Appeal No. UKEAT/0037/09/ZT

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 28 April 2009
	                       Judgment handed down on 3 July 2009

Before
THE HONOURABLE MRS JUSTICE SLADE 
(SITTING ALONE)

ARCHER-HOBLIN CONTRACTORS LTD	APPELLANT

MR G MACGETTIGAN		RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	Mr MARK TAYLOR
(Consultant)
Accountax Employment Law Ltd
Trinity House Opal Drive
Fox Milne
Milton Keynes
MK15 ODF	
For the Respondent	MISS AMY STROUD 
(of Counsel)
Instructed by:
Messrs O H Parsons & Partners Solicitors
3rd Floor Sovereign House 
212-224 Shaftesbury Avenue
London WC2H 8PR	

SUMMARY

WORKING TIME REGULATIONS:  Worker

In determining whether the Claimant was a worker within the meaning of the Working Time Regulations 1998. The Employment Judge erred in taking into account whether the Claimant actually performed work or services personally rather than determining the issue by reference to the terms of the substitution clause. The substitution clause gave an unqualified right to the claimant to delegate and so was inconsistent with a contract to perform personally any work or services within the meaning of WTR Regulation 2(1). Consistent Group Ltd v Kalwak [2007] IRLR 367 and Premier Groundworks v Sozsa [2009] UKEAT/0494/08 applied. Autoclenz Ltd v Belcher and others [2008] UKEAT/0160/08 distinguished.

The Employment Judge erred in failing to consider whether the substitution clause reflected the intention of the parties when deciding whether it was a sham. Applying Protectacoat Firthglow Ltd v Szilaghyi [2009] IRLR 365.

Appeal and cross appeal allowed. Case remitted to the Employment Judge to determine whether the substitution clause was a sham and in the light of that whether the Claimant was a worker within the meaning of the WTR.      

THE HONOURABLE MRS JUSTICE SLADE:

1.	This is an appeal by Archer-Hoblin Contractors Ltd (‘the Company’) from the decision of an Employment Judge (‘EJ’) who held that a claim by Mr MacGettigan for holiday pay under the Working Time Regulations 1998 (‘WTR’) succeeded and that he be paid the sum of £1,457.

2.	The issue before the EJ was whether Mr MacGettigan was a worker within the meaning of the WTR Regulation 2(1) and so was entitled to paid holidays in respect of the period of more than five months for which he worked for the Company. The EJ held that he was. 

3.	Mr Taylor on behalf of the Company contended that the EJ erred in concluding that Mr MacGettigen was a worker within the meaning of the WTR in that :
(1) he wrongly focussed on whether Mr MacGettigan actually performed work or services personally rather than considering whether he could be required to do so under his contract, and
	(2) a conclusion that Mr MacGettigan was a worker within the meaning of the WTR was inconsistent with his contractual right to provide a substitute and the finding that such a right was not a sham.

4.	Mr MacGettigan cross appealed from the finding of the EJ that the substitution clause in his contract giving him the right to provide a substitute to perform his work was not a sham. Miss Stroud on behalf of Mr MacGettigan contended that such a conclusion was perverse.

The judgment of the Employment Judge
Findings of fact

5.	Pursuant to a contract on 15 October 2007 (‘the contract’) Mr MacGettigan worked for the Company as a steel fixer from that date for a period of over five months. 

6.	By his contract Mr MacGettigan agreed that whilst he was providing steel fixing services to the company he was doing so as a self-employed sub-contractor. 

7.	The contract between Mr MacGettigan and the company contained a clause ‘the substitution clause’ which provided: 
‘You have the right to:
Send someone with similar experience and qualification in your place. You will be paid for the work they do and must then arrange to pay the substitute yourself. You must notify the Contractor of the substitute for security and Health and Safety purposes.’

8.	The EJ noted that the contract further provided that the Company would hold public liability insurance and would cover Mr MacGettigan on its accident insurance. The contract provided that he would not receive holiday or sick pay or be covered by the company’s grievance procedure. The contract further provided that the company was obliged to provide necessary safety equipment and was not obliged to offer Mr MacGettigan any work.

