Appeal No. EAT/1504/00

`
EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	                   At the Tribunal
	               On 7 March 2002
Judgment delivered on 21 May 2002

Before
MR COMMISSIONER HOWELL QC
MISS C HOLROYD
MR N D WILLIS

HEALD NICKINSON SOLICITORS	APPELLANT

(1) MRS J SUMMERS & OTHERS
(2) J A PARKINSON FORMERLY t/a PARKINSON & CO	RESPONDENTS

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR DAVID LINTOTT
(of Counsel)
Instructed by:
Heald Nickinson 
Solicitors
24 Park Street
Camberley
Surrey GU15 3PL	
For the Respondent	MR DAMIEN BROWN
(of Counsel)
Instructed by:
Messrs Leuty & Lynch
Solicitors
3 & 4 Market Place
Wokingham
Berkshire RG40 1AL	

MR COMMISSIONER HOWELL QC

1	This is an appeal by Heald Nickinson, a firm of solicitors practising at all material times under that name in Surrey, against the majority Decision of an Employment Tribunal sitting at Reading on 10 October 2000, that they should continue to be Respondents to unfair dismissal proceedings brought by a Mr Laurence Peter Ford, a Mrs Joyce Summers, and five other former employees of a former sole practitioner Mr John A Parkinson, who had originally been the sole Respondent to those proceedings when they were launched by Originating Applications variously presented on 21 March and 14 April 2000.  Heald Nickinson had been joined as additional Respondents as a result of ex parte written applications to Tribunal Chairmen in June 2000, and those applications had been granted summarily, without reference to Heald Nickinson, and without any opportunity for them to make representations on whether they should be joined.  In those circumstances, Heald Nickinson entered Notices of Appearance but under protest, and entirely properly the whole issue of whether it was right for the Tribunal’s discretionary powers to be exercised by joining or retaining them as Respondents to the proceedings came before the full Tribunal, inter partes, on 10 October 2000 by way of review of the earlier Chairmen’s directions.  

2	As the Tribunal’s extended reasons sent to the parties on 30 October 2001 recorded, the background to the matter was that Mr Parkinson, the First Respondent, had formerly practised as a solicitor under the style of “Parkinson & Co” at Rosebank Chambers, Yateley, Hampshire.  Mr Parkinson got into financial difficulties, and his practice effectively collapsed on or about 17 January 2000 when the landlords took possession of the premises, forfeiting the lease, and the staff were unable to obtain access to the offices to continue the firm’s work at all.  

3	On about 21 January 2000 the Law Society intervened, and another firm, Russell Cooke, Potter and Chapman, was appointed to act on its behalf for that purpose.  They gained entry on or about 24 January to secure the position so far as the clients were concerned.  In the absence of any effective action from Mr Parkinson, two qualified assistant solicitors who had been employed by him in the practice did what they considered to be in their own and the clients’ best interests, and immediately set up a practice themselves under the style “Beveridge Gauntlett”, obtaining a licence to do so from the same premises in the First Respondent’s chambers in Yateley. As the Tribunal found, within a very short space of time of their setting up in practice, they had re-employed all the Applicants.  These included in particular Mrs Summers, who had been employed by Mr Parkinson for twenty two years as a conveyancing executive, and Mr Ford, who had been employed for seventeen years as a matrimonial executive.  

4	 Mr Parkinson, who had not been party to these arrangements, was still seeking to salvage something for himself, and on the afternoon of Thursday 27 January concluded an agreement with Heald Nickinson, subject to the approval of the Law Society, for them to acquire the current files and work in progress, together with any remaining goodwill, of Parkinson & Co, with the exception of any criminal work.  That side of the practice, in which Mr Parkinson had specialised, was disposed of to Russell Cooke, Potter and Chapman.  However Beveridge Gauntlett had by this time been actively contacting clients, including of course the conveyancing and matrimonial clients handled by Mrs Summers and Mr Ford who were now styled as “senior legal assistants” in the new firm, with a view to their business being formally transferred to it.  These conflicting arrangements led to a dispute between Heald Nickinson and Beveridge Gauntlett and to County Court proceedings, in which Mr Ford among others took an active part, and in the course of which Beveridge Gauntlett materially relied on their (and his) former employment with Mr Parkinson as having come to an end at the latest by 21 January 2000.

