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Cite as: [1992] UKEAT 626_91_1310

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BAILII case number: [1992] UKEAT 626_91_1310

Appeal No. EAT/626/91

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 13 October 1992

Before

SIR DAVID CROOM-JOHNSON DSC VRD PC

MS B DEAN

BURGESS HILL ANGLING CENTRE APPELLANTS

P BARNETT RESPONDENT

Transcript of Proceedings

JUDGMENT

Revised

APPEARANCES

For the Appellants MRS V M COOPER

(CO-OWNER)

Burgess Hill Angling Centre

143 Church Road

Burgess Hill

Sussex RH15 9AA

For the Respondent MR W N STONE

(REPRESENTATIVE)

Brighton Rights Advice Centre

102A North Road

Brighton BN1 1YE

SIR DAVID CROOM-JOHNSON: This is an appeal by Burgess Hill Angling Centre, which we will conveniently call Burgess, against a decision of the Industrial Tribunal of the 29 August 1991, held at Brighton. Burgess were the respondents to the application by a Mr Barnett that he had been unfairly dismissed - an application which he made in April 1991.

The facts of the case are peculiar. Mr Barnett had worked for a man called Parish who ran an angling centre since 1982 until October 1989. We use the word "worked" in the neutral sense because the issue which became before the Tribunal on the 29 August 1991, was the decision on a preliminary point and the preliminary point comprised simply this- was Mr Barnett an employee of the Angling Centre when it was owned by Mr Parish up to October 1989? Secondly, was he an employee of the Angling Centre when the Angling Centre was bought by Burgess in October 1989?

The alleged contract of employment founding the claim for wrongful dismissal came to an end on 21 January 1991. If Mr Barnett's position was that of an employee under a contract of employment which began in October 1989, by the time his relationship with Burgess came to an end he had not been so employed for two years and therefore there would be no jurisdiction to award him any compensation for unfair dismissal. On the other hand Mr Barnett put forward that he had also been employed by Mr Parish up to October 1989 and that therefore he had two years continuity of employment entitling him to claim compensation for unfair dismissal.

Right at the beginning in his application to the Industrial Tribunal, in his complaints, Mr Barnett said this among other things:

".... Mr Cooper [who was the owner of Burgess Hill] had taken over the business from my previous employer[Mr Parish] about a year ago and maintained the same contract that I had had with the previous employer.

There was no written contract. The arrangement was that I tendered a weekly invoice for "services rendered" and received weekly payment for the same amount each week and that income tax and N.I.C. would be dealt with by myself. I have regularly submitted audited accountants to theInland Revenue for the purpose.

It will be contended by the respondent that I was self-employed, but I dispute this because the reality of the relationship was that of an employee. A preliminary hearing on jurisdiction may be necessary."

The answer put in by Burgess, to this application contained four matters of defence:

1.The complainant was not an employee but an independant contractor.

2.Further and alternatively if the defendant was an employee he was not dismissed.

3.Further or alternatively the complainant was not employed immediately before the transfer of the undertaking from Mr Parish the previous owner of the Burgess Hill Angling Centre, to the respondents. As a consequence, his employment commenced on the 18th October 1989 and he does not have two years qualifying service to bring a claim and

4.Further or alternatively if the complainant was engaged immediately before, it was as an independent contractor with Mr Parish, thus if the complainant was an employee of the respondents then that employment commenced at the earliest on the 18th October 1989 and he does not have the 2 years qualifying service."

When the case came on, at the initiative of the Tribunal it seems, the Tribunal decided to decide a preliminary point as to whether the "independent contractor" point was a good one or not. They came to the conclusion that Mr Barnett was an employee as defined in Section 153 (1) of the Employment Protection (Consolidation) Act 1978. Secondly, the applicant when his contract of employment was terminated had more than two years continuous employment and therefore had a right not to be unfairly dismissed.

The proceedings at the hearing of the preliminary point, because that is what it turned into, were somewhat unusual. Mr Barnett, himself, called Mr Parish the former owner of the Angling Centre and Mr Parish's evidence given on behalf of the applicant was that Mr Barnett was not an employee but was an independent contractor. He also producted in the course of his evidence, or at some stage, a number of monthly invoices which Mr Barnett had supplied to him showing what his monthly earnings had been as an independent contractor rendering services to the undertaking. These were part of the documentation put before the Tribunal.

Strangely enough, Mr Barnet himself described his employment as a self-employment and agreed that he was clearly informed in October 1989, after the expiry of a two weeks notice from Mr Parish, that he would have to negotiate with the incoming proprietor, Mr Cooper of Burgess, for his continued work at the shop. He said, however, that the invoices which had been supplied by him on an apparently monthly basis by Mr Parish were a sham, that he was paid a regular weekly sum and his evidence was that those invoices are prepared only at the end of each financial year and he was assured by Mr Parish that the total sum for the twelve monthly invoices each year equalled the amount which he had been paid weekly as wages. His oral evidence to the Tribunal was that he was paid a sum which has not been clearly identified but has been suggested as being £140 per week and that, in other words, the twelve monthly invoices were nothing to do with the money actually received by him.

Strangely to say, nothing was done, so we are informed, in order to compare the totals of the twelve monthly invoices with what would have amounted to 52 x £140 per week, in order to see whether they tallied or whether they were wholly bogus and whether the profit and loss account of Mr Barnett, which was also before the Tribunal and represented his returns to the Inspector of Taxes, was a true one or a wholly false one. Be that as it may, the documentation apparently was all in favour of Mr Parish's account rather than Mr Barnett's account of what the relationship between them had been. Nevertheless, Mr Barnett said that it was a sham.

After the invoices had been produced at the hearing and Mr Parish had given his evidence, which he seems to have given first, we are informed by Mrs Cooper that Mr Parish left the Industrial Tribunal and accordingly he went off to carry on with whatever his employment was at the time.

As a result of that evidence the Tribunal found in para 12:

"....that the applicant [Mr Barnet] was certainly paid a regular weekly wage from October 1989 after the business had been purchased by Mr Cooper. We accept that he may have been paid a variable sum in the early days of his working for Mr Parish but by 1987 Mr Parish had employed a manager and was only working at the shop himself on Saturdays and we find that the applicant was certainly paid a regular weekly sum and there was no question of the monthly invoices for a variable amount being other that an accounting smoke-screen.

13 The Tribunal is unanimous in its decision that the applicant was not an independent contractor and was working under a contract of employment. We further find that the applicant was certainly working under a contract of employment when the business was owned by Mr Parish from not later than early 1987 and he therefore had the necessary minimum of 2 years' continuous employment when his employment was terminated and there is jurisdiction therefore to hear his application of unfair dismissal."

No decision was made in the course of the hearing of the preliminary point on the other two matters of defence which were pleaded in the answer of Burgess, namely, that Mr Barnett had not been dismissed. And no decision was made on the question which was also pleaded that the Transfer of Undertakings Regulations did not apply in the circumstances because in view of the notice of dismissal which Mr Parish had given to Mr Barnett there was a gap. We say no more about that because so far as gaps are concerned whatever gap there was, if it was a relevant gap seems to have been not as much as seven days.

Mrs Cooper has acted in this appeal on behalf of Burgess, which is an application to admit further evidence. Further evidence was sent to Mr and Mrs Cooper by Mr Parish in a letter dated 22 December 1991, that is to say, some months after the hearing of the preliminary point. What Mr Parish says is:

"Dear Mr & Mrs Cooper

Since the Industrial Tribunal hearing on the 29th August 1991. I have found Mr.P.Barnetts last invoices which he issued to me for supplying his subcontract services up to the 13th October 1989. I have enclosed photocopies of these for your records.

..................... He fully understood that the last day that he would be required to supply his contract services was on the 13th October 1989. He also fully understood that as his agreement with me would be finished on that date, then he would have to renegotiate his services with yourselves, the new owners. To confirm this you will notice that Mr Barnetts October invoice shows that only 2 weeks have been charged.

Mr Barnett also had some book depts [debts] which I cleared and signed off before his last day."

It appears, therefore, that the invoices were documents supplied by Mr Barnett to Mr Parish. We have seen photocopies of the invoices supplied by Mr Barnett for June, July, August, September and October 1989. They say "for Services Rendered" with a figure which varies from month to month finishing up with £305 for services rendered for two weeks in October 1989. Those, of course, were not before the Industrial Tribunal and would have been relevant to seeing whether the amounts which were being demanded by Mr Barnett in the invoices fitted in with his evidence of the receipt of £140 per week spread over a twelve month period. A calculation would have been necessary to see to what extent they matched.

