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Cite as: [1980] EWCA Civ 6, [1980] IRLR 201

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JISCBAILII_CASE_EMPLOYMENT

		BAILII Citation Number: [1980] EWCA Civ 6
		Case No.

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL
ON APPEAL PROM THE EMPLOYMENT APPEAL TRIBUNAL

Royal Courts of Justice Monday,

11th February 1980

B e f o r e :

LORD JUSTICE STEPHENSON
LORD JUSTICE ACKNER
SIR DAVID CAIRNS
____________________

	YOUNG & WOODS LIMITED	Appellants
	v.
	CYRIL WILLIAM WEST	Respondent

____________________

(Transcript of the Shorthand Notes of The Association of Official Shorthandwriters. Limited, Room 392, Royal Courts of Justice, and 2, New Square, Lincoln's Inn, London, WC2)

____________________

MR. N. R. L. CLIFFORD (instructed by Messrs. Thomas Cooper & Stibbard) appeared on behalf of the Appellants.
MR. C. W. WEST appeared in person.
____________________

HTML VERSION OF JUDGMENT
____________________

(Revised)

LORD JUSTICE STEPHENSON: To obtain compensation or reinstatement for -unfair dismissal under what is now the Employment Protection (Consolidation) Act 1978 a complainant has to be an employee as defined by that Act. Section 54(1) reads:

"In every employment to which this section applies every employee shall have the right not to be unfairly dismissed by his employer."

The definition section is section 153 and by subsection (1) of that section:

"In this Act, except so far as the context otherwise requires - 'employee' means an individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment; 'contract of employment' means a contract of service or apprenticeship, whether express or implied, and (if it is express) whether it is oral or in writing".

Mr. West, the respondent, worked for Young & Woods Limited, the appellant company, from September 1975 to 30^th March 1979. On that date he was, as he complained to the Industrial Tribunal, unfairly dismissed. In his application to the Tribunal he took the bull by the horns and said in paragraph 12:

"I was classed as 'self-employed' for tax and National Insurance purposes while I worked for Young & Woods Ltd. but was employed under a 'contract of service' not a contract for services. At all material times the employer had full control over my work, how and when it was done, etc."

The company took the preliminary point that he was not an employee under a contract of service, but he was self-employed, an agent or an independent contractor, under a contract for services. In their notice of appearance they said:

"Mr. C. West was a self employed person for work carried out. He was paid weekly. He to be responsible for his tax and N.I. Contributions."

On 28th June 1979 an Industrial Tribunal decided that he was an employee as defined by the Act and not self-employed as he and the company had agreed that he was. On appeal to the Employment Appeal Tribunal the company set out the questions of law on which the appeal was brought in this form in paragraph 3:

"Whether the Industrial Tribunal has jurisdiction to entertain the complaint of unfair dismissal having regard to the issue whether the Applicant was an employee under a contract of service with the Respondents or an independent contractor under a contract for services."

In paragraph 5 they stated the grounds of appeal as being:

"The Industrial Tribunal erred in law and/or misdirected itself in holding that the Applicant worked for the Respondents as an employee under a contract of service rather than, as they should on the facts have held, an independent contractor under a contract for services."

By a majority the Employment Appeal Tribunal on 27th November 1979 dismissed the company's appeal and refused leave to appeal; so the company comes to this court applying for leave to appeal. That application was granted and we have proceeded to hear the appeal. We have to decide whether five members of the two tribunals below were right in saying that the Industrial Tribunal should hear Mr. West's complaint or whether the one dissenting member of the Appeal Tribunal was right and we should direct the Industrial Tribunal not to hear it. The question raised by this appeal is: Was Mr. West an employee as defined in the statute? Did he work for the company under a contract of service as an employee - which is now preferred, for reasons which may be clear and good but are perhaps neither, to the old-fashioned and not dishonourable word "servant" - or did he work under a contract for services as a self-employed agent or independent contractor?

The Industrial Tribunal found in paragraph 3 and following these facts:

"Mr. West, who is now 54 years old, has been working all his adult life, except for a few years in the Navy, as a sheet metal worker. He is a skilled craftsman, having served a 4 years apprenticeship. He joined the respondents in September 1975 as a skilled sheet metal worker. The respondents are a relatively small firm employing altogether about 20 or 25 people on the shop floor. When Mr. West joined them he was offered alternative methods of payment: either he could go on their books as an employee in the ordinary way, in which case his pay would he subject to deduction of tax and National Insurance contributions, but he would be paid holiday money and he would also receive sickness benefit; or he could go on their books as a self-employed person, in which case his pay would be paid in full without deduction of tax: he would be responsible for his own tax, he would also be responsible for his own National Insurance contributions, and he would not receive any holiday pay or sickness benefit. Mr. West chose the latter; he preferred to be treated as self-employed because he considered that that offered him certain fiscal advantages."

