England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
THE ADMINISTRATIVE COURT

		Royal Courts of Justice Strand London WC2
		2 October 2003

1. THE DEPUTY JUDGE: This is an appeal by Bobcat Plant Hire Limited ("the appellant") from a decision of the Employment Tribunal given at Bristol on 3 March 2003, dismissing Bobcat's appeal from an assessment notice issued by the defendant Board determining that the company, Bobcat, was liable to an industrial training levy. The legislative scheme is as follows. Under the Industrial Training Act 1982, section 11, the Secretary of State may promote a statutory instrument giving effect to proposals to raise a levy on certain specified industries for the purposes of industrial training.
2. Under section 12 of that statute, a company that considers it is not liable to the levy, or not liable to the amount of the levy assessed, may appeal under section 12(5) to a Tribunal where their task is to satisfy the Tribunal that it ought not to have been assessed to the levy, or ought to have been assessed in a smaller amount. If the company satisfies the Tribunal, they can rescind or reduce the amount of the levy. I pause to note that it is, therefore, plain that the burden of proof in an appeal falls upon the appellant to satisfy the Tribunal by evidence that it is not liable to the levy or to the amount of the levy assessed. It is common ground that, in determining any such appeal, the Tribunal can receive evidence, whether it was before the board or not, and may make such findings of fact as they think fit upon the totality of the evidence -- it is a full appeal.
3. From decisions of the Employment Tribunal, section 11 of the Tribunal and Inquiries Act 1992, gives an appeal to an aggrieved party. Section 11(1) provides:

"If any party to proceedings before any tribunal specified . . . [including employment tribunals] is dissatisfied in point of law with a decision of the tribunal, he may . . . appeal to the High Court."

4. The appellant's company, Bobcat, were aggrieved with the decision of the Tribunal. They exercised that right of appeal. It is that appeal that falls for determination today. It is plain however, both from section 11 that gives the right of appeal to this court on a point of law, and from section 12 of the earlier statute that I have just recited, that questions of fact are to be determined by the Tribunal and are to be determined on the evidence supplied by the parties, but particularly the appellant who sustains the burden of proof. This court only has jurisdiction to examine questions of law arising from determinations made by the Tribunal based on evidence before it.
5. In the skeleton argument that the appellant placed before this court there were attachments which included, new averrals of fact, statements from employees and other marketing material from the website that were not before the Tribunal. I explained to Mr Morris, who was given leave to appear on behalf of the company as a representative to argue the appeal, that the court could not receive such material as that would make this court something which it is not -- a fresh de novo determination body reviewing what are undoubtedly contested questions of fact that need careful, factual appraisal. In the circumstances, that ruling substantially affected the scope of the submissions of law that he was able to make. But the legal background to those submissions can be identified.
6. Bobcat (the company) claims that it is in the business, principally, of selling construction equipment to people who want to use it -- presumably in the construction industry. Its name, however, indicates that it is also engaged in the business of hire of such equipment, and to some extent, it is engaged, I think it is common ground, in the business of repair and maintenance of equipment. The Industrial Training Act is given effect to by two relevant Orders for the purpose of this appeal. The first is the Order that defines whether a person is within the jurisdiction of a levy Board, in this case, the Construction Board. The appropriate Order is the Industrial Training (Construction Board) Order 1964 (Amendment) Order 1992, S.I 1992 No. 3048.
7. The first Schedule to that order has effect for defining what are the activities of the construction industry which would bring a particular commercial enterprise within the scope of the Construction Board. It is relevant to refer to two paragraphs of that first schedule. Paragraph 1(f), read as a whole, says:

"Subject to the provisions of this Schedule, the activities of the construction industry are the following activities insofar as they are carried out in Great Britain . . .

(f) the installation, testing, inspection, maintenance or repair of contractors' plant, or the letting out on hire of such plant or of scaffolding.

(h) any activities (other than those above-mentioned) being --

(i) related activities incidental or ancillary to principal activities of the construction industry."

