Ridgwell Fox & Partners (Underwriting Management) Ltd v Campbell [1994] UKEAT 1022_93_1801

EAT
Ridgwell Fox & Partners (Underwriting Management) Ltd v Campbell
[1994] UKEAT 1022_93_1801 · 1994-01-18

JUDGE LEVY QC :

This is an appeal by Ridgwell Fox & Partners (Underwriting Management) Ltd to which Mr R J Campbell is Respondent. After there had been an Industrial Tribunal hearing called for simplicity sake the "Mason Tribunal" as to whether Mr Campbell was or was not an employee of the Appellant, there was a further hearing before an Industrial Tribunal as to whether he had been unfairly dismissed. That hearing was held on 21 July 1993 and by a majority, the Chairman being in the minority, it was held that he had been unfairly dismissed. It was a reserved decision and the decision was communicated on 14 October 1993. With commendable speed this further appeal is before us for determination today, the appeal being by the Employer as to whether the finding was correct. Mr Hedley appeared as he did below for the Company, below Mr Campbell was in person. He has had the assistance of Mr Bowers on the appeal today.The appeal turns in fact on a very narrow point. It is necessary to recite a little of the background facts to the appeal. For a number of years Mr Campbell, to use a neutral term, was working for the Appellants as a computer expert and was paid a sum of money, plus bonuses, for his work. No deductions whatsoever were made by the Appellants for tax and as we learned, no payment was made by Mr Campbell to the revenue authorities for the sums which he received. When this came to the attention of the Appellants, they suggested to Mr Campbell that the position had to be regularised by them in the future making deductions from the payments they were making on the basis that the payments which they had been making were gross payments. Mr Campbell took exception to this and claimed that the change of conduct by the Appellants amounted to a constructive dismissal.There then followed the question as to whether he was employed or not, which was resolved against the Appellants and there was then this appeal as to whether it was a constructive dismissal. There is no dispute as to the findings which the Tribunal made as to what was dismissal. We will therefore not recite the first 10 paragraphs of the decision under appeal. A question arose whether the second Tribunal which I will call "the Baron Tribunal" were bound by findings of fact made by the Mason Tribunal on which issue estoppel would arise. The Baron Tribunal having been referred to the decision in Munir v Jang Publications Ltd [1989] ICR 1 decided (see paragraph 13 of the Reasons for the Decision):"As a result of reading " Munir " and the extract from " Thoday " [that being a reference to Thoday v Thoday [1964] Probate 131] I direct that any fact in the Reasons of the Mason Tribunal which formed an essential part of those Reasons and which was a significant contributory fact to the Decision was binding on this Tribunal. This Tribunal accepted that two statements in the Reasons of the Mason Tribunal fell into that category. In paragraph 3 of those Reasons, the following was said:
"We did not accept Mr Campbell's evidence that the company undertook to pay his tax and national insurance"
. Paragraph 12 records the following important finding: "In Mr Campbell's relationship with the company nothing was said about tax and national insurance".Those, in our judgment, are the essential matters on which issue estoppel rose before the Baron Tribunal.All the members of the Baron Tribunal found unanimously:
"14.4. There was no agreement at all between that parties as to tax and NIC. This was found by the Mason Tribunal"
and in paragraph 14.6, there is the very important finding:
"The Applicant was aware that tax was payable on the income he was receiving, but closed his mind to the point, hoping that no problem would arise."
Mr Hedley, on behalf of the Appellants, said that was tantamount to a finding that payments were made gross and therefore that was a finding which should have determined the decision of the Tribunal. We accept Mr Bowers' submission that in expressing the minority decision the Chairman perhaps may have been less full in setting out their reasons than if he had been in the minority but nonetheless we think he fairly expressed their opinion. What the majority said, and we find this in paragraph 24 of the decision:
"The majority accepted the Applicant's proposition to the effect that as the Mason Tribunal had found that he was an employee, then all payments received by him were net of tax and NIC, as it was the employer who was responsible for paying these to the Inland Revenue. Further, from the evidence mentioned in paragraphs 14.10 and 14.12 above, the Respondent, by virtue of their proposal to make deductions of PAYE and NIC admit their responsibility for the payment and not the Applicant. If this was so at the time of the meeting, it must also have been true prior to that. They were thus in error in not accounting for tax before the meeting. It follows, therefore, that the amount paid to the Applicant was legally net of tax and NIC. Consequently the insistence by the Respondent on deducting tax and NIC from the agreed figure of £40 per hour was a breach of contract which entitled the Applicant to terminate the contract, and claim that he was constructively dismissed."
We would add that 14.10 and 14.12 of the findings of facts were:
"There was a series of discussions between the Applicant and Mr Ridgwell culminating in a meeting on 3 or 4 December 1991. The exact dates of the meetings and the precise details of the discussions at the earlier meetings are not relevant. The general tenor of the meetings was that Mr Ridgwell said that he had received advice from Robson Rhodes as to the status of the Applicant, and that the Respondent would have to deduct tax under the PAYE system and NIC, unless the Applicant could demonstrate that he was treated by the Inland Revenue as self-employed.
if the Applicant had continued working without producing any evidence of being taxed under Schedule D, the Respondent would have deducted tax under the PAYE system and NIC."The point made by Mr Hedley is that there is a massive leap in the reasoning of the majority where they say that he was an employee therefore all payments received by him were net of tax and NIC. This flies against the unanimous holding found as 14.6:

"The Applicant was aware that tax was payable on the income he was receiving"

thereby implying it was paid gross. We think that Mr Hedley is entirely correct in the attack which he makes on the reasoning of the majority and we think this was a manifest error of law. It simply does not follow as the majority held it that because he was held to be an employee, he was of necessity paid net of tax. This avoids the question which the Tribunal had to decide in deciding the question of constructive dismissal.We should say that we have been taken through by both Counsel the appropriate section of the Taxes Act, namely section 203 and we have also been referred to the Tax Encyclopedia Vol E, particularly paragraph E4956 and subsequently and we are impressed by Mr Hedley's submission that the regulations there meant that if payments had been made gross it does not mean that anyone would have to conclude they had been net; and we did not accept Mr Bowers' submission to the contrary.We also took on account of the fact that this as in any other appeal we should not interfere lightly with the decision below and in this respect we were referred by Mr Bowers to Industrial Rubber Products v Gillon [1977] IRLR 389 but in our unanimous judgment this was in an area where the Tribunal below was clearly wrong in law and therefore it was our duty to interfere with that decision.In the circumstances we do not think that Mr Campbell was dismissed by the Appellants constructively or otherwise and it is not necessary for us to go into the further interesting arguments which were addressed to us if he had been constructively dismissed on the basis of the decision in Industrial Rubber Products v Gillon [1982] ICR 693, a case which arose when the Government had imposed restrictions on employees' wages being raised.In the circumstances we must allow this appeal.