Appeal No. UKEAT/0494/06/JOJ

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 29 November 2006

Before
HIS HONOUR JUDGE PETER CLARK
MS V E BRANNEY
MR J R RIVERS CBE

MS G CAIRNS	APPELLANT

VISTEON UK LTD	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MRS FATIM KURJI
(of Counsel)
Instructed by:
Messrs Brindley Twist Taft & James
Lowick Gate
Coventry Trading Estate
Coventry
CV3 4FJ	
For the Respondent	MS ANYA PALMER
(of Counsel)
Instructed by:
Messrs Hammonds Solicitors
Rutland House
148 Edmund Street
Birmingham
B3 2JR	

SUMMARY
Contract of Employment – Definition of employee
Triangular relationship – worker; agency; end user. 
Question raised but not answered by CA in DACAS (Mummery LJ, paras 19-20; Sedley LJ para 78) – can there be parallel contracts of service between worker and (a) agency and (b) end-user. On facts of this case we agreed with ET that there was not.  

HIS HONOUR JUDGE PETER CLARK

1.	This is an appeal brought by Ms Cairns, the Claimant, before an Employment Tribunal sitting in Stratford and Chaired by Mr Peter Wallington, against that Tribunal’s Judgment, promulgated with reasons on 6 July 2006, dismissing her claim of unfair dismissal brought against the Respondent, Visteon UK Ltd, on the basis that she was not employed by that Respondent under a contract of employment.

2.	The facts of the case involve a now common triangular relationship between worker, employment agency and client, or end-user, considered most recently by the Court of Appeal in Dacas v Brook Street Bureau (UK) Ltd [2004] IRLR 358 and Cable and Wireless Plc v Muscat [2006] IRLR 354. 

3.	The Claimant worked as a full-time administrative assistant to the Respondent’s Manager Mr Morris from 1998 until 29 May 2005. However, from at least 2001 it was and is common ground that her services were provided by an agency, MSX, which agency employed the Claimant under a contract of service. 

4.	Employment with MSX came to an end under these circumstances. In May 2005 an issue arose as to whether she had falsified her timesheets, on the basis of which the Respondent made payment to MSX for her services. An investigation carried out by MSX concluded that she had not done so. Nevertheless Mr Morris was not prepared to take her back and the “purchase order for her services” was ended by the Respondent. MSX then looked at the possibility of finding her alternative employment but none was available and her employment was terminated by MSX. She received pay in lieu of notice and a redundancy payment from MSX. In her claim to the Tribunal she originally named MSX as Respondent. However, the claim against MSX and/or its successor was later withdrawn and Visteon added as Respondent. 

5.	The issue before the Tribunal was whether the Claimant was employed by the Respondent under a contract of employment, so as to found the Tribunal’s unfair dismissal jurisdiction. In short, having considered the Court of Appeal Judgments in Dacas and Muscat, and the earlier decision in Franks v Reuters [2003] IRLR 423, the Tribunal concluded (reasons paragraph 27) that, but for the existence of the contract of employment between the Claimant and MSX, they would have accepted the need to imply a contract between the Claimant and the Respondent as posited in Dacas. 

6.	However, notwithstanding passages in the Judgments in Dacas, which did not rule out the possibility that a contract may be implied between a worker and an end-user where there is also a contract of employment between the worker and the agency, no such cases had been referred to them. They were being asked to enter into new legal territory. They were not prepared to find that the agreed test of necessity was made out for implying a contract of employment between the Claimant and Respondent. Accordingly the claim failed. That finding is now challenged in this appeal. 

7.	Before considering the facts of this case we should return to the general question as to whether there can be two contracts of service between a worker and two employers. We think that the answer to that question depends upon the context in which it is posed. Until the Court of Appeal decision in Viasystems (Tyneside) Ltd v Thermal Transfer (Northern) Ltd [2005] IRLR 983 it was generally assumed that, for the purposes of establishing vicarious liability for the negligent act of a workman in circumstances where he could be said to have been both a general employer and a temporary employer, to whom the workman had been loaned or hired, that liability must rest with one or the other employer but not both. That assumption appears to have been made in the seminal House of Lords decision in the Mersey Docks case (Mersey Docks & Harbour Board v Coggins [1947] A.C. 1).  

8.	However, having reviewed the authorities, the Court of Appeal in Viasystems allowed of the possibility and indeed found that such dual vicarious liability could, and in fact did, arise on the facts of that case. Control was shared between the general and temporary employers of the negligent workmen. That principle was accepted as a matter of law by the Court of Appeal in the later case of Horley v Luminar Leisure Ltd [2006] IRLR 817, although on the particular facts dual responsibility was there found not to exist. 

9.	The contract of employment line of cases, including Franks and Dacas, are not referred to in the Judgments of May and Rix LJJ, the members of the Court in Viasystems. However, we think that the observations of Rix LJ at paragraph 76 are pertinent for present purposes. At paragraph 76, His Lordship said:
“In my judgment there is no doubt that there has been a long-standing assumption that dual vicarious liability is not possible, and in such a situation it is necessary to pause carefully to consider the weight of that tradition. However, in truth the issue has never been properly considered. There appears to be a number of possible strands to the assumption. Two are mentioned by Littledale J [in Lather v Pointer [1826] 5B & C 547]: the formal principle that a servant cannot have two masters; and the policy against multiplicity of actions. As for the first, even if it be granted that an employee cannot have contracts of employment with two separate employers at the same time and for the same period and purposes – and yet it seems plain that a person can (a) have two jobs with separate employers at the same time, provided they are compatible with one another; or (b) be employed by a consortium of several employers acting jointly – nevertheless that does not prevent the employee of a general employer being lent to a temporary employer. As was so clearly exposed in Denham [Denham v Midland Employers Mutual Assurance Ltd [1955] 2QB437 (CA)], it is an inaccurate metaphor to say that the employment or the employee has been transferred: it is rather that the services of the employee have been lent or hired out, or borrowed or bought in, in circumstances where the temporary employee becomes responsible, under the doctrine of vicarious liability (respondeat superior) for the employee's negligence, and does so even though the formal contract or relationship of employment has not been transferred. That demonstrates that the doctrine of vicarious liability may properly be invoked against an employer who is not really, in law, the employee's employer; and that the use of the expression "transfer" is potentially misleading.” 

10.	We confess to being attracted by Rix LJ’s analysis of the different approach to be taken to the question of vicarious liability owed to a third party in tort and the concept of employment, based on the contract of employment, for the purposes of unfair dismissal protection under part 10 of the Employment Rights Act 1996, with which we are directly concerned in the present case. 

11.	However, the matter does not end there. It was unnecessary to decide the latter question in Viasystems. Equally it seems to us the point did not arise directly for decision in Dacas. There the Claimant’s services as a cleaner were supplied by the Respondent agency, Brook Street, to Wandsworth Borough Council. For some five or six years she worked a regular five day week at a hostel run by the Council in Streatham. Her engagement, to use a neutral word, having been terminated, she brought a claim for unfair dismissal against both Brook Street and the Council. An Employment Tribunal dismissed that claim on the basis that she was employed by neither Respondent. The EAT took a difference view, finding that she was employed by Brook Street. On appeal to the Court of Appeal, Mrs Dacas did not argue that the Council was her employer, but sought to uphold the EAT’s decision. The Court of Appeal restored the Tribunal finding that she was not employed by Brook Street but, having of its own motion joined the Council as Respondent in the Court of Appeal, would have remitted the question of whether the Council was her employer to a fresh Tribunal for re-hearing. But, since there was no appeal by the Claimant against the Tribunal’s finding that she was not so employed, the original Tribunal decision stood.

12.	What is of interest in the present case are the observations made by Mummery LJ (paragraphs 19 and 20), endorsed by Sedley LJ (paragraph 78), as to the possibility of a contract of service between the worker and both the employment agency and end-user. Mummery LJ thought that “more problematical” than a contract of service between the worker and (a) the end-user by implication or (b) the agency. 

13.	It may be premature to rule out that possibility for all future cases (paragraph 20). It remains for consideration (per Sedley LJ, paragraph 78). What is clear from both Judgments of the majority in Dacas (Munby J dissenting on this aspect) is that whilst in a case such as that, where there is no contract of employment between worker and agency, a contract of service may be implied between worker and end-user as a matter of necessity: see Muscat, per Smith LJ (paragraph 43), explaining Dacas (paragraph 16, per Mummery LJ), and applying the Court of Appeal approach the Aramis [1989] 1 Lloyd’s Report 213. The further possibility of dual contracts of service in respect of the same work done by the worker remains, to use Mummery LJ’s word, problematic. 

14.	The potential problems we see in deciding the point raised directly in the present appeal are three-fold. First the policy considerations. Where a third party Claimant is injured by the casual negligence of a workman, who has both a general and temporary employer, there is no difficulty in holding both employers jointly and severally liable in tort to compensate the Claimant for the damage cased by that negligence. Liability can be apportioned as between both tortfeasors. The Claimant will recover the whole of his damages against either or both of them. Sedley LJ referred to the tortious liability of the Council for any negligent act by Mrs Dacas vis-à-vis a visitor to the hostel at which she worked, who, for example, suffered injury as a result of falling over cleaning materials carelessly left by her in a position of danger: see paragraph 72. 

15.	However the policy consideration in such cases is the protection of injured third parties. It is unnecessary for that purpose on the authorities to find that the negligent workman is employed under a contract of service by both the general and temporary employer, as Rix LJ explained in Viasystems, paragraph 76. We find a similar approach in the Judgment of Arden LJ in Interlink Ltd v Night Truckers [2001] RTR 338, paragraph 51. 

16.	The policy considerations behind the protection under part 10 ERA against unfair dismissal seem to us to be rather different. That protects the right of an employee not to be unfairly dismissed by his employer (section 94(1) ERA). It regulates relations between employer and employee as defined by section 230. 

17.	What, it seems to us, concerned the Court of Appeal, particularly Sedley LJ (see paragraph 78 in Dacas) was the possibility that Mrs Dacas had no employer for statutory unfair dismissal protection purposes, and this defied common sense. In these circumstances we fully understand the policy considerations arising. Where the contract between worker and agency is one for services then it may be possible to imply a contract of service between worker and end-user so as to provide protection under part 10 ERA. However, where it is common ground that she is employed by the agency, and thus is protected under part 10, we can see no good policy reason for extending that protection to a second and parallel employer. If the only reason is, as appears to be the argument for the Claimant in the present case, that she would have a better prospect of establishing unfair dismissal against the end-user rather than the agency, then we can see no basis for departing from what has been the common understanding from at least of the Judgment of Littledale J in Lather v Pointer in 1826. A servant cannot have two masters. That of course does not prevent him from having different employers on different jobs or, as in the case for example of Land v West Yorkshire County Council [1981] ICR 334 (CA), severable parts of the same contract of employment with one employer. 

18.	Secondly the requirement of necessity before implying a contract of service as recognised by Mummery LJ in Dacas: see the passage in the Judgment of Smith LJ in Muscat, paragraph 43. We cannot immediately see any business necessity for implying a contract of service with the end-user in a triangular relationship where the Claimant, it is accepted, has entered into a contract of service with the employment agency; a point to which we shall return on the facts of the present case. 

19.	Thirdly we have considered the nature of the statutory protection under part 10 ERA and its ramifications if there are two employers. The statutory language envisages, we think, one employer. If there are two employers must both, or if one which one, make the decision to dismiss before the employee is dismissed within the meaning of section 95(1) ERA? Which employer, or must both employers, engage in the statutory grievance procedure or dismissal and disciplinary procedures under the Employment Act 2002 and the 2004 Dispute Resolution Regulations? These problems are not insuperable, as Mrs Kurji has submitted, but they do require further consideration. 

20.	Against the background of those general observations we return to the present case. Mrs Kurji advances three submissions in support of the appeal. First that the mere fact that there was a contract (we would add of service as opposed to a contract for services) between the Claimant and the agency did not preclude there being a contract of service between the Claimant and the Respondent. Secondly that the Tribunal was wrong to say that it was being asked to enter new legal territory; Dacas had already established the principle relied upon by the Claimant. Thirdly that the Tribunal did not properly consider the issue of necessity. 

21.	As to the first two points we agree with Ms Palmer that these do not fairly reflect the Tribunal’s reasoning, particularly at paragraphs 27 and 28. Taking the second point first, the Tribunal recognised the observations of Mummery and Sedley LJJ in Dacas, opening up the possibility of parallel contracts of service. They merely observed that no case had yet been decided on that basis. That seems to be the position, as appears from a number of Employment Tribunal Judgments, put before us by Ms Palmer.

22.	As to the first point it is plainly a relevant factor in determining whether it is necessary to imply a second contract of service that the worker is already employed by another employer under such a contract. We do not understand the Tribunal to have found that the existence of the contract of service between Claimant and agency, of itself, precluded implication of a second contract of service between Claimant and Respondent.

23.	However, the real question we think is whether the Tribunal reached a perverse conclusion when applying the test of necessity to the question of an implied contract. As to this we accept the submission of Ms Palmer by reference to the test as stated in the Aramis [1989] 1 Lloyd’s Report 213 by Bingham LJ (page 224), and Stuart Smith LJ (page 299-230), that to imply a contract, here of service, by conduct it is necessary to show that the conduct of the parties, the Claimant and Respondent, is consistent only with there being a contract of service between them. 

24.	On the facts of the present case it was, in our judgment, open to the Tribunal to conclude that the conduct of the Claimant and Respondent was equally consistent with the Claimant’s services being supplied to the Respondent under the terms of (a) the contract of service between the Claimant and the agency, and (b) the commercial contract made between the agency and the Respondent as end-user. 

25.	In these circumstances, having considered the different ways in which this appeal is put, we are not persuaded that any error of law has been made out in the Tribunal’s approach, and consequently this appeal must be dismissed.