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	United Kingdom Employment Appeal Tribunal
You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> BAE Systems (Operations) Ltd v Paterson (Transfer of Undertakings : Service Provision Change) [2012] UKEAT 0003_12_2706 (27 June 2012) URL: http://www.bailii.org/uk/cases/UKEAT/2012/0003_12_2706.html Cite as: [2012] UKEAT 0003_12_2706, [2012] UKEAT 3_12_2706, [2013] ICR D3

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APPEARANCES

 

For the Appellant	MR B NAPIER (One of Her Majesty's Counsel) Instructed by: Eversheds LLP 70 Great Bridgewater Street Manchester M1 5ES
For the Respondent	MR K McGUIRE (Advocate) Instructed by: Messrs Blackadders 30 & 34 Reform Street Dundee DD1 1RJ


 


SUMMARY

TRANSFER OF UNDERTAKINGS – Service provision change

PRACTICE AND PROCEDURE – Amendment

An Employment Judge raised the question whether there might have been a service provision change in April 2011 after all the evidence had been heard by reference to an alleged change in June 2011, submissions had been made, and he had already been considering the case for some days. The representative for the Respondent indicated that fresh and further evidence would be needed to deal with the point. No opportunity was given for this to happen. Accordingly, there had been a procedural irregularity which justified quashing the decision and remission for re-hearing.


 


THE HONOURABLE MR JUSTICE LANGSTAFF (PRESIDENT)

Introduction

1. This is an appeal against a decision at a preliminary hearing made in Dundee by Employment Judge Watt, sitting alone. He gave reasons for that decision on 20 October 2011. What he decided related to whether there had been one or more service provision changes arising out of the facts before him and, if so, when.

The facts

2. The Claimant had a long career as a Fast Jet navigator and thereafter as an aircrew trainer on a flight simulator. In 1996, when the Ministry of Defence decided to civilianise the Aircrew Training Service the Claimant retired from the RAF and became a civil servant. He worked thereafter as a simulator instructor. That work was in relation to Tornado aircraft.
3. On 1 January 2003 his employment transferred to Thales Training and Simulation (Merlin) Limited. They appointed the Claimant Site Training Manager at Leuchars with effect from April 2003. That was a post he held until 1 June 2010. Shortly before that it was known that the Tornado aircraft was to be replaced in active service by the Typhoon. BAE, the Appellant in the present case and First Respondent to the claim as originally brought, were contacted by the Ministry of Defence to supply training in respect of the Typhoon. That was to include aircrew training at Leuchars. It was anticipated that would start in August 2010 (in fact it did not begin until 4 October) and BAE would be responsible for that training.
4. The Tornado aircraft and, it would follow, training on flight simulators in respect of Tornado aircraft, was finally to be phased out by March 2011. Until then Thales would be responsible for such training. BAE needed one instructor at Leuchars; there were six in service with Thales by June 2010. Under arrangements which were made contractually between the MOD, BAE and Thales, three of those instructors and an administrator requested a transfer from Thales to BAE. The precise basis of that was not clearly found by the Employment Tribunal. It might be argued that it was an arrangement made under the Cabinet Office Statement of Practice with nothing directly to do with the TUPE Regulations 2006. It might be argued that the TUPE Regulations 2006 applied.
5. Of those three, one was chosen to work by BAE as the instructor at Leuchars, one accepted a similar post at RAF Coningsby, and the third was the Claimant. The transfer they had requested was effected on 1 June 2010. When the position of the first two instructors was clear, BAE terminated the employment of the Claimant by reason it was said of redundancy with a payment to him of £43,057.27 on 11 June 2010. He returned to work with Thales in accordance with the contractual arrangements which had been made. He served together with the other three remaining instructors until 31 March 2011: that was when Tornado training ceased.
6. In a claim which was filed before the Typhoon training actually began in practice, the Claimant contended that he had been unfairly dismissed by BAE in respect of the termination of his employment on 11 June. He argued amongst other things that the redundancy situation had been falsely identified. However, in his ET1 at paragraph 7 he made reference not only to that complaint but on more than one occasion to the impact of TUPE. The parties agreed that it was desirable that there should be a Pre-Hearing Review in order to determine whether and to what extent the TUPE regulations applied to the termination of the Claimant's employment with his previous employer at Thales; that was the way in which Employment Judge McFatridge characterised the issue on 29 March 2011 in the second of two CMD's. He noted that the parties were agreed that:

"[…] it would be appropriate to hold a Pre-Hearing Review to determine whether TUPE applied to the claimant's transfer. It was the claimant's position as set out in their further particulars that the change in service provider which took place at the beginning of June 2011 was two-fold. Part of the Flight Simulation Services was re-let to the First Respondents; the other part was brought back in-house by MOD, the Second Respondents. It was their position that the TUPE Regulations applied to both changes of service provider."

