Appeal No. UKEAT/0744/03/ZT

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 14 November 2003

Before
THE HONOURABLE MR JUSTICE RIMER
MR D NORMAN
MRS R A VICKERS

MR P CHANDLER & OTHERS	APPELLANT
t/a THE MORTGAGE BUREAU (YORKSHIRE), A FIRM

(1) MRS D GORSKI	RESPONDENTS
(2) MRS J BELL

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR A SERR
(of Counsel)
Instructed by:
Messrs John Howe & Co Solicitors
Cooperative Chambers
4 Manor House Street
Pudsey
Leeds LS28 7BJ	
For the Respondent	MR N TOMS
(of Counsel)
Instructed by:
Messrs Howard Cohen & Co Solicitors
29 Park Square
Leeds LS1 2PQ	

THE HONOURABLE MR JUSTICE RIMER

1	This is an appeal by Mr Peter Chandler, Mr Andrew Vickers and Mr Jonathan Lilley against a decision of an Employment Tribunal sitting at Leeds and chaired by Mr J Whittaker.  The ET’s Extended Reasons were promulgated on 2 July 2003.  The respondents to the appeal are Mrs J Bell and Mrs D Gorski.  They had each made separate applications to the ET arising out of what they claimed was their unfair dismissal by the appellants.  The ET heard their applications together, found their claims established and made awards under various heads in their favour of £3,962.22 and £9,370.52 respectively.  In addition, the ET ordered the appellants to pay them £411.25 in respect of costs.

2	The appeal is not concerned with the merits of the substantive decision.  It is directed to a relatively short, but from the appellants’ point of view crucially important, point that the appellants wish to raise.  Their point is that they say that the applicant’s claims were wrongly brought against them personally and should instead have been brought against a limited company called The Mortgage Bureau (Yorkshire) Limited.  They say, therefore, that no award could or should have been made against any of them; it could and should only have been made against that company.

3	The starting point is that Mrs Bell and Mrs Gorski presented their originating applications on 6 December 2002.  They claimed unfair dismissal and wrongful deduction of wages and they filled in Box 5 of their IT1s by saying that their claims were brought against “The Mortgage Bureau (Yorkshire) (a Firm)” of 116 Harrogate Road, Chapel Allerton, Leeds.  They each set out the nature of their complaint more fully in an accompanying separate document in which they in fact there described the respondent simply as “The Mortgage Bureau (a firm)”.  Their case, as outlined in those documents, was that they had formerly been employed by an entity called Whitegates – whose legal nature they did not make clear but which appears from other documents to have been the trading name of Whitegates Estate Agency Limited – which was an entity they said had been owned by Legal & General.  They then said that:

“In April of 2001, Legal & General who had owned Whitegates for some 5 years previously, franchised the branches they could and closed these which they could not.  The Pudsey branch and a number of other branches in Leeds were taken over by the Respondents.”

The reference to “the Respondents” is a reference either to “The Mortgage Bureau (Yorkshire) (a firm)” or to “The Mortgage Bureau (a firm)”; but either way the applicants were plainly intending to refer to the same entity.  Both applicants claimed to have become employees of that entity in the Pudsey branch.  Moreover, they each made clear in the documents accompanying their IT1s that they regarded Mr Chandler and Mr Vickers as partners in the respondent firm (they make no reference to Mr Lilley), although we should record that Mrs Bell, in her paragraph 5, does refer to Mr Vickers saying, in response to a complaint that she had made, that “it was his company”.  Their main complaint appears to have been the Pudsey branch had taken over a lettings business in addition to its core estate agency business which imposed added strain and stress on them.  This led eventually to their resignations on 1 November 2002 and they claimed to have been constructively dismissed.

4	IT3s were filed in respect of both claims on 6 January 2003.  Box 1 in both IT3s identified the respondent as The Mortgage Bureau (Yorkshire) Limited, also of the same 116 Harrogate Road address as the applicants had given.  So the IT3s were saying, unambiguously, that the relevant employer was not a firm but was a limited company with a separate legal personality of its own.  The point was then expressly spelt out in paragraph 1 of a statement accompanying each IT3.  It reads:

1	“The Respondent is incorrectly identified on the IT1 since the former employer of the Applicant is in fact the Mortgage Bureau (Yorkshire) Limited.  The Defendant company was formed with the sole intention of purchasing a Whitegates franchise from Legal & General in respect of the Pudsey, Headingley and Yeadon Branches.  This purchase, which was completed in or around April of 2001 was made subject to the Transfer of Undertaking Regulations and as a consequence the Applicant’s Contract of Employment was transferred to the Defendant company.  The areas of work which were covered by the franchise was both Estate Agency and Residential Lettings and this work was undertaken by Whitegates for a number of years prior to the sale.”

