Mr M Waring v Fastrax Conveyors Rollers Ltd: 6007531/2024 Mr M Waring v Fastrax Conveyors Rollers Ltd: 6007531/2024
JUDGMENT
[1]The claim for unfair dismissal is dismissed due to the claimant not having sufficient length of service with the respondent (this part of the claim was dismissed on a previous occasion but I could not locate a judgment).[2]The respondent made unauthorised deductions from wages for the period April 2023 in the sum of £3750. This sum is calculated gross of income tax and national insurance. The respondent is liable for any such payments.[3]The respondent was in breach of contract to pay notice pay to the claimant. The respondent must pay to the claimant the sum of £1875. This sum is calculated gross of income tax and national insurance. The respondent is liable for any such payments.[4]The respondent was in breach of its obligation under section 1 of the Employment Rights Act 1996 to provide a statement of employment particulars. The respondent is to pay to the claimant the sum of £11,230,76, this being the equivalent of four week’s wages. STATEMENT OF REASONS Claims and Issues[1]Page numbering referred to in square brackets in these reasons are to pages in the bundle, unless otherwise stated.[2]This is a claim which involves allegations of unauthorised deductions from wages in respect of April 2023, and a failure to pay full notice pay upon dismissal of the claimant by the respondent. I also considered a failure on the part of the respondent to provide a statement of employment particulars under section 1 of the Employment Rights Act (“the Act”).[3]The claim had initially included one of unfair dismissal. However, this claim was dismissed at an interlocutory stage on the grounds that the claimant did not have the requisite two years of service with the respondent. I therefore was not required to deal with this aspect of the claim. However, it was accepted by the respondent at the hearing that the claimant had not been summarily dismissed and was therefore entitled to notice pay. It was further agreed between the parties that the appropriate notice period was 2 weeks.[4]In essence, the claimant alleges that he was not paid approximately half his wages for April, and was underpaid his notice pay, also by about 50%. The rationale for this will be explained below. The respondent asserts that it paid what was due to the claimant for April 2024, and in respect of his notice pay. The issue revolves around the liability of the respondent to pay what I will refer to as ‘dividend payments' to the claimant, although as will be explained below, the labelling of these payments as dividends is itself problematic. Procedure, Documents and Evidence Heard[5]The Hearing took place on 30 June 2025. The claim was heard remotely by video. At the outset of the hearing, I confirmed that I had all of the evidence in order to make my decision. I had a hearing bundle which comprises 100 pages. I also had a witness statement from the claimant. Although Mr Millar was present, no-one from the respondent had submitted a witness statement. Mr Millar expressed surprise that he was required to provide a witness statement. I reminded him of the directions that had been issued by Employment Judge Palmer on 24 April 2025 [32] i.e. that witness statements be provided by 20 June 2025. He said he was aware of the directions but that his representatives, Peninsula, had come off the record about a month ago. He seemed to be intimating that this was the cause of the failure to submit a witness statement. So far as the correspondence on file was concerned, Peninsula appeared to have come off the record on 10 June 2025.[6]After much prompting, Mr Millar indicated that he would like to give evidence. This would require him to give evidence in chief without a witness statement. I invited comments from the claimant. He observed that he had complied with the directions and that requiring him to cross-examine Mr Millar without a statement would place him at a disadvantage. I noted that the claimant had submitted a copy of his witness statement to the respondent, but had password protected it until he had received a copy of the respondent’s witness statement. Therefore, Mr Millar had not yet seen the claimant’s witness statement.[7]The claimant also reminded my of the events of the previous hearing which are fully set out in Employment Judge Palmer’s case management order of 24 April. In short, the case had been listed for rule 21 hearing, but had been converted to a case management order as a result of the respondent submitting a response immediately prior to the hearing. Referring to paragraphs 20 and 21 of the CMO in particular, it was clear that the Judge took the view that the respondent had lacked diligence in responding to the claim and that its conduct was ‘reprehensible’. However, he narrowly decided to allow the submission of a response. As Mr Millar conceded before me, the respondent was left in no doubt by Judge Palmer that it was in the ‘last chance saloon’ in terms of compliance with important Tribunal directions for the remainder of the case.