[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
	Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Messrs Dowling & Rutter v Abacus Frozen Foods Ltd [2000] ScotCS 315 (12 December 2000) URL: http://www.bailii.org/scot/cases/ScotCS/2000/315.html Cite as: [2000] ScotCS 315

[New search] [Help]

[1] In this action the pursuers, who are employment contractors, seek payment in respect of monies they claim are due to them from the defenders in respect of a contract to supply labour to the defenders' fish processing plant near Peterhead in 1997. The defenders plead illegality by way of defence otherwise accepting that the monies claimed would be due and also counterclaim in respect of consequential losses which they claim to have suffered as a result of an alleged breach of the contract by the pursuers.

[2] I heard a proof at which both pursuers gave evidence supported by an accountant. The defenders' managing director, Philip Greig and production manager, Mr Gill gave evidence supported by a former operations director, D. Scott and their control accountant.

[3] There was little dispute, at the end of the day, upon the evidence but the following is a narrative that I find proved.

[4] The pursuers operate, effectively, an employment agency supplying labour particularly to the agricultural industry in the East Midlands. However, their client base was wider than that and they were approached towards the end of 1996 by a consultant advising the defenders with a request to supply labour for the defenders' factory at Mintlaw near Peterhead which processed frozen fish. The pursuers, in turn, approached an organisation called Student Recruitment Ltd. run by two persons named Cox with whom they had regularly dealt and who, it appeared, inter alia, managed the importation of foreign labour, particularly from the Eastern block, into the United Kingdom. Direct contact was established between Student Recruitment and the defenders, but I am satisfied that at all times, until otherwise disclosed in the course of this action, the defenders regarded the two Mr Cox as part of the pursuers' organisation and indeed, had never heard of Student Recruitment Ltd until the point in time I have mentioned.

[5] After sundry discussions and negotiations, rates were agreed and initially 10 rising to approximately 24 persons, who were foreign immigrants, were supplied to the defenders and proceeded to commence work at their plant in January 1997. The method of payment for their services was slightly convoluted in as much that the defenders sent weekly spreadsheets, to what is in fact Student Recruitment whom they presumed to be the pursuers and who were indeed holding themselves out as such in terms of certain letterheads, giving details of payments due to the workers. These sums were settled, it seems, by Student Recruitment and thereafter the defenders were invoiced by the pursuers, both for the sums paid out in respect of wages but also including a mark-up in respect both of the pursuers' services and those of Student Recruitment. Those invoices were settled directly to the pursuers by the defenders. There was no formal written contract although the basic ingredients are to be found in a document by Mrs Scott, 7/2 No.9. While a start date is stated within that document, there is no expressed term as to the intended duration of the contract. Nor were there any specified persons. The contract was simply that the pursuers would supply a certain number of workers such as they were able to obtain. However both Mr Greig and Mrs Scott expressed the view, in evidence, that they expected the contract to last for a year.

[6] The arrangement appeared to work satisfactorily until suddenly, without warning, at the end of October 1997, the immigration authorities raided the house where the workers were staying in Peterhead, and detained them as illegal immigrants or at least as illegal working immigrants under the Asylum & Immigration Act 1996; in particular, in relation it appears to Section 8. Accordingly, the workers in question never returned to the defenders' premises. It appears that some were deported and others detained pending applications for political asylum.

[7] The sums claimed by the pursuers, in their action, represent monies due and not disputed as such in respect of the final payments due under the contract prior to its termination in respect of the particular workers. The figures were vouched by invoices.

[8] The defence pleaded by the defenders to the main action is that of illegality based upon the fact that the workers in question did not have legal authority to work in this country as immigrants under and in terms of Section 8 of the Act.

[9] The counterclaim alleges breach of contract in respect that the workers' labour was withdrawn prior to the end of the year's term as stipulated by the defenders, and the losses claimed are said to be those consequent upon a drop in production by reason of the loss of the workers in question.

[10] The issues raised are quite separate and I shall deal with them as such.

[11] Before, however, turning to the issue of illegality, I hold it established that neither pursuer was aware, at any time prior to the detention of the workers, that they did not have the necessary documentation to enable them to work in this country as immigrants. I accept their evidence that they had used a similar type of labour on many other occasions without any difficulty and had therefore assumed, in the present case, that there was no problem it being for Student Recruitment to organise the necessary documentation and to satisfy themselves that it was in order. They accordingly took no steps, at any time, even to inquire of either Mr Cox as to the state of the documentation of each and all of these workers. They stated that it was never their practice so to do, and I accept this.

