His Honour Judge Altman:
- This is an appeal from the decision of Master Leslie. On the 11th June 2003, he struck out the existing claim, ordered judgment to be entered for the defendants, and refused permission to the Claimant to amend the Particulars of Claim to allege tortious conspiracy, unlawful interference with the claimant's business and wrongful inducement of breach of contract. This judgment is of considerable length; whilst the issues are fairly clear-cut in themselves, and whilst this is an appeal from a striking-out order, I have been referred to a very substantial body of authorities and substantial arguments have been addressed to me.
- The claim is for wrongful dismissed for £50,000 towards a car, two year's loss of notice of £200,000, one year's lost study leave of £100,000 and £8,460 for reimbursement of services, and general damages. An Employment Tribunal has previously found that the contract of employment was unenforceable due to illegality and issues arise, amongst others, as to whether the High Court is bound by that finding. This involves an examination in particular of the law as to illegality and as to 'res judicata', and issues as to whether the effect of illegality in English law and the striking out procedure offend Articles 6 and 14 and Article 1 of the First Protocol of the European Charter of Human Rights.
- The claimant worked as accountant for the defendants from August 1987 until 17th January 2000 when his engagement was terminated without notice. He maintained throughout that he was self-employed. In 1998 this was investigated by the Inland Revenue. The claimant had meetings with them and wrote letters representing a series of facts in support of his contention that he was self-employed which were accepted by the Inland Revenue.
- On the 13th April 2000, the claimant applied to the Employment Tribunal alleging unfair dismissal a remedy available to a former employee.
- The claimant wrote to the Inland Revenue just under 6 weeks before the hearing in the employment tribunal in November 2000; in the letter that was apparently not disclosed subsequently to the tribunal, he effectively withdrew his earlier representations of fact, stating that he had been an employee and alleging
"I was pressurised by Mr Brinton (director of the Defendants) to make a false statement and regrettably I felt that I was cornered at the time and could not find the way to resist his pressures and thus gave in to making a false declaration".
- The claimant did not claim for wrongful dismissal before the tribunal, giving as the reason the jurisdictional limit of £25,000, and notifying the defendants he reserved the right to claim wrongful dismissal subsequently; they in turn responded that they would raise the defence of "res judicata".
- Before the employment tribunal, there was a preliminary hearing of the two contentions of the defendant, first that the claimant was self-employed and secondly that the contract upon which the claim was based was tainted with illegality. In the absence of any other defence these issues would in fact be determinative. The Employment Tribunal heard evidence over 2 days, received detailed submissions from both party's counsel, gave informal notice of their decision in December and promulgated their decision on 9th January 2001. The claimant had already commenced these High Court proceedings on 2nd January 2001.
- The decision of the Employment Tribunal was that:
"The applicant was an employee of the respondents, but that the contract of employment was tainted with illegality so that he cannot rely upon it in bringing proceedings for unfair dismissal".
- The Employment Tribunal found that the claimant was a skilled professional advisor, well aware of the legal and taxation implications of his self employed status who may well have advised his employer of the danger of getting it wrong. They concluded that what the claimant had said to the Employment Tribunal was in stark contrast to what he told the Department of Social Security inspector, and that the statements furnished by him to the benefits agency were either "half truths or downright untruths". The employment tribunal concluded that the benefits to the claimant of self-employment status were sufficiently substantial and attractive to lead him to hold himself out as self-employed quoting the claimant's own calculation that he was £20,000 better off on gross fees of £96,500 if he were self-employed. In particular the Tribunal noted first the more generous treatment of expenses for tax purposes, secondly the receipt of fees paid gross with a liability to tax only twice a year, thirdly the facility to set a proportion of home expenses against income tax and fourthly the fact that in this case the claimant reclaimed VAT on a wide range of personal expenses, including substantial expenditure on home improvements. The Tribunal observed;
"little wonder therefore that the claimant, Mr Soteriou, should have been keen to retain his self employed status when it was challenged by the Contributions Agency"
- In addition the Employment Tribunal found that there was no concluded agreement in respect of the purchase of the motorcar that forms part of the claim in the present proceedings.
- Having found that the claimant was in fact an employee at the material time, the Employment Tribunal dealt with the illegality issues:
"If as a consequence of a finding of employment status, Mr Soteriou were to loose his VAT registration, that too might result in penalties against him alone (the respondents would not be involved here) as well as a loss of the benefits of effective VAT exemption on a number of private purchases. We find that far from being a victim of Mr Brinton's threatening and overbearing manner and being forced to maintain a status of self-employment for fear of loosing his job, we conclude that Mr Soteriou was the prime mover in ensuring that his self employed status was preserved following the contributions agency investigation. Not only that, but he made fraudulent statements to the investigators, knowing full well that the true position would have prejudiced that status. Mr Soteriou had sought to portray Mr Brinton as "a fraudster" (his own word) who forced Mr Soteriou to go along with his tax evasion tactics. While Mr Brinton was no doubt aware that some of what Mr Soteriou was telling Mr Everett (the expert engaged to advise them on self-employed status) was wrong or at least questionable, the main blame lies with Mr Soteriou. Accordingly we find that it would be against public policy to allow Mr Soteriou to come to this tribunal and try to claim the benefits accorded to employees under the employment rights legislation. He volunteered to exclude himself from the employment protection system from the outset, he made no effort to regularise his position when it might have been argued that his status had changed, and he positively misrepresented the position to the authorities when his status was challenged. We can only agree with Miss Eady that Mr Soteriou cannot succeed in defeating the taint of illegality and that having knowingly committed a fraud under a contract in the way that Mr Soteriou has acknowledged he cannot now come to this tribunal to pursue a legal claim based on that contract. The application is therefore refused in all respects."
- In due course the claimant appealed to the Employment Appeal Tribunal and the appeal was dismissed after a full hearing. His application for permission to appeal to the Court of Appeal was in due course rejected.
RES JUDICATA AND ABUSE OF PROCESS
- Ground 4 of the Grounds of Appeal is that Master Leslie wrongly held that he was bound by the findings of law of the Employment Tribunal as to the application of the doctrine of illegality in English common law to contractual claims made by the claimant in these proceedings.
- The learned Master held;
"…the claim here… is based upon the same contract as that which was decided was tainted with illegality in the employment tribunal. It seems to me therefore that the starting point is that the parties are bound by the findings of the employment tribunal."
The learned Master then went on to identify the factual findings by the Employment Tribunal as to the serious fraud and lies the claimant told to the Inland Revenue investigator. These were findings not of law, but of fact, or what Diplock LJ as he then was described as 'facts or the legal consequences of facts' in Mills v Cooper to which I later refer. The Master found that the employment tribunal had found fraud and illegality in relation to all dealings with the Revenue by the claimant and by the defendants during the course of the claimant's employment from sometime between 1996 or 1998, and 2000. He said that illegality was sufficient to render the contract illegal. He went on:
"It is clearly the same contract and to any extent that different claims are now made based upon that contract, it is, in my judgment, nevertheless the same contract and the parties are bound by those findings. It follows therefore that the contract is illegal and unenforceable."
- The learned Master recognised that the employment tribunal were focusing on different aspects of the contract, he recognised that separate property rights between the parties may be enforceable, and he rejected the distinction based upon the proposition that the claimant was limiting his claim to benefits under the employment rights legislation and he dealt to some extent with the principles behind the doctrine of the illegality to which I later refer.
- It seems to me that these findings are as to 'facts or the legal consequences of facts' and the master's decisions was wrongly characterised by Mr Lederman in his grounds of appeal as being a finding that there were binding "findings of law". Mr Lederman recognises that the claim in these proceedings arises out of the same termination of the same contract with the same companies whom the claimant alleged had unfairly dismissed him. Nonetheless he contends that it is at least arguable that there is in this case no identity of matter arising from the issues considered by the Employment Tribunal and that even if there were, there are special circumstances that apply in this case so as to make it appropriate for this action to proceed.
- The courts appear to have identified three aspects of res judicata; 'cause of action estoppel' which arises first where the self-same cause of action has been previously determined, and 'issue estoppel' where a central issue in a case has been determined elsewhere and so cannot be litigated fairly again, and secondly in a category of case, sometimes also referred to as issue estoppel, where a matter is sought to be raised in later proceedings that could and ought reasonably to have been raised in earlier proceedings so that it would be an abuse of the process of the court to permit the matter to be raised even though, in its precise form, it may not have been determined previously. This third category has been termed an abuse of process, although at times the rationale for the first 2 types of 'res judicata' has also been couched in terms of the need to prevent abuse.
- A number of authorities were referred to. Miss Eady referred to Green and Another v Hampshire County Council  ICR 861 in which the finding of an employment tribunal that the employees had been fairly dismissed gave rise to an issue estoppel preventing those employees alleging in High Court proceedings either that the dismissals were illegal or that the procedures adopted were contrary to the rules of natural justice. There was not a precise identity of issues in that case, but nonetheless Fox J held that res judicata applied even though the cause of action before the employment tribunal was for unfair dismissal under statute whereas the cause of action in the high court was for declarations of illegality. The statutory test of unfair dismissal was held to raise an estoppel in relation to the similar but not identical issue of natural justice. Fox J said:
"when an issue has been decided, litigants cannot be permitted to keep returning to the court with new arguments",
and he quoted Sir James Wigram V.C. in Henderson v Henderson  2 HARE 100, 115.
"…where a given matter becomes the subject of litigation in, and of adjudication by, a court of competent jurisdiction, the court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the court was actually required by the parties to form an opinion and pronounce judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reassonable diligence, might have brought forward at the time". (italics my addition of further passage from judgment).
This case seems to bridge the two aspects of res judicata, estoppel of an issue already determined and abuse, but the passage from Henderson seems to be referring to the abuse type of case. In this context, 'special circumstances' are required, and it is noteworthy that 'negligence, inadvertence or accident' do not appear to be regarded as 'special circumstances'. Also in Green statements are made as to issue estoppel. Earlier in the judgment, Fox J. points out that the "identity of subject matter" between the two proceedings "may arise from a cause of action estoppel or from issue estoppel." He quotes the judgment of Diplock L.J., as he then was, in Thoday v Thoday  P.181, 198:
"The second species, which I will call "issue estoppel", is an extension of the same rule of public policy.… Such causes of action involve as many separate issues between the parties as there are conditions to be fulfilled by the plaintiff in order to establish its cause of action;… if in litigation upon one such cause of action any of such separate issues as to whether a particular condition has been fulfilled is determined by a court of competent jurisdiction… neither party can, in subsequent litigation between one another upon any cause of action which depends upon the fulfilment of the identical condition, assert that the condition was fulfilled if the court has in the first litigation determined that it was not, or denied that it was fulfilled if the court in the first litigation determined that it was".
- Diplock LJ does not here refer to 'special circumstances'.
- In Arnold v National Westminster Bank Plc  2 AC 93, the court considered 'special circumstances' in relation to issue estoppel. Walton J as arbitrator had to decide, in fixing a fair rent, whether either a lease that had five yearly rent reviews or one for 32 years without reviews should be used as a measure. He refused leave to appeal his decision so that, unlike the present case, there could be no appeal. However, the opposite decision was then reached in two later High Court cases, one before Sir Nicholas Browne-Wilkinson VC and one before Hoffman J and the first of which this was later twice approved by the Court of Appeal. Accordingly, when the second rent review came subsequently, the landlords sought to re-open the issue of construction previously decided by Walton J. They were met with the plea of 'issue estoppel'. The House of Lords held that justice required that the party who suffered from the mistake should not be prevented from re-opening the issue. Lord Keith at page 103 said:
"It therefore appears that there are powerful grounds for the view that Walton J. wrongly construed the rent review clause in the parties' lease, and that he did so by virtue of an approach to the question of construction which was wholly incorrect in law"
- At page 104 Lord Keith continued:
"It is appropriate to commence by noticing the distinction between cause of action estoppel and issue estoppel. In… (cause of action estoppel) the bar is absolute in relation to all points decided unless fraud or collusion is alleged, such as to justify setting aside the earlier judgment. The discovery of new factual matter which could not have been found out by reasonable diligence for use in the earlier proceedings does not…permit the latter to be re-opened. …"
I note the qualification of 'new factual matter'.
- Lord Keith then quoted the above passage from Henderson and continued:
"It will be seen that this passage appears to have opened the door towards the possibility that cause of action estoppel may not apply in its full rigour where the earlier decision did not in terms decide, because they were not raised, points which might have been vital to the existence or non-existence of a cause of action."
- Lord Keith then turned from cause of action estoppel to issue estoppel and quoted the passage of Diplock LJ in Thoday v Thoday set out above, and continued:
"Issue estoppel, too, has been extended to cover not only the case where a particular point has been raised and specifically determined in the earlier proceedings, but also that where in the subsequent proceedings it is sought to raise a point which might have been but was not raised in the earlier. In Fidelitas Shipping Co. Ltd. V V/O Exportchleb  1 Q.B. 630, 642 Diplock LJ said (with my omissions):
"…the parties to …(a) suit are bound by the determination of the issue. Their only remedy is by way of appeal…and, where appropriate, an application…to adduce further evidence: but such application will only be granted if the appellate court is satisfied that the fresh evidence sought to be adduced could not have been available at the original hearing of the issue even if the party seeking to adduce it had exercised due diligence…
The determination of the issue between the parties gives rise to …an 'issue estoppel'. It operates in subsequent suits between the same parties in which the same issue arises. A fortiori it operates in any subsequent proceedings in the same suit in which the issue has been determined. The principle was expressed…in Henderson v Henderson…"
- The test for admission on appeal of further or new material is there defined by Diplock LJ in very similar terms to the way in which the conditions for admission of 'special circumstances' in res judicata have been defined by the courts. Lord Keith later in his speech referred to the judgment of Diplock LJ in Mills v Cooper  2 Q.B. 459, where Diplock LJ referred to the special circumstances that might mitigate the effect of issue estoppel:
"That doctrine…may be stated thus: a party…is not entitled to make, as against the other party, an assertion, whether of fact or of the legal consequences of facts, the correctness of which is an essential element in his cause of action or defence, if the same assertion was an essential element in his previous cause of action or defence in previous civil proceedings between the same parties or their predecessors in title and was found by a court of competent jurisdiction in such previous civil proceedings to be incorrect, unless further material which is relevant to the correctness or incorrectness of the assertion and that could not by reasonable diligence have been adduced by that party in the previous proceedings has since become available to him"
I note the narrow definition of 'special circumstances' in cases of 'issue estoppel'.