I might add to the findings of the Industrial Tribunal that in evidence he said that those fiscal advantages included a tax allowance for his car on the basis that he needed it for business purposes and, also, that he reckoned that he saved £400 or £500 a year by being classed as self-employed. The tribunal went on to find:

"This is a matter where Mr. West had experience. He had worked on that basis before, he had also worked as an employed person before."

That also can be supplemented by his evidence that before he joined the company he was self-employed and had been for about ten years. The tribunal went on:

"The arrangement was entered into quite openly by everybody. There is no question here of any subterfuge or any tax evasion. Mr. West employs an accountant; his tax returns are made through the accountant, and there is no reason to doubt that the Inland Revenue authorities are fully aware of the position. So Mr. West decided that having the choice, as he had had before in this industry, he would be better off if he was treated as self-employed.

"4. From 1975 onwards Mr. West worked for the respondents as a craftsman, and it appears that of the 20 or 25 people employed at any one time on the shop floor probably 5 or 6 of the craftsmen were working in the same way as Mr. West was, on the basis that they were self-employed: they did not have tax deducted, they were responsible for their own National Insurance contributions, they did not have holiday pay, they did not have sickness benefit, and it may be, although this never seems to have been put to the test, that in an appropriate case the disciplinary procedure applicable to the respondents' employees would not have been applied to those who were treated as self-employed."

In the evidence of Mr. Henderson, the company's Works Manager, he said:

"Everyone was aware of pitfalls of self-employment, that if any shortage of work we would be first to go. That is recognised in industry."

(I think that must mean that "he" would he the first to go; but he may have meant, I suppose, that the company would pack up business early and that would throw Mr. West out of employment.)

He also said, which justifies the failure of the Industrial Tribunal to make a positive finding about disciplinary procedure, that Mr. West had been told on a number of occasions - I will not detail what the complaints were about him, but complaints were made about him:

"Would not have gone further into disciplinary procedure with self-employed."

In other words, the company would not go through the various machinery necessarily preceding the dismissal of an employee in the case of a man whom they regarded, like Mr. West, as self-employed.

The Industrial Tribunal went on in paragraph 5:

"Apart from the matters just mentioned, there was no difference at all between the working conditions applicable to those workers who were treated as self-employed and those applicable to the workers who were subject to PAYE. All the employees worked together in the respondents' factory; they all kept normal working hours; they all used the respondents' equipment for their work; they worked on the respondents' materials; the work that they did was allocated to them by the respondents' foreman; and they were all paid an hourly rate according to the time they worked, regardless of whether they were treated for payment purposes as self-employed or whether they were subject to. PAYE. During the 3½ years that Mr. West was with the respondents, however hard he worked, he was not able to make any additional profit for himself because he was paid simply for the time he worked; and he was not able to employ anyone else to do his work for him or to substitute for him in the respondents' factory.

"6. On those facts we have to decide whether Mr. West was working under a contract of service or under a contract for services."

The Industrial Tribunal then went on to consider the decision of this court in Massey v. Crown Life Insurance Co. (1978) ICR 590; the decision of Mr. Justice MacKenna in Ready Mixed Concrete (South East) Ltd. v. Minister of Pensions and National Insurance (1968) 2 Queen's Bench 497; the decision of Mr. Justice Cooke in Market Investigations Ltd. v. Minister of Social Security (1968) 3 All ER 732; and the decision of the Employment Appeal Tribunal in Davis v. New England College of Arundel now reported in (1977) ICR at page 6. They conclude in paragraph 11:

"In our judgment, in the present case, the indications supporting a contract of service (being all the matters referred to in paragraph 5 of this Decision)" - which I have just read - "are too strong to be displaced by the admitted intention of the parties that that was not the relationship that they were seeking to establish. For these reasons we have come to the conclusion that the relationship between Mr. West and the respondents was governed by a contract of service. Mr. West was employed by the respondents and is therefore entitled to proceed with his complaint of unfair dismissal."

They concluded by expressing, as we, of course, must also express, no view whatever on the merits of the claim. This appeal is concerned, as was the appeal to the Employment Appeal Tribunal, entirely with the preliminary question whether Mr. West was qualified to complain to an Industrial Tribunal under the Act. Mr. Justice Talbot, in giving the judgment of the Appeal Tribunal, set out the preliminary point and a clear summary of the facts found by the Industrial Tribunal. At page 3 of the transcript of the tribunal's judgment he said:

"The question therefore on this appeal is whether the industrial tribunal was correct in finding on the facts which they outlined, to which we have alluded, that the respondent was employed on a contract of service and was not employed on a contract for services."

Further on the same page he said:

"The problem raised in this appeal is whether the parties to a contract which on the face of it appears to be a contract of service can by their declaration and intent cause it to be not a contract of service but a contract for services."

It may be said that, on the face of it, this contract appears to be a contract not of service but for services, for that is what it was stated on its face to be by both parties; or it may be said that, on the face of it, the contract is one of service, for that is what it was in performance, on the facts perhaps rather than on the face. But it is the expression on the face with which the court is first confronted and the court has then to see whether that expression correctly expresses the true nature of the facts behind it.