9.	Evidence was given on behalf of the Company that it regularly engaged self-employed sub-contractors in addition to its own employed workforce but Mr MacGettigan was made aware of his self-employed status. It had employees who received holiday pay, sick pay and pension. Mr MacGettigan had the opportunity to review his contract but did not. The Company referred to the fact that sometimes self-employed subcontractors sent a substitute to work in their place. It gave the EJ an example of a Mr Michael Corbett who provided Mr Martin Corbett as his substitute. 

10.	The EJ observed at paragraph 3 of his judgment that he very much doubted that Mr MacGettigan spent anything other than a moment reading the contract and did not take on board what was contained within it. He noted at paragraph 6:

“The Claimant maintains that although the contract referred to a substitute he knew how the industry worked and it was not the norm to send someone else to do the work. He said that if that were to happen it would be likely that the contract would come to an end. Indeed, he worked throughout for a period of over 5 months working on a daily basis.”

The conclusions of the EJ

11.	The EJ held at paragraph 13 that Mr MacGettigan provided services personally. He was not in business on his own account and the company was not a client of his. 

12.	The EJ considered that in determining whether Mr MacGettigan was a worker within the meaning of the WTR the only issue was whether he was entitled to send a substitute to perform his work. He held that under his contract Mr MacGettigan could do so although he ‘believed very clearly that if he did get one he would probably lose his position’.

13.	The EJ observed: 
“Recent cases indicate that you can have personal service and a qualified right to substitute peacefully co-existing.”

He continued:
“While the Tribunal does not accept that this [the substitution clause] was a sham provision one has to look at the reality. While it is true that the fact that the Claimant chose not to send a substitute to do the work personally that does not mean he was obliged to do the work personally and could not send a substitute. However, the Tribunal, faced with the reality that there had been unbroken service for a period of 5 months and the evidence of the Claimant that he did not consider that he could in reality send a substitute that led the Tribunal to the conclusion that this was a case where the status of worker was established as there was personal service and accordingly the Claimant’s claim succeeds.”

The relevant statutory provisions
Working Time Regulations 1998
2(1) In these Regulations – 
"worker" means an individual who has entered into or works under (or, where the employment has ceased, worked under) - 
(a) a contract of employment; or
(b) any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual;
and any reference to a worker's contract shall be construed accordingly.

13. Entitlement to annual leave
(1) Subject to paragraph (5), a worker is entitled to four weeks’ annual leave in each leave year.

16 Payment in respect of periods of leave
(1) A worker is entitled to be paid in respect of any period of annual leave to which he is entitled under regulation 13 at the rate of a week’s pay in respect of each week of leave.

The contentions of the parties

The contentions on behalf of the Company
The Appeal

14.	Mr Taylor for the Company maintained before the EJ as it did before me that Mr MacGettigan was not a worker within the meaning of WTR because he had an unconditional contractual right to provide a substitute to carry out his work. The EJ erred in determining the issue of whether Mr MacGettigan undertook to perform work personally within the meaning of the WTR by reference to what happened in practice rather than by reference to the contractual rights and obligations of the parties as set out in the substitution clause. In the light of the finding that the substitution clause was not a sham, Mr Taylor contended that the EJ erred in holding that Mr MacGettigan was a worker within the meaning of the WTR. 

15.	Mr Taylor referred to authorities which establish that the issue of whether a person undertakes to perform work personally is to be determined by reference to contractual rights and obligations of the parties and not by how the contract happens to be performed. 

16.	In Express and Echo Publications Limited v Tanton [1999] IRLR 367 the Court of Appeal considered whether a contract with a driver was a contract of service or a contract for services. The contract with the driver provided by Clause 3.3:
“In the event that the contractor is unable or unwilling to perform the services personally he shall arrange at his own expense entirely for another suitable person to perform the services.”

Peter Gibson LJ held at paragraph 25:

“Clause 3.3 to my mind vividly illustrates the difficulty in approaching the identification of the terms of the agreement by concentrating on what actually occurred rather than looking at the obligations by which the parties were bound. Of course, it is important that the Industrial Tribunal should be alert in this area of the law to look at the reality of any obligations. If the obligation is a sham it will want to say so. But to concentrate on what actually occurred may not elucidate the full terms of the contract. If a term is not enforced that does not justify a conclusion that such a term is not part of the agreement.”

