Appeal No.	 UKEAT/0128/04/TM

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 3 June 2004

Before
HIS HONOUR JUDGE BIRTLES
MS J DRAKE
MR D SMITH

MR D J LANKSFORD	APPELLANT

(1) BUSINESS POST LIMITED 
(2) MINTWALL LIMITED t/a BUSINESS POST	RESPONDENTS

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR C MANNAN
(of Counsel)

	
For the 1st Respondent

For 2nd Respondent	MS H WINSTONE
(of Counsel)
Instructed by:
Messrs Hammonds
Solicitors
Rutland House
148 Edmund Street
Birmingham B3 2JR

Mr F Irons
(Representative)
Peninsula Business Services Ltd
Riverside
New Bailey Street 
Manchester M3 5PB	

SUMMARY

Practice and Procedure
and
Contract of Employment

Appeal issue was whether the ET had correctly applied law on employer/self employed.  Was the test applied by HH Judge Clark in Staffordshire Sentinal Newspapers Ltd -v- Potter (March 2004) the correct test.  

Cross appeal on the costs refusal to Respondent - no reasons given at all therefore the case remitted to same Tribunal.  

HIS HONOUR JUDGE BIRTLES

1	This is an appeal and  cross appeal from the Decision of an Employment Tribunal sitting in Ashford, Kent, on 2 October 2003 and 18 November 2003.  The Extended Reasons were sent to the parties and entered in the Register on 11 December 2003. The Chairman was Mrs M I May, the members were Mr J Collier and Mr M Plummer.  

2	The unanimous Decision of the Tribunal was: 
“(1)  The Tribunal does not have jurisdiction to consider the claim of unfair dismissal against either the First or the Second Respondent.
(2)  The Tribunal does not have jurisdiction to consider the claims for breach of contract or wrongful dismissal against the First Respondent.
(3)  The Second Respondent be ordered to pay to the Applicant £2,166.66 (gross) representing unpaid holiday pay …..”

