United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR M LYNE (of Counsel) Messrs Littlejohn & Co Solicitors 118 Kenton Road Harrow Middlesex HA3 8AN
For the Respondents	MR A BURNS (of Counsel) Instructed by: The Solicitor Post Office Counters Ltd Impact House 2 Eldridge Road Croydon CR9 1PJ


 


MR JUSTICE MORISON (PRESIDENT): This is an appeal against a decision of an Industrial Tribunal Chairman sitting alone held at London (North) on 28th November 1997. The Chairman was there to consider as a preliminary issue in the applicant's application under the Disability Discrimination Act 1995 whether it had jurisdiction to hear his complaint. S. 68(1) of the Act defines "employment" as meaning:

""employment" means subject to any prescribed provision, employment under a contract of service or of apprenticeship or a contract personally to do any work, and related expressions are to be construed accordingly;"

The applicant was a subpostmaster who had entered into a contract with Post Office Counters Ltd against whom he has presented his complaint. The question, therefore, before the Industrial Tribunal was this. Does a subpostmaster who enters into a modified subpostmaster's contract with Post Office Counters Ltd enter into "employment under ... a contract personally to do any work"? This is a potentially important case as there are some 18,000 subpostmasters working under similar or identical contracts.

The relevant facts may be shortly stated taken from the Industrial Tribunal's decision and from the terms of the contract itself. After some 36 years' service as an employee of the Post Office on 3rd January 1993 Mr Sheehan, the applicant, took early retirement. He applied for and was appointed subpostmaster at Kenton Post Office on 14th January 1993, which at or about that time was converted from a branch office to a modified sub-post office. The tribunal found as a fact that at his interview with officials of the respondent before his appointment, he (the applicant) was required to present a business plan for the running of the office and in doing so notified them that he intended to work personally in it with the assistance of his two daughters. His formal written contract was not drawn up until September 1994 "but it is agreed that the terms set out therein relevant to the issue before me were the ones which applied to his appointment from its commencement up to the present day".

The relevant terms of the contract are these. Section 1, clause 1. provides:

"The contract is a contact for services and consequently the Subpostmaster is an agent and not an employee of Post Office Counters Ltd."

Subclause 3. provides:

"The Subpostmaster must provide and maintain, at his own expense, reasonable office accommodation required by Post Office Counters Ltd, and pay also at his own expense, any assistants he may need to carry on Post Office Counters business."

Subclause 5. provides:

"The Subpostmaster is not obliged to attend the sub-office personally but he is required, whether he is there or not, to accept full responsibility for the proper running of his sub-office and the efficient provision of those Post Office services which are required to be provided there. Retention of the appointment as Subpostmaster is dependent on the sub-office being well managed and the work performed properly to the satisfaction of Post Office Counters Ltd."

Subclause 6. provides:

"The Subpostmaster is informed at the time of his appointment of the types of business he is required to provide. He must also undertake, if called upon to do so later, any other type of business not required at the time of his appointment but which Post Office Counters Ltd may subsequently and reasonably require him to do as part of the terms of his appointment."

Subclause 13 provides:

"Duties - The principal duties at present required are included in the following list:"

There is then set out in the contract the various services to be provided at the particular sub-post office.

Under section 2, subclause 1. provides:

"A Subpostmasters pay is broadly based on the work which is transacted at his Sub-Post office."

and subclause 13 provides:

"Subpostmasters will be required from time to time by the Regional General Manager to complete returns in connection with the provision of Post Office services. It is essential that Subpostmasters complete an return such information without delay; failure to do so may adversely effect calculation of the Subpostmasters remuneration."

Section 3 is headed

"SUBPOSTERMASTERS' ABSENCE FROM OFFICE"

and subclause 1. provides:

"A Subpostmaster, under the terms of his contract, is not obliged to render personal service and is therefore free to absent himself from the office, provided he makes suitable arrangements for the conduct of the office during his absence."

Subclause 2 provides:

"A Subpostmaster's responsibility for the proper conduct of the office, or for any losses occurring during his absence, is in no way diminished by his absence from the Sub-Office. He must make proper provision, at his own expense, for the conduct of the office while he is away, and must notify the Regional Manager on form ... when period of absence is likely to be more than 3 days giving the name of the person substituting for him."

