Appeal No. EAT/1060/99

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 7 October 1999
Judgment delivered on 23 November 1999

Before
HIS HONOUR JUDGE J HICKS QC
MR D A C LAMBERT
MRS R A VICKERS

KIRKLEES METROPOLITAN BOROUGH COUNCIL	APPELLANTS

OLIVE CATHERINE FARRELL	RESPONDENT

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellants	MR NICHOLAS HILL
(of Counsel)
Instructed by:
Mr J Emms
Solicitor to the Council
Kirklees Metropolitan Council
2nd Floor
Civic Centre 3
Huddersfield
West Yorkshire
HD1 2TG

For the Respondent	MR BEN CASWELL
(of Counsel)
Instructed by:
Miss A Moralee
Messrs Williams
Solicitors
1 Chancery Lane
Crown Court
Wakefield
WF1 2SS	

	JUDGE HICKS QC:		Miss Farrell, the Respondent, was at all material times, and so far as we know still is, employed by the Appellants, Kirklees Metropolitan Council, as a chef supervisor.  She complains that in breach of the requirements of the Equal Pay Act 1970 she is paid less than a man employed by the Appellants on like work or work of equal (that is not greater) value, namely the named sous-chef at a named restaurant.

1.  	The merits of Miss Farrell's claim have not yet been considered, because the Appellants relied upon a defence of estoppel which was heard by the Employment Tribunal as a preliminary issue.  The tribunal held that Miss Farrell was not estopped, but her employers have appealed.  The facts which we have to consider are therefore not those relevant to the complaint itself but those concerned with the procedural history.

2.  	Miss Farrell first sought a remedy under the Equal Pay Act in an Application received by the Leeds office of the Employment Tribunals on 27 October 1998.  The details of her complaint were those summarised in the opening paragraph above.  It named as her representative an officer of her trade union, Unison.

3.  	In February 1999, shortly before that Application was to be heard, negotiations between Unison, acting on behalf of Miss Farrell, and her employers to settle her claim reached fruition.  On 22 February Mr Alan Hughes of Unison wrote to Miss Farrell as follows:

“ Dear Miss Farrell
YOUR EQUAL PAY CASE
I refer to our telephone conversation of Sunday, 21st February 1999. I am confirming the contents of that conversation.
After discussion of the pros and cons of proceedings with your claim via the Employment Tribunal, we agreed the following:-
I would withdraw your case in return for a legally binding agreement from Kirklees Council. That agreement would contain the following assurances:-
1.	Your case would be given priority in the NJC Job Evaluation process agreed between Kirklees MC and UNISON.
2.	The job evaluation would be based on a job description agreed between Kirklees MC, UNISON and yourself.
3.	The new rate of pay determined by the job evaluation process would be back-dated to the date of commencement of your male comparator. Damon Williams, Sous Chef at the Window of the World Café.
I agreed to supply you with a copy of the final agreement and arrange, via the Employment Tribunal Office, for the case to be withdrawn from the lists.”

4.  	On the same date Mr Hughes wrote to the executive director of the employers as follows:

“Dear Dan
OLIVE FARRELL – ET CASE
Please find attached a copy of the arrangement I have reached with Olive Farrell. Please can you confirm that these terms are acceptable to you.
The only slight difference between the terms laid out in your recent letter to me is the back-dating. Olive Farrell is determined that the back-dating should begin with the date of commencement of Damon Williams. I believe this pre-dates the date of application to the Tribunal by about four weeks. This is a minor and, as you will know, the Tribunal could decide to back-date for up to two years.
I trust you will find that this is a much more sensible approach than going down the road of litigation. Should you find these terms agreeable I will immediately withdraw the case from the Tribunal lists and arrange for a compromise agreement to be drawn up which would protect Kirklees Council from any further claims from this individual.
There is a need to act extremely quickly on this matter as today is the last day for submitting documents to the Tribunal.”

5.  	On 26 February 1999 the following order was made by a chairman of Employment Tribunals in Leeds:

“DECISION OF THE EMPLOYMENT TRIBUNAL
The application is dismissed on withdrawal by the applicant.”

6.  	The disposal of that claim therefore had two aspects.  There was a contractual element and an order dismissing the Application.  As to the contract, the letter to the employers contemplated that "a compromise agreement" would be drawn up "which would protect Kirklees Council from any further claims from this individual".  Leaving aside the unfortunate way in which this union official referred to one of his own members, the suggestion of a further document may have been occasioned by the requirements of section 77 of the Sex Discrimination Act 1975.  Subsections (3) and (4) of that section provide as follows:

“(3)	A term in a contract which purports to exclude or limit 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.
(4)	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 1970 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;]
(b)	to a contract settling a claim which section 66 applies.”

