West Law Report

Misrepresentation needed to make contract illegal

Posted in illegality (contract), Misrepresentation, Times Law Report by mrkooenglish on June 9, 2008

From The TimesJune 2, 2008

Misrepresentation needed to make contract illegal
Court of Appeal

Published June 2, 2008

Enfield Technical Services Ltd v Payne Grace v B. F. Components Ltd

Before Lord Justice Pill, Lord Justice Maurice Kay and Lord Justice Lloyd

Judgment April 22, 2008

Where an employee had been treated as self-employed but was later found to have been employed, he was not necessarily precluded from claiming unfair dismissal on the ground of illegality, since in order for a contract of employment to be unlawfully performed there had to be some form of misrepresentation as to the facts.

The Court of Appeal so held in two cases heard together when dismissing appeals by the employers, Enfield Technical Services Ltd and B. F. Components Ltd, against the Employment Appeal Tribunal (Mr Justice Elias, President, Mrs J. M. Matthias, and Mr D. Norman) ([2008] ICR 30) which: (i) dismissed Enfield’s appeal against the decision of a Reading employment tribunal that the claimant employee, Mr Ray Payne, was not precluded from making a claim for unfair dismissal since he was an employee whose contract of employment was not illegal; and (ii) allowed the appeal of the claimant employee, Mr Ian Grace, against the decision of a Brighton employment tribunal which held that he was precluded from making a claim for unfair dismissal since his contract of employment was illegal.

In both cases, the claimants had started work on a self-employed basis and the Inland Revenue had treated them as such for tax purposes. Subsequently, however, their respective employers indicated that they were employed. On being dismissed from employment, the claimants brought claims for unfair dismissal.

The employers in each case argued that the claimants were precluded from making such claims since they were unable to establish a continuous period of employment of not less than one year. Alternatively, they argued, any contract of employment that did exist could not be relied on since it was tainted with illegality on the ground that the parties had represented to the Inland Revenue that they were self-employed for tax purposes.

Mr Marcus Pilgerstorfer for both employers; Mr Stephen Roberts for Mr Payne; Mr Thomas Kibling for Mr Grace.

LORD JUSTICE PILL said that the appeal tribunal was correct when it stated that the essential feature of all the previous cases where contracts of employment were found to be illegal was that the parties had knowingly entered into arrangements which had, to their knowledge, misrepresented the facts of the employment relationship.

There had to be some from of misrepresentation, an attempt to conceal the true facts of the relationship, before the contract was rendered illegal.

Although there could be tax advantages for the claimants in claiming to have self-employed status, that of itself did not render a contract, subsequently found to have been a contract of employment, unlawfully performed.

A contract which was unlawfully performed due to misrepresentation was distinguishable from the situation in which there had been an error of categorisation, as in the instant cases, unaccompanied by such false representations even if the employee had claimed the advantages of self-employment before the dispute arose.

Lord Justice Maurice Kay agreed and Lord Justice Lloyd delivering a concurring judgment.

Solicitors: Natwest Mentor Services, Solihull, and Rice-Jones & Smiths; Berry Smith LLP, Bar Pro Bono Unit.

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