THE INDUSTRIAL TRIBUNALS

CASE REFS:   1964/13
1715/13

CLAIMANTS:	1.	Kenneth Calvert
			2.	Yvonne Elizabeth Calvert	

RESPONDENT:	Department for Employment and Learning	

DECISION 
(A)	The appeals in the Kenneth Calvert case are allowed, to the limited extent indicated at paragraph 36 below.

(B)	The appeals in the Yvonne Calvert case are dismissed.

Constitution of Tribunal:
Chairman (sitting alone):		Mr P Buggy

Appearances:
The claimants were represented by Mr David Calvert.

The respondent was represented by Mr P McAteer, Barrister-at-Law, instructed by the Departmental Solicitors Office.

REASONS

1.	Mr David Calvert (referred to in this decision as “David Calvert”), is the representative of both of the appellants in these two cases.  The first appellant, Kenneth Calvert, is the brother of David Calvert.  The second named appellant, Mrs Yvonne Calvert (referred to in this decision as “Mrs Calvert”) is the wife of David Calvert.

2.	The House of Brindle Ltd (“the Company”) operated a retail business in Lurgan, which was successful for many years.  Unfortunately, it got into financial difficulties.  The Company was the subject of a winding up order in September 2012.

3.	David Calvert owned 50% of the shares in the Company and Mrs Calvert owned the other 50%.  David Calvert was the sole Director of the Company.  For official purposes, Mrs Calvert was the Company Secretary.  However, in practice, as David Calvert acknowledged, Mrs Calvert had little or nothing to do with the governance of the Company, or with the recording of matters relating to such governance.  Kenneth Calvert had no shares in the Company and was not at all involved in the governance of the Company.

4.	In each of these two cases, the relevant claimant makes two types of claims: (1) He/she makes claims against the Company.  (2) He/she appeals against the decisions which the Department for Employment and Learning (“the Department”) has made, in its role as the statutory guarantor in respect of certain debts.

5.	Because the Company is the subject of a winding up order, no claims can be pursued against the Company without the leave of the High Court.  In any event, it is unlikely that the Company will have funds to make payments in respect of any claims.  Accordingly, only the appeals against the Department have been progressed.  This is my Decision in respect of those appeals.

The legislation

6.	The statutory guarantee provisions of the Employment Rights Order (Northern Ireland) Order 1996 (“the Order”) can be summarised as follows.

7.	The statutory guarantee can only be invoked by an individual who, at the relevant time, or at the relevant times, was working as an “employee” (in the sense in which the term “employee” is used in the Order).

8.	For the purposes of the Order, a person is an employee only while he or she is working under a contract of service.  Accordingly, in order for an individual to be an “employee”, both of two criteria have to be satisfied:  (1) The relevant individual must be working pursuant to a contract.  (2) That contract must be a contract of service (as distinct from being a contract for services, or a contract of some other kind).

9.		The effect of Article 201 of the Order is as follows.  If an employee claims that his/her employer is liable to pay him/her a redundancy payment and that the employer is insolvent, and that the payment remains unpaid, that employee may apply to the Department for a payment under Article 201.

10.	The effect of Article 202 of the Order is as follows.  Where, upon an application under Article 201, the Department is satisfied both that the relevant employer is “insolvent” (within the meaning of the statutory guarantee provisions of the Order) and that the employee is entitled to a redundancy payment, the Department comes under an obligation to pay to that employee, out of the National Insurance Fund, an amount in respect of the redundancy payment which that employer ought to have paid to that employee.

11.	The effect of Article 205 of the Order is as follows.  If, in the context of an Article 201 application, it is claimed that an employer is liable to pay a redundancy payment, any question as to that liability of the employer must be referred to an industrial tribunal for determination.  In each of these two cases, this is my decision pursuant to Article 205.

12.	The effect of Article 227 of the Order can be summarised as follows.  If, upon an application made to the Department by an employee, the Department is satisfied both that the applicant’s employer has become insolvent, and that, on “the appropriate date” the claimant was entitled to be paid wages, holiday pay and/or notice pay, the Department must pay certain amounts to that employee, out of the National Insurance Fund.

