MISS M CHILTON v H M PRISON SERVICE [1999] UKEAT 979_98_2307

EMPLOYMENT APPEAL TRIBUNAL

BAILII case number: [1999] UKEAT 979_98_2307

Case No Appeal No. EAT/979/98

Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

Between

MISS M CHILTONAPPELLANT

H M PRISON SERVICERESPONDENT

Before

His Honour Judge Peter Clark Mr P R A Jacques

Date 23 July 1999

[1]APPEARANCES For the Appellant MR T LINDEN (of Counsel) Instructed by: Mr K Farrow Nemesis Welfare Rights and Employment Law Consultant C/o Lloyd Jones & Associates Old Bank House Deacon Road Widnes WA8 6EA For the Respondents MR M BISHOP (of Counsel) Instructed by: Mr A Turek The Treasury Solicitor Queen Anne's Chambers 28 The Broadway London SW1H 9JS JUDGE PETER CLARK : By an Originating Application presented to the Liverpool Employment Tribunal on 7th October 1997 the appellant, Miss Chilton brought a complaint of sex discrimination against the respondent, H M Prison Service. A further claim under the Equal Pay Act 1970 has since been abandoned. It was the nature of her case that she was employed by the respondent as a lay chaplain at H M P Liverpool and that she was subjected to sexually discriminatory treatment by Fr. Burns, the full-time Roman Catholic chaplain at the prison, in that she was denied the use of cell keys; suspended with effect from 8th August 1997 following her complaint of sex discrimination in relation to the use of cell keys and finally dismissed.

[2]The claim was resisted, among other grounds, on the basis that she was not employed by the respondent.

[3]The question of the appellant's employment status was taken as a preliminary issue at a hearing before a Chairman, Mr E Lloyd Parry, sitting alone on 12th February 1998. By a decision with reasons dated 13th March 1998 ["the first decision"] that Chairman held that she was employed under a contract personally to execute any work or labour within the meaning of s. 82(1) of the Sex Discrimination Act 1975 . In reaching that conclusion the Chairman made the following findings of fact at paragraph 4 of his reasons: In September 1996, the appellant started work at the prison as an unpaid volunteer helping Fr. Burns. She hoped to make a career as a prison chaplain. Fr. Burns was willing to let her train with him. Her period of training ended in June 1997. She had proved herself competent. Fr. Burns was happy to offer her a probationary period as a chaplain.

(d) the Chairman said this:

"Fr Burns wanted the applicant to be paid but she did not want more than £15 in any week, because to receive more would complicate her receipt of state benefit: that is, in effect, what she told Fr Burns. He arranged with the personnel department that she should be designated a substitute chaplain and paid £15 a week. That is what happened. She worked far more hours than were at normal rates rewarded with such a small sum of money. But she had throughout put in all the hours she could spare: she was keen on the work and wanted as much experience as she could get."

[4]The preliminary issue having been resolved in favour of the appellant so far as her employment status was concerned the matter next came before a full Employment Tribunal chaired by Mr R S Bradshaw on 7th May 1998. We see from the tribunal's decision, promulgated with reasons on 27th May 1998 ["the second decision"] that that tribunal determined that the findings at paragraph 4(d) of the first decision were binding on the parties. The Chairman, Mr Bradshaw then raised of his own motion the question of illegality. That point had not been taken by the respondent in the Notice of Appearance, but on enquiry by the Chairman the respondent's representative indicated that he wished to take a point on illegality. As a result the hearing was adjourned to 25th June to be dealt with by a fresh Employment Tribunal, and the parties were given leave to amend their pleadings.

[5]By Amended Grounds of Resistance dated 11th May 1998 the respondent contended that by entering into a contract with the respondent for payment of £15 per week so the appellant could receive her state benefits in full, in consideration of full time work in the chaplaincy, that contract was illegal as a fraud on the Benefits Agency and the Employment Tribunal had no jurisdiction to hear the sex discrimination claim brought by the appellant.

[6]The appellant responded by letter dated 4th June 1998 from her representative, Mr Farrow. She took two points:(1) there was no illegality. Reliance was placed on Regulation 42(5) and (6) of the Income Support (General) Regulations 1987 ["the Regulations"]. The appellant's representative added: "In view of the fact that the Adjudicating Officer was fully aware of the hours my Client was working and fully aware of the amount of which she was being paid we would suggest that he must have been satisfied that it was reasonable for the Applicant to provide some of these services free of charge."