Section 5, subclause 9 provides:

"If a Subpostmaster is late in giving notification of sickness, he should advise the Regional Manager of the reason for the delay. If the Regional Manager is not satisfied with the reason given for the delay, any period of sickness prior to the date of notification will not count for the purposes of statutory sick pay. If a Subpostmaster is not satisfied with the Regional Manager's decision on this matter he may apply to the Department of Social Security for a ruling. If a Subpostmaster does not qualify for statutory sick pay, he will on notification of sickness be sent a form SSP1(E) by his Regional Manager."

In Section 6, subclause 1. it is provided:

"A Subpostmaster who receives a summons to serve on a jury should notify his Regional Manager immediately, and should inform him of the arrangements which he proposes to make for the conduct of the work of the suboffice in his absence."

In Section 9 there are various provisions dealing with the responsibility for Post Office stock and cash and the obligations on the subpostmaster to ensure that proper accounts are kept; that he takes personal responsibility for the safe custody of cash and stocks of all kind; and that he is responsible for maintaining a standard of security sufficient to enable him to meet the obligations laid on him in relation to the cash and stock placed in his care. It is provided that if a subpostmaster considers that any stock items have been accidentally lost or stolen, the subpostmaster should make a report as quickly as possible to the Regional General Manger. Where there is a shortfall then the subpostmaster is responsible for making it good, although he may be relieved from that obligation where he can show in the case of a theft or burglary that he has taken reasonable precautions to safeguard the official stock and property.

Finally Section 10 is dealing with the position of assistants and in subclause 1. it says:

"A Subpostmaster must provide, at his own expense, any assistance which he may need to carry out the work in his sub-office."

and at subclause 8:

"The Subpostmaster must notify the Regional General Manager of his intention to employ a new assistant on Post Office Counters Ltd work or when an assistant ceases to be employed in the sub-office."

and in subclause 10.:

"In cases where an assistant is accused or suspected or dishonesty or any other offence such as wilfully delaying postal packages the Subpostmaster must report the particulars to the Regional Manager as soon as possible and await instructions. If the report is made by telephone it must be confirmed in writing as a matter of urgency."

There are other provisions of the contract to which attention was drawn in the course of argument, but we believe that that is a fair selection of the most pertinent to the arguments which were raised on this appeal.

The Industrial Tribunal having set out the relevant factual background and continued in their decision as follows:

"5. From 14/1/93 Mr Sheehan resumed responsibility for the control of the administrative side of the Sub-Post Office and assisted on its operational side by working as a counter-clerk. The Sub-Post Office opened daily from 9am to 5.30pm on Mondays to Fridays and 9am to 12.30pm on Saturdays as required by the Respondent. In addition, Mr Sheehan was under a duty to clean the office. He carried out most of the cleaning on Saturday afternoons, usually working up to about 7pm.

6. Every day he received from the Respondent a pouch which, among other things, contained details of rule changes with which the Sub-Post Office was required to comply. He ensured compliance by advising his staff of the changes and monitoring them subsequently. Failure to ensure compliance could have resulted in a appropriate action being taken against him by the Respondent.

7. In addition to running the Sub-Post Office, on the same premises Mr Sheehan ran a post-shop, selling materials supplied by the Respondent but did not run any other business there. He did not for example sell newspapers, groceries or other items.

8. Apart from Mr Sheehan himself, the staff at the Post Office consisted originally of his two daughters, one of whom was later replaced by another person. They worked full time. He also employed three part-time staff to work in the afternoon, all of whom had been trained by the Post Office."

The essence of the tribunal's decision in holding that they did not have jurisdiction in this case is to be found at paragraph 8(iv) namely:

"With regard to his point (5), I consider that the Mirror Group decision that one need look at only the dominant purpose of the contract is clearly against the proposition that Mr Sheehan is obliged to do any work under his contract personally. In my view, his contract requires him to ensure that the work is done but does not impose an obligation upon him to do it himself. If it does so impose any such obligation, then that obligation is minimal and the Mirror Group decision is against Mr Sheehan's case."