He concluded that the Employment Tribunal chairman erred in concentrating on what occurred in practice rather than seeking to determine the mutual obligations of the parties. Peter Gibson LJ referred to the common intention of the parties that Mr Tanton be a self-employed contractor and not an employee. The terms of the contract were consistent with that common intention. He concluded that clause 3.3 entitling Mr Tanton to provide a substitute was wholly inconsistent with a contract of service. 

17.	Mr Taylor also referred to dicta in Wright v Redrow Homes [2004] 3 AER 98 to similar effect in the context of deciding whether a person was a worker within the meaning of the WTR. In that case the Court of Appeal considered whether an Employment Tribunal had erred in concluding that certain bricklayers were workers within the meaning of the WTR.

Pill LJ observed at paragraph 21:
“it does not necessarily follow from the fact that the work was done personally that there was a contractual obligation to do it personally”

and Holman J at paragraph 30:
“The only question is whether by the contracts ("whereby") the applicants undertook to do the work "personally". I agree with Mr Stafford that it is irrelevant that later the applicants did in fact do the work personally. The question is whether the contracts themselves bound or required the applicants to do the work personally.”

18.	Mr Taylor submitted that there are two strands of authorities on whether a substitution clause is inconsistent with a contract personally to perform work. He accepted that a qualified right to send a substitute is not inconsistent with a finding that the contracting party undertakes to perform services personally and is a worker within the meaning of the WTR. The cases of MacFarlane v Glasgow City Council [2001] IRLR 7 and Byrne Brothers (Formwork) Ltd v Baird & Others [2002] IRLR 96 are examples. He contrasted such cases with those, such as Tanton and Premier Groundworks v Mr Jozsa [2009] UKEAT 0494/08 where there was an unqualified right of delegation which is inconsistent with an obligation personally to perform services. Mr Taylor relied on Premier Groundworks v Mr Jozsa [2009] UKEAT 0494/08 as a recent example of an unconditional substitution clause being held to be inconsistent with a contract personally to perform work within the meaning of the WTR. 

19.	Insofar as Miss Stroud relied on observations in Redrow Homes (Yorkshire) Ltd v Buckborough [2009] IRLR 34 in support of a proposition that where an individual is obliged to provide a substitute to perform work there was still the personal service obligation necessary for an individual to be a worker within the meaning of the WTR, Mr Taylor contended that these were obiter dicta. 

The Cross Appeal

20.	It was a ground of the cross appeal that the EJ failed to have regard to the intention of the parties in deciding whether the substitution clause was a sham. After initial concerns, Mr Taylor accepted that the cross appeal also raises the issue of whether the finding that the substitution clause was not a sham was perverse. He contended that the EJ was entitled to find that the substitution clause was not a sham having regard to the absence of evidence that the parties intended that the right to provide a substitute be fettered.

Contentions on behalf of Mr MacGettigan
The Appeal

21.	Miss Stroud agreed that in this case the existence of an obligation personally to perform work or services depends upon whether the relevant contract provides for a limited or an unlimited power of delegation. A limited power of delegation is not inconsistent with an obligation personally to perform work or services. The EJ was entitled to interpret the substitution clause in accordance with the intention of the parties as evidenced by their performance of the contract. 

22.	Miss Stroud relied upon dicta in Ready Mixed Concrete (South East) Ltd. v Minister of Pensions and National Insurance [1968] 2 QB 497 at page 515 that a limited or occasional power of delegation is not inconsistent with the existence of a contract of employment. She also relied on the observation of Mr Recorder Underhill QC (as he then was) in Byrne at paragraph 13 that the authorities relating to the question of whether a person is an employee or an independent contractor, such as Ready Mixed Concrete, are relevant to the determination of the question of whether an individual is a ‘worker’ within the meaning of the WTR. 

