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	High Court of Ireland Decisions
You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Lynch (Inspector of Taxes) v. Neville Brothers Ltd. [2004] IEHC 375 (7 December 2004) URL: http://www.bailii.org/ie/cases/IEHC/2004/375.html Cite as: [2005] 1 ILRM 536, [2004] IEHC 375

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[2004] IEHC 375

THE HIGH COURT

REVENUE

2003 No. 959 R

BETWEEN/

SÉAMUS LYNCH THE INSPECTOR OF TAXES

APPELLANT

AND

NEVILLE BROTHERS LIMITED

RESPONDENT

Judgment of Miss Justice Carroll delivered the 7^th day of December, 2004

This is a case stated pursuant to s. 942 of the Taxes Consolidation Act, 1997 by His Honour Judge Patrick Moran on a question of law whether on the facts and the evidence admitted or proved as set out in the case stated the learned judge was correct in holding that a merchandiser engaged by the Respondent (Nevilles) was an independent contractor.

The question for determination is whether the merchandiser's contract with the respondent was a contract for service or a contract of service. If under a contract of service, the relationship of employer and employee existed and the merchandiser was an insurable person and within the PAYE system of taxation. If the contract was a contract for service the merchandiser was self-employed for taxation and social welfare purposes.

Both parties agreed that the test was whether a reasonable judge properly instructed could have come to the conclusion he came to on the primary facts and the inferences drawn therefrom. (See Mara v. Hummingbird [1982] I.L.R.M. 421 at 426)

Written submissions of both parties are annexed to the case stated and form part of it. The arguments for the appellant and the Respondent are set out in detail in the case stated.

The Respondent supplies bread and confectionary to various stores including Dunnes Stores Group of Companies. The Respondent engages individuals to "merchandise" its products in Dunnes Stores, one of whom was Gerard Mulqueen.

The contract with Mr. Mulqueen commenced 30^th June, 1992.

It provides:

"3. Appointment

3.1 The company appoints the merchandiser to unload bread and similar products being delivered by the company to the Dunnes Stores located at Parkway/Sarsfield in return for a fee referred to at 3.2.

3.2 The contract fee will be IR£25 per day to be billed by the merchandiser each week and payable in arrears. If the agreement is extended beyond the term, weekly billings shall continue on the same basis subject to review by the company to take into account inflation.

4.Obligations of Merchandiser

4.1 Services to be provided by merchandiser.

4.1.1 Obligations of Merchandiser

The merchandiser will unload bread and similar products from the company's lorries and will deliver the bread and similar products in accordance with the instructions of the management of the Dunnes Stores located at ---.

The merchandiser will be available each day with the exception of Sundays to perform his obligations under this agreement.

4.1.2 The merchandiser shall exercise all reasonable skill, care and diligence in the performance of his duties pursuant to this agreement. …

7. The merchandiser shall not be liable to the company for loss or damage to the company's property unless due to the negligence or other failure of the merchandiser to perform his obligations under this agreement or under the general law.

8. The merchandiser may appoint individuals to work on his behalf in performance of his obligations set out in clause 4.1.1 of the contract. …

12. Miscellaneous. …

12.16 Status of merchandiser

12.16.1 During the term the merchandiser shall be an independent contractor and not the servant of the company.

12.16.2 In such capacity the merchandiser shall bear exclusive responsibility as a self-employed person for the discharge of any income tax, VAT and Social Welfare contributions arising out of fees in respect of work performed by him under this agreement.

12.16.3 The merchandiser shall not be subject to directions from the company as to the manner in which he shall perform his work. …"

Mr. Tommy Counihan, Sales Manger with the Respondent gave oral evidence set out as follows in the case stated:

"His evidence was to the effect that merchandisers:-

on average attend at a particular store once a day and in busy periods two or three times per day;

engage both full-time and part-time helpers;

assist each other;

are paid weekly by cheque;

provide own clothing;

did not invest or provide any equity in the business of the respondent.

He also gave evidence to the effect that:

one of the conditions of the sale of bread to Dunnes Stores is that the respondent must engage a merchandiser to stock the shelves of Dunnes with Nevilles' bread;

when the merchandiser commences to provide the merchandising service for the respondent, the respondent's lorry driver will meet him to outline where the bread is stored in the storeroom. Following this, the respondent will have no further communication with the merchandiser unless the respondent is informed by Dunnes that the merchandising service is not being performed satisfactorily when in such circumstances Mr. Counihan would speak to the merchandisers.

