The “without prejudice” rule provides that statements that are made as part of genuine negotiations to settle a dispute cannot be used in subsequent litigation. In Cole v Elders’ Voice, however, the Employment Appeal Tribunal (EAT) held that the claimant could rely on “without prejudice” material to argue that the terms of a COT3 settlement agreement had been misrepresented to her.

 

Basic facts

 

Ms Cole was employed by Sanctuary Housing Association from 7 November 2011 to 31 August 2017, when her job transferred to Elders Voice (EV) under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (known as TUPE).

 

On 2 October 2017, she submitted an ET1 claim form for unfair dismissal and race discrimination against Sanctuary along with an early conciliation ACAS certificate, which named Sanctuary as her employer.

 

After being made redundant by EV, she signed a COT3 settlement agreement with the company in December 2017 which stated that the payments it had made to her were “in full and final settlement” of “all and any claims” against EV or any of its associated companies. The agreement stated that “For the avoidance of doubt, Sanctuary Group is not an associated company of the Employer.”

 

In April 2018, Ms Cole added EV as the second respondent to her claim. EV said that the tribunal had no jurisdiction to hear it as it had already been settled by the COT3. Ms Cole argued that the COT3 was void for misrepresentation.

 

Tribunal decision

 

At the hearing to decide whether the tribunal had jurisdiction to hear the claim despite the COT3, Ms Cole (who represented herself) emphasised the importance of the last sentence of clause 3(b) of the agreement which clearly stated that Sanctuary was not an associated company of EV.

 

To substantiate her argument, she asked the employment judge to look at the “misrepresentative statements” which were in the “without prejudice” material in the bundle of documents before him. EV, however, challenged this request saying that the judge could not “go behind” the COT3 to look at the material. Holding that the agreement was “all encompassing”, the judge dismissed Ms Cole’s claim.

 

She appealed arguing that the judge was wrong to hold that the COT3 was valid, given the misrepresentation by EV. The judge was also wrong not to look at the “without prejudice” material before coming to his decision.

 

EAT decision

 

Although without prejudice material is not usually admissible, the following exceptions were relevant to Ms Cole’s appeal:

 

  • Cases in which an agreement apparently concluded between the parties during the negotiations should be set aside on the ground of misrepresentation;
  • Cases in which the without prejudice material gave rise to an estoppel (which prevents someone from arguing something that they had previously agreed); and
  • Cases in which the without prejudice material was relied on as part of the factual matrix or surrounding circumstances for the purposes of ascertaining the true construction of the agreement.

 

Upholding the appeal, the EAT held that the solicitors acting for EV had made a number of misrepresentations. For instance, although it was factually correct for them to have told Ms Cole that Sanctuary and EV were not associated companies, they were wrong to represent EV as having no “liability in terms of any claims that [Ms Cole] may have that occurred before 1st September 2017”, given that liability had passed to EV under TUPE. Likewise, it was also a misrepresentation for the solicitors to have stated that EV could not comment on Sanctuary’s liability.

 

As an exception to the “without prejudice” rule, the tribunal should have allowed Ms Cole to rely on the material once she had raised the issue of misrepresentation. The judge was therefore wrong to hold that he did not have jurisdiction to hear Ms Cole’s substantive claims.

 

He was also wrong to find that she could not go behind the COT3 or rely on “without prejudice” or other evidence to show that it was not valid as a COT3 can be challenged on the same basis as any other agreement. Further, as a litigant in person with no legal qualifications, the tribunal should have taken particular care to make sure that what Ms Cole was saying was heard, understood and acted upon.