- Lord Keith remarked on the absence of a decided case where issue estoppel was held not to apply because of a party bringing forward
"further relevant material which he could not by reasonable diligence have adduced in the earlier"
Lord Keith went on to consider any differences between the different types of estoppel, adopting the test of special circumstances identified by Diplock LJ:
"…there is room for the view that the underlying principles upon which estoppel is based, public policy and justice, have greater force in cause of action estoppel, the subject matter two proceedings being identical, than they do in issue estoppel, where the subject matter is different. Once it is accepted that different considerations apply to issue estoppel, it is hard to perceive any logical distinction between a point which was previously raised and decided and one which might have been but was not…In my opinion your Lordships should affirm it to be the law that there may be an exception to issue estoppel in the special circumstances that there has become available to a party further material relevant to the correct determination of a point involved in the earlier proceedings, whether or not that point was speccifically raised and decided, being material which could not by reasonable diligence have been adduced in those proceedings. One of the purposes of estoppel being to work justice between the parties, it is open to courts to recognise that in "special circumstances" inflexible application of it may have the opposite result…"
- Lord Keith then went on to consider whether 'special circumstances' were confined to matters of fact, or whether a change in the law may be an element in 'special circumstances' Lord Keith said that the matter should be regarded as 'entire' and approached as a matter of principle:
"If a judge has made…perhaps a very egregious mistake…and a later judgment of a higher court overrules his decision in another case, do considerations of justice require that the party who suffered from the mistake should be shut out…from re-opening that issue?"
- Lord Keith went on to emphasise that in that case there had been no right of appeal from the judgment of Walton J. Indeed in Arnold the House of Lords appear to have achieved what may well have been achieved by an appeal. Lord Keith expressed agreement with the judgement of Sir Nicholas Browne-Wilkinson V C at first instance in that case:
"In my judgment a change in the law subsequent to the first decision is capable of bringing the case within the exception to issue estoppel. If, as I think, the yardstick of whether issue estoppel should be held to apply is the justice to the parties, injustice can flow as much from a subsequent change in the law as from the subsequent discovery of new facts. In both cases the injustice lies in a successful party to the first action being held to have rights which in fact he does not possess. I can therefore see no reason for holding that a subsequent change in the law can never be sufficient to bring the case within the exception. Whether or not such a change does or does not bring the case within the exception must depend on the exact circumstances of each case"
- Lord Keith went on to hold that in his opinion such special circumstances existed in that case. Lord Lowry in his speech in Arnold traced the history of issue estoppel. He noted the reference to 'special circumstances' in the judgment of Diplock LJ in Mills v Cooper. He pointed out the absence of any example of issue estoppel being distinguished from cause of action estoppel until Arnold. He continued:
"The reliance on "new law" in the proviso was a new departure. It was conceded before your Lordships that the presentation of a new argument or the discovery of a previously overlooked authority would not suffice: the new law must take the form of a new decision; but it seems that this could come about by a lucky accident or even as a result of encouraging another litigant to take the same point...
It appears from this review that there are significant arguments in favour of the proposition that issue estoppel constitutes a complete bar to relitigating a point once it has been decided but I am now of the opinion that the court can, and in exceptional circumstances should, relax that rule."
Lord Lowry then went on to find that the circumstances were special and exceptional in that case.
- Arnold is notable not least because it relates to the type of 'issue estoppel' that arises where the particular issue has in fact been decided previously, unlike Henderson abuse. Features appear to be;
i) the particular circumstances of that case,
ii) the definitive finding by the time of that decision that there had been a serious error of law
iii) the absence of a right of appeal from the first judgement
iv) the error of law was to provide major and damaging errors in the terms of the lease between the parties well into the future
v) that a change in the law may, in some circumstances, be a special circumstance. A new argument or the discovery of existing overlooked authority is not enough, and the new law must be a new decision.
vi) that the doctrine of issue estoppel is not a blanket rule, but has some flexibility.
vii) one of the reasons for the policy of issue estoppel is to secure finality, and to avoid putting a party to the uncertainty, expense and need to re-litigate something that was, or could have been, decided in the first proceedings.
- In Johnson v Gore Wood & Co. (HL(E))  2 WLR 90 Lord Bingham said:
"But Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse), that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional elements such as a collateral attack on a previous decision or some dishonesty, but where those elements are present, the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceedings involves what the court regards as unjust harassment of a party. It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive."
- The approach where there was the same cause of action or issue between the two sets of proceedings was considered recently in the case of Sajid v Sussex Muslim Society  IRLR 113, where it was held that a claim for wrongful dismissal could proceed in the High Court notwithstanding that it had been alleged, but then formally withdrawn without adjudication, before the employment tribunal. It was held that such a procedure before the employment tribunal was not a disposal of the cause of action but, on the contrary, an exclusion of that cause of action from the employment tribunal. At paragraph 13 Mummery L.J. said:
"Save in special circumstances, it is contrary to public policy and may be an abuse of the process of the court to attempt to re-open new proceedings in a case which has already been litigated and finally determined by a court or tribunal in proceedings between the same parties or issues which could have been litigated properly between the parties in relation to the subject matter of the earlier litigation. It is unjust for a party who spent time and money in obtaining a final determination of the claim or an issue in a claim to be faced with fresh proceedings from the other parties seeking to re-litigate the same cause of action or the same issue".
Whether 'causes of action' identical
- Mr Lederman says there is no identity of cause of action; that unfair dismissal in the Employment Tribunal and wrongful dismissal in the High Court are different. He refers to the Sajid case. However, that case determined whether, on the facts, the claim of wrongful dismissal had ever been pursued in the employment tribunal. In the instant case there is no dispute but that wrongful dismissal was never pursued before the employment tribunal, so this narrow issue never arose. The employment tribunal here adjudicated only upon the statutory claim of unfair dismissal. It was not asked to deal with wrongful dismissal. I fully accept that there was no cause of action estoppel, and I do not read the judgment of Master Leslie as making any finding to the contrary. Whilst there may, in some cases, be an available argument that to start second set of proceedings so as to claim wrongful dismissal not raised in the employment tribunal gives rise to a Henderson v Henderson type of abuse, on balance I do not consider this to be one such, not least because of the stark difference in the amounts claimable.
Whether 'issues' are identical
- Mr Lederman accepts that this claim arises out of the same contract between the same parties as the claimant had earlier alleged had unfairly dismissed him. Whether the status of the claimant was that of employee or self-employed contractor, it is the self-same contract that forms the basis of the claim in these proceedings. On the face of it, the issue as to its unenforceability as a result of its being tainted with illegality appears to be the same issue as has already been decided by the employment tribunal.
- However, Mr Lederman submits that this was not the issue before the employment tribunal. He relies upon the words of May J. in Newland v Simons & Willer (Hairdressers) Ltd.  ICR 521 in the way it is cited by Lord Justice Mance in Hall v Woolsten Leisure Ltd.  ICR at page 124. Newland was a case before the Employment Appeal Tribunal. In considering the issue the EAT said the essential question was "has the employee knowingly been party to a deception on the revenue?" That appeared sufficient knowledge, as opposed to active participation, for the employment appeal tribunal, by a majority, to conclude that the contract was not enforceable. Lord Justice Mance in Hall v Woolston, referring to Newland and the judgment of May J. said:
"…the majority took a stern view towards the argument that, even if the contract "on its face or its performance to his knowledge involves a fraud on the revenue", the employee should not be deprived of his rights under the employment protection legislation…May J said…
"We have no doubt that parliament never intended to give the statutory rights provided for by the relevant employment legislation to those who were knowingly breaking the law by committing or participating in a fraud on the revenue" ".
- Mr Lederman says that the issue before the Tribunal was different to that before this court. He would say that the fact of parliamentary intention in the creation of a statutory right attracts very different considerations, particularly in human rights terms, from law which has developed through the common law, so as to mean that the issue of illegality in the two jurisdictions is different. That submission is undermined in my view by an examination of the full judgment of May J in Newland. Having reviewed the common law principles through decided cases he said:
"In the view of the majority of this appeal tribunal, however, where both employer and employee knowingly commit an illegality by way of fraud on the revenue in the payment and receipt of the employee's remuneration under the contract of employment, which is an essential part of such a contract, then we think that there can be no doubt that this does turn it into a contract that is prohibited by statute or common law, and consequently the employee is precluded from enforcing any employment rights she might otherwise have against her employer. The incidence of income tax frauds, both large and small, is so rife that they cannot be brushed on one side…"
However, counsel for the employee had made further submissions in that case to the effect that in so far as the law as to illegality was based on public policy considerations, that should give way, so as to not be a bar on such a claim, to the other public policy considerations manifest in the desire of Parliament to provide a statutory remedy for unfair dismissal. It was in that context, it seems to me, that May J was pointing out the balancing view of parliament quoted above so as only to answer the proposition that the claim for unfair dismissal, being statutory, should take precedence. Indeed it was a reinforcement, not a weakening, of the effect of the common law provisions as to illegality that he was emphasising by indicating that Parliament would not have intended to weaken them.
- It seems to me that Mance LJ, in Newland then referred to the words of May J merely to explain what he described as the 'stern' view of the majority in Newland. I find that the adoption of that narrow phraseology to argue a distinction between the issue before the employment tribunal and the High Court is unjustified in the current case. I note also that Mance L.J in the Hall case went on to confess his doubt about both the reasoning and the outcome in the Newland case.
- Mr Lederman then submits that the issues before this court are not dependent on the legality of the contract and he cites Tinsley v Milligan  3 WLR 126, but that case was concerned with title to property, which may be said to stand outside the contractual relations that may have led to the disposition of that property. Lord Lowry in his speech in that case at page 146 states that the owner of legal title to property can establish that right without having to rely on the contract that led to it. The result is that where property passes the illegality does not become an issue in the case. However, that is not the case here; the instant case is undoubtedly, it seems to me, founded upon contract.
- Mr Lederman then submits that because the claimant had disclosed his true employee status just before the employment tribunal hearing at a time when his wrongdoing in previous statements that he was self-employed had ended, any such wrongdoing was 'executory' and therefore no longer relevant. However, the employment tribunal and this court are concerned with the nature of the contract at the time it was formed and performed, not on any gloss applied to it by the claimant at a later stage after its termination.
- Mr Lederman submits that the decision of the employment tribunal did not decide the issue of illegality in relation to a claim for wrongful dismissal and that this is a matter for this court. He says it falls to be considered in accordance with the principles set out in Hall v Woolston Leisure Ltd. per Peter Gibson LJ to which I later refer:
"In cases where the contract of employment is neither entered into for an illegal purpose nor prohibited by statute, the illegal performance of the contract will not render the contract unenforceable unless in addition to knowledge of the facts which make the performance illegal the employee actively participates in the illegal performance. It is a question of fact in each case whether there has been a sufficient degree of participation by the employee."
- It is true that the employment tribunal appear to have not expressly based their decision on this specific case. Mr Lederman suggests they relied on the test of 'relative moral turpitude' as between claimant and defendant proposed in Hewcastle Catering Ltd. v Ahmed  ICR page 626. In that case it was held that where a contract was not entered into for the purpose of doing an illegal act and the employees had neither benefited nor been essential parties to a fraud carried out by the employer, it was contrary to public policy that the employees should be deprived of compensation for being unfairly dismissed when it was the company that had involved them in the fraud. However, the factual issues that formed the ingredients of the decision of the employment tribunal, namely the defrauding of the Inland Revenue and the involvement of the Claimant, were of course the same to whichever case they applied. Further, because the requirement of knowledge and participation in Hall v Woolston was not the principle of law applied by the tribunal, it is inconceivable that the result could have been different. Indeed the reliance on possibly erroneous law, at best, would amount to special circumstances as in Arnold and not the identity of issue between the two proceedings. Further any failing in this respect was corrected on appeal to the EAT whose judgment was based on the principles set out in Hall.
- In order to found a claim for unfair dismissal, the applicant must show that he was employed under a contract of employment which is enforceable. The contract at the base of this claim had already been adjudicated upon by the employment tribunal and found to be unenforceable because it is tainted with illegality. Whether the claimant was an employee or self-employed, this seems to me to be the self same issue, as were the factual issues on which it was based. Subject to further consideration of this aspect in the context of the human rights legislation, I find that the learned Master was correct in finding the same issues were decided by the employment tribunal as faced this court such as to constitute 'issue estoppel' or 'res judicata', subject only to considering the presence of 'special circumstances'.
- Even if the issues are the same, Mr Lederman submits that there are in any event 'special circumstances', not least in the arguments he now raises and legal principles to which he refers, that were not raised before the employment tribunal, but which would not be abusive to raise now. These relate particularly to alleged non-compliance with Articles 6 and 14 of the Schedule to the Human Rights Act, Article 1 of the First Protocol, and an allegation of estoppel, and together with allegations of tortious conspiracy which are also free-standing allegations as well as being concerned with special circumstances. I have deferred consideration of 'special circumstances' so as to consider the submissions on these issues.
ARTICLE 6 CONVENTION RIGHTS UNDER HUMAN RIGHTS ACT 1998
- Article 6(1) provides:
"In the determination of his civil rights and obligations… everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law".
- The two main issues that arise are first, whether the provisions as to illegality engage Article 6 in the first place, which requires an examination of whether it can be said that the English law as to the impact of illegality is procedural, and, secondly, if they do, whether insofar as a finding of illegality results in the dismissal of the claim without further enquiry as to the merits, that takes place in pursuance of a legitimate objective that is proportionate in the individual case to such objective.
