England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE CCRTF 97/0538/2

(HIS HONOUR JUDGE RICH QC )

Royal Courts of Justice

Strand

London WC2

Thursday 5th February l998

B e f o r e:

LADY JUSTICE BUTLER-SLOSS

LORD JUSTICE SWINTON THOMAS

LORD JUSTICE MUMMERY

CHAAGAN LAL DATTANI Appellant

v.

TRIO SUPERMARKETS LIMITED Respondent

(Computer Aided Transcript of the Palantype Notes of

Smith Bernal Reporting Limited, l80 Fleet Street,

London EC4A 2HD, Tel: 0l7l 83l 3l83

Official Shorthand Writers to the Court)

MR DAVID GILES (instructed by Messrs Sherringtons, Middlesex HA8 7BJ) appeared on behalf of the Appellant (Plaintiff).

MR PAUL STALLEBRASS (instructed by Messrs Bowling & Co, London El5 lNG) appeared on behalf of the Respondent (Defendant).

J U D G M E N T

(As approved by the court)

©Crown Copyright

LADY JUSTICE BUTLER-SLOSS: I will ask Mummery LJ to give the first judgment.

LORD JUSTICE MUMMERY: Introduction

"The law loves compromise" so wrote Lord Bingham LCJ in his foreword to the fourth edition of the Law and Practice of Compromise by David Foskett QC. The converse is also true. The law, in its promotion of finality and certainty in dispute resolution, loathes litigation about compromises. But such litigation does occur. Another quotation from Lord Bingham's foreword is apt. After reference to the ways in which the law promotes compromises he writes:

"But there is, as always a catch. To negotiate a final and binding settlement agreement; to make sure that all necessary matters are covered; to express the terms clearly and unambiguously; to make sure that the agreement is simply and inexpensively enforceable; to advise where one party claims that he has been misled or pressured into making an agreement by the other side; all this may call for as much skill, including legal skill, as fighting the action."

This action unfortunately exemplifies the catch in a compromise. The principal issue is whether the claim made in this case in the Central London County Court by an employee against his former employer for unpaid wages is maintainable in the light of a settlement reched between the same parties when the employee brought a claim against his employer in an Industrial Tribunal for compensation for unfair dismissal.

I turn straight to the facts of this case. The plaintiff, Mr Dattani, was employed as a shop manager of a business owned by Trio Supermarkets Limited (which I shall refer to as "the company"). A director of the company is Mr Dattani's brother-in-law, Mr Kanabar. Mr Dattani was shop manager of the premises at 119-121 Newington Green Road, London Nl. The period of his employment was from the end of February l987 until 30th July l99l. The circumstances in which his employment terminated led to a claim for unfair dismissal in the Industrial Tribunal.

The originating application in the printed form IT1 was prepared by Mr Dattani's legal advisers, a firm of solicitors in Finchley. It is dated 3rd October l99l. It states that the type of complaint that he wanted the tribunal to decide was "unfair dismissal". He describes his occupation as a shop manager. He gives details of the dates of his employment, 27th February l987 to 30th July l99l. That was a fact not disputed by the company when it entered its notice of appearance in November l99l. Mr Dattani gave details of his basic wage of £l50 for a 60-hour week.

In view of what later happened, it is essential to quote the whole of the details of the complaint in box l0 of the IT1:

"Have been working for Respondents since February l987. I worked as shop manager at ll9-l2l Newington Green Road. My net pay was agreed at £l50 per week. However for first 5 months I was not paid anything. I was told the business had financial problems. I started receiving a wage in August l987, but then on £l00 net per week. Throughout the years I have worked I have never received a pay rise nor holiday pay. Throughout the period I worked for Trio I constantly asked Mr Kanabar, the director of Trio to pay me the money he owed i.e. the difference between what I received and what was agreed. His excuse was always we have financial problems. He said he was trying to sell one of the shops and from the sale proceeds would pay what he owes. During this time three shops were sold but I never received my money. In July l99l I had decided to buy a house. I needed my back pay to put down as a deposit. I asked Mr Kanabar for my money. He said 'I've told you so many times I have financial problems - where do you want me to get the money from'. I said I need the money. Mr Kanabar then said 'Give me the keys to the shop and don't come in tomorrow'. I was shocked but I knew he was being serious. I handed the keys to him and Mr Kanabar told me not to come back tomorrow. I have been out of work since then."

