Appeal No. UKEAT/0264/07/RN

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 7 March 2008

Before
THE HONOURABLE MR JUSTICE UNDERHILL
(SITTING ALONE)

MR M ASIF	APPELLANT

KEY PEOPLE LIMITED	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MR E BROWN 
(Appearing under the Employment Law Appeals Advice Scheme)	
For the Respondent	No appearance or representation by or on behalf of the Respondent	

SUMMARY
Practice and Procedure – Preliminary issues
Unlawful Deduction from Wages 
Claim for unpaid wages under Part II of the Employment Rights Act 1996 – At a pre-hearing review a Tribunal Chairman dismissed the claim because he found that the Claimant had been in breach of contract - Held: (1) that the Chairman had been entitled to deal with the substantive issue at the pre-hearing review with both parties’ consent; (2) that the Claimant’s breach did not give the employer a defence to a claim under the Act.

THE HONOURABLE MR JUSTICE UNDERHILL

1.	The Appellant is an IT specialist.  He normally supplies his services through a management or umbrella company called Giant Strongbox Limited.  The Respondents are an employment agency.  

2.	Just before Christmas 2005, a Mr Ellis of the Respondents, who had found work for the Appellant before and with whom he had been in contact about further possible job opportunities, contacted him by phone to offer him a contract working for the pharmaceutical company, Sanofi, in Paris, to start on 5 January 2006.  The Appellant says that he understood from that conversation that the contract was to be for one month and that the cost of accommodation would be covered.  On 23 December 2005 he received a confirmatory email from Mr Ellis in the following terms:
“Hi Mohammed 
Just to confirm the offer of a contract for you at Sanofi in Paris.  This will start on the 5th Jan (with a short break if you wish) and will continue till the 9th May.
The offer of an extension is likely but of course it is your decision as to whether you would like to stay.
The rate is 370 euros per day based on a 7 hour day.  Overtime is paid pro rata but would need to be agreed in advance.
I’m off to grab a bit of food now!!!
Speak to you soon.”

3.	That offer was for a longer period than that which it appears had been considered on the previous day.  It is the Respondents’ case that the rate of pay was also higher than had been agreed on the previous day and reflected the fact that for a longer contract the Appellant would be expected to find his own accommodation.  It is not however accepted by the Appellant that that was made clear to him.
4.	There must have been some further communications between Mr Ellis and the Appellant. The details are unclear but it is evident that in one way or another he accepted that offer.  The Respondents provided a draft contract dated 4 January 2006 in the standard form which they had used with the Appellant before.  This named the contractor as Giant Strongbox.  However the draft was not signed, apparently because Giant Strongbox had notified the Appellant that it could not support overseas contracts.  No doubt because of the imminence of the job, the question of the formal contract was not resolved before the Appellant left for Paris.

5.	The Appellant worked for Sanofi on 5 and 6 January, which were a Thursday and Friday, but it became clear that they were not going to be paying for his accommodation, as, he says, he had been given to understand that they would; and for that reason, he says, he told them that he could not continue to work and he came back to this country.  The Respondents have declined to pay him for the two days that he worked.

6.	The present proceedings are brought under Part II of the Employment Rights Act 1996, to recover the outstanding wages in the sum of £511.02, which is said to be the sterling equivalent of € 740, together with a small sum outstanding by way of unpaid travel expenses. 

7.	The Appellant initially obtained judgment in default but that was set aside.  The Respondents submitted a full defence with their ET3.  It took essentially two points - first, that the Appellant was not a worker within the meaning of the statute because the intention had always been that the contract would be with a management company who would supply his services; and, secondly, that even if the contract was with the Appellant personally he had been in breach of it by leaving after two days.  The Respondents denied that the contract provided for them to pay for his accommodation.  Their case was, as I have already adumbrated, that although the first discussion had been of a contract for a shorter period and at a lower rate under which accommodation would be provided, once the proposal had altered to the longer-term contract reflected in the email of 23 December it had been made clear that accommodation would not be provided, although the rates would be correspondingly higher.

8.	The Tribunal fixed a pre-hearing review for 16 November 2006.  Paragraph 1 of the Notice of Hearing relating to that review said this:
“A chairman has directed that a pre-hearing review is to be held.  The specific preliminary issue to be considered at the hearing is as follows: to determine whether the claimant was a worker for the purpose of Section 23 of the Employment Relations Act 1996 [recte the Employment Rights Act 1996].”

Directions were given for disclosure of documents and the preparation of a bundle in advance of the Hearing.  The parties duly attended the Watford Employment Tribunal on 16 November 2006.  The Appellant appeared in person.  The Respondents appeared by a director called Mr Donovan.  The Chairman was Mr Postle.  What then happened is succinctly stated in Mr Postle’s subsequently provided reasons as follows:
“In the Claimant’s claim form he was claiming for two days work at Sanofi (Paris) totalling £511.02.  Although it was a pre-hearing review on the issue identified above the Claimant attended with a bundle of documents consisting of 36 pages and the Respondents attended with a copy of the proposed agreement between the Respondents and the Claimant’s umbrella company Giant Strong Box Limited.  It appeared that the parties were able to deal with the substance of the claim at this hearing and my notes recalled no objection.  Accordingly, using the best use of judicial time, I proceeded not only to deal with the preliminary issue but the substantive issue as to whether the Claimant was entitled to the sum claimed.”

