. May, sitting as a deputy judge of the Queen's Bench Division, held that P was threatening to persist with dishonest proceedings and accordingly that "without prejudice" privilege did not apply to the discussion. Other more extreme examples are given of threats in the nature of blackmail and other wholly undesirable and, indeed, criminal activities which cannot be indulged in cloaked under the privilege of "without prejudice". We have therefore looked to see whether we are of the view that the exclusion of the "without prejudice" material and persistence in the applicant's case as pleaded in his originating application involves something in the nature of dishonest conduct on his part. Tested by that test we conclude that the material should remain hidden from the industrial tribunal because we do not think that there is dishonesty involved in such an attitude."[17]Mr Bryden also referred us to Savings & Investment Bank Ltd (in Liquidation) v Kenneth Fincken [2004] 1WLR 667 at page 675 paragraph 59 per Rix LJ. Finally, Mr Bryden submitted that this case cannot possibly come within the dishonesty exception in either the dictionary sense or in fact. It was simply an honest attempt by the Respondent's solicitors to settle an existing Employment Tribunal case for payment of sick pay.[18]We agree with Mr Bryden's submission. It seems to us clear both on the authorities cited to us i.e. Independent Research Services Ltd v Catterall [1993] ICR 1 at 6B-7B and Savings & Investment Bank Ltd (in Liquidation) v Kenneth Fincken [2004] 1WLR 667 at 685 paragraph 59 and also on the facts as we have set them out at the beginning of this judgment that there is no dishonesty involved in this case in an attempt to exclude the solicitor's letter under the "without prejudice" rule. There is nothing in the nature of dishonest conduct on the Respondent's part and we decline to extend the law beyond its present boundary. Ground 2: unambiguous impropriety[19]Mr Reed submitted that although again the case law did not cover such a situation we should be prepared to extend the law to cover the present case. Apart from the Unilever case, supra , he referred us to Brunel University v Vaseghi [2007] IRLR 592 at paragraph 32. That decision of the Court of Appeal was based upon waiver which does not apply in the present case. Lady Justice Smith, obiter , said that the Court of Appeal could understand "a possible submission that it may sometimes be difficult to prove victimisation if the general rule (that remarks made in the course of "without prejudice" discussions cannot be referred to) applies to its full width". Mr Reed submitted that the same problem applied in constructive dismissal cases. I have already indicated that Mr Reed had conceded during the course of his submissions that the Appellant did not take up the offer made in the solicitor's letter of 25 January 2007. Her resignation was in accordance with her letter of resignation of 8 February 2007: EAT bundle page 106 which said this:
"Re: GRIEVANCE I am writing to tell you that I wish to raise a grievance. This action is with regard to the following circumstances; Despite my original grievance with regard to the unlawful deduction of my wages dated 3 rd November 2006, you have still failed and refused to pay me what I am entitled to under my Employment Contract dated 5 th June 2001. On account of this repudiatory breach of an express term of my contract and following from this a breach of the implied term of trust and confidence, I feel that I have had no option but to resign. I consider this resignation to be a constructive dismissal. I am prepared to deal with this grievance in writing. If you agree, please confirm your agreement in writing that the modified procedure under the Employment Act 2002 (dispute resolution) regulations 2004 apply. I look forward to bearing from you with your response to my grievance."
[20]Mr Bryden submitted that the unambiguous impropriety exception amount to something similar to fraud or blackmail or perjury and referred us to the comments of Rix LJ in Savings & Investment Bank Ltd (in Liquidation) v Fincken [2004] 1WLR 667 at pages 685-686 paragraphs 62-63 where he said this:
"62. It is of course distasteful for this or any court to avert its eyes from an admission which, subject to any point about value, appears to incriminate Mr Fincken in lying in a sworn document. However, in the tension between two powerful public interests, it seems to me that that in favour of the protection of the privilege of without prejudice discussions holds sway - unless the privilege is itself abused on the occasion of its exercise. 63. I would therefore conclude that Ms Gloster is wrong to submit that the unambiguous impropriety exception is a broad and flexible rule which covers this case. It follows that the judge below and this court should never have known of the admission as to ownership of the shares relied on by SIB."
Mr Bryden further submitted that this was not a case where the Appellant was barred from putting forward the whole of her case i.e. one of constructive dismissal including reliance upon the "last straw" principle. Her objection is that she cannot present her case in the way that she would like to but that is simply the result of the without prejudice rule. He also referred us to Fazl-Alizadeh v Nikbin and Others (unreported 25 February 1993; Court of Appeal (Civil Division) Transcript No 205 of 993) which is referred to in the Savings & Investment Bank Ltd (in Liquidation) [2004] 1WLR 667 at pages 679-680 case paragraph 47 of the judgment of Rix LJ. Finally, Mr Bryden submitted that on the facts of this case the solicitor's letter of 27 January 2007 cannot possibly be unambiguous impropriety.[21]We agree with Mr Bryden's submissions. It seems to us that on the authorities that we have cited as well as on the facts of the case as we have set them out at the beginning of our judgment the solicitors letter of 27 January 2007 cannot possibly be construed as unambiguous impropriety in the sense of fraud, blackmail or perjury or indeed as impropriety of any kind. It is a perfectly proper attempt by the Respondent's solicitors to settle the existing Employment Tribunal case relating to the claim for sick pay. We can see no justification for extending the unambiguous impropriety exception to cover this case. Conclusion[22]For these reasons the appeal is dismissed.