23.	Miss Stroud contended that the judgment in Autoclenz Ltd v Belcher & Others UKEAT/0160/08/DA on whether the claimants were workers within the meaning of the WTR is materially indistinguishable from the case of Mr MacGettigan. His Honour Judge Peter Clark in the Employment Appeal Tribunal (‘EAT’) considered the effect of a substitution clause on the issue of whether an individual undertook to do or perform personally work or services within the meaning of the WTR. The clause under consideration in that case provided:

“For the avoidance of doubt, as an independent contractor, you are entitled to engage one or more individuals to carry out the valeting on your behalf, provided that such an individual is compliant with Autoclenz’s requirements of sub-contractors as set out in this agreement ….”

The Judge concluded at paragraph 24 that:

“(1) This was a contract whereby each Claimant undertook to do or perform personal service for the Respondent. The existence of the qualified substitution clause does not, in my judgment, undermine that element.”

24.	The EAT upheld the finding of the EJ that the claimants were workers for the purposes of the WTR. Although not material for the purposes of the present case, Judge Clark upheld an appeal from a finding that the claimants were employees for the purposes of the Employment Rights Act 1996. I understand that this conclusion of the EAT is being appealed. I do not know whether there is an appeal from the finding that the claimants were workers within the meaning of the WTR.

25.	Another judgment of Judge Clark, AD Bly Construction Ltd v Cochrane UKEAT/0243/05/MAA, was relied upon. In that case the EAT considered a substitution clause which provided:
“7. The Sub Contractor may send a substitute at his absolute discretion but such substitute may be rejected by AD BLY Construction if AD BLY Construction is reasonably satisfied that the substitute does not possess the necessary skills, qualifications and experience required.”

The EAT held that the conclusion of the Employment Tribunal that the agreement between the parties was that the claimant would personally perform the work he was engaged to do should not be interfered with. The EAT considered that the Tribunal had implicitly found that the qualified right to send a substitute under clause 7 of the contract did not remove the element of personal service. Alternatively, the clause did not truly reflect the agreement between the parties.

26.	In Mirror Group Newspapers Group Limited v Gunning [1986] ICR 145 in which the Court of Appeal considered the meaning of ‘a contract personally to execute any work or labour’ in the Sex Discrimination Act 1975 Section 82(1), Balcombe LJ held at page 156F:

“In my judgment, one has to look at the agreement as a whole, and provided that there is some obligation by one contracting party personally to execute any work or labour, one then has to decide whether that is the dominant purpose of the contract, or whether the contract is properly to be regarded in essence as a contract as a contract for the personal execution of work or labour, which seems to me to be the same thing in other words.”

27.	Miss Stroud contended that in ascertaining the contractual rights and obligations of the parties, the EJ is bound to consider the realities of the working agreement.  She contended that:

“It cannot be the case that a tribunal has regard for the realities of the obligation between the parties where and only where it decides that the agreement is a sham and that otherwise it has no regard for the realities of the obligations at all.”

28.	Further, Miss Stroud contended that because Mr MacGettigan was obliged either to perform work himself or perform services by personally providing a substitute, the requirements of WTR Regulation 2(1) were satisfied. To make good this argument she relied on the judgment of the EAT in Buckborough to the effect that an obligation to provide a substitute was an obligation to personally perform services. In that case the claimants were contractually obliged to personally carry out work or to provide a substitute. His Honour Judge Burke QC observed that surprisingly there was no authority which considers the difference between ‘work’ and ‘services’ in the definition of ‘worker’ in WTR Regulation 2(1). He concluded at paragraph 60 that the obligation to provide a substitute ‘was an obligation personally to perform at least services.’

The Cross Appeal

29.	Miss Stroud contended that the EJ erred in failing to have regard to the intention of the parties in deciding whether the substitution clause was a sham. Further, she contended that the conclusion of the EJ that the substitution clause was not a sham was perverse in the light of his other holdings on the way Mr MacGettigan considered the contract was to be performed and the way in which it was in practice performed by him. She relied on the judgment of the Court of Appeal in Protectacoat Firthglow Ltd v Miklos Szilaghyi [2009] IRLR 365 to the effect that a clause in a contract is a sham if it does not represent the true relationship between the parties. Lady Justice Smith observed in paragraph 56 that it is not only in cases in which there is an intention to deceive that a contract will be held to be a sham. She held:
“If the evidence establishes that the true relationship was, and was intended to be, different from what is described in the document, then it is that relationship and not the document or the document alone which defines the contract.”

