The claimant brought claims of discrimination, unfair dismissal and victimisation which succeeded in part. At the remedy hearing a preliminary issue arose as to whether or not the claimant had waived privilege in relation to without prejudice settlement negotiations between the parties. The EJ ruled that she had, because she had included a reference to the £75,000 offer in settlement in the bundle. The claimant appealed. The remedy hearing then resumed and the claimant was awarded £45,000 in compensation. Central to that remedy decision was the Employment Tribunal's finding that (a) on the basis of the medical evidence, the claimant's medical condition and hence her inability to work was caused by the on-going litigation and (b) that on 11 July 2008 the respondent made a reasonable offer of settlement in the sum of £75,000 which the claimant ought then to have accepted.  By refusing that offer she failed to mitigate her loss so that no loss of earnings claim persisted beyond that date. The claimant appealed against this decision also.

The EAT dismissed the appeal concerning the without prejudice offer. The Employment Judge was entitled to accept that the (without prejudice) 'box had been opened by the claimant'. The EAT allowed the remedy judgment appeal, saying that the ET had failed to explain why it reached the conclusion that the claimant acted so unreasonably in refusing the respondent's offer that the chain of causation was thereby broken. Finally, they observed that the Tribunal appeared to be critical of the claimant's single-minded devotion to the litigation as a block to her recovery.  Absent a wholly unreasonable refusal to countenance settlement, which on the evidence was not shown in this case, the claimant was perfectly entitled to pursue her remedy for what the Employment Tribunal found was her unfair and discriminatory treatment at the hands of the respondent. 
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Appeal No. UKEAT/0498/11/DM

UKEAT/0499/11/DM

EMPLOYMENT APPEAL TRIBUNAL

FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON, EC4Y 8JX

At the Tribunal

On 14 March 2012

Judgment handed down on 3 May 2012

Before

HIS HONOUR JUDGE PETER CLARK, MS V BRANNEY, MR G LEWIS

MRS M KONCZAK (APPELLANT)

BAE SYSTEMS (OPERATIONS) LTD (RESPONDENT)

Transcript of Proceedings

JUDGMENT

For the Appellant
MR D PANESAR (of Counsel)

Bar Pro Bono Unit

For the Respondent
MR PAUL GILROY (One of Her Majesty's Counsel)

Instructed by:
Eversheds LLP
Eversheds House
70 Great Bridgewater Street
Manchester
M1 5ES

PRACTICE AND PROCEDURE

Compromise

Admissibility of evidence

UNFAIR DISMISSAL – Mitigation of loss

RACE DISCRIMINATION – Other losses

Waiver of without prejudice privilege. Whether Claimant's loss was terminated by her refusal to accept an offer which the Employment Tribunal considered was reasonable.

Held: privilege was waived, but the Employment Tribunal's finding on mitigation of loss was impermissible. Remedy issue remitted to fresh Employment Tribunal.

1. This case has been proceeding in the Manchester Employment Tribunal. The parties are Mrs Konczak, Claimant, and BAE Systems (Operations) Ltd, Respondent.

1. The Claimant was employed by the Respondent as a secretary from about November 1998 until her dismissal effective on 23 July 2007. She presented three complaints to the Employment Tribunal, alleging sex discrimination, disability discrimination and unfair dismissal. The claims were resisted and came on for hearing before an employment tribunal chaired by Employment Judge Cook, sitting with Mr J Capuano and Mrs S J Ensell on 14 July 2008. Until 11 July the Claimant had been represented by solicitors, Thompsons, but they withdrew on 11 July. Consequently the Claimant represented herself during the 10 day hearing commencing on 14 July. Mr Paul Gilroy QC, instructed by Ms Choudry of Eversheds LLP, solicitors, has represented the Respondent throughout.

1. Following 4 days deliberations in private the Employment Tribunal promulgated their Judgment on liability only (the Liability Judgment ("LJ")) on 8 October 2008. The Claimant succeeded in part. The Employment Tribunal found one act of direct sex discrimination was made out; her complaints of disability related dismissal, substantive unfair dismissal and victimisation by way of victimisation under the Sex Discrimination Act 1975 and failure to make reasonable adjustments under the Disability Discrimination Act 1995 also succeeded. The question of remedy was adjourned.

