England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
THE HONOURABLE MR JUSTICE BEAN (SITTING ALONE)
UKEAT/0536/08/RN

		Royal Courts of Justice Strand, London, WC2A 2LL
		23/07/2010

Lord Justice Elias :

1. This appeal raises a short point, namely whether the respondent to this appeal, Dr Evans, has an arguable case that she was a worker in an employment relationship with the appellant, RSA Consulting Limited.
2. The background facts can be shortly stated. Dr Evans is a molecular immunologist working as a consultant to the pharmaceutical industry. She entered into an agreement with a company called Parasol. Under that agreement Parasol agreed to provide her with payroll services on Dr Evans' payment of a monthly fee. Parasol was described in the contract she had with them as her employer.
3. Parasol entered into an agreement with RSA Consulting Limited, the appellant, under which Parasol agreed to provide services to third parties. Subsequently, she was introduced by RSA, through Parasol, to PharmaNet Limited, a scientific services company provider.
4. In due course PharmaNet indicated that they no longer needed her services. Her relationship with them was brought to an end. She then brought proceedings against each of the three companies, Parasol, RSA and PharmaNet before the Employment Tribunal alleging that they had made an unauthorised deduction from her wages contrary to section 23 of the Employment Rights Act 1996.
5. The basis of this statutory claim is that it is an unauthorised deduction under that section if an employer fails to pay what he is obliged to pay under the contract. Her case before the Employment Tribunal was that she was contractually entitled to a month's payment in lieu of notice from each of these respondents, although she accepted that she would have to give credit for moneys paid by one with respect to her claims against the other two.
6. In order to establish this claim against any respondent, Dr Evans had to show that she was a worker and that it was her employer as defined in section 230 of the Employment Rights Act. Section 230(3) defines a worker as follows:

"In this Act 'worker' (excepting the phrases 'shop worker' and 'betting worker') means an individual who has entered into or works under (or, where the employment has ceased, worked under) –

(a) a contract of employment, or

(b) any other contract, whether express or implied and, if it is expressed, whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual; and any reference to a worker's contract shall be construed accordingly."

7. Subsection (4 )defines "employer" as follows:

"'employer' in relation to an employee or a worker, means the person by whom the employee or worker is (or where the employment has ceased, was) employed."

8. Each of the respondents sought to defend the claim. Parasol conceded that they employed the claimant but denied that she was entitled under the relevant contract to any notice pay. She was only entitled to be paid for hours that she had actually worked and they contended that she had received all sums due to her.
9. The second and third respondents defended the claims primarily on the basis that the claimant was not in employment with them. RSA's case was that it had a contract with Parasol but no contract with Dr Evans.
10. The Tribunal listed the claims against all three respondents for a hearing at a pre-hearing review to determine a specific preliminary issue, namely whether to strike out the claims against each respondent on the ground that they had no reasonable prospect of success. The claimant confirmed at the start of the hearing that she had withdrawn her claim against the third respondent PharmaNet and that claim was accordingly dismissed. This was apparently because she discovered that PharmaNet's contract with the appellant could be terminated without notice.

The hearing before the Tribunal.

11. Dr Evans represented herself at that hearing. She gave evidence and was cross examined. While giving evidence she said that she did not believe that Parasol was liable to pay her anything; her evidence was that "a muddle" had been created by RSA and they should meet the claim. She asserted that RSA had agreed a month's notice with her directly. She referred to the fact that she had signed the agreement between Parasol and RSA, although the document shows that she signed it "for and on behalf of" Parasol.
12. The Tribunal judge concluded that in the light of her own evidence, she was owed nothing by Parasol and the claim against them was struck out.
13. The employment judge then turned to consider her relationship with RSA. He concluded that the documents demonstrated that she was employed by Parasol and not RSA. The judge said this:

"..it seems to me on the evidence I have seen that at no time was the Second Respondent her employer. All the documentation I have seen is entirely inconsistent with the argument that an employment relationship existed between her and the Second Respondent. The Second Respondent was at no time her employer and accordingly there is no basis on which this Tribunal has any jurisdiction to consider a complaint of an unauthorised deduction from wages under section 23 ERA. To pursue such a claim the claimant would first have to establish that a contract of employment existed between her and the Second Respondent. There is no basis on the documentation I have seen on which any Tribunal would come to that conclusion."

