United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR B ROCHE (of Counsel) Messrs Beetenson & Gibbon Solicitors Lauriston House Town Hall Square Grimsby DN31 1JB
For the Respondent	MISS J EADY (of Counsel) Instructed by: Mr Simon Barnett The Treasury Solicitor Queen Anne's Chambers 28 Broadway London SW1H 9JS


 


MR JUSTICE MORISON (PRESIDENT): This is an appeal against a decision of an Industrial Tribunal held at Hull on 25th June 1997. The decision of the Industrial Tribunal was that Mr Watt, the applicant, was not an employee and therefore was not entitled to bring claims against the Secretary of State for Trade and Industry in respect of redundancy payment, outstanding wages, outstanding holiday pay and money in lieu of notice.

The right of a person to make such claims against the Secretary of State derives from the statute and it is a prerequisite that the applicant should prove that he was an employee of the company which has become insolvent.

There was no dispute before the Industrial Tribunal that there was an insolvency situation within the meaning of the legislation. What was at issue and only at issue, was whether Mr Watt was an employee.

He was a director of the company, and a 60% shareholder. He held with his wife 100% of the issued share capital. He had entered into a contract of employment with the company, and had been "employed" by it for a large number of years. The last day on which he received pay was 18th February 1996, the company went into a creditors voluntary liquidation on 15th March 1996.

The Industrial Tribunal's decision runs to three paragraphs. In paragraph 2 of the decision they refer to the fact that Mr Watt held a 60% shareholding in the company, Mr Mean Ltd, which was engaged in the wholesale/retail textile industry. They record the fact that he paid tax and National Insurance on a regular basis, worked long hours and took six weeks' annual holiday and noted that he personally had given guarantees to two of the landlords of the company, one of which had subsequently enforced their rights under the guarantee which had resulted in his bankruptcy. The tribunal in paragraph 3 said this:

"3. In view of the evidence given by the Applicant and in particular that he held 60% of the shares, and following the rationale in the case of Buchan v Secretary of State for Employment and Ivey v Secretary of State for Employment [1997] IRLR 80, the Tribunal finds that Mr Watt as a controlling shareholder of the company is not an employee within the meaning of the Employment Right Act 1996, and as such is not entitled to bring claims against the Secretary of State for the various sums of money referred to in the application. The application is accordingly dismissed."

It would appear, therefore, that the basis and only basis of the Industrial Tribunal's decision was that Mr Watt was not an employee because he was a controlling shareholder, in accordance with the judgment of the Employment Appeal Tribunal in Buchan and Ivey.

After the Industrial Tribunal had given their decision, the Court of Session in Scotland in Fleming v Secretary of State for Trade and Industry [1997] IRLR 682 gave a judgment in which they indicated that the shareholding of an individual did not appear to them to be a determinative factor in the question as to whether a person was employee or not, but was simply one of the relevant factors. Furthermore, since the decision of the Industrial Tribunal, the Employment Appeal Tribunal has had occasion to review the case of Buchan and Ivey in the light of the Court of Session's decision. That judgment was delivered on 12th January 1998 where it was made clear that the shareholding of an individual was not determinative, but was a relevant factor.

Pursuant to leave, the Secretary of State for Trade and Industry against whom such claims are brought, has lodged a Notice of Appeal against the Bottrill decision, that is the decision of the Employment Appeal Tribunal to which I have just referred. It is not clear when this appeal is going to come before the Court of Appeal. I have been told, and accept, that the parties are being required to prepare documentation for the hearing of the appeal.

This morning we were given a copy of an order which both parties were inviting us to make as to the disposal of this appeal. The terms of the order, as suggested by the parties, was this:

"UPON hearing Counsel for the Appellant and for the Respondent

AND BY CONSENT

IT IS ORDERED THAT:

1. The appeal be allowed, and the case remitted to the same Industrial Tribunal to determine the question of the Appellant's employment status.

2. The Respondent has leave to appeal to the Court of Appeal.

3. Legal aid taxation of the Appellant's costs."

It was recognised by both Counsel, Miss Eady on behalf of the Secretary of State, and Mr Roche on behalf of Mr Watt, that the question as to whether leave to appeal should be granted was obviously a decision for the Court and was not a matter which, unless the Court approved, the parties could dictate by agreement. On the hearing of this appeal we indicated to the parties that we were unhappy about the suggestion that we should grant leave to appeal.

The position, as it seems to us, is this. The appeal of Mr Watt should be allowed because the Industrial Tribunal did not have the benefit of the judgment of the Court of Session when they gave their judgment. Accordingly, they have decided this case on a basis, which as the law currently stands, was not open to them. But the parties have asked that the case be remitted to the same Industrial Tribunal because it is recognised and accepted on behalf of both of them that there needs to be a fuller determination of Mr Watt's application, having regard to all the relevant factors as to whether somebody is an employee or not.

