Wilsons Solicitors LLP & Others v Roberts

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLord Justice Longmore,Lady Justice Hallett,Lord Justice Singh
Judgment Date26 January 2018
Neutral Citation[2018] EWCA Civ 52
Docket NumberCase No: A2/2016/1943

[2018] EWCA Civ 52

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL

MRS JUSTICE SIMLER P

UKEAT/0339/15

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Lord Justice Longmore

Lady Justice Hallett

and

Lord Justice Singh

Case No: A2/2016/1943

Between:
Wilsons Solicitors LLP & Others
Appellants
and
Roberts
Respondent

Jonathan Cohen QC and Craig Rajgopaul instructed by and for the Appellants

James Laddie QC instructed by and for the Respondent

Hearing date: 20 December 2017

Judgment Approved

Lord Justice Singh

Introduction

1

This is an appeal from the Employment Appeal Tribunal (“EAT”). For ease of exposition I will refer to the parties as the Claimant and the Respondents, even though this appeal is brought before this Court by the Respondents to the underlying claim.

2

In a judgment given on 21 April 2016 Simler J (President of the EAT) allowed the Claimant's appeal against the decision of the Employment Tribunal (“ET”) at Southampton, dated 8 November 2015. By that decision the ET had struck out “the element of the Claimant's claim that relates to his termination of his membership, and the losses that flow from that termination”.

3

The factual background is likely to be contentious in due course. However, because the relevant part of the claim was struck out at a preliminary hearing, for the time being the facts alleged by the Claimant must be assumed to be true.

Factual Background

4

The Claimant is a solicitor and was a member of the First Respondent, which is a limited liability partnership carrying on business as a firm of solicitors. The other Respondents are some of the remaining individual members of the First Respondent.

5

The Claimant commenced his membership of the firm on 1 May 2008. The First Respondent's affairs were governed by a Members' Agreement.

6

At all material times the Claimant held the position of Managing Partner, Compliance Officer for Legal Practice (“COLP”) and Compliance Officer for Finance and Administration (“COFA”). He also sat on the Board of the First Respondent.

7

On 29 July 2014 a complaint of bullying against the First Respondent's senior partner, a Mr Christopher Nisbet, was received by the Board. The Claimant investigated that complaint and associated compliance issues. He reported his findings to the Board by 30 September 2014 and produced a report on 7 October 2014. That report was due to be discussed at a members' meeting on 21 October 2014.

8

On 9 October 2014 a majority of the Respondents delivered a notice stating that they would not attend the scheduled meeting on 21 October.

9

On 25 and 26 November 2014 the Respondents demanded that the Claimant should resign from the position of Managing Partner. They then voted to remove him from that post.

10

Later the Respondents removed the Claimant from the positions of COLP and COFA before he was able to submit his report.

11

On 5 January 2015 the Claimant wrote to the Respondents claiming that they had repudiated the Members' Agreement, and stating that he accepted the repudiatory breaches. He notified them that he was giving one month's notice of termination of his membership. He said that the Respondents' conduct towards him had made his continued membership intolerable.

12

On 2 February 2015 the Respondents denied that there had been any repudiatory breaches and rejected the notice which had been given by the Claimant on 5 January. They informed him that they expected him to return to work.

13

By letter dated 5 February 2015 the Claimant rejected the Respondents' letter of 2 February and confirmed that his membership would cease as of that date.

14

The Claimant did not return to work and on 30 April 2015 he was expelled from the firm by the Respondents.

15

In the meantime, on 4 March 2015 the Claimant had issued his claim against the Respondents in the ET. His claim was for “compensation for detriment suffered by a worker as a result of the making of protected disclosures”, under section 47B of the Employment Rights Act 1996 (the 1996 Act”). That legislation is commonly referred to as the “whistleblowing” legislation.

16

On 8 June 2015 the Claimant served a schedule of loss, claiming almost £3.4 million. The great majority of the claimed losses were for future loss of earnings.

17

At a preliminary hearing on 2 September 2015 EJ Mulvaney listed a further preliminary hearing to take place on 6 November 2015 to consider the following issue:

“Whether the Claimant's claim that there was a constructive termination of his membership of the Respondent LLP should be struck out as having no reasonable prospect of success in the light of the judgment in the case of Flanagan v Lion Trust Investment Partners LLP and others [2015] EWHC 2171 (Ch)”. 1

18

At the preliminary hearing on 6 November 2015 EJ Salter considered that issue. He reserved his judgment and sent it to the parties on 9 November 2015. As I have mentioned, he decided that the element of the Claimant's claim that relates to his termination of his membership and the losses that flow from that termination should be struck out.

