Appeal No. UKEAT/0435/07/DA

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 28 April 2008

Before
THE HONOURABLE MR JUSTICE ELIAS (PRESIDENT)
MR P R A JACQUES CBE
MRS M McARTHUR BA FCIPD

PROTECTACOAT FIRTHGLOW LTD	APPELLANT

MR M SZILAGYI	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MR G FOXWELL 
(of Counsel)
Instructed by:
Messrs P J H Law
Solicitors
Orion House
14 Barn Hill
STAMFORD
Lincolnshire
PE9 2AE	
For the Respondent	MR M SZILAGYI
(The Respondent in Person)	

SUMMARY

Jurisdictional Points:
	Worker, employee or neither
	Extension of time:  reasonably practicable

The Employment Tribunal held a pre-hearing review in which it found that the claimant for unfair dismissal was an employee and that time should be extended to allow his claim to be considered. The EAT held that the Tribunal was entitled to reach the former conclusion, but that the issue of extending time had not been identified as one of the issues to be determined at the pre-hearing review, and was not satisfactorily dealt with. That issue was therefore remitted to a fresh Tribunal.

THE HONOURABLE MR JUSTICE ELIAS (PRESIDENT)

1.	This is an appeal from the decision of the Employment Tribunal in which the employment judge found against the respondents (the appellants before us) on two matters determined as preliminary issues.  The Employment Judge held that the claimant was an employee, and he agreed to extend time for him to put in his claim for unfair dismissal pursuant to section 111 of the Employment Rights Act 1996.
 
2.	The background is as follows.  The claimant saw a Protectacoat van in a Tesco’s car park. He enquired whether there might be work available and the van driver gave him a business card. The claimant followed this up, contacted Mr Simon Squires and attended the respondent’s yard in Crawley. He was given a health and safety induction card which he was told by Mr Squires was “a load of bollocks” and was told to go out in the van with two other men for the purpose of being trained. He received cash in hand from the respondent for the work done.  He signed certain documents, to which we make reference below, but in circumstances where Mr Squires said to him: 
“Mick, get in here and sign this.  You are looking for work, wife to support, men to pay.”

3.	After some three weeks the claimant went on the road on his own. He was concerned about this because he felt insufficiently trained. He was provided with a van and the respondent gave him 95 per cent of the tools that he needed, such as hammer, trowel, ladders, a mixing machine, and so forth. His job was to do plastering. He said that he was instructed to tell customers that he was employed by Protectacoat and indeed, as the employment judge noted more than once, the company’s own publicity emphasises that they employ no sub-contractors.

4.	The claimant contended before the Employment Tribunal that he was an employee and the appellants insisted that he was a partner. They did so on the basis that he had signed a partnership agreement which identified him as the installer and a Mr Glen Nesbitt as his assistant. Subsequently other individuals were substituted for Mr Nesbit, but nothing of significance turns on that.

5.	There was then a separate agreement between the partnership so created, and the appellants. It provided that the partnership was to provide the services to the appellants. The agreement provided that the partnership was to provide its own equipment and to hire the respondent company van at a weekly rent of £210.00. The Tribunal, in fact, found that no notice was ever paid to this provision.  No sum was deducted for rent of the van.  The company paid for the fuel for the van.  Moreover, although under the contract the payment for the services was to be paid into a partnership bank account, in fact the Tribunal found that that sum was paid to each member of the partnership in the proportion in which they purported to share the profits.

6.	The claimant would report to the yard every morning. That was something the company insisted upon; he was not entitled to go straight to the job. The Tribunal accepted the evidence of the claimant on these matters.  The Tribunal found that there were various breaches of health and safety at work regulations.

7.	The employment judge concluded that the documentation was in truth a sham. There was no real agreement with a partnership. That is what the documents purported to represent, but there was only the payment to the individuals and more ‘hands on’ control than a relationship with a partnership would have allowed. For example, the claimant had to attend work every morning. Also, although the contract stated that the partners were free to do any work they wished, in fact, the Tribunal accepted the evidence of the claimant that one of his colleagues had been dismissed for doing just that. The respondent in practice dictated what jobs were to be done and how they would be carried out. On this basis the true status was that of employee. 

8.	As to the question of whether the claim was lodged in time, the Tribunal expressed its views very briefly about that. It heard that the claimant’s mother had died and it considered that this was a justifiable reason for his not presenting his claim in time, and also for extending time on the grounds that it was not reasonably practicable for the claim to have been lodged within 3 months. Its conclusion was expressed extremely succinctly (para 8):
“Having listened to the evidence in this case I am satisfied that the taking into account the duties that the Claimant had to undertake following the death of his mother and his need to attend the funeral in Budapest that it was not reasonably practicable for him to have presented the complaint on or before the 3 February 2007. The claim having been presented on 16 February 2007, I am satisfied that it was presented within a reasonable time thereafter and the Tribunal has jurisdiction to hear the complaint.”

The grounds of appeal.
9.	The appeal is directed against both the finding that the claimant was an employee, and the conclusion that time should be extended to permit him to lodge his claim. We will consider them separately.  

Was the claimant an employee?
10.	The grounds fall into three principal categories in relation to this finding.  First, it is submitted that there was a procedural unfairness in the way in which the issue was handled. Second, it is submitted that the finding that the documents were a sham involved an error in law because the proper test necessary to establish whether there was a sham was not applied.  Third, it is alleged that the Tribunal had regard to irrelevant matters when concluding that the arrangements were a sham.   We will consider each ground in turn.  

Procedural unfairness.
11.	The claimant had given no prior information or warning that he was asserting that the relationship was a sham. He had produced no witness statement and had failed to give any further particulars of his case. Moreover, the Tribunal had refused an application that further particulars should be provided.  The appellants say that they were taken by surprise by the nature of his case.  They had assumed that the issue would be determined purely by an analysis of the documents whereas in fact it turned on what occurred on the ground in Crawley.  In order to meet the evidence the claimant was adducing, it was necessary to call Mr Squires. He was not present at the hearing because the appellants had not anticipated that he would need to be. Accordingly a request for an adjournment was made to secure his presence but the employment judge refused it 

12.	We have a note from the employment judge dealing with this matter. He observed that the witness called by the respondent, namely Mrs O’Regan, could only give general information about the way in which the partnership arrangement would normally be expected  to operate. She was not in a position to speak specifically about the operations on the ground at Crawley where the claimant was based. That much is common ground. But the employment judge added that it should have been obvious that the respondents would have to call Mr Squires in order to deal with the points raised in the claim. 

13.	The procedural issue here is whether the employment judge ought to have adjourned the hearing.  We think he was entitled not to do so. It seems to us that the claimant was putting in issue the appellants’ contention advanced in their response, that he was not employed personally by them but only through a partnership. It ought to have been anticipated that the particular circumstances of his employment would be likely to be material.  Mrs O’Regan’s evidence did not assist with respect to that.  

14.	The notice sent to the appellants had notified them in the normal way that they should come prepared with their witnesses.  We bear in mind the well established principle that employment judges have a wide discretion when exercising discretionary powers of this nature: see e.g. the observations of the Court of Appeal in Carter v Credit Change [1979] IRLR 361.  In effect there must be a failure to have regard to a relevant matter, taking into account of an irrelevant matter, or the decision must be perverse.  In our view none of those errors was made here.  The employment judge was entitled to conclude that the appellants could have been expected to anticipate that Mr Squires’ presence might be material. Other tribunals may have been willing to adjourn, but we cannot say that this was a perverse decision.

Adopting the wrong test.
15.	The second ground is that the Tribunal failed properly to apply the right test when concluding that the partnership arrangements were a sham. Reliance is placed on the passage from the judgment of Lord Justice Diplock, as he then was, in Snook v London & West Riding Investments Limited [1967] 2 QB 786 at 802 E, where he said this:
       “…for acts or documents to be a “sham”, with whatever legal consequences follow from this, all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating.”

16.	Mr Foxwell, counsel for the appellants, emphasises that the requirement here is that all the parties must have the common intention that the documents are a sham. He makes the point that in this case the other party to the partnership arrangement, namely Mr Nesbitt (although subsequently other partners were substituted), had given no evidence before the Tribunal at all. No-one knows what his perception of the arrangements was.  Accordingly, it was not possible to conclude that all the parties must have understood the arrangement to be a sham if one of the parties had given no evidence before the Tribunal at all. 

17.	We reject that submission. A tribunal can properly conclude that an arrangement is a sham without hearing from all affected individuals. It was open to the Tribunal to look at the nature of the arrangements here and the way in which they operated on the ground and to infer that it plainly was a sham as far as all the affected parties were concerned. The lack of any evidence from Mr Nesbitt did not preclude any such finding. Indeed, if Mr Foxwell were right, then the disappearance or death of a party in these circumstances would preclude the Tribunal ever from reaching a conclusion that the arrangements were a sham. That cannot, in our view, be right. The question is whether it was a legitimate inference on the evidence adduced before the Tribunal.

Taking into account irrelevant matters.
18.	The third argument is that there was no proper basis on which the Tribunal could fairly infer that the partnership documents were never intended truly to reflect the nature of the relationship.  In this context it was submitted that the Tribunal took into account irrelevant matters, such as the literature sent to customers which asserted that no self-employed people were employed, the alleged non-provision of training, and the alleged failure of health and safety laws.   It was also contended that the Tribunal wrongly stated that the payments were made to the individuals rather than into a partnership account.

19.	We do not accept these submissions. The employment judge gave a clear explanation as to why he did not believe that this partnership arrangement ever truly reflected the nature of the relationship. Payments were made directly to the partners and not to the partnership; there was no partnership account; the individuals had to attend every day for work; there was evidence that another individual had been dismissed for doing work of a private nature; the rental payments for the van were never made; and finally, as the circumstances in which the documents were signed confirmed, Mr Squires appears to have treated these matters as no more than formal requirements of no real significance. 

20.	We accept that the fact that there was no or no effective health and safety or induction training, and the comments that there were breaches of the health and safety laws,  were of no real materiality one way or the other.  We also accept that it was unfortunate that the employment judge made any observations at all as to whether there were breaches of health and safety laws since this was not an issue before him.  We would confirm that these findings will have no weight if and when the substantive merits of the case are heard. 

21.	 However, in our view these were not factors which went to the heart of the Tribunal’s analysis.   The finding that the partnership arrangements were a sham in our judgment rested heavily on other matters.  We are satisfied that these misplaced observations of the employment judge do not vitiate the Tribunal’s decision. 

22.	We do not accept that the literature provided to clients is an irrelevant factor to take into account. It is a reasonable assumption that the employer would not seek to misrepresent the true position to the client.   If an employer is contending in one context that a worker is an employee, it must at least be potentially relevant when a tribunal is considering what the true status is.  It was plainly not treated as a decisive factor, and in our view it was certainly a material one which the employment judge was entitled to consider and which lent some support to his conclusion.

23.	Finally, we are not satisfied that the Tribunal did err in concluding that there was no separate partnership account into which the moneys were paid.  We were shown various documents but they did not establish this fact or demonstrate to our satisfaction that the Tribunal had erred in making this finding.  

24.	It follows that notwithstanding the attractive arguments of Mr Foxwell, this part of the appeal fails.

The extension of time.
25.	We turn to the finding with respect to the extension of time. This does cause us greater concern. The evidence appears to have been very limited. Furthermore, it was not a matter which was identified in the notice for the preliminary hearing at all.

26.	Mr Philip Hyland, a solicitor who acted for the respondent below, has sworn an affidavit in which he says that he was not given the opportunity fully to cross-examine the claimant on this matter. According to him, he did not make submissions on this issue either because he had understood that it was not a live issue. He had introduced it at the Tribunal hearing and begun to cross-examine on it but the employment judge had stopped him. That is not the employment judge’s recollection; he says that the issue was explored.

27.	We think that in this matter we should be influenced by the fact that the original notice did not identify this as an issue which was to be determined at this particular pre-hearing review. If it was to have been introduced then that ought to have been made absolutely clear and full opportunity given to the respondent to cross-examine on the matter.   Whatever the employment judge’s perception might have been, we readily accept the statement of Mr Philip Hyland that he did not in fact complete his cross examination of the claimant on this matter.  We recognise that the only relevant evidence is likely to come from the claimant himself, but the full opportunity to challenge that evidence must be provided.
 
28.	We are concerned that there may have been an injustice here, given the lack of forewarning that this was an issue to be determined.  Had the matter been identified in advance the appellants would also have had the opportunity to flag up the fact that they would expect the claimant to produce documents to support the basis of his case for an extension.  

29.	We are also troubled by the extremely brief way in which this particular issue was dealt with in the decision.  According to Mr Philip Hyland, there was further information that was available and relevant to this issue.  It appears that the claimant had taken legal advice in November 2006, but no finding was made about that matter.  Nor is there any reference to the principles of law being applied or any of the relevant authorities.  The latter is not of itself an error of law, but we would have expected a fuller analysis of this issue than this Tribunal provided.   The impression we have gained is that this issue was determined almost as an afterthought.

30.	Taking all these matters into consideration, we are satisfied that it would be unjust to the appellants to allow this aspect of the decision to stand.

Disposal.
31.	We remit the case to a fresh tribunal for reconsideration on the question whether time should be extended.  However, the conclusion that the claimant was an employee stands.