Glasgow City Council v Dahhan – Employment Tribunal can determine whether settlement agreement is invalid for lack of capacity

In the case of Glasgow City Council v Dahhan UKEATS/0024/15/JW the Employment Appeal Tribunal found that the Employment Tribunal does has jurisdiction to set aside a settlement agreement on the ground that it is invalid because a party to the agreement did not have sufficient mental capacity at the time the agreement was concluded.

The claimant in the case, Mr Dahhan, brought claims for direct discrimination, harassment, and victimization on the grounds of race against his employer, Glasgow City Council. On 20 June 2014 the Employment Tribunal was advised that the parties had settled the matter and that Mr Dahhan wished for his claims to be withdrawn and dismissed. The Employment Tribunal therefore dismissed the claims in a judgment dated 24 June 2014. Despite this, on 9 July 2014 Mr Dahhan wrote to the Employment Tribunal stating that he had not had mental capacity to instruct his solicitor and make decisions at the time that the settlement agreement had been agreed, and therefore wished to apply for a reconsideration of the judgment dated 24 June 2014.

Glasgow City Council objected to Mr Dahhan’s application for reconsideration and a preliminary hearing was held to consider whether the Employment Tribunal had jurisdiction to set aside the settlement agreement. The Employment Tribunal decided that it did have jurisdiction to set aside the agreement and Glasgow City Council appealed this decision to the Employment Appeal Tribunal.

The Employment Appeal Tribunal dismissed Glasgow City Council’s appeal, noting that under the relevant statute (sections 203 of the Employment Rights Act 1996 and sections 144 to 147 of the Equality Act 2010) a settlement agreement must be valid in both substance and form in order to prevent the Employment Tribunal from hearing an otherwise-valid claim. The Employment Appeal Tribunal referred to its decision in Industrious Ltd v Horizon Recruitment Ltd and anor (which is analysed by Chris Hadrill in this article) as support for its decision that the Tribunal does have the power to set aside a settlement agreement and that this power is conferred on it by the statutory requirement for the Tribunal to determine a settlement agreement’s validity.

Chris Hadrill, a specialist employment solicitor at Redmans, commented on the case: “Settlement agreements have to fulfil certain statutory requirements in order to be valid and to bind the Employment Tribunal – one of these statutory requirements is that the agreement be valid: as addressed in this article, a party can argue that a settlement agreement is invalid if, for example, a party did not have mental capacity at the time of the agreement, if there was undue influence or duress, or if a party was induced to enter into the agreement by fraudulent representation.”

The transcript of the judgment in Glasgow City Council v Dahhan UKEATS/0024/15/JW can be found here.