In a conspicuously able argument, Mr Lyne made the following submissions. He first of all submitted that the Employment Appeal Tribunal should regard the words to be found in s. 68(1) of the 1995 Act as intending to extend the definition of an employment relationship to those who would not normally be regarded as in employment. He referred to a decision of the Employment Appeal Tribunal in Quinnen v Hovells [19884] IRLR 227 at which the Employment Appeal Tribunal noted that the proper interpretation of the words "a contract personally to execute work or labour" enlarged upon the ordinary connotation of "employment" so as to include persons outside the master/servant relationship. He submitted that the Employment Appeal Tribunal should treat the test as wide and flexible and apply the words to the facts of each and every case.

Secondly, he submitted to us that the proper approach in determining whether a contract is one falling into the category of personal work contracts is to see whether any work undertaken by the appointee in accordance with the terms of the contract is required to be performed personally, and then secondly, to assess whether such work is significant in the context of the contract as a whole. In support of that proposition he relied upon the Court of Appeal's judgment in Mirror Group Newspapers Ltd v Gunning [1986] ICR 145. He said that in the present case the appellant entered into a contract, the written terms of which were set out in the typed document to which I have referred. He submitted that the written terms as a whole expressly distinguished between work for which the subpostmaster takes responsibility but need not perform personally and work that the subpostmaster is obliged to perform personally. In relation to the latter, he relied particularly on section 2.13. which relates to the submission of returns by the subpostmaster to Post Office Counters Ltd section 5.9. which places a burden on the subpostmaster to report in relation to late notification of sickness, section 6.1 which relates to the notification of arrangement when a subpostmaster is summoned for jury service, section 10.8 which relates to the notification that staff are being employed, and section 10.10 which relates to the duty of the subpostmaster to report an assistant's dishonesty. He also referred to the provision of the contract to be found in section 9.4, namely an obligation to immediately produce his accounts of all stock and cash when ever so requested by a person duly authorised by the Regional General Manager. He submitted, therefore, that section 3.1 which stated that a subpostmaster was not obliged to render personal service must be read in the light of the obligations which were of a personal nature imposed upon the subpostmaster to which he had just referred. In other words, he says that section 3.1 of the contract should be understood to mean that the subpostmaster does not have to render personal service at all times rather than at all.

Mr Lyne sought to distinguish this case from the decision of the Employment Appeal Tribunal in the case of Tanner v The Post Office [1981] ICR 371. In that case the Employment Appeal Tribunal had rejected an argument to the effect that a subpostmaster was an employee within the extended definition because under the contract he may be required to render personal services. There, the Employment Appeal Tribunal said that it was not sufficient that he may be required to attend, what the tribunal was looking for was an obligation upon the employee to perform work personally. Because it was conceded in that case on behalf of the subpostmaster that not a single task to be performed within the contract had to be performed by the subpostmaster personally, the decision was obviously right in holding that Mr Tanner was not an employee for the purposes of the Race Relations Act 1976.

The third main submission made by Mr Lyne was that the applicant was required to provide a business plan before he was accepted for appointment as subpostmaster. That business plan set out the basis on which he intended to provide the services required, in other words, that he personally would be providing the service himself directly. Post Office Counters Ltd are looking to see whether an applicant for the position of subpostmaster is capable of producing a sensible rate of return in a business forecast, otherwise there would be a danger that the service would cease. On this basis, therefore, Post Office Counters Ltd knew perfectly well that the way in which the business could be maintained at a profitable level required the applicant in fact to carry out work whatever the contractual position might be. Accordingly, one should import into the contractual obligations, in addition to the express terms of the written contract, some kind of other term that because both parties appreciated that the work was to be done personally by the applicant, it should come a term of the contract that the applicant should do the work himself.

On behalf of the respondents, Mr Burns accepted the definition of the question before the Industrial Tribunal and accepted that the answer to that question was to be determined in accordance with the principles enunciated in Mirror Group Newspapers Ltd v Gunning. He referred in particular to passages at page 149F-151B:

"The first point is the pure point of law as to the correct meaning, as a matter of statutory interpretation, of the words "a contract personally to execute any work or labour." Here the primary division between the parties is as to the meaning of the word "an." Mr Irvine, on behalf of the newspaper group, contends that the court has to read the section in the light of the fact that what it is doing is providing an extension of the meaning of the word "employment" in its ordinary sense of a contract of employment or service, the essential condition of which is that the employee engages to provide his own work or skill in return for remuneration. There may be lacking other essential conditions, for instance that of control by the other party to the contract, so that it does not quality as a contract of service, but the essential concept is of a contract for the services of the "employee", the purpose of which is to make available to the other contracting party (the "employer") the services and skill of the contractor. An example would, for instance, be a contract for the painting of a portrait by an artist or the engagement of an actor, single or dancer. Whilst it is true that the section uses the word "any" work or labour, Mr Irvine submits that this cannot sensibly be applied to include within the definition every contract which contains a stipulation of whatever minimal importance for the personal performance of some function. What is to be looked for is not simply a contractual obligation forming part of a large whole to do something personally but a contract (i.e. a complete contract) personally to do work or labour. Only thus, he submits, can one give a sensible meaning to the word "any." It stems, he submits, from section 167(1) of the Industrial Relations Act 1971, which drew a distinction between "employees" and "workers" and included in "workers" the self-employed so long as their services were non-professional. "Any," he suggests, in this statute means "any kind" and is there to emphasise that even services to a client in the course of professional activities are within the definition. Thus, he submits, to qualify as a contract under the extended definition in section 82(1) of the Sex Discrimination Act 1975 the contract must be one the sole or dominant purpose of which is the execution of work or labour by the contracting party. A contract the purpose of which is to secure a result which is to be achieved by the employment of many does not become a contract personally to execute work or labour merely because the contracting party assumes an obligation to engage himself, in however small a way, in the carrying out of the contractual purpose.

As against this Mr Beloff, for the applicant, submits that nothing turns on the fact that the starting point is that the definition is an extension of the word "employment," which, he submits, in ordinary parlance merely means "work." He accepts that the court has to look for a positive contractual obligation of personal execution and not merely an underlying hope or expectation, even an expectation which is an inducing cause for entering into the contract at all. But if there is a contractual obligation to do anything active under the contract which can properly be described as "work or labour" the fact that this may be entirely undefined and subsidiary to the principal purpose of the contract is, he submits, irrelevant. He accepts that "any" does mean "of any kind" but it also embraces "of any extent," although he accepts, as I understand his argument, that the obligation has to be of such substantiality that it can be said to be a material term of the contract. What he suggests is, essentially, a two-stage inquiry: first, is there an obligation to do any work or labour at all personally? If so, then is that obligation sufficiently substantial to the contract as a whole to enable the tribunal properly to describe the contract as "a contract personally to execute work or labour" as opposed to a contract containing a minimal obligation for such execution.

Such authority as there is, is of little assistance. Mr Irvine relies on Broadbent v. Crisp [1974] I.C.R. 248, which was concerned with section 167 of the Industrial Relations Act 1971 and in which Sir Hugh Griffiths appears to have considered that what had to be looked at in relation to that definition was the totality of the obligation of the party performing the relevant work. But there was no distinct argument before him on the point at issue here. On the other side is Tanna v. Post Office I.C.R. 374, where Slynn J., on analogous provisions of the Race Relations Act 1976, held that some obligation to do work personally was essential, even though other work could be delegated. As Mr Irvine points out, however, although he held that some obligation of personal execution was essential, he did not say - nor was it argued - that any obligation, however minimal, was sufficient.

The arguments are closely balanced and indeed, on analysis, are probably not for practical purposes widely different in their results, since, as already mentioned, Mr Beloff does not contend that any obligation, however minimal, is sufficient to constitute a "contract" of the kind in question. On balance, however, for my part I am persuaded that the more natural and logical meaning is that contended for by Mr Irvine and expressed by Mr Scott in the appeal tribunal. In my judgment, what is contemplated by the legislature in this extended definition is a contract the dominant purpose of which is the execution of personal work or labour, and I would allow the appeal on this ground, for quite clearly here the dominant purpose was simply the regular and efficient distributions of newspapers."