Mr Lederman submits that it is as least arguable that the English law as to illegality as applied in this case offends Article 6, including the provisions that deal with a criminal charge.
- Article 6 further provides:
"(2)Everyone charged with a criminal offence shall be presumed innocent until proven guilty according to law.
(3)Everyone charged with a criminal offence has the following minimum rights:
(a)to be informed promptly, in a language which he understands and in detail, of the nature and cause of the accusation against him;
(b)to have adequate time and facilities for the preparation of his defence;
(c)to defend himself in person or through legal assistance of his own choosing or,if he has nto sufficient means to pay for legal assistance, to be given it free when the interests of justice so require;
(d)to examine or have examined witnesses against him and to obtain the attendance and examination of witnesses on his behalf under the same conditions as witnesses against him;
(e)to have the free assistance of an interpreter if he cannot understand or speak the language used in court"
- It is contended that by reason of his conduct in mis-describing his status to the Inland Revenue, the defence 'charged' the claimant with illegality with the resulting penalty that he has been unable to pursue his claims for wrongful dismissal. Mr Lederman refers to the case of Han v Customs & Excise Commissioners  1 WLR 2253, a case where taxpayers appealed the imposition of VAT penalties and it was held that this was akin to a "criminal charge" for the purposes of Article 6. However, Potter L.J. referred to "civil penalty proceedings" in this context and it seems to me that it is the proceedings, generally, that require to be categorised as 'criminal' for this point to be raised. As Miss Eady points out, these proceedings were initiated by the claimant and were not in the nature of a criminal charge. Mr Lederman responds by saying that it is the raising of the defence of illegality that is the preferring of the charge.
- First, the point is taken that this issue was not raised before the Master. It finds no place in Mr Lederman's detailed skeleton argument of some 28 pages prepared for those proceedings. In response, Mr Lederman says that he remembers making submissions before the Master that the claimant was being accused of fraud and criminal conduct and there was discussion about the claimant's being involved in the criminal activity of claiming state benefits whilst failing to declare income. That seems to me a different matter. The factual background is not itself the charge, it seems to me, even in European terms; indeed in argument Mr Lederman described the charge as being the raising of the issue of illegality by the defence. The nature of the criminality that was discussed before the Master, on Mr Lederman's account, is certainly, I find, wholly different from the present complaint that the Master should have considered that there was a quasi-criminal charge in the very allegation of illegality so that human rights obligations were thereby brought into play. Mr Lederman has shown himself very alive to the European dimension in this context and I am driven to conclude that it was not raised before the Master and should not be considered here. In the event that I am wrong about that, I have gone on to consider the merits of the argument.
- I recognise the autonomous meaning to be given to "criminal charge" when construing Article 6, and that a court will look in particular at the classification in domestic law, the nature of the offence and the nature and severity of the penalty in reaching a conclusion. I recognise that it is a matter of substantial reality and not mere appearances and I take account of the guidance given in the decision of the Court of Appeal in Han. Mr Lederman says the penalty is the dismissal of his claim. He seeks to draw support from the Law Commission Consultation Paper, which contains the suggestion that
"any penal effect that the illegality rules may have on an illegal transaction must be proportionate to the illegality involved".
- However, it does not seem to me that the raising of the defence of illegality is a criminal charge under Article 6. There are a number of issues which can be raised in civil proceedings by the defence and which, if successful, may result in the claim being defeated at one of a number of stages during the process of the litigation. It seems to me artificial to say that where such a decision takes place before many of the other issues that the claimant raises have been adjudicated upon, it becomes a criminal process by depriving the claimant of the remainder of the trial, but that if it continues to the end, then it does not. Further, it seems to be important to not confuse the nature of the conduct that gives rise to the claim of illegality, in this case the misrepresentation to the contributions agency, and the nature of the proceedings themselves. For instance the statute of limitations in its operation is not, so far as I know, regarded as a penal provision, nor, indeed, are the general striking out rules, yet they have the same effect, in terms of preventing the litigation of the remaining issues between the particular parties involved, as does the tainting of a contract with illegality.
- Even if Mr Lederman is correct in his submissions that the raising of the defence of illegality is the preferring of a criminal charge, I adopt the submission of Miss Eady that it is difficult to envisage how the rights given such as the right to silence would apply in the context of this case or can be said to have been unfulfilled for the issue of illegality was examined in the employment tribunal with a procedure, subject to the examination of article 6 below, that was wholly consistent with the additional elements in article 6, referable to a criminal trial. I am satisfied that this is not a ground for criticising the Order of Master Leslie, for it was not raised before him and even if it had would, in my view, have inevitably been concluded against the claimant on the ground that this was not a 'criminal charge', and even if it had been there was no relevant breach.
Procedure or substance.
- Article 6 is concerned with 'procedural' rights; in Wilson v Secretary of State for Trade and Industry  UKHL 40 it was explained:
"Article 6 does not itself guarantee any particular content for civil rights and obligations in the substantive law of the contracting states"
It may be, as Mr Lederman submits, that the terms 'procedural' and 'substantive' are not the real categories, In Matthews v Ministry of Defence  2 WLR 435 Lord Walker pointed out that in Ashingdane the test of the engagement of Article 6 related to whether the relevant provision consitituted an 'unwaivable bar' or was 'arbitrary and unreasonable'. However, the terms 'procedural' and 'substantive' are used elsewhere, though they may be better defined in the sort of terms used in Ashingdane.
- Counsel agree that the statement of the doctrine of illegality under English law is that stated by Peter Gibson LJ in Hall v Woolston Hall Leisure Ltd. Having referred to the "classic statement" of the principle by Lord Mansfield C.J. in Holman v Johnson  1 COWP 341 at 343:
"No court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act. If, from the plaintiff's own stating or otherwise, the cause of action appears to arise ex turpi causa, or the transgression of a positive law of this country, there the court says he has no right to be assisted,"
Peter Gibson L.J. continued at paragraph 30:
"In two types of case, it is well established that illegality rendered a contract unenforceable from the outset. One is where the contract is entered into with the intention of committing an illegal act; the other is where the contract is expressly or implicitly inhibited by statute…."
He continued in paragraph 38:
"…in cases where the contract of employment is neither entered into for an illegal purpose nor prohibited by statute, the illegal performance of the contract will not render the contract unenforceable unless in addition to the knowledge of the facts which make the performance illegal the employee actively participates in the illegal performance. It is a question of fact in each case whether there has been a sufficient degree of participation by the employee."
This appears to refer back to, amongst other statements of the law, that by Scarman L.J. in Ashmore, Benson, Pease and Co. Ltd v A.V. Dawson Ltd.  1 WLR 828 at 836:
"But knowledge by itself is not…enough. There must be knowledge plus participation…"
- This case is concerned only with that aspect of illegality and this judgment is not directed to contracts illegal as formed, or formed for an illegal purpose. Where the illegality arises from the performance of an otherwise legal contract, its effect is therefore dependant on the knowledge together with the actual and sufficient participation of the person against whom it is raised. In Colen v Cebrian (UK) Ltd  EWCA Civ 1676 Lord Justice Waller, in referring to Hall v Woolston Leisure and earlier authorities said:
"…the question is whether the method of performance chosen and the degree of participation in that illegal performance is such as to "turn the contract into an illegal contract"…not every illegality in performance will turn a contract into an illegal contract."
- A number of cases have considered the procedural nature of Article 6. In particular issues appear to have surrounded the question as to whether the procedure that is objected to involves a 'blanket ban' on proceedings. In Ashingdane v United Kingdom  (7) EHRR 528 the applicant complained amongst other things of having no right to a fair trial under Article 6 in respect of an executive decision by the Secretary of State for health to refuse to transfer the applicant, a psychiatrically ill patient, from a secure special hospital to his local psychiatric hospital. The European Court of Human Rights held there had been no violation of human rights. That the applicant there had access to the High Court and to the Court of Appeal, followed by a ruling that his actions were barred by operation of law, led the court to recognise that to that extent the applicant had access to the remedies that existed within the domestic system. They then stated that there must still be established "that the degree of access afforded under the national legislation was sufficient to secure the individual's "right to a court" having regard to the rule of law in a democratic society." The court recognised that the right of access to the courts was not absolute and may be subject to limitation and in determining that limitation, the contracting state enjoys a margin of appreciation. The court stated that whilst making the final decision as to observance of the Convention's requirements, it was no part of their function to substitute for the assessment of the national authorities and the other assessment of what might be the best policy in the field. The court continued:
"Nonetheless the limitations applied must not restrict or reduce the access left to the individual in such a way or to such an extent that the very essence of the right is impaired. Furthermore, a limitation will not be compatible with Article 6(1) if it does not pursue a legitimate aim and if there is not a reasonable relationship of proportionality between the means employed and the aim sought to be achieved."
- It is useful to consider also the analysis of the facts by the court in that case. There was the right to challenge the Secretary of State on the ground of his negligence or bad faith. This was an important factor in the Court's concluding that there was no "blanket ban" on proceedings that engaged Article 6. The partial nature of the ban thereby created seems to have influenced the decision of the court. However, in any event, at the end of paragraph 54 of the judgment the court held:
"even assuming Article 6(1) to be applicable, the requirements of this provision were not violated."
The Court there seemed to accept that the fact that access to the court in relation to some issues is prevented by the ruling being questioned does not necessarily render that ruling 'procedural', not least where the ruling does not contsitute a blanket ban.
- In Tinsley v Milligan  3WLR 126 to which reference has already been made, the court had jurisdiction to hear the dispute between the parties as to ownership of property, because the determination of property rights stood outside the personal contractual relations of the parties. Mr Lederman refers to this case in the present context for the speech of Lord Goff of Chieveley who spoke of the present rules as to illegality in the following terms:
"The real criticism of the present rules is not that they are unprincipled but rather they are indiscriminate in their effect and are capable therefore of producing injustice"
Mr Lederman relies heavily on this statement in support of the proposition that the law as to illegality leads to a blanket ban of a kind to indicate its 'procedural' nature. Miss Eady argues that the test in Hall v Woolston, a case decided after Tinsley, at least in relation to the illegality of performance of a contract, is not indiscriminate in the sense of amounting to a blanket ban as argued for by Mr Lederman. An examination of the facts in Tinsley v Milligan and the speech of Lord Goff shows that the context of these words was his analysis of authority to the effect that:
"…there is to be derived the principle invoked by the appellant in the present case, viz., that if A puts property in the name of B intending to conceal his (A's) interest in the property for a fraudulent or illegal purpose, neither law nor equity will allow A to recover the property, and equity will not assist him in asserting an equitable interest in it"
which related to the purchase of a property for an illegal purpose. Lord Goff then referred to the New Zealand Illegal Contracts Act 1970, and its twofold provision that first any illegal contract was of no effect but that secondly the court had discretion to grant appropriate relief. It was in this context that Lord Goff urged an examination of the English law by the Law Commission and spoke of the indiscriminate nature of the present law. It seems to me, therefore, that Lord Goff was concerned in that case only with illegal contracts formed for an illegal purpose, as having an indiscriminate effect and that in the context of a property transaction. He did not refer to illegal performance of contracts that were legal when formed, nor to the element of 'knowing participation' that already formed part of the common law according to Scarman LJ in Ashmore and others. Lord Goff was in the minority. In one of the majority speeches, Lord Browne-Wilkinson said that
"…the Plaintiff…is entitled to recover if he is not forced to plead or rely on the illegality, even if it emerges that the title on which he relied was acquired in the course of carrying through an illegal transaction"
It seems to me that to take the word 'indiscriminate' and to apply it to the test of Hall v Woolston is to take it into an area not embraced by Lord Goff.
- The Law Commission issued a consultation document entitled Illegal Transactions:The Effect of Illegality on Contracts and Trusts in 1999, before the cases I later turn to and before Hall v Woolston Leisure. Mr Lederman relies on the conclusion that in any reform it is important the new proposals must ensure that any penal effect of illegality rules are proportionate to the illegality involved, and the statement in the report:
"…if anything there is a greater risk of successful challenge under the present common law illegality rules, which provide no opportunity to assess the proportionality of allowing an illegality defence…"..
However, the document seems to be based on contracts illegal in the way formed and not the type of illegal performance of the contract with which this case is concerned. Indeed one reading of the document seems to suggest that it does not expressly take account of that type of illegality at all. Certainly it seems to me difficult to say that the Hall v Woolston approach provides NO opportunity to consider proportionality. Whilst decided after the Law Commission consultation, that case drew on established case law.
- In Z v U.K.  2 FLR 612 it was found that the local authority had failed markedly to take steps to protect particular children in need in a family in the Local Authority area. The House of Lords had held that no claim lay on behalf of the children against the local authority for negligence or breach of statutory duty. Whilst the European Court of Human Rights found breaches of human rights under Articles 3 and 13, the claim under Article 6 was rejected. Mr Lederman relies on the useful statement of principle as to Article 6 at paragraph 87.
"The Court recalls its constant case law to the effect that Article 6(1) extends only to … (disputes) over (civil) "rights and obligations which can be said, at least in arguable grounds, to be recognised under domestic law; it does not itself guarantee any particular content for (civil) "rights and obligations" in the substantive law of the contracting states….it will however apply to disputes of a "genuine and serious nature" concerning the actual existence of the right as well as to the scope or manner in which it is exercised."
- In considering whether the provisions of the English law complied with Article 6, the court observed that the applicants were not prevented in a practical manner from bringing their claims before the courts, litigating up to the House of Lords. The court noted that there was an application to strike out the claims as disclosing no reasonable cause of action. That resulted in the arguments before the court being concentrated on the legal issues, primarily whether a duty of care in negligence was owed. The court continued:
"Moreover the court is not persuaded that the House of Lord's decision that as a matter of law there was no duty of care on the applicants' case may be characterised as either an exclusionary rule or an immunity which deprived them of access to court…The House of Lords… decided not to extend liability and negligence into a new area. In so doing, it circumscribed the range of liability under tort law. That decision did end the case, without the factual matters being determined on the evidence. However, if as a matter of law, there was no basis for the claim, the hearing of evidence would have been an expensive and time-consuming process, which would not have provided the applicants with any remedy at its conclusion. There is no reason to consider the striking-out procedure which rules on the existence of sustainable causes of action as per se offending the principle of access to court. In such a procedure, the plaintiff is generally able to submit to the court arguments supporting his or her claims on the law and the court will rule on those issues at the conclusion of an adversarial procedure.
