United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR C BOURNE (of Counsel) Instructed by: Messrs Williamsons Solicitors Lowgate Kingston upon Hull HU1 1EN
For the Respondent	MR I REES Consultant Peninsula Business Services Ltd Riverside New Bailey Street Manchester M3 5PB


 


SUMMARY

Appellant worked for a year as a publican/restaurateur without pay. Did the provision of accommodation and/or food and drink constitute remuneration so as to provide consideration for a contract of employment? Case remitted to same ET to make concise findings of fact: Burns v Consignia


 


HIS HONOUR JUDGE BIRTLES

1. This is an appeal from the Decision of an Employment Tribunal sitting at Hull on 28 November and 5 December 2003. A Reserved Decision was sent to the parties and entered in the register on 23 December 2003. The Chairman was Mr A J Simpson and the members were Mrs S Scott and Mr W C Scrivens. The unanimous Decision of the Tribunal was that the Applicant had not been continuously employed for a period of one year, ending with the effective date of termination. Accordingly the Tribunal decided that it did not have jurisdiction to hear the complaint of unfair dismissal.
2. The Extended Reasons set out the findings of fact in paragraphs 2 - 9 of the Decision and are incorporated in this judgment:

"2 The Applicant has been in the licensed trade for a number of years. Latterly this has been in association with her partner Richard Shah-Khan. Mr Shah-Khan is the nephew of Angela Marshall who in turn is married to David Marshall. David Marshall is the guiding light of the Respondent which is in the business of railway maintenance and employs some 500 staff in carrying out that work.

3 The Applicant and Mr Shah-Khan had given up the business which they had been operating in London as Publicans. It appears that they had decided that the hard work and unsociable hours which were involved in the licensed trade were not conducive to starting and bringing up a family and so they had decided to seek a new career. They had moved to Hull following the disposal of their business interest in London and Mr Shah-Khan had obtained employment with Mr Marshall in his railway company. At that stage the company had acquired premises in Hedon Road. This had been initially because Mr Marshall had an interest in a motorcycle business and then the premises next door had been acquired. For reasons which need not concern the Tribunal, Mr Marshall despite having had no experience in the hospitality business had decided to convert the premises into a Pub, Hotel and Restaurant. Mr Shah-Khan's initial involvement in the work was to act as a labourer on the building site. Unfortunately not long after Mr Shah-Khan began work on the building site there was a major structural problem which resulted in a collapse of part of the building and the site had to be closed. Mr Shah-Khan then began work on the railway proper and this kept him away from Hull for considerable periods.

4 There then followed a series of events, the exact nature of which the Tribunal, despite closely questioning those involved, was unable satisfactorily to ascertain. None of the participants, the Applicant, Mr Shah-Khan and Mr Marshall, were able to explain exactly how it was that an arrangement came about whereby Mr Shah-Khan with the assistance of the Applicant was to become the Manager of the business which was to be established in the Hedon Road premises once the building work was completed. What we were able to ascertain was that there were discussions between Mr Marshall and Mr Shah-Khan as to how much he would be paid for his endeavours. Whilst Mr Shah-Khan was working on the railway he was paid at the rate of £8.00 per hour. In discussion with Mr Marshall, Mr Shah-Khan indicated that he would expect to spend some 60 hours per week managing the Hedon Road premises. On an annualised basis this would equate to £24,960 and it was therefore agreed that Mr Shah-Khan would be paid at the rate of £25,000 per year. In addition once accommodation became available within the premises he would move in and have accommodation as part of his package. In addition as is common with the hotel industry whilst on duty he would be "fed and watered".

5 Although such arrangements were made for Mr Shah-Khan nothing was said with regard to how the Applicant was to function. It was clearly understood from the start that she would have a role to play in the business and indeed from the evidence we are satisfied that the role was an extensive one. Mr Marshall expressed the view that the £25,000 which he had agreed to pay Mr Shah-Khan would cover both him and the Applicant. Although that does seem at odds with the way in which the £25,000 was arrived at, unless it was contemplated that the 60 hours per week would be shared between Mr Shah- Khan and the Applicant. Although no definitive evidence was produced it seems likely that the total of hours worked per week by the two of them was more likely to be 60 hours each than 60 hours in total but as we say there was no direct evidence on this issue.

6 The Hedon Road business initially opened with the Pub in December 2001. Gradually the Restaurant and the Hotel were brought on stream although it seems that matters did not progress as quickly as had been originally anticipated. Again, the Tribunal was not assisted by the paucity of evidence as to the events which unfolded during the ensuing months. There were meetings on a regular basis and certain items were minuted as to what was discussed at the meetings. It is fair to say that the Applicant was somewhat dismissive of the contents of the minutes. She was not able to put forward any alternative version having kept no notes herself. What is clear is that on a number of occasions the question of remuneration was considered but it is equally clear that on no occasion were any definitive suggestions put forward or accepted.

7. One factor which seemed to inhibit any positive discussion was the absence of real data concerning how well or badly the business was doing. There was a dispute between Mr Shah-Khan and Mr Marshall (or perhaps more correctly one of Mr Marshall's employees) as to how the books were to be kept. Mr Shah-Khan refused point blank to complete certain records which the Respondent required to be completed. Nonetheless those records were completed surreptitiously by the Applicant. It became plain to Mr Marshall as the year wore on that the business was not being profitable. Indeed it was running at a considerable loss. We move on to autumn of 2002. A number of events occurred. One was that the Applicant found that she was pregnant. This was officially confirmed to the Respondent at a meeting, one of the regularly weekly meetings, in September 2002. Indeed the minute noted in a congratulatory way the announcement of the Applicant's pregnancy. The next event was that the Applicant was told that as she was not an employee she would not be entitled to Maternity Pay or Maternity Leave. Finally in October, Mr Shah-Khan was dismissed for what the Respondent saw as his failure properly to carry out his role as Manager.

9. His dismissal resulted in a situation where the Respondent did not have a Manager for the Hedon Road premises. To fill that vacancy the Respondent offered the role to the Applicant at a salary of £20,000 per annum which the Applicant promptly accepted. She then was told that, although the Respondent believed it had no legal obligation so to do, she would be paid Maternity Pay and afforded Maternity Leave. Indeed it is clear that both of those assurances were fulfilled. The Applicant was sent a contract of employment which indicated that her start date was 1 December 2002 and that no prior period would count. The Applicant amended the start date to December 2001 but the Respondent made it plain that this was not acceptable to the Respondent and the Applicant was told that her official start date would remain December 2002. She did not appear to have pursued that matter further although it is fair to note that by this stage she was well advanced in her pregnancy."

3. The Employment Tribunal's conclusions are at paragraphs 12 - 15 of the Decision and they are also incorporated in this judgment:

"12. The question which we as a Tribunal have to approach is whether there was a relationship between the Applicant and the Respondent from 13 December 2001 until 30 November 2002 which amounted to a contract of employment. If there was such a relationship then the Applicant would have the requisite length of service to enable her to pursue her complaint. If on the other hand the relationship between the Applicant and the Respondent did not amount to a contract of employment then she would not have that length of service. We have to ascertain whether on the full consideration of all the aspects of the relationship it is one of a contract of employment or one of some other nature. If it is not a contract of employment then it matters not what the nature of the relationship is.

13. As already indicated we have not been assisted by the lack of clarity from all witnesses as to how the Applicant came to be where she was and what if any discussion there was as to how she was to be regarded. There has been a great deal of evidence as to what the Applicant actually did during the period in question and it is fair to say that even on the Respondent's evidence the work which the Applicant undertook would fulfil one of the essential elements which we expect to find in a contract of employment. On the other hand finding one element is not enough. There has to be a totality of a relationship and it is only upon an analysis of the totality that we can determine whether the relationship amounts to contract of employment or amounts to some other thing. As we often do in cases such as this we look back to the earlier authorities to see whether we can glean some assistance from those authorities. A very early case indeed one which pre-dates the Tribunal's jurisdiction in matters of unfair dismissal is the case of Ready Mixed Concrete (South East) limited -v- The Minister of Pensions and National Ins [1968] 2QB497. In that case Mr Justice MacKenna said:

"A contract of service exists if these conditions are fulfilled:

1. The servant agrees that in consideration of a wage or other remuneration he will provide his own work and skill in the performance of some service for his master.

2. He agrees expressly or impliedly that in the performance of that service he will be subject to the others control in the sufficient degree to make that other master.

3. The other provisions of the contract are consistent with its being a contract of service."

In expanding upon item 1 the learned Judge went on:

"There must be a wage or other remuneration otherwise there would be no consideration and without consideration no contract of any kind. The servant must be obliged to provide his own work and skill."

In a later case when reviewing the words of Mr Justice MacKenna, Lord Justice Stevenson said in the case of McMeechan [1997] ICR 549:

"There must in my judgement be an irreducible minimum of obligation on either side to create a contract of service. I doubt if it can be reduced any lower than in the sentence as I have just quoted from Mr Justice MacKenna."