If it were to transpire that the Industrial Tribunal, having considered the matter as the law currently stands, conclude that Mr Watt was not an employee, it follows that we would have given leave to appeal to the Court of Appeal in respect of a matter which was then moot. It seems to us undesirable that the Employment Appeal Tribunal should grant leave to appeal on this basis.

If of course the Industrial Tribunal were to conclude that Mr Watt was an employee, despite his 60% shareholding, then it would be open to the Secretary of State to appeal that decision to us, when we would consider what should happen.

We anticipate that the Industrial Tribunal would be able to make such a determination within the next three months. We have no reason to believe that if the Secretary of State wished to appeal from that decision, it could not be brought before us in time for us to consider whether it would be desirable to give leave so that the Secretary of State could ask for this appeal to joined to the Bottrill appeal.

It was suggested to us that there would be an advantage in this matter being joined with Bottrill because Mr Watt has the benefit of Legal Aid, whereas, until recently at any rate, Mr Bottrill appeared to be unrepresented. However, we have been told that he has recently been in the receipt of an emergency Legal Aid Certificate, and for the purposes of this judgment, we are not prepared to assume one way or the other, that Mr Bottrill will be without legal assistance when his appeal eventually comes on before the Court of Appeal.

It is obviously sensible and important that the facts relating to Mr Watt's status should be heard and determined by an Industrial Tribunal as soon as is reasonably practicable; both because of the obvious argument that it is better that issues of fact are determined as close as possible to the events concerned, and also because litigation is a stressful process and people are entitled to have their rights adjudicated upon as soon as is reasonably practicable.

For these reasons therefore it seemed to us that the Employment Appeal Tribunal should not both order a case to be remitted to an Industrial Tribunal and grant leave to appeal to the Court of Appeal. We indicated to Counsel that it seemed to us that there were other options to the parties. If it is the view of the Secretary of State that this particular appeal raises the Bottrill point in a particular way which is suitable for determination in the Court of Appeal, then it would have been perfectly possible to have achieved that position by the Secretary of State simply agreeing that the appeal should be allowed. In those circumstances, we would have been prepared more favourably to look upon their application for leave to appeal. But in truth, the Secretary of State wishes both to be able to say that Mr Watt is not an employee simply because he owns 60% of the shares, and also wishes to be able to say that he is not an employee in any event for other reasons. Because they wish to have their cake and eat it, it does seem to us that it becomes important that we should not grant leave to appeal at this time. So long as the Secretary of State wishes to maintain that Mr Watt is not an employee whatever his shareholding, then it seems to us that that case should be heard and determined as soon as possible.

Having given that indication to the parties, Miss Eady on behalf of the Secretary of State, submitted to us that the right course to take would be simply to stay this appeal pending the determination by the Court of Appeal of the Bottrill appeal.

Again, it seems to us, that that would not be a just result for the reasons that we have given, namely, that Mr Watt is entitled to know where he stands. It seems to us that if the matter is to be remitted to the tribunal for a further hearing, that hearing should take place as soon as possible. If of course Mr Watt is not an employee when the law as it currently stands is applied, then of course that will be an end of his complaint. The appeal would have been moot. It seems to us that if that is the position, Mr Watt should know of it as soon as is practicable.

We also offered to attempt to consider the appeal on the documents themselves and to arrive at our own decision as to whether Mr Watt is an employee on the basis of all the material which effectively had been put before the Industrial Tribunal. It was suggested to us on behalf of the Secretary of State that this course had certain dangers attached to it. Whilst we were at one stage in favour of such a course, we recognise that it is undesirable, in general terms, for the Employment Appeal Tribunal to arrogate to itself the role of deciding facts, and we do not consider that there is enough factual material in the decision itself to warrant us taking that course.

In all the circumstances therefore, we have come to the conclusion that the appeal should be allowed; that the matter should be remitted to the same Industrial Tribunal for them to determine, as soon as practicable, the question of Mr Watt's employment status having regard to the Fleming decision and the decision of the Employment Appeal Tribunal in Bottrill.

We are not prepared to grant leave to appeal to the Court of Appeal for the reasons we have given. We are not prepared to stay the proceedings. It should be pointed out that we have no power to order the Industrial Tribunal to stay any rehearing. It seems to us undesirable in the circumstances that they should do so.

Accordingly, the appeal will be allowed. There will be Legal Aid taxation of the appellant's costs, and the case remitted to the same Industrial Tribunal to determine the question of Mr Watt's employment status.