United Kingdom Employment Appeal Tribunal

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Cite as: [1993] UKEAT 653_92_1405

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BAILII case number: [1993] UKEAT 653_92_1405

Appeal No. EAT/653/92

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 14 May 1993

Judgment delivered 17 March 1994

Before

HIS HONOUR JUDGE N HAGUE QC

MS S CORBY

MR A D SCOTT

MRS J BRAND APPELLANT

PAPER CHAIN (EAST ANGLIA) LTD RESPONDENTS

Transcript of Proceedings

JUDGMENT

Revised

APPEARANCES

For the Appellant MR D MATOVU

(OF COUNSEL)

Messrs Leathes Prior

Solicitors

74 The Close

Norwich

Norfolk NR1 4DR

For the Respondents MR J CAVANAGH

(OF COUNSEL)

Messrs Eversheds Daynes

Hill & Perks

Solicitors

Holland Court

The Close

Norwich NR1 4DX

JUDGE HAGUE QC: This is an appeal by Mrs J Brand from the decision of an Industrial Tribunal sitting at Bury St Edmunds entered on the register on 29 July 1992. The Tribunal held, as a preliminary point, that Mrs Brand was engaged by the Respondents under a contract for services, as opposed to a contract of employment, and that therefore they had no jurisdiction to entertain Mrs Brand's complaint of unfair dismissal, because her employment was not under a contract of service within section 153(1) of the Employment Protection (Consolidation) Act 1978.

The relevant facts, as found by the Tribunal and as appearing from the documents, can be summarised as follows. Prior to August 1989, Mrs Brand had been employed as a sales assistant at a newsagent's shop at Shenfield, Essex first by a company called TC Newsagents Ltd and then by the Respondents who took over the business of that company. After negotiations, that employment was terminated when Mrs Brand entered into a contract with the Respondents dated 7 August 1989 for the management of the shop. That contract was later replaced by another contract dated 11 September 1991, which contained no material differences. The latter contract was terminated by the Respondents by a letter dated 31 October 1991, giving one month's notice of termination as required by the contract.

The effect of the contract and of the way in which it had been operated was lucidly summarised by the Tribunal in paragraphs 3.6 to 3.13 of their decision. Mr Matovu, Counsel for Mrs Brand, did not challenge the findings in those paragraphs (except in one respect, which we mention below) and we cannot do better than repeat them:

"3.6 We have listened carefully to the argument on both sides and the evidence which has been advanced, and we have also read the contract in some detail. The conclusion we have reached is that, under the terms of the contract, and as it was applied, the respondent owned the premises and stock of the shop where the applicant worked. The respondent dictated the layout of the shop and provided staff with uniforms and training. The applicant had very limited choice of taking part in various commercial promotions and had to accept instruction as to the display of stock, even down to which items would appear and where on the counter. Any stock which the applicant ordered had to be ordered from nominated suppliers. The applicant had to conform with minimum, but not maximum, opening hours and had to follow the respondent's accounting procedures. The applicant was answerable to the area manager for the conduct of her obligations under the contract, and it was incumbent upon her and such other members of the staff as she nominated to go to various promotions and sales drives organised by the respondent for its contract managers.

3.7 The obligation of the applicant can be summed up in the words of the contract:

"To operate and manage the company's business of a newsagents tobacconists and confectioners shop premises at 88 Hutton Road, Shenfield... Full licence and liberty to enter upon and use the said premises and the company stock in trade, fixtures and fittings, and other property relating to the business."

and

"to provide in relation to the business a full newsagency service including maintenance of home delivery and early opening as required."

3.8 The applicant's obligations under the contract included the fulfilment of the various matters we have mentioned, together with the provision of adequate staffing. In this connection, the contract says:

"The contractor shall be solely responsible for the provision and employment of all such assistants and other persons as may be reasonably necessary for the purpose of carrying on the business efficiently and in accordance with normal trade practice."

3.9 The applicant was the employer of all staff she engaged under that provision and, in the contract, was under an obligation to pay all statutory dues and to comply with the provisions of the Employment Protection (Consolidation) Act 1978 in relation to her employees. In particular the contract provides:

"On the termination of this agreement the contractor will vacate the premises with his family and employees and hereby indemnifies the company against any costs, claims or demands from or in respect of any of his employees."

3.10 It is right to say that the respondent retained the obligation and right to engage and dismiss newspaper boys and girls, and the remaining staff would have to be to the satisfaction of the respondent.

3.11 The contract itself provided for remuneration to the applicant, calculated by reference to a percentage of gross sales. There was a retention provision to cover the eventuality of stock loss, and that retention was to be accounted for to the applicant periodically.

3.12 The ultimate sanction on the respondent's part was that the contract was determinable on one month's written notice, whereupon the applicant would have to vacate the premises, dismiss her staff and submit her management of the business to audit and stock control.

3.13 The applicant, on advice from the respondent and her own accountant, was independently registered for the purposes of Value Added Tax as a supplier of services, namely management services to the respondent in relation to the shop premises and business. The applicant was not entitled to any payment for goodwill or to the goodwill of the business, but there was provision in the contract restraining her business activities for a period of one year as a newsagent within

three miles of the Shenfield shop, and as a tobacconist, confectioner or stationer within two miles."

Mr Matovu said that the Tribunal were in error in saying (in para 3.6) that Mrs Brand "had to conform with minimum, but not maximum, opening hours". He drew attention to clause 5(g) of the contract which provides: "The Company reserves the right to stipulate the opening and closing times of the business from time to time". Mr Matovu suggested that as a result of this clause, the Tribunal were not entitled to make that finding and had therefore misdirected themselves in law. We cannot agree. What the Tribunal did was to make findings as to the way in which the contract had been operated, and we see nothing inconsistent with the contract in their finding that there were no maximum opening hours. It is no doubt correct that the Respondents could have imposed maximum opening hours in the event (which for obvious reasons we consider improbable) that they would wish to do so, but they did not.

The Tribunal in their decision referred to the relevant law applicable, and in particular set out the well-known dicta of Cooke J in Market Investigations Ltd v Minister of Social Security [1969] 2QB 173 at pp 184-5, which were specifically approved by the Privy Council in Lee Ting Sang v Ching Chi-Keung [1990] ICR 409 at p.412. Mr Matovu rightly accepted that the Tribunal properly sought to apply to the facts the test formulated by Cooke J by asking themselves whether the services which Mrs Brand had to perform under the contract were "as a person in business on her own account". The Tribunal also correctly cautioned themselves against a check-list approach with pluses and minuses, and held that it was their duty to look at the matter in the round.

The Tribunal drew attention to the facts that, apart from the news boys and girls, Mrs Brand employed her own staff, she had the opportunity to enhance her earnings and, apart from the minimum hours requirement, there was no restriction on the hours she could open, and said (at paragraph 10 of their decision):

"In all these senses her business acumen and drive had a real effect on her income under the percentage turnover terms. This is quite different from the arrangement which would apply for instance to a manager even if his earnings were to a significant extent dependent upon turnover."

Mr Matovu submitted that, although the Tribunal had not misdirected themselves, on the facts found by them they had come to a decision which was erroneous in law. He said that those facts pointed to the unavoidable conclusion that Mr Brand had a contract of service, and that the conclusion of the Tribunal to the contrary was perverse.

In support of his argument, Mr Matovu referred to and placed considerable reliance on the decision of the Privy Council in Narich Pty Ltd v Commissioner of Pay-Roll Tax [1984] ICR 286. The Appellants in that case ("Narich") were the Australian franchisees of Weight Watchers Inc, an American corporation, with (it claimed) a unique method of helping people lose weight and maintain the weight loss. Narich operated through lecturers, nearly all women, who had to comply strictly with the detailed Weight Watchers handbook. Each lecturer was paid a fee per lecture, out of which she had to pay assistants (known as "recorders and weighers", selected and trained by her) and the lecture hall rental. Despite an express term in the lecturer's contract that she was an independent contractor, the Privy Council upheld Woodward J's decision that the contract was in reality a contract of employment. It is, we think, clear that the basis of their decision was the complete control exercised by Narich over the way in which the lecturer operated. The importance of this factor was stressed by Lord Brandon of Oakbrook (who delivered the judgment) at p.291C:

"...while all relevant terms of the contract must be regarded, the most important, and in most cases the decisive, criterion for determining the relationship between the parties is the extent to which the person, whose status as employee or independent contractor is in issue, is under the direction and control of the other party to the contract with regard to the manner in which he does his work under it."

The Privy Council examined the lecturer's contract and the Weight Watchers' handbook in some detail, and concluded at p.297C:

"The plain situation in law is that a lecturer is tied hand and foot by the contract with regard to the manner in which she performs her work under it. In these circumstances it is not possible to hold that she is, in relation to Narich, an independent contractor. On the contrary, the only possible conclusion is that she is an employee."

