Mr P Dyer v AGI Global Logistics Ltd and AGI Global Logistics (LON) Ltd: 6017746/2024
EMPLOYMENT TRIBUNALS
Case No 6017746/2024
Between
Mr Paul DyerClaimant(1) AGI Global Logistics Ltd (2) AGI Global Logistics (LON) LtdRespondent
Before
Employment Judge R S Drake (of the Virtual Region)Date 9 July 2025
JUDGMENT
[1]The Tribunal finds that the Claimant was not constructively dismissed as defined by Section 95(1) of the Employment Rights Act 1996 (“ERA”) for the purposes of his claims under Section 94 ERA. Therefore, the claim of unfair dismissal fails and is dismissed.[2]The Tribunal finds that the complaint of breach of contract is not established and fails …[3]The Tribunal finds that the complaint of unlawful deduction from pay is not established and fails.
REASONS
[1]The parties were especially well represented and I thank both Counsel for their erudite and effective case presentations, especially their final submissions in both written and oral Skeleton Arguments. I heard oral evidence and read statements from the Claimant (“C”) himself. He was an employed executive director and minority shareholder (20%) in the second Respondent (“R2”) which employed him. I also heard oral evidence from and read a statement of Mr T Wigginton the First Respondent’s (“R1”) Managing Director, principal shareholder and CEO. He is also a Director and via R1 a representative shareholder in R2, which is in effect the principal Respondent in these proceedings because it was C’s employer.[2]Both faced detailed cross examination and referred to a number of documents in an agreed bundle comprising over 250 pages in total. The oral and written testimony of both parties was received on the first day of the hearing, and then written and oral submissions were presented on the morning of the second day, whereafter I released the parties and indicated that I would reserve my judgement which is now set out above and below. I indicated would give full written reasons following detailed deliberations. In case the matter were to proceed to remedies, I arranged to pencil in the morning of Monday 20 October 2025 as a potential remedies hearing date, which may now be regarded as vacated or at least not fixed.[3]Before me were the following claims:-3.1 Constructive unfair dismissal;3.2 Breach of contract and unlawful deduction from pay particularised as :-3.2.1 Non-payment of notice pay;3.2.2 Underpayment of pension contributions; and3.2.3 Underpayment of salary before termination of employment. I noted that the burden of proof in respect of all claims, other than if and when constructive dismissal were proved, rested on the Claimant. Both R1 and especially R2, deny fundamental breach of contract and deny the alleged unlawful nature of any provable absence of payments of salary to C.
The Issues
[4]Because there had been no previous PHR for case Management purposes, there had been no articulation of the issues before day one. So as the case developed, it became in effect common ground between the parties and me that the issues are as follows:- Unfair Constructive Dismissal –4.1 Did the R2 in particular do the following things:-4.1.1 Without C's knowledge or consent pay him via dividends with advances of dividends being accounted for by a Director’s Loan Account (“DLA”)?4.1.2 Without C's knowledge or consent reduce his salary from £100,000 pa to £9,050 pa?4.1.3 Alternatively, did R2 impose upon C a remuneration system comprising salary of only £9,050 pa and a balance made up of shareholder dividends with advances of dividends being accounted for via a DLA?4.1.4 Did R2 cause reduced pension contributions because of the above?4.1.5 Did R2 deliberately or calculatingly cause C as much stress and anxiety as they possibly could?4.1.6 Did R2 deliberately and calculatingly seek to take advantage of what C’ described as his alleged “business naivety” to mask the existence of a DLA for nefarious purposes? C refers to this being “concocted in secrecy to suit their (the R’s ) balance sheets, and shift risk” to him personally - I noted Counsel’s submission that this is a new allegation which is not in the original pleading of C’s case;4.2 Did these events (if proved) breach the implied term of trust and confidence? The Tribunal would need to decide:4.2.1 whether R2 behaved in a way that was calculated or likely to destroy or seriously damage the trust and confidence between C and R2; (my emphases) - and4.2.2 whether it had reasonable and proper cause for doing so.4.3 Was any breach fundamental? Was any breach so serious that C was entitled to treat the contract as being at an end? (my emphasis). In the context of this case, I have emphasised this test as set out in the case law below;4.4 Was there any other cause for C’s resignation? Before resignation, had he already decided to leave and join a subsidiary of the company called Gravitas Worldwide Ltd?4.5 Did C affirm the contract before resigning? The Tribunal will need to decide whether C’s words or actions showed that he chose to keep the contract alive even after the breach? Breach of Contract & Unlawful Deduction from Pay4.6 Did R2 underpay C whilst he was on garden leave and thus make unlawful deductions for all three months of his notice period?4.7 Was there a clear and permanent agreement that C would at all material times be paid a salary of circa £6,400 net per month whether that was by way of dividend or salary (on PAYE basis) or a combination of both? – This assertion emerged during cross examination and was not pleaded by C in his ET1 The Law I set out passages from statute and case law relevant to the issues in this case leaving out extracts which are not relevant.
