Leiper v Hegarty Cleaning Services & Anor  (Jurisdiction/Illegality)  (19 June 2002)
THE INDUSTRIAL TRIBUNALS 

CASE REF:	04580/99WO, 04581/99WS,
04582/99BC, 04583/99WO

APPLICANT:		Walter Leiper

RESPONDENTS:		1. Hegarty Cleaning Services
				2. Hugh Hegarty

DECISION
The unanimous decision of the tribunal is that the contract of employment was tainted with illegality.  Accordingly the tribunal dismisses the originating application.

Appearances:

APPLICANT:		Mr M Reid of the NI Law Centre appeared for the applicant.

RESPONDENTS:		Mr I Cooper appeared for both respondents.

1.	The parties were agreed that the tribunal should look at three preliminary issues, namely

(i)	whether the contract of employment was tainted with illegality

(ii)	whether the applicant was self employed and not entitled to claim unfair dismissal, and

(iii)	whether there was a dismissal at all.

2.	The tribunal heard evidence from the applicant and accepted that he was employed as a janitor/cleaner with the respondent company from October 1996 until 24 September 1999.  The proprietor of the business, a Mr Hill, had died suddenly in February 1999.  The applicant had continued working throughout this period until the business was taken over by Mr Hegarty in June 1999.  The agreement with Mr Hill was that the applicant would work for 24 hours over a Saturday and Sunday cleaning the floors, canteen and toilets at the Transtec site in Campsie.  This contract was then reduced to 16 hours and the applicant was paid at the minimum wage rate which was then £3.60 an hour.  Wages records produced by the respondent show that the applicant received a weekly payment of £57.60.  It was agreed by the applicant that there were no deductions for tax or national insurance from this sum.

3.	The applicant also worked from Monday to Friday for Gardner Merchants at the Desmonds Factory site in Drumahoe in County Londonderry.  The company was subsequently taken over by Sodexho and the tribunal saw records which showed that the applicant was paid a weekly sum from which income tax and national insurance deductions were made.

4.	The applicant’s representative in submissions stated that the applicant believed that the income tax and national insurance which were deducted from his wages at Sodexho covered the amount that was paid in addition to him by the respondent.  However the tribunal considered its notes of evidence from the applicant and did not find he actually made that case.  The applicant stated to the tribunal that there was no discussion regarding tax and national insurance and he did not get paid for any holidays by Mr Hill.

5.	It was accepted by the tribunal that the applicant worked Saturdays and Sundays and was more or less left to his own devices.  He also did other jobs for Mr Hill which involved cleaning carpets and polishing floors for individuals and companies and he was paid on a job rate for these.  There was no mention made of tax and national insurance being deducted from them but these arrangements which the applicant had with the respondent do not concern the tribunal.  The tribunal was concerned with the contract of employment between the two parties.

6.	A significant part of the applicant’s evidence was that he had run his own businesses in the past.  He had two grocery businesses and been in a partnership with a lady running a bar.  All these business had finally been declared bankrupt.  The applicant admitted frankly that he had attended court proceedings in the High Court in Belfast which were derived from a petition of the Inland Revenue because of his failure to pay taxes due on the businesses.

7.	The tribunal considers this to be a significant feature of the case because the applicant is an intelligent man who has had “a brush” with the Inland Revenue in the past and it would have made him all the more aware of problems in the future if he did not declare tax on his earnings.  To try and persuade the tribunal that he believed his regular employer Sodexho was even aware at the relevant time that he was working for the respondents is quite behind credence.  We are satisfied that the applicant was well aware that his work at the weekend for Mr Hill and then Mr Hegarty was an illegal contract.  It was more over and above what he was earning Monday to Friday and was useful to him in terms that it was not a taxed sum.  We are quite satisfied that he was aware that he should have been paying tax and deductions on it.  Needless to say in a case like this it does not reflect well on the respondent either that he participated in a fraud on the Inland Revenue as well as the applicant.

8.	The applicant’s representative referred us to the case of Hall -v- Wolsten Hall Leisure Ltd IRLR 2000 578.  He submitted that even if we did find that there was an illegal contract the applicant could continue with a claim of unfair dismissal as public policy did not bar the employee from recovering compensation.  However, what the applicant’s representative did not point out was that Mrs Hall had a claim for sex discrimination and for dismissal under that heading.  The Court of Appeal held “sex discrimination which is unlawful under the Sex Discrimination Act is a statutory tort.  Accordingly the correct approach of an employment tribunal in a sex discrimination case should be to consider whether the applicant’s claim arises out of or is so inextricably bound up with her illegal contract that the court could not permit the applicant to recover compensation without appearing to condone that conduct.  In the present case the illegality consisted only of the employer’s mode of paying wages.  The applicant herself was not guilty of any illegal conduct and she received no benefit from the employer’s failure to deduct tax and national insurance and to account for the same to the Revenue.”  In Mr Leiper’s case the tribunal are not considering a claim of sex discrimination but a claim of unfair dismissal which relates directly to the contract of employment.  The tribunal is aware that Mr Leiper did benefit from not declaring his additional earnings to the Inland Revenue.  He benefited by regarding the sum of £57.60 every week as an additional untaxed source of income because if he had declared it together with his Monday to Friday wage he would have had to pay additional tax.  The tribunal referred to Harvey on Industrial Relations and Employment Law Volume 1 at para 76 where the commentator states as follows -

	“However if the employee is involved in the illegality to such an extent as to be debarred from relying on the contract it is difficult to see why in law, reason or justice he should be able to claim any statutory right founded on the contract, see Leighton -v- Michael 1996 IRLR 67.”

9.	The tribunal announced its findings to the parties and in the circumstances did not consider the other two issues which were discussed at the outset of the hearing as the tribunal does not have jurisdiction to deal with the matters any further and the originating application is dismissed.

____________________________________
M P PRICE
Vice-President

Date and place of hearing:	17 June 2002, Strabane

Date decision recorded in register and issued to parties: 19 June 2002