THIRD SECTION

PARTIAL DECISION

AS TO THE ADMISSIBILITY OF

Application no. 42295/98 
by Sandro NERVA and Others 
against the United Kingdom

The European Court of Human Rights (Third Section), sitting on 11 July 2000 as a Chamber composed of

Mr J.-P. Costa, President
 Mr W. Fuhrmann, 
 Mr L. Loucaides, 
 Sir Nicolas Bratza, 
 Mrs H.S. Greve, 
 Mr K. Traja, 
 Mr M. Ugrekhelidze, judges,

and Mrs S. Dollé, Section Registrar,

Having regard to the above application introduced with the European Commission of Human Rights on 18 August 1997 and registered on 20 June 1998,

Having regard to Article 5 § 2 of Protocol No. 11 to the Convention, by which the competence to examine the application was transferred to the Court,

Having deliberated, decides as follows:

 

THE FACTS

The applicants are Sandro Nerva, an Italian national, born in 1938, and three Spanish nationals, Jose Pulleiro, born in 1938, Julio Rodriguez, born in 1934, and Jose Cabo, born in 1939. The first two applicants are currently living in London, England, whereas the other two applicants are now living in Spain. They are represented before the Court by Mr Philip Tsamados, a lawyer practising in London with the Central London Law Centre.

The facts of the case, as submitted by the applicants, may be summarised as follows.

The applicants were employed as waiters at the material time. When the applicants received a tip in cash from a customer the money was placed in a box called a “tronc” and distributed proportionately among the waiters at the end of the week. This arrangement also applied to tips which were built into cheque or credit card payments made by customers to settle their bills until the introduction of the PAYE tax system in 1979. As from that date, tips paid by customers by including the amount in a cheque or a credit card voucher were paid over to their employer. The employer would then distribute an equivalent amount, in a proportion which he would decide, among the waiters and the sum which each of the applicants received would feature in his wages slip as “additional pay”. The cheque and credit card gratuities were the subject of deductions in respect of tax and national insurance contributions. The employer bore the charges of the credit card companies, varying at the time from 3% to 5% on the amount of the gratuities. When a credit card voucher was improperly completed and rejected by a credit card company, the employer wrote off the amount and did not seek to recover any sums distributed to waiters in respect of any gratuity included on the voucher.

At the relevant time there was a legal requirement that waiters should be paid a minimum sum as remuneration. The applicants took legal proceedings against their employer to challenge their employer's right to count the tips included in cheque or credit card payments as part of their statutory minimum remuneration. Tips paid in cash were not so counted. The issue was important for the applicants since on occasions their share in the tips in a given week could be more than their minimum wage.

On 25 May 1994 a High Court judge, Mr Justice Mance, held on a preliminary point that tips included in cheque and credit card transactions did count against the minimum remuneration requirement. In his conclusion, the employer obtained the legal title to a tip paid by credit card or cheque, with the result that it became the employer's property.

The applicants appealed to the Court of Appeal. In its judgment of 15 May 1996 the Court of Appeal dismissed the applicants' appeal.

Lord Justice Staughton observed that it was not disputed that the relevant legislation (the Wages Council Act 1979 and the Wages Act 1986) embodied the rule that what was paid by the employer and not by any other person counted as remuneration for the purpose of that legislation. For that reason, tips paid in cash to waiters or to the tronc did not count as remuneration. However, he considered that the same reasoning could not apply to tips which were built into payments made by cheque or credit card to their employer since the amounts became the latter's property. The employer thereafter paid an equivalent amount to the applicants. In his view, tips paid in this manner should count against the minimum remuneration requirement. Lord Justice Staughton rejected the attempts of the applicants' counsel to interpret the applicable legislation differently. He further rejected counsel's argument that the applicants had a right to the cheque and credit card tips as money had and received to their use. In Lord Justice Staughton's opinion, it was decisive that the employer was paying the tips with his own money even if they had been paid by the customers to the employer in the belief that the latter would pass the tips on to the waiters and on terms that he would do so.

As to the issue of the customers' intention when adding the tip to the cheque or credit card payment, Lord Justice Staughton considered:

“This is relevant ... in deciding whether the money became the property of the Employers or the waiters. But it is clear and (in this court) uncontroverted in this case that it became the property of the Employers. Beyond that, as it seems to me, the intention of the customers has no part to play. ... ”

Mr Justice Douglas Brown concurred.

Lord Justice Aldhous dissented. As to tips paid by cheque or credit card, Lord Justice Aldhous accepted that the amount was paid to the employer and therefore it could not be said that the tip so paid never became the employer's property. However, in his opinion the intention of the customer was the same when paying a tip by credit card or cheque as when paying by cash and in either case the customer had no intention of giving anything to the employer. Lord Justice Aldhous stated:

“It was paid to the employer by the customer as a gratuity with the intention that it should be passed to the staff in the same way as cash payments would be and was accepted upon that basis as was apparent from the way that it was operated. The money added to the slip was taken out of the till and added to the tronc. That being so, I do not believe that tips paid by way of cheque or credit card should be considered 'remuneration' when cash tips would not be.”

