Appeal Nos. UKEAT/0568/11/RN
UKEAT/0168/12/RN

EMPLOYMENT APPEAL TRIBUNAL
FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON EC4Y 8JX

		At the Tribunal
		On 25 & 26 April 2012

Before
HIS HONOUR JUDGE PETER CLARK
(SITTING ALONE)

UKEAT/0568/11/RN

MS K L BATES VAN WINKELHOF	APPELLANT

(1) CLYDE & CO LLP
(2) MR J MORRIS	RESPONDENTS

UKEAT/0168/12/RN

CLYDE & CO LLP	APPELLANT

MS K L BATES VAN WINKELHOF	RESPONDENTS

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For Mrs K L Bates van Winkelhof	MR DAVID CRAIG
(of Counsel)
Instructed by:
Messrs Mischcon de Reya Solicitors
Summit House
12 Red Lion Square
London
WC1R 4QD
	
For Clyde & Co LLP and Mr J Morris	MR CHRIS QUINN
(of Counsel)
Instructed by:
Messrs Clyde & Co Solicitors
1 Stoke Road
Guildford
Surrey
GU1 4HW

SUMMARY
JURISDICTIONAL POINTS 
Worker, employee or neither
Working outside the jurisdiction

Whether LLP equity member was a limb (b) worker under section 230(3).  Allowing Claimant’s appeal, she was.  Applying Lawson v Serco, Duncombe (No. 2) and Ravat, on any view Employment Tribunal entitled to conclude that it had jurisdiction territorially to entertain both whistleblowing claim (ERA) and claims under Equality Act 2010.

HIS HONOUR JUDGE PETER CLARK
Introduction
1.	I have before me for full hearing: (1) an appeal by Ms Bates, the Claimant before the London Central Employment Tribunal, against so much of the Reserved Judgment of Employment Judge Welch, sitting alone at a Pre‑Hearing Review held on 16 May 2011, that Judgment having been promulgated with Reasons on 1 July 2011 (“the PHR Judgment”), as ruled that the Tribunal had no jurisdiction to entertain her complaint of detrimental treatment on the grounds of her having made protected disclosures (“the whistleblowing claim”) on the footing that she was not a limb (b) worker, as defined by section 230(3) of the Employment Rights Act 1996 (ERA) (“the worker point”); (2) a cross‑appeal by the Respondents, (1) Clyde & Co LLP and (2) Mr John Morris, against so much of the PHR Judgment as held that both her whistleblowing and sex discrimination claims were justiciable in the Tribunal, notwithstanding that her work was principally located in Tanzania (“the extraterritorial jurisdiction point”); and (3) an appeal by the First Respondent against a disclosure order made against that Respondent in favour of the Claimant by Employment Judge Grewal on 11 January 2012 (“the disclosure appeal”).

2.	I heard the PHR appeal and cross‑appeal first, since the disclosure appeal was to some extent contingent on the outcome of the PHR appeals, particularly the Claimant’s appeal on the worker point.

Background
3.	The Claimant has dual UK/US nationality.  She is an English‑qualified solicitor; she trained at Simmons & Simmons and then spent four years, until 2005, as an associate solicitor with Linklaters in London.  In late 2005 she joined Shadbolts, a UK firm, seconded to a Tanzanian law firm, FK Law, with whom she had an employment contract.  Such a contract was necessary to permit her to work in Tanzania (Reasons, paragraph 10).

4.	In early 2009 Shadbolts terminated its joint venture agreement with FK Law and entered into a new agreement with another Tanzanian firm, Ako Law.  Mr Kibuta Ongwamuhana (“Kibuta”) was at all relevant times the managing partner of Ako Law with whom the Claimant worked.  Her Tanzanian employment transferred over to Ako Law.

5.	The First Respondent, a well‑known London‑based firm of solicitors, was interested in acquiring certain parts of Shadbolts’ business, including that in which the Claimant was engaged.  Following discussions between the Claimant and the First Respondent, she received a formal offer letter dated 24 December 2009 inviting her to join the First Respondent.  Specifically, she was offered membership of the limited liability partnership (LLP) as an equity member.  The First Respondent’s partners are divided into equity members and senior equity members.  She was to receive an annual share of profits fixed at £103,000, continuation of an annual payment that she received from Shadbolts attributed to her employment with Ako Law of $85,000, and 20 per cent of any profit made from the joint venture with Ako Law, which arrangement was to transfer to the First Respondent; of any remaining profits, 25 per cent went to Kibuta and 55 per cent to the First Respondent.  She was also offered the prospect of future promotion to senior equity member; I am told that senior equity members are remunerated by a share of profits only.  She accepted the First Respondent’s offer and formally became an equity member of the LLP on 21 February 2010.