Consistently with this, paragraph 4 of the accompanying statement in the Gorski case refers to “…Mr Chandler…having had discussions with his fellow Director, Mr Vickers…”.

5	On 16 April 2003, before the substantive hearing before the ET (which took place on 29 April 2003), both IT3s were struck out for the respondents’ failure to comply with a directions order, the strike out being pursuant to paragraph 4 (8) of the rules in Schedule 1 to the Employment Tribunals (Constitution & Rules of Procedure) Regulations 2001.  No-one therefore appeared at the substantive hearing for the respondent – whatever its/their true nature or identity was or may have been – and the applicants were in a position to prove their case without the additional inconvenience of having it defended.

6	Despite this, the ET appears (correctly in our view) to have been sensitive to the question raised in the IT3s as to the true identity of the respondent because it dealt with the matter expressly in paragraph 3 (i) of its Extended Reasons in which it made findings about the matter.  It there said:

3	“The Tribunal made the following findings of fact: - 
(i)	The applicants were employed by Legal & General in an estate agency in Leeds until April 2001 when the business was transferred to the three respondents who then traded as The Mortgage Bureau (Yorkshire).  The applicants never were employed by a limited company.  The respondents at all times traded in a personal capacity and the documentation which was presented to the Tribunal confirmed this to be the case as no mention of any limited company was made on any of the firm’s notepaper, the individuals named as respondents were never referred to as directors, there was no mention of any registered office and finally no mention of any company registration number on any of the official notepaper of the respondents.”

7	In support of the appeal, the appellants contend that the documentation before the ET at the hearing in fact supported the conclusion that the correct respondent was The Mortgage Bureau (Yorkshire) Limited rather than Messrs Chandler, Vickers and Lilley trading in partnership as The Mortgage Bureau; and the main, indeed sole, ground of this appeal is that it is urged upon us by Mr Serr, who appears for the appellants, that there is no basis on which this Tribunal can be satisfied that the ET paid proper regard to that documentation in coming to the decision which it did as summarised in paragraph 3 (i) of the Extended Reasons.

8	The appellants rely first, and indeed primarily, on a letter of 18 April 2001 from Whitegates (being the applicants’ former employers) to Mrs Gorski.  Whitegates referred in it to the franchising of the Pudsey branch and informed Mrs Gorski that under the TUPE Regulations:

“…your employment has automatically transferred with the franchising of the business to The Mortgage Bureau (Yorkshire) Ltd, who are now your new employer.”

That letter is, in its terms, entirely unambiguous as to who the new employer was and it was written by Deborah Merx, who was the Personnel Manager at Whitegates, and so one is inclined to assume that Ms Merx knew what she was talking about and that when she referred to the new employer as being a limited company that is precisely what she meant to say.

9	That letter was in the bundle of documents which the ET had for the purposes of the substantive hearing.  As regards the course of the substantive hearing, the applicants were represented by their solicitor, Mr Grant, who is not present before us today, the applicants being represented on this appeal by Mr Toms.  Mr Toms’ instructions are that Mr Grant did not take the ET through that bundle letter by letter or document by document, but that the ET told Mr Grant at the outset of the hearing that they had read the bundle and were satisfied that the employer was the firm of which the three partners are the three appellants.  There was, therefore, no express reference to the letter we have just referred to, one which, on its face, helps the appellant’s case so far as it goes.