8. Paragraph 3 of that Schedule gives a definition of terms and amongst the terms defined are "contractors' plant", which means:

"Machinery, plant or equipment of a kind used or intended for use in operations on the site of any building work or civil engineering work, but does not include lorries, ready-mixed concrete vehicles or other mechanically propelled vehicles mainly used for the carriage of goods on roads."

9. Then there is under "related activities", sub-paragraph (b):

"Buying, selling, letting out on hire, testing, advertising, packing distribution, transport or other similar operations."

10. It is the case for the respondent Board that the company (Bobcat) was a company engaged in those operations. The second statutory instrument is the Industrial Training Levy (Construction Board) Order 2002 S.I 2002 No. 303.
11. Paragraph 2(e) of that Order gives a definition of "the construction industry", and the material passage from a lengthy sub-paragraph says:

" . . . any one or more of the activities which, subject to the provisions of paragraph 2 of the Schedule to the industrial training order, are specified in paragraph 1 of that Schedule as the activities of the construction industry . . . "

Paragraph 3 of the order provides:

"For the purposes of this Order 'construction establishment' means an establishment engaged wholly or mainly in the construction industry during the necessary period."

12. Putting all those matters together, the dispute between the parties in its simplest terms is that Bobcat says it is not mainly engaged in the construction industry as defined because its activities include, and Bobcat would allege mainly are, the selling of construction equipment -- mechanical diggers and variations of that sort -- rather than the hire of them or the repair of them. The dispute arose as a result of a visit first to the premises of the company by those employed by the Board to see whether Bobcat were indeed within the ambit of the Levy Order, both by reason of activity and by reason of the size of the wage bill -- there being an exemption for small employers. It is common ground that one takes the total wage bill of the employers in order to determine whether the company is exempt on the grounds of the size of the wage bill, and this company would not be exempt if one took its total wage bill into account.
13. Nevertheless, Bobcat initially supplied figures to the Board's representatives indicating that its wage bill was £56,912 for repair and hire. Subsequently, it was discovered that there was a further figure of £19,342 that was held to be directly referable to sales. On those figures, two conclusions were drawn by the Board. One, Bobcat was within the scope of the Levy Order by reason of size of wage bill. Two, its activities were mainly other than sales, and, therefore, was within scope for the levy. Accordingly, a levy in the comparatively trivial sum of £381 was imposed on Bobcat.
14. They sought, by representations, to dissuade the Board from imposing that levy. The material letter that was provided to the Board is one from their accountants, GW Jones & Co, dated 15 May 2002. They returned the client company's levy return duly completed for 2002. They make the point in their letter that:

"Although the company name appears to indicate the main activity is that of 'plant hire', it is in fact that of 'plant sales'. We are currently auditing the company accounts for the year ended 31 December 2001, and 'plant hire' only accounts for 14.5 per cent of the company's annual turnover. Therefore both our client and ourselves are of the opinion that any levy payable based on payroll costs during 2001/2002, should be apportioned accordingly, namely annual levy of £X (based on payroll costs of £115,620) x 14.5 per cent [ie they should only pay a levy on 14.5 per cent of the total payroll costs]."

15. That approach to the question of whether the company is mainly engaged in the construction industry can be called "the turnover approach". I should stress that that itself does not entirely determine the question since one would need to see precisely what are the activities in the turnover to which the claim not to be engaged in construction activities relates. But nevertheless, it is an approach based upon the accountant's assessment of turnover.
16. The Board's response to that letter was to indicate that they did not apply the turnover approach to determinations of whether a company was mainly engaged in the relevant industry for the purpose of the levy when they applied what may be called "the activities approach". The particular test that they suggested should be used was to count how many employees were working in construction as opposed to non-construction activities as defined, or indeed, what proportion of time of those employees was engaged in such activities.
17. In my judgment, the Board were right to adopt the activities approach to the question of apportionment and assessment of companies that did a variety of operations, some within and some without the scope of the Board. Mr Morris, appearing for the company, was not minded to dispute that conclusion, but in my judgment, it is clear that that is the approach indicated by the subordinate legislation that this court is primarily required to interpret. I have already read the relevant passages of the two Orders. Both refer to the activities of the construction industry as the basis for bringing the company within the scope. In the course of argument, My Jaffey referred me to an old authority of a then Industrial Tribunal, the case of H Churchill & Sons Limited v Engineering Industry Training Board -- the decision of the Industrial Tribunal given on 3 March 1967, reported in 2 ITR 314, where that Tribunal concluded that it was the activity or the employee's time that was the test of whether a company was within scope, rather than the turnover. In that case the activity approach favoured the company rather than the Board, and I understand that the Board had applied that approach ever since. It has never been challenged and there is no other authority that the researches of counsel, to whom I am grateful, have been able to bring to this court's attention.
18. Once one applies the activities approach one then sees what happened in this case. The correspondence continuing between the Board and the company following the accountant's letter and the Board explaining its activities approach to assessment, on the 2 September the Board invited the company to provide specific information that would be relevant to a reassessment of liability applying the activities approach. It asked the questions:

"How many employees do you employee in the following activities: sales, installation, testing, inspection, maintenance and repair of plant, and hire of plant?"

And:

"If multi-skilled, what percentage of your employees' time is taken up with the following activities . . ."

It then repeated those three categories. Unfortunately, the company did not reply to that letter and proceeded with its appeal without providing any further evidence or material as to what its activities were and what precisely its work force was engaged in doing during any given week of operations. I understand that the company intended to appear through its managing director in person at the hearing of the Tribunal listed on 3 March 2003. In the event, it did not appear for reasons which were not explained to the Tribunal and were not, indeed, in the primary documents before this court, and I was not minded to probe or receive any further information about that. No application for an adjournment had been made to the Tribunal and no written volume of material was served with the Tribunal by the company in lieu of a personal attendance. That was the case notwithstanding that the Board, who did not themselves attend but relied upon their volume of material indicating what enquiries had been made, had supplied all that material, together with written submissions, on 24 January 2003, some five weeks before the hearing on 3 March 2003. It is extremely unfortunate that, if the company wish to maintain its appeal and wish to get the Tribunal to engage with its submissions of disputed fact, it did not provide the Tribunal with any material from which it could have drawn assistance or could have enabled the Tribunal to have been satisfied that the company had discharged the burden of proof that rests upon them.