The material facts
3	The material facts are set out in the Tribunal Decision at paragraphs 12 to 26:
“12. It was not disputed that Mr Lanksford joined Business Post Tunbridge Wells in October/November 1999 as an employed driver at the Tunbridge Wells depot. When the First Respondent resumed ownership of the Tunbridge Wells depot, Mr Lanksford's contract of employment was transferred to the First Respondent by means of the TUPE Regulations. Mr Lanksford's terms and conditions of employment were confirmed on 18 August 2000 by the First Respondent, ie he remained an employee. 
13. In February 20011 Mr Lanksford suffered an injury at work and was not able to resume employment again until July 2001. The only significance of this for these present purposes is that he was vulnerable financially as a result of his time off. 
14. In the autumn of 2001, the First Respondent took the view that the business required owner drivers rather than employed drivers. The First Respondent concluded that the role of employed drivers was redundant. As they wanted to replace their workforce with owner drivers, they decided that Mr Lanksford's employment as an employed driver was redundant. 
15. Although there was dispute as to the exact date when the First Respondent terminated Mr Lanksford's employment as an employed driver (see above), the Tribunal found that the only clear evidence would appear to be in the sub-contractor's agreement itself. This was signed by Mr Lanksford on 3 September 2001 but was expressed to be effective from 31 August 2001 (p.43). Insofar as the date is significant, the Tribunal accept the previous day, ie 30 August, as the last date of his employment as an employee of the First Respondent. 
16. There was a dispute as to whether or not monies paid by the First Respondent to Mr Lanksford at the termination of this employment represented notice pay. The First Respondent argued that it did - and that payment of such notice reinforced their argument that Mr Lanksford's employment (as an employee) had come to an end at this time. Mr Lanksford, on the other hand, argued that the £2,553.49 that he received in September 2001 did not represent due notice pay but consisted of overpaid salary, Saturday payments, extra runs to Brighton for 2½ weeks, and 15 days' holiday due. Whichever version of events is accepted, it is clear that some moneys were paid by the First Respondent to Mr Lanksford occasioned by the termination of his employment as an employed driver -if only the 15 days' accrued holiday pay which Mr Lanksford admitted he received. 
17. Mr Lanksford argued that notwithstanding his signing the sub-contractor's agreement, nothing really changed with regard to his working practice. The Tribunal were urged to accept, therefore, that Mr Lanksford remained an employed driver throughout this period, i.e. from August September 2001 to April 2002. 
18. The Tribunal did not agree that there were no changes to Mr Lanksford's working practices. Firstly, the sub-contractor's agreement itself contained clauses which are contrary to the normal working practice between an employer and an employee. For example 8(2): the sub-contractor may delegate the contracted services to others. At subparagraph (3), the sub-contractor had to provide his own vehicle. At subparagraph (4), the sub-contractor was required to indemnify the company against all claims etc. Subparagraph (6) stated that the sub-contractor "was required to hold and maintain a valid insurance policy in respect of all risks arising from the performance of the services for the company, including comprehensive vehicle insurance, goods in transit insurance, employee liability and public liability insurance etc". Finally, sub- paragraph (9) stated that the sub-contractor should supply all appropriate invoices for services provided. Most, if not all of these clauses are contrary to a contract of service. 
19. It is accepted by the Tribunal that in practice, Mr Lanksford did not comply with each and every term of this contract. In particular, he did not take out all the necessary insurances (apart from goods in transit insurance). Nevertheless, he did provide his own van (after being lent one by the First Respondent for an initial period only). He did pay for his own fuel. He was paid gross, i.e. with no income tax or national insurance deductions. It is true, however, that he did not submit invoices whilst working under this agreement with the First Respondent as the First Respondent was content to pay him on an hours worked basis without formal invoices. He later produced invoices when the Second Respondent asked him to do so. Those invoices were clearly in the style of a self-employed person. Although the Second Respondent has latterly argued that Mr Lanksford was a employee, the readiness in which he produced invoices when asked to do so goes to show that he saw nothing amiss in submitting these documents and no doubt would have produced them in a similar vein if the First Respondent had insisted on their contractual rights for invoices. 
20. Mr Lanksford said (and the Tribunal accepted this) that in practice, he never took advantage of the clause which permitted him to delegate his duties. Mr Lanksford did not avail himself of this facility but other owner drivers who signed similar sub- contractor's agreements were able to substitute other drivers to perform their duties within the company's normal parameters. Mr Fox gave evidence that he occasionally did substitute other drivers to do his tasks. He had signed the same sub-contractor's agreement that Mr Lanksford had signed. In the opinion of the Tribunal, this was sufficient to show that, although Mr Lanksford did not personally avail himself of this clause, he could have done so at any time. The contract was not one for personal services and the clause allowing delegation of duties was not a sham. 
21. Mr Lanksford argued that his signing of this agreement on 3 September 2001 was done under duress. He had not long returned to work after a period off sick and was apparently told by his line manager, Mr Walsh, that if he did not sign the agreement he would be dismissed. He was also apparently told that there was no reason why he should not sign the agreement as it would make no difference to his terms and conditions of employment. 
22. The Tribunal did not find that this was a contract which lacked necessary consensus due to duress. The Tribunal were told that Mr Lanksford protested at signing this document, but there was no independent verbal or written evidence in support. The Tribunal were also told that he was led to believe that the signing of the agreement would make no difference to his working practices. Nevertheless, it must have been clear to him from even a cursory glance at the agreement that fundamental changes were involved. He would have been aware of these from the outset - when he started to receive his wages without deduction of tax etc and the clear instructions to him that he would need to hire or buy a van to carry out his job. Mr Lanksford was instructing Solicitors at that time in relation to his accident at work. It should not have needed the prompt from anyone else to seek advice on the agreement from that source. He would surely have done so if he had truly felt under duress. As it was, at the time, working under the agreement suited him - not least the apparent increase in his money when he was paid gross (at the time of the hearing he had still not contacted the Inland Revenue about any tax due). After entering into the contract, he took no steps to avoid it. 
23. The sub-contractor's agreement permitted the company to terminate the agreement at any time by giving one month's notice in writing. This the First Respondent did in April effective from 5 May 2002. 
24. Given that the Tribunal have found that Mr Lanksford was a sub-contractor from 30 August 2001 until the agreement was duly terminated by the First Respondent certain consequences flow from this. 
25. Firstly, Mr Lanksford does not have continuity of employment as an employee from the outset of his employment with the First Respondent through to the termination of his employment by the Second Respondent. As Mr Lanksford was not an employee of the First Respondent's at the time of the transfer, his contract of employment was not transferred to the Second Respondent under the TUPE Regulations and there is a break in the continuity of employment. This means that Mr Lanksford was only an employee with the First Respondent between October/November 19 30 August 2001. He was a sub-contractor from 31 August 2001 to 5 May 2002. He was an employee with the Second Respondent from 6 May 2002 until 3 March 2003. 
26. He does not have the qualifying one year period of service to claim unfair dismissal from the Second Respondent. He is out of time in relation to any claims for breach of contract, unfair dismissal and wrongful dismissal with the First Respondent. For completeness, even if he had enjoyed two years' qualifying period as an employee with the First Respondent prior to being made redundant on or around August/September 2001 (and this is not admitted by the Tribunal in any event), he is out of time to make a claim for a redundancy payment in the context of these proceedings.” 