The Law
[5]Section 95(1) of the Employment Rights Act 1996 (“ERA”) provides that: - “For the purposes of this part of this Act, an employee is dismissed by his employer …. only if(a) The contract under which he is employed is terminated by the employer (whether with or without notice) … (my emphasis – this is not argued in this case)(b) …(not relevant in this case)(c) The employee terminates the contract under which he is employed (with or without notice) in circumstances in which he is entitled to terminate it without notice by reason of the employer’s conduct … “ (again, my emphases)[6]Section 95 (or its predecessor in identical statutory enactment - the EPCA 1978) is elaborated and explained by the celebrated decision of the Court of Appeal, Lord Denning MR presiding, in Western Excavating (ECC) v Sharp [1978] ICR 221. In that case Lord Denning held as follows: “If the employer is guilty of conduct which is a significant breach going to the root of the contract of employment, or which shows that the employer no longer intends to be bound by one or more of the essential terms of the contract, then the employee is entitled to treat himself as discharged from any further performance. If he does so, then he terminates the contract by reason of the employer’s conduct and he is constructively dismissed.” This case is also authority for the proposition that the breach must be the direct cause of the resignation and resignation must be timely.[7]Further guidance is set out in the Court of Appeal decision of Kaur v Leeds Teaching Hospital NHS Trust [2018] EWCA Civ 978 at para 55 which advises the posing of the following questions:- “(1) What was the most recent act or omission on the part of the employer which the employee says caused or triggered her resignation? (2) Has she affirmed the contract since that act? (3) if not was that act or omission by itself a repudiatory breach of contract? (4) if not was it nevertheless a part of a course of conduct comprising several acts and omissions which viewed cumulatively amounted to a remain repudiatory breach of the implied term of trust and confidence? (5) Did the employee resign in response to that breach?”[8]By reason of my findings below, I am not setting out the full content of Section 98 ERA (which provides for what an employer must show if dismissal has occurred) since it is unnecessary to do so unless dismissal were or had been proved.
The Facts
[9]I find that both witnesses gave their evidence to me as sincerely as they could and in the belief they were being truthful. There were conflicts of evidence on certain key points, so I will explain my resolution of these as I come to them below.[10]The facts I find are as follows and for the reasons described: -10.1 Before C was employed by R2, he worked for, and admitted in cross examination that he had also been a shareholder in a freight forwarding company called Gravitas: He had many years of valuable experience there which made him an attractive proposition to R1 to headhunt and engage him in similar activity for a subsidiary it would form with such experts as C. R1’s business model was to set up subsidiaries such as in this case R2 (part owned by its shareholders) to trade in specific geographic locations and invite relevant headhunted key people to become employees of such subsidiaries and provide them with incentives to do so by paying bonuses and offering equity in such subsidiaries. In this way, people like C could have a real and personal stake in the companies which not only employ them but which they part own and have a very real entrepreneurial interest in their business’ financial welfare and success. In this case, C was not required to pay for his 20% shareholding and nor did he bear any of the set-up costs of R2 which were covered entirely by R1.10.2 R1’s principal shareholder and CEO, Mr Tony Wigginton (“Mr W”), had discussions with C before C started with R2. These led to an offer letter dated 25 May 2022 (PP149-150) and signing of a Director’s Service Agreement (“DSA”) dated 30 March 2022 (PP87-101). A key feature was that C was to be paid £100.000 pa and £700 pm car allowance, plus a £20,000 quarterly performance related bonus based on a Business Plan (“BP”) prepared by C himself and approved by Mr W. The existence of such a BP establishes a reasonable degree of business acumen on C’s part. He also signed up to the usual boilerplate provision that he had read and understood the terms of the DSA. He also entered into a Shareholder Agreement regulating his position as an equity holder. No evidence has been put before me which in any ways suggests that the Shareholding Agreement or R2’s Articles of Association preclude or prohibit the existence or use of Directors’ Loan Accounts as an accounting mechanism for recording debts notionally owed by shareholding directors pending declarations of dividends.10.3 C’s main aim was to secure an overall remuneration package which