Soteriou v Ultrachem Ltd
| Jurisdiction | England & Wales |
| Judge | His Honour Judge Altman,judge altman |
| Judgment Date | 23 April 2004 |
| Neutral Citation | [2004] EWHC 983 (QB) |
| Court | Queen's Bench Division |
| Docket Number | Case No: QB/2003/APP/0472. HQ0100001 |
| Date | 23 April 2004 |
[2004] EWHC 983 (QB)
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
His Honour Judge Altman
Case No: QB/2003/APP/0472. HQ0100001
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This is an appeal from the decision of Master Leslie. On the 11 th June 2003, he struck out the existing claim, ordered judgment to be entered for the defendants, and refused permission to the Claimant to amend the Particulars of Claim to allege tortious conspiracy, unlawful interference with the claimant's business and wrongful inducement of breach of contract. This judgment is of considerable length; whilst the issues are fairly clear-cut in themselves, and whilst this is an appeal from a striking-out order, I have been referred to a very substantial body of authorities and substantial arguments have been addressed to me.
The claim is for wrongful dismissed for £50,000 towards a car, two year's loss of notice of £200,000, one year's lost study leave of £100,000 and £8,460 for reimbursement of services, and general damages. An Employment Tribunal has previously found that the contract of employment was unenforceable due to illegality and issues arise, amongst others, as to whether the High Court is bound by that finding. This involves an examination in particular of the law as to illegality and as to 'res judicata', and issues as to whether the effect of illegality in English law and the striking out procedure offend Articles 6 and 14 and Article 1 of the First Protocol of the European Charter of Human Rights.
The claimant worked as accountant for the defendants from August 1987 until 17 th January 2000 when his engagement was terminated without notice. He maintained throughout that he was self-employed. In 1998 this was investigated by the Inland Revenue. The claimant had meetings with them and wrote letters representing a series of facts in support of his contention that he was self-employed which were accepted by the Inland Revenue.
On the 13 th April 2000, the claimant applied to the Employment Tribunal alleging unfair dismissal a remedy available to a former employee.
The claimant wrote to the Inland Revenue just under 6 weeks before the hearing in the employment tribunal in November 2000; in the letter that was apparently not disclosed subsequently to the tribunal, he effectively withdrew his earlier representations of fact, stating that he had been an employee and alleging
"I was pressurised by Mr Brinton (director of the Defendants) to make a false statement and regrettably I felt that I was cornered at the time and could not find the way to resist his pressures and thus gave in to making a false declaration".
The claimant did not claim for wrongful dismissal before the tribunal, giving as the reason the jurisdictional limit of £25,000, and notifying the defendants he reserved the right to claim wrongful dismissal subsequently; they in turn responded that they would raise the defence of "res judicata".
Before the employment tribunal, there was a preliminary hearing of the two contentions of the defendant, first that the claimant was self-employed and secondly that the contract upon which the claim was based was tainted with illegality. In the absence of any other defence these issues would in fact be determinative. The Employment Tribunal heard evidence over 2 days, received detailed submissions from both party's counsel, gave informal notice of their decision in December and promulgated their decision on 9 th January 2001. The claimant had already commenced these High Court proceedings on 2 nd January 2001.
The decision of the Employment Tribunal was that:
"The applicant was an employee of the respondents, but that the contract of employment was tainted with illegality so that he cannot rely upon it in bringing proceedings for unfair dismissal".
The Employment Tribunal found that the claimant was a skilled professional advisor, well aware of the legal and taxation implications of his self employed status who may well have advised his employer of the danger of getting it wrong. They concluded that what the claimant had said to the Employment Tribunal was in stark contrast to what he told the Department of Social Security inspector, and that the statements furnished by him to the benefits agency were either "half truths or downright untruths". The employment tribunal concluded that the benefits to the claimant of self-employment status were sufficiently substantial and attractive to lead him to hold himself out as self-employed quoting the claimant's own calculation that he was £20,000 better off on gross fees of £96,500 if he were self-employed. In particular the Tribunal noted first the more generous treatment of expenses for tax purposes, secondly the receipt of fees paid gross with a liability to tax only twice a year, thirdly the facility to set a proportion of home expenses against income tax and fourthly the fact that in this case the claimant reclaimed VAT on a wide range of personal expenses, including substantial expenditure on home improvements. The Tribunal observed;
"little wonder therefore that the claimant, Mr Soteriou, should have been keen to retain his self employed status when it was challenged by the Contributions Agency"
In addition the Employment Tribunal found that there was no concluded agreement in respect of the purchase of the motorcar that forms part of the claim in the present proceedings.
Having found that the claimant was in fact an employee at the material time, the Employment Tribunal dealt with the illegality issues:
"If as a consequence of a finding of employment status, Mr Soteriou were to loose his VAT registration, that too might result in penalties against him alone (the respondents would not be involved here) as well as a loss of the benefits of effective VAT exemption on a number of private purchases. We find that far from being a victim of Mr Brinton's threatening and overbearing manner and being forced to maintain a status of self-employment for fear of loosing his job, we conclude that Mr Soteriou was the prime mover in ensuring that his self employed status was preserved following the contributions agency investigation. Not only that, but he made fraudulent statements to the investigators, knowing full well that the true position would have prejudiced that status. Mr Soteriou had sought to portray Mr Brinton as "a fraudster" (his own word) who forced Mr Soteriou to go along with his tax evasion tactics. While Mr Brinton was no doubt aware that some of what Mr Soteriou was telling Mr Everett (the expert engaged to advise them on self-employed status) was wrong or at least questionable, the main blame lies with Mr Soteriou. Accordingly we find that it would be against public policy to allow Mr Soteriou to come to this tribunal and try to claim the benefits accorded to employees under the employment rights legislation. He volunteered to exclude himself from the employment protection system from the outset, he made no effort to regularise his position when it might have been argued that his status had changed, and he positively misrepresented the position to the authorities when his status was challenged. We can only agree with Miss Eady that Mr Soteriou cannot succeed in defeating the taint of illegality and that having knowingly committed a fraud under a contract in the way that Mr Soteriou has acknowledged he cannot now come to this tribunal to pursue a legal claim based on that contract. The application is therefore refused in all respects."
In due course the claimant appealed to the Employment Appeal Tribunal and the appeal was dismissed after a full hearing. His application for permission to appeal to the Court of Appeal was in due course rejected.
RES JUDICATA AND ABUSE OF PROCESS
Ground 4 of the Grounds of Appeal is that Master Leslie wrongly held that he was bound by the findings of law of the Employment Tribunal as to the application of the doctrine of illegality in English common law to contractual claims made by the claimant in these proceedings.
The learned Master held;
"…the claim here… is based upon the same contract as that which was decided was tainted with illegality in the employment tribunal. It seems to me therefore that the starting point is that the parties are bound by the findings of the employment tribunal."
The learned Master then went on to identify the factual findings by the Employment Tribunal as to the serious fraud and lies the claimant told to the Inland Revenue investigator. These were findings not of law, but of fact, or what Diplock LJ as he then was described as 'facts or the legal consequences of facts' in Mills v Cooper to which I later refer. The Master found that the employment tribunal had found fraud and illegality in relation to all dealings with the Revenue by the claimant and by the defendants during the course of the claimant's employment from sometime between 1996 or 1998, and 2000. He said that illegality was sufficient to render the contract illegal. He went on:
"It is clearly the same contract and to any extent that different claims are now made based upon that contract, it is, in my judgment, nevertheless the same contract and the parties are bound by those findings. It follows therefore that the contract is illegal and unenforceable."
The learned Master recognised that the employment tribunal were focusing on different aspects of the contract, he recognised that separate property rights...
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