4	Two points that arise before us today relate to first, an appeal by the Appellant against the finding by the Employment Tribunal that he was self-employed for a material time.  The Tribunal found, at paragraph 25, that Mr Lanksford was only an employee with the First Respondent between October/November 1999 to 30 August 2001 (we will call that “the first period”).  He was a sub-contractor from 31 August 2001 to 5 May 2002 (we will call that “the second period”).  He was an employee with the Second Respondent from 6 May 2002 until 3 March 2003 (we will call that “the third period”).

5	The Employment Tribunal’s Decision was set out in paragraph 26.  The Tribunal held that Mr Lanksford did not have the qualifying one year period of service to claim unfair dismissal from the Second Respondent (I interpolate that that was because they had found in the preceding paragraph that Mr Lanksford was a sub-contractor for the middle period and the Tribunal go on to say:
“He is out of time in relation to any claims for breach of contract, unfair dismissal and wrongful dismissal with the First Respondent.”
That was because the Tribunal found that his employment with the First Respondent as employee terminated on 30 August 2001.  The date of dismissal was 3 March 2003.  It does not appear from the Tribunal’s Decision that any application was made for any claim against the First Respondent to be heard out of time, and the Tribunal go on in paragraph 26 to state:

“For completeness, even if he had enjoyed two years’ qualifying period as an employee with the First Respondent prior to being made redundant on or around August/September 2001 (and this is not admitted by the Tribunal in any event), he is out of time to make a claim for a redundancy payment in the context of these proceedings.”
The Tribunal’s conclusion at paragraph 28 was:
“Mr Lanksford was not employed by the First Respondent at the time of his dismissal giving rise to these complaints.  He has no right of action in this Tribunal against the First Respondent.  The Tribunal only has jurisdiction to consider Mr Lanksford’s complaints against the Second Respondent for breach of contract and wrongful dismissal as he does not have the qualifying period of service as an employee with the Second Respondent (from 6 May 2002 to 3 March 2003) to entitle him to claim for unfair dismissal.”

6	The second matter, which is the subject of the cross appeal by the First Respondent is in respect of costs.  At the conclusion of the hearing the First Respondent made an application for costs under Rule 14(1) of Schedule 1 of the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2001.  The Tribunal’s record of that and its decision is recorded in paragraphs 33 to 35 of its Decision:

“33  After the promulgation of the decision, the First Respondent made an application for costs under Rule 14(1) of Schedule 1 of the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2001.  It was argued on behalf of the First Respondent that the bringing and/or conducting of the proceedings against the Respondent had been misconceived and the Tribunal should consider exercising its discretion to award costs in favour of the First Respondent.  Mr Lanksford had been put on notice by letter dated 29 September 2003 that this application would be made in the event that these proceedings against the First Respondent were not withdrawn.
34.  On behalf of Mr Lanksford, it was argued that at the Pre-Hearing Review which took place on 1 August 2003, the finding of that Tribunal was expressly that this was not a case with no reasonable prospect of success.  That Tribunal had refused to strike out this case against either Respondent.
35.  The Tribunals took the view that this was a case properly brought and argued by the Applicant against both Respondents and they declined to make any award for costs in favour of the First Respondent.”