In considering this contract, like any other contract - and it was a purely oral contract - the court, of course, has to consider the common intention of the parties. What was the intention of Mr. West and the company to be derived from all the circumstances, beginning with the expressed terms of the contract which were that it was to be a contract for services of a self-employed agent, but bearing in mind that those terms may not reveal but disguise the real contract and the true relationship which is created between the parties, and bearing in mind also that there are well-known reasons for dressing up as a contract for services what is really a contract of service? I have said "dressing up", but it is clear from the Industrial Tribunal's unchallenged findings supported by all the evidence that there was nothing underhand or deceitful about the bargain into which these parties entered or about the ways in which they had expressed their mutual intention. Nobody was to be deceived - neither the Inland Revenue nor anybody else. It is plain that both parties intended to call the agreement between them a contract for services and not a contract of employment within the Act. But did both of them really intend it to be such a contract and was it really such a contract?

Mr. Henderson said in his evidence:

"It was the genuine belief of management that West was self-employed."

But was that belief true? In the notice of appeal to this court it is alleged that the minority view of the Employment Appeal Tribunal that he "ought not to be able to resile from his deliberate choice to be self-employed previously made for fiscal advantages is to be preferred to the said majority decision".

I come to the expression of the two views at the end of the Appeal Tribunal judgment. After they had reviewed the cases, including Global Plant Ltd. v. Secretary of State for Social Services (1972) 1 QB 139, Ferguson v. John Dawson & Partners (Contractors) Ltd. (1976) 1 WLR 1213, Market Investigations Ltd. v. Minister of Social Security (1968) 3 All ER 732 and, of course, Massey v. Crown Life Insurance Co. (1978) ICR 590, the Employment Appeal Tribunal said this:

"The majority view is that the industrial tribunal reached the right conclusion. Their view is that it falls within the principle that one has to look at the realities of the situation, and that the label which the parties put upon the contract cannot alter those realities. They point to the fact that the facts as found about the relationship between the respondent and the appellants show that he was no more than a skilled sheet metal worker, working under a contract of service, just as other employees who were admittedly working under a contract of service, and that the only distinction between the respondent and other workers employed by the appellants was a different label which had been attached to the relationship between the respondent and the appellants. They pay particular regard to the matters set out in paragraph 5 of the decision and reasons, to which we have already referred. All those matters were consistent with, and only consistent with, the fact that the respondent was an employee working in the appellants' factory just as any other employee would do. They would not wish to see the decision otherwise, because such individual labelling of the relationship would strike at the root of the protection afforded to an employed person by the Employment Protection legislation. They felt that this case could be distinguished from the Massey case because, whereas in the present case we are concerned with a skilled craftsman working as such with the appellants, in the Massey case the Court of Appeal was dealing with the case of a branch manager who also had a general agency agreement with the employers.

"The minority view, however, is that, where the parties have expressed their intention, if it is sufficiently clear, that must be given some relatively important part in the decision as to what the relationship is. One starts with the freedom of the individual to enter into such contracts as he wishes, provided they do not conflict with the well known rules rendering contracts illegal, unenforceable or void. It must, of course, be accepted that the parties cannot by a mere label alter realities, but the question remains: what was the reality of the intention of the parties? It seems to the holder of this view that, if the majority are right, no working man who wishes to sell his labour, and put himself entirely under the direction of his employer, is able to enter into an independent contract so that he may acquire the fiscal advantages that might flow therefrom. If the Employment Protection legislation is designed to prevent a person from entering into a contractual relationship which denies him the advantage of such legislation, then that legislation must clearly state that that is the result. So far, by Section 140 of the 1978 Act, Parliament has forbidden the inclusion in a contract of employment of any term which excludes or limits the operation of any provision in the Act or which precludes a person from presenting a complaint under the Act subject to the exceptions set out in that Section. The facts that would be emphasised in support of this view are, briefly, that it was the deliberate choice of the respondent to be treated as self-employed in order that he might reap fiscal advantages, which he did to the extent, according to the evidence, of some £400 to £500 per year, and therefore he ought not to be permitted to resile from the contractual position which he has taken up in order that he might now claim the advantages of being an employed person. To force him into the position of being under a contract of service because in every other respect his labour is given to his employer on the same basis as an employed person, is to deny him the opportunity to contract as he wishes and to compel him to accept the status in direct opposition to that which he chose when he entered into his contract with his employer. The essence of this view is that the reality is that he deliberately chose to be in the position of a self-employed person."