7. Although both those statements and the ET1 were focused on events in June 2010, in a paragraph on the third page of his note of the outcome of the CMD discussion, Judge McFatridge expressed the outcome, so far as material, in this way:

"The matters to be determined by the pre-hearing review are:

(1) whether the TUPE Regulations applied to the transfer from Thales Training & Simulation (Merlin) Ltd to BAE Systems Ltd.

(2) Whether there was a TUPE transfer between Thales Training & Simulation (Merlin) Ltd and the Ministry of Defence."

8. Against that background the Tribunal met in Dundee on 10 August and 11 August. On the second of those days during the course of submissions, Employment Judge Watt raised for the first time the question whether there might have been a service provision change in April 2011. It is common ground before me that the parties at the PHR had approached the PHR upon the basis that Judge McFatridge's summarised questions were to be answered in respect of June 2010. The focus that they had was on June 2010. It was no wider.
9. Perhaps accordingly, Miss Choudry, who was then appearing as advocate for BAE, objected to any suggestion that the Tribunal had the power to consider whether or not there had been a transfer or transfers in April 2011. She argued that it would be necessary for there to be an amendment of the claim by the Claimant, something which the Claimant, for his part, did not accept. Thus far what I have said is a matter of agreement between the parties. It may also be, though Mr McGuire does not explicitly recall it, that Miss Choudry raised at this stage, as she did later, that evidence would have been needed to determine the precise questions arising in respect of TUPE in the period between June 2010 and April 2011. It seems to me quite likely that she did so, though recollections are not entirely clear.
10. The submissions having been made, the Judge retired to consider them.
11. On 23 August 2011, a curious passage of events began. Two letters dated 23 August 2011 were sent from the Tribunal to the parties. The first, which was undoubtedly sent to both parties and which I assume to have been the first in time, though sequence is not important, said that the Employment Judge considered after reading the authorities which had been produced to him by the representatives that he would like to have submissions on the following points: (1) If there was a service provision change under Regulation 3(1)(b)(ii) of TUPE 2006 from Thales to BAE, what was the date of the change? (2) If a service provision change did occur between Thales and BAE under Regulation 3(1)(b)(ii), is it possible within the terms of the regulations for there to have been a contemporaneous service provision change under Regulation 3(1)(b)(iii), i.e. a "contracting in" between Thales and the MOD? and; (3) If it is possible for there to be two simultaneous service provision changes, i.e. a "second generation contracting out" and a "contracting in", do both changes take effect at the same time? That last question might seem to answer itself if indeed the changes were simultaneous but it may have been that the Judge had a different meaning for "effect" in mind.
12. The second letter, which undoubtedly went to the Respondent, I shall come to in a moment. First, though I deal with a fax which was sent. The fax, dated 23 August 2011, said in the material paragraphs that:

"Employment Judge Watt advises that he considers when looking at all the papers and whilst preparing the judgment that it may be arguable that there could also have been a service provision change under Regulation 3(1)(b)(iii), i.e. a "contracting in" on the 1 April 2011 since the Fast Jet Simulator Instruction at Leuchars previously carried out by six civilian employees of Thales in May 2010 was then carried out after 1 April 2011 by one civilian employee of BAE and one RAF employee of the Ministry of Defence. The question of whether there could have been two service provision changes at the one time on 1 April 2011 was not addressed by parties and Employment Judge Watt therefore considers it is appropriate that he should obtain written submissions from the Claimant and from the First Respondents on this matter. Could written submissions please be submitted in this matter within 28 days?"

13. There then followed these words:

"Please disregard the copy sent to you by post as there are typographical errors in that letter."