6.	On 23 and 24 November 2010 she reported to the First Respondent’s money‑laundering reporting officers that Kibuta had admitted to her that he paid bribes to secure work and to secure the outcome of cases, an allegation that is denied by the First Respondent and forms the basis of the Claimant’s whistleblowing complaint in these proceedings.  She was dismissed by Ako Law on 25 November and suspended by the First Respondent on that day.  She returned to London, where she attended a meeting with representatives of the First Respondent on 6 December to discuss allegations made against her.  She was expelled from the First Respondent by letter dated 13 January 2011.

7.	It is her case that her expulsion was a detriment on the grounds that she had made protected disclosures in respect of Kibuta and/or amounted to unlawful sex discrimination on the grounds that (a) a male partner would not have been treated in that way and/or (b) was pregnancy‑related, she having recently informed the First Respondent that she was pregnant.  All claims are resisted by the Respondents, Mr Morris being a senior equity member of the First Respondent.

Extraterritorial jurisdiction
8.	I do not find it necessary to recount the tortuous history of the learning on the territorial reach of the Employment Tribunal’s jurisdiction, which may be traced back to the 1970s.  For present purposes it is sufficient to observe that the repeal of section 196 ERA, excluding the right of employees to claim unfair dismissal under section 94, by the Act of 1999 without replacement led to considerable uncertainty, to some extent resolved by the House of Lords in Lawson v Serco [2006] ICR 250.  Although this Claimant does not bring a complaint of unfair dismissal, Employment Judge Welch paid particular attention to the guidance of Lord Hoffmann in Lawson in determining whether or not the Tribunal had jurisdiction to entertain the Claimant’s whistleblowing claim brought under section 48 ERA.  Since the PHR Judgment in this case the Supreme Court has pronounced on the extraterritorial jurisdiction question in unfair dismissal cases in Duncombe v Secretary of State for Children, Schools and Families (No.2) [2011] ICR 312 and Ravat v Halliburton Manufacturing and Services Ltd [2012] ICR 389, to which I shall return.

9.	As to complaints of sex discrimination, under the Sex Discrimination Act 1975 (SDA) the question was whether the Claimant worked wholly or partly in Great Britain (SDA, section 10).  This Claimant would plainly have met the requirement of working partly in Great Britain on the facts found by the Tribunal, but she brings, as she must, her claim under the Equality Act 2010 (EqA), which, like the present ERA, contains no express provision for determining ET extraterritorial jurisdiction.  Thus the omission of any statutory guidance is now common to both statutes under which these claims are brought.

Worker
10.	No difficulty arises for the Claimant in this case so far as her sex discrimination claim is concerned, because section 45 EqA extends protection to partners such as this Claimant.  The issue in the case arises under the ERA and in particular the application of the limb (b) worker definition to this Claimant under section 230(3) ERA.  It is not suggested by either party that she is a limb (a) employee of the First Respondent.  It follows that the exclusion of employees from detrimental treatment protection for dismissal, covered by section 103A, in section 47B(2) does not apply to the Claimant’s expulsion if she is, contrary to the Tribunal’s finding, a limb (b) worker.

The PHR appeal
11.	It is convenient to deal first with the Claimant’s appeal on the worker point, and then to consider the Respondent’s cross‑appeal on the extraterritorial jurisdiction point.

The worker point
12.	Section 230(3) provides:

“In this Act, ‘worker’ […] means an individual who has entered into or works under (or, where the employment has ceased, worked under)—
(a) a contract of employment, or
(b) any other contract, whether express or implied, and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual;
and any reference to a worker’s contract shall be construed accordingly.”

13.	Based on that definition, I accept Mr Craig’s formulation of the four statutory requirements under section 230(3)(b) for a limb (b) worker, namely (1) there must be a contract, (2) under that contract the worker must undertake to do or perform work or services personally, (3) the work or services are to be done or performed for another party to the contract, and (4) the other party must not be a client or customer of a profession or business undertaking carried on by the putative worker (“the exclusion proviso”).

