7 December 2022|
ET / EAT Procedure
Litigation, Disclosure and ADR Procedure
Arvunescu v Quick Release (Automotive) Limited case note
Written by: Lucas Nacif
The Court of Appeal upheld the Employment Appeal Tribunal’s (“EAT”) decision that a COT3 settlement agreement was apt to cover a claim where a Respondent had merely helped a third party victimise the Claimant, as the purpose of the COT3 was to achieve a “clean break” between the Claimant and the Respondent and settle all potential claims.
In Arvunescu v Quick Release (Automotive) Limited  EWCA Civ 1600, the Court of Appeal held that an employee’s claim under section 112 of the Equality Act 2010 (“EqA 2010”) that his former employer knowingly helped another to commit an act of victimisation against him fell within the scope of a COT3 settlement agreement.
A COT3 form is used to record the terms of settlement of an Employment Tribunal (“ET”) claim (or potential claim) agreed following conciliation from ACAS. The parties may enter into a COT3 agreement either during the Early Conciliation process or following the commencement of ET proceedings.
The COT3 form is seen as a simple means of settling a claim in a speedily and cost-effective manner, as opposed to entering into a settlement agreement which must meet the formalities set out in section 203(3) of the Employment Rights Act 1996 and section 147 EqA 2010.
Arvunescu is an interesting case as it concerns the interpretation of a COT3 and highlights the court’s willingness to ensure that settlement agreements can help achieve a “clean break” between the employee and the employer in workplace disputes.
The Claimant was formerly employed by the Respondent between 4 May and 6 June 2014. On termination of his employment, he brought proceedings alleging that he was discriminated against on grounds of race. On 1 March 2018, the Claimant entered into a COT3 agreement, settling the claims he had against the Respondent.
The Claimant then brought new proceedings in May 2018 against the Respondent, alleging victimisation. The Claimant alleged that he had applied for a post with a company based in Germany which was a wholly-owned subsidiary of the Respondent (“the German subsidiary”), and was rejected in February 2018. He alleged that this rejection amounted to victimisation, because he had previously brought a discrimination claim against the Respondent. He alleged that the Respondent, as the parent company of the German subsidiary, was in breach of section 112 EqA 2010 by knowingly helping the German subsidiary to contravene Part 5 of the EqA 2010.
In entering into the COT3, the Claimant agreed that the payment provided for by the agreement was accepted by him “in full and final settlement of all or any costs, claims, expenses or rights of action of any kind whatsoever, wheresoever and howsoever arising under common law, statute or otherwise (whether or not within the jurisdiction of the employment tribunal) which the claimant has or may have against the respondent or against any employee, agent or officer of the respondent arising directly or indirectly out of or in connection with the claimant’s employment with the respondent, its termination or otherwise.” Importantly, the COT 3 went on to stipulate “This paragraph applies to a claim even though the claimant may be unaware at the date of this agreement of the circumstances which might give rise to it or the legal basis for such a claim.”
The interpretation of a settlement agreement is determined by general principles of contract law. Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society  1 WLR 896 stated that the process of interpreting contracts involves “the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract”.
Lord Bingham also observed in Bank Credit and Commerce International SA v Ali  1 AC 251 that in the context of construing settlement agreements, “the object of the court is to give effect to what the contracting parties intended. To ascertain the intention of the parties the court reads the terms of the contract as a whole, giving the words used their natural and ordinary meaning in the context of the agreement, the parties’ relationship and all the relevant facts surrounding the transaction so far as known to the parties. To ascertain the parties’ intentions the court does not of course inquire into the parties’ subjective states of mind but makes an objective judgment based on the materials already identified”.
Employment Judge Wyeth held that the section 112 claim fell within the scope of the COT3 agreement and had been settled by the parties and so could not be the subject of proceedings. The ET considered that, on a proper interpretation, the COT3 was unequivocal and applied in full and final settlement of all or any claim or right of action arising directly or indirectly out of or in connection with the appellant’s employment.
The Claimant appealed to the EAT.
Deputy High Court Judge Michael Ford KC upheld the finding that the section 112 claim fell within the scope of the COT3 agreement. The EAT held that the central question was whether the claim under section 112, was one “arising directly or indirectly out of or in connection with the claimant’s employment with the respondent, its termination or otherwise”.
The EAT observed that, although the COT3 in this case was not the best drafted, it did embrace the section 112 claim. The judge commented that the claim involved an “indirect link or connection” with the Claimant’s employment, as it concerned his previous complaint of race discrimination, which arose during his time as an employee with the Respondent.
Significantly, the EAT took into account the fact that the alleged act of victimisation from the German subsidiary took place before the Claimant entered into the COT3 with the Respondent, as a COT3 is apt to cover existing claims.
The Claimant appealed against the EAT decision.
Court of Appeal decision
The question that the Court of Appeal had to determine was whether, on a proper interpretation of the COT3 that the Claimant entered into in March 2018, the claim he had brought against the Respondent under section 112 EqA 2010 was within the scope of the COT3 agreement.
The Court of Appeal held that, in construing the wording of the COT3, the section 112 claim fell within the scope of the COT3. The Court of Appeal noted that the COT3 was worded in brought terms, including claims “indirectly…in connection with the employment”. The section 112 claim arose indirectly in connection with the employment as the Respondent was responsible for the German subsidiary victimising the Appellant, that is subjecting him to a detriment (refusing to appoint him to a post) for doing a protected act against the Respondent.
The Court of Appeal’s conclusion was also supported by the context in which the COT3 agreement came to be made. The underlying purpose of the COT3 was to settle all existing claims that the Claimant may have had against the Respondent as at the date of the agreement (1 March 2018). The context in which the COT3 was reached, and the wording of the agreement itself, indicates an intention to settle claims connected with the Claimant’s employment which existed as of 1 March 2018 whether or not they were known about at that date.
The section 112 claim concerned events that occurred in January or February 2018 and is a claim connected with the Claimant’s employment with the Respondent and which existed at the date of the settlement.
For those reasons, the appeal was dismissed given that the section 112 claim was settled by the COT3.
What to take away
The Arvunescu decision serves as a reminder that the purpose of settlement agreements, including COT3 agreements, is to provide finality in litigation and achieve a “clean break” between the parties. In this particular case the words of waiver used were sufficient to cover an act of victimisation which was not in the minds of the parties at the time of settlement, but, importantly, was an act that occurred before the date of the settlement. As such the claimant was prevented from proceeding with the victimisation claim.
However, a COT3 agreement (or any settlement agreements) are only apt to cover existing claims, as settlement agreements cannot compromise future claims unknown to the employee at the time that the agreement was concluded. In Bathgate v Technip UK Ltd  EAT 155, Lord Summers commented at §25 that, although at common law it is possible for a litigant to sign away their right to sue for any existing or future claims, section 147 EqA 2010 restricts the parties’ ability to do so. The words “the particular complaint” in section 147 suggest that Parliament anticipated the existence of an actual complaint or circumstances where the grounds for a complaint existed. The words “the particular complaint” are not apt to describe a potential future complaint.