5	However on 28 January 2000, another firm of solicitors, Bells Potter, acting on behalf of Mr Ford, sent a letter before action to Heald Nickinson saying that they understood they had acquired the goodwill and assets of Mr Parkinson’s practice.  On behalf of Mr Ford, Bells Potter stated it as their view that the Transfer of Undertakings (Protection of Employment) Regulations 1981 applied to the transfer, and asserted that under those regulations there had been a relevant transfer of an undertaking and that his employment had been automatically transferred, though he understood Heald Nickinson did not wish to retain his services.  The letter concluded:
“Please confirm that you will fulfil the contractual and statutory obligations as to payment in lieu of notice and redundancy payment.  
Unless we hear from you within the next seven days, we shall be advising our Client to file a claim for unfair dismissal in the Employment Tribunal.”

The allegations in that letter were firmly refuted by a detailed reply dated 4 February 2000 from Heald Nickinson saying that there had been no transfer of the business of Parkinson & Co to which the Regulations applied, and denying any liability on their part to Mr Ford, describing his claim, in the events which had occurred, as:
“frankly a breathtaking affront”.

6	In eighteen detailed paragraphs stretching over four and a half closely typed pages, the letter explained why it was not considered that Heald Nickinson were responsible for the payment of Mr Ford’s outstanding salary or Mr Parkinson’s other employment obligations, and while they would attempt to give some assistance about this with the Law Society:
“If your client persists with his intended application to the Industrial Tribunal, the same will be most strenuously defended, and unusual though it is for Tribunal proceedings, an application will be made for costs by reason of your client’s conduct.”

As the Tribunal recorded in paragraph 16 of their Extended Reasons, on the same day or within a day or so all the other Applicants except one wrote to Heald Nickinson along similar lines, alleging that there had been a relevant transfer, and within a day or so each received a reply refuting that assertion.  No further relevant correspondence passed between the Applicants and Heald Nickinson, but on 8 February 2000, Mr Ford wrote to Mr Parkinson saying:
“You may or may not be aware that I wrote to Heald Nickinson in respect of Redundancy matters, outstanding wages and/or Notice pay.
I took separate and independent legal advice from Messrs Bells Potter of Farnham, who indicated that Heald Nickinson owed me a duty under the Transfer of Undertakings Act in respect of employment……
However, in relation to Notice pay, I am advised by my Legal advisers that because of the situation and length of service I am entitled to three months pay in lieu of Notice, and my initial claim should be made to you.
I am also advised that if you do unfortunately become Insolvent it may that I can put my claim to the Department of Trade and Industry as well, but initially I invite your comments on the matters raised in this letter at your earliest convenience.
I also reserve my right to make my claim to Heald Nickinson, and this is a matter which I am considering doing, as I still take the view (as does my Legal adviser) that any Company who take over a Business must honour and is responsible for any debt the old Employer owed to myself.  As I was quite clearly dismissed I am able to mount a claim for compensation for Unfair Dismissal from Heald Nickinson, and they may well have informed you that myself and other members of Staff have already approached them in this respect.”

7	The Originating Applications with which we are concerned in these proceedings were not, however, issued for some time after that.  Mr Ford’s Originating Application was presented on 21 March 2000, and named “Parkinson & Co” as sole Respondent, claiming:
“Redundancy claim and unfair dismissal”.
It gave the date of termination of his employment as 17 January 2000.  The Originating Applications by the other Applicants followed on 14 April 2000, in each case naming Parkinson & Co or John Anthony Parkinson as the sole Respondent, giving the date of termination of the Applicant’s employment as either 14 or 17 January 2000 (except for one Applicant, Mrs Clark, who had worked as a secretary for the intervening solicitors down to 27 January 2000, and gave that as her date of termination) and making claims for unfair dismissal, plus redundancy claims in some cases but not all.  The factual basis set out for all of these claims was that the Applicants had been effectively dismissed by the conduct of Mr Parkinson.  

