Fegan v Department of Health for Scotland
| Jurisdiction | Scotland |
| Judgment Date | 04 July 1935 |
| Docket Number | No. 82. |
| Date | 04 July 1935 |
| Court | Court of Session (Inner House - First Division) |
1ST DIVISION.
InsuranceNational Health InsuranceEmployed personsWidows' pensionsBookmaker's clerk employed in both legal and illegal betting businessLegal business predominatingWhether employed under "contract of service"ContractPactum illicitumNational Health Insurance Act, 1924 (14 and 15 Geo. V, cap. 38), sec. 1 (1) and First Sched., Part I (a)Widows' Orphans' and Old Age Contributory Pensions Act, 1925 (15 and 16 Geo. V, cap. 70), secs. 2 (1), 3 (1) and (3).
The Widows' Orphans' and Old Age Contributory Pensions Act, 1925, entitles the widow of a person who was "insured" at his death to receive a widow's pension, and the National Health Insurance Act, 1924, provides for the insurance of all persons of sixteen and upwards who are employed "under any contract of service."
A bookmaker, who engaged in both credit and ready-money betting business, the latter in contravention of the Betting Act, 1853, sec. 1, employed his son to act as his clerk. Most of the son's duties related to the credit betting transactions, but it was the intention of both parties that he should also assist, and he did in fact assist, in the ready-money betting business. Contributions under the National Health Insurance Acts were paid in respect of the son.
On the son's death, a claim by his widow to receive a widow's pension was rejected by the Department of Health for Scotland, on the ground that the deceased was not employed under a lawful "contract of service," and, accordingly, was not an insured person within the meaning of the Act of 1925. The widow having appealed against this determination,
Held (diss. Lord Fleming) that the deceased was employed under a "contract of service" within the meaning of the National Health Insurance Act, in respect that employment as a credit bookmakers' clerk was an ordinary legitimate contract of service, and that neither was the basis of the contract in question the carrying out of an illegal purpose nor did the contract contain any express term which made it necessary that the clerk should act unlawfully; and, accordingly, that he was an "insured" person within the meaning of the Act of 1925; and appeal sustained.
Opinion reserved, per the Lord President, as to the title of the Department of Health to question the legality of the deceased's contract of service in proceedings with his widow.
Mrs Jane Fegan applied to the Department of Health for Scotland claiming to be entitled to a widow's pension and children's allowance under the Widows' Orphans' and Old Age Contributory Pensions Acts, 1925 to 1932, in consequence of the death of her husband, Daniel Fegan, who died on 15th May 1934.
It appeared that, from July 1928 until his death, the applicant's husband had been employed by his father, James Fegan, in connexion with the business of turf accountant carried on by the latter at 109 Giles Street, Leith. James Fegan's business comprised both credit betting and ready-money betting transactions. The ready-money betting business involved a contravention of the Betting Act, 1853,1 section 1, as applied to Scotland by the Betting Act, 1874,2 section 4. James Fegan himself suffered from deafness, and found it necessary to employ a clerk to attend to his office telephone and to keep records of bets made with him by his credit customers. It was chiefly these duties which his son, the deceased, discharged. But it was also the intention of both parties that the deceased's duties under his contract should include the ready-money betting transactions. The deceased's wages amounted, at first, to 2 weekly, and, latterly, to 2, 10s. Insurance contributions under the National Health Insurance Acts, 1924 to 1928, were paid by or in respect of the deceased from 2nd July 1928 until 31st December 1933. The deceased was a member of the Prudential Approved Society up to the date of his death, and, throughout, was conceded all benefits under the National Health Insurance Acts.
It was not in dispute that the applicant complied with all the conditions precedent to her obtaining a pension and allowance, provided her husband was engaged in employment within the meaning of the National Health Insurance Act, 1924.3 The Department of Health, however, rejected the claim on the ground that the deceased had not been engaged in such employment.