1. The remedy hearing commenced on 1 April 2011. Due to the illness of one member of the Employment Tribunal Mrs P Clark was appointed to replace Mr Capuano.

1. A preliminary issue arose as to whether or not the Claimant had waived privilege in relation to without prejudice settlement negotiations between the parties. Sensibly, in our view, the Cook Tribunal directed that issue to be heard and determined by a different Employment Judge. The matter came before Employment Judge Howard, sitting alone on 5-6 April 2011. For the purposes of the remedy hearing the Claimant had secured the services of experienced counsel, Mr Richard O'Dair. Having considered legal argument Employment Judge Howard ruled, by a Judgment with Reasons dated 24 May 2011, that the Claimant had waived privilege and that reference could be made, at the remedy hearing before the Cook Employment Tribunal, to such negotiations. Against that ruling the Claimant now appeals (EAT/0498/11/DM. 'The Privilege Appeal'.)

1. The remedy hearing then resumed before the Cook Employment Tribunal. By a Judgment with Reasons dated 20 June 2011 (the Remedy Judgment ("RJ")) the Cook Employment Tribunal awarded compensation totalling approximately £45,000. Central to the remedy decision was the Employment Tribunal's finding that (a) on the basis of the medical evidence, her medical condition and hence her inability to work was caused by the on-going litigation and (b) that on 11 July 2008 the Respondent made a reasonable offer of settlement in the sum of £75,000 which the Claimant ought then to have accepted. By refusing that offer she failed to mitigate her loss so that no loss of earnings claim persisted beyond that date.

1. The Claimant's second appeal before us (the remedy appeal, EAT/0499/11/DM) is brought against the remedy Judgment.

1. It was common ground between the parties that settlement negotiations which had taken place between them were properly to be regarded as 'without prejudice'. The question for Employment Judge Howard was whether the Claimant had waived privilege such that the Respondent could refer to those negotiations at the remedy hearing before the Cook Tribunal.

1. By way of background it was the Claimant's case that the Respondent's medical expert, Dr Jarman, had behaved unprofessionally in reporting on her to the Employment Tribunal, an allegation which the Cook Tribunal rejected (RJ, para. 110). Indeed, the Claimant wished to adduce before us fresh evidence in the form of a letter from the General Medical Council dated 5 September 2011 indicating that no further action would be taken on her complaint against Dr Jarman. We declined to admit that letter in evidence.

1. The waiver issue below arose in this way. On 1 March 2010 Ms Choudry wrote to the Claimant, then representing herself, enclosing a copy of Dr Jarman's report, with attachments, pointing out that references in the report and the Claimant's reply to the questionnaire attached to that report to without prejudice offers by the Respondent, had been blanked out by Ms Choudry.

1. Despite the need to preserve confidentiality having been flagged up by Ms Choudry, the Claimant chose to include in what was described as a disagreed bundle of documents, lodged with the Employment Tribunal for the remedy hearing, her note of the meeting with Dr Jarman on 23 October 2009 which included a reference to the £75,000 offer in settlement made by the Respondent in July 2008.

1. It was the Claimant's position that that reference had been inadvertently included in the Tribunal bundle by mistake and that there had been no deliberate waiver of privilege by her. The Judge rejected that contention (Reasons, para. 18). Further, she held, applying the test of the reasonable solicitor, that it was not evident to the Respondent's solicitor that inclusion of the reference to the £75,000 offer was an obvious mistake on the part of the Claimant. Accordingly she held that the whole of the course of negotiations between the parties was admissible, subject to relevance, before the Cook Tribunal.

1. In challenging that ruling Mr Panesar, now appearing pro bono on behalf of the Claimant, has developed the Claimant's grounds of appeal settled by Mr O'Dair.

1. First, it is said that Employment Judge Howard was wrong to conclude that, in placing the full note of her meeting with Dr Jarman, including the reference to the £75,000 offer by the Respondent, the Claimant had thereby waived privilege. We disagree. It seems to us that the purpose of seeking to put that note before the Cook Tribunal at the remedy hearing was to advance her case that Dr Jarman had behaved unprofessionally in his dealings with the Claimant. To that end, his reference to the Respondent's offer formed part of her case.

