APPEARANCES
| For the Appellant |
MR LACHLAN WILSON
(Of Counsel)
Instructed by:
Messrs Lyons Davidson Solicitors
Oriel House
52-54 Coombe Road
New Malden
Surrey KT3 4QP |
| For the Respondent |
Ms JOANNE DUNLOP
(Of Counsel)
Instructed by:
Messrs Withers LLP Solicitors
16 Old Bailey
London EC4m 7EG |
SUMMARY
Contract of Employment
The Tribunal did not err in law in holding that the Appellant was not an employee of the Respondent.
.
HIS HONOUR JUDGE RICHARDSON
- This is an appeal by Mr Ian Perkin against a judgment of the Employment Tribunal sitting in London (South) by Chairman alone dated 19 May 2005. Mr Perkin had presented a claim against St George's Charitable Foundation, ("the Foundation") for unfair dismissal. In order to claim unfair dismissal a claimant must have been an employee of the respondent. By his judgment the Chairman held that Mr Perkin was not an employee of the Foundation. The question for the Appeal Tribunal is whether he erred in law in reaching that conclusion.
Background
- The Foundation is an independent charity holding and managing charitable funds donated over the years to St George's Hospital and its associated hospitals. It has five trustees appointed by the NHS Appointments Commission. It is regulated by the Charity Commissioners and has auditors appointed by the Audit Commission. The Foundation itself was set up in April 2001. It took over the functions and funds of an existing charity – the St George's Hospital Special Trustees Charitable Fund, ("the Fund").
- Mr Perkin had for some time been Director of Finance for St George's NHS Hospital Trust ("the Hospital Trust"). This was an appointment of seniority and importance. He was an employee of the Hospital Trust with a substantial salary. On 4 December 1995 Mr Perkin was appointed Treasurer of the Fund. Initially he was unpaid. The duties of Treasurer were not particularly onerous or complex to begin with. It is common ground that at that time he was an officer but not an employee.
- However, in due course the Fund became subject to a statement of recommended practice which greatly increased the amount of work he had to do. He raised with the Trustees of the Fund the time he was spending, maintaining that it was becoming unreasonable to undertake the amount of work involved in the absence of a proper pay basis. The Trustees agreed to pay him for the work he undertook as Treasurer. The Remuneration Committee of the Trustees awarded him what was described as an annual honorarium. The Trustees approved that action at a meeting in September 1998. A contemporaneous letter records the matter as follows:
"Yesterday I discussed with Peter Corke, my fellow member of the Remunerations Committee, the question of awarding an honorarium to Ian Perkin for the very considerable work he does for the Special Trustees.
Although funds are short we agree that he should be given the amount of £5,000 per annum, payable monthly in arrears and dating from 1 April 1998.
Would you kindly tell Ian of our decision and make arrangements with him to give effect to it."
- Thereafter, Mr Perkin was paid £5,000 per annum in monthly instalments. That sum was subject to deductions for tax and National Insurance. It was in addition to Mr Perkin's NHS salary as Director of Finance for the Hospital Trust.
- It is important to appreciate that although Mr Perkin was Treasurer of the Fund he could call for assistance in respect of the day to day work of a Treasurer. There was a service level agreement between the Hospital Trust and the Fund whereby the Hospital Trust provided facilities and staffing in respect of administration of funds, processing of financial transactions, account of funds, and so forth. That agreement was actually signed by Mr Perkin in his capacity as Director of Finance at the Hospital Trust. So the Finance Department of the Hospital Trust had a substantial degree of responsibility for the day-to-day work of the Fund. The Tribunal had before it figures for the charges made by the Hospital Trust pursuant to the service level agreement. They exceeded £100,000 per annum although not all the sum related directly to financial matters.
- As I have already said in 2001 the Foundation took over the functions and assets of the Fund. Mr Perkin continued to receive the honorarium of £5,000 per annum. There were no increases for inflation or cost of living. In February 2002 standing orders and financial instructions were revised. Paragraph 17 of the standing orders under the rubric "Appointment of Officers" stated that the Foundation should appoint a secretary and a treasurer "who will be employees" of the Foundation.
- On 23 December 2002 the Foundation wrote to Mr Perkin terminating his office as Treasurer. He was given a cheque for £2,500 representing six months notice. The Foundation said that as he was an officer and not an employee there were no special rules or regulations governing his position as Treasurer.
