Johns v Solent SD Ltd.

This is an appeal against the order ofNelson J, sitting in the Employment Appeal Tribunal on 30 October 2007, when he stayed the claims of Mrs Anna Johns brought against her former employers, Solent SD Limited (“Solent”), for unfair dismissal and age discrimination. Solent appeals against that decision, contending that the claims should have been struck out rather than stayed, because they have no reasonable prospect of success. Nelson J himself gave permission for the appeal to this court.

The facts of the case are not in dispute. Mrs Johns worked for Solent for many years until she had reached the age of 65 in February 2001. She then retired. In December 2002 she returned to work for Solent part-time at the request of their operations manager. On 27 September 2006, Solent gave Mrs Johns six months’ notice of termination on the ground that it had implemented a policy of compulsory retirement at age 65. Mrs Johns requested that she be allowed to continue at work, but this was refused and she was subjected to compulsory retirement. She lodged claims at the employment tribunal, alleging that she had been unfairly dismissed and that her dismissal was unlawful, as it was based on age discrimination. Solent lodged a Respondent’s Notice, contending that its actions had been lawful and fair. It applied to strike the claims out.

The application came before an Employment Tribunal Chairman sitting at Southampton. In fact, the hearing was conducted by telephone. I will say more that in due course. On behalf of Mrs Johns it was conceded that under the present state of United Kingdom law, as enacted in section 98ZG of the Employment Rights Act 1996 and Regulation 30 of the Employment Equality (Age) Regulations 2006, her claims were bound to fail.

It is convenient at this stage to explain the content of these provisions very briefly. In November 2000, the Council of the European Union issued Directive 2000/78/EC, which established a general framework for equal treatment in employment and occupation. By Article 2 it established the principle of equal treatment, which meant that there should be no direct or indirect discrimination whatsoever on any of the grounds referred to in Article 1. One of those grounds was age. By Article 3(1) the Directive was to apply to all persons, as regards both the public and private sectors, in relation to many aspects of their employment, including by subparagraph (c) “employment and working conditions, including dismissals and pay”. Further, Article 6 provided that:

“Member States may provide that differences of treatment on grounds of age shall not constitute discrimination, if, within the context of national law, they are objectively and reasonably justified by a legitimate aim … and if the means of achieving that aim are appropriate and necessary.”

I pause to observe that this is an unusual provision in European Law, in that it leaves open the door to the justification of direct discrimination on the grounds of age, whereas in respect of discrimination on the grounds of race and sex, only indirect discrimination can be objectively justified.

In 2006, the Employment Equality (Age) Regulations were enacted in purported compliance with this Directive. They outlawed discrimination on the ground of age in the employment field. However, at Regulation 30 an escape clause provided that it would not be unlawful for an employer to dismiss a person at or above the age of 65, where the reason for dismissal was retirement. So the Regulations provided an exception to the rule of age discrimination in respect of dismissal over the age of 65 on the ground of retirement.

Sections 98ZA to ZG were inserted into the Employment Rights Act 1996 by Schedule 8 of the Regulations. Section 98 is within part of the 1996 Act which deals with the right not to be unfairly dismissed. The effect of section 98ZG is that, provided certain procedural steps are taken, it will not be unfair to dismiss an employee over the age of 65 on the ground of retirement.

That being the state of the national law at the time when this matter came before the Employment Tribunal Chairman, it was clear that Mrs Johns’ claim could not succeed. However, her representative sought to persuade the Chairman that her claims should be stayed rather than struck out because there was, pending before the European Court of Justice, a case referred to that court by Davis J, sitting in the Administrative Court, called Age Concern v Secretary of State for Business, Enterprise and Regulatory Reform C0/5485/2006, generally known as the Heyday case. In that case, Age Concern is challenging the validity of parts of the Employment Equality (Age) Regulations 2006 and, in particular, Regulation 30, on the basis that it is not compliant with Article 2 of the Directive. Mrs Johns’ argument before the chairman was that if the Heyday claim is successful and Regulation 30 is held to be invalid, her claims in the Employment Tribunal would, or might well, succeed. Therefore, they should be kept alive pending the determination of the ECJ and, presumably, the decision of the Administrative Court thereafter.

The Chairman of the Employment Tribunal rejected that contention. He considered that the Heyday claim was so likely to fail that it would not be fair to Solent to stay the proceedings for the considerable period of time which would inevitably elapse before the ECJ produced its decision. It appears that the Chairman did not have a great deal of information before him about the Heyday case: for example, he did not have the questions that had been referred by Davis J. However, we are told today by Ms Russell that it was accepted on both sides that the Heyday case posed the very question that would be crucial in Mrs Johns’ case: namely, the validity of Regulation 30.