13.	The effect of Article 233 of the Order is as follows.  If an employee is dissatisfied with a Departmental decision made in response to an Article 227 application he or she can present a complaint (can, in effect, appeal) to an industrial tribunal against that decision.   If, pursuant to that appeal, the industrial tribunal finds that the Department ought to make a payment under Article 227, the tribunal must make a declaration to that effect, and must declare the amount of any such payment which the Department ought to make.  In each of these two cases, this is my decision in respect of the relevant claimant’s Article 233 appeal.

Lynch  v  Ministry of Defence

14.	An extraordinary feature of these cases was that Kenneth Calvert chose not to provide oral testimony in these proceedings, and that David Calvert also chose not to give evidence in these proceedings.  (Even though I invited David Calvert to reconsider his position on that matter, he reiterated that he did not wish to give evidence in these proceedings).

15.	At an early stage in the proceedings, I had drawn David Calvert’s attention to the principles which had been endorsed in Lynch v Ministry of Defence [1983] NI 216, at page 22.  In that case, Hutton J endorsed the principles which had been stated in O’Donnell v Reichard [1975] VR 916 at page 99, where it was stated:

"..where a party without explanation fails to call as a witness a person whom he might reasonably be expected to call, if that person's evidence would be favourable to him, then, although the jury may not treat as evidence what they may as a matter of speculation think that that person would have said if he had been called as a witness, nevertheless it is open to the jury to infer that that person's evidence would not have helped that person's case; if the jury draw that inference, then they may properly take it into account against the party in question for the purposes, namely (a) in deciding whether to accept any particular evidence, which has in fact been given, either for or against that party, and which relates to a matter with respect to which the person not called as a witness could have spoken; and (b) in deciding whether to draw inferences of fact, which are open to them upon evidence which had been given, again in relation to matters with respect to which the person not called as a witness could have spoken."

16.	In my view, the principles which are referred to in the quoted extract from the Reichard judgment are more clearly explained in the following summary, which was provided by Brooke LJ in Wisniewski v Central Manchester Health Authority [1998] PIQR 324, in the following terms:

“From this line of authority I derive the following principles in the context of the present case:

(1) 	In certain circumstances a court may be entitled to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in an action.

(2) 	If a court is willing to draw such inferences they may go to strengthen the evidence adduced on that issue by the other party or to weaken the evidence, if any, adduced by the party who might reasonably have been expected to call the witness.

....

(4)	If the reason for the witness’s absence or silence satisfies the court then no such adverse inference may be drawn.  If, on the other hand, there is some credible explanation given, even if it is not wholly satisfactory, the potentially detrimental effect of his/her absence or silence may be reduced or nullified.”

17.	Kenneth Calvert was present during a Case Management Discussion in this litigation.  When his case initially came on for hearing on 16 December 2013, he was not present.  David Calvert told me that Kenneth Calvert had decided not to give evidence.  I encouraged David Calvert to urge his brother to reconsider the matter.  He said that he thought it unlikely that Kenneth Calvert would reconsider the matter.  He told me that Kenneth Calvert had certain health and family difficulties which made participation as a witness in these proceedings more difficult for him than it would be for most people.  However, he acknowledged that Kenneth Calvert could not accurately say that he was medically unfit to give evidence.

18.	I am not satisfied that there was good reason for Kenneth Calvert’s decision not to give evidence in these proceedings.  I do not consider that the explanation provided is a credible and satisfactory explanation, (in the sense in which the words “credible” and “satisfactory” are used in the context of the Wisniewski statement of principle).

19.	David Calvert decided not to give evidence in this case.  His explanation for not giving evidence was as follows.  He told me that he had noted Mr McAteer’s line of questioning in the course of cross-examining Mrs Calvert.  He thought that many of the questions posed by Mr McAteer were either irrelevant to the issues or were of relatively peripheral relevance.  (He was wrong on those points, but I accept that those views, on alleged irrelevance or peripherality, were views which were honestly held).  He asserted that he was declining to give evidence in this case, because he did not want to give Mr McAteer the opportunity of asking him questions in cross-examination which would be either irrelevant or which would only be of relatively peripheral relevance.

20.	I regarded David Calvert’s explanation, for his failure to give evidence, as neither “credible” nor “satisfactory” (in the sense in which those terms are used in the context of the Wisniewski statement of principles).

The evidence

21.	I was provided with several bundles of documents in these cases, along with some miscellaneous documents.  I told the parties that I would not have regard, for evidential purposes, to any particular document within a bundle, unless my attention had been drawn (by one of more of the parties) to that particular document.

22.	Only Mrs Calvert gave evidence in these cases.  (She gave evidence in both cases).  

23.	The appeals of these two appellants were heard together, because they were both allegedly dismissed, at around the same time, by the same “employer”, and because many of the other factual circumstances of each of these various appeals were common to both cases.  Accordingly, evidence given in the Kenneth Calvert case was evidence in the Mrs Calvert case, and vice versa.

The issues in the Kenneth Calvert case

24.	In Kenneth Calvert’s case, the parties were in dispute only in relation to two matters, which are as follows.

25.	Although the parties are agreed that Kenneth Calvert is entitled to redundancy pay, they are in disagreement as to the amount of that entitlement.  That disagreement is solely because the parties are in dispute on the question of whether or not Kenneth Calvert was an employee of the Company from March 1994 (as he contends) or from April 1995 (as the Department contends).  That is the first point of dispute in the Kenneth Calvert case.

26.	The Company ceased to provide services to the public at least from April 2012 onwards.  The Company did not go into liquidation until September 2012.  Kenneth Calvert applied to the Department in respect of unpaid wages in relation to part of that period (the period from April to September 2012).  The Department was not satisfied that he was still employed by the Company from April 2012 onwards.  That is why his application in respect of wages was unsuccessful.  Was he still employed during the April-September 2012 period?  (If so, his wages application must be successful.  If not, it must be unsuccessful).

My conclusions in the Kenneth Calvert case

27.	The first issue between the parties is whether Kenneth Calvert was (as he asserts) an employee of the Company from March 1994, or whether he only became an employee of the Company in April 1995.

28.	The Department opted for the latter date, mainly because the HMRC contributions record makes no reference to Kenneth Calvert being employed in the Company at any time earlier than April 1995.

29.	In argument, David Calvert asserted or admitted that Kenneth Calvert had worked for the business for some time prior to becoming an employee of the Company.

30.	Mrs Calvert told me, during her sworn oral testimony, that she can remember Kenneth Calvert being employed in the business from March 1994.  

31.	However, when asked during the course of cross-examination about the approximate start-dates of other Company staff who joined the Company as employees during the course of the 1970s, she did not always provide accurate answers (which is perfectly understandable given the length of time which has elapsed between the 1970s and the present day).

32.	According to the Company’s wages books, Kenneth Calvert was being paid wages by the Company during the 1994/1995 tax year, but the cheque journal samples for that period indicate that payments made to Kenneth Calvert during that period were not being treated as wages.

33.	Overall, I consider the documentary evidence to be equivocal.  I did not regard Mrs Calvert’s oral testimony on this matter to be convincing.  I consider that there was no adequate reason for Kenneth Calvert’s failure to provide sworn oral testimony in this case.

34.	Against that background, and for those reasons, I am not satisfied that Kenneth Calvert was employed by the Company at any time during the 1994/1995 tax year.

35.	The second area of dispute between the parties in the Kenneth Calvert case is as follows.  The Department was not satisfied that the claimant continued to be employed by the Company from April 2012 until the winding up of the Company.

36.	On balance, I am satisfied that Kenneth Calvert was indeed employed by the Company during the period from April 2012 until the date of the winding up order.  I am so satisfied, against the following background and for the following reasons.

37.	For the purposes of this appeaI, the Department has accepted that Kenneth Calvert was employed by the Company until March 2012.  I accept, as Mrs Calvert asserted in her oral testimony in these proceedings, that there was a significant amount of work to be done after the Company ceased to provide services to the public, during the period leading up to the eventual winding up order; and that Kenneth Calvert continued to work for the Company throughout that point.  Furthermore, I have not received any evidence that Kenneth Calvert was ever explicitly dismissed by David Calvert.  (His employment will automatically have come to an end, upon the coming into effect of the winding up order, if it was not terminated beforehand).

