The claimant had been dismissed from his job at a nightclub and claimed discrimination on grounds of sexual orientation. His schedule of loss claimed c£40,000 but was awarded a total of c£8,000 for unfair dismissal and injury to feelings.  A claim for aggravated damages was rejected.

In this appeal, counsel for the claimant submitted that the remedy judgment had re-tried issues of liability already determined by the default judgment. HHJ Clark reviews rule 8 of the ET Rules and the CPR case of Lunnun, the principles of which he found apply to rule 8 namely

"it was not open to the defendants to challenge allegations in the statement of claim that went to their liability determined by the default Judgment.  However, issues of causation (what loss was caused by the defendants' breach of duty) and the assessment of that loss were open to challenge on the assessment of damages"

He then notes examples in the remedy judgment where the judge had limited the extent of the tortious liability based on her earlier findings rather than the default judgment. Accordingly the damages for injury to feelings were probably underestimated so the award was set aside and remitted to another judge.

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Appeal No. UKEAT/0177/11/DA

EMPLOYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 7 October 2011

Before

HIS HONOUR JUDGE PETER CLARK (SITTING ALONE)

MR K EATON (APPELLANT)

MESSRS SPENCER, COX, DA VINCI & CONROY T/A WIGGLES EXPERIENCE (A FIRM) (RESPONDENTS)

Transcript of Proceedings

JUDGMENT

**APPEARANCES**

For the Appellant
MRS SARAH ENGLAND (Solicitor)

Gales Solicitors
512 Wimborne Road
Winton
Bournemouth
Dorset
BH9 2ET

For the Respondents
Debarred

**SUMMARY**

PRACTICE AND PROCEDURE – Striking-out/dismissal

Default Judgment entered on liability in default of a response with remedy to be assessed. At remedy hearing Employment Judge made findings on liability issues determined by default judgment and assessed compensation on that basis.

Appellant's appeal allowed; remedy issue remitted for re-hearing before a different Employment Judge.

**HIS HONOUR JUDGE PETER CLARK****Introduction**

1. The question in this appeal is what is the effect of a default Judgment entered under rule 8 of the Employment Tribunal (ET) procedure rules (see schedule 1, paragraph 8 to the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004).

**Background**

1. The Claimant, Karl Eaton, commenced employment in April 2007 at a nightclub called Bent. He is homosexual; as the name suggests, the club was then promoted as a venue for the gay community. Many of the staff were also homosexual. Then the club changed hands in about September or October 2008. By this time the Claimant had been promoted from barman to Assistant Manager. His employment transferred under the provisions of the Transfer of Undertakings (Protection of Employment) Regulations 2006. The new owners, the four named Respondents trading as Wiggles Experience, wished to rebrand the club as a heterosexual venue. The individual Respondent who had day to day management of the club was Mr Da Vinci.

1. On 12 December 2008 the Claimant was dismissed. He lodged a claim form ET1 at the Southampton Employment Tribunal on 22 February 2009. Attached to the form were detailed Particulars of Claim settled by his solicitor, Mrs England, then Miss Courtney. He complains of both direct and indirect discrimination, victimisation and harassment on grounds of his sexual orientation contrary to the Equality Act (Sexual Orientation) Regulations 2003, that his dismissal was both an act of discrimination and on those grounds and unfair contrary to sections 98, 98A and 103A of the Employment Rights Act 1996, and further claimed in respect of outstanding holiday pay, pay in lieu of notice and other wages said to be due. The Respondents did not enter a response to the claim in time or at all, so on 17 December 2009 Employment Judge Cowling entered a default Judgment in these terms:

"1. The claim succeeds and the Claimant is entitled to judgment in default of a response under Rule 8 of the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004.

2. The Claim will be listed for a hearing to determine remedy."

1. The remedy hearing came on before Employment Judge Wright on 30 July 2010. The Claimant attended, represented by Mrs England. For the purposes of that hearing he had made a witness statement, and a schedule of loss totalling just over £40,000 was included in the hearing bundle. He gave oral evidence before the Employment Judge and was questioned by her. The Respondents did not attend and were not represented. The Judge took time for consideration and her reserved Judgment with Reasons was promulgated on 16 September 2010. She awarded compensation totalling £5,328.36 in respect of unfair dismissal and £2,700 for injury to feelings in the discrimination claims. A claim for aggravated damages in those claims was rejected.

1. Against the level of compensation awarded in the discrimination claims the Claimant appealed. The appeal was initially rejected under EAT rule 3(7) on the paper sift by HHJ Birtles, but permitted to proceed to this full hearing by Bean J following a rule 3(10) hearing. The Respondents have consistently failed to take part in the proceedings and were formally debarred by an order dated 24 June 2011.

**Default Judgments**

1. The scheme of rule 8 of the ET Rules presently provides among other things that where a Respondent fails to present a response in form ET3 within the relevant time limit, 28 days unless extended (see rule 4(1) and (4)), the Employment Judge shall issue a default Judgment determining liability only or liability and remedy. Prior to amendment to the rule taking effect on 6 April 2009 the power to enter a default Judgment in these circumstances was discretionary not mandatory. The old rule applied in the present case, but since Employment Judge Cowling exercised his discretion to enter a default Judgment on liability only, that change in the rule does not seem to me to be material here.

