Lycatel Services Ltd v Robin Schneider

The Employment Appeal Tribunal allowed the respondent's appeal against the Employment Tribunal's refusal to stay proceedings and held that the ET had applied the wrong test when deciding whether to stay concurrent High Court proceedings. The correct test is the Bowater test: which forum is most conveniently and appropriately to try the dispute, having regard to all the circumstances including complexity, value, technicality of the evidence and appropriateness of procedures. The ET had instead treated the question as one of adequacy and applied an improper presumption in favour of the ET, while also failing to engage with relevant complexities in the claimant's case (notably issues of possible shadow directorship or agency and questions of contractual variation and quantification). The EAT set aside the ET decision and, with the parties' consent, proceeded to decide the stay issue itself, concluding that because of the value (just under £8 million), the potential factual and legal complexity, the technicality of quantification evidence and the appropriateness of High Court procedures for clarifying pleadings, the High Court was the more appropriate forum and the ET proceedings should be stayed pending determination of the High Court claim.

Background and procedural posture:

• The claimant issued Employment Tribunal proceedings for unauthorised deductions from wages under sections 13 and 23 of the Employment Rights Act 1996, claiming a bonus of £7,995,124.89.
• The respondent commenced High Court proceedings seeking negative declaratory relief denying any entitlement and applied to the ET for a stay of the ET proceedings pending determination of its High Court claim; the ET refused the stay and the respondent appealed to the EAT.

Nature of the application: An application for a stay of ET proceedings under rule 29 Schedule 1 of the Employment Tribunal Rules, pending concurrent High Court proceedings raising the same issues.

Issues framed by the court:

• Which forum is most conveniently and appropriately to try the dispute (the Bowater test), taking into account complexity, the amount involved, technicality of evidence and appropriateness of procedures?
• Whether the ET had misapplied the law by presuming that an employee's choice of the ET should prevail absent very good reasons to the contrary (the Carter issue).
• Whether the ET had properly assessed jurisdictional questions as to whether the claim related to an identifiable sum (Coors / Delaney issues) and the potential legal issues raised by shadow directorship, agency, contractual variation, consideration and quantification.

Court's reasoning:

• The EAT held the ET had applied the wrong test, focusing on the adequacy of the ET rather than which forum was more appropriate. The ET's statement that there needed to be a "very good reason" to refuse to hear a statutory ET claim showed it applied an impermissible presumption in favour of the ET.
• The ET also failed to engage adequately with potentially complex legal and factual issues in the claimant's pleaded case, including whether a third party (not a director of the respondent) could bind the respondent by virtue of shadow directorship or agency, whether a variation had been concluded, and difficulties of quantification and causal attribution in the calculation of the claimed bonus.
• The ET wrongly dismissed the respondent's High Court claim for negative declaratory relief as "perverse" and mischaracterised the respondent's conduct in commencing High Court proceedings.
• Having found error, the EAT set aside the ET decision and, with the parties' consent, applied the Bowater factors itself. It concluded the High Court was the more appropriate forum because of the sum involved, the potential complexity (including company law and agency questions), the technicality of quantification evidence and the greater formality and precision of High Court procedures. The respondent's offer to subject its High Court claim to the ET costs regime was a material factor tipping the balance.

Appeal allowed. The Employment Tribunal had applied the wrong test and failed to take into account relevant considerations while taking into account irrelevant ones; its decision was set aside. On the Bowater analysis the EAT determined that the dispute is most appropriately tried in the High Court and ordered a stay of the ET proceedings pending determination of the respondent's High Court claim, exercising the ET's case management powers under section 35 Employment Tribunals Act 1996 and applying the factors of complexity, amount, technicality of evidence and appropriateness of procedures as determinative.

The respondent appealed the East London Employment Tribunal (Employment Judge Housego) decision of 8 August 2022 refusing a stay of ET proceedings. The appeal was heard and allowed by the Employment Appeal Tribunal in Lycatel Services Ltd v Schneider [2023] EAT 81. The respondent had earlier issued High Court proceedings (QB-2022-002294) for negative declaratory relief and sought the stay of the ET claim pending that litigation.