Next steps in the Kenneth Calvert case

38.	The Department should now recalculate the amounts which the Department is willing to pay to Kenneth Calvert, in light of my conclusions on the two disputed issues (as set out above).

39.	The outcomes of the Kenneth Calvert appeals are as follows.  First, for all relevant purposes, he must be treated by both parties (subject to any appeal against this Decision) as having been employed only from 6 April 1995.  Secondly, he must be treated by both parties (again, subject to any appeal against this Decision) as having continued to be employed by the Company throughout the period from 6 April 1995 until the making of the winding up order in September 2012.

The issues in Mrs Calvert’s case

40.	The issues between the parties in Mrs Calvert’s case were as follows:

(1)	Was she an “employee” of the Company at all relevant times, or at any relevant time?

(2)	If she was an “employee”, was she still working for the Company during the period from April 2012 until September 2012?

(3)	If she was indeed an employee, and if she was still working for the Company from April 2012 until September 2012, was she then earning £850 per month (as David Calvert contended) or only £270 per month (as the Department contended)?

41.	In view of my conclusion in relation to issue (1), I have not had to address issues (2) or (3).

The arguments in Mrs Calvert’s case

42.	As the legal representative of the Department, Mr McAteer performed his role with his customary efficiency, courtesy and thoroughness.  On behalf of Mrs Calvert, David Calvert was painstaking and persistent and, in some respects, eloquent.

43.	On behalf of the claimant, David Calvert made the following arguments.  First, Mrs Calvert had worked alongside other people who undoubtedly were “employed” by the Company.  She had worked just as hard as they had.  She had worked under the same working conditions as them.  Why then, would she not be paid redundancy, and other employment debts, under the statutory guarantee procedure?  Secondly, Mrs Calvert had always been treated for tax and national insurance purposes as though she was an employee.  Thirdly, although her contract had never been reduced to writing, she was no different from other people working in the Company (who were recognised by everybody as being employees) in that respect.  Fourthly, it was clear law that the fact that Mrs Calvert was a 50% shareholder was a fact which did not prevent her being classed as an employee.  Fifthly, although she had been a nervous witness, she was not a dishonest witness.  Sixthly, although Mrs Calvert, in her evidence, had talked about the contract being subject to “fluctuations in hours”, what she really meant was that there was flexibility as to the days on which, and times at which, she would work.  

44.	The arguments on behalf of the Department can be summarised as follows.  Mrs Calvert was not employed under a contract of service.  Indeed, she was not employed under any contract at all.  Her evidence had been unreliable.  It was significant that David Calvert had declined to give evidence.

The facts (Mrs Calvert’s case)

45.	At paragraph 5.3 of the claim form, Mrs Calvert was asked to “... say what job you ... did”.  In answer to that question, she stated that she was “Co Secretary/Shop Assistant in retailing”.  In reality, as David Calvert acknowledged during the course of the hearing, she never carried out any significant Company secretarial functions.  At paragraph 7.4 of the claim form, she provided details of her appeal, in the following terms:

	“For some 10 years prior to my employment in the House of Brindle Ltd, I worked for my husband Mr David Calvert, t/a the House of Brindle – sole trader.  This is very much run as a family business, entirely different from the House of Brindle Ltd, in which I was to become an employee in a new job ...”

46.	Having carefully considered the detailed oral testimony of Mrs Calvert, I am unable to identify any important operational differences between the work which she carried out when the business was unincorporated and the work which she subsequently carried out upon the incorporation of the business.

47.	Paragraph 7.4 of the claim form continued in the following terms:

		“In 1998 I joined the House of Brindle Ltd, as an employee; the contract was verbal and the duties varied according to need.  At that time the House of Brindle Ltd appointed me as Co Secretary to deal with the administration of this new Company” ...

