Appeal No. UKEATS/0027/08/BI

EMPLOYMENT APPEAL TRIBUNAL
52 MELVILLE STREET, EDINBURGH, EH3 7HF

	At the Tribunal
	On 16 June 2009

Before
THE HONOURABLE LADY SMITH
(SITTING ALONE)

1) MR G. McVEIGH  	
2) MRS R. McVEIGH	APPELLANTS

MS CHRISTINE LIVINGSTONE	RESPONDENT

Transcript of Proceedings

JUDGMENT

APPEARANCES

For the Appellants	MR. COLIN BOURNE
(of Counsel)
Instructed by:
RBS Mentor Services
100 West George Street
Glasgow
G2 1PP	
For the Respondent	MR DONALD CAMERON
(Advocate)
Instructed by:
Quantum Claims
Employment Division
70 Carden Place
Queen’s Cross 
Aberdeen
AB10 1UL	

SUMMARY

Identity of employer.  Tribunal found, on an assessment of documentary and oral evidence, that claimant employed by respondents and not by a limited company of which they were directors.  On appeal, the EAT held that the Tribunal had not erred in carrying out an exercise which was substantially one of assessing fact.  

THE HONOURABLE LADY SMITH

INTRODUCTION 
1.	This is an appeal from a judgment of the Employment Tribunal sitting in Glasgow, Employment Judge Mr R Gall, registered on 11 February 2008, following a pre-hearing review in the claimant’s claim of unfair dismissal.  In that judgment he determined that the claimant’s employers at the relevant time were the respondents.  They appeal against that determination.  I will continue to refer to parties as claimant and respondents. 

2.	The respondents were represented by Ms S Lennon, of counsel, before the tribunal and by Mr Bourne of counsel before me.  The claimant represented herself before the Tribunal and was represented by Mr Cameron, advocate, before me.

3.	The issue was whether the claimant was employed by the respondents as individuals or whether she was employed by a limited company of which they were directors.

BACKGROUND 
4.	The claimant is a beauty therapist and worked as manageress of a unit in a department store, Wilkies, in Stirling, between April 2006 and June 2007.  The business name of the unit was “Beauty Within”.  During the first week that she worked there, the first respondent showed her a statement of terms and conditions relating to a different employee.  The names of the first and second respondents as individuals were given as the employers in that statement.  The Tribunal found:

“That statement of terms and conditions stated on the face of it that the employers were ‘Mr and Mrs McVeigh (the respondents in the present case) trading as ‘Beauty Inc’.” 

5.	The Tribunal also found that the first respondent told the claimant that her terms and conditions would be exactly the same but would show her name as the employee and the business name detailed would be “Beauty Within”. 

6.	The claimant’s payslips referred to “Beauty Within”.  They made no mention of a limited company.  Her P60 showed her employer as being “Beauty Within (Paisley) Ltd” but she did not receive that P60 until after having lodged this claim with the Employment Tribunal on 14 September 2007, months after the date that it was due to be sent to her.  There are no findings as to the circumstances in which that P60 came to be prepared, evidently due to no evidence having been led from the respondents about that: Who prepared it?  Why was it prepared at that stage?  On what basis was it stated in it that the limited company was the employer?  Was any attempt made to reconcile that with the fact that the weekly wage slips provided to the claimant had not shown the limited company to be the claimant’s employer?  If not, why not?  None of these very obvious questions were addressed by the respondents.

7.	Headed notepaper used by the business unit referred to “Beauty Within” and made no reference to a limited company or to a partnership. 

8.	Mail arrived regularly at the unit in Wilkies addressed to “Mr Glen McVeigh, Beauty Within”.  The claimant did not open it but she often saw it.  Mr McVeigh was actively involved in the running of the business and attended at the premises on 4 or 5 days each week. 

9.	Disciplinary proceedings took place on or around 20 June 2007.  For the purpose of those proceedings, the second respondent prepared a statement of particulars of employment showing the claimant as the employee and showing the employers as being:  “Roslyn Docherty and Glen McVeigh trading as Beauty Within, 44 King Street, Stirling”.  It was shown to the claimant at the disciplinary hearing.  After the hearing, the respondents sent the claimant a note of the meeting headed “Beauty Within”. 

10.	In an undated letter issued by the first respondent on paper headed “Beauty Within” for exhibition to the claimant’s landlord, the claimant was referred to as being employed by “my company” but also “by myself”.  The ‘company’ to which reference is made in the letter was not named.

