Appeal No. EAT/149/98

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 12 June 1998

Before
HIS HONOUR JUDGE PETER CLARK
MR D J HODGKINS CB
MR G H WRIGHT MBE

MR K FASHOLA	APPELLANT

LONDON BOROUGH OF HACKNEY	RESPONDENTS

Transcript of Proceedings

JUDGMENT

PRELIMINARY HEARING

Revised

	APPEARANCES

For the Appellant	MR DOUGHTY
(Of Counsel)
Appearing under the Employment Law Appeal Advice Scheme	

		JUDGE CLARK:   The Appellant, Mr Fashola, was employed by the London Borough of Hackney from 1 August 1974 until his dismissal effective on 8 January 1992.  Shortly before his dismissal he presented a complaint of unlawful racial discrimination to an Industrial Tribunal on 9 October 1991 (Case No.41805/91).  Following his dismissal he presented a second Originating Application dated 27 February 1992, in which he described his complaints as racial discrimination, harassment and victimisation, defamation, unfair dismissal and Employment Act (Case No.32490/92).

	The complaints were consolidated and came before the London (North) Industrial Tribunal on 8-15 November 1993.  The Tribunal’s decision was promulgated with full reasons on 17 December 1993.  Against that decision both parties appealed to the Employment Appeal Tribunal.  As a result of the judgment of the EAT delivered by Mummery J. on 12 January 1996, the eventual conclusion of those proceedings was that all claims were dismissed, save for the finding that the Appellant had been unfairly dismissed.  The finding that he had contributed to his dismissal to the extent of 100% made by the Industrial Tribunal, was upheld by the Appeal Tribunal.

	However, those proceedings did not dispose of a claim advanced by the Appellant that he had suffered unauthorised deductions from his wages during the employment, contrary to what was then Section 1 of the Wages Act 1986, now Section 13 of the Employment Rights Act 1996.  

	By a third Originating Application presented on about 10 February 1995 (Case No.10446/95), the Appellant complained of a contravention of Section 1(1) of the Wages Act, a claim which he alleged had been made in his second complaint (Case No.34290/92) but on which no adjudication had been made.

	We pass over his various review applications and a directions hearing held before a Chairman, Mrs Prevezer, on 10 September 1997, to which the Appellant takes exception, to the determination of his third complaint by a full Industrial Tribunal sitting at London (North), under the Chairmanship of Mr M S Rabin, on 1 October 1997.  It is that Tribunal’s decision, promulgated with extended reasons on 24 October 1997, against which Mr Fashola now appeals, by a Notice of Appeal dated 3 December 1997.  In his Notice of Appeal, Skeleton Argument, and an Affidavit sworn by him in this appeal on 20 February 1998, Mr Fashola sought to re-open various matters previously determined at earlier hearings.  Indeed he asks us to annul the original Industrial Tribunal decision dated 17 December 1993 and the subsequent orders of the Employment Appeal Tribunal made on 12 January 1996.  Needless to say we shall not do so, as we indicated during the course of submissions by Mr Doughty, who today appears on behalf of the Appellant under the ELAAS pro bono scheme.  

	We, in this judgment, focus solely on the Tribunal’s findings in their decision of 24 October 1997.  

	The facts can be shortly stated.  It was conceded by the Respondent that at the date of termination of the employment, the Respondent had made unauthorised deductions from the Appellant’s wages over time totalling £1,847.54.  However, it was common ground that at the date of dismissal the Appellant owed to the Respondent a total of £2,293.41 outstanding on a car loan, made to him by the Respondent during the employment.  The question was whether the outstanding amount of the loan could be used to extinguish the admitted deductions from wages.
	The written loan agreement signed by both the Appellant  and on behalf of the Respondent and dated 22 May 1990, provided for a loan of £5,000 to enable the Appellant to purchase a BMW motor car.  Under the agreement he agreed to repay the loan with interest at 5.45% per annum over three years at the rate of £161.60 per month and further agreed that such repayment would be made by way of deduction from his monthly salary.

	Clause 5 of the loan agreement which we have not seen, but which is substantially set out in the Tribunal’s reasons, provided as follows:
“‘If before having repaid to the council the total amount of principal and interest due under this Agreement the Borrower shall ... (2) cease to be employed by the Council ..... the total amount of principal and interest then outstanding under this Agreement shall forthwith become due and payable to the Council and they shall in addition to the exercise of all other legal or equitable rights and remedies be entitled to deduct such balance from any sum which may then be or become due to [Mr Fashola] from council whether by way of accrued salary or refund of contributions or otherwise and the execution of these presents by [Mr Fashola] shall constitute sufficient authority for such deduction’.”

	The agreement went on to provide for payment of interest on any sums outstanding but at the Tribunal hearing the Respondent indicated that they would not pursue any claims for interest.

	The Industrial Tribunal held that the loan agreement complied with what is now Section 13(1)(b) of the Employment Rights Act 1996, permitting the Respondent to set off the outstanding sum of £2,293.41 against the admitted deductions of £1,847.54, thus effectively extinguishing the Appellant’s claim.  Accordingly it was dismissed.

	In advancing this appeal Mr Doughty has taken a number of points on behalf of the Appellant.  First, he submits, that it is necessary to imply a term into the loan agreement to the effect that the expression in Clause 5 ceased to be employed, means such employment having been lawfully terminated.  We reject that submission first, because it is not necessary to imply that term in order to give the contract efficacy but secondly because it is not clear that the contract was unlawfully terminated.  Mr Fashola was summarily dismissed without pay in lieu of notice.  There has never been a determination of any claim for wrongful dismissal at common law but we note that the original Industrial Tribunal found that, although the dismissal was unfair, the Appellant had contributed to it to the extent of 100%.  In these circumstances we think it very likely that the termination was lawful, even if such a term could be implied and we think it cannot.				

	The remainder of the argument revolved around the effect of Sections 13 and 14 of the 1996 Act.  Having considered the different ways in which the matter is put, we have reached the conclusion that there is one and only one arguable point of law in this appeal, which ought to proceed to a full hearing before this Appeal Tribunal and the proposition may be formulated in this way: although the loan agreement authorised the deduction of the amount outstanding under the loan from any monies due on termination of the employment, it could not have the effect of authorising earlier deductions made without the Appellant’s written authority.  Put another way, the question is whether unauthorised deductions from wages are themselves “wages” from which an authorised deduction can be made.  That is to say, are the cumulative unauthorised deductions admitted by the Respondent in this case, wages from which the outstanding balance of the car loan could be deducted?  That point really requires consideration of the provisions of Section 13(1)(b) of the 1996 Act, which provides:
“An employer shall not make a deduction from wages of a worker employed by him unless—
(b)	the worker has previously signified in writing his agreement or consent to the making of the deduction.”

	On the facts of this case it was common ground that the Appellant had not authorised the deductions totalling £1,847.54.  In these circumstances, it is argued, there can be no relaxation of the employer’s duty not to make unauthorised deductions under Section 13, and there was no final payment of wages from which the outstanding loan monies could be deducted under the authority provided by the 1990 loan agreement.  Accordingly, on this point, the matter will proceed to a full hearing.

	We shall list this case for a half day.  Skeleton Arguments to be exchanged not less than 14 days before the date fixed for the hearing and copies to be lodged with this Tribunal at the same time.  Category C.  There is no requirement for Chairman’s Notes of Evidence.  No further directions are appropriate.