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58
Appeal
No: EAT/539/99 |
APPEARANCES
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For the Appellant |
MR S HOCKMAN QC |
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For the First and Fourth Respondents |
MR A WHITE |
Judgment
delivered on
MR JUSTICE LINDSAY (PRESIDENT):
1. On the
7th May 1998 the Secretary of State for Trade and Industry applied to the Employment
Tribunal under section 3A (1) of the Employment Agencies Act 1973 for an order
prohibiting Mr David Maurice Webster and Mr Geoffrey Richard Burman from carrying on, or being concerned with the
carrying on of any, employment agency or employment business for such period as
the Tribunal might see fit. By the same application an order was sought under
section 3A (5) of that Act prohibiting First Point International Ltd and
Atlantic and Pacific Investment Ltd in like terms. All four respondents to that
application opposed it and there was then a hearing, spread over some nine days
in early February 1999, at the Tribunal at London (North) under the
Chairmanship of Mrs J.R. Hill. The unanimous decision
of the Tribunal, sent to the parties on
2. Section
13 (2) of the Employment Agencies Act 1973 provides as follows:-
"2. For the purposes of this
Act "employment agency" means the business (whether or not carried on
with a view to profit and whether or not carried on in conjunction with any
other business) of providing services (whether by the provision of information
or otherwise) for the purpose of finding workers employment with employers or
of supplying employers with workers for employment by them"
There is a definition of "workers" in section 13
(1) which includes all those employed "by way of a professional engagement
or otherwise under a contract for services" and also, in effect, persons
employed as au pairs. That definition does not purport to be exhaustive (it
merely "includes" what it then specifically describes) and we
therefore do not take it to exclude but rather to include persons employed
under contracts of service, that being the most common meaning of the term
"worker". Accordingly the business of providing information, even
gratuitously, for the purpose of finding workers employment with employers amounts,
subject to the exceptions we next mention, to an "employment agency"
within the meaning of the Act. Section 13 (4) provides exceptions for various
limited forms of publication, display and broadcast and sub-section (7) disapplies the Act as a whole to the specified areas there
mentioned, none of which is relevant to the appeal before us.
3. One
consequence of a body being an employment agency within the Act is that a
person carrying it on:-
"Shall not demand or directly or indirectly receive
from any person any fee for finding him employment or for seeking to find him
employment".
- see section 6 (1). "Employment", as we have
already touched on, includes engagement under a contract of service. Section 6
(2) provides:-
"(2) Any person who contravenes
this section shall be guilty of an offence and liable on summary conviction to
a fine not exceeding level 5 on the standard scale".
It is thus a criminal offence for a person carrying on an
employment agency to receive a fee from any person for seeking to find him
employment.
4. Section
3A of the Act provides, so far as relevant, as follows:-
"(1) On application by the
Secretary of State, an industrial tribunal may by order prohibit a person from
carrying on, or being concerned with the carrying on of -
(a) any employment agency or employment
business; or
(b) any specified description of
employment agency or employment business.
(2) An order under subsection (1) of this section (in this Act referred
to as "a prohibition order") may either prohibit a person from
engaging in an activity altogether or prohibit him from doing so otherwise than
in accordance with specified conditions.
(3) A prohibition order shall be made for a period beginning
with the date of the order and ending -
(a) on a specified date, or
(b) on the happening or a specified
event,
in either case, not more than ten
years later.
(4) Subject to subsections (5) and (6) of this section, an
industrial tribunal shall not make a prohibition order in relation to any person
unless it is satisfied that he is, on account of his misconduct or for any
other sufficient reason, unsuitable to do what the order prohibits.
(5) An industrial tribunal may make a prohibition order in
relation to a body corporate if it is satisfied that -
(a) any director, secretary, manager or similar
officer of the body corporate,
(b) any person who performs on
behalf of the body corporate the functions of a director, secretary, manager or
similar officer, or
(c) any person in accordance with
whose directions or instructions the directors of the body corporate are
accustomed to act,
is unsuitable, on account of his
misconduct or for any other sufficient reason, to do what the order prohibits.