1. To that extent, in seeking to rely on Dr Jarman's comments on the Respondent's offer, the Claimant deliberately waived the privilege which attached to that offer. The Respondent was entitled to accept that waiver and to rely on the whole of the negotiations insofar as they were relevant to the question of remedy. We think that approach is supported by the Court of Appeal decision in Somatra Ltd v Sinclair Roche & Temperley [2000] 1 WLR 2453, to which Employment Judge Howard was referred.

1. Mr Panesar next submits that remedial action was possible following inadvertent disclosure by the Claimant, relying on the Court of Appeal decision in Great Atlantic Insurance v Home Insurance [1981] 1 WLR 529-537H per Templeman LJ. The difficulty with that submission is that the Judge here found that the disclosure was not a mistake. That was a conclusion which she was entitled to reach and with which we shall not interfere.

1. Thirdly he submits that Employment Judge Howard was wrong (Reasons, para. 18) to place the burden of proof on the Claimant to show that the disclosure was a mistake. Again, we are unable to accept that submission. At the hearing before Employment Judge Howard both sides were represented by counsel; it was agreed (see para. 4) that the application would proceed on submissions only; no oral evidence was called. In our judgment it was open to the Judge to find, on the material before her, that the disclosure of the Claimant's full note of the meeting with Dr Jarman was deliberate rather than a mistake, particularly when the point had been clearly flagged up by Ms Choudry when she sent the redacted report of Dr Jarman to the Claimant on 1 March 2010. We repeat, the Claimant was represented by counsel for the purposes of the remedy hearing.

1. There was some discussion before us as to whether the Cook Tribunal had seen the Jarman note prior to the hearing before Employment Judge Howard. As Mr Gilroy points out, the Claimant specifically referred to that note at para. 83 of her witness statement for the remedy hearing and at para. 113 RJ the Cook Tribunal refer to the application made on the Claimant's behalf on the first day of hearing (1 April 2011) that all/part of the transcript of interview between the Claimant and Dr Jarman be admitted in evidence. Thus, whether or not the Cook Employment Tribunal actually read that note and in particular the reference to the Respondent's offer, it is clear to us that the Claimant wished to deploy the whole of that note in support of her complaint directed at the probity of Dr Jarman.

1. In these circumstances we accept the submission of Mr Gilroy that Employment Judge Howard was entitled to accept that the (without prejudice) 'box had been opened by the Claimant'. We shall dismiss this appeal.

1. Here, the principal challenge on behalf of the Claimant is to the Cook Tribunal's finding that her pecuniary loss arising from her discriminatory and unfair dismissal ceased upon her refusal of the Respondent's offer of £75,000 in settlement of her claims on 11 July 2008. At RJ para. 102 the Employment Tribunal find that that offer was reasonable and should have been accepted by the Claimant. Earlier (paras. 81-89) the Employment Tribunal referred to the opinion of Dr Craig, the Claimant's medical expert. Dr Craig was of the opinion (see para. 83) that 'following complete resolution of the case….the Claimant should make a significant recovery in perhaps 2-3 years'. Having considered the medical evidence the Employment Tribunal concluded (para. 89) that the Respondent's liability should end at the point at which they made and the Claimant refused a reasonable offer, i.e. 11 July 2008.

1. On this aspect of the case we prefer the submissions of Mr Panesar to those of Mr Gilroy. The Cook Tribunal does not explain why it reached the conclusion that the Claimant acted so unreasonably in refusing the Respondent's offer on 11 July 2008 that the chain of causation was thereby broken; see the high hurdle formulated by the Court of Appeal in the personal injury case of McKew v Holland [1969] 3 AER 1621. That offer must be seen in context, given that, following Employment Judge Howard's ruling which we have upheld, the whole of the settlement negotiations were in evidence and were summarised at para. 3 of Mr Gilroy's closing submissions below. Indeed, at that time the Claimant put a counter-offer of £85,000 which was not then accepted by the Respondent. Further negotiations between the parties later culminated in the Respondent's highest offer of £200,000 during the week prior to the remedy hearing commencing on 1 April 2011. Against the background of a schedule of loss (on a full loss basis) settled, we infer by Mr O'Dair, for the purposes of that hearing totalling £489,927, it seems to us to be legally impermissible for any reasonable Employment Tribunal to find that refusal of the offer of £75,000 on 11 July 2008 was so unreasonable as to terminate the loss otherwise flowing from the Respondent's tortious act of dismissal. Further, we cannot understand why, even if it was unreasonable not to accept the July 2008 offer, termination of the proceedings as at that date would have brought about an instant recovery, given the prognosis of Dr Craig referred to at RJ para. 83. Indeed, they did not feel it necessary to consider that question (para. 105).