would produce a monthly net take home pay level of at least £6,000 to make it worth is while to leave his then employer. C says that the notion of receiving such a level of salary was Mr W’s idea not his, but I cannot find evidence to support this and conclude that the salary level was agreed at the level set by C at his behest. He knew better than anyone else what he needed to be paid to secure his desired net monthly level; In his statement (unnumbered third para) he says he was promised to be paid an annual salary of £120,000 but this contradicts his DSA (P87 and para 5 of P90) which clearly quotes a figure of £100,000.10.4 Soon after starting, C realised that after taking account of legacy tax issues from previous employment and ongoing tax and NI contributions, his net pay could not achieve his desired level of £6,000 pm, so he raised this concern with Mr W. Notwithstanding what had clearly already been agreed in writing and signed for by C (see P101), Mr W suggested an alternative method of payment based on a much reduced salary of £755.00 pm and a balance of £8763.00 pm as drawings by way of dividends. A similar change had been proposed by Mr W in respect pf C’s colleague Mr Jay Lockett but the latter found that this did not improve his monthly net pay, so C and Mr W agreed that though Mr Lockett’s pay structure would not change, C’s change to payment mainly by dividends would be confirmed. (PP156 and 155 refer)10.5 C says he did not realise that in a private limited company, dividends can be lawfully paid if backed by dividend voucher declarations issued before or within a limited period of time of payment, or they would have to be accounted for somewhere in monthly management accounts in the meantime prior to declaration. Similarly he is silent about needing to be assured that the company made sufficient profit to generate cash to fund dividend payments. In fact in this case, because the company R2 did not trade as profitably as everyone wanted, the correlative credit paid to him as dividends, was matched by debits (typical of double entry bookkeeping) in Directors’ Loan Account (“DLA”).10.6 C says he was not told about there being DLA in his name or what a DLA was by its very nature. However he received dividend vouchers 5 April 2023 (P126), 1 March 2024 (P145) and 5 April 2024.(P147). These reflect the fact as I find it to be that he received shareholder’s dividends to the total value of £148,562.64 during the years 2023 and 2024 despite never having had a to pay a penny for his 20% shareholding. The final dividend was declared and funded by a cash injection from R1 so as to enable the complete cancellation of C’s DLA (accrued upto 31 March 2024), and it was signed off by Mr W on 5 April 2024, long before C resigned. Further DLA accrued in respect of pay drawn from April to July 2024, but this was deducted as described below for C’s final pay. C also received a revised form of DSA dated/signed 14 February 2024 (PP128-143) reflecting this revised pay structure.10.7 C was an experienced businessman with years of time served in freight forwarding. Yet he says he did not learn about there being an ongoing debit balance due from him which sat for accounting purposes in a DLA at some time before he resigned on 31 July 2024. It is already established that immediately before he decided to resign, the debit balance must have been written off by the cash injection made by R1 which prompted and supported the third dividend voucher, i.e. the one dated 5 April 2024. However, I find it probable that he must have known that he was drawing cash dividends from the company from shortly after he started, until his system of pay reverted in April 2024 (with his consent - see P159) to salary and bonus and away from funding drawings from as yet undeclared dividends.10.8 During the course of his employment with R2, a number of significant events occurred as follows:-10.8.1 In March 2025, business with a major customer, simply referred to by the parties as the “Noah’s Box” account, went badly awry when C allowed debt to exceed the insured credit limit of £100,000 to more like £285,000, and it then went into administration owing this larger than insured sum which it could not then pay; This state of affairs necessitated a substantial write off (after debt insurance cover being claimed) in the sum of over £145,000; No doubt and understandably, though he doesn’t refer to it in his statement, this situation was an embarrassment to him;10.8.2 I can accept Mr W’s largely unchallenged testimony on this point that despite pressure from his FD and HR team, Mr W did not put C though a disciplinary procedure as he might have done, but instead he continued to support C;10.8.3 For example, Mr W personally supported C in arranging a lease for a much more expensive company car than his agreed car allowance would support. Again, Mr W’s testimony on this was largely unchallenged so I can accept it;10.8.4 