Bates van Winkelhof v Clyde & Company LLP and another (Pubic Concern at Work intervening)

JurisdictionEngland & Wales
CourtSupreme Court
JudgeLady Hale,Lord Clarke,Lord Carnwath
Judgment Date21 May 2014
Neutral Citation[2014] UKSC 32
Date21 May 2014

[2014] UKSC 32

THE SUPREME COURT

Easter Term

On appeal from: [2012] EWCA Civ 1207

before

Lord Neuberger, President

Lady Hale, Deputy President

Lord Clarke

Lord Wilson

Lord Carnwath

Clyde & Co LLP and another
(Respondents)
and
Bates van Winkelhof
(Appellant)

Appellant

Thomas Linden QC David Craig Claudia Renton

(Instructed by Mishcon de Reya)

Respondent

Andrew Stafford QC Chris Quinn Nicholas Goodfellow

(Instructed by Clyde & Co LLP)

Intervener (Public Concern at Work)

John Machell QC Jonathan Cohen Adil Mohamedbhai

(Instructed by CM Murray LLP)

Heard on 24 and 25 March 2014

Lady Hale (with whom Lord Neuberger and Lord Wilson agree)

1

Can a member of a Limited Liability Partnership (LLP) be a "worker" within the meaning of section 230(3) of the Employment Rights Act 1996 ("the 1996 Act")? If she is, she may claim the benefit of the protection given to "whistle-blowers" in sections 43A to 43L of that Act, inserted by the Public Interest Disclosure Act 1998. There are also potentially other rights involved if the member is a "worker".

2

Section 230(3) of the 1996 Act defines two sorts of worker for the purpose of that Act. Limb (a) covers an individual who has entered into, works under or has worked under "a contract of employment". No-one has suggested that the contract between the member and the LLP in this case was a contract of employment. The question is whether the member falls within limb (b) of section 230(3), which covers an individual who has entered into or works under or worked under

"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".

3

Section 230(5) is also relevant:

"In this Act, 'employment' …

(b) in relation to a worker, means employment under his contract;

and 'employed' shall be construed accordingly."

Section 230(4) provides that in the Act, "employer" means the person by whom the worker is employed.

4

The immediate context is whether the member can claim the benefit of the protection given to "whistle-blowers" by the 1996 Act. But limb (b) workers are also able to claim two other rights under the 1996 Act, the right not to suffer an unauthorised deduction from wages (section 13) and the right not to be subjected to a detriment for exercising rights under the Working Time Regulations ( SI 1998/1833) (section 45A). The same definition of worker is also used in some other legislation, most notably the National Minimum Wage Act 1998, the Working Time Regulations 1998 (SI 1998/1833), and the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000 (SI 2000/1551). But the rights given to this type of worker are much less extensive than those given to workers under a contract of employment. They do not, for example, include protection against unfair dismissal.

The facts
5

The appellant is an English qualified solicitor. In 2005 she was employed by Shadbolt & Co LLP to develop a joint venture with a Tanzanian law firm, with whom she also had an employment contract. In 2009, Shadbolt ended their joint venture with that firm but entered into a joint venture with a different Tanzanian firm. Later in 2009, Clyde & Co LLP were negotiating to take over various parts of Shadbolt's business, including the Tanzanian joint venture. On 24 December 2009, they made a formal offer to the appellant, subject to completion of the deal with Shadbolt. Under this, she would become an "Equity Partner" of the LLP. Her annual share of the LLP profits was fixed at £103,000 (whether or not the LLP actually made a profit). Her existing arrangements with the Tanzanian joint venture would continue. The LLP would "look to propose her as a Senior Equity Partner once the results of the joint venture are able to provide a track record showing the sustainability of income and profit to satisfy our partnership process".

6

The deal with Shadbolt was completed in February 2010, when the appellant became a member of Clyde & Co LLP. She signed a Deed of Adherence to the LLP's Members' Agreement. The other parties to the Deed were the LLP and each of the Members individually. Under the Members' Agreement, there were two levels of membership, "Equity Members" and "Senior Equity Members". Senior Equity Members were placed on the LLP's lockstep, each level of which conferred a certain number of profit sharing units. Equity Members received a fixed annual share of profits and such profit sharing units as the management board might determine. The rights of the Senior Equity Members were more extensive than those of the Equity Members, but they could all vote to elect the Senior Partner and the members of the management board. Members agreed that "the objective of each Member shall be to carry on business for the best advantage of the LLP so as to promote the wellbeing and success of the Business for the prosperity and advantage of all Members and to that end each Member shall devote his full time and attention to the Business" and that "each Member shall be just and faithful to the LLP in all transactions relating to the Business and in relation to the property and other assets of the LLP". "Business" is defined as "the business to be carried on by the LLP as set out in clause 3", which states that "[t]he LLP carries on business as solicitors, foreign lawyers and registered European lawyers".

7

In November 2010, the appellant reported to the LLP's money laundering reporting officers that the managing partner of the Tanzanian law firm had admitted paying bribes to secure work and to secure the outcome of cases. She claims that these were "protected disclosures" within the meaning of section 43A of the 1996 Act. She also claims that she was subject to a number of detriments as a result, including suspending her, making allegations of misconduct against her and ultimately expelling her from the LLP in January 2011. These claims are denied by the LLP and have not yet been tried.

8

In February 2011, the appellant brought claims in the Employment Tribunal against the LLP and one of its Senior Equity Members under the sex discrimination provisions of the Equality Act 2010 and under the whistle-blowing provisions of the 1996 Act. The respondents' preliminary objection to both claims, that the Tribunal had no jurisdiction because the appellant worked primarily outside the jurisdiction in Tanzania, has been resolved in her favour. The respondents also objected to her whistle-blowing claim on the ground that she was not a "worker" within the meaning of section 230(3) of the 1996 Act.

9

The Employment Tribunal found that she was not a "worker", although she worked under a contract to do or perform personally work or services for the LLP, because she was "in business in her own right receiving a share of the profits in relation to the work carried out". In the Employment Appeal Tribunal, Judge Peter Clark allowed her appeal and held that she was a worker. She was an integral part of the LLP's business, she could not offer her services to anyone else, she was in a subordinate position and the LLP was not her client. (The Court of Appeal commented that Judge Clark "appears to have considered the issue of subordination in the context of determining whether the LLP was a client or customer rather than as an independent requirement in its own right": [2013] ICR 883 para 30). The LLP's appeal to the Court of Appeal was successful, but on a completely different ground from those argued in the Tribunals: [2012] EWCA Civ 1207.

The decision of the Court of Appeal
10

The Court of Appeal held that the appellant could not be a worker for the purpose of section 230(3) of the 1996 Act because of section 4(4) of the Limited Liability Partnerships Act 2000. This provides:

"A member of a limited liability partnership shall not be regarded for any purpose as employed by the limited liability partnership unless, if he and the other members were partners in a partnership, he would be regarded for that purpose as employed by the partnership."

11

The LLP argued that "employed by" should be widely construed to include both types of 1996 Act worker. The appellant claimed that its natural meaning was restricted to contracts of employment. Elias LJ (with whom the other members of the court agreed) accepted that "focusing simply on the language, the argument is not clear cut" (para 48). But "the intention seems to me to be that whatever the employment status of the partners under the 1890 Act, it should not alter as a result of incorporation". If Parliament did not intend to change their status as regards whether they were employees under limb (a), "I can see no logical reason why Parliament would have adopted a different position with respect to the questions whether they may be limb (b) workers" (para 48).

12

There was no previous case considering whether a partner could be a limb (b) worker. But both Ellis v Joseph Ellis & Co [1905] 1 KB 324 and Cowell v Quilter Goodison Co Ltd [1989] IRLR 392 established that a partner could not be an employee. Essentially this was because the partners were all in a contractual relationship with one another in a joint venture and thus each partner would have to be employed, inter alia, by himself. "He would be both workman and employer, which is a legal impossibility" (para 63). Further, "[t]he very concept of employment presupposes as a matter of sociological fact a hierarchical relationship whereby the worker is to some extent subordinate to the employer … Where the relationship is one of partners in a joint venture, that characteristic is absent" (para 64). These reasons applied just as much to...

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