THE INDUSTRIAL TRIBUNALS

CASE REF:  03839/09

CLAIMANT:			Paula Venning

RESPONDENT:		Gerard Finch T/A Finch Dental

DECISION
The unanimous decision of the tribunal is that it has no jurisdiction to determine the claim of unfair dismissal.

Constitution of Tribunal:
Chairman:		Mr N Kelly

Panel Members:	Mrs M Gregg
			Mr J Kinnear

Appearances:
The claimant was represented by Miss Roisin Downey, Barrister-at-Law, instructed by Delaney & Company, Solicitors.
The respondent appeared in person.

THE ISSUES

1.	The issues which the tribunal had to determine were;-

(1)	whether the tribunal had jurisdiction to hear and determine the claim of unfair dismissal,

(2)	if so, whether the claimant had been unfairly dismissed by the respondent.

BACKGROUND

2.	The respondent is a dentist who runs a dental practice in Belfast.  At all relevant times, he employed another dentist, a trainee dental nurse (Inge Vanagait) and a receptionist (the claimant).

3.	The claimant alleged that her employment started in August 2007.  The respondent alleged that it started on 1 June 2007.  The respondent produced a payslip for the month of June 2007.  To the extent that it matters, the tribunal concludes, on the balance of probabilities, that the claimant’s employment started on 1 June 2007.  

4.	The claimant was employed as a receptionist.  She had, some 18 to 20 years ago, worked for two years in another dental practice as a dental nurse.  Since that time she had worked for various practices in Belfast as a dental receptionist and administrator.

5.	The claimant’s employment ended on Friday 12 December 2008.  The respondent told her that he could no longer afford to keep her and that she was redundant.  The respondent withheld her final week’s pay and one week’s pay in lieu of notice to set against unpaid income tax and national insurance contributions.  No claim was made to this tribunal in respect of breach of contract or unauthorised deductions from wages.  The only claim before this tribunal was a claim of unfair dismissal.  

6.	The respondent accepts that he did not follow the statutory dismissal procedure in terminating the claimant’s employment.  

CLAIMANT’S EVIDENCE

7.	The claimant stated that, while she had been employed as a dental receptionist by the respondent, she had on occasion assisted the other dentist in the practice as a dental nurse.  She specifically mentioned a period in August 2008 when Miss Vanagait was on holiday.  

8.	The claimant stated in evidence that her gross hourly rate was £8.  Apart from her first month of employment, this had always been paid monthly in cash in an ordinary envelope with no payslip.  She thought that statutory deductions for income tax and national insurance contributions were being made by the respondent.  Her pay fluctuated every month.  She didn’t know deductions were not being made in respect of income tax and national insurance contributions until she was told by the respondent on 31 October 2008 that the Inland Revenue had sought recovery of these sums.  She stated that the respondent had told her that his accountant would sort it out and that monthly deductions would be put in place to recovery the money owed to the Inland Revenue.

9.	The claimant produced an envelope which had included the October 2008 cash payment.  There was a manuscript endorsement on the envelope to state that the gross pay was £1,120.  That worked out at 35 hours at £8 per hour for four weeks.  

10.	The claimant stated that she was not aware of any financial difficulties in the practice but admitted under cross-examination that suppliers would not deliver dental equipment and materials unless paid on delivery in cash.  She accepted that this was unusual.  She also accepted that one major supplier telephoned her regularly and had asked her to tell the respondent to make payments in cash on an outstanding bill.  

11.	The claimant stated that the first she had heard of redundancy was at 4.50pm on Monday 8 December 2008 when the respondent told her that he could not afford to keep her in employment.  She was asked to come back on Friday 12 December 2008.  When she did so, she was told that her final week’s wages and her notice pay were being withheld by the respondent to set against her unpaid tax and national insurance contributions.

12.	After her employment with the respondent was terminated, the claimant had applied for two jobs as a dental receptionist but was unsuccessful.  She stated that she was currently unwell and had been advised by her GP not to go back to work.  

13.	In response to a question from Miss Downey BL, she stated that she was unsure of the difference between gross and nett pay.  

RESPONDENT’S EVIDENCE

14.	The respondent stated that he had first raised the question of possible redundancies in August 2008 at a meeting with the claimant and Miss Vanagait.  He had pointed out at that meeting that the surgery was facing significant financial difficulties.  

15.	He had received two statutory demands, one from the Inland Revenue and one from a firm of accountants, for approximately £22,000 in total, in late 2008.  He needed to meet these demands to avoid bankruptcy.  He produced copies of two bankruptcy petitions which were in fact served on him later in 2008.

16.	The only way that the respondent could meet these demands was by reducing costs.  He stated that dismissing the other dentist was not an option.  She was a substantial fee earner.  That other dentist required the assistant of a dental nurse.  Miss Vanagait was registered as a trainee dental nurse with the General Dental Council and was permitted to do this work.  The claimant was not registered with the General Dental Council and had told the respondent earlier that she was not interested in being registered as a trainee or dental nurse.  She was happy being a receptionist.  The only post that the respondent could do without was the receptionist post.  He took on those duties himself and still carries out those duties.  The post of receptionist remains unfilled. 