Monthly management accounts were posted by R1’s FD Mr Etchells (“Mr E”) which included reference to DLA (P184 for January 2023 – P 186 for February 2023 – P191 for March 2023); I conclude that such references clearly show that C was made aware of DLAs, and as he was one of only two executive directors in R2 on a day to day basis and the only one paid via dividends, it is probable that he should have inferred that these entries referred to him; C says in terms that he was denied access to ongoing accounting information but this is not borne out but the documentary evidence.10.8.5 R2 was never as profitable as the parties would have liked and did not live up to the budgets C had specified and was responsible for setting; I accept that nonetheless, R1 and Mr W continued to have faith in C and support him through a difficult phase of R2’s development; Due credit is shown by Mr W (Statement para 16) for C’s diligence and hard work in trying to remedy the Noah’s Box losses;10.8.6 In April 2024, Mr W discussed and agreed with C that the latter should return to a payment system based purely on salary and bonus, as payment of dividends could not be supported by a loss making business; Again this shows Mr W and R1 were materially supporting C in no small way;10.8.710 May 2024 Mr M Phillips (R1’s Head of Accounts) wrote to C by email (196-197) explaining that monthly accounts had been delayed because of extensive scrutiny he was applying to all R2s finances and the production of a P&L account for the year which is said in the email “did not include directors loans you have taken in the year”; C followed this up by enquiry (see unnumbered para 5 of P2 of C’s Statement) – he says he noticed the initials DL on an email from Mr Phillips, but he did not resign at this time because of this – in fact he resigned on 27 July 2024, fully 71 days later;10.8.8 In Spring 2024 C had been looking to remortgage his house to seek funds to use in a property transaction he was proposing to undertake. This was a project of great significance to his family, especially his wife. He instructed a mortgage broker to assist him, who asked him to seek assurance from R2 as to its finances and his accounts with R2.10.8.918 July 2024 C wrote to Mr Philips by email (P169) and said he wanted sight of a Balance Sheet to show that R2 is healthy and that he can “maintain my monthly dividends and Director’s salary, and that there is no overdrawn Loan Account” from which I conclude his awareness of what such a thing is and what it was in relation to he himself; There was a virtually immediate response next day from Mr Phillips to the effect there was such a DLA, what its balance was (£150,000), but that later in the year, there would be a dividend voted that would have the effect of netting off the debit balance; In fact this was not entirely correct as the dividend voucher dates show that DLA had already all but been completely written down by declared dividends.10.8.10 C wrote back 19 July 2024 to R1’s FD Mr P Freeman asking for a dividend voucher to net off the debit balance on his DLA, and was told that year end of accounts would be finalised shortly; On learning of this, C wrote again to Mr Freeman (P166) saying for the first time that he had not known about a DLA attributable to him, and received a comprehensive response saying (inter alia) – “The description of Director's loan is simply the way it is posted in the management accounts. The amounts you are drawn are considered dividends not money owed back to the company Of the £150,000 shown as Directors’ loan £44,000 has already been declared as dividends on your tax return for the year to 5 April 2023. The remainder is planned to be disclosed on your tax return for the year to 5 April 2024. The only caveat to this is the available profits of the company if there are insufficient profits to vote dividends in the accounts to 31 March 2024 the balance will be cleared by dividends in the following financial year. I hope this clarifies the position but please give me a call if you would like to discuss this.” I conclude from the above that nothing was being done to impose a debt liability on C about which he was unaware but simply to describe in bookkeeping terms the accounting procedure used for supporting dividend payments in a way which would not leave C exposed to future risk, because even if profits were insufficient to enable a dividend to be to be declared in one year, the balance in his words “will be cleared” (my emphasis) by dividends in the following financial year. This is an unequivocal serious commitment to make. The tone and content of this communication is significant and has a bearing upon my overall conclusions. In fact I find that Mr Freeman (on behalf of R1 and R2) was in effect as good as his word, because in the next accounting year 9commencing 1 April 2024) the balance of £74,000 in DLA was discharged by the final dividend voucher which was