(6) .............
(7) For the purposes of subsection (4) of this section,
where an employment agency or employment business has been improperly
conducted, each person who was carrying on, or concerned with the carrying on
of, the agency or business at the time, shall be deemed to have been
responsible for what happened unless he can show that it happened without his
connivance or consent and was not attributable to any neglect on his part.
(8) .............
(9) In this section -
"director", in relation to a body corporate whose affairs are controlled
by its members, means a member of the body corporate; and
"specified", in relation to a
prohibition order, means specified in the order."
5. Mr Hockman argues, and we
accept, that absent some special exonerating or exculpatory circumstances, an
Employment Tribunal may reasonably be "satisfied" that a person who
is in contravention of section 6 (1) by reason, for example, of having received
a fee from a person for seeking to find him employment, is guilty of such
"misconduct" as to make him "unsuitable" within the meaning
of section 3A (4) to be concerned in the carrying on of an employment agency.
Of course, even where section 3A (4) is satisfied, the making of a prohibition
order requires the exercise in that behalf of the discretion conferred on the
Tribunal as is indicated by the word "may" in the opening words of
section 3A (1). With that statutory background in mind we turn to the
Tribunal's Extended Reasons.
6. Mr
Webster and Mr Burman were held by the Tribunal to be
the shareholders in First Point Management Ltd, a company incorporated in the
7. FPI,
whilst remaining one single company, divided its trading operations, which were
in
"The purpose of the appraisal
was to try to determine precisely the attributes of the client and his or her
aspirations. It was then considered to see if they were realistically
achievable. When the appraisal was sent back to the individual it was
accompanied by agreements relating to further services in the group".
If such an agreement was signed then the client services
division would appoint a client services consultant who, as the Tribunal held:-
".... became
the liaison point for the client for the service he was receiving as the
services, particularly in relation to searching for employment, were with the
foreign companies and not with the
That reference to "the foreign companies" would
seem, in context, to be a reference to associated companies abroad,
International Job Search (
"In the period 1995-1997 the
Respondents say the arrangements were such that the client would enter in to
one agreement with FPI, for visa, liaison and relocation services and one with
an overseas company e.g. International Job Search (USA) for outplacement
services as outlined in the contract. Finance arrangements
would be dealt with by Atlantic and Pacific Investments Ltd on behalf of FPI
and International Job Search. Payment was made to FPI in the
8. In March 1997 there was a change in the pattern of
operations and in March 1998 another but the nature of each of those changes is
unnecessary to be dealt with at this stage.
9. In July
1994 the Department of Employment, then the enforcing authority in relation to
employment agencies, took up with another company with which Mr Burman and Mr Webster were associated, Migration Services
International Ltd, whether it and they were in breach of the 1973 Act.
Migration Services International Ltd was put into compulsory liquidation.
10. In September
1997 informations were preferred by the Department of
Trade and Industry against FPI for two alleged offences in May 1997 under
section 6 (1) and 6 (2) of the 1973 Act. Mr Bartle,
stipendiary magistrate, heard the informations in
March 1998 and he found FPI guilty of both offences alleged and fined it £2,500
in respect of each offence and ordered it to pay the Respondents' costs in the
sum of £9,000. FPI appealed and the appeal was heard at the Crown Court at Southwark in July 1998. Judgement was delivered on the 30th
July dismissing the appeal in respect of both of the offences. FPI was ordered
to pay the Respondents', the DTI's, costs of the appeal in the sum of £8,950.
FPI appealed by way of Case Stated to the
11. To
return to the proceedings before us, the Tribunal carefully considered the
evidence in relation to the period 1994-1997, before the organisational changes
to which we shall return, and concluded:-
"The Tribunal therefore finds
as a fact that during the period 1994-1997 i.e. whilst the Isle of Man First
Point company restructure was in place, the Respondents were operating an
employment agency within the meaning of section 13 of the Employment Agencies
Act 1973, namely a business providing services for the purpose of finding
workers employment with employers or of supplying employers with workers for
employment by them".