14. Shortly after that decision, Dr Evans recovered an email which had been sent to her by Parasol on 8 November 2007. So far as material, it reads as follows:

"You have confirmed the following contract.

Agent's Name: RSA Interims.

Client Name: PharmaNet.

Contract Start Date: 12 Nov 2007

Contract End Date: 31 Oct 2008

Notice Period to Agency/Client: 1 month by either party

Agency/Client Notice Period to You: 1 month by either party."

15. This document suggests that there is a one month notice period due to her, which was one of the disputed matters which Dr Evans had been asserting before the employment judge.
16. She sought a review of the original decision. An employment tribunal has the power under rule 34(3) of the Tribunal Rules to review decisions in certain circumstances. It was contended here that a review would be appropriate either under paragraph (d), which relates to new evidence becoming available whose existence could not reasonably have been known or foreseen at the time of the original hearing, or paragraph (e), a more general sub-paragraph providing for a review in the interests of justice.
17. The employment judge treated the application as having been made under paragraph (e) and refused the application. Dr Evans then lodged an appeal to the Employment Appeal Tribunal, both against the original decision of the Tribunal and against the refusal to review it.
18. The appeal against Parasol succeeded without Parasol appearing before the Tribunal to contest the case. Mr Justice Bean, giving the judgment of the EAT, noted that it was unwise to rely on an unrepresented claimant's view of the law and therefore the employment judge should not have given the weight that he did to Dr Evans' contention that Parasol did not owe her any money.
19. In addition, Mr Justice Bean found that the employment judge ought to have reviewed his original decision in the light of the email because it strongly supported her contention that she was entitled to a month's notice. Accordingly he held that the judge had erred in dismissing the claim against Parasol. They do not challenge that ruling.
20. Bean J then turned to what he described as "the more difficult question" of the decision with respect to RSA. He noted that the employment judge had held that the claimant had no contract of employment with RSA, but in fact her submission was not that she had a contract of employment but rather that she was a "worker" as defined by section 230. He appears to have found that the judge did not address that issue.
21. Bean J identified two principles which, taken together, led him to conclude that the appeal should succeed and that he should allow the claim against RSA to go to a full hearing. The first was that even where there is a series of contractual arrangements as in this case and no express contract between claimant and end-user or, as in this case, claimant and intermediate agent, it may be possible to imply a contract but only if that is necessary to give effect to the actual relationship between the parties: see the judgments of this court in Dacas v Brooke Street Bureau (UK) Limited [2004] ICR 1437 and James v London Borough of Greenwich [2008] ICR 545 which concerned the question when a contract may be implied between worker and end-user.
22. However, whether a contract can be implied requires a consideration of all the evidence relating to the nature of the relationship between the parties, and not merely the documents. In James Mummery LJ observed that:

"As illustrated in the authorities, there is a wide spectrum of factual situations. Labels are not a substitute for the legal analysis of the evidence. In many cases agency workers will fall outside the scope of the protection of the 1996 Act because neither the workers nor the end users were in any kind of express contractual relationship with each other and it is not necessary to imply one in order to explain the work undertaken by the worker for the end user."

23. In Dacas Mummery LJ to similar effect said this:

"Although there was no express contract between the applicant and the end user in this case, that absence does not preclude the implication of a contract between them. That depends on the evidence, which includes, but may not be confined to, the contractual documents."

24. The second principle relied upon was that where factual matters are in dispute, it is rarely appropriate to strike out a case. The judge referred to some observations which Lord Justice Maurice Kay made in the Court of Appeal in Eszias v North Glamorgan NHS Trust [2007] ICR 1126. He observed that where there are factual matters in dispute then (para 29):

"It would only be in an exceptional case that an application to an Employment Tribunal will be struck out as having no reasonable prospect of success when the central facts are in dispute. An example might be where the facts sought to be established by the applicant were totally and inexplicably inconsistent with the undisputed contemporaneous documentation."