Nor was the court persuaded by the suggestion that, irrespective of the position in domestic law, the decision disclosed an immunity of fact or practical effect due to its allegedly sweeping or blanket nature. That decision concerned only one aspect of the exercise of local authority's powers and duties and cannot be regarded as an arbitrary removal of the court's jurisdiction to determine a whole range of civil claims… Article 6 does not in itself guarantee any particular content for civil rights and obligations in national law…it is not enough to bring Article 6(1) into play that the non-existence of a cause of action under domestic law may be described as having the same effect as an immunity, in the sense of not enabling the applicant to sue for a given category of harm.."
It seems to me that in the instant case the claimant was able to sue for a given category of harm, namely breach of contract. It appears also, that a striking-out order was here distinguished from a blanket ban.
- In Fogarty v U.K.  34 EHRR 12, the complaint that a claim by the United States Government of immunity from suit was a violation of Article 6 was rejected. Following Z v U.K. it was held in paragraph 25:
"It is not consistent with the rule of law in a democratic society with the basic principle underlying Article 6(1) – namely that civil claims must be capable of being submitted to a judge for adjudication – if, for example, a state could, without restraint or control by the convention enforcement bodies, remove from the jurisdiction of the courts, a whole range of civil claims or confer immunities from civil liability on large groups or categories of persons"
However, this does not seem to be the process with the law of illegality in contract. The type of immunity referred to in Fogarty appears to result from identifying the group or category by looking primarily at facts outside the facts of the particular case, such as by reference to the status or constitutional position of the person concerned. In the instant case, identification of the person who cannot proceed with his action further through illegality essentially requires an examination of the facts of the particular case in so far as they relate to the formation or performance of the particular contract. There can be a ban that is not a blanket.
- In Matthews v Ministry of Defence  2 WLR 435 as stated in the head note:
"…Article 6 … applied only to civil rights which could, on arguable grounds, be recognised under domestic law and where the restriction on the right of access was procedural in nature…"
In determining that issue the House of Lords held that one must not look at the superficial appearance or verbal formulae but with the realities of the situation. Lord Walker said:
"Although there are difficulties in defining the borderline between substance and procedure, the general nature of the distinction is clear in principle and it is also clear that Article 6 is in principle concerned with procedural fairness and integrity of the state's judicial system"
- It does appear that the mere fact of a court's determining issues in advance which result in no hearing of the main issue does not necessarily offend Article 6 and is not necessarily to be described as a ban of the kind which brings into bear the procedural requirements for a fair trial in Article 6. Reference has already been made to the position of an application to strike out a claim. The principles are also set out by Lord Woolf in Kent v Griffiths  QB 36;
"It would be wrong for the Osman decision (to which I later refer) to be taken as a signal that, even when the legal position is clear and an investigation of the facts would provide no assistance, the court should be reluctant to dismiss cases which have no real prospect of success. Courts are encouraged, where an issue or issues can be identified which will resolve or help to resolve litigation to take that issue or those issues at an early stage of the proceedings so as to achieve expedition and save expense. There is no question of any contravention of Article 6 in so doing."
- Mr Lederman refers to the speech of Lord Browne-Wilkinson in Barrett v Enfield LBC  3 WLR 79:
"Extreme care … must be taken in striking out claims in this confused and developing area of the law, and clearly reinforce the conclusion that the case cannot be struck out… Unless it was possible to give a certain answer to the question whether the plaintiffs claim would succeed, the case was inappropriate for striking out…In an area of the law which was uncertain and developing (such as the circumstances in which a person can be held liable in negligence for the exercise of the statutory duty or power), it is not normally appropriate to strike out. In my judgment it is of great importance that such development should be on the basis of actual facts found at trial not on hypothetical facts assumed (possibly wrongly) to be true for the purpose of the strikeout.
- It is however relevant to point out that in that speech Lord Browne-Wilkinson gave as the reason for the need for 'extreme caution' two developments. The first was the decision of the European Court of Human Rights in Osman, which had at that stage been unqualified by that Court. The second was the imminent incorporation into English Law of the European Convention of the Human Rights Act 1998. In view of the submissions of Mr Lederman about 'special circumstances' in relation to issue estoppel, to which I later refer, it appears relevant to note the attention being given by the English courts to the European convention even before its incorporation into English law.
- As Miss Eady points out, as opposed to Barrett the facts in the instant case were not assumed but those found after a full trial of the particular issues and when much of the factual material was admitted by the claimant.
- It seems to me that the thread of legal reasoning in these and other cases was traced in a way that gives considerable guidance to this court in the speech of Lord Phillips of Worth Maltravers M.R. in J.D and Others v East Berkshire Community Health & Ors  EWCA Civ.1151. The first case considered in that judgment was that of Osman v United Kingdom  1 FLR 193. The Court of Appeal upheld a principle of the law of negligence that the police owed no duty of care to individual citizens in relation to the vigour with which they carried out their duties of prevention and detection of crime. The Strasbourg court upheld the applicant's claims. They held that the applicants had a right to seek an adjudication on the admissibility and merits of an arguable claim that they were in a relationship or proximity to the police, that the harm was foreseeable and that it was fair, just and reasonable not to apply the exclusionary rule in the individual case. The Strasbourg court indicated that that determination would require examination of the individual circumstances of each case. Mr Lederman argues for that in this case.
- However, the matter was then later considered by Lord Browne-Wilkinson in Barrett v. Enfield Borough Council. He described the Strasbourg Court in Osman as having found that:
"The applicability of such exclusionary rule has to be decided afresh in each individual case… on these grounds the Strasbourg court held that the English court had breached Article 6 by striking out the claim… without hearing any evidence by reference to which the proportionality of the rule in that particular case could be judged. The court said that the police had been granted a "blanket immunity" which was disproportionate and an unjustifiable restriction on the Osmans' right of access to the court."
- Lord Browne-Wilkinson then analysed the difficulty in applying that judgment of the Strasbourg Court to the common law jurisdiction of the English Court. He pointed out that the process is not, as it were, a negative one of denying a class of defendants access to the court but on the other hand, rather a determination of the positive question as to whether it is fair, just and reasonable to impose liability in those circumstances. Secondly he pointed out that in English law the decision as to whether to impose liability on a particular class requires weighing the balance of total detriment to the public interest in all cases involving such class as against the total cost to all would-be claimants if they did not have a cause of action.
- At that point in the development of the law, Lord Phillips pointed out an understandable reluctance on the part of the English Courts to use the striking out procedure and quoted Lord Woolf in Kent v Griffiths  1 QB 36 where at paragraph 38 he said:
"In so far as the Osman case… underlined the dangers of a blanket approach so much the better. However, it would be wrong for the Osman decision to be taken as a signal that, even when the legal position is clear and investigation of the facts would provide no assistance, the court should be reluctant to dismiss cases which have no real prospect of success… although a strike out may appear to be a summary remedy, it is in fact indistinguishable from deciding a case on a preliminary point of law."
This was also the period of Lord Browne-Wilkinson's observations in Barrett about a period of developing law.
Lord Phillips then referred to Z v United Kingdom in which the European Court of Human Rights reviewed what it had said in Osman. The European Court quoted the speech of Lord Browne-Wilkinson in Barratt to which I have referred. They endorsed the striking out procedure contained in English law as a procedure by which:
"It can be determined at an early stage, with minimal costs to the parties, whether the facts pleaded revealed a claim existing in law"
- Lord Phillips quotes the most material passages from the reasoning of the court, which I have considered in total, in particular that reasoning stated:
"…the court considers that its reasoning in the Osman judgment was based on an understanding of the law of negligence…which has to be reviewed … the court is satisfied that the law of negligence…includes the fair, just and reasonable criterion as an intrinsic element of the duty of care and that the ruling of the law concerning that element in this case does not disclose the operation of an immunity. In the present case, the court is led to the conclusion that the inability of the applicants to sue the local authority flowed not from an immunity but from the applicable principles governing the substantive right of action in domestic law. There was no restriction on access to the court of the kind contemplated in Ashingdane…
The applicants may not therefore claim that they were deprived of any right to a determination of the merits of their negligence claim. Their claims were properly and fairly examined in the light of applicable domestic legal principles concerning the tort of negligence…"
It can be said that for 'negligence' substitute 'contract' and for 'tort of negligence' substitute 'law of contract. The reasoning continues:
"Once the House of Lords had ruled on the arguable legal issues… the applicants could no longer claim any entitlement under Article 6(1) to obtain any hearing concerning the facts. As pointed out above, such a hearing would have served no purpose, unless a duty of care in negligence had been held to exist in their case. It is not for this court to find that this should have been the outcome of the striking out proceedings since this would effectively involve substituting its own views as to the proper interpretation and content of domestic law."
- Lord Phillips went on to observe that Osman and other cases to which he referred would seem fatal to the contention of an infringement of Article 6. However, counsel then urged upon the Court of Appeal the observations of Lord Walker in Matthews. Lord Phillips referred to the reference by Lord Walker to the case of Fayed v United Kingdom  18 EHRR 393 in which it was held by the European Court of Human Rights that where a person has an actionable domestic claim, it may depend both on the substantive content of the relevant civil right as defined under national law and also on procedural bars which prevent or limit the possibility of potential claims. The court held that in the latter case, Article 6 may have "a degree of applicability". The court held it would not be consistent with the rule of law in a democratic society if a State could remove from the jurisdiction the whole range of civil claims or confer immunities from civil liabilities in the passage to which I have already referred. The court also referred to the difficulty in tracing the dividing line between procedure and substantive limitation. All this led to Lord Walker referring to the uncertain shadow of Osman still lying over this area of law. Lord Phillips went on:-
"We do not consider that the shadow of Osman stretches far enough to obscure the position in the appeals under consideration. They do not concern an area where it is difficult to draw a line between procedural and substantive rules of law. They are concerned with the application of a fundamental principle of our common law of negligence."
That case seems to me strong support for the proposition that the law as to illegality represents a fundamental principle of our common law of contract in the same way.
- I take account of the following factors
i) This case concerns that part of the English law as to illegality that relates to the performance of an otherwise lawful contract. The law seems well established, culminating in Hall v Woolston which is binding on this court.
ii) There was in the Employment Tribunal a trial of the issue of illegality by way of preliminary issue. They heard evidence over 2 days and gave a considered decision. This was undoubtedly a fair public hearing, and the contrary has not been contended.
iii) The essential facts were determined by the Employment Tribunal, indeed based largely on the claimant's admissions. The Tribunal did not have to go through what was described by Lord Browne-Wilkinson in Barrett as the undesirable process of basing a decision on hypothetical or assumed facts.
iv) The application of the law of illegality depends on the facts of the case and the knowledge and 'sufficient participation' of the claimant, and not on some external factor such as the status or position in society of one of the parties. The determination of the issue requires an examination of the facts of the individual case and the application of the law as found at a fair hearing. This is unlike those cases which have determined that there is a procedural ban where there is an immunity, such as attaches to a category of party, which avoids the need to examine the facts of the case and so is procedural, as in the situation described, though not applied, in Fogarty, as being
"the removal from the jurisdiction of the courts a whole range of civil claims or categories of persons".
v) The law relating to a contract illegal as performed is not, in my view, arbitrary, depending as it does on the knowledge and active and sufficient participation of the claimant, requiring examination of the facts of each case. The fact that it is thus qualified and not a 'blanket' tends to place it outside the ambit of Article 6. I am mindful of the words of Lord Goff, but the word 'indiscriminate' does not appear to apply, at least, to the operation of that part of the law of illegality as relates to the performance of a contract that is legal as formed, in the sense contended for by Mr Lederman. Indeed the situation here seems rather similar to the partial nature of the ban as seen in Ashingdane.
vi) It seems to me that the fact that determination of the illegality issue, whether by way of preliminary hearing or strike-out, effectively stopped further litigating of the action, does not thereby render it a procedural bar so as to engage Article 6. It is not what has been called a 'blanket ban'. The cases dealing with strike-out and preliminary hearings make this point. In Z v UK the Court found:
"Once the House of Lords has ruled on the arguable legal issues…the applicants could no longer claim any entitlement under Article 6(1) to obtain any hearing concerning the facts"
And this was so, notwithstanding that the ruling in that case prevented further proceeding with the factual issues in the original action.
vii) At a time in legal history when a person who had been found guilty of crime, or indeed had failed to attend his trial on three consecutive occasions, was ruled to be an outlaw and disentitled from the right to a fair trial on any matter, it could perhaps be reasonably argued that there was a 'blanket ban' that was procedural. However, the modern law of illegality involves confining the consequences of the illegality to the contract of which it forms part. In Hall v Woolston, the court was concerned with a claim for sex discrimination in employment which, whilst requiring the contract of employment to establish the dismissal of which she complained, it was held that the claim was not 'based' on the contract of employment (unlike the present case). The Court of Appeal, as Miss Eady has pointed out, placed much emphasis on the need for a causal connection between the illegality and the claim to allow an illegality defence. This process of examination seems to me far removed from the type of blanket ban referred to in the cases.
viii) The law as to illegality in contract does not give rise to issues of 'procedural fairness and integrity of the state's judicial system' (Matthews); there is no 'blanket ban' or immunity (Ashingdane); it is not arbitrary in its application so as to remove the court's jurisdiction to determine a whole range of civil claims, it can be fully litigated under English law, the inability to proceed with the action on a contract found 'Hall v Woolston illegal' as performed flows not from an immunity but from the applicable principles governing the substantive right of action in domestic law(Z v UK); it does not remove from the court's jurisdiction a whole range of civil claims or confer immunities from civil liability on large groups or categories of persons (Fogarty). It is not 'part procedural' so as to be under 'the shadow of Osman' (Matthews).