He then turned to a passage at 151C where Oliver LJ said this:

"Even if this be wrong, however, I am persuaded, having been taken through the material upon which the industrial tribunal reached its conclusion, that Mr Irvine's second ground of appeal [on behalf of the Mirror Group] is also made out. There was not, in my judgment, any material upon which the tribunal could properly conclude that there was any term of the contract between the newspaper group and Mr Stark which obliged the latter personally to engage in the operation of the distributorship agreement, although no doubt the expectation was that he would do so. It may even be that if he had not attended personally, the newspaper group might have queried the efficiency of the operation and terminated the agreement when they would lawfully do so. But I can find nothing which would justify the supposition that there was any contractual obligation upon him to do anything (other than pay for supplied) so that his absence from the scheme of operations could have been categorised as a breach of contract."

He then referred to a passage in the same judgment at page 152E-F:

"So that the case being put to the newspaper group was that the agent had personally to accept responsibility, not that he had personally to carry out the work of distribution, it being accepted that the functions could be delegated as lone as the agent remained responsible for their proper fulfilment."

And again at page 153C to H:

"That appear appears to have been the sum total of the evidence on the point before the tribunal. At highest, so it seems to me, it indicated only that the newspaper group regarded it as desirable that an agent appointed to distribute newspapers should personally participate in the business since, presumably, they would regard that as conducive to the efficiency of the operation. But I am for my part quite unable to spell more out of the evidence than this. The tribunal's finding that personal involvement is material to the offer was, in my judgment, justified to the extent that the newspaper group were clearly concerned with the personality and efficiency of the owner of the business, but the next proposition, namely that "this" - that is, as I read it, the materiality of expected personal involvement to the offer of agency - "does require that the individual be directly involved ... in the work carried out by his or her agency," simply does not, in my judgment, follow from that premise. If the agency was efficiently run, no matter by whom, and the proprietor paid for his newspapers, for my part I am unable to see how his omission personally to oversee and supervise the operation could be categorised as a breach of his contractual obligations to the newspaper group. The appeal tribunal recognised that the process by which the industrial tribunal reached its conclusion on this part of the case was what Waite J. called "evidential brick building when the straws are scant," but regarded the straws as sufficiently numerous. For my part, I think they were insufficient and that there was no evidence upon which a contractual obligation for personal services could be constructed. I would allow the appeal also on this ground.

This renders it strictly unnecessary to consider Mr Irvine's third ground. Again, however, I have felt compelled to conclude that his submission is correct. There is no trace in the judgment of the industrial tribunal of any process of weighing the importance relative to the contract as a whole of the obligation which they found. The reasoning appears to have been simply this, that because there was, as they found, a requirement of personal involvement at least to the extent of overall day-to-day supervision, that by itself and of itself rendered the contract a contract personally to execute any work or labour. I can see no trace of the two-stage process which was suggested by the appeal tribunal as the correct approach.

For all these reasons I would allow the appeal."

Mr Burns also referred us to a decision of Employment Appeal Tribunal in a case called Hitchcock v The Post Office [1980] ICR 100 and in particular to what was said by Slynn J, as he then was, at page 108. This case was concerned with the question of whether a subpostmaster was an employee for the purposes of bringing an unfair dismissal complaint, so that the Court was concerned with what one might call the narrow definition of an employee and not the extended definition which appears in the discrimination legislation. But what the Court said was this:

"We accept, as Mr Carr quite rightly has accepted, that there is here a substantial measure of control which relates to the conduct of the Post Office's business. It might be, if there were no other factors present, that that control would be sufficient to make the contract one of service rather than for services. But there are other factors present. The question in this case, it seems to us, is really whether the control which does exist is such that it prevents the contract from being one for services rather than of service. Accordingly we must look at the matter as a whole. We consider here that great importance has to be attached to the fact that the applicant provided the premises and a certain amount of the equipment at his own expense. The sub-post office came into what was his general store. It was a part of his own business. Moreover it is clear that even though, apparently, he chose to spend a great deal of his working week doing the sub-post office work at this particular premises himself, he had the right to delegate, and did in fact delegate. ... The economic reality of it was that this was his shop, his premises, and it was he who was conducting this sub-post office business even if on behalf of the Post Office. We do not consider that it can be said that he, although doing work for them, was so integrated into their business that he became a servant."

