Cable & Wireless Plc v Muscat

JurisdictionEngland & Wales
JudgeLady Justice Smith
Judgment Date09 March 2006
Neutral Citation[2006] EWCA Civ 220
Docket NumberCase No: 2005/0545
CourtCourt of Appeal (Civil Division)
Date09 March 2006

[2006] EWCA Civ 220




His Honour Judge D Serota QC

Royal Courts of Justice

Strand, London, WC2A 2LL


The Master of The Rolls

Lady Justice Smith and

Lord Justice Maurice Kay

Case No: 2005/0545


Cable & Wireless Plc
Mr P Muscat

Mr Frederic Reynold QC & Ms Anya Palmer (instructed by Charles Russell) for the Appellant

Mr Omar Malik (instructed by Steele Raymond) for the Respondent

Lady Justice Smith



This is the judgment of the Court to which all members have contributed.


This appeal raises, on yet another occasion, the problems arising from a triangular employment relationship. Typically the problem arises where a worker has entered into an agreement with an employment agency on the basis that he will work for a client of the agency, the end-user. When the end-user no longer wants the worker's services and the arrangement is terminated, the worker may wish to claim that he has been unfairly dismissed. In order to found such a claim pursuant to section 94(1) of the Employment Rights Act 1996, the worker must show that he was an employee of either the agency or the end-user. He will also have to show that he has been an employee for at least a year.

Section 230(1) of the 1996 Act provides that an employee is:

"an individual who has entered into or works under (or where the employment has ceased, worked under) a contract of employment."

Section 230(2) defines a contract of employment as :

"a contract of service or apprenticeship, whether express or implied and, (if it is express) whether oral or in writing."


In the present appeal, the appellant, Cable and Wireless Limited (C&W) seeks to overturn the decision of the Employment Appeal Tribunal (EAT) , which upheld the decision of an Employment Tribunal (ET) which held that the respondent, Mr Patrick Muscat, was an employee of C&W. C&W deny that and contend that the ET's finding that he was an employee amounted to an error of law, which was perpetuated by the EAT when it dismissed C&W's appeal.

The Facts


Before this Court a number of matters which had been in issue before the ET and the EAT were no longer contentious. We will set out the facts as they affect the decision to be made on this appeal.


During 2001, Mr Muscat was employed as a telecommunications specialist by a company called Exodus Internet Ltd (EIL) . In September 2001, EIL wished to reduce the number of its employees in order to facilitate a potential buyout. It still wished to retain Mr Muscat's services. Mr Muscat was told that he would have to become a 'contractor' and would have to provide his services through a limited company. On 15 th October 2001, EIL dismissed Mr Muscat and immediately re-engaged him as a contractor. A company named E-Nuff Comms Ltd (E-Nuff) was set up for the purpose of receiving his pay and car allowance. On the day following his dismissal, Mr Muscat continued to work for EIL as before. He became responsible for his own tax and National Insurance contributions. His pay was increased to take account of those factors. In due course, the ET held that Mr Muscat continued to be employed by EIL after 15 th October 2001, as he had been before. That finding was not challenged.


In February 2002, EIL was taken over by C& W. The takeover was complete by the end of April 2002. Mr Muscat continued to work as before, although he now worked under the direction of C&W management. Initially, his manager was a Mr Jones; later it was a Mr Steel. C&W supplied Mr Muscat with a mobile telephone and a laptop computer; they paid his mobile telephone bills. Mr Muscat arranged his annual leave with C&W. Within the C&W departmental structure, Mr Muscat was described as an employee and was assigned an employee number. All the equipment he used was paid for by C&W. In due course, the ET held that the takeover by C&W had been a transfer of undertaking to which the Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE) applied. Also it held that, on that transfer, Mr Muscat became the employee of C&W. That finding is not now challenged.


However, C&W understood Mr Muscat to be an independent contractor. Mr Muscat continued to submit invoices for his services (in the name of E-Nuff) but C&W did not pay them. In August 2002, Mr Muscat was told that C&W did not deal with contractors direct and that he must deal with them through an agency, Abraxas PLC (Abraxas) . On 26 th July 2001, C&W had entered into an agreement with Abraxas, entitled 'Agreement for Provision of Contract and Permanent Personnel' under which Abraxas had agreed to provide contract personnel for C&W.


On 13 th August 2002, E-Nuff entered a 'Contract for Services' with Abraxas by which E-Nuff agreed (in part retrospectively) to provide services to C&W for the period 26 th April to 31 st August 2002. That contract is crucial to this appeal as C&W contend that it changed Mr Muscat's status from that of an employee of C&W to some other status.


The most important provisions of that Contract, for the purposes of this appeal were clauses 2(a) and (c) . Clause 2(a) provided:

"This Contract for Services together with the Works Schedule and any attachments shall constitute the entire contract between the company (Abraxas) and the Consultancy (E-Nuff) and shall govern the assignment undertaken by the consultancy. No verbal or other written contract shall be valid."


The term 'assignment' was defined as 'the period during which the Consultancy is engaged to undertake Works Schedules'. However, from the way in which the term was used in the Contract, it appears that 'assignment' really meant the work that was to be performed for a client of the Company. The term 'Works Schedule' was defined as meaning an outline of the project tasks or services to be performed. Clause 2(c) provided:

"The relationship between the parties to the Contract is one of independent Suppliers and nothing contained in this agreement shall be construed as constituting or establishing any partnership or joint venture or relationship of employee and employer between the parties. Upon completion of a Works Schedule, there is no obligation by the Company or the Client (which in this case would be C&W) to provide future assignments to the Consultancy, neither is there an obligation for the Consultancy to provide future services to the Company or the Client."


There were other provisions within the Contract relating to such matters as the payment of fees, the provision of progress reports and the substitution by the consultancy of individuals undertaking the assignment, provided that the substitutes were suitably qualified and the client was prepared to accept them. However, none of these other provisions is relied on in this appeal.


Mr Muscat (on behalf of E-Nuff) and Abraxas also signed a document headed 'Abraxas Works Schedule' which named Mr Muscat as the 'nominated individual' of E-Nuff and named C& W as the client. Mr Stewart Jones was named as the client project coordinator. The period of assignment was specified as 26 th April 2002 to 31 August 2002. Under 'Work Pattern' it was stated that the standard commitment was 'five professional working days per 37.5 hour week, or such other times as may be agreed with the client'. The rate of fees excluding VAT was stated to be 'a professional daily rate of £265.40'. Under the heading 'Notice of termination/Cancellation' the periods of notice to be given by either side were stipulated. E-Nuff had to give 4 weeks notice in writing. Abraxas claimed the right to terminate the agreement on five days notice during the first four weeks, two weeks notice in writing in the period between four and eight weeks and four weeks notice thereafter. These earlier periods were stipulated retrospectively, as the contract was not signed until shortly before it was due to expire. Mr Muscat was required to submit his expense claims to C&W for approval before submitting them to Abraxas for payment. Finally, Abraxas asked for references but these were never required because Mr Muscat had been working for C&W for over 3 months when the agreement was signed.


After the 'Contract for Services' had been signed, Abraxas paid E-Nuff's monthly invoices. In September, October and November 2002, Mr Muscat signed further contracts (on behalf of E-Nuff) each covering the provision of his services to C&W for a period of one month. In late November 2002, C&W informed Mr Muscat that it would not require his services further. In fact, he continued to work for C&W until 31 st December 2002. During the period from August to December, the only role undertaken by Abraxas was the payment of the invoices.

The Proceedings


In March 2003, Mr Muscat lodged a claim for compensation for unfair dismissal, maintaining that he was employed by C&W and that his employment had been continuous for more than a year. C&W contended that he was not an employee. The ET heard the evidence relating to this preliminary issue in December 2003. At that time, the Court of Appeal had recently heard an appeal in the case of Dacas v Brook Street Bureau(UK) Ltd [2004] EWCA (Civ) 217. It was thought that the Court would give an authoritative ruling on the legal consequences of an arrangement between an agency, a worker and an end-user such as appeared to be in contention in this case. The parties invited the ET to adjourn their decision in this case until the judgements in Dacas had been handed down.


In March 2004, the Court of Appeal (Mummery and Sedley LJJ and Munby J) gave judgment. Mummery LJ,...

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