[12] Mr Sandison submitted in relation to the question of illegality that it could arise for consideration by the Court in relation to the performance or enforceability of a contract in a number of ways firstly as a matter of simple common law, i.e. illegality in relation to either the content of a contract or the way in which it was performed. He referred to Walker on Contract, at p. 153, and MacBryde on Contract, at p. 629. The leading case he submitted was Jamieson v Watts Trustees, 1950, S.C. 265. The substance of the position was that if a contract was based on an illegal act, or if a person seeking to enforce a contract relied upon his own illegal act, the Court would not assist him. He accepted however, in this context, that the knowledge of the existence of such an act or at least of the illegality was necessary in relation to the pursuers before the contract could be set aside or declared unenforceable, and that knowledge either had to be actual or constructive in the sense of effective recklessness. (Smith of Madiston Ltd, 1955, J.C. 48.) He went on, however, to submit that it was perfectly possible for a person to be only an accessory to the illegal act and still be barred from suing upon the contract if it was germane to it.

[13] Again, quite generally, Mr Sandison submitted a further way in which the law would not enforce a contract in relation to illegality namely if it was contrary to public policy so to do. That normally meant that the contract had to strike at something which was contrary to the public policy of the land. Examples of public policy were legion but in this case, he maintained it was perfectly clear both from Section 24 of the Immigration Act 1971, and the Asylum & Immigration Act 1996, Section 8, that the policy of this country was not to allow workers from foreign countries and particularly outside the European Union, to work within the United Kingdom except with the necessary permission and therefore documents.

[14] Again, quite generally, he thirdly submitted that illegality could intervene to render a contract unenforceable if there was an express or implied statutory prohibition affecting its performance. This was to be found particularly focused in St John's Shipping Co. v Joseph Rank Ltd, 1957, 1 QB 267. He also referred to Cope v Rolands, 2 M&W 150, and generally Gloag on Contract, at p. 551/552. The question he submitted was not one of degree; McKenzie v Milligan, 1994, 1A.C. 340.

[15] Against that background, Mr Sandison sought to submit despite the fact that he had not established actual knowledge in the mind of either pursuer as to the lack of documentation in relation to each of the relevant workers, that upon the evidence, it should be established or held by me that in reality the pursuers and the Cox's were engaged in a joint adventure, particularly exemplified by the fact that the Cox's were holding themselves out as being, in fact, the pursuers. If that was putting the matter too far, then the converse was true to the extent that the pursuers were holding out the Cox's as their agents. Thirdly, he submitted in any event, I should not accept the evidence given by both pursuers that they were innocent or in ignorance of the true situation as regards the lack of documentation and relevant permissions.

[16] Mr Summers did not dispute the general law but submitted in respect of each of the three positions taken up by Mr Sandison as regards illegality, that before a contract can become unenforceable in respect of any of them, the pursuing party must be shown to have knowledge of the existence of the illegality whatever it might be. The rule is not as absolute as was contended for by Mr Sandison and this became clear upon a detailed examination, particularly of St John Shipping Corporation v Joseph Rank supra. In the final analysis, he maintained that if I was satisfied his clients were ignorant of the true position as regards the immigration authorities and the documentation of the workers and that I could not be persuaded that they had recklessly ignored the situation, the defence of illegality, however much made out in terms of the actual position in relation to the workers, could not render this contract unenforceable.

[17] In seeking to resolve this matter I did not, of course, hear evidence from either Cox. I was told that some approach had been made to them but they had declined to take part in the litigation to any extent. The reason, therefore, why the workers fell foul of the immigration authorities can only to some extent be guessed at, but it is in my opinion, a reasonable assumption that it must have been in terms of failure to comply with Section 8 of the 1996 Act, whether by not having the correct documents or by having forged ones. There is no suggestion that I can understand in this case that supports the position that they were in fact illegal immigrants in terms of Section 24 of the 1971 Act.