12. The plural "the Respondents" is to be noted.
There could, perhaps, have been some argument on behalf of A & PI that it
had not carried on such a business; we say nothing as to the merits of any such
argument but there is no cross-appeal against that finding and we therefore
take it as correct.
13. The
Tribunal then moved on to considering whether, in relation to the 1994-1997
period, there had been misconduct falling within section 3A (4). Without their
mentioning, in terms, section 6 of the Act at that stage, it is plain that the
Tribunal held that all Respondents had been in breach of it. In their paragraph
26 the Tribunal says:-
"In charging a fee, namely a sum of up to £3,000 for finding work or for seeking to find
employment for their clients, the Respondents were in breach of the
Employment Agencies Act".
Again, there could perhaps have been argument from A &
PI that it was in a different category to its fellow respondents but, again, in
the absence of any cross-appeal we take that finding to be correct. A little
later the Tribunal do specifically consider section 6
of the Act and they say:-
".... We are satisfied .... that a demand for a fee of £3,000 odd to
conduct a job search and visa services [sic] does fall within section 6".
14. Leaving aside section 6, the Tribunal also held FPI to
have been guilty of further, more general, misconduct; it held that it was
satisfied that FPI had failed to meet its contractual obligations through
associated foreign companies, in particular in relation to failure to provide
refunds to clients. It having thus established misconduct on the part of all
Respondents, including criminal misconduct under section 6, the Tribunal was
thus in a position to turn to the exercise of its discretion whether or not to
make a prohibition order as against all or any Respondents under section 3A
(1).
15. Very
properly, as a necessary part of a judicial exercise of that discretion, the
Employment Tribunal first said:-
".... The Tribunal must
consider what is in effect a plea of mitigation by the
Respondents when they set out what is the current position".
That requires an examination of the changes in the operating
structure of the relevant businesses in early 1998.
16. The reorganisation of March and April 1998 led to a completely
different structure. First Point Group Inc., with Mr Burman
and Mr Webster as the shareholders, was incorporated in the
17. No
clear picture emerges from the Tribunal's decision as to the extent, if any, to
which FPI traded after the reorganisation (although
it says it had ceased to trade by August 1998), nor as to A & PI's current
business but the Tribunal did examine "the documentation that is currently
used by the companies controlled by Mr Burman and Mr
Webster", presumably meaning to include within that description the
companies in the reorganised structure which we have
just described. That published material, including website material, included
material saying:-
"If you are looking for a
change, how about living and working in a different country?".
The invitation was to apply to "First Point
International" in
"So the essential first step
was to ensure
As to Tracey it said:-
"The essential first step was
to ensure that Tracey found employment ....".
And as to Brenda it said:-
"First Point provided Brenda
with some appropriate contacts and she obtained a job offer from a company in
The literature continued:-
"We can advise our clients on
where their skills and experience are most likely to be in demand and introduce
a specialist network of recruiters who will provide that vital direct access to
local employers. So if the success of a client's [visa] application is
dependent on an offer of employment - as is frequently the case - we are in a
position to ensure that their job offer meets with every requirement of their
visa".
In another section the material published said:-
"Unless you already have
excellent contacts in your new country it is likely you will need to register
with an international recruitment specialist. First Point will be happy to
introduce you to recruitment companies with direct local knowledge of the
employment market in your destination".
18. Given that it suffices for a business to be an
employment agency despite work of that nature being only part of its overall
business, given also that it is not a necessary requirement that the agency
business should be carried on with a view to profit and that even the provision
of nothing more than information for the purpose of finding employment with an
employer for a worker suffices, it is inescapable that, after the reorganisation, one or more companies under the control of
Mr Webster and Mr Burman have included amongst their
businesses that of being an employment agency within the meaning of the Act.
Indeed, it was conceded by the Respondents before the Employment Tribunal that
"First Point Recruitment" (presumably First Point (Recruitment)
Europe Ltd) is an employment agency.
19. That
being so, if "What is in effect a plea of mitigation by the
Respondents" were to carry real weight with the Tribunal, one might have expected
there to have been an examination and conclusion by the Tribunal as to whether
there was any misconduct within section 3A (4) after the reorganisation,
either by way of breach of section 6 or more generally and, if there was any,
whether it was such that it could be overlooked in order that, all things being
considered, the Tribunal could feel sure that the public did not need the
protection which a prohibition order under section 3A (1) would provide.
20. As to
that, the Tribunal received evidence from three individuals, namely Mr Toop, Mr Chin and Mr Davies, as to the problems they had
encountered with First Point companies after the reorganisation.
The Tribunal dealt very briefly with the respective complaints of Mr Chin and
Mr Davies. Mr Chin complained of inaccurate advice having been given to him but
there is no hint that the Tribunal thought that that had amounted to any form
of misconduct. Mr Davies had been steered by some employee of one or other
First Point company towards the obtaining of a visa rather than the obtaining
of a job and, again, it seems the Tribunal saw nothing to suggest misconduct of
any kind in his case. Mr Hockman, with justice,
complains there are no findings properly-so-called as to the presence or
absence of misconduct in these 2 cases but we shall proceed on the basis that
none was held to exist.
21. As to
Mr Toop, who had wished to become a trucker in the
United States and who responded to what the Tribunal described as "the
Respondents' website", the Tribunal held as follows:-
"35. The Tribunal had one
concern which arose from the way in which the current information about the
truck drivers' programme in
22. We find it difficult to see why the fact that after
paying his £5,000 and completing his course a client would obtain no guarantee
that he would get a job is in any way relevant, still less how it could be
thought to ameliorate rather than aggravate the First Point position. Nor,
given that the First Point business after the reorganisation
professed to include that of giving the client information to introduce him to
a specialist network of recruiters who would provide vital direct access to
local employers, do we see how such a service was outside section 13 of the
Act. However, after setting out that background the Tribunal continued:-
"The Tribunal therefore
considered whether the past misdeeds of the Respondents, i.e. preceding April
1998, should not be used against them with a view to making the order to
prohibit Mr Burman, Mr Webster, [FPI] and [A &
PI] from being concerned in the carrying on of an employment agency".
The Tribunal then directed itself to two separate main
headings, described as (a) and (b).
23. As to
the first mentioned, (a), the Tribunal took the view that A & PI (at any
rate, it seems, by the date of the Tribunal hearing) was "purely a finance
company" and that the Tribunal therefore had no jurisdiction to make an
order against it under section 3A (1). The Tribunal in the earlier holding
which we have cited and in respect of which A & PI launches no appeal, had
held that in the period 1994-1997 "The Respondents were operating an
employment agency". Whilst a cessation or change of business may well be
relevant to the exercise of the Tribunal's discretion, it is no jurisdictional
requirement under section 3A (1) that the person against whom an order is being
sought should currently be carrying on business of the kind sought to be
prescribed. Indeed, were that so, the legislation could be made nugatory, and
the public be rendered bereft of the protection which the Act so plainly
intends, upon a respondent adopting the simple device of either stopping his
business altogether or changing it on the day of the hearing against him.
24. The
second matter the Tribunal referred to, (b), was that
"As to the first three Respondents we have serious concerns". Mr
Webster and Mr Burman had proved, it held, to be not
wholly credible witnesses. The Tribunal concluded in its final paragraph:-
"If we had the power to make
a suspended prohibition order for one year, we would have done so. A
prohibition order would be a draconian measure, which, in the circumstances of
the present company arrangements which appear to comply with the legislation, the
Tribunal does not consider to be appropriate".