The Tribunal
- The Chairman heard evidence from Mr Perkin and from Miss Noble, the Chairman of the Foundation. The Chairman had substantial documentary evidence. He made findings of fact, some of which I have summarized above, to others of which I shall return. The Tribunal had the benefit of full written submissions from experienced Counsel on both sides. A number of authorities were cited. Although Mr Perkin's Originating Application had suggested a date for commencement of his employment in 1996; his case by the time of the hearing was that he was an employee from the time when he began to be paid the honorarium in 1998. The Foundation's case was that he never became an employee and the payment of an honorarium was referable only to his status as an office holder.
The Chairman set out the principles of law he was applying; taking as his point of departure the well-known dictum of McKenna J in Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497. He reminded himself that mutuality of obligation and the requirement of control on the part of the potential employer were the irreducible minimum for the existence of a contract of employment by reference to Montgomery v Johnson Underwood [2001] IRLR 269 at 274. But he also reminded himself that he should consider all aspects of the relationship and that no single factor was in itself decisive. He referred in this respect to a dictum of Mummery J (as he then was) in Hall, Inspector of Taxes v Lorimer [1994] IRLR 171 that it was necessary to paint a picture from the accumulation of detail and then stand back from the detailed picture, which had been painted, to view it from a distance and make a considered, qualitative appreciation of the whole.
- On the question of the honorarium and whether it was a consideration for an agreement by Mr Perkin to provide his own work and skill, the Chairman said (paragraph 45):
"The Claimant had already undertaken the additional work in his role as Treasurer and in my judgment, on the evidence, the payment of £5,000 was a payment made in recognition of the additional work undertaken by the Claimant in his role of Treasurer."
The Chairman continued (paragraph 46):
"I consider that there is force in Miss Dunlop's submission that the payment did not satisfy the first of the Ready Mixed Concrete conditions/ namely that the Claimant had agreed that in consideration of a wage or other remuneration he would provide his own work and skill in the performance of some service for his master. There was no agreement with the Claimant. to provide him with such remuneration and paragraph 98.46 of the minutes approving the payment, page 24, records the approval of the Special Trustees of the action of the Chairman and P Cork as members of the remuneration committee in awarding an annual honorarium to the Treasurer. It is my conclusion that the payment of £5,000 was not a payment to the Claimant pursuant to any agreement with him that he should provide work or continue to provide work for the foundation, or that he provided his work as Treasurer in consideration for such payment. I am reinforced in my conclusion on such issue by the fact that there was no direct correspondence about the payment between the Respondent Foundation and the Claimant. The amount of the payment had not been agreed with the Claimant and the sum of £5000 was a figure arrived at without reference to the Claimant. I did not conclude that there was any contractual basis for the payment of the sum of £5,000 to the Claimant. Indeed the label 'honorarium' in respect of the payment is consistent with a payment to an office holder rather than to an employee."
- On the question of control the Chairman discussed the work which Mr Perkin did. He accepted that Mr Perkin did a substantial amount of work as Treasurer. He accepted that the Trustees had to approve the financial work he did but said that was referable to their role as Trustees of a charity. The mere fact that the Trustees might not accept advice in some respect which might involve Mr Perkin in extra work would not amount to a right to control his work. The Chairman did not conclude, as he put it, that the Trustees dictated the way in which Mr Perkin did his work or the hours he spent on his work as Treasurer. See paragraphs 45 to 46 of the Reasons.
- The Chairman found it necessary, in the context of the argument about control of work, to keep in mind a distinction between what Mr Perkin did as Treasurer and what he did as Finance Director. He found that Mr Perkin in his evidence had not clearly distinguished between the work he did as Treasurer and the work he did as Finance Director of the Hospital Trust pursuant to the service level agreement. See paragraphs 47 and 48 of the Reasons.
- The Chairman then discussed two aspects of the evidence which he said he did not find of any real assistance; the manner of payment and the fact that six months notice was given. See paragraphs 49 and 50 of the Reasons. The Chairman then dealt with the 2002 standing order. He found that this was a factor consistent with employment status. He said that Ms Noble did not recall any discussion of the matter, and there had been no consideration of it with Mr Perkin. The Chairman said:
"…The issue for me is whether the reference to the appointment of a treasurer will be an employee reflected an existing state of affairs, changed an existing state of affairs or evidenced by the use of the label 'employee' the nature of the relationship between the Claimant and the Respondent foundation. As a matter of fact I did not find that there had been any change in the Claimant's role or the obligations of the parties following the Standing Orders."