[8]I retired for a short while to consider whether to allow Mr Millar to give evidence. Whether to do so is a balancing exercise in terms of fairness and the relative prejudice caused to each party, particularly the respondent. I also had regard to the overriding objectives, and in particular ensuring that parties are on an equal footing, and to ensure that matters are dealt with proportionately.[9]I refused the respondent’s application. I placed significant weight on the fact that this was not the first time that the respondent had displayed what I regarded as a contemptuous disregard for orders of the Tribunal. I find that Mr Millar would have been very aware of the need to provide a witness statement if he wished to give evidence. He was present at the previous hearing. It was also apparent from the case management order. No doubt he would have bene advised of this by his legal representatives at the time. He would also have been aware of the claimant seeking to exchange witness statements.[10]I reject the suggestion that the loss of Peninsula was an excuse for Mr Millar’s failure. Peninsula had come off the record on 10 June 2025. There was no explanation as to why they came off the record. In any event, it would have given him plenty of time to instruct another representative or to draft a witness statement himself. At the very least, he should have approached the Tribunal and/or the claimant to indicate that he was having difficulties in complying with the order. Instead, and somewhat characteristically, Mr Millar chose to do nothing until the morning of the hearing. He did not even have the courtesy to respond to the claimant’s chasing emails.[11]In my judgment, the respondent was in a position entirely of its own making. It stemmed from its attitude to the Tribunal and the proceedings in general, which it had sought to ignore throughout where possible. To have allowed Mr Millar to give evidence would have required serious consideration of an adjournment. It would have been a lot to ask of a litigant in person to crossexamine without first having access to a witness statement. It would have caused distress and prejudice. I took into account that not allowing Mr Millar to give oral testimony would cause prejudice to the respondent’s case. However, I took the view that this was out weighed by the prejudice to the claimant, and the impact on the efficiency of the proceedings in general. I was aware that Mr Millar would be allowed to test the evidence of the claimant in cross-examination, which would to some extent offset the prejudice to the respondent. I also had access to the hearing bundle, which I was told had bene compiled by Peninsula. I therefore refused the application by Mr Millar.[12]I heard testimony from the claimant, who adopted his witness statement and confirmed that the contents were true. I also heard helpful submissions from Mr Millar and the claimant. At the end of the hearing, I provided the parties with my decision and detailed reasons. The respondent requested a written statement of reasons.[13]In coming to my decision, I had regard to all of the written and oral evidence submitted, even if a particular aspect of it is not mentioned expressly within the decision itself. Findings[14]Based on the evidence that we heard and read, the Employment Tribunal made the following primary findings of fact relevant to the issues that we had to determine.[15]The respondent is a UK manufacture of fabricated metal products producing a comprehensive range of bespoke conveyor systems and high-quality conveyor rollers.[16]The claimant started work for the respondent as a designer on 15 November 2023. He was dismissed with effect from 29 April 2024. The parties agreed that the claimant was entitled to two weeks pay in lieu of notice of termination of his contract of employment. The claimant was never provided with a statement of employment particulars, despite requesting the same on a number of occasions. Mr Millar accepted this and explained to me that he had not had time to get around to it. I did not accept this to be a reasonable excuse for this failure.[17]What was in issue in this case was how a week’s pay should be calculated in the circumstances. This required an analysis of the status of what were described by the respondent as dividend payments. Until April 2023, the claimant had been in receipt of two payments each month. The first was itemised on the claimant’s wage slips. This was in the sum of £3407.59 (agreed by the parties)[39]. This I will refer to as the PAYE element. The claimant also received a separate sum into the same bank account [46] but this was not included in the pay slips. This was in the sum of £3750. I will refer to this as the dividend element. The primary question then is whether the dividend element of the payments formed part of the claimant’s wages under his contract of employment.