Rubicon Computer Systems v Parfitt [1997] UKEAT 1454_96_0710

EAT
Rubicon Computer Systems v Parfitt
[1997] UKEAT 1454_96_0710 · 1997-10-07
MR JUSTICE MAURICE KAY : This is an appeal by Rubicon Computers Systems Limited against the order of an Industrial Tribunal Chairman, sitting alone, at a review hearing, the order having been entered in the Register and sent to the parties on 21st October 1996.We shall refer to Rubicon Computer Systems Limited as "the appellant", and Mr Parfitt as "the respondent".The respondent was a sales executive employed by the appellant and remunerated partly on a commission basis. The events with which this part of the case was concerned arose out of a transaction on 22nd August 1994 when there was a conversation between the respondent and Mr Sleet, who is described by the Industrial Tribunal Chairman as the proprietor of the appellant. In the decision of the Industrial Tribunal promulgated on 21st May 1996, that meeting between the respondent and Mr Sleet was described in this way:
"9 On 22 August 1994 the applicant [ now respondent ] had approached Mr Sleet and a discussion took place between them regarding money. There is a conflict on the evidence here. I accept the evidence of Mr Sleet preferring it to that of Mr Parfitt, that Mr Parfitt was short of cash and came to ask for a loan for £1,000. There is not a serious disagreement between the parties in that respect, but Mr Parfitt says that his request for a loan was to be responded to by an advanced payment of commission in regard to a particular project then being undertaken with a customer called Saphire Plc. Mr Sleet's position, which I prefer, is that the payment of £1,000 was agreed and as a bookkeeping mechanism it was expressed to be notionally paid against Saphire Plc. It was not, however, by either party, and their understanding was clear at the time, to be a bonus payment attributable to that contract. Mr Sleet knew that his managing director, who shortly afterwards retired or resigned I am not sure which, did not favour loans to staff and both sides ... agreed that the best way forward was to express the loan within the books in the manner I have described. It was a cash loan and not an advance bonus."
The Chairman's findings about that matter were revisited when he reviewed his decision in a further decision that was promulgated on 21st October 1996. He said this:
"2 ... It is clear that, when the applicant [ now respondent ] began negotiations with Mr Sleet for the loan of the £1,000 he had already accepted another job from a competitor ... It is equally clear that, had Mr Sleet known of the true facts surrounding the matter he would not have made the loan. I remind myself of Mr Sleet's evidence ... Mr Sleet said:
"He [ i.e. Mr Parfitt ] said he was in financial difficulty and asked if he could again have an advance of £1,000 as he had had in 1991. I agreed. I also said that I would consider an increase in basic salary to £23,000. I honestly did not know at this time that he was in negotiations with a rival company.""
That evidence was extracted from a written statement from Mr Sleet which went before the tribunal and formed part of his evidence in chief. However, he added to that in oral evidence and in answer to the appellant's solicitor. The Chairman's note reads:
"He asked for (the money) for financial problems. A loan. About £1,000. I said 'fine'. Ely was within seconds of running the pay roll. Sapphire was not mentioned and I did not say that I had earmarked £1,000 for him from Sapphire. I can't remember the nature of his financial problem. That was the sum he was looking for - £1,000. I suggested a salary rise - to help him - an inducement to clear his mind of some of the pressure."
That decision, on review, goes on to refer to some evidence of Mr Parfitt in cross-examination and refers to the fact that by letter of 22nd June, the respondent was giving every indication of wishing to remain with the appellant and to do his best for it.In the event the respondent left the appellant and went to work for the competitor. In due course the appellant deducted £1,000 from the final settlement cheque given to the respondent upon his leaving.The issue before the Industrial Tribunal was whether that deduction was lawful and whether the respondent should be permitted to recover the £1,000 that had been so deducted.In the original decision of 21st May 1996, the Industrial Tribunal held that the payment of £1,000 had been by way of a loan. The Chairman added that accordingly the payment did not amount to "wages" for the purposes of the then legislation and that the Company had not made an unauthorised deduction for purposes of that legislation.It is common ground that that finding relating to the deduction was erroneous and it was the reason for the subsequent review. If the payment was, in reality, a loan, then the tribunal should have found that the recovery of the loan by way of deduction from final salary was an unlawful deduction under the then legislation. This was corrected in the review decision of 21st October 1996, in which the Chairman held, with express reluctance, that the deduction was unlawful and that the Company could not recover £1,000 by counter claim.We have made some reference to the then legislation. It has since been repealed but re-enacted in the Employment Rights Act 1996 . In the course of his submissions today, Mr Cavanagh for the appellant, relied on the 1996 text and it will be helpful if we do the same. There is no material difference save for section numbering between the two statutory regimes.We therefore refer to the relevant statutory provisions. By the Employment Rights Act 1996 s.13(1)it is provided:
"(1) An employer shall not make a deduction from wages of a worker employed by him unless- (a) the deduction is required or authorised to be made by virtue of a statutory provision or a relevant provision of the workers' contract, or (b) the worker has previously signified in writing his agreement or consent to the making of the deduction."
S.14 is headed "Excepted deductions" and subsection (1) reads:
"(1) Section 13 does not apply to a deduction from a worker's wages made by his employer where the purpose of the deduction is the reimbursement of the employer in respect of- (a) an overpayment of wages, or (b) an overpayment in respect of expenses incurred by the worker in carrying out his employment,