1. Having erroneously determined that the cut off date for pecuniary loss was 11 July 2008 the Cook Employment Tribunal also found it unnecessary to determine whether other life events in 2010 would have ended the Respondent's liability for continuing loss (para. 104).

1. Mr Panesar also submits that the Cook Tribunal were wrong to find that the Claimant would have terminated her employment with the Respondent in order to become a teacher of ballet. Having read RJ paras. 71-73 it is far from clear to us what, if any finding the Employment Tribunal in fact made as to if and when the Claimant would voluntarily have resigned her employment to take up that calling.

1. Mr Panesar also raises, by way of this appeal, the question of pension loss. We note that, other than apparently favouring the simplified, rather than substantial loss approach (para. 75), the Employment Tribunal concluded that in any event the Claimant would have left the Respondent's employment voluntarily some three years after her dismissal on 23 July 2007. It was left to the parties to calculate pension loss on that basis, although that would seem to be inconsistent with their primary finding that pecuniary loss ended on 11 July 2008 by reason of her refusal of the Respondent's settlement offer on that date.

1. Finally, we simply observe that at RJ paras. 106-107 the Cook Tribunal appear to be critical of the Claimant's single-minded devotion to this litigation as a block to her recovery. Absent a wholly unreasonable refusal to countenance settlement, which on the evidence is not shown in this case, the Claimant was perfectly entitled to pursue her remedy for what the Employment Tribunal found was her unfair and discriminatory treatment at the hands of the Respondent. It is well documented in ordinary personal injury litigation that the fact of the litigation may contribute to the prolongation and possible exacerbation of the Claimant's medical condition. That is what appears to have happened, on the whole of the medical evidence, in this case. Provided the condition is genuine the Respondent must take its victim as it finds her.

1. For these reasons we shall allow the Claimant's appeal against the remedy Judgment.

1. At the end of our hearing we reserved judgment and did not hear counsel on disposal if we allowed either or both of these appeals. In the event we have dismissed the privilege appeal and allowed the remedy appeal.

1. Following the hearing, by letter dated 16 March 2012, apparently copied to Mr Panesar, the Respondent's solicitors wrote to the EAT, maintaining their position that the appeals should fail, but if not, submitted that the issue of remedy be remitted to the Cook Tribunal which was seized of the matter, rather than a fresh panel. We have not received a response from Mr Panesar but do not take his silence as acquiescence to that course. On the contrary, we shall treat this as a contested issue and exercise our own discretion on the appropriate form of disposal.

1. We bear in mind the guidance of Burton P in Sinclair Roche & Temperley v Heard [2004] IRLR 763, para. 46. In our judgment the Cook Tribunal's erroneous determination that the appropriate cut off for pecuniary loss was the Claimant's refusal of the Respondent's offer in settlement on 11 July 2008 was so fundamental to their reasoning on this part of the case that it would be inappropriate to remit the matter to that Tribunal (itself having had an enforced change of personnel following the liability hearing). Accordingly we shall remit the issue of remedy to a fresh Employment Tribunal on the following basis:

(1) The liability Judgment stands.

(2) Paras. 2, 3 and 4 of the Cook Employment Tribunal remedy Judgment also stand.

(3) The first sentence of para. 1 of that Judgment is set aside. The calculation of pecuniary loss, both loss of earnings and pension loss is at large and will arise for determination by the fresh Tribunal. The second sentence of para. 1 of that Judgment is not the subject of appeal and remains.

(4) For the avoidance of doubt, although we are satisfied that the Claimant did waive privilege in relation to the settlement negotiations between the parties, we direct that the new Tribunal takes no account of those negotiations in its determination of pecuniary loss. The fact of those negotiations is simply irrelevant to the fresh determination of pecuniary loss.

(5) It follows that it will be necessary for the next Tribunal to hear medical as well as lay evidence in order to determine the appropriate period of loss arising from the Respondent's tortious act of dismissal and act of sex discrimination.

(6) Nothing we have said in this Judgment is designed to deter the parties from resuming negotiations towards a realistic settlement of this dispute. Any such fresh negotiations may be categorised as being without prejudice if that is their wish.