1. A respondent may apply to have a default Judgment reviewed under rule 33 (see rule 8(5)), but no such application was made in this case. The effect of a default Judgment is to severely restrict the part that a respondent in default may play in the future proceedings by virtue of rule 9. That limitation has to some extent been softened following the EAT decision in D&H Travel and Anor v Foster [2006] ICR 1537, Elias P (as he then was) and members, where a debarred respondent wishes to take part in and contest remedy at the remedy hearing. However, the point does not arise here, the Respondents having, as I have said, consistently failed to engage with the process.

1. So much is clear. The real question is what is meant by a Judgment on liability, and what precisely is determined by the rule 8 default Judgment. I am not aware of any authority in this jurisdiction on the point, and none has been referred to me. However, Mrs England has drawn my attention to the Court of Appeal Judgment in Lunnun v Singh and Ors [1999] CPLR 587, decided on the former Rules of the Supreme Court (RSC), Order 13, Rule 9. I see that the case is referred to in the 2011 White Book in the notes to part 12 of the CPR, "Default Judgment"; I have been provided with a transcript of the court's Judgment. In Lunnun the claimant sought relief in the High Court for damage to his property caused by an escape of water and sewage from the defendants' neighbouring property. A default Judgment was obtained with damages to be assessed. The question for the Court of Appeal was to what extent could the defendants challenge the claimant's case at the assessment hearing. The effect of their Lordships' Judgment was that it was not open to the defendants to challenge allegations in the statement of claim that went to their liability determined by the default Judgment. However, issues of causation (what loss was caused by the defendants' breach of duty) and the assessment of that loss were open to challenge on the assessment of damages. In my judgement, although the CPR does not apply directly to Employment Tribunals (see Governing Body of St Albans Girls' School and Anor v Neary, similar principles apply to the interpretation of rule 8 default Judgments.

**The appeal**

1. The principal complaint raised by the Claimant in his grounds of appeal is simply stated. The Employment Judge fell into error in making findings that were inconsistent with the liability alleged by the Claimant in his form ET1, which liability had been determined by the earlier default Judgment. Specifically, Mrs England referred me to paragraphs 31, 33, 36, 38, 42, 44, 46, 48, 50, 52 and 54 of the Judge's Reasons. Applying the above principles of law to the Judge's findings, I accept that submission. Two examples will suffice. Under the heading "Particulars of Discrimination" in his Particulars of Claim the Claimant referred to an accusation he said was false of his committing a sexual act with his partner at the club on 12 November 2008 (paragraph 14). That is in the context of his pleaded case that his homosexuality was perceived by the Respondents as a bar to their aim to rebrand the club so as to attract a heterosexual clientele. At paragraph 33 of her Reasons the Judge purported to find that a heterosexual comparator would have been treated in the same way so that that allegation did not constitute sexual orientation discrimination or harassment by the Respondents. That seems to me to be an example of the Employment Judge re-trying a liability issue that had been already determined by the default Judgment.

1. Another example relates to the Claimant's dismissal. He alleged in his Particulars of Claim that he was dismissed by reason of his sexual orientation and/or because he had made a protected disclosure. Whilst it is in every case for the Tribunal to find what was the reason or principal reason for dismissal for the purpose of unfair dismissal, not an issue in this appeal, it is enough that a Claimant's sexual orientation is an effective cause of his dismissal so as to establish unlawful discrimination (see O'Neill v The Governors of St Thomas More RCVA Upper School and Anor [1997] ICR 33, per Mummery P (as he then was)). In my judgment the effect of the default Judgment was to uphold the claim of dismissal on grounds of the Claimant's sexual orientation. However, at paragraph 52 of her Reasons the Judge appears to confuse the question of whether his dismissal was on grounds of his sexual orientation with a separate and legitimate enquiry as to whether he had suffered injury to his feelings as a result, among other things, of the dismissal in those circumstances. The result of this erroneous approach is perhaps crystallised in paragraph 55 of the Reasons, where, whilst acknowledging the fact of the default Judgment, the Judge does not assess her award for injury to feelings on the basis of the pleaded complaints determined by that Judgment but on the basis of her earlier findings which significantly limited the extent of the tortious liability of the Respondents for which the Claimant failed to be compensated. Consequently, it is highly probable that the Judge's figure of £2,700 for injury to feelings underestimated the true extent of recoverable loss under this head and, further, informed her judgment that the Claimant was not entitled to recover the aggravated damages that he claimed.

**Disposal**

1. In these circumstances the appeal is allowed and the award of compensation in respect of sexual orientation discrimination, harassment and victimisation is set aside. The award of compensation for unfair dismissal stands. In my view the proper course is to remit the question of remedy under the sexual orientation regulations to a different Employment Judge for re-hearing. For completeness Mrs England raised a point as to whether the matter ought properly to be before a single Employment Judge or a full Employment Tribunal panel. In light of section 4(3)(g) of the Employment Tribunals Act 1996 I am satisfied that it should return to an Employment Judge sitting alone.