Appeal No. UKEAT/0281/09/DM

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 3 November 2009

Before
THE HONOURABLE MR JUSTICE BURTON
(SITTING ALONE)

MR P J DAINTY	APPELLANT

ELLERTON KNIGHT 	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MR CHARLES PRICE
(of Counsel)
Instructed by:
Messrs Mander Hadley & Co Solicitors
1 The Quadrant
Coventry CV1 2DW	
For the Respondent	No appearance or representation by or on behalf of the Respondent

SUMMARY
CONTRACT OF EMPLOYMENT:  Whether established
Decision by Employment Tribunal that the Appellant was (by reference to a letter of appointment) and remained (there being no subsequent variation) self-employed upheld. Appeal on perversity grounds dismissed.

THE HONOURABLE MR JUSTICE BURTON
Introduction
1.	This has been the hearing of an appeal by Mr Paul Dainty against the decision of the Employment Tribunal at Birmingham on a Pre-Hearing Review, Employment Judge Cocks sitting alone, which, by Reasons sent to the parties on 20 April 2009, dismissed claims for unfair dismissal and breach of contract brought by the Claimant against the Respondent, Ellerton Knight, by virtue of its conclusion on a preliminary issue that the Claimant was not an employee.  The Appellant was represented both below and before me by Mr Charles Price, of Counsel, who has argued the matter carefully and vigorously on his behalf before me.

The Respondent’s Case
2.	The Respondent has not appeared before me today, but, courteously, sent a letter to this Tribunal, in which it indicated that it would not attend, although it opposed the appeal, and relied on the grounds set out by the Employment Judge in her Reasons, which are, indeed, clear and persuasive.

The Appellant’s Case
3.	Mr Price has not sought to base his case on any error of law, in the sense of any misapplication of the law by the Tribunal.  The Employment Judge correctly referred, no doubt in large part because she was referred to the authorities by Mr Price himself, to all the leading cases, in paragraph 34 of her judgment.  In addition, before me, Mr Price has referred to a decision of the Employment Appeal Tribunal in Wilson v Circular Distributors Limited (EATS/0043/05) in a judgment of 11 August 2005.

4.	There is, as Mr Price accepts and as the Tribunal stated correctly in paragraph 38, no one single test for employment status and it is not the job of a court to go through all the factors on a tick box basis: see paragraph 38 of the Tribunal’s judgment, where the Judge went on to say:
“I must look at the whole picture and determine what the relationship was between the parties.  No single test can be conclusive.”

5.	There is no challenge by Mr Price to the fact that the Employment Judge did just that.  He points that out in relation to all the factors which the Judge mentioned at the outset: the existence of a contract; the obligation on the party asserting that he or she is an employee to show that work was provided by way of an obligation to provide work personally; mutuality of obligation; and a sufficient element of control over the work by the Respondent.

6.	Insofar as the Judge did what she said she was not obliged to do, namely go through on a tick box basis, all those boxes were ticked by the Judge, and, in paragraph 43, she finds that the Claimant was integrated into the Respondent’s business.  So far as equipment was concerned, she found that that was a neutral factor.  As she records, in paragraph 46, most of the above factors point towards the Claimant being an employee.  She then records in paragraph 47: 
“Factors going against employment status are: the way in which the Claimant was paid a gross sum on which the Respondent later paid the tax; his tax and NI position; the way in which he was paid drawings for which he received no pay slips.  This form of payment is entirely consistent with his being a self-employed partner.”  

7.	The Appellant worked for the Respondent as Commercial Customer Services Manager from 13 September 2006 until 30 September 2008. He had previously been with another company where he was employed on a salary of £36,000 a year.  The Respondent offered him, as was found by the Tribunal in paragraph 5, a self-employed position. That self-employed position was on the terms of £3,000 per month, with the employer paying the tax and National Insurance, in circumstances to which I will refer. To that extent, therefore, he was receiving more money than in his previous job, because he was receiving the same sum without any deductions as he had previously been receiving under PAYE after deductions. The Employment Judge, in my judgment, correctly found that the factors in paragraph 47 of the judgment were, at the least, entirely consistent with the Appellant being a self-employed partner.

