Generic selectors
Exact matches only
Search in title
Search in content
Search in posts
Search in pages
Back to all news

Benjamin Gray brings successful appeal on the law of misrepresentation in employment settlements

30.11.20

On 26th November 2020 the Employment Appeal Tribunal handed down judgment upholding an appeal in the case of Cole v Elders Voice [2020] UKEAT/0251/19. Benjamin Gray acted for the Appellant.

The Case

Mrs Cole was an employee whose employment transferred to Elders Voice under the Transfer of Undertakings (Protection of Employees) Regulations 2006. She had brought Employment Tribunal proceedings against the transferor.

Following the transfer Elders Voice placed Mrs Cole at risk of redundancy and engaged in settlement discussions. During these discussions Mrs Cole was represented by someone whom the parties believed to be a practising barrister. He asked Elders Voice a series of questions in correspondence marked “without prejudice” about the legal implications of any settlement agreement on the litigation she was pursuing against her former employer.

Elders Voice responded, in terms that Mrs Cole contended were misleading or gave rise to an estoppel. A COT3 was signed, with Elders Voice inserting wording into the agreement at the request of the Claimant’s representative to confirm that they had ‘no connection’ with the transferor.

Following the signing of the COT3, Elders Voice applied to have Mrs Cole’s claims struck out on the basis that they had been compromised by the COT3.

At the Preliminary Hearing to decide this issue, Mrs Cole, then a litigant in person, sought to argue that the COT3 was void for misrepresentation or that Elders Voice’s representations gave rise to an estoppel. However, the Respondent had, earlier in the hearing, objected to the Tribunal looking at any Without Prejudice documents and did not retract that objection. The Tribunal, in turn, acceded to that objection and considered that misrepresentation was not a valid basis for overturning a COT3.

The Issues

On appeal, the key issues were:

  1. Do Tribunals have a jurisdiction to challenge COT3 on common law grounds such as misrepresentation or estoppel?
  2. Should the Appellant have been allowed to refer to documents marked Without Prejudice at the Preliminary Hearing below?
  3. Did the involvement of someone (wrongly) holding themselves out as a barrister preclude the Tribunal from accepting the Claimant’s arguments?

The Decision

On all these points the Tribunal (Griffiths J) found in favour of the Appellant, and remitted the underlying questions of misrepresentation, estoppel and construction of the COT3 to a differently constituted Tribunal.

Griffiths J held that Tribunals have a jurisdiction to void COT3s and Settlement Agreements in common law and equity in line with the decision of Silber J in Industrious Ltd v Horizon Recruitment Ltd [2010] IRLR 204. A recent decision of the EAT to the contrary (Patel v City of Wolverhampton College [2020] UKEAT/0013/20/RN) was per incuriam and not to be followed.

The Appellant had made clear references to misrepresentation and estoppel at the Preliminary Hearing below. In line with the decisions of the Court of Appeal and Supreme Court in Unilever plc v The Procter and Gamble Co [2000] 1 WLR 2436 and Oceanbulk Shipping and Trading SA v TMT Asia Ltd [2010] UKSC 44 respectively, she should have been allowed to refer to without prejudice correspondence to make those submissions. Whilst the Respondent and the Tribunal could scarcely be blamed for realising this point at the time, as a matter of law they should have set aside the objection to referring to without prejudice materials. The failure to do so was a further error of law.

Upon reviewing the statements, Griffiths J concluded that the Claimant had an arguable case of misrepresentation at a minimum, but that this would have to be determined by an Employment Tribunal on remission as it would involve resolving issues of fact.

That analysis, however, was not undermined by the involvement of someone who, at the time of the negotiations, was believed by the parties to be a practising barrister. First, the correspondence showed that the individual did not understand the impact of TUPE on the COT3, and was seeking assurances from Elders Voice’s solicitors on the very issue of whether Elders Voice would be liable for any claim against the transferor. Assurances which he obtained and upon which he and Mrs Cole relied.

Second, Griffiths J rejected Elders Voice’s submission that Mrs Cole or her representative might have been under a duty to verify the representations made to them. The Tribunal reviewed the key authorities in this area of law, including Redgrave v Hurd (1881) 20 Ch D 1 CA and Peekay Intermark Ltd v Australia and New Zealand Banking Group Ltd [2006] EWCA Civ 386, and concluded that negligence on the part of a representee is not a defence to a claim for rescission based on misrepresentation. There was nothing in the role of the representative that would render an otherwise-actionable representation either irrelevant or not actionable.

Commentary

Although the underlying issue of the nature and effect of the employer’s representations will now be determined at a remitted hearing, this case is a cautionary tale for practitioners negotiating settlements.

It confirms an established line of authorities that COT3s and Settlement Agreements can be voided by Employment Tribunals at common law for misrepresentation, or that a party may be estopped from relying on its terms.

More importantly, employers and their representatives cannot negotiate on the assumption that it is merely the other side’s duty to “catch” any potentially misleading communications, even where they appear to be professionally represented. Whilst the facts of this case are unusual (the Claimant’s representative was a disbarred barrister holding out as a practising one), they are not unheard of.

Griffiths J’s reasoning, consistent with a well-established line of authority, holds true irrespective of the ostensible professional status of the representative – if a party makes actionable representations, they are not let off the hook because the other side’s representative ‘ought to have known better’. In this case the representative had asked for and received assurances, in a context where it was clear that he and Mrs Cole would rely on them.

Practitioners should therefore be careful that, where assurances about the effect of a settlement are given to an opposing party, those assurances are accurate not just in a literal sense, but in context and viewed as a whole.

Relevant Members
Benjamin Gray
Shortlist Updated