It seems to me that those differing views are really a restatement of the views which divided this court in the case of Ferguson v. Dawson. That was a case in which an employee or workman who was a scaffolder was, by a majority, held able to get both the tax advantages of working as a self-employed person and the statutory benefits conferred on him by the Construction Working Places Regulations (Statutory Instrument 1966 No. 94) as an employee or workman employed by the defendants, John Dawson & Partners. In the leading judgment Lord Justice Megaw was doubtful whether regard should be had at all to the way in which the parties to a contract described it, but he was prepared to take a less stringent view of the law and to regard the way in which they described their contract as of importance, though not of decisive importance. In that case the plaintiff had been taken on by the defendants after being told that there were no cards, they were purely working as a lump labour force, and that had many of the consequences which are to be found in this case. He referred to the well known case of Addiscombe Garden Estates Ltd. v. Crabbe (1958) 1 QB 513, in which this court clearly laid down that you could not turn what was in reality a lease into a licence by naming it a licence, even in a written document, and convince a court that it was in fact a licence, even though the document referring to it as a licence was not a sham. Such a document could be properly ignored or overridden by the real facts of the case. He added at page 1223 C:

"The parties cannot transfer a statute-imposed duty of care for safety of workmen from an employer to the workman himself merely because the parties agree, in effect, that the workman shall be deemed to be self-employed, where the true essence of the contract is, otherwise, of a contract of service."

He referred to what Mr. Justice MacKenna had said in the; I Heady Mixed Concrete case at pages 512 and 513 of the report:

"It may be stated here that whether the relation between I the parties to the contract is that of master and servant I or otherwise is a conclusion of law dependent upon the rights conferred and the duties imposed by the contract. If these are such that the relation is that of master and servant, it is irrelevant that the parties have declared it to be something else. I do not say that a declaration of this kind is always necessarily ineffective. If it were doubtful what rights and duties the parties wished to provide for, a declaration of this kind might help in resolving the doubt and fixing them in the sense required to give effect to that intention."

I understand that passage to be cited by Lord Justice Megaw with approval and it certainly has my approval as well. He also cited the observations of Lord Widgery, Chief Justice, at page 152 of the report of Global Plant Limited v. Secretary of State for Social Services:

"One must not overlook that the intention of the parties was that the relationship should be that of an independent contractor, and although the parties cannot by intention make a transaction into something which it is not, yet it is recognised that such intention is a factor for consideration in these cases."

He commented at page 1223H:

"Incidentally, although in that case the court was considering whether or not a decision of the Minister should be quashed, the decision of the court shows that the mere fact that under the contract the workman receives his remuneration without deductions of PAYE income tax and without having his insurance card stamped by the other party does not in itself necessarily, at least, involve the conclusion in law that it is not a contract of service."

In Ferguson's case Mr. Justice Boreham had said he must look:

"at the realities of the situation and not to the form alone, and particularly not alone to the label that was put upon the plaintiff by both plaintiff and defendant, for it is contended that the form may he, and in this case is, a mere facade; whether or not the plaintiff regarded himself, whether or not the defendants regarded him, as 'self-employed labour only contractor' may be a matter, a serious matter, to be taken into consideration, but it is by no means conclusive, and the question remains whether in reality the relationship of master and servant existed ... I accept what the parties accept, namely, the label, as a guide and no more. I regard the concept of 'the lump' in the circumstances of the present case as no more than a device which each side regarded as being capable of being put to his own advantage in a manner that I have attempted to describe, earlier in this judgment, but which in reality did not affect the relationship of the parties or the performance of the substance of the contract between them."

That, said Lord Justice Megaw, was the right approach and led the learned judge to the right conclusion. Lord Justice Browne agreed with Lord Justice Megaw's conclusion and he quoted with approval the observations of Mr. Justice Cooke in the Market Investigations Ltd. case at page 184 of the report when he said that certain observations made in other authorities suggest:

"that the fundamental test to be applied is this: 'Is the person who has engaged himself to perform these services performing them as a person in business on his own account?' If the answer to that question is 'yes', then the contract is a contract for services. If the answer is 'no' then the contract is a contract of service."

I too would adopt that text, but I must respectfully express my dissent from what the learned Lord Justice said at the very conclusion of his Judgment that the conclusion to be drawn from the facts as to the true legal relationship between the parties after the right tests have been applied is a question of fact. If by that he meant that it was a question on which this court cannot interfere, I prefer the view of Lord Justice Megaw that it is a question of law, in these cases of service or services as in the case of lease or licence, whether the true inference from the facts, the true construction or interpretation of a written agreement or of an agreement partly oral and partly written or of a wholly oral agreement, is a matter of law on which there is a right and a wrong view, and if an Industrial Tribunal comes to what in the view of this court is a wrong view of the true nature of the agreement, it can and should find an error in law on the part of the Industrial Tribunal and reverse its decision. It cannot say that two views are possible of the true construction of this particular agreement on the facts which the Industrial Tribunal has found, and we cannot say that no reasonable tribunal could have come to the interpretation which the Industrial Tribunal has put upon the facts. It must make up its mind what the true interpretation of the facts and the true legal relationship created by the contract between the parties is.

