Wheeler v Qualitydeep Ltd. (t/a Thai Royale Restaurant)

In an employment contract not made for an illegal purpose and not prohibited by statute, illegal performance does not make the contract unenforceable merely because the employee benefited or acquiesced. The court must find that the performance was illegal, that the employee knew the facts making it illegal, and that the employee actively participated in it. Active participation is fact-sensitive. A finding that the employee knew something was wrong and acquiesced is insufficient without the necessary findings. An Employment Appeal Tribunal should not summarily reject a challenge to the evidential basis of an Employment Tribunal’s decision by relying on inapplicable procedural provisions. The appeal was allowed and the matter remitted for a hearing on the merits.

The appellant, employed as a cook, brought complaints of unfair dismissal and failure to provide payslips contrary to section 8 of the Employment Rights Act 1996. The Employment Tribunal, acting of its own motion, found that the employment contract had been illegally performed and refused to enforce it. It dismissed the complaints.

The Employment Appeal Tribunal dismissed the appellant’s appeal, treating acquiescence and receipt of financial benefit as sufficient participation in the illegal performance. The central issues before the Court of Appeal were whether the Employment Tribunal had applied the correct test and made adequate findings, and whether the Employment Appeal Tribunal had wrongly refused to consider a ground challenging the evidential basis of the decision.

Disposition and illegality

Lord Justice Hooper gave the judgment, with Lord Justices Wall and Ward agreeing. The appeal was allowed. The Employment Appeal Tribunal’s approach and the Employment Tribunal’s decision could not stand.

1. Applicable test. In a contract neither entered into for an illegal purpose nor prohibited by statute, illegal performance does not render the contract unenforceable unless the employee knew the facts making the performance illegal and actively participated in that performance. Whether there has been sufficient participation is a question of fact in each case. The Court adopted the principles stated in Hall v Woolston Hall Leisure Centre Ltd [2001] 1 WLR 225 (CA).
2. Insufficient findings. The Employment Tribunal did not investigate the original contractual terms and failed to distinguish illegality in forming a contract from illegality in performing an otherwise lawful contract. Findings that there was an awareness that something was wrong, that the parties acquiesced, and that the appellant benefited did not establish the required knowledge of the facts or active participation. The Court would not strengthen the findings by relying on the payslips, particularly in light of the appellant’s limited English and limited knowledge of tax and National Insurance.
3. Employment Appeal Tribunal procedure. The Employment Appeal Tribunal wrongly refused to consider the appellant’s evidential ground by relying on paragraphs 8 and 9 of the Practice Direction (Employment Appeal Tribunal – Procedure) 2002, which concerned fresh evidence and case-management directions. Paragraph 7(1) addressed points of law requiring evidence not sufficiently appearing from the Employment Tribunal’s decision and reasons. The Employment Appeal Tribunal should not have peremptorily dismissed the ground, and the result could not be assumed to be the same even if the Chairman’s notes had been obtained.
4. Orders. The Court quashed the Employment Tribunal’s decision and remitted the matter for a hearing on the merits. Paragraph 70 referred to remittal to the Employment Tribunal, while the formal order recorded remittal to the Employment Appeal Tribunal.

1. Court of Appeal (Civil Division): Appeal allowed. The Employment Appeal Tribunal’s decision was quashed and the matter was remitted for a hearing on the merits.
2. Employment Appeal Tribunal: On 16 April 2004, dismissed the appellant’s appeal from the Employment Tribunal.
3. Employment Tribunal, Sheffield: On 29 October 2003, unanimously dismissed the appellant’s complaints after finding that the employment contract was illegal and could not be enforced.