25. The passage suggests that only an inability to suspend
prohibition led to the failure to make a prohibition order and the passage
addresses matters of discretion rather than of jurisdiction. It must follow
that the Tribunal was satisfied within section 3A (4) that the Respondents
were, on account of misconduct or for other sufficient reason, unsuitable to
carry on any employment agency. Moreover, without an examination, not to be
found within their decision, of how far the new company structure could
effectively operate even if Mr Webster and Mr Burman
had been left merely as shareholders not themselves carrying on the business
and how far, if at all, FPI or A & PI currently carried on business as an
employment agency it is difficult to see how the Employment Tribunal could have
concluded that a prohibition order would be draconian against them
respectively.
26. Against
that background Mr Hockman makes a number of detailed
submissions.
27. First
he says that the Tribunal erred in law in holding that it had no jurisdiction
to make a prohibition order against A & PI. We have already addressed this
and accept the submission, but, to our more general approach, Mr Hockman adds a compelling detail. A & PI had, as its
voluntary Further and Better Particulars indicated, both Mr Webster and Mr Burman as directors. Each of those individuals had within
section 3A (7) been concerned with carrying on of FPI's
agency business at the date, the 8th May 1997, in respect of which it was held
to have breached section 6 of the Act. Accordingly each, under section 3A (7),
is to be deemed responsible for that breach (at all events in the absence,
which is the case, of proof of no connivance, consent or relevant neglect on
his part). As A & PI had officers thus deemed to be responsible for
breaches under section 6 of the Act there was jurisdiction to make an order
against A & PI under section 3A (5).
28. Mr Hockman submitted next that as FPI stood outside the 1998 reorganisation and had ceased to trade, which the
Respondents' own voluntary Further and Better Particulars asserted to be the
case, the Tribunal, in exercise of its discretion as against or in favour of FPI, should have been unaffected by the reorganisation and the "mitigation" sought to be
developed out of it. That appears to us to be too compartmentalised
a view of the discretion which section 3A (1) confers; the feature that FPI, at
all events for the moment, is not trading is plainly capable of being taken
into account, although, in the absence of any undertaking that it would not
restart, the weight to be attached to such a point is uncertain. On the other
side, if it is not trading and not intending to reopen trading then the making
of a prohibition order, so far as concerns FPI, would hardly seem to be "a
draconian measure". If the further and better particulars on the subject
were accepted as undisputed, which seems to have been the case, then, in the
absence of any indication that trading might restart, to the extent that the
Tribunal relied on the draconian nature of a prohibition order as a ground for
not making one against FPI, such consideration amounts to an error of law in
the sense of the Tribunal in the exercise of its discretion having taken into
account a factor which could not properly be taken into account.
29. Next Mr
Hockman submitted that the Tribunal had erred in
treating the operations after the reorganisation as
such that they had weight in favour of a decision not
to make a prohibition order and certainly that those operations did not
illustrate that the public does not require the protection of such an order.
There is a force in this submission. To revert to the case of Mr Toop, the would-be trucker, his evidence was that:-
"In 1998 I became aware of
First Point International's web-site which informed me that I could take part
in their
He did not pay the £5,500. It is, though, plain from the
letter to him from Mr Cawthorne to which the Tribunal
refers (a letter of the 9th July 1998, after the reorganisation,
and from "First Point International", explained to be First Point
International Ltd registered in England No. 2695560) that:-
"First Point International have negotiated the programme with
two reputable companies based in the
Information was plainly to be supplied - the identity of the
two reputable companies in the
30. Mr Hockman thus urges us to set aside the Tribunal's decision
and ourselves to impose a prohibition order on the basis that before the reorganisation, as the criminal proceedings had made quite
plain, there were breaches of section 6 of the Act; that there was thus
misconduct which, under section 3A (7) and (5), infected all the Respondents;
that the attempts to mitigate, depending on witnesses found not be wholly
credible, provided no good reason not to make prohibition orders and that the
ways in which the businesses had been conducted since the reorganisation
could found no view that the public needed no protection against the
Respondents.
