United Kingdom Employment Appeal Tribunal

BAILII case number: [1994] UKEAT 767_93_2504

Appeal No. EAT/767/93

I N T E R N A L

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 25th April 1994

Before

HIS HONOUR JUDGE J PEPPITT QC

MR P DAWSON OBE

MR K M HACK JP

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MR & MRS PRATT-JOHNSON          APPELLANTS

1) INTEGRATED MACHINE TOOLS LTD

2) SECRETARY OF STATE FOR EMPLOYMENT          RESPONDENTS

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Transcript of Proceedings

JUDGMENT

Revised


 


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APPEARANCES

For the Appellants MR NEVILLE DIGBY

(Of Counsel)

Messrs Taylors

Solicitors

1a South Street

Caversham

Reading

Berks

RG4 8HY

For the 1st Respondents NO APPEARANCE BY

OR ON BEHALF OF 1st           RESPONDENT

For the 2nd Respondents MS ALISON FOSTER

(Of Counsel)

Treasury Solicitor

Queen Anne's Chambers

28 Broadway

London

SW1H 9JS


 


JUDGE J PEPPITT QC: This is an appeal from a decision of the London (North) Industrial Tribunal made on the 4th May 1993. The Tribunal held unanimously that the Appellants were not entitled to redundancy payments nor to payments under Section 22 of the Employment Protection (Consolidation) Act 1978. To qualify for either it was necessary for the Appellants to establish that they were employees of the Company for whom they worked, Integrated Machine Tools Ltd. Employee is defined in Section 153(1) of the 1978 Act as:

"employee means an individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment;"

The Tribunal held that the Appellants were not so employed. The Appellants now submit before us that this finding by the Tribunal was perverse.

It is trite law that whether or not an individual is an employee, employed under contract of service, is a question of fact for the Tribunal. It is a question of fact to be decided upon an examination of all the indicia of the relationship between the person working and the person for whom he worked, some of which might point in different directions. The function of the Tribunal is to arrive at a conclusion based upon a balancing of those indicia.

The Appellants, Mr and Mrs Pratt-Johnson were Directors of Integrated Machine Tools Limited the only other Director being a Mr Ainger. They effectively controlled the Company by dint of their shareholding.

The Company was set up at the suggestion of a Mr Nishio. He was the Chairman of a Japanese tool-maker Company, Wasino, and the scheme was that Integrated Machine Tools Limited would distribute Wasino products in the United Kingdom. The terms permitted by the Japanese Company were strict; no other products but Wasino products were to be distributed save for certain items which the Japanese principal was prepared to see marketed because they did not compete in any way with its products. In return for those strict terms Integrated Machine Tools Limited received very favourable credit facilities.

It is totally apparent from the evidence contained in the Chairman's notes and from the decision of the Tribunal itself that both Mr and Mrs Pratt-Johnson worked extremely hard for the Company, and invested in it, blood, sweat and tears. For a time Integrated Machine Tools Limited prospered, no doubt as a result of that hard work. But then Mr Nishio died. The trading relationship between Wasino and the Company collapsed, and the Company, Integrated Tools Limited, went into liquidation. Hence these applications.

It was against this background that the Tribunal considered the position of Mr and Mrs Pratt-Johnson. They considered the three authorities most relevant to the question they had to decide. McLean v. The Secretary of State for Employment which is unreported but found at EAT/672/91. Mr J R Wilson v. Trenton Service Station Limited again, unreported EAT/100/87 and Eaton v. 1. Robert Eaton Ltd and 2. The Secretary of State for Employment [1988] IRLR 83. Having, correctly in our judgment, assimilated the ratios of those three cases they considered the various indicia of the Appellants' relationship with the Company. Some of those indicia pointed towards a contract of employment. Some of those factors were recorded at paragraphs 2(f) and 2(g) and 4 of the decision. Other indicia pointed against there having been a contract of employment. Those factors are set out and considered by the Tribunal in paragraph 2(i) and in their conclusion at paragraph 5. The result of the Tribunal's deliberations was a finding that the Appellants were not employed by the Company. In stating its conclusion the Tribunal said:

"The Tribunal in reaching its decision took into account the various factors referred to in the Eaton case. Particularly, it was noted that no statement of the terms and conditions of employment had been issued in accordance with Section 1 of the Act, the salary, if it can be described as such, was agreed by the Applicants after taking advice from accountants as to what the company could stand and also taking into account Mr Ainger's representations although it is to be noticed that Mr Pratt-Johnson's salary was somewhat greater than Mrs Pratt-Johnson's and Mr Ainger's and Mrs Pratt-Johnson's was somewhat more than Mr Ainger's although his salary might increase depending upon the company's performance. However, what appeared most important to the Tribunal was the question of control. It was clear to the Tribunal that Mr and Mrs Pratt-Johnson were, effectively, the company. They were the only shareholders in the company and adopting what was said in the Wilson case, it appeared clear that they were doing their `own thing' with no real control from anybody else and that their company, again to adopt the wording of the Wilson case, was `more like a partnership running under the protection and limitation of a company'."

For us to interfere with that finding we would have to come to the conclusion that it was perverse in the sense that no reasonable tribunal could have reached it. We are very far from coming to any such conclusion. In our judgment there was evidence upon which the Tribunal could have reached the decision which it did, and accordingly, we have no jurisdiction to interfere with it. That is not to say that we have not considered with some care the three submissions which Mr Digby addressed to us. First of all he said that the reality of the situation was that this was not a case of the Appellants' doing their own thing. In fact they were controlled by Wasino and they were doing no more than what Wasino told them to do. If, by that Mr Digby meant that the Company was dependent upon Wasino, we would agree with him. But financial dependence is something very different indeed from control. Many companies are wholly dependent upon others for their continued support. That does not mean that they are controlled by those others. The decisions, by which we mean whether to continue with the agency or to terminate it were, throughout, decisions to be taken by the Appellants. It may well be so that as a term of continuing their agency arrangements Wasino insisted on a high degree of performance from the Company. We know that they insisted upon the Company taking larger premises and holding private exhibitions of their wares but whether that price was too high a price for a continuance of the existing agency relationship was a decision which the Appellants, and only the Appellants, were able to take and in our judgment that degree of dependence in no sense betokens control in the sense that Mr Digby relied on.

Secondly, said Mr Digby, a reading of paragraph 5 indicates that in reaching its conclusion the Tribunal did not apply its mind to the substantial point urged upon it by the Appellants, that is the question of control by Wasino. We do not read paragraph 5 in that sense. The precise relationship between Wasino and the Company, was set out in paragraph 2.a. of the judgment and in arriving at its conclusion in paragraph 5 the Tribunal found, in terms, that in relation to what was described as "most important to the Tribunal" namely, the question of control, the Tribunal found that the Appellants were effectively the Company. They were doing their "own thing" with no real control from anybody else. It seems to us that that can only betoken that the Tribunal was doing, in paragraph 5, precisely what Mr Digby submitted that it had failed to do, that is, consider the question of control and the extent to which that control vested in Wasino.

Finally, Mr Digby referred us to the case of Folami v. Nigerline (UK) Ltd [1977] ICR 277. That was a case where a consideration of the facts pointed to a different conclusion, and in that case this Tribunal held that a proper balancing of the conflicting facts there should have driven the Tribunal to a conclusion that the Director, there concerned, was an employee of the Company. But nothing in that case, in our judgment, invalidates the conclusion which this Tribunal reached and accordingly, with some regret, because it is quite apparent that the Appellants did a great deal of work to make this Company prosper, the appeal must be dismissed.