8	We now come to the applications which were the subject of the appeal before us.  The first of them was not made until 8 June 2000 (that is well over three months, though still under six months, from the dates of termination relied on), when Mr Ford wrote to the Southampton Tribunal in advance of a hearing then listed before the Chairman for 21 June, and applied to have Heald Nickinson added as a second Respondent to the proceedings.  As recorded by the Tribunal, the relevant passage of this letter reads as follows:
“I have sought legal advice and wish to inform you that at the time I completed my application there was some confusion as to who was my appropriate Employer.  At paragraph 5 I have indicated this to be Parkinson & Co.  At paragraph 9 I have mentioned that Parkinson & Co was acquired by Heald Nickinson, Solicitors.  As I understand that Heald Nickinson have been trading under the name of Parkinson & Co, in respect of the files they acquired from that firm my Solicitors have advised me to apply to you to add Heald Nickinson, Solicitors of 77 High Street, Camberley, Surrey as a Respondent.  In this respect they have referred me to the case of Kerry Food Limited v Creber & Others [2000] IRLR 10”

As recorded by the Tribunal in paragraph 6 of their Extended Reasons, that was followed by a similar application from Mrs Summers on 9 June to the Reading Tribunal office on behalf of herself and the other Applicants (at that stage including Ms Beveridge and Mr Gauntlett themselves, though they subsequently indicated that they did not wish Heald Nickinson to be joined). Both applications were dealt with by different Chairmen on an interlocutory basis, simply granting leave for Heald Nickinson to be joined but without recording any reasons or any indication of the matters taken into account.  

9	We were informed at the appeal hearing by Mr Brown, who appeared for Mr Ford, that the “legal advice” mentioned in his letter of 8 June 2000 referred to a fresh firm of solicitors, whom he had in the meantime consulted.  No explanation was given to us for why that letter setting out the basis of Mr Ford’s ex parte application to have Heald Nickinson joined as a Respondent to the proceedings made no mention of the previous advice from Bells Potter to bring proceedings against them, or of the exchange of correspondence about this four months previously in January and February.  Nor has there been anything to substantiate the assertion that Heald Nickinson had been “trading under the name of Parkinson & Co”, which Mr Lintott, who appeared on their behalf, expressly confirmed to us on instructions was simply untrue.  

10	Heald Nickinson’s application to have the Orders joining them as Second Respondent to the unfair dismissal proceedings on the basis of what the tribunal chairmen had been told reviewed and reversed was based on the rather different picture that emerged when the full facts were taken into account.  In particular it relied on the correspondence making it quite apparent that the question of proceedings against Heald Nickinson had been under specific and active consideration by the Applicants and their advisers in January and February 2000, but had not been pursued either at that time or when the Originating Applications had been issued in March and April.  In those circumstances they contended it was not proper for them to have been joined to the unfair dismissal proceedings on an application made well outside the prescribed time limit of three months; though it was conceded that so far as the redundancy claims were concerned the applications were still within the longer six months time limit so joinder was permissible.

