Hostage to fortune? COT3 drafting following the decision in Ajaz v Homerton

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Introduction

The case of Ajaz v Homerton [2023] EAT 142 is a cautionary tale in the effect of signing COT3 agreements where ‘issues’, as well as ‘claims’, are the subject of settlement. In this article, Imogen Brown examines the EAT’s recent judgment and, importantly, the consequences for practitioners in advising their clients of a COT3’s effects.

The facts

The facts of the case are simple. In 2017, the claimant brought a claim against her employer, alleging that she had been subjected to detriments as a result of making protected disclosures under sections 43B and 47B of the Employment Rights Act 1996 (‘ERA 1996’) The claim was settled by way of COT3.

Clauses 4, 8 and 10 of the COT3 read as follows:

“4. The Claimant undertakes and agrees […] that she will not reactivate by any process whatsoever the issues/complaints in the Proceedings or issue any further and/or new claim or claims of any nature against the Respondent or any of its current or former officers or employees in any forum arising from or in relation the issues/complaints in the Proceedings or her employment to the date of this Agreement.

8. […] The terms of this Agreement are without any admission of liability and are accepted by the Claimant in full and final settlement of the Proceedings and any other claims anywhere in the world she may have and howsoever arising in connection with her employment up to the date of this Agreement

10. For the avoidance of doubt, nothing in this Agreement shall prejudice any rights that the Claimant has or may have under the Public Interest Disclosure Act 1998 and/or any obligations that the Claimant has or may have to raise concerns […]”

In 2021, the claimant brought another claim. She alleged that she had been subjected to further detriments which post-dated the 2017 COT3. However, she relied on the same protected disclosures as settled in the 2017 COT3. The respondent sought to strike out the claimant’s claim on the ground (among others) that it was an abuse of process under r.37 of the Employment Tribunal Rules of Procedure.

The claimant contended that the 2017 COT3 did not operate to settle her 2021 claim.  The COT3 only settled issues ‘up to the date of this Agreement’ (clause 8), and the claimant’s ‘rights […] under the Public Interest Disclosure Act 1998’ (clause 10) reserved her right not to be subjected to any detriment relating to the existing protected disclosures.

The respondent disagreed: the claimant had agreed to settle ‘the issues […] in the Proceedings’ (clause 4), which included the issue of whether she had made a protected disclosure under s.43B ERA. Clause 10 simply preserved the claimant’s right to make future disclosures, as required by law and/or her professional obligations. 

The employment tribunal found in the respondent’s favour. Among other things, Employment Judge Elgot found that Clauses 4, 8, and 10, operated conjunctively to prevent the claimant’s current claim: “the disclosures and the question of whether they qualify for protection are an integral part of the first claim which has been 'ended’ and settled by the COT3.  It is not sufficient that the [present] claims simply post-date the COT3” (see [25] of the ET’s judgment).

EAT Judgment

There were four grounds of appeal advanced before the EAT, one of which (concerning the ambit of Rule 52 of the ET Rules) the claimant succeeded on. However, for the purposes of this article, ground (2) is of most importance: did the wording of the 2017 COT3 prevent the claimant from bringing any future claims based on the same protected disclosures, even where the detriments post-dated the COT3? 

For His Honour Judge Keith, the answer was resoundingly “yes”. His reasoning can be sequentially distilled:

1.     In Clause 4, the claimant had undertaken to “not reactivate by any process whatsoever the issues/complaints in the Proceedings”. One of the issues “in the proceedings” was plainly and unambiguously whether the claimant had made a protected disclosure.

2.     Clause 8 said that it applied to the proceedings “up to the date of this Agreement”. However, one of the matters in issue before the date of the agreement was whether the claimant had made a protected disclosure.

3.     Clause 10 simply made provision for the claimant to raise future concerns. It did not preserve the claimant’s right to bring a claim for further detriments resulting from the same protected disclosures settled in the COT3.

4.     Therefore, the claimant was barred from bringing another claim based on the same protected disclosures settled in the 2017 COT3. The employment judge below was right to strike out the claim as an abuse of process.

Analysis

The effect of Ajaz is unquestionably wide. Where it is agreed that the COT3 settles ‘issues’ in the present proceedings, individual ‘ingredients’ of the presently settled claim cannot be reopened without being an abuse of process (see EAT judgment at [64]).

Thus, the Ajaz reasoning could potentially apply to any claim where there are disjunctive ‘ingredients’ that arise at separate points in time. For example, the following circumstances may potentially be caught by His Honour Judge Keith’s reasoning:

·       Victimisation claims where the protected acts are settled via COT3 and the claimant is subsequently exposed to further detriments;

·       Discrimination arising from disability claims, where one of the ‘issues’ settled is the ‘thing’ that arose in consequence of the claimant’s disability, and the claimant is subsequently subjected to further unfavourable based on that exact same ‘thing’ (although, note, this may not be the case if the ‘thing’ has changed or shifted since the issue was settled, for example if the Claimant continued to be absent from work since the COT3 was signed, or the Claimant relies on the ‘thing’ at a later point in time);

·       Reasonable adjustment claims where one of the issues previously settled is substantial disadvantage arising from a specific PCP (although, as above, this may not be the case if the disadvantage changes post-COT3).