Discussion

30.	There is a broad measure of agreement between Mr Taylor and Miss Stroud as to the legal principles to be applied in considering the effect of a substitution clause in determining the issue of whether a person is a worker within the meaning of the WTR. 

31.	As is clear from the definition of ‘worker’ in regulation 2(1) of the WTR, the term includes but is not limited to an individual who works or worked under a contract of employment. The authorities on whether a person is an employee or an independent contractor are of assistance in determining the issue of whether a person is a worker for the purposes of the WTR. Both counsel relied upon such authorities. Mr Recorder Underhill QC (as he then was) observed of the definition of ‘worker’ in WTR Regulation 2(1) in Byrne at paragraph 13:

“…we do not believe that it could be right to adopt a different approach in considering the requirement of personal service implicit under limb (a) and that explicitly stated in limb (b). The authorities relating to contracts of employment are thus plainly relevant. In our view those authorities are wholly consistent with the conclusion which we have reached. They clearly establish that a limited power to appoint substitutes is not inconsistent with an obligation of personal service.”

32.	The dictum of MacKenna J in Ready Mixed Concrete at page 515, in considering whether a worker was an employee or self-employed, has been adopted as the basis for the principle that an unqualified power of delegation or substitution is inconsistent with the status of ‘worker’ within the meaning of the WTR whereas a limited power to provide a substitute is not.  In considering whether an individual was an employee MacKenna J held at page 515:

“the servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some service for his master… The servant must be obliged to provide his own work and skill. Freedom to do a job either by one’s own hands or by another is inconsistent with a contract of service, though a limited or occasional power of delegation may not be (emphasis supplied): see Atiyah’s Vicarious Liability on the Law of Torts (1967) pp.59-61 and the cases cited by him.”

33.	The first issue to be considered, therefore, is whether the substitution clause in the contract between the Company and Mr MacGettigan provided for an unlimited or a limited power of substitution. 

34.	Miss Stroud contended that the same considerations should apply to the construction of a substitution clause as are to be taken into account in determining whether it is a sham. No authority was cited in support of this proposition. In my judgment ordinary principles of construction are to be applied. If the substitution clause is clear and unambiguous, its meaning and effect are to be determined in accordance with its terms.

35.	Mr Taylor contended that the substitution clause conferred on Mr MacGettigan an unqualified right to delegate the performance of his work as were the clauses in Tanton and Premier Groundworks. In that case the EAT set out the relevant substitution clause at paragraph 9:
“The Supplier shall have the right to delegate the performance of Services under this Agreement to other persons whether or not his employees provided that the Firm is notified in advance and provided that any such person is at least capable experienced and qualified as the Supplier himself.”

36.	The EAT in Premier Groundworks held at paragraph 25:
“In conclusion we consider that where a party has an unfettered right for any reason not to personally perform the contractual obligations under a contract but can delegate them to someone else, he cannot be a ‘worker’ within the meaning of the WTR even though the person actually performing the contractual obligations has to meet certain conditions.”

37.	This was to be contrasted with the clauses considered in MacFarlane and Byrne. In MacFarlane v Glasgow City Council [2001] IRLR 31 an Employment Tribunal held that the appellant gymnastics instructors were not employees. There was a substitution clause in their contracts which provided that if for any reason, one of the appellants was unable to take a class, she would contact a replacement from the register of coaches maintained by the respondents and arrange for her class to be covered by a member on the register. 

38.	In determining the appeal the EAT distinguished Tanton on four grounds. These were that the appellants could not simply choose not to attend or not to work in person. Secondly the substitute had to be from the council’s own register and thirdly the council could organise a replacement. Fourthly the replacement would be paid direct by the council. The EAT held that the substitution clause in MacFarlane was not such as to inescapably lead to a conclusion that the contracts in that case were not contracts of employment. The case was remitted to an Employment Tribunal to determine whether the appellants were employees. 

