United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MISS MARY LAZARUS (of Counsel) Messrs Marsh Ferriman & Cheale Solicitors Southfield House 11 Liverpool Gardens Worthing West Sussex BN11 1SD
For the Respondent	MR J BACON (of Counsel) Messrs Manuel Swaden Solicitors 340 West End Lane London NW6 1LN


 


MR JUSTICE KIRKWOOD: Marsh Ferriman & Cheale are a firm of solicitors in practice on the south coast. Ms Cutler was a salaried partner with that firm. In April 1997 the senior partner in the firm and another partner told Ms Cutler that the partners had decided to dissolve the partnership and then to reform it without her. On 20 May 1997, Ms Cutler made complaint to an Industrial Tribunal of wrongful dismissal, unfair dismissal and unlawful deduction of wages. The firm in response said that Ms Cutler was not employed by the firm, she was a self-employed, salaried partner.

On 31 July 1997, at Brighton, an experienced Chairman of Industrial Tribunals heard and decided the preliminary point and decided that Ms Cutler was an employee of the Respondent. The reserved decision was given in extended form on 26 August 1997 and the Respondent firm appealed.

On 1 June 1987 Ms Cutler was employed as a solicitor by the firm of Davies Thomas & Cheale. In 1988 that firm merged with Marsh Ferriman. The new firm was Marsh Ferriman & Cheale. Ms Cutler remained with them.

As from 1 February 1989, Ms Cutler took up position as a salaried partner with the firm. Heads of agreement relating to the partnership of Marsh Ferriman & Cheale had been drawn up in 1988. On 5 June 1989 supplementary heads of agreement were drawn up to accommodate Ms Cutler's appointment as a salaried partner. The supplementary heads of agreement defined Ms Cutler's salary as: "as may be agreed from time to time." By clause 8 they provided that the partnership may be determined with regard to Ms Cutler only, by not less than a quarters notice. That seems to have been a provision that the equity partners could give Ms Cutler notice terminating her position.

In October 1996 Ms Cutler was offered an equity partnership with effect from 1 March 1997. Having taken financial advice she turned it down but said she would like to reconsider it in a year's time. The equity partners seem to have been displeased. On 11 April 1997, Ms Cutler was told of their decision to dissolve and reform the partnership and to leave her out.

The Chairman heard oral evidence from Ms Cutler and from Mr James, one of the partners in the firm. He had before him an Applicant's bundle of documents and a Respondents bundle; those bundles containing some 160 pages in all. The Chairman recorded that there is no authority whether a salaried partner is in business on his own account, or is employed under a contract of employment and said, in the Extended Reasons:

"Cases have been decided in both directions, depending on whether the applicant was assessed as being a person in business on their own account."

We are told that the Chairman was referred to a number of authorities, including a very old decision of an Industrial Tribunal, Burgess v O'Brien [1966] ICR 164, and the well known decision of the Privy Council in Lee v Chung [1990] ICR 409.

The Chairman found and recited the following facts in addition to the bare history to which I have referred.

"Ms Cutler was invited to attend partnership meetings. She did not have a vote on financial matters. Ms Cutler worked at an office adjacent to the building where other partners worked. She did conveyancing, wills, probate and elderly persons affairs. Ms Cutler's secretarial assistants and a receptionist were in the building and she had responsibility for them. Her work was not supervised by the other partners. She shared responsibility for all incoming mail and had authority to write cheques and send out invoices. She had benefits as a partner and an agreement that in the event of her becoming an equity partner she would be deemed to have been in partnership from 1 February 1989. She was taxed and paid National Insurance as a self-employed person: both sums were deducted from her salary by the accountants who also did her tax returns. She was not allowed, in February 1989, to become an equity partner because there was not unanimity about that amongst the equity partners. She was shown the firm's accounts."

The Industrial Tribunal had before it, but did not specifically recite, further facts. That those further facts were not specifically referred to in the Extended Reasons does not by an manner of means indicate that they were overlooked.

Although Ms Cutler had benefits as a partner she did not have all the rights and benefits of equity partners. Ms Cutler had other management financial information in addition to the firm's accounts. She was described in letterheads and on bank guarantees and the like as a partner. She had no financial or financial management control. Ms Cutler did not supply the tools and office equipment of her profession. She was required to be diligent in her attendance to her work and was entitled to six weeks annual leave. Ms Cutler had no share in profits nor responsibility for liabilities of the firm.

