Soteriou v Ultrachem Ltd & Ors

On a second appeal, the Court of Appeal may entertain only an arguable error of law. It cannot reopen factual findings or the tribunal’s evaluation of the evidence. The general rule is that a claimant cannot rely on an illegal employment contract to enforce contractual employment rights. A limited exception exists for statutory discrimination claims, because such claims do not depend on enforcing, relying on, or founding the claim on the contract. That exception does not extend to a claim which is substantively founded on an illegal employment arrangement.

Mr Soteriou had initially been treated as self-employed but was found by an Employment Tribunal to have become an employee. The tribunal also found that he knowingly misrepresented his employment status to the Contributions Agency to preserve favourable tax treatment, and held that the contract was unenforceable for illegality.

The Employment Appeal Tribunal dismissed his appeal, holding that no error of law had been shown. Mr Soteriou sought permission to appeal to the Court of Appeal, arguing that the findings were insufficient and relying on recent authority concerning discrimination claims. The central issue was whether there was an arguable point of law warranting a second appeal.

1. Permission refused. The proposed appeal was, in substance, an attempt to reopen factual conclusions reached by the Employment Tribunal. On a second appeal, both appellate courts could entertain only questions of law. The proposed challenge had not been advanced before the Employment Appeal Tribunal and had no realistic prospect of success.
2. The Employment Tribunal was entitled to determine Mr Soteriou’s proper status from the evidence, including the change from self-employment to employment, and to find that both parties knew the arrangement could have been regularised. The tribunal was also entitled to take account of his deliberate misrepresentations to the authorities and the benefits he obtained from preserving the self-employed classification.
3. The Court recognised the established exception in sex discrimination cases, illustrated by Leighton v Michael [1995] ICR 1091 and Hall v Woolston Hall Leisure Ltd [2000] 4 All ER 787. Such claims do not involve enforcing, relying on, or founding the claim on the contract of employment. The present claim fell within the ordinary rule because it sought to rely on an employment contract tainted by illegality.
4. The order was: permission to appeal refused.

• Court of Appeal (Civil Division): Permission to appeal refused.
• Employment Appeal Tribunal: Appeal dismissed on 24 May 2002; no error of law was established.
• Employment Tribunal: On 9 January 2001, found that Mr Soteriou was employed under a contract of service but that the contract was unenforceable because it was tainted with illegality.