Dattani v Trio Supermarkets Ltd

A compromise reached in Industrial Tribunal proceedings bars only claims objectively shown to fall within its scope. A document recording settlement is not necessarily a decision, order or judgment giving rise to res judicata; its substance, rather than its label, must be examined. The wider Henderson v Henderson principle does not apply where the earlier document merely records an agreement and makes no adjudication or order. A contractual compromise is construed objectively by reference to its language, object, context and background. Extrinsic evidence may assist in identifying the disputes intended to be settled. A claim not actually pleaded may be compromised, but only where the agreement objectively covers it. Here, the settlement covered unfair dismissal, not unpaid wages.

Mr Dattani, a former shop manager of Trio Supermarkets Ltd, brought an Industrial Tribunal claim for unfair dismissal. The proceedings were compromised by payment of £5,000. The Tribunal issued a document recording the settlement, and the sum was paid.

Mr Dattani later brought County Court proceedings for unpaid wages. His Honour Judge Rich QC dismissed the action, holding that the wage claim was estopped because it could have been brought in the Industrial Tribunal proceedings. The appeal concerned whether the Tribunal document created an estoppel and whether the compromise objectively included the unpaid-wages claim.

The appeal was allowed unanimously. Lord Justice Mummery gave the leading judgment, with Lord Justice Swinton Thomas and Lady Justice Butler-Sloss agreeing.

1. No res judicata arose. The document headed as a Tribunal decision was not a decision within the Industrial Tribunals (Rules of Procedures) Regulations 1985, nor was it a judgment, order or decision capable of creating an estoppel. Regulation 2 defined a decision to include a declaration, order, recommendation or award. Rule 12(2)(d), also referred to in the judgment as Regulation 12(2)(d), required written agreement by both parties to the terms of a decision. No such written agreement was shown. The document merely recorded an agreement, made no declaration of rights, decided no disputed question and made no order. The court had to look beyond the label to the substance.
2. The wider principle in Henderson v Henderson was therefore inapplicable. The possibility that the unpaid-wages claim could have been brought in the Tribunal, including under the Wages Act 1986, did not itself create an estoppel.
3. A valid and binding compromise remains a complete defence to any claim within its scope. The critical issue was therefore the construction of the contractual compromise, with the Tribunal document serving only as evidence of the agreement.
4. The scope of the compromise had to be identified objectively by considering its object, language, context and background. Negotiation evidence was generally inadmissible to construe clear terms, but was admissible to resolve ambiguity and identify the disputes the parties intended to settle. The approach in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 All ER 98 was adopted.
5. The IT1 and the guarantee referred specifically to unfair dismissal. The agreed evidence showed an earlier offer accompanied by an express reservation of the wage claim, followed by a later settlement after the Tribunal indicated that it was minded to find against the company. Objectively, only the unfair-dismissal claim was compromised. The unpaid-wages claim remained actionable, and bringing it separately was not an abuse of process. The order below was set aside, judgment was entered for £11,800 plus interest, and costs were awarded here and below. Leave to appeal to the House of Lords was refused.

• Court of Appeal: Appeal allowed; the order below was set aside and judgment was entered for the appellant for £11,800 plus interest, with costs here and below. [1998] EWCA Civ 158
• Central London County Court: His Honour Judge Rich QC dismissed the unpaid-wages claim, holding that it was barred by estoppel arising from the Industrial Tribunal settlement.