United Kingdom Employment Appeal Tribunal

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Cite as: [1992] UKEAT 100_92_1512

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BAILII case number: [1992] UKEAT 100_92_1512

Appeal No. EAT/100/92

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 15th December 1992

Before

HIS HONOUR JUDGE J HICKS QC

MR T S BATHO

MR P DAWSON OBE

COOPER MACDONALD LIMITED APPELLANTS

(1) MR D BROWN

(2) MR R AUSTEN RESPONDENTS

Transcript of Proceedings

JUDGMENT

PRELIMINARY HEARING

Revised

APPEARANCES

For the Appellants MR J SWIFT

(Of Counsel)

Messrs McKenna & Co

Mitre House

160 Aldersgate Street

London

EC1A 4DD

JUDGE HICKS QC: This is a preliminary hearing on an appeal by the employers, Cooper McDonald Limited against the decision of the Industrial Tribunal on what amounted

to a preliminary issue as to jurisdiction, namely, whether the Applicants, Mr Brown and Mr Austen, had the necessary period of qualifying employment.

The history is that Mr Brown in 1971, and Mr Austen in 1972, became employees of a partnership and also of a service company which had been brought into existence to run those affairs of the partnership which could, conveniently, and no doubt perfectly properly, with an eye to the implications of taxation, be conducted in that way. That continued until 1986 and there is no dispute that the Applicants were the employees of the Company until 1986.

In 1986 they became partners in the partnership and in 1990 the partnership assets were transferred to the Company and the shares in the Company sold to outside purchasers. It was conceded by the employers, before the Industrial Tribunal, that that transaction was a transfer of undertaking for employment protection purposes as regards all the employees of the partnership. The Applicants, being partners, were by then no longer employees of the partnership, but if during the period 1986 to 1990 they were employees of the Company the transaction in 1990 was not an interruption of that employment. The issue, and the only issue before the Industrial Tribunal, was therefore whether they continued to be employees of the Company during the period of their partnership from 1986 to 1990, and in paragraph 4 of its Reasons the Industrial Tribunal sets out at some length its grounds for finding that they were. Their relevant finding of facts begins about 10 lines down:

"We accept that if that had been the only employment of the applicants i.e. they had been only partners of the partnership after 1986 that would be the position. However, in this case the applicants had for some considerable time been employed by Epmark Ltd [that was the name by which the respondent Company then went] and when they became partners they continued to be employed by Epmark Ltd as directors and surveyors. They received a salary and many other benefits from the company, they were paid on the PAYE basis and the records show that a large proportion of the remuneration that they received in 1990 was salary from Epmark Ltd i.e. they had 2 sources of income the drawings from the partnership and the salary as directors and surveyors. We do not accept the submission that the only duties of the directors related to the partnership as most of the employees were of Epmark Ltd and there must have been many matters concerning the welfare of the employees and the day to day running of the business to which the directors had to put their mind. The respondents have submitted that the emphasis was on the partnership and pointing out that the minutes of the partnership meetings, which were apparently held on many occasions at the same time as the board of directors, showed that mostly the partnership was the uppermost in their mind. We find however, that the applicants were at all times employed by the service company"

The Appellants would have to show that the Tribunal erred in law and Mr Swift's first submission is that as a matter of law, it is impossible for the Applicants to have been both partners and employees, and he points to the fact that the partnership deed provided by Clause 14(1):

"That except for reasonable holidays each of the partners shall, unless the partners shall otherwise unanimously agree, devote the whole of his time and attention faithfully to the business of the partnership."

He says that does not leave room for time to be employed on the duties of the Company, and he also points out, although conceding that it was never entered into, that there was a draft service contract with the Company, prepared at the time of the Applicants' becoming partners, which also provided that:

"During the continuance of his employment the Employee [that is to say Mr Brown or Mr Austen as the case may be] shall devote substantially the whole of his time and attention during business hours to the proper performance of his duties hereunder."

He says, as a matter of law, that produced a situation where they could not be both partners and employees, and the right and only possible conclusion was that they were partners.

In our view that is not an objection to the decision of the Tribunal which it is possible to sustain or even seriously to argue. It is plain from the terms of the partnership agreement that the partners could unanimously agree to release each other from the obligation in clause 14(1). Even if it had not said so, they plainly could have done, and it flies in the face of reality not to recognise that these persons were both the partners of the partnership and directors of the Company and could, by their collective decision, decide how they should spend their time and how they should apportion their remuneration. So there was no reason why the Tribunal should not reach the conclusion, not only that in fact, as they found, a substantial proportion of the remuneration came from the Company and a substantial part of the Applicants' time was devoted to earning that remuneration by the duties that they performed, but also that in consequence they were employed by the Company during the relevant period, and in reaching that conclusion they were in no way reaching a conclusion which was not open in law, either generally or on the terms of the documents.

Another ground which, on the face of it, might have featured was that in the Notice of Appeal the Appellants allege:

"The Industrial Tribunal erred in concluding that the Respondent owed duties to the Company under the contract of employment and that that contract normally involved the Respondent's employment for at least 16 hours per week."

The Industrial Tribunal in fact reached, on the face of it, no such conclusion. The real nature of this complaint seems to be that they did not pay attention at all explicitly in their Reasons to the requirements of paragraphs 4 and 6 of Schedule 13 to the Employment Protection (Consolidation) Act 1978 which provides, in brief, by paragraph 4 that a week during which the employee is not normally involved for sixteen hours or more is not to count in continuous employment. Then there is a modification of that by paragraph 6 which, I think Mr Swift concedes, would have applied here by which the requirement would be only 8 hours. It is perfectly true that the Tribunal give no express attention to those requirements. It seems from Mr Swift's account, when we asked him about this that the Tribunal was not asked as a separate issue to make a finding in that respect and Mr Swift, so far as this line of argument is concerned, said:

"I do not say that the Industrial Tribunal ought to have spelt out a finding as to the number of hours by reference to paragraph 4 or paragraph 6 of the 13th Schedule."

It seems to us that in those circumstances that ground of appeal also falls away.

Although Mr Swift also referred us to certain other documents in the bundle I do not think there is any need to go through them in detail because our conclusion is really the very simple and straightforward one that the issue before the Tribunal as to whether during 1986 to 1990 the Applicants were employed by the Company, for the purposes of the Employment Protection (Consolidation) Act 1978, was one in which they had regard to the right principles, they had evidence before them upon which they were entitled to reach the findings of fact which they did, and on those findings of fact they were fully entitled to reach the conclusion which they reached on the issue of continuous employment.

We therefore see no ground of law upon which the decision of the Industrial Tribunal could be attacked. We see no justification therefore for prolonging this appeal to a full hearing and we dismiss it.