Tamang & Anor v ACT Security Ltd & Anor (Practice And Procedure : Compromise)

A settlement agreement must be construed objectively from its words and context. An agreement that clearly settles proceedings against one named respondent only, coupled with a request to dismiss the proceedings against that respondent only, is properly construed as a covenant not to sue that respondent. It does not release other potentially liable respondents unless its terms show an intention to do so.

In a TUPE case, liability for dismissal transfers from transferor to transferee under Transfer of Undertakings (Protection of Employment) Regulations 2006, rather than being joint and several. A tribunal’s erroneous view that such dismissal liability is joint and several may materially distort its construction of a compromise agreement.

The claimants, formerly employed as security guards by Reliance, brought Employment Tribunal claims arising from an alleged service provision change. They alleged unfair and wrongful dismissal and failures to inform and consult under the Transfer of Undertakings (Protection of Employment) Regulations 2006. ACT and Euro were alleged to be transferees; Reliance was the transferor.

Each claimant entered an ACAS-negotiated settlement with Reliance. The agreement and accompanying letter referred to proceedings against Reliance only. The Employment Tribunal nevertheless held that the settlement released all three respondents because the claims involved joint and several liability. The claimants appealed, contending that the agreement preserved their claims against ACT and Euro.

1. Appeal allowed. The Employment Tribunal erred in treating the compromise as a release of all respondents. On its proper construction, it was a valid discharge of Reliance alone and a covenant not to sue Reliance.

2. The agreement defined the settled proceedings as proceedings against Reliance. The joint letter requested dismissal against Reliance only. Those words, read in their commercial and procedural context, showed an intention to preserve claims against ACT and Euro. The absence of an express reservation against co-debtors did not alter that conclusion.

3. The Tribunal’s construction was also affected by a legal misdirection. Under Regulation 4 of the Transfer of Undertakings (Protection of Employment) Regulations 2006, employment liabilities pass from transferor to transferee. Dismissal liability is therefore sequential, not joint and several. The separate consultation and information claims did not justify treating all dismissal claims as jointly and severally owed.

4. The underlying question whether there had been a service provision change was not determined. The Tribunal was not required to decide the submissions based on Hunter v McCarrick [2012] ICR 533 and Taurus Group Ltd v Crofts and Anor [2012] UKEAT/0024/12.

5. The proceedings were remitted to the Employment Tribunal against ACT and Euro, whose draft responses were to be accepted. Reliance remained discharged and was removed from the proceedings.

• Employment Appeal Tribunal: Allowed the claimants’ appeal, set aside the conclusion that the settlement released all respondents, and remitted the claims against ACT and Euro.
• Employment Tribunal, Watford: In a judgment sent to the parties on 26 September 2011, held that the compromise with Reliance released all three respondents.