In the notice of appearance the company contended that Mr Dattani had not been dismissed, that he had unilaterally terminated his employment and that he was not entitled to any compensation. In response to the allegations that he was not paid his full wages, it was contended that in fact Mr Dattani owed money to the company. Details were given of the occasions on which it was alleged that Mr Dattani had withdrawn money in cash. This was entered in the books of the company as an advance. The sums had not been repaid. It was also alleged that Mr Dattani took amounts of stock, evidenced by the presence of vouchers found in the till. Details were given.

The hearing began in the Industrial Tribunal on 9th November l992. Both sides were represented, Mr Dattani by a solicitor and the company by counsel (not the counsel who now appears for the company). The tribunal heard evidence from Mr Kanabar. But the tribunal never adjudicated upon the rights and wrongs of the claim for unfair dismissal. A compromise was reached. The tribunal issued on lst December l992 and sent to the parties a document headed "Decision of the Industrial Tribunal, held at London (North) on 9 November l992". Under another heading, "Decision", and after the details of representation and the composition of the tribunal, this is stated:

"This case has been settled on the basis that the Respondent pay the Applicant the sum of £5,000 at the rate of £l,000 per month, the first payment to be made on l6 November l992. The Applicant remains free to return to the Tribunal should the sum agreed not be paid within the agreed time limits."

The only other contemporaneous document relevant to the compromise is a handwritten document addressed to Mr Dattani. It is dated 9th November l992 and signed by Mr Kanabar. It states: "In consideration of your accepting the sum of £5000 from Trio Supermarkets Ltd in settlement of your claim for unfair dismissal by Trio Supermarket Limited in five installments of £l000 per month I as director of Trio Supermarkets Limited hereby personally guarantee payment of each of the said sum of £l000."

A year passed. The sum was paid. Mr Dattani then started proceedings in the County Court. In Particulars of Claim issued in the Clerkenwell County Court on 2nd December l993 Mr Dattani claimed against the company for unpaid wages. It is unnecessary to repeat the details of the claim. The claim covered the period of employment and amplified the allegations in the unfair dismissal claim.

A defence was served containing these allegations:

"3. The Industrial Tribunal Action was heard by the London (North) Industrial Tribunal on the 9th November l993 and upon the said hearing the Tribunal decided, on the basis of a settlement reached between the Plaintiff and the Defendant, that the Defendant should pay to the Plaintiff the sum of £5,000.00 at the rate of £l,000.00 per month, the first payment to be made on l6th November l993. The said decision was entered in the Industrial Tribunal's Register on lst December l992. Pursuant to the said decision the Defendant has paid to the Plaintiff the sum of £5,000.00.

4. By reason of the aforesaid matters the Plaintiff is estopped from maintaining his claim against the Defendant in the present action."

In the following paragraph there is an alternative plea that there had been accord and satisfaction of the claim now advanced in the county court proceedings.

A reply was served pleading:

"2. The Plaintiff's action in the Industrial Tribunal was for compensation for unfair dismissal only. The sum claimed in this action is for unpaid wages only. There is no duplication of claim. Save as aforesaid paragraph 2 of the Defence is denied.

3. The application before the Industrial Tribunal was heard on 9 November l992. At the hearing a settlement was reached. The Defendant agreed to pay the Plaintiff £5,000 compensation for unfair dismissal. In consideration of accepting this sum from the Defendant, C.J. Kanabar, a director of the Defendant, guaranteed payment of compensation in the event of default by the Defendant. Payment of compensation was made. Save as aforesaid paragraph 3 of the Defence is admitted."

That was the case before His Honour Judge Rich QC in the Central London County Court on l8th April l996. An agreed bundle of documents was used at the hearing of the action. There are included in the appeal bundle two statements by the counsel, who represented the company at the hearing of the Industrial Tribunal claim and was involved in the settlement of it. The two statements put in evidence by the company are not mentioned in the judgment of His Honour Judge Rich.