14.	The Employment Judge held that the Claimant met the first three requirements of the limb (b) worker test but fell at the final, fourth hurdle, the exclusion proviso.  Her reasoning is encapsulated at paragraph 83, where she said this:

“As an Equity Member of an LLP, the Claimant was providing services for the partnership in which she was an active partner as well as being employed as a Consultant with Ako Law.  The Tribunal considers therefore that the Claimant satisfies the first parts of the definition of worker contained in section 230(3) of the ERA, namely that she worked ‘under any other contract to do or perform personally any work or services for another party to the contract’.  However, the Tribunal does not find that the Claimant satisfies the second part of section 230(3) in that the Claimant was an equity member of the First Respondent and shared in the profits generated from her work.  The Tribunal therefore finds that the Claimant was in business in her own right receiving a share of profits in relation to the work carried out.”

15.	In challenging the Employment Judge’s finding that the Claimant fell within the exclusion proviso such that she was not a limb (b) worker, Mr Craig starts with this advantage.  The point was not taken or argued below; that is common ground.  The position is that although the PHR was completed in a day it was, I am told, a very long day.  The Judge had the advantage of opening written skeleton arguments from both counsel, who appear before me.  She heard live evidence from five witnesses and considered a good deal of documentation.  Having done so, it was too late in the day for oral closing submissions, and thus written submissions were then delivered; there was no further hearing.  I have been shown all four sets of written submissions below, and it is apparent that the point on which the Claimant lost is not addressed by either counsel.  It necessarily follows that there was a procedural irregularity, in that the Claimant was not given the opportunity to address that point.  However, rather than remit the matter both parties are content, all necessary facts having been found, that I should exercise my powers under section 35(1) of the Employment Tribunals Act 1996 to determine the question as to whether or not the Claimant fell within the exclusion proviso.

16.	Before answering that question, I should first deal with the way in which the Respondent’s case on the worker point was put below and is again advanced as a further ground for rejecting the Claimant’s appeal in the Respondent’s Answer to that appeal.  The Respondent does not take issue with the Claimant’s case that she satisfies the first two requirements in Mr Craig’s formulation, which I have adopted.  The attack is directed to the third requirement.  It is said that the Claimant was not providing work or services under the contract (that is, the LLP equity membership agreement between her and the First Respondent) to the First Respondent but instead did so for the joint venture between the First Respondent and Ako Law.  The Employment Judge rejected that argument (see paragraph 83, set out above).

17.	I am satisfied that she was right to do so in light of her findings of fact, particularly at paragraphs 26, 29, 32, 33 and 41, namely that the Claimant was working for the benefit of the First Respondent as an equity member as well as for her own benefit.  During her time in Tanzania she was the equivalent of the First Respondent’s “man in Havannah [sic]”.  The Judge accepted the Claimant’s evidence that she was predominantly based in Tanzania, overseeing operations there, but regularly worked in the London office of, and was first and foremost a member of, the First Respondent.  I also note Mr Craig’s point that in their ET3 pleaded case the Respondents say that the Claimant “principally worked in Tanzania for the first Respondent”.  In these circumstances, I too reject the Respondent’s argument on the third requirement of the limb (b) worker test.

18.	Turning then to the exclusion proviso question, having heard full argument from both parties, of which the Employment Judge was deprived, I entirely accept the submissions of Mr Craig.  The exclusion proviso contains two elements: first, the Claimant here must be carrying on a profession or business undertaking; and secondly, the other party to the relevant contract must be a client or customer of that profession or business undertaking.  I bear in mind the analysis by Mr Recorder Underhill QC, as he then was, in Byrne Brothers v Baird [2002] ICR 667, particularly at paragraph 17(4), where he speaks of the need for protection of workers who are in a subordinate and dependent position.  I recognise, as Mr Quinn points out, that such a description may not easily apply, certainly to a full equity partner or, in this case, a senior equity member who was wholly dependent on a share of the organisation’s profit for his or her remuneration.  The point has less force, it seems to me, when considering an equity member who, whilst enjoying a profit‑related element in her remuneration, is also guaranteed a certain level of remuneration (here, £103,000 plus $85,000 per annum).  She also had National Insurance contribution deductions made by the First Respondent at source.  She did not pay tax to HMRC because she spent sufficient time abroad; instead, I am told, she paid her tax to the US authorities.

