Glasgow City Council v Dahhan

An Employment Tribunal must determine whether a purported qualifying settlement agreement is valid in both form and substance before treating it as excluding its jurisdiction over the settled claim. That statutory duty is not confined to invalidity caused by mistake, misrepresentation or duress. It extends to an allegation that a party lacked capacity to contract.

The Tribunal's power derives from the statutory settlement-agreement scheme, rather than an inherent common-law jurisdiction. Where lack of capacity is established, the Tribunal may refuse to recognise the agreement as enforceable. A challenge to the agreement's validity concerns the whole contract and cannot be confined to provisions concerning claims otherwise within the Tribunal's jurisdiction.

The claimant, a teacher, brought race discrimination, harassment and victimisation claims against the Council. Following a written settlement agreement, he withdrew the proceedings and the Employment Tribunal dismissed them under Rule 52. He later maintained that he lacked capacity to instruct his solicitor and to agree the settlement.

At a preliminary hearing, the Employment Judge held that the Tribunal had jurisdiction to determine whether the agreement was invalid for lack of capacity. The Council appealed. It accepted that the agreement was facially compliant with sections 144 and 147 of the Equality Act 2010, but contended that the Tribunal could not set it aside for incapacity, particularly where its terms also covered claims outside the Tribunal's jurisdiction.

The central issue was whether the statutory jurisdiction to examine the validity of a settlement agreement includes alleged lack of contractual capacity.

1. Appeal dismissed. The Employment Judge was entitled to hold that the Tribunal had jurisdiction to determine whether the settlement agreement was invalid because the claimant lacked capacity to contract.

2. The statutory schemes in section 203 of the Employment Rights Act 1996 and sections 144 and 147 of the Equality Act 2010 provide that claims are excluded only by a qualifying settlement agreement. The statutory conditions address formal validity, but the agreement must also be substantively valid. Unless it is valid in both respects, the Tribunal remains responsible for determining the claim.

3. The Tribunal and the Appeal Tribunal have only statutory powers. However, the power, and obligation, to examine a settlement agreement's validity arises from the statutory scheme itself. The Employment Judge was therefore wrong only to the extent that she attributed that power to common law.

4. No sound distinction exists between invalidity through misrepresentation and invalidity through lack of contractual capacity. It would be illogical to refuse effect to an otherwise valid contract induced by misrepresentation while being unable to refuse effect to a contract that was a nullity from the outset under Scots law. If lack of capacity is proved on the evidence, the Tribunal must refuse to recognise the agreement as enforceable.

5. A challenge based on incapacity concerns the validity of the whole contract. The Tribunal's conclusion cannot be restricted to those individual provisions dealing with claims within its ordinary jurisdiction. Any later issue of res judicata in another forum would fall to be determined on its own merits.

• Employment Appeal Tribunal: dismissed the Council's appeal and upheld the Employment Judge's ruling that the Tribunal had jurisdiction to determine the agreement's validity: [2016] UKEAT 0024_15_1105.
• Employment Tribunal, Glasgow: at a preliminary hearing, held that it had jurisdiction to set aside the 19 June 2014 settlement agreement if the claimant lacked capacity to contract. The judgment was dated 18 February 2015 and promulgated the following day.