19. In those circumstances, for reasons which I have explained, it was not open to this court to receive fresh evidence, and the Tribunal's conclusions on the evidence which they had received, particularly the letter from the accountant and the information from the accountant tending to suggest that the greater part of the wage bill was devoted to employees who were engaged in hire maintenance or repair, the Tribunal were manifestly entitled, indeed they could not have come to any other conclusion but to dismiss the appeal on the basis that the company had not made out its case that it was not within the scope of the Board. These levy Orders are usually annual affairs and so if the company continues to dispute that it is liable to a levy, it will have a further opportunity to properly lay before the appropriate body, the Employment Tribunal, all matters of fact upon which it relies to seek to demonstrate that it is not mainly engaged in the construction industry. Nothing I say hereafter is designed to predetermine any question which might arise between the parties. It is appropriate to note, however, that there was a respondent's notice filed by the Board in this case in which they indicated that, as an alternative argument to the primary argument advanced before the Tribunal on the last occasion, that repairs and maintenance, and that I anticipate in their submission would include spare parts that employees of the company may be engaged in performing, would themselves be construction activities for the purposes of the Scope Order and the Levy Order because maintenance or repair of plant is directly involved in a construction activity in (f), and if sales of diggers and such like equipment to contractors need subsequent repair or maintenance then that activity would appear to be directly construction activity within the meaning of 1(f).
20. Further, there was a subordinate argument that sales themselves might be included, or are included, in construction activities by reason of paragraph 3 of the 1992 Order that I have read at the outset of this judgment, together with paragraph (H)(i) of that same Order dealing with related activities. It was appropriate to probe those submissions in the respondent's notice to see precisely what was being contended. As far as this court is concerned, it was common ground, I think, that primary sales of construction equipment did not fall within the activities of the construction industry, and as presently advised, that would appear to me to be right because sales would not be ancillary to hiring or repair -- that is to say, sales of the original whole piece of equipment. Different questions might arise where the sale was of spare parts and where the activity was the maintenance and repair of equipment sold to contractors. It is not necessary for the purpose of this judgment to resolve that issue. If there is to be any further debate between the parties on these matters that is undoubtedly a matter upon which the company would need to give very careful attention, having regard to the submissions that they have heard today, the terms of the order, and any evidence which they are likely to be able to produce in any fresh hearing if they wish to pursue it.
21. I say no more about it than to indicate that that would be the question which would need to be determined upon proper evidence, proper findings of fact and possibly quite detailed exploration of those issues. None of that is before this court for reasons I have now explained, and in the event, the only result must be that this appeal is dismissed because there is no issue of law that arose from the Tribunal's findings of fact where the burden of proof lay upon the company to satisfy the Tribunal that they were not within scope, and they singularly failed to do anything that would enable the Tribunal to be so satisfied. I therefore dismiss this appeal.
22. MR JAFFEY: My Lord, I have an application for the Board's costs of the appeal. Perhaps, unlike the Secretary of State earlier this morning, my client took the view that it was right they should be represented in the High Court in this matter. Does your Lordship have a copy of the statement of costs?
23. THE DEPUTY JUDGE: Yes, I have, and I agree that it was right that you be represented and I was grateful for the assistance that the Board has provided. The only question that I raise is the question of proportionality of the costs, given the sum total in dispute, and to whether, indeed, even the costs spent upon the respondent's notice raising issues which I did not have to determine, although I have mentioned them in the overall context of the dispute, was appropriate and necessary given that you had a simple answer to this appeal which, of course, was determinative of it. I am not minded, therefore, to award the totality of the costs claimed unless you have any submissions on that.
24. MR JAFFEY: My Lord, I do not think I do. The only point I would make about proportionality is that this is the first case in which the High Court has been called upon to consider what your Lordship has called the activity versus turnover point. So I do repeat my submission that it was right there was representation at this hearing.
25. THE DEPUTY JUDGE: I am grateful. Mr Morris, do you have anything to say about the costs order? It is normal course before these courts that a party that does not succeed bears the costs of the party that does succeed.
26. CLAIMANT: I am aware of that, my Lord.
27. THE DEPUTY JUDGE: Do you have anything to say? I am not minded to make the full award, but a significant part of the cost that you have served upon you. I think the company has had the costs served upon them, have they not?
28. CLAIMANT: Yes, we have.
29. THE DEPUTY JUDGE: I propose to make an award of costs on a summary assessment in the sum of £4,500.
30. MR JAFFEY: Yes, my Lord.
31. THE DEPUTY JUDGE: Thank you. Is there anything else?
32. MR JAFFEY: My Lord, I forgot to add in my submissions that I have made enquiries as to whether the training order is VAT registered, and, therefore, the VAT element on this claim should not have been there. If your Lordship has taken that into account I think it is right that your Lordship may wish to make the appropriate deduction for that fact.
33. THE DEPUTY JUDGE: I am grateful. Can you just remind me -- I will rescind what I have just said because I think that is going to affect the approach I was going to take.
34. MR JAFFEY: The VAT element is set out at various places in the statement of costs. The total VAT payment on solicitors' fees is £657.84, and then on counsel's fees of £420.
35. THE DEPUTY JUDGE: So 1,000 of the 7,000 was VAT, essentially. So taking roughly a round figure of 6,000, I think I will revise my award a little further downwards to make it £3,750.
36. MR JAFFEY: Can I just confirm that that is a VAT exclusive figure?
37. THE DEPUTY JUDGE: That is a VAT exclusive figure, yes. Thank you very much.