11.	The price lists, publicity materials and signage relating to the business in which the claimant worked made no reference to a limited company.  They referred to the business as “Beauty Within”.  

12.	Neither respondent ever said to the claimant that her employer was a limited company.  On at least one occasion, Mr McVeigh stated to the claimant that he was her employer.

13.	The respondents were, at the relevant time, both directors of a company named “Beauty Within (Paisley) Ltd.”  

THE TRIBUNAL’S JUDGMENT 
14.	The Tribunal found that the respondents were the claimant’s employers, as individuals.  It comments that the respondents had no grasp of the distinction between the various vehicles through which they could trade.  It found it particularly significant that when a document was prepared to show the claimant’s terms and conditions in June 2007, it did not indicate that she was employed by a limited company.  That was not, however, the only fact taken into account by the Tribunal.  It took account of the whole circumstances to which I have referred.  At paragraph 21, it states:

“In considering the evidence and reaching a conclusion in this matter I have looked at written documentation comprising the productions as spoken to and have also had regard to the oral evidence given.”

15.	It is evident from the discussion contained in the judgment that it took account of all the facts and circumstances surrounding the claimant’s employment.  It took account of the fact that the P60 showed the employer to be the limited company but evidently gave it no weight since the claimant did not receive the P60 until after her ET1 had been lodged and since none of the other documents including, significantly, the wages slips showed that the company was her employer.  

16.	The Tribunal specifically declined, however, to take account of documents relating to an application on behalf of the limited company to be struck from the Register of Companies, an application which apparently postdated the claimant’s application to the Employment Tribunal by some four days.  It gave as its reason for declining that the documents had not been spoken to in evidence nor put to the claimant.  It was right to do so. Documentary productions which have not been the subject of agreement between parties and have not been spoken to in evidence are simply not evidence in the case and it would have been wrong for the Tribunal to have regard to them. 

17.	The Tribunal referred to two authorities, Clifford v Union of Democratic Mineworkers [1991] IRLR 518 and Secretary of State for Education and Employment v Bearman [1998] IRLR 431.  It was not referred to either authority at the pre hearing review but I would observe that these are the only authorities referred to in the relevant section in Harvey on Industrial Relations and Employment Law (T1680) and it would be reasonable to have expected counsel to be aware of them.  Of these authorities, the Tribunal states:

“In the latter case, the EAT gives guidance as to the approach to be adopted by a Tribunal in seeking to identify the employer.  Written contractual arrangements fall to be looked at in the first place, enquiring whether they truly reflect the intention of the parties.  If so then the Tribunal can determine the employer then decide whether that position has changed during the employment relationship and if so when this occurred and with what effect.” 

18.	The gloss that the Tribunal puts on the Bearman case is not quite accurate inasmuch as the passage to which it is obviously referring (at paragraph 22 of the EAT judgment) needs to be read in context, which was that in that case the contractual terms had been documented at the outset of the employment relationship.  It is quite correct to say that where that has occurred, the obvious starting point is that document but in a case where the relevant documentation postdates the start of the relationship, there is no need to consider it first.  It will fall to be considered along with the other evidence in the case in the Tribunal’s overall assessment and it is evident that, notwithstanding what the Tribunal say about Bearman, that that is what the Tribunal did in this case. 

RELEVANT LAW 
19.	The question of whether or not a person is employed by A or B is essentially a question of law: who were the parties to the contract of employment?  However, answering it will often involve the assessment and evaluation of fact.  It is a matter of identifying what was agreed between whom at the commencement of the contract.  There may be documentary evidence about that.  There may be oral evidence about it.  It may a matter of inference from documentary and/or oral evidence.  If the parties’ relationship at the outset is recorded in a document then it will be a matter of construing that document (a question of law) and then considering whether there is any other evidence which shows that the parties’ intention at that time was not in fact as the document indicates it was.  Thus, where there is evidence in addition to a documentary record of  the initial contract, then it is a matter of considering the document and those other facts together (a mixed question of fact and law: Clifford) or it may, depending on the circumstances, be a pure question of fact (Carmichael v National Power plc [2000] IRLR 43).

