Hurst Engineering Ltd v Sargenti & Anor [1996] UKEAT 1171_95_1911

EAT

Hurst Engineering Ltd v Sargenti & Anor

[1996] UKEAT 1171_95_1911 · 1996-11-19

MR JUSTICE MORISON (PRESIDENT) : This is an appeal by Hurst Engineering Ltd against a decision of an Industrial Tribunal held at London (South) on 22 September 1995. By their decision, the Industrial Tribunal unanimously held Hurst Engineering Ltd liable to make certain payment, to the two Applicants, Mrs Sargenti and Ronald Hughes.

The payments which they ordered to be made are particularized in paragraphs 19 and 20 of the extended reasons for the Tribunal's decision.

The background circumstances to the claim may be briefly stated. The Applicants were unquestionably due outstanding wages and expenses flowing from their employment with the second Respondents, Aztec Machine Tools Ltd. The Tribunal were satisfied that the business of Aztec was transferred to Hurst Engineering Ltd. What happened was that Aztec ceased to be a profitable enterprise and went into some form of voluntary receivership and the business previously done by Aztec was then carried out by Hurst in the same premises. Exactly the same business was being done, namely, sales and distribution of machine tools throughout Europe. As a result of the creation of Hurst most of the staff previously employed by Aztec continued to work with Hurst, as did both Applicants.

As part of the arrangements, the proprietor of Hurst persuaded or coerced both Applicants into entering into a new payment arrangement under which, purportedly, they provided their services on the basis of some kind of subcontract, treating them as self-employed persons. The Industrial Tribunal concluded that the self-employed arrangement was a complete sham and that the reality of the employment status of both Applicants did not change in the slightest following the transfer of Aztec's business to Hurst.

There are three grounds of appeal which Hurst have raised in this matter. The first relates to the whole of the proceedings and the whole of the award. The first main Respondent was Peter N Hughes, effectively the proprietor of the two companies. He had a heart condition which required him to be in hospital at the beginning of September 1995 and he saw a consultant cardiologist in reference to his heart condition three days or so before the hearing took place on 22 September. He gave evidence to the Industrial Tribunal and at about 12.50 pm, just ten minutes before the short break, he complained of feeling unwell. He explained that he had been ill and the Tribunal then adjourned until 2 pm, as we understand it. Mr Peter Hughes joined the two Applicants for lunch and told them that he was not feeling well. There is some doubt as to what precisely he did but looking at paragraph 5 of the Industrial Tribunal's decision it would seem that he returned to the Industrial Tribunal premises and spoke to their clerk, saying that he was ill, that he was too unwell to continue with the hearing and confirming that he had spoken to the Applicants during the lunch break. But he did not stay at the Industrial Tribunal and went home. Therefore, when the case resumed at 2 pm the Tribunal had to decide whether to grant an adjournment or to continue the case in the absence of Mr Peter Hughes. They decided on the latter course, no doubt having first heard evidence from the Applicants as to his condition during the lunch adjournment.

With the benefit of hindsight we consider that it would have been better if the Industrial Tribunal had then and there adjourned their proceedings and resumed on another day but their task was made more difficult by reason of Mr Peter Hughes simply absenting himself at the time when the Tribunal hearing was due to resume. It is said on Hurst's behalf, accordingly, that justice has not been done or not been seen to be done, that Mr Peter Hughes had a genuine illness, as to which we have no doubt, and that it was wrong of the Industrial Tribunal to have continued in the way that they did.

We see force in that submission and were it not for the fact that we are satisfied that it would be a complete waste of time for the matter to be referred back to the same or a different industrial tribunal, we would have been prepared to allow the appeal on that ground. However, having been referred to authority by Mr Snelson, to whom we are grateful, we are satisfied that in the exceptional circumstances of this case, even though there has been what one might call a procedural mishap, it is within the ambit of our discretion in these circumstances to decline to remit the matter. We refer to a decision of the Court of Appeal in Priddle v Fisher & Sons [1968] 3AER 506 at page 508H. Applying the test there it is our view that it would be quite clearly idle, to use the language of that case, to refer the matter back. The reason why we take that view is because the Industrial Tribunal have made it plain that from the totality of the material which was presented to them it was quite unchallenged that monies were due to these Applicants and quite impossible to suggest that there had not been a transfer of undertaking from Aztec to Hurst.

