Default judgments and undefended claims
The Employment Appeal Tribunal (EAT) has allowed an employee's appeal against an employment tribunal's decision to dismiss her claim and enter default judgment on the employer's contract claim in Limoine v Sharma.
Ms Limoine had been employed as a nanny to accompany Ms Sharma (her employer) and her young children on flights between London and Thailand. She claimed that Ms Sharma had failed to pay her and issued a claim seeking arrears of pay and other payments. Ms Sharma entered a response defending the claim. She also made an employer's contract claim seeking damages for the amount she had spent on flights, accommodation and travel expenses for Ms Limoine. Ms Limoine was notified by the tribunal that if she wished to contest the employer's claim she had to respond within 28 days and, if she failed to do so, judgment might be entered against her and she would only be permitted to participate in any hearing to the extent allowed by a judge. She failed to respond, due to an oversight, and the tribunal entered a default judgment in Ms Sharma's favour and dismissed Ms Limoine's claim. Ms Limoine appealed on the ground that the tribunal had failed to consider the merits of the employer's case and whether Ms Limoine should have been permitted to participate in the hearing of that case.
The EAT held that, under rule 21 of the ET Rules an employment judge was required to decide whether, on the available material, a determination of the claim could properly be made, and the extent to which it could therefore issue a judgment. Otherwise a hearing had to be fixed. Rule 21 did not permit the judge to enter judgment simply because the claim was undefended without giving any further consideration to the matter. The Presidential Guidance which the tribunal was required to consider, suggested that if there was reasonable doubt about any material matter, a hearing should be listed. The judge then had to consider to what extent a respondent to a claim who wished to participate (this would have to be signalled by them proactively seeking and obtaining permission to do so) would be permitted to do so.
In this case the employment tribunal had erred in not giving any consideration to whether, having treated as uncontested the case advanced by Mrs Sharma, there was a proper basis to grant judgment on her claim. Ms Limoine had been entitled to participate in relation to her own claim and clearly wished to participate in relation to the employer's claim. It was relevant to the EAT's decision that there was a live, defended claim to be heard (Ms Limoine's claim) with which Mrs Sharma's claim substantially overlapped. As a result the judge had erred in not considering whether Ms Limoine should be permitted to participate or explaining why not, and both claims were remitted for reconsideration.
Take note: Following this decision, tribunals will have to ensure they make a carefully reasoned decision when faced with an undefended claim rather than going ahead with a default judgment. Obviously if a party has failed to engage in the litigation process altogether the tribunal's decision may bar the party from participating, but in this case it was clear that Ms Limoine did wish to defend the claim.