11	The Tribunal’s divided conclusions on the review were expressed as follows:
“21  The majority view is that of the lay members.  Their view is that the approaches to the second respondent by letter at the end of January were firmly rebuffed and it would appear that the applicants must then have concluded that the appropriate course would be to take proceedings against the first respondent.  He did not enter a Notice of Appearance and it may be that the applicants were then in something of a quandary to know how to proceed.  It was reasonable to seek to join the second respondent in the way that they did.  The second respondent had been on notice that it might be brought into the proceedings although this was done at a stage when the limitation period (save for redundancy claims) had expired.  The delay was not great.  As far as the redundancy claims are concerned, the time limit for presenting an application is 6 months and that period had not expired when the second respondent was joined.  On the issue of hardship, the majority view acknowledges that the second respondent will have to incur the trouble and expense of defending the claim and it will be at risk of an adverse finding.  Those risks exist for any respondent.  A degree of hardship will ensue if that risk is revived in the way that it has been by the joinder of the second respondent.  It could not altogether have disappeared since the respondent would have been unable to resist an application to join them for the purposes only of a claim for a redundancy payment.  On the other hand, the applicants will be prejudiced in that if the second respondent is removed from these proceedings; a potential avenue of redress will be blocked.  It may be that their claim will succeed against the first respondent but it seems that he is probably a man of straw.  Balancing the various competing interests of hardship and in the light of the views expressed above, the majority view is that their discretion should be exercised to the effect that the second respondent should have been made and shall remain a respondent to these proceedings.  
22.  The minority view is that of the Chairman.  The Chairman’s view is that the applicants were all well aware of the general situation in January.  Mr Pope had the benefit of legal advice and, on his behalf, solicitors wrote to the second respondent raising the issue of a relevant transfer.  The other applicants, except Mrs Clark, wrote similar letter on their own behalf.  All were rebuffed.  Even Mrs Clark must be taken to have had broad knowledge of the overall situation even though there is no evidence that she knew of the letters that her colleagues had written.  It would have been open to the applicants to have joined the second respondent when filing their Originating Applications in March or April.  That is a step that could easily have been taken and, in the Chairman’s view, one which should have been taken.  There has been no explanation, satisfactory or otherwise, advanced as to why that was not done.  In the Chairman’s view, the application should not have been granted to join the second respondent, save to the extent of a claim for redundancy payment where the primary limitation period had not expired.  The second respondent was given no opportunity to be heard on the issue before the order was made.  These factors lead the chairman to say that on reviewing the decision it should be revoked and the second respondent dismissed from the proceedings.”  

12	Heald Nickinson appeal against the consequent decision that they should remain as Second Respondents to the unfair dismissal claims, on the grounds that the majority misdirected themselves as to the correct test to be applied in deciding whether to exercise the discretion to allow a fresh party to be joined by amendment of existing proceedings; failed adequately to address material questions, including in particular the reason why they were not joined in the first place; and reached a conclusion that no reasonable Tribunal properly directing itself as to the law could have arrived at.  The correct approach was that of the Chairman, as set out in his minority view recorded in paragraph 22 of the Extended Reasons, and that should be the decision substituted.  On Heald Nickinson’s behalf on the appeal, Mr Lintott argued that the majority had erred in failing to follow the approach laid down for such applications in Cocking -v- Sandhurst Ltd [1974] ICR 650, which has been accepted by later judgments of the Appeal Tribunal as authoritative.  He referred us in particular to the passage in the judgment of Lord Donaldson at pages 656H to 657D explaining where, in such cases, a discretion for the Tribunal arises and how it should be exercised, where he said:
“In every case in which a tribunal is asked to amend a complaint by changing the basis of the claim or by adding or by substituting respondents, they should proceed as follows ……”
and then after satisfying themselves that the Originating Application in its unamended form was properly presented, and within the time limit appropriate to the type of claim being put forward in the amended application, 
“(4) If it was not, the tribunal have no power to allow the proposed amendment. (5) If it was, the tribunal have a discretion whether or not to allow the amendment. (6) In deciding whether or not to exercise their discretion to allow an amendment which will add or substitute a new party, the tribunal should only do so if they are satisfied that the mistake sought to be corrected was a genuine mistake and was not misleading or such as to cause reasonable doubt as to the identity of the person intending to claim or, as the case may be, to be claimed against.  (7) In deciding whether or not to exercise their discretion to allow an amendment, the tribunal should in every case have regard to all the circumstances of the case.  In particular they should consider any injustice or hardship which may be caused to any of the parties, including those proposed to be added, if the proposed amendment were allowed or, as the case may be, refused.”
The context in which those remarks were made, which explains the formulation of paragraph (6) and the reference to a mistake not being “misleading”, was that the employee’s complaint of unfair dismissal had originally named as his employer the wrong company out of two within the same group with similar names: “Sandhurst (Stationers) Ltd” instead of “Sandhurst Marketing Ltd”.  As recorded at page 654F, the Tribunal had found that the erroneous statement in his first application that his employer was the subsidiary company misled neither the subsidiary company nor the parent company.  However they also found that although this mistake was a genuine one, it had been due to carelessness on the employee’s part, and the question, answered in the affirmative in the judgment, was whether he should be allowed to amend in those circumstances.  Here, however, in Mr Lintott’s submission, there was no question of a genuine mistake of that kind having been made, such as to fall within the same discretionary principle.  It was plain that a conscious decision had been taken not to proceed against Heald Nickinson at the time that precise question had been considered with the Applicant’s lawyers in January and February 2000; in view of that evidence, there was no factual basis for the majority to say that: 
“the Applicants were then in something of a quandary to know how to proceed”
and as the Chairman pointed out there was no explanation of any kind for why the Applicants had chosen not to proceed against Heald Nickinson in the first place, so as to bring the case within Lord Donaldson’s “mistake” formulation.  