The final reference to authority was to an unreported decision of the Employment Appeal Tribunal in the case of Soni v Post Office Counters Ltd & Others (EAT/425/96). The issue was whether a subpostmistress was an employee for the purposes of the discrimination legislation. At page 3G it reads:

"Indeed, it could be said that even if condition 5 was not there, read as a whole this contract is not a contract personally to make sure to create work or labour, but merely to ensure that a service is provided. Indeed, the longer that Mr Miller addressed us, the more certain we became that the very central plank of his case was undermined by his own arguments. If you look at the contractual terms, time and time again the position is that the contracting party with the Post Office is taking upon himself or herself the responsibility not to carry out the work personally but to ensure the work is carried out. ...

[There is then a reference to Gunning]

We consider that if you look at the contract as a whole in the light of the authority of Tanna, it is quite clear that this was not a contract within the ambit of section 78 of the Act. this was a contract in which the dominant purpose was that the Post Office wanted their services provided and their merchandise sold. How that was done was a matter for the person who contracted. That person was not required to do the work; he or she was required to ensure that the job was done."

It is to be noted that in that decision a rather brave argument had been advanced to the effect that it did not matter whether there was a contractual obligation on the subpostmistress to do any work personally, what mattered was whether in fact she did do the work personally. As Mr Lyne rightly pointed out this authority therefore may not be of much assistance having regard to the nature of the arguments presented to the Court.

In the light of those arguments we turn to our decision.

As we have indicated, it was common ground between the parties that the proper approach to the question at issue in this case is defined in the Gunning case. We accept that the Tanna case is distinguishable because of the reasons advanced by Mr Lyne. So, therefore, the question arises, first of all, is there any obligation under the contract for the subpostmaster to do work himself. It seems to us that Mr Lyne has identified those parts of the contract which do require personal performance as opposed to the delegation of performance in respect of other obligations. In general terms, the personal obligations on the subpostmaster are in relation to what one might call the management of the business and the liaison between management and Post Office Counters Ltd.

The second question therefore arises, in the light of that answer, can it be said that the work which was demanded of the subpostmaster himself under the contract was a dominant purpose. It seems to us that the dominant purpose of the contract was the regular and efficient carrying out of the Post Office services which are stipulated in section 1 of the contract. It is accepted by the applicant that in relation to those matters he was not obliged to carry out those activities himself. The activities which he was obliged to carry out were, in a sense, minor and ancillary to the main purpose of the contract. It seems to us that the dominant, most weighty or majority purpose of the contract was not the performance by Mr Sheehan of any personal obligation upon him.

The subpostmaster was running his own business in the way he wanted to. He was there to take responsibility for the delivery of the service. The core of the business was capable of being performed not by himself but by his own staff. He was only required personally to perform a limited range of activities. It was therefore open to the Industrial Tribunal, on the basis of the case as the tribunal heard it, to conclude that by comparison with the work he was required to do and the work which he was entitled to delegate, what he was required to do was minimal by comparison with the whole.

It seems to us, therefore, that the Industrial Tribunal has arrived at a conclusion which was fully open to it, having applied as it was accepted on the appeal, the correct approach to the questions.

The second argument, namely that as a result of the interview which took place prior to the letter of offer and the signing of the contract, lead to an oral agreement which supersedes or adds to the written terms of the contract, is unsustainable. It seems to us that quite apart from the fact that this was not a point taken below but which would require some facts to be found and therefore technically should not be admitted as an argument here, there is no merit in the case, because it would require us to hold that the express written terms of the contract were in some way modified by some kind of oral representation or understanding which the parties had arrived at on an earlier occasion. It seems to us, looking at the way this contract was concluded, that whatever was said at the interview meeting, did not form part of the contractual terms agreed between the parties. The letter that was sent following that interview was a letter of offer and it was capable of being accepted as it was by Mr Sheehan accepting the precise terms set out in the letter of offer including entering into the contract to which we have referred.

Accordingly, we are unanimously of the view that this appeal has been dismissed, despite the fact that the consequence is that a significant class of person is outwith the protection of the discrimination legislation. It seems to us that there is a limit to the potentiality for this Court to arrive at a conclusion which might give better effect to the intention of Parliament to extend the range of people to whom protection is offered by extending the definition of employment. On the basis of binding authority it seems to us we have no alternative but to conclude in this case that the appeal must be dismissed. Mr Sheehan is not an employee for the purposes of the discrimination legislation, he is running is own business and is an agent on his own account.