We do not intend that list, set out by us, to be exhaustive. In Lee Ting Sang's case, Lord Griffiths said this:

"The question is to answered by applying English Common Law standards to determine whether the workman was working as an employee or as an independent contractor. What then is the standard to apply? This has proved to be a most elusive question and despite a plethora of authorities the courts have not been able to devise a single test that will conclusively point to the distinction in all cases. Their Lordships agree with the Court of Appeal when they said that the matter has never been better put then by Mr Justice Cook in Market Investigations Ltd v Minister of Social Security [1969] 2 QB 173."

and Lord Griffiths then quotes this passage:

"The fundamental test to be applied is this: Is the person who has engaged himself to perform these services performing them as a person in business on his own account? If the answer to that question is yes, then the contract is a contract for services. If the answer is no, then the contract is a contract of service.

No exhaustive list has been compiled and perhaps no exhaustive list can be compiled of the considerations which are relevant in determining that question. Nor can strict rules be laid down as to the relative weight which the various considerations should carry in particular cases. The most that can be said is that control will no doubt always have to be considered, although it can no longer be regarded as the sole determining factor and the factors which may be of importance are such matters as whether the man performing the services provides his own equipment, whether he hires his own helpers, what degree of financial risk he takes, what degree of responsibility between investment and management he has and whether, and how far, he has an opportunity of profiting from sound management in the performance of his task."

Later, (414), Lord Griffiths said, having considered the various factors in the case before Privy Council:

"Taking all the foregoing considerations into account the picture emerges of a skilled artisan earning his living by working for more than one employer as an employee and not as a small businessman venturing into business on his own account as an independent contractor with all its attendant risks. The applicant ran no risk whatever save that of being unable to find employment which is, of course, a risk faced by casual employees who move from one job to another, and such casual employees are specifically covered by the Ordinance."

and missing out the next paragraph Lord Griffiths continues:

"Whether or not a person is employed under a contract of service is often said in the authorities to be a mixed question of act and law. Exceptionally, if the relationship is dependent solely upon the true construction of a written document it is regarded as a question law."

We are aware that in McMeechan v The Employment Secretary [1995] ICR 444, Mummery J, as he then was, dealt with the question of whether it is a matter of fact or a matter of law and, taking a summary from the head note:

"The question whether a worker whose services were supplied by an employment agency by a third party client on a temporary basis had a contract of employment with the employment agency was a question of law to be determined on the true construction of all the terms and conditions of the contract in its factual matrix."

The approach of the Chairman in this case was plainly to look at the various factors in the round in coming to his conclusion. In support of the appeal Counsel Miss Lazarus argues first that the Chairman paid insufficient attention to the reported Industrial Tribunal case of Burgess. In that case, which was to do with redundancy payments, an Industrial Tribunal held that a partner, though a salaried partner, was not an employee. It looked at all the circumstances. It attached weight to what has been called "holding out", the name on the letterhead as a partner, on the certificate of registration as a partner and the like. It also had regard to Mr Burgess's liability as a partner if the firm was sued.

The Industrial Tribunal looked at all the particular and unusual circumstances of that case. The decision is not in any sense an authority for the proposition that "holding out" is in any way determinant of the issue. Miss Lazarus does not say that it is, but she says that the Chairman erred in law in not expressly bringing in the "holding out" point in considering all the factors.

We approach that submission on the basis that the fact that Ms Cutler's name was on letterheads and the like as a partner was a factor in the case and it was a matter entirely for the Chairman to decide what weight, if any, he attached to it. On the "holding out" point, we were referred also to a decision in a restraint of trade case by Mr Justice Scott, as he then was, in Briggs v Oates [1990] ICR 473, and in particular to this passage on 475:

"No doubt it was intended that the defendant would, following his appointment, be held out to the public as a partner. Nonetheless, the terms of the agreement make it clear, in my opinion, that, as between the plaintiff and Mr Rees on the one hand, and the defendant on the other hand, the defendant was not a partner but remained an employee. The agreement gave him no share of the profits and imposed on him no liability for losses. He was to be remunerated by a combination of salary and commission on bills delivered. "

That case merely underlines what I have already said, that the "holding out" point is not in any sense determinant of status in such a case.