39.	In Byrne a substitution clause provided that:
“Where the subcontractor is unable to provide the services the subcontractor may provide an alternative worker to undertake the services but only having first obtained the express approval of the contractor.”

In addition to a reason which does not apply in this case, the EAT held that because the substitution clause did not give the claimant the right to provide a substitute whenever he chose and because prior approval was needed for a substitute worker, the clause did not mean that the contract could not be regarded as a contract to provide personal services.

40.	Miss Stroud contended that the clause was indistinguishable from that considered in Autoclenz which was held to confer a qualified right of substitution. The substitution clause in Autoclenz provided:
“For the avoidance of doubt, as an independent contractor, you are entitled to engage one or more individuals to carry out the valeting on your behalf, provided that such an individual is compliant with Autoclenz’s requirements of sub-contractors as set out in this agreement …”

Even if it could be said that the substitution clause in Autoclenz is comparable to that in the case of Mr MacGettigan, it is not clear that the decision in Autoclenz on the issue of whether Mr Belcher was a worker for the purposes of the WTR turned on the construction of the substitution clause. The passages in Consistent Group Limited v Kalwak [2007] IRLR 367 relied upon by the EAT in that case are concerned not with the construction of the substitution clause but whether it was a sham 

41.	With respect, the judgments in Consistent and in Premier Groundworks are of more assistance in determining whether the clause under consideration in this case gave Mr MacGettigan a qualified or an unqualified right to provide a substitute. In Consistent Elias P held at paragraph 35:
“I accept the submission of Mr Cooray that the fact that a substitute must be sufficiently skilled and experienced to do the job would not in itself negate a conclusion that there was an unfettered power to delegate. Plainly a van driver can only delegate to someone who can drive, as in the Tanton case. In so far as the Chairman was suggesting that a reasonable restriction on the person to whom work could be delegated could justify a finding that there was no unfettered power to delegate – and I am sure that he was – that would be inconsistent with the Tanton decision. But that is not the reason why the power of delegation is limited here.”

Silber J in Premier Groundworks considered the effect of the following substitution clause on the question of whether an individual was a worker within the meaning of the WTR:
“At the forefront of the respondent’s case is the contention that the written agreement between themselves and the claimant contained in clause 13 a provision which meant that the claimant did not undertake to personally perform any work or services for the respondent. Clause 13 states (with the term ‘the Supplier’ meaning the claimant and the term ‘the Firm’ meaning the respondent) that:-

The Supplier shall have the right to delegate the performance of Service under this Agreement to other persons whether or not his employees provided that the Firm is notified in advance and provided that any such person is at least [as] capable experienced and qualified as the Supplier himself.”
	
He held at paragraph 25:
“In conclusion, we consider that where a party has an unfettered right for any reason not to personally perform the contractual obligations under a contract but can delegate them to someone else, he cannot be a ‘worker’ within the meaning of the WTR even though the person actually performing the contractual obligations has to meet certain conditions. The position would be different if the right not to perform the contractual obligation depended on some other event such as where that party was ‘unable’ to perform his or her obligations (see MacFarlane and James (supra)).”

42.	As for the contention of Miss Stroud that in any event the obligation to provide a substitute satisfied the requirement personally to perform services within the meaning of WTR Regulation 2(1), in my judgment Mr Taylor is correct in contending that the observations to that effect in paragraph 61 of Buckborough were obiter. The EAT decided the case on the basis of upholding the conclusion of the Employment Tribunal that the contracts were a sham. Although they observed at paragraph 49 that it was strictly unnecessary to do so, the EAT considered the alternative contention that the obligation personally to provide a substitute was an obligation to do or perform personally work or services within the meaning of WTR Regulation 2(1) only because they had heard full argument on the point. 

43.	Since the EJ did not accept that the substitution clause was a sham provision, on a fair reading of the judgment, the EJ must have concluded that the right it conferred was qualified and so was not inconsistent with the status of ‘worker’. In reaching such a conclusion, in my judgment the EJ erred in taking into account the perception of Mr MacGettigan that he was personally obliged to perform the work of a steel fixer and the fact that he personally worked for the company throughout the duration of the contract. In my judgment on a proper construction of the substitution clause, Mr MacGettigan was given an unfettered right to delegate the performance of his duties. As a matter of law such a right is inconsistent with an obligation to perform personally any work or services within the meaning of WTR Regulation 2(1). 