20.	If the evidence as to what parties agreed is either non documentary or a combination of documentary and non documentary then it is important to remember that, properly understood, the Tribunal’s assessment may have been one of pure fact and it is then not for this Tribunal, absent perversity, to interfere with the Employment Tribunal’s assessment.  Except in cases where the only evidence of the identity of the parties to the contract is documentary, it is likely to be the case that there is no single right answer.  As the authors of Harvey comment in the paragraph above referred to, different Tribunals could reach different decisions on the same facts without either misdirecting itself.

APPEAL
21.	For the respondents, Mr Bourne began by accepting that the respondents did not ‘issue the correct documents at the correct time’, that they should have issued a contract of employment at the outset but had not done so and that when they issued the statement of employment particulars on 20 June 2007, it should have stated that the claimant’s employer was the limited company but it did not.  Despite that, he submitted that the appeal should be allowed and a finding substituted that the claimant’s employer was “Beauty Within (Paisley) Limited”. 

22.	One of the grounds of appeal referred to the documents regarding the application to have the company struck off the register and asserted that the Tribunal had erred in failing to have regard to them.  Mr Bourne accepted that it was, as he put it ‘not his strongest point’ although did not seem to be prepared to accept that the Tribunal simply could not properly have had regard to them.   

23.	Another of the grounds of appeal referred to Clifford and Bearman and submitted that the Tribunal had erred in having regard to them without having heard parties’ submissions and that, further, the Tribunal had misdirected itself regarding them; it was not necessary to look first at the documents when there was no document entered into at the time of the contracting.  

24.	The main ground of appeal was, however, that the Tribunal had erred in failing to have regard to the P60.  It was, he submitted, probably the most important document the Tribunal had before it because it was a statutory statement of the payment of wages and was a historical document.  It should have been recognised that it required powerful evidence to displace it.  It should be inferred that it was prepared by a bookkeeper.  The payslips, on the other hand, merely showed, he said, that the claimant was being paid by the business for which she worked although he did not expand on what he meant by that submission which appeared, on the face of it, to undermine his main argument.  

25.	Mr Bourne referred to correspondence between agents which confirmed that the second respondent had said in evidence that the company had paid tax and national insurance for the claimant.  On it being pointed out that that correspondence also showed that the claimant’s agents added (a) that that was not what her payslips showed and that (b) it was her position that she had been advised by the Inland Revenue that no tax or national insurance had been paid for her whilst she was employed at the salon in Stirling, Mr Bourne repeated that it was still the case that the second respondent had given evidence to the foregoing effect.  He could not, however, point to any finding in fact by the Tribunal which supported the respondent’s position that the company had paid the tax and national insurance. 

26.	Mr Bourne also submitted that there was a conflict that the Tribunal did not resolve because the second respondent said in evidence that “Beauty Inc’” was set up as a limited company but that had not been referred to by the Tribunal at paragraph 29.  He submitted that the Tribunal had also failed to take account of the fact that it had recorded that the second respondent had said that it was through “oversight” that she had not put the company’s name on the statement of particulars handed to the claimant in June 2007.  He seemed to suggest that standing that evidence, the Tribunal was bound to regard the statement in a different light.  

27.	Mr Bourne did not submit that the Tribunal’s decision was perverse.  However, the most conclusive evidence was, he said, the P60; had legal advice been taken at the time, it would have been the company was the employer and the documents would have shown that.  In the circumstances the Tribunal was bound to conclude that the company, not the respondents, employed the claimant.  The P60 did not, he said, trump everything else but it did “shout loudest”. 

28.	As I listened to Mr Bourne’s submissions, I gained a strong impression that he was approaching matters very much from the standpoint of what the respondents’ had intended and the fact that “Beauty Within (Paisley) Ltd” did exist, rather than the question of what, objectively tested, it was open to the factfinder to conclude about who were the parties to the contract, looking at the evidence as a whole.

29.	For the claimant, Mr Cameron moved that the appeal be dismissed.  The central issue was the identity of the employer and that was, quintessentially a question of fact.  This Tribunal required, accordingly, to be very cautious before interfering with it.  

30.	Mr Cameron carefully reviewed the findings in fact made by the Tribunal and submitted that, in the light of it, the Tribunal was plainly entitled to find that the respondents were the claimant’s employers and not the limited company to which they referred.  

31.	There was no problem about the “oversight” evidence; the Tribunal had said, at paragraph 25, that that explanation would “not do” and rather, the way that the statement was drafted was consistent with the factual position being that the company was not the employer. 

