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Cite as: [1996] UKEAT 811_95_1605

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    BAILII case number: [1996] UKEAT 811_95_1605

    Appeal No. EAT/811/95



    At the Tribunal

    On 16 May 1996






    Transcript of Proceedings





    For the Appellant MS HEATHER WILLIAMS

    (of Counsel)

    Messrs Freeth Cartwright Hunt & Dickins


    Willoughby House

    20 Low Pavement

    Nottingham NG1 7EA

    For the Respondent MR CHRIS QUINN

    (of Counsel)



    2 Marsden Street


    Chesterfield S40 1JY


    MR JUSTICE MUMMERY (PRESIDENT): This is an appeal by Mrs L Greenfield against the decision of the Industrial Tribunal held at Sheffield on 23 May 1995.

    The Tribunal unanimously decided that the Applicant, Mrs Greenfield, had signed and concluded a binding agreement under the auspices of the Advisory Conciliation and Arbitration Service and that that agreement was binding under s.134 and s.140 of the Employment Protection (Consolidation) Act 1978.

    The Tribunal concluded that they did not have jurisdiction to re-open the Applicant's complaint of unfair dismissal against the Respondent, Mr Robinson. The extended reasons for the decision were sent to the parties on 15 June 1995. Mrs Greenfield appealed. She served a notice of appeal in July 1995, setting out various grounds of alleged errors of law in the decision.

    The case was listed for a preliminary hearing before the Tribunal constituted as today. At the preliminary hearing on 15 November Ms Williams appeared for Mrs Greenfield and persuaded the Tribunal that there was an arguable question of law. We therefore allowed the appeal to proceed to a full hearing. We took the unusual step of asking the Chairman to produce his notes of evidence in relation to one of the contentions made by Ms Williams that there was a perverse finding of fact by the Tribunal, namely a finding inconsistent with uncontradicted evidence given to the Tribunal by a witness, Mr Morris, who had acted as representative of Mrs Greenfield in the Industrial Tribunal.

    This is the full hearing of the appeal. The Chairman has provided the relevant part of his notes of evidence. Counsel have helpfully summarized their legal arguments in the skeleton submissions.

    There is a preliminary procedural matter. Mr Quinn, who appears for the Respondents on the appeal, pointed out that the only Respondent named in the proceedings before the Industrial Tribunal was Mr Robinson. Mrs Robinson was at all material times a partner in the business in which Mrs Greenfield had been employed. Mrs Robinson should have been named as a Respondent along with her husband. She had, in fact, completed the notice of appearance. She had been treated throughout as if she were the true Respondent. It was she who entered into the compromise agreement with Mrs Greenfield, that is the subject of the Industrial Tribunal proceedings and this appeal.

    This application to join Mrs Robinson as a Respondent was not opposed by Ms Williams.

    The main point on the appeal is whether and in what circumstances an agreement, evidenced by a signed COT3 agreement, is liable to set aside on the grounds of alleged misrepresentation.

    The background to the case is this: Mrs Greenfield was employed as a kitchen assistant at the Parkhouse Hotel near Chesterfield. She presented an application on 24 November 1994 claiming unfair dismissal against the proprietors of the Hotel. She named Mr Robinson. She said that she had been employed at the hotel since 1 October 1992 and had been summarily dismissed in circumstances that were alleged to be unfair on 26 October 1994.

    The response of the proprietors was that there was no unfair dismissal. They had dismissed Mrs Greenfield for misconduct.

    The case never reached a full hearing because, in the circumstances described in the extended reasons, a settlement was reached. A COT3 agreement was signed in circumstances described in the decision as normal circumstances, involving an officer of ACAS, Mr Wyman, a conciliation officer. That was considered to be the end of the case.

    An application was later made by Mrs Greenfield inviting the Tribunal to reopen her originating application. The case which she had brought was never formally dismissed. It had been adjourned, following the reaching of the agreement recorded in the COT3 form signed by the parties. Mrs Greenfield's application was to set aside that agreement on the basis that it was concluded under an actionable misrepresentation.