In that case Lord Justice Lawton dissented. He was understandably impressed by the injustice of the result and held that it would be contrary to public policy to allow a man to say that he was self-employed for the purpose of avoiding certain taxation, but a servant for the purpose of claiming compensation.

There are clear differences between the facts of that case and the facts of this case: the use of a device in that case, which it is clear from other passages in the judgments which I have not read the court were nearly prepared to hold made the contract illegal and unenforceable. I, therefore, turn to the case of Massey where the facts are much nearer the facts in this case. Again, there are important differences in my judgment, hut that case has this in common with our case, that the bargain which purported to create a relationship of self-employment and services was made openly between the parties and with the knowledge of the Inland Revenue. It was unlike this in being a case in which the applicant had two contracts with the defendants, a contract of service and a contract for services: the first being a contract as manager of one of the company's branch offices and the second a general agency agreement with the company. It is also unlike this case in that the contract of agency which the parties entered into and which, it is said, prevented the Industrial Tribunal from having jurisdiction to hear Mr. Massey's complaint, was not the original bargain under which they had entered into a relationship, but was a deliberate change of relationship or purported change of relationship. In 1973 Mr. Massey not only entered into a new agreement with the Crown Life Insurance Company, but he registered the business which he carried on under that contract with the company under the Business Names Act. The company wrote a letter to the Inspector of Taxes about the matter, advising them that Mr. Massey:

"has now formed a company called John L. Massey & Associates, and they have been appointed manager of our Ilford division with effect from September 2, 1973. All future remuneration will be paid to John L. Massey & Associates, and in view of the fact that they are a company no tax deductions will be made by us."

I do not think I need read any more. It was on those facts that, after Mr. Massey had been dismissed, the question whether he was self-employed or an employee came before this court. Lord Denning, Master of the Rolls, referred to the distinction which had been drawn for the last hundred years between a contract of service and a contract for services, and the important consequences that it had in various fields. He went into Mr. Massey*s position and stated his conclusion as to the law in this way at page 594-E of the report:

"The law, as I see it, is this: if the true relationship of the parties is that of master and servant under a contract of service, the parties cannot alter the truth of that relationship by putting a different label upon it. If they should put a different label upon it and use it as a dishonest device to deceive the Revenue, I should have thought that it was illegal and could not he enforced by either party and they could not get any advantage out of it - at any rate not in any case where they had to rely upon it as the basis of a claim: see Alexander v. Rayson (1936) 1 KB 169. An arrangement between the two parties to put forward a dishonest description of their relationship so as to deceive the Revenue would clearly be illegal and unenforceable. On the other hand, if the parties' relationship is ambiguous and is capable of being one or the other, then the parties can remove that ambiguity by the very agreement itself which they make with one another. The agreement itself then becomes the best material from which to gather the true legal relationship between them. This is clearly seen by referring back to Inland Revenue Commissioners v. Duke of Westminster (1936) AC 1 "

Then he sets out the facts of that case and goes on:

"Likewise, in the present case Mr. Massey - as the tribunal found - worked under the new agreement in 1973 exactly as he worked under the previous agreement. The practical difference, they said, was that Mr. Massey ceased to be a member of the company's pension scheme and the pension contributions he had made under the previous agreement were returned to him. But otherwise everything went on just the same as before.

"It seems to me on the authorities that, when it is a situation which is in doubt or which is ambiguous, so that it can be brought under one relationship or the other, it is open to the parties by agreement to stipulate what the legal position between them shall be. That was said in the Ready Mixed Concrete case (1968) 2 QB 497, 513, by MacKenna J: 'If it were doubtful what rights and duties the parties wished to provide for, a declaration of this kind might help in resolving the doubt and fixing them in the sense required to give effect to that intention.' So the way in which the parties draw up their agreement and express it may be a very important factor in defining what the true relationship was between them. If they declare that one party is self-employed, that may be decisive."

I underline the words "may be". Then he came back to Mr. Massey's case, expressed some doubt whether Mr. Massey was under a contract of service at all before 1973 and said:

"But I am perfectly clear that after the 1973 agreement was drawn up and recast, although the same work was done under it, the relationship was no longer that of master and servant. It was an employer and independent contractor relationship.

"It seems to me that those findings of the industrial tribunal were well-justified in the circumstances of this case. Mr. Massey was not an employee. He was not employed under a contract of service so as to be able to avail himself of the unfair dismissal provisions in the Act of 1974-."

If the judgment of the learned Master of the Rolls had stopped there, there could not, I think, have been any question but that the headnote of the report is correct in stating that what was held by this court was that:

"although the parties could not alter the true nature of their relationship by putting a different label on it, the agreement in 1973, being genuinely intended to establish the applicant as self-employed, made it clear that whatever the nature of the previous relationship the applicant thereafter was an independent contractor and not an employee ...

"Per curiam. When a situation is in doubt or ambiguous, so that it can be brought under one relationship or the other, it is open to the parties by agreement to stipulate what the legal situation between them shall be ..."