dated 5 April 2024 and thus in the new accounting year and helpfully before the next tax year started on 6 April 2024.10.8.11 R2 at Mr W’s behest sent the three dividend vouchers mentioned above to C on 25 July 2024 – before c resigned. This betokens earnest of intent on the part of Mr W and both Respondents;10.8.12 It is not easy to see when, but it is accepted by C that he had become disenchanted with working in R2: It was not as remunerative as he had hoped, though he had agreed his terms freely and could have taken advice upon them, and he very soon after leaving R2 became engaged by a subsidiary of his previous employer Gravitas. I conclude that it is probable that planning to move had been in C’s mind for some time, though I can also accept it is not easy to discern from when.10.8.13 Mr W’ accepted in cross examination that C had not been paid salary from April to July 2024 but I can accept the candour of his account that despite this, (statement para 30) that advance dividends had been paid to C for April to July 2024 ( in effect separate from the dividends the subject of the 3 vouchers referred to above ) and that these amounted to overpayments.10.8.14 Mr W’s account that he told C in Paril that these payments were advances on proposed dividends in future – this was largely unchallenged I cross examination.10.9 My email dated 29 July 2024 (P171) C first communicated to Mr W his resignation and later followed this up with a second email dated 31 July 2024 (P173). The first refers at a third bullet point that the reason for resignation was “being paid via a Director’s Loan which I wasn’t aware of” and the second does not refer to this at all. The first reads as though the first two reasons for resignation were the more important in C’s mind, and the absence of reference in the second suggests it was not the reason. The overall tone in both is one of regret but not of breakdown of relationships.10.10 C having tendered his resignation, acted accordingly (by going on garden leave) as if he had given notice, despite him now saying in this claim that he felt entitled to resign without giving notice. He did not feel entitled at the time, or I conclude it is probable he would have done so. Consideration and Conclusions[11]Starting with the main issues as identified in paragraphs 4.1 to 4.5 above I make the following findings applying the law to the facts:11.1 C was aware from October 2022 and consented to being paid via dividends with advances of dividends being accounted for by DLA. This is a not uncommon necessary accounting process in private limited companies, part or wholly owned by their directors.11.2 The question of whether C knew of the bookkeeping practice/mechanism of accounting for the source of dividend payments via DLA is less clear. I prefer the argument that he was on a balance of probability likely to have known of this system because he knew he had sperate and different capacities in relation to R2; The existence of DLA is related to his shareholding as distinct from his employment relationship with R2; He knew that dividends were being agreed and vouchers issued – these had the effect of reducing his debit balance in DLA. This accounting mechanism is not new or unknown. It is indeed the subject of Section 197 of the Companies Act 2006, which, put simply, prohibits loans by private companies to its directors unless the shareholders resolve to give permission. In this case, the shareholders were C himself and R1 and/or its shareholders who through Mr W consented tacitly.11.3 Mr Montgomery submits that the prima facie illegality of lending to a Director in effect impeaches the very provability of Mr Smith’s submission that C must have known about the DLA. This does not follow as such because what matters is knowledge not illegality at corporate law level. In any event, what may be unlawful under company law does not sound in the employment relationship which is governed by the ERA and the employment terms agreed between the parties. C did not resign because of any asserted illegality of DLA but that he says he didn’t know about it in his case; The issue is did C know he had a debit DLA – I find on balance of probability he must have known that the cash to pay his drawings must have been coming from somewhere especially as the business was running less than profitably. 11.2 Furthermore, what C has to show when claiming constructive dismissal is that something has been done which shows R is in breach of the implied term in the employment contract as to trust and confidence. The existence of DLA is first an accounting mechanism created under the aegis of the time honoured principles of double entry bookkeeping, and second it is not truly relevant to the employment contract. In Malik v BCCI [1998] AC 20, Lord Steyn in the then HoL holds – “Unless excluded, the term of mutual trust and confidence is implied by law into all contracts of employment”. 