48.	Having listened carefully to the oral testimony of Mrs Calvert in these proceedings, and having noted the contentions of and admissions of David Calvert in his role as a representative, I am satisfied that Mrs Calvert never actually carried out any significant Company secretarial functions.

49.	Paragraph 7.4 of the claim form continued in the following terms:

	“The workload and specific duties required would change as the new departments would be opened to bring the shop to its full potential.  I assisted in the Ladies’ Dept. at the beginning and then my duties were changed to the Gift Dept. and Childrens’ Dept.  In the later years I was involved more extensively as an Assistant Cook and then full-time Cook and in my role as Co Secretary looking after the various health and safety charts and general administration.  I had expected to continue working at the House of Brindle Ltd.  However, due to various problems, the House of Brindle Ltd went into liquidation on 13 September 2012 and I therefore lost my job”.

50.	During the course of this hearing, the claimant submitted a written statement (“the Statement”) of what, according to David Calvert and herself, were the terms of her verbal contract of employment.   According to that statement:

(1)	She was “... offered the job in June of 1988 with a start date to be August 1988”.

(2)	“The maximum hours if requested would be 40 and holiday pay was to be 18 days (pro rata).  While I was contracted to do up to 40 hours, it was agreed that these hours would be flexible [as my third] child was now only one year old and two days/wk was what suited me and this was agreed.  Wages was to be £150 per month depending upon the hours worked”.  [My emphasis].

(3)	The Statement continued as follows:

	“As part of the contract I was to work throughout the new shop as it developed.  I said Yes to that and accepted the offer and looked forward to the challenge.  I fully understood what was expected of me”.

(4)	The Statement continued in the following terms:

	“The terms and conditions were abundantly clear to each party.  There was considerable discussion with the Co and myself as to the nature of the job”.

(5)	The Statement continued:

	“All other members of staff had verbal contracts and I was also required to give notice when I wanted time out or days off.  I was no different in that respect”.

(6)	The Statement also contained the following:

	“My instructions were to come from Mrs Arnold, the Manageress in the Ladies’ Depart.

(7)	Later on the Statement, asserts the following:

	“My instructions came from Mrs Arnold, the Manageress in Ladies’ Dept., and while the restaurant was open I took instructions from Mr Beattie, the Head Chef.  Later when the Gift Dept. was opened, I gained much experience from Mr McElroy who showed me the skills of display and dressing out which were totally different from the Ladies’ Dept.  Later on I was to work under Mrs Adamson in the Childrens’ Department.

	Finally I was employed in the [Christmas] shop and then moved on to be Assistant Cook and eventually in recent years was full-time Cook working alongside my daughter Alanna”.

(8)	The concluding paragraph of the Statement was in the following terms:

	“At times it was necessary to take direction from [David Calvert] who was also my husband.  I believe there was a master/servant relationship whilst at the House of Brindle Ltd.  There was simply no other way of operating effectively ...”

51.	Was there, really, no other way of operating effectively?  Of course there was.  Prior to the incorporation of the business, Mrs Calvert had worked regularly in the business, and had not then sought to categorise herself as an employee while working there.  She was a 50% shareholder in the business.  It was in her interests to work in the business, whether she was paid for that work or not.  (If she worked in the business for no pay, more profits would be generated).  She had the closest ties imaginable to the sole director of the Company, David Calvert, who owned the other 50% of the shares.  Her work in the Company could have been carried out effectively, regardless of whether or not she was operating under a contract.  Her ties with David Calvert, and her economic stake in the business, potentially provided another basis, a non-contractual basis, for working in the business.

52.	In my view, the Statement presents a totally unrealistic picture of Mrs Calvert’s situation in the workplace.

53.	I have no doubt that she is not an arrogant person, having watched her give evidence.  I am sure that she put on no airs and graces while working in the shop.  But that was because of her pleasant personality, not because of her legal status.  The reality is that she was very different from most of the other people who worked for the Company.  For a start, she was the 50% owner of the business.  Secondly, she was married to the other 50% owner of the business.  Thirdly, she was married to the sole Director of the business.

