Appeal No.	 EAT/970/99

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 6 March 2000

Before
HIS HONOUR JUDGE PETER CLARK
MR A C BLYGHTON
MRS D M PALMER

MR J L FELSTEAD	APPELLANT

SECRETARY OF STATE FOR TRADE AND INDUSTRY	RESPONDENT

Transcript of Proceedings

FULL HEARING

Revised

	APPEARANCES

For the Appellant	In Person	
For the Respondent	Miss J Eady 
(of Counsel)
The Treasury Solicitor
Queen Anne’s Chambers
28 Broadway
London
SW1H 9JS	

JUDGE CLARK:		By an Originating Application presented to the Bristol Employment Tribunal on 1 December 1998, the Appellant, Mr Felstead, made a claim for redundancy payment, pay in lieu of notice and holiday pay out of the fund administered by the Respondent Secretary of State in circumstances where he alleged that he had been employed by a company, Procip Ltd, then in administrative receivership, from 26 August 1986 until 3 July 1998, when he was dismissed by the Receivers.  

1.	The Respondent admitted that the company was insolvent, but denied that the Appellant had been employed by that company within the meaning of Section 230 (1) of the Employment Rights Act 1996.  The Application came on for hearing before the Employment Tribunal chaired by Mr A C Tickle, sitting at Bristol on 10 February 1999. By a decision promulgated with extended reasons on 25 June 1999 (the first decision) that Employment Tribunal made the following findings of fact.  

2.	The Appellant and a Mr Taylor came together in 1986 to form the company in which both took a 50% shareholding.  Both men used their own finances to support the company; the Appellant provided a personal guarantee and a property owned both by him and Mr Taylor was charged in favour of the bank in the sum of £45K.  The Appellant was Technical Director of the company; Mr Taylor was the Operations Director.  They were joint Managing Director’s of the company, which had no Chairman.  Either Director could block any decision through a company meeting.  A third man, Mr Branch, was appointed Sales & Marketing Director, but he held no shares in the company.  

3.	The Appellent received £45-50,000 per annum for the company.  A document dated 18 December 1996 set out Terms and Conditions of employment for the 2-shareholding directors.  Both were to receive remuneration nominally of £45,000 pa, subject to review.  Each was on 3 months notice of termination and entitled to 25 days holidays p.a. and statutory holidays.  The Appellant paid tax at source and class 1 National Insurance contributions, worked regular hours and took a certain number of days holiday annually.  On these facts the Employment Tribunal found that the economic reality was that the Appellant and Mr Taylor were joint owners of the company.  There was no mutuality between the Appellant and the company; he was in business on his own account. 

4.	In all the circumstances they held that the Appellant was not an employee and dismissed his claim.  Shortly after that hearing, at which the Employment Tribunal had announced their decision which was promulgated with summary reasons on 15 February 1999, the Court of Appeal delivered their judgment in Secretary of State for Trade and Industry v Bottrill.  A report of that decision was carried in the Times newspaper on 24 February.  It is now reported fully at (1999) I.C.R. 592.  Having read the Times report the Chairman caused a letter to be written to the parties on 3 March 1999,informing them that the Employment Tribunal would exercise its powers to order a review of its own motion.  The review hearing took place on 21 May 1999.  The review decision, promulgated with extended reasons on 30 June 1999, varied the first decision. 

5.	The Employment Tribunal made some further findings of fact.  In particular, they found that Mr Branch became a Director of the company in late 1996.  Thereafter the day to day management of the company was in the hands of all three directors, the Appellant, Mr Taylor and Mr Branch, with decisions taken by majority vote.  This meant that the Appellant could be dismissed by a majority of directors.  That state of affairs, the Employment Tribunal found, was consistent with the Appellant having become an employee in late 1996, a view reinforced by the document of 18 December 1996. In these circumstances the Employment Tribunal concluded, varying the first decision that the Appellant was an employee of the company from late 1996 until his dismissal on 3 July 1998.  That was less than 2 years service for the purpose of qualifying for a redundancy payment, but he was entitled to one week’s pay in lieu of notice, £220 and 12 days holiday pay amounting to £528.  Accordingly he was awarded the total sum of £748 out of the fund.  That was the Respondents liability to the Appellant, so the Employment Tribunal found.  

6.	By a Notice of Appeal dated 5 August 1999 Mr Felstead appealed against both the first decision and the review decision of the Employment Tribunal.  It is his case that the Employment Tribunal erred in law in failing to find that he was employed by the company under a contract of service from 1986 to 3 July 1998.  The appeal was permitted to go this full inter partes hearing by a division presided over by Judge Hicks QC at a preliminary hearing held on 18 October 1999.  On that occasion Mr Felstead was represented by counsel, Mr Andrew Hillier, under the ELAAS pro bono scheme.  Counsel settled amended grounds of appeal and it was on those grounds that the matter was allowed to proceed to this full hearing.  

7.	Today, Mr Felstead appears in person as he did before the Employment Tribunal.  The points which he makes in support of the appeal are: 

(1)	That the Tribunal was wrong to determine the case on the basis of his 50pc shareholding, up until the time when Mr Branch became a director in late 1996.  
(2)	That the fact that he was employed under a contract of service since 1986 was evidenced by memoranda similar to that dated 18 December 1996.  However, he was unable to put that material before the Employment Tribunal because the documents were held by the Receivers, who, he thought, would not release them to him.
(3)	That he was hampered at the review hearing by not knowing what findings of fact had been made by the Employment Tribunal following the first hearing.  Although he asked for extended reasons on 23 February 1999, none was supplied until 28 June, after the review hearing.  

8.	It has to be said that those grounds expand on those set out in the amended grounds of appeal, but Miss Eady takes no point on that and has responded to each of those submissions.  Our conclusions on those three points are as follows:

9.	We bear in mind the guidance given by the Master of the Rolls in Bottrill at Page 604 A-E.  The first question for the Employment Tribunal is whether there was a genuine contract between the Appellant and the Company.  As to that, we think it is properly to be inferred from the Tribunal’s reasons as a whole that they were not satisfied, on the evidence before them, that there was any contract between the parties prior to the appointment of Mr Branch as a director and the memorandum dated 18 December 1996.  If there was earlier documents to like effect  Mr Felstead failed to place it before the Employment Tribunal.  He could have applied for an order under rule 4 (2) of the Employment Tribunal Rules of Procedure, seeking an order requiring the receivers to appear before the Employment Tribunal with the documents.  He did not do so.  In these circumstances we cannot simply allow this appeal in order to give Mr Felstead an opportunity to make good that deficiency in his case before the Employment Tribunal.

10.	In the absence of such evidence (compare the facts of Bottrill) it was open to the Employment Tribunal to conclude that no contract came into existence before the memorandum of 18 December 1996.  To that extent the significance of his shareholding was immaterial, save to explain his earlier involvement with the company.  Thereafter, so the Employment Tribunal found on review, the Appellant was employed under a contract of service.
11.	As to the question of extended reasons, as Miss Eady points out, in the Chairman’s letter dated 3 March 1999 the parties were given an opportunity to show cause why there should not be a review.  It was then open to the Appellant to submit that no review should take place before the Employment Tribunal provided extended reasons for the first decision.  He did not do so.  Nor did he raise objection at the review hearing so far as we are aware, to the case proceeding in the absence of extended reasons for the first decision.  In these circumstances, we have concluded that this is not a ground for overturning the Employment Tribunal’s review decision.  

12.	It follows in our judgement, that the Appellant has failed to identify any error of law in the Employment Tribunal’s approach in the first decision as varied on review.  Consequently, this appeal must be dismissed.