Counsel said in the first statement on l5th March l994 (though the statement does not bear any date):

"I was instructed in this matter by Mr Trivedi of (then) Brian Hillman Trivedi on behalf of the Respondent in a claim before the Industrial Tribunal sitting at Woburn Place. I had a conference with the solicitor in chambers and, as far as I recall, there was a hearing which was adjourned in about late July l992.

The case was heard in October l992 and I duly attended.

At the luncheon adjournment, attempts were made to settle the case by way of a payment to the Applicant by the Respondent of an agreed sum of £3,500. When this sum was agreed it was stated by the solicitor for the Applicant that such settlement would be without prejudice to any other claim that the Applicant might have in the County Court. Negotiations broke down at this stage and after luncheon the hearing resumed.

Mr Kanabar gave his evidence in chief after luncheon. There was no cross-examination of Mr Kanabar. The Tribunal then indicated to Counsel and to the solicitor for the Applicant, in the absence, I think, of the parties, that they were minded to find for the Applicant and accordingly an adjournment occurred in which a less favourable settlement was reached. £5,000 was agreed as the sum payable by the Respondent to the Applicant and a settlement, including terms as to payment, was drawn up in respect of the Industrial Tribunal claim alone.

Any other evidence which may be required of me involves matters confidential to my claim."

This was an agreed statement. Counsel did not attend to give evidence. The parties were agreed that the facts stated in that statement were correct. The same counsel made another statement dated 6th January l995 in which he said:

"Since writing my earlier statement I have now been shown a letter signed by Mr Kanabar, written by myself at the conclusion of the hearing which I note was on 9th November l992 which records the agreement made between Mr Simmonds on behalf of Mr Dattani and myself on behalf of Trio Supermarkets Limited. I can accordingly state that no basis for a settlement was discussed between us at the second adjournment other than that it was in respect of the Applicant's claim then being heard at the Industrial Tribunal."

That is also an agreed statement in the sense already explained.

Two further matters should be mentioned. First, it is common ground that a claim could have been made in the Industrial Tribunal by Mr Dattani for unpaid wages under the Wages Act l986. No satisfactory explanation has been given to this court as to why that claim was not specifically made additional to unfair dismissal. Secondly, a year passed between the compromise of the case in the Industrial Tribunal and the commencement of the proceedings in the Clerkenwell County Court. No satisfactory explanation has been provided to this court for that delay.

His Honour Judge Rich dismissed the action. He decided that Mr Dattani was estopped from making a claim to the sum of £ll,800 which he held would otherwise have been due to Mr Dattani in respect of the unpaid wages claimed by him. The judge heard evidence from Mr Dattani, Mr Kanabar and a Mr Shah, an accountant called to give evidence on behalf of the company. He preferred the evidence of Mr Dattani. The main conclusions of the judge were these:

l. At the date of termination of the contract of employment there was due and owing to Mr Dattani the sum of £ll,800 in respect of wages earned but unpaid for the period March l987 to July l99l.

2. The "Decision" of the tribunal was "in effect the recording of a consent order that the application be stayed providing that the terms for payment were honoured and if they were honoured that was to determine the proceedings in total; if they were not, then it was to be possible to renew the application before the Tribunal. The effect of that form of order was... the effect of a consent order in what is called in the courts a Tomlin form."

3. That was a decision of the Industrial Tribunal which could give rise to an estoppel for the purposes of the doctrine of res judicata . The Industrial Tribunal was competent to determine all the matters before it, including the disputes for unpaid wages under the Wages Act l986.

4. The Industrial Tribunal had made a decision with the consent of the parties just as if it had itself completed the investigation and decided the matter by judgment.

5. The formality of the judgment meant that it was not necessary to rely upon the underlying agreement. "It is the judgment itself that raises the estoppel."

6. Although the subject matter of the action, i.e. non-payment of wages, was not essentially the subject matter brought before the Industrial Tribunal, i.e. compensation for unfair dismissal, the doctrine of res judicata extended "beyond the subject matter of the litigation itself". He cited Henderson v Henderson (l843) 3 Hare l00 at ll5 and added:

"But the doctrine of res judicata extends, as is well-known, beyond the subject matter of the litigation itself. It was expressed by the Vice-Chancellor in Henderson v Henderson .... that the plea of res judicata applies, except in special cases, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation which the parties, exercising reasonable diligence, might have brought forward at the time.