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

It will be observed that there is no exception in s.14 in connection with loans in the general sense of that word.There are two other provisions to which we ought to refer. S.27 defined "wages" as "sums payable to the worker in connection with his employment", including a number of matters set out in (a) to (j) of that provision. The subsection to goes on to exclude from the meaning of "wages", any payments within subsection (2). Those excluded matters under subsection (2) include:
"(a) any payment by way of an advance under an agreement for a loan or by way of an advance of wages (but without prejudice to the application of section 13 to any deduction made from the worker's wages in respect of any such advance),"
Finally, we refer to s.25(4) which is in these terms:
"(4) Where a tribunal has under section 24 ordered an employer to pay or repay to a worker any amount in respect of a particular deduction or payment falling within section 23(1)(a) to (d), the amount which the employer is entitled to recover (by whatever means) in respect of the matter in relation to which the deduction or payment was originally made or received shall be treated as reduced by that amount."
The grounds of appeal advanced on behalf of the appellant and refined in the skeleton argument provided by Mr Cavanagh, concentrated on the question as to whether Mr Parfitt had received a loan or an advance on commission, and the contention that no reasonable tribunal could have found the transaction to be one of loan as opposed to an advance on salary or commission.Mr Cavanagh rightly conceded that even if that contention could be sustained here, it would not be enough in itself for the appeal to succeed because of the interplay of the statutory provisions to which we have referred. With this in mind, he made it clear at the very outset of his submissions today, that he was metaphorically tearing up his skeleton argument and concentrating on a new argument.Miss Wakelam for the respondent indicated that although she had received little warning of this change of direction, she was not prejudiced by it and was in a position to meet it.The new approach adopted by Mr Cavanagh is to seek to rely on a submission founded upon the common law doctrine of ex turpi causa . By this is meant that the law should not allow a person to retain the fruits of his turpitude. Mr Cavanagh submits that the sum of £1,000 was obtained by the respondent from the appellant by deceit. That was the word he used initially, although subsequently he concentrated on the word "fraud". His submission is that, therefore, all the subsequent events including the deduction, should be taken as falling outside the provisions of the Employment Rights Act 1996 or at least should be taken as such that the Employment Rights Act 1996 and the sections to which we have referred do not bite upon them. He cited numerous authorities illustrative of the common law doctrine going back to the well-known case of Cleaver & others v Mutual Reserve Fund Life Association (1892) 1 QB 147, he also referred to Burns v Edman [1972] 2 QB 541 ; Hewcastle Catering Ltd v Ahmed & Elkamah [1991] IRLR 473 ; Regina v Registrar General ex parte Smith [1991] 2 QB 393 ; Home Office v Ayres [1991] ICR 175 ; Sunderland Polytechnic v Evans [1993] ICR 392 and SIP Industrial Products Ltd v Swinn [1994] ICR 473 .Clearly if the provisions of the Employment Rights Act 1996 are to be read as subject to some overriding public policy requirement, that requirement must be carefully defined and limited in its nature. It could not be enough to, as it were, dis-apply the Act simply on the basis that a Court or tribunal takes an unfavourable view of the morality of one of the actors. Mr Cavanagh accepts this.He submits that the doctrine becomes applicable so as to qualify the Act in circumstances where a crime has been committed or where there has been a fraud either in the criminal or civil sense.We do not propose to decide more than is necessary for the disposal of this appeal, but we have to say that we have the gravest doubts as to whether any such principle could apply here. However, if it could, we are entirely satisfied that the appellants cannot invoke it in the circumstances of this case.We have considered with care the factual findings of the tribunal Chairman. We do not have the benefit of his notes, but we have also been able to peruse the statements of Mr Parfitt, Mr Sleet and Mrs Ely, which were given as part of their evidence.We do not think that this is a case in which the appellant could establish that the conduct of the respondent was one that was criminal or fraudulent in the criminal or civil sense. When the respondent asked for £1,000, he know doubt expected to have to sign an authority so as to permit deduction of sums of money by way of repayment; that is precisely what had happened on the previous occasion in 1991 when he had obtained a loan to assist him with some legal expenditure in connection with a personal injury claim.We do not consider that the evidence as a whole and the view of it taken by the Chairman permitted a finding (and none was made) that the respondent was seeking to obtain and then retain money to which he did not believe himself to be ultimately entitled. If the appellants had obtained the necessary written authority as they had done in 1991, there would have been no impediment to recovery of sums advanced by way of loan.Mr Cavanagh has mounted a very skilful and articulate submission to seek to persuade us to allow this appeal to the advantage of the appellants and to the detriment of the respondent, whose conduct was, on any basis, less than admirable.However, having regard to the novelty of his submission and the need as he concedes to establish crime or fraud in the criminal or civil sense, we are of the unanimous view that he has failed in that respect and the appeal is therefore dismissed. We shall leave to another day and another case, if ever there be one, the wider question as to whether the submission in principle is well-founded.