[18]Although there was no statement of terms and conditions, the parties did enter into a discussion by correspondence which is enlightening in terms of the contractual term relating to pay. The exchange starts at [47], when Mr Millar confirms the offer of employment to the claimant. As to wages, he states “The remuneration would be £45K dividends paid in equal monthly instalments of £3750, and a salary of £55K per annum, also paid in equal monthly payments”. Mr Millar continued “I would like to add commissions and bonuses related to increase in profitability and orders related to CMECS customers – this should be discussed in greater detail in a future meeting very soon.”.[19]In an email which followed, Mr Millar answered some of the claimant’s queries about remuneration. He confirmed that there would be a 10% shareholding in Fastrax Conveyors Limited (hereinafter referred to as “FCL”), from where the dividends would come. He also stated that the claimant would only be vested in the shares whilst an employee of the respondent but that there would be an agreement for them to be transferred permanently to the claimant “after an agreed time” [48]. Mr Millar agreed that there had never been a transfer of any shares to the claimant during his employment, whether of FCL or any other company. The claimant was therefore never entitled to share dividends as such.[20]In terms of findings, I move on to April 2024. There was a dispute between the claimant and Mr Millar. As this is not an unfair dismissal claim, and because Mr Millar accepted that the claimant was dismissed on notice, there is no need to go into the evidence as to the reasons behind the termination of the claimant’s employment. It suffices to say that the claimant went on annual leave on 19 April 2024 and never returned to work.[21]His wages were paid on 25 April 2024 [42 and 46]. The PAYE element was paid but not the dividend element. As stated, and as the bank statement demonstrates, the claimant got two separate payments each month until April 2024. Both payments were from ‘Fastrax Conveyors”. This is confusing for obvious reasons. The failure to pay the dividend element was a break from previous months.[22]The lack of payment was raised by the claimant in a series of messages which appear at [65] and are dated 29 April 2024. Mr Millar responded stating “I haven't paid the dividend for April as we are not making the profits we should be making for the conveyor division and haven't been for the past few months”. The claimant was dismissed on the same day.[23]On 17 May 2024, the claimant wrote to Mr Millar [66]. He again raised the shortfall in April’s wages, amongst other issues, as well as his notice period. On 14 June 2024, Mr Millar sent what was the beginning of a chain of emails to the claimant [72]. It is not easy correspondence to understand in isolation. There was much discussion about these emails at the hearing. It became common ground as to what the parties were trying to achieve. It is as follows.[24]The claimant owned a limited company called Conveyor Design Solutions Limited “CDS”. Prior to his employment with the respondent, the claimant had been in business himself. He had obtained employment with the respondent because he had become tired of being self employed and wished to have a relatively simpler life as an employee (as he perceived it). It was agreed by the parties that neither the respondent or FCL had ever done any business with CDS or with the claimant in a self employed capacity.[25]In June 2024, as the claimant was pursuing the respondent for unpaid wages, Mr Millar suggested that CDS send the respondent invoices for certain payments made to the claimant in the course of his employment. These are set out at [72]. They appear to relate (in part at least) to the dividend element of his wages. CDS was asked to add VAT onto the payments. The claimant agreed to do this, as well as for allegedly outstanding payments due in April and May.[26]At [74-75]. there is then a discussion between the two of them as to the wisdom of this approach to the payments in the light possible liability for corporation tax and VAT. Mr Millar suggests that they “go back to plan 1 which is to allocate the sums as dividends”. He went on to state that “I will have to get you registered as a shareholder for Fastrax Conveyors Limited immediately and we can get this resolved with no extra costs for you.”.[27]Mr Millar apparently then has another rethink with the assistance of his accountant at [77]. He stated “I spoke with my accountant to confirm about your email and he said it would be simpler to have the new invoice with the additional values added - he said it would cost Fastrax much the same and it avoids the delay in getting shareholdings set up etc. Please can you produce an invoice for the additional amounts (plus VAT) for the amounts already paid to you from November to March on one invoice and a separate one with the additional amounts for April and May (again plus VAT)”. In my judgment, this is a significant email not least because it appears that Mr Millar concedes that sums are owed for April and May, which is the claim.[28]A few weeks later, on 27 June and 3 July 2024, the parties sent emails to each other at [78-79] which purport to set out various contra payments. It is confusing because Mr Millar talks about invoice 3023 and to what carriage charge it relates. I find that this email is, in effect, a fiction. There was no business between the respondent and CDS. There was no ‘carriage’. In his email of 27 June, the claimant does continue to chase for his allegedly outstanding wages for April and May [79]. He makes the point in his email that the respondent made a payment to him on 11 June 2024 which was for 1 weeks notice (salary only, not covering dividend payment). Again, on 25 June, the claimant stated he had received his second weeks notice, salary only not dividend payment. Mr Millar agreed that these payments had been made, as described.[29]What the claimant goes onto say in that email is that Mr Millar had requested that he raise invoices for the outstanding payments and the previously paid dividends and to raise them as if for design work carried out by CDS, to cover for the lack of promised shareholdings in FCL which never materialised. He stated that he had raised invoices 3020 Rev A and 3021 to cover the outstanding wages which form the subject of this claim [80].[30]The said invoices are at [81-84]. The invoice at [83] is invoice no. 3020 Rev A which purports to cover the alleged outstanding wages. The invoice at [84] purports to cover dividend payments made between November 2023 and March 2024, with VAT added. They both purport to relate to design work. At the hearing, both parties admitted to me that invoices were, in effect, an accounting fiction, in the sense that CDS had never provided goods or services to the respondent. There is other correspondence in the bundle which is sent at about the time of the invoices, which appears to be an attempt to maintain this fiction.[31]Mr Millar, for his part, offers to make some sort of payment on Monday 1 July [79]. No payment was made in relation to the payments forming the subject of this claim. The claimant made further demands in correspondence which were unsuccessful. The claimant lodged his claim with the Employment Tribunal on 2 August 2024. Reasons and Decision[32]This is a claim which involves two separate allegations. There first is for unlawful deductions from wages in relation to the dividend element of the claimant’s alleged remuneration for April 2024. The second is a breach of contract claim for damages to reflect the dividend element of the calculation of two weeks notice pay. The parties agree that the appropriate notice was two weeks, and that the respondent made payment in lieu of notice in relation to the PAYE element of the claimant’s wages.[33]I turn first to the unlawful deduction from April’s wages. Although it was not always apparent from the documents, at the hearing, the issue before me was mercifully clearer. The respondent failed to make a payment of £3750 which related to the dividend element of the claimant’s remuneration. The claimant’s case was that he had been paid this sum in each of the other months he had worked for the respondent and that it formed part of the calculation of his weekly wages. Although he accepted that there had been some discussion of a transfer of shares in FCL, this had never happened. As such, the sums he was paid each month were simply wages and not dividends in a genuine sense. In effect, he asserted that it should all have been subject to income tax and national insurance in the same way.[34]The respondent denied that it was liable to pay this sum in April. First, it submitted that the distinction between the PAYE element and dividend elements of remuneration was an important one in this context. It argued that the Tribunal did not have jurisdiction to hear a dispute about dividend payments. Further, that it was a dispute between the CDS and FCL. It alleged that the dividend element of wages were triggered by the claimant sending invoices from CDS for payment described as ‘invoice of services by the limited company’. As the response puts it at [30] “This is how ‘dividends’ were paid.”.[35]I reject the respondent’s argument in the regard. It is simply not supported by the evidence. As I have sought to set out above, the invoices appear only after the claimant was dismissed. The relevant contractual relationship here is clearly between the claimant and respondent. The suggestion that CDS was a relevant party to the aforesaid arrangements is to adopt the events post termination, which both parties accepted was an artificial accountancy exercise which did not accurately reflect what had happened on the ground during the claimant’s employment. Even if there had been a transfer of shares as discussed, I am satisfied that it would have been to the claimant and not CDS, which was never mentioned in the pre-employment correspondence as to terms and conditions of employment.[36]The second issue raised is whether this is a dispute about dividends rather than wages. In my judgment, it is not about dividends at all. Of course, there is some difficulty because the respondent never managed to provide the claimant with written terms of employment. I am satisfied that the starting point is the email of 2 November 2023 [47]. The claimant was to receive £55,000 per annum in terms of “salary” plus £45,000 (the latter labelled as dividends). Mr Millar also added that he would like to add commissions and bonuses related to profitability to be discussed at a later date.[37]In my judgment, despite the labelling in the email, there is insufficient evidence that any of the remuneration package was properly identified as dividends as opposed to wages. I find that the distinction was which made in this regard by the respondent was an attempt to reduce its liability for income tax and national insurance contributions. No shares were ever given to the claimant. Mr Millar admitted at the hearing that he had never taken any steps towards transferring shares in FCL to the claimant. He said he had been too busy to do so, which was a familiar excuse in this case. I do not accept this evidence. In any event, it was common ground that FCL have never actively traded. It had never sent or received invoices. It was therefore difficulty to see how any of the payments to the claimant could be linked to share dividends in that company.[38]In my judgment, the discussion as to the transfer of shares to the claimant pre-employment was nothing more than that. I am not satisfied that Mr Millar genuinely intended to give the claimant shares, or that he thought that the claimant’s package was partly made up of genuine dividend payments. In coming to this conclusion, I have regard to Mr Millar’s continuing attempts post termination to place an accounting gloss on the nature of these payments. In my view, Mr Millar lacks credibility as a source of information on this issue.[39]I also note that both elements of the claimant’s remuneration appeared to come from the respondent. They appear on the claimant’s bank statements in the same way. The respondent has failed to provide any evidence that the dividend payments came from FCL or were in any way linked to shares in FCL. The only distinction which can be made on the evidence is that the so called dividend element of the payments was not put throughout the respondent’s PAYE system. Again, there is no internal documentary evidence from the respondent to explain why this was. Of course, it is the employer’s legal obligation to pay the appropriate tax and national insurance. It is not for the employee to second guess this.[40]It also seemed inconsistent with the respondent’s case on this point that the dividend element of the remuneration was at a fixed monthly rate. This was more consistent with it being wages than it some way being linked to share dividends.[41]If it had been the genuine intention of the respondent to have a contractual, legally enforceable, distinction made between the two element of the claimant’s remuneration package, then it should have taken the trouble to have expressed this in writing. I observe that shares are a legal instrument and that I would have expected a significant audit trail if the respondent has genuinely intended to vest shares and/or the dividends of shares in the name of the claimant. None of this happened in this case.[42]In summary, the separation of the claimant’s wage package was nothing more than an accountancy exercise. It is not supported by the documentary evidence or by the oral testimony I heard. Doing the best I can in the absence of a written contract of employment, I am satisfied that the claimant was entitled to an overall wages package of £55,000 plus £45,000 =£100,000 per annum gross.[43]The next point that the respondent raised in relation to the April wages was that the dividend element was not payable because it was subject to the profitability of the company, and that the respondent could choose to pay the monthly dividend on a discretionary basis. Of course, these provisions were never included as part of written terms and conditions of employment. However, even if one looks at the email of 2 November 2023, there is no mention of a discretion as to whether to make the dividend element of payments. Indeed, it talks only about fixed monthly payments.[44]I note that the paragraph below does mention links to profitability, but only in relation to commissions and bonuses. It is clear to me that the intention at the time was that the dividend element would not be linked to profitability. There is no attempt to set out what the precise thresholds might be for the payment of the sum, or as to how the discretion might be exercised. If it was to be a term of the contract of employment, then there would have needed to have been far more detail. There has been insufficient evidence adduced on this point by the respondent. It is not even clear to me whether the respondent was linking payment to the profitability of FCL or the respondent.[45]Even if I found that there was a discretion based on profitability, the respondent had produced little evidence as to the profitability of either company. Mr Millar could not even tell me at the hearing what the performance of the respondent had been in April 2024. He had not produced any accounts to support the proposition that the profits of the company had fallen since March 2024, when the dividend element had been paid to the claimant. In short, I find that there was no link to profitability as alleged, and that the dividend element of payments were fixed under the contract of employment.[46]In short, I found that, properly construed, the contract of employment entitled the claimant to payment of the dividend element as part of his wages.[47]I therefore find that there was an unlawful deduction from wages under section 13 of the Employment Rights Act 1996. The respondent must therefore pay to the claimant the sum of £3750 which is a figure gross of any income tax and national insurance, for which the respondent is liable to pay.[48]I would add that some of the events described above do not portray either party in an attractive way. Post dismissal, there was an unedifying scramble to address what was described by the parties as a large hole in the respondent’s accounts. As I have said, the request for, and supply of invoices for ‘design work’ did not properly reflect the nature of the outstanding payments. Both parties knew this at the time. The documents had made this case more complicated than it needed to be, not least because the respondent has sought to adopt the fiction which the invoices attempted to create. It undermined the credibility of both the claimant and Mr Millar. However, I am satisfied that it was a process driven by Mr Millar, and that the claimant cooperated with it because the respondent had repeatedly refused to pay what he thought he was owed. I am satisfied that the claimant saw this as a way of being paid the outstanding sums, and this this explains his conduct, as least in part.[49]I then turn to the breach of contract claim. The parties agreed that the claimant was entitled under his contract of employment to two weeks pay in lieu of notice of termination. The only question here was whether the dividend elements of the payments should be taken into account when calculating what he was due in this regard. In the light of my findings above, the answer to this question is that it must be included in the calculation.[50]To calculate the loss, I have taken £3750 which is the monthly figure, divided by 30 to get a daily figure for April, and then times by 7 to get a weekly figure, which is £875. Two weeks loss is therefore 2 x £875 = £1750. The respondent must therefore pay to the claimant the sum of £1750 which is a figure gross of any income tax and national insurance, for which the respondent is liable to pay.[51]Finally I address the respondent’s failure to provide the claimant written terms and conditions of employment which is a breach of its obligations under section 1 of the Employment Rights Act 1996. Mr Millar admitted that he had failed to do so, and attributed this to him being too busy. No other explanation was provided. His failure to provide written particulars has been the cause of much difficulty in this case. It may even have been the primary reason for the claim arising at all. It is a basic and fundamental obligation on an employer. It is not the only example in this case of Mr Millar appearing to take the view that the rules do not really apply to him. It was my impression that he took a cavalier attitude to many aspects of running a business, and to being a party to litigation. I have regard to all of the matters above when setting the level of compensation for the breach under section 1. It must be set at a minimum level of 2 weeks wages, but can be as high as 4 weeks wages. I have chosen to set the award at the maximum amount in the light of the observations above.[52]A week’s wages must include both the wages element and the dividend element of remuneration. The dividend element is £1750 weekly (gross). The wages element is calculated by taking £55,000 per annum divided by 52 = £1,057.69 weekly (gross). The total wage package is therefore £1750 + 1,057.69 = £2,807.69 weekly (gross).[53]The respondent to the claimant must therefore pay the sum of 4 x £2,807.69 = £11,230.76 in respect of its failure under section 1 of the ERA 1996, which is a figure gross of any income tax and national insurance, for which the respondent is liable to pay. This figure is higher than the figure discussed at the hearing because I failed to include the wages element of remuneration into the calculation. Please ignore the figures I announced at the hearing. They are replaced by those set out above. Approved by: