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Employment Law Cases
Settlement agreements and misrepresentation
Cole v Elders’ Voice
Where COT3s or settlements are concerned, the protection afforded by the ‘without prejudice’ rule may fall away where there is an allegation of misrepresentation.
To avoid a claim proceeding to a tribunal hearing, parties will frequently negotiate a settlement via ACAS under which the employer agrees to pay a sum of money in full and final settlement of any claims the employee may have and the employee agrees to waive his or her right to bring any such claims, this is recorded in a COT3 document, which is equivalent to a settlement agreement. In the case below, the employee wanted to challenge the validity of the COT3 agreement she’d entered into and the issue was whether she could refer to the ‘without prejudice’ negotiations.
Mrs Coles was TUPE transferred from Sanctuary Housing Association (Sanctuary) to Elders’ Voice (EV). Shortly afterwards she was made redundant and claimed unfair dismissal and race discrimination against Sanctuary. She then added an unfair dismissal claim against EV. Settlement negotiations were started by EV’s representatives. A COT3 settlement agreement was signed in which EV was named as the employer and it was stated that Sanctuary was not an ‘associated company’ of EV. Mrs Coles then tried to continue her claims against Sanctuary. There was a preliminary hearing to determine the issue of whether the tribunal had jurisdiction to hear the claims against Sanctuary notwithstanding the COT3. Mrs Coles tried to rely on without prejudice material to show that the COT3 should be set aside due to misrepresentations which she alleged had been made by EV’s representatives (essentially to the effect that signing the COT3 would not prevent her continuing her action against Sanctuary). A tribunal refused to allow her to rely on the without prejudice material and dismissed her claim. She appealed.
The appeal was allowed.
Once Mrs Coles (who was unrepresented in the tribunal and EAT) had raised misrepresentation, the without prejudice exceptions came into play. This meant that she should have been allowed to refer the tribunal to the without prejudice material, as she had requested. The EAT held that a COT3 agreement can be challenged on the same basis as any other agreement and, as such, the tribunal could investigate the circumstances in which it is alleged that a COT3 is liable to be avoided. Misrepresentation can form the basis on which a tribunal can set aside a COT3. Mrs Coles’ claim was remitted for a rehearing.
Link to judgment: https://www.bailii.org/uk/cases/UKEAT/2020/0251_19_2611.html
This case confirms the ability to overturn a COT3 on the same grounds as other agreement - previous cases have involved settlement agreements. It is a useful reminder that ‘without prejudice’ cannot be used as a cloak to hide behind to cover up wrongdoing. Although many employment law cases focus on the fact that it cannot be used to cover up discrimination, it extends much further than this and there are other exceptions to the protection offered, including misrepresentation, fraud, undue influence, estoppel and where the without prejudice material is relied on as part of the factual matrix or surrounding circumstances for the purposes of ascertaining the true construction of the agreement.