    The first point to be decided was whether the Tribunal had jurisdiction to entertain that application. The Tribunal dealt with that point in this way: they heard the evidence, made findings of fact and came to conclusions which made it unnecessary for them to rule on the question of jurisdiction. They held that, in view of their findings of fact, they did not have to decide whether the Tribunal had power to set aside the agreement on the basis of misrepresentation. They found as a fact that the alleged misrepresentation had not been made and that there was no actionable misrepresentation on the basis of which an order could be made setting aside the agreement.

    That was a sensible, practical way of dealing with the matter. If there is any doubt about the jurisdiction of a Tribunal to entertain this kind of application, we would remove that doubt now. The position, in our view, is that the conclusion reached in Vol. IV of Harvey on Industrial Relations and Employment Law, paragraph 713 to 735, is correct. On the basis of the ruling by Mr Justice Popplewell in the case of Hennessy v Craig Myle & Co Ltd [1985] ICR 879 at 885 B-E, a tribunal can investigate the circumstances in which it is alleged that an agreement, within the meaning of s.140 of the Employment Protection (Consolidation) Act 1978, is liable to be avoided at common law or in equity. No doubt was cast on this statement when that same case went to the Court of Appeal: [1986] ICR 461. It is clear from the judgment of the Master of the Rolls, (Sir John Donaldson) with which the other two Members of the Court agreed, that they recognized that contracting-out agreements under s.140(2) can be avoided on grounds on which an agreement can be avoided at common law. See page 465 B-C. That particular case dealt with economic duress as a ground of avoidance. There is no reason why actionable misrepresentation at common law cannot also form the basis on which an Industrial Tribunal could set aside a contract falling within that section.

    Ms Williams cited other cases qualifying or casting doubt on this jurisdiction of the Industrial Tribunal. In our view, the two main cases are distinguishable. We agree with the editor of Harvey that neither Eden v Humphries and Glasgow Ltd [1981] ICR 183 nor Larkfield of Chepstow Ltd v Milne [1988] ICR 1 at 6G-7F affect the correctness of the judgment of Mr Justice Popplewell in the Hennessy case. Neither case is authority for the proposition that an Industrial Tribunal (as opposed to the Employment Appeal Tribunal) has no jurisdiction to set aside an agreement disposing of proceedings over which it alone has jurisdiction.

    In so far as the decisions are inconsistent with the proposition in Hennessy, we agree with the editors of Harvey that Hennessy is the more compelling authority.

    On this appeal Mr Quinn did not seek to challenge the correctness of Ms Williams' propositions on jurisdiction.

    We now come to the meat of the matter explained in the extended reasons. The Tribunal heard evidence only from Mr Morris on Mrs Greenfield's side. Mr Morris is from the North East Derbyshire Citizens Advice Bureau. He acted on Mrs Greenfield's behalf during the negotiations, as well as at the hearing in the Industrial Tribunal on 23 May.

    Mrs Robinson also gave evidence. Mrs Greenfield was present at the hearing on 23 May, but she did not give evidence. On the basis of the evidence the Tribunal made these findings of fact. They referred to the application and to the fact that Mr Morris acted throughout for Mrs Greenfield. They then said this:

    "During February and March 1194 the ACAS conciliation service was involved in discussions between the two parties. Initially the respondent was unable to consider an offer of settlement because the respondent's business was in financial difficulties. Throughout this period the respondent was represented by Mrs Doreen Hollingsworth, a Legal Executive with the legal firm of Banners. Eventually Mr Morris and Mrs Greenfield were invited to see the respondent's accounts because the respondent wanted to make the point that the business was in difficulty. Mr Morris and Mrs Greenfield had declined to inspect the accounts because they accepted that the business was in financial difficulties but could not guarantee or be certain that the accounts would tell the full story of the respondent's financial position."