Mr Matovu submitted that it was not possible to distinguish the present case from the Narich case. He said that the degree of control exercised by the Respondents over Mrs Brand exceeded, or at least equalled, that exercised by Narich. He referred in particular to the facts that the Respondents were able to dictate the layout of the shop and the display of stock, that any stock had to be purchased from nominated suppliers, and that the Respondents trained the staff and provided them with uniforms. Mr Matovu said that although Mrs Brand employed the staff (as did the lecturer in the Narich case), there was in reality nothing left for her to decide in the operation of the shop. He said that, as in the Narich case, there was in law only one proper conclusion ie that Mrs Brand was an employee. He argued that the case was not a borderline one, in which an Industrial Tribunal could reasonably come to one conclusion or the other, but that the only possible conclusion was that Mrs Brand had a contract of service.

We are unable to accept Mr Matovu's argument as to the decisive nature of the Narich case. That argument in our view overlooks the considerable differences in the position and obligations of the lecturer in the Narich case on the one hand and those of Mrs Brand on the other. In paragraph 12 of their decision the Industrial Tribunal said this:

"In all the circumstances, and looking at the matter in the round, the economic reality of the situation was that the arrangement between the respondent and the applicant was nowhere near being a mere accounting arrangement such as in Narich Pty Ltd... The control exercised by the respondent was necessary to protect the respondent's proprietary interest in the business and stock, and its trade image, but the independence afforded to the applicant [Mrs Brand] in the discharge of her duties was sufficient to provide her with a real incentive and a real possibility, in response to that incentive, of increasing her earnings in line with her own management expertise and activities."

In our judgment that was a conclusion reasonably open to the Industrial Tribunal on the facts, and was not a perverse decision incompatible with the Narich case, which is distinguishable.

The grounds on which this Appeal Tribunal can interfere a decision of an Industrial Tribunal on the question whether an applicant was employed under a contract of employment are clearly established by the decision of the Court of Appeal in O'Kelly v Trusthouse Forte PLC [1983] ICR 728. In that case, this Appeal Tribunal had held that an appellate Court could reach its own view as to whether, on the findings of fact made by the lower Court, there was a contract of employment, (see at p.761G), but that was held to be erroneous. Fox L.J. after reviewing the authorities, said at page 760A:

"The result, in my view, is that the appeal tribunal was not entitled to interfere with the decision of the industrial tribunal unless that tribunal misdirected itself in law or its decision was one which no tribunal, properly instructed, could have reached on the facts."

Sir John Donaldson M.R. said at page 762C:

"The test to be applied in identifying whether a contract is one of employment or for services is a pure question of law and so is its application to the facts. But it is for the tribunal of fact not only to find those facts but to assess them qualitatively and within limits, which are indefinable in the abstract, those findings and that assessment will dictate the correct legal answer. In the familiar phrase "it is all a question of fact and degree."

It is only if the weight given to a particular factor shows a self-misdirection in law that an appellate court with a limited jurisdiction can interfere...

In the instant appeal the industrial tribunal directed itself to

"consider all aspects of the relationship, no single factor being in itself decisive and each of which may vary in weight and direction, and having given such balance to the factors as seems appropriate, to determine whether the person was carrying on business on his own account."

This is wholly correct as a matter of law and it is not for this court or for the appeal tribunal to re-weigh the facts."

In the present case, the Tribunal likewise correctly directed themselves as to the law, and in our judgment Mr Matovu's argument was really an invitation to this Appeal Tribunal to re-assess and re-weigh the facts. That we cannot do. Whether or not we ourselves, or another Industrial Tribunal, would have come to the same conclusion on the same or similar facts is beside the point.

Mr Matovu also drew our attention to clause 10 of the contract, which provides for the Respondents to insure against any damage, loss or injury to any person in consequence of Mrs Brand's performance of the contract, and to clause 12 which prohibited Mrs Brand from assigning or sub-contracting. In our judgment, both these factors are neutral, and in any event, although they are not expressly referred to in the Tribunal's Reasons, we cannot think they were overlooked.

Finally, Mr Matovu addressed to us an argument, not raised before the Tribunal, that the facts established a "global" or "umbrella" contract of employment between Mrs Brand and the Respondents (of the kind illustrated by Nethermere (St Neots) Ltd v Gardiner [1984] ICR 612 CA) to be inferred from their conduct from the time that the Respondents acquired the shop. We doubt if this point can properly be raised before this Appeal Tribunal: see Kumchyk v Derby City Council [1978] ICR 1116 and Hellyer Bros Ltd v McLeod [1987] ICR 517 at pp 561G et seq. But in any event, particularly as the relationship between Mrs Brand and the Respondents was throughout governed by the written contracts to which we have referred, in our judgment there is clearly no basis for inferring any such global or umbrella contract.

For these reasons, we dismiss this appeal.