9.	On that basis the Chairman proceeded to hear evidence and submissions from both parties.  His conclusion was announced at the end of the hearing with oral reasons as summarised in a short judgment as follows:
“1.	The Claimant is a worker as defined by Section 230 of the Employment Rights Act 1996.
2.	The Claimant’s claim for unpaid wages is dismissed, the Claimant having agreed a 1 month contract only performed two days.
3.	The Claimant clearly was, therefore, in breach of contract as a result of which the Respondents were not paid by their client and in those circumstances it would be doing an injustice to the parties to find in favour of the Claimant.”
In other words, therefore, the Chairman found for the Appellant on the preliminary issue but found against him on the substantive questions in the case.  The Appellant did not at that stage ask for written reasons.  

10.	The Appellant appealed to this Tribunal.  At a preliminary hearing Judge Birtles directed that the appeal should go to a full hearing.  He also directed that the Chairman should provide written reasons.  This was duly done and Reasons were sent to the parties on 15 February 2008.  I have sympathy with the Chairman in having to write up Reasons more than a year after the event, but that is a consequence which sometimes arises from the present provisions.

11.	Before me the Appellant is represented by Mr Edward Brown of counsel.  The Respondents sent an email to the Tribunal on 10 December in the following terms:
“I write to confirm that I will not be opposing this Employment Appeal Tribunal.  If the Tribunal feel that Mr Asif has some validity in his argument then I will go to the full Employment Tribunal with witnesses and witness statements.  Mr Asif was working for a Company in Paris and it will mean flying these people in for the Appeal.”
In accordance with that position there has been no appearance before me today from the Respondents.  The position is not wholly satisfactory because Mr Donovan, the author of that email, appears to have been under a misapprehension as to the possible outcomes of the appeal.  He appears to believe that the worst case outcome for him was that there would be a further hearing in the Tribunal.  That is not necessarily the case, as will appear.  Strictly speaking, the view that he has taken is his own responsibility, but it might seen somewhat harsh to allow the case to proceed when one party is absent under a misapprehension of this kind.  However, my concern is mitigated by the fact that, as Mr Brown has confirmed, his skeleton argument was sent to the Respondents over three weeks ago: that makes it perfectly clear, if it was read carefully, that the Appeal Tribunal was being asked not simply to remit the case to the Employment Tribunal but, if it accepted Mr Brown’s submissions, to substitute its own conclusions and in effect allow the Appellant’s claim.  The Respondents were therefore on notice that that was the outcome being sought.

12.	Mr Brown’s skeleton argument puts the grounds of appeal under two heads.  

13.	First, Mr Brown submits that it was not open to the Chairman to decide the substantive issues in the case.  He refers me to rule 18 of the Employment Tribunal Rules of Procedure, headed “Conduct of Pre-Hearing Reviews”.  Paragraphs 1 and 2 of the rule read as follows:
“(1) Pre-hearing reviews are interim hearings and shall be conducted by a chairman unless the circumstances in paragraph (3) are applicable. Subject to rule 16, they shall take place in public.

(2) At a pre-hearing review the chairman may carry out a preliminary consideration of the proceedings and he may  - 
(a) determine any interim or preliminary matter relating to the proceedings;
(b) issue any order in accordance with rule 10 or do anything else which may be done at a case management discussion;
(c) order that a deposit be paid in accordance with rule 20 without hearing evidence;

(d) consider any oral or written representations or evidence;
(e) deal with an application for interim relief made under section 161 of TULR(C)A or section 128 of the Employment Rights Act.”

Paragraph 5 reads as follows:
“(5) Notwithstanding the preliminary or interim nature of a pre-hearing review, at a pre-hearing review the chairman may give judgment on any preliminary issue of substance relating to the proceedings. Judgments or orders made at a pre-hearing review may result in the proceedings being struck out or dismissed or otherwise determined with the result that a Hearing is no longer necessary in those proceedings.”
Mr Brown submits that, whatever exactly is meant by the reference in paragraph 5 to a Chairman being entitled to give judgment “on any preliminary issue of substance”, that cannot extend to the present case, where the Chairman purported to decide the entire claim.  He also points out that the Appellant was not led to expect that any substantive point would be decided save for the issue of whether he was a worker.  