    That was the background to the events of 9 March when the agreement was concluded. Both Mr Morris and Mrs Greenfield knew in February and early March about the financial difficulties of the Respondent. On 9 March 1995 there was a telephone call between Mr Morris and Mrs Hollingsworth:

    "Mrs Hollingsworth phoned Mr Morris to indicate that the respondent's business was in serious difficulty and that there was a risk that it may have to be put into bankruptcy the following day. Mrs Hollingsworth indicated that the respondent might be willing to settle the application for £250 on the basis of a personal loan and she suggested that otherwise there may be little or nothing available to Mrs Greenfield. Although Mrs Greenfield was not happy at this she decided to accept this and eventually the settlement was conducted through the offices of an ACAS conciliation officer Mr Wyman."

    Mr Wyman visited both Mrs Greenfield and the solicitors acting for the Respondent. A COT3 form agreement was signed by Mrs Greenfield and by Mrs Robinson, acting on behalf of her husband. There was an agreed payment of £250 in full and final settlement.

    The next day, 10 March, there was a meeting between Mr and Mrs Robinson and their accountant about the financial mess their business was in. The upshot of that meeting was that the landlords of the hotel and public house, Mansfield Brewery, were willing to provide Mr and Mrs Robinson with a loan by buying back some fixtures and fittings and postponing a debt which they owed.

    "As a result of this the Robinsons avoided bankruptcy or voluntary liquidation and otherwise they would have almost certainly gone out of business. It was the case that bankruptcy was discussed as a possibility at that meeting but because of Mansfield Brewery's offer bankruptcy was avoided as a consequence."

    The Robinsons' business never became bankrupt. The Tribunal found it continued to be active, though it also continued to have financial difficulties. It was because the business continued as a going concern and was not subject to bankruptcy procedures that Mrs Greenfield made the application to re-open the COT3 agreement. Her case was that that was signed only on the basis of what she contended was a misrepresentation. The misrepresentation was that the Robinsons' business faced bankruptcy and that, if she did not settle for £250, it was unlikely she would receive any compensation at all.

    The Tribunal referred to the submissions by Mr Morris and Mrs Robinson. The Tribunal assumed, without necessarily ruling, that they had jurisdiction to set aside this agreement on the basis of actionable misrepresentation. They then considered, on the evidence, whether there had been an actionable misrepresentation on which the agreement could be avoided. Their crucial findings are in paragraph 9 of the decision:

    "The tribunal finds on the evidence before it that there is nothing to support the contention that the COT3 agreement made by the respondent and the applicant was entered into or induced as a result of an actionable misrepresentation, whether innocent, negligent or fraudulent. The circumstances in which the COT3 agreement was made were quite normal circumstances which ACAS and tribunals frequently observe in such cases. It was clearly a genuine case where the respondent's business was in financial difficulties and this fact was made known to the applicant. She entered into the agreement knowing that there were financial difficulties and taking the chance that it would be better to settle for £250.00 now than risk getting nothing at some future time. The fact that subsequently, the following day, means were found to prevent the business going into voluntary liquidation or enforced bankruptcy did not affect the genuineness of the agreement the previous day or the circumstances in which that agreement was reached. Accordingly, the tribunal is unable to find on the facts before it that there was an actionable misrepresentation."

    Ms Williams has given substantial help in disposing of this appeal. She has argued every point that could reasonably be argued. We will deal with each of her arguments in turn.

    She identified three issues. She accepted that she has to succeed on all three in order to win this appeal. She also accepted that, if she succeeded in the appeal on the basis that there was some legal error in the decision, there were difficulties in this Tribunal deciding whether or not to set aside the COT3 agreement. The likelihood of a successful appeal would be that the matter would have to be remitted to another industrial tribunal to rehear the application to set aside the agreement in accordance with the directions on law in our judgment.

