11/01/2024

How far can a Settlement Agreement (known as a Compromise Agreement in Northern Ireland) settle a future claim not actually known about at the time the Agreement was entered into?

This was a question addressed by the Scottish Court of Session (equivalent to the Court of Appeal) in Charles Melvin Bathgate -v- Technip Singapore PTE Limited [2023] CSIH 48.

Overturning the Employment Appeal Tribunal Judgment, the Court of Session held that a Settlement Agreement could settle future claims even if they were unknown of at the time the Agreement was signed.

Facts:

Mr Bathgate was made redundant and signed a Settlement Agreement which settled his claims against his employer. As is common, the Settlement Agreement set out a list of both specific claims (including age discrimination) as well as a general waiver, which included “all claims… of whatever nature (whether past, present or future)”.

Mr Bathgate received legal advice and expected to be paid an enhanced redundancy and notice payment when his employment terminated, along with a further sum to be paid at a later date (Additional Payment) under the terms of a collective agreement. The Additional Payment (AP) was calculated by reference to the collective agreement and only applied to those under 61 years of age, a fact Mr Bathgate was unaware of when he signed the Settlement Agreement.

After the Settlement Agreement had been signed by Mr Bathgate, the Company decided not to pay him the AP as he was over the age of 61. Mr Bathgate subsequently brought a claim for age discrimination.

In Great Britain the Equality Act 2010 allows claims for discrimination to be settled using a Settlement Agreement provided that the Settlement Agreement relates to the “particular complaint”, meaning a complaint known of or in existence. At tribunal, it was concluded that Mr Bathgate’s age discrimination claim had been settled by the Settlement Agreement, even though the alleged discrimination did not occur until after the Agreement had been signed. The Employment Appeal Tribunal disagreed and held that future unknown complaints could not easily be considered ‘particular complaints’, as they would not have occurred at the point that the Agreement was signed. This point was appealed to the Court of Session.

Court of Session

The focus of the Court of Session was on the paragraph in the Settlement Agreement which stated:

“Irrespective of whether or not, at the date of this agreement, the employee is or could be aware of such claims or have such claims in his express contemplation (including such claims of which the employee becomes aware after the date of this agreement in whole or in part as a result of new legislation or the development of common law).”

It was accepted on ordinary principles of contractual interpretation the current future claim was settled. However, it was argued that there was a requirement for Settlement Agreements to “relate to the particular complaint”, meaning a complaint known of or in existence.

The Court of Session held that “particular complaint” does not mean that at the time of the agreement the complaint must be known of; nor its grounds at least in existence.

The Court held that the Claimant’s age discrimination claim had been validly settled by the Settlement Agreement. The Court stated that “a future claim of which an employee does not and could not have knowledge may be covered by a waiver where it is plain and unequivocal that this was intended.” In this case, the Court held it was clear that the Settlement Agreement was intended to cover claims of which the parties were unaware and which had not accrued.

The Court held that “so long as the types of claim are clearly identified and the objective meaning of the words used is such as to encompass settlement … the relevant claims are covered by … the waiver.”

Commentary

This is a welcome decision for employers. It reinstates what was previously thought to be the position and provides finality and certainty to Settlement Agreements.