- This part of the law relating to illegality seems to me to be part and parcel of the substantive law of contract. To succeed in a claim for breach of contract the claimant must establish an enforceable contract. The claimant was not denied a fair trial. Rather, at the trial he failed to prove one of the essential ingredients, an enforceable contract, so that the claim could not succeed. Because of the form the evidence took in this case it was convenient to take this issue as a preliminary point but that may not always be so. It so happened therefore that as the preliminary issue meant that the claimant was bound to fail in his claim so that there was no purpose in proceeding further. The illegality of performance seems to me to be part of the substance of the contract in the particular case. As Miss Eady has submitted it is the way in which the substantive right is to be defined; the claimant has a right at common law to claim damages upon a breach of an enforceable contract, that is one not tainted by illegality. In the words of Z v UK:
"In the present case, the court is led to the conclusion that the inability of the applicants to sue the local authority flowed not from an immunity but from the applicable principles governing the substantive right of action in domestic law."
- Mr Lederman says the position is the other way around; the claimant had an enforceable contract until the issue of illegality was raised and adjudicated upon. Looking at the substance of those two positions rather than the form of words used, I find that the effect of illegality is part and parcel of the substantive contract law referable to this claim and not a procedural matter which prevents the claim from being brought.
- I find that the law as to illegality as it applies in this case is to be categorised not as an exclusionary rule or an immunity depriving the Claimant of access to the Court, but as a means of determining whether there is an enforceable contract so as to found the claim in a way similar to the situation in Z v UK and Re JD. I find that this defence of illegality does not give rise to a 'procedural' bar so as to engage Article 6. I find that the learned Master was correct that the argument that Article 6 is engaged has no prospect of success.
Legitimacy and proportionality.
- In case I am wrong, and Article 6 is engaged, or for the purpose of the striking out application can properly be argued to be engaged, I consider Mr Lederman's argument that the principle of illegality is subject to the test of legitimacy and proportionality. Similar considerations apply to the application of Article 1 of the First Protocol, which I turn to later. As to legitimacy he refers to the Law Commission consultation paper which suggests the law as to illegality to be deterrence, punishment, and respect for the court (presumably including the preservation of the rule of law). In addition there have been over the years references in the cases to the principles underlying the law as to illegality. There is clearly an important public purpose that is legitimate. It seems to me that where the courts administer the rule of law, unlawfulness is seen to challenge that.
- As to proportionately, Mr Lederman submits that this requires an examination of factual issues, which he instances. He submits that this is not appropriate to a strike out application. Miss Eady says that they were considered by the Employment Tribunal, in so far as relevant, and that there is no more for this court to consider. I return later to the argument that in any event this would lead to a matter of a different argument over the same facts. I do not necessarily accept that the following factual issues that Mr Lederman cites are relevant to proportionality, but have considered them nonetheless:
i) The amount lost to the Revenue. It seems to me there was admitted evidence of this before the Employment Tribunal from the Claimant himself which appears on any view to have been substantial. In some cases the amount may be very small or 'de minimis' as to make the rigours of the effect of illegality unfair. In this case, however, it is difficult to imagine circumstances in which such an examination could produce a favourable result for this Claimant.
ii) Co-operation with the authorities. This is Mr Lederman's description of the claimant's letter notifying the revenue, ten months after his termination of engagement and a few weeks before his employment tribunal hearing, that his earlier statements as to his self-employed status were untrue. I appreciate the argument for the Claimant that the learned Master appears to have made his own finding of fact on the inferences to be drawn from the timing of this letter and I accept that this was not really open to him on the strike-out application, unless that finding was itself 'issue estoppel'. However, it is appropriate, it seems to me, to consider whether it can be said to represent evidence that could reasonably be argued to amount to 'co-operation with the authorities'. This letter was not accompanied by any other gesture of co-operation on the one hand and enabled the claimant to pursue his claim for unfair dismissal on the other. I find it difficult to envisage circumstances in which this could be regarded as evidential support for substantial co-operation with the authorities in the context of proportionality. Indeed it can also be said that, dated long after the end of the contract in issue, it should not colour the court's approach to the way in which the Court approaches the parties' approach to the contract.
iii) The admission of wrong-doing, if made without 'consideration', and if timely made, could be a relevant circumstance. This was referred to in Tinsley v Milligan. However, it seems to me that the matters set out in (ii) above apply here.
iv) The amount of tax saved as a result of co-operation, and the Revenue's opportunity to re-coup by means of penalties. Here again, it seems to me that there was some evidence before the Employment Tribunal and in any event it would have been admissible evidence that the Claimant had the opportunity of adducing in minimising his participation. In any event there does not appear, after the event, any proposed evidence of tax saved or any recoupment. This does not appear, if applied in the context of proportionality, to be an area that would produce any factual conclusion in this case.
v) The windfall to the defendant. This has long been recognised as a possible consequence by the Courts, and taken into account. It is not an inevitable consequence. For instance in this case, it may well be that the defendants are liable to penalties consequent on the claimant's default. Further this can be a consequence of cases resolved on other preliminary issues.
- However, an important objection to these considerations is, it seems to me, that described by Mummery LJ in Shanshal when considering Article 1 of the First Protocol to which I later refer:
"I fail to see how compatibility with the Convention right in Article 1 of the First Protocol requires the national court to apply a principle of proportionality, so as first to divine, and then to exercise, a discretion to relieve the claimant from the consequences of his own illegal act."
- I accept the submission of Miss Eady that the fact that the law looks only at any 'wrongdoing' of the claimant in relation to the particular contract under consideration and then only leads to the illegality having its effect on the enforceability of the contract where the claimant knew of and participated actively and sufficiently, incorporates proportionality. The Employment Tribunal and the Employment Appeal Tribunal appear therefore to have dealt with those issues. I find that the response of a finding that the claim failed in consequence of the illegality is not reasonably arguable as a disproportionate response and the facts proposed to be advanced have no reasonably arguable substance.
- Finally, even if I am wrong and there are cases, which on their facts may be said to result in the barring of the claim being a disproportionate response, I find that this could not reasonably be argued to be one of them. Mr Lederman suggested that the prevention of continuing with the action is a penalty. However, Miss Eady has pointed out that notwithstanding the detailed analysis by the Law Commission in their consultation paper, it is not even described as such in that paper. Both employer and employee admittedly participated in a substantial fraud in the performance of the contract, in which the claimant was found to be the essential initiator by which he embarked on a deliberate course of dishonest conduct designed to evade tax over a number of years, involving deliberate misrepresentations about detailed aspects of the way he carried out his work implying the repeated filing, to the Inland Revenue, of false statements as to income. The very fact of the retraction in the weeks before the hearing of the claim for unfair dismissal demonstrates, amongst other things, the clear knowledge of wrong-doing that the claimant possessed, for there appears no evidence of an external event that operated to change his perception of his status. The fraud was admitted and I find that, even taking account of the sort of issues raised by Mr Lederman, it is not arguable on the facts of this case that the application of the English law as to illegality had a disproportionate result.
- I find that even if Article 6 is engaged the facts of this case are such as to render it not reasonably arguable that the law as to illegality would have in this case anything other than the consequence provided for in English law.
ARTICLE 1 OF THE FIRST PROTOCOL
- Mr Lederman contends in Ground 10 of the Notice of Appeal that the learned Master wrongly held that the English common law doctrine of illegality was consistent with the claimant's right to peaceful enjoyment of his possession, namely his right of action in damages under Article 1 of the First Protocol of the European Convention on Human Rights. Article 1 provides:-
"Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided by law…"
- The "possession" on which Mr Lederman relies in this appeal is the cause, or right, of action itself. Mr Lederman in his skeleton describes this as a "breach of contract" common law claim. Mr Lederman has not argued that the claimant's contract with the defendants was itself a possession of which he was deprived by the finding of the illegality. Mr Lederman seems to rely either on the action of the state in providing, or the action of the court in implementing the common law doctrine of illegality, which deprives the claimant of his cause of action. He submits that if the doctrine of illegality is to have that impact, it must be shown, in every case, to be done in pursuance of a legitimate objective and that the result, namely the rendering unenforceable of the contract, must be shown to be proportionate. Reference is made to a number of cases.
- In Gasus Dosier und Fordertechnik GMbh v Netherlands  20 EHRR 403, it was demonstrated that the meaning of possessions in European human rights law is broader than is sometimes understood, with the result that in a dispute as to a retention of title clause, not only rights of "true ownership" but also entitlement to the retention of title clause as "a security right in rem" were both treated as possessions. The case did not deal with a claim as a possession.
- In Wilson v First County Trust Ltd  3 WLR 5638 the House of Lords were concerned with a claim by a debtor against a creditor in relation to a pawn-broking loan in which the claimant pledged her car as security for the debt. The written agreement did not comply with the Consumer Credit Act 1974 and the issue arose, in consequence, as to whether that barred enforcement. Mr Lederman relies on the speech of Lord Nicholls. Miss Eady asks me to consider also the speeches of their other Lordships. Lord Nicholls held:
"Both parties acquired contractual rights under the agreement. "Possessions" in Article 1 is apt to embrace contractual rights as much as personal rights."
- At page 581, paragraph 42 Lord Nicholls said:
"There are of course many circumstances where statutes empower the executive or the courts to make orders depriving a person of some of his possessions. Compulsory acquisition, and property adjustment orders on divorce, are instances. The exercise of powers such as these prima facie engages article 1. … thus a provision in the Consumer Credit Act empowering the court to refuse to enforce a regulated agreement may engage article 1. …
43. … A law regulating the effect of the transaction between the
parties in the public interest does not always escape review under article 1 of the First Protocol. Such a law may infringe article 1 if it creates an "imbalance" between the parties which would result in one party being arbitrarily or unjustly deprived of his possessions for the benefit of the other".
44.…In my view, consistently with the underlying objective of article 1 of the First Protocol, the relevant provisions in the Consumer Credit Act are more readily and appropriately characterised as statutory deprivation of the lenders rights of the property in the broadest sense of that expression than as a mere limitation of the extent of the rights granted by transactions. The rigid ban on enforcement of security and contractual rights prescribed by (the Consumer Credit Act) … engages Article 1 of the first protocol. The lender's rights were extinguished in favour of the borrower by legislation for which the state is responsible. This was a deprivation of possessions within the meaning of article 1. …Whether this… was justified and therefore not a breach of article 1, is a separate issue."
- Mr Lederman points out that in Wilson, the court was concerned with statutory provisions approved by the legislature whereas this case is concerned with rights and duties acquired through the development of the common law. However, it also appears that it was there the statutory provision, and not its application by the court, that was characterised as an interference with possessions. In that way it was the 'rigid ban on enforcement of security and contactual rights' that appears to have been a material element. It also seems to me that by instancing compulsory purchase and property adjustment orders, and referring to powers 'such as these' Lord Nicholls was not expressly extending his words to all legal provisions that resulted in the determination of claims by a preliminary matter. Paragraph 44 of the speech seems to be focused on the effect of the particular statutory provisions and contemplates the possibility of 'a mere limitation of the extent of the rights' as being in a different position.
- Lord Hope in his speech in Wilson points out that article 1 of the first protocol guarantees the peaceful enjoyment of possessions that a person already owns and of which he cannot be deprived except in the public interest and subject to the conditions provided for by law. He goes on:
"One must, of course, distinguish carefully between cases where the effect of the relevant law is to deprive a person of something that he already owns and those where its effect is to subject his right from the outset to the reservation or qualification which is now being enforced against him. The making of a compulsory order or of an order for the division of property on divorce are examples of the former category. In those cases it is the making of the order, not the existence of the law under which the order is made, that interrupts the peaceful enjoyment by the owner of his property."
Lord Hope then deals with the effect of the provisions of the act there being considered and continues:
"The agreement which was entered into in this case was, from the outset, an agreement which was improperly executed. So it was always subject to the restrictions on its executions which… the 1974 Act set out. I would hold that (the lenders) convention rights under Article 1 of the first protocol are not engaged in these circumstances."
- I approach with considerable diffidence any comparison of the speeches in this case. Lord Hope, apparently disagreeing with Lord Nicholls, there appears to draw a distinction which is referable to the instant case. Lord Hope appears to distinguish those processes of the court which themselves constitute a positive act within the process that is before the court, such as making an order for compulsory purchase, on the one hand, from those processes of the court which involve a declaration or identification of legal consequences already embedded in the facts presented to the court, which is the usual process of litigation and which is the type of case before this court. Although the present case is concerned with performance and not formation of a contract, it seems to me that the performance of the contract by the claimant rendered it subject to the restrictions on enforceability provided for by law. Lord Hobhouse expressed the view that "the article may have been engaged". Lord Scott said:
"Article 1 of the first protocol is directed to interference with existing possessions or property rights. The lender never had at any stage in the history of the loan agreement, the right to enforce against Mrs Wilson the repayment of the £5,000. Neither the 1974 Act as a whole or Section 127(3) in particular constituted an interference with a pre-existing right of (the lender) to enforce repayment by Mrs Wilson of the £5,000. The Act, in Section 127(3) prevented (the lender) from ever possessing that right. No authority has been cited to your Lordships for the proposition that a statutory provision which prevents the transaction from having the quality of legal enforceability can be regarded as an interference for Article 1 purposes with the possessions of the party who would have benefited if the transaction had had that quality. In my opinion the proposition should be rejected."
In the broad generalisation in reference to 'a statutory provision', this passage seems to me to be more readily applicable to the circumstances of the instant case, "the law as to enforceabity of a contract through illegality" standing in place of "statutory provision". Lord Nicholls does not appear to have expressed his analysis as having such a wide application.
- Lord Rodger does not, in his speech, deal with this particular issue. It seems to me that, in dealing with the particular facts before the House of Lords, Lord Nicholls in paragraph 39 was concerned with a situation arising where, as he described it, the lender acquired a proprietary interest in a motor car which ceased some eight months later when the court refused to make an enforcement order. In reciting the facts at the outset of his speech Lord Nicholls referred first to the loan, the pawned property and the failure of the borrower to repay the loan. He then dealt with the signing of the agreement which he described as being regulated for the purposes of Section 8 of the Consumer Credit Act 1974. He pointed out that such an agreement is not "properly executed" unless the document signed contains all the prescribed terms. Failure to do that means "that the court is precluded, from enforcing the agreement". In so far as Lord Nicholls was there dealing with the substance of the dispute between the parties, namely the loan, this was somewhat different from dealing with the cause of action on which such loan was based, which would be the equivalent situation to the one before me. That is a distinction drawn by Mummery LJ in J.A. Pye (Oxford) Ltd. and Another v Graham & Another  2 WLR 1293, to which I refer below. It seems to me that the analysis of Lord Hope is more readily applicable to the circumstances of illegality in the instant case. Where there is no "contractual bite", as Miss Eady put it, the claimant does not have possession of contractual rights that are eligible for protection.
- Miss Eady refers to the case of Pye. One of the issues was the impact of the Limitation Act to bar an owner from recovering possession of land which had been in the adverse possession of another for 12 years. The issue was whether the extension of title by 12 years' adverse possession was a deprivation of possessions. At page 1309 Mummery L.J. held that Article 1 of the first protocol does not impinge on the relevant provisions of the Limitation Act 1980 for those provisions do not deprive a person of his possessions or interfere with his peaceful enjoyment but simply deprive a person of his right of access to the courts if he has delayed in accordance with the provisions:
"The extinction of the title of the claimant in those circumstances is not a deprivation of possessions or a confiscatory measure for which the payment of compensation would be appropriate: it is simply a logical and pragmatic consequence of the barring of his right to bring an action after the expiration of the limitation period"
So here, submits Miss Eady, the dismissal of the claim on the ground of illegality is simply the logical and pragmatic consequence of the unenforceable nature of the contract. Mr Lederman suggests that this case is "trumped", as he put it, by the speech of Lord Nicholls. However, for the reasons I have set out, it seems to me that it does not appear that in describing the general principle that he was applying to the specific situation in Wilson, Lord Nicholls was setting out such a wide principle as to apply to facts such as the present case is concerned with. Also, it does appear that in this context Lord Nicholls was expressing a minority view.
- In Al-Kishtaini v Shanshal  EWCA Civ 264 the Court of Appeal was concerned with a defence that a claim was based on illegality on the basis that the transactions upon which it was based contravened regulations implementing United Nations sanctions against Iraq. The Court found no breach of human rights law. It was argued that the finding of illegality was a deprivation of the claimant's right to possession of the money claimed, so as to be incompatible with Article 1 of the first protocol and that it would not be proportionate to deprive the claimant of his claim. It appears that argument revolved mainly around the "public interest" exception in Article 1 and the defendants made clear they did not concede that the unenforceability of the claim on the grounds of illegality was a deprivation of possessions within the meaning of the article. Considerable doubt existed as to whether Article 1 was engaged at all. The decision is also valuable, in my judgment, in relation to legitimacy and proportionately to which I later refer. Mummery L.J. said that,
"Even assuming that the claimant is entitled to invoke that convention right at all, this case clearly falls within the public interest exception to the right and the illegality defence is not incompatible with the convention rights"
Mummery L.J. identified two striking features of the public interest element; the very high public interest originating from the nature of the United Nations resolution and secondly that the prohibition, on which the claim is based, is not an absolute one. Both elements apply in this case although the public interest element could reasonably be said to be not as considerable. This identification of the two elements follows the reference by Mummery L.J. to the speech of Lord Goff in Tinsley v Milligan  1 AC 340 at 355B-C where the principle of illegality was there described as being indiscriminate and capable of leading to unfair consequences. Rix LJ in Al Kishtaini v Shanshal referred to the public interest element in the case as being very strong so as to make the circumstances of the particular case 'compelling'. In his judgment Holman J. in that case put the matter succinctly and, as Miss Eady submits, in a way that is directly applicable to the principles to be applied in the case before me:
"I am far from persuaded that the circumstances of this case engage Article 1 of the first protocol at all. The claimant's claim is for the return to him of part of the sum paid by him in the course of an illegal and prohibited act. As, ex hypothesi, the law does not afford to the claimant a remedy, it is arguable (as Mr Marshall did argue) that his claim does not amount to a "possession" at all; still less that the court or the state "deprives" him of it."
Nonetheless Holman J went on to assume for the purposes of the decision that Article 1 was engaged.
- In Stretch v United Kingdom, application 44277/98 ECHR 24 June 2003, a tenant sought to exercise an option to renew a lease with a local authority which option, unwittingly, the local authority had had no power to grant and which they therefore refused to exercise of which they refused. Mr Lederman draws attention to paragraph 32 of the judgment:
"The court recalls that, according to the established case law of the Convention organs, "possessions" can be "existing possessions" or assets, including claims, in respect of which the applicant can argue that he has at least a "legitimate expectation" of obtaining effective enjoyment of a property right"
- I return later to this in the context of proportionality, but the finding of the court was set out in paragraph 35 in this context:
"The court considers, in the circumstances of this case, that the applicant must be regarded as having at least a legitimate expectation of exercising the option to renew and this may be regarded, for the purposes of Article 1 of protocol No.1 as attached to the property rights granted to him by Dorchester under the lease.
- It seems that the court was here concluding that the term "possessions" was apt to include not only an option to renew but also a legitimate expectation of having that option. Whilst the passage quoted above refers to "claims", it seems to me the decision does not assist in determining the facts of the case before me for this case does not include a legitimate expectation of a contractual right, but a claim on a contract rendered unenforceable by the claimant's performance, knowing of the illegality of performance.
- Miss Eady submits that Article 1 does not give a right to possession, but where such right exists, it prevents unwarranted interference; I adopt the submission that the unenforceability of the contract results in there being no possession in the shape of a claim of which the claimant has been deprived of by the court. Whilst it may be that the claim for breach of contract can be regarded as a 'possession', it seems to me that the claimant has not been 'deprived' of it. On the contrary, he commenced his claim and that part of it that involved examination of the enforceability of the contract in the event of illegality was fully litigated before the Employment Tribunal. The fact that the claim failed without consideration of all the remaining issues that were raised does not appear to me to amount to a deprivation of the claim. This can be compared with Wilson where the effect of what happened was that the Consumer Credit Act deprived the lender of rights to property; "the lender's rights were extinguished" in the words of Lord Nicholls. Accordingly I find that the claimant cannot argue that he was deprived of a possession so as to engage Article 1
- I also find that the claim in this case does not engage Article 1 in any event. However, recognising the qualified nature of the finding in Al Kishtaini v Shanshal that Article 1 was not there engaged, I have in any event gone on to consider the arguments as to legitimacy and proportionality.
Legitimacy and proportionality.
- Mr Lederman submits that these elements have to be considered in each case and that this cannot be done in a striking-out application. In Hentrich v France  EHRR 440, the European Court of Human Rights considered the issue of proportionality. Miss Eady points to the fact that at paragraph 39 the court recognised that in identifying public interest, states have a certain margin of appreciation to frame their fiscal arrangements to ensure that taxes are paid. The court recognised that the prevention of tax evasion is a legitimate objective, which is in the public interest. The court went on to find at paragraph 45, that in order to assess the proportionality of the interference, the court looks at the degree of protection from arbitrariness that is afforded by the proceedings in the case. The court went on to state that the question of proportionality must be looked at from the point of view of the risk run by a claimant that he would be subject to pre-emptions and therefore penalised. Of course in the instant case, the facts that led illegality of performance to render the contract unenforceable were initiated and contrived deliberately by the claimant. However, the need for protection from arbitrariness as an element appears to endorse the qualified approach in Hall v Woolston as proportionate
- In Lindsay v Customs & Excise Commissioners  1 WLR the respondents forfeited goods alleged to have been smuggled into the country in a vehicle and they also forfeited the vehicle. There was no issue but that this was interference with possessions and the issue of proportionality was considered. The summary in the head note shows that the Court of Appeal found that,
"In taking action under that policy a fair balance had to be struck between the rights of the individual and the public interest, there had to be a reasonable relationship of proportionality between the means employed and the aim pursued and regard had to be given to the individual case to ensure that the penalty imposed was fair; that however strong, the public interest could not justify subjecting an individual to an interference with his fundamental rights that was unconscionable."
The court held that where an importation was not for profit, each case should be considered on its particular facts, including the scale of importation, whether it was a first offence, whether there was any attempt of concealment or dissimilation, the value of the vehicle and the degree of the hardship caused. The court held that in the absence of any regard being paid to the value of the vehicle, as against the goods being imported, of any distinction between commercial and social importation, and of any discretion in practice, Customs & Excise had failed to allow regard to be had to all material considerations. The penalty of forfeiture was held to be disproportionate in that case. Mr Lederman submits that the court must look at the legitimate aim and the effect of the "penalty" in each case. In paragraph 55 Lord Phillips accepted that there was a legitimate aim in the policy of forfeiture but there were then issues as to first whether the policy was liable to result in the imposition of a penalty in the individual case that was disproportionate and secondly whether it had that effect in this particular case. Mr Lederman submits that one cannot ignore in this context the penalty imposed; the impact on the individual of being deprived of his trial on the merits of his claim for breach of contract. Mr Lederman submits that one has to consider public policy in every case and that this cannot be done in a striking out application. However, again the court's reliance on the arbitrary nature of the approach of Customs and Excise who did not consider the circumstances of the appellants seems to contrast with the provisions of the law as to illegality.
- Al-Kishtaini v Shanshal is relevant in this context. Mr Lederman sought to distinguish it on the basis that the public interest there was of a very high order as compared, he would say, with the doctrine of illegality in the context of the instant case. Whilst certainly this illegality is not of such a high order of importance, nonetheless it does seem to me, on any view, to be of a sufficiently high importance to be given great weight. I accept that argument in terms of degree, without diminishing the importance to society of the law as to illegality. The legitimate aim of the doctrine of illegality has been described in a number of ways. It seems to me it is well recognised as having a legitimate aim whether it derives from the desirability of insuring the proper collection of taxes, the need to provide a deterrent in that context, or respect for the courts, as the Law Commission consultation paper suggests, or the principle that courts embody the rule of law, that is the umbrella that enables society to operate by the proper exercise of legal rights and duties to which, it may be said, being able to do so illegally would be an anathema. It seems to me unarguable that the legitimate aim is an important factor. Further, the European Court of Human Rights has held that a degree of arbitrariness would militate against proportionality. Mummery LJ in Al-Kishtani v Shanshal referred to the two factors of importance in relation to the 'public interest element' of the policy in that particular case and that the prohibition in that case was not "an absolute one". That seems to me to apply directly to consideration of the test in Hall v Woolston so far, at least, as it applies to illegal performance of the contract. That test is not arbitrary, and it is not absolute in my view, which again points to proportionality.
- In Hentrich prevention of tax evasion (no doubt what the Law Commission would term 'deterrence') is legitimate, and proportionality depends to an extent on the absence of arbitrariness. Here this element was absent for two reasons; failure of the claim from illegality only arises where the claimant ahs knowledge and participates and secondly this is to be judged by degree (Hall v Woolston Leisure and Colian v Cebrian Ltd).
- Factors which Mr Lederman says would be taken into account in balancing against that public interest are those already dealt with in connection with Article 6. The degree of protection from arbitrariness is a matter that I have already dealt with.
- Accordingly, it does not seem to me that, on the facts of this case, an examination of the sort of matters to which Mr Lederman has referred could provide any arguable assistance for the claimant. It seems to me that it is unarguable that this was a serious and long-lasting fraud, initiated deliberately by the claimant with some support from his employer, and I reach that conclusion essentially on the basis of what appeared to be the admitted facts of the claimant. There may be cases where the participation of the employee is very much less, and the involvement of the employer very much more, so as to render it a case that ought to be argued in the context of proportionality. I cannot envisage in practical terms that this could be one of them. In those circumstances, I find against Mr Lederman's argument that these factors gave rise, at least sufficiently arguably, to a prospect of success in a full trial.
- I distinguish the case of Stretch, on which Mr Lederman relies to the extent that there was, in the present case, no expectation that the claimant had some enforceable employment right; he cannot say he is in the same position as Mr Stretch. The Employment Tribunal found in paragraph 13 of their decision that the claimant was well aware of the distinction between the two types of status and may well have advised the employer of the consequences of getting it wrong. That does not appear to have been in dispute. Insofar as the facts in the Stretch case are relevant, I adopt the submissions of Miss Eady that they assist the defendants in this case, for they demonstrate the importance to be attached to the legitimacy of Mr Stretch's expectations which are to be contrasted with the claimant's knowledge to the contrary in this case.
- I find that I am not persuaded that the claim for breach of contract is a possession, but that even if it is, the claimant was not deprived of it so as to engage Article 1. If, on the contrary, article 1 properly should be regarded as engaged, it is not reasonably arguable that the law as to illegality does not fulfill a legitimate purpose of considerable importance. Further I find that on the facts of this case, as admitted and to be gleaned from that presented by the claimant to the Employment Tribunal, there is no reasonable prospect of succeeding in the argument that a finding of unenforceablility would be a disproportionate response.
DISCRIMINATION UNDER ARTICLE 14 OF THE EUROPEAN CONVENTION ON HUMAN RIGHTS
- Mr Lederman submits that Master Leslie's decision discriminated against the claimant in the enjoyment of his rights under Article 6 and Article 1 of the First Protocol, by applying the defence of illegality so as to unjustifiably discriminate against the claimant as a litigant bringing a claim for damages. The discrimination is said to arise from the decision itself which gave effect to the defence of illegality, and from continuing discrimination arising from the continuing application of that decision and from the application of the defence of illegality to the unfair dismissal proceedings. Article 14 provides:
"The enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any grounds such as sex, race, colour, language, religion, political or other opinion, National or social origin, association with a national minority, property, birth or other status."
