United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	THE APPELLANT IN PERSON
For the Respondents	MISS S LITCHFIELD (of Counsel) The Solicitor's Office Department of Trade & Industry Room 206 10-18 Victoria Street London SW1H 0NH


 


JUDGE PETER CLARK: In this case the issue before the London (South) Industrial Tribunal sitting on 18th November 1996 was whether the appellant, Mr Beckett was an employee of Carver & Beckett Ltd when that company ceased trading in April 1996 and went into liquidation. Such a determination was a necessary prerequisite to the Industrial Tribunal entertaining his complaint of entitlement to a redundancy payment and arrears of holiday pay.

Before the Industrial Tribunal neither side appeared or was represented. Accordingly the tribunal had to do its best on the written representations and pleadings submitted by the parties. The effective respondent to the complaint was the Secretary of State for Trade & Industry, responsible for administering the fund out of which payment of such claims is made where the employer is insolvent.

The definition of employee is now to found in s.230 of the Employment Rights Act 1996 which provides so far as is material:

"(1) In this Act "employee" means an individual who has entered into or works (or, where the employment has ceased, worked under) a contract of employment.

(2) In this Act "contract of employment" means a contract of service or apprenticeship, whether expressed or implied, and (if it is express) whether oral or in writing).

(5) In this Act "employment"-

(a) in relation to an employee, means (except for the purposes of section 171) employment under a contract of employment, and

(b) in relation to a worker, means employment under his contract;

and "employed" shall be construed accordingly."

The Industrial Tribunal decision

The tribunal expressed itself concisely in its extended reasons dated 3rd December 1996. Having indicated that it had taken into account the written representations and pleadings on both sides it continued:

"2. We considered the principles in the authorities referred to in the written representations from the Secretary of State. We came to the conclusion that on the particular facts before us, that the Applicant was a 50% shareholder and a director, he produced no written contract of employment or section 318 Companies Act memo, worked long hours, did not take all his holidays entitlements: he put money into and/or guaranteed the Bank in respect of loans to the company. The Applicant in his claim to the Secretary of State states his job was to "control" the company.

3. On the facts before us, we are not persuaded by the Applicant's case that whilst he was a Director of the company, the Applicant was "an employee" within the meaning of section 230 Employment Rights Act 1996. He is not therefore entitled to a redundancy payment."

The Appeal

At a preliminary hearing held on 3rd December 1996 this tribunal allowed the appellant leave to amend his Notice of Appeal in the terms of a draft prepared by Counsel then representing him under the ELAAS pro bono scheme. That being an ex parte hearing we did not then receive submission on behalf of the respondent.

At the full appeal hearing today Mr Beckett effectively repeats the grounds set out in the amended Notice of Appeal together with a further point to which we shall return. We have also heard oral argument on behalf of the Secretary of State from Miss Litchfield and considered her detailed skeleton argument. It is convenient to deal with the grounds of appeal seriatim.

(1) The tribunal gave no or no adequate reasons for its conclusion that it was not persuaded that the appellant was an employee.

It is for the applicant to show that he is an employee so as to give the Industrial Tribunal jurisdiction to entertain his complaint. It is in this context, we think, that the tribunal used the expression "we are not persuaded".

Industrial Tribunals reasons should, as Bingham LJ point out in Meek v City of Birmingham District Council [1987] IRLR 250, 251 (para 8), contain an outline of the story giving rise to the complaint, a summary of the tribunals basic conclusions based on these factual findings. The parties are entitled to know why they have won or lost.

Although pithy, we are satisfied that this tribunal's reasons sufficiently identify the factors which led the tribunal to their conclusion that the appellant was not an employee. They implicitly took into account factors which pointed the other way and which were highlighted in the Secretary of State's written representations to the tribunal. We therefore reject this ground of appeal.

(2) The decision was perverse in that:

(a) the liquidator of the company did not dispute the appellant's claim. We accept Miss Litchfield's submission that the attitude taken by the liquidator, who would not in any event be liable on the claim, is of no significance in the tribunal deliberations.

(b) the tribunal made a material finding contrary to the evidence that the appellant produced no written contract of employment. In this connection the appellant relies on a letter dated 27th January 1990 from Mr Carver, then a director of Carver & Bowers Limited, the predecessor of Carver & Beckett Ltd, when he commenced working for that company. It was before the Industrial Tribunal and reads as follows:

"Dear Mr Beckett

RE: CONTRACT OF EMPLOYMENT

We wish to confirm your contract of employment as an employee of the above company following the last 4 weeks trial period. Your annual salary will be £15,000.00 per annum with 21 days holiday entitlement. The hours of work will continue as at present be 7.30am until 5.00pm."

In our judgment that is a letter, at most, amounting to an employer's statement of some of the appellant's terms and conditions of employment. It is not strictly a written contract of employment which would require signature by both parties to the contract.

However, even if it can be construed as evidence of a contract of employment entered into in or about January 1990, the tribunal was entitled to consider what happened subsequently. We think they did so by reference to the appellant's status as a director of the company referred to in paragraph 3 of their reasons.