14 Applying those words to this case do we find the irreducible minimum which the learned Judge asserted was essential? There is no doubt that in all aspects other than one, the Applicant's relationship with the Respondent appears to fall within the terms of the words quoted. However there is one omission and in the view of the Tribunal one crucial omission there was no wage nor was there any other remuneration. The Applicant asserted in evidence and was able to point to references in the minutes of the meetings referred to that it was anticipated that at some stage in the future something would be agreed with regard to what she would be paid for her endeavours. It may well be that this was so. It may well be as was stated in both the minutes and in evidence that once the profitability of the operation had been ascertained something would be done about the Applicant's pay but in the view of the Tribunal for this to be regarded in some way as wage or other remuneration there has to be some degree of certainty. Promises along the lines of "something will be sorted out" or "we will see that you are alright" or "we will make it worth your while" cannot in the view of the Tribunal amount to a valuable consideration. It cannot amount to a valuable consideration because it is imprecise and quite impossible to quantify. Wages or other remuneration are usually expressed in some concrete way either on the basis of £ per week or £ per hour for y hours per week or a percentage on some ascertainable sum by way of profit or sale or turnover. If the Applicant had been able to point to some such agreement whereby at a point in time it would be possible with certainty to ascertain what the basis of remuneration was to be then it may then be that although the ascertainment of the remuneration was to take place after the event the very fact that there was an agreement to ascertain would be enough to establish that remuneration was payable. But the Applicant was unable to point to any such arrangement in this case. The most she had was a hope that something would be agreed in the future, a hope that may well have been encouraged by assurances given by or on behalf of the Mr Marshall that matters would in the future be looked at. Although the Applicant may have relied upon such assurances and acted as she did based upon such reliance this cannot in the view of the Tribunal amount to the wage or other remuneration which Mr Justice MacKenna makes plain is an essential pre-requisite to there existing an employment relationship.

15 As the Applicant has not established that the irreducible minimum of the relationship has been met, the Tribunal's conclusion must be that the relationship between the Applicant and the Respondent was not a contract of employment until she was offered such a contract with effect from 1 December 2002. In those circumstances the unanimous decision of the Tribunal is that the Applicant did not have the necessary length of continuous service to enable her to pursue a complaint of unfair dismissal."

4. The short facts are that Ms Catherine Sheehan presented a claim for unfair dismissal as well as other contractual remedies. She brought that claim against her former employer. There was no dispute that she was employed from 1 December 2002 and that the employment terminated on 15 July 2003. That of course would in itself not have given her one year's continuous employment entitling her to bring a claim for unfair dismissal. The issue was whether she had been employed by the same employer prior to 1 December 2002. She claimed that she had been employed for approximately twelve months prior to that date. If that was correct, she would then of course have had the one year's qualifying continuity of employment with the same employer, entitling her to bring a claim for unfair dismissal.
5. The Employment Tribunal heard evidence from Ms Sheehan and from a Mr Shah-Khan, her partner, and also from Mr Marshall, who was the moving spirit behind the Respondent. The Tribunal clearly had considerable difficulty with the recollections of the various witnesses. The Tribunal found that Mr Marshall had, as a side enterprise of his business of railway maintenance, decided to start up a licensed premises. He offered employment to Mr Shah-Khan to come and be the publican. The Tribunal found in paragraph 4 of its Decision that Mr Shah-Khan was to be paid at a rate of £8 an hour on a 60 hour week, which became, on an annualised basis, £24,960. It was therefore agreed that Mr Shah-Khan would be paid at the rate of £25,000 per year. In addition, once accommodation became available within the premises, he would move in and have accommodation as part of his package. In addition, as is common within the hotel industry, whilst on duty he would be "fed and watered". We understand that to mean that he would be able to provide himself with food and liquid refreshment from the premises.
6. Paragraph 5 of the Decision is critical. It says this:

"Although such arrangements were made for Mr Shah-Khan nothing was said with regard to how the Applicant was to function. It was clearly understood from the start that she would have a role to play in the business and indeed from the evidence we are satisfied that the role was an extensive one. Mr 1 Marshall expressed the view that the £25,000 which he had agreed to pay Mr Shah-Khan would cover both him and the Applicant. Although that does seem at odds with the way in which the £25,000 was arrived at, unless it was contemplated that the 60 hours per week would be shared between Mr Shah- Khan and the Applicant. Although no definitive evidence was produced it seems likely that the total of hours worked per week by the two of them was more likely to be 60 hours each than 60 hours in total but as we say there was no direct evidence on this issue."

The business opened with the pub in December 2001 and the restaurant and the hotel were brought on stream. There were delays. The Tribunal found as a fact that what is clear is that on a number of occasions, the question of remuneration was considered for the Applicant, but it was equally clear that on no occasion were any definitive suggestions put forward or accepted. The Tribunal move on with the history of the business and refer to the fact that Mr Shah-Khan was dismissed, and the Applicant was offered a role at a salary of £20,000 which she accepted. That was from 1 December 2002.

7. The Tribunal considered the law and referred to the well known decision of Ready Mixed Concrete (South East) Ltd -v- The Minister of Pensions and National Insurance [1968] 2 QB 497. They referred to the three conditions set out by MacKenna J, for the basic requirements of a contract of service. We are only concerned in this case with one:

"The servant agrees that in consideration of a wage or other remuneration he will provide his own work and skill in the performance of some service for his master"

On the evidence it is quite clear that the Tribunal found that criteria 2 and 3 of the criteria set out by MacKenna J were satisfied in this case.

8. In paragraph 14 of its Decision, the Tribunal said this:

"Applying those words to this case do we find the irreducible minimum which the learned Judge asserted was essential? There is no doubt that in all aspects other than one, the Applicant's relationship with the Respondent appears to fall within the terms of the words quoted. However there is one omission and in the view of the Tribunal one crucial omission there was no wage nor was there any other remuneration."

The Tribunal went on at some length in paragraph 14 to consider the discussions between the parties about money payment to Ms Sheehan. They conclude in paragraph 15 that as the Applicant had not established that the irreducible minimum of the relationship had been met the Tribunal concluded that the relationship between the Applicant and the Respondent was not a contract of employment, until she was offered a contract with effect from 1 December 2002.

9. It is not necessary for us to consider the evidence before the Tribunal as to the other criteria set out by MacKenna J, but we note in passing that it is quite clear that for the year prior to 1 December 2002, Ms Sheehan worked a very substantial working week and that she was a full member of the hotel, restaurant and pub business, and, indeed had a position of considerable responsibility. We also note that both she and Mr Shah-Khan were the joint publicans of the premises.
10. The appeal is on the basis that the Employment Tribunal erred in not considering the issue of remuneration in respect of any accommodation and/or food and drink supplied to Ms Sheehan. If accommodation and/or food and drink was supplied to her, then it is submitted that that amounts to remuneration, within the terms of MacKenna J's judgment in the Ready Mixed Concrete. It would therefore follow that Ms Sheehan was an employee for a year prior to 1 December 2002, and therefore had the necessary continuity of employment with the same employer to bring a claim for unfair dismissal. It is accepted that there were no finalised discussions prior to 1 December 2002 as to the precise wage or salary which Ms Sheehan was to be paid, but that difficulty was met by the claim which is set out in the Originating Application: EAT bundle page 20. If Ms Sheehan was successful at a hearing for unfair dismissal then her compensation claim is based upon approximately one year's employment at the minimum wage.
11. We agree with the submissions made by Mr Bourne. It seems to us that this is an aspect of the case which this Employment Tribunal clearly failed to address. It is not necessary for us to go to the reasons why that was so. Quite clearly, the Employment Tribunal had found that accommodation and food and drink were part of Mr Shah-Khan's remuneration package in this industry; of course such a package is quite common. The failure by the Tribunal to consider this aspect of the matter amounts to an error of law.
12. The question then becomes how should the matter be disposed of? We have considered carefully the submissions made by Mr Bourne and by Mr Rees, who appeared for the Respondent. Given that the only issue is the one that we have identified, we feel it is proper in this case to apply the reasoning of the President in Burns -v- Consignia No 2 [2004] IRLR 425 and remit this case to the same Tribunal. We do that because the issues which the Tribunal will have to consider and decide are within a very narrow compass. They relate entirely to the question of remuneration. The Tribunal has already found as a fact that the other two criteria set out by MacKenna J in the Ready Mixed Concrete case, have been satisfied. There is therefore no need for it to reconsider those matters.
13. We are grateful to Mr Bourne in his Skeleton Argument for suggesting the questions we should refer back to the Tribunal. We propose to amend them slightly and remit the following four questions to the Employment Tribunal. It will, of course, be necessary for the Employment Tribunal to meet and it will clearly need to hear evidence from Ms Sheehan, and it may well be from Mr Marshall, or such other witnesses the Respondent wishes to call.
14. Those questions are as follows;

(1) Whether the Appellant was provided with accommodation and/or food and drink.

(2) If the Appellant was so provided, whether that provision was in return for the services it found she provided to Platform 1.

(3) In the light of the findings made in respect of (1) and (2) above, whether that amounted to "remuneration" as defined by MacKenna J in Ready Mixed Concrete (South East) Ltd -v- The Minister of Pensions and National Insurance [1968] 2 QB 497.

(4) In the light of the findings made in respect of (1) to (3) above, whether the Appellant was an employee of the Respondent from the same date as Mr Shah-Khan became an employee or, at the latest, from December 2001 when Platform 1 opened for business.

15. We do not, as I think that is apparent, consider it appropriate in the absence of findings of fact by the Tribunal, to set the Decision of the Tribunal aside and substitute our own decision that Ms Sheehan was an employee of the Respondent. Neither do we think that given the narrow compass of the issue to be decided is it appropriate for this case to be remitted to a fresh Employment Tribunal to hear the whole matter again.