But the learned Master of the Rolls went on to say a word about Ferguson's case which he said turned on its facts. He then said this :

"In most of these cases, I expect that it will be found that the parties do deliberately agree for the man to be 'self-employed' or on the lump. It is done especially so as to obtain the tax benefit. When such an agreement is made, it affords strong evidence that that is the real relationship. If it is so found, the man must accept it. He cannot afterwards assert that he was only a servant. In the present case there is a perfectly genuine agreement entered into at the instance of Mr. Massey on the footing that he is self-employed. He gets the benefit of it by avoiding tax deductions and getting his pension contributions returned. I do not see that he can come along afterwards and say it is something else in order to claim that he has been unfairly dismissed. Having made his bed as being self-employed, he must lie on it. He is not under a contract for service."

The sentences referring to "most of these cases" appear to be of general application, and the Master of the Rolls appears to he saying that, when an agreement is made for a man to he self-employed, that affords strong evidence that that is the real relationship; and he may be saying that, if such an agreement is found, the man must accept it. He cannot afterwards assert that he was only a servant. On the other hand, it may he that the Master of the Rolls meant that, if the evidence is strong enough to show that a contract for services is the real relationship and that is found to he the real relationship, then the man must accept it. I do not myself find the words entirely clear hut, read in their context - which itself clearly indicates considerable sympathy with the dissenting view expressed by Lord Justice Lawton in the Ferguson case - I do not think that they would justify me in concluding that, wherever there is an agreement openly made that a particular person shall he treated by a company as self-employed, it follows that he must accept the position and cannot claim compensation for unfair dismissal as if he was not self-employed hut an employee. It must he the court's duty to see whether the label correctly represents the true legal relationship between the parties in that case as in every other.

Lord Justice Lawton puts very clearly at the beginning of his judgment those considerations which led him to dissent in the Ferguson case:

"In the administration of justice the union of fairness, common sense and the law is a highly desirable objective. If the law allows a man to claim that he is a self-employed person in order to obtain tax advantages for himself and then allows him to deny that he is a self-employed person so that he can claim compensation, then, in my judgment, the union between fairness, common sense and the law is strained almost to breaking point. The applicant is asking this court to adjudge that he is entitled to make claims with two different voices."

Then the learned Lord Justice went on to consider the facts of the case and to find that that was not, on the facts of that case, so. Lord Justice Eveleigh agreed with both judgments.

It is nowhere stated by Lord Justice Lawton in the judgment which he gave that an agreed change in the status of a person or an agreed choice of status necessarily determines that status and prevents that person from resiling from his choice or from pursuing what would appear to be a remedy completely inconsistent with the choice that he has deliberately made.

Fairness and justice have throughout inclined me to accept the minority view in this case. If Mr. West chooses to call himself self-employed for fiscal advantages which are denied to an employee, why should he claim the advantage of statutory rights which are available to an employee but denied to the self-employed? And why should the agreement of employers to treat him as self-employed make any difference to the injustice or unfairness of his having both advantages? But, in my judgment, the answer is that he and his work should be classified not by appearance but by reality. If he is really self-employed the Industrial Tribunal should refuse to consider his statutory rights as an employee. If he is really an employee or servant the Inland Revenue should reclaim tax deductions which have been granted to him as self-employed; and, if this court declares that the true legal position between him and his employers is not in accordance with the agreement deliberately chosen by the parties and put before them for their information, I do not suppose that the Inland Revenue would fail to discharge their statutory duty.

But I have come to the conclusion that the minority view cannot prevail. I have come to the conclusion that the decision of the Industrial Tribunal was right and that the true legal relationship of the parties was not that of a self-employed agent working independently for this company.

Mr. Clifford has submitted that, though a party cannot alter the true relationship, if the parties genuinely and expressly intend to establish a person (on the employer's hooks) to do a job as a self-employed person, then he cannot make a claim as an employee for the purpose of getting compensation for unfair dismissal. Either, he says, the parties cannot resile from the position which they have deliberately and openly taken up in any circumstances or, if that is putting the matter too high, the presumption created by their deliberately and openly chosen relationship is rebuttable, but not easily rebuttable.

I am satisfied that the parties can resile from the position which they have deliberately and openly chosen to take up and that to reach any other conclusion would be, in effect, to permit the parties to contract out of the Act and to deprive, in particular, a person who works as an employee within the definition of the Act under a contract of service of the benefits which this statute confers upon him. If I consider the policy of the Act I can see the dangers, pointed out by Lord Justice Ackner in the course of the argument, of employers anxious to escape from their statutory liabilities under this legislation or the Factories Acts offering this choice to persons whom they intend to employ, as Mr. West was employed, as employees within the definition of the Act and pressing them to take that employment - it may be even insisting upon their taking that employment - on the terms that it shall not be called that employment at all, but shall be called a contract for services with a self-employed person. I, therefore, reject Mr. Clifford's submission in its extreme form. To accept it would, I think, be to prefer the minority view of Lord Justice Lawton in the Ferguson case to the view of the majority both in Ferguson's case and in Massey's case; and I do not find anything in Massey's case which clearly indicates that, where the agreement to treat a man as self-employed is made as openly as it was in this case, the person called self-employed is forced to accept that position, whatever the reality of the matter, when he comes to try to persuade an Industrial Tribunal to hear a complaint of unfair dismissal. That seems to me to pre-suppose some kind of estoppel against invoking the statute equivalent to, or closely analogous to, a power to contract out of the Act; and to give effect to it would, in my judgment, he plainly wrong.