32.	Mr Cameron submitted that the Tribunal had produced a careful and comprehensive judgment.  It was of particular significance that it accepted the claimant’s evidence that she knew nothing of the limited company until she received her P60.  The P60 was properly treated by the Tribunal in circumstances where it postdated the employment by months and no explanation was given as to how and why it was prepared.  It was not an agreed document.  The Tribunal was entitled to deal with it as it did.  The clear answer lay in the payslips, so far as documents were concerned.  He did not accept that it was wrong of the Tribunal to consider the authorities referred to or that it had misdirected itself regarding them.

DISCUSSION 
33.	The only documentary evidence relating to the period when the claimant’s employment commenced was the statement of terms and conditions that was shown to her which related to a different employee and showed the employer as being the respondents.  No document was shown to the claimant, even less was one exchanged between parties, which specified that the employer was the limited company.  Other relevant documents were the claimant’s weekly wage slips, the respondents’ headed notepaper, the statement of particulars issued to the claimant on 20 June 2007, the note of the meeting of 20 June 2007, the undated letter which is not on company notepaper and that refers to the claimant being employed both by ‘my company’ and ‘by myself’ and the P60 showing the employer as the limited company “Beauty Within (Paisley) Ltd”.  The P60 suffered, however, from the difficulties to which I have already referred.  Mr Bourne’s submission to the effect that it was the most important evidence in the case is not tenable.  It was a single adminicle of evidence and in the circumstances the Tribunal were entitled to evaluate in the manner in which they did.  

34.	The other non-documentary evidence available to the Tribunal was that the McVeighs never told the claimant she was employed by a company; the claimant was not aware of the existence of the company until she received her P60 after this claim was lodged and the claimant had been told by the first respondent on at least one occasion that she was employed by him.  It is also of significance that the Employment Judge gained the clear impression that the respondents had no grasp of the distinction between trading as an individual / partnership / limited company.  They were confused as the distinctions to be drawn and as to their obligations if they wished to use the company as a trading vehicle.  In such circumstances, the Tribunal were entitled to take the view that it was unlikely that they would have communicated to the claimant that she was employed not by them but by the company.  There is then the fact that Mrs McVeigh said that the failure to mention the company in the statement of particulars given to the claimant on 20 June was “an oversight”, a comment which might be seen as seeking to suggest that the intention was to indicate that the company was the employer.  But the problem with that is that the Tribunal did not accept her explanation and, in any event, even if she did, in her own mind, intend to communicate to the claimant that the employer was the company, she did not do so.  On the contrary, she used the same formula as had been shown to the claimant when she started to work at the salon, namely to show her as employed by the respondents in circumstances where they were using a trading name.  I do not see that the evidence that “Beauty Inc” was incorporated assists matters in the respondents’ favour here. 

35.	As regards the grounds of appeal relating to the Tribunal’s reference to the cases of Clifford and Bearman two issues arise.  The first is whether it misdirected itself in the light of them; I do not see that it did.  Even if paragraph 26 of the Tribunal’s judgment is to be read as indicating that construction of a document setting out the employment relationship requires to take precedence in all circumstances including those in which that document postdates the commencement of the relationship (which is not correct, as I have already indicated) that is not in fact the approach adopted by the Tribunal here.  It is plain that it looked at all the facts in the round including the documents.  The second is the general question of whether it is appropriate for a Tribunal to consider authorities to which it was not referred by parties.  There is no strict rule.  The principle to be applied by the Tribunal in such circumstances must be that of affording parties a fair trial.  It requires to ask itself whether a fair trial will still be afforded if it considers and takes account of authorities not referred to in the course of the hearing.  That will be a matter of judgment in each case; it could be that the authority in question is so well known or so clear that the Tribunal can safely refer to it without drawing it to parties’ attention and inviting further submissions.  If, however, the Tribunal is in any doubt, that is the course of action that should be followed.  Further, if parties have the opportunity to make submissions regarding the authorities at appeal stage, that may have the effect of curing any earlier unfairness. 

36.	In all these circumstances, there was ample by way of factual findings to support the Tribunal’s finding that the respondents were the employers. 

DISPOSAL 
37.	In these circumstances, I will pronounce an order dismissing the appeal and remitting the case to the Tribunal to proceed with the claimant’s claim for unfair dismissal.