Settlements induced by misrepresentation ‘may be reopened’, rules EAT

Out-Law News | 15 Dec 2020 | 12:09 pm |

Ed Goodwyn tells HRNews why Cole v Elders’ Voice is a lesson to those advising on COT3s and settlement agreements
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  • Transcript

    A case which should interest anyone advising on COT3s and settlements has been handed down by the EAT. It serves as something of a warning. It is a reminder that whilst a settlement usually spells the end of the dispute it can be reopened if the communications have not been as clear as they should have been. So if you've advised on a settlement and the other side wants to reopen it accusing you of making misrepresentations, misrepresentations which led them into settling, you need to be able to counter those allegations and show everything was above board. The case is Cole v Elders' Voice which makes clear that where assurances about the effect of a settlement are given to an opposing party, those assurances need to be accurate not just in a literal sense, but in context and viewed as a whole.In its judgement the EAT backs an established line of authorities that COT3s and settlement agreements can be voided by employment tribunals for misrepresentation, or alternatively, a party may be estopped from relying on its terms - either way, the settlement falls.  In this case the representations were made by the Claimant’s representative who was disbarred barrister holding out as a practising lawyer. Ed Goodwyn has been looking at the case – I phoned Ed to get his views:

    Ed Goodwyn: "Yes, I think this is a really interesting case. We as practitioners are often advising clients to be careful of issues around 'without prejudice' communications when they're doing deals and we often are sort of, if you like, preaching or advising our clients. This is one, I think, that is salient advice to the practitioners, to us lawyers. It involved a case where there was litigation, the parties came together, there was a settlement discussion, and the claimant was represented but  represented by somebody who, by the sounds it, didn't really know a lot about the issues of TUPE and the claimant asked certain questions as to the extent by which the settlement agreement, or the COT3 they were signing, had an impact on other claims that she might want to bring and the employer rather ducked the question and effectively, whilst not entirely misrepresenting the position, didn't exactly give a complete answer whereby the claimant then entered into the COT3 thinking she would still be able to bring other claims when, by signing the COT3, it stopped her doing that and when she realised what she had done she wanted to open up the COT3 and an argue that there was a misrepresentation and set it aside so she could continue with her claim. So the issue in the case, on appeal, was whether or not it was reasonable to look behind the COT3 and get involved in analysing the 'without prejudice' communications that led up to the settlement. There was no dispute that the discussions were properly' without prejudice', the issue was whether they could be referred to take a view as to whether there had been a misrepresentation or not and based on previous line of judgments and fairly settled law in other areas of law rather than employment, the EAT in this case said where there is an allegation of misrepresentation yes it's perfectly appropriate for a tribunal to look behind the COT3 and analyse what was said to see whether that misrepresentation was made. The EAT went further to remind us that there are other areas where one could open up 'without prejudice' communications which would normally be off the record and that includes not just misrepresentation, but also include includes issues where there may be fraud or an estoppel argument, and even where it's important to look at the communication so as to understand the true construction of the COT3 agreement itself. So for us employment lawyers, whilst one recognises that we're always acting in the best interests of our client and we're not really there to advise the other side, in some instances it's important to make sure that one isn't being reticent in what the position is  and it effectively does mean in this case, that really, the employer's representative would have been better to have given some advice to the other side so they truly understood what the effect of the COT3  was, and to avoid this argument. So again, if one's being a little bit tight on the information one's giving, or not giving the complete picture, one does so at one's peril."

    As with all the cases we review, we provide a link tothe judgement in case you want to read it for yourself. You can find that link in the transcript of the programme. .

    Link to case report: Cole v Elders' Voice (EAT)
    https://www.bailii.org/uk/cases/UKEAT/2020/0251_19_2611.html