13	On behalf of Mr Ford and the other Applicants, Mr Brown argued that the Tribunal’s discretion in such matters, as in all cases where an application is made to amend Tribunal proceedings, is entirely general.  He specifically accepted that we should deal with the case on the basis that (as appears the irresistible inference, from the correspondence we and the Tribunal were shown) there had been a conscious decision taken not to bring proceedings against Heald Nickinson in February 2000, or to join them as Respondents in the Originating Applications when first presented in March and April.  He further accepted that there had been no evidence before the Tribunal that any of the Applicants had been confused as to the identity of his or her employer.  Nevertheless he said that the question whether there had been a conscious decision, or a mistake, on the part of any of the Applicants or their legal advisers was not conclusive.  The reason why a party had not been joined originally was just one factor to be taken into account in exercising the Tribunal’s discretion and was not to be elevated above any other.  The same general considerations as were set out in the passage headed “Procedure and practice for amendments” in the judgment of Mr Justice Mummery, as he then was, in Selkent Bus Company Ltd -v- Moore [1996] IRLR 661 at paragraphs 18 -24 should govern the Tribunal’s discretion in cases such as this: in particular the questions of hardship which the majority had been right to address in the way they did, and their exercise of discretion was a matter for them and not open to be set aside in law.  

14	In our judgment, the submissions of Mr Lintott on behalf of Heald Nickinson were right, and the correct approach was that of the Chairman as set out in the minority view recorded at paragraph 22 of the Tribunal’s Extended Reasons.  The principle laid down in Cocking -v- Sandhurst that the addition of a further party to existing proceedings is a matter of discretion for the Tribunal, and is not confined simply to correcting cases of what is sometimes called a “misnomer” of an existing party, is well established and has been followed in numerous cases by the Appeal Tribunal since then.  In 1989 it was (modestly) said by Lord Donaldson himself, then Master of the Rolls, that:
“it seems to be treated as the leading case on this subject”:

see British Newspaper Printing Corporation -v- Kelly [1989] IRLR 222, paragraph 9.  See also the judgments of the Appeal Tribunal in Gillick -v- BP Chemicals [1993] IRLR 437, paragraph 7; Drinkwater Sabey Ltd -v- Burnett & Another [1995] IRLR 238, paragraphs 31, 34; and the express reference in Mummery J’s judgment in Selkent in paragraph 18 to Cocking -v- Sandhurst, without any suggestion of a difference in principle, for the purpose of determining whether a discretion exists, between amendments to add a different basis of claim against an existing party, and amendments to add a different basis of claim against a fresh party.  