This application for the admission of further evidence requires first of all, that Burgess should have a reasonable explanation as to why they were not produced at the hearing. The answer is that they did not know about them, in fact, it was Mr Barnett who called Mr Parish as a witness at the hearing and caused him to produce his invoices. That test of the admissibility of further evidence is satisfied.

Secondly, the invoices must be credible. That depends, of course, on whether the oral evidence of Mr Parish, the witness for Mr Barnett, or Mr Barnett's own evidence is acceptable but we find no difficulty in saying that prima facie these further invoices are credible. Thirdly, it is necessary that if this evidence is admitted it would, or might have, a decisive effect upon the hearing. That requires for a comparison to be made between Mr Parish's evidence and Mr Barnett's evidence and in particular between Mr Barnett's evidence and the invoices themselves viewed as a continuous series of documents produced by him.

Mr Stone, who has appeared for Mr Barnett, has said that he does not object to the admissibility of the invoices and accordingly we rule that they should be admitted to the hearing. The effect of that is, of course, that it unravels to some extent the finding of the Industrial Tribunal that all the invoices were a sham and that the preliminary point decided in favour of Mr Barnett cannot stand. Their finding that the applicant, Mr Barnett, was an employee definitely had to take account of all the invoices and such documentation as was provided for the Tribunal when it heard the preliminary point.

In addition to that and the letter of the 22 December, Mr Parish sent three pages of documents which represented a kind of running account which he had with Mr Barnett in respect of money which Mr Barnett owed Mr Parish for matters which Mr Parish had obtained for Mr Barnett. These matters were clearly referable, or could be clearly referable, to whether or no Mr Barnett was an independent contractor.

Mr Stone takes the point that although these are new documents and credible documents that they have no relevance to the issue of whether or not Mr Barnett was an independent contractor. What they do indicate, at a reading, is that when Mr Barnett and Mr Parish parted company in October 1989, there was a settling up of debts between the two of them and these are the documents which deal with that. It seems to us that they are relevant to the issue of whether or no the relationship was one of master and servant or one of independent contractor. At any rate, it cannot be said that they are irrelevant and accordingly we rule that those documents also should be admitted.

We have already said that there was no finding at the hearing of the preliminary point in relation to the applicability of the Transfer of Undertaking Regulations and that is so. Mrs Cooper asks for further documents to be admitted which she says goes to that issue but it looks, or is not clear at all events, that during the hearing of the preliminary point that that matter was the subject of express decision. So far as Mr Barnett is concerned there is no decision on it at all although there is a passing reference to its applicability to two other people who worked for Mr Parish at the time of the transfer of the undertaking. Accordingly, we say nothing about those documents: they may or may not be used in further proceedings according to the ruling of the Tribunal which hears this application for unfair dismissal. We leave that where it is.

It is noteworthy that the decision on the preliminary point is not simply that the court had jurisdiction but there was a ruling that the applicant had a right not to be unfairly dismissed as though it were concluding the whole issue. We have come to the conclusion that in the circumstances and particularly in view of the fresh evidence which we have admitted and is not objected to by Mr Stone, that that appeal should be allowed and should be remitted not for any rehearing of a preliminary point, or anything like it, but it ought to be remitted for a full hearing of the full matter comprising all the points which are taken in both the application for compensation for unfair dismissal and in the respondents' answer.

The only question is- where should it go? This has caused us some earnest consideration but we have come to the conclusion that the appeal should be allowed; that the decision should be set aside and the matter should be remitted to a different Industrial Tribunal for a full hearing.

A d d e n d u m

We add a note to our judgment on the question of illegality. It was not raised at the appeal, but is a point which the new Industrial Tribunal which hears the case will be obliged to investigate. Mr Barnett's application to the Industrial Tribunal appears to suggest that he pretended to be an independent contractor in order to perpetrate a fraud on the Inland Revenue. If that should turn out to be the case, then Mr Barnett's claim is based on an illegal course of behaviour which debars him from claiming any compensation. The Court or Tribunal is under an obligation to take note of illegality of its own motion: it does not have to be raised by the other side (Burgess Hill).