14.	That submission seems to me to be good as far as it goes; but in my judgment it would not preclude a Chairman from proceeding to determine the substantive issue in a case if he had the unequivocal consent of the parties to his taking that course and it was not unfair to do so.  Such a course will at least sometimes be sensible and in accordance with the overriding objective, as the Chairman evidently believed that it was here.  It is only of course available where the case is of a type which the Chairman (or, now, an Employment Judge) has jurisdiction to determine on his or her own, but a claim under Part II of the 1996 Act is such a claim - see section 4(2) and 3(c) of the Employment Tribunals Act 1996.  In such a case the Chairman would, in fact, be conducting a Hearing under rule 26, the parties having agreed to waive any formalities as to prior notice and so forth.  That is, in effect, what the Chairman says happened here - see the extract from his Reasons to which I have referred.  Mr Brown was not able to put before me any evidence from the Appellant which would justify me in not accepting the Chairman’s account of what occurred or in finding that there may have been some misunderstanding such as could give rise to an injustice.  It is, frankly, pretty unlikely that the Chairman conducted the enquiry which he evidently did without the parties fully appreciating that he was intending to decide the substantive issues in the case.  It was perhaps less than ideal that he did not obtain and record the express consent of the parties to his taking this course, having explained to them that they were entitled to insist on a separate substantive hearing.  In the absence of such precautions there is a risk that the decision will subsequently be held to have been unfair and/or conducted without jurisdiction; but in the present case, on the material before me, I do not believe that to be the case.  

15.	I therefore reject the first ground of Appeal.

16.	I turn to Mr Brown’s second ground of appeal, which is that the Chairman was not entitled to dismiss the Appellant’s claim on the basis set out at points 2 and 3 in the formal judgment.  Those paragraphs are now amplified in the written Reasons, but those are, as one would expect, substantially to the same effect.  

17.	I have to say that the Reasons are not particularly clearly structured, and there are some obscurities in them as to precisely what the Chairman intended to decide on certain factual points or his grounds for doing so; but that is venial given that, as I have already observed, he was having to produce his Reasons over a year after the event.  However, the crucial points which I should note can be summarised as follows:
	(1)	The Chairman found that the Appellant had entered into a contract to provide services for a period of at least a month and perhaps until 9 May.
	(2)	It is also reasonably apparent that he found that the terms of the contract, at least as regards rates, are to be found in the email of 23 December.
	(3)	The Chairman found that the Appellant had no justification for leaving the job after two days: he seems to have believed - though there is not an explicit finding to this effect - that the real reason was that he had been offered a better job elsewhere. He therefore rejected the Appellant’s point based on the accommodation issue.  There are, however, no clear findings as to what had been said or agreed between the parties about covering the cost of accommodation.
	(4)	The Chairman drew attention to the existence in the draft contract of provisions governing claims for damages by the Respondent when the Appellant had failed to perform his duties - though again there are no entirely clear findings as to the relevance or effect of those provisions.

Having made those findings, the Chairman said at paragraph 19 of the Reasons:
“If an individual freely enters into a contract and then fails to perform, the contract in this case giving up after two days knowing the contract was to run until 9 May, he clearly is in breach.  In those circumstances it is inequitable for the Claimant to seek recovery in circumstances where he has singularly failed to perform his part of the bargain.”
18.	Mr Brown submits, in my judgment plainly correctly, that the Chairman was not entitled to refuse the Appellant relief under Part II of the 1996 Act simply because he found that it would be “unjust”- to use the term in the original judgment (or “inequitable”, to use the term in paragraph 19 of the Reasons) - for the Appellant to recover.  However, I do not think that that fairly reflects the Chairman’s reasoning.  As I read the Reasons as a whole, he was making one or both of two points: 
(a) that the Appellant was disentitled to relief because he had himself not fully performed his side of the contract;
(b) that the Respondents had a cross-claim against the Appellant for breach which extinguished the amount of his claim for the two days that he worked.

19.	Even assuming that both those points were open to the Chairman on his findings of fact, which may be debatable, neither is in my judgment capable of giving the Respondents any defence in law to the Appellant’s claim.  

20.	As to point (a), the consideration payable to the Appellant was plainly apportionable so as to entitle him to be paid on a day-by-day basis for work done.  That can in my judgment be inferred from the terms of the email of 23 December, but if necessary recourse could also be had to the Apportionment Act 1870.  

21.	As to point (b), however strong the Respondents’ cross-claim might be, Part II of the 1996 Act does not allow an employer to set off cross-claims for damages against the worker against wages otherwise due.  

22.	It follows, in my judgment, that the matters relied on by the Respondents by way of defence were not capable of giving rise to any defence in law to the claim as advanced; and this appeal must therefore succeed, not simply to the extent of requiring a remission but to the extent of ordering payment of the sum claimed by the Appellant by way of wages.

23.	I have not found it necessary in this judgment to deal with a further point advanced by Mr Brown based on the terms of the Conduct of Employment Agencies Regulations 2003.  That point was not developed before the Tribunal and I should have been very reluctant to have allowed the Appellant to advance it for the first time on appeal.  However, on the view that I take of the other issues in the case, I need not reach any final view about that.

24.	I will disallow the travel expenses claim because I am not satisfied that that can fall under Part II of the 1996 Act.