15	However the passage in Cocking to which we have referred has also been taken and applied as authoritative that where the proposed amendment takes the form of bringing a fresh party into the proceedings (and certainly where that involves bringing it in on an entirely different basis of claim from that first advanced in the Originating Application, well outside the prescribed time limit for doing so by starting proceedings normally, as these amendments necessarily do) it is only proper to exercise the discretion to allow it if it is established that the failure to join the party in the first place in the normal way has been the result of some genuine mistake as defined within Lord Donaldson’s formulation.  The judgment of the Appeal Tribunal in Gillick cited above on the question of the discretion ([1993] IRLR 437 paragraph 7) puts it thus:
“We do not ……think that the Cocking approach is necessarily limited to cases in which the original and the new respondents are related as principal and subsidiary, or in some similar way.  The presence or absence of a connection between the respondents may well be relevant in considering whether or not a genuine mistake has been made, and whether the industrial tribunal should exercise its discretion to allow the mistake to be corrected, but such considerations are relevant, if at all, as matters to be taken into account in exercising a discretion, rather than as limitations on the circumstances in which the discretion can be exercised.”

That followed the citation in the immediately preceding paragraph of the material passage from Lord Donaldson’s judgment referring to a “mistake”.  In our judgment it confirms that, whatever the precise ambit of the “mistakes” which it is proper to allow to be corrected by an exercise of the Tribunal’s discretion, a case such as the present one (where the only reasonable inference is that after the question of joining Heald Nickinson as a party had been expressly ventilated and the complaints rebuffed in correspondence in February 2000, the idea had been dropped and a decision taken to proceed against Mr Parkinson alone when the Originating Applications were actually issued later) lies far outside it.  We therefore accept Mr Lintott’s submission that the majority misdirected themselves as to the way a Tribunal’s discretion should be exercised in such circumstances, there was no reasonable basis in the facts or evidence before them for their apparent assumption that the Applicants had been placed in any quandary or confusion as to whether to name Heald Nickinson as Respondent to an Originating Application if they had wished to pursue the question of legal liability on Heald Nickinson’s part for unfair dismissal despite the clear rebuff and the threat about costs, and consequently the approach of the majority was invalid in law and the Decision must be set aside.  

16	Having done so, we have further concluded that this is a case where it is proper for us to substitute our own decision for that of the Tribunal, since the matter has been fully argued before us and we are satisfied the minority view of the Chairman was the only conclusion any reasonable Tribunal could have reached in view of the evidence and in the circumstances of the application.  As acknowledged by Mr Lintott, the Chairman did not specifically address the question of hardship; but we have not been satisfied that the loss to the Applicants of the possibility of pursuing these unfair dismissal claims against Heald Nickinson after all outweighs the hardship to Heald Nickinson in having to defend them, and the other reasons listed by the Chairman against allowing the amendment at all.  In our judgment, the application to join Heald Nickinson as Respondent as regards the unfair dismissal claims outside the prescribed time, and long after that exact question had been considered and not proceeded with by or on behalf of the Applicants, should never have been granted; and certainly such an application should never have been made by a legally experienced person in the way it appears to have been by Mr Ford in his letter of 8 June 2000 without mentioning what had gone on previously, which in the circumstances we found disingenuous.  

17	For those reasons this appeal is allowed, the Decision of the Tribunal recorded in the Decision document and Extended Reasons dated 30 October 2000 is set aside to the extent that the Second Respondent, Heald Nickinson, is to cease to be a party to the proceedings as regards any of the unfair dismissal claims.  The case is remitted to the Tribunal to determine the redundancy payments issues as regards Heald Nickinson, and all remaining issues as regards the First Respondent Mr Parkinson, in accordance with the directions already given by the Tribunal for the hearing of the originating applications.