19

The Claimant appealed to the EAT on 11 December 2015. As a consequence the proceedings in the ET were stayed and they remain stayed pending determination of the present appeal.

20

The appeal before the EAT was heard by Simler J on 23 March 2016. Judgment was handed down on 21 April 2016. She allowed the Claimant's appeal and refused permission to appeal to this Court.

21

On 18 July 2016 permission to appeal to this Court was granted by Lewison LJ.

Material legislation

22

Section 49 of the Employment Rights Act 1996 , so far as material, provides:

“(1) Where an employment tribunal finds a complaint under section 48 well-founded, the tribunal –

(a) shall make a declaration to that effect, and

(b) may make an award of compensation to be paid by the employer to the complainant in respect of the act or failure to act to which the complaint relates.

(2) The amount of the compensation awarded shall be such as the tribunal considers just and equitable in all the circumstances having regard to –

(a) the infringement to which the complaint relates, and

(b) any loss which is attributable to the act, or failure to act, which infringed the complainant's right.

(3) The loss shall be taken to include

(a) any expenses reasonably incurred by the complainant in consequence of the act, or failure to act, to which the complaint relates, and

(b) loss of any benefit which he might reasonably be expected to have had but for that act or failure to act.

(4) In ascertaining the loss the tribunal shall apply the same rule concerning the duty of a person to mitigate his loss as applies to damages recoverable under the common law of England and Wales ….”

The decision in Flanagan

23

In Flanagan the petitioner was a member of a Limited Liability Partnership (“LLP”). The petition was an “unfair prejudice” petition brought under section 994 of the Companies Act 2006. Mr Flanagan had joined the LLP on 4 October 2011 and claimed still to be a member of it, although his membership had purportedly been terminated by notices of compulsory retirement served on him.

24

LLPs were created as “a new form of legal entity”: see section 1(1) of the Limited Liability Partnerships Act 2000 (“the 2000 Act”), cited at para. 54 in the judgment of Henderson J (as he then was) in Flanagan. By virtue of section 1(2) an LLP is a body corporate, with a legal personality which is separate from that of its members. As Henderson J observed, the corporate body has “members”, not “partners”, even though it is known as a limited liability partnership.

25

Section 4(3) of the 2000 Act provides:

“A person may cease to be a member of a limited liability partnership (as well as by death or dissolution) in accordance with an agreement with the other members or, in the absence of agreement with the other members as to cessation of membership, by giving reasonable notice to the other members.”

26

Section 5 of the 2000 Act, so far as material, provides:

“(1) Except as far as otherwise provided by this Act or any other enactment, the mutual rights and duties of the members of a limited liability partnership, and the mutual rights and duties of a limited liability partnership and its members, shall be governed –

(a) by agreement between the members, or between the limited liability partnership and its members, or

(b) in the absence of agreement as to any matter, by any provision made in relation to that matter by regulations under section 15(c).”

27

In Part VIII of his judgment in Flanagan Henderson J considered the question: is the common law doctrine of repudiatory breach excluded? He answered that question with his conclusion at para. 243 that the common law doctrine “is implicitly excluded in relation to multi-party section 5 agreements.” The consequence was that Mr Flanagan's purported acceptance of the breach was of no legal effect: see para. 244(3) in the judgment.

The Judgment of the ET

28

The judgment of the ET was given by EJ Salter sitting alone.

29

Since the issue was heard at a preliminary hearing, the ET assumed the facts alleged by the Claimant to be true. It addressed the application as a pure question of law: see para. 42 of the judgment.

30

The Employment Judge set out what he understood to be the relevant law at paras. 16–24 of the judgment. He included reference to section 47B of the 1996 Act and also section 4(3) of the 2000 Act.

31

The Judge set out his conclusions on the application at paras. 38–50 of his judgment.

32

The Judge was of the view that the decision of the High Court in Flanagan presented “an insurmountable hurdle for the Claimant's case”: see para. 50.

33

At para. 47 the Judge said:

“I have considered whether I can distinguish Flanagan as the...

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