HM Revenue and Customs v Stringer (sub nom Commissioners of Inland Revenue v Ainsworth)

JurisdictionUK Non-devolved
JudgeLORD HOPE OF CRAIGHEAD,LORD RODGER OF EARLSFERRY,LORD WALKER OF GESTINGTHORPE,LORD BROWN OF EATON-UNDER-HEYWOOD,LORD NEUBERGER OF ABBOTSBURY
Judgment Date10 June 2009
Neutral Citation[2009] UKHL 31
Date10 June 2009
CourtHouse of Lords

[2009] UKHL 31

HOUSE OF LORDS

Appellate Committee

Lord Hope of Craighead

Lord Rodger of Earlsferry

Lord Walker of Gestingthorpe

Lord Brown of Eaton-under-Heywood

Lord Neuberger of Abbotsbury

Her Majesty's Revenue and Customs
(Respondents)
and
Stringer

and others

(Appellants)

Appellants:

Christopher Jeans QC

Michael Ford

(Instructed by Thompsons)

Respondents:

John Cavanagh QC

Adam Tolley

(Instructed by Inland Revenue Solicitors Office)

LORD HOPE OF CRAIGHEAD

My Lords,

1

I have had the advantage of reading in draft the opinions of my noble and learned friends Lord Rodger of Earlsferry, Lord Walker of Gestingthorpe and Lord Neuberger of Abbotsbury. I agree with them, and for the reasons they give I would allow the appeals, set aside the order of the Court of Appeal and restore the order of the Employment Appeal Tribunal.

LORD RODGER OF EARLSFERRY

My Lords,

2

The appellant, Mr Keith Ainsworth, complains that his former employers, Her Majesty's Revenue and Customs ("the Revenue"), wrongly made a deduction from his wages. Workers have been making complaints of this kind for centuries. More surprisingly, perhaps, for centuries also, the legislature used the Truck Acts to try to prevent employers from making arbitrary deductions - for example, for errors or misconduct - which would deprive the workers of the substance of their earnings. The case law on the subject was not always consistent and eventually Parliament passed the Truck Act 1896 which prescribed what deductions were permissible and in what circumstances. The long history of the legislation is conveniently set out in the speech of Lord Ackner in Bristow v City Petroleum [1987] 1 WLR 529, 532-535.

3

Bristow was the last case to be heard by this House under the Truck Acts for, by the second half of the twentieth century, it was widely recognised that the legislation needed to be updated. The existing Acts were therefore repealed and replaced by Part I of the Wages Act 1986. In 1996 Part I was re-enacted as Part II of the Employment Rights Act 1996 ("the 1996 Act"). The 1996 Act was a consolidation Act, which was passed on 22 May 1996 and came into force three months later.

4

Although the current legislation is modern, Parliament remains concerned to regulate the deductions which employers are entitled to make from an employee's wages. Section 13(1) of the 1996 Act accordingly provides:

"An employer shall not make a deduction from wages of a worker employed by him unless -

  • (a) the deduction is required or authorised to be made by virtue of a statutory provision or a relevant provision of the worker's contract, or

  • (b) the worker has previously signified in writing his agreement or consent to the making of the deduction."

Subsection (3) then goes on to explain what can count as a deduction from wages:

"(3) Where the total amount of wages paid on any occasion by an employer to a worker employed by him is less than the total amount of the wages properly payable by him to the worker on that occasion (after deductions), the amount of the deficiency shall be treated for the purposes of this Part as a deduction made by the employer from the worker's wages on that occasion."

By subsection (4), subsection (3) does not apply to a deficiency which is simply due to an error in computing the gross amount of the wages properly payable. Subject to subsection (4), any failure by an employer to pay any amount of wages properly payable to an employee amounts to a deduction from his wages for the purposes of section 13(1): Delaney v Staples [1991] IRLR 112, 113-115, paras 1-15, per Nicholls LJ.

5

If a worker considers that his employer has made a deduction from his wages in contravention of section 13, he is entitled to complain to an employment tribunal: section 23(1)(a). Section 23(2) contains a time-limit of three months for presenting such a complaint. But subsection (4) allows the tribunal to consider a complaint presented within a reasonable time after that period if it is satisfied that it had not been reasonably practicable for the complaint to be presented within the three-month period. In addition, section 23(3) allows a complaint in respect of a series of alleged deductions to be made within three months of the last deduction in the series.