It is the status that is alleged to be the relevant term here. Mr Lederman suggests that the status relevant to his argument of discrimination is of the claimant as a person who has behaved illegally, like an accused. He says he has the status of a litigant with categories of rights in a different position to the other litigants because of the way in which illegality was treated. Whilst I understand that the element of criminality may provide a comparison, it does not seem to me that it could reasonably be argued, for instance, that an offender sentenced to imprisonment for burglary could claim that he had been discriminated against by being treated differently on account of his criminality, so long as within that context he enjoyed the substantive rights of the convention.
- Reference is made to Michalak v London Borough of Wandsworth  39HLR 721 and the fourfold test proposed by Brooke L.J. The first question is whether the facts fall within the ambit of one or more of the substantive convention provisions. I have found that they do not but proceed in case I am wrong about that. Secondly, was there different treatment as respects that right between the complainant on the one hand and other persons put forward for comparison on the other, and thirdly were they in an analogous position?
- Mr Lederman has suggested a number of comparators.
i) A litigant defending a claim based on the same contract: Miss Eady points out, and I accept, that a person defending a claim is in a quite separate group to one bringing a claim and is not a comparator in the context of this case. I accept that there could be circumstances in which they should be treated in the same way, for instance if the court, in providing facilities for litigants, were to favour one above the other,or if a defendant was preferred in his bringing a counterclaim over a claimant bringing a claim. But where parties are opposing there is no comparison in relation to the court's determination of the issues before it. Mr Lederman sought to draw on Hooper and others v Secretary of State for Work and Pensions  EWCA 813, but that does not in my view apply to the differences or similarities between claimant and defendant such as in this case. In any event, it is a reasonable justification for discrimination; to prevent people bringing a claim to enforce an illegal right or, to put it another way, it appears to beg the essential questions which have already been dealt with.
ii) A litigant bringing a claim to enforce property rights where title has passed: Miss Eady points out that this is not a comparison of like with like for there is a completely different cause of action; that person bringing a property claim were he or she to be bringing a contract claim, would be treated in exactly the same way. It is not a different status.
iii) Defendants to a claim in which they have been found guilty of offences relating to tax evasion where the claim is in contract; here again, it is a distinction between a defendant and someone bringing a claim.
iv) A litigant who brings a claim based on a contract found to be tainted with illegality but where the litigant was an unwilling participant (the Hewcastle case). However, there is then no difference in treatment for the Hall v Woolston test would be applied, although the end result would be different; further this is not a comparator because that person has not been guilty of wrongdoing and furthermore and in any event, such a distinction would be a legitimate reason.
v) A person who is subject to a Confiscation Order under the Proceeds of Crime Act 2002. However, in both cases, the procedural rights relevant to those different cases are preserved.
vi) In closing submissions Mr Lederman suggested those who turn a blind eye to a dishonest scheme or where there was a breach of duty to make tax returns, both of which are in Hall v Woolston, but they do not seem to me to be comparators; all that reference to them does is to challenge the appropriateness of Hall v Woolston in its requirement of knowledge and participation before the doctrine of illegality would bite.
Reference was also made to Hooper v S.S. Work and Pensions  EWCA Civ.813, paragraphs 91 to 101 at tab.41. The facts of that case are different, but the court there drew the distinction between the varying effect of a single condition precedent and the true 'comparator' situation. I find that the second and third questions must be answered in the negative.
- The fourth question in Michelak is whether the difference in treatment had an objective and reasonable justification; as a possible answer I have already referred to that.
- The allegation of discrimination was raised for the first time on appeal and I was disposed to refuse to allow it to be argued. Miss Eady submitted that this ground should be disallowed. She argued that the allegation in relation to Article 14 is an afterthought, pointing out that no explanation has been given as to why this new point is raised at this late stage. The concern of the defendants is that the claimant is in receipt of public funding and there is no means of protecting the Defendants in costs should it turn out to be an insubstantial point. However it seems to me that it can be said that I have all the relevant material before me and so I have considered the argument as addressed. I find that there is no arguable case as to a breach of Article 14. As Miss Eady pointed out, all people who are unable to demonstrate the necessary elements to proceed with a legitimate cause of action will sometimes fail at a strike-out or preliminary stage and will be unable to claim this as a possession so that the claimant has not been singled out. Furthermore, not every characteristic is a "status".
- I find there is no prospect of successfully arguing that there was discrimination under Article 14, even if there were other relevant provisions of the Human Rights Act to which it could attach.
CLAIMS IN TORT
- The claimant seeks to amend the Particulars of Claim to allege tortious conspiracy. Permission was refused by the Master and leave to appeal was refused. Formally this matter, therefore, comes before the court by way of an application for permission to appeal. The proposed amendment constitutes a substitution for the Particulars of Claim upon which the result of this appeal has been based. The proposed amendment described the conspiracy as one where the first defendant company, through its directors, agreed with the second and third defendant companies to cause damage to the claimant by wrongfully terminating his business relationship with them. The claim is based upon the termination of his relationship, the absence of notice and other matters claimed in the main action. Whilst it is alleged that the parties "conspired, combined and agreed", no material facts are pleaded other than the process of termination that forms part of the claim for breach of contract.
- In his skeleton argument Mr Lederman says there is not direct factual evidence of such but that it is to be inferred from overt acts. He refers to particular allegations which he would say amount to a tort.
i) that Mr Brinton complained that the claimant had been having "an affair" and that other employees knew what was going on, and used this as a ground for termination: an unlawful invasion of his right to family life
ii) that the claimant was refused access to his personal property as a wrongful interference with property some of which, unparticularised, the claimant alleges to be still missing
iii) unauthorised surveillance of his private life.
iv) Unauthorised recording of the claimant's private conversations with Mr Brinton.
v) that notes were produced which suggested that the claimant was trying to blackmail the defendants and that such notes were inaccurate.
It is contended that this was part of an agreement to cause the claimant as much damage as possible.
- Miss Eady submits that the pleading does not disclose the facts to support the allegation of conspiracy for there has to be more than one person and here there is only one mind, the controlling mind, of the company. Essentially the controlling mind is that of Mr Brinton and no separate role between him and the companies is pleaded. Miss Eady submits that there is no conspiracy at all. In his first statement the claimant says:
"The defendants are private limited companies owned and controlled by Mr Brinton. I believe that it is only proper and fair to lift the corporate veil in order to uncover the real defendant in this claim. Undoubtedly, it is Mr Anthony John Brinton."
- There is reference in the second statement of the claimant in paragraph 21 to an alleged agreement between Mr Brinton and Janet Brinton to make the claimant's life as difficult as possible with a view to irretrievably damaging their business relationship and further the claimant alleged that there was an agreement about the purchase of a motor car in which Janet Brinton and Mr Brinton were both involved. However, this paragraph was considered by the Employment Tribunal, as Miss Eady has pointed out, and their findings were completely contrary to such an agreement; there was no agreement found as to the car. I bear in mind that the tort claims would arise if the contract claim is struck out. I these circumstances it seems to me appropriate to regard this court as bound, but that finding of fact. This seems to me to undermine the allegation that there is an overt act from which a conspiracy can be inferred. Master Leslie found that there was no overt act and I agree with him. Mr Lederman says that the claimant alleges wrongful inducement by one or more of the defendants to breach the business relationship, and/or with their managing director Mr Brinton. As Mr Lederman put it in argument, where there are 3 defendants it is not difficult to imagine that one or other 'may well' induce the other. I find that there must be alleged a more specific material fact than the fact of 3 defendants and the possibility of collaboration between or influence of one by the other. As Mr Lederman himself argues, for an inducing there must be a direct intervention in persuading one to break a contractual obligation, by intervention by some wrongful act, or by persuasion of some third party. I find no material facts that are pleaded that could reasonably give rise to such a claim.
- Further, it is argued by Miss Eady that the illegality of the contract is equally fatal to the claims in tort as in contract in this case. A number of authorities have been cited. In Hewison v Meridian Shipping Services  ICR 766 the question was expressed as being whether the illegality was 'collateral' so as to not taint the loss of earnings claimed in that case. Mr Lederman quotes the judgment of Tuckey LJ:
"Illegality may affect a tort claim in many ways ranging from an essential part of the story giving rise to liability to some remote aspect of quantum. I favour a broad test…: is the claim or the relevant part of it based substantially (and not therefore collaterally or insignificantly) on an unlawful act? Such a broad test has the merit of simplicity. It does not involve the judge having to make very specific and difficult value judgments about precisely how serious the misconduct is or whether it would result in imprisonment of whether the claimant's loss is disproportionate to his misconduct. I agree with what McLachlin J said in the passage cited by Ward LJ… "The law must aspire to be a unified institution, the parts of which – contract, tort, the criminal law – must be in essential harmony. For the courts to punish conduct with the one hand while rewarding it with the other would be to "create an intolerable fissure in the laws conceptually seamless web."
A broad test enables this objective to be achieved; a more structured one might not"
On that basis Mr Lederman submits that the claimant's fraud on the revenue is not an integral part of his claim. He adopts the words of Ward LJ in Hewison to say that the claim is not so closely connected or inextricably bound up with his own…illegal conduct that the court could not permit him to recover without appearing to condone that conduct.
- Reference is made to paragraph 24/22 and 24-23 of Clerk & Lindsell on Torts in which it is stated that if the contract is void, no tort is committed and that it is not tortious to induce a breach of contract which is unlawful as being an unreasonable restraint of trade although if the contract is severable, liability may arise for procuring a breach of the remaining lawful terms of it such as an outstanding negative covenant. The text goes on to suggest that it is uncertain whether the tort is committed by procuring a breach of contract which is merely unenforceable by action. Reference to the analysis of the law of conspiracy by the Court of Appeal in Hall v Woolston in a sex discrimination case is referred to. In that case the sex discrimination claim stood outside a contractual claim because it arose from a statutory right and not the contract of employment. It was for that reason that the unlawful nature of the contract did not defeat the claim for sex discrimination. Peter Gibson L.J. held:
"In my judgment, it could not properly be said that the complaint of sex discrimination by dismissal was based on the contract of employment, still less that a claim of such discrimination was so closely connected with or inextricably bound up or linked with the acquiescence by the employee in the unlawful failure by the employer to deduct PAYE and NIC that the court would be seen to be condoning unlawful conduct by the employee."
- I infer from that that had there been the close connection or inextricable linkage, then the claim for sex discrimination would have failed. Furthermore, in the present case, the employee was actively involved in the illegality from its inception and in this case there is a much closer connection between the illegality and the inducing of a breach of contract claim. In Hewison a claimant was prevented from recovering in tort for damages for loss of earnings that would only be earned on the basis of a deception by the employee of his employer.
- I find that the claim in tort is not really made out on the pleadings in the absence of material facts supporting a conspiracy or an inducing of a breach of contract and that the claim as framed is shadowy and without a reasonable prospect of success. Further, I find that the claim in tort is not, as Mr Lederman contends, collateral to the fraud which is not essential to such claim, but rather as Miss Eady submits, that the claim in tort is based on the illegality. There is the desirability of enabling different types of civil wrong, here in contract and tort, to lie easily together. It is the termination of the contract that is illegal as performed that is the essential act complained of in the tort claims. I find that it falls on the side of the line of being based on the contract and I accept the submission of Miss Eady. The Claimant, if not able to rely on the illegal contract directly, seeks to mount a substitute claim by bringing this action in tort. I find the two go hand in hand for the claims in tort are founded on the illegality. I find that the claims in tort are not reasonably arguable and are unlikely to succeed so that permission to appeal the refusal to amend to make the claim should be refused.
- Mr Lederman argues that the defendants are estopped or subject to the doctrine of equitable forbearance so as to be thereby prevented from relying on the defence of illegality in wrongful dismissal proceedings, so that the claim should be permitted to proceed, unlike in the employment tribunal where such a 'defence' to an allegation of estoppel could not be raised. I assume this is also raised as a form of 'special circumstance'. Mr Lederman's submissions are contained in his skeleton argument and written closing submissions. He refers to Hughes v Metropolitan Railway Co. (1877) 2 App.Cas. 439 at 448:
"…if parties who have entered into definite and distinct terms involving certain legal results – certain penalties or legal forfeiture – afterwards by their own act or with their own consent enter upon a course of negotiation which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person who otherwise might have enforced those rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which have thus taken place between the parties."