Lord Justice Aldhous further observed that there was no difference in principle between tips paid in cash and tips paid by cheque or credit card. In his opinion, the only difference was that in the latter cases the employer acted as agent for the customer and, when doing so, had to carry out his duties under the relevant tax legislation to ensure that tax was levied on the tips. However, the fact that tax on cheque and credit card tips was deducted under the PAYE system, instead of being paid by the waiters, did not affect the relationship between the customer and the employee and the intention of the customer that his tip would find its way into the hands of the employee rather than enriching the employer's bank account.

On 14 June 1996 the applicant applied for leave to appeal to the House of Lords. On 28 October 1996 the applicants were informed that the Appeal Committee had provisionally decided that leave to appeal should be given and that the applicants' employer was invited to submit objections to the applicants' petition before 11 November 1996. On 4 February 1997 the Appeal Committee referred the matter for an oral hearing before three Law Lords.

 

On 20 February 1997 the hearing was held. The applicants' counsel was given the opportunity to speak to the petition for leave and to address the employer's written objections. The hearing lasted five minutes. On the same day the Appeal Committee refused leave to appeal without giving reasons.

COMPLAINTS

1. The applicants complain under Article 1 of Protocol No. 1 to the Convention that the decision of the domestic courts amounts to an interference with their right to the peaceful enjoyment of their possessions. The effect of the judgment is that money which was left to them by customers is adjudged to pass to their employer to be used as he so wishes and, in their case, to discharge statutory obligations to pay a basic minimum wage.

The applicants further complain, with reference to Article 14 of the Convention, that the effect of the domestic courts' decision is discriminatory since they, as waiters, are treated less favourably than employees in other service industries.

2. The applicants finally complain under Article 6 of the Convention that they were denied a right to a fair procedure since the House of Lords did not give any reasons for its rejection of their application for leave to appeal.

THE LAW

1. The applicants contest the decision of the domestic courts to treat tips included by customers in cheque or credit card payments, and intended for them, as the property of their employer with the result that the latter was entitled to count such tips as remuneration. In the applicants' submission the effect is to interfere with their right to the peaceful enjoyment of their possessions, in breach of Article 1 of Protocol No. 1 to the Convention which states:

“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 for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”

The applicants further submit that the impugned decision is discriminatory since they, as waiters, are treated less favourably than employees in other service industries. Such unjustified discrimination amounts, in their view, to a breach of Article 14 of the Convention, taken in conjunction with Article 1 of Protocol No. 1 to the Convention. Article 14 provides:

“The enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground 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.”

The Court considers that it cannot, on the basis of the case file, determine the admissibility of these complaints and that it is therefore necessary, in accordance with Rule 54 § 3 (b) of the Rules of Court, to give notice of them to the respondent Government.

2. The applicants further complain that the House of Lords rejected their application for leave to appeal without giving any reasons for its decision. They submit that the absence of reasons was in breach of the fairness requirements of Article 6 § 1 of the Convention, which provides as relevant:

“In the determination of his civil rights and obligations ..., everyone is entitled to a fair ... hearing ... by [a] ... tribunal...”

The Court recalls that the right guaranteed to a litigant under Article 6 of the Convention includes the right to have reasons for decisions handed down by a domestic court in his case. However the corresponding obligation on a domestic court to give reasons for its decisions cannot be understood as requiring a detailed answer to every argument adduced by a litigant. The extent to which the duty to give reasons applies may vary according to the nature of the decision at issue (see, for example, the Helle v. Finland judgment of 19 December 1997, Reports of Judgments and Decisions 1997-VIII, p. 2929, § 56).

The Court observes in this connection that the applicants sought leave to appeal to the House of Lords on the ground that their appeal raised a point of law of public general importance. In their submission the Court of Appeal's two to one majority decision left the position concerning the status in law of tips paid to them by cheque or credit card in a state of uncertainty. Furthermore, the impugned decision had wider ramifications for other employees in service industries. For those reasons the applicants contend that the House of Lords should have spelled out more clearly the reasons for rejecting their application, all the more so since they requested the parties' written and oral submissions on the issue raised in their application and had provisionally granted leave to appeal.

The Court does not accept that argument. In the first place, the High Court and Court of Appeal judgments were fully reasoned and addressed in detail the substance of the applicants' submissions in the light of adversarial argument. The judgment of the Court of Appeal represented an authoritative and binding view of the law as it stood, subject to any different view which might be taken by the House of Lords consequent upon a successful appeal. Secondly, as to the limited reasons given by the House of Lords Appeal Committee, the Court considers that it is implicit in that decision that the applicants' case did not raise a point of law of general public importance, which is the gateway requirement for leave being granted. The Court observes that where a supreme court refuses to accept a case on the basis that the legal grounds for such a case are not made out, very limited reasoning may satisfy the requirements of Article 6 of the Convention. In its opinion that principle extends to the House of Lords' decisions on applications for leave to appeal.

For the above reasons, the Court considers that the applicants' complaint under Article 6 of the Convention is manifestly ill-founded within the meaning of Article 35 § 3 of the Convention and therefore inadmissible in accordance with Article 35 § 4 thereof.

 

 For these reasons, the Court,

by a majority,

DECIDES TO ADJOURN the examination of the applicants' complaints concerning the interference with their right to ownership of tips paid to them by customers in the context of cheque and credit card transactions and the alleged discriminatory effect of the domestic courts' recognition of their employer's right to ownership of such tips;

unanimously,

DECLARES INADMISSIBLE the remainder of the application.

S. Dollé J.-P. Costa 
 Registrar President

42295/98 - -


- - 42295/98