6

For reasons which will be fully explained in the speech of my noble and learned friend, Lord Walker of Gestingthorpe, Mr Ainsworth complains that the total amount of wages paid by the Revenue to him in November 2002 was less than the total amount of the wages properly payable to him at that time. He argues that, because he was paid less than he was due, the Revenue was in breach of section 13(1). He therefore made an application to his local employment tribunal on 9 January 2003, one stated basis for his complaint being "unlawful deduction from wages". That was an application in terms of section 23(1)(a) and it was brought within the three-month period allowed by section 23(2). Mr Ainsworth also specified another basis for his application. I must come back to that.

7

Section 13(1) of the 1996 Act applies only to deductions from "wages". The contention for the Revenue is that the sum in question - which concerns holiday pay - does not count as "wages". More particularly, they argue that it does not fall within the definition of "wages" in section 27(1) and (2) of the 1996 Act:

"(1) In this Part "wages", in relation to a worker, means any sums payable to the worker in connection with his employment, including—

  • (a) any fee, bonus, commission, holiday pay or other emolument referable to his employment, whether payable under his contract or otherwise,

  • (b) statutory sick pay under Part XI of the Social Security Contributions and Benefits Act 1992,

  • (c) statutory maternity pay under Part XII of that Act,

  • (ca) statutory paternity pay under Part 12ZA of that Act,

  • (cb) statutory adoption pay under Part 12ZB of that Act,

  • (d) a guarantee payment (under section 28 of this Act),

  • (e) any payment for time off under Part VI of this Act or section 169 of the Trade Union and Labour Relations (Consolidation) Act 1992 (payment for time off for carrying out trade union duties etc.),

  • (f) remuneration on suspension on medical grounds under section 64 of this Act and remuneration on suspension on maternity grounds under section 68 of this Act,

  • (g) any sum payable in pursuance of an order for reinstatement or re-engagement under section 113 of this Act,

  • (h) any sum payable in pursuance of an order for the continuation of a contract of employment under section 130 of this Act or section 164 of the Trade Union and Labour Relations (Consolidation) Act 1992, and

  • (j) remuneration under a protective award under section 189 of that Act,

but excluding any payments within subsection (2).

(2) Those payments are—

  • (a) any payment by way of an advance under an agreement for a loan or by way of an advance of wages (but without prejudice to the application of section 13 to any deduction made from the worker's wages in respect of any such advance),

  • (b) any payment in respect of expenses incurred by the worker in carrying out his employment,

  • (c) any payment by way of a pension, allowance or gratuity in connection with the worker's retirement or as compensation for loss of office,

  • (d) any payment referable to the worker's redundancy, and

  • (e) any payment to the worker otherwise than in his capacity as a worker."

8

If the Revenue's contention is correct, Mr Ainsworth has no remedy under the 1996 Act. That does not mean, of course, that he or any worker in a similar position is without a remedy. It just means that his remedy must be found elsewhere, viz under the Working Time Regulations 1998 ("the 1998 Regulations") which confer the statutory right to holiday pay that Mr Ainsworth is claiming.

9

The origin of the 1998 Regulations lies in Council Directive 93/104/EC of 23 November 1993, concerning certain aspects of the organisation of working time. The directive, the policy of which was opposed by the British Government, was adopted under article 118a of the Treaty establishing the European Community. That article provided that Member States are to pay particular attention to encouraging improvements, especially in the working environment, as regards the health and safety of workers. Measures under it could be adopted by Qualified Majority Voting under article 189c. The then Government considered that the directive did not fall within the scope of article 118a. It should have been adopted, the Government contended, on the basis of article 100 or article 235 - both of which required a unanimous vote of the Council. The challenge to the validity of the directive on this, and certain other, grounds, failed, except in one minor respect. The European Court of Justice gave judgment upholding the directive on 12 November 1996: United Kingdom v Council of the European Union ( Case C-84/94) [1997] ICR 443. The time for transposing the directive into national law expired ten days later, on 23 November 1996. In fact, the 1998 Regulations, which effected the transposition, did not come into force until 1 October 1998. The 1993 directive was replaced by Council Directive 2003/88/EC of 4 November 2003, concerning certain aspects of the organisation of working time, but that change has no practical importance for the present dispute.

10

Article 7 of the 1993 Directive, which is identical to article 7 of the 2003 Directive, provided:

"1. Member States shall take the measures necessary to ensure that every worker is entitled to paid annual leave of at least four weeks in accordance with the conditions for entitlement to, and granting of, such leave laid down by national legislation and/or practice.

2. The minimum period of paid annual leave may not be replaced by...

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