- Mr Lederman says that the defendants made representations first to the claimant that he would be paid bonuses provided with paid study leave and provided with a company car and secondly to the Inland Revenue and the DSS which confirmed that the Claimant was a lawful self-employed consultant so that they are not now able to argue the contrary. He says that the claimant relied on those representations in accordance with his witness statement:
"I will refer to the various forms which I was asked to complete over the years for the Defendants for the Revenue which proceeded on the basis that I was a self employed consultant working for them. The Defendants took the benefit of that status when it suited them. I relied upon promises and assurances made by Mr Brinton and Janet Brinton pleaded in the existing proceedings. I relied upon those promises and assurances to my detriment as I carried on working without receiving written particulars or confirmation of the promises. I also deferred obtaining the contribution to the car as agreed and finalised with Janet Brinton (paragraph 11 of the existing Particulars of Claim). Submissions will be made on my behalf that in the circumstances pleaded in the existing proceedings, it would be inequitable or unconscionable for the Defendants to rely upon a finding of illegality in the Tribunal. This issue was not raised before the Tribunal"
- Miss Eady says that this argument cannot apply in this case. She points to the findings of the employment tribunal about the comparable liability of the parties, and that as to the alleged promises and assurances, she points out that the employment tribunal made express findings to the effect that the bonus was not paid, that the salary was capped and that there was never any undertaking as to the car:
"While we accept that Mr Soteriou did talk to Janet about having a car, no firm agreement had been reached on that subject and she may not have felt it necessary to report the conversation to her father…
27…given Mr Soreriou's meticulous recording of such matters in his faxes to Mr Brinton, we do not believe that any firm agreement was ever reached on the part of Mr Brinton to give Mr Soteriou a motor car…It would have been interesting to see how the parties would have dealt with it had Mr Brinton agreed to give Mr Soteriou a car. Clearly he could not have done so in the open manner which was arranged in respect of Mr Santell and Mr McElroy (employees), since that would have been inconsistent with Mr Soteriou's expressed self-employed status"
Indeed the Employment Tribunal found in paragraph 25:
"We accept Mr Brinton's evidence that it was immaterial from his point of view whether Mr Soteriou was employed or self-employed…when Mr Brinton entered into negotiations for the proposed sale of the company, he was prepared to negotiate a long term contract of employment with Mr Soteriou in order to give him the benefits of employment protection…Little wonder …that Mr Soteriou should have been keen to maintain his self-employed status when it was challenged by the Contributions Agency"
- The absence of writing was his choice. In any event the finding of the employment tribunal was that the claimant was in fact an employee. It seems to me that it is not possible to construct out of what was found by the employment tribunal to have happened an agreement by the defendants to hold back on enforcing an aspect of their agreement with the claimant. Even if res judicata does not apply, and the evidence falls to be considered afresh, I find that the elements required to establish estoppel cannot be imposed on the case of the claimant so as to relieve him of the impact of illegality. Also, even if the facts found by the tribunal are not binding, and the case were to be tried, then if the claimant was involved in 'active and sufficient participation' he would fail and by the same token would be unable to establish that it was the representation of the defendants that led him to act as he did. If the claimant were not involved to that extent then he would be able to proceed with the claim and any argument as to estoppel would be surplusage. Further, and in this context, however, his case is not that he relied on the representations of the defendants, but rather that he was compelled to act by pressure from Mr Brinton. In all the circumstances I find that the argument as to estoppel has no prospect of success. In any event it adds nothing to the case and cannot serve, in my view, to enable a case to proceed that should otherwise be struck out.
- Mr Lederman raises the associated argument as to equitable forbearance. However, it seems to me that the same arguments apply. Further it does not seem to me possible to construct out of the claimant's case an argument that there was 'a clear and unequivocal representation that the defendants would not insist on their strict legal rights against the claimant, arising our of their relationship with him' Chitty on Contracts 28th Edition para 3-081 and 3-082.
RES JUDICATA CONTINUED
Issue estoppel – are they the same issues.
- I find that the arguments advanced by Mr Lederman under the Human Rights Act, or by way or estoppel or a claim in tort do not provide a basis for distinguishing the central issue before both the Employment Tribunal and the High Court, that is the enforceability of the contract when illegally performed. I find that issue estoppel was correctly found to be operative in this case subject to any special circumstances.
Special circumstances: issue estoppel where the issue is the same -.
- I find that none of the material advanced can be described as a subsequent change in the law or the subsequent discovery of new fact, brought about by either decisions of the courts of by Act of Parliament, after the decision in the Employment Tribunal. Nor is such material 'clear'. They represent alternative arguments and refer to law that could have been advanced at the time, such as were referred to by Fox J in Green. It is the sort of material described as failing, and not that described as succeeding in amounting to special reasons in Arnold v National Westminster Bank plc.:
"the presentation of a new argument or the discovery of a previously overlooked authority would not suffice: the new law must take the form of a new decision;"
nor would 'inadvertence' as that case also held. Mr Lederman says that if counsel had realised that the Convention rights was a live issue, they would have taken them, but it seems to me that this would be inadvertence and that such a proposition assists the defendants
Further, unlike the case of Arnold, there was here the availability of an appeal route. the Human Rights Law was not 'new law', as can be seen in Barrett which referred to the need to anticipate the implementation of the Act. The new points proposed to be adduced were not clear cut, and did not, on my findings, have a reasonable prospect of success even if advanced.
Finally, the opportunity to plead estoppel or equitable forbearance in the High Court in answer to the defence of illegality would not present an arguable response to such a defence for the reasons stated.
- If the legal principles derived from cases dealing with Henderson abuse are applicable where the issues are the same, then I adopt what follows in this section.
Special circumstances: abuse – matters that could and should have been raised in the Employment Tribunal.
- Mr Lederman argues that if this is not a case of issue estoppel as based on an issue already decided, then it would not be an abuse to allow the claim for wrongful dismissal to proceed in the High Court. He refers to the speech of Lord Bingham in Johnson v Gore Wood:
"It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt tto dogmatic an approach to what should in my opinion be a broad, merits based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, or on given facts, abuse it to be found or not. Thus while I would accept that lack of funds would not ordinarily excuse a failure to raise in earlier proceedings an issue which could and should have been raised then, I would not regard it as necessarily irrelevant, particularly if it appears that the lack of funds has been caussed by the party against whom it is sought to claim. While the result may often be the same, it is in my view preferable to ask whether in all the circumstances a party's conduct is an abuse than to ask whether the conduct is an abuse and then, if it is, to ask whether the abuse is excused or justified by special circumstances."
- The arguments based on the Human Rights Act. Mr Lederman says that in view of the proximity of the dates of the implementation of the Act and the hearing before the Employment Tribunal, it would not be an abuse to raise the arguments under the Act in High Court proceedings. First, the fact that the Act was indeed in force is an important counter factor. Secondly, this Act, unlike some that pass into law almost imperceptibly, was heralded for some considerable time before the commencement date and courts were applying the principles a considerable time in advance as can be seen from the case of Barrett already referred to. Further there was an appeal to the Employment Appeal Tribunal and although this was taken by Mr Soteriou in person, there was a further application for permission to appeal to the Court of Appeal. The Human Rights Act had then been in force for a considerable time, and the principles applicable to abuse in this context could readily have been taken into account in relation to seeking permission to admit new law on appeal if appropriate.
- Further, the facts upon which the finding of illegality was based were largely admitted, other than the issue of the alleged pressure by Mr Brinton. The Employment Tribunal have had a full opportunity to hear the evidence and come to a conclusion on this issue of fact. Lord Bingham suggests that account should be taken of the facts of the case. In view of the seriousness of the admitted fraud, it is difficult to envisage circumstances in which a favourable finding as to the Hall v Woolston test could succeed.
- Further I have found that the arguments under the Human Rights Act, though based on the Employment Tribunal's findings of fact, would fail. In view of the seriousness of the fraud perpetrated by the Claimant it seems to me that, if prospects of success are to be taken into account in this context, the result would be the same.
- Further, Lord Bingham refers to financial considerations as a reason for there being no abuse. He also refers to the need to take account of the public and private interests involved. In this case I am told that the Claimant is in receipt of public funding so that the Defendants, even if successful, will be unable to recoup the considerable costs of a full High Court hearing. As Mummery LJ said in Sajid v Sussex Muslim Society when describing the policy behind the principle of 'res judicata'
"It is unjust for a party who has spent time and money in obtaining a final determination of …an issue in a claim to be faced with fresh proceedings from the other party seeking to re-litigate the …same issue."
- I accept the submission of Miss Eady that essentially all the relevant facts have been found. The arguments under the Human Rights Act could have been taken before the Employment Tribunal. In any event these are different ways of arguing the issues before the Employment Tribunal such as would lead to there being no abuse in the way Fox J. explained in Green v Hampshire County Council. That is to be seen, it seems to me, in the arguments as to proportionality which draw on the facts already found by the Employment Tribunal. If the claimant were to succeed on this argument the same factual issues would be examined in relation to an alternative argument. I consider that the arguments as to tortious conspiracy and estoppel would not add anything for the reasons stated. In all the circumstances, even if this were not a case of issue estoppel, I would nonetheless conclude that it would be an abuse to allow the issue of illegality to be argued in these proceedings.
- I cannot accept the argument that because the claimant appeared in person before the Employment Appeal Tribunal, that can amount to a special circumstance in this case. Any lingering doubt as to the shortness of time between the implementation of the Human Rights Act and the hearing in the Employment Tribunal is resolved in the defendants' favour with the appeal process. Without necessarily accepting that the arguments under the Human Rights Act 1998 could have been raised legitimately on appeal, the arguments as to admissibility would have been similar to those raised here. The correlation between the appeal procedure and 'special circumstances' was illustrated in Arnold. The failure to raise the matters then, it seems to me, means that it would be an abuse to give leave to raise them in fresh proceedings.
- Both the claim before the Employment Tribunal and that before this court are founded on a contract found by the Employment Tribunal to have been illegal. I find that the enforceability of the contract in this claim attracts issue estoppel and that there are no special circumstances.
STRIKING OUT PROCEDURE
- Mr Lederman draws attention to authorities. In Barrett v Enfield Borough Council Lord Browne-Wilkinson referred to the need for extreme care as I have already cited, and went on
" unless it was possible to give a certain answer to the question whether the plaintiff's claim would succeed, the case was inappropriate for striking out".
- In L(A Child) v Reading Borough Council  1 WLR 1575 at 1578 Otton LJ deprecated reliance in determining a strike-out application on assumed facts from the pleadings. I have earlier referred to the distinction in this case where facts are essentially admitted, and in any event have essentially been found by the Employment Tribunal. In that case the court in fact concluded that there should be a full trial to deal with alleged violation of article 8 of the convention under the Human Rights Act 1998, but the situation in that case was different and there has not been a factual comparison.
- Mr Lederman says that the words of Lord Woolf in Kent v Griffiths (set out in paragraph 62 of this judgment) should be read in the light of the speech of Lord Hope in Three Rivers District Council v Bank of England  UKHL;
"When the court is considering, in a case to be decided under the Civil Procedure Rules, whether or not it is just in accordance with the overriding objective to strike out a claim, it is not necessary to analyse that question by reference to the rigid and overloaded structure which a large body of decisions under the former rules had constructed…It is not meant to dispense with the need for a trial where there are issues which should be investigated at the trial…the proper disposal of an issue under Part 24 does not involve the judge conducting a minitrial, that is not the object of the provision; it is to enable cases, where there is no real prospect of success either way, to be disposed of summarily…The question is whether the claim has no real prospect of succeeding at trial"
- Lord Hope then explains the way in which the scope of the enquiry on the application to strike-out should be conducted. However, Miss Eady points out that, again, in this case there was the admission of essential facts and the issues already dealt with by the Employment Tribunal which it is proper to take into account here. The 'prospect of success' test is the one on which I base my judgment, but Miss Eady rightly points out that the overriding objective also leads to some balance between litigants and she submits that this is a case in which there is no reason to compel a defendant to invest very substantial costs in the High Court against a Claimant without resources where there is no real prospect of success.
- The very length of this judgment and the multiplicity of issues may lead to the proposition that there must be a triable issue. However, it seems to me that the issues lead to a clear conclusion and the essential issues have been already determined.
- Mr Lederman submits that the test of proportionality and non-discrimination cannot be applied without the parties being permitted to adduce relevant evidence about the tests. I have set out the reasons why I consider that further factual matters do not need determination prior to reaching a conclusion on those issues, even were issue estoppel to not apply.
- Mr Lederman argues that the issues as to proportionality under the Human Rights Act cannot be considered without a full hearing, but the facts have already been found.
- The appropriateness of this procedure in the context of the Article 6 right to a fair trial has already been referred to. I refer back to the judgment of the European Court of Human Rights in Z v UK quoted earlier. I find that the endorsement of the striking-out procedure in that case is applicable. Secondly, I take account of the matters set out in this judgment and in particular:
i) The findings as to illegality in the Employment Tribunal operate as an issue estoppel. Accordingly, the High Court would be bound to find that the contract for breach of which the claimant seeks to sue is unenforceable and the claim would be bound to fail. This is also the case even if this is not a case of issue estoppel, but rather of alleged abuse, for the new matters are matters that could and should reasonably have been adduced before the Employment Tribunal.
ii) In so far as the Employment Tribunal did not specifically follow the law as set out in Hall v Woolston, this was corrected on appeal and the facts of the case on the issue of illegality as found by the Employment Tribunal, largely by admission, were clearly such as would come within the part of the test relating to illegal performance. Whilst a developing state of the law may be a reason for refusal of an application to strike out, I do not find such a developing state in relation to illegality, or in terms of the application of the law as to human rights in the context of the facts of this case. As to the latter, whilst Lord Browne-Wilkinson referred to the developing state of the law he did so at a time when the apparent conflict of approach between European Human Rights law and the common law were difficult to apply together; this has been resolved. Any remaining issues as to the application of Osman does not appear to apply to the facts of this case.
iii) In any event, there are not reasonable prospects of success on the Human Rights arguments. Article 6 is not engaged, and even if it is, the law as to illegality has a legitimate purpose and on the facts of this case a court would be bound to conclude that the consequential striking out is proportionate. Article 1 of the First Protocol is not engaged and even if it is examination of legitimacy and proportionality would be bound to lead to the same result.
iv) Article 14 is not engaged, not only because it has no other breach of the European Charter of Human Rights upon which to operate, but because on its own terms there is no arguable discrimination on the basis of the status of the Claimant.
v) There is no free-standing claim in estoppel or equitable forbearance and such a doctrine would not provide a 'shield' to the allegation of illegality in this case.
- The refusal by the Master to allow an amendment of the Particulars of Claim, in order to claim in tort, cannot properly be itself appealed, for there would be no arguable case in tort once the claim in contract could not proceed for the reasons set out herein.
- Applying the principles as to striking out to all these matters, I find that 'a certain answer' can be given that the claim would not succeed. I find that I have come to the conclusion that the learned Master did not err in ordering that this claim should be struck out. Having reviewed his findings I agree with them. Further, I refuse permission to appeal the refusal by the Master of leave to amend the Particulars of Claim. This appeal is dismissed.
- There will be liberty to apply within 28 days, first as to any ancillary matters and, secondly and because no draft judgment was forwarded to Counsel, as to any omissions or corrections
Judgement handed down at Milton Keynes County Court
Friday 16th April 2004.