The respondent does not direct the merchandiser how and when to provide the service.

Dunnes' management informed the merchandiser directly of any change in the location for displaying bread;

as the merchandising service is provided 6/7 days a week, 52 weeks a year, the merchandisers can and often do engage permanent or part-time helpers;

the merchandiser is not required to provide the merchandising service himself. He can arrange for someone else to do the merchandising. The respondent, however, pays the merchandiser for the services rendered regardless of who actually performs the service;

the merchandisers are responsible for paying their own helpers and for supervising them;

merchandisers can and do merchandise for other companies and that to the best of his knowledge none of then merchandise for the respondent alone;

the merchandisers are not reimbursed for their cost of travel between stores;

the merchandiser does not receive any holiday pay, sick pay or pension entitlements and is not paid if Dunnes Stores are on strike;

the merchandisers never set foot on the Respondent's premises."

For the Inspector of Taxes it was argued that the merchandisers are employed under a contract of service and are employees. They supply no equipment; take no financial risk; receive remuneration fixed by contract; have no responsibility for investment and management of the business, the terms being imposed by contract and have no opportunity to profit from sound management in the performance of the task (see J.E. McDermott v. Loy, July 1982, Unreported, Barron J.)

They provide no equipment or premises; make no financial investment in the business; the profit is fixed by contract and is not therefore dependent on the efficiency with which it is conducted by them (see Henry Denny & Son Ireland Ltd. v. Minister for Social Welfare 5 I.T.R. 238).

For the Respondent it was argued that the test to determine whether the contract was a contract for service is as follows:- "Is the person who has engaged himself to perform these activities performing them as a person in business on his own account?" (see Market Investigators Ltd. v. Minister for Social Security [1969] 2 Q.B. 173). Cooke J. set out the principal tests to determine this issue under four headings:

(1) Contract: The contract provided the merchandiser should be an independent contractor, this was not inconsistent with the substantive terms or general effect of the contract as a whole. See Massey v. Crown Life Insurance Company [1978] 1 WLR 676.

(2) Control: If the individual could not be directed or controlled in what to do, when, where and how to do it, then he was self-employed. Control is no longer the sole test but is still very important. Provided the merchandiser ensures the Respondent's bread is continuously on the shelves they can merchandise it any time, are under no obligation to perform the services personally. They may and do delegate the work to others without clearance from anyone else.

(3) Integration into the Organisation: The merchandiser is not integrated into the Respondent. The service provided is to facilitate the trade carried on by Dunnes Stores. They do not work on the Respondent's premises; are not members of the Respondent's pension scheme, they have no prospects of promotion; they are not subject to employee disciplinary procedures; also they provide services to other suppliers.

(4) Economic reality: The relevant factors are:

(a) Does the merchandiser provide his own equipment? No equipment is needed but he does provide his own transport and wears a special coat owned by him.

(b) Does he hire his own helpers? He does.

(c) Does he have the opportunity to profit from sound management? He can increase income by providing merchandising services to a number of companies. He can merchandise products for another merchandiser to their mutual advantage. He can pay helpers less than the amount he receives himself.

In Readymix Concrete (South East)Ltd. v. Minister for Pensions and National Insurance [1968] 2 QB 497 McKenna J. said a contract for service exists if all three conditions are fulfilled:

1. The servant agrees for a wage to provide his own work and skills in the performance of some service for his master.

2. He agrees he will be subject to the other's control in sufficient degree to make that other his master.

3. The other provisions of the contract are consistent with being a contract of service.

In this case the merchandiser is not subject to direction and not one of the three conditions is present.

It is correct that the relationship between the Respondent and the merchandiser cannot be defined merely by labelling it as a contract for services in the contract between them but the reality of the situation is that there is nothing in the contract or in the factual matrix of this case to cast doubt on the designation of the relationship in the contract.

Case law shows that there is a variety of tests. No single test is decisive. The question is whether this court is persuaded by the Appellant that no reasonable judge would have come to the conclusion that the merchandiser is an independent contractor on the facts and evidence set out in the case stated. In my opinion the Appellant have not discharged that onus. It was in my opinion entirely reasonable for the learned Circuit Judge to come to the conclusion (which he did) that this was a contract for services. The question of law for determination by the High Court is that the learned Circuit Judge was correct in holding that a merchandiser engaged by the Respondent is an independent contractor.