11.3 With regard to analysing whether the Claimant was entitled to resign without giving notice because of the Respondent’s conduct, I turn to the further application of the law to the facts below.11.4 For the reasons set out in my fact findings above. I cannot find that R2 unilaterally reduced C’s pay at any time, and in any event I conclude that at all relevant times his co-operation and consent to the way he was paid was always forthcoming until points in time when he could see he was not better off overall.11.5 R2 did not impose upon C a remuneration system comprising salary of only £9,050 pa and a balance made up of shareholder dividends with advances of dividends being accounted for via a DLA? At all times C either raised queries or accepted the changes which Mr W suggested – there was no sense of imposition in any of the evidence before me. There was little or no evidence of the impact of changes on pension contributions or that if there were, though a breach cannot be remedied as Mr Montgomery submits (Buckland v Bournemouth University [1977] IRLR 389) , there was an absence of objection to the change to the pay system nor its reversion to salary and bonus alone and certainly not within the three month period before resignation.11.6 On the question of whether R2 acted in such a way as was likely or was calculated to breach trust, I find one cannot look at the acts complained of in isolation from the wider picture of the circumstances around them. The totality of that picture bespeaks considerable support being shown to C by not only Mr W but all the support staff involved in dealing with C’s pay structure. None of what I have found speaks of repudiation, but in fact quite the opposite.11.7 I cannot find that anything done by R2 had the effect of entitling C to resign without giving notice even if he gave notice. I find that he was already planning his departure and was looking for an opportunity to leave. In cross examination, he touched upon the fact was under pressure from his wife and understandably felt embarrassed that the venture he entered open-eyed was not as successful as he had hoped. C himself did not regard the cause of his resignation as being sufficient to justify summary resignation. He worked out his garden leave albeit from home. He simply realised that the deal he had done in respect of pay was not as remunerative as he had wished, but he had agreed it and had to live with it even it was bad bargain for him.11.8 I cannot find that C has shown that the reason or principal reason for resigning was anything to do with what R2 had arranged in relation to his pay, or that it was because he suddenly out of the blue learned about DLA which in event was discharged or was in the process of being discharged when he sounded his most serious query about it. I can find that he did not affirm the DSA by giving notice and remaining on garden leave, but I can accept that the fact he did so bespeaks much about his subjective state of mind in response to the acts he asserts were repudiatory breaches.11.9 I conclude that the resignation was because C had another job to go to which he started immediately he was free to do so , but that during his notice he kept his head low in face of the post termination restrictions he had agreed in the Shareholding Agreement. This I conclude that the alleged fundamental breach was not fundamental and was not the cause of resignation.11.10 Of C’s claim that he was underpaid during notice, I can accept the arithmetic of what he says but that he faces the inevitable reliance by R2 on clause 8.2 of his DSA (PP132-133) that by agreement in writing signed by C any outstanding debts as at date of termination may be withheld by R2. I also accept Mr W’s account (statement para 30) that advance dividends had been p[aid to C for April to July 2024 ( in effect separate from the dividends the subject of the 3 vouchers referred to above ) and that these amounted to overpayments and therefore debts capable of being recovered under clause 8.2 of the DSA.11.11 C has not established to my satisfaction that there was a clear and permanent agreement that C would at all material times be paid a salary of circa £6,400 net per month whether that was by way of dividend or salary (on PAYE basis) or a combination of both? As indicated above under identification of Issues, this assertion emerged during cross examination and was not pleaded by C in his ET1 and is obviated/negatived by my findings at paras 9.2 to 9.4 above.[12]Therefore I find that C has not established fundamental breach of contract and therefore his unfair constructive dismissal claim must fail.[13]Further I find that C has not established either breach of contract or unlawful deduction from pay, and therefore these claims mut also fail.[14]I am satisfied, should I need to say so, that all parties have acted reasonably throughout these proceedings and all parts of the process leading up to their conclusion.