14. It appears that Miss Choudry, when she received this fax, understood those last comments to refer to the letter posing the three questions to which I have just referred. It might have been difficult to understand precisely what "typographical errors" meant since none obviously appear in the letter but it might have been a reference to the phraseology in the third paragraph, albeit using a misplaced word. At this Tribunal it emerged for the first time what the typographical error might have been. There was produced to me a copy of the letter which had been received by the Claimant, in which instead of reading "six civilian employees" etc, read "six Brazilian employees" etc. It seems quite likely that that is what the phrase "typographical error" related to. The second letter did not: it was on this that Miss Choudry focussed. This nonetheless left two letters covering very much the same territory both sent to the parties, giving rise to misunderstanding, in the light of the fax, entirely understandably, by Miss Choudry.
15. The consequence was that both parties made written submissions; for the Claimant they focused upon the three questions specifically, for Miss Choudry they focused upon the question as posed in the fax which broadly corresponded to the letter with the replacement of "Brazilian" by "civilian". They were tilting at slightly different windmills.

The Employment Tribunal decision

16. The Tribunal had to decide whether there had been a transfer. The law it had to apply was Regulation 3 of the TUPE Regulations 2006. The Regulation provides under "A Relevant Transfer" as follows:

"(1) These regulations apply to …

(b) A service provision change, that is a situation in which:

(i) Activities cease to be carried out by a person (a client) on his own behalf and are carried out instead by another person on the client's behalf ("a contractor).

(ii) Activities cease to be carried out by a contractor on a client's behalf (whether or not those activities had previously been carried out by the client on his own behalf) and are carried out instead by another person ("a subsequent contractor) on the client's behalf or;

(iii) Activities cease to be carried out by a contractor or a subsequent contractor on a client's behalf (whether or not those activities had previously been carried out by the client on his behalf) and are carried out instead by the client on his own behalf

and in which the conditions set out in paragraph 3 are satisfied …

(3) The conditions referred to in paragraph (1)(b) are that:

(a) Immediately before the service provision change:

(i) There is an organised grouping of employees situation in Great Britain which has its principle purpose the carrying out of the activities concerned on behalf of the client;

(ii) The client intends that the activities will following the service provision change be carried out by the transferee other than in connection with a single specific event or task or short-term duration.

(b) The activities concerned do not consist wholly or mainly of the supply of goods for the clients use."

17. Those words require a focus upon an undefined expression, "activities". The Tribunal decided that the activity on the facts of the present case was that of Fast Jet aircrew simulation training. It did not restrict that to a particular model of aircraft but noted that the activity which it considered the Claimant to have been doing just happened to be in respect of the Tornado. Secondly, the Tribunal decided that BAE carried out similar activities, although on the Typhoon, again not regarding the make of aircraft as a fundamental difference. It summarised its conclusions in paragraph 57 in words I need not for present purposes set out.
18. As to date, the Tribunal considered that a transfer will frequently take place over a period of time on a transitional basis and it commented that that was exactly what had happened in the present case, setting out the dates on which the Tornado simulator training fell away and the Typhoon simulator training began until on 31 March 2011 the Tornado F3 Fighters were all replaced by Typhoon Fighters.
19. It went on to conclude that it was only upon the cessation of the activities being carried out by Thales on 31 March 2011 in consequence of this change of aircraft that the service provision change finally took place. It addressed the request for further submissions by reference to the three questions posed in one of the letters of 23 August. It recorded that written submissions had been received by the Tribunal from both parties; it set those out. In her submissions, Miss Choudry had argued that if the Claimant had been running the argument that service provision change occurred on 1 April 2011, the Tribunal would have to hear evidence from Thales Training & Simulation (Merlin) Ltd as to the nature of the services that they provided between June 2010 and 31 March 2011 and the services which were provided by BAE on and after 1 April 2011. She noted that the evidence had not been heard by the Tribunal because the Claimant's claim was never run on that basis. She argued that the Claimant would have had to issue new proceedings or amend his existing claim if he was seeking to argue that there was a service provision change in April. She made reference to the CMD and argued that it was not open to the Tribunal to make findings as to whether there was a service provision change on 1 April.
20. As to those points, the Tribunal specifically gave its answers. At paragraphs 72 and 73 it admitted to a certain inclination in favour of Miss Choudry's views as to amendment but observed it was not for it to determine. It disagreed that it was not open to the Tribunal to make findings; it said that it had to look at the whole of the facts of the case and then decide whether in its opinion there was a service provision change or service provision changes. It went on to say that it had indicated in its view that there were two separate service provision changes which both occurred in this case on 1 April 2011.

Grounds of appeal

21. Before me, the Appellant, represented now by Mr Napier of Queen's Counsel, argued three points. The first two were closely related. He submitted that the Tribunal had not been entitled to consider whether the service provision changes had occurred in April 2011. The second ground allied to that was that it made for unfairness that there had been the procedural mishap in respect of the various communications of 23 August. As a third point he argued that the Employment Tribunal had misunderstood the law relating to service provision changes in that it had not directed itself properly as to what could or could not be an activity and in approaching the identity of what was a relevant activity for the purposes of Regulation 3 of the 2006 Regulations.
22. The first ground relied upon the way in which the finding arose. It had been common ground between the parties that the Claimant was seeking the determination of issues in relation to June 2010. He referred to the observations of Employment Judge McFatridge. The questions which were recorded in paragraphs 35 were questions which effectively Miss Choudry had been shut out from answering because she had, understandably, construed the facts as telling her to ignore the letter which asked them. It was insufficient to describe both parties as having provided written submissions without identifying that they were able by those submissions to deal with the cases against them.
23. In the case of Taskmaster Resources Ltd v Kanyimo [2007] UKEAT/0441/06 an Appeal Tribunal presided over by HHJ McMullen QC set out the legal principles which appeared to it to be appropriate where a Tribunal had raised an issue during the course of a hearing which neither party had anticipated in advance of the hearing that they might have to deal with. The issue in that case, in a claim by Zimbabweans in respect of the termination of their employments, was whether they had been discriminated against. The case had been presented on the basis of indirect discrimination. An issue arose to whether there might have been direct discrimination. The Tribunal ruled against the case insofar as indirect discrimination was concerned but it allowed the claim of direct discrimination. It was a full hearing, both parties were represented. But not professionally so: in effect they were party litigants.
24. The legal principles are set out at paragraph 14. I quote:

"1. A Tribunal should deal only with the issues which are identified as live before it. If it is to deal with another issue it must give the parties a full opportunity to consider it and to make submissions, both on the admissibility of such issue and upon the substance of it. If necessary, and if appropriate, an adjournment should be given.

2. The Tribunal is under a statutory duty to enquire into the matters before it and if it comes up with a point which had not occurred to the parties and was not vouchedsafed by previous case management or Pre-Hearing Reviews, it should take particular care especially when the parties are not legally represented to ensure that a full opportunity is given for the point to be considered, again this may require an adjournment. Silence by a litigant in person should not be taken as unequivocal acceptance of the correctness of the introduction of a new point."

The third principle related to discrimination cases alone.

25. At paragraph 17, the Tribunal added this:

"It was open to the Tribunal when it saw that a point had arisen that not occurred to the parties for it to make that known to the parties. Indeed it would stultify a Tribunal if it did not have that power. We hold that no error was committed by the Tribunal when it ventilated the matter which had occurred to it during the course of the evidence. The proper course was to consider what to do about that. We know that legal advice was available in the background to this employer from experienced employment solicitors. Had Mr Godfrey [he was a member of the staff of the Respondent who was representing it and was effectively a party litigant] said that he was overawed or confused as is to put to us or that he needed an opportunity to consult his solicitors, no doubt that would have been made available by the Tribunal and an adjournment would have been called for, however nothing was said."

26. It went on, however, to say at paragraph 19, particularly where parties are not professionally represented:

"A three person Tribunal at a full hearing during the course of evidence will be better informed of the issues than a single Chairman at a PHR. It is not an error for a Tribunal having seen a point to raise it with the parties, indeed we consider that justice would require it to do that rather than standing by idly watching matters develop. However, the exercise of discretion in this case was, we hold, wrong in principle for the Respondent was not given the opportunity to do what we consider it would have done which was to take advice on what to do. This is particularly important because it is held against the Respondent in the findings by the Tribunal that it had no explanation."

On that ground, that is one of essential unfairness, the Appeal Tribunal allowed the appeal.

27. Rule 18 of the Employment Tribunals (Constitution Rules of Procedure) Rules deals with Pre-Hearing Reviews. It describes Pre-Hearing Reviews as interim hearings; the scope provided for such hearings by 18(2) is particularly wide. An Employment Judge:

"May carry out a preliminary consideration of the proceedings and he may;

(a) Determine any interim or preliminary matter relating to the proceedings …"

28. The words "any" and "relating to" are words which confer very considerable latitude. They are plainly intended to do so at least at this stage of the proceedings. Various powers are provided for by rule 18(7) in respect of which prior notice must be given to the parties that those powers are to be exercised. None relates to identifying as a possible claim one which has not been clearly articulated by the parties beforehand.
29. Accordingly in considering the submissions made to me by Mr Napier of Queen's Counsel, I have come to the conclusion that parts of his argument cannot be accepted. I reject his submission that the Tribunal had no entitlement to consider the question of whether there might have been a service change in April 2011. That was open to it, not least given the width of the rule under which a PHR is conducted. It was open to it as a matter of principle as recognised by Taskmaster Resources Ltd v Kanyimo.
30. I cannot accept his submissions that the difference between the letters of 23 August made a material difference. It is right that those letters differ in form. The issue, however, is one of substance. If an appeal is to be upheld in respect of a procedural irregularity, it must be one that matters in the context of the proceedings between the parties. I am satisfied that Miss Choudry, on behalf of BAE, had the opportunity to advance such arguments as she wished in respect of an issue identified at least in part by reference to the date of 1 of April 2011.
31. However, I do accept other submissions which he made. In my view the principles which apply are these; (1) An Employment Tribunal should determine the issues placed before it. It has no entitlement to consider issues which are not before it. If authority were needed that is provided by Chapman v Simon [1994] IRLR 1214 CA. However; (2) a Tribunal is not in error in raising an issue it considers to be relevant even where the parties have not done so, though especially where parties are represented a Tribunal should take very great care before doing so. The reason for that is plain. Represented parties must generally be assumed to have considered the law carefully and considered what findings of fact are relevant to the issues of law which they consider relevant. If a point has not been taken it may well be because the parties, for their own purposes, have concluded it should not be taken. The procedure is an adversarial one. I would not wish without further and more developed argument to accept what is set out in Taskmaster Resources Ltd v Kanyimo at principle number 2 to the effect that a Tribunal is under a statutory duty to enquire into the matters before it, certainly as entitling a Tribunal in general terms to raise whatever issue it wishes, rather than to determine the issues which the parties wish to determine so far as the Tribunal may properly do so within the available law; (3) If, however, a Tribunal does, as it is entitled to do, raise an issue which it has considered relevant, although the parties have not appeared to appreciate the relevance of it, it must (as the Tribunal in Taskmaster pointed out) consider the consequences of doing so. Generally matters of fact are before a Tribunal for it to determine. There may be matters of law for it to determine. Where all the facts have been determined, matters of how the law applies are matters of argument, which may require no adjournment. The case of Eddie Stobart Ltd v Moreman and Ors UKEAT/0223/11/ZT 17 February 2012, a decision of Underhill J as President makes that plain. However, a new issue may require facts to be found. Where that is so, then if a party raises the possibility, it is almost always going to be incumbent upon the Tribunal to give that party a proper opportunity to advance those facts; (4) The reason why that is the case is a manifestation of the fundamental principle of justice that a party is entitled to know the case against it. That is the way in which the principle is often formulated. Knowledge of itself, however, in this context does not make for justice merely because there is information. The purpose of knowing the case against oneself is to afford a chance to meet the case. Where a case can be met by argument alone, then a proper opportunity for argument in the light of that case will meet it (see Eddie Stobart Ltd) but where knowing the case implies the opportunity to consider whether, and if of a mind to do so, to call evidence on the point to meet it factually then that opportunity must be given. If it is not then there is a material procedural irregularity. Fairness has been denied. A party simply has not been given proper opportunity to meet the case against it, her or him.
32. Applying those principles to the present case, here it seems to me that despite the best efforts of Mr McGuire to persuade me otherwise (though I recognise the fundamental realism of his arguments and express my appreciation to him for the frank and practical way in which his submissions have addressed the issues) I have concluded that both matters of fact and matters of argument were relevantly in play. The decision whether there is or has been, or when there is or has been a service provision change necessarily depends upon a characterisation of the facts in the particular context in which they appear. Although the Judge focused on the legal argument, he did so against a background of fact which had been established with a view to arguing that June 2010 was the relevant date. Mr McGuire acknowledged that evidence might have been available in respect of the period from June to April the following year. It was not led. No opportunity was given to BAE to lead it. Miss Choudry drew attention to the need for such evidence, probably in her oral submissions and certainly in paragraph 7 of her written submissions. The Tribunal's response focused not upon the facts which might have placed the legal arguments in context but upon the legal argument alone. That was insufficient to meet the justice of the case.
33. It follows that since BAE did not have an opportunity which in fairness they should have had; (a) to consider and; (b) if after consideration it was deemed appropriate, to call evidence which might have placed a different flavour upon what was or was not to be said to be an activity and about whether that activity was treated such that events in April 2011 constituted a service provision change there was a material irregularity. It therefore follows that the decision of the Tribunal must be set aside.
34. Seeing the way in which the wind was blowing in the course of submissions this morning, both advocates are agreed in inviting me not to come to any definitive conclusion upon the other matters of law which, intriguingly, had been raised in the grounds of appeal and in the skeleton in response and the Respondent's Notice. Accordingly, I do not do so.

The consequence

35. The consequence of this decision is that the decision made insofar as it relates to the claim between the Claimant and BAE - the MOD has been dismissed from the proceedings by agreement - must be set aside. The parties are agreed on much of what follows.
36. They agree that the Claimant should have 42 days from today's date to decide if there should be an application to amend. Thereafter, there should be a case management discussion which will consider the case as a whole and define what areas have to be covered in the light of the pleadings as they stand. It will, of course, consider any application to amend if one is made.
37. Thereafter, the matter should be set down for a PHR. Under the terms of rule 18(3), because one or more substantive issues of fact are likely to be determined at the PHR, the parties consider and I agree that it would be desirable for the PHR to be conducted by a Tribunal of three and not by a Judge alone. The parties, however, are at loggerheads in their submissions whether it is appropriate for Judge Watt to hear the case as the Chairman of that panel of three. Mr Napier, Queen's Counsel, argues by reference to Sinclair Roche & Temperley v Heard [2004] IRLR 763 a decision of the Employment Appeal Tribunal delivered by Burton J, which it is acknowledged sets out the relevant principles, that there should be a different Employment Judge. He does so principally upon the basis that the decision made was totally flawed because the failure to permit evidence to be called or to realise that that was what was being asked amounted to a complete mishandling of the case.
38. For Mr McGuire's part, he argues that the same Judge should determine the case, not least because the decision could not be said to be totally flawed. The professionalism of an Employment Judge should be respected.

Conclusion

39. I would acquit Employment Judge Watt of the charge of making a decision which was totally flawed. The way in which the Judgment is expressed is careful and considered. It shows, to my mind, that he gave anxious thought to what the correct decision was. He cannot easily be held responsible for the uncertainties of the letters of 23 August. I have little doubt that he would be professional in his approach. I do, however, consider that in this case it would be sensible for there to be a different Tribunal Judge.
40. I do so bearing in mind that proportionality, which is always a relevant consideration, does not figure greatly in this case where the hearing was one of two days duration alone. I am concerned more about the point made at 46.5 in Sinclair Roche that there is a danger that the Judge may have a view of the facts which it may be difficult, if not impossible, to change, not because of any lack of professionalism, but because that is the instinctive reaction confirmed by the evidence thus far that the Judge has heard. The very real and very human desire to attempt to reach the same result, if only on the basis of the natural wish to say, "I told you so", is a danger. This reflects no criticism whatsoever of Judge Watt's professionalism but it seems to me important in this case that the parties appreciate that the Tribunal will be a Tribunal which will look at the evidence as a whole and afresh.
41. Contributory to this decision is the fact that there will now, by agreement, be two lay members in addition to an Employment Judge. It seems to me that there is a danger where there has been a chair who has heard much of the evidence previously and come to an expressed view upon it that that view will have a disproportionate weight in the discussions between the three, however hard each of them may try to ensure that the facts are examined and explored properly.
42. For those reasons, and noting that in this case it will add nothing to the inevitable further expenditure of time that there has to be, I have concluded that the proper course is for the PHR to be listed before a different Employment Judge and, of course, lay members.