The applicant then applied for the question at issue to be submitted to a referee for determination. In connexion with the reference, the Department submitted a statement to the referee in, inter alia,the following terms:"At least 104 contributions were paid by or in respect of [the deceased] from 2nd July 1928 to 31st December 1933. The Department do not admit that these last-mentioned contributions were in respect of insurable employment. The Department submit that from 1922 or 1923 he was engaged in business on his own account as a bookmaker, or, alternatively, that if he were employed by his father the employment was illegal, and was not employment within the meaning of the National Health Insurance Act. It is explained that the applicant's husband had no title to become a voluntary contributor in 1928 either in his own right or by virtue of the insurance of his wife. He was not an insured person at the date of his death. The contention of the Department is that, as the condition specified in section 3 (1) of the Widows' Orphans' and Old Age Contributory Pensions Act, 1925,4 is not satisfied, the applicant is not entitled to a widow's pension."
After taking evidence and hearing parties, the referee (Mr J. M. Hunter, K.C.), on 8th February 1935, issued the following note:"The applicant in this case would apparently be entitled to a widow's pension, provided her late husband's employment with his father between 1928 and the date of his death was insurable employment. The father is a bookmaker, and for the purposes of his business had an office in which his son, Daniel Fegan, was employed as a clerk during the period mentioned.
"The question is whether this was insurable employment, and, in particular, whether it was employment under a contract of service within the meaning of the National Health Insurance Act, 1924 (14 and 15 Geo. V, cap. 38), First Schedule, Part I (a). I do not think it is doubtful that contract of service means a lawful and valid contract of service. In this connexion, it is significant that it was considered necessary under the Workmen's Compensation Act, 1925 (15 and 16 Geo. V, cap. 184), section 3 (3), to provide that, where, in proceedings for recovery of compensation it appeared that the contract under which the injured person was working was illegal, the judge should have a discretion to deal with the matter as if the injured person had been working under a valid contract. Without reference to that provision, I should have no doubt as to the meaning of the words contract of service, but,
if support be needed for the view I have expressed above, the said section supplies it.
"The point in this case, therefore, is, Was Daniel Fegan employed by his father under a lawful contract of service? I have no doubt, on the evidence which was led, that part, at least, of the business carried on in the said office constituted a contravention of section 1 of the Betting Act, 1853 (16 and 17 Vict. cap. 119) (which was applied to Scotland by the Betting Act, 1874 (37 and 38 Vict. cap. 15)), in respect that, to use the language of the section, the business consisted in, inter alia, receiving money on behalf of the occupier of the office as the consideration for an undertaking to pay money on events relating to horse races. I am also satisfied that Daniel Fegan's employment to a substantial extent consisted in receiving such money and doing clerical work incident to such receipt, and, further, that it was the intention of both parties that his duties under the contract should include this illegal work. On the other hand, I think it is clear that his employment, to a preponderating extent, consisted in the clerical work incidental to the credit betting branch of the business, which was, of course, perfectly legal.
"The question thus comes to be whether it is sufficient to render a contract of service invalid that some part of the work which the servant is employed to perform consists in a breach of a statute, although the bulk of the work is lawful. So far as I have been able to discover, this particular question has not been decided in Scotland, but, on principle, I think the point is clear. In Lord Skerrington's edition (the third edition) of Lord Fraser's book on Master and Servant (at p. 27), the law is stated as follows, viz.:If the consideration of a promise be in part illegal, and the promise be not divisible and apportionable to the several parts of the consideration, the whole is void, and certain English cases in support of this proposition are referred to. In the present case it is impossible to separate the contract into parts of which one had reference only to the performance of duties which were lawful. The contract must therefore stand or fall as a whole. I am, accordingly, of opinion that the said contract of service was wholly invalid, and that consequently Daniel Fegan's employment with his father was not insurable employment.
"It will be observed that what made the employment illegal was contravention of the Betting Act, 1853 (16 and 17 Vict. cap. 119), not contravention of the Street Betting Act, 1906 (6 Edw. VII, cap. 43), of which there was no evidence whatever within the relevant period. Consequently the section of the latter...
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