Appeal No.	 EAT/67/96

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 7 March 1997

Before
HIS HONOUR JUDGE N BUTTER QC
MR R JACKSON
MRS J M MATTHIAS

MRS E BAILEY	APPELLANT

FIRCROFT ENGINEERING SERVICES LTD	RESPONDENTS

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR J CAVANAGH
(of Counsel)
Messrs Shepherd Oaks & Co
Solicitors
21 Church Street
Macclesfield
SK11 6LB	
For the Respondents	MR M DUGGAN
(of Counsel)
Messrs Wacks Caller
Solicitors
Steam Packet House
76 Cross Street
Manchester
M2 4JU	

	JUDGE N BUTTER QC:     This is an appeal by Mrs Bailey in respect of a decision of the Industrial Tribunal at Manchester on 27 October 1995.  The reasons for the decision were sent out on 23 November 1995.  The Chairman sat alone.  He decided, on what was the crucial preliminary issue, that the Applicant was not an employee of the Respondents and accordingly that the Tribunal did not have jurisdiction to hear the Applicant’s complaint that she had been dismissed.

	The Chairman in his reasons records the fact that he heard evidence from the Applicant and from the General Manager, but no specific reference is thereafter made to their evidence and it is plain to us that the Chairman reached his decision upon the basis of the documents which were before him.  That was, on the face of it, an entirely appropriate course to take.

	The Respondents are an employment agency which provides personnel to clients.  The Applicant’s case was that she had worked for the Respondents for 4½ years.  The whole of that time she had been located at the Atomic Energy Authority.  The Respondents’ case was that they simply operated a recruitment business and that the Applicant entered into a contract for services as distinct from a contract of employment.  On 2 March 1995 the Applicant, at her place of work, was told that she was not required any more.

	In his decision the Chairman referred to a number of documents.  The important question for his consideration was, or should have been, “what were the relevant terms and conditions of any agreement that may have existed at the time of the dismissal in 1995?”.  We have had the opportunity of considering a number of documents.  It may be convenient if I refer in a few words to the terms and conditions as set out in the original contract, which was described as a contract for service, dated 7 November 1990.  I shall refer more specifically to certain terms and conditions which were in force as from April 1992.  The relevant documents begin by saying:

“These terms and conditions will apply to and govern all contracts under which you, as a skilled and professional technician, agree to render your services as a self-employed person to Clients of the Company.”

	The only provision that I need refer to at this stage concerning the 1990 document is that at clause 13, it says:

“13.  Relationship Between The Parties
Nothing herein contained shall constitute the relationship of Master and Servant or any partnership either between you and the Company or between you and the Client.”

	I turn to consider the terms and conditions of engagement which are in the bundle before us and were annexed to a letter from the Respondents to the Applicant dated 27 April 1992.  It is headed “Terms and Conditions of Engagement.”.

“These terms and conditions will apply to and govern all contracts under which you agree to render your services to Clients of the company.”

	There are then various definitions.

(1)  The company, meaning Fircroft Engineering Services Ltd, the Respondents in the present case.

(2)  ‘The Client’ shall mean any individual to whom or any firm or company to which your services are supplied by the Company.

(3)  ‘The Rate’ shall mean the Rate at which payment will be made to you in respect of your services to the Client.  The Rate shall be calculated on the reasonable expectation that you will complete the works within the period for completion reasonably estimated by the Client.  The works shall mean work from time to time allocated to you by the Client.

(4)  Under the heading “Your Services” I can conveniently refer simply to the first sentence:  “The Client will be solely responsible for allocating work to you and for supervising the manner in which you carry out such work”.

(5)  Under the heading “Payments”.  The Company will be solely responsible for payment (calculated at the Rate) and expenses payable to you for works allocated to the Client.  You should submit to the Company on a weekly basis Company time sheets signed by the Client’s authorised signatory and such written information as the Company may from time to time request in support.

(6)  Under National Insurance and Income Tax.  All payments made to you shall be subject to a deduction of National Insurance contributions and Income Tax on a PAYE basis.

(7)  There was then a provision concerning holidays and under Health and Safety it says the Company accepts no responsibility for your health and safety and protection from injury or loss or damage to any of your property while engaged on the works.

(8)  Clause 10 deals with termination which reads as follows:

“(a)  If you fail to proceed with any work allocated to you with that degree of technical and professional skill as was anticipated by the Company in agreeing the Rate, or if you shall be guilty of any criminal act, gross default or other misconduct in connection with or affecting any such work, then the Company may give notice to you terminating the use of your services forthwith.
(b)  Subject to paragraph (a) above, the Company may terminate any contract relating to the provision of your services at any time by giving to the other not less than the minimum period of notice stipulated in the contract confirmation document.
(c)  Upon any such termination as aforesaid the Company shall be liable to you only for any payments and expenses payable hereunder up to the termination.”

	There was then a provision concerning confidential information.  There is, it is to be noted, no equivalent to Clause 13 to which I referred earlier.