(2) In any event, a claim under the Sex Discrimination Act is not dependent upon the assistance of an enforceable contract of employment. See Leighton v Michael

[1995] ICR 1091

[7]On 25th June 1998 the case came back before a third tribunal, chaired by Mr S Christie. The sole issue was whether the contract for services made between the parties was tainted by illegality and if so whether the tribunal was thereby deprived of jurisdiction under the Sex Discrimination Act . By a decision with reasons dated 8th July 1998 ["the third decision"] that tribunal decided both questions in the affirmative and dismissed the complaint. Their reasoning was as follows: (1) The tribunal was referred to Regulation 42(5) and (6) of the Regulations which provide as follows:

"(5) Where a claimant's earnings are not ascertainable at the time of the determination of the claim or of any subsequent review the adjudication officer shall treat the claimant as possessing such earnings as is reasonable in the circumstances of the case having regard to the number of hours worked and the earnings paid for comparable employment in the area. (6) Where- (a) a claimant performs a service for another person; and (b) that person makes no payment of earnings or pays less than that paid for a comparable employment in the area, the adjudication officer shall treat the claimant as possessing such earnings (if any) as is reasonable for that employment unless the claimant satisfies him that the means of that person are insufficient for him to pay or to pay more for the service; but this paragraph shall not apply to a claimant who is engaged by a charitable or [ 19 voluntary organisation] or is a volunteer is the adjudication officer is satisfied [ 19 in any of those cases] that it is reasonable for him to provide his services free of charge." (2) At paragraph 6 of their reasons the tribunal say that they were referred to paragraph 79 of the Regulations. That is a mistaken reference to the page number in the Employment Tribunal bundle on which a copy of Regulation 42(5) and (6) appeared. More to the point they summarised the effect of Regulation 42(5) and (6) in this way: "… where a claimant performs a service for another person and that person pays less than that paid for comparable employment in the area the adjudication officer shall treat the claimant as possessing such earnings as is reasonable for that employment unless the claimant satisfies him that the means of that person are insufficient to pay more for the service."

The important point is that the tribunal make no reference to the volunteer exception under Regulation 42(6). (3) The tribunal heard evidence only from the appellant, who said that she had informed the Benefits Agency that she was receiving £15 per week. They rejected her evidence. The material finding is at paragraph 9 of their reason where they say this: "Having heard the evidence given by the applicant the Tribunal was satisfied that the applicant had informed the Benefits Agency about her original voluntary work at the prison. It was not satisfied that she had told the Agency that she was being paid £15 per week for a large number of hours from June 1997 as there is no suggestion that the applicant had her benefit withdrawn and the applicant was unable to tell the Tribunal what information she gave to the Benefits Agency after starting to be paid or to explain why the provisions of paragraph 79 of the Income Support (General) Regulations have not been applied to her case, as it seems clear they should have been." (4) The tribunal went on to find that the contract between the parties was tainted by illegality because the appellant did not advise the Benefits Agency of her change in circumstances and that as her claim for sex discrimination arises out of the contract then her application must be dismissed as the appellant was a knowing party to the illegality. The tribunal reached that conclusion after being referred to Leighton v Michael

[1995] ICR 1091

; Johal v Adams (

EAT/128/95

. 11th January 1996. Unreported) and Hall v Woolston Hall Leisure Ltd

[1998] ICR 651

, but without analysing the effect of those cases. The Appeal

[8]Mr Linden takes two points on behalf of the appellant in this appeal against the third decision.(1) Was there illegality? On the face of it the Christie tribunal made a finding of fact adverse to the appellant in paragraph 9 of their reasons. They found that she had not informed the Benefits Agency once she was in receipt of £15 per week from the respondent. That would normally be an end to the matter. Questions of fact are for the Employment Tribunal, not the EAT. However, Mr Linden points to the tribunal's reasoning in paragraph 9 which led them to reject the appellant's evidence and he submits that it is fundamentally flawed. The reasoning appears to be that if the appellant had informed the Benefits Agency that she was being paid £15 per week then the provisions of paragraph 79 [Regulation 42(6)] would have been applied to her case and benefit would be withdrawn. As it was not withdrawn, she cannot have informed the Agency of her earnings. The illegality consisted in her failure to advise the Agency of her change in circumstances. Mr Linden submits that that reasoning could not be faulted if only the general rule, as summarised in paragraph 6 of the tribunal's reasons, is applied. She was performing a service for the respondent and was being paid less than that paid for comparable employment in the area. £15 per week is scant reward for the 20-26 hours work which she said she did. Further, it could not be said that the means of the respondent were insufficient to pay more for the service. However, that reasoning overlooks the important exception to the general rule at the end of Regulation 42(6); that paragraph (Regulation 42(6)) does not apply to a claimant who is a volunteer if the adjudication officer is satisfied that it is reasonable for her to provide her services free of charge. In the particular circumstances of this case it may very well be that an adjudication officer would be satisfied that it was reasonable for the appellant to provide her services over and above the 1½ hours paid work as a volunteer free of charge. Mr Bishop has sought to persuade us that such a construction ought not be put on Regulation 42(6) but in our view Mr Linden's submission is plainly correct. In these circumstances we have concluded that the tribunal erred in its approach and on this ground we should have allowed the appeal and remitted the question of illegality to a fresh Employment Tribunal for reconsideration. However, Mr Linden goes further.