31. Mr
White accepts that there was jurisdiction to make a prohibition order against A
& PI; to that extent he accepts there has been error of law, but he emphasises that what is in issue is a discretion the EAT's ability to interfere with which is severely limited
and that the Tribunal had the irreplaceable advantage of hearing and seeing
witnesses over the period of some 9 days.
32. Mr Burman, who has since, he says, withdrawn from any relevant
directorships, tells us that he has no further desire to carry on or be
concerned with the carrying on of any business, thus, it may be said (although
after the Tribunal's decision) denying force to the Tribunal's fear that to
make a prohibition order against him might be draconian. He argues that there
has been no misconduct after the 1998 reorganisation
but the Tribunal's tentative view in that direction did not amount to a holding
to that effect and was in any event based, so far as we can tell, on an error
of law at least as to the ambit of section 13.
33. We do
not accept Mr Hockman's submission that we should
ourselves exercise the discretion under section 3A (1). Even with the benefit, which
we do have, of Chairman's notes of evidence, we cannot hope to have in mind the
fuller awareness of the evidence which the Tribunal has. Mr White in that
behalf reminds us of Lord Hoffmann's observations in Piglowska
-v- Piglowski [1991] 1 WLR 1360 at 1372. If we
are to set aside the Tribunal's discretion we shall do so only to remit the
matter to the same Tribunal.
34. Do we,
then, set aside that discretion? As we have mentioned, the Tribunal's last
paragraph is consistent only with its taking the view that there had been
misconduct and unsuitability on the part of all Respondents within section 3A
(4). Such conclusion was either manifest, as to FPI, or inescapable as to the
two individual respondents or, as to A & PI, has been held to be the case
and is not appealed. Therefore the discretion under section 3A (1) fell to be
exercised but, unfortunately, the Tribunal erred in law in its exercise in a
number of respects. It took the view that a prohibition order would be
draconian whereas FPI was for the time being at least not trading. It
considered that the services rendered after the reorganisation
were not such as to amount to employment agency business within section 13
whereas Mr Toop's experience, if none other, showed
that a section 13 service was being continued. The Tribunal considered,
wrongly, that so far as concerns A & PI it had no jurisdiction. Further, in
considering the position after the reorganisation the
Tribunal concentrated, it would seem, on whether the current arrangements
appeared to comply with the legislation. That approach fails to give sufficient
weight to a recognition that the very wide words "misconduct" and
"unsuitability" within section 3A (4) are not confined to misconduct
which is in breach of the Act. The Tribunal had, earlier in its decision, been
alive to that point, when it held FPI to have failed to meet contractual
obligations, but seems later to have overlooked the consideration. A group's
business might, for example, technically avoid breach of section 6 by dividing
its businesses between an employment agency (which did not demand or receive
fees) and an associated company playing and intended to play a significant rôle in the chain of events between a worker's response to
an advertisement and his getting a job, which did charge fees. A Tribunal
would, nonetheless, on appropriate evidence, be able to discern misconduct or
unsuitability in such a case notwithstanding that the 1973 Act itself was not thereby breached. It would be able to take
the view that, notwithstanding the absence of breaches of the Act, job-seekers,
a vulnerable class, might still require protection against the associated
operations taken as a whole. It is to be noted, too, that unsuitability within
section 3A (4) can derive not just from misconduct but "for any other
sufficient reason".
35. With
these matters in mind we determine that we must set aside the Tribunal's
exercise of the discretion. We remit the matter to the same Tribunal as before
for it to consider it afresh, in the light of this judgment,
how the discretion conferred upon the Tribunal by section 3A (1) is to be
exercised. It is to do so against the background that the pre-condition of
section 3A (4) has already been met in respect of each of the four Respondents
and that the evidence already received by the Tribunal is to suffice.
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