The Chairman acceded to Solent’s submission that the Heyday case was unlikely to succeed by reference to a case in the European Court of Justice called Palacios de la Villa v Cortefiel Servicios SA, C-411/05 [2007] IRLR 989 In that case, the European Court was to consider whether a piece of Spanish legislation fell foul of Article 2 of Council Directive 2000/78/EC. At the time of the Chairman’s decision, the European Court of Justice had not yet delivered a ruling in Palacios but Advocate General Mazak had delivered an opinion favourable to the Spanish government. Counsel for Solent, Ms Russell, submitted to the Chairman that it was likely that the European Court would follow the Advocate General in Palacios and uphold the Spanish legislation as non-discriminatory and lawful. She also submitted that that would, effectively, determine the outcome of Heyday in favour of the United Kingdom government, because the similarities between the two cases were such that that was likely to follow. That argument was accepted by the Chairman, who concluded that Mrs Johns’ claims had no reasonable prospect of success; he added that it would not be fair on Solent to stay her claims.

Mrs Johns’ appeal to the Employment Appeal Tribunal was allowed. Nelson J was of the view that the Chairman had been wrong to prejudge the likely outcome of the Heyday case on the basis of the Advocate General’s opinion in Palacios. He noted that there were factual differences between the Spanish legislation considered in Palacios and the United Kingdom legislation under consideration in Heyday. Also, with the benefit of the judgment of the court in Palacios, which was available to him although not to the Chairman, it could now be seen that the reason why the Spanish government succeeded was that it had been able objectively to justify the provisions which would otherwise have been discriminatory on the grounds of age. Nelson J observed that it was not known how justification was going to be put in the Heyday case and impossible to assess its prospects of success.

Nelson J was of the view that the Chairman should have stuck to what was known, rather than to speculate about the unknown. In Nelson J’s view, the fact that the Chairman had speculated about the unknown was in itself enough to justify him in considering the question for himself. He was also of the view that the Chairman had not applied the correct legal test when considering whether to strike out the claims. In the end, Nelson J substituted his own view of the matter, which was that the claims should not be struck out but should be stayed. He noted that it was known that Heyday raised the same issue as Mrs Johns’ case: namely, the validity of Regulation 30. He observed that Davis J was clearly of the view that the claimant’s case -- that is, Age Concern’s case in Heyday -- was at least arguable and that the position as to what the outcome was going to be was not clear; otherwise, he would not have referred the questions to the European Court. He considered that if the claimant does succeed in Heyday, Mrs Johns’ claims may succeed. Putting that another way round, he was holding that if the claimant succeeds in Heyday, Mrs Johns will have reasonable prospects of success and that therefore her claims should not be struck out.

The judge considered the issues of prejudice, acknowledging that there would be some prejudice to Solent, who would have a claim outstanding against it for a substantial period of time. However, he was of the view that the issues of prejudice must be resolved in favour of staying the claims because Mrs Johns’ claims would be snuffed out if they were not stayed and there would be very real prejudice to her in that event. Accordingly, the parties having agreed that it was not appropriate that the matter should be remitted to an employment tribunal Chairman, the judge himself directed that the claims be stayed. He also granted permission to appeal to this court, noting that there are a large number of age discrimination claims pending throughout the country dependent upon the result of the Heyday case.

In the light of Nelson J’s ruling, the President of Employment Tribunals has issued a Practice Direction to the effect that all such claims should be stayed. That direction is to be reviewed in the light of the judgment of this court on this appeal; thus this appeal is not limited in importance to its effect on Mrs Johns’ claims.

In the appeal to this court, Ms Russell for Solent has submitted that the tribunal Chairman did not apply the wrong test to the issue of strike-out as Nelson J had held. When one looks at the judgment as a whole, one can see that he asked himself whether the claim had reasonable prospects of success and that was the right test. She accepted that one passage of his judgment appeared to show that he had not applied the right test; but, taken as a whole, his self-direction, she submitted, was correct. Nelson J was in doubt about that.

I for my part am content to accept that the Chairman directed himself properly as to the test, even though I might have some doubt about it. But the point is, even if he did, that does not, in my view, avail the appellant. Even if he applied the correct test, the Chairman’s conclusion was, in my view, clearly perverse because he based his reasoning on unwarranted speculation about the outcome of the Heyday case. He concluded that the claimant would almost certainly fail in Heyday and that Regulation 30 would be held to be valid; therefore Mrs Johns’ claims have no reasonable prospects of success. But in my judgment he did not have sufficient material on which to base that conclusion about Heyday.

Ms Russell has submitted that the Chairman was entitled to take account of such material as was before him. The material he had was the fact that Davis J had referred the Heyday case to the European Court; he also had the Advocate General’s opinion in Palacios. She has submitted that he was entitled to draw the analogy that he did draw from the Palacios case.

I cannot accept that. In Palacios, as should have been apparent to the Chairman, the Spanish legislation under consideration was significantly different in some important respects from the English legislation which is under consideration in Heyday. In Palacios the legislation permitted employers to retire an employee compulsorily at the age of 65 if the relevant collective agreement permitted that to be done, and if the employee had made the pension contributions necessary under the relevant pension scheme. The English legislation has no such limitations.

