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United Kingdom Employment Appeal Tribunal
You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Grimwood v Secretary Of State For Employment [1996] UKEAT 375_95_1202 (12 February 1996)
URL: http://www.bailii.org/uk/cases/UKEAT/1996/375_95_1202.html
Cite as: [1996] UKEAT 375_95_1202
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At the Tribunal
THE HONOURABLE MR JUSTICE MUMMERY (P)
MR J R CROSBY
MR D A C LAMBERT
JUDGMENT
PRELIMINARY HEARING
Revised
APPEARANCES
MR JUSTICE MUMMERY (PRESIDENT): This is the Preliminary hearing of an appeal by Mr N M Grimwood. His appeal is against the decision of the Industrial Tribunal held at Reading on 13 January 1995. The Tribunal heard a claim by Mr Grimwood against the Secretary of State for Employment, the Respondent. He sought a redundancy payment, holiday pay and pay in lieu of notice, following the insolvency of a company Milano Cars Ltd of which he had been a Director. The Secretary of State accepted that the company was insolvent, but did not accept that Mr Grimwood was an employee of the company as defined by Section 153(1) of the Employment Protection (Consolidation) Act 1978.
The Tribunal notified the parties of the extended reasons for their decision on 1 March 1995. The reasons explain why the Tribunal reached the decision that Mr Grimwood was not an employee, and was therefore not entitled to the payments which he claimed from the Secretary of State. Mr Grimwood appealed against that. He served his Notice of Appeal on 10 April. He took various points of law against the decision of the Tribunal. He said he was an employee of Milano Cars; that further evidence was available which contradicted the evidence on which the Tribunal relied for their decision, and that there was a judicial precedent which he intended to cite to this Tribunal, not available at the time of the hearing by the Industrial Tribunal.
The case was listed as a Preliminary hearing because it was not obvious from any of the points in Mr Grimwood's Notice of Appeal that he had a point of law. Appeals to this Tribunal can only be on points of law. If there is no arguable point of law, there is no jurisdiction to entertain an appeal and no point in having a full hearing. The position today is that Mr Grimwood has not attended and he is not represented. He has, however, sent to the Tribunal in the last few days a letter from the United Arab Emirates (he is now working in Dubai). He says this:
"I have only just received the papers by redirected mail from the U.K. I have been living in Dubai since December 8 1995, and have relied upon redirection to receive all mail. Hence the last minute reply to your correspondence.
However, it is still my intention to pursue my appeal on the basis that was originally submitted in the appeal application dated April 7 1995. Namely that I disagree that I was not an employee of Milano Cars Ltd under section 153 of Employment Protection Consolidation Act 1978."...
He helpfully highlights the points in his appeal. In order to see whether those points reveal an arguable point of law in the decision, it is necessary to consider the decision, the facts found and the reasoning that led the Tribunal to the conclusion that Mr Grimwood was not an employee.
The facts found by the Tribunal, after hearing evidence from Mr Grimwood, were these: he had no written contract of employment; he was registered as a Director of the company at the Companies Registry, but there was no note or memorandum of his appointment to comply with the Companies Act 1985; since about 1990 Mr Grimwood, his wife and his father had been trading in an unincorporated partnership called Marlow Alfa Romeo Centre; in April 1993 that was incorporated into a limited company Milano Cars Ltd. That traded until 23 December 1993. The shareholding in the company is significant. 60% of the shares were held by Mr Grimwood, 30% by his father and 5% each by his wife and his mother. The Tribunal identified the capital introduced into the company. The initial introduction was of partnership capital of £3,571. Mr Grimwood, his wife and father, then each contributed a further sum of approximately £1,500. The company traded on a bank overdraft or business development loan, secured by a debenture over the company's assets. No personal guarantees were given. There was no charge on private homes to secure the overdraft. Mr Grimwood was to be paid a salary of £23,700 per annum by monthly instalments, subject to PAYE and National Insurance Contributions. The salary was decided on by the Directors on the basis of cash-flow projections. Mr Grimwood, who qualified as a commercial airline pilot, devoted his full time to the business as Managing Director. The business of the company was buying and selling second-hand cars, including repairs and accessories. Most of his duties were with the running of the car sales and general administration. Mr Grimwood's father was involved in the business part-time. Mrs Grimwood was involved in the administration of the company and worked 20 or 30 hours a week. Mr Grimwood's mother did not take any active part in the business, apart from attending Board meetings. All the major business decisions affecting the business were taken by the Directors meeting as a Board, but the day-to-day running of the business was in the hands of Mr Grimwood. They pointed out that, while he was employed as an airline pilot, Mr Grimwood still spent about 40 to 60 hours a week working for Milano Cars.
When the company ceased to trade in December 1993, a liquidator was appointed. Mr Grimwood and his wife completed and lodged insolvency forms with the liquidator. The initial view of the Redundancy Payments Service was that both claims were valid and arrangements were made for payments to Mr & Mrs Grimwood. Sums were forwarded amounting to £1,970.82 for Mr Grimwood and £1,180 for Mrs Grimwood. They were sent to the liquidator for onward transmission. Payment was made to Mrs Grimwood, but in June 1994 the liquidator advised the Redundancy Payments Service that he doubted whether Mr Grimwood was an employee, and queried whether the payment should properly be made to him. The decision was reviewed and Mr Grimwood was notified on 8 July 1994 that the Secretary of State was no longer prepared to make a payment to him. In those circumstances Mr Grimwood began proceedings in the Industrial Tribunal claiming payment.
On those findings of fact the Tribunal considered the relevant statutory provisions in the 1978 Act. They set out in their decision Section 81(1), Section 106(1) and Section 122(1). They referred correctly to the definitions of "contracts of employment"; "employees", "employers" and "employment" contained in Section 153(1). They correctly identified the issue: whether what Mr Grimwood was doing constituted employment for the purposes of the 1978 Act. They cited four relevant decisions. The Tribunal correctly pointed out that a person may at one and the same time be a Director of a company, holding office under the Companies Act, and also an employee. Whether or not he is an employee in a particular case must depend on the facts. He could be regarded as an employee for some purposes, such as tax and National Insurance, but not an employee for other purposes, such as employment protection. The Tribunal correctly stated that every individual situation depends on an analysis of all the various factors.
For the remainder of their decision the Tribunal considered in detail the relevant factors. They took into account the unusual feature of this case that the Redundancy Payments Service initially took the view favourable to Mr Grimwood that he was an employee. They had gone as far as authorising payment, but later rescinded that decision in view of what the liquidator represented to them. The Tribunal indicated those factors which point to the conclusion that he was an employee. He devoted his whole time to the business, except that part spent in temporary employment as an airline pilot. He was paid a salary. His salary was subject to PAYE and National Insurance. He was entitled to a fixed holiday entitlement. He was entitled to sick pay. The Tribunal then correctly pointed to other factors tending to the opposite conclusion. The most important of those was that Mr Grimwood owned the majority of the shares in the company, and was therefore in a position to out-vote his fellow shareholders and directors. None of them would be able to subject him to disciplinary proceedings. None of them would be able to dismiss him from the company. Unless he took the decision to dismiss himself, he was not dismissable, because he had 60% of the shares. In those circumstances we are of the view that the Tribunal came to the correct conclusion in saying that Mr Grimwood was, in reality, a self-employed person running his own business with members of his family. The fact that he was running his own business is reinforced by the point the Tribunal correctly highlighted; that, as he controlled the company, he could decided everything affecting his conditions of work - how long he worked, how much he was paid, what holidays he should have, and so on. The normal feature of employment is that the employee is controlled by the employer, not that the employee is in control of the employer.
In our view, this decision is legally correct. There are no grounds for arguing that there is an error of law in it. Mr Grimwood set out in his letter to us a number of points which he would wish to argue if he were here. He said that he did not have written contract of employment. You could be an employee under an oral agreement. That is so. He pointed out correctly a contract can be made orally or in writing. He was an employee for the purposes of tax and was accepted as such by the Inland Revenue. The Redundancy Payments Service had been persuaded to change their own decision in his favour by what was said by the liquidator. He said that they had initially recognised his status as an employee. That was a point in his favour. It was his understanding of Company Law that an individual, acting as a Director, could not by definition be self-employed. He asked us to take that fact into account in making a decision.
We have noted those points. We are grateful to him for the submissions. We accept his apologies for not being here today. We can well understand that he is not in a position to afford legal representation. The position, however, is that none of these points made by Mr Grimwood address the critical factor in this case; that is, he owned the majority of the shares and was able to control the company which he said employed him. In our view, the Tribunal were correct on that basis to conclude that he was not an employee. For those reasons this appeal is not arguable. It will be dismissed.