The second and third grounds of appeal to which we now turn relate not to the whole of the proceedings, or the whole of the award, but just to part. The Tribunal considered two items which they have referred to as unnotified deductions. The phrase "unnotified deductions" is a phrase to be found in the relevant legislation. For present purposes we refer to the Employment Rights Act 1996, which is a consolidating statute not in force at the time of the Industrial Tribunal proceedings but the language is no different and we are content to refer to the 1996 Act rather than to the predecessor sections in the Employment Protection (Consolidation) Act 1978.

It is provided in section 8 that:

"(1) An employee has the right to be given by his employer, at or before the time at which any payment of wages or salary is made to him, a written itemised pay statement."

Section 11 provides that

"(1) Where an employer does not give an employee [such] a statement ... the employee may require a reference to be made to an industrial tribunal to determine what particulars ought to have been included or referred to in a statement so as to comply with the requirements of the section concerned."

It is provided in section 12 that where, on a reference under section 11, an industrial tribunal determines particulars then a statement shall be deemed to have been given containing those particulars and in subsection 3 of section 12, where on a reference under section 11 an industrial tribunal finds that there has been a failure to give a pay statement in accordance with section 8 the Tribunal shall make a declaration to that effect. Subsections (4) and (5) read as follows:

"(4) Where on a reference in the case of which subsection (3) applies the tribunal further finds that any unnotified deductions have been made (from the pay of the employee during the period of thirteen weeks immediately preceding the date of the application for the reference (whether or not the deductions were made in breach of the contract of employment), the tribunal may order the employer to pay the employee a sum not exceeding the aggregate of the unnotified deductions so made.

(5) For the purpose of subsection (4) a deduction is an unnotified deduction if it is made without the employer giving the employee, in any pay statement or standing statement of fixed deductions, the particulars of the deduction required by section 8 or 9."

For present purpose we do not need to decide the ambit of section 8. In this case the employees were not provided with a pay statement as they should have been. In relation to the month of March they were not paid at all. It seems to us that where no payment has been made and no deduction, therefore, has been made, the Tribunal cannot call the employer to account for an unnotified deduction, simply because, as a matter of language, an unnotified deduction is made from the payment of a wage and if no wage has been paid, then there is no deduction and, therefore, no unnotified deduction. Accordingly, it seems to us plain that in relation to the March payment, which was due, it was wrong for the Tribunal to have included within their award as monies due, the unnotified deductions because no deductions had been made. That means, in our view, that in relation to paragraph 19(d) in relation to Mr. Ronald Hughes' award and 20(e) in relation to Mrs Sargenti's award, those sums should not have been ordered by the Industrial Tribunal and to that extent we should allow the appeal.

There are two further unnotified deductions which, again, it would seem to us not to be proper items for the Industrial Tribunal to have awarded. As we understand the position, what they were seeking to do by those two unnotified deductions was to put the employees into the same position as they would have been in had they been treated as employees and not on a self-employed basis. The difficulty with that desire of theirs, which is quite understandable, is that they had, in paragraph 14 of their decision, specifically rejected the claim for a pay differential between the new casual employment and their former fixed wages. It seems to us, in those circumstances that they were trying to give effect to a decision in the opposite direction to that which they had just decided. Again, it seems to us that this is not a matter which falls within section 12 of the Act and, therefore, these were not unnotified deductions at all. These were deductions that would have been made had they been salaried employees but because they were self-employed or treated as self-employed, then even though it was a sham, these deductions had not actually been made and, therefore, they were not unnotified deductions.

Accordingly, it seems to us that the sums in paragraphs 19(e) for Mr Ronald Hughes and 20(f) for Mrs Sargenti, cannot form the subject matter of an award by the Industrial Tribunal. To that extent, the appeal is allowed.

It follows, therefore, that we dismiss the appeal on the main ground. The award which was made by the Industrial Tribunal should be reduced by the sum of £883.80 in the case of Mr Ronald Hughes and in the case of Mrs Sargenti it should be reduced by £411.09. That means that they are entitled to the balance and it seems to us that they should be paid that sum as soon as possible.