The passage from the Advocate General’s opinion which the Chairman relied upon did not discuss the features of the Spanish case in any detail. At paragraph 11 of his judgment, the Chairman cited paragraph 140 of the Advocate General’s opinion, which was a summary of his view:

“The principle of non-discrimination on grounds of age as laid down in Article 2(1) of Council Directive 2000/78/EC of 27 November 2000 establishing a general framework for equal treatment in employment and occupation does not preclude a national law… pursuant to which compulsory retirement clauses contained in collective agreements are lawful, where such clauses provide as sole requirements that workers must have reached normal retirement age and must have fulfilled the conditions set out in the social security legislation of the Member State concerned for entitlement to draw a retirement pension under the relevant contribution regime.”

That statement does not refer to the need for objective justification. However, when the ECJ’s decision became available the Court held, contrary to the Advocate General’s view, that the legislation was prima facie discriminatory but that, in the particular circumstances of Spanish legislation and the particular provisions of the Spanish legislation, the justifying explanation proffered by the Spanish government was acceptable. Therefore the Spanish legislation was not unlawfully discriminatory; it had been objectively justified.

It seems to me that, with the benefit of Palacios, it can now be seen that in Heyday the European Court is likely to hold that Regulation 30 will have to be objectively justified if it is to be upheld as non-discriminatory. It appears to me that Nelson J recognized that that was so. The issues of objective justification in the Heyday case are not going to be determined by the European Court, as they were in Palacios, but are going to be remitted to the national court. Indeed it is apparent from Davis J’s reference that both sides have submitted to the national court extensive evidence about the issues of objective justification. We have not seen that evidence; the Chairman of the tribunal had not seen it; Nelson J had not seen it.

It seems to me that Nelson J was right when he said that it was not appropriate for him or the Chairman -- and I would add, or indeed for this court -- to form any view about the likely outcome of the justification issue in the Heyday case. It does, however, seem to me that Nelson J was entirely justified in reaching the conclusion that, on the basis of what is known about the Heyday case, it may succeed. Ms Russell accepts that if the claimant succeeds in Heyday and Regulation 30 is struck down as unjustifiable and incompatible with the Directive, Mrs Johns’ claim will have real prospects of success; indeed, so far as I understand it, she accepts that the employers will have no defence to her claim. It follows that because Heyday might succeed, Mrs Johns’ case has reasonable prospects of success. It cannot be struck out.

Ms Russell sought to address us about the fairness of staying the claims. She submitted that Solent can properly complain about the position that they will be put into if these claims are stayed for the considerable period of time that will inevitably elapse before they are heard. It will have this claim hanging over it. There are other claims it will wish to deal with brought be other employees who may be compulsorily dismissed before matters are resolved. It complains that the result may be in the end that it may be deprived of a statutory defence to actions which it carried out in good faith believing them to be lawful. I can see the force of those complaints and I am not without sympathy for them. I note that Solent cannot complain that delay will reduce the cogency of the evidence on which it would rely; there is no factual dispute.

However, as the claims cannot be struck out and it is unfair to stay them, what can become of them? The only remaining alternative is that they should be tried now. The result would be that they would be snuffed out because the employment tribunal would have to apply Regulation 30 as it presently stands. But Regulation 30 might be struck down. Mrs Johns would be greatly prejudiced if her claims were to be tried now.

It seems to me that there really is no contest about what should happen; the balance of prejudice weighs heavily in favour of staying the claims. Accordingly, in my judgment, the appeal against Nelson J’s judgment must be dismissed.

I wish to add a few words about the Chairman’s conduct of the hearing of this strike out application over the telephone. I must say at once that the practice concerns me. I entirely accept that it may be both efficacious and appropriate for case management issues to be resolved following a hearing by telephone. However, it does not seem to me to be at all appropriate that an issue of substance, such as a strike out, should be decided after such a process. In the present case, there was reference to authority and the Chairman heard submissions as to the likely outcome of Palacios and the Heyday case. Quite apart from the practical difficulties which are likely to arise if documents cannot be handed between the parties, I do not think it is fair or satisfactory for issues of such complexity to be addressed over the telephone.

I agree. Ms Russell, who has argued her client’s case this morning with great skill, accepts that unless she can persuade us that the employment tribunal Chairman was right in finding no reasonable prospect of the claim succeeding, this appeal must fail. No issues of prejudice or discretion would arise and the proceedings, it is agreed, should then be stayed.

Like my Lady, I regard the tribunal Chairman as having erred in his finding. One cannot safely forecast what the ultimate outcome will be of the Heyday case, especially on the issue of justification for the discrimination which is inherent in Regulation 30. The present case, in effect, raises the same challenge to the lawfulness of Regulation 30.

It cannot be said, as things stand, that this claim has no reasonable prospect of success and I, too, would dismiss this appeal.

I also agree. The employment tribunal Chairman made his decision following a hearing by telephone. He knew that Heyday had been referred to the European Court of Justice. He based his decision on the Advocate General’s opinion in Palacios [2007] IRLR 989. He held at paragraph 13 that:

“the issues [that is, in the two cases] are sufficiently close in both cases for the outcome is likely to be the same.”

On the basis of that, he concluded that the claim “has only a remote chance of success”.

At the Employment Appeal Tribunal, Nelson J disagreed with that conclusion, which was a legal conclusion. He was entitled to reach the conclusions he did at paragraph 19 of his determination to which my Lady, Smith LJ, has referred. That, in my view, too, concludes the case.