(2) Does illegality matter? Mr Linden submits, on the authority of Leighton v Michael , that even if the tribunal was entitled to conclude that the contract between the parties was tainted with illegality and that the appellant was a knowing party to the illegality, that does not prevent her from bringing a claim under the 1975 Act. We accept that on strict application of the reasoning of the majority in Leighton that submission is correct. The critical conclusion is to be found in the judgment of Mummery J at 1098 G-H, where he said:

"(11) Protection under the Act of 1975 against sex discrimination involves a reference to the contract to determine whether the person is "employed" within the meaning of the statute, but the claim of sex discrimination does not involve enforcing, relying on or founding a claim on the contract of employment. In brief, the right not to be discriminated against on the ground of sex is conferred by statute on persons who are employed. There is nothing in the statute to disqualify a person, who is in fact employed, from protection by reason of illegality in the fact of, or in the performance of, the contract of employment. There is nothing in public policy to disqualify a person from the protection of the statute, if the claim to the statutory protection is not founded on, or is not seeking to enforce, contractual obligations."

The minority member dissented from that broad approach, and would have upheld the appeal by Ms Leighton solely on the ground that she was not knowingly a party to the fraud on the revenue in that case. In his skeleton argument Mr Bishop maintained that Leighton was distinguishable on its facts from the instant case. We do not accept that submission. In oral submission he broadened his argument to contend that the majority reasoning in Leighton was wrong. Quite simply, a claim of sex discrimination under the 1975 Act, like a claim of unfair dismissal under the Employment Rights Act 1996 necessarily involves relying on or founding the claim on the contract between the parties. The doctrine of illegality applies equally to both causes of action. That submission took Mr Linden by surprise. He would have required an opportunity to research the point more fully before giving a considered response. Further, he invites us, in the interests of consistency to show reluctance to depart from a now well-established authority at this level. If Leighton is wrong it should be put right by the Court of Appeal; it is unhelpful to Employment Tribunals and litigants to be faced with conflicting decisions at the EAT level. He points out, correctly, that in both Johal and Hall , divisions over which I presided drew back from saying that the majority reasoning in Leighton was wrong, although reservations as to its correctness were expressed in Hall . We find ourselves in this position. We have no doubt that the Christie tribunal was bound by the majority reasoning in Leighton ; the cases of Johal and Hall did not alter that fact; they ought to have followed Leighton and decided that the tribunal had jurisdiction to hear the appellant's claim of sex discrimination on its merits. On appeal, we are not bound by the majority reasoning in Leighton . It is open to us to decline to follow it. However, in the interests of consistency we shall not do so. We have grave reservations as to the correctness of Leighton . We are unable to appreciate the distinction between statutory claims of unfair dismissal and sex discrimination for the purposes of applying the public policy doctrine of illegality. Both statutory causes of action depend upon the contract as a prerequisite for the claim. Nevertheless, we have not heard full argument and in these circumstances we are not prepared to accept Mr Bishop's invitation to depart from Leighton .

[9]It follows that on Mr Linden's second ground we shall allow the appeal and direct that the appellant's claim proceed directly to a full merits hearing. Leave to appeal At the close of oral argument we reserved our judgment in this case and invited provisional applications for leave to appeal, depending on the outcome of this appeal. Both parties applied for leave. In the event it is Mr Bishop's application which falls to be considered. We gladly grant leave, limited to the " Leighton point", which we regard as being of considerable public importance. We would welcome a determination by the Court of Appeal on this matter. Legal Aid taxation The appellant is legally aided. We have been greatly assisted by Mr Linden in this appeal as we have been by Mr Bishop. We shall make the usual order for Legal Aid taxation of the appellant's costs. We think it right to add that in our opinion it would be most unfortunate were Legal Aid not to be extended for the appellant's representation before the Court of Appeal. We repeat that in our view the appeal raises a point of general public importance. The Court of Appeal will benefit from the same assistance from counsel on both sides which we have enjoyed.