This no issue between the parties that it was within the jurisdiction of the Tribunal to award the sums now claimed for non-payment of wages had that matter been brought before the Tribunal. The grounds of the application for compensation for unfair dismissal depended precisely upon the allegation of fact that the plaintiff had been consistently underpaid during the course of his employment and had been refused the payments due to him when he asked for them and when he persisted in his request for payment was then summarily dismissed. That is to say, the claim for unfair dismissal was factually based upon the allegations as to non-payment of due wages which founds the cause of action before me.

In my judgment that is without doubt a point which properly belonged to the subject of the litigation before the Tribunal, it being accepted that it was a matter which could properly be determined by the Tribunal."

For those reasons the judge held there was an estoppel and dismissed the action.

The relevant legal principles fall under two headings. First, the law relating to res judicata . There is no dispute between the parties about the essential elements of a plea of res judicata . The law on this topic in the context of decisions of Industrial Tribunals in unfair dismissal cases was recently reviewed by the Court of Appeal in Staffordshire County Council v Barber [l996] I.C.R. 379. Neill LJ at 396G said:

"A cause of action estoppel was defined by Diplock L.J. in Thoday v. Thoday [l964] P.l8l, l97, as follows:

'"a cause of action estoppel" is that which prevents a party to an action from asserting or denying, as against the other party, the existence of a particular cause of action, a non-existence or existence of which has been determined by a court of competent jurisdiction in previous litigation between the same parties. If the cause of action was determined to exist, i.e. judgment was given upon it, it is said to be merged in the judgment... If it was determined not to exist, the unsuccessful plaintiff can no longer assert that it does; he is estopped per rem judicatam .'"

Neill LJ held that the order of the Industrial Tribunal in that case was a judicial decision or judgment to which the doctrine applied. The decision of the Industrial Tribunal in that case was in the form set out on page 392E of Neill LJ's judgment. The decision of the Industrial Tribunal as recorded was in these terms:

"The unanimous decision of the tribunal is that this application is dismissed on withdrawal by the applicant."

Neill LJ held that the doctrine of res judicata applied even when no evidence and no argument had been heard by an Industrial Tribunal, and where the Industrial Tribunal had by consent dismissed a claim upon one of the parties deciding to withdraw.

Neil LJ considered the species of estoppel, which was the subject of the Vice-Chancellor's judgment in Henderson v Henderson . He quoted the famous passage:

"...I believe I state the rule of the court correctly, when I say, that where a given matter becomes the subject of litigation in, and of adjudication by, a court of competent jurisdiction, the court requires the parties to that litigation to bring forward the whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, in which the parties, exercising reasonable diligence, might have brought forward at the time."

Neill LJ said:

"This statement of principle has been applied in a number of more recent cases. As Stuart-Smith L.J. explained in Talbot v. Berkshire County Council [l994] Q.B. 290, 296, the rule as stated in Henderson's case is in two parts:

'The first relates to those points which were actually decided by the court; this is res judicata in the strict sense. Secondly, those which might have been brought forward at the time, but were not. The second is not a true case of res judicata but rather is founded on the principle of public policy in preventing multiplicity of actions, it being in the public interest that there should be an end to litigation;...'

In Arnold v. National Westminster Bank Plc [l99l] 2 A.C. 93 the House of Lords considered what 'special circumstances' would allow the reopening of an issue which had already been decided inter partes . It was held that the doctrine of issue estoppel was not inflexible and a disputed issue can be reopened where it would in effect be an abuse of process if permission were refused."

Mr Stallebrass in his submissions on behalf of the company, cited the Privy Council in Yat Tung Investment Co Ltd v. Dao Heng Bank [l975] A.C. 58l, 590 where, prefacing the quotation from the Vice-Chancellor's judgment in Henderson v Henderson , Lord Kilbrandon said:

"...there is a wider sense in which the doctrine may be appealed to so that it becomes an abuse of process to raise in subsequent proceedings matters which could and therefore should have been litigated in earlier proceedings.

...