8.	Mr Price has submitted that there was some inconsistency in that regard with what the Judge had said in paragraph 23 of her judgment:

“There can be no doubt that the Claimant signed off his tax returns as a self-employed person and benefited from receiving his pay or drawings as a net sum of £3,000 per month with the tax on it being paid by the respondent, certainly until April 2007.”

9.	I see no inconsistency.  It is certainly consistent, to receive a gross sum and for the Respondent to pay tax and national insurance on it, with there being a position of employer and employee. But the Tribunal is also at least entitled to find that that, coupled with the other factors which were set out in paragraph 47 of the judgment, was entirely consistent with the Appellant being a self-employed partner. The Employment Judge continued, in paragraph 48, by saying this:
“I now turn to what I see as the crux of this case.  The agreement between the parties as set out in the offer of an associate partnership letter dated 19 July 2006.”

10.	This is the letter which was the only document which recorded the terms of the agreement between the parties.  It is headed up “Associate Partnership with Ellerton Knight”.  It commences with an offer of an associate partnership with Ellerton Knight as a commercial customer services manager commencing 1 September 2006.  

11.	It is the case that there were two other people within the document, which is listed in the papers, called “Company Structure 2008” at the same level of seniority with the Appellant, who were described in that Company Structure as self-employed, neither of which were equity partners.  One was a development executive and the other was an IFA. Both were incorporated into the structure, as was the Appellant. The Employment Judge was not in a position to make any findings as to proper analysis of the position of those two others in law, but she simply recorded the evidence that there were two others engaged as self-employed within the company.  

12.	The letter continues: 
“As discussed, you will join as an associate partner on a self-employed basis with a monthly draw of £3,000.  From your draw you will be responsible for providing your own car, car insurance and mobile telephone.

Ellerton Knight will provide you with a fuel card to meet the fuel costs which will be in addition to the monthly draw.  Ellerton Knight shall pay the tax and National Insurance due on the drawings of £3,000 per month at the required time.

Ellerton Knight will allow the draw to continue in the event of sickness or absence due to illness for a period of four months.  Ellerton Knight will maintain professional indemnity insurance for Paul Dainty as a self-employed agent.

As an associate partner of the practice you will share in the profitability of the company, details of the profit share to be decided and mutually agreed at a later date.

The monthly draw will be guaranteed for the first 12 months and renegotiated at that time.  Should our objectives be achieved then discussions can be commenced in respect of an “equity participation” in the practice, as discussed.  I am now in the process of preparing a suitable contract which will be forthcoming within the next two to three weeks.

In the meantime I look forward to the confirmation of your exact start date and would take this opportunity to welcome you to Ellerton Knight and now look forward to a mutually successful working relationship over the coming years.”

13.	The Appellant did indeed start with the Respondent, and continued with them for over two years. There was a letter in the bundle, not in issue between the parties, which the Appellant himself wrote to HM Revenue and Customs, dated 4 December 2006, which enclosed an HM Revenue and Customs self-employed CWF1 form, an application to pay Class 2 contributions by way of a direct debit form, and there is other correspondence relating to tax ante-dating April 2007, which all show that the Appellant had recognised that he was self‑employed for tax purposes and appears to have accounted in that way throughout to the Revenue.

14.	The evidence which the Appellant gave to the Tribunal is recorded in paragraphs 49 and 50 of the Tribunal judgment and is of some significance.  He said this, as found by the Tribunal, and Mr Price, who was there, has not challenged in any way those findings as properly made.

“49.	The Claimant has accepted that this was the agreement [that is that contained in the letter 19 July 2006] that reflected the intentions of both parties when he started work, namely that he was self-employed.  There is no ambiguity in that letter, other than what Mr Ellerton meant when he refers to a “suitable contract” being prepared in the next two to three weeks.  Seen in the context of the rest of the letter, this can only have been to formalise contractually what had been agreed between the parties and described in the offer letter.  It makes no sense to read that sentence as referring to a contract of employment. 

50.	The Claimant’s statement that he understood that he was to be self-employed to begin with but when he did not get a contract he became a “deemed” employee is a strange one.  As late as April 2007 he was holding himself out to Revenue and Customs as self-employed, as evidenced by the letter of the accountant and the tax return itself.”

15.	Mr Price says, however, that the evidence that his client gave before the Tribunal was, and must be seen to be, overridden by his confusion as to what is self-employed and what is an employee, and that it is obvious that no layman should be relied upon for a conclusion in law, not least, because it is difficult enough for a court or tribunal to arrive at such a conclusion.  Underlying that is the fundamental point, which was found by the Tribunal, which is that the Claimant accepted, whatever it may have said - and what it said falls to be construed in law by the Tribunal - that it was that letter which reflected the arrangements.

16.	What the Appellant was saying is that he was expecting there to be a contract which would change things.  Indeed it is clear that there was, upon the findings by the Tribunal, some discussion subsequently by the Appellant with the Respondent:  

26.	The claimant did not receive payslips. His explanation as to why he accepted this was because he had joined the respondent on a self-employed basis.  His view at the time (and now) was that if he did not get a contract from Mr Ellerton then he would be “deemed” to be an employee and would have employment rights.  

…

29.	 It is clear from Mr Hannigan’s evidence that there were regular discussions with Mr Dainty about his status but on the grounds that he wanted a full or equity partnership.  In the event, this did not materialise, as the firm was having financial difficulties and it would not have been an appropriate time, or in his interests, to make Mr Dainty an equity partner.

17.	It is plain that, as a matter of law, if the contractual arrangements between the parties were indeed constituted by the letter of agreement of 19 July 2006, then for the Applicant’s case to succeed there would need to have been something amounting to a variation of that contract. As to that, it would be wholly unlikely that any kind of implied variation could be based upon silence, or upon a simple request for a fresh contract containing something different. In any event, there do not appear to have been any discussions, never mind agreement, as to any change of terms, and certainly that was the finding of the Tribunal:

“51.	I asked myself whether the initial arrangements and the agreement that the claimant was self-employed were varied at any point in time.  There is simply no evidence that this happened.  Whatever the claimant has contended since his working relationship with the respondent has broken down, the evidence at the time is that the claimant understood he was self-employed, was called an Associate Partner and had expectations of becoming a full equity partner.
52. 	The claimant may well have had discussions with Mr Ellerton about his employment status and wanting a contract but at no time did he complain formally, put anything in writing or inform the tax authority at the time that he was not self-employed but an employee.  I view this as clear evidence of what Mr Dainty’s intention and belief about his employment status was at that time.
55. 	There is simply no evidence that that relationship [of self-employment in accordance with the letter of July 2006] changed at any time from that of the claimant working in accordance with what he had accepted to be a self-employment agreement into a contract of employment.”

18.	It is wholly clear that the Tribunal found that the contents of the letter of 19 July 2006 reflected the agreement between the parties, and it is equally clear that the Appellant’s case was not that that was not the case, but that he understood that the arrangement for self-employment would be changed once a further contract was signed, or indeed agreed. It never was.

Conclusion
19.	This is not a case which depends upon any difficulty in relation to the law.  Insofar as Mr Price has referred to the case of Wilson, to which I referred earlier, there the predicate for any discussion was that the document which contained the terms and conditions of employment, as is recorded by the HH Judge Serota QC, giving the judgment at paragraph 3, “looks very much to us like a contract of employment”.

20.	That is not the position here. The position here at best, from the point of view of Mr Price, is that the letter was consistent with employment, notwithstanding the terms used, but more consistent, not only because of the terms used, but because of the tax arrangements that were set up as a result, with self-employment. At the end of the day, Mr Price’s submission is one of perversity, not of erroneous approach in law. He submits that the conclusion by the Employment Judge that the relationship between the parties was one of self-employment, with reference to what the Judge called the “crux of the case” (paragraph 48), the letter, was perverse.

21.	I am wholly unpersuaded that the Employment Judge in any way succumbed to error: certainly none of the kind that can and needs to be characterised as perversity, in the light of the consistent decisions of the Court of Appeal, including Yeboah v Crofton [2002] IRLR 634 CA, to which Mr Price has referred.

22.	The real decision was not as to the construction of the contract when the matter started, which really was not in issue between the parties, subject only to Mr Price’s correct point that the intentions of the parties are not conclusive but that the matter must still be looked at objectively by the court. This is a case in which the Tribunal was more than entitled to conclude that the relationship so reflected was one of self-employment. The Tribunal was also however plainly entitled to conclude that the initial arrangement was never changed, and indeed that the Appellant acted in accordance with it.

23.	In those circumstances this appeal is dismissed.