[18] I should also record that a debate took place in this case which prompted an extremely helpful analysis by Lord Wheatley in his opinion dated 15 March 2000. In that, in considering the question of statutory illegality, His Lordship states as follows at page 11:

[19] With this analysis I entirely agree. The issue of statutory illegality to my mind raises a separate issue from what might be described as simple, common law criminality or illegality either with regard to the purpose of a particular contract, or the way in which it has been performed. It is necessary to analyse in each case the extent to which the contract in question is affected by, or governed by, the illegal act, and obviously, if a party is seeking to rely upon his own illegal act, the Court will not assist. This is perfectly apparent from the case of Jamieson supra, where the builder knowingly exceeded the license and was thus performing work which was in fact unauthorised by statute and therefore illegal. On the other side of this spectrum, however, it is clear that just because illegality enters into a contract, that does not necessarily make it unenforceable. Again I agree with Lord Wheatley that there has to be some scope for considerations of inadvertence, irrelevance, immateriality, innocence and so on to mitigate significantly or even exclude the issue.

[20] In my opinion, the most important consideration in this context in this case, relating to the issue of illegality, as a starting point is that the contract itself was perfectly legal for a legal purpose with legal aims, that is to say the provision of labour for value. If illegality supervened or entered upon the scene, it was purely by reason of the status of the workers in question in relation to the Immigration Act. This seems to me to be in a direct parallel with the position to be found in the St John Shipping Corporation case where the fact that the ship was overloaded did not in any way affect the performance of the contract of freight for which payment was being claimed. It was at worst or at least a parallel issue of illegality separate from the actual performance of the contract itself. It is not entirely clear to me in St John case whether or not the master of the ship knew he was overloaded, but that does not appear to have affected the reasoning of the Court who looked at the matter surely as an issue of connection between the performance of the contract and the so-called illegality. If there is a distinction to be drawn between the present case and the St John case it maybe that, in relation to Section 8, the purpose of the statute is to prevent immigrant workers working illegally which would, it could be said, be the case in the present case because that, in fact, appears what was happening. Be that as it may, it does not seem to me that prevents me from looking at the role of the pursuers in this case to assess the extent to which they might be guilty of "turpitude". This is not an easy branch of the law but I have come to the view that, at the end of the day, the issue is essentially one of equitable remedy in the sense that a person who is seeking to rely knowingly on his own illegal act cannot gain by it but equally should not lose by it if the illegal act is committed by somebody else completely outwith his own knowledge, actual or constructive. This proposition seems to me to apply equally whether one is concerned with issues of public policy or statutory prohibition.

[21] In the foregoing circumstances, given my finding that I consider the pursuers to be wholly innocent of any wrongdoing and ignorant of the position with regard to the immigration status of the relevant workers, I have come to the conclusion that it would not be equitable to deny them the right to sue upon what was otherwise a perfectly legal contract for money admittedly due to them merely because illegality is entered upon the scene through a side wind without any fault or act on their part. If it is appropriate to balance the equities between the two parties, and I am not necessarily satisfied it is, such would at least admit the observation that all the defenders are being asked to do is to pay for services that they received, since the invoices include the point when the work ceased in each case, but go no further.

[22] Nor am I satisfied that Mr Sandison's valiant efforts to impute knowledge that may have been in the minds of the Cox's, to the pursuers whether as party to a joint adventure, or on a basis of agency, is sufficient to establish the necessary knowledge with regard to the pursuers. My reason in approaching this matter is a very simple one. The onus of proof is upon the defenders and I have not even been told whether the Cox's knew of the true situation with regard to the state of these workers. Some suggestion was made that their documents were forged. That simply heightens the degree of uncertainty.

[23] In these circumstances, it not being established that there was the relevant knowledge in the mind of the pursuers or either of them in relation to the question of illegality, I consider that the reference of illegality fails.

[24] I now turn to deal with the counterclaim which is of course free-standing, independent of the pursuers' right to the money that I have now found established. If the counterclaim is established, credit will require to be given to the pursuers to the extent of the sums decerned for.

[25] The counterclaim depends essentially upon the defenders establishing a term of the contract either express or implied as to its duration which would admit a claim for breach upon the withdrawal of the labour in question upon the basis that the pursuers were required, as a matter of contractual obligation, to provide labour for the relevant period, whatever it might be.

[26] Mr Sandison argued upon the evidence that, particularly with regard to that of Mr Greig and Mrs Scott, the contract had a term of a year which had been agreed. If that was not established, in any event he submitted that any contract of this type must be subject to some form of implied termination clause which would be reasonable notice. He submitted, at the very least therefore, that a period of one month should be allowed in terms of any losses established by reason of the withdrawal of the labour.

[27] A separate question arose as to the value I should put upon the spreadsheet 7/1 prepared by Mr Greig, which formed the basis of the financial aspect of the claim.

[28] The position of the pursuer in this respect was very simple. This was a contract on a day-by-day basis for the supply of labour to be paid for only in respect of services actually rendered.

[29] I have no hesitation in concluding upon the evidence that an express term that the contract should last for a year, has not been made out or established. I have no doubt that that was the expectation at least of the defenders, but such is not sufficient to found an express term of the contract as agreed between the parties and I would have expected to find the term expressly stated in Mrs Scott's fax, if such would have been intended by the parties. My view of the evidence is that this contract was, to some extent, open-ended and this is confirmed by the fact that discussions appear to have taken place just before the crucial day of withdrawal as to which of the labourers might be returning after Christmas. Mr Sandison, without hesitation, accepted the position put by me that if his position was correct then, in the event of the defenders deciding not to continue to use the labour for any reason at any time during the currency of the year, the pursuers would have been entitled to make a claim, at least for loss of profit, for the balance of the so-called term.

[30] I do not consider that claim could have been established on the evidence. It seems to me that there was no reason to read a duration clause in this contract which was simply as the pursuers so stated, one for the supply of labour on a day-to-day basis paid for as such. Accordingly, since I have held it has not been established that there was an express term of the contract as to duration, it follows that there was no breach when the labour was withdrawn. If not replaced the contract simply came to an end which is in fact what happened. I do not consider as a corollary that the defenders could have compelled performance from the pursuers, even though the pursuers made some dilatory efforts to provide alternative labour, which in any event it appears that the defenders did not want in the circumstances , not surprisingly.

[31] That leaves the question as to whether or not a term of at least reasonable notice should be implied and again I see no reason to do this in the present case. While such is frequently implied into a contract of employment, this is not a contract of employment but a contract for the provision of labour which I have held to be on a day-to-day basis. That being so, either side was free to bring the matter to an end in any way they liked and I consider that is what happened here, even although it was not a voluntary act on the part of the pursuers that caused the labourers to be withdrawn.

[32] In these circumstances I do not consider that the withdrawal of the labour in the circumstances discussed constituted a breach of contract by the pursuers rendering them liable in damages. The counterclaim will therefore be dismissed.

[33] I should finally deal with the issue of the spreadsheet. Its background was that it contained figures drawn apparently by Mr Greig, supported by Mr Gill, from basic records kept within the defenders' premises. It was entirely a derivative document, albeit it was prepared by Mr Greig.

[34] The argument against its validity advanced by Mr Summers was essentially that it was contrary to the best evidence rule in that the figures upon which the calculation proceeded were not vouched beyond a declaration by both Messrs Gill and Greig. The pursuers had taken a specification in respect of the relevant records but had decided not to enforce it to avoid making a case against themselves.

[35] I have not found this issue easy to resolve since, upon one view of the matter, the pursuers are essentially prejudiced by being unable to test the accuracy of the figures that were relied upon. However, I had no basis to challenge the credibility of the witnesses that were speaking to them. The issue therefore would seem to turn on one of reliability and Mr Sandison's position was simply that upon the evidence given I should find it acceptable in order to make the relevant calculations if I considered that should be done.

[36] In the final analysis I consider that the document so far as it goes is not sufficient to be accepted as reliable by the Court. In an adversarial system when the figures are not vouched but merely stated to be taken from another source, the defenders', in order to substantiate their claim, should have at least made available the basic figures that formed the source of the document.

[37] For these reasons I would not have proceeded upon the spreadsheet if I had considered that the defenders were entitled to damages. I would, however, recognise that they must have had some production losses by reason of the diminution in the workforce caused by the withdrawal of labour and if I had been going to make an award under the counterclaim, I would have made a nominal award of £5000.

[38] On the whole matter, therefore, in respect of the counterclaim, I shall sustain the pursuers' second plea-in-law and assoilzie them from the conclusion of the counterclaim. In respect of the main action, I shall sustain the third and fourth pleas-in-law for the pursuers, repel the second plea-in-law for the defenders and grant decree for payment in terms of the first and second conclusions of the summons, with interest thereon at the rate of 8% per annum from the date of decree until payment since that is all that is asked for.