- The Tribunal Chairman expressed his overall conclusion as follows:
"52. In the circumstances of this case, I concluded that the Claimant's role of Treasurer of the Respondent foundation lacked the irreducible minimum for a contract of employment, namely mutuality of obligations and control. In any event having attached what I considered to be the appropriate weight to each of the relevant factors and having had regard to the observations or pointers of Phillips J in 102 Social Club v Bickerton and standing back and having undertaken a considered evaluation of the overall effect of the accumulation of detail, I concluded that the work undertaken by the Claimant in his role of Treasurer had not been undertaken pursuant to a contract of employment."
The Appeal
- Mr Perkin's appeal was listed before HHJ McMullen for a Preliminary Hearing on 29 September 2005. Judge McMullen had before him a Skeleton Argument prepared by Mr Wilson and it is clear that the oral argument proceeded by reference to the Skeleton Argument. There is a transcript of the judgment. Judge McMullen gave judgment by reference to the points made in the Skeleton Argument. He ruled that there were no reasonable prospects of success in certain arguments which can clearly be identified by comparing his judgment with the Skeleton Argument. The appeal was allowed to go ahead only on certain Grounds; other Grounds were dismissed.
- One of the arguments that was ruled out by McMullen J related to the issue of control. See paragraphs 6 to 7 of the transcript of his judgment. That has resulted in argument before me today by Miss Dunlop for the Foundation that the appeal is nugatory, sterile and ought to be dismissed. It is submitted that unless Mr Perkin can overturn the Tribunal's decision as to control he is precluded from establishing employee status regardless of any finding of the Appeal Tribunal as to any other Ground of appeal.
- It is of course trite law that an employee must establish the requirement of control on the part of an alleged employer as part of the irreducible minimum for the existence of a contract of employment. That I accept. But I do not accept that this appeal is nugatory and should therefore be dismissed for two reasons.
- First, it is plain from his judgment that Judge McMullen did not think the effect of his order would be to render the appeal nugatory. Although it is theoretically possible to decide a knock-down ground of appeal and still send the balance of the Grounds to a full hearing it would be a course of action to be taken only in special circumstances. The reason why Judge McMullen did not think the full hearing would be nugatory is in my view plain. He sent through to a full hearing at least one ground of appeal which would, if I accepted it, undermine the substratum of fact from which the Chairman reached his conclusion on the question of control. For Judge McMullen left in play a ground of perversity. This Ground was originally in paragraph 7 of the Notice of Appeal and was in a more focused form in paragraph 1.3 of the Skeleton submissions at the Preliminary Hearing. If this argument for Mr Perkin were made good, it might be decisive in his favour. To adapt the metaphor used by Mummery J it is all very well applying the right test for control but to no avail if you are standing back from the wrong picture. Mr Wilson, in his submissions for Mr Perkin, may also be right to say that if he could make good other errors of law the overall decision might be so unsatisfactory that it could not stand. In the end I do not need to decide that point.
- The second reason why I do not accept that the appeal is nugatory and must be dismissed is that it is in my judgment necessary in the interests of justice to deal with the remaining grounds of appeal. It is the duty of the Appeal Tribunal to do so. Mr Perkin is entitled to know the full result of his appeal; so is the Foundation. Depending on the result it may assist one or the other in deciding on the future course of this litigation. Mr Perkin, for example, might wish to know the extent, if any, to which he is successful on the remaining Grounds of Appeal before he decides whether to pursue any appeal against the judgment of Judge McMullen.
- Before I turn to the individual Grounds of Appeal it is important to emphasize the limited role of the Appeal Tribunal. An appeal lies to the Appeal Tribunal only on a question of law; questions of fact are for the Tribunal. Where as here there is no written contract of employment, the question whether a person is an employee is a mixed question of fact and law and it is only if an error of law can be distilled from the Tribunal's reasons that an appeal will lie. It is therefore only if the Tribunal has applied wrong legal principles, or if its reasoning places such weight upon a particular factor as to demonstrate a misdirection of law, or if the Tribunal's conclusion, (or some aspect of it) is perverse in the legal sense, that the Appeal Tribunal should intervene. See for these principles Clark v Oxfordshire Health Authority [1998] IRLR 125 at paragraphs 35 to 36 citing O'Kelly v Trusthouse Forte [1983] ICR 728 at 761 to 762.