	I turn to consider paragraph 6 of the decision of the Industrial Tribunal which has been the subject of much argument before the Employment Appeal Tribunal today.  At paragraph 6 the Industrial Tribunal said:

“6.  The Tribunal finds that the factors suggesting that there was a contract of employment were that the agreement between the parties stipulated where the applicant was to work and what the rate of pay was.  Factors suggesting that the agreement was a contract for services were that the respondent had no power of control and no obligation to provide alternative work; the applicant could work for others if she so wished and the earlier terms referred to the applicant being self employed and excluded the relationship of master and servant.
The fact that tax was deductible under PAYE is in the view of the Tribunal neutral, in view of the legislation.”

	On that last point, we accept the Chairman may well have been right.

	In paragraph 7 the Chairman went on to say:

“7.  On balance the Tribunal is satisfied that the applicant was not employed by the respondent under a contract of service.  There was an agreement between the parties which was a contract for services, and accordingly the Tribunal has no jurisdiction to consider the applicant’s complaint.

	On behalf of the Respondent to the appeal, it is urged that in relation to what is said in paragraph 6, that must be seen in conjunction with what is set out in the preceding paragraph 4.

	The test which should be applied in determining the question as to contract of employment or contract for services, has been before Tribunals on many occasions.  The words of the Privy Council in the case of Lee Ting Sang v Chung Chi-Keung & Another [1990] ICR 409 and in particular, at page 412 are pertinent.  “What then, is the standard to apply?”.  This has proved to be a most elusive question and despite a plethora of authorities, the Courts have not been able to devise a single test that will conclusively point to the distinction in all cases.  Their Lordships agree with the Court of Appeal when they said that the matter had never been better put than by Cooke J in Market Investigations Ltd v The Minister of Social Security[1969] 2 QB 173, 184-195:

“The fundamental test to be applied is this:  ‘Is the person who has engaged himself to perform these services performing as a person in business on his own account?’  If the answer to that question is ‘yes,’ then the contract is a contract for services.  If the answer is ‘no,’ then the contract is a contract of service.”

	I need not read out the remainder of that paragraph.

	In the present case the Chairman reached his decision prior to the Court of Appeal decision in what may well now be regarded as a leading case, or conceivably, the leading case, in relation to issues of that kind.  The case is McMeechan v The Secretary of State for Employment.  The main judgment was given by Waite LJ on 11 December of last year and we have a transcript of that decision.  

	I have to say that we consider that the question as to whether there was a general or a specific engagement is one that needs careful scrutiny in each case.  Where a person is employed under both a general engagement and a specific engagement, the Industrial Tribunal is, according to the authorities, under a positive duty to give independent consideration to both engagements in determining whether the person is an employee.  The general engagement relates to the agreement under which the individual is placed on the agency’s books.  The specific engagement is the agreement under which the individual works for a specified third party.

	Here, we have to say that we consider there is force in the submission that the Chairman in the present case misdirected himself in failing to distinguish between the general engagement and the specific engagement under which the Appellant was engaged.  It appears to us too, that he placed reliance, or certainly seems to place reliance, on some of the terms and conditions of the agreement in November 1990.  We recognise that there was no grievance procedure as there was in the case of McMeechan, but the reservation of power to dismiss for misconduct, although not crucial, is of obvious importance in determining whether or not there is a contract of employment.

	Yet further, as was said by Waite LJ in the McMeechan case (see page 26 of the transcript):

“When it comes to considering the terms of an individual, self-contained engagement, the fact that the parties are not obliged to offer in future or to accept another engagement with the same, or different client, must be neither here nor there.”

	Again, although it would not be fair to criticise the Chairman personally, it appears to us that he was in error in purporting to rely upon that aspect.

	We have considered all the arguments before us and we have come to the clear conclusion that the present decision cannot stand and that it is based, in part at least, upon errors of law.  The Respondents say that we should send the case back; we should remit it for further consideration and that they will be entitled to call all the evidence which might affect the position.  

	It seems to us however, that the decision was based upon interpretation of the documents and that that is the appropriate way in which the case should be considered.  We see no reason at all to believe that factual evidence as to what may have been in the minds of the parties, would be admissible, or that it would affect the position in one way or the other.  

	In the case of McMeechan at page 22 of the transcript:

“Consideration was given as to whether the matter should be remitted.”

	In that case the parties did not ask for that to be so, but the Court of Appeal said:

“This long outstanding claim clearly needs to be resolved as soon as possible.  The relevant facts are not in dispute.  No industrial expertise is required to resolve the issues, largely of documentary construction to which it gives rise.”

	The Court itself therefore considered the matter.  

	Here, there are, as always in such cases, factors which may point in each direction.  Here however, we have to bear in mind the provision as to where the Applicant was to work;  that the rate of pay was stipulated; there was the right to dismiss for misconduct; there was the right to dismiss on notice and other factors.

	If one returns to the quotation from Lee Ting Sang to which I referred earlier, is the person who is engaged himself to perform these services performing as a person in business on his own account?  

	Considering all arguments presented to us, we come to the clear conclusion and we are unanimous in our view, this was a contract of employment.  We do not think it necessary or appropriate to remit the matter on this issue.  An Industrial Tribunal will have to consider the application on its merits.

	In these circumstances and for these reasons it follows the appeal is allowed.