The second point taken on this appeal, ostensibly also as a point of law, was that the Chairman erred in not adding into the scales of his expressed considerations the fact that Ms Cutler had access to financial material which only the partners had. In fact, as I have indicated, reference was made, and it was in paragraph 12 of the Extended Reasons, to Ms Cutler having the firm's accounts. Plainly that matter was in his mind.

Miss Lazarus argues that Lee's case makes clear that the Industrial Tribunal should investigate and evaluate all the relevant considerations. In failing to set them all out the Chairman did not make clear that he had carried out the exercise properly, so that his decision is, it is said, bad in law. Miss Lazarus goes further and says that the Chairman did not, indeed, take all those factors on board. She says that because the Chairman did not, in paragraph 6 where the finding is made, expressly weigh the points about "holding out" and access to financial information. Finally, Miss Lazarus challenges the finding of fact that Ms Cutler did not have a vote on financial matters as being perverse.

Dealing with that perversity argument on its own I make clear that we have no hesitation in saying that the Appellant does not begin to make out a perversity argument.

We have given careful consideration to the various points made on this appeal. It is not for us to go into close analysis of the Extended Reasons, either as to their draftsmanship or as to their content. Our task is to look at them as a whole and to see whether it is established that a wrong decision was reached as a result of a wrong direction as to the law.

The Chairman referred to decisions depending on whether the Applicant was assessed as being a person in business on their own account. That is a pithy way of putting the matter. The Chairman then plainly made his own assessment. He is criticised for not setting out all the considerations in the Extended Reasons: It seems to us inconceivable that this experienced Chairman, hearing what was a short point, with a not-excessive amount of material before him, has overlooked any significant point.

Indeed when Chairmen do set out every single consideration that is put before them optimistic Appellants seek to impugn the decision on the basis that a checklist approach has been taken rather than looking at the total picture. It is indeed the Chairman's task to decide what weight he attaches to this factor and what weight he attaches to that. He is by no means obliged to mention everything.

We are quite unpersuaded that the Appellant establishes any grounds on which we could properly interfere with the Chairman's decision in this case.

I wish to stress that this case provides no sort of precedent on the question whether a salaried partner in a firm of solicitors is or is not an employee. Each case turns on its own special facts and circumstances. The Chairman here decided that she was an employee. We do not interfere with that finding and so the appeal is dismissed.

Following our decision in this case, an application is made on behalf of the Respondent for an order to costs.

It is a case that comes to us by way of appeal from an interlocutory decision and does not go through the process of a preliminary hearing. Had it gone to a preliminary hearing it may very well be that the appeal would have been dismissed at that stage without the Respondent to it being put to expense. Had it gone to a preliminary hearing and been allowed to come to a full hearing from there then it would have been necessary for the Appellant to bear in mind, nonetheless, that passing the hurdle of a preliminary hearing is not in any sense a shield against a potential liability for costs if the appeal fails.

The provisions of the Employment Appeal Tribunal rules as to costs are contained in Rules 34:

"Where it appears to the Appeal Tribunal that any proceedings were unnecessary, improper or vexatious or that there has been unreasonable delay or other unreasonable conduct in bringing or conducting the proceedings the Tribunal may order the party at fault to pay any other party the whole or such part as it thinks fit of the costs or expenses incurred by that other party in connection with the proceedings."

This appeal is brought by a firm of solicitors and it is an appeal which, as we have made clear, is essentially an attempt to challenge a finding which is a factual finding on the basis of argument dressed up as a point of law. The principal authority on which the Appellant sought to rely was the case of Burgess, which I described in our judgement as an old case, decided on its own facts, and one on which reflection upon the judgement in Briggs v Oates should have had an impact.

In so far as a point of law was argued, we found it to be a bad point and we are left with the position that the Respondent has succeeded in this appeal which was really a hopeless appeal on behalf of the Appellants. The question is whether a hopeless appeal, an appeal challenging facts though dressed up as a point of law, can properly be described as unnecessary or improper. We have reached the conclusion that either or both of those words apply to this appeal. It should not have been brought. It had no prospect of success and did not raise any properly arguable points of law.

In those circumstances we intend to make an order that the Appellant pay the costs of the Respondent, those costs to be taxed, and I will hear submission from counsel as to whether I should provide for the method of taxation, and if so, what it should be.

I have in mind the Industrial Tribunals regulations which gives Industrial Tribunal power to order taxation in the County Court according to such scale of the County Court Rules as we decide. I would be inclined to order taxation in the County Court on Scale 2.