Scicluna v Zippy Stitch Ltd & Ors

The Court of Appeal dismissed the employer's appeal against the Employment Appeal Tribunal's decision that the claimant was entitled to unpaid salary which was outstanding on termination. The central legal point was whether an implied term should be read into the employment contract that deferred salary would crystallise and become payable on termination. The court held that it was not open to the employer to advance that argument on this appeal because the issue was not in the agreed list of issues before the Employment Tribunal and therefore had not been argued or decided below.

The Court of Appeal confirmed that the Employment Tribunal had found an agreement to pay £100 per day with payment deferred until the business could afford it, and that the EAT lawfully concluded the contractual entitlement to unpaid salary was outstanding on termination. The court expressly declined to decide whether, as a matter of law, a term should be implied that deferred pay becomes payable on termination.

Background and parties: The claimant (Mr Scicluna) worked in a small family company, Zippy Stitch Ltd, as managing director and held 20% of the shares. He alleged an agreement to pay him £100 per day but that payment had been deferred until the business could afford it.

Nature of claim: The claimant brought claims in the Employment Tribunal for unlawful deduction from wages under the Employment Rights Act 1996 and for breach of contract (contract claim within the ET's jurisdiction under the Extension of Jurisdiction Order 1994). He also pleaded unfair dismissal, which the ET rejected and which was not appealed.

Procedural posture: The Employment Tribunal (Judge Balogun) found there was an agreement to pay £100 per day and that payment had been deferred. The tribunal held there were no "identifiable sums properly payable on any specific occasion" for the purposes of section 13(3) ERA 1996, but also held the contract claim for unpaid salary was "outstanding on termination". The claimant appealed to the Employment Appeal Tribunal (HHJ Peter Clark), which upheld the contract claim and allowed the unlawful deduction claim. The company obtained permission to appeal to the Court of Appeal.

Issues framed by the court:

• whether an implied term exists that deferred salary becomes payable on termination, and
• whether the employer could raise that point on appeal when it had not been in the agreed list of issues before the Employment Tribunal.

Court's reasoning and disposition: The Court of Appeal held that the agreed list of issues before the Employment Tribunal limited the matters to be decided and that the employer could not, on appeal to this court, advance an argument not put to the tribunal below about affordability and the need to imply a term that pay would crystallise on termination. Because the tribunal and the EAT had both proceeded on the basis that, if the pleaded agreement were established, the appropriate amount would be due and payable, the appeal was dismissed. The court declined to express a view on whether a term should be implied in law that deferred pay becomes payable on termination, noting there were arguments both ways but that the point had not been part of the issues before the tribunal.

Other points: The Court of Appeal ordered the appellant to pay the respondent's costs of the appeal assessed at £13,000 including VAT.

This was an appeal from the Employment Appeal Tribunal. The Court of Appeal dismissed the appeal. The court held that the employer could not raise on appeal a point about implying a term that deferred salary crystallises on termination because that was not an issue in the agreed list of issues before the Employment Tribunal and had not been argued or decided below. The EAT's conclusion that the claimant's contractual entitlement to unpaid salary was outstanding on termination was therefore left intact; the Court of Appeal expressly declined to decide whether such an implied term should be recognised as a matter of law.

Appeal to the Court of Appeal from the Employment Appeal Tribunal (HHJ Peter Clark). The Employment Tribunal decision below was by Judge Balogun. Permission to appeal to the Court of Appeal was granted by Lewison LJ. Neutral citation for this Court of Appeal judgment: [2018] EWCA Civ 1320.