United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR J BOWERS QC and MR TRAFFORD (Of Counsel) Instructed by: Homelet Homelet House 30 Thornton Heath Surrey CR7 6BA
For the Respondent	MR DAVID BERKLEY QC and MARTIN BUDWORTH (Of Counsel) Instructed by: Messrs Horwich Farrell Solicitors National House 36 St Ann Street Manchester M60 8HF Messrs Edwards Geldard Solicitors 44 The Ropewalk Nottingham NG1 5EL


 


JUDGE PETER CLARK

1. This appeal raises once more the distinction between employees and the self-employed within the meaning of Section 230 of the Employment Rights Act 1996.
2. An Employment Tribunal sitting at London (South) over 3 days under the Chairmanship of Mr I M MacInnes, followed by 2 days deliberations in private concluded, in a reserved decision promulgated on 22 April 2003, that the 10 Applicants were, from 10 November 1999, employed by the 1^st Respondent, Propertycare Ltd (Propertycare). The identity of the putative employer is no longer in issue on appeal, although it was before the Employment Tribunal.
3. Against the finding that the Applicants were employees Propertycare appealed by Notice dated 28 May 2003 settled by Mr Trafford, Junior Counsel appearing below. At a Preliminary Hearing Her Honour Judge Wakefield and members, on 12 September 2003, allowed the appeal to proceed to a full hearing without limitation, that is to say all grounds of appeal were permitted to proceed.
4. Thereafter leading Counsel, J Bowers QC was instructed and he, together with Mr Trafford, prepared proposed amended grounds of appeal which were served on the Applicants, Mr Berkeley QC tells us, on 17 October 2003. Formal objection is taken to the proposed amendments, an objection to which we shall return. The full merits hearing of these applications has been listed for a 10 day hearing before an Employment Tribunal at London (South) to commence on 24 November 2003.
5. At paragraph 10 of their Extended Reasons the Employment Tribunal directed themselves as to the applicable law in this way:

"10 Mutuality of obligation and control are together the irreducible minimum legal requirements for the existence of a contract of employment. The Tribunal considered that the guidance of McKenna J in Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance as approved by the House of Lords in Carmichael v National Power Plc should be followed by Tribunal. Three conditions are required to be fulfilled:-

(i) "Mutuality of obligations", ie a wage in return for work:

(ii) An express or implied agreement that performance of the service would be the subject of the control of the party employing; and

(iii) That the other provisions of the contract are consistent with it being a contract of service.

We also had regard to the cases to which we were referred by the parties in submissions"

6. It is common ground between Counsel that the first sentence of the Employment Tribunal's self-direction is plainly correct. It follows that an Applicant who fails to pass either the Mutuality of Obligation test or the control test will fail to establish that he is an employee for the purpose of giving the Employment Tribunal jurisdiction to entertain his complaint here of unfair dismissal or breach of contract.
7. In the proposed amended grounds of appeal, supplemented by a written skeleton argument, Mr Bowers organised his submissions under 5 heads. One of those challenges was to the Employment Tribunal's express finding that mutuality of obligation existed between these parties (see Extended Reasons paragraph 12). The point is succinctly stated at paragraph 5(A)(iv) of the amended Grounds of Appeal, under the heading 'Legal Misdirections'. It is there contended:

"The Employment Tribunal failed to apply the principle of mutuality of obligation as a precondition of a contract of employment since there was no obligation on the putative employer to provide work."

8. Pausing there, we shall grant Propertycare permission to amend the original grounds of appeal to add paragraph 5(A)(iv). We do so because, in our judgment, that way of putting the case is a way of developing the original ground 5(A)(ii), which refers to the irreducible minimum for a contract of employment and the guidance provided by the Court of Appeal in Montgomery v Underwood [2001] IRLR 269. It is, as Mr Berkeley elegantly phrased it, within the capsule of paragraph 5(A)(ii). In these circumstances we see nothing inconsistent with the guidance given by Peter Gibson LJ in Miriki v Bar Council [2002] ICR 505, paragraph 28, in allowing this amendment.
9. Since the Employment Tribunal's finding that Mutuality of Obligation existed in this case was a critical finding, it being a pre-condition of a contract of service giving rise to an employment relationship, we invited Mr Bowers to deal with this point first and then heard full argument from both parties on the point. Having done so we have concluded that the Employment Tribunal's decision cannot stand and must be set aside. Our reasons for reaching that conclusion are as follows:

(1) The Applicants were each engaged by Propertycare under the terms of a contract headed 'Authorised Independent Sales Agency Agreement'. It is dated 29 March 1996. Each Applicant at various times accepted engagement under the terms of that Agreement which the Employment Tribunal, we are satisfied, found amounted to a contract for services. See Decision paragraph 2; Extended Reasons paragraph 14. However, the Employment Tribunal went on to find that with effect from 10 November 1999, the date on which Propertycare's recently appointed national sales manager, Mr Hunisett, met with the Business Development Managers (BDM)including these Applicants, the nature of the relationship changed from that of self-employed to employed persons.

(2) In reaching that conclusion the Employment Tribunal first directed themselves (Reasons paragraph 10) that a pre-condition which must be fulfilled was that there was 'Mutuality of Obligations" ie a wage in return for work.

(3) The cases, starting with Ready Mixed Concrete [1968] 2QB 497, show that mutuality of obligations means more than a simple obligation on the employer to pay for work done; there must generally be an obligation on the employer to provide work and the employee to do the work. That is how we understand the first of McKenna J's tests in Ready Mixed Concrete (page 515C). In Clark v Oxfordshire Health Authority [1998] IRLR 125, paragraph 41, Sir Christopher Slade allowed of the possibility that paying a retainer when no work was available might give rise to mutuality of obligations, but there must be some mutuality of obligations. The principle was affirmed by the House of Lords in Carmichael, and applied subsequently by the Court of Appeal in Montgomery and again in Stevedoring and Haulage Services Ltd v Fuller [2001] IRLR 627.

(4) In these circumstances, on the face of it, it appears that in their short self- direction at paragraph 10(i) of their Reasons this Employment Tribunal has misdirected itself. However, as Mr Berkeley rightly points out, it is necessary to consider the Employment Tribunal's reasons as a whole to discern whether in fact they have applied the correct test and answered the correct legal question. Unhappily we must part company with him when he submits that they have. We accept Mr Bowers' submission that nowhere in the Employment Tribunal's reasons do they make any finding that there was an obligation on Propertycare to provide work for the Applicants. Their only contractual obligation was to pay commission on business generated by each Applicant. Mr Berkeley was driven to concede that there was no express finding by the Employment Tribunal that such obligation was placed on Propertycare by the contract made between the parties. He contends however that the Applicants had a real expectation that they would receive work; again there is no finding to that effect, assuming that such an expectation would be sufficient. See Fuller.

(5) Further, we accept Mr Bowers' submission that in dealing with Mutuality of Obligation at paragraph 12 of their Reasons the Employment Tribunal had demonstrated that they have in fact confined themselves to the narrow question posed at paragraph 10(i). There they say:

"we find that there was a mutuality of obligation between the Applicants and Property Care Ltd that the Applicants would receive payment (albeit by commission varying with sales) in return for work which the Applicants had in practice to do personally."

The reference to personal service was we think a reference to a separate submission made, in closing written argument by Mr Trafford on behalf of Propertycare, that the Applicants were not required to perform the work personally, but could, with permission, engage a substitute (See Express & Echo Publications v Tanton [1999] IRLR 367).

(6) Finally, we should deal with the argument advanced by Mr Berkeley that the question of Mutuality of Obligation was not in issue before the Employment Tribunal. He points to what we regard as an equivocal statement of Propertycare's position below contained in outline written submissions prepared by Counsel, Mr Ben Adamson, originally instructed for Propertycare (see paragraphs 10 and 18 of those submissions). However, the point was, in our view, fully and squarely put by Mr Trafford at paragraph 29 of his closing written submissions to the Employment Tribunal, following the hearing, where he submitted in terms that at no stage did Propertycare (or any of the other Respondents) provide work for the Applicants to do. That submission required adjudication by the Employment Tribunal as a matter of law and fact. It has not been dealt with, expressly or implicitly, in their Extended Written Reasons.

10. For these reasons we shall allow the appeal and remit the Section 230 issue to a fresh Employment Tribunal for complete rehearing. It may be convenient for that matter to be dealt with first at the hearing presently fixed for 24 November, but that will be a matter for directions by the Employment Tribunal.