10	Thereafter, however, the appellant’s case runs into rather rougher seas.  A letter in the bundle immediately after the one we have just referred to is one addressed again to Mrs Gorski.  It is dated 5 July 2001.  The letter heading is “The Mortgage Bureau (Yorkshire)” and the legend at the bottom of the page describes Messrs Chandler, Vickers and Lilley as “partners”.  The letter gave Mrs Gorski details of her new hours and salary and was signed by Mr Chandler who described himself there as “Director”.  This notepaper appears to have been the standard notepaper of a partnership called The Mortgage Bureau (Yorkshire), of which the three appellants were indeed the three partners; and indeed it is acknowledged before us that that is precisely what it was.  It is accepted, indeed asserted, by Mr Serr that apart from the entity known as The Mortgage Bureau (Yorkshire) Limited there was a separate partnership called The Mortgage Bureau (Yorkshire), of which the three appellants were partners.  The importance though of this letter of 5 July 2001 and also of several others which follow it and which form part of a pattern of correspondence between that firm and the applicants, is that the inference to be drawn from it is that the firm regarded itself as the employer of the applicants and the applicants regarded themselves as the employees of the firm.  It is correct to notice, which apparently the ET did not, that in that letter of 5 July 2001 Mr Chandler describes himself as a “Director”, as indeed he does in certain other of these letters, although not in all of them, but we would not regard that description as shining any red lights in anyone’s direction to the effect that the letters were really letters from a limited company.  They plainly were not.  They were letters from a partnership and the description of Mr Chandler as a director may simply have been a less than precise description of his status (either by himself or by his secretary) but does not take the matter much further than that.  Accordingly, it appears to us that the notepaper we have referred to and on which a number of letters were written, provides no support for the appellant’s case – indeed it positively undermines it and supports the respondents’ case.

11	Reliance is also placed by Mr Serr on two letters written by Legal & General on 12 and 18 November 2002 and addressed to Peter Chandler at “The Mortgage Bureau Yorks Limited”, being letters relating to the cancellation of direct debit mandates for Mrs Gorski’s and Mrs Bell’s pension plans.  The importance of those letters is that in their sixth paragraph they say

“You only pay employer contributions to your employee’s pension plan.  The due date for receipt by Legal & General is the 19th of the following month.  If we do not receive this missed payment by the due date you will be reported to OPRA as a late or non payer.”

The significance of those letters is that Legal & General plainly understood that the employer was not an unincorporated partnership but was an incorporated limited company and so they are in line with the letter written by Whitegates on 18 April.  They were not in fact in the bundle which was before the ET, although they were included in the applicants’ list of documents which they served on the appellants before the appellants were struck out of the proceedings.  Mr Serr tells us, with, it seems to us, some justification, that his clients assumed that as the applicants’ solicitors regarded those two letters as sufficiently relevant to be included in the list of documents they would also be included in the bundle for the ET.  In the event they were not, although our view is that they should have been.  They are letters which are as relevant as the letter of 18 April.  They are of a like kind and can be said to make the like point that that letter made.  If it was thought relevant to put that letter into the bundle for consideration by the ET, then we cannot see why it would not have been equally relevant and proper to have included these two letters.

12	Mr Serr also seeks to rely on some bank statements which are before us, being bank statements with HSBC of The Mortgage Bureau (Yorkshire) Limited and giving as the correspondence address of the account holder The Mortgage Bureau Limited, trading as Whitegates Lettings Clients, 25 Church Lane, Pudsey, West Yorkshire.  Those statements are in a similar position to the two letters to which we have just referred, in that they were also included in the applicants’ list of documents but were not included in the bundle for the ET.  The probative value of the statements is perhaps rather less than that of the two letters since it appears to be common ground that the applicants were not paid their salary out of that account and so there is no direct connection between that account and the applicants and those statements do not, as it seems to us, support the argument that the true employer was the company.

13	Also before us, as there were before the ET, are the P60 and P45 for Mrs Bell and Mrs Gorski which describe their employer as the Mortgage Bureau trading as Whitegates.  Precisely who or what is referred to in that reference is obscure.  It could be a reference to the partnership, or it could be an inaccurate reference to the company referred to on the bank statements.

14	That is the material we have.  We come, therefore, to the disposition of this appeal and in doing so turn first to guidance as to how we should approach it.  In our view, helpful guidance is to be found in the decision of the Court of Appeal in Clifford v Union of Democratic Mineworkers [1991] IRL 518.  In paragraph 7 of his judgment, with which Woolf LJ and Lord Donaldson MR agreed, Mann LJ said as follows:

7	“A question as to whether A is employed by B or by C is apparently a question of law for it is a question as to between whom there is the legal relationship of employer and employee.  The resolution of that question is dependent upon the construction of the relevant documents and the finding and evaluation of the relevant facts.  Where the only relevant material is documentary in nature then the question is not only apparently, but is also actually, a question of law (compare Davies v Presbyterian Church of Wales [1986] IRLR 194).  Where, however, the relevant material is an amalgam of documents and facts then the apparent question of law is often said to be a mixed question of law and fact (for a recent decision see Lee v Chung [1990] IRLR 236).  The present case is one where the relevant material is an amalgam of documents and facts and it can thus be described as a case of mixed law and fact.  This description does not, however, in my judgment mask the reality that the answer to the question is determined by the determination and evaluation of the relevant material.  This is the task of the Industrial Tribunal and is not for either the Appeal Tribunal or this Court.  Neither can interfere with the resolution of an issue of fact unless the resolution contains an explicit misdirection in law.  I appreciate as did Fox LJ in a somewhat similar context (see [1983] IRLR at p.380) that the inability to interfere means accepting that my question as to B or C can possibly be answered as to B or as to C.  One body’s evaluation may lead to B whilst another body’s evaluation of the same material may lead to C.  If neither body misdirects itself neither is ‘wrong’ although in theory what is apparently a question of law should admit to only one ‘correct’ answer.  In the present case therefore the question is not whether the Industrial Tribunal were ‘wrong’ but whether their conclusion betrays a self-misdirection.”

15	We take the view that that passage shows that, in the circumstances of the present case, the issue before the ET as to the identity of the employer was one of mixed law and fact.  It appears from paragraph 2 of the ET’s Extended Reasons that the applicants gave evidence on oath and that they answered questions from the ET, although we do not know whether they related to the identity of the employer.  We have already quoted from paragraph 3 (i) of the Extended Reasons in which the ET made its findings of fact as to the identity of the employer.

16	The difficulty, however, which we find ourselves faced with on this appeal is that those reasons, as so expressed, are unhelpfully succinct.  They do betray at least one element of oversight in as much as they say that there was no reference to any of the respondents being a director, whereas we have pointed out that Mr Chandler (although it seems to us probably irrelevantly) did in fact describe himself as a director on at least certain of the firm’s correspondence.  But the particular concern we have is that the ET had before it a bundle of material which included at least one letter which provided a fairly authoritative indication that the true employer was a limited company and it should also have had two other letters which supported that indication, although in fact it did not.
17	What concerns this Tribunal is that given that there was that letter of 18 April 2001, which can be said to have indicated the identity of the employer, we do not know from the ET’s reasons on what basis they dismissed it as being of unhelpful guidance on that point.  On the face of it, that letter was quite inconsistent with the inference drawn from the subsequent correspondence.  What the ET does not do is to explain why it is that, if they considered that letter, they did not regard it as providing any guidance on the question of identity.

18	We are, it seems, faced with two problems.  Either the ET did not consider that letter at all, in which case they did not consider a relevant piece of evidence which they should have considered and should have dealt with.  Alternatively, they did consider it, but having done so did not explain why it was a letter they could reject in coming to their conclusion as to the identity of the employer.  If the former is the case, then it would appear to us to be a case in which they misdirected themselves, by failing to take relevant evidence into account.  If the latter is the case, it would appear to us to be a case in which they simply have not explained why it was that they were able to dismiss that letter as being of no materiality.  In the latter circumstances, the appellants are, it seems to us, entitled to say that they do not understand the basis on which the ET came to the decision which it did.  Either way, we take the view that this makes the decision an unsafe one, either because it involved a misdirection or else because it does not explain the reasons on the basis of which the ET arrived at the decision it did.

19	We record that we have every sympathy with Mr Toms’ submission that this was a case in which the respondents to the application were not present.  The matter was, therefore, unopposed and there was therefore no defence to the case advanced by the applicants, including their case as to the identity of the employer.  But it remains the case that the ET itself regarded it as important (as we agree they should have done) to identify the employer; and of course they embarked upon that consideration in paragraph 3 (i) of their reasons.  For the reasons we have endeavoured to give, we are not satisfied that their conclusion is a safe one or one which we can simply uphold by dismissing this appeal.

20	Accordingly, albeit with some reluctance, we propose to allow this appeal, to set aside the decision and to remit the matter to the same ET for a re-consideration of that issue.  In saying that we set aside the decision, what we mean is that we are simply setting aside the decision or the finding in paragraph 3 (i).  We are not of course remitting to the ET a reconsideration of the substantive issue.  All we are remitting is a reconsideration of the identity of the employer.  If they were to conclude that the employer was the limited company then the award would have to be against that company.  But if they come to the same conclusion as they have already come to, then the award would stand.

21	Accordingly, we set aside the decision in paragraph (i) of the summary of their decision at the beginning of their Extended Reasons and remit that matter for a rehearing by the same ET.