The shutting out of a 'subject of litigation' - a power which no court should exercise but after a scrupulous examination of all the circumstances - is limited to cases where reasonable diligence would have caused a matter to be earlier raised. Moreover, although negligence, inadvertence or even accident will not suffice to excuse, nevertheless 'special circumstances' are reserved in case justice should be found to require the non-application of the rule."

Secondly, the law relating to compromise has figured prominently in the arguments in this case. The relevant legal principles can be conveniently taken from Mr Foskett's book on The Law and Practice of Compromise (4th edition). I cannot improve on the relevant passages in that book.

There are three passages with direct bearing on this case. On page 93, paragraph 6-07 under the heading " Matters left out " the author states:

"Not infrequently the analysis of the appropriate materials will disclose that the parties expressly or by necessary implication compromised certain matters of dispute but not others. In some cases it will be clear that certain matters were expressly or by implication not made part of the compromise. However, there may be cases where, on any objective view, the parties could and should have dealt with a particular matter but neglected to do so. To what extent will they be permitted by the court to litigate that matter on some future occasion?

It is submitted that there is, in principle, a distinction between compromises effected merely by agreement and those effected by a judgment or order. In the former case, unless the court can imply a term to the effect that the matter was compromised, the agreement as construed must stand: the court will not rewrite the parties' bargain. It may be quite possible for the agreement to be effective without the matter in question having been made specifically part of it."

There follows a quotation from Henderson v Henderson affecting compromises embodied in a judgment or order. That passage concludes:

"Thus where parties have compromised their litigation and have finalised the matter by a consent judgment or order, it would appear to be open to a party to plead res judicata in this wider sense if the other sought to raise afresh a matter which 'properly belonged' to that litigation but which, through negligence, inadvertence or accident, had not been raised and thus compromised expressly."

Mr Stallebrass submitted that this is a case of a compromise embodied in an order of the Industrial Tribunal, namely the "decision" quoted, so that the doctrine of res judicata in the extended sense of Henderson v Henderson applies. The claim for unpaid wages properly belonged to the Industrial Tribunal proceedings, which had been comprehensively terminated by the "decision" of the Industrial Tribunal.

The second passage from Mr Foskett's book is under the heading: " Identifying the disputes resolved ":

"6-04 An important aspect of the whole subject of compromise is the need, which may arise subsequent to the making of a compromise, for a court to identify precisely the disputes which have been settled. The end result contemplated by the process of identification is the same whether the court is considering a compromise embodied in an order or judgment or one which is not. There may, of course, be differences in the materials which the court will have available and be prepared to examine for this purpose in each case. There may also be, it will be submitted, one important distinction between each in respect of the effect of the failure of the parties neglecting specifically to compromise a matter which could and should have been raised in their disputation.

6-04 Where no order or judgment. Where a compromise is effected other than by a consent order or judgment, the court will have a variety of materials to examine: first and foremost, of course, will be the agreement itself, whether comprised in some formal document or merely the one or two letters which crystallised (or evidenced) the agreement. Indeed if the agreement was oral, the precise words used on the material occasion must be examined. However, the phraseology of the agreement may not always yield the answer to the question in hand. As observed previously, in the normal course of events the parties' negotiations are inadmissible as an aid to construction of an agreement. However, they are relevant and admissible to assist in resolving any ambiguity of phraseology in the agreement or to identify the disputes it was the common intention of the parties to resolve. It is axiomatic that the analysis of these materials is an objective one, the subject intentions of each party being irrelevant. An objective analysis of the 'factual matrix' that formed the background to the compromise is required to enable the disputes settled to be identified."

Section 6-05 is headed " Where there is an agreed order or judgment " and states that "The same problem can arise where a consent order or judgment sets the seal on the compromise of the disputes between the parties".

At 6-06 it is stated that:

"Circumstances may arise when no materials exist with which to determine the disputes apparently compromised in a consent order or judgment. Astonishing it may be, but it is not unknown in practice for a consent order or judgment to appear almost, as it were, out of the blue with the most insubstantial evidence of its background. Unless by inference from such evidence as there may be, the court can conclude the disputes compromised, it would appear that all matters between the parties, except the terms of the actual judgment or order, are at large."

In this case there is a paucity of material on the compromise. There is no agreement in writing signed by the parties recording what they had agreed. The court has three pieces of evidence: first, the letter signed by Mr Kanabar guaranteeing the terms of payment agreed; secondly, the record of the compromise stated briefly in the "decision" of the Industrial Tribunal; and, thirdly, the two statements made by the previous counsel on his recollection of the negotiations.

Mr Stallebrass, on behalf of the company, submitted that this is a case of an agreed order of the Industrial Tribunal which should be construed according to its language without any direct evidence of the parties, even though it was the company that put in evidence the agreed statement by the previous counsel about the compromise. He said that the decision of the Industrial Tribunal resolved the dispute. That dispute concerned not only unfair dismissal, of which specific complaint was made, but also unpaid wages, inter-mingled with the complaint of unfair dismissal.

I return to Mr Foskett's book and a passage on the problem with which this court is directly faced: how to construe the agreement from the material before it. Under the heading " Construction" in chapter 5, page 73, 5-02, the author states:

"General problems and approach

Subsequent to the conclusion of a compromise, questions may arise as to its meaning and effects. This can occur even when those with the highest calibre of legal expertise have been responsible for the drafting of the agreement. The task is to determine the common intention of the parties by construing the agreement.

If an agreement has been reduced to writing, whether purely as a written contract or as an agreement embodied in a consent order or judgment, the intention of the parties must be construed by reference to the document or order itself: extrinsic evidence of what may or may not have been in the minds of the parties is not admissible for this purpose."

Paragraph 5-04 is directly relevant:

"However, although evidence of the parties' negotiations is normally inadmissible for the purpose of construing their agreement, it may be admissible:

(a) to explain the meaning to be attached to an ambiguous word or expression; and

(b) along with other extrinsic evidence, to show the disputes which the parties, by their agreement, were endeavouring to resolve."

In my judgment, the critical evidence contained in the agreed statements of counsel fall within that ambit of admissible evidence, namely extrinsic evidence to identify the disputes which the parties by their agreement were endeavouring to resolve.

Paragraph 5-05 on " Rules of construction " reads:

"When the matter is one of pure construction, a number of rules have been developed to assist the resolution of the type of problem that can arise. The principal rules are as follows:

(a) words are to be given their plain and literal meaning unless the result is absurd or the agreement is inconsistent within itself;

(b) words are to be interpreted in such a way as to effectuate the agreement rather than to invalidate it;

(c) the agreement should be considered as a whole, the meaning of words to be taken from their context with a view, if possible, to giving effect to the whole of it."

I make no apology for the extensive verbatim quotations from that excellent book. Many of the matters discussed in those passages are directly relevant to the resolutiion of this appeal.

Finally, a short passage from the recent decision of the House of Lords in Investors Compensation Scheme Ltd v West Bromwich Building Society [l998] l All ER 98 in the speech of Lord Hoffmann at page ll4 G to H:

"Interpretation is the ascertaining of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contracts."

Adopting that approach and applying the relevant principles of compromise and the principles of res judicata I conclude that this appeal should be allowed for the following reasons.

l. The doctrine of res judicata does not apply to this case. The judge was wrong to treat it as a case governed by Henderson v Henderson . Although the Industrial Tribunal sent to the parties on the lst December l992 a document headed "Decision", it is neither a "decision" within the meaning of The Industrial Tribunals Rules of Procedure l985 which were then in force, nor is it a decision, order or judgment to which the doctrine of res judicata applies.

The Industrial Tribunals (Rules of Procedures) Regulations l985 defines "decision". Regulation 2 provides:

"'decision' in relation to a tribunal includes a declaration, an order (other than an interlocutory order), a recommendation or an award of the tribunal but does not include an opinion given pursuant to a pre-hearing assessment held under Rule 6."

Under "powers of tribunal" in Rule l2 of the Schedule, it is provided in (2) as follows:

"A tribunal may, if it thinks fit-

(c) if the applicant shall at any time give notice of the withdrawal of his originating application, dismiss the proceedings."

That was the relevant provision in case of Staffordshire County Council v Barber (supra).

Rule 12(2)(d), a provision on which Mr Stallebrass relies, provides:

"except in proceedings under the l966 Act, if both or all the parties ... agree in writing upon the terms of a decision to be made by the tribunal, decide accordingly."

In my judgment this case cannot be brought within Regulation l2(2)(d) because the court has not been shown - and it must be assumed that there does not exist - an agreement in writing by both parties upon the terms of the decision. The only documents available are the guarantee letter signed by Mr Kanabar, the decision of the tribunal itself and the two statements of counsel. Further, this is not a decision, judgment or order within the doctrine of res judicata because, although the matter is headed "decision", the document simply records an agreement which has been reached. It makes no declaration of rights. It makes no decision on any disputed question. It makes no order about anything. It is necessary, in applying the doctrine of res judicata , to look beyond the form of, or label attached to, a document to the substance of it. The substance of this document could not give rise to the plea of res judicata either in strict form or in the extended Henderson v Henderson form.

2. The Industrial Tribunal proceedings were compromised. There is no dispute that a valid and binding compromise affords a complete defence to any action to enforce a claim covered by the compromise. There is no dispute that the compromise reached prevents Mr Dattani resurrecting his unfair dismissal claim against the company.

3. The critical question is: what claims were compromised? That is a question of the construction of the scope of the contract made between the parties, not a question of the construction of the decision document, save insofar as that document is evidence of the contract. The claim in the Industrial Tribunal was for unfair dismissal. That complaint is specifically referred to in the IT1 and in the letter of guarantee signed by Mr Kanabar on 9th November l992. The Industrial Tribunal's decision document, which is evidence of what was agreed, simply says "This case has been settled on the basis" and then states the basis on which it has been settled.

4. Initially I thought there was force in Mr Stallebrass's submission that the unfair dismissal case was based substantially on complaints about the unpaid wages claimed in the county court proceedings. Complaints about unpaid wages were part of Mr Dattani's case. It is possible to compromise a claim which is not actually made in the proceedings compromised. That submission has its attractions, especially in the context of the policy of the law, invoked by Mr Stallebrass, to uphold compromises in the interests of promoting settlements and achieving finality in disputes. Parties who enter into a compromise often wish to put an end to all their disputes, not just some of them.

There is no express exclusion of the unpaid wages dispute from the terms of the compromise. Although the counsel in his agreed statement referred to a reservation of a right to bring proceedings in the county court, there is no express reservation of such rights in the record of the Industrial Tribunal decision. (Equally, it may be said, there is no statement, such as commonly found in compromises, that the payment made is in full and final satisfaction of all the claims that the parties may have against one another.)

5. Taking account of its object, language, context and background this agreement should be construed as limited to a compromise of the unfair dismissal claim. Counsel's agreed statement is highly material on the issue of identification of the claim compromised. There was an initial offer to settle for £3500. That was not accepted. An express reservation was made by Mr Dattani's solicitor of the right to bring proceedings in the county court. The sum, which was finally agreed at £5000 was described by counsel for the company at that time as being "less favourable" to the company. That was after Mr Kanabar had given evidence and the tribunal had given an indication that they would find against the company.

This evidence of counsel is only admissible (see the passages relating to evidence in Mr Foskett's book) and relevant. When that evidence is viewed as background to what was agreed, all that was covered by this compromise was the claim for unfair dismissal. The claim for unpaid wages was not a dispute intended to be corrected by this compromise.

I reject Mr Stallebrass's submission that the reservation made by Mr Dattani's solicitors, as described in counsel's statement, was a reservation that Mr Dattani was not entitled to make, i.e. that he was reserving the right to abuse the process of the court by starting a separate set of proceedings based on the same facts in the county court. It would not be an abuse of the process of the court to start a claim in the county court, if the compromise was limited to the unfair dismissal claim.

For all those reasons I would allow this appeal and give judgment for Mr Dattani. The form of the judgment is, as indicated to counsel before the end of the hearing of argument, to be the subject of further submissions by them.

LORD JUSTICE SWINTON THOMAS: I agree.

LADY JUSTICE BUTLER-SLOSS: I also agree.

Order: Appeal allowed with costs here and below;

order below set aside; judgment sum of

£ll,800 plus interest be for appellant;

legal aid taxation of appellant's costs;

application for leave to appeal to the

House of Lords refused.