Robert Stack v Ajar-Tec Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Tomlinson,Lord Justice Patten,Lord Justice Moore-Bick |
| Judgment Date | 05 February 2015 |
| Neutral Citation | [2015] EWCA Civ 46 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A2/2014/2345 |
| Date | 05 February 2015 |
[2015] EWCA Civ 46
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
His Honour Judge Birtles
UKEAT/0293/13
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Moore-Bick
Vice-President of the Court of Appeal, Civil Division
Lord Justice Patten
and
Lord Justice Tomlinson
Case No: A2/2014/2345
Timothy Pitt-Payne QC (instructed by Charles Russell Speechly Llp) for the Appellant
David Reade QC (instructed by Brian Harris & Co Solicitors) for the Respondent
Hearing date: 14 January 2015
This case is not a good advertisement for our system of resolving employment disputes.
As Elias LJ explained when this case was first before the Court of Appeal nearly 3 years ago, the issue is whether the Appellant Mr Stack was at the material time either an employee or a worker employed by the Respondent company. Mr Stack has lodged claims before the Employment Tribunal for constructive unfair dismissal and unauthorised deduction from wages. He has to be an employee to pursue the former, and a worker to pursue the latter. At a preliminary hearing in April 2010 to determine whether Mr Stack fell into either or both of these categories, the Employment Judge held that he fell into neither and that accordingly the Tribunal had no jurisdiction to hear his claims. The Employment Appeal Tribunal (Mr Justice Underhill P sitting alone) concluded, on 8 July 2011, that the Employment Judge had erred in law in his approach and remitted the matter to a differently constituted tribunal to decide the issue afresh. By its appeal in April 2012 to this court the Respondent company, then the Appellant, sought to restore the decision of the Employment Judge.
The company's appeal was dismissed by this court — see [2012] EWCA Civ 543. So the matter went back to a differently constituted tribunal to decide the issue afresh.
On the second time around, the matter came before Employment Judge Pettigrew, sitting alone in the Employment Tribunal at Watford. After a 4 day hearing in August and December 2012 he decided, by a decision dated and sent to the parties on 8 January 2013, that Mr Stack was both an employee within the meaning of section 230 of the Employment Rights Act 1996 and a worker within the meaning of that section and of Article 2 of The Working Time Regulations 1998.
The company appealed to the EAT. His Honour Judge Birtles, sitting alone, allowed the appeal. He concluded, giving his reasons in a judgment dated 30 May 2014, that the Employment Judge was in error in finding that there had been a contract of employment. He concluded:-
"On the facts found by the Employment Judge, I am quite unable to say that it is possible for me to imply a contract or a contract of employment between the parties. In those circumstances, the matter will have to be remitted to be tried again by a fresh Employment Judge. It must follow that Mr Stack was not a worker either."
Now there is a further appeal to this court, brought with the permission of Underhill LJ who, as President of the EAT, had himself heard the first appeal to that tribunal. Underhill LJ considered that all four grounds of appeal disclosed a reasonable prospect of success. In granting permission he observed:-
"It goes without saying that it is highly regrettable that this preliminary issue will have to be considered in this Court for a second time; but that cannot be helped."
Mr Timothy Pitt-Payne QC seeks to uphold the decision of Employment Judge Pettigrew in the Employment Tribunal.
The Statutory Provisions
The terms "employee" and "worker" are defined in section 230 of the Employment Rights Act 1996 as follows:-
"(1) In this Act "employee" means an individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment.
(2) In this Act "contract of employment" means a contract of service or apprenticeship, whether express or implied, and (if it is express) whether oral or in writing.
(3) In this Act "worker" (except in the phrases "shop worker" and "betting 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."
As Elias LJ observed on the earlier occasion,
"It follows from the definition that all employees are workers, but not all workers are employees. The central feature of both concepts, however, is that the worker should be employed pursuant to a contract. If there is no contract personally to perform work or services, then neither concept applies"
The Facts
Ajar-Tec is a supplier of audio-visual equipment, and was incorporated on 19 April 2005. There were three shareholders: Mr Martin, Mr Keane, and Mr Stack, with equal shares, save that Mr Martin had 334 shares whereas Mr Keane and Mr Stack had 333. Each of the shareholders was also a director of the company. The principal motivator behind the founding of the company was Mr Martin. He was leaving a job in marketing in 2004 and he approached Mr Keane, a financial advisor, with a view to setting up a business. Mr Martin had been involved in marketing 360 degrees cameras and he was keen to try to market that technology. He was looking for financial backing. Mr Keane was able to introduce Mr Martin to some investors, or potential investors, principally Mr Stack. Mr Stack was looking for a project in which to invest, and this one was attractive to him because he had skills derived from running a business in the building and contracting industry. Principally his skills were in relation to project management but he also understood audio-visual technology having done many installations. He was also experienced in procurement. Mr Keane in turn also possessed financial expertise. Mr Stack's building and contracting company was called London Trellis Company Limited, ("LTC"). Mr Keane was also a director of that company. In addition, Mr Stack had interests in property. See the judgment of Employment Judge Pettigrew at paragraphs 6.1 and 6.2.
The judgment of Employment Judge Pettigrew suffers from the defect that it is not always clear whether what is contained in that part of the judgment described as "findings of fact" is in truth a finding of fact or rather a recitation of the evidence of one particular witness, which may or may not have been contentious. A paradigm and important passage appears at paragraph 6.2:-
"The discussions that took place were on the basis that all the directors would eventually share equally in what Mr Stack described as 'remuneration'. Mr Stack's evidence was that there was an agreement that he would be paid on the same basis in relation to salary from incorporation but only once the company had the resources to make payments. He said it was understood that he would be remunerated at the same rate as Mr Martin back to the start of the company."
It is clear from subsequent findings in the judgment that the Judge is here referring to discussions which took place prior to the incorporation of the company. The reference to being paid "on the same basis" is not entirely clear but appears to be a reference forward to the undisputed finding, at paragraph 6.4 of the judgment, that it was agreed that Mr Martin would receive a salary from the start and that he duly began to receive payment under PAYE from the date when he joined the company in June 2005. The Employment Judge did not expressly accept Mr Stack's evidence that it was agreed in the course of these discussions that he would be paid by the company, whether at the same rate or on the same basis as Mr Martin or indeed at all. On the other hand, he did not expressly reject that evidence either, see further at paragraph 31 below.
It was the company's pleaded case that whilst Mr Martin was at all material times an employee, neither Mr Keane nor Mr Stack were. The evidence does not disclose that Mr Martin had a formal written contract of employment, but he did receive a statement of particulars of employment which was effective from 1 May 2007. That recorded that his salary would be £60,000 per year, subject to review, and with eligibility to receive private health care. The period of continuous employment is stated to commence on 1 June 2005, and holidays were expressed to be 20 days plus statutory and public holidays. The period of notice was to be 4 weeks in the first 2 years, 8 weeks thereafter, increasing by one week each year after 8 years' service. It does not appear that Mr Keane has ever asserted that he was an employee of the company. However I doubt if that circumstance of itself assists the enquiry. In 2009 Mr Martin and Mr Keane resolved to terminate Mr Stack's appointment as director of the company. He was removed at an EGM on 26 August 2009. Since that time Mr Stack and the company have been in dispute. It would not have assisted the company's case for Mr Keane to assert that he was at all material times an employee of the company.
It was common ground that Mr Stack had never in fact sought payment and had never been paid for his work carried out for the company, and...
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