25. Bean J concluded that in the light of these principles, and also recognising that the question of implied contracts in this area is notoriously difficult, there was sufficient disputed factual evidence in this case for the matter to go to a trial of the issue. It was at least arguable that Dr Evans might be able to establish an employment relationship with RSA. In this context, the judge gave some weight to the email, although he conceded that it was of greater relevance to the claim against Parasol than RSA.
26. RSA now appeals that ruling. They were initially refused permission to appeal on paper by Sir Richard Buxton, but permission was granted by Lord Justice Rimer after an oral hearing. The basis of the appeal, attractively advanced by Mr Duggan, is that the employment judge correctly interpreted the contractual documents and reached the only possible conclusion that there was no contractual relationship of any kind between the claimant and RSA. He had heard the evidence adduced by Dr Evans and did not think it sufficient to cast any doubt on the fact that the contractual documents properly reflected the true relationship between the parties. It was not necessary to spell out any direct relationship between the claimant and RSA.
27. Ms Ling, counsel for Dr Evans, submits that this is far too simplistic an analysis of the case. The employment judge's decision demonstrates a number of flaws. The principal one is that he does not seem to have recognised at all that it was necessary to have regard not only to the documents but also to the oral evidence given by Dr Evans about the way in which the relationship was in fact conducted. Dr Evans had given evidence about how she had negotiated the agreement on behalf of Parasol, and she had asserted that RSA had on occasions dealt directly with her rather than through Parasol. None of this evidence was referred to by the judge.
28. In addition, the employment judge had held that there was no contract of employment, but that was not the issue. The claimant accepts that she did not have an employment contract but the relevant question was whether she had a contract with RSA of a kind which rendered her a worker within the meaning of section 230. Finally, Ms Ling says that the claimant was not given a proper opportunity to put forward all the evidence she wanted before the Employment Tribunal. As a litigant in person, she did not appreciate fully the nature of the case she had to advance. It was unjust to dismiss her claim without a proper consideration of all the factual matters on which she wished to rely. Bean J was correct in his analysis and the appeal should be rejected.

Discussion.

29. The legal principles are not in dispute. The issue is whether the tribunal judge erred in concluding that it was not arguable that Dr Evans might be able to establish that it was necessary to imply a contract with RSA to explain the nature of the relationship between them.
30. Unusually, I do not think it necessary to understand the legal issues in this case to spell out the terms of the contract between Parasol and the claimant on the one hand, and Parasol and RSA on the other. This is because it is accepted that the only possible conclusion that could be reached simply focusing on those documents is that the claimant has no contractual relationship of any kind with RSA.
31. For myself, I am entirely satisfied that this was the conclusion reached by the employment judge; contrary to the view expressed by Bean J, I do not think that he was simply focusing on whether Dr Evans could establish a contract of employment. It is true that he did observe that the claimant did not have a contract of employment with RSA but that is because that appears to have been the way the case was being advanced at that time. The logic of his analysis - and at one point in his judgment he says this in terms - is that there was no employment relationship of any kind between the claimant and RSA.
32. However, the authorities clearly establish that where the claimant is asserting that a contract should be implied in accordance with the principle of necessity, the documents are not the beginning and end of the story. Evidence of the actual relationship must be considered. I have concluded, not without some reluctance, that Ms Ling is right to say that the employment judge did not have, or at least may not, have had, regard to such evidence. Certainly he did not spell out what evidence the claimant had given, or upon which she relied, to demonstrate an implied contractual relationship. Nor did he in terms identify the legal principles which he was applying.
33. The result is that it is not clear from the judgment that the employment judge did properly direct himself as to the appropriate legal principles, nor that he took account of all relevant evidence. The impression I have is that the judge may have thought it unnecessary to go beyond the documents because they are so unambiguous. The short passage in his judgment dealing with the position of RSA (set out at paragraph 14 above) makes no reference at all to any evidence other than the documents he had seen, and concluded in effect that they speak for themselves. As the authorities show, that is too narrow a focus.
34. For this reason, and only this reason, I would dismiss this appeal and hold that the employment judge's decision cannot stand. There is a real risk that the case advanced by Dr Evans was not properly considered. My reluctance in reaching this conclusion is that I think that the evidence which Ms Ling has indicated the claimant would want to rely upon in order to show that it is necessary to imply a contract falls some way short of making good her case. It is well established that one situation where the claim can be struck out without a full trial is where the evidence of the claimant, even taken at its highest, could not sustain her case. I suspect that this may be the case here.
35. Ms Ling relies, for example, on the fact that Dr Evans negotiated the contract with RSA. But that does not, in my judgment, demonstrate any inconsistency with the formal documents since she did so for and on behalf of Parasol. Nor do I think that the email helps on the question whether she has a direct contract with RSA. They were not even a party to it.
36. Ms Ling also relies upon certain direct communications between the claimant and RSA, but they are not necessarily inconsistent with her services being provided via Parasol. It may simply be convenient for communications to be made in that direct way.
37. However, as Ms Ling correctly points out, the employment judge did not approach the issue by concluding that no contract should be implied even taking her evidence at its highest, and we do not know the full extent of that evidence, because the employment judge did not make any findings about it. In any event, it is not the role of this court to take over the function of assessing evidence from the employment tribunal.
38. It follows that in my opinion Bean J was right to uphold the claimant's appeal against the employment judge's decision, although I would not altogether share his reasons for so doing.
39. I should add that I see nothing in the complaint by Ms Ling that the complainant was not able to adduce all the evidence she wanted before the employment tribunal. I sympathise with litigants in person who face difficulties preparing their case and may not be clear what evidence is potentially material and what is not. But in this case Dr Evans was asked if she wanted to give evidence and she took that opportunity. She also confirmed that the bundle contained all the documents on which she wanted to rely. Any failure to adduce all the evidence she wanted could not be laid at the door of the employment judge and raises no error of law. Employment judges will quite properly seek within bounds to help litigants in person, as this judge did. But it was not for the judge to step into the arena and take her part in the course of the hearing: see the observations of Rimer LJ in Muschett v HM Prison Service [2010] IRLR 451 paras 31-32.
40. However, for the reason I have given, I would dismiss this appeal.