54.	According to the Statement, the wages were to “... [depend] upon the hours worked”.  However, as the claimant accepted during the course of                              cross-examination, the reality, throughout lengthy periods, while her child was young, was that her wages did not in fact fluctuate, even though her number of hours of work did fluctuate.

55.	The stilted language of the Statement implies a classic “offer-and acceptance”              pre-contractual negotiation.  However, the reality is that these were arrangements which were informally agreed between a married couple.

56.	The Statement says that “there was considerable discussion with the Company and myself as to the nature of the job”.  Perhaps.  However, as the claimant accepted during her oral testimony, the amount of wages, at any given time, was always decided upon by David Calvert, and she never knew why was being paid X pounds as distinct from Y pounds.  She presumed, she told me, that, at any given time, she was being paid whatever the business could afford.

57.	As Mrs Calvert emphasises in her statement, she received “no profit sharing, no dividends, no fee ...”.

58.	Mrs Calvert thought she had never been off work through sickness for more than a short number of weeks.  I accept that this was truthful evidence.  I accept that she genuinely believed that she had never been off on the sick for more than a short number of weeks.  However, the reality is that she was receiving statutory sick pay in 2011 and 2012, for many months.  At the time, she did not know that she was receiving statutory sick pay.

59.	On the basis of Mrs Calvert’s oral testimony, it was clear to me that it was David Calvert who made all the relevant decisions relating to the operational context within which the claimant worked for the Company.

60.	I asked David Calvert, in his role as Mrs Calvert’s representative, the reason why the Company had decided to employ Mrs Calvert under a contract of employment (as distinct from having her work in the Company on some other basis).  In response to that query, he didn’t appear to be sure of the reason.  In the end, he said it was probably on accountants’ or solicitors’ advice.

61.	In his role as representative, David Calvert told me that, because of the small size of the Company, any statutory sick payments made were refunded by Government.  The statutory sick payments were made at a time when the Company was already in some financial difficulties.  Against that background, I infer that the reason for payments being paid by way of statutory sick pay was that it was in the Company’s financial interests to do so.  

The legal principles (Mrs Calvert’s case)

62.	I made it clear to the parties that, in making decisions in relation to Mrs Calvert’s appeals, I would have regard to the legal principles which were set out by the English Court of Appeal in Neufeld  v  Secretary of State for Business, Enterprise & Regulatory Reform [2009] EWCA Civ 280.

63.	In that case, the Court of Appeal endorsed, subject to modification, legal principles which were set out by Elias J in Clark  v  Construction Initiatives Ltd [2008] IRLR 364.  

64.	In both Clark and Neufeld, the issue was whether or not a controlling shareholder was, or was not, to be recognised as an employee.  Mrs Calvert was not a controlling shareholder.  In applying the Clark/Neufeld principles, in Mrs Calvert’s case, it is appropriate to have regard to the fact that she did not have a controlling shareholding.  

65.	Various ‘factors’ were outlined in Clark, and endorsed, subject to certain modifications, in Neufeld.  What were those factors designed to address?  

66.	According to Clark (at paragraph 98 of the judgment), the factors were designed to assist the tribunal in carrying out “ ... the task of determining whether the contract of employment should be given effect or not ... ” 

67.	The quoted phrase has the potential to mislead.  The reality is that, in the context of any statutory guarantee appeal, an employment tribunal never has any discretion to decline to give effect to the terms of a legally effective employment contract.  Instead, its task is simply to ascertain whether or not any relevant purported contract is actually legally effective (and, if so, to decide whether it constitutes a contract of employment).

68.	Support for the latter proposition is to be found in Paragraph 77 of the Court of Appeal judgment in Neufeld, in which the court expresses agreement with:-

“ ... Elias J’s summary of the types of case in which the court or tribunal may find on the facts that the purported contract is not a genuine contract.”

69.	Accordingly, in the circumstances of the Mrs Calvert’s case, I have to ascertain whether the relevant purported contract was legally effective, or was not legally effective, at the relevant time, or at the relevant times.  

70.	Eight factors were identified at paragraph 98 of the Clark judgment, as factors to which an employment tribunal could usefully have regard, in determining whether a particular purported contract of employment should be regarded as legally effective.  In the reminder of this Decision, any reference to a particular factor is a reference to that factor as set out in Clark (subject, where appropriate, to any modification decided upon by the Court of Appeal in Neufeld).  Thus, for example, a reference below to factor (1) is a reference to factor (1) in Clark, and a reference to factor (2) is a reference to factor (2) in Clark, and, so on.  

Conclusions (Mrs Calvert’s case)

71.	It is convenient to take the Clark/ Neufeld factors out of order.  

72.	Factor (2) is irrelevant in the context of Mrs Calvert’s case because she was not a controlling shareholder and she was not in practice able to exercise sole control over what the Company did.  

73.	Factor (3) emphasises that the fact that a particular appellant will profit from a company’s success, is not a factor which militates against a finding that there was a contract in place during any relevant period.  I have taken that factor into account in arriving at my ultimate conclusions in Mrs Calvert’s case.

74.	Factor (7) is irrelevant in the factual circumstances of this case.  

75.	Factor (8) notes that the fact that there is a controlling shareholding may raise doubts as to whether the relevant individual is truly an employee, but emphasises that that fact alone does not resolve those doubts one way or another.  Mrs Calvert is not a controlling shareholder.  The fact that she had a substantial shareholding in the company does not “resolve [any doubts as to her contractual status] one way or another”.  

76.	Thus far, I have not referred to factor (1), factor (4), factor (5) and factor (6).  I now address those factors.  

77.	According to factor (1), where there is a contract ostensibly in place, the onus is on the party seeking to deny its effect to satisfy the tribunal that it is not what it appears to be.  However, at paragraph 88 of the judgment in Neufeld, the Court of Appeal stressed that there is no legal burden, in the circumstances envisaged in factor (1) upon the party which is seeking to deny the purported contract’s effect, to satisfy the tribunal that the “relevant contract” is not what is appears to be.  Instead the position remains that, where the putative employee is asserting the existence of an employment contract, it will be for her to prove it.  (Perhaps there is an evidential burden upon the opposing party in that connection, but there is no legal burden of proving a negative).  In light of the factual circumstances of this case, I have no doubt that the Department has discharged any such evidential burden.

78.	At factor (1), reference was also made to the implications where an individual has paid tax and national insurance as an employee.  I accept that this is a matter to be taken into account, in favour of an appellant, in deciding whether or not a particular putative contract of employment is legally effective.  

79.	At all relevant times, Mrs Calvert was treated as an employee for tax purposes.  I do not accept Mr McAteer’s submission that the payment of tax under the PAYE system is irrelevant, given that directors, and officeholders are also paid pursuant to a PAYE system: in the circumstances of this case, in view of Mrs Calvert’s testimony, and in view of David Calvert’s concessions as to her                  non-involvement in company secretarial activities, there is no question of this claimant having been paid by the company in her capacity as an office-holder.  

80.	According to factor (6), (as modified by the Court of Appeal on Neufeld) the assertion that there is a genuine contract will be significantly affected adversely if the terms of that contract have not been identified or reduced into writing.  I accept David Calvert’s assertion that none of the workers in the Company received written contracts of employment, and that none were given written statements of terms and conditions of employment.  However, Mrs Calvert was not like other workers.  She was a 50% shareholder.  She was married to the other 50% shareholder.  If the parties to the purported contract, Mrs Calvert and the Company, truly intended it to have operational significance, one would have expected the “contract” to have been reduced to writing, or to have been referred to, in detail, in contemporaneous correspondence or documentation.  The fact that none of those things was done is a factor which is of significance, though not of central significance, in deciding whether or not there really was a contract at the relevant times.  

81.	Incidentally, at paragraph 89 of Neufeld, the Court of Appeal pointed out that factor (6), as set out in Clark, “ ... may perhaps have put a little too high the potential negative effect of the terms of the contract not having been reduced into writing”.  Nevertheless, the Court also recognised that the lack of a written contract would “ ... obviously be an important consideration ... ”.  