In the appellant's written representations to the tribunal he set out the history of his shareholding in the company. In late 1990 he acquired 10% of the shares; 12 months later he acquired a further 10%, and in 1995 he increased his shareholding to 50% when Mr Bowers left. We note that the name of the company was changed; Mr Beckett's name replacing that of Mr Bowers, following the latter's departure, in the name of the company.

In these circumstances it was open to the tribunal to conclude that as a director with a 50% shareholding, the appellant was effectively able to block his own dismissal, see Buchan v Secretary of State for Employment [1997] IRLR 80, a factor which the Employment Appeal Tribunal held in that case contraindicated employee status.

(c) The tribunal made no express reference to undisputed factors which pointed to the appellant being an employee. In particular:

(i) he had been paid by regular monthly instalments of a fixed salary as an employee;

(ii) he had been taxed as an employee;

(iii) he had not been paid director's fees or dividends;

(iv) he had been obliged to attend for work everyday;

(v) he had been entitled to 21 days holiday pay per annum;

(vi) he had been entitled to six month's full pay and three month's half pay in the event of sickness.

In their reasons the tribunal make it clear that they have taken into account the written representations made on both sides. Against these factors pointing to employment, Miss Litchfield relies upon the findings set out in paragraph 2 of the reasons which point in the opposite direction. Ultimately it was for the tribunal to weigh the factors in both directions and to reach a conclusion carrying out the balancing exercise. That is what they did.

(3) Control

It is contended that in his written representations the appellant made it clear that he was subject to the control of the board of directors. However, we think that it was open to the tribunal to find that far from being subject to control by the company, the appellant controlled the way in which the company was run. We refer to the appellant's application to the Secretary of State relied upon by the tribunal in paragraph 2 of their reasons. The material questions and answers are as follows:

"19. [Q] What were your functions, duties and responsibilities as a director?

[A] To obtain a work load and control a company turning over £1.2 million.

20. [Q] What duties did you carry out in a normal working week?

[A] Control labour, materials and plant.

22 [Q] Where you subject to control or guidance?

[A] NO."

Again the absence of control over the appellant is a material factor in reaching the conclusion that he is not an employee. Ready Mixed Concrete (South East) Ltd v Minister of Pensions & National Insurance [1968] 2QB 497.

That disposes of the amended grounds of appeal. However, Mr Beckett raises a further point, identified in his original ground of appeal. It is simply this. His fellow director Mr Carver brought a similar claim following liquidation of the company. That claim was also resisted by the Secretary of State. The matter came before a different Industrial Tribunal which found that Mr Carver was an employee and his claim succeeded. Eight days later Mr Beckett lost his claim in similar circumstances. How can that be right, he asks rhetorically.

The short answer, submits Miss Litchfield is that the question of employee/self-employed status is essentially one of fact for the Industrial Tribunal. This appeal tribunal may only interfere where perversity or a misdirection in law is made out. See O'Kelly v Trust House Forte PLC [1988] IRLR 369. Absent such error of law the Industrial Tribunal decision must stand.

In Gilham v Kent County Council (No.2) [1985] ICR 233, it was submitted on the part of the appellant employer, that different results in other Industrial Tribunal cases on similar facts raising similar issues pointed to a misdirection by the tribunal whose decision was under appeal. That submission was rejected by the Court of Appeal. Griffiths LJ put the matter this way at page 240C-F:

"Mr Harvey [Counsel for the employer] therefore submits that those decisions are a powerful indication that this tribunal must have misdirected itself in law in order to arrive at an opposite conclusion. This court must not allow itself to be seduced by this beguiling argument. Parliament has determined that there shall be no appeal from an industrial tribunal on a question of fact. No doubt one of the parties is often very fed up when an industrial tribunal has found the facts against him, but that is just too bad; there is nothing he can do about it; he has had its hearing and that is an end of the matter. This was policy decision taken by Parliament, presumably because it is obvious that the country's legal resources would not run to providing for the vast number of appeals that would result from allowing an appeal on fact.

Now whether or not an employer has behaved reasonably in dismissing an employee is a question of fact, and it is a question upon which different people, looking at the same set of circumstances, may reasonably come to different conclusions. It is therefore endemic in a system where there is appeal on fact that from time to time different industrial tribunals will give different answers to broadly similar situations, and neither decision can be challenged. It is therefore important that this court should resist the temptation to seek to overturn a factual decision with which it may not agree by searching for some shadowy point of law on which to hang its hat for the purpose of bringing uniformity to the differing decisions. If we were to take this course, it would have the very undesirable effect of encouraging innumerable appeals which raised no point of law, but depended upon comparative findings of fact."

We respectfully adopt that approach, as we are bound to do, and we think that it disposes of Mr Beckett's submission.

However, we think that the answer to such an apparent inconsistency may lie in part of the administrative arrangements for listing cases within the same region. If two similar cases are to be heard, it would be desirable for them to be heard together before the same Industrial tribunal, thus reducing the risk of inconsistent findings in similar cases.

For these reasons we have reached the conclusion that there are no grounds in law for interfering with this Industrial Tribunal decision and the appeal must be dismissed.