June 11 2007 Employment Law Enews

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Without prejudice, but with limits

The protection afforded to "without prejudice" communications has come under scrutiny recently, culminating in two decisions from the Court of Appeal.

"Without prejudice" exchanges are often used between parties attempting to negotiate or settle disputes. The important effect of the "without prejudice" label is that it prevents the fact and substance of the negotiations being adduced as evidence in any subsequent litigation. The negotiations are therefore referred to as 'privileged'. The reason for this is that it could reveal to the court an admission of liability from one party or a willingness to accept a sum far less than claimed by the other. However there are still uncertainties as to the ambit of the protection given under the "without prejudice" rule.

Framlington Group Ltd v Barnetson

One issue that recently came before the Court of Appeal is whether negotiations taking place well before litigation is even contemplated are still covered by the "without prejudice" rule.

Mr Barnetson (previously the Chief Operating Officer of Framlington Group Ltd) brought a claim in the Tribunal for damages for wrongful dismissal and other breaches of contract. He sought to show the Tribunal a document from Framlington offering him share rights and a bonus in an attempt to negotiate his departure from the company. Framlington argued that the Tribunal should not see this document as it was "without prejudice." It was an attempt by Framlington to settle the dispute and so should be inadmissible. Mr Barnetson in turn claimed that as it had been given to him some time before he even considered litigating the dispute, it was not covered by the "without prejudice" rule.

The Court of Appeal ruled in favour of Framlington stating that the "without prejudice" rule covers all genuine attempts to settle disputes "notwithstanding that litigation has not yet begun" the rule is in place to prevent these attempts being shown to the court "as admissions on the question of liability".

Brunel University v Vaseghi and another

This case, however, saw the Court of Appeal weaken the "without prejudice" rule by ruling that there may be circumstances when employees should be able to rely on "without prejudice" communications where they are necessary to support a claim of unlawful discrimination or victimisation.

Mr Vaseghi brought a claim for discrimination against Brunel University and, before the case was heard in the Tribunal, without prejudice negotiations between the parties took place. No settlement was reached and Mr Vaseghi subsequently lost his Tribunal case. Several months later the Vice-Chancellor of the University published a piece in a newsletter stating that Mr Vaseghi's claims had been accompanied by "unwarranted demands for money".

Mr Vaseghi then claimed that this statement was unlawful victimisation and argued that the University had first suggested a financial settlement. Mr Vaseghi raised a grievance with the University, which was investigated, (with evidence being heard by an independent panel) and then filed a claim for victimisation in the Tribunal. The University objected to Mr Vaseghi referring in his witness statement to details of the settlement discussions that took place between the parties as they were "without prejudice".

The Employment Appeal Tribunal held in no uncertain terms that the without prejudice settlement discussions were privileged as they were an attempt to settle a dispute. However, the EAT held there had been a waiver of the privilege as the grievance panel had already heard evidence on the point. The EAT further held that even if there had not been a waiver of the privilege, that: "in discrimination cases the necessity of getting to the truth of what occurred and if necessary eradicating the evil of discrimination may tip the scales as against the necessity of protecting the "without prejudice" privilege". It was therefore held that it would be a "clear abuse" of the without prejudice rule not to allow Mr Vaseghi the opportunity to rely on the evidence as it would seriously hamper his case.

The EAT's decision was upheld by the Court of Appeal. This was based on the fact that they agreed there had been a waiver of the privilege, both at the grievance stage and by the fact that both Mr Vaseghi's claim form and the University's response had the grievance reports appended to them, which detailed the settlement discussions. The court went on to comment that it could understand that: "it may sometimes be difficult to prove victimisation if the general rule (that remarks made in the course of without prejudice discussion cannot be referred to) applies in its full width."

The case emphasises that by labelling communications "without prejudice" by no means provides a complete defence against disclosure of the correspondence or oral discussions in question. This seems particularly so in cases of discrimination and victimisation.

Disability discrimination - using expert evidence to disprove a physical impairment

Where a party disputes that another suffers from a "disability" under the disability discrimination legislation, one issue that the Tribunal must consider is whether that party has such a physical or mental impairment. Expert medical evidence will usually be obtained to assist the Tribunal. Where a single joint expert has reported to the Tribunal, a party may only instruct its own independent expert where there is a good, not merely fanciful, reason to do so, as was the case of The Hospice of St Mary of Furness v Howard.

Facts

Mrs Howard was the director of nursing at the Hospice, who shortly after starting work was absent with a back complaint. Following investigations by an orthopaedic consultant into Mrs Howard's condition and an MRI scan that revealed no significant pathology, Mrs Howard was dismissed. Mrs Howard issued a claim against the Hospice alleging disability discrimination and claiming around £500,000 compensation. The Hospice disputed that Mrs Howard was 'disabled' under the disability discrimination legislation, the genuineness of her complaint and whether her impairment was a 'physical' one.

A jointly instructed medical expert reported that Mrs Howard was suffering from a back complaint, although he could not diagnose the precise cause of this. As the expert was unable to clarify his findings, the Hospice instructed its own independent expert to prepare a report using the documentary evidence. This Hospice's expert concluded that Mrs Howard suffered from low-level intermittent symptoms which were unlikely to affect her day-to-day activities. The Hospice requested that Mrs Howard be examined by its expert, so that he could produce a full medical report.

Decision

The EAT concluded that the Hospice had a good reason for seeking the report. As the existence of Mrs Howard's complaint was in issue, the Hospice could seek to disprove that this existed by producing evidence to show that it was not genuine or did not amount to a physical impairment. The Hospice had taken appropriate steps to obtain medical evidence by agreeing to a joint expert and then seeking clarification of his findings. However, in the absence of objective support, or a clear diagnosis, of the cause of the complaint it was not surprising that the Hospice wished to obtain a further report. Further, in light of the Hospice's expert's initial opinion, that Mrs Howard's symptoms were low-level and unlikely to affect her day-to-day activities, seeking a full medical report would not be for a fanciful reason. Finally, given that Mrs Howard was claiming £500,000, the additional delay and expense of obtaining the report would not be disproportionate.

Comment

This case is a pertinent reminder to claimants that, although they need not establish the precise cause of their physical impairments for the Tribunal, their cases may be open to attack. A respondent may be permitted to seek further medical evidence to disprove the genuineness or basis of a complaint if it acts reasonably and it would be proportionate in the circumstances.

Further, care should be taken to ensure that the amount of compensation that a claimant claims accurately reflects his actual loss. As we have seen here, where a claim is for a large sum the Tribunal is not likely to regard the delay and expense of obtaining further medical evidence as disproportionate. Thus an overoptimistic claim for compensation may lead to delays and extra expense that a claimant may wish to avoid.

Agency Workers held to be employees of the agency

A recent trend has emerged in agency cases in which agency workers have been denied employee status. This has been due to insufficient mutuality of obligation (James v Greenwich Council) and reluctance by the Tribunals to imply a contract of employment, where an existing contract accurately reflects the arrangements between the parties, (Craigie v London Borough of Haringey). In the recent case of Consistent Group Limited v Kalwak & Others and Welsh County Foods Limited, the Tribunal held that in the "exceptional" circumstances the agency workers in question were in fact employees of the employment agency.

The agency, CG Ltd, recruited Polish workers and brought them to work in the UK. Each worker signed a "Self Employed Sub-contractor's Contract for Services". This contract included, amongst other things, a term stating that the agency workers were not employed by CG Ltd, CG Ltd was not obliged to offer work and the worker was not obliged to accept the work. The agency workers commenced work for Welsh Country Foods Limited ("WCF Ltd"). They were discouraged by WCF Ltd from joining the trade union and were subsequently dismissed. The workers presented a claim for unfair dismissal and for their notice pay.

The Tribunal and the EAT held that despite a contract, to the contrary, the relationship between the workers and CG Ltd satisfied the 3 elements of personal service, mutuality of obligations and control, thereby making the workers employees of CG Ltd. This decision was based on the fact that the workers could only provide a substitute to do the work when they were unable to do it themselves, therefore, indicating that they owed a personal service to CG Ltd. In reality, the worker could not refuse to accept the work offered by CG Ltd, indicated by fact that the contract between CG Ltd and the worker stated that the worker could not work elsewhere. The EAT also recognised that, although the lack of detailed control over the workers daily activities can be a factor in deciding an employee's employment status, it is not always a necessary condition. It was held that CG Ltd exercised a sufficient degree of control over the workers who relied on CG Ltd not only to dictate where and when they worked, but to provide accommodation for them.

This case serves as an important reminder to both employers and Tribunals that in each case there must be an investigation into the particular facts and a contract which does not accurately reflect the arrangement in place will carry little weight in terms of evidence.

This article copyright © 2007 Steeles Law llp. All rights reserved.