82.	Factors (4) and (5) are best considered together.  I note that those factors were devised in litigation involving an issue as to whether or not a particular controlling shareholder was an employee.  The claimant here, Mrs Calvert, was not a controlling shareholder.  However, I consider that the principles which underlie factors (4) and (5) are also applicable in situations in which the putative contract of employment is between a non-controlling shareholder and a company.  Those factors can be summarised as follows.  

(1)	If the conduct of the parties is in accordance with the contracts (for example if the individual works the hours stipulated or does not take more than his stipulated holidays), that would be a strong pointer towards the contract being valid and effective.

(2)	Conversely, if the conduct of the parties is either inconsistent with the putative contract, or, in certain key areas where one might expect it to be governed by the contract, it is not in fact so governed, that would potentially be a very important factor, militating against a finding that the “employee” is in reality a true employee.  

83.	In what respect, I have asked myself, did the alleged contract of employment, from 1988 onwards, govern Mrs Calvert’s relationship with the Company?  (In other words, what practical effects did the existence – if there was one – of a relevant contract between Mrs Calvert and the Company have, upon the relationship between them?).

84.	I have concluded that the alleged existence of the contract had no practical effect upon the relevant relationship.  

85.	In arriving at the latter conclusion, I have taken account of the following.  First, Mrs Calvert left it to her husband, on all occasions, to decide on the amount of “wages” which would be payable to her.  Secondly, throughout lengthy periods, the “wages” paid to Mrs Calvert were less than the national minimum wage requirements, at a time when those requirements were in force.  Thirdly, Mrs Calvert was paid statutory sick pay for a lengthy period, and was not aware that she was being paid statutory sick pay.  Fourthly, I am unaware of any operational reason (relating to the claimant’s working relationship with the Company) which would make it appropriate or necessary or helpful for Mrs Calvert to work for the Company under a contract (as distinct from working in her capacity as a major shareholder, or as the wife of a major shareholder and director).  

86.	In considering the effect of factors (4) and (5), I have taken due account of the fact that statutory sick pay was paid to the claimant throughout lengthy periods in 2011 and 2012.  However, in light of David Calvert’s admission that there was financial advantage to the company in doing so, I consider that the Company’s decision to pay statutory sick pay is of limited significance in the context of factor (4).  

87.	In deciding on the “employee” issue, I have taken account of the fact that David Calvert declined to give evidence in this case, although he would obviously have had useful evidence to give in relation to the context of the alleged formation of the purported contract of employment; I do not regard the explanation for the relevant failure (the failure to give evidence) as being satisfactory or credible.  Accordingly, I draw adverse inferences from the omission of David Calvert to give evidence in the case, and those inferences have the effect of weakening the evidence which has in fact been adduced by and on behalf of Mrs Calvert.

88.	In deciding on the question of whether or not Mrs Calvert was employed under a contract, I have conscientiously had regard to each of the Clark/Neufeld factors.  However, having done so, I have then stood back, and considered the issue in the round.  

89.	Against the background set out above, and for the reasons explained above, I am not satisfied that Mrs Calvert worked in the Company pursuant to any contract.  Accordingly, she cannot be regarded as an “employee” for the purposes of the statutory guarantee legislation.

90.	It was clear to me that both Mrs Calvert and David Calvert felt that she had a moral entitlement to avail of the statutory guarantee in respect of certain relevant employment debts.  Their view was as follows: She had worked hard, for lengthy periods, over many years, alongside other people who would be able to avail of the statutory guarantee.  So why should she be excluded from the benefit of the guarantee, although they would be within its scope?

91.	However, unfortunately, Mrs Calvert does not have a legal entitlement, because the legislator has determined that this entitlement is to be limited to those who worked
91.	However, unfortunately, Mrs Calvert does not have a legal entitlement, because the legislator has determined that this entitlement is to be limited to those who worked under a genuine contract of employment (a genuine contract of service).  In deciding Mrs Calvert’s appeals, I am obliged to respect that limitation.

Chairman:

Date and place of hearing:	16 December 2013; and
					 9 January 2014, Belfast

Date decision recorded in register and issued to parties: