United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	NO APPEARANCE OR REPRESENTATION BY OR ON BEHALF OF THE APPELLANT
For the Respondent	NO APPEARANCE OR REPRESENTATION BY OR ON BEHALF OF THE RESPONDENT


 


MR JUSTICE MAURICE KAY

1. This is an appeal from an Employment Tribunal sitting at Stratford on 3 September 2001. That Tribunal dismissed the case of Mr Stein who was seeking to recover a redundancy payment and other entitlements including notice and holiday pay.
2. It is apparent from the body of the decision and the Extended Reasons attached to it that the hearing was quite a brief one. The Employment Tribunal made findings which would have been helpful to Mr Stein, but for the fact that it concluded that the contract of employment was tainted by illegality and for that reason it dismissed Mr Stein's claims. It is against that finding that he now appeals to this Tribunal.
3. He has indicated, by a letter to the Employment Appeal Tribunal, that he is content to have the matter dealt with on the papers. The Respondent Company is in the state of a voluntary arrangement at the moment and the supervisor of that voluntary arrangement has written to the Tribunal in terms which result in our being unsurprised by the absence of any representation from that source. Accordingly we shall accede to Mr Stein's request and deal with the matter on the papers.
4. The crucial finding in the brief Extended Reasons was expressed as follows:

3 "However the contract to which the Applicant worked was tainted by illegality. He had an arrangement described as being for the payment of expenses which was designed to exclude Inland Revenue and National Insurance deductions which should have been made. The Applicant was paid in cash on a monthly basis the amount of £120.00 which was described as being for expenses but for which he was not required to present receipts. The amount of £120.00 was not recorded on his payslips. It was an amount which would have represented approximately £150.00 gross had tax been deducted. The Applicant was paid £120.00 per month even when his working weeks were shorter by reason of taking leave, a time when he could not have incurred expense in relation to his work.

4 The Tribunal cannot separate out the illegal part of his contract from the legal part of the contract. As the contract is illegal, then the Applicant does not have any right to raise any claim, either for the redundancy pay or for any of the other claims in respect of notice or indeed holiday pay."

5. The complaint made by Mr Stein is that he was taken aback by that decision in that, in the course of the brief hearing, there had been no indication that illegality was a matter that was troubling the Tribunal. His case now is that if he had realised that there was such a concern on the part of the Tribunal he would or might have been able to assuage that concern.
6. To his Skeleton Argument he has attached a letter from the company secretary and former Director of Operations of the Respondent Company. That letter was written on 7 February of this year. It confirms that Mr Stein was:

"…reimbursed for out of pocket expenses incurred in his carrying out his duties for the company."

7. The letter goes on to describe these expenses as being related generally to the use of Mr Stein's own vehicle on company business and continues:

"Furthermore, these expenses were supported by valid, authorised receipts in all expense claims. There was no irregularity concerning the submission of receipts by Mr Stein and these were processed in the normal business fashion by the Company, and reflected in the accounting records.

To the best of my belief and knowledge the expenses paid to Mr Stein were accounted for in the correct manner in the books of the Company."

8. The Chairman's notes of evidence from the Tribunal hearing are unsurprisingly brief, given the nature of the hearing, and the fact that the Respondent was not present or represented. They record the fact that the expenses part of the remuneration was so described. It was referred to as "not taxed". It was also referred to as "paid in cash – against fuel bills."
9. There is a further reference of attribution to Mr Stein of an assumption that the Employer was deducting tax. There is nothing in the part of the note recording the evidence which indicates that any concern was expressed by the Tribunal, to Mr Stein, that the arrangement might be illegal.
10. When this matter came before a differently constituted Employment Appeal Tribunal on a Preliminary Hearing, reference was made to the case of Hall v Woolston Hall Leisure Ltd [2000] IRLR 578. Mr Stein seeks to rely on that in his Skeleton Argument. His complaint is that for illegality to deny him his remedy it would have to be established that he had knowledge of and participated in the illegal performance of the contract.
11. The Hall case was concerned with sex discrimination in the form of a statutory tort, rather than with the forms of entitlement sought by Mr Stein. Nevertheless, there may be some relevance for the present case in that authority.
12. We have come to the conclusion that the decision of the Employment Tribunal in this case ought to be quashed and the appeal allowed because we are not satisfied that the issue of illegality was appropriately investigated by the Employment Tribunal. There is nothing in the notes of evidence or in any representations from any other source to dispute or undermine Mr Stein's complaint that illegality was sprung on him in the decision, without any prior investigation.
13. We take the view that, had there been such an investigation on the material which Mr Stein has produced to us, it may be that he would have been in a position to deal with that concern. It may be that he would have been able to contend, with success, that his entitlements remained unaffected by any illegality, if indeed illegality there was.
14. Also, we observe, that in the Extended Reasons the Tribunal stated specifically that

"he was not required to present receipts"

whereas, the notes of evidence appear to justify a contrary proposition where it is said that he was:

"paid in cash – against fuel bills"

15. For all these reasons we shall allow this appeal. We do not feel able to substitute a decision of our own. What needs to take place is a proper investigation of the arrangement so that an Employment Tribunal can come to a proper conclusion as to whether the contract was tainted by illegality or not.
16. Accordingly, we shall remit the matter to a differently constituted Employment Tribunal.