17.	He had thought about other options including reducing the claimant’s hours but the only way that he could make a sufficient difference in the practice finances was to make the claimant redundant.  

18.	The tribunal pointed out that in his response, the respondent had stated that he had applied the” last in first out” rule but that wasn’t what he was suggesting now in oral evidence.  The respondent stated that the fairness of” last in first out” was a factor in his decision but the response could have been more clearly expressed.

19.	The claimant was paid in cash and knew that she was being paid without any deductions in respect of income tax and national insurance.  

JURISDICTION

20.	The Court of Appeal considered the issue of illegality in the case of Hall  v  Woolston Hall Leisure Ltd [2001] ICR 99.  It stated;

	“There can be no doubt but that under English law a claim, whether in contract or in tort, may be defeated on the ground of illegality or, in the Latin phrase, ex turpi causa non oritur actio.  The classic statement of the principle was by Lord Mansfield CJ in Holman  v  Johnston [1775] 1 Cowp 341;

	“No court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act.  If, from the plaintiff’s own stating or otherwise, the cause of action appears to arise ex turpi causa, or the transgression of a positive law of this country, there the court says he has no right to be assisted.””

	The Court of Appeal went on to consider the decision in Newland  v  Simons & Willer (Hairdressers) Ltd [1981] ICR 521.  It stated that;

	“The question was whether an employee could complain of unfair dismissal in circumstances where the tribunal had held that the employee knew or ought to have known that her employer had failed to pay tax and national insurance contributions in respect of her wages.  The majority of the Employment Appeal Tribunal were of the view that, where both employer and employee knowingly commit an illegality by way of a fraud on the revenue in the payment and receipt of the employee’s remuneration under a contract of employment, the contract was turned into one prohibited by statute or common law and the employee was precluded from enforcing any employment rights which she might otherwise have against the employer.  The majority thought the essential question to be;

	“Has the employee knowingly been a party to a deception on the revenue?”

	The court further stated;

	“We have no doubt that Parliament never intended to give the statutory rights provided for by the relevant employment legislation to those who were knowingly breaking the law by committing or participating in a fraud on the revenue.”
          
            In Ashmore, Benson Ltd v Dawson Ltd [1973] 1 WLR 828, Lord Denning said;

                     “Not only did [the plaintiff’s transport manager] know of the illegality, he participated in it by sanctioning the loading of the vehicle with a load in excess of the regulations. That participation in the illegal performance of the contract debars [the plaintiff] from suing [the defendant] on it or suing [the defendant] for negligence.”
                      “But knowledge by itself is not enough. There must be knowledge plus participation-For those reasons I think the performance was illegal.”

21.	The claimant had been working for some 20 years and was not inexperienced.  She had previously been employed in a large dental practice in Belfast from 1995 to 2006.  Latterly she had been the practice manager in that dental practice.  She had been responsible for PAYE and NIC deductions for five dentists and approximately 10 staff.  She was very familiar with payroll deductions and with the rules relating to PAYE and NIC.

22.	The claimant was paid in cash monthly in an envelope with no payslip.  The amount paid corresponded to the £8 hourly rate identified with the claimant as her gross hourly rate.  That would have alerted the most disinterested employee to the fact that statutory deductions were not being made.  The claimant referred to fluctuations in her monthly pay but she was unable to specify the amount of those fluctuations and they were, in view of the tribunal, probably the result of some months having more pay days than others and the gross amount therefore fluctuating between months.

23.	The tribunal does not accept that the claimant was unaware that deductions were not being made during the approximately 15 months of her employment up to the end of October 2008 when she was told by the respondent that the Inland Revenue had sought payment of the unpaid tax and national insurance contributions.  The claimant was an experienced employee who was extremely familiar with payroll calculations and deductions.  It strains credulity beyond any reasonable breaking point to suggest that accepting monthly payments in cash in a plain envelope in amounts corresponding to her gross hourly rate did not indicate to her in the clearest possible way that statutory deductions were not being made in respect of income tax and national insurance.  The tribunal concludes that she was aware that deductions were not being made and that she actively participated in the continuation of this practice and the consequent loss to the Inland Revenue by agreeing to accept payment in this manner.  Her statement at one point that she didn’t understand the difference between gross pay and nett pay is not credible.  

24.	The tribunal concludes therefore that it has no jurisdiction to determine the claim of unfair dismissal.  

25.	If the tribunal had jurisdiction, the tribunal would have concluded that the dismissal was automatically unfair.  However since, in the view of the tribunal, it would have been inevitable that the claimant would have been selected for redundancy even if a fair procedure had been followed, a Polkey deduction of 100% in the compensation element would have been applied by the tribunal.

Chairman:

Date and place of hearing:	7 October 2009, Belfast.

Date decision recorded in register and issued to parties: