Burrows Communication Ltd v Knowler [1995] UKEAT 912_95_2510

EAT
Burrows Communication Ltd v Knowler
[1995] UKEAT 912_95_2510 · 1995-10-25
MR JUSTICE MAURICE KAY: On 4 July of this year, Ms Katherine Knowler's application to the Industrial Tribunal was heard at London South. The hearing that day was concerned with preliminary matters and was a hearing simply before an Industrial Tribunal Chairman, Mr G W Davis. He came to a decision which was sent to the parties on 17 July this year.The preliminary issue with which the Industrial Tribunal was concerned was whether Ms Knowler was an eligible Applicant to present a claim for unfair dismissal. She had worked for Burrows Communications Ltd in its then and previous incarnations for a number of years, but there had been changes in the nature of the employment relationship. In particular, the original predecessor of Burrows, namely the Pyramid Group Plc, had gone into receivership in the summer of 1993 at a time when Ms Knowler was working there. We do not need to go into the details of what occurred at that time. They are graphically described in paragraph 16 of the decision of the Industrial Tribunal where it is stated:
"16 ... The Pyramid, having crashed on 23 June, became rapidly reconstructed on 28 June."
There was, at that time, effectively a kind of management buy-out.Ms Knowler continued to work for the business but in the summer of 1994 she asked Mr Paul Dipre, a Director of the Company, for an alteration of her arrangements for the payment of Tax and National Insurance.It is clear from the findings of fact in paragraph 19 of the decision that her own personal financial position had become serious; one of the reasons for this is that she, along with others, had had to take a pay cut in the previous year. In essence, what she was asking Mr Dipre was whether she could work on a self-employed basis for a period of time, thereby taking responsibility for her own Tax and National Insurance liabilities.Such an arrangement was agreed to by Mr Dipre. It is clear from the findings of fact that the arrangement was intended to be a temporary one; it is recorded in paragraph 25 of the decision that in October 1994 Ms Knowler stated that she would revert to the PAYE system upon receiving a pay increase in January 1995. In the event, that was not to be because she left the company on or about 21 December 1994. She thereafter presented her application to the Industrial Tribunal claiming that she had been constructively dismissed.The preliminary matters raised before the Industrial Tribunal were related to her eligibility to claim having regard to the rearrangements that were effected in 1993 and 1994 and to which we have referred.It was the company's contention that one or both of those rearrangements had affected an interruption to her continuity of employment such that she would not have qualified under the two-year rule and/or that she had become self-employed and was therefore not an employee for purposes of the 1978 Act.On the evidence heard and in a most careful decision, the Chairman decided that Ms Knowler was an employee of the company and had been continuously employed for a period of not less than two years, ending with the effective date of termination ie 21 December 1994. He therefore adjourned the balance of her claim, namely the determination as to whether or not she was unfairly dismissed for a full merits hearing. That has yet to take place.In the meantime, the company gave notice of appeal to this Tribunal dated 21 August 1995. The Notice of Appeal does not challenge the findings of the Chairman upon the evidence and arguments as presented. It raises what Mr Thornton frankly concedes is a new point. The new point can be summarised in this way. He says that on the evidence the arrangement for self-employment for Tax and National Insurance purposes in 1994 was tainted with illegality. If that is so, submits Mr Thornton, the employment contract was an illegal contract; it was contrary to public policy for Ms Knowler to seek to enforce it and, indeed, the Industrial Tribunal ought to have declined jurisdiction.It is not uncommon for Industrial Tribunals to be confronted with working arrangements that are tainted with illegality, particularly where arrangements have been reached in order to deceive the Inland Revenue as to how much a person is being paid by way of remuneration. In a clear case of that kind, Industrial Tribunals rightly conclude that they are confronted with an illegal contract and they consistently refuse to give effect to that illegality.The question we have had to consider is whether this is such a case. There has been no application to adduce fresh evidence before this Tribunal, nor do we have the Chairman's notes of evidence from the hearing in the Industrial Tribunal. What we do have is the decision itself and the very clear findings of fact. Paragraph 20 of the decision describes how Ms Knowler approached Mr Dipre to request a temporary arrangement. The outcome of that approach is dealt with specifically in paragraph 21 which reads as follows:
"(21) Mr Paul Dipre had no objection to this arrangement, provided that it was agreed with the Inland Revenue and accepted as a legal arrangement. The Applicant did indeed clarify the situation with the Inland Revenue and obtained their agreement."
Those are clear findings of fact. Mr Thornton's submission is to the effect that the rearrangement affected at that time must have had as its purpose at least the postponement of the payment of tax. In our judgment, the finding in paragraph 21 lends itself to only one interpretation, namely that Mr Dipre was insistent that the arrangement had the agreement of the Inland Revenue and that Ms Knowler clarified the situation with the Inland Revenue and obtained their agreement.These being the findings of fact, it seems to us that there is not a basis in this case for submitting that the arrangement made in 1994 was tainted with illegality. The arrangement may have been unusual. There was no evidence that we are aware of, and no cross-examination that we are aware of, to the effect that the Applicant had not been straightforward with the Inland Revenue. Indeed, there must have been evidence to the contrary for the finding of fact that paragraph 21 contains.For that reason we have come to the conclusion that this appeal must fail. We should add that this Tribunal and all the Industrial Tribunals will remain vigilant towards schemes that are dishonest deceptions of the Inland Revenue and they will not be allowed to provide a basis for claims in the Tribunals. In this case, however, the evidence is clearly that there was no deception, that the situation was "clarified" with the Inland Revenue and that the Revenue agreed to what was proposed.There have been submissions by both sides as to whether the Appellants ought to have been allowed to raise this point at this stage, bearing in mind the fact that it is a point that was not raised below.If there had been an evidential basis for the assertion of illegality we would have had no hesitation in allowing it to be ventilated here since it would, in those circumstances, go to jurisdiction and the authorities to which we have been referred would encourage us to the view that we ought not to have refused to deal with the matter. However, that does not arise because the evidence upon which Mr Thornton bases his submission is, in our judgment, entirely against him.Accordingly, this appeal is dismissed.