The Cross-Appeal

44.	In considering whether a contractual provision is a sham, Elias P in Consistent observed at paragraphs 57 and 58:
“57. The concern to which tribunals must be alive is that armies of lawyers will simply place substitution clauses, or clauses denying any obligation to accept or provide work in employment contracts, as a matter of form, even where such terms do not begin to reflect the real relationship. Peter Gibson LJ was alive to the problem. He said this (p.697):
“Of course, it is important that the industrial tribunal should be alert in this area of the law to look at the reality of any obligations. If the obligation is a sham, it will want to say so.”

58. In other words, if the reality of the situation is that no-one seriously expects that a worker will seek to provide a substitute, or refuse the work offered, the fact that the contract expressly provides for these unrealistic possibilities will not alter the true nature of the relationship. But if these clauses genuinely reflect what might realistically be expected to occur, the fact that the rights conferred have not in fact been exercised will not render the right meaningless.”

The Court of Appeal allowed Consistent’s appeal but in Protectacoat Lady Justice Smith commented at paragraph 48 that the Court of Appeal in Consistent appear to have approved Elias P’s test for the existence of a sham.  In Protectacoat Lady Justice Smith shared the view expressed by Elias P in paragraph 57 of Consistent. Further she observed at paragraphs 55-56:
“55. It seems to me that Peter Gibson LJ, Rimer LJ and Elias J have, between them, enunciated the principle or test for determining whether a written contract is a sham. The question is always what the true legal relationship is between the parties. If there is a contractual document, that is ordinarily where the answer is to be found. But, if it is asserted by either party, or in some cases by a third party, that the document does not represent or describe the true relationship, the court or tribunal has to decide what the true relationship is. 
56. Tribunals will be well aware that contracts may be partly written and partly oral and that they can also be constituted or evidenced by conduct. While a document which can be shown to be a sham designed to deceive others will be wholly disregarded in deciding what is the true relationship between the parties, it is not only in such a case that its contents cease to be definitive. If the evidence establishes that the true relationship was, and was intended to be, different from what is described in the document, then it is that relationship and not the document or the document alone which defines the contract.” 

45.	In my judgment the findings of the EJ in paragraph 13 of his judgment indicate that he did not consider that the substitution clause accurately represented the intention of the parties. However he appears erroneously to have relied on those observations not in considering whether the substitution clause was a sham but in construing the clause. Further, in my respectful judgment, the extent to which the EJ relied upon the way in which the contract was actually performed rather than the way in which the parties intended it to be performed is unclear. In my judgment the EJ erred in law in failing to consider whether the substitution clause accurately represented the intention of the parties and to decide whether it was a sham in the light of his conclusion on that issue. The answer to the question of whether the substitution clause was a sham cannot be determined with sufficient certainty from the findings of the EJ. Accordingly on the findings of the EJ it cannot be determined whether the finding of the EJ that the substitution clause was not a sham was perverse.

Conclusion

46.	The EJ erred in law in deciding whether Mr MacGettigan was a worker within the meaning of WTR 2(1)(b) in that he determined the issue on the fact that Mr MacGettigan had performed all the work under the contract himself for five months and that he did not consider that he could in reality send a substitute. 

47.	On its proper construction, the substitution clause conferred an unqualified right on Mr MacGettigan to provide a substitute to perform work under the contract.

48.	Unless the substitution clause was a sham, Mr MacGettigan was not a worker within the meaning of the WTR.

49.	As alleged in the cross appeal, in deciding whether the substitution clause was a sham the EJ erred in failing to consider whether the intention of both parties was properly reflected in the unfettered substitution clause in the contract. What occurred in practice should have been considered in determining whether the clause in issue was a sham. 

50.	Accordingly the finding of the EJ is set aside and the case is remitted for rehearing to a different EJ.