    She also accepted that, even if that remitted industrial tribunal set aside the agreement, that would not be the end of the dispute. If the Industrial Tribunal, on the remitted hearing, concluded that the agreement ought to be set aside one inevitable consequence of that would be that Mrs Greenfield would have to hand back £250. She could not claim to be entitled to keep £250 paid under an agreement which she had successfully invalidated in the Industrial Tribunal application.

    At the next stage there would have to be a hearing of the Industrial Tribunal claim for unfair dismissal, which the parties had thought they had conclusively settled on 9 March 1995. It was accepted by Ms Williams that the Industrial Tribunal might reject Mrs Greenfield's claim. Whether they did so or not would depend on all the evidence and argument at that hearing. If Mrs Greenfield's unfair dismissal claim were rejected, the ultimate result of a successful appeal would be that Mrs Greenfield was worse off than if the agreement had remained binding on her.

    We spell all those matters out, because it is important to set this appeal in the context of what limited objective can be achieved at the hearing today if the appeal is successful.

    We now examine the two issues which Ms Williams identified on the appeal. The first issue is whether there was a legal error in the Tribunal's findings of fact. Although findings of fact cannot normally be challenged in this Tribunal on an appeal, because appeals are confined to questions of law, there are limited circumstances in which a finding of fact may be made as a result of a legal error. For example, a finding of fact is made as a result of a legal error if the finding of fact is not supported by any evidence. It cannot then really be described as a finding of fact. If it is a conclusion which is contrary to uncontradicted evidence, it is perverse and unsupportable.

    The second point is whether the evidence taken with the Industrial Tribunal's other findings, establishes that there was in this case an actionable misrepresentation. We have to enquire whether the Tribunal erred in law in saying that there was no actionable misrepresentation. The argument on that aspect of the case requires consideration of the elements of actionable representation, namely, whether the representation was false, whether it was a representation of fact or another kind of representation which can be actionable and whether the Appellant had been induced by the representation to rely upon it and did, in fact, rely on it in entering into the agreement under attack.

    The basis of the first submission rests on the comparison made by Ms Williams between what the Tribunal said they found as a fact and what is recorded in the Chairman's notes of evidence of Mr Morris's evidence in-chief. In-chief Mr Morris is recorded in the notes as giving this evidence:

    "I acted for Mrs Greenfield. Calls from ACAS (February/March). Respondent unable to consider [making] offer because of financial difficulties. Respondent represented by Doreen Hollingworth, a legal executive with Banners, solicitors. We were invited to see accounts. We declined. We accepted that the business may have been in difficulties. But was there money elsewhere?"

    The crucial passage is in these three sentences:

    "9 March. Mrs Hollingworth phoned. Said that business was in serious problems and would be put into bankruptcy the next day. But would be willing to settle for £250 on basis of borrowing. Suggested there may be nothing otherwise."

    He went on to deal with the circumstances which are already the subject of findings of fact and there is no dispute about that. Mrs Greenfield was not happy, but decided to accept. The matter was not signed up finally on the COT3 form until Mr Wyman of ACAS was involved and had a meeting with Mrs Greenfield and with the solicitors for the Robinsons. His evidence in-chief concluded:

    "We now understand no bankruptcy and business continuing."

    There was cross examination by Mrs Robinson. The only recorded answer to her questioning was:

    "We had no guarantee that you did not have other accounts."

    There is recorded under the heading "Tribunal questions":

    "We did not look at the accounts. Mrs Hollingworth had no idea whether there were any other accounts. Mrs Hollingworth said that business was approaching bankruptcy."

