Sip (Industrial Products) Ltd v Swinn [1994] UKEAT 279_93_0403

EAT
Sip (Industrial Products) Ltd v Swinn
[1994] UKEAT 279_93_0403 · 1994-03-04
MR JUSTICE MUMMERY (PRESIDENT) : Introduction This appeal poses the question whether, on the true construction of S.1 of the Wages Act 1986, an Industrial Tribunal has jurisdiction to decide whether an employer is entitled to make a deduction from the wages of a worker in respect of an overpayment occasioned by the worker's dishonest claims for expenses.

The Facts

Mr Keith Swinn was employed by SIP (Industrial Products) Ltd ("SIP") as a general handyman from 26th November 1991 until 27th July 1992 when he was dismissed. SIP discovered that Mr Swinn had obtained money from it by dishonestly altering receipts for diesel fuel. SIP's case is that Mr Swinn filled SIP's van with diesel fuel from time to time. He paid for the fuel and presented a voucher or receipt to SIP's cashier for reimbursement of the expenditure. SIP alleges that between March 1992 and 23rd July 1992 Mr Swinn actually incurred expenses of about £1,633 but, as a result of fraudulently altering the vouchers or receipts, he procured payment to himself from SIP of about £3,786. For reasons explained later the Tribunal did not investigate the facts in detail. It did find as a fact that Mr Swinn was prosecuted after he was dismissed. He pleaded guilty to a charge of dishonestly obtaining money from SIP by deception. His case was dealt with by the Loughborough Magistrates Court which made a compensation order in favour of SIP in the sum of £540. Mr Swinn was owed £457.12 in respect of wages and holiday pay, but it was not paid to him by SIP.Mr Swinn therefore presented a complaint to the Industrial Tribunal on 8th August 1992. His complaint was that SIP withheld his wages by instructing the bank to stop payment. SIP's defence was that it had retained the sum which would otherwise be due to Mr Swinn against monies dishonestly obtained by him and by way of reimbursement of expenses overpaid to him.The Industrial Tribunal sitting at Leicester on 2nd February 1993 decided, for reasons notified to the parties on 17th February 1993, that SIP had made an unlawful deduction from Mr Swinn's wages and awarded Mr Swinn the sum of £457.12. The Tribunal found that it was an unlawful deduction because it did not fall, as SIP contended it did, within the provisions of S.1(5)(a) of the 1986 Act. The Tribunal summarised the reasons for its decision as follows -
"4. We had to decide whether or not this was a lawful deduction. Mr Povoas [solicitor for SIP] relied on subsection (5) of S.1 of the Wages Act 1986. He said that the respondents were entitled to deduct from the applicant's wages `any overpayment in respect of expenses incurred by the worker in carrying out his employment'. We cannot conceive that the subsection can possibly have been meant to refer to the present circumstances. We cannot believe that the legislation can have intended an employer to have the power of judge and jury in establishing dishonesty and making a deduction. Clearly what the applicant did amounted to theft and had nothing whatsoever to do with expenses incurred by the applicant in carrying out his employment."
As a result of the view formed by the Industrial Tribunal on the effect of S.1(5) of the 1986 Act, the Tribunal did not hear evidence from SIP about the operation of its system for payments in respect of expenses incurred by Mr Swinn in purchasing diesel fuels or any further details of the circumstances in which Mr Swinn purchased diesel fuel or submitted fraudulently altered vouchers and receipts for reimbursement.SIP was dissatisfied with the decision and appealed by Notice of Appeal presented on 21st June 1993. The two main grounds of appeal are, first, that the Industrial Tribunal may have misunderstood the facts which gave rise to the deduction of the sum of £457.12 and, secondly, that the Tribunal misinterpreted the provisions of S.1(5) and misapplied them to the facts of the case.

Wages Act 1986

Part 1 of the 1986 Act was enacted for the protection of workers in relation to the payment of wages. Section 1(1) imposes a general restriction on any deductions from wages by an employer.
"(1) An employer shall not make any deductions 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."
It is common ground that SIP made a deduction from the wages of Mr Swinn and that that deduction does not satisfy either of the conditions stated in paragraphs (a) and (b).

It is provided by S.5(1)(a) that -

"A worker may present a complaint to an Industrial Tribunal - (a) that his employer has made a deduction from his wages in contravention of S.1(1) ..."
The dispute in this case centres on of S.1(5) which disapplies S.1 and, consequentially, S.5(1), in six categories of case, (a) to (f). It is common ground that the only relevant category is that contained in (a) of S.1(5).