19.	In my view, the most helpful analysis is to be derived from the approach of Langstaff J in Cotswold Developments Construction Ltd v Williams [2006] IRLR 181 at paragraph 53.  Although I have been referred to a number of cases in which the question as to whether a partner or equity member is a limb (a) employee for the purposes of unfair dismissal protection (see, for example, Kovats v TFO Management LLP [2009] ICR 1140; Tiffin v Lester Aldridge LLP [2011] IRLR 105; affirmed [2012] IRLR 391 and Williamson & Soden Solicitors v Briars UKEAT /0611/10, 20 May 2011, per Langstaff J), I do not find them to be of assistance in determining the limb (b) worker question, which raises different considerations.  Somewhat surprisingly, despite the researches of counsel, I have been shown no case, nor am I aware of any appellate decision, on the question as to whether a partner or equity member is a limb (b) worker.  The point is therefore novel, one of five novelties identified by Mr Quinn in his submissions.  The novelty does not alarm me; every point of law was novel once.  The answer is to be found in the application of the law to the facts of the individual case.

20.	Returning to the analysis in Cotswold, whilst it cannot provide the answer in every case I find it useful in the present case.  Langstaff J opined in relation to the exclusion proviso that:

“[…] a focus upon whether the purported worker actively markets his services as an independent person to the world in general (a person who will thus have a client or customer) on the one hand, or whether he is recruited by the principal to work for that principal as an integral part of the principal’s operation, will in most cases demonstrate on which side of the line a given person falls.”

21.	In the present case the Claimant was recruited by the First Respondent to join them from Shadbolts.  Under the LLP agreement between the Claimant and the First Respondent at clause 24.1, noted by the Judge at paragraph 23 of her Reasons, the Claimant agreed to devote her full-time attention to the business of the First Respondent; indeed, one of the alleged grounds for her expulsion was a breach of clause 24.1.  Mr Quinn accepts that she was an integral part of the First Respondent’s operation; she, by agreement, precluded herself from offering her professional services to anyone but the First Respondent, let alone the world at large.  In these circumstances, it is plain and obvious to me that the exclusion proviso did not apply to her.  She was in the subordinate position referred to in Baird and again by the Court of Justice of the European Union in Allonby v Accrington & Rossendale College [2004] ICR 1328, Judgment paragraph 68.  The First Respondent was not her client.

22.	In these circumstances, I shall allow the Claimant’s appeal, set aside what I find to be the erroneous finding of the Employment Judge that the exclusion proviso applied to her, and declare that she is a limb (b) worker.  Having so found, it is unnecessary for me to consider Mr Craig’s alternative argument under ERA section 43K, rejected by the Employment Judge at paragraph 84 of her Reasons, since the extended definition of “worker” for whistleblowing protection is not engaged where she falls within the primary section 230(3) definition.  I record that Mr Craig formally reserves his position as to this alternative argument.

The extraterritorial jurisdiction point
23.	At the PHR held on 16 May 2011 the Employment Judge had the advantage of the guidance provided by Lord Hoffmann in his opinion in Lawson.  She was also referred to the Court of Appeal decision in Ministry of Defence v Wallis [2011] ICR 617.  It would appear that the Employment Judge for the purpose of her determination that the Tribunal had territorial jurisdiction in relation to both the whistleblowing claim under the ERA and the sex discrimination/pregnancy‑related claim under the EqA applied the Lawson approach equally to both statutory causes of action.  I should record at this stage that in opposing the Respondent’s cross‑appeal Mr Craig deploys characteristically sophisticated arguments both involving European law and in submitting that the bar is set lower for whistleblowing territorial jurisdiction than it is for unfair dismissal claims under section 94(1) ERA, being considered by Lord Hoffmann in Lawson, and the Supreme Court in Duncombe (No. 2) and Ravat.  However, it is accepted by both counsel that initially it is permissible for me to make the assumption that there is no difference in approach to this jurisdictional question under the ERA in all its forms of statutory protection and under the EqA.  As I have earlier observed, Parliament now makes no provision for the determination of this question under either statute.

24.	Dealing first with the Judge’s approach, she considered Lord Hoffmann’s three categories of case as in Lawson and concluded that the Claimant fell within his third category; that is, cases of expatriate employees having equally strong connections with Great Britain and British employment law as with the foreign jurisdiction in which they worked (Lawson, paragraph 40; Tribunal Reasons, paragraph 57).  At paragraph 65 the Judge found that this Claimant had very strong connections with Great Britain.  She there listed six factors among others taken from her findings of fact; I need not repeat them.  At paragraph 66 she found that the Claimant was working for a global law firm with a global reach, which involved her working at least partly in London.  It was found that she worked 78 days in London for and spent 11 days travelling on behalf of the First Respondent between 1 February 2010 and 1 January 2011 (paragraph 39).  It will be recalled that after 25 November 2010 she was suspended by the First Respondent.  In conclusion (paragraph 68) the Judge found that the Claimant had firm, sound connections with Great Britain entitling her to bring her claim of sex and pregnancy discrimination.  Applying the same reasoning (paragraph 77), she also held that the Tribunal had territorial jurisdiction to hear her whistleblowing claim, subject to the worker point with which I have dealt earlier.

25.	In my judgment, on the facts found, the Employment Judge was plainly entitled to reach those conclusions, which reflect those reached by Regional Employment Judge Gay in Wallis, following an approach later approved by both the EAT and the Court of Appeal.  Further, I note that the MoD’s application for permission to appeal to the Supreme Court in that case was dismissed by the full court that heard Duncombe (No. 2) (see Lady Hale, paragraph 18).

26.	Thus far I can see no prospect of upholding the Respondent’s cross‑appeal.  However, at the forefront of Mr Quinn’s submissions in support of that appeal is the proposition that the law as it has now been revealed by Lord Hope, giving the Judgment of the Supreme Court in Ravat, raises a different question from that formulated by Lord Hoffmann in relation to his third category of cases, and that when the Ravat question, which post‑dates the PHR in this case, is posed, the only permissible answer is that the Tribunal does not have territorial jurisdiction to consider any of the Claimant’s claims.

27.	Mr Quinn has referred me to paragraph 27 of Ravat, where Lord Hope said:

“[…] I agree that the starting point needs to be more precisely identified.  It is that the employment relationship must have a stronger connection with Great Britain than with the foreign country where the employee works.”

28.	Of course, Lord Hope was dealing in that case with an employee all of whose services were performed abroad.  In the present case, this Claimant has also performed work for the First Respondent in Great Britain.  At paragraph 28 Lord Hope continued:

“The reason why an exception [to the general rule that jurisdiction will not reach out to employees or workers based abroad] can be made in those cases is that the connection between Great Britain and the employment relationship is sufficiently strong to enable it to be presumed.  Although they were working abroad, Parliament must have intended that section 94(1) should apply to them.”

29.	I accept Mr Quinn’s submission that the expression “employment relationship” in the present limb (b) worker case might more properly be expressed as “the working relationship”, although it seems to me that makes no difference to the outcome.  Whereas linguistically, reading the words of Lords Hoffmann and Hope respectively as if they were contained in a statute, which they are not, it would appear that Lord Hoffmann’s equally strong connections test has now morphed into a stronger connection test, per Lord Hope, it would be surprising if the court in Ravat, to which Lady Hale was an assenting party, had proposed a different approach to that in Duncombe (No. 2), in which Lady Hale gave the Judgment of the court and in which permission to appeal in Wallis was refused.  That said, in answer to Mr Quinn’s submissions on the stronger connections test, I am entirely satisfied, based on the Employment Judge’s findings and conclusions to which I have referred, that had she been asking herself Lord Hope’s question she would have arrived permissibly at the same overall conclusion, just as did Lord Hope in relation to the Employment Judge’s conclusion in Ravat (see paragraph 35).

30.	In these circumstances I reject the First Respondent’s cross‑appeal.  The Tribunal has territorial jurisdiction to entertain the claims under both the ERA and EqA.  Again, I record that Mr Craig reserves his position in relation to his additional arguments on this aspect, which I have earlier mentioned but did not find it necessary to consider.

The disclosure appeal
31.	Mr Quinn accepts that if the Claimant’s PHR appeal on the worker point succeeds, as it has, and his cross‑appeal fails, as is the case, then he cannot pursue this appeal.  Accordingly, I shall dismiss it.  Employment Judge Grewal’s disclosure order is to take effect by 4.00pm on 10 May 2012.

Disposal
32.	In summary:
(1)	The Claimant’s PHR appeal succeeds.  It is declared that she is a limb (b) worker under section 230(3) ERA.

(2)	The cross‑appeal fails and is dismissed.

(3)	The disclosure appeal is dismissed.

(4)	The case will now return to the Employment Tribunal for substantive hearing of all claims.  That hearing is presently listed for 18 to 30 June 2012.  Since that hearing must now also encompass the Claimant’s whistleblowing complaint, I am told that the parties have discussed the question as to whether or not that hearing can go ahead on those dates.  I emphasise that it will be for the Employment Tribunal to determine, in the exercise of its case management powers, whether or not that hearing proceeds on those dates.

33.	Finally, I should like to express my gratitude to both counsel for their industry and the clarity of their submissions, whilst observing that the agreed bundle of 36 authorities was unnecessarily excessive for the determination of the issues in these appeals.