    Ms Williams' argument was that Mr Morris gave clear evidence that Mrs Hollingsworth had said on the telephone on 9 March that the business would be put into bankruptcy the next day. Mr Morris was not cross-examined by Mrs Robinson on that part of his evidence. No alternative version of the conversation was put to him or given in evidence. Mrs Hollingsworth was not called to give evidence. Mrs Robinson gave no contrary evidence, because she was not a party to that conversation and there was no suggestion that there was any reason for treating Mr Morris otherwise than as a reliable and credible witness. There were no grounds for rejecting his testimony on this point. On this basis the submission was made that there was no evidence to support the Tribunal's finding of fact that Mrs Hollingsworth told Mr Morris in the telephone conversation that the Respondent's business was in serious difficulty and that there was a risk that it may have to be put into bankruptcy the following day. Ms Williams said what the Industrial Tribunal had done in paragraph 4 of the extended reasons was to place an interpretation on the evidence given by Mr Morris that was contradictory to, or was a watered-down version of, what he is recorded in the notes of evidence as having actually said. She submitted that the Tribunal's finding of fact about the terms of the representation was perverse and, therefore, legally erroneous, because no reasonable industrial tribunal, in the light of Mr Morris' uncontradicted evidence, could have made the finding they did in paragraph 4 of the decision.

    We should therefore allow the appeal if the other ground was established namely that what was in fact said by Mr Morris, not what was attributed to him by the Tribunal, was an actionable representation.

    The second point was that the representation was actionable and that the Tribunal had not correctly interpreted or applied the law relating to misrepresentation when they came to the conclusions quoted in paragraph 9 of the extended reasons. On this part of the case Ms Williams argued that there was a clear representation that there would be a bankruptcy the next day. That was a representation of fact or was a representation treated in the same way as representations of existing fact. On this aspect of the case, she referred us to the passages in Halsbury's Laws relating to misrepresentation. She drew to our attention passages relating to statements of intention. A statement of intention involves a representation as to the existence of an intention which is itself a present fact. The non-fulfilment of an intention may be evidence in the particular case that the intention never existed at all. Ms Williams referred particularly to paragraph 1007 and footnote 6 to that paragraph in Vol. 31 of Halsbury's Laws. She also referred to another passage under the heading "Forecasts", paragraph 1010, citing authorities for the proposition that a statement of expectation is a statement that the party does actually expect as stated and is therefore a representation. There are other authorities relating to statements of opinion, belief and information as constituting representations. If a person makes a statement of his opinion, belief or information, there is a representation that he has the opinion, belief or information when he makes it.

    It is submitted that this is an actionable representation. The representation made by Mrs Hollingsworth must have been on the basis of what she knew, either directly or from what she was told by the Robinsons. She represented what their intentions, expectations, beliefs or information were at that time. The fact was that this representation was false because the very next day, instead of the business going into bankruptcy, it was rescued and there was money available which enabled it to continue. It has never gone into bankruptcy. Ms Williams contended that, on the proper understanding and application of the law, the Tribunal ought to have found that this representation was actionable, because it had induced Mrs Greenfield to enter into the settlement. It had been stated by Mrs Hollingsworth to Mr Morris. Mr Morris was known by Mrs Hollingsworth to be the person representing Mrs Greenfield throughout the case. A person who had made a false representation could not deny that it had had the effect of inducing a person to rely upon it. Ms Williams submitted that it did not matter that the inducement was made to Mr Morris, rather than to Mrs Greenfield direct. The fact was that on the very same day that the conversation took place between Mrs Hollingsworth and Mr Morris an agreement was reached in the terms proposed in the conversation, i.e. £250 in full and final settlement and the whole matter was signed up later that day.

    In brief, Ms Williams' submissions amounted to this, that the Tribunal erred in law because they made a finding of fact at variance with uncontradicted evidence. If they had applied the law correctly to the evidence given they would have found a definite representation that there would be bankruptcy the next day. That was an actionable misrepresentation because it related to facts, expectations or intentions existing at that time, which were untrue, as shown by what happened the following day. In those circumstances, as Mrs Greenfield had relief on these, and they were false, she could have the agreement set aside.

    We are grateful for those clear and comprehensive submissions. We do not think it necessary to refer to the authorities, because the propositions about the law of misrepresentation are clear. They were not substantially in dispute between Ms Williams and Mr Quinn.

    It is obviously important that, when cases are settled, they are settled on the basis that both sides are correctly informed of what they need to know and have not been misled by mis-statements of fact into thinking that the position is different than it really is. We have, however, reached the conclusion that there is no error of law in the Tribunal's decision.