(i) any overpayment of wages, or

(ii) any overpayment in respect of expenses incurred by the worker in carrying out his employment,

made (for any reason) by the employer to the worker;"

Submissions of SIP

It was argued on behalf of SIP that the decision of the Industrial Tribunal erred in law for the following reasons:(1) Section 1(5) of the 1986 Act permits "any deduction" where the purpose of the deduction is reimbursement of overpayment in respect of expenses.(2) On the facts of this case Mr Swinn admitted at the time to SIP a fraud in excess of the sum deducted. Accordingly, the overpayment was common ground at least to the extent of the deduction and SIP was not acting as judge and jury, as perceived by the Industrial Tribunal.(3) The fact that the overpayment to Mr Swinn was secured by fraud or theft does not alter its character as an overpayment made by SIP to Mr Swinn "in respect of expenses incurred by [Mr Swinn] in carrying out his employment." The words of S.1(5) are plain. The Industrial Tribunal misapplied the law.(4) Further, as a result of an erroneous view of the law, the Tribunal wrongly declined to hear any evidence from SIP about the factual situation, beyond that stated in the decision.

Mr Swinn's Submissions

It was argued on behalf of Mr Swinn that the Tribunal correctly interpreted the provisions by concluding that expenses dishonestly obtained which were the subject of criminal proceedings fell outside the remit of S.1(5)(a)(ii). The Industrial Tribunal was entitled to conclude that the criminal issues of dishonesty and fraud were of such a different character to those envisaged by S.1(5) that no further investigation of the issues in the case was appropriate. By retaining wages contractually due to Mr Swinn in order to meet a potential future claim arising from criminal and/or civil proceedings SIP had acted in breach of the general restriction in S.1(1).

Conclusions - The Legal Position

The Tribunal has reached the conclusion that the appeal must be allowed on the short ground not specifically argued before the Industrial Tribunal that it had no jurisdiction to entertain Mr Swinn's complaint. The position is briefly as follows -(1) Prima facie the Industrial Tribunal had jurisdiction to hear a complaint that SIP had made a deduction from Mr Swinn's wages in contravention of S.1(1): see S.5(1)(a). If, however, the deduction fell within one of the six categories set out in S.1(5), the Industrial Tribunal had no jurisdiction to hear a complaint about such a deduction. In the six cases listed in S.1(5)(a) - (f), the restriction contained in S.1(1) against deductions does not apply and, if it does not apply, it cannot be contravened so as to entitle the worker to present a complaint to the Industrial Tribunal. In cases where S.1(1) is disapplied the appropriate procedure is not to make a complaint about the deduction to an Industrial Tribunal but to institute appropriate proceedings in the civil courts for alleged breach of contract and recovery of the sum deducted.(2) Section 1(5)(a) - (f) covers cases of the kind described whether the deduction is lawful or unlawful. Section 1(5) disapplies the provisions of S.1(1) in cases where there is " any deduction", lawful or unlawful, falling within any of the specified categories. In those cases the Industrial Tribunal has no jurisdiction to enquire into or determine the issue of lawfulness or unlawfulness of the deduction. See Sunderland Polytechnic v. Evans [1993] ICR 392 , which did not follow an earlier decision of the EAT in Home Office v. Ayres [1992] ICR 175 . The Industrial Tribunal in this case could not have been aware of the decision in the Sunderland Polytechnic since it was not reported until after the decision of the Industrial Tribunal.(3) The wording of S.1(5)(a)(ii) is wide enough to take this deduction out of the jurisdiction of the Industrial Tribunal. SIP made a deduction from Mr Swinn's wages, but the purpose of that deduction was the reimbursement of SIP. The reimbursement sought was in respect of an overpayment. That overpayment was in respect of expenses. Those expenses were incurred by Mr Swinn in carrying out his employment. The reason for making the overpayment was the dishonesty of Mr Swinn. The provision includes " any overpayment" in the category made "for any reason".(4) The purpose of the deduction thus falls within the wide words of S.1(5)(a)(ii).The Tribunal erred in law(a) in entertaining a complaint on the question whether a deduction made for the purposes of reimbursement within the meaning of S.1(5)(a) was a lawful deduction and(b) in holding that it was an unlawful deduction. The determination of the question whether or not it was an unlawful deduction does not fall within the statutory jurisdiction of the Industrial Tribunal. The dispute is a common law contractual dispute which can only be resolved by civil proceedings in the High Court or in the County Court.For those reasons the appeal is allowed.