7	The Notice of Appeal was drafted by Mr Lanksford personally but a number of the matters in it have not been pursued today.  He as at this Tribunal been represented by Mr Mannan, of Counsel, and he has supplemented his submissions with a Skeleton Argument.  We are grateful to him and to Ms Winstone, who appears for the First Respondent, and to Mr Irons, who appears for the Second Respondent, for their Skeleton Arguments and submissions.  

8	We turn then to the only ground of appeal.  Mr Mannan argues that when one looks at the Employment Tribunal Decision, paragraphs 17 through to 20, the Employment Tribunal have focused solely upon the sub-contractor’s agreement, signed between Mr Lanksford and the First Respondent, on 3 September 2001, which was the sole basis on which the Employment Tribunal decided that Mr Lanksford was self employed and not an employee of the First Respondent.  The sub-contractor’s agreement appears in the EAT bundle pages 110 to 111.  It was actually signed on 3 September 2001 and is dated 31 August 2001, and is clearly meant to operate from that letter date.  

9	Mr Mannan submits that the Tribunal decided to look only at the sub-contractor’s agreement in determining Mr Lanksford’s employment status as a result of a reference to Express and Echo Publications Ltd -v- Tanton [1999] IRLR page 367.  In doing so, it was in error because it failed to take proper account of subsequent authority, first the decision in Carmichael -v- National Power Plc [2000] IRLR 43 and, second, and more importantly I think from his submissions, Hewlett Packard Ltd -v- O’Murphy [2002] IRLR 4, and also the case of McFarlane -v- Glasgow City Council [2001] IRLR 7.  Mr Mannan submits that if one looks at those four cases properly analysed, the McFarlane, Carmichael and Hewlett-Packard cases post-date Tanton and alter it, and the proper rule of law in deciding whether a person is an employee or self-employed is to look not only at the actual documents, but also about what the parties did in practice.  

10	In response to that, Ms Winstone and Mr Irons rely on the analysis of His Honour Judge Peter Clark, sitting at this Tribunal in the case of Staffordshire Sentinal Newspapers Ltd -v- Mr E Potter, (unreported decided on 18 March 2004).  In that judgment, His Honour Judge Peter Clark analyses all of the preceding cases to which I have referred, and in paragraph 16 of his judgment says this:

“16.	We accept Mr Swift’s analysis of these 2 cases, Tanton and McFarlane.  They are not inconsistent with each other as a matter of principle, indeed they are entirely consistent.  The critical question is what is the relevant contractual term?  Where there is no clear express term in writing then it may be necessary to look at the overall factual matrix in order to discern that term - see Carmichael -v- National Power Plc [2000] IRLR 43.  However, where the term is clear from the contractual document that course is unnecessary, subject to variation of the term or where it can be said to be a sham, to use Peter Gibson LJ’s expression in Tanton”
 
We agree with that and we propose to follow that analysis of the cases.  It follows in this case that there is a clear document, the sub-contractors agreement to which I have referred.  The Employment Tribunal were therefore right, subject to two matters that I will raise in a moment, to consider that document and to analyse it and decided whether or not Mr Lanksford was employed or self-employed, solely on the basis of that agreement.  

11	The two exceptions that Judge Clark referred to were first, whether or not the document is a sham.  In this case that was not so and the Employment Tribunal specifically heard evidence about that, and submissions about it, and found as a fact that it was not: see Decision paragraph 20.  Second, the Tribunal also considered a possible exception, which is the issue of duress.  Mr Lanksford averred and gave evidence to the effect that he was pressured into signing this agreement.  Again, the Employment Tribunal specifically considered the evidence and submissions on this, and found as a fact that there was no duress: decision paragraphs 21 and 22.  It follows that the Employment Tribunal were correct in law in deciding that Mr Lanksford was employed under a contract for services, in other words that he was self-employed.  The appeal is therefore dismissed.

12	We turn then to the cross-appeal.  It emerged during argument that Mr Mannan for the Appellant, and Ms Winstone for the First Respondent agreed that the cross-appeal should be allowed because the Employment Tribunal had failed to provide any reasons whatsoever for its conclusion in paragraph 35 that this was a case properly brought and argued by the Applicant against both Respondents and the Tribunal went on to decline to make any award for costs in favour of the First Respondent.  In the absence of any reasoning, that cannot stand - see Meek -v- City of Birmingham District Council [1987] IRLR 250 and Tran -v- Greenwich Vietnam Community [2002] EWCA Civ 553; [2002] IRLR 735.  The cross-appeal therefore must be allowed.  

13	We turn then to disposal of the cross-appeal.  There are various options which were canvassed before us.  We take the view that the issue of costs in the Employment Tribunal will have to be remitted to the same Employment Tribunal to reconsider the First Respondent’s application for costs, in the light of (1) its findings in paragraphs 25 and 26 of its Decision, and (2) the judgment of this Tribunal.  We do not think it would be right to remit the issue of costs to a fresh Employment Tribunal because that effectively will mean a fresh Employment Tribunal re-hearing the whole of the case in order to decide whether or not an application for costs should or should not succeed.  Neither do we feel able to substitute our decision for that of the Employment Tribunal.  The fact that the bulk of Ms Winstone’s submissions were directed to the issue of costs, and in particular why we should substitute our decision for costs, in place of that of the Employment Tribunal, justifies our view that we cannot decide that issue.

14	The final issue is the question of costs in this Tribunal.  Ms Winstone makes an application that the First Respondent should have their costs of the hearing today.  Our powers are circumscribed by statute.  Regulation 34 of the Employment Appeal Tribunal Rule 1993 says this:
“(1) Where it appears to the Appeal Tribunal that any proceedings were unnecessary, improper or vexatious or that there has been unreasonable delay or other unreasonable conduct in bringing or conducting the proceedings the Tribunal may order the party at fault to pay any other party the whole or such part as it thinks fit of the costs or expenses incurred by that other party in connection with the proceedings.
(2) Where an order is made under paragraph (1) of this rule, the Appeal Tribunal may assess the sum to be paid or may direct that it be assessed by the costs officer, from whose decision appeal shall lie to a judge.”
And then there are subsequent provisions.  

15	We have carefully considered the submissions of Ms Winstone and Mr Mannan in reply.  In the light of the Employment Tribunal’s Decision at paragraphs 25 and 26, we are of the view that it was unnecessary for this Appellant to join the First Respondent as a respondent in his appeal.  The effect of the Employment Tribunal’s findings in those two paragraphs make it crystal clear that even if he was correct on his point of law that he was an employee of the First Respondent in the middle period, he could not recover, either for wrongful dismissal, unfair dismissal or breach of contract, from the First Respondent because his employment would have transferred over under TUPE to the Second Respondent until the date of dismissal on 3 March 2003.  The finding of the Employment Tribunal in those two paragraphs is that the Appellant did not recover against the First Respondent, but as we say, even if he had been successful on his appeal it would have made no difference.  It was therefore totally unnecessary for the First Respondent to be joined.  

16	That leaves the issue of procedure.  We will order that the First Respondent do file and serve here on the Appellant a schedule of costs, properly particularised, within 14 days of the date of the sealed order.  Second, that the Appellant do file a response to that, properly particularised within 14 days thereafter, and third that the First Respondent do have the right to reply, fully particularised, to the Appellant’s response, if so advised, within 7 days thereafter.  The issue of costs will be dealt with by Judge Birtles in Chambers unless either party wishes to incur the expense of a further oral hearing.