    As to the Chairman's notes of evidence, it is important to have this in mind, that the notes are not a transcript. The Chairman is not obliged to record all the evidence word for word. This evidence is recollection about a telephone conversation some months previously and of which there is no written record. The evidence given by Mr Morris on 23 May was about what had been said in some negotiations on the telephone on 9 March. Account can be taken by the Tribunal of the fact that it is unlikely that a person would remember, word for word, what is said. We bear this in mind when so much of Ms Williams' argument on this aspect of the case turns on the variation in language between the note of evidence (i.e. that the business would be put into bankruptcy the next day) and the finding of fact in paragraph 4 that there was a risk that it may have to be put into bankruptcy the following day.

    The Tribunal, in making findings of fact, are carrying out a process of interpreting all the evidence before them, making assessments about the probabilities and then stating their findings of fact. They are not obliged to accept every word that is said by the witness as literally true. They must interpret that evidence in the context in which the events recounted have taken place. We do not think that it was a perverse interpretation of the evidence to state the finding of fact in the first sentence of paragraph 4 of the extended reasons. This was not a case where for the first time on 9 March 1995 Mr Morris became aware that there was a financial crisis in the affairs of Mr and Mrs Robinson. According to paragraph 3, this was known the previous month and, in fact, it operated as an inhibition to reaching a settlement. There were offers to make accounts available for inspection, but that had been declined. It is important also to bear in mind that the agreement reached was not made instantly on the conclusion of this conversation and the communication of its contents by Mr Morris to Mrs Greenfield.

    The Tribunal were entitled to take into account, in interpreting the evidence, the circumstances in which the agreement was reached that day. It seems to have taken most of the day to involve those who were necessary to conclude the agreement: Mr Wyman and the solicitors for Mr and Mrs Robinson, as well as Mrs Greenfield and Mr Morris. The agreement by which Mrs Greenfield is said by the Respondents to be bound, was only made after the visit that Mr Wyman made to Mrs Greenfield and the solicitors and was signed up with all the usual formalities on the COT3 form.

    In all those circumstances, we do not find that the Tribunal's conclusion about what was said in the telephone conversation is perverse. In our view, it was a finding of fact which they were entitled to make on the basis of all the evidence before them. It would be an unrealistic exercise in this Tribunal to find that there was perversity in the Tribunal's decision simply because their wording of the finding of fact did not correspond word for word, or near word for word, with a note of part of the evidence which they had taken from Mr Morris.

    Much of what we have said on that point provides the answer to the arguments on the alleged errors of law about actionable misrepresentations. In our view, this part of the appeal fails because there are findings of fact in which there is no error of law. If the Tribunal made a finding of fact on the representation, which they were entitled to, then they were entitled to come to the conclusions of fact which they did in paragraph 9. The crucial conclusion of fact there is that the agreement was entered into by Mrs Greenfield knowing that there were financial difficulties and taking the chance that it would be better to settle for £250 now rather than risk getting nothing at some future date. The Tribunal found in those circumstances that there was no evidence to support the contention that the agreement was induced by the actionable misrepresentation. The reason that Mrs Greenfield entered into it was not because of any specific representation that there would be bankruptcy the next day, but because of a fact which she had known for some time and which Mr Morris had known for some time, that the respondents were in financial difficulties and it was better to have something certain now than the prospect of something uncertain in the future.

    In our view, there is no legal misdirection or error in the paragraph 9 of the decision rejecting the claim of actionable misrepresentation.

    For all those reasons, we agree with Mr Quinn that the appeal fails. Mrs Greenfield cannot show that there was perversity in the findings of fact and cannot show that there was any actionable misrepresentation which induced her to settle the case. She settled the case in a manner which was binding upon her. The Tribunal were legally right in dismissing her application to set it aside.

    The appeal is dismissed and legal aid taxation of the Appellant's and Respondent's costs.

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