- The general approach of the Chairman, as a matter of law, which I have already summarized in this judgment, has not been challenged. Mr Wilson, on Mr Perkin's behalf, argues the appeal on four essential Grounds, which I will take in turn.
Analysis of Work
- Mr Wilson's first submission is that the Chairman reached a manifestly perverse and irrational conclusion in paragraph 20 of the Reasons in the following passage:
"There did not appear to me to be a great difference between the work which the Claimant stated he undertook as treasurer and the work which the Trust was required to provide for the Respondent pursuant to the SLA agreement."
Mr Wilson submits that this conclusion is inconsistent with further findings made in paragraphs 45 and 48 of the Reasons, that it is irrational in the light of the service level agreement which the Chairman quoted, that it is compounded by a failure to analyse what the treasurer's role was, and that the Chairman therefore failed to focus on the role of treasurer properly when reaching final conclusions. Mr Wilson has taken me to the duties of the treasurer set out in the Fund's Standing Orders and summarized in paragraph 16 of the Tribunal's Reasons. He contrasts those with the provisions of the service level agreement summarized in the Tribunal's reasons at paragraph 18.
- In my judgment it is important to read paragraph 20 of the Reasons in the context of the Reasons as a whole. It is plain from the Reasons as a whole that the Chairman was not saying that the Treasurer in his capacity as Treasurer undertook little work. On the contrary the Chairman expressly found that "in his role as Treasurer" Mr Perkin's work had increased. See paragraph 43, last sentence. The Chairman expressly stated that this substantial amount of work was the reason for the annual payment of £5,000. See again the last sentence of paragraph 43 and paragraph 45 as a whole.
- In my judgment it is quite clear that the Chairman has not forgotten the findings it made as to the duties of the Treasurer in paragraph 16 of his Reasons. At paragraph 20 of the Reasons, in my judgment, the Chairman was dealing with a specific problem he found in the evidence of Mr Perkin. Granted, that he was undertaking considerable work in his role as Treasurer, Mr Perkin was still tending in his evidence to lump together work he did as Treasurer and work the Trust did, pursuant to the service level agreement. Thus, in paragraph 19 the Chairman quotes Mr Perkin's Witness Statement where he refers to the work "I and my staff" undertook; but Mr Perkin's staff were not working in the role of Treasurer. So there was a tendency in his statement to put together that which the Chairman had to distinguish. That is the point in my judgment the Chairman is making in the sentence which Mr Wilson criticizes in paragraph 20 of the Reasons. Read in context, I do not think the sentence betrays any error of law and I am entirely satisfied that when the Chairman, later in his judgment, stood back from the detail to look at the picture, he looked at the right picture.
Label of Employee
- Mr Wilson's second submission is that the Chairman dealt inadequately with the revised Standing Orders in February 2002. He points out that even if there was no discussion as to this particular item, the Standing Orders as a whole were certainly considered by the Foundation before they were adopted. He says that the Chairman failed to answer the question which he posed in paragraph 51 of its Reasons. He submits that if there was no change in Mr Perkin's role following the introduction of the Standing Orders, as the Chairman found, then the logical consequence is, that the reference to Treasurer as employee reflected an existing state of affairs and evidenced the nature of the relationship between Mr Perkin and the Foundation. He says the Chairman, if minded to ignore the Standing Orders had to find that the Standing Orders in this respect were a mistake. He referred to Carmichael v National Power plc [1999] ICR 1226 to 1235, where Lord Hoffman said:
"The evidence of a party as to what terms he understood to have been agreed is some evidence tending to show that those terms in an objective sense were agreed. Of course the Tribunal may reject such evidence and conclude that the party misunderstood the effect of what was being said and done. But when both parties are agreed about what they understood their mutual obligations, or lack of them to be, it is a strong thing to exclude their evidence from consideration."