Mr. Clifford, who has said everything that could he said on behalf of the company, is perhaps on stronger ground when he recedes from the extreme form of his argument and asks us to hold that, on the facts of this case, the presumption created by the label openly put upon this contract by the parties was not rebutted. He complains that the Appeal Tribunal referred to the facts set out in paragraph 5 of the Industrial Tribunal's decision and not to those facts set out in paragraph 3 which point away from a contract of service to a contract for services. All those facts are, however, set out in the earlier pages of the Appeal Tribunal's judgment, and I cannot think that they were ignored or undervalued by the Appeal Tribunal. The Industrial Tribunal and the Appeal Tribunal seem to me to have had the relevant authorities in mind and to have applied the correct tests. It is clear, for instance - and not only from the express reference in paragraph 8 of their decision to Mr. Justice Cooke's judgment in the Market Investigations case -that the Industrial Tribunal had what he said in that case in mind because, in paragraph 5 which I have read, are set out a number of factors which are set out in an earlier part of that same judgment as indicative of a contract being a contract of service. It is also clear from a question asked of Mr. West in chief that Mr. Justice Cooke's test, referred to by Lord Justice Browne in Ferguson's case, was in the mind of that Tribunal.

"I thought", said Mr. West, "some tax concessions beneficial to me, that's why I wanted to be classed as self-employed. Didn't look on myself as in business on my own account."

It would, in my judgment, be impossible to regard Mr. West - self-employed though he asked to be treated, self-employed though his employers agreed that he should be treated and the Inland Revenue agreed that he should be treated - as a person in business on his own account as Mr. Massey, in very different circumstances, was clearly rightly regarded. Unjust as it may seem in this case that Mr. West should be able to get away from the bed which he has made, or to eat his cake and still keep it, or to wear two hats according to which one happens to suit him at the time - whatever metaphor is used - nevertheless it is in my judgment the duty of an Industrial Tribunal, once a person goes to it and says, "Though I was self-employed, nevertheless I am an employee entitled to enforce my statutory rights", to see whether the label .of self-employed is a true description or a false description by looking beneath it to the reality of the facts, and it must be its duty to decide on all the evidence whether the true legal relationship accords with the label or is contradicted by it.

There are, of course, here pointers in both directions. Mr. West was paid his wages without deductions. He would not have been entitled to holiday pay or sickness benefits. I do not go to the authority which says that those circumstances alone do not prevent a contract from being a contract of service, but the pointers in the other direction, which I have read from the decision of the Industrial Tribunal, were, in my judgment, strong enough to satisfy the burden which no doubt rested on Mr. West to show that the label was a false label and that, though the mutual intention of the parties was undoubtedly to call the work which Mr. West was going to do for then services under a contract for services, nevertheless it was in reality service rendered under a contract of service. There is no such ambiguity in the relationship between Mr. West and the company as could make their declared intention as to what it should be decisive of it.

For these reasons which I have taken long enough to give, though I have not referred to all the authorities, including the two interesting decisions of the Employment Appeal Tribunal in Davis v. New England College of Arundel (1977) ICR 6 and Winfield v. London Philharmonic Orchestra Limited (1979) ICR 726, I would dismiss the appeal.

LORD JUSTICE ACKNER: I agree. It is by now well settled that the label which the parties choose to use to describe their relationship cannot alter or decide their true relationship; but, in deciding what that relationship is, the expression by them of their true intention is relevant, but not conclusive. Its importance may vary according to the facts of this case. I said this is well settled and the authorities to which I refer are Beady Mixed Concrete (South East) Limited, v. Minister of Pensions and National Insurance (1968) 2 QB 4-97, Ferguson v. John Dawson & Partners (Contractors) Ltd. (1976) 1 WLR 1213 and Massey v. Crown Life Insurance Co. (1978) Industrial Cases 590.

The last case to which I have just made reference is a good indication of circumstances in which the parties' expression of their true intention may become decisive. It became decisive for this reason. As the Master of the Rolls pointed out in giving his judgment, the situation of Mr. Massey was ambiguous. In giving his judgment at pages 594- to 595 the Master of the Rolls said:

"... if the parties' relationship is ambiguous and is capable of being one or the other, then the parties can remove that ambiguity, by the very agreement itself which they make with one another. ... It seems to me on the authorities that, when it is a situation which is in doubt or which is ambiguous, so that it can be brought under one relationship or the other, it is open to the parties by agreement to stipulate what the legal situation between them shall be."