Theoretically, the Ajaz ratio could extend even further. What about employment status? Jurisdiction? Or any other preliminary issue? Could these be ‘reopened’ in subsequent proceedings?  At the time of writing, it is difficult to tell.

Zooming out: the COT3 drafter’s toolkit

Given the ambiguities in the COT3 wording used in Ajaz, the EAT judgment sits somewhat uncomfortably alongside previous authorities, which frequently stress the need for waiver clauses to have unquestionably clear drafting to take effect:

·       Livingstone v Hepworth Refractories Ltd [1992] ICR 287, EAT at [12]: where a COT3 seeks to limit a claimant’s right to bring claims under (what is now) the Equality Act 2010, there must be express words to that effect. 

·       Bank of Credit and Commerce International SA v Ali and ors [2001] ICR 337, HL at [9]: it is possible for parties to surrender “claims which not on the facts known to the parties have been imagined”, so long as the contractual language is clear. See also Royal National Orthopaedic Hospital Trust v Howard [2002] IRLR 849, EAT at [9]; and McLean v TLC Marketing plc and ors EAT 0429/08.

·       Department for Work and Pensions v Brindley EAT 0123/16 at [26]: a COT3 that waived “all other relevant claims arising from the facts of the proceedings up to and including the date [of] this agreement” would only preclude the claimant from bringing a future claim that arose from the specific factual matrix of the settled proceedings.

·       Arvunescu v Quick Release (Automotive) Ltd [2023] ICR 271, CA: The COT3 in this recent Court of Appeal case was drafted in the broadest possible terms, covering “all or any costs, claims, expenses or rights of action of any kind whatsoever, wheresoever and howsoever arising under common law, statute or otherwise […] which the claimant has or may have against the respondent or against any employee, agent or officer of the respondent arising directly or indirectly out of or in connection with the claimant's employment with the respondent, its termination or otherwise. This paragraph applies to a claim even though the claimant may be unaware at the date of this agreement of the circumstances which might give rise to it or the legal basis for such a claim”. Unsurprisingly, it was held that the claimant’s subsequent claim against the respondent was covered by the COT3. This was so even though it was not a claim “arising […] out of […] the claimant’s employment”, because it was an allegation of aiding a contravention under s.112 EqA. On the facts, such a claim was still “indirectly […] in connection” with his previous employment with the respondent.

Avoiding future issues: how can practitioners avoid Ajaz’s bite?

There are three ways for practitioners to avoid Ajaz’s consequences.

The first, and most obvious, is to draft COT3s differently. The fatality in the Ajaz claimant’s COT3 was the use of the word ‘issues’ in addition to the word ‘complaints’ (see [64] and [66] EAT judgment). Advisers should therefore be extremely careful where they are settling the issues of a claim, in addition to the claims themselves. Such wording is wide enough to settle claims that the claimant could not possibly be aware of at the date of signing the agreement (EAT judgment at [65]).

The second way around Ajaz is to settle proceedings by way of settlement agreement instead of by COT3. This route often takes longer and requires the advice of a qualified adviser, which makes it less preferable for practitioners. However, s.203(3)(b) of the Employment Rights Act 1996 necessitates that compromise agreements must relate to the “particular proceedings”. Consequently, if a settlement agreement were used instead, the issue in Ajaz would not arise, as alluded to by His Honour Judge Keith (see [59] to [61] of the EAT judgment).

Third, claimants should be advised in detail about what they are giving up when they sign a COT3 containing the Ajaz clauses. In the writer’s view, the Ajaz clauses present a highly unfavourable settlement for claimants who remain in employment with the respondent. Indeed, the 2017 COT3 essentially gave the respondents in Ajaz carte blanche to subject the claimant to further detriments on the ground of previous protected disclosures. Conversely, of course, the Ajaz clauses are a highly effective means by which respondents can protect themselves against future claims from a claimant who remains employed. This might be a sticking point for practitioners in the future.  

Conclusion

Under the immediate pressures of litigation, knotty points of COT3 drafting are easily overlooked. Ajaz warns advisers to think carefully about drafting (or agreeing to) clauses which are potentially wide in interpretative scope and application. Despite previous authorities suggesting the contrary, ambiguous clauses regarding waiver of claims will not necessarily be interpreted in favour of the employee.

Agreeing to settle all ‘issues’ in a claim severely restricts a claimant’s future rights against their employer. This may be of little consequence where the employment will be terminated, but if the employee remains, there is the possibility of becoming hostage to fortune. Or, more accurately, hostage to an unfortunately worded COT3.