- In my judgment the last sentence of paragraph 51 again needs to be read in context. The Chairman has already said at the beginning of paragraph 51 that the reference to the revised Standing Orders is a factor which is consistent with employment status. Indeed, that is correct; the factor is one which requires careful consideration. After careful consideration it might turn out to be indicative of a changed state of affairs, so that Mr Perkin became an employee at that time, or it might be indicative of an existing state of affairs evidencing the nature of the relationship between Mr Perkin and the Foundation; equally of course it might be neither of these things.
- In the last sentence of paragraph 51 the Chairman found that there was no change of role or obligation at the time of the Standing Orders. In paragraph 52 of his Reasons the Chairman went on to find that Mr Perkin was not an employee at any stage. In other words the Chairman in the end having considered the Standing Orders as a factor to be weighed in the balance concluded that the Standing Orders were neither indicative of an existing state of affairs nor indicative of a change at the time of their introduction. The penultimate sentence of paragraph 51 is not well expressed. In truth there were two ways in which the Standing Orders could have assisted Mr Perkin: either they could have reflected an existing state of affairs or they could have indicated a change in employment status. The penultimate sentence of paragraph 51 does not express the third possibility which of course was that the Standing Orders did neither of these things. I suspect that the penultimate sentence of paragraph 51 was an attempt by the Chairman to summarize the ways in which the Standing Orders could have helped Mr Perkin's case. But in my judgment although the sentence may not be well expressed, it does not disclose an error of law.
- In my judgment the Chairman has properly considered the 2002 Standing Orders as a potential factor in favour of Mr Perkin. He has made such findings of fact as were available to him on the evidence, mainly negative findings, concerning the 2002 Standing Orders. He has certainly not excluded the 2002 Standing Orders from consideration. He has not fallen into the error which Lord Hoffman demonstrated in Carmichael v National Power plc. He was entitled, having had regard to the various factors in the case to stand back, consider the picture as a whole and reach the conclusion that the 2002 Standing Orders did not reflect an agreement in 1998 to employ Mr Perkin.
Mutuality of Obligation
- Mr Wilson thirdly submits that the Chairman misdirected himself on the question of mutuality of obligation in paragraphs 42 to 44 of his Reasons. He submits that the Chairman was wrong and perverse on the evidence to say there was no agreement to pay the £5000, and that his conclusion is inconsistent with the finding at paragraph 16 of the Reasons. He says further that the Chairman has placed undue weight on the label "honorarium" and failed to apply the guidance given in 102 Social Club (an institute) v Bickerton [1977] ICR 911 at 919-920. He submits that the Tribunal did not have regard to the inclusive and purposive approach to employment protection which Morrison P referred to in Johnson v Ryan [2000] ICR 236 at 242. He submits that Mr Perkin was offering services only on terms that he was paid money and that must result in a contract with mutuality of obligation, whether it would be a contract of employment would then depend on the balance of the well-known test of McKenna J.
- In my judgment the Chairman did not fall into the error that Mr Wilson suggests. In paragraph 16 of his Reasons the Chairman is using the word "agreed" in a general or popular sense. In paragraphs 42 to 44 the Chairman is concentrating on the legal question whether there was a contract with mutuality of obligation. It is one thing for trustees to agree to make a payment to an officer in his role as officer. It is another thing for the trustees to enter into a contract with an officer with a concomitant requirement of mutuality. The Chairman had this distinction well in mind. Many officers do substantial amounts of work by virtue of their office; it does not necessarily follow that because an office holder receives a payment, the payment is referable to a contractual obligation to do the work. The Chairman had 102 Social Club (an institute) v Bickerton in mind, see paragraph 33 of the Reasons. He committed no error of law. The guidance in 102 Social Club (an institute) v Bickerton, while of some general assistance, was principally directed to the facts of that case with a view to helping the industrial tribunal on remission in that case.
Employee or Office Holder?
- Mr Wilson's final submission is that the Chairman entertained a false dichotomy. He thought that Mr Perkin must either be an office holder or an employee but could not be both. I reject this submission. It is of course trite law that a person may be both an office holder and an employee. Since Mr Perkin was on any basis an office holder, the Chairman's reasons would have been very short if he had thought for a moment that Mr Perkin could not be both an office holder and an employee.
- For these reasons I reject each of the Grounds of Appeal which are put forward on Mr Perkin's behalf today. It follows that the balance of Mr Perkin's Grounds of Appeal fail and that the Appeal now in its totality stands dismissed.