Almost at the end of his judgment, in fact in the penultimate paragraph, he said:

"Having made his bed as being self-employed, he must lie on it. He is not under a contract of service."

This was interpreted by Mr. Clifford as meaning that there was some species of estoppel which debarred a person having, so to speak, opted or elected from resiling from that situation. I do not read the judgment of the learned Master of the Rolls in that way at all. As I read his judgment he was saying:

"In this case there was ambiguity. The parties were able, if they were so minded, to resolve that ambiguity. They did in fact resolve it by their agreement and, having done so, then the worker has made his bed and he must lie on the bed he has thus made."

"...individual labelling of the relationship would strike at the root of the protection afforded to an employed person by the Employment Protection legislation."

It would not only strike at that protection, but also at the protection afforded by other acts such as the Factory Acts and other analogous legislation. I, as this court in the Ferguson case, have obtained much assistance from the observations of Mr. Justice Cooke in the case of Market Investigations Ltd. v. Minister of Social Security (1968) 3 All ER 732, where he said this at page 737:

"The observations of Lord Wright, of Denning, L.J., and of the judges of the Supreme Court in the U.S.A. suggest that the fundamental test to be applied is this: 'Is the person who has engaged himself to perform these services performing them as a person in business on his own account?'. If the answer to that question is 'yes', then the contract is a contract for services. If the answer is 'no' then the contract is a contract of service. No exhaustive list has been compiled and perhaps no exhaustive list can be compiled of considerations which are relevant in determining that question, nor can strict rules be laid down as to the relative weight which the various considerations should carry in particular cases. The most that can be said is that control will no doubt always have to be considered, although it can no longer be regarded as the sole determining factor; and that factors, which may be of importance, are such matters as whether the man performing the services provides his own equipment, whether he hires his own helpers, what degree of financial risk he takes, what degree of responsibility for investment and management he has, and whether and how far he has an opportunity of profiting from sound management in the performance of his task."

As my Lord has pointed out, these considerations are to be found well reflected in a question in particular asked of Mr. West and in paragraph 5 of the findings of the Industrial Tribunal.

It has been strongly urged by Mr. Clifford that it would be quite wrong for the respondent to have his cake and eat it. I see no reason to assume that this unpalatable situation will result from our decision. The Inland Revenue, as I understand it, have a duty to collect taxes. It follows from our decision that the respondent was wrongly assessed under Schedule D. He should have been assessed under Schedule E. He has thus obtained since 1975 or thereabouts fiscal advantages worth some £500 per annum to which he was not entitled. I am not prepared to assume that the Inland Revenue will fail to exercise its statutory duties and take the appropriate recovery action. It may well he that this will prove for the respondent, Mr. West, to be a hollow, indeed an expensive, victory. This is, however, one of the hostages which is so frequently given to fortune when a person decides to go back on his bargain in order to obtain, what he believes to be, a fortuitous advantage at the expense of the other contracting party. I, too, would dismiss this appeal.

SIR DAVID CAIRNS: I have found this a difficult case. I was much impressed by Mr. Clifford's contention that the right conclusion from the facts found in paragraph 3 of the decision of the Industrial Tribunal was that there was in reality, and not merely as a matter of label, a contract for services rather than a contract of service. An alternative argument of Mr. Clifford's which also seemed to me to have much force was that, taking account of the facts in paragraph 3, together with those in paragraph 5 of the decision indicating that Mr. West's working conditions were indistinguishable from those of the company's employees, the case was one of ambiguity where the label might be decisive. In addition, I found attractive the doctrine enunciated by Lord Justice Lawton in the case of Ferguson as based on public policy and referred to by both the Master of the Rolls and Lord Justice Lawton in Hassey's case that it is unfair that a person should be able to obtain tax advantages on the basis that he is self-employed and then later to claim compensation for unfair dismissal on the basis that he was an employee; though it may be, if the observations of Lord Justice Ackner towards the end of his judgment in respect of that matter are right, that the tax advantage will not in the end have accrued to Mr. West.

However, I am at the end of the day satisfied, first, that this court should not reverse the decision of an Industrial Tribunal affirmed by the Employment Appeal Tribunal that a contract is a contract of service except in cases where that is clearly not its character; secondly, on balance, the matters pointing to its being a contract of service do outweigh the matters pointing in the other direction; thirdly, it is of great importance as a matter of public policy that an employer should not be able to avoid his statutory responsibilities as an employer - responsibilities for safety, redundancy of payments, compensation for unfair dismissal and other matters -by offering to those who are, or are about to become, in sub-stance employees a form of contract purporting to put them in another category and offering tempting fiscal advantages.

For these reasons I, too, would dismiss the appeal.

Order: Appeal dismissed with costs.