7.  	Mr Hill, for the employers, concedes that no agreement complying with section 77(4) has ever been entered into.  It is no doubt for that reason that no reliance is placed by the employers on the contractual element of the settlement as disentitling Miss Farrell to bring her current claim.  It is, however, to be noted that subsection (3) does not avoid any contract as a whole; it merely makes unenforceable by the favoured party (in this case the employers) any term purporting to exclude or limit any provision of the relevant statute.  We have not been referred to any reason why Miss Farrell cannot enforce the terms of the settlement contract as against her employers.

8.  	The other aspect of the settlement, namely the order of dismissal, is relied upon by the employers, and we must return to a discussion of the issues in that respect after completing the history.

9.  	On 14 May 1999 the Leeds office of the Employment Tribunals received a further Application by Miss Farrell.  It was in all material respects identical to that of 27 October 1998.  It is that Application which was the subject of the preliminary hearing referred to in paragraph 1 above and is the subject of the appeal to us.

10.  	Before the tribunal, as before us, the employers' principal authority was Barber v Staffordshire County Council [1996] 2 All E R 748.  In that case Mrs Barber was advised that her claim for a redundancy payment, which depended on being entitled to aggregate hours of work in two of the authority's schools, was bound to fail.  She therefore withdrew it and it was dismissed.  A subsequent decision of the House of Lords removed the basis of that advice and she presented a fresh application claiming both a redundancy payment and compensation for unfair dismissal.  The Court of Appeal held that she was estopped from doing so.

11.  	Dealing with the claim for a redundancy payment Neill LJ, with whom Auld LJ and Sir Iain Glidewell agreed, said:

“The argument from Mrs Barber was that on 5 May 1993 the industrial tribunal made no relevant determination; it simply dismissed her claim by means of an administrative action or, at any rate, without any consideration of its merits.
In my judgment, however, Mummery J was correct when he said that there was nothing in the principles of cause of action or issue estoppel which stipulated that they could only apply in cases where a tribunal had given a reasoned decision on the issues of fact and law in the previous litigation. Section 140 of the 1978 Act contains provisions which render void any agreement to preclude a person from bringing proceedings before an industrial tribunal. A tribunal has therefore to be satisfied that a withdrawal is properly made.
I am satisfied that the order which was made by the industrial tribunal on 5 May 1993 was a judicial decision made by the industrial tribunal in the exercise of its powers under the 1978 Act and the 1985 regulations. It is not a mere administrative act.
It is true that no evidence was heard by the tribunal but that fact does not prevent the decision operating by way of res judicata. In SCF Finance Co Ltd v Masri [1987] 1 All ER 194, [1987] QB 1028 the Court of Appeal considered the earlier decision in Khan v Goleccha International Ltd [1980] 2 All ER 259, [1980] 1 WLR 1482, where it had been held that an express admission and a subsequent order by consent could give rise to an issue estoppel. The court continued:
‘The decision in Khan’s case makes it clear that an order dismissing proceedings is capable of giving rise to issue estoppel even though the court making such order has not heard argument or evidence directed to the merits … If a party puts forward a positive case, as the basis of asking the court to make the order which that party seeks, and then at trial declines to proceed and accepts that the claim must be dismissed, then that party must, in our view, save in exceptional circumstances, lose the right to raise again that case against the other party to those proceedings’ (See [1987] All ER 194 at 208, [1987] QC 1028 at 1047.)
Before leaving this part of the case I should deal with the subsidiary argument advanced on behalf of Mrs Barber to the effect that there were exceptional circumstances which prevented the application of the ordinary rules of res judicata and cause of action estoppel. It seems to me, however, that this argument is bound to fail. It is sufficient to refer to a passage in the opinion of Lord Keith in Arnold v National Westminster Bank plc [1991] 3 All ER 41 at 46, [1991] 2 AC 93 at 104:
‘Cause of action estoppel arises where the cause of action in the latter proceedings is identical to that in the earlier proceedings, the latter having been between the same parties or their privies and having involved the same subject matter. In such a case the bar is absolute in relation to all points decided unless fraud or collusion is alleged, such as to justify setting aside the earlier judgment. The discovery of new factual matter which could not have been found out by reasonable diligence for use in the earlier proceedings does not, according to the law of England, permit the latter to be reopened.’”

12.  	The tribunal rejected an argument for Miss Farrell that the doctrine of estoppel offended the principles of European Union law and could be disregarded for that reason.  It was right to do so.  Article 119 of the Treaty of Rome and the Equal Pay Directive, on which Mr Caswell, for Miss Farrell, relies, are concerned with substantive rights; enforcement, including rules of evidence and procedure, is a matter for the courts of the member states, applying national law.

13.  	The tribunal nevertheless held that Miss Farrell was not estopped.  The relevant passages in their Reasons are as follows:

“6.	The second argument put forward by the Applicant is that there is a difference between the Barber situation and the situation before the Tribunal today. Miss Barber was seeking a redundancy payment. That was a fixed sum to which she claimed she was entitled by reason of the termination of her employment. In this case, however, the Applicant argues, there is a continuing entitlement to equality of treatment and that where there continues to be contraventions of that entitlement a right exists to issue fresh proceedings.
7. … It seems to us that when the Applicant on 22 September 1998 lodged an application with this Tribunal she was alleging that there had been a breach of the implied equality clause within her contract of employment and she was seeking payment of arrears of remuneration or damages arising out of that contravention. That claim was compromised and, by this Tribunal dismissed. By her application of 13 May 1999 she alleges further contraventions of the equality clause within her contract of employment. Those further contraventions have not, in our view, been adjudicated upon. We are, therefore, of the view that the Applicant is not estopped from pursuing that further application which we accordingly allow to continue.”

14.  	Before us Mr Caswell sought to support that reasoning.  He drew an analogy with successive actions to recover rent arrears accruing due at different dates.  But a second or later action for arrears of rent is claiming money which had not accrued due  and could not have been recovered in the first or earlier ones.  An employee's right to equal pay, however, takes effect by the inclusion of an equality term in her contract of employment.  Once it is established in an Employment Tribunal that that clause operates to entitle the applicant to equal treatment with a specified man in a specified post that decision affects the future as well as the past, in fact it continues to govern the position until there is a material change in one or both of the two posts.  Breach of the clause by the employer entitles the employee to the usual contractual remedies; there is no need or occasion, and therefore no right, to go back to the tribunal to re-establish or re-open what has already been decided.  What is true of a decision in the applicant's favour must be equally true of the dismissal of her claim, and if in such circumstances the contractual position cannot be re-opened no question of financial compensation, or therefore of further compensation for the period between the two claims, can arise.  Mr Caswell himself could not suggest any way in which the relief obtainable on Miss Farrell's two Applications would differ.  We do not, therefore, consider that Barber's case can be distinguished on the basis relied upon by the tribunal.

15.  	Mr Caswell sought to support the tribunal's decision on other grounds.  He submitted that there was here, as in Dattani v Trio Supermarkets Ltd [1998] IRLR 240, no "decision".  In that case also there was a compromise.  The tribunal issued a document of which the relevant part was headed "Decision" and read:

“This case has been settled on the basis that the respondent pay the applicant the sum of £5,000 at the rate of £1,000 per month, the first payment to be made on 16 November 1992. The applicant remains free to return to the tribunal should the sum agreed not be paid within the agreed time limits.”

16.  	The Employment Appeal Tribunal not surprisingly held that despite the heading that was not in truth a decision, saying that it was "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" (paragraph 47).  We agree, but here the order of the tribunal was plainly a decision in substance as well as in form.  It dismissed the application.  Nothing could be more plainly an exercise of the tribunal's power to dispose by its own authority of the claim before it.  It is true that there was no hearing on the merits, but that was the very objection taken and rejected in Barber's case.

17.  	Mr Caswell also sought to rely upon an exception to the ordinary rules of estoppel in special circumstances.  The special circumstances on which he relied were the fact that Miss Farrell disputes the authority of her union representative to agree to the dismissal of her first claim.  That contention fails at both stages.  In the first place the last section of the extract from the judgment in Barber's case in paragraph 11 above makes it plain that in cases of cause of action estoppel, such as Barber and Miss Farrell's, there is no such exception; the bar is absolute.  The exception for special circumstances applies only to issue estoppel.  Secondly an issue as to disputed authority could not in our view be a special circumstance for the purposes of any such exception in a case such as this, in which lack of authority would be a ground for appealing the order or applying to set aside the compromise and no such step has been taken.

18.  	Next Mr Caswell submitted that there had been a material change of circumstances since the dismissal of the first claim, namely the employers' alleged failure to implement the compromise agreement by proceeding expeditiously with the job evaluation process in which Miss Farrell was to have priority.  But so far from alleging a change of circumstance that is a complaint of the opposite; that there has been no change.  The remedy for breach of the compromise agreement by the employers is to enforce it or obtain damages.

19.  	Finally Mr Caswell submits that to allow estoppel would circumvent section 77 of the 1975 Act (paragraphs 6 and 7 above)  by achieving the same ouster of jurisdiction as if the contract for compromise complied with section 77(4)(a).  But full effect has been given to section 77.  The contract is not relied upon to debar Miss Farrell's claim.  Had that been the only objection, and had the first claim been disposed of in such a way as not to amount to res judicata (for example by stay or adjournment) estoppel would have been no bar to the revival of the first claim or the commencement of a second, whichever was procedurally appropriate.  Estoppel arises not because Miss Farrell entered into a contract not to bring a fresh application but because her first claim was dismissed.

20.  	We conclude that Miss Farrell is estopped by the dismissal of her first claim from pursuing her present Application and that the tribunal misdirected itself in deciding otherwise.  The point is one of pure law and no purpose would be served in remitting the matter to the tribunal.  We therefore allow the appeal and dismiss Miss Farrell's Originating Application.