United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR D BASU (of Counsel) under the Employment Law Appeal Advice Scheme and MR R PEAT (Brother)


 


MR JUSTICE MAURICE KAY: This is an appeal from the decision of an Employment Tribunal sitting in Manchester on 5th July 1999 in respect of which extended reasons were sent to the parties on 6th August 1999.

1. The appellant, Mr Peat, had been managing director of a company called Fensterplas Ltd. In due course that company went into liquidation. Mr Peat made a claim against the Secretary of State for Trade and Industry for a redundancy payment.
2. The issue before the Employment Tribunal was whether at the material time, that is to say at the time of liquidation, Mr Peat was employed under a contract of employment.
3. The decision of the Tribunal was that his claim for a statutory redundancy payment and other monies said to be due was dismissed.
4. We understand that this was the second occasion upon which such a claim by Mr Peat had been dismissed. He had made the same claim on an earlier occasion, had failed in the Employment Tribunal, but had succeeded in this Employment Appeal Tribunal in having the matter remitted for a further hearing. The present appeal, therefore, is from the decision on that second hearing.
5. The Employment Tribunal made a number of findings of fact and it is appropriate for us to set them out in full. They were listed and numbered as follows:

"(i) The applicant was appointed by Fensterplas Limited as their Production Manager in 1985. He did not have a written contract of employment. He did not hold any shares in the company at that time. Later in that year he was appointed a Director of the company.

(ii) In October 1991 the applicant became the Managing Director of the company at which time he had a 10% shareholding, having acquired 5% of the shares in 1987 and a further 5% in 1991.

(iii) In April 1993 three other directors resigned and the applicant purchased 40% of the remaining shareholding. His total shareholding at that time was 50%. Mr Barnes, the other sole remaining Director, purchased additional shares to increase his shareholding to 50%.

(iv) Throughout the applicant's service with the respondents he was subject to Schedule E (PAYE) income tax and Class 1 National Insurance. He had a company pension and was treated by the trustees of that scheme as an employee. It is to be noted that no other person who was engaged by the company was engaged under a company pension.

(v) After the company changes in 1993, the business ran into financial difficulty. Although the 12 junior members of staff were paid their wages during periods of financial difficulties the applicant did not receive his salary between December 1995 and 20 November 1996.

(vi) The applicant was responsible for the appointment of new members of staff from time to time such as his secretary.

(vii) The applicant conceded in his written statement prepared for the Tribunal hearing, made at the suggestion of the learned judge at the Appeal Tribunal, that from 1993 he had day-to-day managerial care and control of the company. He was at all times thereafter a working Director. Mr Barnes was not involved in the day-to-day running of the business.

(viii) There was no written contract of employment. There was no Board Minute nor a written memorandum of the terms of an unwritten contract as required by Section 318(1) of the Companies Act 1985.

(ix) By mid-November 1996 there were no other members of staff engaged within Fensterplas Limited apart from the applicant. The last two junior members of staff, a foreman and a manufacturing labourer, had ceased to be employed by that stage.

(x) During periods of sickness absence the applicant was paid his full salary.

(xi) The applicant did not take his holiday entitlement for a period of approximately 2 years between 1994 and 1996.

(xii) Towards the end of company's life the applicant's brother provided some financial support (of unspecified magnitude and unsupported by any documentary evidence). He was not concerned with the day-to-day management of the company.

(xiii) A winding-up order was made on 20 November 1996 and on that date the applicant was informed at a the factory premises by the Official Receiver's representative that there was to be no further trading from that date forward."

6. Upon those findings of fact the Employment Tribunal then went on to consider the crucial question of whether at the material time the appellant was an employee within the meaning of section 230(1) of the Employment Rights Act 1996. The Tribunal also had regard to a number of reported cases, including Secretary of State for Trade and Industry v Bottrill [1999] IRLR 326. It was in that case that the Court of Appeal gave some guidance as to the correct approach in cases of this kind.
7. The Tribunal then proceeded to list matters which supported the analysis that the appellant was an employee and matters which supported the analysis that he was not. They are duly listed in the decision in paragraph 6.
8. The Tribunal next went on to consider the more important items one by one. So far as the payment of income tax under Schedule E and National Insurance Class 1 contributions were concerned, the Tribunal concluded that that was an indicator that the appellant was an employee, but "this was only one factor to be taken into consideration. It was not conclusive of an "employer-employee" relationship. The Tribunal then stated itself to be "more concerned with the issue of control." There followed a detailed analysis of the history of control, in the course of which the Tribunal rejected the submissions made on behalf of the appellant that he had been subject to control from Mr Barnes, his own brother and ultimately the petitioning creditor. The Tribunal concluded that Mr Barnes played no role in the company's day-to-day management and neither did the appellant's brother.
9. The tribunal then proceeded to make specific findings in paragraph 8 of its decision. They read as follows:

"The Tribunal concluded on a balance of probabilities that the applicant's situation changed in 1993. The applicant had become the Managing Director in 1991 and he was at that time a minor shareholder. He was subject to control by a Board of Directors and so remained until April 1993. Following the resignation of other Directors and his purchase of the additional shareholding, he and Mr Barnes held equal shareholdings. Mr Barnes did not play an active role in the company and the applicant was concerned with the day-to-day control from that time. The Tribunal was satisfied on a balance of probabilities that any employment situation which had existed up until 1993 ceased at that time. The applicant was no longer subject to any control and thereafter continued to run the business in the way that he saw fit unencumbered by others.

The Tribunal concluded on a balance of probabilities that, at the material time on 20 November 1996, the applicant was no longer an employee of Fensterplas Limited within the statutory definition in Section 230 of the Employment Rights Act 1996. …"

10. It seems that when the matter came before the Employment Appeal Tribunal on the earlier occasion the Employment Appeal Tribunal identified certain issues which ought to be addressed when considering the matter that was at stake in the present case. In paragraph 9 of the decision currently under appeal the Employment Tribunal went through that list of issues and came to its conclusions about them. They related to matters of control and dismissal and also as to whether inferences might be drawn from the fact that the applicant had not taken his wages and holidays between 1994 and 1996.
11. We have carefully considered the issues there set out and the responses to them given by the Employment Tribunal. We are satisfied that in each and every case those responses are consistent with the evidence and the inferences were ones that the Employment Tribunal was entitled to draw.
12. Today the matter is listed as a preliminary hearing. Mr Peat has had submissions made on his behalf by two advocates, namely Mr Basu who represents him under the ELAAS scheme and Mr Peat's own brother, who had represented him in the Employment Tribunal.
13. Mr Basu sought to take one point only on behalf of the appellant. He submitted that the appellant had undoubtedly been an employee when he first went to work for the Company as a production manager in 1985. Mr Basu says that that is a significant matter which may distinguish this case from other cases where the person claiming from the Secretary of State has been a director throughout his relationship with the insolvent company. Mr Basu submitted that if the appellant had been an employee in 1985 it was incumbent upon the Employment Tribunal to demonstrate when and how he ceased to be an employee.
14. It seems to us that the Employment Tribunal discharged its responsibilities fully in that regard. It came to the conclusion that he had made the transition from employee to being solely a director in 1993 following the resignation of the other directors and his ascendancy to a 50% shareholding. In fact it now seems that the facts were more strongly adverse to the appellant than they seemed to the Employment Tribunal. The Employment Tribunal seemed to have been under the impression that Mr Barnes, the other 50% shareholder, remained a director, albeit not involved in the day-to-day affairs of the Company, until the end. From documents that are now provided to us it is apparent that that was not so and that Mr Barnes resigned as a director on 29th March 1993 on the same day as the other directors. In our judgment, there is nothing in the point which Mr Basu sought to make. There is nothing unusual about somebody making a transition from being an employee to being a director and employee and ultimately to being a director alone. Each case turns on its own facts and on the facts of this case it is abundantly clear why the Employment Tribunal made the analysis that it did.
15. The appellant's brother made some additional submissions to us. In a sense they were submissions inviting us to take a different view of the evidence from that which had been taken by the Employment Tribunal.
16. The Employment Appeal Tribunal cannot take that task upon itself. It can only deal with appeals on points of law, save in those cases where a decision of the Employment Tribunal is perverse to such an extent that that becomes a point of law. It is absolutely clear to us in this case that there is no evidence of perversity in the decision of the Employment Tribunal. Accordingly, we see no arguable ground of appeal in the matters advanced by the appellant's brother.
17. It follows from what we have said that there are no arguable grounds to be advanced in the present case and we shall dismiss the appeal. However, we do not leave it without recording our unanimous sympathy with Mr Peat. We appreciate that it has been a frustrating and no doubt at times bewildering experience to go to the Employment Tribunal twice and the Employment Appeal Tribunal twice. The reality is that on the second occasion the Employment Tribunal reached a lawful decision that was carefully reasoned and it contained no errors of law. On this occasion the Employment Appeal Tribunal is unable to interfere with it.