United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MR R HOWARD (of Counsel) Messrs Clyde & Co Solicitors 51 Eastcheap London EC3M 1JP
For the Respondent	MS L HARDY (Representative) Citizens Advice Bureau 50 Victoria Street Crewe Cheshire CW1 2JL


 


MR JUSTICE HOLLAND: This is an appeal from a decision of an Industrial Tribunal held at Liverpool, which decision was reserved and is dated 14th March 1996. The Tribunal was constituted by a Chairman sitting alone. The appeal is by the then Respondents, Blackstone Franks Investment Management Limited; the then applicant and present Respondent is Mr J.R. Robertson. The decision was:

"1) The applicant's complaint which he had brought against the respondents under the provisions of the Wages Act 1986 is partially well-founded.

2) The respondents are ordered to pay the applicant the sums of £69.00, £2,497.50. £1,660.00 and £9,900.00 being unauthorised deductions of wages made contrary to the provisions of the Wages Act 1986."

The somewhat unusual circumstances giving rise to the matter are as follows. Mr Robertson is a financial consultant who, by way of a written agreement dated 10th January 1994 entered into a contract to provide Blackstone Franks with services, essentially obtaining clients for the latter, clients who would invest moneys through them in appropriate financial 'products'. The contract itself provided "The consultant will be entitled to commission on business completed by the consultant ... the commission rates are as set out from time to time in (Blackstone Franks) procedures manual ..." It further provided for termination by either party on one month's notice. The procedures manual included the following: "Commission will only be payable during the continuation of this agreement and when the business has been completed and the commission received by the company. Any business introduced but not completed at the date of termination will be completed on your behalf with due diligence,"

In the event Mr Robertson acted as such a consultant until 4th October 1994, the appropriate notice of termination having been given by Blackstone Franks on 6th September 1994. The situation with respect to commission was as follows. Mr Robertson had already received from Blackstone Franks £10,500 by way of an advance against future commission, such being repayable on or before 10th January 1996. He contended that a substantial amount of business had in the event been introduced before termination so that he was entitled to completion thereof on his behalf leading to entitlement to, and receipt of commissions. In the event he chose to make his claim to the latter by way of a complaint based upon the provisions of the Wages Act 1986. Proceeding in stages his case was that:

a. He was a 'worker' as defined by Section 8(1) and (2). Thus, he was "an individual who ... worked under one of the contracts referred to in subsection (2) viz a contract "whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual ..."

b. Blackstone Franks were employers as defined by Section 8(1), viz, persons by whom he was employed under this contract.

c. The commissions due upon completion of the business as introduced by him amounted to 'wages' as defined by Section 7(1)(a) viz "any ... commission referable to his employment, whether payable under his contract or otherwise."

d. In failing to pay the claimed commissions, Blackstone Franks were in breach of Section 1(1):

"(1)An employer shall not make any deduction from any wages of any worker employed by him unless the deduction satisfies one of the following conditions namely-

(a) it is required or authorised to be made by virtue of any statutory provision or any relevant provision of the worker's contract; or

(b) the worker has previously signified in writing his agreement or consent to the making of it."

We interpose: the Court of Appeal in Delaney v Staples [1991] ICR 331 held by reference to Section 8(3) that a total failure to make any payment of a sum due could be a 'deduction' for these purposes. That finding was not the subject of the subsequent appeal to the House of Lords, see [1992] ICR 483 at 490.

e. And finally, Section 5(1) empowered him to complain to the Industrial Tribunal in the event of a 'deduction' by the employer, Section 1(1) notwithstanding.

So much for the framework of the claim: in the event Mr Robertson alleged 'deductions' by way of a failure to pay commission on some twenty four items of business. Having heard the evidence the Tribunal ruled in his favour on four thereof. Blackstone Franks appeal. It is convenient to consider the four in turn for their respective individual merits before turning to one argument common to all four.

a. Mr Barnes. The Tribunal found that there had been an unlawful 'deduction', that is, non-payment of £69 by way of commission. Regarding this award as 'de minimis' there is no appeal specific to it by Blackstone Franks.

b. Mr Northrop. The Tribunal found that there had been a like 'deduction of £2,497.50. In presenting the appeal, Mr Howard submits:

(1) The sum was wrongly calculated. Whilst the contract was current the commission was to be calculated at 2.2% of the sum invested; after the termination the rate increased to 3.3% or 3.33%. The sum as found by the Tribunal reflected the latter rate; submits Mr Howard it should have reflected the lower rate as the one current during his consultancy, viz, £1,665. We unhesitatingly reject this argument. As appears from the passage already cited from the Procedure Manual the relevant business was to be brought to completion on behalf of Mr Robertson and it was at completion that commission became payable. Turning from these statutory provisions to the facts, it is conceded that as at the relevant completion 3.33% was the appropriate rate. The construction of the Procedures Manual applied by the Tribunal cannot be faulted by reference to its terms and to the commonsense of the situation. Indeed, in the case of Mr Northrop there was a commission statement that adopted the same figure as found by the Tribunal.

(2) Commission payable after termination cannot be categorised as 'wages' as defined by Section 7(1). This submission is advanced by reference to Delany Staples [1992] op. cit. In that case the House of Lords held that 'a payment in lieu' in the context of a dismissal could not be categorised as 'wages' as defined by Section 7(1). The reasons were several but the point seized upon by Mr Howard is that which emerges in the speech of Lord Browne-Wilkinson at 493, namely that as at the date of dismissal that which is properly due by way of 'payment in lieu', that is by way of damages for wrongful dismissal, cannot be specifically ascertained. Says Mr Howard, the quantum of any commissions as claimed was similarly speculative as at the 4th October 1994 and the Tribunal should have categorised the sums so claimed as being outwith the Act. He develops this point by reference to the Act: Section 7(1), and 2(e) serve to exclude from its ambit "any payment to the worker otherwise than in his capacity as worker" and he submits that the sums claimed by way of post-cessation commission fall into that category. Again, we have no hesitation in rejecting these arguments. So far from being similar to 'payment in lieu' that is to damages for wrongful dismissal, the commissions claimed are the subject of a contractual entitlement, readily to be identified as and when due and plainly to be paid to Mr Robertson in his capacity as worker, The point is finally resolved by Section 8(3): "Where the total amount of any wages that are paid on any occasion by an employer to a worker employed by him is less than the total amount of wages that are properly payable by him to the worker on that occasion ... the amount of the deficiency shall be treated ... as a deduction made by the employer from the worker's wages on that occasion". The total amount of a payment in lieu that is properly payable cannot be identified as and when paid (as Lord Browne-Wilkinson pointed out); the total amount of commission as and when that is properly payable can be identified by reference to the contract.

d. Mr Duncan. The Tribunal found a deduction of £9,900. Mr Howard submits:

(1) The calculation was similarly wrongly based on 3.33%. We similarly reject the submission.

(2) What was claimed was similarly not 'wages' within Section 7(1). We similarly reject this submission.

(3) The commission should have been regarded as divided between Mr Robertson and the consultant who completed the business so that his entitlement reduced by 50%. The Tribunal rejected this submission. In so far as there is a basis for it, such seems to be a short passage in a memorandum from Blackstone Franks addressed to the consultants and dated 22nd February 1994. We can see no reason to regard this document as contractual, that is, as evidencing either the contract of the 10th January 1994 or a subsequent agreed variation of such. We cannot hold that the Tribunal misdirected itself and this ground is rejected.

(4) Mr Robertson did not sufficiently perform the contract so as to become entitled to commission. This substantially raises a question of fact. That question was for the Tribunal to resolve and we can only set aside its finding if we can categorise it as perverse. Mr Howard had no material upon which so to contend and we reject this further ground. We observe: a Tribunal which rejected 20 of the 24 heads of clam can hardly be said to have done other than heed the evidence.

c. Mr Reeve. The Tribunal found a 'deduction' of £1,660. Mr Howard raised like points as to commission rate, status as 'wages' and sufficient performance. We reiterate like rejections.

Subject to one other point, this appeal is unsuccessful. That other point arises as follows. At the outset of the contractual relationship Mr Robertson agreed with Blackstone Franks that the latter should pay him by way of a loan an advance against future commissions, as it were 'to prime the pump'. The advance was to be in total £10,500 and it was to be paid by instalments over the next ensuing six months. Repayment was to be before 10th January 1996. In the event, the advance was made in total; it has not so far being repaid. In our judgment the fact of an advance against the commission claimed as wage 'deduction' invokes Section 5(6) of the Act:

"(6) An employer shall not under subsection (4)(a) or (b) be ordered by a tribunal to pay or repay to a worker any amount in respect of a deduction or payment, or (as the case may be) in respect of any combination of deductions or payments, in so far as it appears to the tribunal that he has already paid or repaid any such amounts to the worker."

Prima facie the application of that subsection serves to achieve an offset, that is against the total award arising out of all four claims, £14,126.50 there should be set off the sum already paid as advance commission (that is, 'wages'), £10,500 so that Mr Robertson's outstanding entitlement is £3,626.50. In the event, the Tribunal did not make this offset but left Blackstone Franks to recover the loan in the County Court. This has spawned parallel Court proceedings presently adjourned pending this appeal hearing. Mr Howard agrees that the Tribunal was not asked to make any such offset through oversight, but now asks this Tribunal to do so. Mr Robertson has drawn our attention to a reported decision of this Tribunal, Potter v Hunt Contracts [1992] ICR 337 but has otherwise left the matter to our discretion. We have looked at Potter only to find that Section 5(6) was not in point: the potential and impermissible offset there in issue was between a wages entitlement and a loan referable to a training course fee. Plainly that loan did not serve to act as a prior payment of 'wages'.

In the overall result we are entirely satisfied that the Tribunal (through no fault of its own) misdirected itself as to the significance of the advance on commission so that it did not make the set-off that was required by reference to the facts and section 5(6). This we now put right by allowing the appeal so as to substitute for the total sum originally ordered to be paid as reflecting unauthorised deductions from wages, £14,126.50, the revised sum, £3,626.50. No doubt with some relief, the parties can now seek orders from the County Court appropriate to bring the further litigation to an end.