Lord Justice Etherton:

41. I have read both judgments in draft, and agree with them.

Lord Justice Lloyd:

42. Elias LJ has set out the history of this litigation and the basic facts giving rise to the dispute. I have been troubled by the issue on this appeal, and will set out some of the factors which cause me concern. However, like him, I have come to the conclusion that the appeal should be dismissed. I reach that conclusion with some reluctance because I suspect that, when Dr Evans' evidence is considered in full, it may well turn out that there is no basis for her claim to have been in a relationship with RSA such that section 230 applied as between her and RSA. I fear that it may well turn out that the shortcut adopted by the employment judge at the PHR will prove to have reached the right destination, but by the wrong route, causing the parties unnecessary time and expense.
43. The appeal bundle included contracts between Parasol and RSA and between RSA and Pharmanet, but it did not include the contract between Dr Evans and Parasol, though this had been before the Employment Tribunal. We were supplied with a copy of it after the hearing. As one would expect, it is consistent with the quadripartite relationship which Mr Duggan argued was the correct and only possible analysis: Parasol employs Dr Evans, and assigns her to carry out Services for End Users, either directly or via a Client, namely an employment business or other business with which Parasol enters into a contract. In terms of that contract RSA was the Client and Pharmanet the End-User. Dr Evans was entitled to be paid at either the national minimum wage or the particular rate agreed for the particular assignment, in respect of all hours worked. Termination of a particular assignment was not termination of the contract with Parasol. Dr Evans had to give whatever period of notice was agreed for the assignment if she wished to terminate the assignment. Parasol was to give her at least a week's notice, where possible, where an assignment was to be terminated. There were separate provisions for termination of the contract between herself and Parasol.
44. The appeal bundle included a contract between Parasol and RSA which appears to be on a standard form provided by RSA, dated 18 October 2007 and signed on behalf of Parasol (by Dr Evans) on 21 October 2007. This provides for the agreement to start on 1 November 2007. It appears from other documents that Dr Evans was undertaking an assignment with Johnson & Johnson in October 2007, which was due to come to an end on 9 November, and that it was she who found the new assignment with Pharmanet, via RSA. She informed Parasol of this by an email dated 17 October, giving details of both Pharmanet and RSA. Parasol acknowledged this and asked for RSA's contract to be issued to them for confirmation. This was done, and on 24 October Parasol confirmed the contract to Dr Evans and asked her to approve and accept it. In fact she did not, because the start date had been revised to 12 November. Later she confirmed the revised details, and it was in response to this that Parasol sent her the email dated 8 November 2007 which Elias LJ has mentioned at paragraph [14] above. This email was not in relevantly different terms (apart from the start date) from another, earlier in the process, dated 25 October 2007. That appears to have been part of the normal process by which a contract between Parasol and its Client (here, an employment agency) was set up in terms approved by the person who was to carry out the particular task. In terms of the contract between Parasol and RSA, it was reflected in a provision in the schedule which stated: "Notice period One month by either party". That means that one month's notice had to be given either by Parasol or by RSA, the two parties to the contract.
45. It is therefore difficult to see how these emails can provide support for the proposition that there was a direct contractual relationship of any kind between Dr Evans and RSA. As Rimer LJ said when granting permission to appeal, the email "is arguably a complete red herring". I cannot agree with Bean J's statement, at his paragraph 6, that the email states "that the assignment between Dr Evans and Parasol, which all parties before the Employment Judge had agreed was a contract of employment, was terminable only by one month's notice". The assignment was not a contract of employment; it was arranged with RSA (and through them Pharmanet) in pursuance of Dr Evans' contract with Parasol. Termination of the assignment did not terminate the contract between Dr Evans and Parasol. Likewise I am not at all sure that the email carries the weight that Bean J attributed to it at his paragraph 21. What it shows is that one month's notice had to be given either by RSA (to Parasol) or to RSA (by Parasol).
46. Nothing turns for present purposes on the contract between RSA and Pharmanet. It is as one would expect, and consistent with the other documents.
47. I see a great deal of force in Mr Duggan's submission on behalf of RSA to the effect that the legal position as between the various parties is entirely consistent with, and properly explained by, the contractual documents, and that it is not legitimate, and certainly not necessary, to imply a contract between Dr Evans and RSA. The test of necessity in this context is that enunciated by Bingham LJ in The Aramis [1989] 1 Lloyd's Rep 213 at 224:

"… necessary … in order to give business reality to a transaction and to create enforceable obligations between parties who are dealing with one another in circumstances in which one would expect that business reality and those enforceable obligations to exist."

See James v London Borough of Greenwich [2008] EWCA Civ 35, Mummery LJ at paragraph 23.

48. Ms Ling's contention is that Dr Evans stood in relation to RSA in the position of a worker to an employer, as defined by section 230(3) and (4), set out by Elias LJ at paragraph [6] above. The contract on which she would rely must presumably have been implied, rather than express. For her to come within the statutory definition, there would have to have been a contract by which Dr Evans "undertakes to do or to perform personally any work or services for another party to the contract". No other party besides RSA was identified. However, one thing seems to be reasonably plain, namely that RSA's role was as an intermediary, for whom Dr Evans was not undertaking any work or services at all. Her work was to be for Pharmanet. To that submission on the part of Mr Duggan, Ms Ling responds, relying on James v London Borough of Greenwich, that the statutory phrase is capable of covering work done for an agency, in the sense of being provided by the agency to its own client. If an agency undertakes to get work done for a client, the person by whom that work is done might be said to be doing it for the client, but might also be said to be doing it for the agency, enabling the agency to fulfil its obligation to its client. I should also record that Ms Ling also submitted that RSA's reliance on this point under section 230(3)(b) had not been raised before the Employment Tribunal or the Employment Appeal Tribunal, and was therefore new on this appeal, not having been addressed by the judges below.
49. As Elias LJ has identified, the difficulty in this case arises from the way in which the Employment Judge dealt with it, albeit, I am sure, with the best of intentions. A preliminary point having been identified by RSA in its ET3, and one which (not least for reasons to which I have referred) seems to have a good deal of weight, the PHR was treated as a striking out application, but one on which, somewhat unusually, oral evidence was heard from Dr Evans, without it having been foreshadowed by a witness statement. That was not necessarily impermissible, but as a striking out application it should have been dealt with on the basis of taking Dr Evans' case at its highest. For that purpose, findings should have been made as to the effect of her evidence. It may be that, if the Employment Judge had proceeded in that way, he could have reached an unappealable conclusion that, at its best and highest, her evidence could not meet the test of necessity to which I have referred, and could not make good an argument on her part that the real agreement was between her and RSA, or that at least there was an agreement between them which fell within the scope of section 230. Moreover, he did not refer to section 230 or to the test of necessity.
50. For those reasons, though with a good deal of doubt as to the eventual outcome, I agree that the appeal should be dismissed. I express the hope that, now that Dr Evans has the benefit of legal representation, it may be possible to resolve the outstanding issues without having to go through further contested proceedings at the level of the Employment Tribunal.